Eurocell (LSE:ECEL) — Preliminary financial results for the year ended 31 December 2025

0:00 Good morning, and welcome to the EUROCELL PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time via the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. And I'd now like to hand you over to Will Truman, CEO. Good morning, sir. Good morning. Welcome to EUROCELL's 2025 results presentation. I'm Will Truman, chief executive, and I'm with Michael Scott, who you who you all know as the CFO. This morning, we will follow a similar format to prior years in so much that I will give a brief overview, recognizing that I was appointed as CEO in February of this year.

0:51 Mike will then cover the financial review. I will pick up the strategy update focusing on our commercial initiatives and then hand back Michael who will cover ESG, business effectiveness, and people first. I will then wrap up with a summary. As mentioned, I was appointed after the year end, but in overview, 2025 can be summarized as an improved performance over the prior year, principally by virtue of Alunet's inclusion in the group results. This shouldn't detract from the continued improvements made elsewhere but underlines the reality of the market within which EUROCELL operates. Group revenues improved 13% to $4.00 4,000,000 from $358,000,000 in the prior year. Operating profit for the year was 24,000,000 versus 23,000,000 in 2024.

1:41 Good financial management is evidenced from the strength of the balance sheet and strong cash flows, low net debt and improving total shareholder returns. There is more to be done to improve the outcomes of the strategy, but good gains were made in 2025 with new branches opened and all branches now included in the window and door program together with further progress in garden rooms and digital sales. We We are are confident we can improve the pace and delivery against the strategy over the course of this year, mindful, of course, of recent events and the impact they have on input prices and demand. And with that, I'll hand over to Michael for the financial review. Thanks, Will. So I'll start by going through the financial highlights on page five. With market conditions remaining tough, organic volumes were below 2024.

2:30 However, organic revenues do include further progress with our strategic initiatives, and total group sales were up 13%, enhanced by the acquisition of Alienet in March. Adjusted operating profit increased by 6% compared to 2024. This reflects a strong contribution from Alienet and good cost control, partially offset by lower organic sales volumes and competitive pressure on selling prices in the branches, plus continued labor and other overhead cost inflation. At the same time, we've also progressed further targeted investments to maintain momentum on our strategic initiatives. Adjusted profit before tax down 5% includes increased finance costs following the acquisition, and adjusted earnings per share of 1% includes the impact of our buyback program.

3:16 Cash generation remains good, thanks to continued focus on working capital. Net debt of 22,000,000 reflects the impact of funding the Alienet acquisition through our RCF. And with leverage of point seven times, we have good headroom on our debt facility, which was refinanced in March this year and now matures in 2030. Finally, on this slide, we've announced shareholder returns of 11,400,000 for 2025, which includes total dividends for the year of 6.4p per share, up 5% on 2024, plus the £5,000,000 buyback, which commenced in March 2025 and is now complete. Turning to the full p and l on Page six. I'll come on to our sales performance and the other components of EBITDA in a moment. But first, just looking below that line, depreciation and amortization was 27,400,000, up 2,000,000 on 2024.

4:08 And with our CapEx program, lease renewals and Alienet, we expect D and A for 2026 to be in the region of 29,000,000. And just to note that I've summarized all of our technical financial guidance at the end. Finance costs were 5,100,000, up 2.3 on 2024, reflecting the use of our debt facilities to fund the acquisition and the impact of new leases on our IFRS 16 interest charge. The tax rate for 2025 was approximately 22%, which is lower than the standard rate due to the benefit of patent box relief. Looking down the p and l, basic earnings per share were 14.6% 6p, up 1% on 2024, and dividends of 6.4p have already covered. Moving to the right of the slide, non underlying charges for the year of 6,800,000 includes 4,200,000 of implementation costs for our systems replacement project, 1,800,000 of termination costs in respect of restructuring, and naught 800,000 of acquisition due diligence and other costs.

5:06 Later in the presentation, I'll pick up on the systems replacement project and our cost reduction initiatives, which include restructuring. Finally, on this slide, it's worth noting that excluding Elliott, our organic sales and gross margin percentage were both flat with 2024 with overheads up just 1%, demonstrating resilience in the face of difficult trading conditions and ongoing cost inflation. Moving on to our sales performance on page seven. Revenues were up 13% in 2025 or flat excluding Alunet. As you know, difficult macroeconomic conditions and weak consumer confidence have hit activity levels in our key markets. Profile sales up 1% with volumes 2% lower reflects reduced RMI activity through our trade fabricators, partially offset by a small improvement in the new house building market in the first half.

5:54 Overall in the branch network, sales were down 1% with volumes 2% lower. This includes underlying RMI volumes down 6%. However, set against that, we've made further progress with our strategic initiatives, up 9,400,000, including windows and doors up 12%, garden rooms up 9%, and ecommerce activity up 40%, plus sales from new branches of 3,300,000. AudiNet is performing well under our ownership with post acquisition sales growth of 28% over the same period in 2024 driven by market share gains, and we'll cover Alienet's performance and the other strategic initiatives later in the presentation. On to adjusted operating profit on page eight. Profit of 24,100,000 is an increase of 6% versus 2024.

6:41 Moving left to right across the chart, the adverse volume impact of 8,600,000 follows organic sales down 2%. The margin benefit of 3,800,000 has several components. Whilst revenues include selling price increases implemented to offset overhead cost inflation, increased competition for limited demand has put pressure on selling prices in the branch network. However, we do proactively manage our gross margin and cost base and delivered stable raw material recycling feedstock and electricity prices last year. Strategic initiatives includes new branch openings, which create a short term profit drag but drive longer term profit growth, incremental operating profit of naught 800,000 on the other strategic initiatives came at a good EBIT margin of 13%. Alienet Alienet made a strong contribution with post acquisition operating profit of 4,800,000, up 1.8 on the same period in 2024.

7:34 Moving along the chart, labor inflation of 4,800,000 includes the annualization of our April 24 pay award of 4% and our '25 award of 2%, plus the increases to national insurance and the national living wage effective from April 25, which have an annualized cost of approximately 3,000,000. Variable labor costs were down in 2025, reflecting lower bonuses and commissions payable. On cost cost reduction, the restructuring we implemented in the first half delivered savings of 3,100,000 in 2025, and I'll pick up on those programs when I talk about business effectiveness later. In summary, operating profit is up due to Alienet's effective cost control despite weaker underlying volumes and ongoing cost inflation. Moving on to CapEx on page nine. Investment of 11,800,000 in 2025 includes 3,700,000 for the branch network, being a combination of new openings, refurbishments, and relocations, with the balance primarily maintenance CapEx.

8:34 Our guidance for '26 is for CapEx of up to 15,000,000. This includes 3,000,000 for strategic initiatives such as new branches, refurbs, and relocations, and 3,000,000 for site consolidation, which I'll come back to when I talk about business effectiveness. There's also 3,000,000 for facilities, welfare, and safety improvements across our property estate with the remainder largely maintenance CapEx. As noted earlier, implementation costs for cloud based IT solutions are charged to the p and l rather than capitalized. Our ERP system replacement falls into this category with 4,200,000 charged to the p and l as a non underlying item in 2025, taking the total cost incurred to date on the project to 6,400,000. We now estimate non underlying costs on the ERP project will be approximately 13,000,000 for the period 2024 to 2027, and I'll provide a further detail on the project later in the presentation.

9:28 Coming back to CapEx, the lower chart illustrates that we have manufacturing capacity in place well ahead of demand, which is an important component of being well placed to deliver growth. Turning to the full cash flow on page 10, which sets out the components of an increase in in net debt of 19,000,000 in 2025 on a pre IFRS 16 basis. This follows the acquisition of Alienet in March, which was funded from our debt facility, and the non underlying items of 6,800,000 I described earlier. Moving left to right across the chart, cash generation has continued to be good with an inflow from working capital of 3,700,000 in 2025. The cash consideration for Alunet, net of cash acquired, is 20,600,000, and CapEx payments of 12,500,000 include the asset additions covered earlier plus a small reduction in our capital creditor.

10:20 After financing charges of 2,100,000, share buybacks and treasury share purchases of 6,000,000 and dividends paid of 6.2, this results in pre IFRS 16 net debt of 22,000,000 at the end of the year. IFRS 16 adds 76,000,000 to debt, which you can see in the table is up 17,000,000 compared to December 24. This reflects the net impact of leases acquired with Alienet, branch openings and lease renewals, a total of 36,000,000, less cash payments on leases of 19,000,000, which are accounted for within net cash from operating activities on the left of the chart. Overall, this leaves us with a strong balance sheet with net leverage of point seven times EBITDA on a pre IFRS 16 basis and good headroom on our recently refinanced £75,000,000 debt facility, thereby providing security, flexibility, and options for the future.

11:15 Turning to capital allocation on slide 11, moving left to right across the chart. Our approach to capital allocation is to prioritize organic investment in line with the strategic plan, supporting initiatives to drive profitable growth in the branch network, continuous improvement in operations, and to upgrade our IT systems. On dividends, our policy recognizes the importance of the ordinary dividend with this year's total dividend up 5% on 2024. The board has also taken the decision that employee incentivization by equity should be through shares acquired rather than issued, and our target is to hold sufficient treasury shares to satisfy employee share options expected to vest over the next two years. Moving across the chart, we believe that Alienet demonstrates a disciplined approach to acquisitions with a very clear strategic fit and a compelling financial justification.

12:04 Thereafter, we've been enhancing returns through share buybacks. The 5,000,000 buyback launched in March 25 is now complete. Our intention remains to continue buybacks, assuming no prolonged impact from the Middle East Conflict and, as always, subject to maintaining a strong financial position, with net debt generally not to exceed one times EBITDA unless there's a short term deleveraging plan in place. So to sum up on page 12, a resilient financial performance with adjusted operating profit up 6%. We continue to focus on cost reduction and cash flow management. Cash conversion remains good. We have a strong balance sheet and good headroom on our recently refinanced debt facility. The business is therefore well positioned to deliver growth growth strategy with invested facilities well invested facilities and available operating capacity.

12:53 We're driving shareholder returns through ordinary dividends and share buybacks with total returns for 2025 equivalent to a yield of 8%. We're planning to deliver further progress in 2026. And whilst we're monitoring the potential impact of conflict in The Middle East, we're also convinced that the medium and longer term prospects for our sector remain attractive. Finally, to the right of the slide, there's a summary of our technical financial guidance, which I hope is helpful. So now over to Will to update on our strategy. Thanks, Michael. Right. So just to recap on the strategy, which was a pathway to achieve turnover of 500,000,000, operating profit of 50,000,000 with a 10% operating profit margin. This This was was predicated on some market recovery increasing existing share.

13:38 Clearly, the last two years have not borne that assumption out with demand remaining weak, and the group is currently behind on the plan. Strategy encapsulates increasing the size of the branch network, improving the sale of windows and doors through the branches combined with additional sales of garden rooms and a further improvement in digital sales. I will touch on each of these together with the performance of Valinet in a minute. It's fair to say that 2026 is about regaining some ground against regaining some ground. Again, it's cognizant of recent events, but the aim is to quicken the pace. To that that end, we have realigned the sales teams operating within the branch network and the wider group with a renewed focus on improving all volumes sold. This is particularly important with our own manufactured goods with which increasing volumes improve the manufacturing efficiency of our factories.

14:31 It also leverages the largely fixed cost base we have, particularly in the branch network. This is in tandem with new product innovations and introductions in specific categories to to revitalize demand. The benefits of the Alienet acquisition have been felt throughout 2025, not only in the financial contra contribution to the group, but also the wider benefits with the potential to cross sell across both customer sets as well as improvements in product categories such as doors, now including garage doors and solid timber core composites. The improving financial performance across the year is a result of market share gains, particularly in Alienet Systems and Comtor, and the growth plan assumes a continuation of this together with fur furthering the synergistic benefits of being part of a wider group.

15:22 Alienet Systems grew by 26% in 2025. The acquisition complements our proposition to fabricators by providing a one stop shop for PVC and aluminum door and window systems. As a result, 14 EUROCELL PVC fabricators have now switched their aluminum requirements to Alunet. Comp door grew by 41% last year and has continued to acquire installers with the new sleek skin door now representing more than 15% of sales. We expect the business to benefit from cross selling opportunities and supply chain synergies with Vista. EUROCELL operates a 215 strong branch network, and the plan remains to increase this further together with improvements made to existing sites and relocations to more favorable locations where available.

16:14 Moving to slide 18. In 2025, the group opened seven new branches and relocated six. We're expecting at least five new branches in 2026, and we're also in the middle of a program to refresh the branch exterior and signage for the entire network. During this year, we also need to build on the successful launch of the customer loyalty program, PowerUp, whilst ensuring we improve on the functionality of the branch branch network. Most importantly, we need to drive volumes, and an important part of that is the windows and doors program. As set out on slide 19, during 2025, the rollout was accelerated such that by the end of the year, all branches were live and widened to include comp doors and aluminum windows.

17:00 Key to increasing volumes is to have a dedicated sales support to branches and cross sell with made to order manufactured products. There is also an opportunity in sustainable construction, which Michael will pick up in ESG. Digital sales have increased year on year and totaled 6,600,000 in 2025, 40% up on the prior year. This has been achieved through further marketing support, improved website design, and usability together with new initiatives such as click and click from branch. In In 2026, we want to further invest and improve this offering to maintain the growth. Extended living sales improved from 8,800,000 to 9,600,000 in 2025.

17:46 While struggling initially to deliver consistent margins from erratic demand, the offering was refined and improved such that a greater expectation is now placed on 2026. Furthermore, the decision was taken to exit extensions due to the complexity of each site and reliance on other providers. And with that, I'll pass back to Michael to cover the other strategic initiatives. On people first, after improved safety results in 2024, our LTIFR slipped back from 4.1 to 6.4 in 2025. Given these results, we've made some changes to health and safety leadership in q four last year and developed an improved health and safety plan focusing on the behaviors needed to drive a more proactive safety culture. As you know, under business effectiveness, we're replacing our ERP systems.

18:33 Genetic, the new trade counter system, will transform the way we interact and transact with our customers and the branches, including simplified processes and the use of Epos functionality. With IFS, the new ERP system, our objective is to improve efficiency via the automation and standardization of business processes. The build is now well advanced, and we'll start the testing and training programs later in the second quarter with transition into the new systems taking place at the end of the year. This is a few months later than previously reported, but we're confident that the revised timeline is robust. We estimate total non underlying costs on the project will be approximately 13,000,000 over the twenty twenty four to twenty seven period, with 6,400,000 incurred to date. This is higher than our previous estimates, reflecting the later transition plus the extra third party resources now engaged to secure successful delivery.

19:24 Also under business effectiveness, our previously announced cost reduction initiatives will deliver £4,000,000 of annualized savings, of which 3,100,000 was realized in 2025. The branch network restructuring was completed at the end of q one twenty five and will generate annual savings of 2,000,000. We also captured further overhead cost reductions of 2,000,000 in q two twenty five, including restructuring now completed in operations and shared services. Looking ahead to improve our recycling operations, we've been began a project in February 26 to consolidate our two recycling plants onto the existing facility at Ilkeston. This requires relocation of some critical equipment from the Selby site, plus investment in the Ilkeston plant to eliminate single points of failure and to improve the layout. We expect to close operations in Selby and begin processing it at Ilkeston in h two twenty six with Selby exit to be concluded by the end of the year.

20:18 CapEx is estimated at 2,600,000 with annualized cost savings of about 1,500,000 running from 2027. Nonunderlying charges are expected to be in the region of 3,000,000, including noncash asset write downs of 1,500,000. On ESG, EUROCELL is already a leader in PVC recycling, preventing 3,000,000 waste windows being sent to landfill every year. And our use of recycled material and extrusion remains substantial at 30%. We've also made progress on our other carbon reduction initiatives, including further investment in on-site electricity generation through the installation of solar panels at our largest operating facilities. Our net zero targets have now been validated by SPTI, and we've published our transition plan. We've also maintained our CDP climate disclosure rating of b and our MSCI rating of double a.

21:11 Finally, we do think there's an opportunity for EUROCELL with sustainable construction. Government regulation and consumer demand is pushing our sector towards sustainability. The future home standard final implementation begins in 2026 with all new homes required to comply by 2028. The objective is to reduce c o two emissions for of new homes by 75 to 80% and half the energy use of new buildings by 2030. The government also launched the warm homes plan earlier in 2026 with a target to upgrade 5,000,000 existing homes by 2030. EUROCELL's products can help our customers meet or exceed the future home standard. Many of our standard profiles have a high recycled content, and our window and door systems, such as Logic and Illumina, are energy efficient with ratings well above industry standards.

22:01 We therefore believe that we're well placed to benefit from these tightening regulations as they come into effect. With that, back to Will to wrap up. Thank you. Right. In summary then, a stable performance enhanced by the inclusion of ValuNet with some important lessons learned. In '26, our focus will be on continued strong financial management and cost control throughout the group with a renewed focus on driving commercial outcomes to increase volumes, which in turn will improve the operating profit and the associated margin. Whilst mindful of global events, we do expect to make further progress in 2026, and the group will continue to drive shareholder returns through a combination of ordinary dividends and share buybacks. And that's the end of the presentation. So So we'll now move on to to take or answer some of the questions which have been raised. So I'll read them out in between Will and I will will answer these.

22:55 So the first one is from Alex c which says which which asks, asks, what gives you confidence organic growth turns positive in 2026 rather than remaining acquisition led? If I just tell you what our assumptions are around '26, and Will can give you maybe a little bit of a flavor of some of the things we're doing. But in terms of our assumptions for for 2026 revenues, we have assumed basically no help from the market. So we've assumed a flat RMI market with maybe a little a small benefit from new house building. The growth that we will that we're looking to achieve organically comes from the strategic initiatives, which are window and door sales, which are doing well, digital, which Will mentioned, rooms where we've got a plan, and and from new branches which of which nine were opened last year, and we have a plan to open another five this year. So those initiatives will drive organic growth, but to be clear, we're we're not expecting any help from the market this year.

23:54 Anything you'd add, Will, on on what you're doing? Not too much. I think I think what you just covered it with the strategic initiatives that are driving the organic growth. The only thing I would say is that we have lost some ground in terms of our share, and we have realigned some of the sales team teams operating specifically within the branch network. This is with a focus on driving further volumes and regaining some ground. There's some work to refresh some product categories to make sure we're offering the right products to our customers, and we're hoping that that will drive some incremental volumes as well. But aside, the the the most significant part of this remains with the strategy. Yeah. Okay. Second question, how much of the path to 500,000,000 revenue now depends on acquisitions acquisitions versus organic growth? Look. 500,000,000 is is our target. We we are determined to get there. I think we will get there.

24:48 Alieneta is a strategic acquisition. Its sales were £47,000,000 for ten months in 2025. It's on a growth plan, and therefore, it should mean that we exceed Yeah. 500,000,000, basically. Next one, Mark s. There's still no research available to individual investors. As a small micro cap company, shouldn't you change one or more of your brokers to one more suitable for company of your size? But I we have two brokers who, I I think, do a good job for us. I am conscious that their research is not available to to everybody. We do put our estimates for the next current and next two years on the website or consensus estimates. Sorry. I am also conscious we are conscious of of this point. It's been raised before. We have not yet found what we think is a suitable and cost effective solution to this, but we we will continue to look.

25:45 You'll have seen there've been some significant changes in the company over the last sort of three or four months. We have been focused on that. So looking forward, we will resolve this issue and come back to you one way or another. Next one. Have you given many investor presentations this week? Do you think there's renewed investor interest in the company? Well, yeah, absolutely. You know, we we we published our results on Thursday morning, and we've been back to back in investor presentations since then. Our stock is relatively closely held, so we we've seen the vast majority of our large shareholders wanted to still to pick up through due due to holidays, but we've seen a number of non holders too. So there would seem to be plenty of interest.

26:35 Next one. Since the new ERP system costs are excluded as non underlying, will you be excluding any gains from the higher efficiency of the system as non underlying in the future? Well, I think those gains are with if you went back to the beginning on this project, the the reason that we're doing it is because our current SAP system, is an old version of SAP, and it goes unsupported in 2027. So this is a project which has to be done. There are two aspects to it that I covered in the presentation, replacing SAP with IFS as an ERP system. That that is, in effect, a like for like replacement, but we are standardizing and simplifying business business processes as a result of this change, and that ought to lead to efficiency gains. How you would put a number on that and call that out, I'm not sure, but that will be in the underlying p and l.

27:30 The biggest gains, I think, from the system change come from the new trade counter system, though. You know, it has been a huge frustration that we have operated without a proper trade counter system. We've bespoke SAP to try and work for our branches, but it's cumbersome and unwieldy. Genetic is a is a is built specifically as a trade counter system and has a number of other clients in the in in our space. It will simplify a number of our processes. The EPOS, the use of electronic point of sale is probably the best one I can give you. That will give time back to our branch teams. And with that time, we'll be pushing them to drive profitable sales, and those profitable sales will be in the underlying p and l. Yeah. Yeah.

28:20 Right. I think that actually covers all of the questions that we've got. So unless there's any others, we'll we'll we'll draw a a hold to it at that point. We'd like to thank you for listening in this morning. Please do participate in the, in the subsequent poll, and we look forward to speaking to you in the future. That's great. Thank you for updating investors today. Now please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This may take a few moments to complete and I'm sure will be greatly valued by the company. On behalf of the management team, we'd like to thank you for attending today's presentation, and good morning to you all.