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. 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.

Let's hop into it. 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 want to give you an update on the important and really good strategic progress we've made in the last six months. Of course, plenty of time for Q&A.

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. 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.

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 UK growth sort of so far.

Remember, entering the year, of course, we were all expecting a couple of rate point rate cuts. Clearly, that hasn't happened.

We are in this kind of higher-for-longer environment. 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 the work the team has done.

Importantly, we've taken what I would characterize as balanced cost and price actions. 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.

Of course, we've made excellent progress integrating our two 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 margin sequentially in the second half. We'll give you a few insights as to where that's coming from.

Importantly, the simplification work I talked about is expected to deliver over £4 million of annualized savings. That will most primarily just impact 2027 and beyond.

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. 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%. I'll remind you of our 4 months trading update to April, that was down about 8% at that point.

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. Although a very challenging market, as Joe sets out, but actually our profit just slightly down, 1.6% at £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, over 70% cash conversion at the half, still on track for over 90% for the full year.

Because we have a lot of confidence in our strategy, execution over the medium term, we've held our dividend at 4.2 pence despite those challenging market conditions. Leverage at 1.6 times is well within the 1 to 2 times range that we target, and that will delever further as we go through the second half as well.

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. 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 Adey, 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. This is how our revenue breakdown looks: Water division representing about 70% of the business, our Climate division representing just under 30.

Looking at it by sector, housebuilding is about a third 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.

Really, the strength of the Genuit portfolio is in that breadth across different areas. Almost a third 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 June was a good month for the Middle East operation. If we look at our profits, £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 £5 million contributed by the acquisitions, which are accretive on a margin basis. 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 two issues. 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. There's two different dynamics going on there which are important to unpack.

Ventilation is actually one of our relatively strong sectors in the first half of the year. 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 damp and mold problems in social housing.

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 Adey business associated with boilers, and then our Nu-Heat business in underfloor heating.

There we are seeing lower levels of renovations, extensions, and refurbishments, etc., and therefore lower levels of business. Two specific issues in Adey that happened in the first half that won't recur in the second are, one, a slow-moving stock provision of £1.5 million related to some particular products, and also a supplier issue with an impact of about £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.

Actually, the technical integration of the controls capability is a fantastic news story. We can now go to market with a combined school solution with Nu-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.

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 housebuilding and in the RMI sector. We have seen some project delays in civils and infrastructure markets, really a reflection of lower business confidence in the current macro environment.

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.

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 says.

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 scenarios, 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.

You can see the business has covered that well with this result. Again, the acquisition side of things has gone really well.

Davidson has been integrated well, and we've accelerated that simplification. Two of the three 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 £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, and as I say, those cost savings will be generated next year. Which brings us into the non-underlying items.

We've got about £17 million or so. About £9 million of that is non-cash-impacting.

That includes £4 million investment in a multi-year IT systems transformation. This is a really important pairing with GBS, deploying modern Software as a Service software platforms to complement the lean operational input that we're putting in with GBS.

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. Expect to see a run rate at about this level going forward.

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 £3.9 million, say that's underpinning over £4 million of savings from next year.

We've also got a loss on the Polypipe disposal that we completed in the first half of the year of about £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. 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 sites, it's also about that working capital management to really help with our cash flow.

Net debt about £190 million, and our leverage about 1.6 times. 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.

Investing in capacity, innovation, and sustainability for our capital spends. We've got that optionality for additional bolt-on acquisitions given the strength of our balance sheet.

We're maintaining our dividend, and we also have optionality for buybacks if conditions are right in the future. That's the financial results.

Happy to take questions at the end, but for now, I'll invite Joe back onto the stage for our strategy.

Thank you, Tim. Let me just set this over here.

Don't want anyone to look at that yet. All right, wanted to give you a quick update on the progress we've made in implementing our strategy.

Remember our purpose: Together, we create sustainable living. That actually drives everything we do, tying back to our strategy, which had the four same tenets that we've been working on for four 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 less cyclical segments, but also improve our solutions.

We'll talk about some of those. Focusing on growth first, absolutely number one on our agenda.

At the same time, while what we do is fundamentally green, as you see from our Green Economy Mark, where 70% of our revenues plus are climate-friendly solutions, how we operate the company is equally important. 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 heart to everything we do. It's how we run the business, right?

Founded in lean thinking and the kaizen methodology, we've continued to share some good examples of that, and I've got another example for you today. Increasingly, as Tim alluded to earlier, we see the ability to really make this a more inclusive set of tools.

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.

Investing in our people is key. This is our strategy; it remains true.

It is say at the outset, look, the warm weather today is kind of indicative of some of the things we're dealing with. 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 UK with some of the longest drought conditions we've ever experienced in this country, right? Lots of opportunity, 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 cast your mind six months ago in this room where we were just talking about the wettest January on record in the UK, 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.

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.

Our team prepared this incredibly complicated slide that's very busy. 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 in new homes.

The center is essentially getting after the 25 million homes in the UK that need to be upgraded, it's really about RMI work to upgrade existing homes. Of course, the ever-growing, approaching 40% non-housing sector for us now.

We're going to highlight two 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. Of course, the other stuff is actually already planned and coming, but just a year or two further out.

All of these will stimulate more solutions, more end-market demand for us. A couple of highlights: That the Future Homes Standard was finally released in March.

By next year, 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 six months after that.

The timeline 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 a year and a half 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 stormwater and flood mitigation. Of course, Construction Framework '25 is the current 4-year school rebuilding program framework, okay?

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 that we're seeing at Monodraught and the solutions we'll talk about coming up. 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, that 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.

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 at our Loughborough plant. This is the installation going in.

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.

We're essentially retrofitting the country with much better stormwater mitigation to protect our sewers and our waterways. This is challenging.

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. 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'll be much more material impact in 2027. We've actually done some kaizen work in the Loughborough plant, and 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 could 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%. Right, 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 access outside air and allow natural ventilation, which often is very good and a lot of fresh air, to be linked directly to the Nuaire units, which are the powered units often found in say the hallways, the canteens, the gymnasiums, the kitchens.

When you think about all of those different applications, this interface box allows all the Nuaire 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 opportunity.

If you ever get a chance to visit Monodraught, you'll see there you can actually see every installed system in the UK they've ever done, right, which is really fantastic. As of now, all the Nuaire products that are needed can interface through this box into the whole system.

This is a first to market in this case, and we've already received our first orders in July totaling over £1 million just for the first two projects, quite exciting. Despite already being up 24%, strength to strength.

Question I often get is, well, do you have the capacity for all this growth? 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." 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 at there.

As a result of this work, by the end of the week, they'd 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, 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 kinds 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.

The question then comes, how do you actually document this? EPDs, or Environmental Product Declarations, are in effect 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 clearinghouse for this called One Click LCA last year. In the first 6 months of this year, we saw over 3,000 views of these EPDs from almost 300 about 350 end users.

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

This is proof, and this has grown very, very rapidly. 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 it takes a bit of work to calculate, 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 products, we are the lowest-carbon alternative.

That is really important as well. 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 was just a fantastic article in one of the trade magazines with some of our graduates and apprentices.

It's just kind of is characteristic of the investment that we've made in our people. When I came here four years over four 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 leavers who haven't had that kind of attention and investment. They're learning math 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 millions 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, really collaborating together, 6-month new product release that's already driving additional revenue.

Importantly, we'd 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 scarcity becomes a problem.

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'd expected this year. More importantly, they had some small, underinvested facilities that we are going to be consolidating into two really good, scaled Genuit facilities during the second half of this year.

This is the main driver for the over £4 million step-up in operating cost reduction that we'll see heading into 2027. 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. Really pleased with both acquisitions.

Of course, we remain active in the space, as Tim said, with the deleveraging continuing, we'll be in a good position to continue to make more good acquisitions like this increasingly beyond the UK. If I turn to outlook, it's no surprise.

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 UK. Another budget's coming, thankfully not in November.

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've root-caused 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 onward, but we continue to make the kinds of improvements like the case study I shared with you, GBS across the business. As a result, would 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 £4 million of annualized operating cost reduction.

Most importantly, the structural growth drivers that we've anchored our strategy on for the last four years are getting closer every day. We are now in some of the key regimes: Future Homes Standard, AMP8, CF25, and we see a lot more coming.

The future actually looks brighter than ever, and we are well positioned to address those climate change challenges. I think that puts us well on path to deliver our long-term investment case, where we said that we would certainly 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.

Of course, we'll augment that with really good acquisitions as well as you've done, you saw that impact this year, certainly in the first half. Continue to be committed to taking that really large market we have, that £3 billion kind of market opportunity and growing in the UK, and make sure 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.

Finally, that strong cash conversion is really important so that we can continue to delever, make more acquisitions, improve those through the application of the Genuit Business System, and continue that cycle. 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. Yes, you're first.

Sorry.

We're good. Hi, it's Rob Chantry from Berenberg.

Thanks for the presentation, guys. Just three questions.

Firstly, you talked about some of the, I guess, political dynamics of the timing lag on cost recovery. You mentioned cost increases in 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 put and takes of trying to get price increases in? Be interesting.

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 multi-year view separate from the near-term issues? Then thirdly, could you just kind of give us an update on the potential pipeline of international acquisitions and expansion, like two really good deals last year, but both in the UK?

Is that something you're still prospecting in, I guess, the wider climate and water space in Continental Europe? Thanks.

I take the first two on pricing and Adey, and then I'll take the acquisitions piece?

Sure.

Okay.

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.

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 re-escalation.

It's a dynamic picture. We've managed it well.

Our procurement teams are 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 two issues in the half which are non-recurring, 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. As we 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.

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?

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.

Sure. On the M&A, great question.

As I've said, we've been quite active. These two deals, one was a process, one was actually a bilateral piece of effort on our part, the ones that 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 any 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 UK.

Our main focus is on ventilation first and then stormwater management, because we see those are the two end markets, which by the way, not just in the UK, have those same sorts of macroeconomic drivers everywhere. Those slides I showed earlier, those are true across all of Europe as well.

The climate issues, the mitigations there, and the need for better ventilation is actually a universal issue today, too. Hope that answers your question.

Great,

thank you.

All right. Let's see.

Aynsley, sure. We've got time to get to everyone, so.

Thanks. Aynsley Lammin from Investec.

Just two from 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 trended a bit better as well, and what you've seen in July. Then the second question, just on the fact that PVC price and polymer prices gone up, is there a kind of risk in the second half you get more substitution for copper?

Not sure how that dynamic works, what the price differential is, any color on that would be interesting. Thanks.

Want to take the first one?

I'll take the second?

Yeah. Sorry, what your first one was on the...

Just

May, June, the improvement like-for-like.

Oh, the improvement, May, June, yeah. 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. We did also see a seasonal uptick.

You'd 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. That's a solid sign.

I would see the market volumes really as still being slightly negative year on year overall, but stabilized and not getting worse. That's really come through in July as well.

July was in line with our expectations, and is consistent with the kind of seasonal phasing of May and June.

On your second question, 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 comes, it's a completely different way of working, push-fit ease, much faster assembly work, much more assures 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 who have made the switch won't be going back.

The other thing, 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 less than 1% of the cost of a house. The overall pressure to shift is probably bigger on other issues, and I think you'll see higher up the 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, we're not anticipating or modeling for a reverse substitution to happen.

Sure. Go over there and then we'll come back over to this side, how's that?

It's

Charlie Campbell at Stifel. A couple from me as well, please, if I can.

Just as we get very close to Future Homes, sort of finally, I suppose, just wonder if you've got a feel now for kind of pounds per house for a house now versus pounds per house in a Future Homes Standard sort of fully compliant unit with selling everything that you could into it. Then the second question was just on again that plastic-concrete point, and just wondering if that's coming through as you expect under AMP8.

Sure. I'll take both of those.

On the Future Homes 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, they could have £800 to £1,200 worth of plastic plumbing.

If you think about and of course, each individual house design in the Future Homes Standard may be a bit different, have different combination of heat pumps, underfloor heating, different ventilation solutions, filtration, wastewater heat recovery, right? If I think about all of the things that we can deliver to a house, it's still somewhere in that sort of 2 or 3 times more revenue to up to 5 times more revenue.

The 5 times would be two floors of underfloor heating, mechanical ventilation, heat recovery, the best filtration and heat recovery options. 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 have with heat recovery, because if you don't have heat recovery in the ventilation, you're going to be increasing the operating cost of the 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, 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? 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? You're essentially going into developed areas, subdivisions, right, areas in sometimes urban environments where you have to go in and essentially put in drainage where it wasn't originally anticipated.

The ability to get more products in on each lorry, right, fewer lorries, faster time installed, much easier, less heavy equipment, all of that is really significantly advantaged by using a plastic solution. We do expect that conversion actually to be better with AMP8 going forward for us.

Let's see. Let's come up, maybe I guess Christen, and then we'll just kind of work our way back in this side, maybe.

Okay. Oh, okay, we'll go there first.

That's fine. Christen, we'll get to you eventually.

Don't worry. No, Priyal, go ahead.

Cool. Thank you.

It's Priyal Woolf here from Jefferies. I've just got two questions.

The first is a follow-up on the Future Homes Standard. You've obviously talked about this 2 to 3 times to 5 times uplift.

Does that kick in mainly from March 2027, or are there some particularly volume housebuilders who might already be building to the Future Homes Standard already, just trying to work out the sort of curve of that uplift that might come through? Then the second question is just on the £4 million of cost savings that you've been talking about.

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 Homes Standard, you'll do the cost?

Yeah.

On the Future Homes Standard, some of the large housebuilders 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?

From March of next year, new projects can't be permitted unless they have all the plans in place and will be Future Homes compliant. Things that are already in flight will be completed as they are.

A year and a half from now, you won't be able to complete anything that isn't compliant. We're talking about stand-alone houses and picture of housebuilding right now.

There is a slight lag for high-risk buildings, right, about another roughly 6 months. You can think that between now and essentially 2 years from now, everything will need to be compliant that gets a building certificate, okay?

That sort of the phase-in period. Now, there's two other factors: One is some builders are already building already, and we've done about 3,000 plots, or are doing either completed or are doing, about 3,000 plots of underfloor heating for mid-sized and large housebuilders already.

They're essentially ramping up ahead to debug the system, okay? 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. In the beginning, we expect we'll see more one-floor underfloor heating, that could become two at some point in the future, and the mix between distributed ventilation and mechanical ventilation and heat recovery, we think will shift over time toward more MVHR.

It is a bit of a phase. Starting small now, will certainly pick up between March of next year and March of '28, at which point all new houses will need to be compliant.

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. 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. It's there.

Now we have to figure out how we're going to meet it. The government did say they'll come back and take a look at Part O at a future date.

That's overheating. I suspect they're going to be pressured to do that sooner rather than later.

I think that what we'll see is this 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 £4 million, yeah, today is a 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.

I am expecting £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.

Okay. We got two here.

Sir, go ahead, you're in back, and then Christen, yeah.

Hey, guys. Jamie Murray from Bank of America.

Two questions, please. First is following the news over the weekend about Vistry, that 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 forwards? Then the second, if you could just provide some color on the like-for-like growth of Monodraught and Davidson, please.

Shall I take the first, and then...

You take... You can take both if you want.

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 housebuilders we may have an agreement with, but they will be using contractors, obviously, to purchase our products from the merchant network.

We would never see that we have a direct credit exposure to any of the housebuilders directly, although of course we have an interest, as everyone does, in the overall health of the industry overall. Sorry, the second question was on...

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

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 that's to do with the dynamics of how the schools funding flows.

At some point, that will start to unwind. 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. No weaker than anything else, but performing in line with expectations.

Cool. Thank you.

Thanks, Jamie. Christen, definitely.

Thanks for being patient.

Not at all. Christen Yorke 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 aircon and ventilation work?

Are they sort of substitutes? Do they work together?

Just sort of how we understand how that fits. The second one, just to touch on the AMP8 win rates to date, I understand you're sort of one of three 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.

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 UK 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 at night quite a few times. Really, there's few times where you don't get that cooling effect in the evenings.

The problem with retrofitting just sort of RMI air conditioning is it's highly energy-efficient, and it tends essentially overcommit to a carbon footprint, and just a cost in your electric bills that most people don't want. 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.

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?

I think it'll be really interesting to see, and in other markets, we've seen some solutions that I think will continue to play. 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.

Stay tuned. We'll watch that space.

Let's see, 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 two reasons: One is it is relatively early, but yes, we're one of three people who can provide the full plastic solutions here. All I will say is our win rate so far is definitely more than a third of the projects out there.

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.

Great. Thank you.

Thank you. Toby, back to you.

Thank you. I just have two as well, both for Tim.

I think good gross margin performance in the half. Could you just unpick for us the impact of the acquisitions from the back end of last year within that, whether they're accretive or otherwise?

Also, I'm assuming there was some impact of higher input costs negative in the first half. Perhaps you could quantify that if you could as well, please.

That's the first question.

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

At the gross level?

At the gross level as well, yeah. We won't disclose specific figures, but yeah, strong gross margins.

Monodraught, as we've said, is on track. 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.

Thank you. Polymer costs in the first half?

It really does vary quite widely by polymer grade. You can see some quite substantial increases in costs there.

As we've said previously, last year, we spent about £80 million on polymers, about £50 million of that on virgin polymer, £30 million on recyclate. Recyclate, cost increases have been much lower than virgin, actually that high use of recyclate that we have does give us a natural hedge, which is important in keeping overall costs down.

Across the virgin polymers, we've seen grades at 10, 20, 30% plus inflation across the board. Hence why we've done a double-digit price increase to make that sustainable.

Thank you. 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 two acquisition sites?

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

Thank you.

Any other questions? No?

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

Great.

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

Sure. I could take a stab at that.

I think the important piece is actually most of it is essentially in optimized plants and equipment that can be run more. There really isn't an impactful carrying cost per se, and we're able to flex the workforce accordingly.

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. 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 will need to do is obviously add some people where we've been able to hire people and add people, we don't see that as a constraint. 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.

That's a continual journey, and I think that's really the right approach.

Thank you. Then the second one was, given the length of subdued markets, do you see leverage becoming an issue for participants in the sector, and is this likely to lead to more consolidation or capacity exits, in your view?

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, we tend to play at the high-quality end.

We have strong brands, strong, sticky customer relationships, and because of that, we have strong, profitable businesses with healthy cash flow. We delever quite quickly.

We've obviously gone up to 1.6 times leverage in this half, but that's because of the two acquisitions that we did last year, not really because of weak trading conditions. 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.

With the leverage that Joe describes when we think about that capacity and how we can come outside the other side, then there's even more potential in the business. 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.

The only thing I would add is if you think about the last time we had a significant competitor exit the market with Polypipe, that was actually more of a kind of a strategic decision, as we understand, but we've responded by commercially taking share. I think that's probably the best way to think about this.

You never know. Something else could come up, but it's nice to be in a good position and a relative strength.

Anything else from 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, we can investigate more cooling solutions. 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 members of our executive team, 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.