Genuit Group Stock

Welcome, everybody. Good morning. Great to be here on what promises to be a fairly warm day, but not as warm as what's to come. More on that in a minute.

So delighted to be here. I'm Joe Vorih, CEO of Genuit. I've got Tim Pullen with me here, our CFO, as well as a few different members of our management team. We'll all be around afterwards.

Feel free to ask questions either during the session or afterwards. So let's hop into it. So we're here to present our half year results for Genuit Group for 2026. I'll give you just a quick sort of scene setting introduction, pass it over to Tim for the financial highlights and then come back and definitely wanted to give you an update on the important and really good strategic progress we've made in the last 6 months.

And of course, plenty of time for Q&A. So getting right into it, it won't surprise you that we have seen a challenging trading environment in the first half. I'm really proud of the actions that our team has taken in order to navigate that quite successfully. We have seen subdued market demand, and those lower volumes are really on account of several different factors, of course. We've -- most top of mind for a lot of people is the conflict in the Middle East and the impact that's had directly, which we'll talk a little bit about, but indirectly, which I think is true for just about everybody in our industry in terms of material prices and transport costs.

And Tim will talk about that as well as the work we've done to mitigate that. The other thing, too, is we're sitting here in a time where I think there's a bit of a lower U.K. growth sort of so far.

Remember, entering the year, of course, we were all expecting a couple of rate cuts. Clearly, that hasn't happened. So we are in this kind of higher for longer environment. But when you have a challenging trade environment, Genuit does what we always do. And we take decisive actions. We've done that yet again.

Really proud again, as I said, of what the work the team has done. Importantly, we've taken what I would characterize as balanced cost and price actions. So weighing the interests of both our investors and our customers to make sure that we really offset the impact of inflation on our business model. We also have continued to simplify the business.

This has been a long-standing journey, and we've been able to identify a few more options that we've taken that in the second half will help accelerate some of the work that we actually thought was out there, but will begin to take impact and certainly improve our outlook entering '27.

And of course, we've made excellent progress integrating our 2 acquisitions we made last year in the second half. Both are going really well, and we'll give you more fulsome updates on those.

Of course, underpinning all of this is the Genuit Business System, which we deploy across the business increasingly, and I'll share some examples of how that's impacting actually one of our acquisitions, too. In terms of outlook, our full year expectations are unchanged.

Of course, that means that we'll see a good step-up in margins sequentially in the second half. We'll give you a few insights as to where that's coming from. And importantly, the simplification work I talked about is expected to deliver over GBP 4 million of annualized savings. That will most primarily just impact 2027 and beyond. But again, it's the type of work that we do, really making sure the business is fit for the future.

Importantly, and we'll spend some good time on this, the regulatory and sustainability tailwinds, which are so important to our future growth and business model are continuing to strengthen and they're much closer. We've done a lot to invest and be ready for those and I'll give you some more on that in just a bit.

But in the meantime, let me turn it over to Tim to walk you through the numbers. Tim, over to you.

Great. Thank you, Joe. Good morning, everyone. Delighted to present our results for the first half of 2026 to you this morning.

Thank you for coming. We start with the financial highlights. You can see that we've actually got good revenue growth for the half at 3% on a reported basis, including the acquisitions that we bought last year, offsetting a like-for-like decline of about 5%.

But I'll remind you of our 4 months trading update to April, that was down about 8% at that point. So you can see that trading for May and June has been solid and obviously buoyed by the double-digit price increase that we put through in response to the cost inflation. So although a very challenging market, as Joe sets out, but actually, our profit just slightly down 1.6% to GBP 43.9 million and our EBIT margin down about 70 basis points as a result.

Cash conversion remains very strong. We have the usual phasing where H1 is slightly lower than the full year. So over 70% cash conversion at the half, still on track for over 90% for the full year. And because we have a lot of confidence in our strategy execution over the medium term, we've held our dividend at 4.2p despite those challenging market conditions.

Leverage at 1.6x is well within the 1 to 2x range that we target, and that will delever further as we go through the second half as well. So looking at the summary P&L, you can see there the revenue increase of 3% on a reported basis. It's important here, I think, to point out the gross margins, which have remained strong, which I think shows the cost control and the price management that Joe was referring to coming through the P&L there.

Obviously, we did have a bit of a lag there where we had inflation in March and April before price increases kicked in, in May. So the second half dynamic will be slightly different.

Overall, though, that margin being affected by the cost and price lag, also by a couple of issues at AB, which I'll come on to talk about in the segmented results, but really offset to an extent by those accretive acquisitions coming through the P&L as well.

So this is how our revenue breakdown looks. Water division representing about 70% of the business, our Climate division representing just under 30%. And looking at it by sector, housebuilding is about 1/3 of our business. Obviously, we've seen some, I think, resilience there in the first half, but with an outlook that looks like it could be a bit weaker.

But really, the strength of the Genuit portfolio is in that breadth across different areas. So almost 1/3 of the business coming from RMI, 27% almost from non-housing, including commercial and civils and infrastructure type work and about 10% internationally. It's worth pointing out that the Middle East, whilst we did see some direct revenue loss when the conflict erupted in kind of March, April, that is now pretty much back to normal and July was a very -- sorry, June was a good month for the Middle East operation.

So if we look at our profits, GBP 43.9 million underlying operating profit, just slightly down on a reported basis as a result of those lower volumes, which obviously do affect our gearing, the cost inflation that we saw before price increases kicked in and those operational issues.

We do have GBP 5 million contributed by the acquisitions, which are accretive on a margin basis. And we've also been working on the cost base in this environment to bring forward or accelerate our simplification initiatives, which particularly affects the Davidson businesses. I'll talk a bit more on those when we look at water in particular.

If you break it down then into the segmentation, you can see both divisions growing on a reported basis, that climate reduction in profitability, really the majority of that is those 2 issues. So looking at Climate in particular, revenue there is up 2.4% on a reported basis. It's down 8% on a like-for-like basis.

But there's 2 different dynamics going on there, which are important to unpack. So ventilation is actually one of our relatively strong sectors in the first half of the year. And actually, if you look at ventilation on a trailing 12-month basis, we're about flat, which in this market is pretty good, both on the commercial side, in particular, the schools sector, which Joe will talk a bit more about in our strategic update section, but also in residential as well and the continuing theme of the addressing of dampen mall problems in social housing.

So ventilation remains strong. And really, that's offset to an extent by our heating business, which is weaker. There, we're more exposed to the RMI market in our AB business associated with boilers and in our new heat business in underfloor heating.

There, we are seeing lower levels of renovations, extensions and refurbishments, et cetera, and therefore, lower levels of business. Two specific issues in AB that happened in the first half that won't recur in the second are one, a slow-moving stock provision of GBP 1.5 million related to some particular products and also a supplier issue with an impact of about GBP 0.8 million, and that's the loss of sales plus the cost of addressing that issue. We're confident that both items have been root caused and won't recur in the second half.

On the positive news front, we've seen really good progress in integrating Monodraught into our Climate business. And actually, the technical integration of the controls capability is a fantastic new story.

So we can now go to market with a combined school solution with new air mechanical ventilation and Monodraught hybrid ventilation, we think a unique offering in the marketplace, and we've already received our first orders in July.

So great momentum there. The Water Division revenue is about 4% higher on a reported basis, about 3% lower on a like-for-like basis.

Residential markets have been subdued, I think, both in new house building and in the RMI sector. And we have seen some project delays in civils and infrastructure markets, really a reflection of lower business confidence in the current macro environment.

But there are some positive areas as well. Our Manthorpe business actually grew year-on-year in the first half of the year as did our Italian business and also our operations in Ireland as well.

So whilst that international sector is smaller for us at the moment, it does show we have some strength in diversification there. Underlying operating profit is broadly flat on a like-for-like level, really demonstrating strong price and cost management, as Joe said. This is the sector that's most affected by the cost inflation.

Obviously, we saw rapid inflation in March. And we've seen that whilst the situation remains volatile, we haven't seen the worst-case scenario. So we haven't seen supply shortages, but we do still see elevated levels of polymer costs.

And hence, our price increases have been important to stabilize things, and you can see the business has covered that well with this result. Again, the acquisition side of things has gone really well. So Davidson has been integrated well, and we've accelerated that simplification.

So 2 of the 3 sites will be closed for Davidson and integrated into our larger strategic sites. That means there'll be no loss of capacity. It's underpinning a big chunk of the GBP 4 million savings that we're talking about for next year. And also, it gives us the scope for more sales and operational synergies by co-locating those operations. That will be completed by the end of the year, as I say, those cost savings will be generated next year, which brings us into the non-underlying items. We've got about GBP 17 million or so, about GBP 9 million of that is noncash impacting.

That includes GBP 4 million investment in a multiyear IT systems transformation. And this is a really important pairing with GBS. So deploying modern Software-as-a-Service software platforms to complement the lean operational input that we're putting in with GBS.

And as is normal practice for cloud-based systems, this is accounted for through exceptional items as opposed to previously on-premise systems that would have been capitalized and depreciated over time. So expect to see a run rate at about this level going forward. And as we get more into the program and drive the consistency, efficiency and productivity through that combination of modern software platforms with lean thinking, we'll start reporting the benefits alongside that in the future as well.

Our restructuring costs associated with the simplification work that we've done in the half are GBP 3.9 million. So that's underpinning over GBP 4 million of savings from next year. We've also got a loss on the Polydeck disposal that we completed in the first half of the year of about GBP 1 million to tidy up the accounting there.

In terms of cash flow, really positive result here. You can see the strong cash conversion of 70%, in line with our phasing expectations. And in particular, I'd highlight the working capital here where we continue to focus and drive real benefit. A lot of that is coming from inventory management.

Remember, GBS is not just about efficiency in the site. It's also about that working capital management to really help with our cash flow. So net debt, about GBP 190 million and our leverage about 1.6x. So just a final word then on capital allocation to round things off. I think we continue to invest in the business. We're confident in the strategy despite the challenging environment, so investing in capacity, innovation and sustainability for our capital spend. We've got that optionality for additional bolt-on acquisitions given the strength of our balance sheet. We're maintaining our dividends, and we also have optionality for buybacks if conditions are right in the future.

Okay. That's the financial results. Happy to take questions at the end. But for now, I'll invite Joe back on to the stage for our strategy.

Thank you, Tim. Let me just set this over here, anyone look at that yet. All right. So I want to give you a quick update on the progress we've made in implementing our strategy.

So remember our purpose that together, we create sustainable living, and that actually drives everything we do, tying back to our strategy, which had the 4 same tenets that we've been working on for 4 years now.

First is investing in growth, organic growth in areas where there are clear sustainable climate-driven tailwinds, where we believe billions and billions need to be spent over the coming decades to deal with the impact and the mitigation of climate change.

At the same time, those sustainable solutions can be augmented by great M&A as we did last year, where we can both get into higher growth segments, even for cyclical segments, but also improve our solutions. We'll talk a bit about some of those.

So focusing on growth first, absolutely #1 on our agenda. At the same time, while what we do is fundamentally green, as you see from our green mark, where 70% of our revenues plus are climate-friendly solutions. How we operate the company is equally important.

So continuing to push the envelope on recycled material, lowering the carbon content of our supply chains, using renewable energy throughout the business and increasingly, as I'll share in a few minutes, being able to show customers how that can actually benefit them remains very important.

The Genuit business system is hard to everything we do. It's how we run the business, right? Founded in Lean thinking in the Kaizen methodology. We've continued to shared some good examples of that, and I've got another example for you today.

But increasingly, as Tim alluded to earlier, we see the ability to really make this a more inclusive set of tools. So partnering with the best technology so that we can take advantage of everything that's out there, eventually even some of the AI tools as well.

On the people side, investing in people has been the fourth key part of our strategy, and it underpins everything because the best team wins. So investing in our people is key. So this is our strategy remains true.

But I did say at the outset, look, the warm weather today is kind of indicative of some of the things we're dealing with. And a lot of people complain about the weather, but actually, we see some real opportunity despite the difficulties.

First, it won't surprise anybody that we are actually looking like we're extending what was the hottest July on record in many parts of the U.K., some of the longest drought conditions we've ever experienced in this country, right? Lots of opportunities, lots of discussion about cooling and ventilation and how we're going to deal with or essentially adapt to this climate change.

At the same time, standing here, it's very difficult to catch your mind 6 months ago in this room, where we were just talking about the wettest January on record in the U.K., certainly in most of it. It's quite a duality, right? We're seeing extremes of drought and flooding, and this is becoming more common.

I don't think there's much debate about that anymore. So while some companies are faced with kind of some ESG pressure, we actually see really the need to respond, innovate and release new solutions is more important than ever. Now at the same time, while the inevitable climate change issues are driving fundamental end demand, I get a lot of questions from investors about what the regulatory framework looks like. So our team prepared this incredibly complicated slide. It's very busy.

And that's really the point. This is a very busy sector. There are over 10 different regulatory and framework drivers here on this slide, and this isn't all of them. This is just probably the 10 most impactful ones for us. The way to think about this broad terms is on the left, essentially is what's driving innovation and new regulations and new homes.

The center is essentially getting after the 25 million homes in the U.K. that need to be upgraded. So it's really about RMI work to upgrade existing homes. And of course, the ever-growing, approaching 40% nonhousing sector for us now. We're going to highlight 2 specific areas of infrastructure and education, but there's more. A few of the things on here. The way it looks basically the stuff that's in green is already in effect now. The stuff that's in yellow will largely have already taken effect by the time we're back together for the full year results. And of course, the other stuff is actually already planned and coming, but just a year or 2 further out.

All of these will stimulate more solutions company and more end market demand for us. A couple of highlights. You know that the Future Homes Standard was finally released in March.

By next year, this -- by March, all new housing permits will now need to be compliant with the Future Homes Standard. And a year from that, the grace period expires. There's a separate grace period for high-risk buildings, but just 6 months after that.

So the time line for the Future Homes Standard is now active and the clock is ticking. Obviously, there's Awaab's Law we've talked about. If I turn to AMP8, we are now 1.5 years into AMP8 and the momentum is seriously picking up as well as the consensus that AMP9 and 10 are probably going to be similar or larger in scope, focused on a lot of the same issues, including a heavy emphasis on storm water and flood mitigation.

And of course, Construction Framework 25 is the current 4-year school rebuilding program framework. It is a serious upgrade to the ventilation and indoor air quality standards in schools, and that is what's behind a lot of the growth we're seeing at Monodraught and the solutions we'll talk about coming up.

So what are we doing about it? This is a case study in our water business. As Tim said, while parts of the overall traditional civils business are still a bit slow, feeds housing and other sectors, this part is actually growing very well.

At this time last year, we had 2 million of quotes in our quote bank, meaning quotes issued, active projects that we're going after winning. That's 9 million today, okay? We've already been taking orders.

This is actually a real live order for Yorkshire Water that's been delivered recently. And you can see from the top left, these are more complex assembled solutions made from our large best-in-class, nearly fully recycled polymer products that we make in our [ Lubro ] plant. And this is the installation going. And you'll note also in the background, it's a really challenging environment. It's right in the middle of a housing estate, some traditional homes, petrol station.

So we're essentially retrofitting the country with much better storm water mitigation to protect our sewers and our waterways. This is challenging. And what's really exciting about this is that these integrated plastic solutions are lighter, easier, faster and lower carbon to install than any of the alternatives, including concrete.

So we do think that the opportunity here will continue to grow. While the projects are growing and we're starting to ship this year, it will be much more material impact in 2027. And so we've actually -- we've done some Kaizen work in the [ Lubro ] plant. We've authorized some additional investments.

We have enough capacity now. But looking 2 and 3 years down the road, we want to make sure that we are ahead of the game because we believe this will continue to be quite a fast-growing market for us. That's water.

On the climate side, as Tim said earlier, first, I'd like to say, look, our acquisition last year of Monodraught was underpinned on the commercial strength of that business.

That has continued and just gone from strength to strength. In the 11 months to date of the acquisition compared to the 11 months before the acquisition, same period, their orders are up 24%, this is really exciting.

This is before the synergy potential of the new solution. That new solution, as Tim said earlier, is essentially the release of this product right here. This is the very last rapid prototype version. The production tools are in place, and we'll be shipping this in production in September, okay? What this is, very exciting product. I'm sure you're thinking the same. It's actually an interface box that was designed in just 6 months, fully tested, released to market and has now been for sale since June. What does this do?

Essentially, as it shows there, and as Tim said earlier, if you take a complete school system, although this could be many other applications, an office building, a doctor's surgery, a community center, any building that has essentially a multimode ventilation system and higher air quality standards will benefit from this.

It allows the hybrid systems of Monodraught, which essentially directly outside -- access outside air and allow natural ventilation, which often is very good and a lot of fresh air to be linked directly to the new air units, which are the powered units often found in, say, the hallways, the canteens, the gymnasiums, the kitchens.

So when you think about all of those different applications, all this interface box allows all the new air products needed to now interface into the Monodraught ecosystem. That is the Medina wall controllers, which are state-of-the-art easy-to-use configurable wall controllers, which can do the whole ventilation system and control heating.

And Acuity, which is the brains of the whole operation, one per building, which also allows us to remote monitor and diagnose and troubleshoot systems, which has been a great.

If you ever get a chance to visit Monodraught, you'll see there, you can actually see every installed system in the U.K. they've ever done, right, which is really fantastic.

So as of now, all the new air products that are needed can interface through this box into the whole system. This is first to market in this case, and we've already received our first orders in July, totaling over GBP 1 million just for the first 2 projects. So quite exciting.

So despite already being up 24% strength to strength. So the question I often get is, well, do you have the capacity for all this growth? Well, glad you asked or anticipating your question, I guess, I should say, right?

Our GBS case study we wanted to share today actually is exactly that. It's a really good example of the business. In this case, Monodraught, our newly acquired business, saying, we need some help.

We see big orders coming. We need to increase our output. So we had a Kaizen team together of Monodraught people, plus people from ventilation and across the patch in Genuit work for a week on how to improve the assembly cell there.

As a result of this work, by the end of the week, they demonstrated a new cell, which is now in full operation, if you go there, which it takes up half the floor space, has demonstrated 40% more output capacity.

So they're ahead of the 24% increase, and I'm confident they'll be able to do more than that and gets a nearly 30% productivity benefit, pretty impressive and typical of the kind of results we can get and clearly addressing core business needs.

Now on the sustainability side, as I mentioned earlier, we lead with lowest carbon products with a high content of recycling. We continue to be the industry leader here. So the question then comes, how do you actually document this? So EPDs or environmental product declarations are affect the carbon passports for products, right? It's become pretty much the industry standard approach to do this.

Our customers are asking for these increasingly. We joined sort of a clearing house for this called One Click LCA last year. And in the first 6 months of this year, we saw over 3,000 views of these EPDs from almost -- about 350 end users.

These are people around the industry, architects, specifiers, engineers, project managers, sustainability experts. And they've been attached then being used and sort of put into the documentation for nearly 700 active projects.

So this is proof, and this has grown very, very rapidly. So the adaptation of this is important. Why this matters is because we continue to push, right? At the end of last year, we were at 57% of our revenue coverage, had these EPDs in place. That's definitely over 60% now, and we -- it takes a bit of work to calculate.

So we'll update you as we go forward. But the goal is to get more than 80% of our product line covered, right? The second thing that's important is that 2/3 of the time, right, when people compare our products, we are at the lowest carbon alternative. And that is really important as well.

So this is gaining momentum. Again, something we've worked on for years, but there's tangible examples of where this is really starting to matter. On the people side, this is just a fantastic article in one of the trade magazines with some of our graduates and apprentices.

And it's just kind of -- it's characteristic of the investment that we've made in our people. When I came here 4 years -- over 4 years ago, 3.5% of our people were in what we call earn and learn programs, apprenticeships, graduate programs and continuous education. It's really important not to forget about the colleagues who are already here, perhaps early levers who haven't had that kind of attention and investment. They're learning mass skills, lean work in accredited learning environments. I'm pleased to say that as of now, about 20% of our people are in this wide range of earn and learn programs, reflecting our commitment to actually putting the best team in the field and making this the kind of place where people can grow an incredible career.

Very important investment there as well. On the M&A front, we've made great progress here. On the Climate Division, we acquired Monodraught last year. As I said, the revenue synergy opportunity, which really is underpinned by that solution that we walked through is better than we initially anticipated.

We did the business case and we decided to do the acquisition, we thought there was a double-digit million piece of revenue to go after that actually was on top of what Nuaire or Monodraught could do separately.

Without giving specific numbers, that's even higher still as we've really gotten in and learned the market better. Really pleased about that. That was the primary driver here. The technology transfer we've talked about, I mean, really collaborating together, 6-month new product release that's already driving additional revenue. And importantly, we've said at the beginning that these acquisitions need a clear pathway to get to the group margin target. Monodraught has that, and they're on track.

On the Water Division side, we bought a collection of brands. You remember the Davidson acquisition. What's important is the brands inside there. Salamander Pumps and Cistermiser are water conservation brands that are really well positioned for some of the innovation needed as we do expect water conservation to make it into subsequent generations of housing regulations as that becomes -- scarcity becomes a problem. So that was really, really helpful. Talon is actually a bit like Manthorpe. They're complementary products to what we have. They go through the same channel and have done really well. Really pleased with the businesses, but perhaps even more so, we accessed the first synergies, essentially a reduction in corporate overhead, and they are on track as we had expected this year.

More importantly, they had some small underinvested facilities that we are going to be consolidating into 2 really good scale Genuit facilities during the second half of this year. This is the main driver for the -- over GBP 4 million step-up in operating cost reduction that we'll see heading into 2027. But that means that they'll continue to be ahead of plan. Already, however, they are in line with our group margin target of 20%, which is fantastic. So really pleased with both acquisitions. And of course, we remain active in the space, as Tim said, with the deleveraging continuing, so we'll be in a good position to continue to make more good acquisitions like this, increasingly beyond the U.K.

So if I turn to outlook, it's no surprise. Like we do -- we are counting -- well, not counting. We're prepared for the challenging market conditions to continue for the remainder of the year. The Middle East conflict has proven difficult to predict exactly how that's going to play out. Obviously, we are entering an autumn of continued political and economic circumstance and uncertainty in the U.K., another budget coming, thankfully, not in November. And underlying operating margins, however, will benefit in the second term from a few different things. One is the impact of that balanced cost price approach that really started to help in May and June, but actually will have a full impact for the second half. The non-recurrence of the isolated operational issues at Adey, we root cause those, no issue there. And the productivity gains we continue to make across the piece.

I'd emphasize, as I said, most of the simplification work will actually take effect from '27 onwards, but we continue to make the kinds of improvements like the case study I shared with you at GBS across the business. As a result, we'd like to confirm that our full year expectations remain unchanged. And that, as I said, the profitability will benefit heading into '27 by that over GBP 4 million of annualized operating cost reduction. Most importantly, the structural growth drivers that we've anchored our strategy on for the last 4 years are getting closer every day. We are now in some of the key regimes, Future Home Standard, AMP8, CF25, and we see a lot more coming. So the future actually looks brighter than ever, and we are well positioned to address those climate change challenges.

And I think that puts us well on path to deliver our long-term investment case where we said that we would certainly deliver -- outperform the market, which we believe we have done. But increasingly, we want that just to become much more consistent organic growth period, right, by investing in those markets that are actually growing and less cyclical. And of course, we'll augment that with really good acquisitions as well as you've done. So you saw that impact this year, certainly in the first half. Continue to be committed to taking that really large market we have, that GBP 3 billion kind of market opportunity and growing in the U.K. and make sure that it's addressing and that we are addressing those key climate change drivers so that essentially, not only are we reducing the scope of our carbon, but we're delivering more and more climate-friendly solutions.

All of this then matters as a sustainable investment case where we're committed to our over 20% margin target for the business and the over 20% return on invested capital. We think that the work we've done, the growth we're seeing starting to come through in the future years and the acquisitions have us well on track for that. And finally, that strong cash conversion is really important so that we can continue to delever, make good more acquisitions, improve those through the application of the Genuit Business System and continue that cycle.

So with that, I'd like to open up to questions. Tim, if you'd like to join me. That's the end of the presentation. So all right. Sure. Let's get started.

It's Rob Chantry from Berenberg. Just 3 questions. So firstly, can you just talk about some of the, I guess, political dynamics of the timing lag on cost recovery. So you mentioned price increases -- sorry, cost increases May and April, but it was May when you started putting the prices up. Is there any kind of conversation around increasing indexation or the kind of puts and takes of trying to get price increases in would be interesting.

And secondly, could you just kind of give a bit more of a structural update on Adey in terms of the state of the boiler market, the proposition that it has, the headwinds that it could face on a multiyear view separate from the near-term issues?

And then thirdly, could you just kind of give us an update on the potential pipeline of international acquisitions and expansion, like 2 really good deals last year, but both in the U.K. Is that something you're still prospecting in the, I guess, the wider climate and water space in Continental Europe?

You want to take the first 2 on pricing and Adey, and then I'll take the acquisitions piece.

Sure. Yes. So yes, I mean, on the cost dynamics, I think we've seen the inflation come through. It's a complex landscape. You can't just look at the oil indices and you can't just look at the kind of naphtha indices or things like that. The polymer pricing is really specific to the grade of polymer. So quite a complex landscape. We've put through double-digit price increases to cover that. We've seen, I guess, on average, things stabilize at the cost level. The picture remains volatile, obviously, in the Middle East.

We're not seeing polymer costs come down dramatically. That may change in the second half, and we'll manage that accordingly. If we see deflation, then clearly, we'll be having conversations with customers if that comes through. It hasn't yet. It could be that it stays where it is. We can't rule out further increases if we saw further inflation, right, if there was a reescalation. So it's a dynamic picture. We've managed it well. Our procurement teams liaising across the supply chain to get as best value as possible and maintain supply, which they've been successful at doing. We just need to continue to actively manage that and see how we go.

In terms of Adey, actually, there's a quality business in there. We've had 2 issues in the half, which are nonrecurring, but they have been root caused and we've made improvements there as to how we manage our inventory so that we don't get those and how we manage our suppliers, so that doesn't repeat. They are a strong gross margin business. It's a high market share product for a reason. It's the highest quality product in the market, really the first to market back in the day in terms of magnetic filtration and continuing to innovate.

So as you move from boilers to heat pumps, they have products for those as well because whatever your system, a hydronic water system, it needs to be kept clean to run efficiently, to protect the heat source, whether that's a boiler or a heat pump and also to maintain the life of that system and the efficiency. So that will continue. Clearly, the more RMI work that's out there, the more people are moving house, doing renovations, extensions, all those kind of things, that will drive volume, right? So we are still at a low point in the cycle, but we do still see that that's a really important part of our overall portfolio.

So on the M&A, great question. So as I said, we've been quite active. These 2 deals, one was a process, one was actually a bilateral piece of effort on our part, the ones that they closed. They're representative of many of the things we'd like to see going forward, good easy bolt-on size, good strategic fit, right? The one thing that they didn't do is bring us a bit more geographic diversification. Obviously, the solution infill was really pleasant on both of them, especially Monodraught.

Our funnel is quite active. We remain, as I've always said, we'd like to be cultivating between 5 and 10 active discussions at a given time. It's always difficult to know when things will happen, of course. But I can tell you right now that we're at the upper end of that range. And most of those deals that we're actively discussing with people hoping to make something happen, cultivating relationships are outside the U.K. Our main focus is on ventilation first and then storm water management, because we see those are the 2 end markets, which, by the way, not just in the U.K., have those same sorts of macroeconomic drivers everywhere. I mean these are issues. Those slides I showed earlier, I mean, those are true across all of Europe as well. So the climate issues, the mitigations there and the need for better ventilation is actually a universal issue today, too. So I hope that answers your question.

All right. Let's see, Aynsley. We'll try to get -- we have time to get everyone, so...

Aynsley Lammin from Investec. Just 2 for me, please. Just wondering, obviously, like-for-like decline in revenue for May and June was better than the first 4 months. Just wondering how much of that was kind of better pricing versus the volumes actually trend a bit better as well and what you've seen in July? And then the second question, just on the fact that PVC price, polymer price has gone up. Is there a kind of risk in the second half, you get more substitution for copper? I mean I'm not sure how that dynamic works, what the price differential is. Any color on that would be interesting.

Want to take the first one?

I'll take second.

Yes. So sorry, the first one was on the...

May, June, the improvement like...

The improvement May, June, yes. So obviously, there's a big price impact there. We put through double-digit price impacts on about 60% of our business. So that's had a big effect. But we did also see a seasonal uptick. So you normally expect May, June to be higher on a seasonal basis, given the activity levels in the construction industry as a whole, and that did come through. So that's a solid sign. So I would say the market volumes really are still being slightly negative year-on-year overall, but stabilized and not getting worse. And that's really come through in July as well. So July was in line with our expectations and is consistent with the kind of seasonal phasing of May and June.

So on your second question, on -- could we see some sort of reverse substitution with the pricing increases? I really don't think so. Two different sides. One is if you think about plumbing, the switch from copper to plastic has been going on steadily for decades now. And one of the things that -- it's a completely different way of working. Push fit ease, much faster assembly work, much more assurance of not having leaks. I think going back to soldering is something I don't think you'll see a lot of plumbers who haven't already made the switch or have made the switch won't be going back.

The other thing that I remind people that as much as a double-digit price increase in plumbing is significant for us in the product line. Plumbing is still like less than 1% of the cost of a house. So the overall pressure to shift is probably bigger on other issues. And I think you'll see higher up to build materials, perhaps a bit more substitution pressure over time. We're not worried about that. On the drainage side, the substitution has been largely from concrete to plastic over the years, similar situation. We think that the total installed cost of the solution is still far superior. So we're not anticipating or modeling for a reverse substitution to happen. I will go over there and then we'll come back over to this side. How is that?

It's Charlie Campbell at Stifel. A couple from me as well, please, if I can. So first of all, just as we get very close to Future Homes, finally, I suppose. Just wonder if you've got a feel now for kind of pounds per house under a house -- for a house now versus pounds per house in a Future Home Standard sort of fully compliant unit with selling everything that you could into it. And then the second question was just on, again, that plastic concrete point. I'm just wondering if that's coming through as you expect under AMP8.

Sure. I'll take both of those. On the Future Home Standard, what we said, we did modeling early on in this. And really, it hasn't changed much. If you think about a house today, it could have GBP 800 to GBP 1,200 worth of plastic plumbing. If you think about -- and of course, each individual house design in the Future Homes may be a bit different, have different combination of heat pumps, underfloor heating, different ventilation solutions, filtration, wastewater heat recovery, right? So if I think about all the things that we can deliver to a house, it's still somewhere in that sort of 2 or 3x more revenue to up to 5x more revenue. That would be -- the 5x would be 2 floors of underfloor heating, mechanical ventilation heat recovery, the best filtration and heat recovery options.

And of course, there's hybrids all the way in. In any case, it is clearly a net revenue gain for us, and we expect the penetration of these solutions to be quite high as it's pretty much consensus that everything is pretty much going to air source heat pumps. And that really changes the dynamic of both the heating and how you heat the house because you need much larger emitters, more efficient systems. And actually the impact of ventilation with heat recovery. Because if you don't have heat recovery in the ventilation, you're going to be increasing the operating cost of house over time. Some of this may take a few years to play out, but it's quite positive, and we still think that's about the right range, okay?

On the concrete substitution, so when we did the AMP8 modeling in particular, we assumed the traditional sort of 1/3, 2/3, 1/3 being plastic, 2/3 being concrete, right? Very -- I mean, this is very broad strokes. What we do believe, and we see some indications that we're going to be able to apply plastic solutions in this retrofit. Retrofit sort of not the right term, right? But I mean, you're essentially going into developed areas, subdivisions, right, areas and sometimes urban environments where you have to go in and essentially put in drainage where it wasn't originally anticipated. So the ability to get more products in on each lorry, right, fewer lorries, faster time install, much easier, less heavy equipment. All of that is really significantly advantaged by using a plastic solution. So we do expect that conversion actually to be better with AMP8 going forward for us.

Let's see, maybe I guess, Christian, and then we'll just kind of work our way back on this side maybe. Okay. Let's go there first. That's fine. We won't -- Christian, we'll get you eventually don't worry. No, no, Priyal, go ahead.

It's Priyal Woolf from Jefferies. I've just got 2 questions. The first is a follow-up on the Future Home Standard. So you've obviously talked about this 2 to 3x to 5x uplift. Does that kick in mainly from March 2027? Or are there some particularly volume house builders who might already be building to the Future Home Standard already? Just trying to work out the sort of curve of that uplift that might come through. And then the second question is just on the GBP 4 million of cost savings that you've been talking about. Should we -- should we think about that as incremental to profit next year or potentially just offsetting weakness that you might see in the market or more cost inflation that might come through?

I'll do the Future Home Standard, you'll do the cost?

Okay.

So on the Future Home Standard, so some of the large house builders have already started implementing some of these so that they make sure they're ready. Nobody is expecting to all of a sudden flip a switch on March of next year and go from 0 to 100% for a few reasons, right? First of all, from March of next year, new projects can't be permitted unless they have all the plans in place will be Future Home compliant. Things that are already in flight will be completed as they are. 1.5 years from now, you won't be able to complete anything that isn't compliant. We're talking about stand-alone houses and pitched roof house building right now.

There is a slight lag for high-risk buildings, right, about another roughly 6 months. But -- so you can think that between now and essentially 2 years from now, everything will need to be compliant that gets a building certificate, okay? So that's sort of the phase-in period. Now there's 2 other factors. One is some builders are already building already, and we've done about 3,000 plots are doing -- either completed or are doing about 3,000 plots of underfloor heating for small -- for midsized and large house builders already. So they're essentially ramping up ahead to debug the system, okay? So that's underfloor heating.

The other thing that we'll see is there's work to do by different housing designs to see what ventilation solutions will be needed. And so in the beginning, we expect we'll see more one floor underfloor heating, that could become 2 at some point in the future. And the mix between distributed ventilation and mechanical ventilation and recovery, we think will shift over time toward more MVHR. So it is a bit of a phase, starting small now. We'll certainly pick up between March of next year and March of '28. At which point, all new houses will need to be compliant. And then the question is, how do we actually continue to improve? Because the point I've made many times before is it's not like one and done. This is the beginning of an innovation cycle, I believe. So I think we'll see quite a lot more coming out.

There are other parts of the regulations, including wastewater heat recovery that still needs to be worked out. Well, it's there. Now we have to figure out how we're going to meet it. And the government did say they'll come back and take a look at Part O at a future date. That's overheating. I suspect there's going to be pressure to do that sooner rather than later. So I think that what we'll see is this a little bit of activity now starting to ramp up over the next 24 months and then continuing to find more ways to add value.

On the GBP 4 million, yes, I mean, today is the reiteration of the number that we obviously talked about in May with our trading update. I think at that point, most of our analysts, many of whom are in the room today, updated next year's numbers and included that in there. So I'm expecting GBP 4 million to be incremental to this year's result when you look on a year-on-year build, but not necessarily incremental to what's currently in consensus for next year.

We have 2 here. Sure, go ahead. You're back, then Christen.

Jamie Murray from Bank of America. Two questions, please. First is following the news over the weekend about Vistry, that is an insurer, is cutting supplier credit insurance by 70%. Can I just ask what sort of exposure you have to Vistry and what sort of impact this might have for you? And how will you manage this development going forward? And then the second, if you could just provide some color on the like-for-like growth of Monodraught and Davidson, please?

I'll take the first and then...

You take both if you want.

So yes, I mean, we'd never comment on any specific customers. But if I perhaps explain the way our chain works. We sell our product into the merchant network, and that's for reasons of getting nationwide distribution coverage. Our end house builders, we may have an agreement with that they will be using contractors, obviously, to purchase our products from the merchant network. So we would never see that we have a direct credit exposure to any of the house builders directly, although, of course, we have an interest as everyone does in the overall health of the industry overall. I'm sorry, the second question was on?

The acquisitions, Monodraught and Davidson, the like-for-like growth, please.

Yes. So I think we won't go down to the full detail of the segmentation of those, but Monodraught is growing well. Actually, order growth is even higher than the revenue intake. And we think that's to do with the dynamics of how the schools funding flows. So at some point, that will start to unwind. So we see good revenue growth, but also getting stronger off the back of that order intake. Davidson is down slightly in line with the rest of the market, to be honest, which you'd expect from that product set. So no weaker than anything else, but performing in line with expectations.

Christen, definitely. Thanks for being patient.

Christen Hjorth from Deutsche Bank. Two questions. The first one, obviously, with all the heating, I can imagine air conditioning is becoming more prevalent, particularly probably in the RMI market. How does air con and ventilation work? Are they sort of substitutes? Do they work together? Just sort of how we understand how that fits. And the second one, just to touch on the AMP8 win rate to date. I understand you sort of 1 of 3 key competitors in that area. And just how we should think about success in terms of AMP8 as well?

Sure. I can take both of those. So in terms of -- I think really the core is around air conditioning and ventilation, right, on your first question. It's an interesting one, and I think we've got to look at that because the demand for cooling of some kind is increasing in the U.K. and a lot of places, right? However, I think everybody realizes that actually the number of days we actually need cooling is not that many because it cools down a night quite a few times. Really, there's a few times where you don't get that cooling effect in the evening. So the problem with retrofitting just sort of RMI air conditioning is it's highly energy efficient. And it tends to essentially overcommit to a carbon footprint that -- well, and just a cost in your electric bills that most people don't want.

So what we do think is going to be a real opportunity is use incremental cooling solutions, much like we released with the MVHR with cooling. Some of you saw that when we released it about 3 years ago. That has been a fantastic solution for apartments. It's essentially mild cooling. It lowers the temperature on the hottest days to make it much more comfortable and livable, but actually also brings the benefits of heat recovery. So a much better solution than augmenting air conditioning. Certainly, for anybody who's operating buildings with somebody else as a tenant, they're going to be mindful of the fact that they don't want to pay for the bills for somebody setting it to 18 and leaving it, right?

So I think it will be really interesting to see. And in other markets, we've seen some solutions that I think will continue to play. So my view, it's too early to tell it's going to play out, but it is clearly an opportunity for us because we do ventilation and we have cooling capability in both Monodraught and Nuaire already. So stay tuned. I mean we'll watch that space. Let's see, the second question again was?

Just on the AMP8 win rates and how we should judge success.

I'm not going to give you a specific win rate for 2 reasons. One is it is relatively early. But yes, we're 1 of 3 people who can provide the full plastic solutions here. And all I will say is we are definitely winning much -- our win rate so far is definitely more than 1/3 of the projects out there. So we're really pleased with the initial performance, and we think it shows the overall engineering capability of our business, which we actually believe is the best in the market.

I just have 2 as well, both for Tim. I think good gross margin performance in the half. Could you just unpack for us the impact of the acquisitions from the back end of last year within that, whether they are accretive or otherwise? And also, I'm assuming there was some impact of higher input costs negative in the first half. Perhaps you quantify that, if you could as well, please? That's the first question.

Yes. So the acquisitions are both accretive. As we've said today, the Davidson acquisitions are over 20% EBIT in the first half, so in line with our medium-term targets.

At the gross level?

And at the gross level as well, yes. So we won't disclose specific figures, but yes, strong gross margins. And Monodraught, as we said, is on track. So again, very strong at the gross margin level and accretive at the EBIT level as well. You can consider that high teens in terms of performance.

Okay. And polymer costs in the first half?

Yes, it really does vary quite widely by polymer grade. So you can see some quite substantial increases in costs there. As we've said previously, we've got about -- last year, we spent about GBP 80 million on polymers, about GBP 50 million of that on virgin polymer, GBP 30 million on recyclate. Recyclate cost increases have been much lower than virgin. So actually, that high use of recyclate that we have does give us a natural hedge, which is important in keeping overall costs down. But across the virgin polymers, we've seen grades at 10%, 20%, 30% plus inflation across the board, and hence, why we've done a double-digit price increase to make that sustainable.

Okay. And secondly, on cash flow. Could you quantify what you think the non-underlying cash outflows will be second half and perhaps in FY '27 as well based on the consolidation of the 2 acquisition sites?

We're not giving specific guidance on that, but you can always assume that we'll have a 90% plus cash conversion. So if you model our profit and apply that cash conversion, you'll get pretty close.

Any other questions? No?

We've then just got a couple of questions from the webcast.

Okay. Great.

There's no more in the room. So firstly, was, can you quantify the annual cost of the surplus capacity you're carrying? And would anything cause you to trim these overheads?

Well, sure, I could take a stab at that. But I think the important piece is actually most of it is essentially in optimized plants and equipment that can be run more. So there really isn't an impactful carrying cost per se, but we're able to flex the workforce accordingly. And so we've been quite clear that being able to run more shifts or essentially change tools out on machines, think about extrusion and molding machines. I don't really think that there's an important carrying cost of that extra capacity right now.

And more importantly, as you see us investing in the revenue and the growth stories here, it's really important to have that ready. What we'll need to do is obviously add some people where we've been able to hire people and add people, so we don't see that as a constraint. And importantly, with the productivity focus and GBS, we keep improving and essentially lowering the cost of doing business by improving productivity and better utilizing our overhead. So that's a continual journey, and I think that's really the right approach.

And then the second one was, given the length of subdued market, do you see leverage becoming an issue for participants in the sector? And is this likely to lead to more consolidation or capacity exit in your view?

So yes, I mean, we don't necessarily see ourselves as similar to many in the sector because of, firstly, the breadth of what we do across things as diverse as ventilation as well as piping markets, for example. Ours is a very cash-generative business. So we tend to play at the higher quality end. We have strong brands, strong sticky customer relationships. And because of that, we have strong profitable businesses with healthy cash flow. So we delever quite quickly. We've obviously gone up to 1.6x leverage in this half, but that's because of the 2 acquisitions that we did last year, not really because of weak trading conditions.

So as we continue along the kind of trough in the market, actually, we're still a very profitable and cash-generative business, which is probably going to contrast with some of the pure cyclical players that are out there. And with the leverage that Joe described, when we think about that capacity and how we can come outside the other side, then there's even more potential in the business. So we obviously monitor this very carefully, but we do have still optionality on our balance sheet for further acquisitions when we think about that dynamic.

I guess the only thing I would add is if you think about the last time we had a significant competitor open -- exit the market with Aliaxis, that was actually more of a kind of a strategic decision as we understand, but we responded by commercially taking share. And I think that's probably the best way to think about this. You never know. I mean something else could come up, but it's nice to be in a good position and a relative strength.

Anything else on the webcast?

That's everything from the webcast.

Great. Anything else in the room? Okay. Thank you all for coming. We really appreciate the time and effort. It's good to see a lot of people here, probably the best attended half year results we've had yet. I know it's getting a bit warm in here, so we can investigate more cooling solutions. But there's breakfast upstairs. If you haven't had anything, we'll be around. Our extended team is here. We've got Chairman, some of the member of our executive team. So feel free to ask us more. Thank you very much and we'll see you back for the full year results. All right. Thank you.

Good afternoon, and welcome to the Genuit Group plc investor presentation. [Operator Instructions] Before we begin, I would like to submit the following poll.

I'd now like to hand you over to Tim Pullen, CFO. Good afternoon, sir.

Good afternoon. Thank you, and thank you all for taking the time to listen to us this afternoon. I'm delighted to present our financial results for 2025. I'm Tim Pullen, I'm the Chief Financial Officer of the group. And with me this afternoon, I've got Lisa Oxnard, who's our Group Financial Controller.

So the plan for today is to talk about our financial update that we released to the market last week, talk also around our strategic progress as a group, and then there will be an opportunity for Q&A at the end as well.

So 2025 for us as a group really was a resilient financial performance in the context of a market that continues to be challenging for the construction industry. Despite the prolonged downturn, we saw a revenue increase of over 7%, 3% on a like-for-like basis and also increased our profitability by 2.4% to GBP 94.4 million. We also saw an improvement in profitability as a business in the second half versus the first, as expected, and that was after digesting as well additional employment costs and I will come on to explain.

We had a strong underlying operating cash generation. We had 102% cash conversion in the year, really focused on keeping this above 90% over the medium term. And as a result of our disciplined M&A, our balance sheet strength and our strong cash generation as well as our confidence in the future, we have awarded a dividend of 12.9p, which itself has increased as well. So a good set of financials that we'll come on to explain, but also some really strong strategic progress as well.

So we're really focused on the higher growth segments of the construction industry, such as ventilation and bluegreen roofs, where actually despite the prolonged downturn in some core markets, there are higher growth trajectories available. And we're really trying to tap into the legislative tailwinds such as things like AMP8, which is the CapEx cycle for the water utilities really focused on improving the storm water overflow into streams and lakes, which is well publicized. And for things like mechanical ventilation heat recovery, which really drives the performance of a green energy-efficient heating system. So these things all relate really to structural sustainable drivers, which is really an inherent part of our business.

We've also been able to obtain some targeted market share gains, such as that with -- associated with the exit of a competitor from the U.K. drainage market and also winning the Redrow business following the Barratt Redrow combination. We continue to implement what we call GBS, which is our Genuit business system, and this is a lean operating and manufacturing system, which means that we're driving continuous improvement through all of our operations, both on the shop floor and in the back office to really drive efficiency, productivity and working capital improvements. We continue to improve the business every year using that and are really gaining momentum in rolling out that business system to the whole group. And we've also strengthened that group with the addition of 2 key acquisitions in the year. So in September and August this year, we acquired Monodraught and Davidson Holdings. Monodraught is a fantastic ventilation business that really complements our new air business that we already had. And Davidson had 3 group businesses, which fit really well into our SBS business and integration for both is going really well.

So those are the key headlines. I'll talk a bit more about some of the strategic progress a bit later on. But first of all, I'd like to invite Lisa to talk through the detail of our financial results.

Thank you, Tim. So moving through some of our financial highlights. You'll see that even though in a subdued market, we have shown growth on a revenue basis being up 7.3% and then on an organic basis, 3.2%. And with EBIT on GBP 94.4 million, we're also up 2.4%, but broadly flat on a like-for-like. And when you look at the margin being down 70 basis points, when we look at some of the headwinds from a cost basis in the year from the National Insurance and National Living Wage, both of these contributed to about the 70% -- sorry, 70 basis points, but we did show growth in the second half of 2025 versus the first half of 2025 on an EBIT margin basis. So really bring us into that kind of 2026 run rate, not too dissimilar from our exit rate of 2024.

Our strong cash conversion, we always aim to be north of the 90% mark, and we had cash conversion of 102%. And that strong cash conversion alongside a strong balance sheet gave a progressive dividend of 12.9p which was up 0.4p from prior year. And you'll see our leverage at 1.5x, and that's after we did some strategic bolt-on acquisitions of over GBP 100 million in 2025. And so we're in our range in the middle between the 1x to 2x range.

And as we step into then breaking down some of those financial highlights, you'll see our revenue split in the chart on the far right-hand side in the business units that we restructured within 2025, just over 40% of our revenue comes from our SBS, our Sustainable Building Solutions business and then just slightly sub of 30%, both climate management solutions and water management solutions within a final small percent of 1%, which falls into our other. And the pie chart in the center, you'll see our kind of market segment split with just over 10% within our international with 35% from our U.K. new build and then just short of 30% elements within U.K. RMI and our U.K. non-housing, which consists of our commercial infrastructure and public nonhousing segments.

Moving into our profit. And whilst we had underlying operating profit, an increase of 2.4%, whilst our margin percentage was slightly down, some of that revenue growth did offset that National Insurance and National Living Wage headwinds that we had. And we also had some contribution from the acquisitions that we did in August 2025 and September 2025. And really, the Genuit business system that pull through where it's contributing lean productivity, efficiency savings also helped offset some of the headwinds, and we continue to drive further pricing and cost actions, and that enabled us to have that second half improvement versus the first half margin within 2025.

Breaking into the individual business units that we restructured in within 2025, we had Climate Management Solutions. So our revenue growth of 10.7% on a reported basis and 5.9% on a like-for-like basis. We had strong growth within the ventilation segment of Climate Management Solutions and particularly over 10% growth within that ventilation was where we've managed to combine our MVHR offering with cooling modules within nonresidential, particularly multi-story residential. And we've also had strong resilience within our water filtration business of Adey with some softness in our underfloor heating businesses. But again, a growth for a future path where we can -- we're exposed to the RMI market at the moment, but ultimately in the future, see strong growth within underfloor for heating. Our underlying operating margin of 130 basis points lower than 2025 was really impacted by the underfloor heating volumes, but our integration of Monodraught is on track, and our margin will be accretive to the group on the longer term to our midterm -- medium-term target of 20%.

Our Water Management Solutions business unit. So we had revenue of 5.3% reported and then 0.5% growth on a like-for-like basis with resilient performance within our Civils business and growth shown within our stormwater attenuation and blue-green roofs. And while profit was overall down, we did at the half year announce we had a slow-moving inventory provision reported. And we also had the impact of the National Insurance and National Living Wage increase. And within Water Management Solutions, this has been slightly harder to pass on some of those increases whilst the volumes have been lower. But as we scale, we have the opportunity to continue to grow margin within the WMS business. And we saw from H2 in 2025 versus H1 2025, again, some incremental margin around some of the work that we've done on simplification in our Genuit business system.

And our final business unit, which is our largest, so Sustainable Building Solutions, our revenue is 6.5% higher and 3.3% on a like-for-like basis. As Tim talked to you, we had some market share gains from an exit of a competitor within the U.K., which was about a win of about GBP 20 million annual revenue. Our growth in the commercial markets was offset with some of the subdued market volumes that we have seen in RMI, particularly in the second half of 2025 and the run-up to the U.K. government budget. We have strong underlying operating margin performance within our Sustainable Building Solutions business. And the integration of Davidson Group is still on track and will be margin accretive to the group, again, coming in line with EBIT of over 20%, which is in line with our medium-term targets.

And just moving into how we will be structured in 2026 onwards. We've taken a look at the organization and particularly when we look at 2 of the revenue kind of market streams, we've reorganized into what will be a Climate division and what will be the Water division. So on this slide, you can see the split of some of our brands into those segments and then also the revenue for each of the divisions and also the return on sales for each of the divisions.

So if I start with Climate on the left-hand side, the Climate division for 2025, excluding the acquisitions, had revenue of GBP 172 million and a 13.6% ROS, and that subset is into ventilation and also heating. So 55% of the Climate division is based on ventilation. You can see from a growth rate perspective, the green box indicating that it is a strong growth area for the market versus the heating, you'll see in the orange range. But overall, the cross-selling or the interoperable solutions between ventilation and heating is really where we see some of the future growth coming within our Climate division, and that will be strong growth for the group in the future. And then on the right-hand side, you see the Water division at GBP 413 million revenue and 16.7% ROS. The Civils and Infrastructure element within the Water division at 25% circa of the revenue. This is particularly where we'll see things like the AMP8 elements coming through into that business versus our more traditional kind of residential and commercial structure. And you'll see the growth, the EBIT margin color on the bottom right-hand side for residential commercial being particularly strong with the green margin box.

And just moving through a couple of other elements of our financial highlights. So talking to cash flow. As we said, we had strong cash conversion at 102% with always a target of north of 90% cash conversion. And really, we've been working through our working capital improvement, particularly using our Genuit business system, driving that improvement, particularly in inventory and debtors. And you'll see here our net debt of the GBP 208 million and the cash flow is post our acquisitions that we did of over GBP 100 million during the year of 2025, but our strong cash flow essentially enabling that funding of the dividend payment.

And finally, on capital allocation, we'll continue to invest in the business with circa GBP 30 million of capital expenditure in 2025. Obviously, the acquisitions that we have done as we continue to look at disciplined M&A for 2026 and onwards. And that strong balance sheet we have provides that optionality for future bolt-on acquisitions and our progressive dividend policy, delivering that shareholder value.

And I'll hand back to Tim to talk through our strategic progress.

That's great. Thank you, Lisa. So I thought I'd start with our purpose for those not familiar with it, and that is that together, we create sustainable living. And this really runs true through the whole business because everything that we do tends to either be a mitigation or an adaptation as far as climate change is concerned. And so really, we are helping to decarbonize the built environment and create the sustainable living whilst tackling things like the structural housing shortage and the need for better infrastructure.

Our strategy is really based around 4 key pillars associated with this. And so we're focused on growth, both organic and inorganic. We're focused on sustainability, which really runs true through the whole company, and that's both providing our customers with lower carbon products so that we can decarbonize the built environment, along with more efficient systems to go into buildings, but also to help the world adapt to the effects of climate change, such as hotter summers and more volatility really in rainfall. So bigger rainfall events followed by droughts. We're deploying the Genuit business system that I talked briefly about before. So this is our lean manufacturing, our lean operating system, and this is as much about cultural change as it is around process and this is focusing our group on being able to improve businesses that are already in the group and further businesses that we bring into the group through M&A through continuous improvement. And then fourthly, people and culture is really important to us. So making sure that we have the best access to talent within the industry, really focusing on the development of our people, the diversity of our people and creating a culture in which people want to come and work. So that's our strategy.

To break that down a little bit more, let's talk about growth and how we generate that, obviously, in the context of a market that has proved continually challenging over the past few years for construction as a whole. And we're really focusing on areas that have particular exposure to sustainability drivers, and that's creating structural growth trends for us, which are evident now, but we think will grow in momentum in the future as well. And so those are end markets that are not necessarily associated with GDP. So it could be the CapEx cycles like AMP8. It could be regulatory drivers such as the future home standard, it could be government initiatives such as the warm homes plan. It could be sector-specific. So in the case of schools, the schools rebuilding program and some of the legislation around air quality and schools. So there are lots of aspects that we're exposed to that we can focus on to get growth even in a soft market. The regulatory environment is supporting that. Some of this legislation is a bit later than we might have hoped. The future home standard for those familiar, has been delayed a few times. But what I would say is that the direction of travel is really set. So whilst it might come in a bit later than we would like, people know that it's coming, and we're not expecting the elements which affect our business to be watered down. And that really drives the adoption of air source heat pumps. And whilst we don't make air source heat pumps ourselves, we do then make everything that goes around it from underfloor heating to plumbing, to drainage to efficient ventilation systems and so on. And that will really drive our share of wallet when we think around the construction of future homes. But it's not just about new homes, it's also around existing homes as well. And for the U.K. to hit its net zero target, we do need to decarbonize the 20 million existing homes out there. And the warm homes plan from the government is a really great start on that, GBP 15 billion of funding to transform 5 million homes and bring 1 million homes out of fuel poverty. So a really important initiative. into which we can really play.

And then we'll also drive inorganic growth. So we've shown in the businesses that we bought, the 3 businesses of Davidson, Talon, Salamander Pumps, Cistermiser & Keraflo and also the ventilation business, Monodraught, that we can complement our portfolio with additional products that give us more strategic capability, but also address the same themes of sustainability.

So if we look at the Climate division as we'll think about it going forward in our 2 division structure that Lisa set out, Climate growth really is going to come from that adoption of air source heat pumps, the electrification of the built environment essentially, but also the need for clean and healthy air. And when you think about modern buildings, high levels of insulation, so well sealed, but also often high amounts of glass as well. So think about tall apartment blocks with very glass fronted. In the summer, those can get pretty hot. And we can provide really efficient mechanical ventilation heat recovery systems with a cooling module. It's not air conditioning. It's much more efficient than that. And that can really create efficiency in the whole system to make sure that you're heating and cooling homes on a really efficient basis. We also see the trend towards fitting more ventilation to fix damp and mold problems. Many of you will be aware of the tragic case of the Ahmed Awaab on which the law is named which really is about addressing damp and mold problems in the rented sector, be it in social housing or in the private rented sector to come as well. And some of these problems can actually be fixed relatively easily with ventilation solutions. And so we're seeing drivers in that space as well to ventilate those types of homes better.

In Water, our other division, we see other drivers really in this space. So here, we're seeing that you're getting more intense rainfall, prolonged rainfall and periods of drought. And that means that our infrastructure needs to adapt, our built environment needs to adapt essentially. So we need bigger storm water attenuation systems with more capacity, better designed. And in doing so, what we'll do is we'll start to solve the problem of brown rivers and streams, which has been well publicized and has been challenging for the water utilities. And that problem is there essentially because we have combined sewage overflows. So storm water gets into the combined storm water and sewage system. If it's inundated because perhaps it's a Victorian system or just because of increases in population, then that can cause overflow into lakes, river, streams, beaches and so on. So there's a big cycle now to do something about that. The AMP8 water cycle is the latest CapEx cycle. These run in 5-year periods, but we think that 9 and 10 will also need to address the same problem because it's a multiyear cycle. And we see a big opportunity here, at least GBP 100 million over the next couple of years for putting these types of solutions in.

And we're also decarbonizing what we do. So we lead the industry really on recycling. Over 50% of our polymers are recycled as a business, which is leading in terms of pipe businesses across Europe. And that means that we can offer our customers the most energy-efficient, fuel-efficient and carbon -- less carbon-intensive solutions to be able to decarbonize themselves. And so as many of our customers themselves are listed businesses with net zero commitments and so on, we're able to help them achieve those aims. So I talked a bit about sustainability. It's genuinely really important to us. It's also important to us to decarbonize what we do as a business as well as offering those solutions to our business. And so you'll see that we've signed up to a net zero commitment and SBTIs. We've made good progress on those in the year. We continue to reduce our Scopes 1, 2 and 3 carbon intensity. So great work by the team there. And we continue, as I say, to lead in recycling with over 50% of recycled material used in 2025.

The Genuit Business System is really gathering momentum now. I'd like to think about it as a snowball effectively. You start off small, you get a few people involved. They learn how to use the tools and techniques and they start to share that experience and the snowball grows. In 2025, we delivered 75 Kaizen events, which was almost a fourfold increase on the year before. And we also launched more tools, specifically focused on the growth side of the business. And over 90% of our leadership team participated in the Kaizen event. So you can see this snowball beginning to grow. And this is about continuous improvement, small gains in a lot of places to drive the productivity and efficiency of the business.

And then last but not least, people. We continue to invest in our people. We're really proud that we're a member of the 5% Club, which is about the percentage of people in formal learning programs. Actually, we have close to 20% of our people in formal learning programs. And that's a real important thing for us to invest back in our workforce and get more from them over time as well. And we're really driving diversity within the construction industry and proud that a number of our colleagues in the business and particularly those being promoted were female in the year. So that's an update on our strategy.

Turning to the outlook for the business for 2026. We saw that in the final quarter of 2025, market conditions were soft, and that was really associated with the lead up to the government budget and the uncertainty around that. And so we expected that to continue into January and February, which seasonally are lower months for the construction industry. And certainly, we saw that. And prolonged wet weather in January and February. For those of you in the U.K., you'll be very familiar with this, will have impacted things as well. It's just the fact that site activity tends to be a bit lower when it's raining. But we balance that with some positivity that in certain parts of our business, we did see some promising order intake, particularly on those more structural growth aspects that I talked about in the commercial sector. We wait to see a bit more on RMI and new house building. Now we have to reflect the current situation that's evolving in the Middle East. Our primary thought is with our team out there. We have about 30 people in the Middle East and about 3.5% of our revenues came from that region in 2025. Our priority is to keep those people safe in the short term, and I'm glad to say that they currently are. So our thoughts are with them. In terms of the broader impact on our business, it's a bit too early to say at this stage. We're managing the situation. We're dealing with our polymer suppliers. We're dealing with our customers, and we'll adjust as we need to if this is a more prolonged situation rather than a shorter one.

Regardless of what's going on in the world, though, we're really focused on controlling the controllables, focusing on the aspects of the market, which are more likely to see structural growth, those higher growth segments, and we think that we can continue to outperform the market in any condition because of that. And we'll continue to strengthen the business with the Genuit Business System and that continuous improvement. So we're still really confident in achieving our medium-term targets, which is to outperform the general construction market by 2% to 4% and also to drive margins of over 20% at the operating margin level.

So just one final slide before we go to Q&A. I thought I'd highlight here our investment case for attendees on this presentation. Here, you can see our targets for the medium term, the market outperformance and the operating margin target that I've talked about. You can see our sustainability credentials and that we're committed to driving down our own carbon footprint as well as providing good solutions to our customers to enable them to do the same. We do have leading positions across quite a broad range of heating, ventilation and water technologies, and we aim to have -- maintain a high market share in those markets. We aim to drive a strong return on invested capital through our business performance and the performance of our M&A as well. And maintaining really efficient operations is not just about the shop floor and the efficiency of production, it's also around working capital. So continue to drive that and maintaining that over 90% cash conversion so that we can continue to reinvest in capital and also in M&A. So that's our investment case. And that concludes our presentation. So I'd like at that point to turn to Q&A.

Fantastic. Tim and Lisa, thank you indeed for updating investors today. [Operator Instructions] Just a quick reminder, a recording of today's presentation will be available on the Investor Meet Company platform shortly after this meeting has ended. Tim and Lisa, as you can see, we had several questions during today's presentation. If I could just ask you to read out the question where appropriate to do so, give your response, and I'll pick up from you at the end.

Yes. Tim, we've got a question. So what criteria do you use for bolt-on acquisitions? And how do you ensure they deliver shareholder value rather than just revenue growth?

Great question. So this is something we're really focused on. We've done quite a strategic piece of work to identify a pipeline of acquisitions. And the good news is there's a list of at least 50, 60 companies that are interesting to us, both in the U.K. and in Northern Europe as well that have a product that would fit into our portfolio well. And in the case of international acquisitions have some form of market access, which is interesting from a synergy perspective as well. So we don't have a shortage to look at. But when we're appraising those, really, we're looking for good businesses. We're not looking for turnarounds. So they will often be profitable, cash-generative businesses. Monodraught and Davidson are both examples of that. Actually, those 2 were both accretive to our group margin in year 1. And the Davidson business, when we've removed the corporate overhead that they had, will actually be at our group margin target of 20% in 2026, which is great. Now we can go and buy something that's lower than our group margin target. That's fine as long as we've got a business case to improve it, and we can do that in several ways. It could be sales synergies such as we saw in Monodraught, where we see really strong synergy between Monodraught and our new air business. It could be operational synergies such as some of the retrospective integrations we've done of previous acquisitions in recent years. And it could also be about market access, so particularly in the case of international business. So as long as we can see a way -- and I should say with GBS as well, we can deploy that anywhere. So the ability to improve businesses through lean methodologies. So lots of ways we can do it. And as long as we see a business case to get to that over 20% and to contribute to that over 20% ROIC target as well, then we'll make an acquisition on that basis.

And then final question, how confident are you in rebuilding margins overall? And what actions are left in Water Management to build that segment?

Yes. So margins did improve from half 2 versus half 1, and we'll continue to focus on that. As a group, we are committed to getting to that over 20% margin target. SBS, talking about old business unit structure was already there. The other 2 business units on an improvement journey and this business has spotted water management solutions had the furthest distance to go. We won't repeat the inventory provision that we had in the first half of last year, which will give us a bit of an improvement in the first half of this year year-on-year. But importantly, we've also taken certain margin improvement actions. So that included a price increase in July, some operational cost actions, including the integration of our Keytec installation business into our Civils business and also the acceleration of some Genuit business system projects as well. So that was behind the improvement of margin in half 2 versus half 1, and we'll continue to see the annualization benefits of that. We think we can get the water business to over 10% through our own action. And then there's a target of getting to over 15% for that part of the business, which is then associated with volume. And when we think about the AMP8 business, that GBP 100 million of addressable market for us, if we can increase our business by GBP 10 million, GBP 15 million, even GBP 20 million a year, that will give us much more operating leverage essentially to get to that kind of margin level. So we definitely see line of sight to continue to improve the margins.

And another question has just come in. So sales cycle and process and visibility of revenues, how should we look at these in line with achieving your targets?

Yes. So we do a lot of business as a group through the merchant channels. So they play an important role for us because they provide a national stocking of our products. So a lot of our piping products, ventilation products, our filtration products will be sold through the merchant channels. We also do work with some end customers as well. So we work with a number of the large housebuilders to get specified into their designs. And we do something similar now with the water utilities thinking about AMP8, so working with the end customer to really build solutions that will meet their problems. As well as the merchant channel, we also bid for project activity. So we do drainage down the side of highways or HS2 or nuclear power sites. And we also bid for commercial buildings. So we have a level of kind of RFP and bidding activity. And then we have a small amount of solution type business, our new heat business, looking at underfloor heating solutions, sells to homeowners, architects, small builders and so on in that space. So a variety of business models. But really, we don't have too much concentration. So a good amount of spread and a good amount of exposure to different markets. So about 1/3 in new house building, about 1/3 in the RMI market, about 1/3 in nonhousing, so including commercial and infrastructure. And as Lisa pointed out in those pie charts, about 10% or 11% international, which is something that we would like to grow and diversify to more like 20% over the medium term.

And that concludes all of our questions. I think, Tim.

Fantastic. Thank you very much indeed to you both for updating investors today. Just before we ask investors for their feedback, which is particularly important to you and the team, Tim, I might just ask you for a few closing comments, please?

Of course. So this is the first one of these that we've done. So I'm delighted to have this opportunity to speak to everybody today. Really keen to get your feedback as to whether this was useful so that we can factor that into how we think about future events. But certainly, looking back on 2025, we're pleased with the performance, resilient, we think, in the face of a continued challenging market, but we're really focused, as I say, on where we can grow, continue to outperform the market and continue to improve the business to drive our profitability and drive shareholder value as well. Thank you.

Fantastic. Tim, Lisa, thanks indeed for updating investors today. Can I please ask investors not to close this session, you should be automatically redirected to provide your feedback to help the company better understand your views and expectations.

On behalf of the management team of Genuit Group plc, we'd like to thank you for attending today's presentation, and good afternoon to you all.

Welcome, everybody. Joe Vorih, CEO, at Genuit. I think most of you know me by now. But I'm pleased to be here to present our fiscal year '25 results as well as a really interesting update on our strategy, and we're going to give you a bit of a divisional overview as well. So, as soon as I get the clicker here, importantly.

So anyway, let's get started. Just a couple of notes. We're going to head through the agenda here. I'm going to give you a bit of an introduction, turn it over to Tim, who will take you through the financial update and a few words on the outlook. I'll come back for a bit of the strategic progress we did last year. And then, I have -- I'm being joined also in addition to Tim, our CFO, by Lee Mellor, who will talk to you about our Climate division, and Steve Currier, who will talk to you about our Water division. In addition, we've got the rest of our leadership team here. So I've got Martin, our Head of Strategy and Sustainability; Edel, our Chief -- Edel Conway, our Chief People Officer; and Emma, our General Counsel and Company Secretary here. So great team. Feel free to see any of us. We'll be around after as well.

And importantly, as soon as we're done, we will have some Q&A after the whole session. And then upstairs, as you might have noticed in the way in, there's some really interesting demonstrations. So if you've got a few minutes, I definitely encourage you to ask the team up there. They're delighted to tell you about some of the things we're doing, including some systems and solutions from our newest acquisition. So a lot to get through.

So first off, pleased to say that despite what, once again, was another challenging year, I seem to be really good at talking about challenging environments 4 years on. But revenue increased last year, 7.4% -- 7.3%, as we managed to outperform through a mix of both organic growth and share gains as well as integrating 2 really good acquisitions. Our underlying operating profit increased to GBP 94.4 million. And this is, of course, despite the market conditions we had and, of course, the headwinds from National Insurance and National Living Wage increases.

We were able to deliver the sequential margin improvement from H1 to H2 that we had told you we would. And that's really important as we think about going forward, as we've absorbed those costs and continue to improve the business. And importantly, our strong operating cash flow generation, 102% this year, means that we continue to have the wherewithal to be able to reinvest in the business, both organically and, of course, inorganically, as you saw. As a result, the Board had confidence to declare a 12.9p increase in our dividend, which is in line with our progressive dividend policy, but also reflects both our strong balance sheet and our confidence in our strategic execution going forward.

As resilient as our performance was, it was a year of great strategic progress. So as you know, we've been focusing on higher-growth markets, where sustainability leads and where we can actually drive better growth than our peers in the rest of the market. Some of these are, for example, the higher growth rates we saw in ventilation and in the blue-green roof sectors, among others.

And of course, we continue to benefit from regulatory and other tailwinds, such as the AMP8 framework, where some of our AMP8 where some of the initial framework wins have started to come through, which is great. So that sets the tone for midterm growth and continued increased demand in things like ventilation, including mechanical ventilation, heat recovery as our customers prepare for the future home standard, start to build a passive house in some parts of the country.

So again, these are just really good markets and businesses to be operating. We did deliver some targeted market share gains last year. We talked about the exit of one of our drainage competitors. We successfully captured that share. And importantly, we were able to leverage our relationship with Barratt following the Redrow acquisition and tender to use our strategic partnership with them and our more sustainable offering to really drive a much better value proposition and win that expanded business as well.

It wouldn't be a presentation if I didn't point out that the Genuit Business System is at the heart of everything we do. It continues to allow people to drive productivity and efficiency in the business. And as we'll talk about in a bit when I come back, it's starting to now impact the growth rates of the business as we launch our growth tools as well.

Finally, in terms of strategic progress, I'm really pleased with the acquisitions of Monodraught and the Davidson Group of companies, both of whom are represented upstairs. We spent over GBP 100 million in these acquisitions. These are fantastic. They're integrating really well. And both of them are both on track to be accretive this year as well as hit our midterm operating targets of 20% plus in the midterm. So they're on track for that, and we're really pleased. And of course, as you know, we'll keep cultivating that strong pipeline. So we'll have more exciting news in the future, I'm sure.

The other thing, and I'll come back and tell you a little bit more about this, is we announced a divisional simplification. Just to say, this is continued evolution on our strategic plan. We'll address later -- Lee and Steve will talk to you about the Climate and Water divisions, and I'll give you a little more of the rationale before that right before. But for the meantime, we're going to go through with the results, and Tim will come and give you those financial results, but we will do that in the 3 divisions that we've been operating for the last few years.

So, Tim, with that, over to you.

All right. Thank you, Joe. Good morning, everyone. Thank you for coming this morning, and it's a pleasure for me to present the financial results for 2025 to you this morning. So the financial highlights, first of all, as Joe said, our revenue was up around 7% last year at GBP 602 million, and that represents organic growth of about 3%. So a great performance by the Genuit companies to generate growth despite the continued subdued market environment that we saw.

We also increased our profitability. So profit is up by 2.4% to GBP 94.4 million or broadly flat on a like-for-like basis. Our margin was down slightly during the year, so about 70 basis point reduction in margin to 15.7%. However, we did consume additional employment costs in the form of National Insurance and National Living Wage, and that actually equated for about 70 basis points. So there are some ups and downs in the segmentation that I'll talk you through, but largely, that's about the same value. Importantly, our margin in the second half, as Joe mentioned, was larger than the first, actually, about 16.4%, which is back to the run rate of 2024, as we continue to improve the business, the efficiency, the productivity, and therefore, our operating margin.

Cash conversion was really strong. So we aim to always be above 90% cash conversion. You can see we've had a strong performance here at over 100%, and that's because we continue to focus on improving working capital within the group. Because of that strong cash generation and because of the strength of our balance sheet, we've continued our progressive dividend policy, so 12.9p, up 0.4p for the dividend, so continuing to drive shareholder value there. And our leverage about 1.5x is bang in the range of the 1 to 2x that we aim to keep our leverage. And actually, we deliver -- we delever pretty quickly, about 1/3 of a turn a year. So you will see that our firepower to do further acquisitions will come fairly quickly as well through the year.

So let's unpack the results a little bit more. If we look at our revenue, you can see that our proportion of revenue amongst the 3 business units was fairly stable year-on-year, so about 40% of our revenue comes from SBS and about 30% each from Climate Management and Water Management in our old 3 BU structure. And the proportion of that, to split slightly differently across the sector, shows that about 35% is from New Housebuilding, just under 30% from the RMI market and just over 25% from what we call Non-housing, so that's commercial, infrastructure and multistory residential and about 11%, which is consistent of International revenues as well.

In terms of profit, as I say, profits are up year-on-year, whilst margin is slightly down. We did see that the contribution from the additional revenue that we've had is flowing through and helped to offset those additional employment costs that we've consumed during the year. And we obviously got some profit contribution at the end of the year as well from those acquisitions that we completed in August and in September.

The Genuit Business System continues to drive at profitability improvement. And so that also helps us as well as balanced price management offset those additional employment costs. And our margin was bigger in Half 2, as I say, than Half 1. So a good run rate and trajectory coming into 2026.

So if we look at the bridge of our business units, you can see that all 3 of our business units grew during the year. So strong healthy performance from them all. And in general, our profitability increased, most notably in SBS apart from in WMS, where we did have some challenges. So let's just dig into the detail of our segmented results and go through our business units one by one.

Starting with Climate Management Solutions, here, we saw a really strong revenue performance. So revenue up over 10% year-on-year or about 6% on a like-for-like basis. Actually, within there, our Ventilation business grew at over 10%, and we saw really strong performance there, particularly with MVHR, mechanical ventilation heat recovery, with a cooling module in multi-story residential. And when Lee Mellor stands up in a moment to talk about our Climate business, this is a really exciting area of continued growth for us, as you'll see.

We had a resilient performance within our Adey business concentrating on water filtration despite kind of subdued boiler market still. But we did see some softness in our underfloor heating business, which is particularly exposed to the RMI market, but it's a business that we certainly see growth potential in. So whilst that did drive some underperformance in terms of margin during the year, we see a route to improve that as we scale that Underfloor Heating business associated with future home standard, warm homes and so on. And as we integrate our Monodraught business, which is accretive to our margin overall, we do see the opportunity to grow those margins.

The Water Management segment, revenue growth of about 5% year-on-year or about flat on a like-for-like basis. Here, we had a resilient performance within our Civils business, and the stormwater attenuation piece grew as well as blue-green roofs, which is really on a different growth trajectory, small, but rapidly growing for the future.

Our profit here was down. We talked at the half year around an inventory provision that we made, and we've also had the effect of National Insurance and National Living Wage, which is slightly harder to pass on within this market at lower volumes. But again, looking forward, we see the opportunity to improve margin. Steve Currier has done a great job improving this business in the second half of the year and that's from a price, cost and Genuit Business System point of view. And we do see that as we scale our business, particularly the Blue-green Roof business, there are opportunities to grow our margin here, too.

Sustainable Building Solutions is our largest business unit. Revenue here grew again 6.5% for the year or about 3% on a like-for-like basis. We did get some targeted market share gains here. So Drainage, we saw the exit of a competitor from the U.K. market, and we were successful in winning about GBP 20 million annually of business there. We also saw good growth in commercial markets, in particular, within this segment during 2025. And that helped to offset some softness in the new build and the RMI markets, particularly in the second half of the year and that run up to the U.K. government budgets.

And overall here, we did see a strong improvement in profitability, really driven by that commercial performance. So about an 80 bps improvement in our margin. So really well done to the team here. And we continue to drive at that, both with the continuous improvement of the Genuit Business System and integrating the Davidson Group of companies, which will be delivering an EBIT of over 20% in line with our medium-term target in 2026.

So that's the run-through of the old business unit structure. I wanted to give you as well a flavor of what the new 2 divisions will look like in the component parts. So we've got a number of our analysts within the room. This slide really is a one-off to help you reset your models and explain what goes where and what kind of trajectory we are on in terms of growth and profitability. So here, you can see our Climate and Water divisions and where the various logos our businesses end up and the proportion of those businesses and the growth in profitability rates.

So if we take Climate, first of all, that's over GBP 170 million a year business, had a return on sales of over 13% in 2025. Here, you can see that our Ventilation business, which is about 55% of that division, is really growing very well. So that's our fastest growing element of the business at the moment, whereas in Heating, slightly slower growth, and that's really related to the fact that the RMI market hasn't picked up yet, but also technologies like underfloor heating are on a growth trajectory for the future, but are currently not at the scale that we would want them. That means that in both of these divisions or elements of this division, we've got opportunity to improve the margin as we look forward as we grow the business, but also, as we offer interoperable solutions across this division, and the opportunity to be able to sell heating with ventilation systems is really a very strong point for Genuit as a group.

Our Water division, that's an over GBP 400 million business, nearly 17% return on sales. Here, you can see our Civils and Infrastructure business is one of the lower margin areas of the group and lower growth, but we do see very strong growth as we look forward, particularly with the AMP8 water cycle that Steve Currier will talk a bit more about when he's presenting.

And that means that the volume increase and the economies of scale and operating leverage we can get from that will drive our margin profile as we do. And that will complement our existing residential and commercial business, which, as you can see, is our highest profitability component of the business right now, but also growing at a decent rate as well.

So a little bit more detail on some of the results. So non-underlying items first of all, here, you can see that the amount of exceptionals reduced year-on-year to GBP 25 million. A big chunk of that, about GBP 14 million, relates to the usual amortization of intangibles. We did have some restructuring in the year, so we've invested around GBP 5 million in restructuring, which is partly to create those 2 divisions and really set them up for the future, but also tackle some of the improvement in the Water Management sector and improve profitability there, Half 2 versus Half 1 and into 2026.

We spent about GBP 3 million on our acquisitions. As Joe mentioned, over GBP 100 million worth of spend on those acquisitions. We're really pleased with them. These are the costs that are associated with buying those. And we've also continued to invest in our systems as well. So really investing in the future of the group here. So creating really efficient processes complementing the Genuit Business System and setting ourselves up to be able to use future technologies, like artificial intelligence, to really create manufacturing operations that are fit for the future, and you'll see this as a continuing theme that we'll continue to invest in. And then, some costs associated with some impairments associated with holding the Polydeck business for sale. This is a business that we've concluded in the year, is not strategic to us, relatively small, but we'll look to divest that business in Half 1.

So, on to cash flow, as I said, really strong cash flow performance by the team, over 100% cash conversion. We've really focused on improving that working capital, which is as much about Genuit Business System as it is in the operations and productivity. And that allows us to fund the acquisitions of over GBP 100 million, that dividend payment of over GBP 30 million as well. And it means that our balance sheet remains really strong and puts us on a great footing to be able to invest for the future. So we'll continue to invest in the capital of the group.

We spent just under GBP 30 million of CapEx in 2025. We'll spend a similar number, we think, GBP 30 million to GBP 35 million in 2026. We'll continue to prosecute that acquisition pipeline. And as we delever, that will certainly have opportunity to look at similar strategic bolt-on-size acquisitions. We'll continue to provide shareholder value in the form of our progressive dividend policy as well.

So those are the results for 2025. Just a word then on the outlook for 2026 before we go back to the strategy and our divisional deep dive. We have seen the continued subdued environment that we saw in Q4 come into January and February. That was expected given the soft end to the year. And we have seen that compounded by wet weather in the U.K. in January and February. So hopefully, as we go into the spring, we'll see some sunnier weather and construction site activity will improve. Certainly, we have seen some positive signs in our order intake that would suggest that sites are gearing up for more activity in the spring. So we'll see how that goes.

Obviously, at the moment, we've got the evolving situation in the Middle East to think about as well. Our primary concern there is for the people we have there. So we've got about 30 people in the Middle East. Keeping them safe is the utmost priority. And we do hope that things will settle down there quickly. It's probably too early to really predict what's going to happen from a business point of view at this stage, but we'll continue to monitor that situation and see how things evolve.

Despite whatever market conditions we'll see, our focus is really on outperforming the market. And there are certain parts of our market that are not necessarily linked to GDP or the housing market, particularly in the commercial sectors, the schools rebuilding program, which Lee will talk a bit more about, the AMP8 water cycle, the drive towards urban re-greening and blue-green routes. We've got lots of things in the group that we can focus on to drive market outperformance whatever the economic conditions.

And we'll continue to improve the business as well through the Genuit Business System. So you'll see continual focus on working capital improvement, productivity and efficiency of the group. And that -- all of that means that we remain very confident in achieving our medium-term targets, outperforming the market by 2% to 4% and growing our profitability to over 20% operating margin over the medium term.

So that's the outlook. And now, I'll invite Joe back to the stage to talk around our strategy.

Thank you, Tim. All right. So just a few words on the progress we made last year, and then, we'll get into the divisional overviews. So first, recall that we're all here, 3,500 or so of us, because we believe in the purpose that together we create sustainable living. And unlike so many companies, one of the great things we don't have to worry about going forward with the questions around ESG is actually sustainability is so ingrained in the core of everything we do, it's actually, we believe, a long-term competitive advantage. And I got to tell you, when you're leading a team of people and your purpose and what you're trying to do as a business are so closely aligned, it's a great luxury.

And as such, we've actually been on the same strategic journey since November of '22, when we launched this, and some of you were in the room then. And that is our sustainable solutions for growth strategy, still very much the strategy that we're working towards and have been for some time. It's underpinned by a focus on higher-growth, sustainability-driven markets, where we believe that actually helping our climate -- our customers deal with climate change and mitigation is actually really important and can be a competitive advantage. So we invest in organic growth in those segments as well as, as we did last year, finding great strategic bolt-on acquisitions that can help us enhance our position there.

Sustainability is not just what we sell, it's also how we run the business, and I'll share with you some results as how we continue to improve that and make sure that we are a leader in operating sustainably and in being the lowest carbon supplier of choice. The Genuit Business System continues to gain momentum, and it is fundamentally lean thought processes at the heart of everything that we do. It's how we run the business, front to back, from sales all the way through to how we install products, manufacture them all the way, how we run our back office. And that continues to gain momentum. And importantly, it's now starting to inform how we drive growth, a set of growth tools that are part of the Genuit Business System going forward.

And of course, last and definitely not least, perhaps most importantly, it's about investing in the very best people, the best leadership, the career development for everyone and the fundamental belief that an inclusive and diverse environment actually is a competitive advantage. So just a couple of words on some of those bits. If you think about growth for a minute, a couple of examples here. I mean, Ventilation going into long-term, structurally-driven markets like the need for more housing, the need to reinvest in education in our schools are the types of markets that we like to play in, right?

We have a supportive regulatory environment. We're preparing for the future home standard. When it eventually comes, it's the right thing to do. We know we're going in that direction anyway. And as I said earlier, some of our customers are already building there in anticipation of that. And the recently announced Warm Homes Plan, which is a really welcome sign from the U.K. government to get on with trying to accelerate the upgrading of the 20 million-plus homes that are already out there.

These are definitely good tailwinds for us, of course. And as you see or you can see upstairs, some of the high-quality bolt-on companies and brands that came last year, where Monodraught strengthened our ventilation presence and the Cistermiser & Keraflo, Salamander and Talon brands fit really well into our Water business.

In terms of sustainability, what's really interesting to me is that this is long term, this is on a growing trend to be something that really matters to our customers, will help drive demand and differentiate us as a leading supplier of choice, okay?

We actually continue to make improvements on our journey to net zero. And perhaps one of the harder things is actually to reduce not just your absolute emissions, but also your carbon intensity. It's another form of productivity, if you will, on the path to net zero. We did -- we made a 15.7% decrease in our carbon intensity last year, great accomplishment, and we continue to work on that journey and build it in as part of how we run the business and really being more efficient in everything we do.

We continue to be a leader in the use of recycled polymers and in the use of low-carbon materials in all of our businesses. Our recycled polymer content remains around 50%. But importantly, we have invested in some substantial projects that will keep advancing that long term. So this is one of those areas where we retain our leadership position, and we do believe that long term, it will be a competitive advantage and continue to be.

In terms of the Genuit Business System, this is something we've been sort of tracking the permeation of it through the business, last year, we delivered 75 kaizen events, nearly 4x as many as we did in '24. That's a huge step up. And part of it is because our leaders all committed to being part of this process. And the 7 of us and the 70 or so other of the senior leaders across the business, all participating themselves hands-on in kaizen because we believe leading from the front is the right thing to do. As such, over 23% of our employees across the whole business so far have been part of a kaizen event or a lean training.

And then, as I said, we launched the lean GBS tools for growth. So these are tools that we can deploy across the organization to help our sales, marketing and innovation colleagues advance the progress that we actually deliver new products to market that are truly what our customers desire.

I thought it would be helpful since we're not at one of our sites right now to take you there. So last fall, let me just set the stage here, one of our new acquisitions, Sky Garden, right, delivers complete blue-green solutions to site that are then installed. It's a very complex process and several Lawries need to leave with everything exactly the way it's needed. So going forward, they need to be able to really increase their output, and this is the site that they actually stage everything from. So let's have a look.

[Presentation]

Obviously, they have been modest actually because he's the site supervisor there, and I spent a week there with him and with the team. And the transformation that site went through in the space of 1 week is really remarkable. And you might associate lean methods and thinking with shop floors, but you can do it here, you can do it anywhere, right? And what we're going to look for Sky Garden to do is actually they're in such a growing market in blue-green that their aim is to be able to double the output of that site. And so we'll be tracking that metric going forward. So hopefully, that helps you kind of see how this all comes to life.

And of course, the last and most important piece really is investing in our people. I've alluded to the strength of our leadership team, and importantly, the succession and talent development that we drive throughout the whole organization to create more opportunities for people. It starts right at the very beginning of somebody's journey. So we've been committed members of the 5% club for some time, which means that we invest in accredited earn-and-learn programs for people either early in their careers or retraining or perhaps getting some of the training education they never got.

Last year, I'm proud to say we had 18.9% of our employees were involved in earn-and-learn programs, which is really remarkable. And it's a great investment and very well received. We promoted internally 94 colleagues last year, of whom 40% were female leaders. And our leaders -- 1/3 of our senior leadership team are female now. Of course, we invest in all the forms of diversity and continue to make this an absolute part of what we do. It's something that personally matters to me and to all of us. But in the end, the best team wins, and we think that is truly key.

Let me just say a few words about the division announcement that we just made, and then, I'll turn it over. So those of you who have been on this journey with us for a bit recall that we used to operate the business, 5 and 10 years ago, very, very decentralized, right? And in fact, there was no collaboration really across any of the different companies. We were reporting in 4 different segments. And then, in '22, late '22, we went to 3 segments, 3 business units, right: Climate Management Solutions, Water Management Solutions, Sustainable Building Solutions.

Last year, we had the opportunity to actually operate Sustainable Building Solutions and Water Management Solutions, both involved in different aspects of water and together. And Steve Currier actually led those 2 businesses. He led Water on an interim basis. And as a part, we were able to really uncover some great opportunities to further collaboration with those businesses. We think there are both efficiencies to gain, but also importantly, ways that we can leverage that collaboration to really focus on driving growth and to accelerate our investment in customer-led innovation. So that's really the rationale. So going forward, we will be reporting as the way we manage this business as a Climate business and a Water business. You can see some of the brands that are in there. But rather than hearing me talk about it, I'd like to invite Lee and Steve up, starting with Lee, to take you through the Climate division.

There you go. Lee, over to you.

So good morning. I'm excited to be here to tell you this story. But before I do, I'll introduce myself. So you've heard I'm Lee. I joined this company from a background of very growth-centered large P&Ls operating across Europe, the Middle East and Africa, where actually tailwinds were not the thing that grew you. It was about how you drove your company. So I'm really happy to be here, and I'm going to share with you why.

So Climate Solutions, we are a group of problem-solvers and solution-makers for a world that's warming and where you need to mitigate and adapt. On the right-hand side, you will see our Heating Solutions business. We start off with Adey. We filter things so the system works better, extends its life, heat and keeps you warm. We've then got Surestop. Surestop is a stopcock. It's very innovative. And if you've got Adey, it's a cross-sell. Your installer is installing the filter at the same time as stopcock.

In Nu-Heat, and I'll go into this some more later, we design and commission underfloor heating systems and more and more renewable technologies. So when you put in a heating system, you're putting alongside that things like storage batteries. We have Alpha. Alpha is a testing business. Now, this offers the opportunity such as hospitality, where we are today to make sure that the water in the building is safe and another cross-sell.

We then go into our ventilation divisions, and we have Nuaire, Domus, which are in the residential and commercial building spaces. This is where we're seeing very, very fast growth and our newly acquired Monodraught business. You've seen some of this in operation on the boards upstairs. This is hybrid technology with software. And actually, the software is a huge part of the mix, and I'll explain that further.

So where are we focused and how are we helping in mitigation and adaptation? Three stories to pull out. One is the transition to low-carbon heating. It's fair to say the U.K. is some way behind the rest of Europe in adopting, for example, lower temperature heating systems. So we're very much at the early stages of this, but actually, we've got interoperable solutions to deliver.

In a world that is warming and where people live, you actually have to help ventilate and ventilate in a different way. So I'll give you an example of that. And in a need to provide clean and healthier, how do you deliver that, particularly where there's heavy regulation, so a hospital, a school as 2 key examples.

So let's talk about our homes. First and foremost, we have a suite of products, solutions and design and commissioning services, which means only Genuit can package together a heating system, which is operated from a heat source, which we will design and commission, however, complex the building actually is with interoperable controls, you've actually seen some of them upstairs today, and you're more than happy to play with those later.

And then putting in more and more ventilation systems as our homes, because they are heavily sealed, require a lot of mechanical and hybrid ventilation. So we have a package of goods and the solutions to deliver that. And I want to introduce you to Jeremy to show you our solution and services.

[Presentation]

About 10%, 15% of our projects every year look like that, where they're highly complex buildings. But it doesn't matter if they're complex or simple, we can provide you with both the service and the products to make sure that you transition into low-carbon heating as a way of adapting to a new way of working through the future home standard.

So let's talk to you about Ventilation. So apartment buildings, simple example of how we need to mitigate. So in this example, about 1 in 5 of us live in apartment buildings, particularly prevalent in cities like this, Central London. And in an apartment that is well sealed, ventilating that room or those rooms from heat, or on the other extreme being cold, it's very difficult to do. You can't open the window because of noise. You can't open the window because of safety regulations. So as problem-solvers, we developed a product for house-builders to put into the building to make sure that you're recycling warm air and bringing in cool air. And as a result of that, the person living in the apartment is living well. This has been a multimillion-pound product for us and is still rapidly growing with projects out through 2026 and 2027 already.

In acquiring Monodraught, the power of actually creating something that at present time only we can bring to the market, which is a benefit for the end-user living with the building, but also the installer. We are able now to combine mechanical ventilation with hybrid ventilation using fresh air, control it from 1 source. And we've all been there where the controls in rooms do not control single source.

We can talk to the heat source, so the heat pump in this example, and we can monitor every single room with the use of acuity upstairs. It really is a very unique proposition and something that is going to pay a great dividend for us when it comes to growth.

And in this transition, I wanted to show you what the companies look like apart, and when bringing them together, the sum of the parts are far greater. In yellow, Monodraught were able to sell hybrid ventilation units, predominantly into classrooms. That's where they live. Mechanical ventilation was Nuaire specialty, actually a lot bigger in a school. And in mechanical ventilation, you're doing this in high work areas, so gymnasiums, kitchens to mention a few.

Now, we're able to ventilate all of the property. We can control it from one source, and that means in a funded area of growth, it creates us an opportunity, which is very, very significant on an annual basis of around about GBP 150 million. In fact, it's the deployment speed, i.e., the installations that our current challenge, not the acquired order book where we are growing quite rapidly.

So I want to introduce you to Everard, who, again, will show you what living with one of these systems looks like.

[Presentation]

So listening to Everard there, slight segue before my final slide I wanted to give to you is the international opportunity that also presents itself for Genuit. Many of the things that I've showed you today in ventilation are actually attributable to European markets, where the climate is broadly similar, but also standards. What is driving that school are also very prevalent in markets such as France, Belgium, et cetera. So as part of our future mid- to long-term pathway, it's about how we commercialize this also outside of the U.K.

So we're standing here today in the middle of a world that's pretty chaotic, but it always has been. And hopefully, what you've seen today is we have a great opportunity to grow this business and take control of growing it above the marketplace. We have a group of very uniquely positioned ventilation and heating services that we believe are at market-leading edges with future product development pathways that we can expand where you live, work and play.

So that's enough for me today. I wanted to hand you over to Steve to talk to you about our Water division.

Thanks, Lee. Good morning, everybody. I'm Steve Currier.

I've been with business 3.5 years. Prior to that, I was with Eaton Electrical. And for 15 years, prior to that, I was in the automotive industry for another 15 years. And I really want to talk you through how we're handling one of life's most precious substances, which is water.

So this slide really sort of covers the scope of our activity, and it really encompasses the path of water through the built environment. So we start with water supply with Polypipe and Terrain into the buildings. Slight issue there. We'll just attend to that. Okay. Right. We'll go again. So Polypipe and Terrain supplying water into the buildings through the point-of-use applications with Cistermiser and Salamander, 2 of our new acquisitions.

And then, we bring in rainwater with Permavoid and Sky Garden, also Manthorpe. And then finally, back to Polypipe again for drainage from the buildings, attenuation tanks and then our work to support sort of civils. So that's the way the business looks.

And we structured the businesses into 3 segments, and they're focused around route to market. So they're civils and infrastructure, residential and commercial buildings. And we've done this fairly recently, and we've done it very deliberately so that we bring our businesses closer together so that we can prompt and promote the ability to sell full solutions for common customers.

There's a reasonable amount of international presence here as well. We have facilities in France, Italy and the Netherlands, and also, as we mentioned, the Middle East. And one of the aspects of the new structure is that we are transforming some of those to be country organizations to sell the full portfolio across those various territories.

Now, in terms of the problems we're trying to address, there are really 3 key challenges. And the first on the left, which I'm sure everybody is more than familiar with, is sort of excess rainfall and flooding. If you're a King gardener, a golfer or if you have recently holidayed in Spain, you'll be sort of more than familiar with this. And it's really caused by warm air giving more intense periods of rainfall.

And I'll cover off some of the sort of solutions, how we're tackling that. But the real thing is, yes, okay, we might have a sort of a little poor sort of winter break, but the real issue here is the overwhelming of aging sewage systems, leading to the well-publicized instances of brown rivers and the associated health and environmental impacts.

Paradoxically, the second problem is not having enough water. And this is due to higher temperatures and more frequent instances of drought in the summer. And this is a growing area of concern for the customers. And there's a couple of issues here really. The first is that in some areas of high-stress water, we can't get planning permission to build the homes we need. But also the customers, as we do, see the impact of approaching legislation, reducing water consumption to 110 liters per person per day and actually less in some water distressed areas. So a key area of focus moving forward. And actually, the recent acquisition of Davidson Holdings has brought some new products and solutions in this sphere. And we see water conservation in buildings as an area that will only grow with opportunity for us.

The third challenge that we're trying to address is to continue to support construction. And a lot of our customers have got ambitious, but more importantly, committed carbon targets there, and they have to sort of achieve this combined with the ongoing problems of scarcity of labor in the construction segment and also the impacts of inflation, which have to be sort of mitigated through that.

So those are the issues we're trying to address. I'd like to really sort of talk through a couple of solutions here. So the project you see on there is a deep attenuation tank, and that's designed to intercept flood water, hold it and release it in a controlled manner after the event. The alternative being an overload of flood water and sewage in the system, which then breaches the capacity at water treatment works, and that leads to the aforementioned sewage overfills.

Now, the good news here is that we're entering a cycle of funding with AMP8, and there's GBP 104 billion committed with focus on flood mitigation and sewage segregation. Of that, the addressable market is around about GBP 100 million for Genuit and part of which actually funded the project you see on the screen. And if I can plug my colleague, Jason, there's actually some drone videos of this project being installed, which is in leads that you can look at.

There is bad news, though, is that inevitably, these projects are down a country lane or in a crowded urban environment, usually next to a very flashy listed building, you name it, there is always problems, and they always have time constraints to deliver. But actually, this is where we feel the Genuit solution can support. And we use a sort of a modular approach. It's multifaceted. We have a combination of assembly in the factory, and then, final configuration on site. And this, when you combine it with the light weight of a polymer system gives really good advantages to the contractors and the consultants on site.

And actually, the fact that we use a lot of recycled polymer here helps the utility businesses supporting their carbon aspirations. One of the other facets of the water offering from Genuit is nature-based solutions. And these can range from green roofs, including bio-solar, which you might have seen in the previous video of the school through to green walls, planters, rain gardens, et cetera. And these, together with our traditional solutions and more increasingly controls, can give us a real range of opportunities to tackle very complex-built environments.

Now, we've been present here for a while, but where we're starting to gain traction is designing these systems holistically at the start of project on a roof-to-river basis, as they say. And one of the things we've recently done to test and look at our value proposition is go back over a number of projects, and in effect, redesign them as we would now. One of the notable ones is on the slide here, which is a Stockport Interchange. We had most of the data for the project. So using that, we went and redesigned it with the full range of control solutions now available to us. And we found that, that would have saved the main contractor GBP 600,000 in the total cost of installation of the system.

In addition to that, they would have gained additional sustainability credentials and a GBP 20,000 cost reduction in the -- in water supply annually for them as a business. All this at the same time as giving Genuit increased scope of supply and revenue to the project, we think, is a real compelling value proposition and actually a genuine win-win customer Genuit situation.

I'm convinced, but don't take my word for it. Let's hear from one of our customers.

[Presentation]

We will come back to that in 6 months because unfortunately, we'll present the results in March, which isn't the greatest time to see the abundance of greenery float up. But, I guess, as my hairdresser always says, some you win, some you lose.

Okay. So changing tack slightly. So the last thing I'd like to talk through is how we're supporting construction. And the first thing just to really pick up is shortage of labor in the construction world. This is a well-trailed problem with around about 250,000 less people in the sector pre-COVID and has led to a lot of focus on modern methods of construction. But I'm sure you're aware there's been many, many missteps here and many business failures.

And when you look at those, they're generally in high fixed-cost businesses that haven't been able to cope with the fluctuations of volumes, particularly in the period of sort of fairly sustained low activity that we've had. But what we found at Genuit is that really having adjacent systems with our traditional product and channel supply next to our design and prefabrication service has allowed us to flex to meet that fluctuating demand.

And actually, having both solutions to offer the customer means we tend to offer the customer the right solution for them rather than just the one that we have to offer. And actually, in a similar manner to the Stockport Interchange, we can often find with that prefabrication in addition to supporting them in terms of labor availability. We can reduce the total cost of installation for them. So another win-win situation.

We've actually seen over the last 3 years, a doubling of our MMC and prefabrication offering. And last year, it was 20% growth as well, which is a further year. And that through a period of downturn means we think we're really well set for the long publicized and trailed, but not yet here recovery in the housing market. So we're really excited with that.

And last slide to cover is actually embedded carbon in the products themselves. We've made good progress here on a couple of points. Firstly, from a data perspective, so we've now got 70% of our revenue covered by environmental product declarations. And that allows the customer to make informed, but also accredited choices in terms of the product that they want to sort of design into their system. But the other element of progress has been on the embedded carbon itself.

And last year, over 50% of the products had recycled polymer in, which is one of the ways that we help to reduce the embedded carbon. The others are designing the product for mass out and efficiency and then responsible sourcing there. And we know this is really important for the customers because we can track the search of EPD databases. And actually, the 2 most searched product sets are piping systems and HVAC. So we think it's really important.

And actually, as was mentioned earlier, last year, we've run the combined Barratt Redrow tender. And in addition to our system capabilities and obviously sort of the value that we provided as part of that, the sustainable carbon credentials of the offer were really fundamental in winning that.

So in summary, we think we're set up to leverage sustainability and regulatory growth drivers in that water -- that world of water. Three points of how we do this really. Firstly, broad holistic solutions for the water problems of today and tomorrow. Secondly, design optimized for the lowest cost of installation to maximize customer value. And third, at all times, maintaining the lowest embedded carbon we can.

And that's water, and I'll hand back to Joe to finish off.

Great. Thanks, Steve. Hopefully, that helps give a bit of a view into this. And again, like I said, there's some great demonstration with some colleagues upstairs, so feel free to stick around after the Q&A. But let me just kind of wrap up here. So in the end, as I said, our -- look, we will continue to focus on being a well-run, high-performing and resilient business, at the same time, positioning ourselves really well for the long term. We think our sustainable solutions for growth strategy is very much aimed at that, and we're making good progress.

I hope you can see by now that we are, in fact, very well positioned to benefit from the regulatory tailwinds by serving higher growth markets. We've demonstrated the ability, and we'll continue to be able to grow organically as well as inorganically with strategic bolt-on acquisitions funded from the good cash flow that we get from this well-run business and that we are and remain well positioned to hit the midterm targets. And I'll just leave you with the investment case. This is quite the same direction investment case we've been working, and we're very confident in achieving these midterm targets.

So that's all we brought. Tim -- if Tim, Steve and Lee can come up, and we'll just take a bit of Q&A, and then, we'll all be available upstairs afterwards, and we'll go from there. So Tim, why don't you coordinate questions and farm out as you see fit there.

Okay. So just put your hand up if you would like to ask a question in the room, perhaps? Rob, you are first.

Guys, really interesting across all the different points. Yes, just a couple for me. I suppose, firstly, on full year '26, clearly, evolving situation, et cetera, but is there any indication on the H1-H2 split of margins given the quite significant step-up in H2, I think, 140 bps higher? So any H1, H2 thoughts for '26 on margin?

And then secondly, when I think Lee was running through, I guess, the Climate division. You mentioned one of the businesses called Alpha, which seems to have, I guess, testing capability. Could you just kind of set briefly, I guess, the opportunity for Genuit to do a lot more on the kind of the testing front here? Because clearly, a lot of what you do is kind of install products. Are there different economics, more recurring revenues, different opportunities to consolidate into the testing market related to water and climate?

Okay. So yes, our margins, our run rate going into 2026 is more akin to the margins we achieved in 2024, around that 16.4% achieved in H2. The market remains subdued, similar to the end of last year. So really, obviously, Rob, our margin kind of continuing at that level. And then, we'll see for the second half, whether things pick up.

In terms of comp, first half is harder this year than second half because we actually started off with some bright spots, if you remember first half last year, whereas it then weakened in the second half of the year towards the government budget in November. So we'll -- the comp will get easier in the second half, but obviously, there's risks and opportunities abound, I think, as we look forward to the year.

Do you want to tackle the testing question?

Yes. So taking that capability, I want to bring you back to the transition to low carbon homes. So in a heating system that's running at around 50 degrees with wet, essentially, the problem is that you're going to get a different form of sludge, as we call it, in the system. So this year, Nu-Heat, we'll actually launch a warranty-based system, where for the homeowner, we will test the system every year for system efficiency.

The logic of that is we can tell you preemptively before the actual heat source starts to break down of challenges to come. And that gives you an example that's tied to today's presentation, but testing is definitely something that we see both in residential and commercial buildings, we can extend into different uses.

And just to add to that, that's one of the things we love about the Alpha business is that, as Lee said, since that is something that you'll do every year in a home or a commercial setting that the ability to build a recurring revenue stream is very attractive there and a good differentiator.

Great. Thank you, Lee. Clyde?

A couple for me. Obviously, there's an awful lot of volatility around oil prices at the moment -- Clyde Lewis, Peel Hunt. Obviously, an awful lot of volatility around oil prices. So it would be useful to get an update as to maybe the group's energy cost, total fuel diesel costs within the business. And then, also attached to that is sort of what sort of coverage have you got around PVC brought forward? And how quickly would that higher oil price lead into higher cost for you? That was the first one.

And the second was really around the wet weather start for this year. Would you like to sort of help us a bit as to how wet and how much of a negative impact it's been? Because I'm...

Really, really wet.

Yes. No, I'm a golfer. So I know how wet it has been, but anything on that side would help. I mean, clearly, we'd expect to sort of see better conditions, but it would be helpful to get an idea for the first couple of months of the year.

Yes. Okay. So if we take the Middle East situation, from an energy cost perspective, we're actually pretty well covered. So we're 90% hedged for the summer and 80% hedged for the winter of this year. So from 2026 perspective, I'm not expecting energy costs to hit us hard.

From a direct revenue point of view, 3.5% of our revenues come from the Middle East, so small within the group, but still there's some revenue there. As I say, the priority at the moment is keeping people safe, activities are lower, but it's early days, and we'll see how that pans out.

And then, of course, you've got the indirect effects, which could affect things like inflation, interest rates at home and so on. It's really too early to see what's going on there. But in terms of magnitude, we buy about GBP 80 million of polymers each year, GBP 50 million of virgin, GBP 30 million of recycled. Clearly, virgin will correlate more closely to the cost of things like oil and gas, but recycled can as well depending on substitution effects and substitution demand as well.

We buy a very good discount from the market price given the scale that we have, but it will move with a short lag to that. So we'll see how we go. We do have a history of being able to pass on price in this industry. It is rational in that sense. And there may be a bit of a short lag. But if this is more structural than temporary, and it's too early to say whether it is, then obviously, we would look to work with our customers in the right way to manage the right commercial outcome.

Okay. In terms of wet weather, well, it is the U.K. So yes, I think the subdued market conditions in January and February are expected in the sense that Q4 was subdued. And it's also expected that January and February might be quite damp. It's hard to say exactly how much of what you see in the market is down to this. But there's no doubt that when it rains, site activity is lower in terms of the construction industry. So -- many of you who walked here this morning, as I did, will have enjoyed the very dry and pleasant morning this morning, so hopefully, that's the shape of things to come. There's no doubt to say there's a slight uptick in some order flow, which suggests some gearing up for the spring, and over the next couple of months, hopefully, we'll see that improve.

Okay. Christen?

Two for me. Christen Hjorth from Deutsche Bank. First, just looking at the addressable market for education, I think that was more than GBP 150 million now. Just to give us a bit of a sense of where Genuit is currently there in terms of market share and so the sense of the opportunity in terms of market share gains as well.

And then, one for Steve. Obviously, SBS margins have moved up really nicely over the last few years. How similar is the opportunity in WMS? Is it the same playbook in essence to put there? Or are there differences that we need to be aware of?

Lee, do you want to take that one?

Very large market, ventilation, lots of different systems. We hold somewhere between 10%, 15% share, and actually, our industry, there isn't anybody that holds anymore, and it gives you the runway of growth. There is a huge growth opportunity if you can simplify this. And that's why you see upstairs, the interoperable controls. As soon as somebody starts to do that, your share gain becomes more relevant because the system is easier to install and talks to each other.

Steve?

So yes, to answer that, it's a similar playbook with some nuances. And I think the first thing -- one of the things we found when looking at the businesses together is they're quite connected. There's a lot of intercompany supply and sales. And actually, sort of it's not as stark as SBS was at this level and WMS was that level when you look at it from an end-to-end sort of perspective. So it's not a stark anyway.

However, the things that are similar are some of the consolidation and structure elements that we previously did in SBS that we are now working through in WMS. Tim, mentioned some of those changes that we've made, and there are more to make there. There's then the process efficiency, the lean work, the Genuit Business System, and we are, in effect, slightly less mature in the WMS businesses than we are in the SBS businesses.

And we deliberately started the SBS businesses because they are more mature markets with less potential sort of growth drivers. The bit that's different is that in those key areas of WMS with the blue-green space, the AMP8 funding, there are some growth drivers there, and they will really help cover economies of scale and fixed cost in what is generally a more capital-intensive part of our business. So very similar, but with some nuances.

Yes. The volume point from AMP8 is really important because when we look at the civils business, we actually see very good gross profit levels, but we haven't seen the kind of constant throughput that you need in a business like this. So the operating gearing is there with that additional volume from AMP8 and particularly because these are engineered solutions. It's not just about buying cheap pipe. We do see the potential to grow our margin significantly in Water.

It's Jeremy from JPMorgan. I've got 2, please. The first one is just on the order intake, where you mentioned some positive signs there. Can you maybe elaborate on what exactly you are seeing on the ground?

And then the second one is just around M&A. What's your current thinking there? And how is the pipeline looking? Any particular areas where you're focusing at the moment?

Okay. Well, so I'll take the order point, and then, Joe talk about M&A. So yes, I think particularly in the commercial spaces that are not so linked to GDP or perhaps the housing sector, where there's perhaps more question mark at the moment, we're seeing pockets of good order intake. So Lee has talked about the schools rebuilding program. That's one area we're seeing an increasing activity around AMP8. We've got Jason Shingleton with us today, who some of you can talk to afterwards if you like to learn more about that. But really, the contractors and the water utilities are ramping up their activities there.

Things like blue-green rooms that you've seen some examples of today, that's on a different growth trajectory because of the need for greater urban regreening. So even though perhaps there's some softness in multistory construction with holdups with the building safety regulator, where people are getting planning permission, they're having to do that urban regreening. So there are these exciting pockets of commercial areas where we are seeing the order flow there. We do need that site activity to pick up, as I say, so that weather improvement will help that, but certainly some pockets of opportunity that we see.

Joe, do you want to talk about M&A?

Yes. And on the M&A front, I mean, really 2 sides. One is sort of the process, and the other is the targeting, if you will. As you can see this year, I mean, obviously, with last year's acquisitions, I mean, we're quite pleased with those. And they are the types of companies that we're looking for, right? Ones that expand our portfolio, that allow us to bring more solution and growth capability in the group that may bring access or strengthen access in a particular market is with the education sector.

The one thing that they didn't do is actually increase our international exposure in the short term, which has been a key part of our M&A strategy. And we continue to cultivate that. We've got a really good corporate team that Martin leads. He'll be here afterwards, you can ask him as well. We continue to increase our targeting. And so we've expanded our pipeline intake, if you will, the universe of companies that were running the rule over.

So you've heard us say in the past, it's sort of an 80-plus funnel. We're putting -- so it will be a 3-digit funnel clearly of things going in. And in our experience, that's what you need to do. You have to actually be cultivating quite a bit in order to find the right targets and always have a pipeline. So you will see us continue to, obviously, look at U.K. opportunities, but our focus increasingly on Europe, on Central and Northern Europe and to feed both water and climate. So he's working very closely with both teams there.

So look, I can't obviously tell you much about exactly what's going to come down the pipeline or the timing. That is a hard thing to predict, as are a lot of things lately. But we are very active in the space. The only thing I would say is that we've demonstrated a disciplined process to integration with both of these acquisitions last year. We have a playbook that we run, and we've been refining that. And I'm really pleased to say that the Water and Climate teams did a brilliant job of integrating these 2 acquisitions, and they are on or ahead of our initial expectations. So that's been really pleasing.

Charlie Campbell at Stifel. Maybe a couple of kind of medium-term questions really, largely around ventilation, I think. Just wondering when the future home standard might start to bring through some extra volumes, if you had any more thoughts on timing around that? And also kind of a similar idea really around Awaab's law. Obviously, public sector now, but there is a thought that might be expanded into the private rented sector. Any thoughts and developments around that?

Joe, do you want to start us off, and then, we'll come to -- Awaab's law.

Future home standard. As we've been talking about this for quite a while, it is -- obviously, the legislation has been delayed. I think there have been other priorities. We're very heartened by the Warm Homes Plan because it does show the government hasn't abandoned the green agenda, and this is a key piece.

And what I would say interestingly is what we've seen actually on both businesses is homeowner -- the house builders are continuing to put in place the work they need to do to be ready for it. And in many cases, there are actually some aspects building ahead. So we've sold in the thousands of sites with underfloor heating to some of the larger and mid-sized developers. Some of those are being installed as we speak.

I mentioned passive house earlier, it's quite interesting. You see it more prevalent in Scotland, but also some of the developments that are either premium or with more proactive sort of local areas where that's quite attractive. And that drives you in the same direction. So look, we're doing the work. We are ready to scale up, but some of the activity is happening in advance of that.

Do you want to say a few things about Awaab's law?

Yes. And I want to jump off from where Joe just left you. Many of the people that I meet are trying to predict a regulatory environment that's not in place, but they already have inflation. So actually adopting these ways of working is more prevalent. People are moving to the future home standard because the no man's land in the middle is very expensive, very expensive. So we're seeing adoption despite -- we're seeing adoption because people are trying to predict.

Now, adoption has good signs and bad signs. So if you take Awaab's law, it's actually the loss of somebody's life. At the end of the day, local authorities grabbed that and through 2024 and 2025, council-driven homes started to adopt more ventilation. But the challenge was the ventilation systems that were being adopted, the variability in their performance probably wouldn't stop the mold spores that killed that young child. So it's up to suppliers like us in a bit of no man's land to actually take people to make better decisions about what type of ventilation units there are, where sometimes there is a law in place, but how you execute it is a little bit gray. And that's what we're busy doing, creating the ventilation units that would stop the mold spores in the first place and then educate the authorities and the installers and if they did go to private landlords on what good looks like, which is currently a gap.

Yes. It's an interesting point. It's something I've said before, some of you on the Future Homes Standard, too. A lot of these cycles are actually the beginning of innovation cycle, not the end. So what we're installing in houses 5 years from now will be better than what we're installing next year. And I think that's really the point we can continue to innovate and improve and bring better solutions for the developers, and importantly, the homeowners.

Okay. What other questions do we have?

Anything online?

Any online questions? Nothing from the webcast.

Okay.

Okay. Last chance then in the room for anyone who's got a question. Otherwise, we will finish up.

Yes. So look, thank you all for -- go on.

[ Max ] from [ Oghma ] Asset Management. If you could just help us. I know the outlook is quite good for water. So what sort of drop-through percentages could we expect if we do see, let's say, 5% volume improvement this year that is coming in?

Yes. So as a group, generally, we talk about a 30% to 35% contribution drop through from incremental business. That does vary, then you can adjust that up or down, probably based on the chart I showed earlier on, right, with the different margin profiles, although we won't talk specific margins for each of our businesses. So it's a really strong operating gearing that we have, and the group maintains at least 25% capacity to manufacture more if we see a recovery in the market. And so, as volumes increase, we can see a clear path towards that over 20% margin target.

Okay, which actually is a great kind of wrap up. If I go back to the investment case, we're committed to driving above-market organic growth, augmenting that with fantastic acquisitions that expand our ability to bring solutions and to serve additional markets. You know that sustainability is at the heart of everything we do. We serve a large market here in the U.K. and one that stands to be significantly expanded as we expand our global presence.

We remain committed to hitting our 20% plus operating margin. Simple math tells you both of our divisions need that target as well, and we're confident both of them have the ability to get there. And making sure that we deliver really good returns on invested capital and that we redeploy that cash flow, the excellent cash conversion that we have, and we'll continue to strive for into both good organic growth investments and the type of acquisitions that you can go hear from upstairs.

On that, thank you all very much for coming. I appreciate this was certainly more than our normal presentation, but I hope it was really useful. And we've got 4 different demonstrations from some of our own people here just to tell you a bit about it. So any of you who can stay, feel free to have coffee and Danish on us, and we'll see you upstairs. And we'll be around for questions. So thank you very, very much.