Good afternoon and welcome to the Headlam Group PLC investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and can be submitted at any time via the Q&A tab situated on the right-hand corner of your screen. 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 publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Chris Payne, CEO. Good afternoon, sir.
Good afternoon and thank you for joining us. We're going to talk to Headlam Group PLC's half-year results for 2025. I'm Chris Payne, the Group Chief Executive Officer, and I'm joined here by our Chief Financial Officer, Adam Phillips. I'm going to cover an introduction, which is really an update on current trading conditions. I'm going to give an update on strategy and the transformation plan, then hand over to Adam to talk to the numbers for the first half, who will then hand back to me to get into a bit more detail around the transformation plan in particular. Firstly, just on current trading, if you like, and the market conditions that we see, the market's been quite subdued for a number of years now. Certainly, prior to COVID, we've seen perhaps a 25% reduction in volume on the flooring market.
I think we have seen some signs in recent months, certainly of an improving trend in terms of like-for-likes. Last year, obviously, it was quite a negative year. This year's open negative, but the performance has been trending a bit more flat. In June and July, we saw a flat performance, a bit bumpy, where August is seeing a little bit of a negative again. It is sort of bumping along at the moment, but we have seen that improving trend. I think that sort of belies a bit of detail, though. When you peel back and look at the component parts of our business, and I'll come onto those when I talk about strategy in a moment, the core business that's been a mature part of Headlam Group PLC for a number of years has seen a sort of continued weakness and seen that in decline.
Where we've been deploying additional resources and putting down space, in particular trade counters, we've seen that in growth, and we've seen good growth from both the trade counter business and larger customers, which has offset some of the weakness that we've seen in the more mature part of the business. Challenging market continues, market situation remains, but perhaps with a little bit more trending back to zero. We will talk in the future slides about the outlook and perhaps a little bit more positive lead indicators, which point perhaps a more positive future. With regard to the transformation plan, there are kind of three key elements of the transformation plan. Firstly is around the kind of customer effect and the sales plan. The second one is around the network and the shape of our operations.
The third element is around our business model and the sort of business operations itself. I'll talk in depth when we get to the transformation plan detail slides around our progress against each of those three elements. In summary, certainly we've seen more progress on the customer-facing element of the transformation plan, and I think that's the most mature element. We created the Mercado business out of our 32 wholesale businesses this time last year. That's been in place now for the best part of a year, and the customer response to that has been quite positive. That's given us the encouragement to also consolidate six of the branded sales teams into a single branded sales team as well. We've taken the next step in more recent months on the customer side. I think the other areas of the plan are less mature.
I'll come onto those, as I said earlier, but we've employed Alvarez & Marsal to help us, I suppose, accelerate some of those items that we identified and also look at perhaps expanding the scope of some of those improvement plans. That's given us the encouragement to upgrade the benefit of the transformation plan to 35%. We'll come onto that in some detail. The last thing I'll just cover before I hand over to Adam is that we have decided also just to double down really on the UK and focus on the UK business. We've taken the decision to exit our continental European businesses in France and the Netherlands, and therefore that's been classified as discontinued operations. Adam will cover that in the numbers in a moment. I'll just hand over to Adam, who's going to talk to you about the half-year numbers now.
Thanks, Chris. I'll just start with an update on the flooring market. You'll have seen some of these indicators before, but on the left-hand side, we've put some indicators of market performance year to date, and then some of the lead indicators, which give a bit of a sense of how the market might perform going forward. Just on the left-hand side, perhaps if you look at the bottom left-hand chart, that's the Barclays data on consumer spending on the home improvements category. After a quite significantly negative year in 2024, and as we entered 2025, we did see some return to growth and a bit of optimism in that spend category of consumer spending in the spring sort of time, but you can see that's deteriorated again in more recent months.
I think that just highlights the fragility of the market conditions and the consumer confidence, which is the chart above it, which is making it difficult to see a sort of momentum of recovery in that consumer spend on that category. We see that in, I mean, this is home improvements in total. We see that correlate quite closely to what we see in the flooring market as well. However, on the right-hand side, the lead indicators do continue to be positive. Housing transactions top right, that correlates typically will correlate quite closely as an indicator of demand for the flooring market. People move houses, they move in, and they want to do kitchens, bathrooms, floors, etc. You can see those have been in growth now for about a year and a half.
There's a blip there around the stamp duty change, but the trend is upwards for about a year and a half. Incomes are rising. People are increasingly having the ability to do these big ticket projects on their home. They've got the ability and they have a reason because people are moving house more. We're just not yet seeing that translate into spending on home improvements, which is the bottom left-hand chart you see there. It does suggest there is some built-up pent-up deferral of demand as and when people have the confidence either to dip into their savings or to take on a bit of credit to do some work on their house. Moving then on to Headlam Group PLC's results for the first half of the year, income statement on this page, I'll just walk through quickly down the table.
First point just to note on this is that this is our continuing results. Chris mentioned that we have made the decision to sell our French and Dutch businesses. What that means is that they are, for accounting purposes, they're effectively carved out of the P&L and they are treated as one, their net result is treated as one line at the bottom of the P&L, which I'll come onto in a minute. The rest of this P&L you see here is the remaining, is the UK continuing business. If we start at the top revenue, revenue declined 3.8% on a same-day basis. We had one less day in the first half of this year. We're down 4.7% on an absolute basis. We've got the same number of days year on year when it comes to the second half.
Continued growth in trade counters and larger customers, as Chris mentioned, was offset by the decline in the core distribution channels. Gross margins slightly increased, and that's a mix of mixed impact. As we mix into larger customers, they have a lower gross margin %, and that pulls the margin down a bit, but we had lower, also offsetting that had lower clearance activity in the first half of this year compared to last year, which offset that holding margin flattish but slightly up for the first half. Operating costs increased by 2.4%, and that was all due to the final investments in the new trade counter sites. Putting those to one side, actually our costs declined year on year in the first half of the year, and that's with the benefits of the transformation plan more than offsetting the cost inflation in the first half.
Just moving down the table, net finance costs lower year on year by £0.5 million, and that reflects the benefit of lower average borrowings year on year this year compared to what we're borrowing in the first half of last year. That all culminates in the loss before tax there of £19.9 million. I'll come onto that on the next slide where we've got a breakdown of the movements year on year. Just to finish off on this table, bottom of the table there, second row from the bottom, loss from discontinued operations, £2.1 million loss, that's the loss after tax from our French and Dutch businesses. That's the mix of a £1.5 million loss before tax and a £0.6 million tax charge relating to deferred tax assets. Just moving on to the bridge then of the result from the first half of 2024 to the first half of 2025.
I'll just take each item from left to right. Revenue, the revenue decline contributed to a £3.5 million reduction in profit. Trade counters, £2 million reduction in profit. We've talked about this before where in the rollout phase, trade counters are dilutive to profit, and that is because typically it takes about 15 months or so for a new location to become break-even. It's loss-making in those first 15 to 18 months. Trade counters as a business unit is positive profit contribution, but it's been diluted year on year. It's made a smaller profit contribution as we've been investing in and opening up new trade counters. As we move into next year and we've ceased the rollout program, now we've got around 80 and that's about the right size of the estate, we think for now.
You'll see that gray bar then flips to become a green bar as the trade counter business becomes profit accretive year on year. Essentially, as those sites mature, the revenue growth that they will generate will be onto a relatively fixed cost base. That revenue growth will drop through to profit at quite a strong rate. That's trade counters investment. Cost inflation £2.3 million. That includes the 7% national minimum wage increase and also the increase in employers' national insurance contributions. As I mentioned previously, that was more than offset by the early benefits of the transformation plan. Finally, interest costs, as I mentioned, £0.5 million lower year on year reflecting lower average borrowings this year compared to last year. Non-underlying items, these are the items that are not treated as part of the underlying results. These are one-off costs, essentially. £11.9 million expense in the first half.
We've split a bit in the table between cash and non-cash items. I'll take the cash ones first of all. We've got the usual amortization of acquired intangibles, broadly flat year on year. There's a £3.2 million non-cash charge relating to goodwill impairment on the Melrose acquisition. Onto the cash items, £5.8 million is part of the one-off costs of implementing the transformation plan. We've guided to those being £35 million in total. It's about £10 million last year. This is the first half element of that £35 million overall one-off cash costs. Finally, bottom of the table there, ERP system development. This is the cost of us transitioning away from our legacy system onto the new Microsoft platform. This project's on track. As we previously guided, the costs in relation to this are treated as non-underlying whilst we're in the implementation phase.
Cash flow, if you look about, I'll come onto net debt. If you move down the cash flow, look about a third of the way down, underlying operating cash flow, £18.7 million negative in the first half. Important to note two specific pieces in that. One is a £10.8 million VAT timing movement. We collected VAT on the property sales that we made in December 2024. We collected the VAT on that in December 2024 and paid that over to HMRC in January 2025. We also made a £13.4 million investment in stock in the first half. That was to support the improved revenue trajectory we saw during the first half and to bring more of our fast-moving lines into the front end of our business. Without those two specific moving pieces, which won't recur, operating cash flow would have been positive in the first half.
What you'll see in the second half is some or all of that stock investment actually reversed in the second half. What we're going to do in the second half following the implementation of the central buying function, which Chris will talk more about in a few minutes, we would expect to be investing a bit more in some of the fast-moving lines in the second half of the year, but that will be more than offset by efficiencies in slower moving products as we move our business more towards a five-time stock turn and higher over the next nine to twelve months. Other than those movements I've talked about in working capital in the first half, receivables and payables are broadly just reflecting the timing and seasonality. Nothing particularly going on there.
Moving down cash flow, interest and tax, £2.9 million inflow that reflected refund of corporation tax payments made last year. CapEx was £2.9 million outflow in the first half. The vast majority of that was trade counters, and that's the final piece of that investment program now. That's ended. We've got the £8.2 million outflow in respect to non-underlying items, which I talked about on the previous slide. That left us with net debt at the end of the first half of £24 million compared to £28 million of net debt at the same time last year. Now, post-period end, in July, we disposed of a property at Tamworth for £21 million. That net debt number has come down substantially since the end of the first half. Let me just finish on balance sheet before I hand back to Chris. Key points are on the right-hand side here.
I talked about net debt at the end of half one, so £24 million subsequently come down significantly. £72 million worth of borrowing facilities. In the orange box there, property assets, so £94 million worth of property assets at the end of half one. That was at January 2023 valuation. In the last 12 months, the average premium when we've been selling some of these properties has been 23%. We've got well north of £100 million of the property assets at the end of the half year. In the green box on the right-hand side, over £200 million of unleveraged inventory and receivables. Strong balance sheet underpinned by that property and working capital. I'll finish there. I'll take questions at the end and I'll hand back to Chris.
Thanks, Adam. I'm going to do a couple of slides, which is a reminder, really a reminder of our strategy and the changes that we're making to the business through the transformation plan. I'm going to run through those. A couple of slides is just to remind. First up, we have my slide. Stop me. Would you mind leaving the slide off? Thank you. This is just a reminder of our strategy. This has been set out for some time as putting the customer at the heart of what we did. This is a customer-first strategy. Headlam has been very heavily focused for many years in the independent retailer and small contractor business. That's where Headlam's historically had its business focus. That forms a significant part of the market.
The strategy is we're looking at how do we preserve and protect that part of the market where we have very high share and we have a mature business model. That's just about holding great service, great stock, and doing what we do well. The transformation element of that is just doing that in a much simpler and efficient way. The second part of the strategy then is looking at the right-hand side of this slide. There are customer segments who are buying flooring in the market that we've not really addressed and we've not offered a good quality customer proposition to. The second part of the strategy is about developing those other elements of the business to offer a compelling proposition to those customer types as well as preserving the great service that we offer the independents.
This is where the trade counters and the larger customer focus has come from in recent years where we can develop a proposition alongside the independent retail one and offer great service to those markets as well to access more of the addressable flooring spend in the UK. Would you mind moving me on again? Thank you. The transformation plan that we announced a little while ago is about using an existing strategy and actually just accelerating it in tough markets. As I said earlier, the opportunity that we have to really simplify what Headlam offers to its existing customers, in particular the independent retail space where typically Headlam had offered multiple phases to the customer. In order to get the best out of Headlam, customers had to have multiple accounts and see multiple salespeople and place orders for multiple products.
It's quite a complex order process for customers, quite a complex offer. We duplicated our efforts from a customer perspective and a network perspective in order to meet that. The transformation plan is one of simplification: simplification of the customer offer, simplification of our network, and as a result of operating as a single business, simplifying how we do business as well. That's the transformation plan in summary. I'll now take you through those three elements in a bit more detail. This is something that we started earlier in the year and we outlined what we were doing. You'll see as we progress through these three slides the relative progression that we're at, how far through this transformation plan we are in various areas. The first one is around the customer offer. I said about putting customer first.
Our strategy is one of expansion into new customer types, but a simplification of how we do that. I mentioned that we've consolidated what was 32 wholesale businesses that we presented to the customer, and we've simplified that to a single business under Mercado. We did that in September last year, and the customers have responded well to that change. Customers now can get effectively a one-stop shop for all of their wholesale needs from Headlam. They don't need to see multiple salespeople. They don't need to access multiple websites to place orders. They can now do that in a single way and access a common portfolio of products. A significant step change for customers. Similarly, on the brand side, we have a number of different sales teams selling branded products into the marketplace.
We've recently consolidated those, six of those, into a single sales team as well so that a single salesperson now has access to multiple parts of the Headlam branded business, again, to simplify the customer's experience of all their products and getting service from Headlam. All of those customers are now transferred and transitioned into this single account approach. I've mentioned the trade counters, and I'll come onto those again in a moment. This sort of order anywhere, collect anywhere concept is one of, again, putting the customer first.
Many of our customers who operate across the country were requesting this and saying, "Look, why can't I order product for collection in another part of the country where my work happens to be?" Typically, these would be contract customers who may be working on projects around the country and like to have their product approximate to where their job is rather than where they're based. We launched this system earlier this year, which means that we can access for the first time the entire network that Headlam Group PLC has at its disposal, in particular to trade counters, which can act as a click and collect type operation for customers around the country, thereby enhancing the service to customers. Those things are largely now in place, and there's been progress and development we've seen since last year. You can see the balance of this slide.
A lot has been achieved, and there are still some areas to go from a customer-first perspective. POS is a key part of our investment phase. I mentioned this earlier, but independent retailers, and you imagine the floor space that independent shops have, you know, product presentation is critical to the success of this. I think Headlam Group PLC in the past has been guilty of underinvesting in this area. It was particularly difficult when we had multiple brands and multiple businesses facing into the customer because we would duplicate the effort, duplicate the investment. As we've been going through this process of consolidation of the offer and presenting a single face to the customer, we weren't able to roll out that POS to customers, but now we can. Now we've got a single business model to work from.
We have now started to deploy a new POS to the customers. This is a £4 million investment this year. We're about halfway through. On the next slide, we actually have some images of some of the stands that are now in customer situ. You can see here we've got some lifestyle branded ranges that have now gone in, award-winning stands and POS, Kersaint, Coldwater branded floors that we have for the market again, top right. These are real images from customer premises. Customers who have been getting this new equipment love it. The simplicity of it is modular. It looks fresh and new. It's critical that we invest in this type of product and POS to engage the independent retailer. We've got more of that to come. That's a key part of preserving our position in that marketplace.
If I just move on to the next page, this is the network and simplification of the network. This was started a little while ago before the consolidation of the business. Prior to the consolidation of the business into a single business model, we were able to start looking at the national network, logistics network, and start to move to more of a postcode-driven delivery network. That did generate some quite significant savings moving to our delivery network. We're now able to take the next phase. We have completed some of the optimization, and we've been able to exit some of our sites and ultimately sell some of those sites, either already in the first half last year, and there is still property available for sale at the moment. We've completed the trade counter rollout program. We'll end up around about 80 or just over sites across the nation.
It now means that we can, as a single business, start to look at the next phase of optimizing the networks. Now we are effectively acting as one. What does an efficient, modern network look like at the sort of scale and the volume that we see today? Headlam Group PLC has built and developed at a time when the volume is significantly higher than it is today. Therefore, the task is not only one of consolidation and simplification, but one of just becoming more effective and efficient. There are a number of steps here, a number of items that we've pulled out to give granularity about what we mean. A good example: when you've got fast-moving items that we have, and Adam's talked about investing in stock, there are some five fast-moving stock items that should be everyday sales in good stock debt at every location.
We've invested in those and we put that stock close to where the customer is. In contrast, there are other products that are sold less frequently. They might be slow in moving. Instead of holding those at every site, which we would have done in the past, we can now centralize those and lean on those in the center. We can still service customers, but they'll be held in fewer locations. That gives us the ability to move product into a more effective and efficient distribution. It means that we can reduce trunking so that we can have fast-moving items close to where the customer needs it, and we can just trunk the items that we need to because it makes sense to you from a slow-moving perspective. There are a number of things now which become possible because we've got this single business model.
Many of these items now will move into more of an optimization phase while we're moving more, for example, trade counters. The third aspect of the transformation plan is really one of, what do you do? How can you access an improved financial position through acting as a simple business? Now, clearly, we now need less overhead because we've simplified the business model. We've consolidated the finance team already because we're now a single finance, a single business rather than multiple businesses that required multiple P&Ls, if you like, to run. Now it means that we can create a single version of what Headlam's product was. We've moved from a significant duplication of SKUs and ranges into now what's a standard Headlam range.
That gives us the ability to have fewer, more better quality relationships with suppliers where we can buy in depth, we can buy in volume, we can act as a single business for the first time. Prior to this, we were buying for individual businesses. Now we're buying as one. It gives us the ability to be more effective, more efficient, working through partnerships with the suppliers so that they gain simplicity and ease of contact points with us, and we can take advantage of better buying benefits as a result. We've created a central buying function relatively recently. The task ahead of us now is to start to use that as a single business.
This is the area that Alvarez & Marsal have helped us in in particular, and we've asked them to make some recommendations of how we can move quickly in this area using their experience and indeed on the network. These areas are less mature in their development. You can see from the balance of the slide that there is less completed and more in progress. That's the clue as to why we've got more potential in this area. This is working in partnership with our suppliers to try and drive margin up for us and to make us a simpler business for them to trade with. What does all that mean? When you put all those things together, it means that we can expand the appetite for the benefits coming out of the change plan and the transformation plan. Now we've increased our guidance to £35 million once it's mature.
Cash benefits also significantly increased, and as Adam has described, the process we're going through to extract that, whether it's through stock or the disposal of surplus assets and properties. We've upgraded our guidance in this area, and that's net of the reinvestments we're making in the business model. Last couple of slides before we close the presentation. Just in terms of outlook and summarizing where we are, as we said, you know, the market has remained weak. Just when you think that it's about to perhaps tip into some growth, we have a bit of a bumpy summer, as I described. It's been a bit weaker the last few months. Based on those indicators that Adam referred to earlier, there has been a bit of a stalling in some of the consumer spend and the consumer confidence.
Our revenues consequently have been relatively flat through the summer months and a little bit weaker in August. What remains true is the lead indicators, the underlying drivers of volume in our marketplace, the housing transactions, the ability for consumers to spend because they've got real wage growth is there. We've suffered this sort of 25% reduction in volume since pre-COVID levels. There's an element of deferred demand that we've got satisfying the marketplace as well. I think that that does point to a more positive future, but the confidence in the consumer in particular is just holding that back. Final slide in summary then, I think the longer-term outlook therefore is much more positive. We've got a strategy which is looking at addressing more of the market than we had before.
There's a transformation plan which does address those challenges that the business has faced of having duplicity and multiplicity of cost base, of having a simplicity that we can execute a much simpler transaction both with customers and suppliers. The market improvement is going to be there. When? We don't know, but it will come back. There is an element of market recovery, I'm sure. Those items together just put Headlam Group PLC in a good position for the future. That brings us to the end of our presentation. I think we've got some time for some questions.
Chris, Adam, thank you very much for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions just by using the Q&A tab situated on the right-hand corner of your screen. While the company takes a few moments to review those questions submitted today, I'd like to remind you that recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via your investor dashboard. As you can see, we've received a number of questions throughout today's presentation. I please ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end.
Yeah, there's a couple actually that were pre-submitted before the presentation. I think although the presentation perhaps answered some of them, it might be worth me just sharing those. The question really is looking around, how confident are we that we can return to profitability? What do we need to do to create a sustainable business model? I think we've gone some way to answer that, but let me put a little bit of flavor on that. The question also talks to the board members as being shareholders as well. I think we are aligned with that. Certainly, myself and the rest of the board have been buying shares since the last time we reported. Of course, we're personally invested and on behalf of shareholders. We need to create and want to create a sustainable business.
That's why the transformation plan is so important that we move with pace, we move with ambition, and we create a simple and sustainable business for the future. The path that we've set out does get us there. It does show that we can return to a profitable business model by following the steps that we've laid out. That's the guidance that we've given and you may have seen. We've increased the ambition and the scale of the benefit as we've announced this time around. We know that that will therefore bring us back into a profitable situation going forward. That's the target for us. We've condensed that period because we realize that an extended period of losses is not a sustainable business. We've shortened the period to get back into profit and cash generation, and that is the goal of the board.
There's another couple of questions here that have been raised. Phil, for example, has raised a question around the segmentation of our results and how are we performing at trade counters and larger customers and things. If I just address all of those two or three questions there that sort of reference the same topic, what we've seen is as we've moved through this customer offer, we've seen quite a blurring of our channel lines really. Trade counters, as an example, is there to address and provide service enhancement to customers as well as a fulfillment channel for others. It blurs the lines between a standalone sales channel and a fulfillment convenience for other customers. We've seen that across the board really. We are able to track performance of individual trade counters and as a code report. We're able to see how they're performing in line with their expectations.
From an external perspective, in many cases, the customers that we're servicing, we are actually seeing growth with those customers because of the convenience of a trade counter. From an external perspective, they're the same customer. It's a bit blurring these lines, hence the decision to merge them back together. We are able to track the performance as a cohort of businesses. What we've seen there is that the target, broadly speaking, let's say it's £2 million a trade counter, broadly is that kind of target that we've shared with the market previously. It doesn't come in a linear way. Clearly, when you open a trade counter, you start with zero sales, and it takes time to build that scale up. That sort of S-curve, if you like, of market performance, of individual revenue performance per site, we are seeing being followed despite the tough markets.
I think there is a, when you open a new site, clearly you do to improve marketing, you get new customers, you get some existing customers coming to trade with you. We have seen the performance of trade counters broadly in line with what we thought we'd see. That's the sort of good news. As I said, there's been more of a blurring of the lines than we perhaps expected between the way that the customers interact with us and new customers are attracted to us. Broadly speaking, the sales of the trade counters are performing in line. The good news about that is that now we've finished the initial rollout, we've finished that phase of development. The future sales that are still to come through on that S-curve for maturity will drop through at a higher rate of profit than when we deploy the new ones.
As you deploy the new ones, clearly they have a low level of gross margin relative to their cost. Hence, it becomes a drain on the P&L, as Adam's described. Now we're through that phase, the revenue that we gather should come through at a higher drop-through profitability. I think on larger customers, it's been a bit of a mixed bag there where some of our customers have withdrawn from the markets, Homebase being one of them, SCS being another who have changed direction. We've seen some headwinds in the larger customers. Despite that, we've seen some growth, and that's because some of our partners have seen some success, like Tapi, for example, a customer that we serviced that's done well. We've been offering services to new customers. I think larger customers have done reasonably well with us, but it's a mixed bag because of people withdrawing from the market.
I think there are parts of that market that are still ahead of us. Some of the house builders and the larger contractors, for example, are still in an area of development that they're looking to get into. I hope that sort of answers those questions around how the individual channels are performing. I think the relevance for pulling them out separately is perhaps not so much there, but we are something that we look at certainly internally. There's another question here from James, which is around the kind of prolonged weakness in the marketplace and how do we right-size the business model so that we can create that sort of sustainable profitability.
I think that goes to the heart of my first sort of question that I raised around the pre-submitted ones, which is that is very much at the heart of what we're trying to do, is to create a sustainable business. I know and we know that the business that was there before had too high a cost base to service the market. Not only are we simplifying the business model and the proposition to customers, but we're reducing our cost to serve as well, reducing that break-even point. I know that we need to have growth as well, hence the focus on rolling out trade counters on large customers, as well as preserving the investment in the independent retail space. This isn't just about kind of cutting costs to get back to break-even. We also need to stimulate demand as well.
We certainly need to address the footprint and the overlap of costs and become a much more efficient business. That's at the heart of the transformation plan. Adam, any you'd like to pick out from here?
Yeah, there's a few related questions on property disposal. Let me just summarize the questions and then I'll cover the answers for those. The questions we've got are around what value of property disposals would we expect going forwards, which kind of acquirers could buy these properties and what will they use them for. Given the current uncertain macroeconomic conditions, is there potentially less appetite for potential buyers? What has held back disposals so far, if anything? Let me take those in order then. What capital can we realize from these property disposals going forward? In reality, it's not a fixed answer because we've got optionality here. We have a network where we had about, a year ago, we had 1.5 million square foot of warehousing space overlapping. We knew the legacy formation and structure of Headlam Group PLC meant that that was overlapping.
We've got warehouses near to each other too much, and that's suitable when you had the market volumes where they were 10 years ago, perhaps, but not with the size of market that it is now. It was duplicative. The strategy is to reduce that. We're down from 1.5 to 1.3 million square foot now. There'll be opportunities to take that down further. The key point here, though, is there's optionality based on what the market does. I've seen a few of the other questions here, which is around, what if there's a bit of a depressionary environment and the UK economy declines and the flooring market declines further for another couple of years? We can trim the network back further if that were to happen. The fact that we own a large proportion of the sites that we operate from gives us the optionality to do that.
I know I'm not quite answering the question, but the reason for that is it can flex according to what size does the network need to be to adapt to the market. There's a clear line of sight for us of double-digit millions of property disposals going forward regardless, and that could flex upwards if the market was worse than we expected. We've got one property disposal live at the moment. We vacated the Nottingham site, and that is in the latter stages of a sale process. There's another one that we're potentially looking at as a disposal. Thereafter, it will depend on market conditions, size of the market, what size is the right size for the network. If I just move on to the questions around who buys these, is there a risk that there's less interest now because of the macroeconomic circumstances?
These are all quite generic sheds, big sheds in good locations with good road networks. The appetite has been really strong, actually, when we've sold these. When we've been through any sale process, we've ended up having interested buyers in the double digits. We've done a first round, a second round, sometimes a third round. It's been that much interest. It's actually been quite hard managing the amount of people wanting to come around and do surveys on the site, actually. I'm confident there's strong interest. They're very good locations, generic sheds, generic format, can be used, very adaptable for all sorts of purposes. We've not seen any lessening in appetite over the last 12 months. The most recent one we did in July, for example, I think that had the most interest that we'd had in anything that we've sold over the last 12 months.
There was a question around what has held back disposals, and the reality is there hasn't. I've described we've had multiple buyers, lots of interested parties. They're generic. They're not particularly, they're not in strange locations or formats. They're generic sheds in good locations with good road networks. I'm not anticipating any particular issues on that front going forward.
If I just want to add, Adam is scrolling through some of the questions. I'll just pick up a question raised by Richard and another one by Domenico, which talks around, I suppose, this going back to the segmentation of our customers that I mentioned earlier. This talks about market share and whether we're favoring one segment over another. I think it's important to note that the question asked, do we have a renewed focus on big contractors instead of independent retailers because other people are having success in independent retail? Just for clarity, we haven't lessened our focus on independent retailers. I think sometimes I talk and we've talked about trying to expand our offering to other customer segments, and that can be misinterpreted as we're actually focusing on different parts of the market. That isn't true.
What we're trying to do is look to offer that great service and stock and simplify the way that we go about offering service to independent retailers. That remains the largest part of our business and is a key part of our strategy. What we're trying to do is develop additional service lines, additional customer propositions, to those elements of the market that we have low share in. That leads me on to Richard's question, which is one of share. Now, historically, Headlam Group PLC was very much focused on that independent retail space. Although that remains the case, I think the business is left with a relatively high share of the independent retail customers to them, and consequently, a relatively low share of things like the small contractors and the larger customers.
If you roll that forward and go back to Domenico's question, what that means is that when our competitor, someone like Likewise, is set up, has acquired around £100 million of sales and is trading, there's a competitor of ours, as are many in that space. It's a competitive area. Independent retail is the key marketplace that many of our distribution competitors target. Clearly, when you open in a new space and you develop a proposition against the market leader, there is a market share challenge there. Similarly, when we've opened up and deployed space in trade counters and we've put additional footprint down, we are seeing double-digit growth in trade counters as well, and that's taking share from other parts of the market. I think it is quite fluid where we have a low share, we've been able to deploy resources and gain share.
Where we have high share and it's a competitive space, I think there has been downward pressure on market share. It's not because we've lost focus on it, it's just because it's a competitive environment. It's important to us that we preserve our share in there. We've now started to make investments as a single business group. We're offering a simple, simple approach to customers, one place to go to see your product, and we've been deploying more stands into that marketplace. Hopefully that explains perhaps a misconception around where our focus is, but we're now able to invest as a single business back into all areas again.
There's a question here on the sale of the European businesses. I think there's a couple here. One is what price are we selling those businesses at now? The important thing to know on here is that this is a live process. There are multiple potential buyers in the process. Obviously, right now we can't comment on that because it's quite sensitive to the negotiation process, but subject to an appropriate valuation, we'd expect to complete that in the coming months.
are a number of questions here from Christian, which talk about kind of a look forward really on market volumes, how long it might take to recover back to profitability and things, and where the recovery program's coming from. Now, although we're obviously not going to comment specifically on any forecast or give any guidance, we have talked in broad terms to the scale of the recovery, and we've given some guidance at £35 million and broadly where that might come from and how long that might take. Brokers have taken a view over that, and then there's a consensus that exists for us that looks to get back towards break-even at the end of 2026 into 2027. That's the sort of timeframe that consensus has us on.
I think it's important to note that, as I said earlier, the key thing for us and the Board is to create a sustainable business model as quickly as possible and not necessarily dependent on market recovery. Although we think that market improvement will come, there is a degree of uncertainty about when that might happen, particularly around consumer confidence. It's important that we can take self-help measures, if you like, and be in control of our destiny to create a business model that gives us that sustainable profit. That's the focus, and that's why the transformation plan is so important because it gets us back into profitability relatively quickly. It comes from a mix of places. It isn't all about cost cutting. It's about right-sizing. It's about optimization. It's about smart trading. It's working with suppliers to buy better. Let's just buy in bulk.
Let's act as a single buyer rather than a fragmented buyer. Clearly, you have an opportunity then to improve margins as a result. This isn't just about cutting costs. It's about being more efficient and more effective and smart about how we do things as well. It's across a number of the lines of the P&L, including in fact interest costs and the way that we use our cash as well. It's across a number of items, but it's important that we can be in control of that, I think.
Question on pensions. Don't get many pensions questions, so it's always great to see one of these from time to time. The question is, could you speak to the pension deficits, specifically assets and liabilities, and likely prospective drivers going forward? Last year we did a pension buy-in, which is the first step towards an eventual pension buyout. At the buyout stage, it's gone. The pension liability is gone. It's eradicated in the balance sheet. What we did last year with the buy-in is essentially what that does is freeze in time your assets and your liabilities in the pension scheme. With those, that's now been done. What we did is we sold our assets to an insurance firm, Aviva. They then give us an insurance policy which pays all of the liabilities going forward, so that the assets and liabilities are essentially frozen in time.
They won't flap around based on movements in pension assumptions, etc. That liability was £2.1 million at the end of 2024. It's now £1.8 million. As we just settle down those remaining liabilities that are frozen in time, that will just eventually dwindle to zero. We'll do a full buyout probably in the next 18 months or so. The key point here is the volatility is gone. There is no risk that that £1.8 million becomes £5 million or £10 million or whatever. It's just a case now of settling down the final bits on that buy-in to get to the buyout.
There are a number of questions here. If I pick up sort of Michael and David, they talk about speed of action and right-sizing the business. There are a couple of questions here. Forgive me if I won't read all the lines out, but speed of action is important. I mentioned bringing on board some third-party support to help us accelerate. They add firepower, muscle, depth of experience, and they've enabled us to move at more pace with some analytics to help us get after some of the prizes. I think pace is important, and that's at the heart of the question. Some of these things by design take time.
I think, you know, where operationally right-sizing the footprint, when you've got a number of assets, as we do across the country, with a distribution center, quite often we might need to have two or three sites that become a single larger site. They need to be effective. Clearly, it takes time to work the way through that. Other areas where we are able to consolidate service to create a single site that might become surplus, it's typically a bit quicker to do. It does take time to plan that operational footprint realignment. Similarly, when you consolidate a number of businesses into a single entity, it's important that we do that with the minimum risk as possible. We go through a process of planning, mitigating risk, and taking out time to do that effectively. There is pressure.
We feel the pressure to do it quickly, but we're trying to do it safely with a sustainable outcome. I think that's at the heart of what we do. Certainly, the key question is, you know, we've been getting some help to get us there. We know and understand the scale and need to make that as quick as possible. Clearly, the root here is to create a sustainable cash challenge of business that then has longevity. Right here, right now, you know, we don't have that model in place. The transformation, the delivery of that transformation plan is critical to that success, which is why it's pleasing to be able to report an increase in the scale of that benefit. There's another question here from David on the new house. That's an interesting question.
We do some work around the market scaling and the size of the, you know, the opportunity for housing. Let's say there's 30 million dwellings in existence across the UK. The house-building program, whether it's one, two, three million, whatever it's going to be, is a relatively small element of the marketplace. What it does do is it creates stimulation for housing transactions. The two things that we look at: one, we can participate in the house-building process itself. A key part of our strategy is to look at how do we become a partner to house builders because typically house builders would buy from manufacturers. Actually, we can multi-product that with house builders to offer a kind of joined-up service model. That's one element. I think the second thing, and that's why we report on it from a data perspective, is housing transactions themselves tend to stimulate demand.
If house builds lead to further transactions, we can participate through an RMI refresh of those dwellings. That's where I think the bigger benefit comes for us, in servicing the existing housing estate and looking at offering RMI services in there. I think it's got a twin benefit for us. Anything that stimulates the housing market typically will be good for us. There are a number of questions here around use of capital and return of capital. Adam and myself talked about this a little while ago, and I think it's worth probably just refreshing the memories on this. Once we've got that confidence around that sort of we've created that long-term sustainable cash and profit generation, it comes back to our capital allocation policy. We've talked about that in the past. Buybacks, return to shareholders in some sort of dividend is clearly a feature of a cash-generative business.
That is something that then becomes costable. Right here, right now, that isn't something that we're participating in, as you might imagine. Certainly, that's back on the agenda once we generate that sort of sustainable cash position. That's certainly a feature of what we've seen before. Right here, again, buybacks become an attractive proposition given the share pricing. Matthias has asked a question. I think, Matthias, we might be seeing you in a couple of days, but this is around what are we doing to regain market share you've lost during the last few years? Again, I think the market share question that I sort of outlined earlier is one of, I think as a whole, market share is broadly flat for Headlam. What we have seen is we're taking share in certain areas of the market.
I talked about the growth in large customers and trade counters, and I think we've been losing a bit of share in the independent retail space. The area for us to address in terms of market share is that independent retail space. It's doing the basics well. We have competitors that are new, that are existing, and they offer stock, they offer service, they offer proximity. Some of those competitors have been deploying new space. Clearly, they offer a new competition in that environment. We just need to have the right stock, we have to offer the right service, and we need to invest in that customer segment. As I mentioned earlier, that is an area that we haven't necessarily invested in in recent times because of this sort of fragmentation of our branding and the need to pull it together into a single business offer.
Now that that's in place, we're able to invest in new POS, and we've committed £4 million this year in that rollout. As I said on the slides, customers are pleased with what they're getting. They love the stands, and they've requested more.
Okay, I think we are just about out of time. Any more questions, Adam, that's on the list? I think we're running out of time now.
Yeah. Just a quick look through.
There's a question about profitability of larger customers. Is this?
Yeah. I think the segmentation, as I said earlier, you know, we have different parts of the business with different levels of gross margin. We've talked about this in the past. Typically, larger customers may well have a slightly lower gross margin, but they have bulk service arrangements, or we might deliver to a large DIY store, for example, and we do that in volume. The marginal cost of service is relatively low. In those cases, the operating margins are broadly consistent with the independent retail margins. There's a scale play, of course. If we're able to drive more scale through the shared resource that an independent retailer brings, that technically has a higher drop-through. Larger customers give you good scale.
They give you solid margins, but it's less incrementally beneficial because of the leverage, operational leverage you get with other segments. That's just a feature of that part of the market. Okay, I think we're just about out of time. I think we've done all the questions we can for now.
Chris, Adam, thank you for taking the time to answer those questions you can have investors. Of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, which I know is particularly important to yourself and the company, Chris, could I please just ask you for a few closing comments?
Yeah, so look, thanks for taking the time to join the presentation today and to ask some good questions. We're not able to answer them all, unfortunately, but we try to do our best to answer most of them. It is a tough place. We're a tough market. We've had some ups and downs. It's pleasing to see a flattening in the market demand in recent times. It's great to be able to report bigger benefits coming out of our transformation, but we have to do that. I know that we have to deliver that transformation and get the business back into a profitable and cash-generative shape. That remains ahead of us. We've got a plan that does that, doesn't rely on big market recovery to do it.
I think the longer-term outlook, come back to that final slide, we deliver the strategy, we deliver an implementation plan, and the market will recover, and it gives us a really positive outlook for the future. Again, thanks for joining the call and all of your questions.
Chris, Adam, thank you for updating investors today. Can I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, and I'm sure it'll be greatly valued by the company. On behalf of the management team of Headlam Group PLC, we'd like to thank you for attending today's presentation and good afternoon to you.