Good morning. Everyone, welcome to the Grafton Group plc half year results.

Quick agenda, I will start with some operational highlights before our CFO, David Llewelyn Arnold, will go through the financial details and afterwards you will have me again talking a little bit about strategy and outlook for the remainder of the year. The performance in the first half was I will call it, very solid.

We had revenue growth of 6.7%, adjusted operating profit increase of 8.2% and a growth of our adjusted earnings per share of 10.8%. As you will have noted this morning, we increased the interim dividend by 2.3% and reconfirm our full year operating profit guidance between NOK 190 million and NOK 200 million.

In terms of development activities, in the first half of the year, we completed 2 acquisitions in Europe's faster growing markets, in Ireland, where we acquired Signum and in Iberia, in Spain, where we acquired Merkeluth. And both of those acquisitions have started well in our ownership.

and are trading strongly year to date. We also invested into new branches on a group wide basis.

Especially in Iberia, and also in Ireland. And we maintain a strong balance sheet to have sufficient firepower to deploy capital as the opportunities arise.

I will now hand over to David to go through the financials.

Thank you, Eric, and good morning, everyone. As Eric has already covered some of the key financial KPIs, from our first half performance, I will now dive straight into the income statement in a bit more detail.

Revenue of £1.34 billion was 6.7% higher than last year. Strong execution across the group enabled us to deliver a resilient adjusted operating margin before property profits of 7.4%, up 10 basis points year on year despite ongoing competitive pressures in several of our markets.

This reflects a continued focus on margin management across the group and proactively addressing our cost base to mitigate the ongoing inflationary environment on operating costs. We have seen no material disruption from developments in The Middle East as we continue to manage supply chain risks proactively maintaining strong product availability, while effective supplier engagement and pricing actions have helped protect margins.

it is pleasing to report that we saw strong profit growth in the first half with the group's adjusted operating profit of £98.5 million up 8.2% compared to prior year. Net finance costs were £5.5 million, £1.4 million higher than last year, largely due to reduced interest income on our cash deposits and lower cash balances following the acquisitions and share buybacks that was partly offset by favorable foreign exchange movements.

In the full year, we currently expect a finance charge of £15 million to £16 million The effective tax rate was 19.8% 30 basis points higher than last year and is our assumed rate for the full year. This slightly higher rate reflects the increasing contribution from Spain where the corporate tax rate is 25%.

We are pleased to report an increase in adjusted earnings per share of 10.8% to 39.4p, which is consistent with our target set out in our recent Capital Markets event and reflects the impact of operational improvements, organic growth and capital deployment into acquisitions and share buybacks. Looking at the first half revenue increase to £1.3 billion we delivered an increase of GBP 8 million in organic revenue and cover that in more detail on the next slide.

Acquisitions were the main driver of sales growth in the first half. Contributing £56 million of incremental revenue.

This reflected the inclusion of the seasonally important May and June trading period at Merkeluth, a full second quarter of trading from Signum and the incremental contribution from HSS Hire Ireland, which was acquired at the end of March 2025. The divestment of the small MFP plastic pipe business in the Republic of Ireland at the end of May 2025 reduced revenue by £3 million And finally, the strengthening of the euro against sterling accounted for an exchange gain of £23 million in the first half.

This slide analyzes the net increase of £8 million in organic revenue. In general, I would note that we saw an uptick in product pricing inflation in the second quarter as pricing actions implemented in response to the conflict in The Middle East flowed through to the P&L.

Our diversified portfolio supported a resilient first half as strong performances in the Island of Ireland and Iberia more than offset the decline in Great Britain. The Island of Ireland segment delivered organic revenue growth of £19 million largely attributable to a strong performance in Chadwick's.

Against the backdrop of persistently challenging market conditions throughout the first half, organic revenue in Great Britain declined by £19 million year on year. Revenue in Northern Europe increased by £2 million on a like for like basis, driven largely by an improved performance in Finland.

Organic growth of £6 million in Iberia was driven by Salvador Escoda only since Merkeluth was acquired in the first half. The Salvador Escoda performance reflected it continuing positive growth trajectory since we first entered the Spanish market.

And finally, branch openings and closures had a small negative impact on revenue, and that will reverse in the full year. Turning to the movement in adjusted operating profit, I will look at the performance of the like-for-like in a moment.

The major component of the increase in group operating profit to £98.5 million was the £10.4 million of profit attributable to acquisitions led by Merkeluth with £6.5 million Looking at the £4 million reduction in adjusted operating profit in our like-for-like business, you can see that all operating segments except Great Britain reported an increase in adjusted operating profit Disappointingly, the profit growth we achieved in Great Britain during 2025 was not sustained into the first half of 2026, with UK private RMI and newbuild markets both weakening further and all our business units exposed to The UK reporting lower profits year on year. Moving on to look at each segment now in a little bit more detail.

Once again, we saw a good performance from our Island of Ireland segment in the first half. Revenue of £579.4 million increased by 7.5% on a constant currency basis.

Like for like revenue grew by 3.4% in the first half, led by strong trading in Chadwick's and modest growth in Woody's against tough comparatives. After a relatively slow start to the year, trading strengthened during the second quarter as construction activity increased and the weather improved markedly.

Our businesses on the island of Ireland delivered strong profit growth in the first half. With adjusted operating profit of £60.6 million up 7.3% on a constant currency basis.

This performance was underpinned by a strong performance in underlying trading in Chadwick's in addition to the incremental contributions from the HSS Hire Ireland and Signum acquisitions. Trading in MacBlair in Northern Ireland followed a similar pattern to our GB segment with the overall environment remaining challenging.

The integration of Signum is well on track and we have been pleased with the business' performance since its acquisition on March 31. First half sales increased by 18.3% on a pro forma basis compared with the prior year.

Driven by additional production capacity that was brought on stream shortly before the acquisition completed. Signum enhances our exposure to the growing Irish newbuild housing market and Eric will speak in a little bit more detail about the strategic rationale for the acquisition in a little later.

We continue to strengthen our market leading position on the island of Ireland. This included the opening of a new Woody store in Ennis, County Clare in June and a new Chadwick Specialist Hub in Ravenhill, Belfast in July.

Bringing together the paneling center and Sitetech in a single location. The hub demonstrates the Grafton Way in practice.

Showcasing how our businesses work together across the island of Ireland to improve our proposition for customers. Moving next to Great Britain, it is fair to say that we were disappointed with the first half result after positive progress last year.

Market conditions remain very challenging with new build housing activity and discretionary home improvement projects constrained by affordability pressures and weak consumer and business confidence levels. Revenue in Great Britain was £367.2 million in the first half, down 5.1% year on year with average daily like-for-like revenue declining by the same amount.

All our GB businesses reported declines in like for like revenue during the period. Despite lower market volumes and continued competitive pressure, we were pleased to deliver a slight improvement in gross margin in the first half.

This reflects the strong execution of our teams and disciplined pricing across our business. Businesses.

Notwithstanding inflationary pressure on costs, especially with respect to labor and property, overheads were tightly controlled with the increasing like-for-like overheads contained to approximately 1%, well below general inflation levels. Nevertheless, despite tight cost control, adjusted operating profit of £17.5 million declined by almost 30% as lower volumes weighed on operating leverage.

In Northern Europe, market conditions remain subdued in The Netherlands. Where the expected recovery has been slower to materialize resulting in slightly lower volumes compared to prior year.

In contrast, Finland showed more encouraging signs of early recovery, supported by improving consumer spending exports and business investment. Revenue of £244.2 million increased by 0.7% on a constant currency basis.

Average daily like-for-like sales grew by 0.8% in the first half driven primarily by growth in Finland, where an improvement in trading conditions and targeted management actions supported trading. Adjusted operating profit increased to £16.3 million in the first half with the adjusted operating profit margin unchanged at 6.7%.

Higher profitability in Finland more than offset a modest reduction in profits The Netherlands. We continue to make good progress in The Netherlands in the execution of their multiyear improvement program.

A key milestone was achieved in the period with our end to end purchasing and finance processes now successfully operating on their new ERP platform. We continue to be very encouraged by the performances of our business in Iberia and the broader opportunities in this market.

Revenue of £145.1 million increased by 35.5% on a constant currency basis. Average daily like-for-like sales grew by 6.6% in Salvador Escoda, supported by strong market demand and record first half temperatures in Spain with robust commercial execution across its air conditioning refrigeration and ventilation product categories.

A key highlight during the period was the completion of our second acquisition in Iberia, Merkeluth, at the end of April. Like Salvador Escoda, it is primarily serving the professional HVAC installer market.

And represents another important step in strengthening our position in the region. We have been pleased with the integration process to date and very encouraged by its early trading performance with average daily like-for-like sales up 0.7% on a pro forma basis across May and June and Eric will discuss Merkeluth in more detail shortly.

Our Iberia segment delivered an adjusted operating profit of £14.1 million representing an adjusted operating profit margin of 9.7%. The strong year on year increase on both profits and margin was largely attributable to Merkeluth, which joined the group just before the start of 2 of its most important seasonal trading months.

Grafton continues to support local management teams in driving organic growth, Salvador Escoda opened 5 branches in the first half, and Merkeluth opened a further branch following completion of its acquisition. Having successfully supported Salvador Escoda's accelerated expansion plans following integration, we expect to provide similar support to Merkeluth.

We continue to assess further growth opportunities in the attractive Iberian market with a strong pipeline of both organic and inorganic development. Now this slide analyzes our cash flow in the first half.

And as you can see, the group generated £70.7 million in free cash flow, and that represents a 72% conversion adjusted operating profit into cash building upon the group's strong cash flow generation credentials. Working capital management remains a key focus for the group.

And we invested £22 million in net working capital during the first half reflecting product price inflation and inventory actions taken in response to developments in The Middle East. We have always said that we believe it is essential to continue to reinvest into our businesses to maintain that competitive edge even during times of market weakness.

And we invested a net £23 million into replacement and development CapEx in the first half. Where do we use that free cash flow and that strength of our balance sheet?

Well, the major element went into acquisitions. But we also returned a net £75.5 million to shareholders through dividends and buybacks.

Will have seen from today's results announcement that we propose to increase interim dividend by 2% to 11p per share and consistent with the targets we set out at our Capital Markets event, it remains our intention to restore dividend cover more firmly within the 2 to 3 times dividend cover range as we move forwards. Share buybacks of £25.6 million were executed in the first half out of a total figure announced in the current year of £50 million Grafton's cash generative nature, together with its strong balance sheet, continues to support both shareholder returns and provides significant firepower for the group to capitalize on organic and inorganic development opportunities.

At the end of June, our net debt was £315 million, representing lease adjusted net debt to EBITDA of just under 1x. And turning to the balance sheet, a key point to note is that the acquisitions accounted for £34 million of the £53 million increase in net working capital since the end of 2025.

Adjusted return on capital employed was 10.7% in the first half. That was down 20 basis points on last year, and that is very much a function of our capital deployment into acquisitions.

This level of return on capital employed is still around 2 percentage points higher than our estimated weighted average cost of capital, Capital turn was constant at 1.4x. Finally, just to note before I hand back to Eric, have included some technical guidance for the full year, which you might find in the appendices.

Eric.

Thank you, David. So a few words about strategy and outlook.

I will share a few slides which I went through in detail at our very recent Capital Markets event. So I will not dwell on them.

But the strategy remains unchanged. We provide our trade customers in Europe with construction related products and solutions.

that is what we do. We drive growth through long term organic growth in markets where they are underlying structural growth drivers and supplement that via acquisitions and execute all of that in our federated operating model.

We combine the best of 2 worlds, which means good controls, processes, best practice and technology through the group whilst having local accountability in execution and customer proximity. And all of that is what we call the Grafton Way.

To talk about the long term growth drivers, key is how we select markets, again, a slide from the Capital Markets event. We select regions and countries which have underlying structural growth drivers.

We are well aware this is a cyclical industry. But in the long run, these are like markets where the growth drivers are there.

Then in each market, we look at which verticals we believe we can deliver the returns, the profitability, strive consolidation and growth and enhance the businesses through our shared knowledge across the group, exactly what we do in Spain. And the outcome of that is that in every single market where we operate in, we have strong management teams running differentiated models with trusted local brands, have local scale, and the necessary customer centricity, which allows us to deliver industry average above industry average returns, ROCE and cash generation.

Throughout the cycle. Our federated operating model again, just a little illustration, The outcome is really the most important thing is on the bottom of the slide.

Agile customer focus businesses, empowered and engaged colleagues, delivering their returns we expect, And from a structural point of view as a group, we have the structures in place to make sure that best practices are leveraged IT solutions are leveraged, procurement benefits are taken where it makes sense and the capital allocation is stringent controlled by the group. So that is a model which has worked very well for us over time.

We continue to execute. David mentioned briefly Merkeluth.

Merkeluth is a Spanish company leader in HVAC, predominantly air conditioning, very complementary to Salvador Escoda. it is a different model.

Salvador Escoda offers 40 thousand-plus SKUs AC, ventilation, refrigeration, a 1-stop-shop for the installer, with branches and the network of branches. Merkeluth has their branches are like small distribution centers.

They deliver to the installers. They have a narrow range, about 8 thousand SKUs.

Very much focused on the own brand, which is 75% of the sales are own branded products, hence the very strong margin which can be achieved. There is a rapid expansion underway.

We have now 20 locations in Spain, 9 locations were opened in the last 18 months, whilst we were in contact with them and talked about acquiring the business. Integration progressing really well.

The local management team remains in place, so the 2 former owners continue to run the business with all the appropriate incentive structures you would expect so that our incentives are aligned to successfully continue to grow the business and have the next phase of accelerated growth in a strong market. Our other acquisition was Signum, in the Republic of Ireland.

A leading supplier of made to order off-site timber frame, solutions. that is a product extension for Chadwicks.

it is a business where our first MMC business, so modern methods of construction. This is a growing element, especially in scheme housing, low rise scheme housing.

Where in 66% of new scheme housing commencements had timber frames, We have synergies with Chadwick's in 2 ways: 1, are the largest buyer with the Chadwicks Group of materials like insulation and so on, which and timber, which is needed to do those timber frames. So there is a product, a procurement synergy but also in addition to the customers which Signum already has, there is now access to the customers which Chadwicks has to provide the timber frame solutions.

Again, integration progressed very well and trading is in line with where we expected it. to be.

At the Capital Markets event, we were clear about our ambition of CHF 850 million-plus free cash flow cumulatively until the end of 2030. An EPS CAGR greater than 10% and in normalized markets a ROCE, which is 13% or more by 2030.

So we are tracking well to achieve that. We had a free cash flow in the first half as David mentioned, of just shy of EUR 71 million.

And adjusted EPS growth just shy of 11%. And ROCE of 10.7% and that with 2 markets which are not at all pumping on all cylinders, namely Northern Europe and in particular, GB.

Which nicely brings me to the current trading and the average daily like-for-like sales, as you can see in the first half, but also in the most recent weeks up until August 23, the island of Ireland performing well and strong, and the same can be said for Iberia, our 2 strong growing markets Northern Europe with a little bit of growth, but not fantastic and still a challenge in GB which is in my eyes, significant upside potential once we can have the positive effect of the operating leverage that we have in our GB businesses. In terms of H2 outlook, we have a positive Republic of Ireland construction outlook for the second half, so we expect to continue to perform strongly in the Republic of Ireland.

In terms of Northern Ireland with our MacBlair business, we expect no significant uplift in the second half as from a macro point of view, this is more aligned to our GB businesses. In Great Britain, we expect the second half market conditions to remain unchanged compared to the first half.

So we expect it to continue to be challenging. And of course, the autumn budget will be key in shaping consumer confidence going forward.

So we will see what the outcome will be. In terms of Northern Europe, the Dutch market conditions are expected to be similar to the first half.

And in Finland, we expect that the gradual recovery, which has started will continue in the second half of the year. In Spain, we expect continued strong growth as Spain remains 1 of the fastest growing large economies in Europe.

In summary, resilient performance in the first half The acquisitions are performing well, are in line with our expectation. Integration is going well.

So that is always important that the teams gel with the teams we already have. So that is all going well.

We continue to execute our strategy drive long term organic growth supplemented with value enhancing acquisitions. And we reaffirm full year guidance for the operating profit for the full year and remain on track to deliver our 2030 targets.

Any questions? So just on the questions front, we have some microphones that will come around.

If for the benefit of the tape, you could state your name and your rank and serial number, that would be great. I certainly have a selective memory.

So if you ask me too many questions at once, I will select to answer them. So if you could do them 1 at a time and I will give you the answer, would be even better.

So we will start with Will. You have the mic.

Will Jones, Rothschild & Co, Redburn. A couple, please.

The first on the top line as you have gone from, say, Q1 through to the early part of Q3, and maybe within that, just how commodities are faring relative to normal finished products?

Yes. So actually, the year started an inflationary perspective in a very benign way.

If I was to look across the group, Q1 inflation was very modest indeed, pretty flat actually. And then we started to see it pick up as we got towards the end of the second quarter.

I would say across the businesses the more material impacts have been around the heavy building products in GB and in Ireland. If you look at the Spanish businesses, indeed, if you were to look at Woodies, a lot of the products which they are buying in, they would have bought in some way in advance.

So they have not really been as impacted by product price inflation at this point. that is more likely to be a feature as we move into 2027 for those businesses in particular.

But if you look at the likes of Chadwick and the GB distribution business, I think what we saw was inflation in second quarter. We were more in the 3% to 4% camp.

And as we exit I would say we were more around that 4%. And how the huge amount of volatility as we know in markets more generally What is the outlook for the second half?

I think probably for the heavy on the heavy building material side, probably is probably closer to 4%, I would say, than 3%. I think that is where the bigger pressure that we see comes through.

For those other businesses, I think it is about next year and next year, we are probably likely to see a higher rate of inflation for those businesses than we saw this year where it is been running at sort of that 1% to 2% level.

Whether there is anything to note in timber and steel where it is relevant?

I would not say there is anything particular to call out there. I mean, they have they have been relatively steel has been relatively volatile.

And of course, we have to concern ourselves with things like CBAM as well these days and the impact of that.

Second was just maybe unpicking some of the moving parts around gross margin. Firstly, whether there is been any kind of 1 off assistance from that sequential price inflation through recent months?

And then maybe just exploring where you are seeing the competitive tension and any of those self-help levers that I think, Finland, you called out as 1, for example. But anything to explore on gross margin?

Well, if I sort of pick up the gross margin and then perhaps Eric picks up the sort of competitive elements, around the market and self help I mean, on gross margin, would say no, there has not been no sort of specific 1 off elements of that. it is just a function of an awful lot of work that we have been doing at the branch level.

In terms of pricing, terms of being quick to pass through any of the extra price increases that we have got. I mean a lot of work around selective promotional activity.

And I think continuing that theme that we had and talked about last year really, which in GB in a GB context, which is we saw no benefit in being very aggressive on price because we just did not see that the market would give the volume uplift to compensate for that. So yes, I think we continue to be quite tactical.

We will be very responsive. GB had a good performance on gross margin as we talked about in the first half.

Overall for the group, we were pleased with where the gross margin landed.

I think in terms of competitive environment in each market is as you would expect, given the circumstances of the market. Toughest market, I would say, at the moment is GB where volumes are really low.

And with low volumes you will have the same amount of players fighting for lower volumes, which normally gives extra competitive pressure. But as David said, we are not really driving the businesses per se on gaining market share and achieving less gross profit.

Than maintaining market share and achieving more gross profit. So we work closely with the businesses in each market, certainly have no irrational competitive behavior in any of the markets.

Pass to Shane.

Shane Carberry, Goodbody. The first 1, just a follow-up maybe on Signum and given how constructive the new build background is in Ireland, probably right out to 2030, trying to get an idea of where you think that business could go over the medium term and when we think about it scaling from here, is this additional manufacturing facilities?

I know it is just been ramped up from a manufacturing perspective. Or is it plugging into the Chadwick's model?

Just how we should think about the growth from here over the medium term?

Well, in the medium term, I would say we have sufficient capacity in the existing setup after the capacity extension to significantly grow the business. But of course, if the business will grow successfully and at some stage we need to extend capacity, well, that is that is what we will do, right?

So like in any of the businesses, but in the in the medium term, we certainly have no capacity constraint. To significantly grow the business over time.

And then the second 1, I guess, was just around the 2030 targets and the EPS targets. I mean, already, you are coming in slightly ahead of that kind of circa 11% relative to the 10% CAGR.

What does that do for your confidence level when you think about the fact that some of the markets, as you mentioned, are quite subdued within that mix? It might have been easy to think some of that CAGR would have been back end weighted maybe.

Look, the way how I look, I joined this industry in 2022, and I did not expect that at that time, there were lots of our earnings coming out of GB. So when I joined, I did not foresee that GB would kind of do what it will do, and I always teased David who has spent a lifetime in the industry telling me, second half next year, the recovery will start, right?

It has not yet happened. So my point is, you know, you do not really know 5 years out.

What is happening. We certainly had a good start, and if all the markets in a perfect world, so let's say Ireland continues until 2030 to be strong, so does Iberia.

We achieved the ambition to get €1 billion in Iberia the 7% to 10% operating margin. and Northern Europe plus GB recover, happy day.

I feel very confident But what I do not know is do we have some other market which has a slowdown in 2028, 2029, right? So I think you can only deal with it as you as you as you go along.

Overall, as we explained in the Capital Markets Day. I think we have the levers necessary in our hands to achieve those targets.

So I am pretty confident we will get there, but I am not overconfident because you know, I do not have a magic wand to read the future, so you just have to be cautious and react to what happens. Harry.

Flor, I think, has just got the mic. Thank you.

A couple from me. Flora O'Donoghue from Davy.

First 1, my might ask is in relation to Salvador Escoda. Just the network expansion.

You just might give us a bit more color on the 5 new branches, where they are. Is it geographic gaps, just broad economics around how it works in terms of opening costs, the kind of pathway to maturity and those kind of things, if that is okay?

Yeah, sure. You know, it is feeling openings, right?

So where we have still white gaps, where we think we can will be able to open this. it is across Spain where we opened and also on the Balearic Islands.

We have a plan to open 7 this year. 5 were done in the first half.

2 more to come in line with our business plan. Opening a Salvador Escoda branch is not expensive.

You know, they are not massive branches. it is not like a alcohol where you put quite a lot of capital down, so it is a relatively modest investment, and we would normally expect the business to certainly contribute after 12 months.

To the bottom line. So it is sometimes earlier, right?

So it is a relatively fast breakeven And you have relatively short lease commitments as well. You take a 5-year lease costs are relatively low.

And so if it would not work, you can exit relatively painless. And if it does not work and if it does work, it is normally moves into an extension of leases is pretty simple or it moves into Evergreen contracts.

it is slightly different to the Merkeluth model. A new Merkeluth branch tends to be a slightly higher investment because it tends to act as a distribution hub.

So you need a sort of slightly bigger warehouse than you would with a Salvador branch. Second 1 then, just my turn to GB.

Really feels like you have done everything you can on operating costs and trying to keep the business as tight and as lean as possible. Is there any thought around maybe as leases come up on the likes of Selco that you may look at kind of consolidating the estate a bit, or will you just kind of just hang tough till the till the market turns?

it is a constant process. Where we look at each branch, does the branch contribute Does it contribute to overhead?

If it is not otherwise, know, in the best shape. So we look at these very actively.

And if it makes economic sense, to consolidate, we will consolidate. If it makes economic sense to continue to trade, we will continue to trade.

I think we 1 in the last 18 months, We went from 75 to 74. And we will keep monitoring it.

Now in the long run, we still believe that there is potential for up to 90 Selcos in GB. We believe it is very good model, but it is a model with a lot of operating leverage.

And at that moment in the cycle, operating leverage is not great. When the cycle turns, operating leverage is great.

that is how it works. Right?

But we will if it makes economic sense to exit some sites, we will. But you have to look at it on a side by side basis.

How does it contribute now? Do we think how much more revenue do you actually need for the site to be a really good contributor again, so you have to look at it in the at the overall picture of each site.

And just to add to that, I mean, I think Frank Elkins covered some of this at the Capital Markets event. We have got a new centralized distribution center that will be coming on stream next year.

So that is an important investment. Now inevitably, there will be an element of some double running costs for a period.

But once that is operating on its own, that is a big efficiency gain for Selco as well. It gives them more capacity for doing some own brand sourcing and that sort of thing.

So that is quite an exciting efficiency improvement that by the time we get to sort of 2028, 2029 that will be in full stream.

As you can see, we are committed to GB in the long term, and I can only stress that we invest throughout the cycle. It would be easy to say, no, we do not put a new DC down for Selco But actually, it is it is the right thing, and GB will return it is not a question if, it is a question when.

I think it is second half of next year. as we keep telling you.

Christen Hjorth from Deutsche Bank. Just to start with the first 1, probably for David.

The Merkeluth margin looked very good. In the first half.

You did point out there was a couple of good months for them, but just to get a sense of that versus normalized, it is a big pickup versus what they generated last year, for example. Yes.

Look, I think the result in the first half, if you were to just look at the Merkeluth's contribution to the group, the operating margin was supernormal because it had those 2 months in it. Ordinarily, we would expect their margin to be sort of mid teens.

It was stronger than that, as I say, in the first half. So looking sort of further forward, if you just take the Salvador and take the Merkeluth business, we would expect and it sort of normalized to be that sort of 9% to 10% When we think about our broader ambitions for Iberia, again, which we talked about the capital markets event.

We want to get to €1 billion of revenue. that is our target.

I mean, the sort of zone, if you like, for the operating margin that we see for a mature business in different business streams would probably be more in that 7% to 10% margin. And the second 1, obviously, is sticking with Spain.

Clearly, bit of a benefit, I imagine, from the heat wave. That we have had across Europe.

Just your sense whether that drives brought forward demand or actually triggers a structural change in the demand for air conditioning and therefore, you can see good sales even as the weather gets cooler because people realize they need to have air conditioning in the summer months.

Look, you already have a strong AC penetration in countries like Spain. So many of the houses have already AC, but I do think that the penetration of AC will continue to increase.

And of course, if you know, summer months are particularly hot, know, the AC systems have to work harder It might shorten their lifespan, so therefore, you will sell more AC units over time. And I think all those fundamentals, if you want, are reasons why we invested into that particular product segment in Iberia.

I believe there is, among other segments, still a lot of stuff to do and to consolidate that particular market. So you know, I expect the heat to be an ongoing feature.

And as we have seen in London this summer, it was pretty hot here, and I am sure many of you who do not have air conditioning in the house thought about maybe next year I should buy some air conditioning. Right?

Right. Thank you.

Alastair Stewart from Progressive Equity, Research. A couple of questions The first 1 on The UK and going onto second halves again.

The it is probably a bit unfair to get granularity on 8 weeks of latest trading, but it is down 5.6% versus 4.9%. For the second quarter and 5.2% for Q1.

what is the sort direction of travel in that latest 5.6%? The get the sense it is getting better, worse, or no change?

And you mentioned the autumn budget, but I get the sense this time around, there is far less speculation than in the 2 or 3 months before the last budget, which really did slow down the market. So maybe a bit of color on what your customers are actually saying.

So that is the first question.

So just I mean, what are we seeing? Look, I think if I can describe it, I think we are bumbling along a bit.

I think week to week we will have I would not say we have a good week, we just do not have a really bad week. I think the feature that we saw in May and June and July though in particular was newbuild.

We saw that in CPI Euromix. We saw the volume that was being drawn off on sites was down quite significantly.

So I think that as we went through the first half, that was the thing that really emerged. We started off with newbuild was flat and then it really came off.

So now look, I would not say it is getting worse. I just think it is it is bumbling along where it is.

Now you are you are right. In terms of that speculation that we had, I mean, last year, crikey, it was horrendously attritional in terms of all these all the kite flying that was out But we are not seeing that to the same extent yet.

Let's hope that we do not see it. But I think ramifications for the sort of Q4 and into Q1 next year is really what happens in that budget.

Do we see another tax raising exercise? And if we do, then I do not think that will be particularly good for confidence more generally.

But that was the context in which we made that comment.

And second question, probably quicker. Timber frame, 66% penetration in Ireland.

Just out of interest, where's that come from? 5 years ago for you?

how much has timber frame rallied in Ireland?

So I have not a clue. Yeah.

No.

I mean, we that has that is been quite strong growth over the last decade, but still sits beneath the level of timber frame in Scotland or in Scandinavia where it would be probably close to 90% of timber frame. So we still see further opportunity Ireland for that to grow from a penetration perspective.

Harry, Charlie.

Yeah. I am Charlie Campbell at Stifel.

So a couple of questions. The first 1, it is really around the drop through and I suppose if you look at the results and you put GB to 1 side, and you do the exercise of the drop through for the other countries, it is it is maybe not as much as we might have thought.

So just wonder what the offset is there because, you know, you have talked about gross margin obviously kind of picking up in all those areas and discipline on overhead. So I guess there is some investment going in the other side just to understand what that is really.

Yeah. So you probably have to look at it.

Geographically, really. In terms of that drop through.

We look at island of island, the thing to bear in mind is there is also an element around Macblair in there, which has its exposure to The UK. If we look at the businesses in the Republic of Ireland, we were pleased with the level of drop through that we saw.

The common theme across all the geographies that is impacting has impacted around drop through is really around labor inflation and property costs. If we look at our overhead base, 75% of our overhead base is drawn from people and property.

Property, I would say, is still suffering. That tail of the inflationary impact that we have seen that is coming through in rent.

So that is sort of still coming through. People is very heavily influenced across many of our businesses either by, if I take The Netherlands, you know, collective labor agreement.

Collective labor agreement for 2026 is up a little under 4%. If I look at minimum wage levels in Ireland, or in GB.

You know, with that is where the pressure is coming. So that is the thing that we are having to work really hard from an operational efficiency to try to offset If we look at Iberia, then what we have been doing in Iberia is we have been investing in the business.

If I look at my like overheads in Iberia, I mean, that is that is up somewhere around about 5%, but some of that is really because we have been investing in that business for the future. We have been putting those new branches in which is why that drop through does not look as strong as ordinarily we would expect.

Through given that level of revenue. But yes, we are all over that 1.

And second question, risk of being too optimistic. The drop through in The UK, if that is when this recovery comes through.

Mean, we ought to be thinking at least the gross margin because 1 would have thought there is really not much overhead to go in for quite some time. Is that the right way to think about that?

I mean, I would love to aspire to a drop through that came in at the gross margin. I think that is a bit bullish.

Because I think inevitably you know, there is there is other stuff that comes along. I mean, typically in a recovery, and it does depend upon the pace and the speed at which volumes come back, But typically, you would be looking at 15% to 20% would be a reasonable level of drop through, I would have said.

I would love it to be coming through at the gross margin. I mean, the real kicker in drop through is if you can combine that volume uptick with some improvement in gross margin, and then it becomes a bit adrenaline fueled and then you will see much stronger levels of drop through.

1 day. Thank you.

Oh, Samuel.

Hi. Samuel Cullen from Peel Hunt.

I have just got 1 and really related to that 75% number. On the property and labor costs and sort of the question did you currently is what are you doing or exploring in terms of AI to take some of that labor cost out or be more efficient across the business, particularly with your kind of centralized model in Ireland?

Yeah. Yeah.

Look, I mean, we are doing a lot of work generally across the sort of centralized functions, but it is not just about productivity, but it is also about quality as well in terms of output. So that is where the principal focus is because you know, a lot of that labor cost is people serving people in branches.

You know, it is moving product, putting product on shelves, helping customers. So that is where the major element around labor expenditure sits.

But yes, the AI level we are using across all elements, whether it is recruitment or whether it is marketing and whether it is product descriptions. So I mean, is I think where it will help is comes back, I think, probably to Charlie's point around drop through.

Is that it that it will just enable us to be more efficient. And benefit then when we see volume uptick without having to put additional resources in.

Ben? Thanks.

Bennett, RBC. 1 on Iberia.

With the target to the €1 billion Can you just remind us how we should think about organic growth sort of as we head into next year enter that target out to 2030? Look, I do this like mental math by Eric.

Right? So I guess on an annualized run rate with the businesses we have, we should be somewhere around €430 million to €450 million in revenue.

I would expect them to organically grow to €600 million-plus. By 2030.

So we need to acquire and grow around €400 million to get to €1 billion. Right?

So that is really how I look at it, and we have a pipeline which would facilitate that. But as we keep saying, we do not buy a business for the sake of buying a business if you do not think the valuation is right.

Or there is something which we do not think after looking at the business closely. That it will give us what we really expected it to be.

So the pipeline is there to facilitate that. I am confident that we will get there.

But I think just want to reiterate, the $1 billion is a target I if we end up at €850 million and 9% operating profit, I would not look at it as failure. Right?

I would still be content with that If everything goes great, we might end up above €1 billion, who knows, right? But you really have to think about, okay, to be more than CHF 600 million purely organically with the business we already have.

And then add another few hundred million we should then keep growing to that portfolio. And of course, the earlier between now and 2030, we will be able to add those businesses in.

The more confident to get to a billing. But in the end, we want to have quality businesses, which we buy at the right time for the right valuation.

Rather than businesses we overpay just for the sake of having them early in our portfolio.

Okay. Jamie at the back.

James Murray from Bank of America. Just on free cash flow, why did that fall by about 10%?

Think you mentioned cash conversion fell a little bit, but if you could just provide a little bit of color Yeah. Around why that happened.

And also, how you see that going forwards into H2. Yes.

Look, I mean the cash conversion dropped a little bit compared to last year because last year, actually, we released capital from working capital. This year we invested into working capital, which is why that was an incremental drag I mean, ordinarily, you have to bear in mind, if we think about our operating profit, I characterize our free cash conversion.

it is after we paid tax. So typically a 20% tax rate in round terms.

that is going to come off and after we pay finance charges as well. So actually something in the range of 70% to 80% would be a reasonable level and an expectation level.

Had some really strong performances. I think we can continue to do good work around working capital, but the most important thing for us is to make sure that we have got the products available for customers.

And when we end up with a bit of conflict in The Middle East and a bit more investment into working capital is the sound thing to do.

That looks like it. We have got no 1 on the line.

So I think that draws to a conclusion the proceedings. Thank you very much for coming.

Good to see everybody. Thank you.

Thank you all.