SIG PLC (SHI) Q2 2026 Earnings Call Transcript

Good morning and welcome to the H1 presentation of SIG. I'm joined here by my colleagues, Chris Lodge, the MD of our UK Roofing Division, and Simon Kesterton, our CFO. Simon joined 1st of May. I'm delighted he's joined us. As some of you may be aware, I've worked with Simon for over six years at RBC Group PLC, and subsequently Simon had a stint of six years at Keir Group, during which time he was part of management teams which were able to create a significant amount of shareholder value. In terms of an overview, the H1 results have been resilient, I would say, in light of difficult market circumstances. Q2 actually did show a like-for-like growth compared to last year versus a weather-impact at Q1. I'm pleased to report that the Benelex business has returned to profitability, and indeed further cost savings across the group have been realized, and we are maintaining good liquidity. Beginning of this year, we launched the Vision 2030 strategy, but against the backdrop of subdued markets for the foreseeable future, we have identified more opportunities going forward. So we've accelerated actions, but also extended our management actions with the team now in place. Numbers-wise, we are targeting a £50 million improvement in operating profit run rate, admittedly, by mid-2028. We're aiming to reduce leverage, to improve leverage, I would say, to generate at least £100 million of cash by the end of 2027. Our longer-term target, as we announced at Vision 2030, remains a 3% to 5% operating margin through the cycle, whilst being cash generative. We have a net debt to EBITDA target of less than three times, and we are focusing more than perhaps we did do in the past on latest technology, AI in particular, to enhance our key processes which are in sales, supply chain management and procurement. Before we move further on the value creation plan, we first go back to what's happened in the half year, handing over to Simon on that one.

Many thanks, Pim, for your introduction. Good morning to everyone, it's good to meet many of you in person this morning. Having joined the group in May, I've been encouraged by the SIG culture, our people, the market positions we occupy. This gives me great confidence that the significant self-help opportunities available to improve profitability and cash generation can be delivered. So moving on now into the results, slide 7. This slide sets out our high-level results. Despite difficult end markets, as Pim mentioned earlier, and a weather-affected first quarter, the group delivered a resilient first half. Trading improved throughout the period, returning to growth in Q2, whilst our management actions delivered 10 million of benefits and we maintained strong liquidity. Revenue in the period is lower than HY25 and reflects the weak demand across our end markets, made worse by the poor weather in the first quarter of the period. This resulted in like-for-like sales declining 1.5%. Lower volume in Q1 resulted in underlying operating profit declining 5 million to 10.5 million and margins falling 40 basis points to 0.8% due to a competitive market chasing low demand. The free cash outflow of 16 million reflects a normal working capital seasonality. However, the opportunity to build stock levels ahead of price increases and higher prices during Q2 is partly offset by other working capital improvements. The group has robust liquidity and long-term financing is provided through the 300 million senior secured notes, which are due in October 2029. And despite leverage being high at five times net debt to EBITDA, we have a clear plan to reduce it to below three times. Turning to slide eight, I'll walk you through the group's revenue change. On the right-hand side, we see a strong month-on-month growth. Pricing impact was largely flat as the group was able to pass through cost inflation. An impressive result bearing in mind the competitive scenario low demand created. The key point is that the exit rate had recovered and was materially better than the start of the year. Moving on to explain how the like-for-like sales translated to the overall revenue change. We start on the left with the previous period revenue of just over 1.3 billion. The next The next two bars show the like-for-like sales changes split between volume and price, which I've just explained, and volume decline, partially mitigated by some pricing pass-through. The impact of closed and exited business has resulted in a 0.7% decline in revenue in the As a reminder, in 2025 we closed 14 sites, 6 in each of the UK and France, and 1 site each in Germany and the Benelux divisions. We closed a further net one site in the half-year 2026. Across the geographies we serve, there were fewer working days in the first half of the year, and this combined translation gains results in a revenue growth of 1.3%. This resulted in a revenue of just below $1.3 billion during the period, a solid performance considering January and February revenue. Moving now to the underlying operating profit bridge. We start on the left with the previous period's underlying operating profit, £15 million. The volume decline seen, especially in the first quarter, result in lost margins of £6 million, £9 million negative in the first two months of the year, and £3 million positive during the following four months. Pricing growth contributed to £2 million. Closures mentioned on the previous slide, alongside the impact of other gross margin impacts, has reduced margins by a further £3 million. pounds. Overhead cost inflation was around 2% or 6 million pounds during the period. We delivered 10 million of management actions in the period. That more than offset the 6 million of inflationary headwind and went some way to mitigating the volume impact from January and February. Of this, around 3 million pound related to restructuring and branch closure projects, and a further 3 million came from increased focus on procurement across the group. The balance came from a range of overhead and property actions which we expect to accelerate given the continued absence of a market recovery that Pim touched on earlier. The overall result is an underlying operating profit of £11 million, a good result considering the first two months of the year and the continuing wheat market conditions, materially contributed to by our self-help initiatives. Now let's turn to our free cash flow. We did of underlying EBITDA of £51 million during the period. We have paid £36 million in lease payments and CAPEX in the period amounted to £6 million. There was an £8 million working capital inflow, a great performance despite investing in stock ahead of price increases. This reflects the stock build ahead of a price increase and the impacts of higher prices during the last quarter, partly offset by receivables and other working capital improvements. branch closures and other restructuring activities resulted in a six million payment in the period the group generated 11 million of operating cash in the period a 104 percent conversion of operating profit the interest and financing payments were 26 million in the period and this results in the free cash outflow of 16 million pounds this slide sets out the long-term funding arrangements the group currently has in place the long-term financing of the group is provided through 300 million euros senior secured notes which are due in october 2029 and this combined with the 90 million revolving credit facility which runs to april 2029 gives us significant long-term liquidity the rcf was undrawn and combined with 64 million of cash at the period end gave us a robust liquidity of 154 million pounds the only facilities in the next three years due are $13.5 million of fixed-rate secure notes. $322 million of the group's total net debt of $532 million are IFRS 16 capitalised leases related to our operating assets, resulting leverage of five times EBITDA. As I mentioned earlier, whilst leverage remains high, we have substantial liquidity, no near-term financing issues, and a clearly defined plan, which I'll walk through later to reduce leverage to below three times net debt to EBITDA. And now I'll hand back to Pim for the business review.

Thanks, thanks Simon. So here you see a slide with an overview of the various businesses. A couple of remarks on this slide. The presentation is following the management structure, so there has been some streamlining in the organisation. So you can see UK interiors has been combined with Ireland. Second remark is no loss making divisions anymore, given the fact that Benelux turned around into a profit and you can see that the main markets we have in france germany and the uk are the most difficult ones but we do have some bright spots when you look at ireland poland and and the netherlands i'll give some more background of the various divisions in the coming slides and also chris is here it'll take in a bit more depth through the uk roofing division as you can see on this slide actually our star performer certainly this half year with the 7.3 million operating profit a like-for-like growth of 1.7 percent. France and Germany, two of our challenged markets in terms of overall market environment. In France, you see a drop in revenue, although that was compensated in Q2 partially. It remains challenging. The reduction in profitability has indeed reflected that challenging market, although we are taking further action one of them has been the closure of our lyon bronze perhaps also to note we're trying to balance the cost reduction with also continuing to progress our customer proposition so we have made good progress implementing ai tools particularly in france we went live with something called labo response which is a quoting tool which we developed over six months with an ai startup basically reducing the time for quotations from six plus hours to 30 minutes so that's now in actions and it's also very much improved the quality of the quotations within the group we have our building an AI roadmap which we are deploying centrally to make sure we learn from each other so perhaps more than before we are focusing on technology helping improve our key processes being sales customer service as well as dynamic pricing supply chain management and procurement germany a significant drop at five and a half percent in terms of the market compared to that drop still a resilient performance in operating profit as you can see 0.7 reduction costs have been taken out and will be taken out and as we see it actually the market there is very challenging and we think we are doing better than most of our competitors there. Clearly we know the long-term incentive plan of the German government hasn't kicked in just yet its effects but hopefully in the not too distant future we see some effects in the general market circumstances. Again also here we try to give the balance between cost and continuing to improve our customer proposition so last year we introduced the omnichannel digital project also in germany so we can see some momentum gathering in germany as well vis-a-vis our customer base some bright spots in the in the half year sag in poland had the hardest winter since the last 20 years in poland that impacted sales quite dramatically in january and february as you can imagine on the construction sites nonetheless we've recovered subsequently growth of four percent year on year in the first half continuing to gain market share a part of the reason also there is a digital omnichannel capabilities driving market share and also in poland we're some way down the line in terms of developing and starting to implement the ai roadmap benelux i already referred to that turned a profit turned to profit this year from a loss last year they have been in a reorganization for the better part of two years and they're now regaining their market position and retaking market share in those numbers is still included the company called mpa which is a heavily loss making belgian subsidiary which we've announced closure in the h1 towards the the back end of h1 which closure process will be concluded in h2 so clearly we have a path going forward, where Benelux should enhance its profitability. UK and Ireland interiors, as I said, we changed the reporting line, simplified the organization structure, so that's now in one. You can see, though, recovery in market share, where you may recall that we lost from market share in the second half of last year. That's now recovered, and Ireland is improving its profitability. But in the UK, particularly our insulation and dry lining business, is having a tough time, as have our competitors. We remain profitable, but it's been very intensive competition, volume-wise, you know, housing new builds. And I think my colleague Kevin mentioned the Southeast high-rise buildings market not being great, and we're suffering from exactly that same impact. So cost measures, further cost measures are under consideration. The division is larger than that, so we also announced recently the restructuring of two smaller businesses called Euroform and CMS Danskin. and there was still a separate management structure called performance technology business that also has been dissolved. So there's further measures to come in that front, on that front. UK Roofing, as I said, our star performer, is market leader in roofing, is continuing to take market share in difficult markets. Chris will talk about that.

But it also includes building solutions where we actually see a significant growth in H1, 13% up, and indeed it's improved its profitability. but having that having said that I'll hand over to Chris to deep dive a little bit more in UK roofing Chris thank you Pam good morning everyone before I talk about performance I'd like to start with what sits at the heart of SIG roofing our purpose is simple to be the home of roofing and for us that means creating a place where customers suppliers and importantly our colleagues feel that they belong. We believe sustainable outperformance is built on the strength of that ecosystem. It starts with investing in our people, maintaining the highest standards of health and safety, and developing expertise and creating a culture that puts the customer first. The result is stronger engagement, stronger customer relationships, better service, and ultimately market share gains. So the home of roofing is more than a slogan. It is the foundation of our strategy and ultimately the reason why we continue to outperform the market so with that in mind let me briefly explain the scale and capabilities that sit behind that proposition we are the number one specialist roofing merchant in the uk operating out of 108 locations and implying 920 colleagues our focus is entirely on the specialist trade of roofing which differentiates us from general merchants We provide specialist expertise through pitched, flat, industrial and increasingly solar roofing solutions. Alongside the SIG Roofing Core business, we have complementary specialist capabilities through AcuRoof, SR Timber and Flexar. This enables us to support customers across specification, waterproofing and timber solutions. So this specialist positioning, combined with national scale, gives us a strong platform to regain and win share and support customers regardless of the market conditions. So on to 2026 to date. Firstly, the point is the markets remain challenging. Industry forecasts have market volumes in private new build and private RMI down 10% and 8% respectively. Now, given that two-thirds of our exposure is in these markets, we are certainly not immune to these conditions. Against that backdrop, I am pleased with the resilience of our performance. Also, the inclement weather that we experienced in Q1, January and February, and now the weather extremes that we are seeing in June and July have impacted demand, and I'm pleased with performance and how we've come through that. And we estimate we've outperformed the market by 4%. This continues a multi-year trend of share gains, driven by our laser focus on our customer proposition, commercial discipline, and growth initiatives. Importantly, we balance growth and profitability. Despite ongoing cost inflation, our operating margin improved. And we also generated 6 million of free cash flow, supported by strong working capital discipline. So while the market remains subdued, the business continues to demonstrate resilience on sales, profit and cash. Looking ahead, we remain realistic about the market conditions. We expect the roof and demand to remain challenging throughout 2026 and I'm not assuming any near-term recovery. However, our focus remains on the factors that we can control. First, continuing to invest in our people and our customer proposition. second supporting customers and accelerating targeted growth areas such as solar where training and technical expertise are becoming increasingly important differentiators third expanding customer proximity through both digital capability and selective network expansion we believe increasing our local market coverage remains one of the most effective ways to drive growth above market levels and finally we are progressing our ai roadmap focused in practical applications like inquiry and pricing optimization and inventory management that will simplify the front line allowing us to provide an enhanced customer service and of course beyond the current cycle we remain very positive on the medium-term outlook structural housing under supply and eventual recovery and RMI activity should support roofing demand greatly over time and enhance margins further thank you thanks chris so on to the strategy and outlook just as a reminder 2030 was launched efficient 2030 beginning of this year has two legs optimizing our operating leverage and optimizing the business portfolio we do not expect the markets to recover

in the foreseeable future so our action plan is against that backdrop key actions there you can see it on the slide. One is to simplify the business portfolio but also the property portfolio and indeed the branch network. We are simplifying the organization as well in terms of the organization structure. Some of the things that you've already seen, UK specialist markets no longer there, PJG no longer there, consolidation of Ireland into UK interiors. Reaffirming our operating model, again we've stated at the beginning of this year we anticipate procurement to have a benefit of at least 1% of our procurement spent. It is network-driven, so no big central department. It's really revitalizing and sharing best practice and, indeed, information. We're reviewing our logistics models, and we're also looking how to more efficiently use our capital structure. But Simon is our expert in that. Mentioned a couple of times, we're embracing AI and enabling technologies. We are, and that's part of the £50 million operating profit improvement target. Some of it is what I would call traditional, some of it is really enhancing our processes, as I said, on sales, where everybody is looking to further implement dynamic pricing, customer service, Chris already mentioned it, supply chain management, procurement, visibility of data. So that roadmap is in development for the group, and we will invest more going forward in order to indeed become a higher quality distribution platform. So our target remains the same, 3 to 5% operating margin through the cycle and create a best-in-class distribution platform. However, the more short-to-medium-term plan is clearly how do we get to the £50 million operating profit by mid-2028? How do we achieve cash generation of at least £100 million by the end of next year? indeed the target leverage of less than three times net debt to EBITDA and to that I'll hand over to Simon to go through the next slide.

Thanks, Pim. I'd like to explain how we intend to create value over the next few years. Importantly, this plan is not dependent on a market recovery as Penn mentioned in our end markets. A market recovery would clearly provide additional upside but the majority of these opportunities are management controlled and can be delivered irrespective of market conditions the program is focused on three financial objectives improving profitability generating cash and reducing leverage on profitability we're targeting a 50 million operating profit run rate improvement by mid-2028 as pin mentioned earlier This will be delivered through a combination of procurement savings, back office simplification, organisational efficiencies, footprint optimisation and over time market share gains. Procurement alone represents a significant opportunity, with a further of £25 million of benefits targeted. Alongside this, we see substantial opportunities to improve cash generation through tighter working capital management, optimization of stock and receivables selective asset disposals and further operational efficiencies we are targeting at least 100 million of cash generation by the end of 2027. technology and ai as pim explained earlier will act as accelerators across many of these initiatives our focus is practical improving pricing decisions supporting procurement optimizing inventory space and distribution costs, and simplifying support functions to enhance productivity across the group. Importantly, these opportunities are not theoretical. The actions already taken in the first half provide evidence of the potential. We delivered £10 million of management actions in H1, including procurement savings, restructuring initiatives, and organisational improvements, whilst also significantly reducing working capital as a percentage of sales. Taken together, we believe these initiatives provide a clear path to a significantly more profitable, more cash-generative and lower-leveraged SIG. As we execute the plan, our target is to reduce leverage to below three times EBITDA while building a higher-quality specialist distribution platform supported by technology, including AI, capable of delivering sustainable operating margins of 3% to 5% through the cycle. I'll now I'm back to Pim for the outlook and takeaways.

Thanks, Simon. So, in terms of the outlook for the second half, as said before, main markets are expected to remain subdued in the second half, the full year operating profit is expected to be around £25 million, as we highlighted two weeks ago. We aim to reduce the net debt in H2, expect to maintain healthy levels of liquidity going forward and as we alluded to we are really accelerating our value creation plan so to conclude what are the investment takeaways strong markets in what we shouldn't forget are structural growth markets we are in a downturn of the cycle which is longer than anybody apparently ever experienced before but those are structural growth markets and we do have strong market position you heard about our extension and an acceleration of our self-help so those targets you've already seen, and we aim to reshape SIG to a higher quality distribution platform going forward. With that, I think we're now over to Q&A. Let's start in the room with Q&A. We've got our lady with the mic.

Thanks. Ainsley, I'm here from Investa. Just to clarify the 50 million run rate and profit improvement, the way we should think about that, is that if we assume the market just stays as it is now then the kind of base is 25 million for this year i think consent so so it's 50 million on top of that and then just wondered how back end loaded that is is it a smooth kind of development to f128 first question yeah you're absolutely right ainsley i mean you think about it the first priority is to realize the capital which you're going to invest in in really improving the business performance so you just think about it developing towards a full run rate of that 50 million by the second half of 2028 so you're full run rate through 2029 and you'll be I would

imagine quite close to a full run rate through 2028 as well won't you.

Great and then just on maybe if you could give an update on the kind of inflation you're seeing both on COGS and OPEX as you look into the second half.

Yeah so I touched on the inflation it was six million in the first half on OPEX effectively but we see that modest inflation continuing we're not expecting that to drop off and there we've seen a tremendous amount of pricing inflation through the first half of the year i think up to sort of nine percent but we've successfully passed on as you've seen alistair stuart from progressive equity research a couple of questions one actually continuing from ainsley's um much more short term um the uh looking to the second half You're looking for a delta in second half versus first half operating profit of about $5 million. Bearing in mind your comments on the underlying market, is that really just the removal of the two months of bad weather in the first half? You've nodded, so I assume that's...

Yeah, I mean, the removal of the two months of bad weather is $6 million in itself. So I think, yeah, that's effectively what we're saying.

And the second question, in terms of insulation, the mood music's changed from keeping heat in to keeping heat out. Are you planning any innovations, new products, systems on the back of that, and not unrelated in your continental markets, sadly France in particular. Do you see any retro work on the back of the horrible fires they've had?

Not as we speak today. I think it's a conservative market. Insulation continues to do exactly that. So, I mean, in terms of weather-related changes, it might not be on insulation. I think, Chris, you can talk a little bit about our solar activities in the UK. Okay, perhaps now is the time. Not to do with insulation, but...

Yeah, I mean, we see solar as a very big growth area. We're seeing it in our numbers this year. We've had very strong growth this year. We had strong growth last year. We're investing in the specialist expertise that market is at the moment and traditionally through the electrical wholesale market. And actually, we're trying to give that value to roofers who have the specialism to work on a roof. So that's where we see that we can add value into the market through training and expertise. and we are seeing some good wins through that. And, of course, for us, that solar panel has taken up space that a tire we used to be in, so it's very important that strategically we take a foothold in that market. And it's important for our customers.

Morning, Adrian Kiersey, Pamela Libram. One on branches, on roofing, Chris, you've got 108 branches, and I think you mentioned about selective openings going forward.

Is that in terms of on a growth or a net basis? so are you would you be closing branches and relocating and trying to think of and what how quickly will that that process take yes we've gone through those plans again through the second half of this year we have a network design strategy that has identified locations where we would like the business to be of course if you compare it to the general merchant sector 108 locations actually isn't that many and proximity to customers remains the number one demand that customer would like there is still a demand to have a branch or an outlet within 20 minute drive time of a customer so it still is a you know a strong demand from the customer network and although we have 108 locations we cover around about 40% of the UK's population so we still see that as an opportunity as well as looking at our current network and seeing where we can optimize on the space because in the main we are in the conurbations that we need to be in it's just about being in the right place.

Clyde Lewis at Peel Hunt I think I've got three maybe four so apologies um could you give us an idea of the scale of the losses at MPA and presumably they were included in the first half and they'll be excluded from the business once you sell it or exit it um in July any different trends in July versus the second quarter um and then i suppose geographically would you still expect poland benelux island uk roofing to be positive territory and and germany france uk interiors to still be in a negative um situation for for the second half of the year and finally the last one was i suppose price inflation um someone you you mentioned obviously big numbers in the first half can you maybe update as to what you're hearing out of the manufacturers in terms of sort of price rises that they're trying to push down the pipe.

So if I take the MPA and the geographic development and you pick the other two of July results.

Reminding three, I think I heard.

And price inflation. Anyway, so MPA, yeah, they have been making losses and included in the half-year results about a half a million euros loss. So you can see that's a significant improvement opportunity. Geographically, I see Ireland, Netherlands, Poland continuing those markets to grow, and we're outgrowing those markets, so I don't see any change. I think the big markets, I mean, in Germany, as I said during my presentation, we're actually, even at a zero result, seem to be outperforming our competition. If you look at the indicators, there are some green shoots. time will tell what we have done in Germany is taking costs out and likely to take more costs out but at the same time have been investing as I said Omnichannel is one have been investing in certain regions specifically poaching some teams from the competition and that takes some time to mature so I think in Germany we are good to on the short or medium term to continue to take market share, take costs out and that overall initiative in germany as has been well touted eventually will come true in that sense uk you've heard from from chris we don't expect any change but he has a very successful he and his team have a very successful track record of continuing to take market share hotspots clearly is and you've heard travis perkins say that is in the insulation the uk interiors market I think that is where the battleground is. This is where we are still making a profit. This is where measures are being contemplated in order to... We don't anticipate any improvement, but you never know. The new government leader may actually start to unlock some of the new-built houses, and we would benefit from that. But at this moment in time, we're aiming to improve on the small profit we had in H1 by also internal measures. I don't think you've got price inflation.

Yeah, so I think July was the first one. So in terms of sort of how we see the market looking through the second half, it's still quite grim, isn't it? So I don't see anything that's indicating it will be significantly up or down. I expect July and August to be pretty similar to the prior year. In terms of then you talked about Poland, Benelux and Ireland, we do expect those to continue to remain profitable for the foreseeable future. And then in Germany and France, still negative. I think the second half last year was a slightly better comparator, but, yeah, possibly still down, I think, during the second half as well. And finally was price inflation. Yeah, so we've seen that flattening off. But, of course, that's no indication. What we can be sure of, though, is we've done very well passing through those price increases, and we'll continue to do that.

I've got the mic, so I'll go Ben Vara, obviously. First one, is it fair to say that at the end of, so H2, 28, you target to be at the three percent or between three and five and at that point could you give give us an idea of the run rate operating cash flow free cash flow excluding the sort of one one-off cash benefits you will unlock and then on that point can you also split the 100 million into the different buckets if possible and and last point is just the costs to deliver that plan They all look like Simon.

They're all my questions, aren't they? I'm doing well here, collecting questions. Yeah, so the 3% to 5%, I think, obviously, it depends on mixed changes and other events, but I don't see you getting to that by the end of 2028. It'd be tight. You might be close to the bottom end of that by the end of 2028 because you haven't got the full run rate. Going through 2029, you might be getting quite close to the bottom end of that range, and it is a through-the-cycle number. So you'd obviously expect to be at the bottom end of the range. The 100 million buckets, it's an at-least number. We don't give that because some of the actions will be interdependent. Obviously, if there's some disposals, you can't then improve the working capital of the business that you've disposed of. But it's an at-least number, and I think even without disposals, you will be getting the majority of that 100 million anyway. And then in terms of cost, it's a net number. So that 100 million includes the costs of getting there as well. oh yes you had the uh yeah i mean the run rate i would assume relatively flat so once we've improved the working capital there's a law of diminishing returns i guess you will get there and then you've got to look at the operating profit converting quite well so it should be converting depending on price changes up and down there might be some seasonality there and then the interest costs which should be materially reduced you never know markets may have been recovering by the end of 20, 28 months. MR. So we should be definitely seeing positive. Let's wait and see. MR. It should be positive free cash flow, that's for sure, if you add up all those numbers.

Hey, I'm Pritchela from Caius Capital. So just on the 100 mil savings, it sounds like most of that's coming from working capital. Can you break down where that's coming from? And also, you mentioned factoring. So how much is being used today, and how much do you expect to get from that?

MR. Yes, so we're using approximately 30 million of factoring. does suit the business relatively well as a source of financing because it's a positive working capital business so as you grow in fact in theory your sort of facilities would grow in line with factoring yeah and that is definitely an opportunity for us as we move forward to contribute towards 100 million can you just break out the the rest of the hundred million yeah we haven't given a breakdown because there's quite a wide range and there's quite a lot of interdependencies so that's why we say it's at least number I can can say that disposal proceeds should be up to 40 million pounds in order to at least start to unveil

a little bit of the break up, the break down.

Thank you, Kristin York from Deutsche Bank. Three, the first one is very simple. On the 100 million savings, should we just think about net debt being 100 million lower basically at the end of next year? Is that the right way to think of it? Second of all, understanding the divestments potentially up to 40 million is that accounted for in the profit growth as well so that 50 million extra is that you know despite whatever divestments happen and then the third one is just around you know capital structure gross debt as you rightly say you've got some time I assume the point is when you get closer is to reduce the gross debt and just generally options around that as you get towards you know 2029 thank you yeah so the 100 million reduce i think that's a sensible way to look at it it's an it's an at least number um clearly the disposals some

of that might impact earnings slightly but i think even if we achieve all of the disposals that are non-core it doesn't really change the impact that much so you still look in a business that's relatively the same size the same shape and the same leverage and then in terms of the 50 million And, of course, they'll be generating cash as well, which does contribute modestly to that 100 million over those couple of years. And ongoing, you'll continue to receive that. So, I mean, the leverage will be materially reduced by the time you'll be financing towards the back end of 2028, probably. Options around gross debt. So, in terms of the instrument we're financing.

Yeah, I mean, I think if the business is the current size and shape, that's too big an instrument so you would be looking at a smaller instrument i think to refinance in 2028 um yeah charlie camelot's t4 just just one actually but it's i guess maybe quite broad i'm just wondering what um impact future homes standard has on the business 27 28 um i guess there's more insulation going into houses and more solar so some opportunities across the group just wondering if that's material i think we've got our expert here

on the right hand side you know something about the roofs in the uk and standards yeah i hope so i think that's pretty much all i can say on that now look you know the reason why we've been building up the capability and to support our customers that want to get into this space is because of the future home standard direction that the company's going with obviously net zero and future hand future home standard takes that one step further in terms of what coverage is required equally there's an offset so where the tiles would have been before that's now being replaced with solar um so there's a downside to the tile market upside into the solar but that yeah that's the reason why we're trying to lead as much as we can to support the customers um who want to undertake those works for the for the new homes um to make sure that we're front and center and supporting them so it should be a good um upside for us in solar but equally a downside in the tile in the tile market presumably you would have imagined that solar might be a higher margin than and roof towers, is that sort of the hope, the expectation?

In the future, yeah.

I found that because I'm at the back. Stephen Rawlinson for Applied Value. A number of us in the room will remember 10 years ago when the SIG revenue was 2.8 billion and we're still at that point despite considerable inflation. But the real question is in and around whether you've been able to explore other ways to add value to your suppliers' products in order to get the margin much higher. At the moment we've talked about cost savings. we've heard about a little bit about AI but to what extent have you been able to explore discussions with your suppliers of your materials actually had greater value along the way to get up to that three to five percent other than what we're talking about at the moment which is actually if you like just greater volume to get throughput through a fixed overhead base so is there something we could just mention there about what you've been doing AI presumably is available to most your competitors as well so that isn't sort of bespoke um there's a little bit of value added been mentioned in regard to the roofing market in the uk but if you could just talk us through that pimp since you've arrived and simon as well um as to what extent you've been able to explore

those sorts of areas to add greater value well we are talking to suppliers in terms of sustainable materials uh clearly uh when you go to more sustainable products that we can can use indeed for our wider customer base. I think I disagree with you on the fact that AI is available to everybody and therefore it's not going to be a distinctive competitive advantage. Certainly I mentioned Labon response. That takes a six, nine months development with your key users to develop something which is our own proprietary system. Similarly, we are working across the group on dynamic pricing systems. And AI, when you're talking about the support functions, these are the general AR chat spot accounting, yeah, available to everybody relatively standard. But when you look about our core processes, be it on procurement as well as on dynamic pricing and customer service, we believe at this point in time we haven't focused at least not centrally on that, but I do believe introducing technology in what is a conservative industry, low technology industry, ahead of the pack, and allocating resources more than we have done in the past will give us, certainly for a significant period of time, an advantage in our key market. So yes, we're taking costs out. I think we've highlighted there are more costs to be taken out in areas which may not have been in focus previously together with our market position and we have been certainly if you take the last three years have been regaining market share for all the traditional stuff that we do I mean we have UK Roofing is the traditional market share growth driver which is something called people helping to drive that so I am a firm believer that with our market position in what is a structural growth market, streamlining our cost space, but also optimizing our customer service. I mean, we still have today many decision makers on a daily basis who take suboptimal pricing decisions, depending on whether they're in Germany or which part they are in the UK, with no good information at hand. And we know, as a consequence, where we get it right, you get an uplift in margin, half a percent, one percent. And you just translate that for the whole 2.6 billion, and it starts to become significant. Similarly, on procurement, we have a power supply base. As you know, having full visibility and aligned procurement, network-driven procurement, will be a sustainable advantage. Now, some of our competitors may be able to do that, but as you know, this is a fragmented industry, and not everybody will have the willingness, conservative industry, and or the capability to do that. So I would disagree with the statement, AI is just something that everybody can do and everybody gets more proficient at the same time. I'm actually, I'm a Luddite from origin, but I'm now a convert in AI. Don't pretend to understand all the details and the ins and outs, but I do understand we are going, we have been doing some really good stuff in various parts of SIG, and this is definitely going to be a key focus point going forward. Yes, there have been on the supplier side, okay, can you give us the more sustainable products to help in that? And I think you say a bit on UK Roofing, but I believe Chris is doing with his team a great job differentiating, I mean, the way UK Roofing has really trained its contractors on solar panels and helping them move along the supply chain. that is actually support for continuing to gain market share. So we also continue to do the way in the traditional way of operating. And I think with the lower cost space, more streamlined, we don't have much resources, as you know. You know our current situation. What we will do, I mean, the net cash or the cash generation of at least 100 million is after investing in resources to to make ourselves better equally there are some some traditional areas where we have a wide range of businesses across sig someone may not be exactly course or may not have been really treasured and developed so So I see a lot of improvement opportunity going forward. AI-driven service model, sustainable materials from suppliers. In the end, this is a people business, and as what Simon said, I can only confer. There's a reason we've been doing relatively well compared to competition in most instances, even though markets are bad, because I do believe that we have very good management teams across the piece. So it's a bit traditional in the way we try to regain market share, but definitely aiming to get that 3% to 5% fixed. And if you want to take a longer-term view, this industry will continue to consolidate. Has done, will do. What we're aiming to do with SIG is put it in a position where we are a key player with a proven track record. And I know there's been a history, you say 10 years. I mean, I've looked at the history clearly, and there have been many CEOs, and there have been many chains of directions that have been. Many people say, oh, procurement, this, all logistics, that, prove that the pudding is in the eating. So I understand the skepticism, but I do believe we have the team in place, and the down-to-earth, sensible, pragmatic approach that I think we'll be able to deliver this plan. Once we're in this plan and we are better than competition in terms of the way we operate in a consolidating market, hey, we may be consolidated by other players because we're a desirable piece, or we may earn the right to do it properly next time. But this is not Vision 2030, this is Vision 2035. Let's first get to getting this business on a better footing. I think those are the questions for the room. I don't know if there's anybody online who wants to ask a question. I think we need to look to the back of the room. So, thank you for coming and for the questions. Enjoy the rest of the day.

Thanks, everyone.