Hello, and welcome to the Grafton Group call to discuss today's acquisition announcement and trading updates. Participants will be able to ask questions later by pressing Star one on their telephone keypads, but for now, I would like to introduce Eric Born, CEO, and David Arnold, CFO of Grafton Group, for their opening remarks. Please go ahead. Thank you. Good afternoon, everyone, and thank you for joining us at such short notice. I'm Eric Born, Grafton Group's CEO, and I'm joined by David Arnold, our Group CFO. Whilst I'm in Barcelona, David is in our office in the U.K. at the moment. We are delighted to announce today the acquisition of Salvador Escoda in Spain, and the purpose of this call is to explain a little more about the business and the strategic rationale for this purchase. Because we announced this acquisition today, which is two weeks ahead of our planned trading update, we felt it was also appropriate to bring forward the trading update to do at the same time. Ordinarily, we wouldn't do a conference call to run you through a trading update, but we are conscious that you may have some questions around it, and we'd be happy to take those. But I would emphasize that the call is intended to focus on Salvador Escoda. David will, as ever, be happy to have separate conversations with you on the trading update if that's helpful. I will give a short introduction to Salvador Escoda, and then I'll hand over to David to make a few comments around the trading update before we go to Q&A and hand over to the operator. So let me start with Salvador Escoda. So why did we buy a platform in Spain? So we have, as you know, spent some time looking at the European markets, and we identified Spain and overall the Iberian Peninsula as a very attractive market. So if I look at Spain, Spain is the fifth largest economy in Europe with a population of 48 million people. It's the fifth largest construction market in Europe. It has a positive macroeconomic outlook and is likely to be one of the fastest growing major economies this year with a GDP + 2.9%. There's a resilient construction market with projections for growth, especially on the residential area, as there is currently a shortfall of around 600,000 houses expected by the end of 2024. There is increased demand for renovations due to energy efficiency regulations, and around 80% of the buildings do not meet the EU energy efficiency regulations. But equally important, it's a highly fragmented market with a large number of small players. So if I then look at why a new segment, so in terms of products, we looked at which market segments are the fastest growing segments in the Iberian Peninsula, and that's mechanical distribution, which accounts for around EUR 12.4 billion of the overall market. Mechanical distribution includes HVAC, electricals, and plumbing. If you look at the HVAC element, that's about EUR 2.3 billion in terms of market size. So if you look at Salvador Escoda, it's a company which was founded by Salvador Escoda, who has sold the company to us today. Salvador built it from scratch and organically grew it by opening over a 50-year period, 93 branches across Spain, operates four distribution centers, and generates a revenue of around EUR 230 million, and last year generated an EBITDA, so an operating profit of EUR 16.5 million. If I look at the CAGR of that segment, the growth rate in this market is estimated about 7% until 2026 per year. So it's a very attractive segment. Salvador's products, or Salvador Escoda's main product categories, are air conditioning, ventilation, heating, cooling, and renewables. It's one of the largest platforms in Spain, and a particular strong element is that around 50% of the revenue is generated by own brands, so air conditioning units and so on, which are branded MundoClima or EscoClima, depending on which product segment. So we believe that this is a first step into a very interesting market where we will continue to grow after the integration, continue to drive organic store openings. We will review the overall product ranges, which include plumbing, electricals, and some renewables, and we can see adjacent opportunities for growth, and of course, to further drive consolidation in what is today a very fragmented market in Spain and equally in Portugal. So we look at this as an entry into the Iberian Peninsula. I will leave it there before we go to Q&A and hand over to David to say a few words around the trading update. Thanks, Eric. Yes, turning to the trading update and to just pick out a few highlights, we continue to be pleased with the performance of our Irish businesses, where both Chadwicks and Woodie's reported like-for-like sales growth over the last four months, and where the outlook remains positive. In the U.K. and Finland, I think it's fair to say the conditions remain challenging, with like-for-likes in our distribution businesses down by 4.4% and by 2.4%, respectively. Comparatives have become slightly easier in both geographies because, if you recall, it was the second half of last year that really saw the pronounced reduction in sales. But I would say that the common feature of both of these geographies has been that the normal seasonal upturn in distribution, which we would have expected to have seen in September and October after the summer, that hasn't materialized. In the Netherlands, like-for-like sales were only down 0.3%, which represents an improvement against the first half, and we do continue to see good growth with larger customers, which broadly offsets weakness in repair, maintenance, and improvement spend. In manufacturing, both CPI and StairBox have seen lower volumes compared to the prior year, but that rate of decline is easing. When we look across our markets, there are a number of leading indicators which are looking more positive, but I would say that we're yet to see any pronounced improvements in volumes outside Ireland. And because the timing of any recovery does remain uncertain, we naturally remain cautious and are focused on tight cost control and driving efficiencies. Overall, we anticipate delivering full-year adjusted operating profit in the current financial year, broadly in line with expectations. So that was a sort of quick summary of the trading update, and I'll now hand back to Jess to just coordinate on the Q&A. So Jess, back to you, please. Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you wish to withdraw your question, please press star two. You may have multiple questions. Please ask them one at a time and allow each question to be answered before asking the next. So once again, if you'd like to ask a question, please press Star one. And our first question comes from the line of Shane Carberry from Goodbody. Please go ahead. Hi guys, thank you very much for taking my questions. First one really is if you could just give us a little bit more color, Eric, on the kind of competitive landscape. I know you talked about kind of how fragmented the market is, but can you give us a little bit more color in terms of who are the key competitors out there that we should be kind of keeping our eye on? Yeah, sure. Look, there are many competitors distributing some of the products which we sell. It goes from general builders' merchants into people like Saltoki, who also distribute air conditioning, ventilation, and so on. I think, as I said earlier, at the current time, Salvador is the second largest player overall in the market behind Saltoki. And the uniqueness of Salvador's model is that he has a very high component of own brands which he distributes, which gives you an overall better margin mix. And if you look at the positioning of the own brand, they are around 10%-20% below in price, depending on which segment below the A brand with absolute comparable quality and, of course, a far better margin. That makes a lot of sense. And then I just wanted to question a little bit more in terms of the kind of store growth. You obviously mentioned the kind of 9% CAGR over the course of from 2019, I should say. How much of that was driven by kind of store growth, and was there an ambition already in terms of where these guys could get to from a store perspective in terms of the numbers? Yeah, the CAGR I mentioned before is actually the market growth of the CAGRs in the market in mechanical distribution in general. So they have built, as I said, over a 50-year period, they have built this business up organically across Spain, and we believe from the 93 outlets, there is a room to grow this by another 50 outlets or so as a minimum. And then there is, and that's on organic growth, and then there is further consolidation to be done by M&A. And Shane, just to add to that, I mean, if you look in the more recent past, typically you're in the sort of two, three, four branches that would have been out of the year. If you look at the CAGR of Salvador since 2019 of approximately 9%, then clearly within that, you've probably got half of that is likely to have been from new store openings and maturing stores. Yeah, that's right. Cool. Thanks, guys. The next question comes from the line of Will Jones from Redburn Atlantic. Please go ahead. Thank you. First was just around the margin of the business. I think it was about 7% last year, and from memory, I think you aimed to make over 8% on acquisitions in time, so what would you think are the levers to improving that margin from here? I don't recall having said, certainly during my time, that we are focused on a specific operating margin like 8% or anything like that. I think what we want is a good operating margin, but the main focus is driven on do we generate a ROCE, which is throughout the cycle greater than our back. That's really where the main focus lies. We believe that we will be able over time, similar to what we have done in the Netherlands, improving adjacent ranges, which we might not have the right range structure or don't offer the range structure yet, which we could sell in this market and have a slightly different proposition on, as I said, ancillary ranges, which will drive sales up and the overall margin structure up. That's very similar to what we have done in the Netherlands over time. So, part of why we made the acquisition today. This is a good business with a good team, and the existing team continues to run the business. The daughter of the founder is the CEO since several years, and she continues to be the CEO. But what we will do with her is work through the range reviews, revisit which categories we might want to build out a little bit more, which we don't have today, as I said, in adjacent areas, and how do we improve or further enhance our online proposition, and equally what store remodeling or changes to store layout will we do in order to drive sales up. So it's fairly similar to what we would have done with the Isero acquisition. But I think the one thing I want to make sure it's well understood what we are doing here is we work with an existing management team, which has been very successful. So we take them on a journey, and year one, we really begin now to solidify. I mean, we have our integration plan, and we have our view on the areas where we can drive further growth, as I just mentioned. But of course, it's important to take the Spanish team on board and drive it together with them. Right. Thank you, and maybe, as you pointed out, one of the standout numbers is that private label percentage. I don't know if you can share any extra detail as to how it's come to be so high, how the relationship works with the manufacturer, any kind of extra color there? And I think on the website, it talks about some kind of export capacity as well. But just anything around that would be great. Thank you. Export is a very small part of the business, so a negligible part of the business. But there are, for example, some Spanish companies, for example, when Spanish hotels go and open up in certain areas and have then Spanish installers who are trained and prefer the own brand of EscoClima, there are sometimes requests that we export own brand products into international markets, which, of course, the business does. In terms of relationship with the manufacturers, there are long-standing relationships Salvador has cultivated with the top manufacturers, and the own brand products are produced in exactly the same factories where the A brand product is basically manufactured. So that's why, as I said earlier, you have one-on-one comparable quality for a lower price at the better margin because we just capture the margin within the distributor rather than a Daikin who capture the margin for themselves or other brands like that. Great. Thank you. And then the last is just, would you be willing to give a view on the overall market share of the business and maybe when you look at the kind of gaps on the map within the country where they sit? Look, the estimated distribution market around the HVAC column is EUR 2.3 billion. So we have a revenue of EUR 230 million. So it's probably somewhere how accurate the market estimate is, internally, we thought about having somewhere around 7%-8%. I think, as I said, we will continue to grow that over time. If you look at the gaps, we are well distributed around where the population sits across Spain. But where we have those CAGR analysis done, we still have sufficient room for new store openings across Spain, actually in the major conurbations. Thank you. The next question comes from the line of Flor O'Donoghue from Davy. Please go ahead. Thank you. Afternoon, everyone. I'll keep it brief given I'm in transit. I'll just ask the one question if it's okay, Eric. Congrats on the deal. One question I have is, obviously, the figures you've provided us with today relate to 2023. Can you give us any sense into how the business has been performing through the current year, as it were, if that's okay? Yeah. Look, we expect the business to deliver a similar number as last year. There have been quite a bit of cost added into the business, so we opened a new distribution center, a large distribution center in Seville, which added in some cost and which will, of course, be needed for the future growth in that particular area. And secondly, so there is one element, and the other element is we also opened more stores which haven't yet reached maturity, but so overall, I expect the operating profit for the year to be roughly around where it was last year. And that means slightly suppressed, i.e., not grown year on year because of those elements I have just explained. Yeah, that's very clear. Thanks, Eric. Thank you. Thanks, Flor. The next question comes from the line of Christen Hjorth from Deutsche Bank. Please go ahead. Afternoon. Thanks very much for taking the questions. A couple of them. I'll start with the first one. Just could you sort of just comment on the process? Was it a bilateral process? If so, what was the attraction of Grafton as a buyer of the business? Yeah, look, it was a bilateral process. In fact, I met Salvador and his family, what is now almost two years ago. I think it was in my second month or so when I was here, and he was somebody where we already cultivated a relationship prior to my time. He has, as I said, he's a gentleman, will be 78 this year, built a business over 50 years, so it was clear that at some stage he might or might not sell, and I think this is a classical one on estate planning. He has three children. He has his oldest daughter as the CEO, so he kind of decided that he wants to sell the business. He has been approached many times with far higher headline bids than what we now pay for this business from private equity as well as from industry players which are already having positions in Spain, and for him, it was threefold. First of all, this business has his name above the door and is a lifelong work. His key elements were, "I want to have a new owner." If I sell, because it's the right thing for me to do as a family from a family planning point of view, I want to sell to an owner, to a new owner who will continue to develop the business, who is a long-term holder. W ho will take care of the people and will make sure that the business continues to prosper and is not somebody who comes in and just rips out the back end because consolidated with something they already have and make a lot of the people who have been on the journey with him for a long period of time and the family and just makes them redundant. For him, he made as much diligence on us from a cultural point of view as we did diligence on him. In other words, he came to visit us. He was in Ireland. He visited many of our businesses and spoke to the people and his daughter as well and spoke to the guys in Chadwicks, to the guys in Woodie's without me showing him around so that he could really see and feel whether or not he thinks there is a cultural fit. So the attraction for him clearly was we have similar values. We will take care of the people. We want the business to continue to grow and make successful. Of course, for him and especially his daughter, the fact that we operate in a decentralized federated structure where what we do from a central point of view is, as I said earlier, work with them, give input on our view on ranges, say, what we have done in other countries, make sure we have best-in-class finance processes in place from a group point of view, from an HR point of view, and so on. He saw the benefit of us bringing that to them whilst letting them do what they do best and have done excellently over the last 50 years, which is building a really strong business in Spain. Brilliant. Thanks, and the other one, I know this is of course mostly focused on the trading update, but maybe just sort of broad brushes, just how you view the world from a more organic point of view as you look forward to the next 12 months. David, do you want to pick that up? Mr. Arnold, I can't hear you. I thought it was a very interesting answer, but it was just to myself. So one of the facets that we've had, obviously, over the last 12 months has been price deflation. And as you will have seen from the trading update, we have seen that moderation in the U.K. and Ireland, and we expect that to continue to moderate. I think going into next year, we're likely to see a little bit more in terms of price inflation, but we would definitely be in the view that it's likely to be quite modest, so sort of 0% to 1% or around 1%, but certainly nothing too significant. I think as we've highlighted in here, the timing of any recovery next year, a broader-based recovery, remains really quite uncertain. Prospects in Ireland continue to look strong for volume growth, which is great. But I think in the U.K. and Finland in particular, we're cautious about the timing of any recovery, and I think we need to see the reaction today once the implications of the budget have settled because, amongst other things, that's quite a significant cost that will be borne by corporates operating in the U.K. The impact for us, for example, in terms of the increase in the employer's national insurance contribution is GBP 3.5 million. So I think that overall, we could be looking at some form of recovery at some point next year, but more probably towards the back end of next year. The thing that I think will remain a continuing theme for next year, as it has been for this, is a real focus on cost efficiency and trying to mitigate some of what are effectively regulatory and statutory increases in the cost base, particularly around employment costs. Brilliant. Thanks very much, and well done on getting to the left of the line. The next question comes from the line of Harry Goad from Berenberg. Please go ahead. Yeah. Yeah. Yeah. Hi, good afternoon. I was interested in your, I think your closing remarks, Eric. You referred to being on the lookout for other opportunities. I mean, I appreciate this acquisition will keep you busy for the time being, but I mean, how do you think about more opportunities with regard to, I guess, both management time and balance sheet? I mean, is it sensible to see nothing now for another year, or could there be something in the next year? Thanks. Hello, Goad. As you know, M&A is not a straight line, yes? So we have been very active to fill the hopper on M&A opportunities within the Iberian Peninsula. And we wanted to make sure we get the right platform to start where we over time can not only organically develop, but also bolt on and build, hopefully, a substantial business and be also a more substantial business than it already is. So there might be some bolt-ons happening earlier rather than later, but the base plan is really drive now organic. So first of all, improvements in what is already a good business, and B, make sure we drive the organic openings within Escoda. If we can execute another platform, then we will. I think in terms of management bench strength, we are fine. And that's kind of for a couple of reasons. First of all, we have a good management team in Salvador Escoda, which has worked in this industry for a very long time here in Spain. And they will be able to drive the growth agenda we have here. In terms of my own bandwidth, you might or might not have realized that we have, from a management point of view, someone who is responsible of distribution in Ireland. So Patrick Atkinson has the whole of the island of Ireland under his wing, if you want, on the B2B distribution side. And Frank Elkins has responsibility for the whole of the U.K. So just by that move, I have been able to reduce the number of direct reports for myself, which again enables me to spend more time as we grow the business further. So if we will do another acquisition in any of the existing territories, we have the management team in place who can deal with that if it will be another territory, which I don't expect us to do necessarily outside of the Iberian Peninsula. And outside of any of the geographies we are in right now, but defining Spain as the Iberian Peninsula rather than just Spain is probably unlikely that we would buy into a new market within the next 12 months. The next question comes from the line of Ben Barrow from RBC. Please go ahead. Hi, good afternoon. Just one more from me, please. I just wanted to dig a little bit into the fragmentation again, just to give an idea of your size, perhaps relative to the number one player, and then could you give an idea of the tail of the market? So number three down to 10, if possible, just to give an idea. Do you want me to pick? Shall I just pick that up in terms of? Yeah, why don't you just? Yeah. So if you look very broadly, Ben, at the composition of the market, and as Eric has explained, our estimates are about EUR 2.3 billion. It comprises the individual players in the HVAC market, which represent just under 60% of sales, distribution sales in the marketplace, of which Salvador is one of about seven participants in that 60%. Just under 30% is addressed through buying groups. So that effectively comprises lots of smaller players in that market space. And as Eric has explained, in terms of our own estimates of share, of somewhere around about 7% - 8%, the other players in that just under 60%, the sort of the other six players in addition to ourselves, have similar-ish sort of levels of market share in that. Okay, thanks. That's clear. And in terms of consolidating that, is the consolidation story focused on that particular market, so the HVAC market, or is there actually opportunity outside of that as well? There is also opportunity outside of that. So the fragmentation of the market goes across most of the segments. Understood. And I noticed you mentioned as well some private equity interests. Could you shed any light on the activity there, whether there's any private equity players currently holding any of these? My remark earlier was that private equity players approached Salvador, but he wasn't really to sell to them. In terms of private equity players in the market, yes, you have smaller businesses which are owned by some smaller local private equity companies. You have businesses owned by BME, which is ultimately owned by Blackstone. So you have a normal landscape, but it's not to the same level as, for example, in the U.K., where private equity has been very active. Understood. Thanks very much. The next question comes from the line of Ami Galla from Citi. Please go ahead. Thank you. Just a couple of questions for me. The first one was just on the customer base. Can you give us some color as to how is that structured? Who are the customers that you're talking to? And are you involved in specification of it, or is it more just a route to market in terms of a distribution channel? And also, in terms of the sort of when you kind of think about the business, the HVAC business that you require, in terms of the product SKU, are there scope for synergies, i.e., can you expand your product offering in other markets on the back of this transaction? And maybe the last one I had was, in terms of the order book that this business has, what sort of visibility or color do order pipelines typically have? Okay, so that's a lot of questions. So let's start with what I think was the first one. So basically, our customer is the installer, and it's predominantly SMEs. So they are predominantly small installers. We also do have some of our own brand is actually strong, and it's so strong that we even have competitors like Leroy Merlin selling one of the more DIY-focused brands through their channel. But overall, our core customer base is the SME, the local installer. And you see how that business has cultivated over the years the loyalty of those installers by training them normally within certain branches, by having training events, by having national training events, and build a loyalty around their brand, i.e., the own brand. But of course, we also distribute other brands because sometimes a customer just wants to have a brand, a product that they're keen on, whatever. But that's how the customer base, our customer base, is mainly installers, so SMEs. Now, all the other questions you have asked, I have to admit I have. David, if you have. Yeah, let me do that. Yeah. So Amy, you asked a question about the order book and the visibility. And because roughly 80% are from the installer base, there isn't much by way of significant order book. Typically, the size of projects tends to be relatively small. So that's the first point. And then in terms of the products that we sell and synergies and can we look at other geographies, very potentially in due course. I mean, this is an exciting category. It's a new category for us. And I think that we can learn a lot from the experience in working with Salvador. As Eric said, I mean, there is a very small component that is linked to export. But I think going forward, there could well be some positive opportunities in that regard. But for the short term, certainly our focus is just working on Salvador Escoda, helping it to integrate within the group and looking to support that business on growing their own business within the Iberian Peninsula. We have no further questions in the queue, so I will hand the call back over to our hosts for some closing remarks. Okay. So look, thank you very much for having joined the call at such short notice. And as I mentioned earlier, if you have any follow-up questions, please feel free to give, as always, David Arnold a call, and he will talk you through whether it's related to the Salvador Escoda acquisition or related to the trading update. So thank you very much, and have a great evening. Thanks everyone.