Good morning, everybody, and welcome to Marshalls' 2025 full year results presentation. Thank you to everybody in the room for joining us and of course to those online too. I'm joined this morning for the presentation by Justin Lockwood, our Chief Financial Officer. Just a quick rundown of the agenda. Before I get into the presentation itself, I will outline my thoughts as a new CEO to Marshalls. I'm then gonna give a brief overview of the full year performance before handing over to Justin, who will take us through the group's full year results in more detail. I'll then return and share an update on the progress we are making with our Transform & Grow strategy, and then I'll wrap up with a view on the outlook before opening the floor to questions.
Just a quick reminder for our online participants, you can submit your questions at any time via the chat, and we'll read them out in the room before responding. As a reminder, I've been in the business for over 10 years, and during that time I have held a number of roles, including that of Chief Operating Officer and more recently, Chief Commercial Officer. I've also been a member of the board since 2022. Both myself and Justin are integral in the development of our Transform & Grow strategy, and as you will see from today's presentation, we firmly believe it, that it remains the right strategy for Marshalls. If we're not changing strategic direction, what are we doing?
Well, the message today is one of strategic continuity, but with much sharper execution that will ensure that we deliver on the commitments and the medium-term targets that we set out in November 2024. Looking at the left-hand side of the slide, where are we now? Well, Marshalls is a great business with a diversified portfolio, and that does give us a good degree of resilience in subdued markets. The proposition that we have is genuinely differentiated with unique capabilities that our competition cannot easily replicate. We still have great products and those hold enviable number one or number two positions in the market. Our national network gives us the service and carbon leadership advantages over our competition. Underpinning all of this, we have really talented colleagues with both the capability and the desire to deliver outstanding outcomes.
This certainly shows through with the unrivaled technical and design expertise that we bring to every project. Now, these are advantages, real advantages, and these are advantages that our competitors cannot easily replicate. What are we doing differently? Looking at the right-hand side of the slide. We've already tightened our focus with fewer higher value activities, both operationally and strategically. We've intensified the pace in which we operate, and we are improving the commercial performance culture up and down our business. I'm now gonna take you through each of these in detail on the next slide. We're absolutely committed to the near- to medium-term targets, and we believe in the strategy, but we must sharpen up our execution. As a result, we've been tightening our focus. We're being much more selective about the activities that we undertake.
Strategic investments have now been prioritized, and these are guided by customer insight, financial performance, and structural and regulatory tailwinds. The people related activities in 2026 will be directly linked to value creation in the P&L, and we are now more proactive in the management of our product portfolios and new product development to make sure that we keep things simple. We've intensified the pace by building an organization that is focused on delivery. We've got a flatter structure that will improve accountability throughout the organization, and clearer frames of reference for trading will enable agile, more confident decision-making at every level in the business. This will mean that we can compete more effectively with our regional competitors.
We've already seen examples where we are becoming a seamless extension of our customers' businesses, and we're making it easier to deliver value, drive collaboration, and reinforce the long-term partnerships that underpin sustainable growth. Finally, we are embedding a performance culture into the business, strengthening our commercial excellence. We now have far better visibility of the commercial levers that drive financial performance, such as pricing architecture, customer and channel profitability, and cost to serve management. We've redesigned our incentive schemes to focus on margin performance, and we're ensuring that our cost base remains aligned to our market opportunities. All of this is being underpinned by a reinvigorated sales and product awareness training. As we look into 2026, our focus is simple. It's one of delivery. Delivery that is evidenced by improved profitability. Not just plans, not just intentions, but results that demonstrate progress.
Before I hand over to Justin, I'm just gonna run through a very brief summary of our performance for 2025 and the progress that we're making against the Transform & Grow strategy. Despite challenging market conditions, the group delivered revenue growth and landscaping has shown a clear improving trend throughout the year. In terms of profitability, we've seen growth in Roofing Products and a solid performance from Building Products. Landscaping profitability was in line with our expectations and against our plan. Finally, our disciplined approach to working capital throughout the year has delivered a very robust balance sheet. Overall, these results demonstrate early but clear progress with regards to our Transform & Grow strategy. We're stabilizing the group, we're rebuilding growth, and we're improving our financial resilience.
This is all while investing in the capabilities that will strengthen our market positions for the long term. This is a solid foundation to build on, and I'm confident that as we continue to execute the strategy with increased pace and greater discipline, we will unlock further value across the group. With that, I'm going to hand over to Justin, who will take you through the financial detail.
Thank you, Simon, and good morning, everybody. I'm going to take you through the key financial highlights for the period. I'll then run through the detail of the results at both group level and by our reported segments, and also our cash flow performance. I'll then give you an update on the strength of our balance sheet before closing with a recap on our capital allocation policy. This first slide sets out the key financial highlights for the period. We're pleased to be able to report a return to revenue growth of 2% to GBP 632 million, and that's after a couple of years of declining revenues. However, operating profit contracted by 15% to GBP 56.4 million, and that was due to a weaker performance by Landscaping.
Profit before tax and EPS both declined by 16% year-over-year to GBP 43.7 million and GBP 0.134 per share, respectively. Our proposed full-year dividend reduced by the same percentage to GBP 0.067 per share, reflecting the application of our dividend policy. Finally, we've continued our disciplined approach to cash management. Despite that, we had a modest increase in net debt due to some normalization of working capital and the payment of adjusting items. I'll now go on to revenue and operating profit at group level. The chart on the left-hand side of this slide sets out a year-over-year revenue bridge showing the component parts of the 2% increase in revenue to GBP 632 million.
You can see from the chart that both Building Products and Roofing Products delivered growth in the period, and they both increased by 4%. However, Landscaping Products contracted by 1%. The slide on the right shows a similar bridge for operating profit, and it's clear from that bridge that the main driver of the reduction in profitability was Landscaping Products, with relatively small movements across the other reported segments. Now, as usual, the operating profit numbers are stated after adding back adjusting items, and adjusting items in the year totaled GBP 24.4 million. They comprise the amortization of intangible assets arising on acquisitions, that's GBP 10.3 million, and that's a recurring feature of our P&L account.
In 2025, we also had restructuring costs of GBP 14.1 million, and they were split broadly 50/50 between cash costs and asset impairments. More details on those are set out in the appendix to the deck if you have interest in that. I'll now move on to the performance of each of our reporting segments, starting with Landscaping. As mentioned on the last slide, Landscaping revenues contracted by 1%, and that's against a challenging market backdrop where sector-wide volumes are still at running below historic norms. Against that backdrop, we were pleased to deliver an increase in volume growth of 4%, and that was delivered through improved customer relationships and new trading agreements.
However, the benefit of that volume growth was offset by deliberate and targeted price reductions, which reduced revenues by 1% and a shift in product mix which had a 4% impact on revenues. The impact of those three factors all moderated in the second half of the year. Operating profit contracted by GBP 10.1 million, and as a result, the reported segment was broadly breakeven in 2025. The reduction in profitability was driven through the price investment that I've talked about and a shift in product mix towards lower margin categories. In addition, we saw cost pressures in the business with pay awards and higher national insurance contributions, and those weren't offset by customer price increases during the period.
In addition to that, we saw a significant deterioration in the financial performance of our natural stone processing business, and that resulted in a closure decision in the second half of the year. Those factors, though, were partially offset by the benefit of improved volumes and the early benefits of our restructuring programs. We responded decisively to that deterioration in profitability in this business and identified GBP 11 million worth of cost savings, which we expect to be fully delivered by the end of 2026. Indeed, three million pounds of those was delivered in 2025. A little later in the presentation, Simon's going to take you through the component parts of how we expect to rebuild margins in this business.
We believe that the decisions that we've taken in 2025 will result in a more flexible and agile business that will underpin a significant improvement in profitability in 2026. Now moving on to our Building Products, where we delivered revenue growth of 4%, and that reflects good growth in both Water Management and our Mortars business units, partially offset by lower revenues in Bricks. In our Water Management business, the growth was driven through both our core residential market and the wider infrastructure markets, supported by improved stock availability and good customer service levels. Our Mortars business benefited from its strong service proposition and relatively modest build rates across housing developments that favors our ready-to-use product. However, in Bricks, we chose to focus on pricing rather than volumes, and therefore we saw a reduction in revenues during the period.
We did that in order to protect our gross margins. In the second half of the year, we saw increased competitive intensity as the rate of house building slowed. Operating profit was 8% lower year-on-year at GBP 13 million, and that reflects improved profitability in our Water Management business from higher volumes and an improved product mix. That was offset by lower profitability in Bricks with lower volumes and reduced manufacturing efficiency. In addition, the Roofing segment benefited from lower levels of property income compared to recent years, and that reduced profits by about GBP 800 ,000.
Now turning to roofing products, which delivered revenue growth of 4%, and that growth was driven through Viridian Solar, where revenues increased by about a third as house builders continued to select its products as part of their response to changes in building regulations which require increased energy efficiency. The rate of growth of Viridian moderated in the second half of the year, as we expected, and that's as the comparatives became tougher. However, we were pleased to see sequential growth in 2025, with higher revenues in the second half of the year than the first half. Revenue in Marley Roofing, though, declined, and that was due to the tough market backdrop and increased competitive intensity as we saw increased market capacity come on stream during the period, which reduced our sales of concrete roof tiles.
Operating profit in this segment increased by 2% to GBP 50.2 million , and that reflects improved profitability in Viridian from higher volumes and its disciplined pricing strategy. That was partially offset by lower profits in Marley due to lower volumes and weaker manufacturing efficiency, which in itself led to product availability issues for certain product profiles. We've instigated a targeted program of capital expenditure aimed at improving the resilience and efficiency of Marley's concrete roof tile lines, and that will remain a key area of focus in 2026. Now moving on. This slide sets out the profit and loss account from operating profit through to earnings. As mentioned earlier, operating profit reduced by 15% to GBP 56.4 million .
Finance costs were GBP 1.8 million lower year-on-year due to lower base rates and the benefit of a pensions credit. As a result of that, profit before tax contracted by 16% to GBP 43.7 million. Our effective tax rate was 22%, and that's unchanged year-on-year, and it's lower than the headline rate of corporation tax in the U.K. because of a Patent Box arrangement we have in place. Taking all of that together, earnings per share reduced by 16% to GBP 0.134 due to the weaker operational performance. Turning now to cash flow and net debt. The chart on the right-hand side of this slide sets out the component parts of our movement in net debt during the period. Starting from the left-hand side with EBITDA at GBP 85 million.
We've continued our disciplined approach to working capital management and delivered cash conversion of 88%. However, despite that, we still had a working capital cash outflow of GBP 12.5 million. We consumed around GBP 25 million of cash in interest payments and taxation, and that was higher year-on-year due to normalization of the timing of interest payments and arrangement fees associated with the new syndicated bank facility that was put in place in November 2025. Capital expenditure of GBP 15.7 million remains targeted and tightly controlled, but it did increase year-on-year by about GBP 8.5 million.
That reflects increased CapEx on Marley's concrete tile lines, investment in Viridian's office space and warehousing facility, increased investment to increase capacity in water management, and we also benefited from lower levels of proceeds from site disposals than last year. Adjusting items paid was GBP 10.9 million, and the most significant item of that was the final Viridian Solar contingent consideration payment of GBP 6.6 million, and the balance was restructuring cash costs. Overall, net debt increased by GBP 4 million to GBP 137.9 million. I'll now move on to focus on the balance sheet and our capital discipline. This slide sets out a range of metrics which look at working capital management, returns, and balance sheet strength.
You can see from the table on the right-hand side that debtor days and creditor days both improved year-on-year by a day, and that average inventory turn was unchanged at 2.8 x. Return on capital employed reduced to 7%, and that reflects the weaker operational performance. However, we continue to target to rebuild that to 15% on the back of delivering our Transform & Grow strategy and seeing a normalization of market volumes. Our balance sheet continues to be robust, although, leverage increased a touch to 1.8 x. We've got a lot of headroom against our new syndicated bank facility, and at the year-end, that was GBP 125 million. That bank facility, along with the cash generative nature of our business, provides the capital that we need in order to execute our growth plan.
Finally, moving on to our capital allocation policy, which remains unchanged. Our strategic plan requires us to invest between GBP 20 million and GBP 30 million a year, and in 2026, we expect capital expenditure to be at the lower end of that range. A couple of slides ago, I talked about the slight increase in net debt during the period. We do expect in 2026 and beyond to return to annual reductions in net debt, reflecting the cash generative nature of our business. We'll continue to target leverage to be in the range of 0.5x-1.5x EBITDA. With that, I'll hand back to Simon.
Thank you, Justin. It is very clear against that tough market backdrop that we've delivered a performance that demonstrates the strength of our broad product portfolio. We're now gonna turn to the, Transform & Grow strategy, where I'm gonna give you a brief update on the progress in each of the business units. As a brief reminder, and many of you will recognize this slide, our Transform & Grow strategy is built around our customers and a common set of capabilities that we absolutely know they value. Our medium-term goals along the bottom are clearly defined, and they are built on delivering market outperformance across the business and leveraging the financial strength of the group to deliver sustainable growth. I'm now gonna take you through each of the business units in turn.
I'll give you a brief overview of the market, the strategic priorities for each, and the progress that we are making against those. First of all, let's have a look at Landscaping and a brief market update. In the second half of 2025, we did see a softening in the market. However, overall activities year on year were broadly flat. Across the industry, there were no significant changes in overall capacity, although a number of our competitors did scale back their output throughout the year. Now just directing you to the top right of the slide and as a reminder of our near-term improvement plan, we've been busy strengthening the leadership team, growing our strategic relationships with customers, and simplifying our offer. We've also made significant progress in embedding a commercial excellence program across the business.
Now looking at how we're doing against the plan, the team is now rebuilt, and I'm absolutely confident we have that Premier League winning side in place. Multi-year trading agreements are secured and pricing is agreed for 2026. Our customer engagement scores are improving, and they're up by 15 percentage points, and our share of wallet in yard is growing. In some cases, that is now beyond 85%. Overall, we've gained just over 4% of overall market share during the year. This progress with our customers has been recognized through multiple supplier awards, most notably Supplier of the Year from two of our major partners. The product portfolio has been simplified and our pricing architecture is now aligned to that.
Most importantly, we now have a very clear new product development pipeline with launches planned for quarter two of this year. These new products are going to rebalance the good, better, and best ranges, and that will help us to defend against the competition where customers have previously been migrating. All of this is underpinned by an improved commercial capability, driving greater value, and this has certainly been evidenced with an improvement in gross margin in H2 of 2025. Let's not forget, we will deliver GBP 11 million worth of cost savings in 2026, and this will, you know, underpin and improve our profitability through 2026. These results demonstrate clear progress, and they certainly strengthen our competitive position.
Alongside our nationwide network, we firmly believe that we're in a great position to capture value as the demand recovers. I'm now gonna talk you through the building blocks for margin recovery in the landscape products business. I'm absolutely confident we will rebuild the landscape business and deliver operating margins of at least 12%. We've achieved this before, and the foundations are now in place, so I firmly believe we can do it again. Starting on the bottom left of the slide, 2025 has very much been a reset year, one where we focused on rebuilding the foundations needed for sustainable, profitable growth. The key to this was having that Premier League winning team in place to allow us to reinvigorate our relationships with customers.
We've reset the cost base and already unlocked around GBP 11 million worth of cost reduction, and that's been done through network optimization and overhead removal. This has given us a much simplified footprint and lower complexity to improve our efficiency and control. Our commercial excellence is now starting to show, and we've introduced clear product and pricing architecture, and this is supported by a robust pipeline of new product development. All of this is gonna enable us to improve our margins through specification-led sales. Service and availability has also improved, and that's helping us to protect mix and retain our customer base. Finally, as demand normalizes, we can deliver incremental volume with our existing footprint.
We've seen this historically, and it does result in significant operational leverage. In summary, we've rebuilt the foundation, we've reset the cost base, and we have strengthened our commercial capabilities. The plan is very clear, the actions are in motion, and the impact is beginning to come through. Now turning to Marley Roofing. In terms of a brief market update, underlying demand has remained broadly stable. However, the competitive dynamic in concrete roof tiles has seen a shift. New capacity was introduced across the market in 2024 and 2025. However, some older assets will be retired this year. We do expect competitor intensity to persist in 2026. Against this backdrop, we've assessed our strategic priorities that we already have in place, and we're confident that we have the right plan.
We will, of course, continue to monitor market dynamics very closely. As a reminder, and directing you to the top right of the slide, repairs, maintenance, and improvement in both social and private markets remains a priority for us, as does leveraging our full roof system offer to drive share in private new build housing. Of course, we will continue to focus on boosting availability in categories where supply has held the market back. If we look at the progress and response against those actions, we're absolutely protecting our margins by continuing to invest in the Marley brand and in our specification and full roof system capability. From this, we've seen specification-led growth. We've secured pilot deals with small to medium house builders for full system offers, and this includes solar.
To support in that, we've invested in new software to strengthen lead generation and maximize our margin per tile. To further support, we've got dedicated capital expenditure plans to improve operational efficiency and quality. This investment will be dedicated specifically towards those concrete tile lines that are subject to increasing competition. Therefore, our plan is very clear. We will continue to strengthen our heartlands through targeted investment, and we will continue to drive share in adjacent markets. Moving now to Viridian Solar. 2025, industry demand increased significantly, and that was due to the Part L regulations. Alongside this, there were no changes in competitor dynamics, and we maintained our market share throughout the year.
The demand for our ArcBox Fire Protection product continued to grow strongly, and the introduction of the Future Homes Standard remains a long-term growth driver for us. In terms of our strategic priorities on the top right, they remain unchanged. We will continue to leverage regulatory tailwinds that drive solar into new build housing, and alongside that, we will continue with new product development and innovation. We'll continue to increase the attachment rate of our ancillary products, and we're gonna accelerate the growth of ArcBox in European markets. We look at the progress against the plan. Well, in 2025, we delivered an outstanding performance and protected our market share, and this is reflected through very, very strong customer service metrics. New product development has been a continued focus for us, and this has resulted in the launch of our most powerful panel to date.
We've strengthened our supply chain due diligence, and this is increasingly becoming a deciding factor with regard to contract award. Finally, we've expanded our international sales team with a specific focus on the potential for ArcBox across several European markets. This product has seen significant volume growth over the year and has resulted in over GBP 2 million worth of revenue in 2025. This year, we will continue to innovate. We're gonna launch the Viridian Solar mobile app, and this will give our customers greater control across the installation journey and will further enhance the ease of doing business with Marshalls. While growth in 2026 is expected to moderate, the future remains highly attractive in this area. Regulatory tailwinds will provide leverage, and new product development will accelerate growth. Now let's look at Water Management.
In 2025, again, demand remained broadly flat, and there was limited growth in revenue into, in regards to AMP8. However, design activity in this area is increasing, and I'll come to that shortly. Finally, we did not see any significant change in competitor dynamics. The priorities on the top right of the slide are unchanged. We will continue to strengthen our position in new build housing, and we will look to access new markets in commercial and infrastructure. To underpin this, we're gonna invest in new capability and capacity. How are we doing against this? Well, our actions in 2025 delivered really strong results. We scaled up our production on existing assets, and that improved our stock position and indeed our responsiveness. The result of that was 15% revenue growth, and that was in new house building.
We improved our customer service scores despite overall market flatness. In readiness for major commercial infrastructure growth across water, energy, and transport, we've strengthened our engineering and design capability. Now, this is gonna ensure that we can engage earlier with customers, we can shape project specifications, and secure higher value work, and it's already paying off. We've seen design activity in this space increase by around 25%. Finally, to further support, we're evaluating capital investment options at the moment that would enable us to scale up our existing network.
The aim is to finalize the business case and indeed the capital expenditure case in the first half of 2026, and this investment will be within the existing capital expenditure numbers that Justin reported on earlier. In summary, we'll compete, continue to compete in new build housing and surface water markets, and we will reposition to access growth in commercial and infrastructure. Finally, let's look at our Bricks business. In terms of a market update, 2025 industry demand again remained broadly flat with no recovery in new build housing. At the same time, several of our clay brick manufacturing competitors brought back capacity online, and this was in anticipation of a market upturn that did not materialize. What this did do was create oversupply in the market and indeed put pressure on pricing.
Although activity in this business unit remains subdued, our strategic priorities remain unchanged. That said, our responses in a subdued market have been very selective. We prioritized value over volume, and we focused on price realization, protecting our unit margins rather than cutting prices to chase volume. Now this approach has cost us a little bit of market share, but it has limited the negative impact on the P&L. We reduced marketing activity, and we slowed down new product development to avoid incremental pressure, and we reallocated those resources to areas of the group with stronger near-term returns. We've also paused capital expenditure programs that were allocated to converting lines to brick manufacture. We will restart those programs once volumes recover to a level that will support the investment case. Now pausing these activities shows real focus on the P&L and cash performances.
In summary, we'll continue to drive market share in new regions and accelerate concrete adoption. New product development will be accelerated as the market picks up and not before. We will still have the opportunity to increase our capacities to meet demand in the future. I'm now gonna turn to the outlook before opening up for Q&A. Demand has remained consistent with that of quarter four of 2025, and the weather is certainly not helping us. Although we don't know the full impact of the Middle East conflict, we are mindful there could be an effect in the future on energy prices in the wider economy. All of that supports my view that we need sharper execution of our strategy. As I've outlined before, that means tightening focus, intensifying the pace, and improving our performance.
With that, therefore, the outlook for this year has not changed. The fundamentals of the business are solid, our proposition is unique, and this certainly gives us a competitive advantage. Because of this, we also remain confident in delivering a material uplift in profitability and returns over the medium term. We now have the foundations in place, and we are committed to unlocking the full value and potential in this business. This year will be a year of delivery. With that, I'll ask Justin to join me for the Q&A.
Morning. Adrian Kearsey, Panmure Liberum. Two questions, if I may. On Bricks, we've seen in recent years sort of fairly elevated levels of imports. Are you continuing to see that in terms of a headwind? In terms of Building Products, within Water, you talked about investing in the business there in regard to infrastructure type projects. Is that about capacity or capability or a bit of both?
Okay. I'll take the Brick ones, Adrian. Imports continue. That doesn't change our, you know, kind of focus on the plan and our view in terms of what we're facing into. Nothing changes as far as we're concerned with regards to the imports market. In terms of Water, in terms of investment, it's both capability and capacity. We will need both moving forward, and I've already said, we're evaluating the proposal at the moment to be able to deliver that. That investment is both in people and in the equipment.
Thanks. Aynsley Lammin from Investec. Just two from me, please. First on Roofing, if you could just provide maybe a bit more color of who's increasing capacity, and who intends to increase capacity going forward as well. Are you losing share there? Does it impact the clay roofing products? I guess on that margin of 26%, what would that kind of be as a normalized margin in the context of what's happening in the wider market? Just on landscaping, obviously invested in price last year. Just interested to hear where you are in terms of price increases this year. Do you think you can capture that and still hold the market share? Any thoughts there'd be interesting. Thanks.
Okay. In terms of roofing, increased capacity, FP McCann have entered into the market, and that's where we're seeing capacity increase in Wienerberger. In terms of what that means, well, clearly, there may well be some pricing pressure in the market, and we need to monitor that closely. As I said in the presentation, it doesn't change our plan, and the strategic focus that we've had. We can't control the capacity coming into the marketplace. We're very mindful of protecting our margins. Overall, we're still expecting the roofing division to be delivering margins of between 20%-24% in the medium term. The plan hasn't changed, Aynsley. We reviewed the strategic priorities, and we believe they're the right actions for that area of our business. Landscaping
Remind me what was the second part of the question, Aynsley?
Pri-pricing.
Pricing. Pricing's gone into the market. I mean, that comes in two parts. There's pricing into yards and merchants, and then we've obviously got spot pricing in terms of commercial infrastructure projects. As far as we're concerned, we're on plan with our pricing plans at the moment. Those have gone in, they've been accepted for 2026. We'll clearly monitor market dynamics when it comes to spot pricing.
Is the price increase just to cover cost inflation, or do you want to get a bit more that you lost maybe last year?
No, this is about inflation.
Thanks.
Thank you. It's very cozy. Chris Millington, Deutsche Bank. First one just about energy. You mentioned Middle East, it's difficult to ignore. Can you just talk about exposure and hedging in that regard? I'll do one at a time, actually.
Yeah. Thank you. Yeah.
Across our utilities, we are hedged for the rest of the year to a little over 80% on both electricity and gas, so we're pretty well protected there. The other energy-related costs that we're mindful of is oil prices. Every $10 per barrel increase in oil prices beyond about $80, which is our central planning assumption, costs about GBP 1.2 million. Clearly, if this becomes a prolonged issue, then we'd have to look at how we recovered that. Yeah, the increase isn't enormous based on the kind of oil prices that we're seeing at the moment.
It's very helpful. Thank you. Next one's really about the 12% margin in Landscape, and I appreciate it's some way off from where we are at the moment, but would you need to see a full volume recovery back to the levels we saw back in 2019 to attain that? Or can it be attained a little bit lower given the cost savings you've done?
I think in terms of volume recovery, Chris, it's probably around 15%-20% volume recovery to get that additional operational leverage. Obviously, the three building blocks below that are all within our control. That's what we aim to deliver first and foremost, and then it'll be about 15%-20%.
Great. Thank you. Then just one on Viridian and kind of the process it goes through with regulation changes and the Future Homes Standard coming in. One, can you just give us a feel of kind of that near-term movement in revenue, but also what potential uplift could the Future Homes Standard do for the division?
Clearly Viridian had a very strong performance in 2025. We think that as we got to the closing months of 2025, pretty much all new homes, we believe, have been built out under the Part L regulations. Which means that in 2026, we should see some growth in the first part of the year until you sort of catch up on a monthly basis. Then really, the business becomes more cyclical on the basis of house building rates. The Future Homes Standard still hasn't been published. Interestingly, the Welsh version of the Future Homes Standard was published a few weeks ago.
That makes solar a functional requirement as part of new builds in that country. That would result in a substantial increase in the amount of solar that goes on each home, as well as an increase in the number of homes that have solar. It's difficult to be precise about what that would look like, but it could be up to a doubling of the market. We don't know what the implementation timelines will look like around it, but hopefully, the Future Homes Standard will be published in the coming weeks, and we'll get some clarity around that.
Certainly, the noises from the government in last year, you know, indicated that we would see solar becoming a functional requirement. We're optimistic, but until it's published, we can't be definitive.
Thank you.
Thanks, Chris.
Thanks. Morning, Ben Barrow, RBC. I'll do two as well. I'll do them one by one, both on landscaping. Just on the competitive landscape there, last year there was some talk of overcapacity in some segments. Could you chat through the dynamics there and how you see that evolving?
Yeah, I think in terms of the competitor landscape, there was overcapacity, and we did see some of our competitors scaling back and indeed switching assets into other areas, predominantly Bricks. That still remains, but again, I'll go back to what we've presented. It doesn't change the plan. We're confident in the plan. We're delivering against the plan. The metrics are showing that, and we'll continue as is. There's no change to that competitor dynamic and no change to the plan, Ben.
also, we've not seen any incremental capacity being installed across that.
No
That market, which is perhaps not surprising given the degree of surplus capacity in it.
Thanks. Next one on landscaping as well, just on the obviously the price premium versus competition narrowed last year. In your 12% margin assumption, do you need to get back to that level of premium to get to that margin, or what's your thinking on how that evolves?
The price premium that we've now got is back inside the range that we talked about previously, and that will be maintained as we move forward. You know, it's about being inside that range while still you know keeping that premium against the competition. The reason we command that premium is for the proposition, the service, the offer, and everything that goes with it. We're comfortable with the premium. That premium will be maintained. What we will make sure is that we don't drift away from the pack like we did before.
Okay. Thanks.
Thank you. Clyde Lewis at Peel Hunt. I think I've got three, maybe four. In terms of the Marley CapEx, could you say a little bit more about what you're planning to do there on the concrete lines? That'd be sort of helpful to understand whether you're adding capacity or whether it's very much aimed at improving the cost performance of what you're producing.
It's the latter, Clyde, so it's making sure that we are improving existing assets. We need to make sure that we maintain the quality and the efficiencies, both from a customer perspective and margin performance perspective. It will be on existing lines, and it will be on specific lines that are subject to increasing competition in the marketplace. That's where we're gonna concentrate our efforts.
Thank you. Sticking with Marley, in terms of the, I think you said the overall market's sort of flat for roof tiles, and obviously you've got new build, you've got private RMI, and you've got public RMI in there. Was there much difference in terms of those end categories in terms of how they performed? Because obviously your market share is probably, you know, stronger in certain categories and probably new build is probably the most competitive, certainly as far as the concrete tiles side are concerned.
Yeah. We're seeing the most activity is in that new build area, the new capacity coming in on stream is targeting that area. That is the area that we're monitoring very closely. You're completely right with that, Clyde.
Last one was on Viridian, just in terms of the sort of route to market or routes to market, sort of either direct or via the sort of Marley sort of full offering. Any real change sort of with regards to sort of that shift in the air? Still sort of very much sort of two streams for you?
Shall I pick this one?
Yeah, sure.
The growth that we've delivered has come through new housing, and that's principally a direct sale from Viridian, either directly to the house builders or through electrical wholesalers or through installers. The growth rates of solar in Marley have been more modest than the new build, because it doesn't have quite the same regulatory driver behind it.
Last one, promise. Any change in the competitive environment in those in-roof solar systems? Is it still very much just the two of you that are dominating that market?
There is a new entrant into the market. If you recall, there are two basic products, which is ours, which is an aluminum flashing system which fits around the panels. The panels and the flashings go together. The competitor product is a plastic tray, and the roof tiles are attached to the plastic tray. There is a new competitor which has introduced another plastic tray product, which is sort of I guess probably more in direct competition with the other player.
I think it's been launched by a group of ex-employees from the company which is called GSE. At this stage, yeah, I mean, it's out there in the market, but it's too early to say what impact it may have.
Thank you.
We've got, sir.
Thanks. Morning. Toby Thorrington from Equity Development. A couple really, I think. First of all on debt, I think you managed to refi last year, on the same terms. Just remind us what your average cost of debt is. Also if you could clarify within that, I think you mentioned that, working capital metrics normalized over the course of the year, but the metrics presented in terms of days appear to be pretty stable. Can you just explain that? That's the first question, please.
Okay. Just remind me the first question on the terms.
Cost of debt.
Average cost of debt. The facility at current leverage levels is priced at 180 basis points over SONIA. It does ratchet down when leverage is below 1.5 x by 15 basis points.
Thank you.
Okay. In terms of the working capital, you may recall last year that we talked about actually. Sorry, when I say last year, back in 2024, that we closed the year with a stronger cash flow performance than we expected, and it's because we'd received a gift from one of our customers that paid us twice. That's reversed in this year. In addition, you know, there was also some timing of interest payments which were accrued last year and not this year. So the underlying payables position on the creditors ledger unchanged, but it's just some specifics around the year-end numbers.
All right, good. Thank you. Just on the medium term, I guess we're a year on from the, or getting on for a year on from the capital markets day. You know, when does the medium term become the point? 15% margin target, I guess most of the writing analysts in the room that have rolled forward to 2028, are you expecting to hit 15% by 2028?
Yeah, you can tell him if you want.
I think it depends.
Well, I
I think it depends on underlying market demand.
Depends on the market, yeah.
Yeah.
I mean, it's the market tailwind. We need the market to recover. We do need that. But that said, we're, you know, we're confident in the plan that we can control, and we will see incremental improvement as we travel, but we need the market to recover.
Sure. Okay.
One more, Clyde. Sorry.
Poor, poor Ed's waiting.
Oh, sorry. No, please. I'd like to take.
Okay.
Yeah.
Right. Chris, you're back.
Chris, you're back on.
Back on.
You haven't given up. That was easy.
It's just we've talked a lot about kind of commercial end markets. We've not really talked about Repair, Maintenance, and Improvement. I know it's not as big a part for you anymore, but look, just recent trends, any regional stuff, any kind of commentary around price point, whether the premium or more value-ended the product range is doing better there. Just a quick overview.
Well, I think things are still subdued, as we know. I think, interestingly, we did get a number of installers together last week. Over 200 attended an event to look at the new product development pipeline that we've got going. Look, it's subdued, Chris, and again, it's another market backdrop point. But again, premium, we're happy with the premium. We're not looking to kind of squeeze margins or move that price point because we believe we've got the best products, we've got the best offer, we've got the right installer base to be able to deliver that, certainly in the domestic and end consumer space. So we're happy with the plan. It's just the market backdrop is tough at the moment.
Thank you.
Thank you. Just one from me, it's Flor O'Donoghue from Davy. Just going back to your comments on the flatter structure. We know what you mean by it, but how does it work in practice?
Well, look, I've got much more direct line of sight in terms of what's happening on the ground, both commercially and operationally, so I'm heavily invested in that. As I said from the outset, I've been in that space as, you know, Chief Operating Officer and Chief Commercial Officer, and I believe that if we're gonna continue to get traction, and indeed continue to improve and be all over that transmission into the P&L, I need to be closer to the commercial and operational side of the business. So that's how it translates, is that I'm, you know, not completely hands-on, but certainly very, very close to what's happening on the ground. Do we have any online questions?
Yes, we do. The first one is from Vishal, from J O Hambro. Given the intensified competitive landscape, economies of scale become more important. Would you ever look to release capital from asset sales, reinvest in areas of structural strength?
Well, yes, I think is the answer to that. We've been doing a little bit of that over the period that Justin can elaborate on.
Well, yeah. We've been looking at our portfolio of surplus assets and turning them into cash where we can. As I mentioned in my presentation, there was a smaller cash generation in 2025. You know, we continue to focus and look at how we can realize those assets going forward. In terms of the broader portfolio of businesses, we're broadly happy with the portfolio that we have. If there were opportunities to do something which would result in improved shareholder value, we would certainly look at that.
Thank you very much. This next one is from Jasper from Berenberg. How do you assess FP McCann's long-term strategic commitment to concrete tiles? Is this a permanent structural shift to increased competitive intensity or do you expect rationalization as older assets are retired elsewhere in the market?
I think from an FP McCann perspective, I would expect, and I can't comment in terms of what their business plan is, but I would expect that they're in it for the long term. In terms of assets in the roofing channel itself, there's a lot of old equipment out there, and some assets through 2025 were retired. We expect more to be retired in 2026. We think overall the net effect of that will still be increased capacity in the market by low single-digit percentages. That's our view at the moment. As I said in the presentation, we need to continue to monitor what that means for Marley, but our plan doesn't change.
Brilliant. Thank you. Last question. Has FP McCann's entry caused you to lose any specific customer relationships or contracts, or is this the impact permanently on pricing rather than volume?
No, we haven't lost any customer relationships. The impact, again, we need to monitor what the overall impact is. It's a competitive market out there, you know, and the dynamics are tough in terms of market backdrop. No relationships have been lost with FP McCann coming into the market. Absolutely not.
Brilliant. Thank you. We have no further questions, so I'll hand back for some closing remarks.
Okay. I think my closing remarks would be we have a plan. We're confident in the plan, and we're confident in the delivery for 2026. We've got the right team in place to be able to deliver that. That's what we will do. Thank you for your time. Appreciate all the questions. Thank you.