Okay, good afternoon and welcome to our Capital Markets event. It's great to see so many people in the room, and welcome to those of you joining online too. Now, having met with many of you over the last few months, I know there's a great deal of interest in hearing about the future direction and the growth opportunity for the Marshalls Group, and I'm sure that myself and the team will give you that clarity through this afternoon.
So, over the next couple of hours, I'll reflect briefly on how Marshalls is evolving from its heritage in landscaping to the broader and more diversified group of businesses that it is today. I'll outline the size of our markets, our position within these markets, and the growth drivers that will positively impact these markets and our businesses through the next cycle.
I'll then talk through the overall Transform and Grow strategy before handing over to Simon and the business unit Managing Directors to bring their individual business strategies to life. Justin will, as normal, summarize our investment case and our targets before we bring the formal presentations to a close. What I will say is there will be a break for refreshments in the middle of that so that you're not sitting down all the time.
At the end, there'll be a chance to grab some refreshments and to circulate around the room and visit the stands and chat to many of the Marshalls colleagues about those products and solutions that will unlock the growth for the group. I'm joined by a team of presenters today: Justin Lockwood, our Chief Financial Officer, and Simon Bourne, our Chief Commercial Officer, both of whom you know well.
More importantly, I'm also joined by the business unit Managing Directors, Susan Barclay, the Managing Director for Marley Roofing, Stuart Elms, Founder and Chief Executive of Viridian Solar, who has graced us with a suit today, which is the first time I've seen him in a suit since I've known him for a year, and Paul Curtis, our Managing Director of Water Management, and Dean Harris, our Managing Director of Bricks and Masonry. I'm also pleased to welcome Nick Platt, who joins us on the 1st of January to become the Managing Director of our Landscaping Products business. Welcome, Nick. I know he's going to get up and say a few words later on.
I'm also pleased to welcome Vanda Murray, our Chair, and Diana Houghton, one of our non-exec directors who are joining us today, as well as many colleagues from across the Marshalls Group who you'll get to chat to later. So, let's crack on. Marshalls is evolving from its heritage in landscaping to become an increasingly diversified group of businesses through the acquisition of CPM Group in 2017 and Edenhall in 2018, and by the larger acquisition, Marley Roofing and Viridian Solar in 2022. And it's worth noting that we disposed of our Belgian landscaping business in 2023 so that we're primarily focused on supplying products and solutions to the U.K. construction and building products market.
Now, we have a proven track record of delivering market outperformance and profitable growth over a long period of time, and those acquisitions that we've made have only strengthened the business. Now, the first chart shows how we have grown our profits and outperformed the ONS construction output through the years up to the pandemic in 2020. And while the performance since 2020 has been a little less strong through the subsequent volatility and downturn, the business foundations are still strong. We've controlled our cost base, and we've ensured that we've maintained that strong cash flow conversion. And our strategy of diversification has definitely made us a stronger, more adaptable, and resilient business and provides a platform to unlock growth and value creation for all our stakeholders.
Today, we have a more balanced business, balanced in exposure to our end markets, with just about, for just over 40% of our business exposed to new housing and about 30% to both RMI and the commercial and infrastructure markets. And on the right-hand side of the chart, you can see those end market exposure across our reporting segments of landscaping products, roofing products, and building products. And I think what's really important to note is we are far more balanced in the revenues coming from those different reporting segments than we were 10 years ago when over 85% of our revenues came from landscaping alone. So, back in March this year, I shared some first impressions about the business. I talked about the strength of our leading brands and our national scale.
I talked about the great talent and experience of our people and our reputation for leading in sustainability. Without doubt, some really great foundations. But we have also, as we've got underneath the business and understood the changing markets, the changing customers, and our competition, we've clearly recognized the underperformance in our landscaping heartland, which we outlined at the half-year. And even with the backdrop of challenging end markets, it was clear that we needed to take improvement actions in order to address this performance. And I'll return to this in a moment. And over the last six months, we've taken the opportunity to undertake a full strategic review of the business, or lifting the bonnet of the business, as I refer to it.
We've done that to better understand our end markets, our customers, and our competition so that we can be clear on our direction and the strategies that will improve performance and unlock that growth. Let me return to that underperformance in landscaping that has occupied a lot of our focus over the past few months. Let me say first that this is a very strong business, and I'm very confident in our ability to not only improve that performance but to grow this business. I know Simon Bourne is going to come and talk to you a little bit later about that strategy, and he has spent a lot of time in the last few months getting under the skin of that business. However, we clearly needed to take some improvement actions, and all of those are already underway.
We focused on bringing in some new experience and talent into landscaping. As I mentioned, Nick Platt joins us on the 1st of January from Baxi to lead that business. Stacy Temple, who is also in the room somewhere, has joined us as the Marketing Director for the Marshalls brands across the group, and she has a wealth of experience in building products and construction, having spent a lot of time in Saint-Gobain. And we're reorganizing our sales team to strengthen our focus on specification into our end markets. And we've created a fourth sales region so that we're actually going after business where it is on the ground. And we've aligned our technical specifications and sales teams to ensure that we're converting that specification really well.
Really importantly, we've established a new commercial operations team under Tom Foster in order to focus on the critical disciplines of margin management. We're actively pursuing portfolio simplification, which I've spoken about in the past. We've completed a review of our pricing architecture and our portfolio architecture, and it will result in somewhere around 25% net reduction in the number of SKUs across landscaping. That's net of the new products that we'll be bringing to market, which means we're taking out of our business around 300 SKUs. That's really important because the natural thing we'll do off the back of that is ensure that we're optimizing our manufacturing network to support that new portfolio and to drive the efficiencies into that network as a result. We've also been reinvigorating our senior customer relationships.
Now, myself and particularly Simon have spent a lot of time out in the market with our customers from right the way across our different channels. And what's been clear is we've just not been visible and proactive enough with them, and that is changing very, very quickly. So, even now, some of those actions are starting to take effect. In our quarter three trading update, we talked about the like-for-like rate of contraction slowing to 13% through Q3 from 19% in the first half of the year. And whilst the actions we're taking will get more traction as we travel forward, it is evidence of the progress we're already starting to make.
What I hope is when you leave today, you'll be clear on these key takeaways that are on the slide: that we have a diversified portfolio that's exposed to attractive and scale-end markets with strong growth drivers and near-term structural and regulatory tailwinds. That we have enviable market positions with number one or number two leading positions in all the markets that we operate. That there is significant headroom for growth in our addressable markets from the portfolio of businesses that we have today. And we'll invest to enhance our capability and leverage the inherent strengths we have in our nationwide network and our operational leverage. And we'll also see material profit improvement delivered by the revenue outperformance and the operational leverage that comes with that.
As a result, this business will remain a highly cash-generative business, and in fact, the execution of our strategy should deliver material increase in our free cash flow. Let's start with our markets. Today, our addressable market is of significant scale. The businesses that our market serve is around GBP 3.5 billion. Well, actually, when you get under the skin of that and you start to look at the businesses that we have that go across landscaping, roofing, energy transition, Water Management, bricks, and masonry, and we think about the competencies and capabilities of this group, the actual size of our potential addressable market is double that at about GBP 7 billion.
We have significant opportunity to drive profitable growth from our existing portfolio of businesses and organic innovation. Markets that are exposed to some significant long-term growth drivers associated with climate change mitigation and adaption.
The need for low-carbon solutions as the entire world and the U.K. drive towards net zero carbon and tackles the challenge of reducing greenhouse gas emissions and embodied carbon in the built environment. The need for green urban spaces that tackle the challenges of increasing urbanization through surface water drainage, greater biodiversity, and greater resilience in the built environment, and the need for better Water Management and drainage, which, if you look at the weather outside today, is increasingly important as we experience more frequent severe weather events that often overwhelm an aging infrastructure in U.K. towns and cities, and in the nearer term, these are markets with structural and regulatory tailwinds that will fuel our revenue growth across our businesses.
You'll see this chart used in the business unit strategy presentations, and it is, in fact, a summary of which near-term tailwinds impact each of the businesses across the group. Now, when we look at new housing, there is clearly a structural shortfall in the supply of new housing in the U.K. And this new government has set a very ambitious target to deliver 1.5 million new homes in this parliament. That is a huge target. It equates to about an 8%-9% per annum increase in the number of new houses every year through this parliament.
So, look, if I'm to be pragmatic about this, given where the level of house building is today, if we were just to get back to building around 250,000 to 300,000 new houses a year by the end of this parliament, it would have a significant impact into our group businesses when you remember that over 40% of our group is exposed to new housing. And investment, oh, I'll just come back to that chart. And when we think about water infrastructure, the investment into water infrastructure will be at a scale that we've not seen before, with nearly GBP 90 billion being invested by the water utility companies through the AMP8 cycle. And I know that Paul Curtis will touch in more detail on this in his presentation.
Regulation is clearly driving energy transition at pace through the Part L and through the forthcoming Future Homes Standard in our residential housing businesses and in the public sector through Warm Homes Fund and the decarbonization schemes that fuel growth in both our roofing and solar businesses. Beyond that, this government has also committed over GBP 130 billion in capital investment into commercial and infrastructure that will see this country build new road and rail networks, invest in new towns and green energy projects, projects that will benefit many of our businesses. We have enviable market positions with very strong and differentiated propositions, with significant headroom for growth, which is indicated by the very large gray areas that you can see on this simplified share chart.
From our powerhouses in Marshalls Landscaping and Marley Roofing, where even as strong number ones with shares of over 40%, we see opportunities for share growth in profitable parts of the profitable segments of the market through a cyclical recovery. And to solar, where regulation will drive significant growth in the market, as Stuart will talk about later. And we believe that we can take huge advantage of that growth through our leading brand in Viridian Solar, which also has shares of over 40%. To Water Management, where we not only believe the market will grow through investment in new housing and water infrastructure, but where we have real potential to grow. From our strength in new housing to start leveraging that competency and capability into the very large water infrastructure market.
Finally, in bricks, where we are the number one lower carbon concrete bricks manufacturer, and we see significant opportunity to drive penetration in win share in a very, very large market. Marshalls will transform and grow through the next cycle, unlocking our potential for growth.
From where we are today, an increasingly diversified group of businesses that's moving beyond its heritage in landscaping with a portfolio of strong brands, a reputation for leading in ESG, a strength in operational excellence with a national network, with good customer relationships and knowledgeable and passionate people, with a commercial and large group functions business operating model to a group that has real strategic clarity and ambition and is known for its leading brands delivering pioneering products and solutions to our ESG and particularly our carbon leadership, and realizing the synergies and the operational leverage of our nationwide manufacturing and logistics network to developing powerful customer relationships where we grow business together and we create a high-performance culture that releases the potential of those knowledgeable and experienced people.
We move to a really clear business unit operating model where our teams are clearly aligned to deliver against the strategies and plans that we'll highlight later today. Through that change, we'll deliver medium-term targets that will see us as a group deliver 2%-4% market outperformance and deliver at least 15% operating margin through the cycle. Let me now start to outline our transform and grow strategy. I'm going to start with a video that captures the new purpose of Marshalls, mainly because you've just already heard me talk for about 10 minutes, so I want to give you a little bit of a break. This is a video that I would primarily use internally.
But what I think it captures is how we impact the world with the products that we make and the impact it has upon the people that use the spaces and buildings that we help to shape.
At Marshalls, we've shaped the world we live in for over a century. But we do more than make building products. We create spaces where life happens. As pioneers of yesterday, today, and tomorrow, we believe that every space we craft should inspire and endure. We breathe life into resilient and beautiful built environments, creating buildings and spaces where communities flourish and individuals are uplifted. Within our walls, songs are belted, hearts are melted, families come together, and memories are made. Under our roofs, businesses flourish, friendships grow, and communities come together. Beneath our feet, cities thrive, communities are protected, and stages are set for families and friends to gather.
With decades of know-how, a pioneering spirit, and a deep commitment to care, we shape spaces that uplift communities and inspire generations. At Marshalls, we don't just make products. We empower people to craft the stages where life's greatest stories unfold, where everything we do supports the stories of tomorrow. Marshalls: Building Tomorrow's World.
I think that video really brings to life the impact that we have on the world. That purpose is developed from the work of over 100 colleagues across our business. We talked about the DNA of Marshalls, but it also reflects the huge pride and passion that exists within this group right the way across all of our businesses. Look, over the last few months, we've spent a lot of time talking to our customers, understanding what they value about us deeply and what differentiates us from our competition.
On this slide are just a few of many, many quotes that I could choose that talk about the things that the customers value about us and differentiate this business, from their willingness to pay more for the quality we offer, from the breadth of range and offer that we provide to our different customers, to the unquestionable support, the flexibility, and the help that we give to our customers, both when we're selling to them but also in the after-sales service too, to the sustainability assurance, which is becoming increasingly important for many of our end users, to the quality of the products and services and the accreditation that we give that means people can rely on the products that they use in the built environment.
I could choose many, many more examples of the things that our customers say about us. What's really clear is that there is a unique set of capabilities that our customers value, from our leading brands, our market-leading brands and solutions, solutions that are consistently recognized for their range, their quality, and their service, to the best-in-class technical design and support, that technical expertise and know-how that gives us an understanding of the building standards not just of today but tomorrow and provides unrivaled expertise to all of our customers and to our carbon leadership, that commitment to materials innovation coupled with our nationwide network that makes us a low-carbon supplier of choice, and these are the unique set of capabilities that our customers value.
We're very clear on the key customers in our value chain who influence the specification and value that unique set of capabilities, whether we're talking about builders, merchants, landscape designers in our residential landscaping business, or whether we're talking about our tier-one contractors and our builders and the house builders themselves in influencing in new housing and in newer areas that we'll grow into, tier-one contractors, design engineers, and water utility companies who we know all value that unique set of capabilities. What we know through our research is that they will increasingly value that set of capabilities over the coming years. You will see in each of the business unit presentations their specific value chain and the customers that significantly influence the specification of those products and solutions in their specific businesses.
At the heart of our strategy are the customers who value that unique set of capabilities, our leading brands, our best-in-class technical and design support, and our carbon leadership. It's underpinned by investing in our enabling foundations of business-wide enterprise excellence, leadership in ESG governance and standards, and investing in our people, our organization, and our culture. Over the next few slides, I'll bring to life those pillars of differentiation and those enabling foundations. We'll start with those leading brands, those leading brands that provide solutions across the whole of the built environment, from residential through commercial and retail, both above ground and underground. This short animation can bring to life those solutions better than I can talk them. Beyond our leading brands, our best-in-class technical and design support helps differentiate us and creates value for our customers.
From things like pavement engineering, where we match the environmental benefits with cost and performance for sustainable landscape and drainage solutions, from the custom design and build of wastewater and sewer outflows to the roofing dry-fix ventilation systems, a market that Marley actually created, to the Viridian Solar wrap-around design and technical support that is so highly valued by house builders, and in low-carbon concrete bricks, harnessing our design expertise to deliver unrivaled aesthetics and durability in our concrete-facing bricks. These are just a few of the many, many value propositions that are built on our expertise in technical design and support. Our last unique capability that helps differentiate us is our carbon leadership. We continue to invest in pioneering and innovating our materials.
For instance, our tri-blend technology in concrete block paving and driveways that uses 60% less cement than our competition, the CarbonCure technology that we harness in bricks, and investing in supplier partnerships and innovative collaborations that will continue to put us at the forefront of materials innovation, and all of this coupled with a nationwide network across our manufacturing and supply base that delivers a carbon miles advantage and reinforces that leadership. I could choose all sorts of illustrations. I've chosen one to compare: an environmental product declaration for our market-leading Marshalls Tegula product, which is used in many driveways across this country, and when you compare that to a leading competitor, we have over a 40% lower carbon advantage. And we know that is hugely valued by the customers that we serve.
So, beyond our unique capabilities, we'll be investing in our enabling foundations, in our business-wide enterprise excellence, investing in technologies and systems to enable data-driven business intelligence, investing in best-in-class websites and CRM systems, making it easier to do business with and win business with our customers, and simplifying our business through investing in our ERP systems to drive more efficient central business processes. These technologies are key to enable our enterprise-wide operational and commercial excellence programs and ultimately ensure that we are building powerful customer and supplier partnerships, delivering sustainable cost and efficiency gains, and driving increased colleague engagement right the way across our group.
And we also remain totally committed to leading on ESG standards and governance as a responsible business, not just because it's the right thing to do, but because it also differentiates us and helps us to win business as it becomes increasingly important to our customers, whether that's our SBTi approved net zero across all emission scopes by 2050 or the nearer-term targets and retaining our position of one of Europe's climate leaders, continuing to reduce our carbon footprint. We've reduced that footprint by over 54% since 2008 and providing transparency across all our products through environmental product declarations and ensuring that we retain the Fair Tax Mark and a reputation as a living wage employer. And equally important is the comprehensive human rights due diligence that we have.
Just an example of that in solar, where we go back five tiers within the supply chain, shows the responsibility that we take to ensure we're sourcing our products from the right places, and Stuart will talk more about that in his presentation, and absolutely critical to our transformation and growth is investing in our people, our organization, and our culture, from investing in our leadership talent, which has already begun through the formation of a senior leadership group known as the Momentum Team within our business, who have all been going through a leadership development program over the last six months and will continue to go through that program as we develop role model leaders who have the skills to execute our strategy and drive forward the success.
And we're supplementing that with bringing in new talent like Nick and Stacy and many others across the business to strengthen that leadership. But it also goes beyond the leadership into all our colleagues across the group, investing in their learning and development so that they can have strong careers and strong career opportunities through the business, from the hundreds of apprenticeships that we have across the business to accredited learning programs where our senior leaders go through Cranfield School of Management, or we welcome the engineering apprentices as I did just two months ago, our third cohort of engineering apprentices who are so vital to our business. And then when we think about what does that do? Well, it helps us with our colleague engagement.
That's vital if we're to be successful, from the monthly leadership calls to the town hall and business briefings that we give, and importantly, to the listening that we do to our employees through the Employer Voice Group, a group that myself and other exec members attend, but also Vanda and Diana and some of the board also attend that. So we're really clear on what our colleagues are calling for. All of this helps us to create a high-performing culture based on the principles of performance management that is diverse and inclusive, where health and safety is front and center and where we recognize and reward success. It is critical that we invest in our people in order to drive the transformation and growth that we want.
So, as part of our transform and grow strategy, it does require that each of our businesses deliver against some core strategic imperatives, from our brand powerhouses in Marshalls Landscaping and Marley Roofing to the three growth engines of Viridian Solar, Marshalls Water Management, and Marshalls Bricks and Masonry. They all have clear strategic imperatives. So, Marshalls Landscaping driving greater value from the national specification pool model to Marley Roofing defending specifications in its heartlands and driving growth through roofing adjacencies to Viridian Solar, leveraging those tailwinds to accelerate the adoption of solar. And in Marshalls Water Management, repositioning from our strength in new housing to access the significant headroom and growth that's available to us in water and infrastructure. And in Marshalls Bricks and Masonry, accelerating that adoption of lower-carbon concrete bricks in a very large market.
The group plays its role in enabling that strategy and driving that transformation. Our business unit operating model will need to evolve. Today, we have commercial teams with quite large central group functions. We'll evolve to a clear business unit operating model where we have clearly aligned marketing, sales, finance, and operations teams who are responsible for delivering against their strategies and their plans and delivering the performance that we set out. They'll be supported by group centers of excellence across our HR, our technical, IT, procurement, ESG, and health and safety teams. That equally applies to our mortars, screeds, and aggregates business, which is a regional business that is a strong player and will grow through a cyclical recovery.
The group plays its role in ensuring that we're enabling that strategy, we're prioritizing resources, and ensuring that we're realizing the synergies that we can see across our group. That's our strategy and outline with customers who value that unique set of capabilities at its heart, those capabilities of leading brands, best-in-class technical and design support, and carbon leadership, underpinned by these enabling foundations of business-wide enterprise excellence, leadership in ESG governance and standards, and investing in our people, our organization, and our culture.
Through that strategy, we'll deliver that 2%-4% market outperformance across the group and a margin, an operating margin of at least 15%. Importantly, I hope that will provide the context for what comes next, which is far more important as far as I'm concerned, which is talking about the business unit strategies that will deliver that plan. I'd like to hand over to Simon Bourne to take us through that.
Thank you, Matt. Good afternoon, everybody. For those that don't know me, I'm Simon Bourne. I'm Chief Commercial Officer for Marshalls. I'm going to take you through the business unit strategies in turn. I'm going to be ably assisted by the business unit Managing Directors as we go through each one and go through the strategic imperatives. Before I get into that, I'd just like to formally welcome Nick Platt to the team and let Nick introduce himself to all of you. I'm sure you'll be able to catch up with him later. Nick.
Hi, everybody. I guess it just comes to me to say thank you for coming to my induction. It's the best induction I've had to any business. Super exciting times to be joining Marshalls. I think as I got to know Simon and Matt, some of the things that we were talking about through that process, to see it come to life in such a real and tangible way, and not only that, but to see the level of investment that's being made in the future.
I think for me it really underlines and underpins what has been a fantastic opportunity for me to join the Marshalls business at a very exciting time, so as Simon said, if you want to come and have a chat with me later on and tell me all about yourselves and a little bit more about the business, I'll be looking forward to it. Thank you very much.
Thank you.
And welcome.
Thank you.
Okay. So, what we're going to do, Matt has already introduced the team in turn, and we're going to walk through each of the strategic imperatives. Now, it would have been unfair to Nick to have him presenting today. So, I'm going to take you through the Landscaping Products business unit. But myself and Susan, Susan Barclay, will cover off the powerhouse brands of Marley and indeed Marshalls Landscaping. And then Stuart, Dean, and Paul will go through each one of the growth engines in turn. So, onto Marshalls Landscaping business unit. I mean, you can see from the images there on the screen the impact that the Landscaping Products business unit has on the built environment in both a residential and commercial context. You see our products and solutions in a residential setting, in driveways, and indeed patios.
And when you look at public spaces such as commercial offices, schools, and colleges, we're also impacting the public realm. And you can see a notable project there at Trafalgar Square. And that is where we provided some natural stone, indigenous natural stone to be laid in that scheme. And I'm sure for many that have been there, it is extremely impressive. So, in summary, Marshalls Landscaping is synonymous with a quality product and indeed service. And it is really a brand powerhouse.
We are going to drive greater value in this business unit from our distinctive national model. So, the charts on this slide do reinforce the importance of the Landscaping business unit. We see a number one market leading position with regards to concrete products. And that is complemented by significant presence in natural stone and porcelain. The competition in this area is on a regional basis.
We do not see one single player in terms of a competitor. The end market exposure is well balanced between residential and indeed commercial sectors. The share of landscape revenue within the group is extremely significant at 48%. When you look at the revenue splits within the business unit itself, concrete certainly dominates with 76% share. This is underpinned, and I must stress again, a nationwide manufacturing model, which should not be underestimated in terms of its importance. Therefore, a true brand powerhouse. We've certainly got room for share growth throughout the recovery cycle. We've got a brand powerhouse in landscape that is well placed to benefit from the recovery. This recovery will not only be structural. It will be supported with tailwinds due to regulatory change. Where will we play?
We all know the requirements for new housing are well documented, and indeed so are the targets. And we do have exposure in this area. And we have relationships with these customers. And that will certainly serve us well throughout the cycle. Investment in Water Management across the U.K. and within infrastructure itself offers significant opportunities. We're already engaged with local authorities and tier one contractors to benefit from these requirements. And this, of course, will be underpinned with further product innovation. Finally, investment in commercial infrastructure across the U.K. gives us an opportunity to specify our products and indeed our solutions. And if we think back to the earlier slide, this end market accounts for around 42% of revenue within the division and attracts much more value-add products. So, therefore, it makes it an extremely attractive segment for us.
Matt referred to the value chain and, more importantly, the key influences within the value chain, and this is really important in both the residential and commercial sectors for landscape, and we will continue to focus on these relationships as we move forward. There will, however, be even more focus given the people changes that we've made and, in some areas, a slight change in our approach, and we'll cover that more when we get to the organizational changes, so as Matt said, our winning proposition is simple. We've got leading powerhouse brands supported by a distinctive national model, and that gives our customers surety of supply. We talked about best-in-class technical teams that unlock material and product innovation and a design team that provide installation solutions and indeed project support.
We've always led the way regarding carbon reduction, providing full transparency of our embodied carbon performance through our environmental product declarations, and let's not forget the carbon miles advantage through our distinctive national manufacturing model, so we're looking to re-energize the core elements of our historical success. It definitely is a winning formula, and Matt addressed some of the immediate recovery actions that we've got in play, and they're very much underway.
Nick Platt, as we said, is joining us in the new year as Managing Director for the Landscape business unit. He's got a wealth of senior management experience, more recently at Baxi. Stacy Temple, we've already mentioned, joins us as marketing director for the Marshalls businesses and will be focused in this area particularly. Again, a wealth of experience from senior marketing roles, and she certainly knows the channels that we operate in extremely well.
Somewhere in the room, we've got Mike Roden. He comes back to the business after a break away in another business. He joins us as Trading Director. And he will be particularly focused on commercial and infrastructure sectors. Keith Brophy, again, an individual coming back towards Marshalls. He's not with us today, but he joins us in January. He will be particularly focused on our merchants and indeed our installers. Tom Foster, Matt alluded to earlier, will move into a new role as Commercial Operations Director.
And he will focus on margin management and commercial excellence. And we've got a number of other experienced trading managers that are coming back into the Marshalls business. They will give us knowledge and experience and certainly give us that boots on the ground to focus on where the business is. So, as you can see, we've certainly been building a Premier League-winning team.
But it's not just about the appointments. It's also about reorganization to focus on those key specification end markets. We've added a fourth region, as Matt has said. And that will go across the central band of the country. And that will allow us to get focused on our customers and go where the business is. And all of our teams are now engaged, aligned, and ready to deliver our strategy. We've been reinvigorating relationships.
I have personally engaged with customers at a senior level. And as we build the teams, we will continue to establish contact points at all levels across both residential and indeed commercial sectors. The engagement and feedback from our customers has been enlightening and informative. And it is very clear we've got work to do. But what I can say, however, is that our customers want to work with Marshalls.
They recognize us as a market leader that's got quality products and services. And again, this is underpinned with our distinctive national manufacturing model that gives them surety of supply. Finally, we are on with our range simplification, ensuring we have the right products vertically from a good, better, and best perspective, but also horizontally regarding too many SKUs. Again, Matt referred to that earlier.
So, the work we have started that is already underway allows us to focus. And it is aligned with what we want to do for the future. And it's part of the winning formula. So, whatever we've done in the near term certainly supports those medium-term goals and objectives. So, in essence, we've got a brand powerhouse in the Landscape business unit with an enviable market position. We've got an opportunity to drive greater value and share growth from the distinctive national specification model.
Our marketing products and sales teams have clear plans. They've been reorganized, and they certainly have focus. We will reinforce our brand position in our commercial heartlands, drive share growth in some higher margin commercial segments, and these certainly present headroom opportunities for us. We'll also strengthen our brand position and drive share in our residential segments. So, how are we going to win in commercial? Well, I would describe this slide as our flywheel for success. We do have a similar model later on with reference to residential sector. So, the heart of this chart is our unique national model. I must stress again, this is key. If you think about Landscape as a brand powerhouse, as we move around the model, it should resonate with you.
So, starting with our distinctive proposition, range, service, and carbon leadership sets us apart from the competition in both commercial and residential sectors. However, in commercial, range clarity alongside a clear value-add proposition is really important and key to success. We absolutely understand the value chain and, more importantly, who influences it. And we will continue to build on these relationships.
Again, tier one contractors, architects, designers, local authority. It is all about specification and customer relationship management. We're targeting the upstream client specification with an optimized portfolio and a very, very clear pricing architecture. And we will generate margin improvement over time through value-add mix, volume growth, and economies of scale. Additional focus here will be on new product development and innovation to boost the value-add mix. So, in summary, we're going to grow share and profitability by investing in attractive commercial specification-led segments.
We've set ourselves up to do this internally with the right people and plans. And our customers recognize us as a market leader and brand powerhouse. We have a unique national manufacturing model that underpins it all. It's now all about focus and indeed delivery. So, thinking about the model and areas where we've been successful, I'm going to share a couple of case studies with you. We won a low-carbon project in Westminster City Council.
And it's a great example of securing an upstream specification if you think about the model with a customer. But this couldn't have been done without working with the contractor alongside that, who is, in this case, a key influencer. This proposition was extremely distinctive inasmuch as it relied on our paving engineers to work closely with both the customer and the contractor to reduce not only paving thickness but also base material.
Plus, don't forget that carbon miles advantage. The overall carbon savings on this project were around 79%. And when we think about materials per meter squared used, it was around 46%. So, again, that was managing through the pipeline with key influencers, specifiers, and making sure we've got that distinctive model in place. Again, thinking about the model, the flywheel of success, Battersea Power Station was a cost and carbon challenge. Again, we work with a customer and contractor directly.
Another good example of securing upstream specification and managing it all the way through the pipeline. We maintain quality and aesthetics while reducing cost as well as reducing carbon. And this was, again, done through paving engineer support and value-add products off the Dual Block plant. Plus, again, I must stress the carbon miles advantage through that distinctive national model. Again, a great example of our distinctive proposition.
So, how are we going to win in residential? And again, I refer to the flywheel of success. And you'll see a number of consistent themes. We see the unique national model at the heart. And again, this is key. The distinctive proposition is consistent range, service, carbon leadership setting us apart from the competition. However, simplicity is particularly important in this channel. The key influencer relationships here are all about visibility, support, and training with landscape architects, installers, and our merchant partners.
We need to be present in the market. Securing design-led specification is all about investment in marketing and installer loyalty. We'll do this through the relaunch of our installer scheme. And we'll get boots on the ground to support our service to our customers. And the margin generation over time, again, will be done through value-add mix, volume growth, and economies of scale.
However, in this space, there needs to be value-for-money propositions through our merchant yards as well as value-add products through design-led specification. So, again, in summary, we will strengthen our position in these residential markets by leveraging our distinct national model and winning design-led specification. Again, I've got a couple of case studies to share with you. And this success story is a great example of working with an architect and residential house builder to deliver a blend of materials both front and back of the scheme. And this is a grade two listed site.
Again, a really good example of design-led specification and key influencer relationship management through the pipeline. Again, the project was quite distinctive, made use of value-add products such as blended concretes and porcelain. And let's not forget that unique national manufacturing model that also delivered carbon miles advantages through shorter delivery distances.
Finally, some great examples of design-led specification where installers who are already part of the Marshalls scheme have been supported by our technical teams and made use of our services such as design tools to create both functional and, what I'm sure you will agree, are aesthetically pleasing designs. All of this is underpinned by new product development and innovation. It is playing a significant part in our flywheel of success, whether that be new technologies to enhance our offer or indeed it gives us that distinctive proposition or fuel for growth to reduce our costs and indeed enhance our margins.
The investment in our Dual Block plant has created concrete technology to produce innovative designs with aesthetics that compete directly with imported natural stone. These products incorporate processes and material technologies that see a much reduced carbon footprint and are very much value-add in their nature.
Now, due to the market headwinds, we're yet to see the full impact of the Dual Block Plant, but there are some fantastic opportunities, and it certainly has a great future in the network. We're also introducing energy technologies into the Landscaping business unit with patented curbside charging solutions, and this type of innovation is underpinned by extremely strong demand. Over eight million homes in the U.K. have no driveway or garage, and there is a requirement for more than 300,000 public charging points by the year 2030.
The government have already pledged GBP 200 million worth of funding for on-street charging infrastructure for the years 2025 and 2026 with further schemes in the longer term. We're already engaged with local authorities, house builders, and tier one contractors, and we're certainly exploring the potential for additional applications in this space, and finally, we talked earlier about the impact of climate change.
It's exposed towns and cities to increased risks of flooding and watercourse pollution, and this won't get any better in the future. The government will be introducing mandatory requirements for developers and house builders to manage flooding and watercourse pollution in the future. Sustainable drainage systems will play a key role in reducing the amount of water that makes its way to our sewers, so we're going to be looking at permeable surfaces, rain gardens, soakaways, and certainly much more aesthetically pleasing solutions will be in demand. So, in response to this regulatory tailwind, we've developed Eden Kerb, and this has been piloted on Mansfield's flood resilience project, the largest retrofit SuDS scheme in the U.K. And we've supplied and tested over 400 units working with tier one contractors and local authorities.
So, in summary, we're a powerhouse brand with a market-leading portfolio of products and solutions with headroom for growth. The Premier League-winning team is taking shape. And we're beginning to gain traction on our near-term solutions. And those are aligned to our future objectives and goals. Outside of the self-help measures, our markets will benefit from both structural and regulatory tailwinds. And that distinctive national model underpins what we're doing. It will help us to drive greater value and share growth. We're already investing in a distinctive proposition through range and carbon leadership. We're strengthening our relationships with key influencers to secure upstream design-led specification. We are extremely focused. And the team is being reorganized to deliver across both commercial and residential sectors. Simplicity and clarity in the product portfolio is a must.
We're already underway with the changes in the range architecture with a clear value proposition driving a value-add mix. Sitting alongside this will be a pricing architecture that is fit for purpose, and we will ensure that we do not have price gaps in our product ladder. We will continue to develop material technologies, product innovation to fuel this growth, and this gives us differentiated products, carbon reduction, and cost benefits, and last of all, and let me reiterate, let's not forget what is at the heart of the flywheel of success.
It is our unique national specification pool model, and this gives us a distinct advantage over our competition and allows us to leverage the manufacturing network, so we will absolutely drive greater value from this distinct national model, and we fully expect to outperform the market between one and three%. Thank you.
I'd just like to hand over now to Susan Barclay, who will take you through the Marley Roofing Products division. Thank you.
Okay. Good afternoon, everyone. I'm Susan Barclay, and I'm the Managing Director of Marley. It gives me great pleasure to present today. Oh, it'd be good if I did that. It gives me great pleasure to present today our business roofing strategy and our future strategic imperative of defending our heartland and driving share in adjacencies. I've worked at Marley for over 14 years now, of which 10 of those have been in senior leadership positions. I formed part of the team of the Carve Out, where we were owned by Etex and sold to inflection. I now join the Marshalls team, contributing to our diversified portfolio.
I've had the benefit of influencing and leading Marley's growth, whether that be through our people, our products, or our profits. I look forward to speaking to you as the day goes on, and my colleagues, Stuart Nicholson and I, will be on the Marley stand. We have a strong, recognizable brand, Marley. Our logo has evolved over the years. However, we have kept our heritage. This year is a remarkable landmark for us as we celebrate 100 years anniversary. That's 100 years of leading and supporting in the built environment as a roofing business. We have historical and solid relationships with roofing contractors, and we are the market leader within the U.K. roofing space. We hold a particularly strong share within the social housing RMI with our unique roof system offer.
With our exceptional design and technical and on-site support, we make a great partner for a wide range of customers. With the most comprehensive roofing system on the market, we're the only manufacturer to offer everything above the rafters. This is served by a distinct roofing channel of merchants and roofing contractors. It's more than a roof. It's a Marley roof system. And it's tried and tested with all of our individual product solutions, giving our customers peace of mind and that one point of contact from project concept through to on-site installation.
You may see just a roof, but it's so much more than that. It's a Marley solar roof system. We offer roof coverings, base layers, our own branded Marley solar tile accessories, and all this is supported by our digital tools and our in-house contracting services. We also offer a 15-year full roof system warranty.
Marley in a snapshot. We have an enviable number one market leadership position, accounting for an almost 30% market share in concrete and clay tiles. This is in a relatively consolidated market, but with headroom to drive growth through cyclical recovery. We're a brand powerhouse with a strong brand recall, particularly through specifiers. We account for 23% of the Marshalls Group revenue. We have a balanced end market exposure, which allows for us to access the most profitable segments. We have important exposure to social housing RMI, with 50% of our sales revenue supplied here. This exposure is underpinned by the U.K. aging housing stock demand. We are the market leader within our core products of concrete, clay plain, timber battens, and roof integrated solar. The graph to the far right shows our split of sales.
You can see that concrete accounts for 61% of our revenues. We have full insight into our value chain. We're well connected at every activity point. Our route to market is via our channel partners, roofing and builders merchants, and our roofing contractors who install the products. We focus on a pull demand generation marketing strategy. We use our CRM systems to ensure that every sales opportunity is tracked within our pipeline. Importantly, we take these opportunities and convert these into a Marley sale. So, not only do we know our customers, but we know what they need. With our unique leading brand with over a 100-year heritage, we're highly regarded as the best-known roofing brand and most preferred by specifiers. This is evident through our brand recall with a 73% unprompted and 98% prompted result.
A market leader, we have an extensive product range in clay and concrete tiles, our JB Red battens, solar, and accessories. We're a strong brand to hold on the shelf, adding value to all our channel partners. With our best-in-class technical and design support, we have the most comprehensive pitch roofing system on the market, and we're the only manufacturer to offer everything in a roofing system from the rafters up, offering complete peace of mind when you're specifying our products. We're pioneers. We pioneer our product solutions for mechanical fixing, ventilation, fire safety, and ease of installation.
Our digital platforms differentiate our service offering to our channel and specification partners, making us easy to deal with and accessible. We support specifiers to select products that match their sustainable goals. This is evident in our involvement in the Code for Construction Product Information. We were the only manufacturer involved.
We promote carbon leadership. This is evidenced in our strong ESG track records of first, including the first roofing manufacturer to offer the environmental product declarations across our entire concrete and clay and solar portfolio. EPDs provide transparency about a product's environmental impact over its lifetime. And this allows for specifiers to make an informed and sustainable decision about their product choice. We are committed to maintaining a sustainable environment and minimizing the impact of our operations. And we crush 100% of concrete production waste.
We also leverage the Marshalls Group concrete technology and carbon reduction team, working together for further innovations. Now, Matt has highlighted the tailwinds. And for Marley, these will fuel revenue growth in our roofing business. In new housing, our key drivers are that we've got a 37% market exposure. And the demand on labor availability offers the opportunity for a roof system.
Due to these skill shortages, there is a growing demand from installers for a tried and tested and quality roofing system, offering a warranty and backup, which we're already responding to. This driver forces us to continually work to descale our roofing system to attract new roofing contractors into our industry and make it simple, strengthening us to be the brand and product of choice. In energy transition, the Future Homes Standard is expected to drive the adoption of full solar roof system in new housing.
The Social Housing Decarbonization Fund, which is now called the Warm Homes: Social Housing Fund, continues to support the upgrades of housing stocks. This is benefiting the whole roofing system and driving the adoption of solar panels further. This funding offers social landlords an opportunity to make a meaningful impact on sustainability and tenant well-being.
This legislation supports the U.K. aging housing stock with a strong demand to bring these roofs up to today's standard. Within commercial and infrastructure, we'll optimize our current brand specification in non-housing and build on sectors such as care homes and schools, where our strengths already lie. So, how are we going to do it? So, our strategic imperative is to defend specifications in our heartland of social RMI and drive share in adjacent markets such as private RMI and new housing.
We will do this by optimizing profit in social RMI heartland and drive market share in the larger, relatively high-margin private RMI. We will build on our leading brand position, protecting specifications. We will increase our sales of full roof by maximizing accessories and solar attachment rates. We will look to reduce specification breaking to drive improved leverage from the strong position with the specifier community.
We will invest in the development of our salespeople in specification and technical selling, whilst ensuring the recruitment and induction process is supporting our employees on their journey to becoming the best that they can be and the go-to expert within their local area that they serve. We'll also invest in a quality proposition to support a relationship-building strategy with roofing contractors, specifically those roofing contractors who are in their mid-career or next generation. Importantly, we will continue to invest in tools and tracking to retain outperformance in customer experience. We will differentiate and innovate, whilst leveraging this through the entire value chain. And under new housing, we will do this by building on our early successes of our roof system for regional to mid-sized house builders.
We will create our value proposition that meets the needs of the house builder and offers them access to roofing and solar channels from one source. We already have a highly reputable and established product proposition across our roof system, so this has been the recognized leader within the industry and the roofing knowledge. We will provide house builders with the confidence and an integrated system solution for their new-build homes. I've included a case study here because I think it shows where we've excelled and where we work really well through the supply chain.
In this example, it's with the client North Ayrshire Council, so it's a social housing RMI project. It's a five-year reroofing program with a PV included, and the client's carbon neutral program is being tackled alongside fuel poverty for tenants. In this example, there's a minimum of 200 properties per year.
It's a combination of roof or solar-only properties. The client estimates a payback of four and a half years. Marley were involved through the whole specification, where we completed some roof surveys and did the designs and also some on-site training given to the roofing team. In this specific example, it was Marley Contract Services, who's part of the Marley Roofing Group as well. They're based up in Scotland. In summary, we will defend our specification heartland and drive share in adjacencies. We've got an established, reputable, and unique roof system offering, including our leading-in roof solar. Our specification customers value our unique set of capabilities. They find it easy to work with. They enjoy having one point of contact and that peace of mind. We will continue to build on this.
With our balanced sector exposure, we have attractive tailwinds from new housing and non-discretionary reroofing opportunities from the aging housing stock. We have clear growth and improvement strategies targeted at an attractive reroofing sector and our value propositions of full system solutions for house builders. We will achieve a 1%-2% market-out performance in the medium term. Okay. Thank you all for listening, and we're going to have a short break for 20 minutes now.
Okay. Back, everybody. I'm Stuart Elms. I'm CEO of Viridian Solar. And yes, I'm the one wearing the suit. And I can assure you I own this suit. I did not rush out to Moss Bros this morning and purchase it. Now, you are now going to hear from the three Growth Engine business units.
I must warn you that during the following presentation, you may be overcome by an uncontrollable urge to whoop, cheer, perhaps break into spontaneous applause. Now, please do not feel inhibited. Do not try to suppress this feeling. You are welcome to show your appreciation for the great presentations that are about to follow in this second half. Thank you. Thank you. Color change? OK. So when we first set up Viridian Solar, when I first set it up with two other friends, little did I suspect that I would still be here 20 years later, less still that I would be presenting at an event like this as part of the brilliant team at Marshalls plc.
The road that brought Viridian to this point has been and has had its share, let's say, of excitement and challenge, perhaps too much of the second and plenty of the first. We think there's plenty more in store. I hope that in my section, I'm going to be able to convey a little bit of that excitement to you. Are you ready for a bit of light audience participation? Now, don't run for the doors. It's just a show of hands.
Who in this room, by a show of hands, has solar on their own home? Now, for the avoidance of doubt, I will include your second homes, your Scottish estates, and your French vineyards. Keep them up. Look around. Shamefully, our CEO nor any of our three have their hand in the air. There's around 1.8 million solar PV installations in the U.K..
That's been driven by a generous subsidy scheme in the early 2010s. Some would say over-generous. In the solar industry, we won't hear a word of that. And also, more recently, the energy crisis stimulated by the invasion of Ukraine and the embargo on oil and gas from Russia. So we might actually expect about one in 10, or maybe between eight to 10 people in this room, to have firsthand experience of the benefits of solar on their own property. It's a mainstream technology. That is my point, really. It's already mainstream. But the volatile private residential market is not where Viridian Solar operates. We manufacture roof-integrated solar panels that replace the tiles on the roof to form the roof covering itself.
The advantages of this approach include better aesthetics, a saving on the materials and labor for the avoided roofing materials, sequencing benefits if you're fitting a new roof or building for the first time, easier subsequent roof maintenance because you don't have to remove a solar panel to get to a roof covering behind it, and avoiding problems associated with bird nuisance, where these pesky critters take up residence behind your solar panels, wake you up in the morning by flapping their wings and making a noise, and fill your gutters with their mess.
There's a couple of sectors in which these advantages are highly recognized and appreciated, and the first of those is new-build housing, where the aesthetic and sequencing benefits of integrated solar are really important, and we estimate that for new-build sector, roof-integrated solar represents around 80% of all of the solar installed.
Many social housing providers have also had experience of installing solar above roof. And it's that experience that makes them actually quite receptive to the advantages of in-roof solar. In particular, the bird nuisance, where tenants complain about, and roof maintenance mean that they are quite keen and interested to hear about the advantages of in-roof solar. And in this photograph, it's from a job by Luton Council. Both social housing, one installed earlier with above-roof solar, and the more recent project with our in-roof solar sitting there, looking beautiful by comparison.
S ocial landlords are also starting to take a more thoughtful approach to low-energy retrofit by coordinating its installation with other maintenance and repair work. And of course, when that happens, that means that the solar is more often being installed as part of a reroofing project, which has great advantages for our approach.
The solar panels themselves are obviously only the most visible part of a solar system. Inside the building, there is also wiring and electrical components to install as well, and the highest value component inside is the inverter, the inverter which converts DC electricity, as created by the solar panels, into alternating current or AC electricity, which is suitable for use in the property or export to the grid if the property is not using sufficient power at the instant.
We also offer these, and we have found that our customers do value the idea of getting both the solar panels and the inverter from the same manufacturer with all of the confidence that that inspires. Now, I have to tell you before I stop talking about this slide that solar is a very safe technology. It really is very, very safe. The incidence of fire is very, very low.
But it's an electrical installation, and the incidence of fire is not zero. And of course, the more solar installations there are around the place, the more chance we're going to see examples like this one top right, which was a flat roof on a warehouse in Peterborough that caught on fire earlier this year and made the national news. Our corporate counsel has insisted that at this point, at this point in the presentation, I do make it clear that these are not our panels.
The most common cause of fire in solar, where solar is the cause of the fire itself, is thought to be installation errors relating to the DC connectors between the panels and then wiring on down. And to combat this, Viridian Solar invented a brand new product category, something new in the world. We call it the ArcBox.
It's a molded cement block that just snaps around the DC connector. If an arc does occur, it is safely contained and less likely to spread to combustible materials in the roofing around the solar panel. ArcBox has been going great. It already represents 4% of our sales so far this year. You can see in the slide on the diagram top right. It's growing quickly. We're on track to sell four times more ArcBoxes this year than we did last year.
We've beaten our budget by 3x. By the end of the year, we expect to. Our inverter sales have also grown well from a similar start, with taking only 12 months since launch to achieve an attachment rate of 20%. As you can see top left, we estimate our market share. We have to estimate it because there's no industry figures to use.
We estimate our market share of roof-integrated solar in the U.K. somewhere between 40% and 45%. And in terms of the structure of the industry, there is one other competitor that has a similar market share to us. Our share of group revenue is a tiny sliver at 4%, but we're working hard to try and make that bigger and bigger each year. We've always been very clear in our own minds about who are the customers who value our unique set of capabilities. And for Viridian Solar, that has been, for the last 20 years, people building new homes. It just makes sense to put the solar into the roof as you build the roof rather than try and bolt it on top of an existing roof covering after it's already done.
Our solar roofing systems are installed on houses built by 15 of the top 20 house builders in the U.K.. And we have group deals with seven of those, some of which are preferred and some of which are sole. Under our own brand, as Viridian Solar, you can see we sell out through partners in electrical wholesaling and renewable wholesaling to mostly electricians and solar installers. Under the Marley brand, the route to market is more through roofing merchants and more towards roofing contractors doing the solar installation.
But there's a bit of a mix, of course, in all of that. Marley, as Susan mentioned, has very strong relationships into social housing RMI, where these customers really value the peace of mind that comes from buying the whole roof system from one supplier. And Marley's had great success at winning specifications for those products into that sector.
A little bit about the product itself. Our patented Clearline Fusion system, as we call it, is a one-box system, and that contrasts with our main competitor that tends to work with interchangeable solar panels from different manufacturers. Because we control the whole product, that gives our customers complete confidence that the as-installed system will be compliant with regulations. The PushFit all-metal roofing kit also sets us apart from our competitors, and we have the only system on the market that has third-party accreditation that the product meets durability requirements under the NHBC insurance technical documents. I could go on.
Our sales team is spoiled for choice of USPs. In fact, I will go on. The top-quality DT connectors that we use, that increases fire safety in our product compared to others. We have the highest wind loading of any integrated solar system without any modification to the roof below.
The closed design excludes pests and wind-blown debris, further enhancing the fire safety of the product. I'll stop there. We couple a really excellent, high-quality, market-leading product with unmatched technical support in common with many of the other businesses across the group. And this is highly prized by our house-building customers. And some of the strategy work we did as part of this, where we did lots of market research with customers and interviewed customers, really backed that up. We provide our group deal house builders with marked-up site plans, drawings of each property, elevation drawings, and a solar schedule that's ready to go out to the tendering subcontractors to provide competitive tenders.
A combination of this great, great service that the house builders really, really appreciate and the high quality of the products have really contributed to building that strong brand that the group is looking for across its business units. In recent years, though, human rights concerns have emerged in the solar sector. I have to say, to a number of us operating in this sector, it's come as a bit of a blow.
We definitely saw ourselves as being on the side of the angels, selling products that reduce carbon emissions and make houses and buildings more energy efficient. Working alongside experts at Marshalls, we've put in a tremendous effort to confirm where our supply chain is and show our customers that our supply chain, right back to tier five, avoids those regions that are most associated with the risk of forced labor.
We're not aware of any other manufacturer that can match the level of assurance that we provide on this point. And I can tell you that more and more of our customers are starting to ask very deep questions on this topic. And it's becoming an issue that drives buying decisions. I would also mention a world-first EPD for solar PV, for a crystalline solar PV module. There was a non-crystalline one that beat us to the punch. And the only EPD available for a combination of a solar panel with an in-roof kit. Now, at the moment, I would say customers ask about this, but it's not really a buying decision for those customers in our sectors at the moment. But we can see that coming.
Because once you've taken all of the carbon out of the house in use, then the only thing left is to start looking at what is the amount of carbon in the building as built. So here's our version of the table of drivers. And the main driver of our growth is changes in the regulatory environment that's encouraging the uptake of solar PV by house builders. And more on this in a moment.
As with some of the other business units, a return to growth in new housing, once it comes, will, of course, further compound the growth rate that we experience. But before we come back to the house-building sector, I think it's worth mentioning a couple of other drivers as well. The new government has announced that it's reinstating the minimum energy efficiency standards for private rented properties.
Solar is a great way to raise the EPC level of your house in a fairly non-invasive way to try and meet those regulations for rented properties. Susan already mentioned the Social Housing Decarbonization Fund, now magnificently rebranded by our new government as the Warm Homes Social Housing Fund. It made all the difference, didn't it? This is the big one. The big one is the new-build housing sector. Prior to 2015, most of the solar going on to new homes was either grand designers building their dream property, or it was because local authority had instituted local planning requirements for renewable energy on the building sites in its region. It was patchy by definition. The industry estimated that at that time, around 10% of all new homes built were going with solar. In 2015, the Scottish Government did something.
It introduced its own building regulations. And those building regulations, of course, were better and higher than the ones in England and Wales. And that meant that house builders had to respond. And the way they chose to respond was to install some solar PV alongside a gas boiler and a little bit higher level of insulation. Over the next few years, the penetration of solar into new homes in Scotland rose to about 80% of all homes built. In 2021, the government in Westminster and the government in Cardiff introduced new regulations at a very similar level to those in Scotland, a little bit higher, in fact. And we are in the middle of a transition that's going to follow what happened in Scotland.
So we're estimating that we're well within the five-year period on which the strategy period that we're talking about, that this will reach its final penetration. We'll have 80% of new-build homes will be with solar. And we further estimate, as I mentioned before, that 80% of those, being 64% in total, will be roof-integrated. And the size of the prize is quite significant. Or at least for the little part of Marshalls that we represent, it certainly feels it. So if you imagine that this block represents 100,000 homes built per year, you may have your own estimates of what that number should be multiplied by to get to a building rate in the U.K.. If 80% with solar and 64% roof-integrated, that's 64,000 homes per 100,000. Two kilowatts peak is our estimate of the amount of solar installed.
And that turns into an opportunity of GBP 77 million per year per 100,000 houses built. But that's not all. We believe we can further improve the attachment rate for our inverters beyond the 20% that we're achieving now. And of course, the inverter sales will grow alongside the in-roof solar sales. And our ArcBox Fire Safety product is patent-pending in 40 countries, which represent together about 94% of solar installations worldwide. Our sales of ArcBox are currently 90% U.K.. So we see a big opportunity to take our sales of ArcBox further north. Here's our case study. I'd like to talk about our long-standing relationship with Newland Homes, a company with which we've had a national supply agreement since 2021. It's a premium regional house-building company operating in the west of England.
Its developments span across Wiltshire, Gloucestershire, and Somerset. Newland Homes embraced the opportunities presented by the energy transition early. It's been reaping the rewards. A range of energy efficiency measures are installed on its homes, including solar PV, generous helpings thereof, heat pumps, electric vehicle chargers, high levels of insulation. In fact, since 2002, every home that they've built with solar has been zero carbon. This has allowed Newland to differentiate its offer in a crowded marketplace. It quickly sells the properties on its development. To conclude, our strategic imperative is to leverage regulatory tailwinds to accelerate growth. We've got a really strong position in a market that's going to scale up in the next few years. We're going to really work hard to take our share of that growth.
And at the same time, we're going to get stuck into other opportunities, including a higher attachment rate for our accessories and our ArcBox solar safety product. We're going to beat the market by 8%-12%. I'll leave you with this. This is a development near Glasgow, which resulted from the regulations in Scotland. As you can see, beautiful, beautiful. Every single roof, a solar roof. Isn't that what we all want to see? I'm going to hand over now to Paul Curtis, who's MD of another growth engine, the Marshalls Water Management business. Paul.
Good afternoon, everybody. My name is Paul Curtis. I'm the Managing Director of our Water Management business. Before I get started, don't worry, I'm not going to copy Stuart and ask you to put your hand up if you got wet this morning when you were coming in.
When we turned up, it was snowing. The Thames is looking its gorgeous self looking out that window. And there was a rumor it was going to be sunny this afternoon. So it probably sort of explains some of the issues we've got as we're looking at our Water Management business. I was just sat down there reflecting on some of the bits, actually, that Matt was talking about earlier. I joined the business in 2003 in the landscaping division. And when you look at the lineup that you've got this afternoon, it just shows how much this group has changed in the last 20 years. That's why I'm really excited today to talk to you about what we're doing in the water sector, as well as the big opportunities that we see for the group over the medium term.
The problem that we've got and that we're dealing with is really plain to see. You only have to switch on the TV in the evening or look through your media scroll, and you're going to be stuck with these sorts of images, bombarded with images and headlines of what's going on in the world around us. Whether it's freak flooding, climate change, or the underinvestment in our sewer networks, these issues have a direct impact on our lives, our towns and cities, and the economy as a whole. We believe in Marshalls that we've got a unique proposition in this sector, that not only can we address some of these problems, but we can actually make a positive impact to the lives and communities around us. Matt mentioned earlier about the acquisition of CPM in 2017.
It wasn't until 2021 that we integrated that business with our Marshalls drainage business, which was very sort of focused on our Beany range. That's where we were most popular with. By bringing the two ranges together, it gives us a unique end-to-end offer in this sector. In layman's terms, we can basically take the water at source, whether that's flooding or surface drainage from the roads and pavements around us, take that underground, store it, and then discharge it safely back into the environment in a controlled manner. If we add on our ranges of permeable paving and rain gardens that we've seen in the landscaping range, this means that we can offer clients and their design teams a unique proposition. We can design and engineer solutions for them, irrespective of the size or nature of their project.
That's something that none of our competition can do and is a real strength for us in our sector for the future. The other key thing is, by bringing these businesses together, we've got over 50 years' experience in the sector. This isn't something that we've got L plates on and starting from scratch. We know what we're doing. We've got the expertise and the know-how to deliver it. What we're on about is looking at the growth focus and those sectors that we can use those skills to grow the business. Looking at the sector and our performance, last year, the Water Management business delivered about 10% of growth revenue, sorry, of group revenue, and this was predominantly in new housing and commercial infrastructure.
We actually needed to do a pivot of our strategy last year because of the amount of new housing reliance that the CPM business traditionally had. So what we did is focused on selling the underground systems, which were traditionally sold through the CPM business, and then moved them into the commercial and infrastructure sector. This was successful last year. It's something that will continue to grow and strengthen as we go ahead. When we look at the markets on the far left-hand side, you see we've got a strong position in the residential market. The brand is strong there.
Customers value our quality and our service proposition. There's a number of competitors in that market. It's aggressive, but we're in a good place and well-positioned to deliver there. Our infrastructure market, that's wastewater infrastructure for this diagram. That's our biggest opportunity.
We'll capture that in a second. It's got one main supplier in there, one competitor for us. It's probably got the biggest headroom for us to move this business forward. When we look at the value chain, what we've traditionally dealt with is the groundworker, the tier two contractor, the civils contractor in our traditional highways infrastructure and house builder markets. There's been an element of specification with design and engineers, but we've very much been a contractor project-focused business. What we're looking to do as part of our growth strategy is build our specification presence with design and engineers, reposition our brand in the water sector, wastewater sector, to deal with the utilities and water companies, and have a much stronger proposition for the tier one contractors that are operating in there.
We know from our customer research that Matt was talking about with the strategy work that the customers in that sector, in the water sector, are looking for a company like Marshalls to come in and support them on their projects, and we're well geared up to support that and drive that forward. When we look at our proposition, it fits with the core values of the Group. Our brand is strong in housing, but we've got an opportunity to grow in wastewater, our best-in-class technical and design support. In this part of the business, we've spent the last two years investing heavily in this area, and part of our strategy will be to reposition our technical and design service so it's frontline, so that it differentiates from our competitors and adds true value to our clients and customers.
This is quite a change for us because this will be moving away from a, if you like, a back-office support service, and we feel that this will add additional value, particularly in early engagement on these framework agreements. At the same time, all of that is underpinned by our carbon position. Concrete as a technology in this market offers a number of advantages. It's got a 120-year design life. And when you look at whole life costings and the carbon impacts of that, it's got a number of benefits over alternative materials in this sector. The tailwinds for us, when you look at these new housing, as everybody is looking for an upturn in that, and we're looking for growth in that sector as that comes through, but we're not reliant on that to deliver our number.
We've already seen a shift over the last couple of years in sealed systems. This is where we can offer benefits by off-site manufacture rather than wet trades on site. And there's health and safety benefits and installation benefits that I won't bore you with now. But there's a lot of USPs on those. And we're seeing that trend get stronger. And we're seeing more of that market move that way. So that's again a big focus for us over the next sort of short-term and medium-term.
The commercial and infrastructure business, very important to us. As I say, we've proven last year that we can sell the traditional CPM products into that market. We'll continue to support that. We've had good success on major energy projects like Hinkley Point C, big infrastructure projects like HS2. We're continuing to support those with bespoke solutions as well as standard product.
That work will continue. As part of the strategy, we'll continue to focus on that, engineering bespoke systems for our customers where they need it on high-capacity systems, as well as critical applications where you've got to get it right first time. When these systems go wrong, it costs a fortune. We're talking about stuff that's buried four meters, five meters underground. You need the expertise that we've got backed with a design and technical capability to get it right first time. Our big growth opportunity, AMP8, so probably the biggest investment in water infrastructure that I'll have seen in my lifetime. You guys are probably more up to speed on a lot of this than maybe some of us with the influence it has across the sector.
Certainly, from our side, GBP 35 billion worth of investment in new water infrastructure, that's a 3x on the AMP7 cycle, a major opportunity to expand in this area. When we look at these products, the projects and how they fit with our product range, about 80% of what we already manufacture, we believe, fits within this scope. So there's areas of range expansion that we need to look at. But our biggest driver is going to be unlocking capacity in our manufacturing sites to be able to support the growth in this sector, as well as continue to support the growth in housing and commercial that we've already talked about. So for us, two key priorities. One is that we need to reposition the brand in the wastewater sector.
We need to build on the strengths of housing and infrastructure, but make sure we're seen as the supplier of choice in this area. At the same time, we need to carry on supporting our customers in residential and the commercial infrastructure markets. We're well-respected in there. We've got a good track record with 50 years' worth of experience that we're relied on in that market. How are we going to do that?
We've got a number of parts of the strategy to deliver it. Most important thing is unlocking the capacity that we need to make sure that we support our current customers as well as the growth customers. It's not an either/or decision. It's that we're going for growth on both sides. Now, remember back a few years ago in the landscaping days, we used to be very proud that we'd paved every square of the Monopoly board.
I think in the drainage business, we could probably say that we've drained just about every major highways network the length and breadth of the country. The problem is with these products is they're not very sexy. So we haven't got the same sort of pictures that you've got of some of the other products. We can't put Trafalgar Square up there and things like that because most of this is buried under the ground. But believe me, if it's there and you don't know about it, it's working.
The key bit is that we've already got those relationships with the Highways Agency, Network Rail, the Environment Agency, some of the water authorities that have been using some flood alleviation schemes. We're not starting from scratch in this strategy. We're building on the basics that we know work well and delivering them into a bigger market.
To bring this all to a close from my point of view, repositioning the brand is key, as well as accessing the growth and headroom that we're on about in that manufacturing capability. We've got a high-quality, full-service Water Management proposition. The tailwinds will support us, whether that's the growth in housing over the next couple of years or AMP8. We've got a strong network opportunity with the ability to invest in it, as well as a really strong growth strategy that underpins all the fundamentals. We're looking to outperform the market between 4% and 6%. If there's any takeaway from me today, it's, make no mistake, Marshalls is in the Water Management business. But we're not just designing and delivering systems for today. We're protecting the futures and the communities of tomorrow's world. Thank you for your time.
I'll introduce Dean Harris from our Bricks and Masonry business.
Thank you, Paul. Thank you, Paul. Okay. My name's Dean Harris. I'm the Managing Director of Marshalls Bricks and Masonry. Marshalls Bricks and Masonry was born from the acquisition of Edenhall in 2018. We offer bricks and walling solutions for the U.K. market. I took the job as MD in March 2020. It was actually a week before the pandemic. So my first week, I sent all the staff home. The sales dropped by over 60%. So probably not the best week I've had anyone's ever had in the job, but I've still got a job. I previously was with Edenhall before the acquisition. I started in 2011. I started as a management trainee. I worked across a number of sectors within that business, achieving a director level in 2016, and then I made MD in 2020.
I've been proud to be part of that business and see the market share grow from 1% we had back then to 8% what we've got now, so that's me. What do we do? We do five key product lines from facing bricks, walling stone, engineering bricks, blocks, and common bricks. We have a good market share across all sectors. Our lowest is in facing bricks. Facing bricks is the biggest market, and this is where we see the biggest opportunity. We've been supplying facing bricks for about 30 years. However, for me, it wasn't until 2017 when we developed a perforated lightweight facing brick that we're now supplying a product into the market to cover all needs, and I'll touch on that later. We now have a wide range of colors, palettes, finishes, textures, and a range of formats available, so a bit about the history.
You've probably all heard negative comments about concrete bricks, and I want to tackle that today. As mentioned, we delivered concrete bricks into the market about 30 years ago. They were thought of as solid, heavy, which caused issues with laying, and dull in color, as you can see on the product on the left in this picture. However, in 2017, we developed the lightweight perforated brick. The product is now vibrant, lighter, that deals with the issues with laying, color-fast, 100% recyclable, and it's a lower carbon unit than that of a clay product. We have a number of bricks displayed on our stand over there, and please feel free to come across later and ask some questions, although I've answered quite a few already, so I said it's a lower carbon product unit. Just to explain that and talk that through, this is our manufacturing process.
I know a lot of you will know this, but I'll just walk you through. Starting at number one. So the raw materials come in. The materials are mixed together. They're fed into a mold. The mold is put into a curing chamber and sits in a curing chamber for 72 hours. The product is then pulled out, taken through packaging, and put onto the stockyard ready for delivery. For the brick experts in the room, you'll notice that the firing process with kilns is missing. Our products do not require a fire-and-kiln process. And as such, we avoid the high-energy inputs. Avoiding this in our process results in a circa 49% saving per ton of our product versus a clay product. Additionally, as we do not require the kilns in our manufacturing process, it also reduces the amount of CapEx required when we're adding additional capacity.
This is a snapshot of the market. You'll see the graph on the left shows our market share. At the moment, we have circa 8%. The remaining market is about 90%, and that's headroom for us to go at. The market is predominantly made up of three main manufacturers, and it's a clay market. It's worth noting that we're market leaders when it comes to concrete brick manufacturing. In the middle, you'll see our share of group revenue. You'll see our exposure by end market. We have over 80% exposure to the new build market.
You'll see our revenue split by product category. You'll see that 60% of our revenue is attributed to our facing brick sales. Three years ago, this was under 30%. It's now 60%, and I expect that trend to continue as we develop further into the facing brick market.
So this is taking a look at the opportunity we have with our customers. Four years ago, one customer made up over 70% of our overall sales. Now, we have a spread across a wide variety of customers, including 18 of the top 20 house builders. The chart on the left shows the top 15 house builders in the U.K.. And as you can see, we have a variety of penetration across those accounts, ranging from 1%-30%. We've been able to do this.
We've been able to get to this stage by developing strong customer relationships, developing our product range, responsive customer service, and our low-carbon credentials. We now expect our penetration to grow as we extend our brand proposition into new regions. Okay. This is our value chain. So we have a number of end users from house builders, contractors, housing associations, and homeowners.
Our key influence for us have definitely been house builders and bricklayers. As I said on the previous slide, we've been building strong relationships with house builders in previous years, understanding what the house builders' needs are, and now our offer can align to those. Additionally, we've been working with the bricklayers, helping to develop their knowledge around concrete bricks and supporting their needs. We're proud to be partnering with the NHBC across their training colleges, helping educate bricklayers for the future.
Our winning proposition. So this is aligned with the group. From leading brands, we're the market maker for concrete bricks. We brought this product to market. We're established as the go-to authority on concrete bricks, leading the way and setting the standards. We also work with the NHBC to develop the specification of masonry concrete bricks for their building standards.
Additionally, we're the leading U.K. manufacturer of reconstituted walling stone solutions. Best-in-class and technical design support. We have dedicated account managers and technical teams for house builders. We have a strong after-sales service providing on-site inductions and training program. Carbon leadership, where I think we're really strong, where our bricks have 49% lower embodied carbon than that of our clay competitors. End-to-end superiority versus concrete bricks and other concrete bricks, sorry, making us one of the lowest carbon options on the market. We also leverage our concrete technologies to achieve further reductions in embodied carbon. We've shown that by using a concrete CarbonCure technology done at our site in South Wales. We also believe that we have tailwinds that will fuel growth for Marshalls Bricks and Masonry. In new housing, we have 80% exposure to new house building.
And we expect the government support and ambition of 1.5 million new homes to support that. Energy transition. There's an increased emphasis on sustainability and reducing embodied carbon in the decision-making process. And additionally, also, we think future standards are expected to focus on lower carbon products. And in commercial and infrastructure, we think additional support in this area will drive further demand for bricks beyond new housing.
So the key areas for us accelerating concrete adoption come from increased penetration of facing bricks from national house builders in new regions and growing facing bricks share through a targeted approach with regional house builders supported by new product development. Our value creation levers are investment in our brand. We have a good name in the market, but we're definitely not the market leader. And we have more to do and more to go at.
Strategic marketing and commercial resources targeted at expansion with national house builders. Investment to accelerate adoption in new markets, including regional house builders. NPD to develop a new range underpinning our penetration strategy to serve more regions. And manufacturing investment to grow our capacity and extend our nationwide coverage. This is a low investment cost to achieve our targets. We've now added a few case studies. The first case study is a development in Hayes, Middlesex in Barratt London.
The development had four listed buildings. I think it was important for them that we matched the existing properties. Aesthetics were key on this build, both color and finish. And our products were very close to the originals and exactly what Barratt's were looking for. The next case study is Backhouse in Calne. This is a great development, very modern in its use of a gray facing brick.
Not only does the product align with Backhouse's aesthetic ambition, but it also supports enthusiasm for sustainability and carbon reduction. This site was able to save 93 tons of carbon by using our product rather than clay. So in summary, we're going to accelerate adoption of our lower carbon concrete bricks. We have a market leading proposition for lower carbon bricks versus clay and concrete competitors.
We have a track record of delivering market share growth over the past five years, irrespective of the market conditions. We have attractive tailwinds from new house building and low carbon purchase decisions. A large headroom when it comes to the market opportunity. Remember, 90% plus. A clear strategy on growth, including accelerating penetration of new and existing customers. All of this will help us deliver performance between 8% and 12% ahead of the market. Thank you.
I'm now going to hand over to Simon Bourne.
Thank you, Dean. So the first thing I'd like to do, I'd like to thank the team for presenting the business unit strategies today. So I'm sure you will agree. You can see that we've got very, very clear strategic imperatives and a fantastic number of areas for opportunity in the future. We've got detailed plans for delivery, and we've got clear targets to aim for. And as you can see there, we've got focused and experienced business unit leaders to be able to deliver this. I'm sure you'll agree it's a very exciting future for the Marshalls Group. I'm now going to hand over to Justin, who's going to take you through the investment opportunity and the targets for the future. Thank you.
Thank you, Simon. And good afternoon, everybody. So I'm going to take you through how we expect all those exciting plans to feed into our group financials in the next five years or so. And I'm also going to explain to you what our revised and updated investment case looks like. So on this first slide, we've got a diagram which depicts how we expect the Transform and Grow strategy to interact with the group's financial model.
A successful execution of the Transform and Grow strategy, so starting at the top, will allow us to unlock market tailwinds, which will allow us to grow revenue at a faster rate than the broader market. Now, I'm sure you'll all have your views about the rate of market growth. But I'm sure you're also aware from the latest publication from the Construction Products Association that they're targeting growth in 2025 of 2.5% and then in 2026 of 3.8%.
That revenue growth is accessing those tailwinds is expected to deliver faster than the market revenue growth. Now, with pushing more volume through our existing manufacturing network, we'd expect to benefit significantly from operational leverage. That will drive profitability through our business, driving up return on sales and also return on capital employed. The group has got a long track record of successfully translating its profitability into operating cash flow. Historically, it's translated about 90% of EBITDA into operating cash flow. We expect that to continue in the future. Increased profitability is expected to result in increased cash flows. That will fuel our capital allocation policy. The capital allocation policy itself is broadly unchanged.
And it will allow for shareholders to benefit from growing profitability in the form of ordinary dividends, but also allow us to reinvest capital in the business to support further development of the transform and growth strategy. And so that virtual circle starts again. So I'll now talk you through the different components of the financial model, starting with revenue. So you've heard from Matt, from Simon, and all the business unit MDs today about their exciting plans to drive revenue growth beyond the market by accessing exciting tailwinds driven by regulatory and structural factors.
And that will drive outperformance for the business. Now, the chart on this slide sets out how we expect, or the sources of revenue growth for each of our reporting segments. And this has been fed into by all the revenue targets that each of the business unit Managing Directors have already talked about.
So we expect the cyclical recovery in the U.K. construction market and the government's house building targets to provide tailwinds for all of our reporting segments. In Landscaping Products, we expect to generate incremental growth through recovering some of the market share that we have lost in recent years. And that's through driving more value through that distinctive business model. And therefore, we expect to outperform the market in Landscaping Products by between 1% and 3%.
In Roofing, we're targeting to outperform the market by between 2% and 4%. And that's principally due to Viridian Solar leveraging the tailwinds associated with Part L of the building regulations and also the Future Homes Standard. And also increasing its share of growth of new products like the ArcBox and the inverters. And turning on to Building Products, where we expect the fastest rate of outperformance.
And that will be driven by that segment's exposure to new build housing, which is over 60%. A pivot in our Water Management business towards servicing the water utilities as they ramp up their investment plans associated with AMP8. And a continued increase in our market share in concrete bricks. So if we take that at group level on a weighted basis, we're targeting a market outperformance of between 2% and 4% per annum.
So if we now turn to returns. So the two charts on this slide, the chart on the left sets out return on sales or operating margin. And the chart on the right sets out return on capital employed. And you can see from these charts that the returns in 2023 on both counts are relatively subdued. And that reflects the weakness in the U.K. construction market.
And we'll see some similar levels of returns in 2024. Now, with the outperformance on the revenue line that I've talked through on the last slide, we expect to drive higher volumes through our existing manufacturing footprint. And that will drive significant operating leverage through the business and drive up profitability. In addition, we'll continue to focus on optimizing the manufacturing network in order to reduce our unit cost to serve.
And again, we expect that to support a recovery in our margins. And therefore, we're targeting a return on sales or operating margin of at least 15% in the medium term. If I now turn on to return on capital employed, again, that surplus capacity that we have across our business means that we don't need to deploy significant amounts of capital into fixed assets in order to support the revenue growth.
As a result, that recovery in profitability is expected to result in a significant improvement in return on capital employed. We're targeting return on capital employed in the medium term to be around 15%. Turning now to cash conversion. The chart on the right of this slide sets out cash conversion over recent years, cash conversion being the percentage of EBITDA that flows into operating cash flow.
You can see from the chart that we've delivered a consistently strong performance in recent years. That's been driven by active working capital management. While we expect to continue to invest in working capital in order to support the growth plans, we do also expect to continue to deliver EBITDA conversion at around 90%.
Therefore, that growth in profitability that I've talked about on the last slide is expected to flow through into growth in operating cash flow. That will provide the fuel for our capital allocation policy. Our capital allocation policy is broadly unchanged. Our first priority continues to be to invest in organic growth opportunities. The chart on the slide sets out capital expenditure in recent years.
You can see that it's ranged between GBP 20 million and GBP 30 million a year. Now, given that the transform and growth strategy isn't contingent upon a significant step up in capital expenditure beyond the normalized levels that you see on this chart, it means that we don't need to deploy significant amounts of incremental capital into fixed assets in order to support the plan. Our pre-IFRS 16 depreciation in 2023 was about GBP 23 million.
And you can see that that's broadly consistent with the average level of depreciation. Hence, it just underlined that point that when we get back to that normalized level of capital expenditure, we won't be investing huge incremental amounts of capital into the business. Our capital expenditure plans, which will range between GBP 20 million and GBP 30 million a year, are aligned with our group strategy. And we'll be focused on building capability and capacity in our Water Management business to support that growth opportunity, in converting existing plants in order to be able to manufacture more concrete bricks to support that opportunity, investing in our IT systems in order to support the imperative of building our business-wide enterprise excellence, and continuing to invest in maintaining our existing capital base.
On that latter point, in the early years of the plan, we will be focusing on our concrete tile factories, which we expect to also drive improved efficiency. Our next priority is to invest in those areas of the business that are valued by our customers, as set out on the strategy chart. Now, Matt explained earlier that leading brands, best-in-class technical and design support, and carbon leadership are key areas of differentiation for the group. And therefore, we intend to invest in these in order to enhance our competitive advantage. We're making no change to our dividend policy. We'll continue to maintain dividend cover of two times adjusted earnings. And therefore, that growth in profitability will feed through into increased shareholder dividends in the medium term.
That strong conversion of profitability into cash flow that I talked about a couple of slides ago, together with a normalized level of expenditure, means that we'll continue to deliver further reductions in net debt as we go through the plan, and therefore we expect to see the balance sheet continue to delever, and we're targeting a leverage range of between 0.5 and 1.5 times EBITDA, and we believe that that gives us optimal balance sheet flexibility, and finally we'll continue to evaluate selective acquisitions that will help to accelerate our strategy.
Our focus will primarily be on companies that operate within roofing systems, within Water Management, and within energy transition, and add something to our customer offer and/or our capabilities, and in the longer term a successful execution of our strategy and deleveraging the balance sheet will create optionality for a scale acquisition.
Bringing this all together now in our investment case, the group is well positioned to outperform the broader construction market. We've got a very attractive portfolio of businesses that are competitively advantaged to win in their marketplaces through a combination of national presence, scale, leading brands, and technical expertise. And we're increasingly exposed to attractive tailwinds driven through regulatory and structural factors, which will help us outperform the market.
And we're targeting to outperform the broader construction market by 2%-4% on an annual basis. We expect to deliver a material improvement in profitability through operational leverage. Our business has the ability to handle materially more volumes than it does today. And that will drive that incremental profitability and drive up our operating margin. And we're targeting that operating margin to be at least 15% in the medium term. Our business models are extremely cash-generative.
The successful execution of the strategy, including the conversion of profitability into cash flow, together with a normalized level of capital expenditure, will drive a significant increase in free cash flow. So we're targeting cash conversion at 90% and capital expenditure to between GBP 20 million and GBP 30 million a year. That free cash flow that the business will generate will delever the balance sheet. And it will create capital to invest in bolt-on acquisition opportunities.
We're targeting a range of leverage of between 0.5 and 1.5 times EBITDA. And if leverage drops below that and we're unable to deploy capital within the business in an efficient way within a reasonable timescale, we will return that capital to shareholders. And this profitable growth will drive an increase in shareholder returns. So we expect that operating profit increase along with reduced leverage to result in a material improvement in earnings.
And that will drive higher shareholder returns through the application of our dividend policy of maintaining dividend cover of two times adjusted earnings, and also through higher levels of return on capital employed. And we're targeting that to be 15%. And finally, the successful execution of the strategy will increase the cyclical resilience of the business due to greater exposure to long-term tailwinds associated with low carbon energy efficiency, green urbanization, and Water Management and drainage. That, I'll hand back to Matt. So we're nearly there. So thank you for your patience. So I'm going to quickly summarize what we've been through today.
Our transform and growth strategy with customers who value our unique set of capabilities right at its heart, our leading brands, our best-in-class technical and design support, and our carbon leadership, and supported by that investment in our enabling foundations of building business-wide enterprise excellence, leadership in ESG governance and standards, and investing in our people, our organization, and culture. And this will guide us as we travel through the next few years. And our business units that have been so well presented by our business unit Managing Directors are really clear about the role that they play in that.
From our brand powerhouses of Marshalls Landscaping and Marley Roofing to our three growth engines of Viridian Solar, Marshalls Water Management, and Marshalls Bricks and Masonry, with their clear imperatives in Marshalls Landscaping, delivering that greater value from a national specification pool model to Marley Roofing defending specification in its heartlands and driving share in roofing adjacencies. And in our three growth engines, Viridian Solar, leveraging those tailwinds that Stuart talked about so aggressively to accelerate the adoption of solar.
And in Marshalls Water Management, repositioning our business from its strength in new housing to access that huge investment that's going into the water infrastructure market. And in Marshalls Bricks and Masonry, it's very clear that we have a huge opportunity to drive penetration and win share in what is a very large market with our lower carbon concrete bricks. So each of our business units has clear strategic imperatives.
I'll come back to the chart that I shared with you at the very start. I hope that through today, that you can see that these are the clear six takeaways. We have a diversified portfolio that's exposed to very attractive scale markets with long-term growth drivers and near-term tailwinds. We have enviable market positions with number one or number two leading positions. We have significant headroom for growth in those addressable markets that we've talked about. We'll continue to invest in enhancing our capability and leveraging the inherent strengths in our nationwide manufacturing and logistics network and our operational leverage. You will see material profit improvement as a result of that revenue outperformance and the operational leverage that flows from that. Ultimately, that means we will continue to be a highly cash-generative cash business.
And you will see through the execution that we'll deliver material improvement in our free cash flow. And so guided through that strategy, these are the medium-term targets that Justin has just outlined that we will deliver: a 2%-4% revenue outperformance versus the market, and at least a 15% operating margin through the cycle. So thank you. Thank you for listening. Thank you for your time this afternoon. And I do want to hope you'll join me in thanking the team that have presented today because I think they've done a great job of positioning Marshalls for the future. So thank you for your time.
So Justin and Simon, do you want to join me on the platform stage, whatever you call this? And we'll open it up for Q&A, of which I'm sure there are plenty. I think we've got some microphones around.
So, when we do kind of point at someone, we'll make sure we get a microphone to you before you start speaking. And if you could just let us know who you are and where you're from, just so that we've got that on record. Okay. And we'll try to keep it to one question at a time. But I do know you lot. It'll probably be about three. And I haven't got a pen and a piece of paper. But we'll try.
Matt, I have three questions.
Yeah, I thought you would.
Thank you for a very interesting set of teams. I never knew roofing and concrete is so sexy. But anyway.
Thank you. We love it too.
In terms of our current capacity utilization, what is our manufacturing footprint? What percentage of our products do we manufacture? And what is our current capacity utilization?
Do you want to do it? Justin, you start, and then Simon can finish.
I'll try those. So which one would you like me to answer first?
Both of those.
In terms of actually manufacturing, it's a vast majority of the products we sell. We import some sandstone from India. We import granites from China. And there's other bits and pieces of stone that's imported. But it's very small in the great scheme of things. The other key area of import, though, is solar panels. And Stuart talked about those products coming from China. The vast majority of what we sell, we actually make. The capacity levels vary from business to business. We've got the most significant surplus capacity in landscape products. That's more than 30%. In roofing, it would be somewhere between 25% and 30%. In bricks, there's not an enormous amount of surplus capacity.
We can generate more through taking on more shifts. But we do have significant opportunities to increase that capacity through the conversion of other plants. And that's something that we've proven we can do. And it's not particularly expensive from a capital perspective. In Water Management, again, we've got some opportunity to increase output largely through labor. But it's our intention to invest in that area in order to create the capacity for us to deliver the growth plans.
So no plans for rationalizing reducing manufacturing footprint?
We're constantly looking at the efficiency of our manufacturing network. One of the points that Simon talked about and Matt mentioned in their sessions was about the rationalization of the SKU count. That is very helpful because it gives you working capital benefits, but it also results in efficiency benefits. We're constantly reviewing the right footprint for us to have. And as I mentioned in my piece, we're looking to drive down the unit cost to serve. We have no immediate plans, but it's something that all business should do on an ongoing basis.
Thank you very much.
You'll go straight behind. There we go.
Thanks very much. Aynsley Lammin from Investec. I think I've just got two, actually. Firstly, on landscaping, obviously cyclical factors and structural factors you've mentioned. Just interested what your estimate of kind of volumes are down, say, relative to 2019 in that business, so the cyclical force in the market. And then secondly, on the structural factors, you've mentioned your market share losses. Just maybe if you could have a bit more color, who have you lost market share to?
Why have you lost market share? How confident are you that you can recover that in the cyclical upturn? And then second question, just on the group margin target of 15%, interested or you'd like to hear your kind of view of where landscaping, building products, and roofing would be within that 15%. How do you get to the group 15%, I guess?
Do you want to talk about landscaping, Simon?
Yeah. Yeah. So I'll take the middle one. But it's the one I can remember. In terms of share, it's low-digit share that we believe that we lost in landscape. I made it very clear through the presentation. A lot of that was to do with focus. It was presence in the market. And we've lost that to regional players. There isn't one main competitor that we're dealing with out there. They've been nipping at our heels, quite frankly. We're absolutely confident that we will get that share back, absolutely confident. And all of the conversations that I've been having with all of our customers are confirming that they want to work with Marshalls. We've just got to be better out there in the marketplace. Okay.
So I think your first question was about you talking about our volumes or market volumes?
Well, both.
Our volumes have been down more than 30% since 2019. Market information is really difficult to get hold of, but I would say probably a little bit less than that, but not too much. I think your final question was on margins. From a segmental perspective, roofing, we expect to be in the range of 20%-25%. No change in the expectations there. Landscape products and building products, we'd expect to be in the region of 12%-15%. When you take all that together with our central cost base taken into account, then that gets you to around about 15%. Now, clearly, within each of those segments, we'll be shooting for the upper end of those. We've got to recognize where the margins currently are in the businesses. We've got some rebuilding to do, particularly in landscape products.
Okay. Thank you.
I think we've got over to the side.
Thank you. It's Jack from Baillie Gifford. Just one question from me. I guess when you were talking at the start, Simon, about kind of product line rationalization, I'm curious to understand how that can go hand in hand with what you're talking about in terms of specification. Because I guess if you're sort of reducing the SKUs by sort of 25%, 30%, does that potentially jar a little bit with kind of making sure you're specified and meeting all the needs of the end users? Or how does that work?
Yeah. Great. Let me top that. I think maybe one of the things that talked about both in March, but also in the half year. And I think it's a criticism I make. And I've been in the position as well of leading big number one brands. And over time, your portfolio does this. And particularly when times are good, you become all things to all people. And your range becomes inefficient and less well-targeted. And that's why we can do the range simplification without losing business. In fact, we will grow business as a result of doing that by getting the right portfolio and the right ranges.
So I'm very confident that by doing that, we're doing the right thing to drive the business forward and simplifying the offer to our customer. So I think that's a really important kind of starting point. It's not we're just taking product out. We're taking it out because we've just let the range get too complicated. Simon.
Yeah, just to support what Matt is saying there, the feedback certainly from people that specify our products is that some of our ranges are too complicated when you think about horizontally. Where we've got work to do in terms of filling the gaps is vertically when we talk about good, better, and best. And making sure that as we move up and down the product ladder, that customers don't migrate to the competition. That's where we've lost out on market share. The range vertically has not been where it needs to be alongside that pricing architecture. As Matt said, it's just become too complicated horizontally.
Okay. And we also want to create the space to bring some fantastic new product development to market. And you can't just push that back in on top of everything else you've got.
Yeah.
We'll come over there.
Hi, Rob Chantry from Berenberg. Thanks for the presentation, everyone. So yeah, three questions. Firstly, landscape products. I guess you referred quite a few times to kind of loss of focus in the past two or three years in the business. Could you just talk a bit more about how the management of incentives for the installer base has impacted performance in landscape products, how much that's kind of come off, been a factor, and effectively losing share? I think secondly, Viridian clearly looks like an exceptional little business, growing very well. Could you just talk a bit more about the gross margins in comparison with the broader Marley business? And then the expected evolution of that gross margin as the input cost, i.e., of solar panels, varies. And then thirdly, water, I guess GBP 90 billion framework in AMP8.
You've got GBP 69 million at the moment, growing 4%-6% ahead of market. Is that ambitious enough given the size of the spend? I'm aware that's quite a big number. But is that ambitious enough? How much more can the business do to properly play a role in that cycle? Thanks.
Do you want to pick landscape?
I'll take landscape. Yeah. So, in terms of the investment, and I'll take it there, of you referring to the installer scheme. Yeah, I think, again, it is about lack of focus. It's less about the incentives that were in play. It's more about letting it get out of control. We had an awful lot of members on the scheme that potentially were not leveraging the benefits and indeed utilizing the Marshalls products. The relaunch will be much more focused moving forward, much more value-add, and certainly pushing towards installers becoming seamless with Marshalls products in the future.
And the incentives will align to that. And certainly, we believe the new scheme will drive that value-add mix moving forward. If you recall, I talked about value propositions through yard and indeed value-add mix through the installers. So we're absolutely confident the relaunch of the scheme will be able to do that in the future. Okay.
Okay. On Viridian, well, Rob, you know we don't disclose gross margins individually within our reporting segments. What I would say is that gross margins in Marley and Viridian are broadly similar. I think you've heard about the features and benefits of the product and the service that Stuart and the team offer. And that justifies a premium in the marketplace. Now, we're acutely aware that we want Viridian to be a much more significant part of the group. And we think the tailwind that's available for us is an absolutely fantastic opportunity. And what we're really interested in is driving parent net margin out of that business rather than focusing specifically on the gross margin. And therefore, monitoring our market share and how that aligns with gross margin is really, really important. So I guess it's comparable.
We're trying to drive a business in the longer term that will be really valuable to the group.
If we come back to Water Management, I'm glad you're so excited by Water Management. It's a sexy business, even though you can't see much of it. It's below ground. I think, look, we've said it's four to six market outperformance. If you think about where we are in new housing, we'll probably perform in line with that market. It's in that bigger area where we see the market itself growing quite sizably, where we'll also probably be looking for greater market outperformance. But I think it's also about coming back to one of the earlier questions. It's the area where we're going to have to build our capacity and our portfolio offer. That will take a little bit of time as well through the cycle. Look, it's a great business.
I understand the question, but we think that's a reasonable outperformance target for us to go through in the medium term.
Oh, I think we've got Clyde behind. Yeah, if we go to Clyde, and then we'll come back over here.
Thank you. Clyde Lewis at Peel Hunt. Apologies. I think I've got four, but two are sort of, yeah, four of Viridian. So I'll wrap those like Aynsley does into sort of one question. Carbon benefits. I mean, obviously, the group has pushed on the benefits of cutting carbon within its products for a long, long time. And it's obviously been an ethos of the group. And you've invested a lot in new products to drive that. Do you think you're at the point now where you are getting financial benefits in terms of higher margins from those lower carbon products? Or do you think it's enabling you to gain share? Or is it still a little bit of a cost and the benefits have yet to accrue to the business?
Big question. Is it cost? The cost is irrelevant. It's the right thing to do. And it's winning as business. And it's becoming an increasingly big determiner of choice for our end customers. It doesn't matter whether we're looking at it in landscaping or whether we're looking at that in solar. It's actually turning into a commercial benefit. I think if I went to Stuart and asked about how he won at the National House Building Council, he was about to lose that business. And still, they started to look at the sourcing of the supply chain of the solar provider. And they came back to us at a premium versus the nearest competitor because they knew it was the right choice for them. So I think as you go through the cycle, it's going to become increasingly important.
And therefore, carbon and our carbon leadership plays an increasing part in that. So I think that works across all parts of our business. And I don't think it's going to go away. And so we have to continue investing in the innovation of our materials and investing to lower our carbon footprint ongoing. I think it's a challenge that every business has to address. I believe we're right at the forefront of it. And I think we'll continue to be so.
Thank you. On solar, the two-part question there, I suppose, is the first one was how big do you think the potential for non-panel, non-sort of roof systems is likely to be for you and, I suppose, the total market, i.e., if the total market's 300 million, is the inverters and everything else below roof likely to be at least as big as that, I suppose, over the medium term? And the second one on solar was why is there only a 64% share of the new roof market that's integrated and not much higher? Because why would you put an on-roof product after you've installed the roof? It doesn't make any sense to me. So is that just an element of conservatism in those numbers?
So I'll pick up the last point. And maybe Stuart can pick up the more difficult one. So in terms of that 80% of 80%, it's really because not every house has a pitched roof or not every dwelling has a pitched roof. So if you think you've got blocks of flats, etc., well, if that doesn't have a pitched roof or only a relatively small amount of roof space on there, then you don't get that degree of penetration. I think it's pretty unlikely, not impossible, that you will see a new build with a tile roof with on-roof solar on top of that. Second question, Stuart.
Yeah, yeah. So the solar panels, I think the question was about what's the balance between the panels themselves and all the balance of system price. It depends a little bit on the size of the solar system that's being installed. But if we're saying two kilowatts, then we're looking at about eight panels. No, about six panels, sorry. And that's about GBP 1,200-GBP 1,400 on the panels. The inverter will be GBP 300 or GBP 400. So the panels are significantly more valuable per dwelling, per installation, than the inverters. And of course, the bigger the system gets, the more that gap grows. So the accessories opportunity is not in scale close. It's a fraction of the opportunity for the panels themselves. But it's a really nice little bolt-on source of revenue for the business.
Although as you build that attachment rate for 20%, you can see that it's going to get slightly bigger, which is where I think you were going to go.
Well, and the other side of that is, are you looking at developing a sort of battery storage facility alongside the inverters such that if the house is not using it all, can you actually store it rather than sell it to the grid next to nothing?
That's a really good question because in the retrofit market now, 90% of installations are going with batteries. And the reason for that is that the value of energy when you buy it from the grid is GBP 0.30, GBP 0.25. The value when you export it is maximum GBP 0.10 or GBP 0.12, depending on who you're with.
So it's much better to hold the energy and use it. And then batteries bring other opportunities, for example, buying electricity when electricity is cheap and using it when electricity is expensive as well. At the moment, in the new build sector at least, batteries don't help the house builders hit the targets that they're trying to design to. Because if you export a unit of electricity, you're still offsetting carbon somewhere. If you use it in the building, you're offsetting carbon as well.
So the net benefit is kind of zero on carbon. But the benefit to the householder is high in running costs. So we will introduce a battery system for sure at the point where it becomes something that our customers, the customers we target, value. I feel confident of that. Marley's customer base is a little bit more towards the RMI social housing. And there, the drive is slightly different. The social landlord might be concerned about fuel poverty and affordability of rents and reducing energy bills for their tenants, as well as meeting carbon targets, for example. And I think there's a bigger opportunity for batteries in that sector, at least to start with. But it's a coming technology. And it's certainly something we will be looking at.
Thank you, and sorry, the last one was around, I mean, you haven't mentioned it, but there's obviously been a lot of chat around NI, sort of impact on minimum wages. Is that an issue for the group? Presumably, it is. But maybe you can give us an idea of the scale.
You're absolutely right. It is and will be an issue for us next year, in common with all companies. Financial impact: it's around about GBP 3 million. I think just building on that, yeah, it's an unplanned cost that every business is having to take, but I think you can see from the strategy that we're talking about today is that next year is about investment, and when you're hit with unplanned costs, but you're also wanting to invest, that's something you have to look to try to offset. The challenge with that is in a difficult market where supply is exceeding demand, it's very hard to pass on price, and so you have to look for efficiencies. Over the last three years, every business has been looking at efficiency and productivity because it's been tough out there.
So it's a challenging environment to be receiving an unplanned bill of GBP 3 million. It's a significant impact, even into a business where we haven't got a vast amount of people compared to some other sectors. But we have to work through that. Okay.
Toby Thorrington from Exane BNP Paribas. Just a couple of straightforward product segment questions, please. There are a couple of pictures in the presentation on solar panels on commercial installations, buildings. But it wasn't really talked about very much. Is that a segment opportunity?
Do you want to answer that, Stuart?
Yeah. Yeah, yeah. It is. But most commercial buildings, if they're like sheds, for example, will have metal roofs. A lot of commercial buildings will have flat roofs. So it's not really an opportunity for roof-integrated solar for those types of building. If the commercial building has a pitched tiled roof or a pitched slate roof, then it is an opportunity. So really, the opportunity is more about the type of the roof and the roof covering for this product type. Yeah.
Although you can add ArcBox to every single.
Absolutely very good point. Really, one of the things where we're finding real interest in the ArcBox is where the building below the solar system is of really high value. For example, if it was out of use, so if it was a factory that was put out of use because there was a fire on the roof, then the extra cost of adding a few ArcBoxes across that installation is really quite modest compared to the peace of mind that it adds.
Would data centers be covered by that?
Yeah, absolutely. You certainly wouldn't want one of those going out of use, would you? Very valuable.
Okay. And the other product segment was bricks. Could you just clarify which new house building segment they're targeting, really? Is it sort of single dwelling, multi-occupancy, social?
Would you like to answer, Dean?
Yeah. Simple answer. We're not restricted to any. It's typically terraced houses. It's typically new build housing that we're looking at. But yeah, whole market's available to us.
Okay. Thank you.
Okay. Just behind you, actually. You can pass it across.
Hi. Ben Barrow from RBC. Take a few as well, please. First, on the underlying market growth assumptions, I'm assuming they're the same for each segment. And can you maybe shed a bit of light on what you're assuming over the next five years?
Sorry. Sorry.
In terms of the underlying market growth.
In the underlying market.
Obviously, you've put in a lot by section. Keen to know what your base case is.
Look, when we talk about the underlying market growth, we're talking about the U.K. construction market. We're not talking about how it weights to our particular sectors. I can give you a view, which will be largely based on everything that you're reading in the press and research as well. I'll probably just refer you back to not that I'm endorsing it, but I would probably just refer you back to the CPA numbers of 2.5% and 3.8%. Perhaps you'd like to share what your expectations are.
I'm sure you know better than me. On landscape products, you mentioned a few rehires. Keen to know maybe the reasoning behind them leaving and what's tipped those over the edge to come back.
There's a few in the room. In terms of leaving, some people went off to explore different opportunities. I don't think in some instances it was clear what the future held for some of those individuals in terms of promotion and picking up bigger roles. Certainly, the people that have been hired and coming back, and there is quite a few, are coming back because they see a fantastic opportunity at Marshalls moving forward. A few people have moved away to other companies. The grass has not been particularly greener on the other side. I would suggest that the way we're setting ourselves up for the future in terms of that specific focus around commercial infrastructure, merchants, and installers has certainly been attractive for the guys to come back. It's the world that they know.
It gives them an opportunity to grow into some quite sizable roles and clearly make a difference, so yeah, really pleased, by the way, to have those people come back. It's people that I've worked with certainly some years ago, and good to have them back in the team.
Thanks. And then moving on to Viridian, you mentioned gross margin similar to the current group. What kind of scale do you need to get to in Viridian for the EBIT margin to look similar to that roofing segment division? And is it in there, or is that lower than the overall roofing?
It's broadly similar. So it isn't lower than the rest of roofing.
Okay. And what sort of scale do you need to, or is it there now?
It's there now.
It's there now. Okay. And then more open-ended, just looking at the Future Homes Standard and potentially the impact on solar and potentially the rest of the group. I mean, what are you hoping to see in there, and how could that change the trajectory of solar over the next few years?
Off you go, Stuart. Yeah.
So the Future Homes Standard, the next step of it, because the 2021 regs was the sort of first step towards it, will for sure mandate heat pumps and electric heating as a minimum. There are two options in the consultation. One of them is just a heat pump for the notional house, which the house builders have to exceed the performance of. And option two includes solar as well. And obviously, we're very keen, and it includes an amount of solar which is in excess of the amount of solar that's on the notional house in the current regulations. So on the one hand, the Future Homes Standard could increase the amount of solar per house and therefore increase the size of the market opportunity.
On the other hand, if the other option was the one that the government went for, then potentially it may reduce the solar that house builders are putting on homes. But there is a penalty to using heat pumps, which is generally higher running costs for the occupants compared to a gas-heated house. So we do understand from some of the house builders we're speaking to that even if it went that way, that they might still reach for solar as a way of ensuring that the running costs of the properties that they were selling were still advantageous compared to buying a secondhand house.
The change of government, I think, has been positive in regards to this consultation, which is still the government hasn't yet come back on. Certainly, Ed Miliband is talking the talk about reaching for solar on new build house roofs. And we're working through Solar Energy U.K., where I'm co-chair of the new build working group. And I've been representing Solar Energy U.K. on the Future Homes Hub. And it does look at the moment like the government is still exploring options about how much solar is the right amount of solar to require under the Future Homes Standard. So we're keeping our fingers crossed. But we still think there's a bright future for solar, whichever way they go.
Thanks.
I would just say I think Ed Miliband was quoted as saying, "I'd like to start a solar roof revolution." This is his level of support towards that renewable energy. So hopefully, that gives us some encouragement. Just before we carry on in the room, are there any questions online that we want to have a look at, or we can have a? There are. Let's just take a few online because I'm conscious there are a lot of people in the room, and we will come back to you.
Thank you. So we have a couple on the webcast from Nigel Yates at AXA Investment Managers. Firstly, on ArcBox, how long do you anticipate that this will be unique before competitors replicate it?
Stuart.
In some ways, if and when it is replicated, then that would be an endorsement of the opportunity that the product represents. As I mentioned in the presentation, we have patent protection pending, but we are aware of a number of copycat products that are already being put out in the market. They're not yet available, so in some ways, that could be good to have more people in the market talking about the need for a product like this.
It might be that it actually grows the overall market size for it. We'll have to take a close look at whether we think their products infringe any of our intellectual property and decide what to do about that when it eventually does happen. Yes, it's a good idea, and people will seek to have a go as well, for sure.
Okay. And second one on Marley Roofing. Why are you not targeting the volume house builders, preferring regional and mid-size ones instead when targeting private RMI?
Would you like to talk about that?
Yeah.
Yeah.
We're a priced premium manufacturer, and although our roof system solution is available to all customers, there is a difficulty when it comes to the overall value of the roof. There's also quite a bit of crossover with Viridian, who would specifically target the top 20 house builders with solar, so there are already instances where we do it, but not as a Marley roof system. It's with a Clearline Fusion panel and some Marley products, but not the Marley system.
Okay. Shall we come back into the room?
Chris Millington. Chris. He's right over the far side. He's going to try and be quiet.
I'm struggling a little bit for remaining ones. But could we talk about premium pricing? You've mentioned it lots through the presentation. What extent on like-for-like products are you versus your peers? Perhaps landscaping and Viridian would be helpful there.
Maybe I can just be a little bit more general. I think one of the things we're known for is our leading brands. And when you have leading brands, you put a cost into your business. And you expect a return for that business. And I'd say good brands can confidently command, and our customers will be willing to pay anything between a 15%-20% premium or more in certain markets when your proposition is that strong.
How's that fared with the volume backdrop we've seen in the last three or four years?
In terms of, I mean, you'd have to look across the different parts of the portfolio. I think in landscaping, we probably pushed that pricing a little bit too far, and I think that's what Simon's touched upon in terms of making sure that we maintain the right pricing architecture and that we're attractive in the marketplace with the right propositions. I think in other parts of the market, I think unquestionably we've managed to command that premium, and we've seen that willingness to pay for it from our customers.
Just another. It's more of a checking query. You talk about 8% market share in the concrete bricks. Is that concrete bricks as a share of all bricks? What is your share of concrete bricks then, perhaps?
Dean, you're right. Just there.
Yeah. So the 8% is the share of overall brick market, which is published figures, so it's easy for us to tell. The concrete brick is a bit more difficult, but we will have a high market share. I don't know the actual figure, but I would estimate over 70%. Yeah.
Is that okay? So we've got one in the middle just over here.
Thank you. Sorry, this is another Viridian question. Quite a naive question for me, but I know that often sheds can have problems actually getting solar on there because of grid capacity. Have there ever been any boundaries to that with your customers when it comes to big new home sites?
Yes, you're absolutely right. The grid can be a constraint to the deployment of solar. And it's pleasing to see the new government has sort of recognized that. And through the Solar Task Force and other announcements, we're expecting quite a lot of grid reinforcement investment over coming years. In terms of where people have struggled to get actual connections because of localized constraints, it's more often the case for larger installations like the ones you're talking about on large commercial buildings. But it can occur, particularly where the grid is weak. So Scotland's a great example. It's a great case study, really, for what's happening and going to happen in the rest of the country because it's already at a very high level of solar penetration on new sites.
And also, Scotland's grid is not really as strong as the rest of the country, apart from around the very big cities. And there have been examples where developers have found that getting a grid connection for the amount of solar that they wish to install to be an issue. There are technical and technological means to get around that. One is called export limitation, and our inverters support this, where you measure whether the house is exporting to the grid, and you reduce the solar generation to prevent that happening. So you get all of the benefits of the self-consumption and the use in the home, but you don't get to export out to the grid. And that helps the local network.
The other thing is that some of the calculations that local networks use to determine whether a development's going to take the network over some engineering limit are generally becoming less constrained because they're getting more experience of seeing solar on developments, and also how the generation and consumption across a large number of houses means that they're not generally all exporting at the maximum all at the same time. There's a sort of contention ratio to take into account there as well, and so that's helping as well. But it is a very, it is outliers. It's a small number of developments that have been required to use this technological means to circumvent the constraint.
Thank you.
Hey. I think final two sets of questions, I think, because I think people are looking for a well-deserved refreshment after this. So there we go.
No pressure there. It's Charlie Campbell at Canaccord Genuity. I've only got one in regards to here. Just wondered what your thoughts are on modern methods of construction and the threats and opportunities around that. If government does succeed in building more houses, we might get a bit short of capacity to build them.
I mean, modern methods of construction, I think, has been this growing wave that never seems to get to a point where it breaks and where people are trying to build houses in factories, if you like. I think actually the way it's working is looking at, and I think Susan referred to this, is how you deskill. You create systems that deskill. So it's easier and quicker to install systems, whether it's roofing systems, whether it's brick systems, whether it's interior lining systems, and I think a lot of the businesses are now focused on how you just make it easier for people to install because probably the critical pinch point here is actually labor and having the right skills in the labor force in the U.K. construction industry to tackle that problem.
So, I think lots of businesses are focused on how do you make it easy for installers. And then how do you also train installers to be able to put those systems in at pace. And I think that's probably where the industry is focusing, particularly manufacturers like ourselves, is how do we help in that process. Okay.
I'm from River Global. You previously had a slide which showed the earnings recovery potential if market volumes recovered 20%, which I think took you back to sort of trend cycle. But correct me if I'm wrong. You no longer show that data. Has your view on where volumes are overall for the market versus trend, have they changed or are they the same?
I think the chart you referred to was just designed to show what would happen with a recovery of the volume and lost margin in a pretty mechanical way from the previous period. What we've subsequently done is worked through in a lot of detail, very granular about each of our markets, how we expect to access those tailwinds, how we expect leverage to come through the business. And they're represented now in the forecast that, or in the, not the forecast, not putting forecasts out, sorry, in the guidance that we're providing today. So that's the operating margin of at least 15%, which is pretty much in line with what that slide said.
Or to think about it another way, you mentioned the volume decline in landscape products being down around 30%. How would the other two segments compare versus 2019 levels?
So yeah, it's probably a little bit more complicated. So if we go back to 2019, then Viridian Solar would be a tiny, tiny little business. In terms of 2019 across the roofing business, then volumes will be down somewhere in the 20%. Our brick business is larger than it was in 2019. And our water business is a little bit smaller than it was in 2019 in the current year.
Thank you.
Okay. I think I'm going to wrap it up there and thank you for your time. I hope I could do a show of hands. How many people will put Marshalls Landscaping around their house? How many people will put Viridian Solar on their roofs? How many people will put our Marshalls Water Management under their driveways? And how many people will build their houses with concrete bricks? And have I left anything out?
Oh, Marley Roofing. Show of hands. I promise this time next year, I will have Viridian Solar on my house. Look, thank you for your time. I know it's been a long day, but please stay. There are refreshments. And you can chat to some of the team and go and ask some more questions around the stands there. But really appreciate your time today. Thanks for joining.