Good morning, everyone. Thank you for joining us on this call this morning. Earlier today, we announced that we've agreed to acquire the parent company of Ultima Furniture Systems Limited, which trades as DIY Kitchens, for an enterprise value of GBP 390 million. DIY Kitchens is a high-quality, vertically integrated kitchen business which sells kitchens exclusively online, principally to end users, particularly those looking to self-manage the purchase of their kitchen. I'll explain why we've made this move, and then Jackie will take you through the financials. I'll make some closing remarks, and then we'll open the call for your questions. In DIY Kitchens, we're acquiring a highly profitable and growing enterprise with a proven business model quite distinct from our own trade-only full-service model, through which we can access directly non-trade customers, thereby expanding the Group's addressable customer base in the U.K.
By way of background, I've known DIY Kitchens for some time, so we know the business well. The business was originally a manufacturer of kitchens supplying wholesale to independent retailers. With further investment in manufacturing and distribution capabilities, the founders, Alf and Clare Ellis, then successfully transitioned the business to one serving end users directly online. In the last five years, the CAGR in sales has been 17%. The business has the founders' entrepreneurial spirit in it, which sits well alongside Howdens' own strong entrepreneurial culture. We believe DIY Kitchens is the best example of a vertically integrated online kitchen business operating at scale in the U.K. As such, DIY Kitchens will operate as a standalone business in parallel to our much larger Howdens trade-only kitchen and joinery business. In terms of size, it's an incremental acquisition for the group.
On a pro forma basis, DIY Kitchens would have represented around 5% of group sales in 2025. The economics in terms of revenue growth, potential margin, earnings per share and cash generation are all highly accretive for the group. There are three principal reasons why we see the business as being a good strategic fit for Howdens. First, DIY Kitchens is a successful business which gives us an additional route to market and expands the group's accessible customer base in the U.K. The business has grown rapidly by attracting an emerging customer type who is motivated to plan and design their own kitchen from the comfort of their own home, with control over the ordering process. The business achieves this through an online platform which purchasers use to design and order kitchens and provides high-quality made-to-order product with low selling overheads. For example, no brochures, but few large showrooms.
DIY Kitchens has consistently delivered strong growth and impressive returns and is highly rated by its customers with an excellent TrustS core. Secondly, like Howdens, DIY Kitchens is positioned for growth. It is well invested, scalable, and vertically integrated across its manufacturing and supply chain. While structured differently, both businesses have strong vertically integrated manufacturing and supply operations. DIY Kitchens operates around short production runs made- to- order, whereas Howdens manufactures to stock, predominantly long production runs. In-house manufactured product represents around 40% of the cost of goods sold, comparable to Howdens' level of manufacturing, and product quality is also very high. DIY Kitchens' online-only proposition is currently supported by two large destination showrooms adjacent to regional distribution facilities, where customers can make a trip to see impressive displays of product.
A third showroom is under construction in Livingston, in Scotland, and we see opportunities for further U.K. coverage with destination showrooms with broadly a two-hour catchment. Finally, following completion of the transaction, we believe the group will comprise of the two best business models in the U.K. kitchen industry. In recent years, both businesses have outperformed the kitchen market as a whole. The U.K. kitchen market is large and remains relatively fragmented, and with their distinctive and complementary business models, we see plenty of room for both Howdens trade-only and DIY Kitchens to continue to grow. Both models have efficient cost bases, making them strong, robust, high-growth, and high-margin propositions. Their respective manufacturing operations contribute profit and value with the ability to make sourcing decisions which balance lower product costs with overall supply chain availability, resilience, and flexibility.
These businesses are complementary because of their disciplined focus on servicing distinct customer bases with very different requirements. Howdens' offering is entirely dedicated to trade customers who build their own businesses off the back of our in-stock depot proposition, and our overall net trade customer account base has continued to grow year-on-year. Builders trade with Howdens time and time again because they value the full-service offering from stock to design. We offer customers confidential local pricing backed by credit terms that help them manage their cash flow, an in-stock proposition in more than 890 locations across the U.K., and we see this continuing to rise in size in the coming years, which are staffed by depot teams, including designers, on hand to support throughout the planning and the installation process. None of this will change.
DIY Kitchens will remain an online-only business focused on non-trade customers with a differentiated product range, which is made- to- order and displayed in a small number of destination showrooms nationwide over time. Many of you will know that I was the CEO of Screwfix for some time prior to joining Howdens. A key reason for Screwfix's success in my time there was its freedom to operate independently. We will run DIY Kitchens and Howdens as distinct and separate businesses so that each model can continue to focus on its well-defined customer base. This will ensure that there are unhindered growth opportunities for both businesses. While DIY will operate as a standalone business with its own infrastructure, we do see cost savings over time. These will be focused, at least initially, where there is a common approach to raw materials, sourcing, and machinery.
Finally, I would like to explain how DIY Kitchens will be managed within the group. DIY Kitchens leadership team will be led by Julian Lee as Managing Director. Julian has led Howdens manufacturing and logistics operations for the last six years and will continue to report to me in his new role. Julian also oversaw and led the development of our solid surface worktops business, including the cornerstone acquisition of Sheridan Fabrications, which we also purchased from an entrepreneur. Howdens Work Surfaces, or we now call it HWS, is now one of the leading suppliers of solid work surfaces in the U.K. The founders, Alf and Clare Ellis, will retire from the business on the completion of the deal, but Alf will continue to provide advice and support as needed.
Their son, Matt Ellis, who was pivotal in the launch and success of the online business, will become the DIY Digital Marketing Director, and he will also be a key member of the leadership team of the business. Now, I will hand you over to Jackie, who will take you through the numbers. Thanks, Jackie.
Thank you, Andrew. Good morning, everyone. I'll cover the key numbers, how we're funding the acquisition, and what it means for capital allocation. The deal enterprise value is GBP 390 million on a cash and debt-free basis. The consideration is GBP 292.5 million of cash, +GBP 97.5 million of new Howden Joinery Group Plc shares issued to the vendors. The enterprise value represents a multiple of approximately 8.5x of the last 12 months' EBITDA for the period ended 31 March 2026. The deal is subject to customary regulatory approvals. We currently expect completion during the summer. Financially, DIY Kitchens is a fast-growing, high-margin business with strong cash generation and attractive returns. In 2025, DIY Kitchens generated revenues of GBP 136 million and has achieved revenue growth of over 17% per year over the last five years.
In 2025, EBIT was GBP 37 million at an impressive EBIT margin of 27%. Cash generation is very strong, supported by customer prepayment, and the business does not offer consumer finance. Turning now to the balance sheet, capital allocation, and shareholder returns. The transaction includes DIY Kitchens' freehold property assets valued at around GBP 55 million. On CapEx, DIY Kitchens is already well invested in manufacturing. We will continue to invest where this supports growth and offers appropriate returns. The GBP 292.5 million cash consideration will be funded from existing cash balances and a new GBP 240 million bank facility. Howdens is a highly cash generative business with a disciplined approach to capital allocations, and DIY Kitchens is similarly cash generative. Following completion of the acquisition, the group will retain a robust balance sheet.
Howdens expects to remain in a net cash position post the transaction, and going forward, we expect our capital allocation priorities to remain unchanged. The group will continue to prioritize organic growth, maintain a progressive dividend policy, and will look to return surplus cash to shareholders while the group maintains a net cash position. The transaction doesn't change the group's existing dividend policy or impact the current 100 million share buyback program to be completed in 2026. We expect the acquisition to be immediately accretive to revenue, operating margin, and EPS, and to deliver returns on capital employed above our cost of capital from the outset. Finally, I wanted to confirm that Howdens will announce its half-year results on the 23rd of July 2026. Year-to-date trading has continued to be in line with our expectations, and we remain on track with the outlook for 2026. Thanks, everyone.
With that, I'll hand you back to Andrew.
Thanks, Jackie. Let me summarize. Howdens has a strong organic growth model in which we will continue to invest through our strategic initiatives. DIY Kitchens represents an attractive opportunity for us to access a new route to market. Like Howdens, it's invested well in manufacturing, strong vertical integration, high capture of margin in the value chain, scalable capabilities, and a deep, well-embedded entrepreneurial culture. It will sit very well alongside Howdens because it's considered a completely different proposition by both the trade and by the Howdens staff. We will have two of the best business models in our industry, and I am very excited to be leading this group with such a significant opportunity in both of these businesses over the coming years. Now I'll hand you back to the operator for your questions. Thank you.
Thank you. We will now begin the question and answer session. If you wish to ask a question, please call U.K. +44 (0)20 7544 1375 and ask to join the Howdens call. You may then press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press star then two. Your first question comes from Christen Hjorth with Deutsche Bank. Please go ahead.
Thank you. Morning, everyone. Congratulations on getting the deal over the line. A couple of questions from me, if that's okay. First of all, the DIY Kitchens growth over the last five years has clearly been impressive, and almost double that of Howden. If you look forward to the next five years, do you expect DIY to continue to outperform on the top line quite significantly? The second one is just on the competitive landscape for DIY Kitchens specifically. Are there competitors out there with that same model? If so, what do you sort of see as the key competitive advantages that DIY Kitchens has? Thank you.
Thanks, Christen, for your questions. Look, I think what excites me so much and why I love this deal, we're buying a distinctive customer base here, and it's appealing to a different set of customers. Howdens has got moats around it, which we've talked about over the years. It's built for trade. We've got a growing customer base of 540,000. The model which we are obsessed about is very strong. DIY has had growth. I mean, Howdens growth has been 9% compounded over the last five years, which would be pretty much industry leading. DIY is growing from a much smaller base, yeah.
17% and we'd be very comfortable with that sort of figure going forward because it's a very fresh new proposition that sort of makes me feel, think about early Screwfix, and I used to run that business, and I know what it feels like. I'm not sort of commenting from the sidelines. I ran that business, and I was in there when it got bought, shortly after it got bought from B&Q. Entrepreneurial, fresh route to market, this is something new. There isn't any real competitors doing the same sort of thing.
You'll go and you'll find a worktop supplier online doing specific things, but actually customers going online from the comfort of their home, for those customers who want to do it and get involved, build a kitchen plan, place an order, or take a sample and have it delivered to their home so they can see the color of the kitchen door in their home, is a fresh new experience. It's ticking a box for a number of customers. We feel very comfortable that this is a complementary model. Even the depots that we have around the DIY showrooms show no impact on sales. If anything, it's the opposite because more customers are coming to the area. They go into the showrooms, have a look around, and they go and place their orders online. DIY is very disciplined about its operating model. No home visits.
You get involved, you design your kitchen, you do it all yourself. Howdens is there to support the trade customer all the way through the journey. It's relationships, and the depot manager is important, and the account, the builders, the customer, the builder builds his business off the back of our credit, and our design service, and our availability, and all the work we've done on XDC. The biggest driver of convenience for the builders is the number of depots that we've got. I think it's wide open for us to grow this business very well. It's hard for others to bring their propositions online. I think this is a smart way for us to attack this online proposition. Of course, online is growing.
Given the strength of our business model and the opportunities to acquire additive stuff, I mean, Jackie and I all the time get businesses across our desk. We don't really see anything that's worth acquiring that's additive to our brilliant business model. DIY is one of these businesses that is additive, and it sits well, and it's perceived and seen as something very different by our teams in the Howdens business. Yeah, we feel there's a great pathway ahead of us here.
Perfect. Thank you.
Thank you. The next question comes from Emily Biddulph at Barclays. Please go ahead.
Hey. Morning, guys. Thanks for taking my questions. I've got two to go, please. Do you have any sense of what the market share is of this company amongst its total addressable market? How big the addressable market might be for this company? I suppose related to that, do you have any sense of what proportion of customers visit one of the two showrooms, and whether to give us a sense of the quantification of how much more of an opportunity there is if there are more showrooms rolled out? Are sales concentrated around those showrooms at the moment, despite it being an online business? Thanks very much.
Thank you. Thank you, Emily. That's very good. It's a smaller business. It's about 5% of our revenue, so think about 1% or 2% market share. This is both small and separate. We think of the Howdens business being in the trade part of the GBP 6 billion kitchen market. This is the other side, something entirely different. It's starting out in its journey on that side of the market. I think customers like to see product, and they're prepared to drive for it. I always think of customers being looking for something to do at weekends, and certainly I see, and I've been in the DIY showrooms many times over weekends, and of course in our depots in the surrounding areas. I think people like to touch and feel stuff.
There's a good proportion of customers who do want to go and touch it, but are very happy to go and place the order and do the ordering process as they go through it. All of this to learn. We've got all of this to learn about how we bring customers through the checkout, how we increase the conversion rate, and I'm skilled at doing that from Screwfix. James Mackenzie is our Commercial and Marketing Director, also came from Screwfix and ran Toolstation. We've got the skills in our team to do a good job on this business and grow it nicely.
Thank you.
Thank you. The next question comes from Robert Chantry with Berenberg. Please go ahead.
Hi, guys. Thanks for the call this morning. Just three questions from me. Firstly, could you just talk about the pricing dynamics of the two businesses in context, given the difference model i.e., do you expect more customers to go and compare and contrast different pricing availability? Secondly, on manufacturing, obviously it's well invested and kind of good in-house manufacturing. Do you see any opportunities to scale the different techniques that they have into the broader Howdens model? I imagine there's probably different levels of automation, different levels of manufacturing skill set. Thirdly, just on financing costs, Jackie, I know you mentioned expecting a net cash position post-transaction as the RCF in place. Is there any guidance you can give on potential interest impacts, any leases to think about, et cetera? Thanks.
Thanks. I'll deal with your first question first. The two businesses come from completely different places. DIY was really servicing into the studio independent type business as its core business before it went to end customers. Howdens serving trade customers. By the way, our pricing is set on Howdens. The sort of 540,000 prices set differently for each customer now, and that's the number of customers we've got. They're not really comparable business models. When you're sitting with one of our designers, and if a DIY quote is in front of them, it happens occasionally, but not very often. Howdens is a full- service model. It's home visited, it's designed, it's stocked, it carries financing for the builder or sort of credit for the builder in his account. We think of DIY as something entirely different that the trades don't really want.
It's very, very separate from it. DIY on its own is a price competitor, and we will carry on doing that. There's no change. Two businesses run entirely differently. In terms of manufacturing, look, Howdens is, and probably this is one of the reasons why we knew about this. Alf and Clare are retiring. We're very, very close to the kitchen industry. We are kitchen industry- obsessed. We know everybody in Europe. We know everybody in the U.K., and I sort of discovered and heard about this thing, and so did Alf and Clare got to know them. The relationship has been built for some time because on an acquisition like this, the cultural fit is absolutely critical. Particularly with Howdens, with such a strong entrepreneurial culture, having another business that's also sort of family feel entrepreneur, very important.
Alf Ellis is a fantastic manufacturing capable person, and he's a brilliant businessman, and he's built this fantastic business. He's invested wisely, and he's invested ahead of time to ensure that the business has got future capacity. He always has said to me, "I've always grown out capacity and built machinery ahead of time before the business needed it." That would be a very similar philosophy to us. That business does a very different thing on manufacturing than we do. DIY made- to- order, but DIY's business, their manufacturing production line, their automated cabinet production line, is probably one of the most modern cabinet production lines in Europe. It's known to be among the supply base as the most interesting thing to watch. We will carry on bringing our skills on kitchens around supply chain, and forecasting, and optimizing distribution routes to customers.
All the stuff that we're good at, we can bring to that business. Julian's very well-placed. Julian Lee being the MD of it. Very well-placed to bring those skills across. We'll continue on with our developments in Howdens, where we're expanding Runcorn, and we're investing into making another million cabinets. I think we're very well-placed to own this business and do a good job with it. Jackie?
Yeah. Then in terms of the questions on financing. Firstly, there's no leases in the business. We've purchased all the land, buildings, and property, and equipment. No leases. The facility is a three-year facility. It's at SONIA plus a margin. I'd note that both Howdens and DIY are very cash-generative businesses. We will expect to start paying down some of that debt as soon as we take it out. I'd also note that we believe that we can pay down the debt and continue with our capital allocation, so we will return excess cash to shareholders as well. In terms of looking forward to next year, Rob, I'd be looking at an interest around about the sort of GBP 13 million for next year, would be what I'd put in at this point.
Thanks, guys. Very helpful.
Yeah.
Thank you. Your next question comes from Geoff Lowery with Rothschild & Co. Please go ahead.
Good morning, team. Thank you for all the detail. It's very much appreciated. Two questions, really. The first is, can you remind us how big you think the retail or consumer market is relative to the trade market at this point? I'm just really trying to access your observation about the increase in addressable market for you. The second question is more one for Jackie. When you reference surplus cash, can you remind us or update us what that definition of surplus cash is, at which point you sort of think about buybacks in over time? Thank you.
Let's go with your one first there, Jackie.
Sure. Just in terms of surplus cash, pretty straightforward. It's the cash on our balance sheet, less the debt facilities that we've got. Certainly, Geoff, what we've done is we've modeled it out looking forward and believe that we can continue to pay down that debt and then also to return excess cash to shareholders. We can do both.
Yeah. I think your question.
There's no sort of intra-year working capital adjustments or similar in that view of surplus cash?
No. There's not, no.
Yeah. I mean, Geoff, broadly, we think about the market.
Perfect. Thank you.
Geoff, in your first question, yeah, we think of the market as a whole. Howdens has got about 540,000 trade customers. We think the market about GBP 6 billion. We think broadly half of it's retail. This business that we're acquiring, DIY Kitchens, has got around about 1%-2% the total market, so lots to go at.
Understood. Thank you.
One more question, please.
Thank you. The next question comes from Clyde Lewis with Peel Hunt. Please go ahead.
Morning, Andrew. Morning, Jackie. Couple of questions, if I may. One, I suppose, around areas that Howdens are currently strong in or starting to grow. Things like bedrooms, things like sort of overseas presence, and I suppose the solid surface offering as well. Are those areas that you can transfer into DIY Kitchens, and sort of take that business into, I suppose, a bigger market that they can serve in terms of the retail side of things?
It's a good question. I think the immediate opportunity for DIYs in the U.K. it's a relatively brand-new proposition to the market. It's online, and it's kitchens, and that's where it'll be for now. I think as we take this business, put operational improvements into it, and grow it out, there is so much for it to be done just as it is. Some of these opportunities may be right for later on. For now, it's kitchens, it's online, it's kitchen categories. There's nothing changes in the Howdens strategy whatsoever.
Okay. At this point, you wouldn't see the opportunities of taking DIY Kitchens into, say, Ireland or France, or into bedrooms at that point?
I think sticking to our knitting, and there's just so much opportunity within the U.K. There's only two showrooms, for example, and I see a few big showrooms. I don't want a retail business with multiple showrooms, multiple displays. I want this business to be performing well online. A few regional showrooms are important, and think big cities and think U.K.
Okay. The second one I had was probably around the historic performance of the profit levels at DIY Kitchens. If we look at Companies House, it certainly stepped up in 2025 from sort of, I suppose, mid-GBP 20 million levels in terms of millions of pounds . What was the sort of reason behind the step-up last year?
Yeah. It's basically a slightly different perimeter. We've bought the business, including all the property. If you look at the perimeter and Companies House, it had leasing costs in there. That's the biggest driver. The second driver is, clearly, as they continue to grow, as with Howdens, there's a big drop through to the EBIT line. That would be the second one. It's mainly there's no lease costs in our numbers.
Okay. Perfect. Thank you.
Yeah, t hanks, probably.
Thank you. This concludes our question and answer session. I would now like to turn the conference back over to Andrew Livingston for any closing remarks.
Thank you very much for your questions. I just want to iterate that this is a complementary business opportunity. It's a completely different proposition to Howdens. That Howdens is in great shape as we grow out our estate to 1,000, complete our refits, all our range developments, and our absolute focus on the trade remains a complete focus for us. This is a new leg growth in our journey. I'm here eight years. I think I'm extremely excited about this business. I don't hold any non-execs anywhere else because my focus is entirely on Howdens and now this acquisition. A rare day for us, really, because you very seldom find a business of this quality that's additive to the group and fits in such a complementary way. Thank you very much for your support.