加载中...
共找到 2,964 条相关资讯
Operator: Good morning, ladies and gentlemen, and welcome to the IP Group Plc Half Year Results Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and we'll publish their responses where it's appropriate to do so on the Investor Meet Company platform. Before we begin, as usual, we would just like to submit the following poll. And if you'd give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from IP Group Plc. Greg, good morning, sir. Gregory Smith: Good morning, and thank you to Jake. And as always, thanks to everyone at Investor Meet Company for again hosting our half year results webinar. I was reflecting -- I was reading my FT on Saturday, and I almost choked my yogurt, I guess, these days, I've sort of had to move on from corn flakes for longevity reasons. But I saw the headline, the U.S. market for IPOs has exploded back to life with the busiest week for 4 years, and that's not something I've seen for a few years, I guess, maybe obviously based on the cycle. But it was an interesting reflection that the public markets have had quite a positive impact on the portfolio in more ways than one so far in 2025. And hopefully, there is more opportunity that arises for us in future as a result. I'm Greg Smith. And as CEO, I have the honor of leading IP Group and our excellent team on our mission to accelerate the power of science for a better future. And with me on today's call, we have our managing partner, Mark Reilly; and our CFO, Dave Baynes, both in the room really and virtually. As usual, this presentation will be uploaded on to the IR section of our website with a few appendices. Before we start, please note all the usual disclaimers and you can read that in the time I'm going to spend on the slide and good luck, but this covers all the information, particularly any forward-looking statements that we may make during the course of the next hour or so. So in terms of what we're going to cover, I'll provide an overview of the Group's performance in the first half, then I'll pass on to Mark, and he'll give an update on a number of our key balance sheet holdings and then some other notable development actually. And then Dave is going to run us through a summary of the numbers, and then we'll head into Q&A. As Jake said, as always, please post your questions up in the Q&A section. And as always, we'll endeavor to cover them all either live in the session or afterwards by platform as we run out of time. So for the half year, I think the main message is, overall, we made strong progress in the first half. We saw a number of encouraging developments in the portfolio. And indeed, the pipeline of significant milestones remains good through to the end of 2027. The public markets were more of a contributor in terms of fair value. And then there were a number of other positive developments in the private portfolio. That public side included the successful IPO of Hinge Health in May and strong half year results from Oxford Nanopore who beat city expectations. We recorded total cash proceeds of GBP 30 million. That's 9x what we saw in the first half of '24. And as a reminder, I said at the full year that we were targeting GBP 250 million of exits by the end of 2027. So what we've seen year-to-date means that we remain confident in achieving that target. And we had a small overall loss for the first 6 months. However, NAV per share essentially stabilized in the reporting period and has subsequently increased since the period end to about GBP 1 a share. We continue to be in a strong balance sheet position and have good liquidity, and we still got gross cash of GBP 237 million. And obviously, that's significantly up from this time last year when we had the Featurespace exit and others during the period. And then a final note is we are seeing increasing momentum in our efforts to add to our private scale-up capital under management. And the market hasn't necessarily moved as quickly as we hoped or expected on this front. However, we have good confidence of securing at least one new mandate by the time that I talked to you at the time of our full year results. So on the portfolio, coming into the year, 4 out of our top 5 holdings have seen encouraging developments in the year-to-date. As Mark and DB will cover briefly later, the fifth Oxa, while it's making encouraging underlying progress, is yet to close its latest funding round. And so our revised valuation has been pegged back to reflect that position. On Hinge, we were delighted for Dan and Gabe and the team to have the opportunities to ring the New York Stock Exchange opening bell on May 22. PitchBook described their successful IPO as a pivotal moment for digital health, signaling the reopening of the health tech public markets after a 3-year drought, and Mark will cover more on this shortly. But in summary, the company has traded very well since IPO is up about 80% off the back of strong Q2 numbers. Oxford Nanopore, they delivered a strong first half of trading. They beat analyst expectations on both revenue and on a lower EBIT loss. I think our observation was that growth was strong across all sectors and geographies. So by customer category, they grew in academic and in all of the 3 sort of applied sectors. And then by regions, even despite the sort of some of the headwinds in America, Americas was up, APAC was up, EMEA was up. So we're confident in the outlook for that company. By way of context, we are now the second largest holder behind EIT, The Ellison Institute of Technology, which is backed by Larry Ellison, as many of you will know. Of course, Larry recently became briefly the world's richest man, and he obviously has quite an incredible track record of delivering value through Oracle. I thought it was quite interesting that the U.K. press has started to pick up more recently on EIT and its Oxford Ambitions. And Nanopore is very relevant. If you go to the website, you can see how relevant it is to their focus on 2 of their big themes. One around health, medical science and generative biology and the other around food security and sustainable agriculture. In terms of our position, as a reminder, we invested about GBP 80 million into the company over time. We've realized about GBP 110 million to date. So we've already covered our costs in full. And as you'll have seen in our portfolio data for this year and last year, we've taken a small amount of liquidity on a couple of occasions. And as you'd expect, we continue to very actively monitor the company against where we consider fair value to be at any given time. But as I said, we remain really confident in the medium-term outlook for the business. And we -- our feeling was that the full year '25 guidance was maybe a bit conservative given the strong first half update. So we're confident in our holding. We look forward to further commercial updates from the company. There's clearly a number of interesting commercial relationships brewing there in biopharma and in clinical and also the deeper dive on their refined commercial strategy, which will be coming out in Q4, particularly around how they intend to exploit the sort of $13 billion to $14 billion of TAM that they've identified in what they call the higher priority segments. And then on Istesso, following the news that the -- their most recent trial didn't meet its primary endpoint back in February, the management team has worked hard to progress that program through to value. And the company published a peer-reviewed paper in The Journal of Pharmacology and Experimental Therapeutics, JPET, to its friends, and that was outlining the impact of its compounds on various chronic diseases where tissue damage occurs. So rheumatoid arthritis, as you know, but also things like osteoporosis, fibrosis and interestingly, sarcopenia or muscle loss. And that last bit, I think, led to the paper being picked up by some of the longevity publications because muscle loss is particularly relevant at the moment around the weight loss drugs very common side effects of some of the GLP-1s. And during the period, the company also added a very experienced nonexec, Dr. Mike Owen, delighted to have Dr. Owen joined the Board. And he -- you might recognize the name. He was a co-founder of Kymab, which sold to Sanofi back in 2021 for -- I think it was a GBP 1.1 billion upfront. And when he joined, he said Istesso's old approach to reversing tissue damage could fundamentally change the treatment paradigm for chronic diseases and therefore, holds enormous clinical and commercial potential. As I mentioned a few months ago at the full year results, the company has got funding to carry out a further trial and the location and design of which is well underway, and we anticipate that will commence before the end of the year. On exits, we had a good period for cash realizations. We set an internal target of GBP 50 million for full year '25 coming into the year and the momentum into half 2 and I guess, a more elevated level of inbound interest in the portfolio gives us a high degree of confidence that we'll achieve that and likely exceed it. Of the examples shown here, 2 companies were outright company acquisitions and one Centessa was a partial realization. For our remaining holding in Centessa, the company recently gave a positive update at the Morgan Stanley Global Healthcare Conference. And we anticipate the readout of the Phase II in narcolepsy is pretty imminent, and that will be the next catalyst for our remaining holding. In addition to these examples, also worth mentioning, we realized a small amount of our Hinge holding at the time of the IPO. And as I mentioned, the balance has gone up by around 80%. So our lockup expires on that in November. On what we've done with that cash, as a reminder, our policy is a commitment to deliver cash returns to supplement capital growth using a proportion of the exits that we make in any given year. At the moment, we are using buybacks, and we said that we'll do that until the discount gets to a lower level than 20% and given that persistent discount at the time of our full year results back in March, we announced the intention to use a greater proportion of our realizations in 2025, and we will again review that towards the end of this year based on our capital forecast for going into 2026. The current program is GBP 75 million, and that includes GBP 20 million that we announced in June. At today's date, as of yesterday, we've got about GBP 9 million left to run on that program. And so as we make further realizations, we'll look to add to that total. I think it's worth noting the acceleration this year has been quite significant. In fact, yesterday, I was looking at the numbers, our share count fell below 900 million shares for the first time, which means that we've now retired 15% of our capital in issue. We focused lots of our capital in the last couple of years on the buyback and on existing portfolio and getting those with the highest value potential through to their milestones and value realization. And I've -- we're starting to see as sort of performance and market appetite continues to return, we'll start to selectively add a few more new holdings to the balance sheet portfolio, including from Parkwalk and the wider ecosystem. But before I hand on to Mark, I just want to sort of briefly look forward quickly a reminder of the IP Group investment case, 3 things to believe. The first is that there is significant value potential in U.K. science and technology. I've talked about this and exemplified this at our Capital Markets Day back in June. The second is that IP Group is well positioned to exploit this given the team, the track record, the sourcing and the portfolio and that this represents an attractive shareholder opportunity, particularly given the discount to NAV against which we currently trade. To reiterate again, this is something that I've covered in the past few updates. This in a single slide, I guess, depicts the capital strategy that we are following to be able to exploit that opportunity. From the perspective of a developing science and technology business, we're one of the few investors that can support development from the very earliest stages to relative maturity at the sort of venture growth end of the journey. And complementary private funds are strategically important in terms of pipeline, particularly in the case of Parkwalk, but also development capital for our businesses, and they also contribute fees to mitigate our net overheads. In terms of scale and ambition, Parkwalk, we're aiming to maintain around GBP 0.5 billion of assets there, successful exits of balancing off against new subscriptions. On the balance sheet, we're focused on NAV per share delivery, and that obviously includes that GBP 140 million of cash that we've returned to shareholders over the last couple of years and is appropriate for where we are in the cycle. And then on the scale-up fund side, under which you'll remember Hostplus increased their commitment by a further GBP 125 million last year. And that's where there is a real growth opportunity to scale available capital to ensure strong returns from our balance sheet and our sources of -- for our various investors. On the first bit of that, just a quick update on our differentiated U.K. sourcing platform, Parkwalk. The business here, as you'll see from the numbers, as I mentioned, has about GBP 0.5 billion of assets under management there, which are all EIS tax advantage capital, and we partner with many of the U.K.'s leading universities to source new spin-out opportunities. I'll just pull a couple of highlights out from the first half. And so one, in addition to the alumni funds that we have with Oxford and Cambridge and Imperial and Bristol, we were very pleased to add a new fund in collaboration with Northern Gritstone, which covers Leeds, Liverpool, Manchester and Sheffield. And then similar to the theme that we're seeing on the balance sheet side, last week, we were delighted to announce the acquisition of one of our portfolio companies in the funds, [ Cytora ], which gave a good return to our EIS investors. And for our Plc shareholders, that generates additional fund management fees that contribute to lowering our net overheads. And then at the other end of the -- of that sort of capital strategy is our objective to add further scale up capital. I mean the context here continues to move in our favor. Our overall observation is that the public and private sectors are starting to align in terms of their policy and their approach. And during the first half, there have been quite a lot of important points of progress and those things like updated mandates and increased funding for the British Business Bank and the National Wealth Fund, which you can see there on the left-hand side. And a lot of that is highly aligned with the industrial strategy in the U.K. and the sectors that we focus on in turn, aligned with those. The pensions bill is currently passing through and the commons, how long that's quite going to take, but that removes some of the widely cited barriers to pension funds and similar long-term capital investing more in private productive assets in the U.K. And the Mansion House Accord, which is about 17 of the largest workplace pension providers in the U.K. committed to a voluntary commitment to have 10% of their default schemes in private markets by 2030, including half of that capital going into the U.K. So there's been quite a lot of sort of sector activity. Our experience and probably that of the wider market when you look at mandates is that there hasn't been very many VC commitments, perhaps with the notable exception of the Phoenix, Schroders joint venture future growth capital. But there's not been much that's really at scale. And our view is ultimately, that's what's needed and where the big opportunity lies. I would say encouragingly, the number and the stage of conversations with potential funders has seen quite an increase since the time of the Match House Accord, and we've added some additional experienced resource to our team to help exploit that. As I said at the start, we've got a good degree of confidence in securing at least one new mandate by the time I next talk to you for the full year results. And then quickly before I hand on to Mark, I thought I'd just cover a few of the companies or trail a few of the companies that we are excited about and particularly those that have either presented or are going to present at our events this year. So OXCCU, our sustainable airline fuel business. Mark is going to talk about that one shortly. Andrew, the Co-Founder and CEO, will be at our flagship scale-up event in October. Intrinsic, you might remember that the Co-Founder and CTO of Adnan presented at our Capital Markets event. There's a video on our YouTube channel. If you like a lot of technical detail, that's quite a technical one. They are producing the world's smallest nonvolatile memory, and they have a sort of tape-out coming towards the back end of this year. That does have very significant commercial potential given the company is initially targeting a segment of the memory market that's worth more than GBP 50 billion. And then genomics at the Capital Markets Day back in June again, David Thornton, who is the President there, gave a very compelling overview of the technology and its commercial applications. You also say right till the end to update everyone that revenues will grow by more than 100% this year and will do so again in 2026, taking them to $70 million, $80 million. He said they'll be EBITDA positive by the end of this year. So that's another of our top 20 companies to watch. And then on the therapeutics, our current clinical stage portfolio is worth about 23p per share, and there's a good number of clinical milestones coming up between now and the end of '27. Again, Mark is going to cover a couple of those shortly. And then just one other quick thing to mention just briefly on our licensing portfolio. We don't speak much about this. We have a licensing portfolio of IP predominantly from Imperial, and that contributes a few hundred thousand to our net overheads. There are 3 main projects in that portfolio. But I mentioned at the start that the public markets have contributed in more ways than one this period. And back in January, Metsera, Therapeutics business IPO-ed in the U.S. and actually, we licensed the core IP to Metsera. Now of course, it's early days, but if successful, there could be quite a meaningful source of royalty income over time. So we'll keep you updated on that one. So with that, I will hand on to Mark to talk a bit more about the portfolio. Mark Reilly: Thank you, Greg. Good morning, everybody. So there have been a few notable events over the course of the first half, perhaps arguably the standout one certainly for me personally having sort of witnessed the whole journey of Hinge Health. I recall, I think it was 2012, 2013 when its founder, Dan Perez who remains the Chief Executive of Hinge Health, walked into our office and very confidently said I'm going to make you guys a lot of money. And I think you can say that some confidence that, that was accurate now with a 50x overall return on our investment so far on to -- that asset. So the company, of course, we were the first investor when Dan was still a PhD student in the University of Oxford. It went on to raise substantial sums in -- from some of the top Silicon Valley investors, underwent very impressive growth and had that successful IPO in May of this year. We were able to sell a small amount at the IPO, and we did sell a larger chunk of our holding prior to that at a very good valuation in the private markets 2 or 3 years ago. But we still have a remaining holding that was worth just under $40 million at the half year and some share price continues to trend upward since then, which is good news. So that holding is locked in now until end of November, but we still have that holding [indiscernible] in the company has since put out some announcements of its latest results, its Q2 announcement and again, exceeded expectations, did very well. Revenue reported is increasing at 55% year-over-year, and they're now at $140 million of revenue in that period, and they're projecting 40% of the year-on-year growth going forward. So still very strong commercial progress there. I saw there was a question in the Q&A. The first question that came in, in the Q&A was why sell Hinge Health when there are lots of other smaller holdings in the portfolio that are -- that were described as nonlisted and nonrelevant in the question. So I would, first of all, highlight that Hinge was one of those nonrelevant nonlisted holdings until relatively recently. And so we think there is value in holding stuff that has potential that could hit that inflection curve. I think also the reason why you as investors have us holding shares on your behalf that there are some rationale for doing that, which is that we have this technical expertise internally that we can kind of arbitrage technical risk. We can judge that better than others. We have influence on these companies. We have extra visibility of a lot of these companies that others don't. And when those things become less true as the companies mature, that's less of a kind of rationale for us to hold them and so where that liquidity exists. That's where we start to consider divesting those positions. So just running through some of the other -- the top firm assets by value in the portfolio, just to update you on what's been happening at some of those assets. Greg spoke quite a bit about Nanopore, so I won't spend too long on that one other than to reiterate the fact that it continues to outperform its peers. They had a positive set of results that beat the market expectations, 28% rise in revenue, up to GBP 105 million now. And the key thing that we were looking for in those results was a diversification of revenue, a demonstration that they're moving into applied markets into clinical markets as well as this strong base of research revenue that they've already demonstrated over the past several years. And we really saw that this time. The revenue grew by over 50% in the clinical domain and 27% in the applied domain. So that's really showing that they're moving into those big market opportunities, and that's very encouraging. On [indiscernible] as Greg said, this was frustrating that they missed this endpoint in the first Phase II trial, but frustrating because it also demonstrated there's so much potential in this drug. And as Greg said, there was some data from that trial published in the Journal of Pharmacology and Experimental Therapeutics that demonstrated that this ability to elicit tissue repair, not just sort of preventing degrading the tissue, but actually showing that it's repairing the tissue, which has a lot of implications, but it showed these improvements in bone erosion and disability and fatigue. And so that has a lot of implications for sort of slowing aging and to slow the progress and even reverse the progress of some of these really detrimental conditions that people suffer from like this, their focus is currently on rheumatoid arthritis. So that publication certainly increased market confidence that there's a mechanism of action here that's really interesting. The efficacy of this drug is real that there's a range of clinical indications and diseases where it could be used. So we're sort of frustrating because of this potential. And unfortunately, that benefit didn't manifest in particular primary endpoint chosen over the time scale and over the cohort of this first trial. But we've learned a lot from that. They're going to do another trial now that implements those learnings and focuses on the things that they think they can really create a difference with, and they're well-funded to do that trial. So that's positive in that respect. So I remain optimistic about the sort of long-term prospects of that company. And finally, on this side, amongst our most valuable assets, Pulmocide. So they -- not a huge amount to report there because things are going well. The trial is on track. That's progressing according to plan. This is developing these respiratory treatments [indiscernible] inhaled treatments for respiratory infections like invasive pulmonary aspergillosis is a very nasty thing that you get wrong with your lungs and sort of mold infection in the lungs. And the trial is recruited well. And so we're still expecting that to read out in sort of H2 of '26 and have some results from that next year. Finally, not on this slide, but Greg also mentioned Oxa. So Oxa, we have taken this impairment on the holding there. It continues to make good technical progress. We've got very encouraging commercial progress. The company is doing well. It has been harder than we hope to raise money for the company, a bit frustrating because we have sort of the building blocks around, but it's -- we're just not quite over the line with that yet, but we are quite advanced now in discussions with some major potential cornerstone and I hope to have some good news on that asset soon. So that's sort of the higher-value stuff in the portfolio. That's the kind of top end. But another -- just picked out another handful of assets to mention because of some exciting developments in those assets. So Artios you may recall, is a company that's developing DNA damage response-based cancer therapies, and they are focused on hard-to-treat solid tumors. It's now public that they're targeting pancreatic and colorectal cancers, both of which have a huge, unfortunately, unmet clinical need. So a big market opportunity for the company, a big commercial opportunity. They did publish some of the sort of early data from the current trial, the Phase II trial at the American Association for Cancer Research Conference, and that data was very well received. They're funded to continue that trial and to explore the indications that they're seeing. And so we expect to see results from that end of next year, sort of early 2027 is the most likely time [indiscernible] I have to sort of qualify all of these clinical trial expectations that there are always things that can go off track and it can be delayed. But at the moment, as far as we know [indiscernible] both on track and expecting the same time scales that we've already guided. Then finally, there's 2 assets to mention in our Cleantech portfolio. So OXCCU, I don't know we maybe haven't spoken a huge amount about this company in the last few presentations, but this is a company in Oxford that spin out of Oxford University that's developing the world's lowest cost, lowest emission methods of making sustainable aviation fuel. So you use sort of waste carbon, and you turn it into fuel for airplanes and it's a good news for those of us who would like to continue traveling without, I think, quite the impact on the environment that it currently has. So that company raised GBP 28 million in a Series B round during the period. And the exciting thing about that is the sort of incredibly impressive list of strategic investors who came in to really validate the proposition that OXCCU is working on. So it was -- round was led by Safran, which is the world's second largest aircraft equipment manufacturer. The energy company Olin came into the round. IAG, which is the parent company of British Airways, came into that round. So a real kind of validation of their proposition based on the strategic interest that they've had in strategic financial support that they've got. They've built a demonstration plant. It sat on the top of my head there in Oxford Airport that's kicking out jet fuel. It's working. It's producing jet fuel now, and they started the process to develop a full-scale commercial project in the U.K. So that will be the sort of next scale up of their project. And finally, Hysata, we've talked about Hysata in these presentations before, a very compelling proposition. They have a hydrogen electrolyzer, a machine that produces hydrogen at 95% efficiency, which is well above anything that you will achieve if you buy a hydrogen electrolyzer off the shelf today. So their 100-kilowatt system, it is slightly delayed, but we anticipated there was a possibility that there will be a delay on this 100-kilowatt system. So that's built into their funding road map with the money that we raised with them last time. So they're still fund to produce that system, and we're still expecting it to be commissioned during Q3 as in this quarter of this year. They've also got a field trial going on a [indiscernible] machine running on a customer premises in Saudi Arabia. So this is not set in Hysata facility it's halfway around the world, and that is working, and it's -- they've reproduced that world-leading efficiency at that customer site. So they've demonstrated the ability to put machine in different places probably that [ where we need ] efficiency. And with that, I will hand back to David now. David Baynes: Thank you very much. Thanks, Mark. Yes, financial results, nice to review again as always. I'm going to go through this fairly quickly. It pretty much just pulls together all the things we've been talking about. Overall, cash, very strong again, GBP 237 million cash, that's actually up 47% from this time last year, and that's because of a very successful exit Featurespace at the end of last year, which of course, has generated significant amount of cash. We are, of course, slightly down from the year-end if we make investments, and I'll give you the cash flow in a minute to talk you through that. There was a small loss in the period, that 1.5% to about GBP 43 million loss. It is worth making the point as you've already heard that since the year-end, all of that has reversed actually for improvements in Nanopore and Hinge, about GBP 35 million of that's come back. And it means combined with share buyback, actually our NAV per share is now actually up. So it was briefly down at the half year from 97 to 96. We're now about GBP 1 a share. So that's, as I say, a combination of the improvement since year-end and also the share buyback which improves the NAV per share as we go along. And net overhead is down about 14% period-on-period. I'll do a slide on those in a minute and talk you through it. This next slide could be long, could be short. I'm certainly going for the short option increase and as disclosed in the interim results. There's a number of kind of uplifts over 5 or 6 companies and a number of write-downs over a similar number of companies and a foreign exchange loss of GBP 14 million, which relates to the pound being strong when we convert some of our American-denominated assets in particular, that may or may not reverse at some stage, depending on currency. But those elements just eliminate, quite frankly. And then you've got really just to do with 2 funding rounds really, Artios and Oxa, where actually, as you've already heard, the company is performing well, but actually, we've not either completed or have started a full funding. And as such, we have no choice but to actually make some kind of provision against both. And those -- that accounts for sort of GBP 9 million of that. So pretty much that is the story of the half. But just adjusting for those 2 assets in that small loss, but that loss has now been eliminated between the year-end and today. That's why when we now look at the assets here, assets are down a small amount from about GBP 1 billion to GBP 900 million, those are rounded, it's actually down about GBP 60 million. So it's a combination of that small loss and also shares we bought back because, of course, the buyback does actually balance sheet slightly smaller as we buy back shares. The concentration hasn't changed. So that next bit of the slide telling you there's no news. It was about exactly 56% of the top 10 at the year-end, and it is now. It's pretty much the same sort of ratio of how the portfolio looks. And actually, the next slide is also no change. This is a slide I always do but talks about how well the portfolio itself is funded because of course, that's very important. And actually, we've increasingly seeing this pattern whereby it's about 1/3 that is funded to profitability. You don't need to worry about that. And then there's about 1/3, which over the next year, 1.5 years need funding and then another 1/3 that doesn't need funding until '27 and beyond. So much of the portfolio is pretty well funded, but there will always be funding challenges and companies requiring funding at any point in time. So that kind of 1/3, 1/3, 1/3 rule is beginning to come pretty well solid as a rule. And now this just pulls it all together. So here's the cash of what's happened, and you've heard, I think, all of these numbers now. We've invested GBP 35 million in the period. It occurred over a number of assets. Most in current assets, only about 12% of that total investment into new assets as a single new company in the period. Realizations, we've talked about at length, GBP 30 million. Share repurchases, GBP 25 million. It almost exactly what we realized we've used on buybacks. That's actually a coincidence. But we are this year committed to 50% of our realizations to be done in the form of buybacks. It just so happens that some of the buybacks we've done relate to last year. It doesn't quite work out the math. But in short, we will be during the course of the year, I think 50% of our realizations and buybacks. Overhead is down, as we've heard, the net debt, actually, we generated about GBP 2.6 million net income on interest, but we've made some repayments on the debt in the period, which means the actual total move just a small reduction overall. And then there's a relatively large working capital movement. That relates to the licensing, which we just started talking about a bit. What happens on the licensing, we own certain licensing assets on Imperial College. We're responsible for them. We often collect in the proceeds and then actually we keep some, some need to distribute to other parties, it's Imperial College itself. And that means you sometimes have these working capital movements where we're paying out money in receipt on behalf of others. And that's why you get a relatively large movement. But that's the story of the cash, cash still very, very strong. And overheads, I'm very glad to say pretty much exactly what we said they'd be. So that 15% this time compared with this time last year, but we're going to do what we said we'd do. When we did the cost reduction in the second half last year, we said we'd reduced the '23 number, which was about GBP 22.5 million net to about GBP 16.5 million net. That's what we're going to do, 23% reduction. That still looks like what we'll achieve at the year-end. So I think without further ado, I'll pass back to Greg. Gregory Smith: Thank you, Dave. So leaving some good time for questions. So a summary of the half year results. So we made good progress in the first half. We saw a number of encouraging developments in the portfolio, many of which Mark has touched on, the public markets were a particular fair value contributor, including that Hinge Health IPO and Oxford Nanopore's strong trading. We made good progress on exits of GBP 30 million, and that momentum into half 2 means we remain confident of our target of achieving GBP 250 million of exits by the end of 2027. As Dave just mentioned, our NAV per share essentially stabilized over the period and has subsequently increased since the period end to GBP 1 a share -- about GBP 1 a share. And on the scale of capital and expanding our resources as a group, our capital resources as a group, we continue to see a big opportunity. And while the market hasn't necessarily moved as quickly as we hoped or expected, good confidence of securing at least one new mandate by the time we next see you all on the IMC platform for our full year results. I'll just quickly remind you, looking forward, our investment case is based on these 3 sort of hypotheses. The first is that there's significant value in U.K. science and technology, given our world-leading position there. And the IP Group is one of the pioneers in this space and with a long track record is well positioned to exploit that and that we hope we've set out an attractive shareholder opportunity in the next 6 months and indeed out to 2027. And then just because I think this is a good form, these were the priorities and future areas of focus that I set out at the full year, which we are aiming to achieve over the course of the time between now and the end of the year in 2027 on the exits. And I think on all of those, we're making good progress. So I won't go through them each in turn, and I'll cover them all off when we report to you our full year results. So thank you, everyone, for listening, and we will now turn to questions. David Baynes: Great. Thank you very much. Well, that's gone well so far. We said we'd be 40 minutes, and we're 38. So we've got quite a lot of questions, maybe not quite as many as normal. So we may get through this now. Laurent Tess, if you don't mind, I think we've answered yours, you had a question about why you're selling Hinge and keeping some of the smaller positions. I think Mark answered that while he was presenting. So I'll move on to next. Kane, nice to have you, analyst from Deutsche. Nice to have you here, Kane. You've got 3 questions. I'm going to do them one at a time. Mark, I'll do the first one with you. Might the adverse uncertain conditions research in the U.S. for example, funding like the NIH create opportunities in the U.K. Mark Reilly: Maybe. And there are headwinds as well and some pharma investments being withdrawn from the U.K. newspaper a couple of week or so ago. So I think we frequently see -- remember a few years ago, this question was about Brexit and the time before that, it was about the recession. And so there are lots of these kind of ebbs and flows of funding. I think it takes time to have an impact on us because it takes time to then filter through to the funding of the science, and that takes time to filter through to the commercialization that's coming out of those research lab, I would say not in the short term, but maybe in the long term. David Baynes: Kane, your second question, I'm going to point out to you, Greg. Why do you think Larry Ellison is so keen on LNG? Gregory Smith: I think looking at the time the question came in, it might have been before I said why I think he's keen. I mean I think the commercial answer is that the technology is incredibly well suited to 2 of those big themes that they're trying to solve the big global challenges they're trying to solve through the Ellison Institute of Technology, particularly around sort of human health and genetics, but also on the sort of sources of food and agriculture. Clearly, they're building a significant position there, which is interesting. So I haven't spoken to them directly. So I couldn't say definitively, but it's a good sign if you -- he's had such an incredible track record, like 40 years of delivering value through being able to not necessarily be ahead of the curve on technology adoption but certainly delivering real cash value. So I think it's a good sign, but also, it's one to watch. David Baynes: Yes. I'm going to point the next one to you, Mark, we know it's coming. Hinge Health up strongly post period end. Will you be inclined to take some profits? Mark Reilly: Well, we're locked in at the moment, and we did take some of the IPO. Then as I said earlier, it's an evaluation of the liquidity and the value available to us at any given time also. David Baynes: Thank you very much. Gregory Smith: And as you'd expect, obviously, we don't want to tell you about our intentions on our quoted companies because there's smart people out there that can do things with that information. But yes, we're pleased with that holding, and it's a good source of liquidity over time. David Baynes: The next one, Sam. Nice to have you here. Another analyst at Berenberg, good to have you here, Sam. I'm mentioning this because people in the past have said, can you make it clear when someone is an analyst and when they're not, so I'm doing that. I'm going to split this question. I'll do the first bit, Mark, and then maybe give you the second, if that's all right. First, one sentence, but would you be able to provide more detail on your IP licensing portfolio? And then separately, and therapeutic programs, when do you expect licensing income to ramp up? I'll perhaps do a little bit on the licensing. Licensing traditionally has been a relatively small part of our business. We inherited the licensing as part of the acquisition when we bought Touchstone. They, as part of their remit used to do the licensing for Imperial College. A very large number of patents, some of what we call active, ones that actually we had an agreement around them and some of the ones that was just exploratory and still waiting for maybe some of the license. And we retained all of those active licenses. So there's a relatively big portfolio about 80 different licenses. The actual strengthen that's what question is. The actual strengthen is relatively small traditionally, we'd be recognizing something like GBP 500,000, GBP 700,000 income a year. That tends to be the patent licenses you have to have a large number, most of them generate relatively small amounts. And then from time to time, you can sometimes get some really big licenses, a single license can do 95%, 99% sometimes of your license income. We have kind of 3 licenses out there. Greg has already referred to the Net Zero one. It's early. It's early. We're not going to start making claims about their value. And we're not recognizing in the books. Actually, in accordance to accounting standards, it's unlikely we will recognize in the books until such time as actual license income is recognized. So you can't kind of recognize it like a potential intangible or something. But any of the top 3 have the potential to, in time, generate significant revenues. Net Zero are now about a GBP 3.8 billion company, a GLP-1 agonist and it looks promising at the end of a Phase II trial. There are some notes out there. If that got to a Phase III trial, if that then became a successful drug, there may in time be some decent license income that come to us and something we would be also shared with Imperial College. So that's probably what I can say at the moment. At the moment, no impact on the financials, no significant impact on the financials. But maybe in time, maybe -- and I'm thinking maybe 2 to 3 years' time, you may start seeing if some of the things go well, some decent licensing income, and we'll talk about that at the time. It's a bit of a wide one to talk about all therapeutic programs. Is anything you want to touch on, Mark, where we might treat that question as dealt. I don't know there's anything over and above what we've already talked about there. Mark Reilly: I wonder whether that was at 10:18 as well as we have couple... David Baynes: Yes, I think that is. Gregory Smith: It's worth saying in the appendices in our results presentation, we do a sort of a summary of the main holdings and where they are in their clinical development and our valuation. And so what we're sort of -- what we're seeing as milestones coming up. So that's sort of a ready reckoner and I'm very happy to talk about in more detail than any of the others we haven't covered when we next see you, Sam. David Baynes: I've got another one for you, Sam, you split yours. I'll give it to you, Greg. I mean, given the current cash position and potential exits over the next couple of years, is there any change in your thinking around buybacks? Gregory Smith: Well, we hope we've got a pretty clear policy out there. While the discount is greater than 20%, the proportion of cash that we allocate to returning to shareholders is being done by way of a buyback. We think that's most accretive way to do that at the moment. And at the moment, for this year, we're doing -- we're using 50% of our realizations to that end. We will, as always, look at that number for next year. Historically, it's been around 20% of realizations that we've returned, which we see as sort of a more sustainable steady state. But obviously, we'll look at the relative opportunities for buybacks of our own shares versus portfolio opportunities and some small number of new opportunities. So no real change in the policy. The application changes each year based on circumstances. David Baynes: Next, Josh L, not an analyst, of which I'm aware. I'll probably take this. How has there been no First Light Fusion fair value movement despite a complete change of strategy during the period? There has been a significant change in strategy and actually some very promising technical developments, which I won't try to talk to. You can ask Mark about those if you're interested. But actually, reviewing the valuation, one of the main considerations which is like the probability of funding, the likely valuation of funding. And when we reviewed it, we came to conclusion that actually the kind of value we carry it at looks pretty robust around what we'd expect to value that. Mark Reilly: Myr recollection is that the new strategy was fairly well advanced at the time of the full year valuation. So that was... David Baynes: Pretty much factored in, yes, exactly. And at the moment, I think from where I'm sitting in terms of technical side of valuing it, I think that actually we carry it where we sort of think it may be valued. We may be wrong, but we will see. But we -- after quite a lot of discussion, we felt it was fairly valued and the movement in its actual carrying value is that just related to money we've invested in the business. So it's gone from. So that [indiscernible] So next, who would this be? From MV, hi IP Group team, nice momentum in portfolio. Thank you. Any plans on a partial full sell down on Nanopore, particularly given the IT initiatives? Well, Greg has already mentioned unlikely to comment on that. I don't know if you want to say anything further, but we're unlikely to comment on ourselves to public companies. Maybe you want to add to that Greg [indiscernible] Gregory Smith: I don't think anything to add to what we've said on that front. We do look at it all the time. It's not -- I've said in the past; it's not our strategy to have big holdings in large, quoted liquid companies that our shareholders can access directly. So it's a matter of time, but we're very -- we're a happy holder given the progress in the portfolio, and we always look at liquidity. David Baynes: Next question from Bill H. Probably, Mark, is about you, what is the role of IP Group's managing partner? If you'd like to... Mark Reilly: Well, to deliver shareholder value to increase the value of our existing portfolio and to make exciting new investments into companies that will be future well-changing company. So I have responsibility across the portfolio. I'm the person that chairs our investment committee. So I sure that the decision-making is sound and as good as it can be. And I see all the decisions around transactions of investments and exits. David Baynes: Thank you. Again, I think one for you, Mark, how much you want to talk about this. Can you -- this is Milosz, another analyst, Edison this time. Milosz, nice to have you. Can you give us an update on the monetization of Ultraleap patents and what you're able to talk about on that, Mark, I think. Mark Reilly: I can. I wasn't sure if I could, but I [indiscernible] text the CEO and he told that they did a LinkedIn post on Monday actually on this that the transaction, you might recall, we had an agreement to sell the patent portfolio to a company called [indiscernible] specialist in monetizing patent portfolios. And we were way to close that transaction when we last spoke publicly about this. That transaction has now closed. And so that's very positive. And the company has received the proceeds for that initial part of the transaction. There is an earn-out agreement. So as [indiscernible] monetize that portfolio, funds flow to [indiscernible] very positive. We really believe in the value of that portfolio. There's a lot of places where we think those patents are valuable. So we're optimistic about future fund flows from... David Baynes: Thank you. Next one, there's more questions coming in actually. Questions are picking up page. Robin M, I'll give this to you, Greg. I think maybe you can talk a little bit about cash raise from private markets secondary sales, both in the past and going forward. Is this becoming an easier way to raise capital? I think possibly referring to the small deal we did last year. I'll let you... Gregory Smith: Yes, so yes, we did do a small secondary last year. I think there's another question further down that asked about how are the assets marked and all that sort of stuff. And I think at the time, we said that on average across the various holdings on the balance sheet, it was a slight premium. It was about NAV, maybe a tiny premium to NAV on the balance sheet, and it was across -- it was a secondary that was across a few companies on the [indiscernible] funds and a few companies on the balance sheet side. There was -- the exact total was around GBP 23 million, I think, across the 2 pools. And we also said that there were things like preemption rights and all that sort of stuff, which we -- which meant we couldn't complete the full transfers that we planned to. I think we did just over 2/3 of the GBP 23 million, I think that transaction is all played through. And we do look at other options like that. We've explored all the time that I've been at IP Group, which is sort of 15-plus years, we've always looked at are their ways that we can accelerate value through these sort of structured transactions. I think the secondary markets are interesting at the moment. And they're interesting potentially -- for us potentially as we think about how we access scale up capital and build some strategic relationships. But also the secondary market is quite interesting because we have a permanent balance sheet and our liquidity position is reasonably strong, relatively speaking. There is clearly an opportunity where in companies that we're existing shareholders of that we particularly like or even potentially companies that we've tracked over the last few years that have made significant developments, but perhaps the cap table isn't as strong as it could be, then clearly, there's secondary opportunities for us. So yes, we look at it on both sides, and we'll always consider those opportunities. David Baynes: Next one, I'll point towards you, Mark, from Milosz again. And it's one that probably just give a general feedback on. But what appetite for M&A and licensing deals do you see across the life science sector at present? It's quite a wide-reaching question. Mark Reilly: I mean it seems good. My context is perhaps lacking a bit because I wasn't responsible for life sciences until a year or so ago, but I don't have a full history of staying close to this market in a way that others might, but it's -- that we've had quite a lot of interest in particularly one of our portfolio companies, there's been some inbound interest from potential sort of license acquirers. So in the small sample set that we have, it's maybe not representative, but it seems positive. David Baynes: I'll have a next one. Congratulations. This is David R. Congratulations on a good set of results. Thank you for that. On what basis is the optimistic view of exits of GBP 250 million for the period through to '27? Well, it's basically on our internal projections. So you can imagine we're running the sort of capital allocation process all the time. So I'm always updating estimates of how much we need to invest, how much we think we're going to realize, therefore, what's the closing cash balance is going to be. And in that process, we're always running out 3-year projections what our realization is going to be. And we do feel relatively optimistic in the period at the end of '27, we will generate that level of realizations. And to be clear, that doesn't include Oxford Nanopore. There's no plan for selling that. Nanopore is not in that. So one would hope Nanopore itself, that's the number they're talking about, could easily grow to a GBP 200 million asset on its own share at least by that time. So that's separate. We do think looking -- particularly there's a number of the therapeutic programs, which we think will come through in that timeline reporting both in '26 and '27, which we feel if they are successful, could generate really quite sizable realizations for us. So when you look at our numbers, I mean too much detail. When you look at our estimates for what we think we're going to realize, we have weighted probabilities, all types of complexity to try and estimate it. But we're increasingly finding we're relatively accurate at it. Although it's sort of a balancing day with 10% probability of that and 40% probability of that actually, it seems to work out relatively well, which is why we've been able to manage our cash relatively well. So in short, it's based upon our current expectations of the portfolio as it stands, and there are quite a number of, as you can see, look at therapeutic readout, therapeutic quite big programs reading out, which if any one of those work could make a serious dent in that number. And we are certainly, as we've already said, on target to do the number we plan to this year already. Next one, Haran, I hope you don't think I'm ignoring you. I think this is a question around the secondary we did last year, which Greg referred to, and I think we've answered. So I'll have a next question, which could answer the last one I haven't read, but I will read it out. We'll see what we've got. This is from David R. Your ambition is simply to increase NAV rather than achieve a more typical target of, say, 15%, which might be expected for VC investing. Should shareholders assume either that you're very cautious or simply don't believe you can create typical value on this risk or asset class in the U.K. Greg, how about you have that one? Gregory Smith: We all have a view on that. David Baynes: Yes. We go for that. Gregory Smith: We've got to be realistic with the current environment that we're operating in. However, it's fair to say that our ambition or our objective is to deliver compelling financial returns that are consistent with that risk profile. And certainly, when the IC needs to consider any investment in a portfolio company, we're not looking at will we keep this holding flat. We're looking at VC type multiples and VC type IRRs. And so the objective is to have more of those successful returns, and we focused the investment strategy more into those areas where we've seen that those success returns in the past, but also importantly, where we think there is returns to be had in the future in delivering against the sort of science-back investing environment. I don't know, Mark, if you'd add anything particular to that. Mark Reilly: No, that's all. Gregory Smith: Hopefully, we're moving into a period where that the environment is a bit more accommodative, and we're seeing good pickup in M&A interest. I wouldn't say it's sort of like a wall of M&A interest, but certainly compared to the last couple of years, there's quite a marked increase in inquiries. So that's obviously what -- it's the sort of cash-on-cash returns ultimately, which are important. And I think if you look at the track record of things we've had, including feature space recently and others, the cash-on-cash record there is very good. It's sort of 5x, 6x and in the sort of 20%, 30% IRR. So that's what we're targeting. The NAV gives you an idea of how it's going over time. But sometimes we have NAV setbacks and that doesn't necessarily mean that the company is not going to deliver strong cash-on-cash returns in the future. David Baynes: I agree. I also -- but I think 15% is something we can certainly can achieve. And certainly when you look at some of the areas we now focus on, as Greg said, actually mathematically, you can see the past, no proof of the future, but you can see investing in those areas in the past, we have achieved those sort of returns. So it's certainly a number we have part to and believe we will achieve. Andrew M, next, talking about the fall in value of Oxa, which has been partially explained by Greg. Could we -- he has mentioned there's some good technical progress. Could we perhaps, Mark, a little bit more about how we feel the technical progress despite the fall in value. Mark Reilly: Yes. Yes, I get an e-mail from the CTO once every couple of weeks talking about some of the exciting technical progress in the -- most of it's in the context of deployment on actual vehicles in real-world applications. They're doing a lot of work. Some areas I don't want to go into too much detail of because this is sort of commercially sensitive information, but they're doing a lot of work deploying their software on to real-world vehicles. One is in Jacksonville in the U.S., where I got an e-mail from the CTO the other day saying they're now 1,000 journeys and over 4,000 kilometers traveled autonomously. And I believe all those passengers survived the experience. So that seems to be going very well. And the sort of equivalent proof point in the off-road domain currently fitting out the trucks that transport big containers around ports. And the CTO has been sending me videos of these trucks. Look, we've now got 2 of these things and they can drive around without driving into each other. And so its very rapid progress being made of deploying this software on unusual vehicles accommodating all the parameters of those vehicles and the different requirements of their environment and operating effectively in those environments. So yes, I think from a technical perspective, they move at a great pace at Oxford and it's very impressive. David Baynes: Thank you very much. I appreciate that. Going to the next one, Haran again. You do get your question at this time. There were reports in the press reg Hinge Health that some shareholders sold shares at the time of their most recent results. Could IP Group have sold at the time? Mark Reilly: Yes. I think that may refer to the staff sale I guess there was a provision which allowed them to sell in that period, which other shareholders couldn't. I'm in contact with the bankers and with the company pretty regularly. I spoke to them a couple of times around that time that the staff sales occurred. So... David Baynes: Yes. No, we can confidently say we couldn't have done no. We're aware that we've tested the market. We know what we can and can't do and we couldn't know. Next one, Andrew M, where GBP 5 million investment in First Light go, I think [indiscernible] effectively bridge funding, a standard way we often fund our companies. I don't know if... Mark Reilly: Yes, on this operating capital, it's paying the salaries of the people that are continuing the research, developing this product that they're selling to the people who are pursuing the nuclear fusion and the people who are selling that product. David Baynes: I should warn everybody, by the way, but we are exactly at 11:00. So those of you only have on that, we won't be offended if you leave, but we're going to carry on. I think I've got about 5 more questions, so we will carry on. So for those that are engaged, stay with us. I've been guessing about another 10 minutes. But thank you for those who have to leave. I'm going to hand this to you, Greg, slightly unusual, but interesting question. Which competitors do you use as internal benchmarks. Well, are there any public or private funding vehicles you view as best-in-class that you draw inspiration from? It's a good question. Gregory Smith: It's a good question. Competitors or comparators in the U.K. I mean there's a reasonably well-developed market in the U.K. for certainly the early-stage bit of commercializing U.K. science. And a lot of the comparators, and we don't really compete with them significantly more often because there's more opportunities in capital generally at the moment. And you're often looking to collaborate rather than compete. We do compete if it's competitive deal. So on the U.K. side, there's Oxford Sciences Enterprise, we've got a small holding in that. We were a founder, shareholder in setting that business up, same with Cambridge Innovation Capital, Northern Gritstone, we work reasonably closely with, and we just launched that fund I was talking about for early-stage EIS investing alongside them in the portfolio. We also work some of the other well-known VCs in the U.K., Amadeus. And then I suppose some of the people that I have looked up to in terms of scale of business, I guess it's businesses like ICG, who very successfully used their flagship credit product to build out a very scaled asset management business bringing in private capital to support their existing portfolio and indeed to then build that out. So I often look at those comparators as sort of ambitious directions of travel for the group because certainly, it does feel that there is a large amount of capital that wants to allocate to this space. And so clearly, being in a position where we're a public listed entity, we've got the professional valuations and the systems and the reporting and the track record puts us in hopefully in an attractive position for those partners who are looking sort of reputationally at working with people that have been around for a period of time. So yes, there's probably those sorts of businesses. And of course, there are some world-leading VCs who are focused in particular areas, and we look at those for best practice and various of the team have the sort of their favorite bloggers in VC space that we track their thought leadership. They're very well resourced on VCs on the West Coast, some of whom they're increasingly moving into the deep tech space where we are. And so looking at their pronouncements and how they're seeing the world is all useful information for us. David Baynes: Thank you. I'm going to move on to Ian. I'm going to point this from your direction, Mark, if that's all right. It's a question we sort of get from time to time. How are you finding the U.K. universities at present? Are their funding issues making much difference to the way they're approaching tech transfer? And sort of separately, but connected, are any of the government-funded schemes being impacted by budget constraints and has this affected you at all? Mark Reilly: I would say yes, but I would say that's been the case for the past 15 years. I mean, they've always had these constraints on budgets and that has always manifested in their approach to tech transfer, and it sort of varies by university based on recent success or lack of in the domain of commercializing innovation. I think some of the universities that have had one standout success are much more kind of ready to invest in the area of tech transfer than others who have their fingers burned by it. So I wouldn't say that I've observed a huge sort of sea change or big fluctuation in the last period, but there is definitely always a budgeting pressure on tech transfer activities. And any of the government-funded schemes being impacted by budget constraints. Again, we're a little bit to us and there is definitely -- you will hear that if you walk the corridors of universities that budget constraints are impacting the research. But I think in some of the exciting areas that we're focused on in areas like quantum computing and emerging AI research work, there is still good money flowing into those areas, and we've done some really exciting research. And U.K. has always done a lot with a little. We've always done good research with limited results. David Baynes: I'll go on next. I think I'll probably take this one. It looks like my direction of it. Andrew M, thank you for this. Is it really accurate share buyback program has accelerated? It's up compared to '24, pretty stable in '25. I mean, I guess the answer is yes and yes to that. It certainly accelerated compared with what it did historically. I mean certainly, the amount we bought about 75 million shares just in the last year compared with sort of GBP 88 million, I think, ever. So it has, yes, accelerated. But it's a fair point within the year, it has been buying back at a relatively constant rate. During the year, why can our program be increased further? Well, it could, obviously. But that's the correct balance. I think we feel if we think we're buying at about the right rate and using about the right proportion of our proceeds on that buyback program. We feel it's been relatively successful. Ironically helped by a very low share price and then we bought quite a large amount of shares in the first half year at an average of about 47p. So we think we've got the balance right. We've already made this commitment we're doing half of the proceeds this year. So I think we feel that we've got the balance about right. Of course, one could always do more. There are some people that are saying, why don't you do less. So it is about trying to get a balance really. Next one, I'll probably do that as well, [indiscernible] doesn't it from Haran. The cash generated in half 1 from sales, what was the cash value relative to the holding value. Well, ironically, they were all actually. There's about 5 sales over the period, and they're pretty much all public company -- public company. So in terms of we haven't talked about what was an up or down because it was just the market price at the time. And a number of them went, I think, in for example, went for about double. That was the main one. I think we got about GBP 8.8 million. I think at the year-end, that was got in books at about GBP 4.4 million. So we haven't -- it doesn't really make sense to talk about whether we sold them up or down at the time because they were public market shares in any case. Let's have a quick look at the next one, sorry, coming down, Phil N. I think we've had this before, Phil N, if you don't mind, you're asking a question about whether we could sell Hinge or not. I think we've answered that fairly comprehensively. Okay, this one is always a tricky one. I'll ask Phil. I mean probably I'll point this to you, Greg. Always difficult, but for the shares to ride, you need happy existing shareholders and new buyer's summary. So who are the people who are selling? Is there a pattern, a trend or what? And is there an excess being dribbled out by a certain style of owners? Yes, quite a lot in that question. Do you have another go at there? Gregory Smith: Yes. Well, the overall backdrop probably you'll have seen the same sort of data that we see around net flows in and out of U.K.-focused equities, which continues to be negative and quite significantly negative global equities, actually, the flows have started to become negative overall, but particularly the U.K. has been negative. So there has been certainly in my experience over the last 10, 15 years, the number of humans that we go and talk to in the U.K. who are managing small mid-cap capital has definitely decreased and the number of funds has definitely decreased. When you look at the -- we get a monthly register analysis each month, and we go through that and try and get some clues as to who's buying and selling. Often there's changes period-to-period on the tracker funds. And sometimes from month-to-month, you get some of the larger or middle-sized holdings either reducing the position a bit or increasing the position a bit. There's not really a huge pattern that I could talk to, if I'm honest. Our job is to deliver on the strategy to be able to communicate that strategy, and we seek to do that as actively as we can. We've got a number of capital markets events we've done over the course of the year to attract new investors. And Dave, maybe you just want to talk a little bit about the efforts we've done with brokers this year and the other sort of -- given the U.K. has been more net reduction in capital available with the other relationships we've been. David Baynes: Yes. Yes, we're very proactive actually. I mean we have quite a wide range of brokers. I say our primary brokers is extreme supportive and very good. Numis and Berenberg, but we do also get some help. There's an asset called [ TKDY ] in New York, a small team of 5, who have been -- they've kind of identified about 200 American investors who are interested in U.K. stocks. And they've been getting us meetings. I probably have a meeting on average about once a week on them. And if they're interested enough, then Greg joins me, and we do a joint meeting. We think we -- it's often actually hard to tell. I know it sounds funny. We get a full shareholder register every month and you're paying down and trying to analyze. Sometimes you can't immediately identify who is what because they get through nominees, for example. But we think some of those American presentations are beginning to bear fruit. Cantors have also been helping us as well. We're finding some meetings both in America, and we've got some roadshows in Europe coming up. [indiscernible] have helped us. They took on a roadshow in Switzerland recently. So we're actually extremely active. And you will find by the end of the year our Head of Global Capital [indiscernible] some presentations in the Middle East and also in the Far East. So it's definitely not due to a lack of energy, and we are trying to get out and see people. And we think that is begun to pay dividends. We think and that partly reflects in the share price that we are getting people to find out how interesting the story is and find out how extraordinary discount is and what the opportunity is, is pretty much what we're telling people. Next one is from Lucas, a shareholder from Switzerland. Lucas, good to have you there with us. A new written -- just thinking out loud, you're giving an additional GBP 200 million in exits in private holdings until 2027. So you add that on to sort of Nanopore, which sort of hopefully by then, something like GBP 170 million. Are you saying that there's nearly 70% to 80% of current market cap might be achieved? I think the answer is yes. That was pretty much what I said earlier. Yes, that is about right. Obviously, there's a lot ifs in that. But if we achieve that, which we believe we will on the sort of non-nanopore holding. If Nanopore still performs as it should, we believe it will, yes, there's something between GBP 150 million to GBP 200 million Nanopore on top of that number, we will hope we will see. Last one, David B. Always nice talking [indiscernible] Why are you so good on someone. David B, this is for you, Mark. Do you think the start of U.S. drug pricing and tariffs by the U.S. administration is affecting pricing in the biotech market but ultimately successful innovation? If so, does that mean the model needs to be revisited so it is sufficiently profitable given the huge development costs? It's repeat your question. Mark Reilly: Question -- danger of being a political question, yes. So from our perspective, yes, I think we've got to assume that there has an impact something that is an impact. It's something that the team is factoring into the valuation work that we do every time we make a transaction in the portfolio. And so with the sense of the model needing to be revised. I think it's about making sure that we're putting money in at the right price to reflect the ultimate terminal value of the company. And so that's -- you described it as a revision of the model on a macro basis, we're doing it from the ground up of the looking at these transactions and the value is there to be delivered in the context of the current market. The other thing I said, I don't think we're really seeing this in the conversations we're having with pharma in the portfolio yet. I don't think I haven't heard that we've had pharma coming to us and saying we can possibly engage with you on this or pay this much for this company on the basis that the ground has shifted beneath us, but that might be going. David Baynes: And the last question is not a question, thank you, Filip N. Thank you, everybody, who stayed with us this long, and thank you all the questions. That's a 29th and last question, Jake. Operator: Perfect, guys. That's great. And thank you, as usual, for being so generous of your time then addressing all of those questions that came in from investors this morning. And of course, if there are any further questions that do come through, we'll make these available to you after the presentation. But Greg, perhaps before really now just looking to redirect those on the call to provide you their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments just to wrap up with, that would be great. Gregory Smith: Thanks, Jake. Yes, so to summarize, again, we've made strong progress in 2025 year-to-date, good progress on cash proceeds, and that gives us good confidence around that GBP 250 million of exit target to the end of 2027. I think the standout in performance for the first half or standout transaction was that successful Hinge Health IPO, which we're very pleased to see and delighted for the team and of course, for our financial returns, and that's helped NAV per share now get up to about GBP 1 a share, and hopefully, we go up from here. And then on the share price, we've done -- continue to do 2 things that we think we can to close the discount, convert more portfolio into cash and return that excess capital with discipline at today's price. We still think that buybacks are an accretive tool. And so we've been using that tool more aggressively that year, and as David said, to good effect, and we'll continue to weigh buybacks against new investments strictly on a returns basis. And so we are one of the world's most experienced university science investors. And so we remain uniquely positioned to capitalize on the sort of the fiscal reform that we're seeing and hopefully, this rising demand for high-growth innovation. So thank you all for listening and look forward to updating you on progress for the rest of the year and into 2026. Operator: Perfect, Greg. That's great. And thank you once again for updating investors this morning. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order the management team can better understand your views and expectations. This will only take a few moments to complete, but I'm sure it will be greatly valued by the company. On behalf of the management team of IP Group Plc, we would like to thank you for attending today's presentation. That now concludes today's session. So good morning to you all.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Sangoma Investor Conference Call. The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Samantha Reburn, Chief Legal Officer. Please go ahead, Ms. Reburn. Samantha Reburn: Thank you, operator. Hello, everyone, and welcome to Sangoma's Fourth Quarter of Fiscal Year 2025 Investor Call. We are recording the call, and we will make it available on our website for anyone who is unable to join us live. I'm here today with Charles Salameh, Sangoma's Chief Executive Officer; Jeremy Wubs, Chief Operating and Marketing Officer; and Larry Stock, Chief Financial Officer. Charles will provide a high-level overview of the quarter. Jeremy and Larry will take you through the operating results for the fourth quarter of fiscal year 2025, which ended on June 30, 2025. Following their presentation, we will open the floor for Q&A with analysts. We will discuss the press release that was distributed earlier today, together with the company's financial statements and MD&A, which are available on SEDAR+, EDGAR and our website. As a reminder, Sangoma reports under International Financial Reporting Standards, IFRS. And during the call, we may refer to terms such as adjusted EBITDA and free cash flow, which are non-IFRS measures, but defined in our MD&A. Before we start, I'd like to remind you that the statements made during the course of this call that are not purely historical are forward-looking statements regarding the company or management's intentions, estimates, plans, expectations and strategies for the future. Because such statements deal with future events, they are subject to various risks and uncertainties, and actual results may differ materially from those projected in the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements are discussed in the accompanying MD&A, consolidated financial statements, our annual information form and the company's annual audited financial statements posted on SEDAR+, EDGAR and our website. With that, I'll hand the call over to Charles. Charles Salameh: Good afternoon, everyone, and thank you for joining us today. As we close out fiscal 2025, I am proud to report that Sangoma has delivered another quarter of strong performance, strategic execution and accelerating momentum. We exceeded consensus expectations in Q4 with revenues of $59.4 million, adjusted EBITDA of $11.4 million and margins of 19%. These results reflect the strength of our model, the discipline of our execution and the growing impact of our transformation. Over the past 24 months, we have modernized our systems, streamlined operations and sharpened our go-to-market strategy. That work is now complete, and the results are showing up across the business. With the solid foundation in place, we are relentlessly focused on growth, investing in innovation, including AI, channel expansion and deepening our partnerships to scale faster and capture share. Sequential growth this quarter was driven by prem-based product sales, which performed well on the back of targeted campaigns and strategic share gains. We're seeing clear signs that our integrated communication offerings are resonating with our customers, and that Sangoma is finally winning in the market. A prime example of our sharpened focus is the sale of our VoIP or VoIP Supply business completed at the end of June. We executed the divestiture with speed and discipline, marking a deliberate shift towards software-led recurring revenue services, which now represent more than 90% of our revenue mix, up from 79% 24 months ago when I joined this company. It also frees up resources for our high-impact growth initiatives with proceeds reinvesting to support our mid-market enterprise go-to-market strategy. Beginning in Q1, we will also evolve how we talk about and report our business. Going forward, we will categorize our results into 2 areas: core services and adjacent services. Now core represents our SaaS-led communication platform and is the growth engine, whereas adjacent are noncore but cash-generative businesses. This view clarifies where we're investing for growth and where we're harvesting cash flows and provide investors with greater transparency into where we see the strongest potential and how our mix is evolving. Jeremy is going to expand on this a little more shortly. As we enter fiscal 2026, our priorities are clear: deliver organic growth by investing in our people, products and partners; pursue inorganic opportunities where they create strategic value and generate strong cash flow to support these strategies and create value for our shareholders. We are increasing our investment into marketing and channel partner development to drive growth across our UCaaS, our CCaaS, our CPaaS and our infrastructure platforms. These investments are already yielding results, and we intend to broaden our presence in key verticals such as health care, education and distributed enterprise, positioning the company to capitalize on structural shifts in the market. And we're not doing this alone. As you may have seen by some of our recent press announcements, we've built strong strategic partnerships to deliver enterprise-grade solutions tailored to very specific industry needs. In hospitality, for example, we partner with VTech Hospitality to integrate their industry-leading phones with our UC platform, creating a fully unified guest experience solution for our hotels and for resorts. In education, we teamed up with Quicklert to help schools comply with Alyssa’s Law and enhance campus safety and urgent and growing opportunity across the U.S. Our prem-based solution is gaining solid traction here with a 16% rise in pipeline demand from this sector alone. Equally important is our partnership with Amazon Web Services, which I'm very excited about, which we announced this summer. This is not a one-way relationship. On one side, we leverage AWS technologies to deliver scalable, secure, high-performance communication infrastructure for our UCaaS and Contact Center platforms globally. On the other, we're aligning closely with AWS' vast ecosystem to tap into their global scale and co-sell opportunities driving stronger demand generation for our combined solutions. Together, we are better positioned to serve this mid-large market for the enterprise customer that we've been talking about for some time who require mission-critical cloud-based essential communication services. These partnerships reflect our commitment to building purpose-built solutions for very specific priority industries. Now looking ahead, we are encouraged by the momentum and the opportunities we see across the core business. Although some of the larger enterprise opportunities we've pursued in FY '25 have longer sales cycles and implementation cycles, we expect sequential growth to begin in Q2 and to continue through the remainder of fiscal 2026 and beyond. This has been a transition phase for Sangoma with fiscal Q1 marking the inflection point. As it concludes in the coming weeks, we expect growth to resume as the pipeline builds to create bookings, which flow into implementation and then on to revenue with contract terms lasting 3 to 5 years on average. The direction is clear. Our strategy is working, demand is building, and we are confident in the durability of these high-margin opportunities. In closing, I want to thank the entire Sangoma team for their outstanding work this year. Together, we have shaped a more focused company, one that is ready to scale and backed by strong, flexible balance sheet that gives us multiple pathways for growth. I also want to thank our investors for your continued support and confidence in our vision. We are energized by the opportunities ahead and confident in the significant value we will unlock. With that, I'll hand it over to Jeremy and Larry. Jeremy Wubs: Thanks, Charles. I want to echo Charles' remarks and thank the Sangoma team for their tremendous work and accomplishments this fiscal year and our investors for their continued support. While the pace of growth is ramping more gradually, I am confident and excited by the opportunities we are capturing. I'm going to focus on 2 topics this afternoon, both of which Charles referred to in his opening remarks. First, more detail on how we're going to categorize the business going forward; and second, more on a go-to-market progress and key indicators. In Q2, I explained that we restructured how each of the product lines fits within our ecosystem and how we consolidated 11 product lines down to a simplified structure. I also talked about some areas not fitting in with our strategy. We have acted on that with the recent sale of VoIP Supply. Now as we further push to focus the business with the objective of capitalizing and prioritizing on areas of growth and high margin potential, it's natural to categories the business between core and adjacent, with core being high-margin SaaS and related proprietary communications products covering UCaaS, CCaaS, CPaaS, Premise PBX solutions and our bundle strategy supported by our MSP capabilities. Put another way, core represents the products and services that materially contribute to our essential communication strategy for SMB and mid-market. And with adjacent being the communications technology supporting specific needs such as trunking, analog to digital and media gateways and open source solutions. So adjacent covers more established technologies that have a higher propensity to be sold standalone or as part of a third-party's communication solution. Core will be our growth engine and today represents roughly 75% of Sangoma's revenue while adjacent accounts for about 25%. Shifting to the go-to-market. Our offerings are resonating with customers, and we are winning in the market. We have and continue to see improvements in our forward-looking pipeline across the core categories I mentioned earlier, including UCaaS, managed services and our prem UC Product business, where we are capturing share from Avaya and Mitel. This drove a 3% sequential increase in our backlog at the end of Q4, reflecting healthy demand and providing visibility into future revenues. So why, as Charles mentioned, have our go-to-market efforts taken longer to impact revenue with their contributions expected to be more visible as we move through FY '26. During our transformation, we've reprioritized our cloud product road maps, advancing features like Microsoft integration, unified mobile apps and others to support acquiring larger logos and moving upmarket. As we were prioritizing and completing software development, which took longer than expected, we focused our go-to-market on our [ prem UC share-take ] program and large managed services opportunities. These larger managed services opportunities have a 6- to 8-month sales cycle and similar implementation cycles. This high mix of managed services deals in our pipeline means the MRR revenue is recognized in later quarters. Today, as we exit Q4 and enter Q1, that pipeline mix is becoming more balanced. Now we also have a growing number of shorter cycle deals of 60 to 90 days with implementation cycles of 30 to 60 days that will help as we progress through the fiscal year. Adding multiple layers of pipeline, long-cycle high-value opportunities and shorter cycle wins is providing better visibility into the growth that we expect to begin in Q2. This stronger, more balanced pipeline includes some of the largest MRR opportunities since Charles and I joined Sangoma, including some exceeding $100,000. And in our prem UC products, which contribute more quickly to the P&L, our channel has delivered 3 consecutive quarters of sequential revenue growth, including 18% growth in Q4 over Q3. We are opening new routes to market, including partnerships with service providers, hyperscalers and vertical solution providers. Charles highlighted a few of the recent examples like AWS, VTech and Quicklert. I've also talked in prior quarters about the untapped opportunity to provide solutions to service providers, something we put focus on as part of our wholesale offerings in late FY 2025. Since then, we started working on an opportunity with a CLEC approximately 4 months ago to provide a complete bundle to replace their SOFTSWITCH and provide hardware and services to install and activate new users. That opportunity is now in late stages of the sales process and will ramp to over $20,000 MRR in the next 7 months with the potential to double by FY 2027. Equally important is how we focus on monetizing existing channels and deepen relationships with current clients. For example, one of the top opportunities in our pipeline that we've been seeding for 8-plus months is an upsell with a distributed enterprise customer we supported for years, expanding to a broader managed service and UCaaS bundle. Our value proposition of essential communications with enterprise-like capabilities at an affordable price lends itself well to many of our clients, and in this case, supports an upsell of an incremental $16,000 MRR. These are just a few examples of how our go-to-market is taking hold across new logos, account expansion and strategic opportunities. With the right focus and the right programs in place, we are adding layers to our pipeline that give us the visibility and confidence that demand will translate into revenue growth. Thank you, and over to you, Larry. Lawrence Stock: Thanks, Jeremy, and welcome, everyone. We appreciate you joining us for today's call. In Q4, Sangoma built on the momentum from earlier in the year, delivering solid financial performance and disciplined execution, providing the financial flexibility to invest with discipline to drive long-term growth. In the fourth quarter, we generated $7.1 million in net cash from operating activities, including $3 million of accelerated vendor prepayments relating to our ERP implementation. Excluding this onetime impact, net operating cash flow would have been $10.1 million, representing a healthy 89% conversion from adjusted EBITDA. For fiscal '25, net cash from operating activities reached $41.8 million, representing 102% conversion rate from adjusted EBITDA. Working capital management was again a positive contributor as we added $1.9 million for the year, driven by strong collections and improved inventory management. This builds on the $3.9 million generated in fiscal '24. Free cash flow for the fourth quarter was $4.8 million or $0.14 per diluted share. For the full fiscal year, free cash flow reached $32.9 million or $0.98 per diluted share, consistent with the $1 per diluted share in fiscal '24, underscoring the value we are unlocking at Sangoma. This strong cash generation enabled us to retire an additional $5.2 million in debt during the fourth quarter, bringing total debt reduction for the year to $29.9 million. We ended Q4 at $47.9 million of total debt, well below our original target of $55 million to $60 million. We also executed on our NCIB as another way to return capital to shareholders. To date, more than 500,000 shares have been repurchased for cancellation, representing 1.5% of shares outstanding and reinforcing our confidence in Sangoma's long-term value. The consistency of our cash generation and strong balance sheet is enabling us to lean into growth while still expanding profitability. We are prioritizing organic investments to advance our products and platforms, enhance the customer experience and scale our go-to-market capacity. At the same time, we are preserving flexibility to execute on our inorganic pipeline, reduce debt and return capital to shareholders. Now turning to the P&L. Revenue for the fourth quarter was $59.4 million, representing an increase of $1.3 million or 2% sequentially from the third quarter, driven primarily by the strength in our prem-based product sales. Core platform revenue was stable sequentially, reflecting consistency in the base business. Gross profit was $40 million in the fourth quarter, representing 67% of revenue compared to 69% in the third quarter, reflecting a higher mix of product sales. Adjusted EBITDA for the fourth quarter was $11.4 million or 19% of revenue and included $0.5 million in expense related to our ERP implementation. Excluding these costs, adjusted EBITDA would have been $11.9 million or 20% of revenue. This is up from 17% in the third quarter and represents the highest margin we've delivered over the past 8 quarters. These results demonstrate the consistency of our performance and the resilience of our business model. Now on to guidance. On June 30, we completed the sale of VoIP Supply, our lower-margin resale business for $4.5 million in cash. This was a deliberate step to streamline our portfolio and sharpen our focus on recurring high-margin growth while realizing a solid outcome at roughly 4x trailing 12-month adjusted EBITDA. With this divestiture behind us, our fiscal '26 guidance reflects a stronger business mix and a sharper focus on our higher-margin core platform products and services. For fiscal '26, we are expecting total revenue in the range of $200 million to $210 million. This compares to $209 million in revenue in fiscal '25, excluding the contribution from VoIP Supply. As Charles and Jeremy mentioned earlier, demand in our core categories is building, supported by progress in our mid-market enterprise initiatives. We expect sequential growth to begin in Q2 and continue through the year with Q1 marking the low point and the bridge to stronger growth ahead. Beginning in Q1, we expect gross margins to improve to approximately 75% and with operating expenses stable at approximately $30 million per quarter, excluding the amortization of intangibles. Finally, we are guiding to an adjusted EBITDA margin in fiscal '26 in the range of 17% to 19%, up from 17% margin in fiscal '25. EBITDA margins will follow our normal seasonal pattern, starting lower in the first half and expanding in the back half, driven by higher sales and ERP-related cost efficiencies. This outlook reflects improved gross margin following the sale of VoIP Supply while also funding incremental investments in channel and partner initiatives. Importantly, we expect strong cash generation to continue, giving us flexibility to lean into the growth initiatives and return value to shareholders. As we enter fiscal '26, we do so with a stronger business mix, a healthy balance sheet and growing momentum in our core markets. We are confident these fundamentals, combined with disciplined execution, position Sangoma to deliver sustainable growth and long-term value. To repeat what Charles and Jeremy said earlier, we extend our sincere thanks to the talented team at Sangoma, whose dedication and daily contributions continue to drive our success. That concludes our prepared remarks. Operator, let's open the call up for some Q&A. Operator: [Operator Instructions] The first question comes from Gavin Fairweather with Cormark. Gavin Fairweather: Maybe just start on the incremental go-to-market investments. I'm curious how much of this is about going deeper with existing partners and channels versus kind of adding new partners and distribution channels. And then maybe just secondly, I mean, do you feel like you have some really good data in your pipeline that suggests to you that these incremental investments will make a nice return. Charles Salameh: Gavin, it's Charles. I'll take a shot at the beginning of this. So the investments are being put into kind of 3 areas, and I would kind of categorize an overarching theme of coverage. Our platform is now being transformed and literally infinitely scalable. It's time now to start putting money into coverage, and that comes in 2 areas. One is field coverage, which will be adding more bodies to cover more of our states in the U.S. and potentially into Canada as well as recruiting of new partners. And secondly, into marketing coverage, which is brand awareness, brand increases and marketing events and industry events, things of that nature that are much more tied to our vertical strategy. So we also now have better unit economics that we really didn't have, say, 2 years ago, as we now better understand the dollar of input of investments into the market, both in field coverage and in brand awareness and the translation of that to pipeline as well as the lag from pipeline to bookings and then bookings into revenue. So we have a pretty clear line of sight. We're being a little cautious with our investments. We don't want to go crazy right off the top. We're incrementally adding investments, seeing the results and then will continue to do so over the course of the year as the pipeline builds. And so far, the investments that we have made have begun to show improvement in not only pipeline size, but also the quality of some of the activities in the pipeline given the money we've spent so far. So it's a progressive investment strategy throughout the course of this year and certainly going into '27 and '28. Gavin Fairweather: Yes, I appreciate that. And Jeremy, you touched on growth taking a little bit longer to accelerate than you anticipated, and you touched on R&D initiatives and sales cycles. You didn't really mention the macro or competitive landscape. Curious if you've noted any change on those fronts as well. Jeremy Wubs: No, I think, Gavin, like we haven't necessarily seen any major competitive pressures. I think -- as I mentioned, the sales cycles are a little longer and the implementation cycle is a little longer when you're attacking and going upmarket into some of these larger opportunities. So it's really that, right? Larger deals take longer time to sell, longer time to implement. Like we balanced that out a little bit, as you saw from some of the onetime product sales, which went up quarter-over-quarter for 3 consecutive quarters. So it's just going to take a little bit of time for the -- kind of the MRR engine to light up. But Q2 and beyond, we'll start to see that lift quarter-over-quarter. Gavin Fairweather: Great. And just quickly on VoIP Supply. Was there a decent amount of Sangoma proprietary product moving to that channel? Or was it mostly third party? Charles Salameh: It was mostly third-party. I'd say 90% plus would be third party, and I think a little less than 10% was actual Sangoma, and they're still a distributor for us. So even though we sold them, they still sell our product as they do with all the other product lines that were carried in that particular portfolio. Gavin Fairweather: Got it. And then maybe just lastly on M&A, and you touched on it, Charles, in your opening remarks. I think you'd be looking at various opportunities for a little while now, but with the balance sheet kind of where it is and being in a great shape, maybe you can just discuss your appetite for kind of firing up that growth lever and discuss how active your funnel is. Charles Salameh: I'm starving. That's my appetite. I think we've been very cautious and very disciplined about our M&A strategy. We've actually embarked with another group to kind of help us fine-tune the target. We've got a target list. But I've been really waiting for the ERP to get finished, which got finished in May and June. The company is now very much able to accept in the manner by which I want to bring acquisitions on, integrate them within a quick period of time, 120 days, extract the integration savings. With now the systems in place, the tools in place, the structure is in place, the transformation behind us, we've shifted completely towards growth and driving the 2 growth engines of organic, which you heard Jeremy talk about, and now the inorganic has taken a top priority for us. So very much on the books and very much down the road looking at various targets in the areas we've described before at SD-WAN, Security, Zero Trust network, these kind of areas that add value to enrich the portfolio and create the stickiness that we're looking for. Jeremy Wubs: I'd just add to Charles' comments. We have a very robust funnel of targets. And part of our strategy to drive essential communications bundles into the market means when you do an acquisition, you want to be able to, in a simple way, bundle in those capabilities. So the leading work that was required that Charles talked about the ERP and some of those integration components are really required for us to go and deliver a compelling bundle based on some of the things that we have in our target. Operator: The next question comes from Mike Latimore with Northland Capital Markets. Mike Latimore: Congrats on the strong balance sheet improvement this year. That was awesome. In terms of your view into the second quarter sequential growth, maybe give a little more color on visibility there. Is that tied to basically deploying bookings you've already had in hand? Or is it dependent on a lot of kind of new or smaller sales that close quickly? Or like what are you sort of counting on for that sequential... Jeremy Wubs: Mike, it's Jeremy. It's a combination of both. I mean we've got some business we've closed already or closing in quarter or closed in quarter in the pipeline, some of those larger deals, which have longer sales cycles, they'll start to pull up and show in the second half and then a pretty robust funnel of newer deals that have shorter sales cycle. I mentioned a little bit of that in my early remarks. [ Two ] quarters ago, we started a pretty aggressive program to go after some of these larger logos. We've done that. They have 6- to 8-month sales cycles, 6- to 8-month implementation cycles with some of the new features and capabilities we've focused on from a product road map perspective. In the last quarter, we've been able to target some more cloud-based deals that have shorter cycles. So it's a combination of both that will help us drive the back half of the year and give us confidence in our forecast. Charles Salameh: You heard us talk about the company now in these core versus noncore or core versus plus adjacent. Those are the 2 categories of which we described the company. Core being the high-margin SaaS business at 85%, 90% margins. And then the adjacent businesses are really more of the cash generative businesses that creates stickiness with our customers. So both of these together are going to start moving based on stuff we did way back in January and certainly in Q3 and Q4, and that revenue starts to spill in, in the second quarter of this year and then continue as it compounds going into Q3, Q4 and then beyond. Mike Latimore: And for second quarter sequential growth, that's both -- are you thinking both total revenue as well as -- and services, both sequentially up? Lawrence Stock: So total revenue, but in the categories of core and adjacent, Mike, is how we're looking at it. That will take into account the MRR, NRR, et cetera. Mike Latimore: Yes, okay. And then on the adjacent category, how much investment is going to go there? It sounds like you're counting on that to grow some here. Just how important is this adjacent category? And are there other products in here you might divest? Jeremy Wubs: I would say the things that are in the adjacent category, I mean they're going concern businesses. They're reasonable markets. They don't have the same type of growth opportunity as the core does. So we're not putting a lot of investments per se in those areas, a little bit in kind of certain lines that are pretty targeted. So we do see some growth in some areas, but not to the same degree as really the core and where we think the big SaaS opportunities are that will really help drive margin and revenue over time. Charles Salameh: But to answer your question specifically, no, we don't see any divestitures there at this point. Operator: The next question comes from Suthan Sukumar with Stifel. Suthan Sukumar: For my first question, I wanted to touch on the customer churn that you guys have seen as part of refocusing the business, given that your gross retention rates remain pretty strong. Is that churn largely contained now? Or is there still some low-hanging fruit that could fall off in the quarters ahead? Charles Salameh: No. I think the churn is actually well under control. We're starting to see positive trends in that area. We're also deploying -- now that we've got some of the systems in place, we're deploying more advanced AI-based tools that are going to help us even mitigate churn further. Our models right now are predicting that churn will actually continue to decline over the year and certainly going into FY '27. As we've gone through the stage of a lot of the legacy customers that were in the business over the last 2 years through the transformation have kind of retired out and our ability to upsell and cross-sell the new customers creates even more stickiness with less churn. And so we feel pretty comfortable about churn sort of being balanced and actually improving going into the next 3 quarters. Unknown Executive: That's great. Suthan Sukumar: Next one, I want to touch on organic growth. It sounds like visibility is improving given your commentary on sequential growth in Q2 and forward. As you think about kind of the revenue growth and the bookings growth rather looking ahead, how do you expect the mix of expansion activity versus new business to trend compared to what we've seen in the past? Charles Salameh: I think they're going to be driven pretty equally. We're actually investing in our field coverage that way, right? And I'll explain quickly as I can. On the expansion side, we've lit up several new programs, we call them ignite programs where we're going to our existing base. And now that we've got better tool sets to allow cross-sell and upsell, we're seeing service attach and expansion to our existing clients beginning to ramp pretty significantly, actually, especially in our business voice platform. So some of the old Star2Star business that we had. And the example of that was the [ Vega ] deal that we just described, the deal that we described on one of our customers who creates kind of retail franchise operation who had a legacy access service with us, and we actually advanced a cross-sell solution to them. The other area is new logos where we're going into new industry verticals. So we're partnering with new partners in hospitality and health care. We're expanding the RCM footprint, our regional channel manager footprint, investing in those areas, and they're creating momentum on new activity, new customers who've never done business with us before, but they're coming in with larger deal sizes and bigger chunks from us at one time versus buying a single point solution. So it's a pretty dual strategy on both account expansion or share of wallet strategy as well as new logo or market share strategies. And then we have a third one, which is large strategic deals, which has its own momentum in and of itself that are not even really predicted in our forecast at this point because they're so binary. Suthan Sukumar: Got it. Okay. Great. That's helpful. And then just wanted to double click on the M&A commentary. With respect to M&A, what priorities do you have here? And in terms of -- are these about market access or running out the tech platform? Or is it really about looking at consolidating competitors or quasi-competitors here? Jeremy Wubs: A little bit of it is market access, different entry points into different channels, right? So some of the technology that was highlighted earlier, things like SASE, SD-WAN, Security, we provide some of those solutions a little bit more in MSP model. Our ability to integrate those kind of natively into our portfolio and leverage the partner ecosystem that would be part of an acquisition like that would open the door to not just selling more of those technologies, but also our -- some of our UCaaS platforms, Contact Center platforms and then vice versa. It gives us the opportunity to cross-sell those technologies into our existing partner ecosystem. So the strategy really is how do we make the go-to-market strategy we have today with our essential communications bundles kind of more fulsome and how do we not only provide value to the installed base through our cross-sell, upsell programs, but open up really new channels, right, that gives us an opportunity to cross-sell our existing technologies and solutions into those as well. Operator: The next question comes from Robert Young with Canaccord Genuity. Robert Young: Maybe just a couple of quick clarifications, if I could. The split, the 75-25 core versus adjacent. Is that a Q4 metric? Or is that what you expect in 2026 after VoIP Supply? Jeremy Wubs: Yes, that's 2026 and forward. Yes. Robert Young: Okay. And then a couple of comments on the return to growth. I just want to make sure I understand it. In the press release, it said second half return to growth in core platform. And then some of the comments were returning to growth in Q2. I just wanted to like parse that the right way. Like what are the pieces that are returning to growth just to make sure I understand it. Unknown Executive: So what we're seeing beginning in our Q2 is actually core and adjacent both growing from that point forward, Rob. Robert Young: Okay. And then maybe last question. The EBITDA margin guidance for 2026 at 17% to 19%. I'm just trying -- if you could help maybe bridge in simple terms. I know you talked about seasonality and expansion of some of the go-to-market. But I think you said that ex onetime items will be 20% in the Q4, and it's stepping down in 2026 despite gross margin going up quite a bit. And I think in the comments, you said $30 million OpEx ex amortization, which is -- I mean, it seems to be that similar to where it is. Maybe if you could just help me understand the -- maybe if you could bridge between the 20% to the 17% to 19% for me, that would be really helpful. Lawrence Stock: Yes, sure. So OpEx throughout the year will be about stable at about $30 million a quarter. You got to take out from '25, part of it is VoIP Supply, right? That was included in our '25 results, right, from both an OpEx and an EBITDA perspective. The EBITDA was about [indiscernible] million in the year. Also, revenue is down about $4 million and 75% is [ the other $3 ] million. So that bridges you down to that 17% to 19%, Rob. Robert Young: Okay. That's helpful. And -- then maybe last thing. The -- I think just -- I think you said you saw 18% growth in Q4 over Q3 from some of the channel efforts. Unknown Executive: Yes, our channel efforts around -- yes, just specifically around our Switchvox prem product line, we put a program in place 2 quarters ago to go after a lot of the Premise PBX market, specifically Avaya, Mitel. We hired some folks from those organizations. And we've seen like that's 3 quarters now of sequential growth in our Switchvox prem lines and our phones and the Q4 over Q3 had an 18% lift. Robert Young: Okay. And so that's a direct result of some of these competitors and on-prem disengaging and channel coming to you [indiscernible] there. Jeremy Wubs: Yes. We went to find them. We weren't shy about it, right? They didn't necessarily just ring us up and call them. We went to find them. We knew just given some of the distress in the market between those 2 organizations that we could go find opportunity. We had a compelling product, and we went and grabbed some of the key leaders from those organizations and kind of went out hunting, convince them of the value proposition of our products being competitive and having the right compelling features and signed up new partners, and we've seen pretty substantial, as I mentioned, 18% Q4 over Q3 growth. And we see that continue to be an opportunity for us going forward. Charles Salameh: Yes. I'll add one thing, Rob. Rob, you and I talked about this, that discontinuity that occurred in the market where some folks exited, the mainstream players exited the prem business, we were able to jump in very quickly. And there was this quick -- really quick lift. And we see that continuing for the foreseeable future. But one of the things that is unclear completely is how big is this going to be because these players have really moved out. And we're even a little bit surprised by how fast the reaction of the market was to our offering. The nice thing about our offering is a great transition from the prem markets at the clients' pace to move to cloud, which we can capture them in our Switchvox Cloud solution. So this is a really interesting new area of growth for us. We've been at it for about 3 or 4 months since we really tackled it, and we're just seeing this quick lift. And we're not really sure how big this is going to get over the course of the year, but certainly some opportunity that we're going to keep our eye on as we move through the year as a real growth engine for the company. Robert Young: If I maybe push this a little bit there, would you give an absolute dollar value for that business? Just to kind of -- the 18% growth is really impressive. Is it just a small piece of revenue? Or can you give us a sense of scale? Charles Salameh: We don't report [ nothing ] on that particular number as part of our overall core services, but I'll tell you, it's a major chunk of the business on 2 fronts, right? One is it creates a larger base of customers by which then get transitioned over to cloud. As long as you can maintain service levels, which we have, we have record service levels now and customer sat of over 90%. These become long-term value customers who go from prem-based to eventually cloud-based. So it's a significant part of the portfolio. I don't want to give you the exact number, but you can assume it's a material piece of 3. Prem, hybrid and cloud are the 3 big engines of growth for us. Prem plays a very important role in its current state, but then also in the future state as those customers move to cloud. Operator: The next question comes from David Kwan with TD Cowen. David Kwan: It sounds like the gains you've been making on the on-prem side has been more driven by you grabbing market share because of those players exiting versus kind of maybe a slowdown in that transition towards cloud-based solutions. Would that be a fair statement? Charles Salameh: Yes, that would be a fair statement. David Kwan: Okay. That's great. And it relates to the M&A strategy. So it looks like you're looking for acquisitions in probably higher growing markets, which I suspect might carry higher valuation multiples amongst other things. So are you willing to make a dilutive acquisition here to help bolster your growth profile? Charles Salameh: We don't -- are we willing to -- is that the question? Maybe to some degree, but to be honest, I think as the year progresses, also with the dynamics of what's going on in the industry with point solution providers, there are opportunities of other companies that are relatively close to our valuation that are in the market today. Particularly in the security MSP space, the SD-WAN market. The point solution providers are beginning to realize the market is looking for -- especially the mid-market is looking for single vendors that can provide a holistic set of solutions with a service wrapper on top. And going it alone, the valuations, I think, are coming down, and there's opportunities for companies like ours, especially given where we are with our leverage ability of the company to find targets, plenty of targets that are not going to be very dilutive to the company. So if there's something really good out there, and it's a smaller acquisition that's slightly dilutive, I don't think we'd have a problem with it. But nothing that would be too material from a dilution point of view. David Kwan: Okay. And how big of an acquisition would you look at? I don't know if that view has changed over the last year or so? Charles Salameh: The spectrum changes, right? I mean it's really about the value of the acquisition and how it fits into the opportunity that we see in the market relative to our base and the clients and the industries we're focusing on. But I've already expressed, we could go big with an acquisition if we wanted to or we could pick up a client and account for something sub-$1 million. It really depends on what -- how we're going after adding value to particular parts of our portfolio that capture market that we're maniacally focused on, health care, retail, education. And I think as the year goes on, that ideology might shift. But our target list right now spans a large spectrum of smaller type -- buttress type tuck-ins and larger type accounts that would be more materialistic to the company. David Kwan: Great. That's helpful. Just a couple more. Are you planning to provide historicals as it relates to kind of -- I assume it sounds like you're going to be changing how the revenue is going to be classified in your financials? And are you going to provide maybe other financial metrics like ARR? Lawrence Stock: We certainly will do both comparatives, David, and then look to add additional metrics beginning in Q1, absolutely. David Kwan: Great. Last question. Just looking at the revenue by geography, obviously, the vast majority of the revenue is coming out of the U.S. It's kind of been -- the growth has been kind of low to mid-single digits on the negative side. But outside the U.S., there's been much larger declines. So wondering what's driving that difference there? Is it just weaker demand abroad? Or are you maybe culling some of your international channel partners? Just wondering what's going on there. Charles Salameh: I'll let Jeremy fill in some blanks here, but I'll just give you a high-level view. Our focus has been North America, particularly the United States. It's just -- as we prioritize where we put our energy through the transformational phase of the company in the first 2 years, our focus was to revive the brand and really begin to open up new channels in the United States. Our focus now as we move into the transition and growth phase of the company is to focus on international markets, mostly English speaking, Canada and U.K. In the U.K., our business there has been predominantly built on the back of VoIP hardware technology, legacy technology that we own, proprietary technology. Our goal now is to expand the rest of our toolkit into those markets, into the U.K. and expand our international footprint, but also into establishing new presence in areas like Canada, where we don't really have much of a presence, but we have lots of infrastructure already in place. So the international side of the business is kind of part of the plan for this year and certainly will be a major part as we go into FY '27 and FY '28. Jeremy Wubs: I'd just add to that, too, that the international portfolio is very heavily oriented towards hardware products, right? So it doesn't have -- today have limited SaaS and software products that are of high margin [ pursuing a big ] part of our core growth strategy. So we've been selective in how we've moved investments in dollars towards core and where we see the biggest growth in margin opportunity. So that's why they certainly results in those areas in those areas. International theaters haven't been as strong because it's kind of a purposeful for us in terms of where we put our dollars and where we get the best return going forward. Charles Salameh: It will be part of the program [indiscernible]. Jeremy Wubs: Yes. Historically, a lot of it -- with the product mix, the later life cycle products. Charles Salameh: Correct. Operator: This concludes the question-and-answer session and today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
John Messenger: Great. Good morning, everybody. Thank you for being with us this morning for the Barratt FY '25 full year results meeting. Just a couple of points of housekeeping. There is no fire alarm expected. So if there is an alarm, follow Mike through that door, because he will be the first off or through this door with myself. We're going to start with David in a moment. So David is going to do a first intro, then pass it over to Mike, and then return to David, and then we'll open it up for Q&A. But with that, I'll hand over to David. Thanks, David. David Thomas: Thanks, John, in your comparing role. So good morning, everyone, and welcome to the first full year Barratt Redrow presentation. So as John said, Mike and I are going to take you through our FY '25 performance and current trading as well as updates on sales outlets and also building safety. We'll conclude by looking at the market and the underlying fundamentals and why Barratt Redrow is best place to perform across the cycle. First of all, I'd like to just take you through some of our key messages for today. In FY '25, the market clearly remained challenging. Affordability was a constraint for many and consumer confidence remained low with political and economic uncertainty persisting. Despite this, the business has produced a very resilient performance, both operationally and financially, alongside completing the majority of the Redrow integration whilst delivering cost synergies well ahead of target. The business remains financially robust, underpinned by our strong balance sheet. And now through our acquisition of Redrow, we have 3 distinct brands that position us well for future growth. So looking in a little more detail at the operational highlights from last year. Bringing the Redrow brand into the business was, of course, a particular highlight, allowing us to reach most of the market as well as capitalize on synergy opportunities. We received CME clearance in October 2024 and as mentioned, have already completed the bulk of the integration. This allows us to concentrate on maximizing the benefits of the combination and driving the total business forward. In the year, we remained active in the land market, enhancing our land position through strong approval levels utilizing our numerous land channels. We delivered 16,500 homes, which is a significant achievement in what is a challenging market. I would also like to take a moment to highlight some of our externally accredited achievements over the past year. Our repeated success in the HBF ratings and the NHBC Pride in the Job Awards are testament to the dedication of our teams across the business as well as the quality of the training and the customer first culture we maintain across the group. This quality is also reflected in our Trustpilot scores given by our customers, which award all 3 brands with the highest rating of Excellent. Mike will cover the financials in much more detail, but just to pull out a few highlights. Whilst our completions came in modestly below guidance, our adjusted profit before tax and PPA was in line with market expectations. This reflected our rapid progress on cost synergy delivery with GBP 69 million confirmed in the year and GBP 20 million crystallized in FY '25, double our previous forecast. Our return on capital employed, excluding PPA, improved to 10.7% from 9.5%. We finished the year with a strong net cash position, supporting our growth and capital allocation plans. Now looking at reservations. Our growing portfolio of PRS partners helped to increase our overall reservation rate to 0.64. Additionally, some improvement in mortgage competition and availability provided a boost to our net private reservation rate, excluding PRS and other multiunit sales. However, the improvement in the rate was offset by the reduced number of sales outlets and our opening order book. Turning now to completions. Our total completions were down 8% compared to the aggregated figure for FY '24. This was due to a reduction in affordable completions, reflecting the nature and timing of these types of deals. However, we were pleased that our underlying private completions in the year were up around 3.5%. Our average selling prices saw price inflation of around 1% with customers remaining very sensitive to both increases in headline prices and reductions in incentive levels. Other increases in underlying private ASP were largely due to increased delivery of larger homes outside of London. For more detail on reservation rates, completions and ASPs, please see the information in the appendices. Our land bank supports our medium-term growth ambitions. Our multiple land pipelines allow us to source high-quality land throughout the cycle. While planning remains a slow process, we are very optimistic about the reforms and the positive changes we will see once the legislation is passed. Gladman remains an important part of our business and will also benefit from the planning reforms, being the partner of choice continues to benefit us in the land market as well. In the year, we announced the MADE partnership alongside Homes England and Lloyds Banking Group, and also the West London partnership with places for London, giving us access to further high-quality land opportunities. Moving on to outlets. The proposed planning reforms, as I've said, are extremely positive. However, they have taken longer to come into law than we expected. Therefore, as announced in our July trading update, we expect outlet numbers in FY '26 to be largely flat. From FY '27, we will start to see organic outlet growth plus the benefit of our revenue synergy outlets. As seen on this graph, the vast majority of our FY '27 outlets are already open or have detailed planning concern. In FY '28, there is still a relatively low proportion of forecast outlets that rely on future planning approvals. This provides us with excellent visibility over the next few years and gives us confidence in our growth forecasts. On current trading, in July and August, we saw our net private reservation rate, excluding PRS, increased slightly compared to the same period in FY '25. However, we recognize that the market remains subdued. And after speculation about stamp duty, some customers are going to wait to see the impact of the budget in late November. Meanwhile, the lack of PRS reservations in the period simply reflects the timing of deals. Our year-to-date completions are marginally ahead of last year's and our forward sold position is in line. So we are very pleased with the solid start to the financial year. So I'm now going to hand over to Mike who will take you through our FY '25 performance and financials. Michael Scott: Thanks, David. Good morning, everyone. So as David said, I'll take you through our FY '25 performance and also spend a few minutes this morning on building safety. This slide shows FY '25 performance against the reported position for FY '24, which obviously excludes any impact of the Redrow acquisition. I'll touch on the P&L metrics shortly. But you can see here our total home completions of 16,565 homes and strong closing net cash position of GBP 773 million after the payment of GBP 249 million of dividends, GBP 50 million spent on the share buyback and just over GBP 100 million spent on building safety remediation. So if I move on now to a more meaningful comparison of performance as Barratt Redrow. As we did at the half year, we're focusing on the FY '25 performance stripping out the impact of deal purchase price allocation adjustments, which I'll touch on later. And these are noncash accounting adjustments, which largely fall away from FY '26 onwards. We think this is the best view of underlying trading in the business during the year. In the comparative for FY '24, we're including Redrow here from the 24th of August 2023, but without any adjustment for accounting policies. And we've put a more detailed slide in the appendices if anyone has the appetite which shows the reconciliation of all of these amounts to ensure you've got full transparency. So several points to highlight. First of all, total home completions, as David said, were down 7.8% as a result of lower outlet numbers during the year. Despite the lower volume, adjusted gross profit was broadly flat at GBP 970.3 million, and gross margin improved by 30 basis points to 17.4%, which mainly reflected modest sales price inflation and the positive mix effect of more recently acquired land coming into production. Adjusted operating profit was up 2.9% at GBP 595.4 million, with margin up 50 basis points at 10.7% reflecting the benefit of cost synergy delivery during the year. Adjusted profit before tax was GBP 591.6 million, slightly ahead of guidance in July, and adjusted EPS was 30.8p, which delivers a full year dividend up 8.6% to 17.6p. So overall, we're pleased with the performance of the combined group delivered in the year despite the reduced total home completions and particularly positive to see both gross and operating margins moving in the right direction. This slide updates on the accounting fair value adjustments that have been finalized since our provisional position at the half year, and 4 changes to draw out here. First of all, the uplift on land and work in progress is now GBP 120.4 million, that's up from GBP 93 million at the half year, and that reflects the final valuation of sites in the opening balance sheet. Secondly, as I mentioned back in February, the recognition threshold for building safety liabilities is lower than normal for Redrow because we were required to bring contingent liabilities onto the balance sheet by the accounting rules. As we detailed in the July trading statement, we've increased Redrow's building safety provisions to take into account concrete frame issues in London, and this has increased this adjustment to the GBP 144.5 million shown here. The final changes relate to the tax effect of the fair value adjustments, resulting in a GBP 94 million adjustment to deferred tax. So goodwill recognized on the Redrow transaction is, therefore, GBP 321.9 million and that's up from the provisional estimate of GBP 259 million. So again, just to note that most of these fair value impacts have actually already unwound in FY '25 with a reduction of GBP 103.3 million in adjusted profit before tax. We're expecting a further GBP 20 million charge in FY '26 before this becomes immaterial to future years. So moving on to land, and this is the updated position on embedded gross margin in the land bank. And pleasingly, the land bank margin continues to improve, up 90 basis points since half year to 19.2% at the end of June. So with little net inflation impact, roughly 1/3 of the improvement came from the utilization of land in the half and the remaining 2/3 from the new sites that we've added to the land bank. And as you know, we remain focused on improving this position over the medium term to our current gross margin hurdle rate of 23% by optimizing price, managing build cost inflation effectively and bringing new land into production. So moving on to look at adjusted operating margin in FY '25. And from last year's Barratt only operating margin, we saw a reduction of 120 basis points from reduced volume. That was almost all offset by improved pricing across the year. And as we've said previously, build cost inflation was broadly flat in FY '25. Looking at our same site, same house type measure of inflation, which covers around 1/3 of our volume, like-for-like sales price inflation was around 1.4% in the year. Last year, we saw a step-up in completed development costs, but these have normalized this year, resulting in a positive margin benefit of 80 basis points. The impact of other mix effects, including Redrow coming into the group, contributed 70 basis points together with a further 30 basis points from the cost synergies we realized during the year. Our adjusted operating margin before the impact of fair value PPA adjustments was therefore 10.7%. And you can see the impact of those PPA adjustments, which take margin to 9%, flat on the Barratt only margin from last year. So now just to update on cost synergies. We're making really good progress on realizing the cost synergies target of at least GBP 100 million with GBP 20 million included in the income statement in FY '25. With 9 office closures confirmed, 6 were completed by year-end and 3 are in the final stages of closing at the end of June with GBP 23 million of savings confirmed. The head office rationalization is also underway, and will complete shortly with GBP 21 million confirmed at the 29th of June. And on procurement, we're making good progress in aligning pricing and terms across key materials categories with GBP 25 million confirmed at the 29th of June. As we said, our operational leadership was aligned and effective from the 1st of July 2025, and the IT integration is in progress with the migration of 6 remaining divisions expected to complete in FY '26. Having crystalized GBP 20 million of cost synergies in FY '25, we're well on track to deliver an incremental GBP 45 million in FY '26. So on revenue synergies, just to give you the latest numbers to date, we've now submitted 25 planning applications at the end of August, and we've already received planning permission on 9 of those sites. We expect to submit the remaining applications during the course of FY '26, and we're very much on track to see the first incremental outlets ready to open at the start of FY '27. So now I'd like to spend a few minutes just updating on building safety. So as you know, our approach from the start of this issue has been to focus on the safety of the buildings we've built and the people who live in them. We've been very engaged with government, and we were the first housebuilder to create a unit dedicated to remediation, and we commit significant time and resources to support it in delivering our program. We apply a rigorous process in assessing buildings within the scope of our obligations. That includes using reputable fire engineers and seeking peer reviews of all fire risk assessments undertaken on our buildings. We're also making some progress with recoveries from the supply chain, where we have a robust case to pursue them for substandard workmanship or design. So looking at our building safety provisions, we currently have GBP 886 million on the balance sheet relating to fire and external wall system issues. During the year, we brought the Redrow provision of GBP 184 million onto our balance sheet. And as we announced in July, within the Barratt legacy portfolio, we've provided GBP 109 million across 3 areas. Firstly, GBP 76 million in relation to developments in our Southern region, which related to a specific build typology we don't think is repeated anywhere else in the group. We've also seen GBP 17 million of incremental costs at an existing remediation project in London. But other than that, the underlying position was relatively stable with a net GBP 16 million movement of costs, which was offset elsewhere in the income statement by supply chain recovery. Moving on to look at the provision for concrete frame issues. We carry a provision of GBP 187 million at the end of June. During the year, no new buildings came into scope in the Barratt portfolio. As we updated in July, we identified concrete frame issues similar to those identified on legacy Barratt development at up to 4 Redrow developments. And we booked GBP 105 million to the opening balance sheet provision for these issues. But based on the reviews we've carried out today, we don't expect any further buildings to come into scope for these frame related issues going forward. So on to the balance sheet, and here's our usual balance sheet breakouts. And in the appendices, we've included a slide which reflects the impact of the consolidation of Redrow at fair value and also the movements from underlying trading. So 2 points to highlight here. First of all, the ongoing organic investment in land. And as well as bringing Redrow's land into the balance sheet, we invested an incremental GBP 181 million across FY '25. The significant increase in land creditors saw an additional GBP 167 million added over and above Redrow's consolidation. So land creditors remained below the target range of 20% to 25%, but moved up to 15.9% this year, and we're looking to ensure that we add land on deferred terms to take us into that 20% to 25% range. Part exchange has increased by GBP 39 million, which is a reflection of its importance of a selling tool in a tough market, but more than 2/3 of the 549 homes in our portfolio had already been sold by the 29th of June. And as you know, we keep tight control of part exchange stock. So here's the cash flow bridge for Barratt Redrow from reported operating profit on the left to the net cash outflow on the right and really just a couple of things to point out from this slide. Firstly, a step-up in tax payments was the prime driver of the GBP 101 million outflow in interest and tax. And as I've already noted, building safety spend totaled GBP 101 million. Our operating cash inflow was GBP 50 million, and we brought Redrow's cash onto the balance sheet and also made some further investment into additional timber frame facilities at our Oregon factory in Scotland. With dividends paid and the share buyback of GBP 50 million, the net cash outflow for the year was GBP 96 million. So just to update on capital allocation and just reiterating our unchanged capital allocation priorities here. Clearly, our enhanced scale and balance sheet strength with net cash of GBP 772 million and committed lending facilities of GBP 700 million put us in a very strong financial position looking forward. We're focused on investing in our business to drive our future growth. David detailed our sales outlook profile, and we're focused on delivering land to accelerate development using our 3 brands. We remain committed to innovation and development and we'll continue to invest in opportunities like the timber frame facilities and also our sustainability initiatives. And finally, we have a clear approach on shareholder returns, including our ordinary dividend at 2x cover and the ongoing share buyback program of at least GBP 100 million per annum. So turning now to guidance. Most of these points have been covered, but just to highlight, we expect our adjusted administrative costs to be around GBP 400 million. This reflects the additional period of Redrow's overhead base, which will impact FY '26, underlying cost inflation and the benefit of incremental synergies of approximately GBP 30 million. We're anticipating total synergies of GBP 45 million with the balance of GBP 15 million crystalized in cost of sales. A finance charge of approximately GBP 50 million, which is dominated by noncash charges in relation to land creditors and legacy property provisions as well as modest cash interest income on a reducing cash balance. In relation to land, we expect to operate at broadly replacement levels and spend between GBP 800 million and GBP 900 million on land and land creditors in FY '26. On building safety spend, we estimate spend will be around GBP 250 million for FY '26. And within this, I'm assuming that around half of our building safety fund costs will be paid during the year, so that's around GBP 70 million. Looking at net cash at the end of June 2026, we expect to be between GBP 400 million and GBP 500 million. So finally, to summarize, we believe we've delivered a solid financial performance in FY '25 in what was a tough market. Adjusted profit before tax was delivered slightly ahead of expectations for the year. And notwithstanding the tough market backdrop, our balance sheet remains strong. We've delivered cost synergies ahead of schedule whilst also making good progress on revenue synergies and the wider integration program. Our land bank and strong balance sheet give us a great platform to grow the business. And finally, we've put in place both clear capital allocation plans with an updated dividend policy alongside the annual GBP 100 million buyback program. And with that, I'll hand back to David. David Thomas: Thanks very much, Mike. And now just turning to look at the market. So I think whilst I've covered earlier that the current market clearly has its challenges, I think we need to bear in mind that the fundamentals of our industry remain very strong. Housing is clearly a top priority for government and the demand for homeownership remains steadfast. When consumer confidence returns, the policy environment becomes clearer and the planning reforms kick in, we can expect to see a strong uptick in planning approvals, outlet growth and opportunities to increase sales and volumes through our 3 leading brands. We remain confident that Barratt Redrow is best placed to navigate the market at all points of the cycle. Fundamental to Barratt Redrow are our 3 high-quality differentiated brands, and we have the skills and experience to deploy them effectively. These brands allow us to operate in a variety of locations and local markets with the optimal divisional infrastructure to match. Our customer focus is clearly demonstrated and recognized by our numerous third-party credentials. We have demonstrated that we are a reliable partner, allowing us to be flexible and innovative. Our reorganized divisional structure and brand portfolio positions us well for growth over the medium term. And finally, we remain financially strong with a solid balance sheet, a robust net cash position and cost synergies, which will increasingly drive higher profit margins. So in summary, we remain confident in the medium-term guidance that we gave in February. Outlet growth on which we have good visibility will allow us to reach our outlets goal, which will flow through to 22,000 total home completions. Our progress on cost synergies has enabled us to deliver on profit expectations, and we will continue to benefit the business financially as we move forward. Savings through synergies as well as greater efficiency of our fixed -- on our fixed cost base will help us to drive our operating margin back to 15%. We will be increasing our use of line creditors, which will aid our return on capital employed, recovering back to 20%. Also helping us to improve return on capital employed will be the effect of multi-branding of developments using our 3 high-quality and differentiated brands. And finally, as we've touched on, we remain financially robust and that gives us confidence in our growth aspirations and also providing stable shareholder returns. Thank you very much. And Mike and I will be happy to take questions, which John is going to host. Thank you. John Messenger: Thank you, David. We're going to open up for Q&A. [Operator Instructions] We'll start in the front row with Will, if you could, please. William Jones: Will Jones at Rothschild & Co Redburn. Try 3, please, if I can. First, just referencing, I think, in the statement, you talked about additional risk given the obvious and understandable around the budget in November. And I think the need for a normal autumn. Could you just expand on what the normal autumn might look like? And perhaps just remind us of the -- roughly the full year sales rate you're assuming? Second one was actually back to building safety, 2 parts to it. To what extent is there still risk around the building count with respect to inactive buildings maybe coming into scope? And perhaps you can expand on the other side, the recovery process. I think you talked about some steady progress there, but what's the potential for that over time? And then the last one is maybe just around build cost. I think you've reiterated your guidance for the current year and you've got good visibility, but just wondering what -- how you think things might shape up for the conversations that start to take place at the end of the year, start of calendar of '26 with suppliers, subdued market for you guys? Will it be, I guess, subdued for them in terms of what they end up achieving? David Thomas: Well, first of all, good morning, Will. Good to see you in the front row. So Mike will pick up in terms of building safety and also on build costs. I mean if I just touch in terms of the budget, I mean, I think really kind of 2 points to make. I mean one is, look, we're pleased with what we've seen through July and August. So that's the first thing. And we've also provided that information in terms of reservations through July and August. I think it's understandable that we would flag that speculation relating to the budget can affect customer sentiment. And we recognize that, that can be both positive and negative. So what we've got to do is we've just got to concentrate on trading our business, making sure that we're putting attractive offers in front of our customers, and we feel that we're doing that effectively, given the market conditions. In terms of rates of sale, we would normally see some tick up as we move into the autumn. So we've clearly provided rates of sales through July and August. I think the tick up in the autumn or the tick up in the spring has probably been less substantial than it used to be. Primarily, I think because we've just seen strong trading through, say, January, February or strong trading through July and August, which we haven't necessarily seen previously. And I mean overall time, I think we said earlier in the year that somewhere around about 0.6 is the kind of rate of sale that we're looking at as a group. Mike? Michael Scott: So if I pick up building safety first. So first of all, on the portfolio that's provided, I think we've got increasingly good visibility on costs and progress there. So about 90% of that portfolio has now been through some kind of tender process on costing or we're actually actively remediating it. So I think the visibility we've got on that is really good. On inactive buildings, I mean they have been through a process, albeit largely desktop in terms of documentation around the status of risk assessments, the build typology, the external wall systems and so on. So there's been an element of process there already. And that's why we don't believe that there's work to do, and they're not in the active bucket. And then if you look at the flow-through of buildings from that sort of inactive group into the provision over time, actually, it's very, very low in the second half of the year, literally just a couple of buildings that moved across. So I think as we move through time, we are increasingly confident of the position. The problem with it is you can't say that nothing will come out as we get into buildings and time passes. But I think our visibility and confidence is increasing. On the recovery process, I mean, we're engaged in a number of conversations. Obviously, we can't talk too much about them for commercial reasons, obviously. But I think we are engaged in that process. We recovered GBP 60 million from the supply chain during the year, and we're actively engaged on a program to do that as we go forward. Moving on to build cost. So I mean, I think we're still comfortable with the 1% to 2% guidance range for the year from everything that we've seen. As we said previously, a little bit more pressure on labor and the subcontractor side than on materials. And I think some of that's now the flow-through of the national insurance increases and the other labor cost increase is coming through. And again, it's the early-stage trades. It's the ground workers and so on that we're seeing a little bit more pressure on. But we obviously also have the benefit of the cost synergies through our procurement program. And again, we've had really good engagement with the supply chain on that. We're able to get very good forward visibility of the growth of the business, which is helpful. So overall, we're comfortable with 1% to 2% for this year. John Messenger: Aynsley from room. Aynsley Lammin: Aynsley Lammin from Investec. Just 2 from me, please. One, if you could just provide a bit more color on incentives and pricing and what you're doing going into the autumn selling season in relation to that? And then secondly, just on the planning, obviously slow to come through at the local level. Could you just remind us of the time line of what happens from here when you expect that to actually start to impact positively at a local level when the legislation comes in, et cetera? David Thomas: Yes. Aynsley, so I mean, first of all, in terms of incentives, I mean, the short answer is no real change in relation to incentives or incentive levels. I think when you look at our incentives, I mean, I won't run through them all, but if I just highlight 2 or 3 of those incentives. So for example, for first-time buyers, we will offer a deposit match. So if the first-time buyer has a 5% deposit, we will effectively match that deposit. It allows the first-time buyer to get on to a 90% loan to value, and that is an attractive proposition. Secondly, we have, for a period of time, accelerated post COVID, run a key worker discount. So primarily aimed at blue light workers, but a broader range has been brought in of key workers. I don't think analysts are in that range. But we can expand it, and that is a really attractive proposition. So we're typically offering a 5% discount subject to ceiling. So it probably blends at about 3.5%, 4%. And then the third offer is part exchange. So part exchange is probably our most expensive offer. We don't look to make profit on the part exchange offer, but it is a very attractive offer for consumers. So if you were a second or a third time buyer, then clearly taking all of the pain out of the move process is attractive. And I think we tend to see that when the second hand market, the existing home market is a bit slower than part exchange becomes much more attractive. But we're still seeing overall incentive levels as we've set out sort of 6% plus in terms of overall incentive levels and quite a bit of that is driven by part exchange. In terms of planning and infrastructure, we've said very consistently that the government coming in, in July '24, have really tried to take a transformational approach to planning. We have to remember that if you go back to March, April '24, we were going backwards very, very rapidly from a planning point of view. And I think the government has set out what I see as being a very bold and ambitious agenda in terms of planning, not just for residential development, but for commercial development, for infrastructure and so on. Most of that is contained within the planning and infrastructure bill. I think it has taken a bit longer than we would have thought back in July, August '24. And our understanding of the time lines presently is it's going through the review within the House of Lords. And we'd expect that perhaps November, December, it will come into legislation. And then all local authorities will need to comply with the requirements of the planning and infrastructure bill. So we should start to see that taking effect during 2026. John Messenger: Chris? Christopher Millington: Chris Millington, Deutsche. First one, I just wanted just to kind of gauge your steel behind the outlet opening profile. Obviously, we had a delay last time. They're still obviously subject to third parties kind of moving in line just how front or back-end loaded in those periods, do those outlets come through. So that's just the first one. Second one is looking more at the longer-term shape of the balance sheet. There's obviously quite a lot of demands on cash over the next few years. Where would you start getting uncomfortable with regard to adjusted leverage? It does look like the net cash balance is probably going to be eliminated in the next couple of years? And the next -- the last one, I thought a really helpful slide on the land bank margin really good to help us build it up. Perhaps you can give us some sort of guide as to the evolution of that maybe something like when do the sub-15% gross margin categories get eliminated or something to that effect? David Thomas: Thanks very much, Chris. If I pick up on outlets and then Mike will pick up in terms of the sort of shape of the balance sheet and cash and land bank margin. So think in terms of outlook, so we recognize that we had a revision of guidance for outlets for FY '26, which we updated the market with that in July. I mean I think our confidence regarding outlet delivery is twofold. One, we're putting it up on a slide, we've broken it down in detail, and I'm presenting the slide. So I think that demonstrates a strong level of confidence. We wouldn't normally give that level of detail. I think the second point I would say is that this is unusual. I mean I've been here 16 years, and I think at any point over the last 16 years, if we had put up an outlet profile, we would have had much less with detailed consent or much less with planning submitted. And that's just a byproduct of 2 things. One is that since we've gone back into the land market post 2022, we have acquired sites that can be single, dual or triple branded. So that gives us good outlet delivery. And secondly, through the combination with Redrow, we've identified that 45 sites can be delivered. And obviously, we see that there are more than 45 potential. So we take a reasonably conservative view and say we can deliver 45. And that's also entirely in our control, and Redrow are already on those sites or Barratt are already on those sites, and we're effectively either doing a plot substitutional or we're doing a replan. So yes, we have a high level of confidence regarding delivery. As I touched on a moment ago, I think everyone in the industry is very positive about the government's approach in relation to planning. I mean why would you not be? But I think it has been more protracted than anyone would have expected because we're now 14 months later, and we still don't have the legislation. So -- but we are where we are. The legislation will come, and it should be effective from the beginning of '26. Michael Scott: If I just pick up on the balance sheet first. So I guess the first point to make is we're starting from a really strong place. GBP 770 million of cash at the end of last year. We flagged in February that there would be a couple of years of investment in web and infrastructure to get the new outlets open and get us up to the 500 outlet target in a few years' time. So we do expect to be in that phase. We expect to use that net cash over the next couple of years, but then we start to generate cash at the end of the plan as those outlooks come into production and we sort of stabilize outlet numbers. I think when you step back from it, the shape of the balance sheet over the last 3 or 4 years has probably been the outlier in a sense with the level of net cash that we've been holding. If you look over a longer period of time, we'd normally have targeted very small level of net cash at year-end. And that's probably where we'll end up getting back to trust. But I think we're starting from a very strong place. We've got good line of sight to those investments and work in progress and infrastructure to get the new outlooks open. And we've said many times that the strength of the balance sheet is a real priority for us and the board as we go forward. On the land bank margin, I mean it's difficult to predict exactly when those sites will roll off, but average site length is sort of 3.5 years. So you think over the next 2 or 3 years, you'll see those lower site margins roll off. We've given the medium-term target of getting to the hurdle rate of gross margin of 23 and then 24 when the procurement synergies have kicked in. So you'd expect to see that evolution continue over the next few years, 90 basis points up in the year this year with the land we've added. We're carrying on adding land hurdle rates that will blend up over time. So again, it will take a few years to get there, but we're confident that that's directional travel. John Messenger: Great. Ami? Ami Galla: Ami Galla from Citi. A couple of questions for me. One was on the gross margin in the land bank. Can I clarify, is the synergies on top of that, the procurement synergies associated with the gross margin, will that be on top of that? Or is that included in the land bank gross margin that we see? The second question was really on the WIP investments linked to outlets. You've talked about this previously, but can you remind us how should we think about that investment profile over the medium term? And the last one was on the ASP in the land bank. That's also marginally higher, and I presume that's mix as well. Can you give us some color as to how is that -- how is the shape of that mix adjustment over the next 3 years? Michael Scott: Sounds like 3 for me. So gross margin in the land bank does include procurement synergies. So that's fairly straightforward. On work in progress, so I think we're guiding this year that we'll have GBP 200 to GBP 250 million of incremental with investment as we go through this year. And again, that's investing in outlet openings that we'll see coming through both at the end of this year and into FY '27. And then we're not guiding for '27, but we've been at that level of GBP 200 million to GBP 250 million for the last couple of years. And on ASPs in the land bank, it is largely reflective of mix. And clearly, in the land bank now we're reporting Redrow as well, which operates at a slightly higher ASP than Barratt and David Wilson did previously. We're not seeing any particular sales price inflation at the moment. Our sort of like-for-like measure is broadly flat on selling prices. So the increase in ASPs that you're seeing is coming through the mix of sites rather than inflation. John Messenger: Clyde? Clyde Lewis: Clyde Lewis at Peel Hunt. 3, if I may as well. Firstly, on the desire to grow the deferred terms around the land buying, how easy do you think that's going to be? And do you think that's going to limit your choice in any way in terms of what you can buy? Second was around the sort of bulk sales mix in terms of the volume guidance this year, what sort of contribution are you expecting to see from bulk sales? And the third one probably was going back to your comment, David, about being up at the company with 16 years, pretty much in every one of those years, you will have seen some sort of demand incentive from the government, whether it's stamp-duty holidays or specific first-time buyer help. Do you think this government actually understands that it's probably going to need some of that to try and get the overall housing market back to where it wants to be, despite all the extra money they put into the affordable housing sector? David Thomas: Yes. Okay, Clyde. Thank you. I think if I just pick up on the deferred terms and Mike will pick up in terms of multi-unit bulk sales, and then we'll just talk -- I'll about the demand side. So I think on deferred terms, I mean -- I think it obviously depends on the position of the land owner, but I would say as a generalization, we are buying sites that are larger than average and the ability to secure deferred terms is greater. So I don't see anything that will change that because we see that when we're bidding maybe on a site that might be 150 to 200 plots, there can be a huge amount of interest in those sites, whereas if we're looking at sites that are maybe 750 plots and above, there's just a limited number of buyers, probably ourselves, Vistry, maybe a couple of the other majors might be in that market. And so I think there is an ability to structure deals, which is -- it's got to work for both sides, but securing deferred terms for us has always been important, and we're just going to place a little bit more emphasis on it going forward. So that's the kind of deferred terms. I think on the demand side, and you've seen everything unfold in terms of the way that the markets evolve. So all the 16 years I've been here apart from the last 2 years, there has been a government-backed program in the market. So since 2009 without interruption. The programs have changed in their nature. And as you know, in the early days, the house builders either participated by providing 50% of the shared equity loan or the house builders paid to access the scheme. And with Help to Buy, the house builders were not asked to pay to access the scheme. And we've said Barratt Redrow, and I know many other house builders said that we would happily pay to access the scheme. We see that when you look at affordability in areas such as London or London in the Southeast, affordability for first-time buyers is at record levels of challenge. We've not seen the kind of metrics on affordability previously. And therefore, you can see that particularly in London, as you know, London for us is a relatively small part, 5% to 7% of our completions in London. But the reality is that affordability challenges in London are acute. And you can see that coming through in terms of the numbers. So our message to government has been the house builders are happy to contribute towards a scheme. It should be targeted at first-time buyers and there should be a particular focus on areas of acute affordability. Michael Scott: And then just on multiunit sales and so on. I think on the affordable side, we are seeing slightly more appetite from the registered providers to do additionality. Again, that was probably backed off a little bit over the last 12 or 18 months, and we're seeing good levels of grant funding come through into some of those deals that we're doing. So I think they'll definitely be a feature for us this year. And then on PRS, as you know, we sort of focused on 2 or 3 key relationships on PRS, the most significant of which is Lloyds Living. And we've talked about the framework we've got in place with them, want to do about 1,000 units a year over time. And in general, as we grow the business to 22,000 homes per year, we think PRS will be about 2,000 of that 22,000. So I think for this year, we'd probably expect multiunit sales in PRS to be just over 1,000 units in the completion mix again. But we're seeing -- we're still engaged in good conversations with the PRS providers. I think that there are still deals there, pricing that we're comfortable to do the deal. And it will just be part of our mix going forward, I think. John Messenger: Charlie? Charlie Campbell: Charlie Campbell at Stifel. Just a couple of questions, please. Just firstly, on mortgages, some changes in stress tests and loan to income. Just wonder if that's had any impact yet and whether we should expect that to have some impact going forward? And then secondly, on Section 106 and HAs, affordable housing, has that appetite return back to normal after the hiatus or do we need to wait for things like the prospectus to come out for the affordable homes program? David Thomas: Charlie, okay. If I pick up both of them. And first of all, I think that everyone is conscious of the fact that there was very substantial tightening of the mortgage lending rules post the financial crisis. And I think we recognize that there is some concerns about a rapid relaxation of those rules. But we would welcome the relaxation that has taken place, and we think that the scope for further relaxation, particularly around multiples of joint income multiples. So I think it's very difficult to disaggregate that from exactly what is the impact. But clearly, it is a positive impact in terms of allowing more lending to take place in the market. And there has been quite a lot of documentation published around the way in which it improves affordability. So that has to be a positive. In terms of the Section 106, I mean, look, at a headline level post the announcement by government, I would say, at June '25, we found the closure of Section 106 agreements in aggregate to be much easier than at June '24. I'm not saying it was easy, but it was much easier. And I think beyond that, it is an assessment on an HA by HA basis. And I think where housing associations have got challenges regarding cladding and cladding remediation, and the government have done something to alleviate that by allowing the housing associations to access the building safety fund. And also where housing associations have got particular challenges around the remediation of existing housing stock, i.e., it needs to be brought up the standard under Awaab's Law. I think the reality is that housing associations have got some cash and funding challenges. So I think it is the housing association specific. And the industry is very definitely flagging that it is not a resolved issue for government. And there's a consultation in terms of the effectively, the equalization of rentals. But that consultation is not closed. And so the equalization of rentals is another very important thing for the HAs in terms of the financial impact it has on the HAs. John Messenger: Allison? Allison Sun: Allison from Bank of America. 3 questions from my side. The first one on the ASP for next year, I don't know what's your expectation is overall. Do you think it's going to still be positive, stable? Or you just still a lot of uncertainties there given the budget impact? Number one. And number two is on the PRS because we also saw the news like the government might impose some landlord tax or the national insurance on the investors. Do you see it's going to be a negative impact for the future investment demand for the PRS? And thirdly is on this future home standard, which I understand we still haven't got full details yet. And I heard there are some builders saying, if there is a mandatory requirement on the solar panel installation, there could potentially be a negative or the downside risk to the earnings for that particular builder. But I wonder if you heard anything on the regulation and what's the progress for the Barratt portfolio? David Thomas: Yes. Certainly. Mike, can you take the ASP one? So if I just pick up on PRS initially. I mean I think this just falls into a category of the sort of budget speculation. And clearly, we don't know whether there is any intention to put national insurance on rental income. So we just have to wait and see. I would think that if you're an institutional investor, then you're going to want to look at that fairly carefully, I would assume. But we'll find out in November about directionally where that is going to go. In terms of the Future Homes standard, so I chair the Future Homes hub. So I'm sort of very close to the Future Homes standard of what's happening with the Future Homes standard. So I think the first thing is that the Future Homes standard has been delayed. It depends on at what point you're measuring, but the Future Homes standard is probably 12 months to 18 months behind when it was originally anticipated to be. And that is giving all participants in the industry more time to adjust. And when the standard comes into effect, we expect the standard to be published prior to Christmas. There will be a transition plan, and that transition plan will run through certainly '26, '27, '28, but the transition plan will be published. And then thirdly, there is a subconsultation about the number of -- the amount of solar panels that will be required on properties. And certainly, from the Future Homes point of view, we've just effectively said that there has to be a balance to that. We shouldn't be in a situation that we're mandating very large quantities of solar panels because the standards can be achieved in different ways, not simply through the provision of solar panels. But when the standard is published in December, we will see the outcome from that. But again, I would emphasize it will be over quite a long transition period. Michael Scott: And then on ASP. So on pricing, generally, we said that using our like-for-like measure last year, pricing was up 1.4%. So that's the sort of underlying pricing position. Year-to-date, that's been flat. So clearly, the pricing position has been more challenging in recent months. And so looking forward into FY '26, we're not expecting any benefit from sales price inflation in the numbers. There will be a small increase in ASPs just coming through the mix effect. We'll be blending in Redrow. And that will be slightly offset by a higher proportion of affordable housing in the year, but I'd expect it to be very slightly ahead year-on-year. I don't think there will be significant movements in the ASPs. John Messenger: Alastair? Alastair Stewart: Yes. Alastair Stewart from Progressive Equity Research. A bit of a niche series of questions all based in Scotland, no vested interest there, of course. Yes. Just a bit of color on Scotland. First of all, you did a couple of deals with Springfield. Any further organic opportunities north of the Borden? Also, the Scottish government seemed to have changed tack quite a lot on -- especially build to rent, but just generally seem to be a bit more pragmatic, let's say. Any color on that? I suppose it's a question for you, David. David Thomas: Yes. I feel well qualified to answer. Yes. Look, we have a big business in Scotland. So we're based in Glasgow, Edinburgh and Aberdeen. And we've had a big business in Scotland over a long period of time. I think that the Springfield deal that you touched on is reflecting two things. One is we have a very positive view of the market in Scotland. It is a market that operates under different regulations and different policy from England. So for example, Scotland never had a government support program, not in the same way. And policies in Scotland have probably been a little more slanted towards affordable housing generally. But we see it as being a positive environment. And therefore, we acquired the sites from Springfield, and they've obviously gone through a restructure of their activities to be more focused in terms of the north of Scotland. So we're positive about that opportunity. Again, I would say that the rent controls in Scotland adversely impacted the buy-to-rent market. And the institutional investor, I think, was less enthusiastic. But that position seems to be altering and therefore, we should see the opportunity for more private rental, particularly for Edinburgh. I think Edinburgh is a very, very strong market or a very strong potential in terms of private rental. And then the other area, which Mike, maybe just touch on, is just on building safety because, again, I think that -- do you want to just touch on building safety? Michael Scott: Yes. I mean, I guess, it's been an open conversation for a while in terms of where the standard for remediation would end up compared to the standard in England and Wales. I think that has moved during -- this year has moved towards the England and Wales position, which clearly for us is positive because that's the basis that we've approached building safety in Scotland, but still not concluded, but I think closer to conclusion and in a more positive sort of state. John Messenger: Marcus? Marcus Cole: Marcus Cole from UBS. Just one question on timber frame. Obviously, you all went up to the factory earlier this year. I'm just thinking about how that's progressing. Any learnings you have there? And how do you think about more about vertical integration on the back of those learnings? David Thomas: Yes, we're very positive about timber frame. I mean, if you -- just to go back to Scotland very briefly, when I came into the business, we were almost entirely brick and block in Scotland. And we're now almost entirely timber frame. So 95% plus in terms of what we're doing in Scotland is timber frame. It would only really be on higher apartments where we would move away from that. So I think that the use of timber frame is going to become more and more prevalent in England. And you can see that through the majors that most people have either got agreed sourcing arrangements or they have their own factories. I mean -- and that's the reality. It's very much the direction of travel. So we are very positive about it. The factory -- the new factory in Derby is progressing well and we see volumes rising. Ultimately, we see capacity between the 2 factories up to 9,000 frames. But I think the opportunity goes beyond that in terms of being able to do more and more within the factories. So having closed panels, being able to put services into the panels, whether it's windows, doors, plumbing, et cetera. There's a lot of stuff that can be done within the factory. So we see that -- what we have in Scotland and what we have in Derby is very much a platform for us to grow from over the next few years. In terms of vertical integration, I mean, I would say our starting position is that we would prefer not to vertically integrate. You'll find that many of the products that we buy we are a relatively small part of the manufacturers business. And what we don't really want to be doing is running a business where because of the economics of the business, we're having to provide a lot of product to other companies. We want to be able to like with timber frame, bring something into our portfolio where it can provide exclusively to Barratt Redrow. And therefore, when you look at the sort of volumes that are involved in certain production areas, that just wouldn't be possible. You wouldn't be able to run the sort of economies on our volumes alone. So I think we're very, very selective about what we would vertically integrate on, but where we see an opportunity like our acquisition of Oregon or for example, we run our own in-house wardrobe factory, then we're certainly happy to further integrate those types of businesses. John Messenger: Any more questions? Hope we exhausted everyone. Thank you, everyone. One more? Yes, of course. Chris? Christopher Millington: Sorry, Chris Millington, Deutsche. It's just about what your thinking is about the proportion of affordable going forward. Do you think it can keep pace with the private growth within the business on volumes? Or is there an assumption that will lag slightly because of the funding issues we've seen historically? David Thomas: I think if you look at a policy level, then I think you would expect the proportion of affordable to increase slightly going forward on the basis that for greenfield sites under the planning and infrastructure build, there will be a higher assumption in terms of affordable for example. So I think you would say that the general trend would be an upward trend on affordable. I think the funding question is we've touched on that, that's a kind of separate question. And the funding challenge is real. I mean the government obviously announced a huge funding program over a 10-year period, but short term, the funding challenge is real. And I think the final point, and we -- this has been well documented in London is that 35% or 40% or 50% of nothing isn't benefiting anyone. And I think we've consistently seen this over 20 or 30 years is that as there is an attempt to take more value from the land, the landowners have an opportunity to say, actually, we won't participate or sites get bogged down in viability arguments. And that clearly is what's playing out in London presently. John Messenger: Great. Thank you, everyone, for coming along. If there are any follow-up questions, don't hesitate to get in touch with myself. But thank you, and we'll close proceedings. Michael Scott: Thank you. David Thomas: Thanks very much. Thanks, everyone.
Operator: Good evening, and welcome to the Nano Dimension Second Quarter 2025 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ms. Purva Sanariya, Director of Investor Relations. Please go ahead, ma'am. Purva Sanariya: Thank you, and good evening, everyone. Welcome to Nano Dimension's second quarter 2025 earnings conference call. Joining me today are our new CEO, Dave Stehlin; and our CFO, Assaf Zipori. [ John Brenton, ] our VP of Finance, will also be joining us for the Q&A session. Before we begin, I will remind you that certain information provided on this call may contain forward-looking statements. Forward-looking statements are not guarantees and involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. The safe harbor statement outlined in today's earnings press release also pertains to statements made on this call. If you have not received a copy of the press release, please view it in the Investor Relations section of the company's website. A replay of today's call will also be available on the Investor Relations section of the company's website. With that, I will turn the call over to Dave. David Stehlin: Thank you, Purva. Purva recently joined as Director of Investor Relations here at Nano, and will be a primary contact for you going forward. Good evening, everyone, and I thank you for joining us today. As you may have read, I joined Nano Dimension last week as the new CEO. While I've been on the Board of Directors since February of this year, I'm excited to take on this role as we work to unlock shareholder value and further strengthen the leadership position the company has earned. Because I'm new, I'd like to share a bit about my background. I've held leadership positions in technology-focused companies for well over 30 years, including as CEO of a publicly traded multinational company MRV Communications and as CEO of 2 venture-backed companies operating in high-growth technology markets. Over the course of my career, I've led multiple mergers and acquisitions and complex integrations and my focus has always been on delivering results, executing strategic plans and maintaining and building transparency. I was drawn to this role because I see a company with a strong balance sheet, excellent technology and products and alignment with the needs of critical and forward-leaning industries such as aerospace and defense, automotive and industrial automation all in the era of manufacturing 4.0. I'm confident that together with the team, I can help unlock the value the company has to offer. With that, let's dive in. We've made significant progress toward our goals since our last earnings call. The current Board, all of whom have joined since last December, have taken the necessary actions to understand our situation, reshape the business and create a more valuable enterprise. As we recently shared and in line with our commitment to maximize shareholder value, the Board has initiated a formal process to explore and evaluate a comprehensive range of strategic alternatives. This is a deliberate and disciplined step to ensure all options are considered to unlock the full potential of the business. To support this process, we've engaged with Guggenheim Securities and Houlihan Lokey as our financial advisers. These world-class firms provide complementary expertise and global perspectives, enabling us to conduct a thorough and disciplined evaluation of our strategic alternatives. We're confident their guidance will support a rigorous process, and we will provide updates when key actions have been taken. I would now like to provide an update on Desktop Metal, and I want to be transparent about the financial impact. Following the acquisition of Desktop Metal, the group of assets was classified as assets held for sale as of the acquisition date, April 2nd. This resulted in a noncash impairment of $139.4 million and a loss from its operation of $30.4 million during the quarter, both of which are included within net loss from discontinued operations. As announced on July 28, following a comprehensive review by Desktop Metal's independent Board to address the significant liabilities and liquidity needs, the company filed for Chapter 11 bankruptcy protection. We believe this removes a significant overhang on our business and provides a clearer path forward. Nano Dimension remains one of the best capitalized companies in its ecosystem and is focused on maintaining financial strength. I'm also pleased to report that our Markforged integration is progressing as planned. Since closing the acquisition on April 25th, our teams have been focused on identifying synergies and aligning operations. Markforged brings an exceptional team and highly respected products that serve critical applications for many leading companies. These efforts, together with our work to streamline our portfolio and sharpen our commercial focus, are helping us to build a more agile and scalable company, capable of delivering strong results over time. So where are we going? And if you're new to Nano Dimension, we are a digital manufacturing leader and a trusted supplier to industries, where performance is critical. We are advancing digital manufacturing through differentiated industrial hardware, software solutions and transformative materials. Our platforms provide customers with measurable gains in quality, efficiency creativity, speed to market and cost improvements, all while keeping security and ROI top of mind. This focus strengthens our customers' operations and positions us to capture long-term growth opportunities in expanding in strategic markets. While macroeconomic headwinds persist, particularly in industrial sectors, we're seeing positive momentum in regulated industries such as defense. For example, during the second quarter, we completed a critical defense order valued at approximately $3 million. This milestone demonstrates the effectiveness of our focus on forward-leading industries, and we expect to generate additional opportunities this year and beyond. Momentum is also building with global brands like Nestle, which recently shared its plans to expand its use of Markforged systems across multiple production sites in the U.K. This will allow them to manufacture more than 5% of their site inventory using 3D printing, demonstrating both the scalability of our platform and the tangible ROI our customers are realizing. Above all, we'll be committed to capital discipline. Every action, whether organic or inorganic, is guided by margin expansion, strategic clarity and value creation. We're encouraged by the momentum we're starting to see and are confident in the foundation we're building to scale intelligently, drive innovation and redefine advanced digital manufacturing. With that, I'll turn it over to Assaf to take you through our results. Assaf Zipori: Thanks, Dave. Before I review our financial performance for the second quarter of 2025, I want to highlight that we've been proactively working through a comprehensive strategic review and the integration of Markforged. I'm also happy to share that we have transitioned our financial reporting from IFRS to U.S. GAAP. This move reinforces our commitment to the highest standards of financial transparency. Unless stated otherwise, all numbers I'll be discussing today are non-GAAP and reflect continuing operations. Desktop Metal is excluded from non-GAAP reporting as it is classified as discontinued operations. Now revenue for the quarter was $25.8 million, representing a year-over-year growth of approximately 72% compared to $15 million in the second quarter of 2024. This growth was driven primarily by Markforged, whose results have been consolidated since the April 25th acquisition and contributed $16.1 million in revenue. Excluding Markforged, revenue was $9.7 million for the quarter, down 35% year-over-year, reflecting strategic divestitures and macroeconomic headwinds, including high interest rates and lingering tariff pressures. Gross profit for the quarter was $11.6 million, with gross margin of approximately 44.7%. This reflects a decrease compared to the prior year's gross margin of 46.1%, driven by lower revenue volumes and product mix. GAAP gross margin decreased to 27.3% from 44.7% in the prior year primarily due to the amortization of the fair value step-up of acquired Markforged inventory. Operating expenses for the quarter were $28.2 million, higher than the prior year due to combined operations with Markforged. However, on a stand-alone basis, Nano Dimension's operating expenses decreased by over 24% year-over-year, reflecting the benefits of our focused efficiency initiatives and disciplined cost management. Adjusted EBITDA for the quarter was a loss of $16.7 million compared to a loss of $14.6 million last year, primarily due to the inclusion of Markforged. Turning to the balance sheet. Our financial position remains exceptionally strong. Total cash, cash equivalents and investable securities stood at $551 million at the quarter end, which includes approximately $16 million of Desktop Metal-related balance compared to $840 million at the end of the first quarter. The decrease primarily reflects the cash considerations paid for the acquisitions of Desktop Metal and Markforged, totaling approximately $179.3 million and $115.1 million, respectively. This substantial liquidity provides us with the flexibility to pursue strategic options from a position of strength. As of August 31st, our cash, cash equivalents and investable securities for Nano Dimension, including Markforged, totaled over $520 million. This does not include any amounts related to Desktop Metal. I will now hand it back to Dave. David Stehlin: Thanks, Assaf. Nano Dimension offers a market-leading mix of products and solutions that address today's needs along with programs that have the potential to deliver significant value in the future. We are advancing digital manufacturing by delivering needed and innovative solutions to customers with precision, performance and flexibility. We're also building the capability to deliver these solutions at scale to address challenges that previously have been unsolved. We've taken deliberate and needed steps to strengthen our business strategically, operationally and financially. We've sharpened our focus on high-value technologies and opportunities, and we remain focused and disciplined in our capital allocation and continue to refine our strategy to build a strong foundation for growth. Our mission remains clear. We aim to lead the future of advanced digital manufacturing. With our differentiated technology platforms, our strong balance sheet and focused execution, we're positioned to create long-term value for our customers and our shareholders. I'm excited by the opportunities ahead, and I'm committed to executing our strategy with focused teamwork, discipline and transparency. Thank you, and we're now ready to take your questions. Operator: [Operator Instructions] This concludes our question-and-answer session. I would like to turn the conference back over to Dave for any closing remarks. Please go ahead, sir. David Stehlin: Thank you very much. And as I said, we're excited about where we're going. There's a lot of work to still be done. We've accomplished a lot and taken away a lot of roadblocks that have been in our path for the last quarter or 2, but excited very much about the market segments that we're focused on. So thank you for your time, and hope to speak to you again in the future. Good night. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Hello, everyone, and welcome to Ferguson's Fourth Quarter and Year End Results Presentation. My name is Nadia, and I'll be coordinating the call today. [Operator Instructions]. I will now handover to host, Brian Lantz, Vice President of Investor Relations and Communications. Brian, please go ahead. Brian Lantz: Good morning, everyone, and welcome to Ferguson's Fourth Quarter Earnings Conference Call and Webcast. Hopefully, you've had a chance to review the earnings announcement we issued this morning. The announcement is available in the Investors section of our corporate website and on our SEC filings web page. A recording of this call will be made available later today. I want to remind everyone that some of our statements today may be forward looking and are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected, including the various risks and uncertainties discussed in our Form 10-K available on the SEC's website. Also any forward-looking statements represent the company's expectations only as of today, and we disclaim any obligation to update these statements. In addition, on today's call, we will also discuss certain non-GAAP financial measures. Therefore, all references to operating profit, operating margin, diluted earnings per share, effective tax rate and earnings before interest, taxes, depreciation and amortization reflects certain non-GAAP adjustments. Please refer to our earnings presentation and announcement on our website for additional information regarding those non-GAAP measures, including reconciliations to the most directly comparable GAAP financial measures. With me on the call today are Kevin Murphy, our CEO; and Bill Brundage, our CFO. I will now turn the call over to Kevin. Kevin Murphy: Thank you, Brian, and welcome to Ferguson's Fourth Quarter Results Conference Call. On today's call, we'll cover highlights of our fourth quarter and full year performance and our market performance for fiscal year '25, including additional details on our customer groups and growth focus areas. Then we'll turn the call over to Bill to review financials, the change in our fiscal year and our new calendar year financial outlook before I wrap up with a few final comments. We'll have time to take your questions at the end. In the fourth quarter, once again, our expert associates drove market outperformance and strong growth as they continue to serve our customers in a challenging market environment. Sales of $8.5 billion increased 6.9% over prior year, driven by organic growth of 5.8% and acquisition growth of 1.1%. Gross margin of 31.7% increased 70 basis points over the prior year. We remain disciplined on cost and generated $972 million of operating profit, which grew 13.4% over last year. Diluted earnings per share increased 16.8% over prior year to $3.48. We continue to execute our capital priorities, deploying $483 million this quarter. Our investments in key growth areas, HVAC expansion, Waterworks diversification, large capital projects in Ferguson Home yielded solid results. We also announced 4 acquisitions in the quarter and 1 subsequent to the quarter, which focused primarily on HVAC and Waterworks diversification. We'll provide more details on these growth areas and the recent acquisitions later on the call. We're pleased to return $354 million to shareholders through share repurchases and dividends. And our balance sheet remained strong with net debt-to-EBITDA of 1.1x. While we continue to operate in an uncertain environment, we remain confident in our markets over the medium term, leveraging multiyear tailwinds in both residential and nonresidential markets as we invest to support the complex project needs of the water and air specialized professional. Turning to our performance by U.S. end market in the fourth quarter. Net sales increased 7.1%, driven by our strong growth in nonresidential markets. The residential end market, which makes up about half our U.S. revenue has remained subdued due to weakened new construction starts and permit activity as well as soft demand in repair, maintenance and improvement. Residential revenue was flat in the quarter. Nonresidential end markets, representing the other half of U.S. revenue showed continued resilience with increased activity on large capital projects. We continue to grow share with nonresidential revenue growth of approximately 15%. We delivered 17% and 13% growth across commercial and civil infrastructure end markets, respectively, while Industrial grew 5%. Our intentional balanced end market exposure and focus on key growth initiatives continue to position us well both in the current environment and into the future. Moving to our U.S. performance by customer group for the quarter. HVAC revenue was slightly down due to softer market conditions impacted by the industry's transition to new efficiency standards and weak new residential construction activity. Despite these conditions, we were pleased with market outperformance during the quarter, particularly given the strong prior year comparable. Residential trade plumbing revenues decreased 2%. The business continues to face headwinds in new construction and ongoing PVC price deflation, while repair, maintenance and improvement is performing better. As we previously shared, we've merged our residential building and remodel and our residential digital commerce customer groups into a unified brand called Ferguson Home. This customer group accounts for approximately 19% of U.S. sales and focuses on the higher-end project market, which delivered Ferguson Home revenue growth of 3% in the fourth quarter. Both Waterworks and commercial mechanical continued to drive strong activity on large capital projects. Commercial mechanical revenue grew 21%, and Waterworks revenues increased 15%, both on top of prior year growth comparables. Our Industrial, Fire & Fabrication and Facilities Supply customer groups delivered a combined net sales growth of 5%. Our multi-customer group approach uniquely positions us to solve complex project requirements and drive market outperformance. Turning to our full year performance. Our teams delivered solid results while faced with challenging markets and periods of deflation. Revenue of $30.8 billion was 3.8% ahead of last year. The actions we took to streamline our business and manage costs more diligently resulted in operating profit of $2.84 billion up 0.6%, representing a 9.2% operating margin for the year. Diluted earnings per share came in at $9.94, a 2.6% increase over last year. Cash generation was strong with $1.9 billion of operating cash flow, which allowed us to continue investing in our growth areas and executing our capital allocation priorities. We returned $1.4 billion to shareholders via dividends and share repurchases during the year, while also welcoming associates from 9 acquisitions, continuing our strategy of consolidating our fragmented markets. And we continue to deliver strong overall returns on capital of approximately 29.4% for the year. Despite the challenging environment, we outperformed our markets, delivered solid volume growth and drove profit expansion in fiscal '25. Next, our performance against the broader end markets for the year. Our residential end markets declined approximately 3%, due to a combination of weak new construction and softer RMI markets. We outperformed with organic revenue up 1%. Nonresidential markets were approximately flat as large capital project activity offset the weaker traditional non-res activity like warehouse and office space. As we discussed in the past, we believe our scale, our size and our multi-customer group approach uniquely position us to provide value on large capital projects. We delivered 6% organic growth in the year, outperforming our typical 300 to 400 basis point market outperformance. And our balanced end market exposure continues to serve us well, and we've continued to take share across both end markets. Now let me highlight our 4 key growth areas that continue to show ongoing returns from our multiyear investments. Our HVAC revenue increased 8% for the year, driven primarily by organic growth and approximately 1% from acquisitions. By leveraging the synergy between our residential trade plumbing and HVAC customer groups, we continue to outperform the market. Dual trade counter conversions, geographic expansion of our HVAC network and strategic acquisitions make up the multi-pronged approach of our HVAC everywhere strategy. We've completed over 600 counter conversions, nearing our goal of 650, which we expect to achieve in early 2026. Our dual trade counters are uniquely positioned to serve approximately 65,000 dual trade contractors, which continue to make up a growing share of HVAC and plumbing markets. Our recent acquisitions of Manufactured Duct & Supply Company out of Atlanta in the fourth quarter and more supply out of Chicago, which was subsequent to year-end, further strengthen our HVAC strategy by expanding our footprint and continuing to support this dual trade professional. For Waterworks, our revenue grew 10% in fiscal year '25, driven by our diversification efforts as we expanded our capabilities to deliver a more integrated solution and address the nation's aging infrastructure. We've expanded our role as a strategic partner by collaborating with engineers and construction professionals during initial project stages and broadened our product offerings to include process equipment solutions. Specifically, our recent acquisitions of Templeton and Ritchie Environmental strengthened our expertise in water and wastewater treatment plant design. This adds to the existing breadth of solutions we already provide for water, wastewater and green stormwater management as well as erosion control, treatment plant construction and metering technology. Our unique approach to large capital projects and the rise in number of projects helped drive 7% total nonresidential growth for the year. We're pleased to be a trusted partner in managing these complex projects that require expertise, scale, operational agility and value-added solutions. By bringing together the capabilities of underground waterworks infrastructure, commercial and industrial PVF and fire protection create a compelling solution, particularly for data centers, large manufacturing operations, life science and health care facilities. Onshoring and restoring initiatives aimed at growing domestic production are further driving activity of large capital projects. We believe our early alignment with owners, engineers and general contractors combined with our deep contractor relationships, our scale and our ability to offer a suite of value-added solutions will continue to position us for success with these projects. Ferguson Home began its rollout in February and is a key milestone in delivering a seamless customer experience across all touch points, including online and in-person. It represents another compelling example of the value our multi-customer group approach brings to the market. In addition to enhancing the experience for residential customers, Ferguson Home is supported by a network of dedicated outside sales and showroom consultants who serve our specialized professional customers. These associates bring deep product expertise and personalized service to builders, designers and other trade professionals, helping meet their unique project needs with precision and care. Bringing together residential building and remodel and residential digital commerce reinforces Ferguson's role as a trusted partner for the professional. We're pleased with the ongoing success of these growth areas and we'll continue investing in them to leverage the unique advantages we can bring to the market that drive outperformance. I'll now pass to Bill, who will discuss the financial results in more detail. Bill Brundage: Thank you, Kevin, and good morning, everyone. Let me start by covering our fourth quarter financial results in a bit more detail. Net sales of $8.5 billion were 6.9% ahead of last year. Organic revenue increased 5.8%, with an additional 1.1% coming from acquisitions. During the quarter, we saw a return to mild inflation with pricing contributing approximately 2%. We saw improvement in finished goods pricing, while commodity-related categories were down low single digits. Gross margin of 31.7% increased 70 basis points over last year, driven by our associates' strong execution and the timing and extent of supplier price increases. We tightly managed operating expenses, benefiting from the streamlining actions we took earlier in the year while we continue to invest in core capabilities for future growth. As a result, operating profit of $972 million was up 13.4% on the prior year, delivering an 11.4% operating margin with 60 basis points of expansion over prior year. Diluted earnings per share of $3.48 was 16.8% above last year, driven by operating profit growth and the impact of share repurchases. And our balance sheet remains strong at 1.1x net debt to EBITDA. Moving to our segment results. Net sales in the U.S. grew 7.1% with an organic increase of 6.1% and a 1% contribution from acquisitions. Operating profit of $962 million increased $118 million over the prior year, delivering an operating margin of 11.9%. In Canada, net sales were 4.8% above last year, with organic growth of 0.3% and a 4.9% contribution from acquisitions partially offset by a 0.4% adverse impact from foreign exchange rates. Residential activity has continued to be softer than non-residential, where the market has remained more resilient. Operating profit of $24 million in the quarter was $2 million above the prior year. Turning to our full year results. Our associates delivered growth amid a challenging market backdrop. Net sales were 3.8% above last year, with organic growth of 3.2% and an acquisition contribution of 1%, partially offset by a 0.4% adverse impact of 1 fewer sales day. Pricing for the year was slightly down as a result of deflation in certain commodity-related categories, particularly early in the year. Gross margin of 30.7% was up 20 basis points. Operating profit of $2.8 billion grew 0.6% over the prior year, delivering a 9.2% operating margin and diluted earnings per share of $9.94 was up 2.6% on the prior year. Next, our cash flow performance. EBITDA of approximately $3.1 billion was up $44 million on the prior year. Working capital investments of approximately $300 million and interest and tax of approximately $800 million were generally in line with the prior year. As a result, operating cash flow was $1.9 billion, up $35 million on the prior year. We invested $305 million in CapEx and generated $51 million in proceeds from asset sales, resulting in free cash flow of $1.654 billion an increase of $132 million over the prior year. Turning to capital allocation. As previously mentioned, we invested approximately $300 million in working capital and another $300 million in CapEx to drive further above-market organic growth. Our Board declared an $0.83 per share quarterly dividend. This is consistent with the third quarter and represents a 5% increase over the prior year, reflecting our confidence in the business and cash generation. We continue to consolidate our fragmented markets through bolt-on geographic and capability acquisitions. As Kevin mentioned, we completed 4 acquisitions during the fourth quarter, including HPS Specialties, a manufacturer's representative of HVAC, plumbing and hydronic supplies serving commercial mechanical and industrial engineering professionals in the Northeast and Mid-Atlantic regions. Ritchie Environmental Solutions, a process equipment manufacturer's representative serving the water and wastewater treatment market in Virginia. Manufactured Duct & Supply Company, an HVAC supplies and parts distributor covering the Atlanta and Southeast markets and Water Resources, Inc., an exclusive distributor of Neptune Technology Group products and water meters in the Greater Chicago metro area. In total, we completed 9 acquisitions in the fiscal year. Subsequent to year-end, we purchased more supply, an HVAC distributor based in Chicago that serves HVAC and dual trade professionals. As we look forward, our acquisition pipeline remains healthy. And finally, we are committed to returning surplus capital to shareholders when we are below the low end of our target leverage range of 1 to 2x net debt to EBITDA. We returned $948 million to shareholders via share repurchases this year compared to $634 million in the equivalent prior year period. This year, we have reduced our share count by approximately $5 million and still have approximately $1 billion outstanding under the current share repurchase program. Now let me address the change of our fiscal year-end from July 31 to December 31. This move shifts year-end activities from our seasonally busiest time of the year to our slowest, allowing our associates to remain focused on our customers during their peak season. A 5-month transition period will span from August 1 through December 31, 2025. During this time, we will release earnings on December 9, covering the 3-month period of August 1 through October 31. We plan to announce our 5-month transition period results in late February, and our new fiscal year will begin on January 1, 2026. As a result of this change, we are providing guidance for the 2025 calendar year. But before I move to the guidance, we have presented our first half performance on a calendar year basis for background. For the 6 months ended June 30, sales of $15.6 billion grew 5% over the prior year. Operating profit of $1.5 billion increased 8%, resulting in an operating margin of 9.6%, an improvement of 30 basis points from 9.3% in the prior year. Further historical financial information for calendar quarters with relevant reconciliations can be founded in the appendix at the end of the slide deck. Now turning to our guidance for the 2025 calendar year where we have provided the relevant comparative results from calendar 2024. We expect mid-single-digit revenue growth in calendar 2025, and we expect an operating margin range of 9.2% to 9.6%, an improvement of between 10 and 50 basis points over the prior year. Interest expense is expected to be between $180 million to $200 million. Our effective tax rate is expected to be approximately 26% and we estimate CapEx will be between $300 million to $350 million. Despite the market uncertainty, we are leveraging the strength of our supply chain, tailored value-added solutions, innovative digital tools and the expertise of our associates, enabling us to capitalize on multiyear tailwinds and drive outperformance. Thank you, and I'll now pass you back to Kevin. Kevin Murphy: Thank you, Bill. And let me again thank our expert associates who delivered strong results to finish this challenging year by continuing to take care of our customers and execute our strategy. Our ability to offer a scaled, multi-customer group approach on a project is unique and important to our key growth areas, including HVAC expansion, Waterworks diversification, large capital projects and Ferguson Home. Our performance continues to deliver results from these multiyear investments as we help meet our customers' needs. While we continue to operate in an uncertain environment, we believe our markets remain attractive over the medium term, and we continue to invest in our expert associates and our value-added capabilities to drive growth. We're committed to supporting the project needs of our water and air specialized professional customers by delivering scale locally and providing exceptional customer service. Thank you for your time today. Bill and I are now happy to take your questions. Operator, I'll hand the call back over to you. Operator: [Operator Instructions]. And the first question goes to Matthew Bouley of Barclays. Matthew Bouley: So kind of a broad question on growth and the end market outlook here. Obviously, a lot of crosscurrents recently around new residential, HVAC, et cetera, all of that. Meanwhile, you showed this strong non-residential result and inflation is improving. So really I'm asking, looking ahead, kind of thinking about this mid-single-digit growth for the total calendar year. Just trying to put all these trends together kind of -- it would -- I guess, it would be helpful on kind of price and volume quarter-to-date to sort of help us out there. But then really, what are your assumptions going forward on these kind of changing end markets here over these next few months? Kevin Murphy: Thank you for the question. Maybe I'll take a little bit about the market and then let Bill fill in with a bit of color. If I take a step back, if we look at when we entered fiscal year '25, we came into the year believing that our markets would be down, low single digits. We thought that the residential markets would be down low- to mid-single digits, and we thought non-res would be roughly flat. And so suffice it to say, we're pretty pleased with Q4 plus 7% and a year-to-date of plus 3.8%. And probably even more pleased that our key growth areas that we wanted to focus on drove that growth, whether it's HVAC expansion, Ferguson Home, Waterworks diversification. And then what we were doing with what we believe is a strong value proposition on large capital projects in non-residential, and that really did drive the growth. If we then take a shift into where we are currently and how we view, call it, the back half of calendar year '25 or this stub period of 5 months, we think that growth could be a bit softer in half 2 of calendar year. And we really recognize that new residential construction weakness continues. We've seen continuation of softer RMI or repair remodel markets. And then candidly, when we look at some of our larger growth areas like HVAC, we have an affordability issue with a pressured consumer and a movement to more repair versus replace. Now the nonresidential markets really continue as traditional nonresidential activity isn't going to step up or we don't see that step up happening. But the strength of large capital projects and that being our growth area does play out. But we do recognize that, that residential new construction in RMI market can be a bit more challenged. Bill Brundage: Yes. And Matt, maybe just to build on that. If you look at the first half calendar results that we just walked through and that we put in the slide deck, revenue was up about 5% for the first half. I would tell you, July was a strong month, a solid month in line largely with what we saw in Q4. But as we stepped into August, we did see that growth come down a touch. August sales per day were up about 5%. And I say sales per day because we had 1 fewer sales day which we'll pick back up in September, but it did step down to 5%. And to Kevin's point, as we look into the back half of the year, and we've provided a full year guide of mid-single digits, we would expect the overall growth rate to maybe be a touch softer in the second half, the market dynamics that Kevin outlined are certainly the driving force of that. And then if you just look at our comparables, our volume comparables do step-up as we go through Q1 and into our old fiscal Q2, which would be November, December. So we feel good about the guide that we've provided. We think we will continue to have good growth in the second half, but probably a touch softer than half 1. Matthew Bouley: Okay. Yes. That's all super helpful, exactly what I was looking for, given these, again, clearly dynamic end markets here. So that leads to the second question. Kevin, you really touched on it, the large capital projects. It just seems like all your efforts are coming to fruition here. So around this kind of multi-customer group approach, you mentioned Waterworks, commercial PVF, fire protection, et cetera, with these large projects. Can you go into maybe just some more specifics, number one, just around how do you go to market with these customers, with the different types of contractors around actually leveraging your multi-customer group approach and kind of how that actually all comes together? And then just more specifically, anything around kind of data center and what the pipeline going forward of these large capital projects looks like for you guys? Kevin Murphy: Thank you, Matt. And we really did build the organization to be better together than a part and a multi-customer group approach, and it plays quite well in large capital construction projects, which, as we've discussed, are really driving the day in non-residential activity. We go to market being best-in-class for the individual contractor or trade professional for that particular customer group, whether it be commercial mechanical, waterworks, fire protection, industrial pipe valve and fitting, making sure that we're the best provider on that job for the contractor. But we then elevate and go towards the source of funds, if you will, the engineer, the architect owner to try and make sure that we are engaged from a supply chain perspective, from a design perspective to make sure that, that project can get completed on time and on budget. And so that work up funnel, closer to the source of funds, allows us to be a best solution for the individual trade on the job, and it served us well. And as we look at Waterworks being up 15% in the quarter, commercial mechanical being up 21% and our industrial business and our fire protection business being up 5%, it's paving the way for future growth. You asked a bit about what we see in the end markets. And just like the rest of the world, we're seeing that activity from a data center construction perspective, continuing to accelerate. We haven't seen pauses or cancellations and that activity is stepping up, and it's stepping up in a variety of geographies across the nation. Those are great projects for us. They're great projects for us on piping systems as well as valve and automation, fabrication and virtual design, which are some of the other value-added services that we're bringing to the market that help us to earn that business from the local contractor as well as the trust of the owner and the engineer. Operator: The next question goes to Phil Ng of Jefferies. Philip Ng: Congratulations on a really impressive quarter in a tough environment. Kevin, I just want to drill down a little bit more on the non-res piece. It sounds like the data center side of things remain really strong, but we appreciate comps to get a little tougher in the coming quarters. But just give us a little perspective, what are you seeing on the momentum side of things? You talked about bidding activity still being strong. Just give us a little more color on where you're seeing the strength, the bidding activity within non-res? And how far are you bidding out in just the backlogs in general? Kevin Murphy: And the backlogs are tough to really get after. And the reason that I say that is our backlogs are building, and they're quite healthy across commercial, mechanical, across fire protection, across Waterworks and across industrial pipe valve and fitting, so more broad-based. The tougher part is, as we've discussed in the past, the gestation period of these projects, they do vary. And so for us, it really is around what that operational agility is, if you will, of making sure that we have the supply chain tightened up right so that the piping system and the valve project are done in a timely fashion because these are incredibly large projects relative to historical standards. And so making sure that you've got that in the right place at the right time is challenging. But those backlogs are building. But it's not just in the data center activity. We're seeing it in biotechnology and pharma. We're seeing it in some large-scale hospital work as well. And then we're starting to see that play out in the water and wastewater treatment plant side of our business, which again plays well to our Waterworks business, but also plays well to industrial pipe valve and fitting because those 2 customer groups work very well together on the construction of water and wastewater treatment plants, and you saw that play out in our results. You also saw that play out in what our M&A strategy is as we look to get, again, closer to the design and specification side of the world and broaden our offering on process equipment solutions, pump packages, valve offerings and overall controls inside the water and wastewater treatment plant. So we're building out that capability very much in sequential line with our strategy. Philip Ng: Okay. Great color, Kevin. And then from a price and margin standpoint, both really impressive, pricing inflected nicely in this quarter. Bill, I guess, a question for you. Should we expect pricing to kind of build from here? Or this is a kind of a good run rate? I know the commodity side of things were still negative. Are you starting to see that stabilize and potentially we got an avenue for that to inflect? And then on the gross margin side, strong, nice expansion there. Was there any timing nuances with like inventory profit gains? So should we see some moderation or we can build off these gross margins, assuming obviously normal seasonality? Bill Brundage: Yes. First, just to start on price and margin. We were pleased to see price inflect positive. As we've talked about over the last couple of quarters, we came into this year expecting our suppliers and the industry to return to, call it, low single-digit inflation and passing through annualized price increases. We saw that step-up a bit with initial announcements of tariffs. We then saw that pull back a bit when the reciprocal was pulled back and paused. So we've seen a lot of noise in the system. But overall, we've seen price move back into that low single-digit rate. It's difficult to predict how that plays forward. But I would expect and we are expecting some modest level of overall inflation as we play through the calendar year. On the commodity side, as you mentioned and as we noted, the commodity basket as a whole is still in low single-digit decline. We have seen movements in the different product categories. Clearly, copper tube and copper fittings are in, I would call it, healthy levels of inflation. We have seen with -- as steel tariffs came through, we have seen steel pipe, carbon steel and stainless steel move back towards flattish, maybe up a little bit. And then there's still pressure on PVC, both on the plumbing side of the world and Waterworks, which is still in deflation. So as a basket, those are still in modest deflation, and it's difficult to predict how that plays forward. But if I take a step back from that, again, our best view is that probably some modest level of inflation as we round out the calendar year. On gross margins, we were really pleased with the 31.7% gross margin delivery in the quarter. We did see the benefits of the actions that we took earlier in the fiscal year. We talked a lot as we came out of Q2 and into Q3 that we had focused our sales teams. We had made some pricing tweaks and we had made some adjustments to ensure that we are properly charging for the value that we provide in the market every day. And we saw that start to play through as we exited Q3 -- exited Q2 into Q3 and then certainly through Q4. But there's no doubt we saw some temporary benefit in the quarter based on the timing and the extent of supplier price increases. So when we take a step back, we've been, I think, pretty consistent with our view that this -- the overall underlying ongoing normalized gross margin of this business is somewhere in that 30% to 31% range. And we would expect that we would settle back down into that range as we move into the future. And in fact, if you look at -- we talked about August revenue, but if you look at August gross margins, we started to see that normalization play through. So we're very confident with the underlying gross margins of the business, and the teams are doing a great job executing every day for our customers. Operator: The next question goes to John Lovallo of UBS. John Lovallo: You may have answered this partly with Phil's question, but sort of back of the envelope at the midpoint, it seems like the implied calendar year second half operating margin is expected at about 9.2-ish percent versus 9.6% in the first half, and that comes despite what looks to be about a 1% improvement in sales half-over-half. So what's sort of driving that expected margin decline? Is it the timing of the pricing that you just mentioned? Or is there other factors as well? Bill Brundage: Yes, it's a great question, John. And I think we'll -- as we get more used to calendar quarters, we'll get more used to the seasonality of the business. But I would point mostly to that seasonality. If you go back to last calendar year in the second half, we delivered about an 8.8% operating margin. And your back of the cocktail [ mapping ] math is spot on in terms of the guide for the full year at 9.2% to 9.6%, implies that the second half will be somewhere in the upper 8% to, call it, mid-9% range in the back half of the year. So we are expecting continued improvement year-over-year. And I'd point a bit more towards seasonality that the second half of the calendar year will be typically a touch lighter given November and December with the holidays from a seasonality perspective. John Lovallo: Okay. That's helpful. And then last quarter, I think you guys talked about $100 million of expected annual savings from restructuring actions and there wasn't expecting much impact in the fourth quarter -- fiscal year fourth quarter. So how should we sort of think about the cadence of those savings as we move forward here? Bill Brundage: Yes. We are pleased with the execution of those streamlining actions and the cost savings are playing through in the underlying cost base of the business. But maybe more importantly, the speed and agility of decision-making has improved in the field. And that was really the primary reason for some of the organizational design changes that we made, moving those decisions closer to the customer. We did quote about $100 million of annualized cost benefits. We did see that play through in the fourth quarter. And I would expect that, call it, roughly $25 million year-over-year to play through over the next 3 quarters. If you look at the fourth quarter and just take a step back, our cost as a percentage of sales were roughly 20.3%, which is roughly flat to last year. So we got good underlying cost reductions from the streamlining actions. We had a bit of cost increase driven by sales volume and a touch of cost inflation. And then certainly, every one of our associates has a variable component of their pay that's linked to performance. And given the strong financial performance in the second half, our associates were appropriately awarded for that performance. So we very much believe that the cost base is positioned well as we look to the second half and would expect a bit of operating leverage, assuming that the sales environment plays out like we expect. Operator: The next question goes to David Manthey of Baird. David Manthey: Kevin, Bill. First question, Bill, you gave some nice detail on commodities pricing. I was wondering if you could just give us an idea by segment sort of high end versus low end of the pricing spectrum by segment, just so we understand how that sort of lays across your reporting segments? And then you mentioned the kind of the reversion of the gross margin to that 30%, 31%. And I guess that kind of implies 100 basis points maybe of incremental benefit in the period because of some of the inventory gains that would be temporary. Is that in the range? And then is there anything left over as we look to the October quarter, should we expect some residual benefit as well there? Or are we pretty much worked through now? Bill Brundage: Yes. I'll start with the commodities and pricing. And if I go back to my comments earlier, having seen a bit more inflation in copper and then steel returning towards flat to up a little bit. You should expect that our non-res business has a bit more inflation in it right now than our residential business. It does vary by customer group, and we generally don't provide a lot of detail by customer group. But I would consider that Waterworks is slightly down on price, largely driven by PVC and with the majority of our customer groups, slightly up from an overall inflation standpoint and maybe again, a touch more inflation on the commercial mechanical side of the world, given copper and steel. In terms of the gross margin, we do expect, again, it to land somewhere in that normalized range of 30% to 31%. If I look at last year in the second half of the calendar year, we were right about the mid-30% range, 30.4%, I believe. So we would expect there to be some relative performance to last year. But we would expect, again, the temporary benefit that we've seen over the last quarter, 1.5 quarters, driven by the timing and extent of supplier price increases to start to wane as we go through the back half. David Manthey: Okay. And then specifically on HVAC, you didn't mention that as it relates to pricing. But maybe if you could help us understand the benefit from pricing and acquisitions in the HVAC segment that netted to the number we saw. And any comments you have regarding the refrigerant transition? Like do you have any R410 systems left at the end of July? And then multi-family is a hot topic lately. Any other commentary around HVAC would be helpful. Bill Brundage: Yes. HVAC overall, on equipment, we are going through the transition, as you noted, from 410A to A2L. And so clearly, A2L systems have a higher price point, but we are clearly working through that transition as we went through the back half of the calendar year. So there was a bit of inflation on overall equipment, but we're also seeing a lot of repair replace and so not nearly as much inflation on parts and supplies. I would consider HVAC. You should think about it as very low single-digit overall inflation in the overall business, again, a bit more on equipment, a bit less on supplies and parts. Kevin Murphy: And when you look at the overall market and what our business was, Dave, we were pleased with being, call it, down 1 in Q4 on a plus 9% prior year compared to. And if you look at the business overall, we continue to get after counter conversions to address the dual trade contractor and be the source of supply for them. We've done about 600 of them. We'll continue with, call it, 50-plus more as we go into early 2026. You've seen us expand our geographic footprint and we will continue to open up new stores that are dedicated to serving that dual trade HVAC and plumbing contractor, and then you've seen it play out in the M&A side. There's clearly a move towards more repair versus replace in today's world. We have sold through the majority of our 410A, and that was in place as we went through the fourth quarter, which is why, as Bill indicated, low single digit is probably the inflation number you should be thinking about. But that will clearly move as repair moves a bit more to -- repair moves to replace and as we start to see that A2L play into the system as the system of choice. But you've also got the balance between ductless and unitary systems playing through as well. Generally speaking, we're very pleased with the strategy. We're very pleased with the execution, and we'll continue to have that as a major source of growth for us on the residential side of our house as we go forward. Operator: The next question goes to Sam Reid of Wells Fargo. Richard Reid: So you called out a little earlier some softness in resi remodel. And I just wanted to unpack that a bit more because you've got a really strong presence in remodel with higher income consumers. And that's historically insulated you from some of the category slowness. So are you starting to see demand crack from that higher income consumer? And then can you just give us a sense as to where remodel backlog sit today versus, say, 1 to 2 quarters ago? Kevin Murphy: Sam, the remodel market is continued pressure. We're seeing continued pressure there. We've said that the higher end of the market will continue to perform better than the rest. We're pleased with a plus 3% growth rate in Ferguson Home, especially as we brought those 2 channels together. And if you look at our showroom business in particular, it is predominantly that remodel space today, and it's primarily that remodel project work for the higher end of the market. We've seen traffic continue to be healthy and so we'll look at that continuing to be the driver. On the lower end of the market, we saw that pressure play through in residential trade and along with new construction pressure and PVC price deflation, that puts that business under a little bit more pressure in a down 2% position. But generally speaking, we're pleased with that higher end of the market with Ferguson Home. Richard Reid: That helps. And then just switching gears and drilling down a little bit more on Waterworks, I mean really strong results here, especially in the context of some peer REITs, can you just talk to more specifically what you're hearing from your large homebuilder customers? It sounds like there was a pullback that accelerated in August in demand for, let's call it, new residential subdivision projects. But I just want to confirm that. And then can you just give us a rough sense as to where your resi Waterworks business sits from a geographic standpoint? Do you under-indexed, for instance, in markets like, say, Florida? Just love some additional context there. Bill Brundage: Yes. I'll start with, we don't under index in Florida. But if I take a step back and look at our business, clearly, we're really pleased with a plus 15% in the quarter, we're really pleased with a plus 20% on a 2-year stack inside that Waterworks business. It's a testament to what the group has built over time and that diverse business mix that they have, residential, commercial, public works, municipal spend, water wastewater treatment plant, stormwater management, geosynthetics and even moving closer to that engineering environment, as I referenced earlier, with pumps, valve packages, process equipment and controls. And so that continues to play well for us. Perhaps the biggest impact that we've seen though is in that large capital project, non-residential space as the water piece of that business is quite impactful. And then the multi-customer group approach on non-res is playing out. If I then shift to your residential portion of the question, we have a pretty broad-based business residentially across the U.S. We're very -- we have strength in the Southeast. We have strength in the South, but it's pretty broad-based. If you look at what we're seeing, I'll take aside conversations with the large builder. We've clearly seen pressure on that new residential construction space as has the rest of the country. If you look at our bidding activity, we have not seen a significant fall off in residential bidding activity. But that said, we have no idea how that work will be released. Will it be released at all? And what does that look like in terms of sections or phases and how that plays out. But we do anticipate that in the near-term, we'll see some continued pressure on that new residential waterworks insulation space. Operator: The next question goes to Ryan Merkel of William Blair. Ryan Merkel: I wanted to follow up on the new residential construction market. So you mentioned that trends have weakened. Can you just give us a little bit more color? We've heard the Sunbelt, in particular, has weakened recently and then lot development feels like that slowed quite a bit. So curious if you're seeing that. And then for the guide, are you assuming that it gets worse from sort of August to December for new resi? Bill Brundage: Yes. Maybe, Ryan, I'll start with the guide. Again, we don't see anything falling off of a cliff. From where we sit today, we think that new resi will be a bit weaker as we move through the back half of the calendar year. And therefore, we think that our growth overall for the second half of the calendar year could be a bit below the first half. First half was clearly at 5%. So I'd read that to be sub-5%. But again, don't see that falling off dramatically. To Kevin's point, we're still seeing decent activity out there. And if I go back to kind of how we saw the residential markets playing through our fiscal year, we've been pretty consistent and kind of seen a bit more softening as we've come through, but expected those markets to be down low- to mid-single digits. We now expect them to be down maybe a touch more in the second half of the year. Kevin Murphy: But Ryan, it's precisely why we are pleased with the balanced business mix that we have inside the organization and the growth areas that we've got with HVAC, Waterworks diversification, large capital and then that higher end of the remodel market of residential with Ferguson Home. Ryan Merkel: Got it. Okay. And then my second question, just back to the non-resi market, up 15%, so a really good number. But when I look at the details, industrial is up 5%. So could you comment on why that particular market might be a little bit slower than the others? You mentioned the onshoring theme, which is very real. Just curious if you expect the industrial market to stay softer than commercial and civil. Kevin Murphy: I'll give you a bit of color and then Bill can fill in. If you look at that plus 5% number. That's inclusive of our fire protection business, our industrial business and our facility supply business together. If I think about the fire business and the industrial business, they still were working through periods of commodity deflation. And as Bill indicated, we haven't seen a massive ramp-up in steel pipe pricing across those markets. But we were very pleased with what those businesses have done in market share and especially in our industrial business and what they've done to work together with our water business and our commercial mechanical business on the valve packages and the valve actuation and automation pieces of large capital projects. We're pleased with that, and I wouldn't read too much into the plus 5% against the plus 21% of the commercial. Operator: The next question goes to Mike Dahl of RBC Capital Markets. Michael Dahl: Just to go back on HVAC for a minute. I wanted to dive a little bit deeper. Obviously, a lot of concern from some of the OEMs and invoicing some much sharper declines in the near-term. So a similar question as you just answered on Waterworks. But when you think about what the guide embeds for the balance of the year, the OEMs seem to suggest that the near-term is going to be quite pressured on HVAC volumes, but then potentially even better price mix than what you've articulated. Just give us a little more detail on how your guide embeds kind of that HVAC growth in the second half. Kevin Murphy: Mike, thank you for the question. If you look at the HVAC business, as we looked at the fourth quarter, as Bill indicated, we would see low single-digit price embedded. We clearly believe that, that will increase on the equipment side as 410A moves over to A2L. We also had that mix move from replace to repair, which had muted what that overall inflationary impact is. But if I also look at a down one number in the quarter, it really was the tale of, call it, 2 geographies, if you will, inside of our company. Very strong performance on the East Coast, the Mid-Atlantic up through the Northeast and the Midwest with some challenging weather environments and sell-through inside the Western United States and it really was bifurcated. We know there's going to be pressure on new res construction. We know there's going to be pressure on affordability with the consumer as we go through the next several months. But we are pleased with what has been happening from a volume perspective, especially as we've got a lot to go after in the market and continue to expand. As I indicated, we're going to expand our counters. We're going to expand our locations, and we're going to continue to focus on that from an M&A perspective. So the market is going to be a bit challenging, but we're bullish on what that looks like over the medium term. Bill Brundage: And Mike, that's effectively embedded in the guide, again, being -- not to be too repetitive, but the second half being down a bit from the first half would play through. And our expectation is that, that's driven by that new resi weakness and a bit of HVAC softness. And we've seen that in August. HVAC was down a touch in August, still low single digits. So again, I don't see that falling off a cliff from our revenue perspective. But we're coming up against some pretty tough comparables in HVAC, start to lap some double-digit comparables. So probably some softness in the near-term on HVAC, all embedded in the guide with a touch softer revenue in the second half. Michael Dahl: Okay. That's helpful. And then shifting gears just on the balance sheet and capital allocation. You've done a good job deploying a decent amount of capital. That said, your balance sheet is still being pretty conservatively managed around the low end of your target range. There's obviously a lot of differing views on where we are in the cycle right now. But from your standpoint, what would it take for you to deploy capital even more aggressively towards the midpoint or upper end of your leverage range? And is that more likely, as you sit here today and look at your M&A pipeline, is that more likely to come through increased focus on M&A or a step-up in buybacks? Bill Brundage: Yes. I'll start with. We try to be very consistent, and I think we've delivered consistency when it comes to capital allocation. We like having a strong balance sheet. It gives us that optionality to scale up and to go after growth investments. And so we intend to operate towards the low end of that leverage range of 1 to 2x net debt to EBITDA on an ongoing basis. In terms of scaling up, you would see us scale up where there were really good organic growth opportunities or maybe more so in the near-term, where there would be more M&A opportunities. There's nothing large in the pipeline right now, but we have that balance sheet flexibility to take advantage of those opportunities should they occur. Operator: We'll take our last question from Anthony Pettinari of Citi. Anthony Pettinari: Just following up on the last question on M&A. I think you indicated there's nothing large in the pipeline, but I wonder if you could talk more -- maybe more generally about what the pipeline looks like as we get closer to the end of the year. I guess, specifically, valuations, seller expectations, whether you're seeing any increased competition for assets in water and air, maybe from new parties. Just -- is there anything that's kind of changed about the landscape in the model? Bill Brundage: Yes, Anthony, no real significant changes in the landscape. I mean it's been a pretty competitive environment in water and air for a number of quarters and years, quite honestly. But valuations still probably towards the upper end of our typical, call it, 7 to 10 net -- 7 to 10 enterprise value to EBITDA range. We have a good actionable pipeline. As I mentioned, yet nothing really large in that pipeline. But quite frankly, that's what the industry is. The industry lends itself to 10,000-plus small- to medium-sized competitors that are out there. And our focus has been on consolidating those markets over time. So our strategy is very consistent. Our pipeline is pretty healthy. And we think we have a good opportunity to continue to consolidate the industry. Anthony Pettinari: Okay. That's very helpful. And then just following up on maybe some of the earlier questions on margin. You said you expect some level of inflation over the next few quarters. Does that anticipate any specific tariff-related price increases? Or are we pretty much kind of level set on tariffs essentially sort of being in prices right now? Kevin Murphy: Yes, Anthony, as Bill said earlier, we expected earlier in this year to get annual price increases, that's happened. We thought we would see some additional increases based on a variety of factors, that's happened. And it was offset by continued commodity deflation principally in PVC. And so at 2% inflation in the quarter, that's modest overall inflation. We expect that to continue. But it's a pretty uncertain environment. As Bill indicated earlier, manufacturers reacted quickly to the reciprocals, then pulled back in large part and they have been slower to address those changes and taking a more wait-and-see approach. The good part for us as a business is that the cost of product pales in comparison to the cost of labor, and we wake up every day, making sure that we're driving construction productivity for that water and air specialized pro. And so yes, we expect some degree of modest inflation, but we're going to compete every day in the market and make sure that we leverage scale, that we're sourcing product from 37,000 different suppliers and then we're getting the right price for the right project, and getting it at the right time to get that project done. So it will be modest inflation as we go forward, but still a lot of uncertainty in the marketplace right now. Operator: I'll now pass back to Kevin Murphy, CEO, for closing remarks. Kevin Murphy: Thank you, operator, and thank you all for the time today. We appreciate it more than you know. And again, I just want to reiterate, thanks to our associates. We're incredibly pleased and proud of the execution of our strategy in both the quarter and the full year. And although near-term markets remain challenging, particularly on the residential side of our balanced business mix, we're confident in our ability to outperform over time. So please reach out with any further questions, and we look forward to seeing you very soon. Thank you again. Operator: That concludes the Ferguson Fourth Quarter and Year-end Results Conference Call. I'd like to thank you for your participation. You may now disconnect your lines.
Operator: Good morning, and welcome to the EKF Diagnostics Holdings plc Investor Presentation. [Operator Instructions] Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Gavin Jones, CEO. Good morning, sir. Gavin Jones: Good morning. Thank you. And just to reiterate, that's EKF Diagnostics, and this is our interim results for 2025. Thank you all for joining us today. I really appreciate it. I think I'll start with describing the team. Hopefully, by now, you know who I am. Joining me in the room is Stephen Young, our CFO; and slightly off camera is our Executive Chair, Julian Baines. You may hear him chip in every now and then, he can't help himself. But getting to the meat of the bones today, I think it's important to say what we're going to be talking about is a fairly simple but significant update for the business. If you look at the revenues for the first half, we're at GBP 25.2 million, which is very much in line with the same period last year. So you could say that it looks flat. But if you look at it on a constant currency basis, we're closer to GBP 26 million. If you also consider the fact that we've taken out some of the lower-margin products that were causing us some challenges previously. Then actually, it is -- we are delivering significant growth in the first half and will continue to do so into H2. You can see the impact of the reduction of those lower-margin products by the improvement in gross profit and the gross margin now to 50% from 48% in the previous period. In terms of increased EBITDA, we're up 7.4% to GBP 5.8 million versus GBP 5.4 million in the same period. Profit is also up 16.1% and the cash continues to grow, GBP 16.6 million at the end of this period, but has continued to grow and is certainly looking a lot better, and we will be on target to hit the numbers that we previously talked about somewhere in the region of GBP 20 million by the end of the year. I think last time we spoke, I talked a lot about implementing the strategy that we had for the business. And I think it's important to keep coming back to that and communicate that, that has now been implemented right throughout the business. I personally have gone around to every site and spoken to everyone and made sure that they understood what the strategy is, how it's going to work so that we have that clarity and vision and focus right throughout the business. We continue to look at our production capacity, as you'll see a little bit later on. I'll talk about the number of analyzers we put out into the market. So it's important that we do continue to support that improvement in production capacity for our point-of-care products. We have improved the output in that area, but we look to continue investment in that space to get to a 30% increase. Our hematology analyzer production is up 60% versus the same period last year, and we anticipate that, that will deliver significant consumable growth in H2 2025 going into full year 2026 and beyond. Most of you would have seen the announcement that went out earlier on this year where we talked about signing 3 new contracts in some of the strategic growth areas that we have been targeting, specifically in Africa and Latin America. And that will continue to deliver that growth over the next 12 to 24 months. If you look at one of our other areas, Beta-Hydroxybutyrate, that's up 12% or 16% on a consistent currency basis. That is always a really good measure for how EKF Diagnostics is performing and has a big influence on our gross margin. Certainly, a lot of the reason for that is the increased focus with the splitting of the sales team to focus entirely on BHB or Point-of-Care depending on which area they find themselves in and also some of the development of our key partners within the U.S. market. Each time I do this, I will come back to what the Board expectations are, I think it's important to give an update on what the Board is expecting to see and how we're delivering on that. So the first thing they wanted to see was some capital deployment to deliver sustainable growth and unlock unrealized potential. First part of that was really to invest in operational excellence to increase production capacity, improve efficiency and implement new technologies. So that has been initiated, and you've seen some of the benefits of that by the fact that we've been able to get so many analyzers out in the first half. This will continue to run into 2026 and beyond. This is an ongoing program and something that we will continue to invest in. It's -- where we really focus at the moment is developing the analyzer production to be able to be more efficient by looking at subassemblies, but also be able to really get more analyzers out there and make sure that they are going out at a lower cost to the business. Second phase of that will be to look at the consumable production, and that's currently ongoing. We have two projects in that space to deliver at the end of the year, which will give us a better idea of what we need to invest moving forward and how we will do that. We also wanted to make sure that we had a commercial team that was able to respond to the growth that we anticipate, certainly in the focus areas of hematology, Beta-Hydroxybutyrate and fermentation. That's still ongoing. It does take time when you're restructuring your sales team, but we have put in new people within the marketing side and also within the sales side, certainly within the U.S. market, which has been a key focus for us. Some of that will continue into the rest of this year, but we do anticipate that we will have a complete expanded commercial team by the end of 2025. In terms of our new product development, that is specifically aligned to our growth strategy. We are on track there. We are looking to work within Beta-Hydroxybutyrate area and also hematology and the projects that we have in that space are ongoing and look to be on track to continue according to schedules that have already been set down. In terms of our second point, we implement the share buyback to improve earnings per share. We have utilized some of our cash reserves to implement a share buyback. I know that a lot of people have been asking whether we would be reimplementing the dividend, and that's not something we're currently looking at the moment. We feel that this is a much more controllable way to use our cash reserves and to improve the earnings per share. So far, we bought 4.6 million shares, which I think is probably went a little bit slower than we want and some of that's down to the liquidity that we have in the market. We're a very stable share. There aren't as many shares to buy out there as we might like. But we have continued with that share buyback, and we will continue with that share buyback for as long as we need to. So we're certainly continuing into H2 2025 with that process. So from the 5-year strategy, again, I think it's important to be consistent with our messaging and make sure that we come back to that 5-year strategy and keep talking about it. So for the 2029 target where we're looking at increasing revenue and EBITDA, revenue target for 2025 looks to be in line with expectations. We have had high volumes of low-margin analyzer build in the first half. Obviously, that does have an impact on our profits and our EBITDA. So I think we'll wait and see where we get to with EBITDA, but we are looking like we are in a good position. For the Point-Of-Care hemoglobin business, evaluations are ongoing in U.S. blood banks. They've been established and are still -- we have to get results in each of those spaces. This is a long-term investment. This is a conservative market, but it's the most highest value part of the business for us and certainly something that we are looking to grow. We have won new tenders in both Africa, and we've now seen Peru come back online, which is an important partner for us. For the #1 in ketone testing in BHB for lab and Point-of Care, as you know, we are already #1 for the lab testing, but we are developing our lab tests further to make sure that we can secure and extend that business even more. We will also be launching the Point-of-Care products in this area and the development program for that is ongoing and on track and looking to be in good shape. So in terms of where we are with the 5-year strategy from a geography point of view, I think it's important to note that we shouldn't focus too much on the APAC negatives where we've seen a drop of 26%. That does seem to be a lot, but we're really talking about a much smaller part of the business. And a lot of that business was really focused on the discontinued products, so the clinical chemistry. And that's one of the reasons why we chose to take those products out. They weren't really contributing to the business in terms of margin. So it made sense to realign the business, focus on the Point-of-Care side of things. And that's really what you're seeing now is a realignment and refocus in the APAC region. By the same rationale, you can see that the Americas has grown by 3%, driven by continued BHB expansion in the U.S. and hematology coming back online in Peru. EMEA has also grown with opening new markets. We certainly signed a new contract in Africa, stabilized the Russian business, and we're looking to deliver extensive growth in that area in H2. Obviously, there's been a lot of analyzer build, and that's something I'll talk about in a second. But what that does mean is that we exceeded those markets and now we anticipate to see much higher consumable usage within H2 2025. So in terms of that analyzer build, I think it's important to really reiterate just how much we've seen going out the door versus the previous period. So 125% growth in our hematology analyzer build, which is pretty substantial, most of that going into Peru, Brazil, U.S.A. and Italy. HemoControl is obviously one of the key products in our hemoglobin range, but it's also partnered there with Diaspect, which has previously seen huge analyzer growth. That's not quite as big as what is looking HemoControl, we're only looking at 40%, but that's still a huge jump up in where we anticipate to be. A lot of that's going into blood banks. And we certainly new business that we have in India and Uganda leading to that 40% uplift. Overall, we're seeing a total 60% hematology analyzer increase in terms of the demand. That obviously then means that there's a bit of a reduction in HematatSTAT and Ultracrit. Those are somewhat legacy products. There is still a market for them certainly in the U.S., and we are still serving that market, but the focus is without a doubt on our HemoControl and Diaspect product ranges. In terms of our Life Sciences business, I think it's important to keep making sure that we give a good strong update here. It's challenging because we can't always talk about some of the partners we're working with. They would rather remain anonymous for certainly business and commercial reasons, and that's perfectly acceptable to us. It would help if we could talk a little bit more about them. But unfortunately, what I can do is talk about the size of the pipeline. So we've got a $1.5 million pipeline on new business currently coming through, one of which is due to deliver anytime soon. I wish I could have said something different, but we do have a significant contract in the final stages of agreement. It's just going through the signing process. Again, I won't be able to announce this to the market, but we will try to give you regular updates on new customers and new contracts as they do come through. As you can see, there's a various number of different sized opportunities in the pipeline. I think it's important to say that some of these would be simple tech transfer, which is great. That's exactly what we want. Some of them, like the one big opportunity we have here, which is worth nearly $0.5 million in terms of dollars will take a little bit more effort. There's a little bit more development in that, and that one is going to be an 18-month project. Hopefully, we will be able to announce that when that comes through. But as you can see, there is a pipeline. It is relatively significant. And this is all new business and new customers. So it's important to make sure that people understand that we are bringing in more customers than we ever have done before. We've got more people coming on to site to do audits, more people looking at our capacity and really being attracted by what we have to offer in Life Sciences. And I think this is a significant turnaround from where we were previously. We were seeing customers before, but we weren't seeing the level of interest that we've got now. And a lot of that's down to the sales team and what they're bringing in, but also the new site management that we brought in our life science facility and how they're running that operation. So for the rest of 2025, it's certainly important that we make sure that we continue to deliver on that broader pipeline of new life science opportunities. I said that we will deliver on that one significant partnership. I'm hoping that we can add to that. Whether we can announce that, we'll see. But yes, we will definitely deliver on one new customer, and it will be significant in the Life Sciences side of things. We will focus on the pull-through of consumables and that aligning with our record hematology analyzer production achieved in H1 2025. It's key to our strategy is to really get those consumables out there and make sure that the analyzers that we've used to see the market are being utilized in the right way. And then we'll continue to support the strategy development by boosting supply of our hematology products into new markets. whilst developing existing markets further. We've got a long history in this space. We do have a lot of well-established customers, but we are looking to add to that and redevelop some of those markets as we move forward. Like I said, I thought it would be a simple update today just to tell you where we are, but also very positive. Thank you very much. I think we'll go to questions. Operator: Stephen and Gavin, thank you very much for your presentation. [Operator Instructions] I'd like to remind you that recording of this presentation along with a copy of the slides and the published Q&A can be accessed by our investor dashboard. As you can see, we received a number of questions throughout today's presentation. Can I please ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end. Stephen Young: Okay. I think there's a first couple of questions, which we can see relate to CapEx. Julian Baines: Read them out... Stephen Young: The first two are linked to. Julian Baines: Can you quantify CapEx Point-of-Care capacity expansion? Is the Fermentation CapEx done? What's the total CapEx budget for '25, '26, which is similar to with production capacity expansion plans underway, what capital investment is required. So they're pretty much the same and what's the effect on short-term margins? Gavin Jones: Go ahead. No Stephen go ahead. Stephen Young: In terms of capital expenditure for -- it's mainly Point-of-Care. The Fermentation CapEx is done in the U.S. There will always be some small pieces of equipment that we continue to buy each year just to enhance our service offering, but no any other level of the money was already spent. So in terms of the split of this particular year for 2025, our budget Point-of-Care is probably GBP 2.5 million and GBP 1 million -- GBP 2.5 million spent on the German facility, which is all Point-of-Care and then a mixture of about GBP 1 million being spent in the U.S., which is the Point-of-Care BHB and Fermentation. So we're looking to spend around that level, maybe a little bit less than that this year in terms of the actual amount, but that will be a follow over then into next year. We were expecting probably to spend again probably another GBP 3.5 million to GBP 4 million on CapEx next year, mainly in relation to Point-of-Care capacity. And we don't really see that having a major impact on the margins in the short term. Gavin Jones: Okay. And in terms of which production capacity expansion plans are underway, it's a question from George. So we've done some work in terms of subassemblies, so rather than produce everything in-house, we have outsourced some of our subassembly work that's allowed us to basically put more out there. That has been implemented, and that's been successful. So we've had a few months of that now, and we're looking to expand that further. We do have an external project ongoing, which is due to deliver two stages to that, one delivers in October, the other delivers in November. And that will -- that's very much more focused on our consumable side of things. The point of that project is to really review where we are right now, look at what improvements can be made to our consumable lines, especially in the hematology area and then also to produce a plan for how we can extend that completely. So really redeveloping our consumable lines from scratch. But there will be an interim period where we look to improve the efficiency and capacity on those lines. So that project is ongoing, delivering in H2 2025, but they will continue into 2026 and beyond. Go ahead. Julian Baines: Next question. Yes. Tim has asked, first of all, very encouraging set of results and congratulations to you and the team -- can you talk a little bit more about the Life Sciences plant in South Peru and put this in context on ROI on return on investment and the facilities there? Gavin Jones: Yes, sure. I think in terms of where we are with the Life Sciences pipeline, it's going well. I think it's something that takes time. I think we said that a lot, but we need to be patient with it. In terms of return on investment, at the time when we did make the investments in Life Sciences, we had the cash available. We needed to make an investment in that area no matter what, just to be able to serve our existing business and that existing business that exists and it still really underpins everything that we do there. So that would have probably been in the region of anywhere between GBP 5 million to GBP 6 million, GBP 7 million. So yes, we have added to that, but we are looking for -- this is a long-term investment here to be able to build a business that really is something different than anything we've ever done before. So I think it's challenging to say when we'll hit that return on investment. I don't want to make any promises there. But really, what we do need -- we always needed to make that investment or some level of investment. We may have gone a little bit higher than what we needed to originally, but that has given us the opportunity to grow that business, something that we wouldn't have had if we've made that investment. Stephen Young: And that particular site does manufacture the BHB site. Gavin Jones: Exactly. Stephen Young: And as Gavin was explaining, that investment needed to be made to a certain level to protect that BHB business. Julian Baines: That's growing year-on-year I think it's important to mention, as you've already mentioned, there's a lot of visitors coming to that site. It's becoming very clear that strategically, we've chosen now making sure we do tech transfer contracts and people are coming and saying that there's very little capacity globally. And so seeing our new site coming to it, we're starting to feel a little more comfortable that we've taken our time. We've got our strategy right. We've got the right salespeople, and we're targeting the right customers. And we're seeing encouraging signs this year where we didn't particularly previously. Gavin Jones: Yes. I think that goes some way to answering in line with [indiscernible] question as well, which is how are you progressing with increasing utilization at the South Peru facility. Yes, very well. I think as Julian alluded to, we've got a lot of customers coming to us now. And one of the things that they're interested in is the fact that we do have capacity I think we wouldn't be seeing so many customers if we didn't have that capacity. One of the things that they do tell us is that they have been to see other partners, potential partners, and they've not been able to serve them. So you've either got the very, very big kind of food production facilities that the type of customers we're talking to, it wouldn't suit their purposes or then you have other sites who maybe are closer to our site, but they don't have any available capacity. So it is helping with bringing in new customers, and we are moving towards filling that site. We're nowhere near it yet. We're still at around maybe 10%, 15%. We can certainly take on more and will take on more. But yes, we will update the market as and when we can. We may not be able to tell you exactly who we're working with, but we'll be able to tell you what we're doing. Julian Baines: Next question. Does such a strong increase in analyzer volumes and thus revenues mean that consumables were down in H1? Gavin Jones: Not necessarily. No. I mean, I think one of the things that's important to know is every time we sell analyzers, it does come with consumable sales. I mean the normal business is still going on. It's just that when we win tenders, we do have a very big influx of analyzers at the front end of that tender. You can't work in that tender until someone has an analyzer to work with. They also -- when they do take those analyzers, they also take a percentage of consumables as well. But once you've done that initial outlay, you then have nothing but consumables for the period of that tender. So no, I'd say consumables were not down, but I just say they were not down. It's just that the focus has been very heavily on putting analyzers out there in the field because you need to see that market. Julian Baines: We would expect to see significant consumable growth on those? Gavin Jones: Absolutely. I mean we've talked about this before where it takes -- it can take anywhere from 3 to 4 months to start seeing the consumable pull through. So we're already in that phase, but we'll see that continue into H2 2025 and beyond because a lot of these tenders aren't just a single year, they're 2-, 3-year tenders. Julian Baines: From George, given consolidation in the diagnostics space, do you see EKF as a consolidator or a potential target over the next few years? That's an open question in E-mail? Gavin Jones: I think it depends on who you ask. I mean, we'd never say no to the right type of opportunity if the right opportunity came about. But at the same time, yes, I mean, we certainly could be a target for the right type of partner, and we certainly take anything serious into consideration. Julian Baines: And then Tim has said again, because I think you were a politician the last time [indiscernible] expected time line, say, 3 to 5 years from making sufficient target return on this investment. If I say, I think it's part of that 5-year plan, we expected to get by the end of the 5-year plan full ROI on that facility by 2029. Gavin Jones: Yes, absolutely. Julian Baines: Hopefully sooner. Depend on the pipeline, but it's developing well. Gavin Jones: Yes. And I think, yes, you're right, it was a politician answer. But the reason being is I think we needed to rebase that business and relook at it. And promises were made previously that we haven't followed through on, and we accept and understand that. I don't want to make those mistakes myself. So I've got to be careful to make sure they don't overpromise. But yes, certainly, within that 5-year plan, Life Sciences is a significant part of that and we should be hitting the levels that we need to in that space within that time. Any more questions that... Operator: Julian, Steve and Gavin, thank you for answering all those questions you have from investors. And of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, which is particularly important to the company, Gavin, could I please just ask you for a few closing comments? Julian Baines: Should we answer the last question. Gavin Jones: We did just have one last question from Tim. Tim you've been very busy this morning. So lastly, for the share buyback, would you consider embedding this policy as part of your ongoing positive free cash flow generation and having, say, a monthly rolling program? I can say quite simply, yes. That would be something... Julian Baines: It's not even a monthly rolling program, Tim, it is continuous. Always on and problem when we're inside, obviously, we couldn't do it for the last 4 weeks. But then we reinstated it again this morning, and we certainly intend to carry on indefinitely just having the buyback in place. And we slightly increased the price of the buyback as well. So we think that there's a very positive future for EKF. We think that Gavin's 5-year strategy plan is implemented and this team is very, very strong. Also to answer the -- would we be a target for some people. I think that there's a real strength in EKF at the moment of being on our own because actually, we are finding that very valuable that people are coming to us more and more because we have better customer service, better delivery times, better response. And so at the moment, EKF is in a very good place to deliver this 5-year plan, and that's what we're totally focused on. So we will continue to buy back in that. Gavin Jones: Yes. So just to wrap up, I'd like to say thank you for everyone joining us today for this simple yet significant update on the strategy on where we are as a company and how we're choosing to deliver sustainable growth within the market, and we will continue on that route and continue to update you as we move forward. Operator: Julian, Steve and Gavin, thank you for updating investors today. Can I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of EKF Diagnostic Holdings plc, we'd like to thank you for attending today's presentation, and good morning to you.
Operator: Hello, and welcome to the JTC PLC Interim Results Presentation. My name is David, and I'll be your host for today's event. Please note that the event is being recorded. [Operator Instructions] Before we proceed, as you will have seen, JTC is currently in an offer period under the U.K. Takeover Code. As summarized in the company's RNS of 12th of September regarding possible offers, the Board received three preliminary nonbinding proposals from Permira in August, which were considered by the company and its advisers and unanimously rejected by the Board. The Board received a fourth revised proposal on the 9th of September and is in early stage discussions with Permira in relation to the possible offer. The Board also received two preliminary and nonbinding proposals from Warburg Pincus in early September, which were considered and unanimously rejected. A further proposal has been received and the Board is currently in early-stage discussions with Warburg Pincus in relation to the possible offer. In respect of these approaches, you will appreciate that management are very restricted in the comments they make only commentating on information already in the public domain, and we therefore prefer that most of the questions this morning are focused on the business. Thank you. I will now hand you over to the presenters for today. Nigel Le Quesne: Good morning. Welcome to the presentation of JTC PLC's interim results for the period ended 30th of June 2025. I'm Nigel Le Quesne, the Group CEO, and presenting with me today is Martin Fotheringham, our Group CFO. Let's move to Slide 1 and the agenda. We will begin with my CEO highlights for the period, after which Martin will run through the financial review. Following this, I'll take a deeper look at the group and the divisions and then go on to discuss how the rise in popularity of alternative assets positively impacts JTC's long-term growth potential and explain how we act as a key enabler of capital flows in these asset classes through both divisions. I'll also give a brief progress report on the integration of Citi Trust into our wider business post completion and we'll provide color on our focus areas for the medium to long term. Finally, I will summarize our key takeaways and my expectations for the group for the rest of the year. We will then open the forum up for questions. 2025 is the second year of our Cosmos era business plan, in which we aim to double the size of the business by no later than 2027 and for the third time since our IPO in 2018. The group has delivered a strong performance in the first half of 2025 with strong organic growth of 11%, record new business wins achieved through high win rates in what has been a more challenging macro environment. The results underline the benefits of having access to both institutional and private capital bases and continues to demonstrate the sustainable and evergreen nature of the JTC business model. As we approach the end of our 38th consecutive year of revenue and profit growth since inception, our unique shared ownership culture, diversified professional services business model and continued focus on client service excellence, all lead to our being well positioned to succeed and continue growing in any economic environment. In H1 2025, our group revenue was up 17.3% and EBITDA was up 15.1%, delivered at an underlying EBITDA margin of 32.8%. Our net organic growth was 11%, ahead of our guidance for the Cosmos era with growth at 14.6% and client attrition at 3.6%, an improvement on last year's 4.8%. We also achieved another record for new business wins in the period of GBP 19.5 million. As a result of our performance in H1, coupled with the benefit of our two most recent acquisitions, Citi Trust and Kleinwort Hambros Trust, we remain confident that we will achieve our Cosmos era goals ahead of schedule. The PCS division has performed particularly well in the period with outstanding net organic growth of 14.5%, continuing a strong trend. It is now established as the leading independent global trust company business and is the largest independent provider by some distance in the important U.S. market, which continues to be an opportunity-rich environment for the group. It is pleasing to report the completion of our acquisition of Citi Trust on the 1st of July, and we've made good progress to accelerate the integration and harmonize the business model. I will return to this later. Building on this, post period end, we were delighted to announce the proposed acquisition of Kleinwort Hambros Trust Company or KHT. The KHT deal is further evidence of the reputation JTC has established as the offtaker of choice for banks as they seek lighter operating models and retrench to their core capabilities. KHT is highly complementary to JTC's existing offering and brings us a U.K. trust presence for the first time. The deal was executed at an attractive price of circa 6x EBITDA, and we expect to complete in Q4 2025 and for it to be earnings accretive in 2026. The ICS division delivered net organic growth of 9.2%. This is a strong result in a market where macroeconomic headwinds have led to a period of volatility and uncertainty leading to prolonged sales cycles. Nevertheless, our pipeline has remained healthy, and we achieved robust win rates of over 50% and onboarded some significant clients in the period. At a group operations level, there's been heightened project activity in the period. In the process of implementing a global billing platform to enhance consistency and standardization across the group in support of our proprietary frameworks performance management tool. We are also enhancing our global risk and compliance framework, including a review and harmonization of policies and procedures underpinned by the implementation of an enhanced new RegTech solution [ CAMS ] . In addition we're using the Citi acquisition as a catalyst to accelerate the planned upgrade to [ Quantios Core ], our group-wide primary administration system. These important projects, together with our recently implemented group HR platform and our development of the ChatJTC AI tool, our infrastructure investments, which allow us to future-proof our global platform and capture the strong growth opportunities we see, both in the current Cosmos era and into the Genesis era that will follow. Although temporarily margin dilutive, these investments are all designed to improve commercial performance and enhance the platform for growth in the medium term. As always, I will wrap up my highlights by thanking the top-quality team we have at JTC. In July, we were delighted to award the second tranche of warehouse shares from our employee benefit trust to our global workforce for their individual and collective achievements in the Galaxy era between 2021 and 2023. We continue to believe that the power of our shared ownership culture is the foundation of JTC's 37-year track record of uninterrupted revenue and profit growth. Having 2,300 owners rather than employees makes an enormous difference to our working environment and the organization's culture, which is reflected in our industry-leading staff retention figures, which are currently 96%. This enables us to ensure that the team are happy, valued and empowered and highly motivated to improve our business and client experience every day. So now let's turn to Slide 4 and the financial highlights. Our revenues have grown to GBP 172.6 million and underlying EBITDA was GBP 56.5 million, delivered an underlying group EBITDA margin of 32.8%. As previously highlighted, our group net organic growth was an excellent 11%. New business wins were a period record of GBP 19.5 million as the group continues to benefit from excellent win rates of greater than 50% across both divisions. Now a consistent performance metric achieved in a competitive market. The new business pipeline remains strong and increased from GBP 49.8 million at year-end to circa GBP 60 million at the end of H1, indicating the probability of good momentum in the second half of the year. The Lifetime Value of work Won was another record at circa GBP 267 million based upon the 14.2-year average lifespan of our client book. This gives us visibility of over GBP 2.4 billion of forward revenues from our existing client book, i.e., what the business would generate without the addition of any new mandates from this point forward. This metric continues to demonstrate the long-term and compounding value of the group. And finally, on to the interim dividend, which has been proposed at 5p per share, up 16.3% from 4.3p. Now over to Martin for a deeper look at the financials. Martin Fotheringham: Thank you, Nigel. We've delivered a strong set of results that are in line with our expectations, where we've continued to focus on delivering growth. Organic growth was 11%, the sixth successive reporting period where net organic growth has exceeded 10%. The financial highlights slide shows that our overall revenue growth was 17.3%. We're performing well, led by net organic growth. It's pleasing to see the momentum we built in 2024 carry into 2025. Our underlying EBITDA margin dropped by 0.6 percentage points from H1 '24 and was 32.8%, and there's more on this later. Earnings per share increased by 7.1%. Cash conversion was 86% and is in line with our guidance range of 85% to 90% annual cash conversion. This is lower than our normal H1 performance, and I'll explain why later. Net debt increased by GBP 43 million, and this was driven by drawdowns for earn-outs. It was a busy year in 2024 for M&A with 5 deals completed, which we've continued to integrate throughout 2025. The Citi Trust acquisition also completed on the 1st of July, and we have the KHT deal, which will complete later this year. At the period end, our reported underlying leverage was 2.06x. On a pro forma basis, our underlying leverage was below 2x underlying EBITDA. And finally, our return on invested capital for the last 12 months was 13%, an improvement from the 12.6% we reported at the end of 2024. Moving on a slide, we'll start with revenue and our revenue bridge. On a constant currency basis, our revenue growth was 18.4%. This was above our reported growth of 17.3%, where we were again impacted by the weaker U.S. dollar during the last 12 months. As our U.S. presence has increased, so has our exposure to the U.S. dollar. Gross new revenue was GBP 36.8 million, a decrease from GBP 38.3 million in H1 '24. The prior period continued to enjoy the benefit of the immediate impact from the launch of our banking and treasury service. Gross attrition was GBP 9.1 million, which is 3.6% of annual revenues and is down from the 4.8% reported in the prior year. GBP 6.2 million of this attrition was end of life, and therefore, 98.8% of non-end-of-life revenue was retained. This is the highest retained revenue result we've posted since IPO. Revenue recognized on new business wins in the year was 54% compared to 51% recorded in H1 '24. Our new business pipeline at the period end was a best ever GBP 60.4 million, which is a GBP 10.6 million increase from the end of 2024. Let's move on to Slide 9 and take a look at the first of our key metrics, net organic growth. As I've already said, we delivered organic growth of 11% in the last 12 months with our 3-year average now standing at 14.8%. We've posted net organic growth in excess of 10% for 3 successive years. ICS recorded net organic growth of 9.2%, which was commendable when considering external factors where the continuing macroeconomic and geopolitical uncertainty has generally stalled fund launches and slowed down activity levels. The U.S. has continued to deliver good growth for our ICS business. PCS has excelled with 14.5% net organic growth with the U.S. and Cayman the key drivers. Pricing growth remained strong at 5.1%, demonstrating our ability to recover increased costs of doing business. To conclude on revenue, let's look at the geographical profile on Slide 10. All regions once again supported revenue growth in the period. The U.S. continues to deliver impressive levels of organic growth and has established itself as a leading growth region. At IPO, the region represented 4% of our global revenue, and this now stands at 31%. Taking into account the Citi acquisition, we expect the U.S. will represent approximately 35% of our global revenues. The rest of the world also recorded impressive growth of 74.3%, and this was driven by the inorganic growth of the FFP acquisition and the continued growth of our own Cayman business. We now move on to the EBITDA margin on Slide 11. The underlying margin was 32.8%, a drop from the 33.4% recorded in H1 '24. I said previously, there are many moving parts in our margin story. On the one hand, we've improved our margin over recent years through the introduction of higher-margin banking and treasury business. Typically, we also have a small operational gearing uplift each year of approximately 1%. As you know, we're committed to the future success of the business, and it's our strategy to invest in areas where we believe will ultimately benefit the business, whilst delivering an acceptable margin. This includes start-up services in new jurisdictions, current examples of which are our private office, ESG service and Irish Funds business, which we calculate drag our margin today by 0.6%. We also see margin dilution from investment in growth jurisdictions. These are jurisdictions where organic growth exceeds 15% or where the current infrastructure is disproportionate to the revenue generated. We currently have just over 10 jurisdictions that fall into this grouping. Gross margins from this cohort averaged 51% compared to mature jurisdictions where the average is 69%. Four years ago, 33% of our revenues came from these growth jurisdictions, whereas today, it's over 50%. Finally, on margins, I've previously noted our higher spend on risk and compliance. Notwithstanding the hard to quantify amount of chargeable time we spend dealing with regulatory obligations, we also continue to invest into our group capability. Over time, that alone has impacted margins by 50 basis points. Now focusing on cash conversion on Slide 12. Cash conversion was 86%, a decrease from 104% recorded last year. Our normal cash collection cycle is that we have strong collections in H1 that were above 100%. So this is a significant drop, albeit it remains within our guidance range. The drivers for the drop are temporary and do not impact our ability to meet our annual target. Adjusting for these temporary impacts, would have seen us delivering cash conversion of approximately 102%. The drivers for the decrease, as shown in the bottom graph, were as follows: 4 percentage points for temporary timing differences. These include cash outflows that we paid in H1 this year that we would normally pay out in H2. 4 percentage points for a change in billing cycles for one of our business segments, where we've moved to a biannual billing cycle for fees that were previously billed on an annual basis at the beginning of each year. These fees were collected in July. A 2 percentage point impact due to FX in the period. This can fluctuate and has been adjusted to show a constant currency position. The 6 percentage points is due to the impact of recent acquisitions, primarily FFP and SDTC, where the businesses do not follow our usual H1 seasonality and our cash inflows are not weighted to the first half of the year. As you can see, adjusting for these, our underlying performance in H1 was strong. We maintain our medium-term guidance range for annual cash conversion of 85% to 90%. Now let's look at net debt and leverage on Slide 13. At the end of 2024, our reported net debt was GBP 182.3 million. And by the 30th of June, it stood at GBP 225.1 million, an increase of GBP 42.8 million. This was driven in the main by the net outflows for acquisitions of GBP 47.8 million, where material outflows included the payout in full for the FFP earn-out of GBP 24.9 million, the SDTC earn-out of GBP 19.1 million and a total of GBP 3.8 million covering Hanway, perfORM and Buck earn-outs. Our reported leverage was 2.06x underlying EBITDA. However, annualizing recent acquisitions to achieve a pro forma leverage shows that we would be within our guidance range. With the Citi and KHT acquisitions, leverage will be above 2x at the year-end, but below our absolute peak of 2.5x. We expect to rapidly delever through 2026. As anticipated at the year-end, we completed on a U.S. private placement facility in the first half of 2025 for $100 million. As at 30th of June 2025, the group had total undrawn funds available from banking facilities of GBP 123 million. And finally, our return on invested capital. We delivered a return on investment of 13% in the last 12 months. This was an improvement of 40 basis points from the position at the end of 2024, and this continues to be significantly above our cost of capital. I'm really pleased with this improvement in a period of ongoing acquisition activity. The lifetime value of clients, which represents the revenue that our client relationships will generate in the absence of new business, increased by 4.3% from 2024 to GBP 2.4 billion. Since IPO, we've reported over a 700% increase from GBP 0.3 billion in 2018 to GBP 2.4 billion today. To conclude, we continue to deliver a solid and resilient set of financials in the second year of our Cosmos era. And on that note, I'll hand back to Nigel. Nigel Le Quesne: Thank you, Martin. As I've mentioned earlier, next, we will cover the macro environment, its effect on the M&A market and take a deeper look at the 2 divisions. Following which I will discuss 2 key topics. Firstly, how the growth of capital allocation to alternative assets acts as a tailwind for the group; then secondly, detailing the positive progress of the Citi Trust integration and how our ability to solve for banking institutions seeking lighter operating models provides JTC with a competitive advantage. In the wider M&A market, global deal volumes were down 13% in the first half of 2025 when compared with the previous year. This was largely due to the macro environment, including trade uncertainty, geopolitical instability and a difficult funding environment. The sentiment has definitely improved in H2 as the financing markets improve. Buyer appetite remains strong as firms face mounting pressure to deploy capital, demonstrated to some degree by the recent interest in JTC. Advisers have backlogs of deals creating a buoyant market. In our sector alone, we're aware of close to 10 deals of a good size attracting strong market interest. Given our current financial leverage and recent acquisition activity, we will concentrate on maximizing the opportunities presented by Citi Trust and KHT in the short term. But we will keep a close eye on the developments in the wider market, where we continue to be viewed as a good counterparty and long-term home for businesses by sellers and advisers alike. The regulatory regimes continue to prove challenging, as I've commented on previously. The propensity to look to impose regulatory fines on organizations for specific client matters, which are often minor in nature rather than systemic issues has been unhelpful. At JTC, this current environment has led to increased costs in the risk and compliance teams, created a need for greater technology spend and a disproportionate amount of time being demanded on the divisional fee earners. The number of regulatory interactions we've been required to engage with across our growing global platform continues to increase period-on-period, reflecting the trend of increased scrutiny across the sector as a whole. Regulation can, of course, also act as a tailwind to our industry, however, creating additional demand for our services and providing M&A opportunities as businesses consolidate to share the cost of the regulatory burden. As I mentioned earlier, the divisions have both performed well, although have been faced with slightly different challenges. In PCS, we have had opportunity of pre-completion work ahead of the delivery of Citi Trust, our largest acquisition to date. As mentioned, we have also been successful in our bid for the KHT business and are now following a similar but less complex integration process and expect to complete the transaction following regulatory consents in Q4. Alongside this, division has benefited from excellent net organic growth of 14.5% and continues to lead its market. In ICS, we have not had the benefit of M&A activity in the period. And as a result, it has been a consolidation phase. We have taken the opportunity to refresh our go-to-market strategy and implement operational and technological enhancements. As indicated earlier, the macro environment has been more challenging. As a result, we were pleased with organic growth performance of 9.2%. This has included the addition of some substantial clients, which will continue to grow and flourish on our watch. Overall, as we look across the group, what is crystal clear is that we have an abundance of opportunities to explore in the second half of the year and beyond. I mentioned earlier that our industry has developed to deal with greater complexity over time, leading to a several market participants leaving the sector. In part, this has been due to increased burden of regulation and internationalization, which in turn has led to sector consolidation. This has then been accelerated by the attractive nature of the business model to investors. However, in our view, the core underlying tailwind has been the growth and increase in popularity of alternative assets. This is particularly evident by the retrenchment of banks from the market where bankable assets alone do not provide the breadth of holistic solutions demanded by ultra-high net worth individuals and families. Similarly, on the institutional side, with the growth of alternatives came the need for new and innovative corporate and fund structure solutions to manage those assets, creating a powerful driver for the industry in the process. As a result, we are operating in a market which has undergone profound structural change. It has expanded, consolidated and become increasingly multifaceted, driving demand for sophisticated administration, advisory and governance solutions, all of which are core strengths of JTC. According to the data provider, Preqin, today, there's around $16 trillion in global capital allocated to alternatives across private equity, real estate, infrastructure, renewables, private debt and hedge strategies. This figure is projected to nearly double to $30 trillion by 2030, growing at 9.5% compound annual growth rate. The growth is driven by both institutional allocators, for example, pension funds, sovereign wealth funds and endowments, all of which are supported by JTC's diversified model and by private capital from ultra-high net worth individuals and family offices, many of whom have a scale and sophistication that means they operate at a quasi-institutional level. JTC facilitates this capital deployment by providing administration for funds, companies and trusts. This places JTC at the intersection of two major flows, institutional capital seeking exposure to higher return illiquid strategies and private capital pursuing diversification and intergenerational wealth preservation. From an analysis of our own book of clients, we estimate that around 80% of our revenues are linked to structures that are designed for or contain alternative assets. This underscores the group's strategic focus and exposure to these long-term growth trends. As global allocation shift further towards alternatives, demand for sophisticated and scalable administration services like those provided by JTC can be expected to rise significantly. JTC is, therefore, not merely a professional service provider, we are an enabler of capital allocation in the fast-growing alternatives market. With strong exposure to both institutional and private capital flows, we are positioned to benefit from multiyear tailwinds. We have recently decided to update the names of the divisions to Institutional Capital Services and Private Capital Services, respectively, to better reflect both what we do and this important value driver that is common to both divisions and the vast majority of client types. The alignment between our service offering and expansion of the alternatives ecosystem across both institutional and private capital provides a clear, durable and scalable growth trajectory for the business. Now on to the progress of the Citi Trust integration. This deal has already had a significant positive impact on our profile and in particular, increased the awareness of the JTC brand in the United States and opened up greater access to very important markets in the Middle East and Asia. The Citi credentials have been particularly important in this regard, and we've experienced excellent collaboration from the bank with a sense of a true partnership, including the introduction to both potential and established clients, providing new distribution channels for JTC. We are already able to report that we have a clear route to improve the operating model, bringing an accelerated margin enhancement from our previous estimates made at the time of the acquisition was announced. As we indicated in July trading update, we are now confident the margin of the business will be 30% plus by the end of 2026. And this acquisition continues to look to be one of our most exciting deals to date. More generally, we have proved ourselves as a reliable counterparty for bank carve-out deals by concentrating on the priorities of the banks, which are focused on protecting their reputation and the client experience. We now have a track record that places us as the offtaker of choice for deals of this nature as a lighter operating model is sought as most recently demonstrated by the subsequent KHT deal. Finally, on to the key takeaways. We have delivered sector-leading performance with strong organic growth and stable margins that reflect our ongoing investment in the global platform. We are established as the leading independent provider of trust company services globally and the additions of Citi Trust and KHT are highly complementary to JTC's existing offering. The growth in capital allocation to alternative assets is a major structural tailwind for the group, and JTC is positioned at the intersection of those capital flows ready to capture significant growth opportunity for both divisions. We are progressing well towards achieving our Cosmos era goal of doubling the business from January 2024 and are highly confident we'll be able to do this ahead of schedule before the end of 2027. Looking at the second half of the year, we have a strong new business pipeline and consistent high win rates, giving us good momentum for organic growth in H2. While we will focus on the ongoing integration of Citi and early stages of KHT, we continue to track good opportunities to our M&A pipeline across both divisions and our key target markets. Return on invested capital is expected to continue to strengthen in 2025 with further improvement anticipated in 2026 as we realize the full year contributions from the Citi Trust and KHT acquisitions, both of which have been acquired at excellent multiples. As always, we will continue to invest the growth, ensuring that our global platform is always scalable and fit for purpose. Ultimately, we continue to concentrate on being the best service provider and less on being the biggest. Once again, we maintain our guidance metrics that define what sustainable success looks like for a business of our nature. So thank you for listening and for your ongoing support. We will now be happy to take your questions. Operator: Thank you to Nigel and Martin for the presentation. They're now unmuted. So we'll be happy to take questions. [Operator Instructions] I think the first one was Michael Donnelly. So Michael, we will come to you and unmute first. Michael Donnelly: Three from me. Could we take them in turn, please? First one, Nigel, you said the 20% new business pipeline growth from December to June suggested it was the effect of strong growth in the second half or good growth or something like that. Can you just confirm, should we interpret that growth in the second half as being in line with the 10% or 10% plus organic growth in that period? Nigel Le Quesne: I think, Michael, the signs are good, right? So it's the fullest pipe we've ever had. I think we've seen slower delivery, in particular, in the institutional market in terms of bringing clients through to a successful launch and into fee-earning territory. But the signs are really good, and it's a very strong pipe. So we're expecting, I think, to be keeping above our 10% plus organic growth metric. Michael Donnelly: That's great. Secondly, the 14.5% organic in private capital services, can you tell us how much of that you think came from U.K. Channel Islands? You may not have the exact number, but just a feel for was it the -- was it a major contributor? Or was it just in line with everything else? Nigel Le Quesne: I don't think -- the question is around the exposure to or migration from one to other. We're not really that exposed to the U.K. market to a large degree. So what I can tell you is the Jersey is probably the biggest single jurisdiction for wins in that period. And then we've had some really good wins in Cayman, Singapore and Dubai as well. So -- but not necessarily as a result of sort of driven by tax or other considerations. We're just not exposed to that market particularly. Michael Donnelly: Understood. And then finally, on Kleinwort and Citi, both trust businesses, do you think that once they're both completed and embedded in, the number of -- the amount of revenues exposed to assets under management will be very different from the sort of 15% that I think historically we've been used to that are AUM exposed? Nigel Le Quesne: No. The KHT book is actually a time and materials book in any event. So that doesn't change the mix at all. The Citi book, on the other hand, has got AUM elements associated or primarily as AUM. And the way we're dealing with that is we will use this year's fees to create, if you like, the minimum for future fees. So we create a floor and then we'll run the clock alongside the work we do for these clients and top up accordingly if we believe that's what it is. So in effect, we'll make it -- how can I put it, measured by time and materials. Operator: Thanks, Michael. It was great. Appreciate your questions. Next, could we unmute Vivek Raja, please. Vivek Raja: Thank you for your presentations. I found your results presentation very comprehensive. I don't have any questions. So apologies, I'm going to ask you about the bid situation. Just a simple question. You've set different PUSU dates for Permira and Warburg Pincus. I was just curious about why you've done that? Nigel Le Quesne: No, we didn't set separate different PUSU dates. It's really driven by when the bids were received. So they were just received on different days, and therefore, the dates are different. Unknown Analyst: Nigel, would help if I jumped in. It's [ Stuart ] from Deutsche. The PUSU dates are set by the date of the leak announcement. It's as simple as that, and there's sort of 2 different leak announcements. That's what sets those 28 days. Vivek Raja: Okay. I mean is that process -- how are you going to sort of align that process given you've got competing bids then? Unknown Analyst: There is no obligation to align it. Operator: Can we go to James Clark, next please. James Clark: My first is just on the wider industry and sector. There's obviously, as you know, right now, a lot of PE interest in all sorts of assets, both bolt-on and sort of larger platforms. I guess I just wondered from your perspective, when you take part in these bids and you see PE either out compete on price or maybe you outcompete them. I guess I just wondered what you are able to offer to some of these larger businesses privately that's drives their interest specifically, i.e., things like are they able to accelerate the margin profile because of greater automation or great use of AI? Are there any other areas that they're able to really explore that perhaps publicly as a publicly listed company, it's a bit harder. So I guess what really drives their specific interest? Obviously, it's a highly consolidating industry and there's lots of M&A potential. But what are they able to deliver, do you think privately that perhaps is harder publicly? I have a second question as well, which is more on the margin profile, but I'll wait for the answer. Nigel Le Quesne: I think -- well, can I just answer it from our perspective? Look, we like and have liked being a listed business. So -- but our industry is dominated by private equity, as you probably -- as you're alluding to, and it's at various levels. So if I look at it from our perspective, currently, it's fair to say that the ability to -- we have got balance sheet constraints in a consolidating market. So that is a challenge for us to work through as a listed business. And I think occasionally, it's meant that we couldn't compete for good assets over time. But we work it through and we find and we always have found very good deals to be done sort of away from and outside of perhaps the normal processes that you go through. But clearly, there wouldn't be the same balance sheet constraints in the business as a whole. In terms of what they can do that we couldn't do ourselves, I think it's debatable. I think there is a little bit of -- there can be a sense that we're in sort of period-to-period sprints as a listed business, which you may not be in quite the same place with a longer-term view that may be taken by a private equity house, particularly to, if you like, just we take time to sort of pit stop for a little bit and work out what it is you want to be doing in particular areas, technology you alluded to could be one of those. So there's obviously pros and cons with both, but there's definitely advantages for us for being the only listed business in our space, but occasionally works as a disadvantage for us as well. So I hope that answers the question. James Clark: That does. That's very helpful. And then my second question is just on the additional costs to do with compliance and risk management sort of spending centrally and the regulatory cost headwind. I think you flagged it was 50 bps headwind in the first half. Should we expect that heightened level of spending to kind of continue? And I guess, is it accelerating today versus a year ago? And then sort of follow-up to that would be the upper end of your margin limits being 38%. Is that now not really achievable because you've got this sort of, I guess, headwind structurally to your margin? And then I think -- so that's a big question here, but you also flagged that you can manage that margin headwind through scale. So I'd be interested to know how you sort of do that and why you wouldn't pass it on through price? Nigel Le Quesne: Happy to pick that up. I think it's too early to say whether the risk and compliance or risk and regulation environment we work in is necessarily always going to be a drag on margin to the degree it is today. But just to answer your question about sort of regulatory interactions, which we track, we've gone from 46 in 2022, 58 in 2023, 76 in 2024, expecting 90-plus this year. So that gives you an idea of -- now in fairness, we will have -- we're probably regulated in more ways, in more places than we were initially. But just gives you an idea of the burden and that is permanently some sort of regulatory interaction required. More generally, I think we were quite pleased with the Moneyval visits to Jersey and Guernsey, which obviously quite big jurisdictions for us that seem to go reasonably well. And we had a very good meeting with the group of international finance centers. I think we met 5 or 6 of them together in a forum around the beginning of the year. So having said that, we've seen a little bit more interest in the regulatory environment from both the Netherlands and Luxembourg in the last sort of 6 months or so. So it's there's sort of one area you feel is feeling -- is going quite well and then you'll get interest from another area. So -- but I wouldn't necessarily say that it will -- it means that 38% isn't doable. I just think there are different ingredients in different times, and there's other things we're doing all the time. I mean the margin is quite complicated. I'm sure as you know, growth can affect your margin, tech investment can affect your margin in the short term with a view to being long term. But I wouldn't say it's impossible for us to get to 38%, but it's probably a little bit more difficult than it was when we set the 33% to 38%. And then in terms of how we might address that, I think there's discipline, efficiency are all things I'm thinking of. Scale is part of it, technology is part of it. And frankly, pricing could be part of it as well. So I hope that's helpful. Operator: Thanks, James. We don't have any further hands up. So unless anyone wants to jump in quickly, I think we are through most of our time anyway. Great. Well, thank you very much to Nigel and Martin and all who have attended today. I hope you enjoyed the presentation, and the presentation will be on our website later today also. Many thanks. Goodbye.
Operator: Good afternoon, and welcome to the Flux Power Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Joel Achramowicz, Managing Director. Please go ahead. Joel Achramowicz: Good afternoon, and welcome to Flux Power's Fourth Quarter and Full Year Fiscal 2025 Earnings Conference Call. I'm Joel Achramowicz, Managing Director of Shelton Group, Flux Power's Investor Relations firm. And joining me today are Krishna Vanka, Flux Power's CEO; Kevin Royal, Chief Financial Officer; and Kelly Frey, Chief Revenue Officer. Before I turn the call over to Krishna, I'd like to remind our listeners that during the course of this conference call, the company will provide financial guidance, projections, comments and other forward-looking statements regarding future market developments, the future financial performance of the company, new products or other matters. These statements are subject to the risks and uncertainties that we discuss in detail in our documents filed with the SEC, specifically our 10-K and our most recent 10-Q, which identify important risk factors that could cause actual results to differ materially from those contained in the forward-looking statements. Also, the company's press release and management statements during this conference call will include discussions of certain adjusted or non-GAAP financial measures. These financial measures and related reconciliations are provided in the company's press release and related current report on Form 8-K, which can be found in the Investor Relations section of Flux Power's website at www.fluxpower.com. For those of you unable to listen to the entire call at this time, a recording will be available via webcast on the company's website. And now it's my great pleasure to turn the call over to Flux Power's CEO, Krishna Vanka. Krishna, please go ahead. Krishna Vanka: Thank you, and welcome to everyone as we review our fourth quarter and fiscal year 2025 results and business update. I have been at Flux Power now for 6 months as CEO and have had the opportunity to meet more extensively with our customers and partners. This gave me a better understanding of their business, the product requirements and how Flux Power can offer added value through our battery solutions. These discussions have made me very excited about the company's future and the opportunities that lie ahead of us. Flux Power is at the forefront of shaping the future for intelligent energy solutions where every lithium-ion battery functions as part of a connected self-optimizing network. This vision is part of a mandate shared across the members of our newly established management team, and we are all fully committed to achieving our long-term objectives, both operationally and financially. In our last earnings call, I shared with you the 5 strategic initiatives that will be guiding our execution and performance in the upcoming quarters and years. These initiatives include: number one, achieving profitable growth; number two, executing on operational efficiencies; number three, implementing a solution selling approach; number four, building the right products for customer needs; and number five, integrating value-added software across our battery portfolio to generate recurring revenue streams. As highlighted in our press release issued earlier today, we finished 2025 with a solid year-over-year growth both on a quarterly and annualized basis. We also significantly improved our gross profit and margin performance, contributing to meaningful improvement in our bottom line results. Acknowledging that we still have some work to do to achieve our goals of profitability and cash flow break-even, we are demonstrating initial progress. In support of these goals, we have implemented various operational efficiencies to further reduce costs. First, I spent time in China meeting with existing partners in order to strengthen the vendor relationships. We discussed the macroeconomic situation and determined ways to work together to help offset the impact of the current tariffs. More broadly, we also engaged with our domestic vendors to mitigate the international tariff exposure by renegotiating contract terms where possible. We are also evaluating additional product engineering work to reduce costs by simplifying our design. This work is ongoing, and we'll have more details to share with you on future calls. Finally, in June, we took action to reduce our headcount by about 15% across all segments of the company, except for sales and marketing. This will help to reduce our ongoing operating expenses and ultimately our cash burn. As part of our initiative to grow our software offerings and provide high-value solutions to customers, we have made good progress on our SkyEMS AI platform during this quarter. I'm pleased to inform you that we have provided beta testing access of our SkyEMS version 2.0 to one of our airline customers, and we will be rolling it out soon to additional customers in the coming months. By embedding our solution into a connected ecosystem of vehicles, chargers and software, Flux will eventually create an integrated services and solutions that will generate recurring revenue and predictable replacement cycles. We believe these initiatives will position Flux to accelerate product adoption among our customers, thus expanding our market share and driving our growth of sustained profitable growth. Now I would like to review some of our recent customer successes, recent orders. In early July, we received a significant purchase order through our GSE distributor for a major North American airline for 120 units of our newly announced and redesigned G80-420 lithium-ion battery pack. This $2 million-plus order will be delivered throughout the calendar year 2025, reinforcing this airline's commitment to operational efficiency, sustainability and next-generation fleet readiness. In mid-August, we received an additional $1.2 million plus purchase order through our GSE distributor from another airline for a G80 lithium-ion energy solution, along with the SkyEMS software platform. This is a great example of success of our new solution selling strategy. We offer the customer a powerful combination of both hardware and software designed specifically to transform their fleet of ground service equipment. In addition to our progress on the new business development, it is also important to note that we have now shipped more than 28,000 battery packs. This represents a tremendous opportunity to add intelligence to the customer's existing equipment and IT infrastructure with our SkyEMS software and telemetry systems. Now I would like to hand over the call to Kelly Frey, our Chief Revenue Officer, to discuss our partnerships and solution selling initiatives, which are transforming the way we sell by aligning our product offerings to each customer specific needs. Kelly, please go ahead. Kelly Frey: Thank you, Krishna, and thanks, everyone, for joining us today. I'm now in my third quarter at Flux Power. And like Krishna, over the past several months, I've immersed myself in the outbound business development activities across the company. I'd like to spend just a few minutes walking you through how we're thinking about the business today and where we see opportunities and momentum building. At Flux, our top focus is on building long-term partnerships with customers, dealers and OEM sales teams. Over the last couple of quarters, we've shifted our sales approach to engage more directly with end customer users while continuing to fulfill business through OEMs, dealers and distribution partners. This is giving us better visibility into their needs and how we can deliver more value along with our dealer and OEM partners. We're not just selling a battery, we're also selling the accompany telematics software, which can be a critical component for customers to design their charging and energy management infrastructure. In fact, our SkyEMS telemetry and energy management systems for monitoring and optimizing battery performance are becoming a bigger piece of the conversation. In addition to the potential new revenue streams from our software, we're also excited about our growth opportunities in new market verticals and geographies. We're leveraging our strong foothold in the United States and targeting expanded opportunities in North and Central America, where we think Flux can play an important role. These efforts are expected to open up significant market potential to help drive future growth. Partnerships are another key driver of our growth strategy. Currently, we're engaged in more OEM discussions than at any other point in our history. We are working to remove barriers to adoption by expanding certifications, pursuing private label opportunities and investing in marketing. The goal is to turn first-time buyers into long-term repeat customers. We are also looking at partnerships beyond OEMs with telematics providers as well as energy and charging infrastructure players. We see a real opportunity to strengthen the ecosystem around our solutions and add more value for our customers. Finally, in terms of our sales pipeline, Flux has been involved in more opportunities this year and quoting activity is up significantly. And even though it may take a couple more quarters for that activity to materialize into backlog, the recent trend is very encouraging. So with that, let me now hand the call over to our CFO, Kevin Royal, to discuss our results for the quarter and year. Kevin? Kevin Royal: Good afternoon, everyone. Revenue for the fourth quarter of 2025 was $16.7 million compared to $13.4 million during the same quarter of the prior year. Full year 2025 revenue increased to $66.4 million from $60.8 million in the prior year. Increased sales for the full year 2025 was driven by higher volume in both material handling and ground support equipment markets, higher average selling prices in the GSE market, while slightly offset by lower average selling prices in the material handling market. Gross margin in the fourth quarter was 34.5% compared to 26.8% during the same quarter of the prior year. Full year 2025 gross margin increased to 32.7% from 28.3% in the prior year. The improvement in gross margin was driven by sales of higher-margin products, the benefit of cost savings initiatives and lower warranty-related expense. Operating expenses in the fourth quarter of 2025 were $6.5 million compared to $5.4 million in the fourth quarter of 2024. Full year 2025 operating expenses increased to $26.8 million from $23.8 million in the prior year. Higher operating expenses were driven by $2.9 million of onetime costs associated with the multiyear restatement of previously issued financial statements. The net loss for the fourth quarter was $1.2 million or $0.07 per share compared to a net loss of $2.2 million or $0.13 in the fourth quarter of 2024. Net loss for the full year was $6.7 million or $0.40 per share, which includes approximately $3 million in onetime costs. This compares to a net loss of $8.3 million or $0.50 per share in 2024. Excluding onetime costs associated with the multiyear restatement of previously issued financial statements and stock-based compensation, the fourth quarter non-GAAP net loss was $30,000 or $0.00 per share compared to a non-GAAP net loss of $1.9 million or $0.11 per share in the prior period. For the full year, non-GAAP net loss was $2.8 million or $0.17 per share, which excludes onetime costs associated with the multiyear restatement of previously issued financial statements and stock-based compensation. This compares to a net loss of $6.8 million or $0.41 per share in the prior year. Adjusted EBITDA for the fourth quarter was positive $600,000 compared to negative $1.2 million in the same quarter a year ago. Full year 2025 adjusted EBITDA was a negative $0.1 million compared to a negative $4 million in the prior year. Turning to the balance sheet. We ended the quarter with cash and cash equivalents of $1.3 million compared to $600,000 a year ago. I will now turn it over to Krishna for his final remarks prior to the question-and-answer session. Krishna Vanka: Thank you, Kevin. As we highlighted today, we finished fiscal 2025 with solid year-over-year growth on both a quarterly and as well as on annualized basis. We have a refreshed leadership team here that's fully focused on executing our strategic initiatives, including implementing our solutions-based sales approach with partners and customers to increase the value we provide. Although the current tariff and macroeconomic environment create uncertainty and near-term caution to certain customers, the growth of our sales opportunities, combined with the expected benefits from our strategic initiatives gives us a reason to be increasingly optimistic for the later part of our fiscal year. With that said, I will now turn the call back over to the operator for Q&A session. Operator? Operator: [Operator Instructions] Our first question is from Craig Irwin with ROTH Capital Partners. Andrew Scutt: It's Andrew on for Craig. First question for me. It was really nice to see the strong gross margin expansion in the quarter. Can you guys just kind of talk a little bit more about what went right in the quarter there? And you guys have also talked about near-term visibility to 40% gross margin. So kind of additional color on kind of where we are in that journey would be great. Kevin Royal: Yes. So we've had some initiatives to improve the cost of our product input. So the components and raw materials that go into our products. Really, that's what you're seeing flow through the quarter that contribute to probably about 60% of the improvement. The other being lower warranty costs. As we continue to improve the quality of our products, we're really starting to see the number of repair incidents decline both for the full year, but especially in the fourth quarter. So both of those items contributed to the improvement that we saw in the gross profit in the quarter. Andrew Scutt: Great. Now it was great to see the progress. And second one for me before I jump back in the queue. Congrats on getting the beta rollout of SkyEMS 2.0. Can you just kind of talk about how that's -- the customers received the product so far? And maybe just remind us kind of what the upgraded product provides versus the initial rollout of SkyEMS. Krishna Vanka: Yes. So this new version, SkyEMS 2.0 is really designed with customer in mind. We work closely with both the airline industry and the material handling to understand their pain points. These are specifically related to, "Hey, let us know when it's time to charge your battery. Can you increase the efficiency of the battery charging? Can we know when [ are we ] overusing the battery when it's discharging just to warm up the vehicle," for example, in colder environments. So we took all the feedback and we improved the product. We also made it pretty light and sleek that can almost work on a mobile environment like in a browser. So this is a new product. We are very proud, as I mentioned, that we gave this to an existing airline who is testing this, gave us good feedback so far. We are also giving it to a material handling customer this week as we speak. And pretty soon, we will roll this out. And as you heard me saying, we are packaging this together when we sell the battery. That's one of the things we did earlier with the airline for $1.2 million. That solution included SkyEMS software. Andrew Scutt: Congrats on the continued progress and the strong quarter. Operator: The next question is from Amit Dayal with H.C. Wainwright. Amit Dayal: Congrats on all the progress. Just trying to see what the pipeline is looking like for you guys? And if you maybe have shared the backlog number, I didn't see it in the press release, I think. So any color on that would be helpful. Kevin Royal: Yes. So specifically related to the outlook, while we don't provide guidance, we have seen kind of a bit of a slowdown and a pause from some of our customers in the quarter that we're currently in, which would be our first fiscal quarter. We've also started to see an increase in quoting activity, which we think bodes very well for the second fiscal quarter, which is the fourth calendar quarter. As it specifically relates to backlog, our current number is right at $9 million as we end the quarter. Amit Dayal: Okay. And as you sort of look to now maybe moving from beta to actual sort of product rollout for the SkyEMS, how should we think about what the plan is on that side? And what are your expectations for the attach rate? Are you selling this independently as well? Or will this exclusively initially be sold along with the battery solutions? Just trying to get a sense of what the sort of -- at least the initial sales strategy is going to be for this offering? Krishna Vanka: Sure. I'll answer this, and then I'll have Kelly add any more color. So yes, our strategy is to package and sell the SkyEMS software along with the battery. That's why we are calling it intelligent battery. And we are seeing some good success with it as we roll this out. Beta is the name we gave it to make sure customers are happy and they will gladly use the product, but the product is literally ready with their live data. So as I mentioned, in a month or 2, we will remove the name beta from the product and call it SkyEMS 2.0, which we are already selling, as I mentioned, with every battery possible. You also probably noticed we have 28,000 units that are already in the field. Our intentions are to go back and get them on the platform as much as we can. We do have a few thousands of the batteries in the field that are already online. It's literally working with these customers, giving them access and having them pay for it, which gives us a very good upsell opportunity. With that said, Kelly, do you want to add any other color? Kelly Frey: Sure. I think, Krishna, you nailed it, but it's really 3 motions. The first is telematics on every battery to make sure that we're positioning in it, including at least a base level of telemetry, SkyEMS with each battery. Then is going back to the installed base of customers who are maybe in their first, second, third, fourth year of having a Flux battery even longer and saying, "Hey, there could be value in you putting telemetry on this battery so you can get better visibility, which allows for better capital planning, better optimization." That's kind of the second motion. And then the third motion is once somebody takes perhaps their first version of SkyEMS, as we move [Technical Difficulty] we have upsell opportunities, perhaps advanced reporting, advanced optimization capability, integrations with other software they may be using. So it's kind of an upsell on top of the additional -- sorry, the original purchase of that telemetry. Operator: The next question is from Rob Brown with Lake Street Capital Markets. Robert Brown: First question is on the airline orders that you received. I think there were 2 pretty sizable orders there. Could you give us a sense of sort of what's driving that? Is it an expansion into the fleet or really kind of the new product offerings that you've got? Krishna Vanka: So the G80-420, the $2 million is a redesigned battery. It was redesigned to be more efficient, more gross margin-driven design. So I would say it is as a new product almost that we sold to an existing airline. And the second order we mentioned is for the G lithium-ion, which is sold as a package with SkyEMS. So that's an existing product that we sold with the software added to it as a package. Kelly Frey: Could I add something, Krishna? The other thing is -- so Krishna is accurate in that. The other thing is just to remind everybody, we're still at a very early adoption phase of lithium within the ground support equipment market. So even our existing customers who have purchased several hundred or even a couple of -- thousand of batteries from us or low thousands of batteries from us, still have a lot of migration to do from lead acid to lithium or from internal combustion to lithium. So it's not only just upselling the existing customers to get further adoption throughout their fleets, they typically roll out airport by airport by airport or sometimes by region or by country. So it's the existing increased adoption and then it's new airport acquisition is the other -- sorry, new airline acquisition is the other key focus in that market. Robert Brown: Great. And then on the quoting activity, I think you talked about an uptick after a bit of a lull. What's the -- is that both material handling and ground support equipment? Or what's sort of the dynamics of that improving order quoting? Krishna Vanka: Kelly, do you want to take it? Kelly Frey: Yes, I can. So really, I think everybody on this call is aware, we service 2 main markets. There's the ground support equipment market and the material handling market. The ground support equipment market, we didn't see as much of a pullback in capital expenditures. There was a little where there was related to uncertainty with the economy, we think driven mostly by the tariffs and what was going to happen, perhaps a little downturn in passenger traffic. So there was some impact on the ground support equipment market. However, in the material handling market, we did see in particularly Q1 calendar year, there was a little bit of advanced purchasing. Let's get it before the tariffs hit. And then there was a pullback on capital expenditures. I think everybody is aware, our batteries go into lift trucks. Lift trucks are a fairly heavy capital expenditure. We saw customers kind of holding their capital tied to chest in kind of late Q1, Q2. And now that increased quoting activity is really people saying, "Okay, I think I understand what's going on with tariffs. I understand the impact on my supply chain. Okay, I'm now going to release that capital to purchase the lift trucks, purchase the batteries," et cetera. So that's really what's driving it in the material handling market. Operator: This concludes our question-and-answer section. I'd like to turn the conference back over to Krishna Vanka for any closing remarks. Krishna Vanka: Thank you all again for joining us on the call today. We really look forward to speaking with you again during our first quarter call in November time frame. Operator, you may now disconnect. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good afternoon, and welcome to the CRISM Therapeutics Corporation Interim Results Investor Presentation. [Operator Instructions] Before we begin, I'd like to submit the following poll. I'd now like to hand to CEO, Andrew Webb. Good afternoon to you, sir. Andrew Webb: Thanks, Alessandro. Good afternoon. Thank you for taking the time to join today's presentation. My name is Andrew Webb. I'm Chief Executive of CRISM Therapeutics. And today's presentation, we'll be looking to really reflect on the highlights for the interim results that we posted yesterday. And following that, I really want to take some time to look at the important development for the company, and that's our movement now into commence our clinical trials. So in order to take that forward, and I'm looking -- I'm joined today by Professor Garth Cruickshank. Professor Cruickshank is Professor of Neurosurgery at the University Hospital in Birmingham. And Professor Cruickshank, if you just take perhaps a couple of minutes to introduce yourself, that would be helpful. Garth Cruickshank: Hi, Andrew, thanks very much, and welcome to everybody. Yes. So I'm Emeritus Professor of Neurosurgery in Birmingham. I've been involved with the treatment of glioblastoma for well over 30 years or so and have been heavily involved in the development of trials, which have really focused in on the very difficult ways of treating these tumors, bearing in mind that they sit within the brain. Also working with Chris McConville and with CRISM, I've been quite instrumental in helping design the current trial that's now been approved by the MHRA and also in particular, how we might actually progress this in terms of sort of practical solution for surgeons to use in the trial. Andrew Webb: Okay. Thank you. So if I may start, firstly, I'll run through the highlights from our interim results. As those of you that have heard me talk before and give you more of an insight into the company, everything we do is around ChemoSeed. ChemoSeed is our key asset. It's the platform drug delivery technology, which we're developing. And we're developing it as a platform technology and the brain tumor work we're doing at the moment is our primary indication. There are other solid tumors, which we're looking to address and some of those programs have started, which I'll highlight shortly. As I mentioned briefly in our introduction, we've had an absolute focus on delivering our first treatments in the brain tumor indication. And the highlight really is over the last few months is that the -- our application to the MHRA, the U.K. regulator to commence our clinical trial has now been given approval. And so we are on track for H1 to make the submission and I'm delighted the MHRA at the end of August approved us to go into trial. That removes any regulatory hurdles now, and we're free now to set up commence the trial itself. Professor Cruickshank has highlighted, we are starting with the most challenging of the brain tumor indications of grade 4, which is glioblastoma, which we'll talk about in a little bit more detail. It's important just to note as part of the set of an approval for the clinical trial, we also had to see ethics approval and where we've got a very positive feedback on the approach we're taking to the trial. Clearly, given the unmet clinical need, this is a sensitive area. Clearly, ahead of the trial, we need to have a clinical batch of products of the ChemoSeeds and where our manufacturing partner has initiated the clinical batch. And so that manufacturing process is under GMP, which is the regulatory standard for human trials and human medical purposes. We talked about -- we announced that we've established the Scientific Advisory Board. And clearly, Cruickshank is our lead medical adviser here on the design and setup of the trial, which we'll hear more about shortly. I did mention just briefly that we worked on as a platform technology, and I know there's interest to think, we know where else can we be using the technology for. We have building up our portfolio now to extending into prostate cancer. And clearly, this is quite a bit of airtime sadly for some high-profile individuals that have been diagnosed. This is now the prevalent cancer in men, and we have a strategy and the ChemoSeed we believe is suitable. So with support from Innovate the Launchpad grants, we have actually already initiated that program earlier this year. So it's an early stage, but initial progress has been good. In order to move things along, we did pause and raise some money just in the end of June, July. I'm pleased to say that we raised some GBP 874,000 to take us through to the commencement of the clinical trials. And so we brought in quite a number of new investors, which was very pleasing. But I'm also grateful to very grateful to our incumbent shareholders who have been with us through this early part of our journey, which was raised GBP 74,000 as part of that offering. So thank you very much for that. Final comment is our net cash at the end of September was just over GBP 900,000. So just quickly in terms of ChemoSeed itself, I think many of you have heard me talk this, so I'll just be very brief. This technology is the -- really the brainchild of our Chief Scientist, Professor Chris McConville, Garth Cruickshank has an early influence as well on this program, as you'll hear when we talk about the early clinical journey that the technology has taken. But first McConville has had this vision to basically improve. We have a lot of good cancer drugs are out there. But often the way they're delivered and particular indications like the brain tumor where the blood-brain barrier really does a very too good job of actually keeping the therapies out from the brain. Local delivery, this is something that Professor Cruickshank has championed personally, really we believe is a significant opportunity to progress and for the company. So without further ado, I think it's fully appropriate now. I'll hand over to Garth. Garth will set the scene for the glioblastoma and walk through then the plans and the strategy for the clinical development of ChemoSeed treatment. Garth Cruickshank: Thanks, Andrew. So I thought it would be useful for those who are perhaps not up to speed with the complications of patients with glioblastoma to give you a good feel for what the problem is and how we've gone about attacking it. So this slide shows you a montage of MRI scans using contrast enhancing substances to show up a tumor in a patient over time. Now there are unusual set in the sense that the very first scan actually occurred in this gentleman 9 months before he presented with his brain tumor. So we have what you might call a normal scan right at the top. And we can then see the focal development of his glioblastoma when he first presents on that second -- second montage with a tumor in the brain, which enhances. You see it's very focal nature. And you can see what happens over time over those scans. So at the beginning, when he first presented, he actually presented with mild headache, and we actually thought he might have had problems related to his previous head injury. But when we did the scan, we found this tumor in the right side of his head here. Now the appearances on the MRI scan were fairly diagnostic of that. But it was important to try and understand also whether we've missed anything before. So we checked on the previous scans and so on. Now patients who present with glioblastoma don't always present with headache. That's a relatively unusual way to present. Most of them usually present with what we call focal symptoms related to the part of the brain in which they actually have their tumor. A few will present with seizures. And later on, if the tumor gets larger and starts causing swelling, so they will develop headaches and a very particular type of headache that's persistent. But going back to the presentation, which is sort of what you might call focal symptoms, these can often be very difficult to pick up and GPs and doctors have real problems trying to understand whether a slight discomfort in the hand or a little bit of memory loss or whatever it happens to be, is really a symptom or not. So unfortunately, a number of these patients will present quite late. And that means that the tumor is already of the kind of size that you can see there. And that makes it more of a challenge to deal with. Glioblastoma is universally unifocal. You do occasionally get patients who've got multiple sites at the time of presentation. But more often than not, it's really focal. And this means that as a sort of surgical target, it becomes quite possible to think about trying to remove as much of this tumor as possible. So you can see on that third scan down that we've managed to get quite a lot of the -- if not all of the enhancing tumor out. But unfortunately, these tumors are not discrete. They have a diffuse component and a focal component. And that means that there's an amount of tissue -- tumor tissue still left in the walls of the area where we've actually operated. It doesn't enhance, but it's definitely there. And if you were to do further biopsies in that area, you would probably be able to demonstrate it. Now the current treatment for these patients is good surgery, followed then about 4 weeks later by radiation treatment and chemotherapy running together. And although that can have an effect, and I'll show you some of the results of that, by and large, these patients will recur and then go on to get progression of the tumor. Once you've had recurrence, there's virtually no treatment available for these patients. And perhaps one of the more solitary things to pick up here is that the picture on the right there shows you a postmortem specimen of a patient who had a glioblastoma. And although you can see there that sort of darker brown patch, and you can see the brain being distorted there. And this a coronal section highlights the damage that these tumors cause to both function, which can obviously impact on something like physical behavior or physical performance, but much more frightening and awful to patients and families is the erosion of mental function and personality, making this type of cancer truly awful. So down the bottom right there on the slide, I've shown you that the median survival is on/or around 15 months or something like that for these patients, but they all go on and progress and less than 5% of patients live 5 years. So it's a truly dreadful cancer in many different ways. If we have the next slide, please, Andrew. Now this is an important slide, and many of you who look at the literature will see this slide. This goes back to 2005. It's from a European ERTZ study and the publication was by Roger Stupp. It is probably -- and this is sad to say as someone in the business as it were, the last time we saw any real benefit from any particular agent in this disease. It's a survival curve. So on the y-axis there, you can see the percentage of patients surviving. On the x-axis, you can see time in -- I think it's in months there. It's in months. And you can see that these curves coming down, and you can see them separating. And this was actually at the time, quite a remarkable slide in the sense that for the first time, someone had actually shown that something worked in terms of separating out a control group who are having standard therapy with radiotherapy and those who had radiotherapy and a drug called temozolomide. And although they are separating -- those curves are separating, the downward trajectory of those cures is still fairly disappointing. And indeed, this is an important trial for us to understand because it was a trial which never achieved its intended statistical outcome. That is to demonstrate that you could get a 3-month improvement in survival. However, this treatment then went on to become the gold standard treatment and still is for this drug in conjunction with radiotherapy for patients with glioblastoma. And if you look at the figures, the reason why it actually went into and became the standard drug was because the 2-year figures, 24 months there showed that there was a rough doubling in terms of patients surviving from about 8% or 10% up to over 20%. Not remarkable, not fantastic in terms of the living 5 years, where I say less than 5% live about 5 years. But nonetheless, it did show an improvement. Now look, that date there is 2005. And if I'm right in saying that's 20 years ago, and we've hardly seen any real improvement since that. Also, less than 50% of patients with glioblastoma get any real benefit from this additional drug, temozolomide. And subsequent research has failed to advance even on this limited benefit despite many trials. So many have failed, I think, because we've not been able to ensure that the tumor is adequately dosed or that with the new drug, all because of poor penetration, as Andrew was saying, into the brain. And also one of the more problematic areas, of course, is that some of these drugs is a limitation on the dose you can give systemically before you get more side effects, making a limitation on the total amount that you can actually give. So this led me to think about what other ways could we overcome these problems and particularly to start thinking about whether we could put drugs in proximity with the tumor and also whether we could do it as early as possible as, for example, during surgery. Go to the next slide, please, Andrew. So this rather wordy slide describes some information around a Phase I trial that I did probably 8 to 10 years ago. So we know that irinotecan is a topoisomerase inhibitor. It works in a completely different way to temozolomide and carmustine. And it's been shown in -- had been shown in clinical trials at the time to have an effect on patients with glioblastoma that you almost always had to discontinue the therapy because they had too many side effects. However, those that were able to stay on it seem to get benefit from it and quite clearly were showing imaging changes as well, which was helpful. We know also that the substrate for irinotecan, the topoisomerase enzyme is upregulated in glioblastoma and is more potent and that the product of the enzyme creates a substance called SN38, which is about 1,000x more toxic than irinotecan. So there were some good biomechanical chemical reasons why exploring irinotecan seemed a good idea. Not only that, but it seemed to have in terms of tissue status relatively little toxicity. So in a Phase I study, I had access to some microbeads, about 100 micron microbeads that we were able to inject in a gel, an allogeneic gel directly into the tumor margin, in this case, recurrent patients, patients with recurrent disease. And we were able to demonstrate not only that it was safe in the sense that we didn't have anything like the inflammation and wound problems that we had with carmustine wafers, but also that these patients felt well after it. They were not having to have further chemotherapy because they had their chemotherapy put in. And not only that is that there was some evidence from the 9 patients that we treated that there was an improvement in survival somewhat unexpectedly, bearing in mind that we understood that one of the problems with what we were doing and what we hadn't realized was that there was very rapid offloading of the drug from these seeds. But it had a sort of silver lining effect in the sense that we were able to work out what dose was released from those seeds at the time. And this gave us a starting point for considering where we might want to go if we could improve the treatment. So that is the time that I started to talk to Chris McConville about the idea of, well, now isn't it possible for us to put in a much bigger dose of irinotecan and control the dosing in a way in which we could get prolonged release in a format formulation that would fit for a surgeon to be able to put into a tumor. And I think, Andrew, you're going to summarize briefly what some of the work that Chris has done. Andrew Webb: So those of you that listened to our presentations before maybe be familiar with this slide. This slide was actually pivotal in the proposal to the MHRA to take this proposed treatment forward. So what we show here is that the differences we're comparing -- this is the first work with the ChemoSeed. This is the small cylindrical implants loaded with the drug, irinotecan. What it means is here, we've compared this to the standard of care, which is temozolomide and also irinotecan itself when given intravenously. And as you can see that we had an exceptional survival on the ChemoSeed. So just to put it in context, this was a study conducted in mice, -- they've been administered well in the brain was actually a human cell line, which is very aggressive. It's called a patient-derived xenograft. So it's actual human brain tumor that was administered. And then we put in a ChemoSeed to treat it. And you can see that from those images on the right-hand side, at the end of the study, this is 148-days was the ethical limit of the study. Those mice that hadn't died through the brain tumor as has happened in most cases were then euthanized, we imaged the brains afterwards. So what was remarkable here is that those mice which had the ChemoSeed showed no sign of recurrence at all. We did lose one mouse early on, and that was really felt that it didn't recover fully from the surgery. But with temozolomide, you see on the right-hand side, as you'd expect and as Professor Cruickshank just described, inevitably sadly the tumor that does return, it does really, really quite aggressively. So -- but to have no recurrence of ChemoSeed really gives us a reason to be optimistic about the opportunities for the program. So with that, I'll hand back to Professor Cruickshank, and he'll talk about now the plans and how we're going to take the ChemoSeed technology through into clinical trials. Garth Cruickshank: So when Chris and I discussed this, we were trying to think of a formulation that would enable us to give perhaps a higher concentration of irinotecan in such a way that it's released at a dose rate, which would be satisfactory. So Chris then went on and did a number of in vitro studies looking at what kind of dose we had to achieve to kill tumor cells, and he did a lot of studies during that. And also to look at the way and the kinetic behavior of his formulation to enable that dose to be released under the conditions that exist within the tumor bed margin here. And also in a form in which we could actually use this as surgeons to put into the tissue to allow us to carry out the dosing. There has been around for a number of years, a drug called calmustine, which is in a wafer form, which you tend to -- which is approved by NICE for use in this particular situation. And the problem with that is that it looks a bit like sort of peppermint tablets, sort of like little seed tablets you just place within the cavity. And the trouble with this is that it just releases drug into the cerebral spinal fluid that bathes this area and virtually none of it goes into brain. So built on what I had done on the Phase I study, we felt that implantation that is actually putting the drug into tissue and allowing that to, as it were, temporarily heal over it would allow diffusion of the drug within parenchymal tissue, brain tissue directly. And that proved to be the case even from some of the seeds we used in the Phase I study. But this form of it as little rods. So these rods are 6 millimeters by 2 millimeters and they contain about 7 to 8 milligrams of irinotecan. And the matrix that they're in certainly breaks down over time, giving us -- we estimate somewhere between 30 to 60 days release of the drug, which is an important time period to understand because that's from the time of surgery to well into the time of radiation for these patients -- and not only that is that you're getting dose into these patients from the moment of their surgery from the moment you've got the pathological diagnosis, you're getting treatment running. The other problem that we had to think about here was dosing. Well, we had information from the Phase I study, which gave us an understanding about what sudden high doses might happen because of the offloading effect. And we were then able to calculate how we might do the dosing up to about 30 seeds to generate a reasonable dose for treating these patients. You can see there in that left-hand picture, you can see how the seeds are rained into the resection cavity. And then on the right on the cartoon, where you do this is to make a small 6-millimeter hole, a little bit bigger there with a standard brain cannula and then you put the next seed in. How do you work out the distance between them? Well, we use the sort of raster pattern as I've demonstrated there on the right. And that enables you to cover the area that you want to cover. And indeed, because of the imaging and because of what you know is the surgeon when you go into these, you can avoid risky areas and you can make sure you try and put it in areas where we think it's more likely that the tumor is going to be so you can get the most effective dosing that you can hope to achieve. And this is obviously based on the idea, most important idea that a very high proportion of these glioblastomas will recur locally, implying that that's the area to hit when you're going to retreat these patients. So if we go to the next slide, Andrew. So in terms of designing our study, we have to build -- we are obliged to build on the work that we've done already. We're not allowed to just jump off into unknown territory. We have to build on what we've done on the Phase I study, take it that bit further, prove safety and go on from there. So in this study, what we've got -- we've done is broken into 2 parts. In part 1, we're going to use the same kind of patients that I used in the Phase I study. And what we're going to do is to dose escalate. Because we know the kind of dose that was released quickly in the Phase I study that I did, we know that we're unlikely to get to what you might call dose-limiting toxicity in the early phase. So the last thing we want to do is to disadvantage these early patients by giving them suboptimal therapy. So the idea is to try and get the dose up as quickly as possible. So what we've designed is a novel Bayesian approach based on the probabilities of toxicity arising from the first study to rapidly increase the dose so that as many patients get as good a dose as we can give them early on. And it's probably more useful in terms of toxicity to have more patients at the higher dose than to have a lot of patients who are on suboptimal doses. The MHRA were concerned about the rate of dosing versus the numbers of seeds, and we explained in detail that, of course, this will be dependent very much on what the surgeon thinks they can do. I'm very grateful to Victoria Witt, who is our lead investigator for a lot of discussions on how we might achieve the kind of high doses that we actually want to achieve and the sheer practicalities of actually doing this towards the end of a period of surgery on these patients. So we plan to treat in the first quarter of this part 1, 12 patients. And from that, we will confirm the dosing, and we will also get a much better idea of any issues and complications to do with the technical procedure and also how patients respond to this. Now the most important thing for us is to optimize the chances of getting a result from this kind of therapy. We need to get ourselves in a position where we can get the best chance of getting these patients to respond. So by selecting patients who are newly diagnosed, who have the smallest amount of tumor left because they just had maximal surgery and to treat them at the earliest instance, i.e., the moment we've got that diagnosis at least for glioblastoma offers a unique opportunity, I have to say, because I've not seen any studies which have tried to do this in quite this way and quite so early is to get a high dose of chemotherapy in very early on with the idea of building on the surgery that you've done to get as big a cytoreductive effect as you can. And that will also see patients through the 4-week period whilst they're recovering from their surgery and then before they start their radiation therapy later. So this is the plan, and we hope to recruit in the initial phase, 60-odd patients and be looking at progression-free survival. This is a very common parameter to measure in these sorts of patients. And what we've opted for is to look for a slightly better threshold to obtain this kind of data statistically with the idea that we will get an answer quicker as to whether these patients are getting any kind of response. Not only that, but we've set up the statistics so that if we do get an answer, if we are able to demonstrate statistically significant progression-free survival, automatically, we can then consider overall survival, median overall survival as another critical endpoint, the kind of endpoint that NICE and the NHS will need to hear about to be able to take this further. So that's where we stand at the moment. We've had a lot of discussions with MHRA about the trial, and they're extremely enthusiastic to see how we get on. And this is really breakthrough from the point of view of this kind of cancer in these patients. And I'm very optimistic, me as a surgeon I know I've been heavily involved with this, but to be able to offer surgeons something that they can do over and above just surgery alone here and accelerate the therapeutic armamentarium that they've got for these patients is just -- is it very exciting, but it's also very needed and given, as I said, for the outcome for these patients, absolutely needed to try and progress this field further. So I think that's more or less all I've got to say, Andrew. I think you've got some other slides there, yes. Andrew Webb: Just a final slide. But thanks very much for what is an exceptional account of the story, the back story really to where we are today. And we certainly -- I certainly share your enthusiasm for the potential that we have within our grasp here. So just on a final summary slide. One that we haven't mentioned, we talked about the drug irinotecan. This is a well-known, it's a well-understood drug. We can only derisk these programs to a certain extent. The MHRA they're welcoming irinotecan as a choice. It's a well understood, well used drug. It's still used in first-line in bowel cancer and also as part of the drug combination in pancreatic. So it's well-known, it's well understood. And as being described, it is a mechanism of action, which we feel will be complementary to the other treatments out there at this point. Clearly, the securing access to the trial with the MHRA has been a most significant tipping point. It's been a significant amount of work. And Cruickshank and colleagues as well as our COO, actually put in -- this has been months of work to get this. And we've had a great engagement and a very positive engagement, I'm pleased to say with MHRA. So we're looking forward, everything now is to focus on the clinical trial setup and treating our first patient hopefully early into 2026. The commercial opportunity clearly is significant, and we've highlighted that before. We would hope that with our innovation passport, you may remember, we were awarded as of last year. We are under regulatory fast track, as I've indicated, we are getting very, very good support on this journey. We do have some service contract work. It isn't the primary focus. We're reactive, but it does certainly brings in some additional revenues to help mitigate the cash burn. And clearly, that is key. We need to make sure that we manage our cash runway as best we can at this point. But we know the journey, this is really this -- what we're doing here in brain tumor, I do believe is open the door to other opportunities. I'm pleased that Innovate saw that in us when they've helped to agree to fund the initiation of our prostate program. So that's started a little earlier than planned, but with the funding that was available, it gave us the opportunity to get a head start there. But plans are also commencing for commercialization as well. And again, the regulatory environment is supportive of that. So this has really been quite a remarkable journey. I've been through this with this lived this for some 8 years now, 6, 5, 7 years. But clearly, for professor Cruickshank, this has been a long and exciting journey, and we're actually really quite an inflection point. But -- so that really ends the formalities of the presentation. And Professor Cruickshank, thank you again for your input there. There will be 1 or 2 questions, which I'd like to pick up on before we close. One which I think I partly covered beyond glioblastoma, how do you see ChemoSeed developing as a platform for other cancers? And I think we touched on the fact that it is suitable really for any solid tumor. And we believe we can formulate most drugs into this -- into ChemoSeed, and that gives us a great opportunity. They just put some parallels. So with pancreatic cancer -- sorry, with prostate cancer, which we started on, we're using it again, a well-known well understood drug, docetaxel. Docetaxel has similar challenges. It's delivered systemically, but it does have some challenges how its uptake into the prostate. So working with the lead hematologist, we've got some guidance now about implanting these seeds into the prostate directly. And that's a program we're running at this point. Pancreatic is something we really, really would like to be doing. It's more global complex, will require more development because we're looking at doing cover today standard of care is a 4-drug combination. And we believe we can formulate this, but it will take a little more in terms of development. Somebody asked, can you please give an approximate cost for treating the first 12 patients in the Phase II trial and expand on how you intend to raise the cash? Clearly, this is key. The cost of the trial will start in this month. So it was about GBP 250,000 for the setup. It's going to take probably to get to a reportable data point, probably around GBP 700,000. Total Part 1 costs will be -- we're thinking somewhere around GBP 1 million in totality. That is -- I hesitate a little on that. And the reason being is that the rate of recruitment is going to be key here. And -- but as you can understand from Professor Cruickshank's network, we're working with to on board numerous clinical trial sites that will help to speed up that recruitment. This is really all about -- it's a rare disease, so there's only so many patients, but we believe there's a level of interest in order we can cover this very quickly. How the question is, how do you plan to balance advancing clinical pipeline whilst creating value for shareholders in the near term? All I can say is we believe that the commercial opportunity is significant. There is -- the standard of care has been adequately described here has not changed for 20 years. There's a real appetite for this. We have the proposed costing, which has been -- came from an independent health economic report done by patient consulting a couple of years ago. That gives us a good figure, somewhere it was around GBP 13,000 per patient. This sits nicely within the NICE guidelines as we currently understand them. There's always going to be pressure on the drugs. But one thing the company is very clear on we do not want to fuel this health and quality we see with such expensive cancer therapies coming forward. So we're trying to find -- we obviously find a pathway through that. And we will likely partner at some point. But this is something we're working on. So the -- in terms of the approval, just to be clear on the question, in terms of approval, we will have these inflection points as Professor Cruickshank described, where we can issue data through to the MHRA and we could get an early approval on the basis of the data, and it's all about the data. And I think that has been adequately described, we have a very good preclinical data set and some early clinical experience with irinotecan, which gives us reason to be optimistic. But our primary market will be with NHS in the first instance and then we've rolled out through Europe and then leveraging the ILAP program for other markets. And U.S. is very much on our radar. There's a question here for... Garth Cruickshank: Yes. So from your experience of clinical trials, Professor Cruickshank, do you think ChemoSeed will have making a significant difference to the life outcomes of patients of the trial has been completed. The answer is I don't know. But the reason why I think it might be work and some evidence to prove that it probably will work is the fact that in a number of patients where we were able to treat super early with temozolomide, for example, in 1 or 2 of the trials that I was involved in, there was no doubt that, that cohort did better. In other words, indicating that very early treatment of the tumor, whilst it's small, is actually beneficial as a general principle of treating this kind of cancer. So that's very clear. The other thing is that in a few of the patients that I've treated in the Phase I study, some of the results are quite remarkable. And it was as if, if we want to hit some kind of threshold, maybe you could get an effect. That's why I think that there's a very, very good chance because we're doing something that's not been done before, bearing in mind that previous trials have failed where you've done about conventional adjuvant type treatments. This is what you might call ultra early. And I think that this stands a really good chance of having an effect. So if one can not only treat early and get the tumor smaller, but you can also expect to see some enhanced effect of the radiation because of the presence of irinotecan there as well, which we know from our biological work is probably true, then I think that the outlook for this is good. So I would be -- what's the word? Probably about 75% certain that we're going to see some kind of a result here. Is that result going to be big enough to make a real difference in terms of patients now living -- going from 5% at 5 years to 25% at 5 years. I think that's a tall order. But I do think we might see something that's better than the impact of temozolomide was in terms of those curves for a larger number of patients. And this is really actually economically important because most of the current trials that are going on or most of the current attempts of treatment are involved in looking for molecular pathways and particular molecular signatures within tumors where you can target whatever it is with some kind of IB or AB type drug. Now the trouble with that, particularly in glioblastoma is that so variable is the tumor and so heterogeneous is it that you have a relatively few number of patients who are likely to respond. So for example, larotrectinib works extremely well on the NTK (sic) [ NTRK ] fusion, but only in 1% or 2% of cases of glioblastoma where the abnormality is demonstrated. And a lot of the current drug companies are worried that their molecular-based approaches are only going to yield relatively few patients who are going to be sensitive. Now our treatment here that we're proposing here seems to have a much more broad effect based on its particular effect on the universal mechanism to do with basic excision repair and the way in which repair mechanisms work, double-strand breaks and so on in tumors. So I think it's much more likely that, one, we'll get an effect; and two, we'll be able to do it in many more patients. So that's the best answer I can give you, I'm afraid. Andrew Webb: That's great. So I think that concludes the questions. I don't think we've had any more come in. No. So I want to take this opportunity to thank everybody very much for taking your time and for your attention during this presentation. Thanks to Professor Cruickshank for that insightful information really about the setting the scene for glioblastoma and how we plan to address such a challenging disease and one where clearly, as we've seen, the unmet need is really there with some need to address with some urgency. So I look forward to keeping shareholders updated as we continue our journey. But thank you again for your commitment, your support is immensely important to us, and I look forward to updating you again in due course. Thank you very much. Operator: That's great. Well, thank you both for updating investors today. Could I please ask investors not to close the session as you now be automatically redirected to provide your feedback in order the management team can better understand your views and expectations. On behalf of the management team of CRISM Therapeutics Corporation, we'd like to thank you for attending today's presentation, and good afternoon to you all.
Nick Wilkinson: So good morning, and an emotional welcome to the Dunelm prelims presentation covering our financial year to the end of June. My name is Nick Wilkinson. And Alison Brittain, Karen Witts and I are delighted to welcome you to the offices of Peel Hunt in London in what is my last results presentation. Whether you are here in person or joining virtually, I hope you're well, and thank you for your interest in the continuing story of Dunelm. It's our normal running order. I'll introduce the highlights. Karen will then go through the FY '25 financials and our guidance, and I'll be back to share more on our plans as we carry on growing Dunelm as the U.K.'s home of homes. So with images from our autumn/winter product collections, we'll get started. Our full year results show strong performance as we again successfully balanced growth and grip. Sales up by 3.8%, were ahead of the market, which was up only slightly, and we continue to move towards our next market share milestone of 10%. As reported by global data, our combined share now stands at 7.9%, which is up by 20 basis points on the prior year. The balance of our sales growth was particularly broad-based from a customer point of view, by which I mean we saw both higher volumes and higher average item values this year. Last year, we only saw higher volumes and not higher AIVs. And we saw both higher frequency as well as more active customers, which grew by 80 bps on the prior year. And in terms of grip, a strong gross margin and profit before tax of GBP 211 million reflects the strength of our operating model in a cost environment which is more challenging than we expected this time last year. And in a year when digital channel grew significantly, there's particularly good grip on digital profit levers. Operating cash flow was strong, supporting a higher than normal for us level of capital investment and therefore, good free cash flows. We've announced this morning an increased total ordinary dividend for the year of 44.5p. Alongside this is the continued development of our business, and FY '25 saw a number of firsts, our first store serving in London customers, our first sales outside of the U.K. with the acquisition of a third-generation family business, selling home textiles through a national network of small stores in Ireland. And we built in-house production for the first time in the Midlands for made-to-measure Venetians, roller blinds and shutters. All of these moves, along with getting to know the Designers Guild business, whose brand and IP we also acquired bring us new capabilities and new opportunities. These are seeds for future development, and many of them are complementary, coming together already in our Made-to-Measure business, which grew by 1/3 last year. Our nonfinancial highlights demonstrate our commitment to growing sustainably making good decisions for all of our stakeholders, doing the right thing for the long term is in our DNA from our founders. But make no mistake, these are areas where we're looking to create value. So while regulatory and consumer expectations may shift and fragment, we are clear sighted on our goals. In terms of reducing our impact on the planet, we relish the innovation opportunity that new materials and technology bring. We've made good progress in the year on Scope 1 carbon reduction and in reducing plastic packaging, but Scope 3, that's the impact of the products we design and source and our customers' use of them, Scope 3 progress is more challenging. We're sourcing lower impact materials, but there is more work to do at all tiers of the supply chain to measure and reduce both carbon and water consumption. It's also been a meaningful year for our role in communities. Being a good neighbor is not difficult, but it's not something that every business does. We've got 1.4 million Facebook followers on our store community pages, up 15% year-on-year, and they've helped us to organize campaigns to connect generous customers with great local causes. Alongside all of this, our national charity partnership with AgeUK is thriving. And with our colleagues, higher levels of retention and engagement, the start of progress on developing more leaders from ethnic minority backgrounds and increasing opportunities for colleagues to access lifelong training and personal development. A particular thank you, therefore, to all my colleagues listening today for everything you do to adapt and develop and to grow yourselves and thereby our business. And now over to Karen to walk you through the financials. Karen Witts: Thank you, Nick, and good morning, everybody. So, as usual, I'll start with a summary of our full year financial results, then I'll take you through our financial performance in more detail. This time around, I've included a schedule that sets out how we are thinking about costs, both the input costs that sit within gross margin and our operating costs to show how we also think about sustainably managing PBT margin. And then for completeness, I'll conclude with our guidance and our outlook for the year, and then I'll hand back over to Nick to focus on our strategic progress. We're very pleased to be reporting another good set of results, demonstrating ongoing progress and growth in a market that continues to be challenging. We grew sales in the year by 3.8% to GBP 1.8 million. We saw stronger growth in H2 than we did in the first half of the year, but we're not yet calling out a consumer recovery. Our sales were high quality, meaning that they were driven by a combination of volume and a higher average item value from product and category mix. We held retail prices largely stable over the year, absorbing most of the impact of high inflation in our cost base rather than passing it on to customers, and we were disciplined around promotional activity. This, in combination with strong operational cost grip drove a very strong gross margin of 52.4%, up 60 basis points year-on-year. Delivering with grip remains important as input costs continue to rise, particularly those driven by labor cost inflation. We're balancing these inflationary pressures by ensuring that we deliver more efficiencies. And at the same time, we believe in continued careful investment to sustain both short- and long-term growth. Profit before tax of GBP 211 million grew by 2.7% in the year with slightly higher earnings per share growth of 3.2%, reflecting the normalization of our effective tax rate after a once-off adverse impact last year. Our PBT margin remained broadly stable year-on-year at 11.9%. Cash generation remains strong. Operating cash flow was up 10% year-on-year with full year free cash flows of GBP 127 million after an increased level of CapEx. We ended the year with net debt of GBP 102 million, with a net debt-to-EBITDA ratio of 0.3x, comfortably within our target range of 0.2 to 0.6x. With healthy cash generation and ongoing confidence in our business model and prospects, the Board has declared a final ordinary dividend of 28p, taking the total ordinary dividend to 44.5p per share, up 2.3% year-on-year. We also paid a special dividend of 35p per share in April. So that takes our total declared distribution to shareholders in the year to 79.5p per share. This next slide sets out how our sales growth was delivered through broad-based growth in active customers with increased average item value, not driven by price increases and slightly higher frequency, resulting in another year of market share gains. As I said, we were pleased with the quality of our sales, which were delivered with a focus on bringing more of our ranges more conveniently to more of our customers, all while maintaining our outstanding value proposition and our focus on our good, better and best price quality tiers. Digital sales participation increased by 3 percentage points year-on-year and now makes up 40% of our total sales, reflecting the success of our ongoing efforts to improve our customers' digital experience. As a reminder, digital sales include Click & Collect sales, which are ordered online and fulfilled in store and which grew very strongly in the year, up by around 30% as we expanded the number of products available for in-store collection. As we reached more customers with our proposition, we grew our active base by 80 basis points. We saw particularly strong growth in our 16- to 24-year-old younger consumer cohort, and we grew well in the London region, where we opened our first inner London store in the year with another to be opened in quarter 2 in Wandsworth, Southwest London. We gained 20 basis points of market share year-on-year and now have 7.9% share of the U.K. market that grew only slightly. So we're still confident in reaching our medium-term market share milestones of 10%. As well as sales growth, we delivered further gross margin expansion with gross margin up by 60 basis points year-on-year. We have maintained our outstanding value proposition and kept retail prices broadly stable, understanding that most of our customers are feeling the impact of macroeconomic pressures. We've been disciplined around our approach to promotional activity in order to underpin the quality of sales growth. And we had a good quarter 4 when an early start to the summer season helped us to deliver a strong performance on seasonal sell-through and full price sales throughout our summer sale period. Freight costs and the impact of FX were broadly stable across the year, although towards the end of the year, we began to see a slightly favorable impact from foreign exchange. We expect a small overall net gain from freight and FX in FY '26. And as ever, we will keep optionality over pricing in order to deliver the right combination of value growth and profitability to our various stakeholders. The pressure on costs in the retail environment is well documented. Our operating cost base grew through a combination of volume-driven cost growth, inflation and investment, partly offset with efficiency and productivity gains. Volume increased variable costs by GBP 18 million. This related particularly to those costs associated with digital sales, including Click & Collect expansion and 2-person delivery related to strong furniture sales. We've had to deal with more than GBP 20 million of inflation, which is around 3% on our operating cost base, with most of this coming from increases in the national living wage and some from the national insurance contribution threshold and contribution increases in quarter 4, which will fully impact in FY '26. Because of this, we've worked hard on accelerating productivity gains, largely through what we call continuous improvement initiatives. including the efficient management of our performance marketing spend, optimizing our store operating model and making improvements to our supply chain operations, for example, by improving internal processes around returns. In total, we delivered GBP 22 million of productivities to help offset inflation and to limit the impact on our overall cost to sales ratio. We believe in an ongoing drumbeat of investment to realize opportunities for growth and efficiency. The incremental investment activity we expensed in the last year was focused on new store openings, further investments in made-to-measure capability, improving digital search capability and costs associated with acquisitions. As we're talking about costs, this is where I thought it might be helpful to describe how we think about them to show the various characteristics of costs in our business model and to give our current view of the direction of these costs over the next 12 months. As a management team, we think about all of our costs, whether they're reported in our gross margin or through operating costs. We like to live our value of acting like owners, and therefore, we make every pound count. Our focus is on delivering a broadly stable PBT margin over time rather than guiding specifically to gross margin as we think this better suits the evolving nature of our business. Our reported gross margin will continue to be strong, but we won't be guiding to it. Our costs can be impacted by external factors like freight, foreign exchange, raw materials and inflation, where we have limited direct control, but where we can create a degree of cost certainty through, for example, freight agreements or our hedging activity. We can also mitigate cost increases by using P&L levers like pricing and promotions and by making sourcing decisions. And we invest with regard to the balance of growth initiatives to productivity drivers. As we start FY '26, we believe that freight and FX will give us a small net tailwind. We see relatively stable raw material cost impacts at least for the first half of the year, but we will need to work hard to deliver efficiencies to help offset the impact of another 3% to 4% of inflation across our cost base. This is largely driven by the National Living Wage and National Insurance contribution increases. Continued sales growth will come with associated variable costs. These costs depend on where the growth comes from. So store labor costs, logistics costs and performance marketing costs will vary depending on sales by channel and product category. Across these various moving parts, we have flexibility in our P&L to make choices and to manage profitability to a broadly stable PBT margin. Profit before tax of GBP 211 million grew 2.7% year-on-year, while our PBT margin of 11.9% was broadly stable year-on-year. You will see that our effective tax rate of 25.9% is back within our guidance of 50 to 100 basis points above the headline rate of tax as FY '24 was impacted by a one-off tax -- deferred tax adjustment. And this has had a positive effect on diluted earnings per share, which grew by 3.2% to 76.8p. Our operating cash flow was strong, up 10% year-on-year, reflecting a good trading performance and well-controlled inventory, which is benefiting from the investment in and deployment of forecasting and replenishment tools, particularly in stores. As I explained in our interim presentation, CapEx of GBP 67 million is higher than we've seen recently, primarily driven by the acquisition of two freehold retail properties in attractive locations, which will connect us with more customers in areas where we're currently underrepresented. These opportunities are unpredictable, and we still expect most of our store openings to be leasehold. We remain a CapEx-light business, and we take significant amounts of investment through our P&L while still delivering that broadly stable margin. We ended the period with a net debt position of GBP 102 million, which at 0.3x EBITDA, it is comfortably within our target range, and this was after the payment of GBP 159 million of dividends in the year. To give more color to our GBP 67 million of CapEx this year, more than half of it was driven by our decision to take advantage of four strategic opportunities. These were primarily the two freehold properties in the Southeast of the country that I've described, and we'll start work to convert these to Dunelm stores this year. We also acquired a small business in Ireland with a portfolio of 13 stores. We're currently bringing new Dunelm product to our Irish customers and are refitting and rebranding the stores we have acquired as well as working on developing a full e-commerce offer for Ireland. Finally, we acquired the Designers Guild brand and design archive, which will give us an exciting opportunity over time to bring more beautiful fabric designs to our customers. And then more usually, we also continue to invest in new stores and refits, spending GBP 22 million on opening 6 new superstores, including 1 relocation, our first store in inner London and an 8 major refits. We aim to continue this approach on stores and refits in FY '26 with a view to opening 5 to 10 new superstores, a second inner London store, and we have more than 10 refits planned. It's important to us that we invest in the business for growth and efficiency. And we're also proud of our track record of strong shareholder returns in the form of a progressive ordinary dividend and further distributions from the surplus cash on the balance sheet. This year, the Board is declaring a final dividend of 28p per share, bringing the total dividend for the year to 44.5p per share, up 2.3% year-on-year. Ordinary dividend cover for the year was 1.73x, very slightly outside our target range of 1.75x to 2.25x, but comfortably covered by cash generation and a reflection of our confidence in the business. We also paid a special dividend of 35p per share in April, bringing the total distribution for the year to 79.5p. I'll now give our guidance and outlook for FY '26 before handing back to Nick for his strategic update. In terms of financial guidance, we will continue to invest in the business for growth and efficiency, and we're guiding to CapEx of around GBP 50 million for 5 to 10 new superstores, at least 1 in the London store and a continued program of store refits. We expect working capital to be broadly neutral over the year, but we expect a timing benefit of around GBP 90 million at the end of H1, just as we saw in the first half of FY '25. And finally, we expect our effective tax rate once again to be 50 to 100 basis points above the U.K. rate of corporation tax. Moving on to outlook. At this early stage of the year, we're pleased with trading so far and that despite some pretty warm weather, which has impacted store footfall, we're pleased that we've seen a positive response to our new autumn/winter ranges. Nevertheless, we're not yet seeing trends that would indicate a sustained consumer recovery. We will continue to progress our strategic initiatives. We're excited about our future plans, which as well as more new stores and investment for growth and productivity include our app, which will be available for download -- for customers to download this autumn. We're well placed to deliver sustainable, profitable growth despite entering another year of challenging inflationary pressures. And we are confident of making further market share gains as we progress towards our 10% medium-term milestone. And with that, thank you for your attention, and I'll now pass back to Nick for the last time. Nick Wilkinson: Thanks, Karen. So onwards. As you know, our ambition is to build Dunelm into the most trusted and valued brand for customers in homewares and furniture. We want to be The Home of Homes and a 10% share of our addressable market is simply the next milestone on that journey. To achieve this, we have three broad focus areas which frame our priorities and our investments. And in summary, outlined on the right-hand side of this page, we drive sustainable growth through the combination of elevated product, the development of our channels, to offer better shopping experiences to more customers and the harnessing of our operational capabilities to drive efficiency and effectiveness. These pillars are compounding, which necessitates a high degree of cross-team collaboration and of learning, something which our values and culture sets us up well to do. We're doing all of this in a period of lackluster consumer confidence, but we're happy to embrace the realities of how U.K. consumers are feeling right now. There's plenty of joy in our offer. And in the current environment, we're getting on with helping our customers create the joy of truly feeling at home and raising the bar on the value that we offer at every price quality tier, remembering that our average item value is still only just over GBP 10. As we enter a new year, we're accelerating and evolving those parts of our plan, which play to our multichannel and multi-category strengths. I think the benefits of operating both physical and digital channels proficiently are now well understood. Almost 30% growth in our Click & Collect sales last year is an illustration of this. At the same time, the benefits of being a multi-category specialist are also increasingly apparent. Coordinating our offer across categories allows our customers to better sell their homes, makes it more easy for them to shop with us and improves our marketing efficiency. Our current student campaign is a great example of this for some of our newest customers. So to bring our plans to life, I'll talk just briefly to a couple of examples in each of those three focus areas. And we'll start with furniture. It's been a strong contributor to our growth for many years now. And you've heard me say regularly how we're building capabilities here in product design and in sourcing. There's no better example of this than in upholstered chairs and sofas. From an early success in a chair that some of you may remember called Ila, we have grown a well-curated range of strong sellers. Ila lives on in the LC chair shown here with new colorways and materials this year. Beatrice is another best seller, recently evolving into Beatrice II, you've got the picture. Our supply chain is also getting more sophisticated. We deliver furniture through our own home delivery network to most of the U.K. and most of our range is available for quick delivery. If you order today, Tuesday, you'll have it before the weekend. Meanwhile, in our U.K. manufactured made-to-order collections, it's important not to overwhelm customers. That's why the 14,000 combinations we offer are presented as four simple steps. You choose the shape, the fabric, the padding and the feet of the sofa or chair you want us to make for you. With our supply chain increasingly advanced, our focus is now on evolving the furniture shopping experience in our channels with changes to our store presentation being tested this year. I'll make all of this sound rather methodical, but the results are dramatic. In upholstered chairs and sofas, our market share has more than doubled in the last 5 years. But with only 2.2% of product category worth over GBP 3 billion, there is plenty of headroom for further growth. Moving to our heritage textile categories where our market shares are higher, product development is still the starting point for raising the bar on our customer offer. I've listed three examples of this. Egyptian Cotton towels, we talked about in February, where we invested more quality in the yarn and manufacturing process and increased prices slightly while still being lower priced than comparable quality elsewhere. Results have been really good with growth in sales and gross margin. Hanging pack curtains is a current example. And to explain very briefly, we offer many price/quality tiers of curtains from good to better to our best made-to-measure curtains. Our good tier curtains are folded and packaged on shelf. Our better curtains are heavier weighted. So rather than fold them in packets, we hang them on rails in store. To this tier, we've now added more quality, weighted corners and deeper headings and a refreshed and updated color selection. The top image on the right-hand side is taken from our recent summer product event in Somerset House before we open the doors to press and influencers. As we double down on our product in these heartland categories, we are attracting customers who might otherwise go to nonspecialists. So we are evolving, evolving our packaging to more clearly explained product features as well as price, easier navigation of the range in store and more personalized content to inspire in our digital channels. Our soon-to-air Home of Color autumn campaign presents our depth and breadth of product in simple terms, giving consumers confidence across our categories from curtains to upholster chairs and beyond. On to our second focus area, connecting with more customers, and I'll start with online. Here, I've stepped right back to when we were in a phase that we called catch-up to show you in the graphic how enabled by improving data and tech capabilities, we've been constantly raising the bar on the digital customer experience that we are able to offer. With experimentation to improve customer experience, more choice, AI-driven search tools, more data to allow better personalization, we have excellent levers to carry on growing sustainably now and into the future. The phase we're entering next will see us doing more scaling up. And with the imminent launch of our app, we're also referring to this phase as joining up. Launching an app at this stage when we have good product data and good digital capabilities, we see a twofold opportunity. Firstly, the app will offer us more capability for product inspiration. That's because, and I know many of you know this really well, the app won't have the high cost of generating website traffic, so it's possible for us to play further up the customer funnel, focusing on product stories and ideas that appeal to customers who are browsing rather than necessarily looking to buy immediately. And because you're always signed into the app, we'll be able to show you better content that's more relevant to your preferences. That's exciting for us as a product specialist with many, many stories to tell. Secondly, the app will allow us to better develop our cross-channel experiences, easier to check availability in your preferred local store, more product information on the shelf, more personalized offers and in time, much more beyond. Good cross-channel shopping drives frequency and differentiation from single-channel players, which is why we love our stores. And as you'd expect, we've been very busy here. And as Karen explained, we've invested slightly more than normal in our stores in the last 12 months. London is simply a segment of our addressable market that we underserve. 10 years ago, we were very much just arriving in Greater London, opening stores close to the North and South circular roads. And those stores have done very well for us, but there's a lot more to go for. As you know, we've recently opened our first store in London borough, connecting us to new customers, and it's going to be joined by another similar sized store in Q2. And the two freehold developments we purchased last year will be large stores when they open just outside of London to the South. It's worth emphasizing that the different sizes of stores we operate are a function of site availability and catchment size. We favor large superstores, 20,000 square feet with a mezzanine to trade 30,000 square foot in total wherever practical, such as recently opened in our latest store in Manchester. But in Trowbridge, which is a smaller infill catchment in an area with longer drive times, we'll happily open a smaller superstore. Both sizes generate good paybacks and sustainable growth, giving us more optionality in a tight property market. This year, we expect to open 5 to 10 superstores and for the majority to be larger ones. We're also busy with store refits. These are ongoing programs of work to ensure our estate is upgraded on a regular basis. Refits allow us to introduce new ideas. And as I mentioned earlier, when I talked about product innovation, we're improving our store presentations and densities in furniture as a current focus. The best ideas we then roll out through the refits we do each year, such as our new cafe format or more quickly to many stores, such as the new self-checkout that we will roll out to all stores by the end of the year after this. And on to our third focus area, harnessing our operational capabilities, to drive efficiency and effectiveness. This one is not just about cost, it's also about growth. Karen has given you more on costs. So just one slide here of examples. Continuous improvement first. And I'd call out our performance marketing efficiencies as a good example of a small team doing smart things with data and experimentation to drive customer level transaction profitability. In our big labor areas, I'll highlight store operations as a good example of a large team doing smart things and managing a lot of change. In the last 6 weeks, we've introduced new store leadership structures, new delivery schedules and new Click & Collect processes. Self-checkouts are taking 70% of total transactions where we rolled them out. Tech and data-enabled changes like self-checkout and the new forecasting replenishment system we've successfully implemented are examples of moderate-sized programs that have grown our skills and confidence in good product discovery, tech delivery and business change. We've got many new initiatives that we're exploring, as you would expect. And 3 examples to share with you here. We like the benefits we've seen from the initial testing of RFID tagging in textiles to improve stock accuracy and store processes. We're developing with our committed suppliers and partners the optimum approach to adding more mechanization into our logistics operations. And we're excited by what we've already done with AI, site search, for example, and with some proofs of concept, we're currently running in new areas, the optimization of ultra-high-quality content images at scale as an example of this. I'm as excited as I am for the opportunities we have on grip as I am for growth for profitability and efficiency as well as for sales. So to sum up, it's fair to say that my ambition for the business is no less now than it was when I was preparing for my interview in 2017. With amazing colleagues, we've built and achieved a lot since then, but there is still so much more to do. A feature of my tenure has been the fast-changing macro environment. In sometimes stormy seas, my team and I have benefited greatly from inheriting a very strong business model. In turn, that's allowed us to continue investing, ensure we make our model even stronger, always adding quality as well as quantity. We now have a thriving digital business alongside our stores and scaling up digitally has been in lockstep with elevating our product offer, the two have fueled each other. And this combination, multi-channel and multi-category positions us strongly for the future. Analysts often ask me who our biggest competitors are. And when your share is only 8% and you face different players in different categories, the answer is really fragmented. We are surrounded, which we love. We respectfully compete against some of the best businesses in the world, but we feel strong for being multi-channel, and we feel strong for being multi-category. In shopping for their homes, U.K. consumers are multi-channel and they are multi-category. We also like to be different in our relationships. We want our customers to be themselves, not our image of what they should be, never judged in terms of budget or style. We do extraordinary things in our local communities and our committed suppliers are as much part of our business as our own teams of buyers and designers. All the team at Dunelm are ambitious and restless. They're looking forward to the arrival of Clodagh Moriarty, and I'm profoundly grateful to them for all they have taught me and how much they have grown over the years. On the right-hand side of this page, probably my favorite graph, showing our market share growth by category. This is the data up until calendar year 2024. But with only 8% of the market, the picture is of headroom, not of achievement. I know that all my Dunelm colleagues look at that graph and see what can be done and the opportunity to sell more. From furniture to hard goods like lighting to textiles we've been selling for over 40 years, we are, in many ways, still only just getting started. Just getting started is not the typical last line of a departing CEO, but it's my last lines and why I'm delighted to carry on as a long-term shareholder in this business. So on that note, we're going to go to Q&A, but I think Alison is going to say a few words before that. So [indiscernible]... Alison Brittain: Good morning, everybody. For those of you who don't know me, I'm hoping not very many, I'm Alison Brittain, I'm Dunelm's Chair. As many of you know, I don't normally speak at these results presentations, and I am promising you now that I will not make a habit of it. However, we are approaching a pivotal moment, a transition in leadership for our company. And so I thought it was worth me saying a few words about that. So I'd like to start by recognizing Nick for his enormous contribution and all that he's done for Dunelm in his 7.5-year tenure as CEO. As he himself said in his presentation, Dunelm's inherent strengths have been a constant throughout this time. However, he has undoubtedly used his own special blend of skills, experience and leadership to harness those strengths and to move the business forward. Beyond Dunelm's strong financial performance, Nick has overseen a significant transformation, building Dunelm's strengths and developing the business as a truly multichannel retailer. He's preserved the very best of the company's values whilst modernizing and developing its capabilities in what have often been extremely challenging external circumstances. So on behalf of the Board, I'd like to extend a huge thank you to Nick and to wish him every success for the future. As you've seen this morning, Nick's leaving the business in fantastic shape. And testament to this was the very high quality of candidates who wanted to succeed in. And of those, the outstanding candidates through the process was Clodagh Moriarty, who's known as Clo. I'm delighted that Clo will be joining us as our new CEO in just a few weeks' time. She brings extensive experience across a range of leadership positions, combining successful roles in retail, strategy, digital, technology and transformation. I have no doubt that her passion and energy alongside her expertise will be invaluable to Dunelm as we move forward. And Clo is joining the business at a great time. There's lots of opportunity in the business. She's joining a very strong, well-established executive team, and she has a supportive and experienced Board behind her. So I'm really excited to be working with her, and I know that she is equally excited to be getting started. So I hope that many of you with us today will get the chance to meet her in person over the coming months and before, of course, hearing from her properly at the interim results presentation in February.
Operator: Good day, and thank you for standing by. Welcome to the Transgene 2025 Half Year Financial Results Conference Call and Webcast. [Operator Instructions] After the speaker's presentation, there will be the question and answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Lucie Larguier, Chief Financial Officer. Please go ahead, madam. Lucie Larguier: Thank you, Maria, and good afternoon, everyone. Thank you for joining us on today's call to discuss our progress over the First Half of 2025 as well as a half year results. You can access the press release issued today on the Investor page of our website. On today's call is Dr. Alessandro Riva, our Chairman and CEO. After Alessandro's discussion, we will take questions already on this telephone call and also on the web platform. Before we begin, I'd like to remind everyone that today's discussion contains forward-looking statements, which are subject to a number of risks and uncertainties. And with this, I now hand over the call over to Alessandro. . Alessandro Riva: Thank you, Lucie, and good afternoon, everyone. I would say that it has been an exciting first half of the year, not only for Transgene Individualized Therapeutic Vaccine, but also and more importantly, for the head and neck cancer community. We presented the full 24 months disease-free survival data for all Phase I patients treated in randomized Phase I trial in a rapid oral presentation at ASCO this year in a session that was dedicated to head and neck cancer. We are extremely proud that all operable head and neck squamous cell carcinoma patients treated with our Individualized Therapeutic Vaccine, TG4050 in the randomized Phase I trial remain disease-free after a median follow-up of 30 months, as you can see from the Kaplan-Meier course projected in this slide. And now on Slide 5, all the trial endpoints of the randomized Phase I study were met. Safety is extremely good. Immunogenicity has been demonstrated. And not only do we see the induction of a specific cellular immune response, but also we see that this response are durable and can still be seen after 24 months since the start of treatment. We will present additional immunological data from this trial at a scientific conference in Q4 2025, including insight into the phenotyping of patients' immune response. In addition, as you can see in this slide, the ongoing Phase II trial is progressing at a very good pace, and we are very confident that we will randomize the last patient in Q4 2025 allowing us to plan for the communication of the first immunogenicity data in the second semester 2026 and the 2-year efficacy data in the Q4 2027. I'm now going to Slide 6. TG4050 randomized Phase I data were presented at ASCO along with other 2 trials with immune checkpoint inhibitors in the adjuvant treatment of operable head and neck squamous cell carcinoma, the KEYNOTE 689 and the NivoPostOp trial. These 2 trials, as you can see, extremely encouraging data and pembrolizumab, as you know, is now approved for this patient population in the United States of America and probably soon in Europe. Nevertheless, 35% of patients relapse within two years after surgery and that is exactly where the future lies for TG4050, improving the outcomes for these patients that do not benefit durably from immune checkpoint inhibitors. Moving to Slide 7. So as you can see, we want to build on the positive Phase I data and the successful inclusion in the Phase II trial. And for this reason, we are discussing with clinicians the best way forward for TG4050 in the head and neck cancer so that we can bring this potential new treatment to patients in need as quick as possible. In addition, our myvac platform has broader potential in early solid tumor setting that goes beyond head and neck tumors. We want to continue to leverage this unique technology to address areas of high unmet medical need. And that's why in parallel, we continue to prepare a potential new Phase I trial in the early treatment of a solid tumor with biology that different from the head and neck tumors. We aim to initiate this study as soon as all conditions are met from a regulatory and financial point of view. As you know, and I'm on Slide 8, the manufacturing is key for Individualized Vaccine as it is key for CAR-T cell therapy. That's a topic that we started to address from the beginning of our work on myvac. We have demonstrated feasibility to deliver TG4050 to operable head and neck cancer patients in the context of a multicentric multinational Phase I/II trial. The next step for us is to continue optimizing the manufacturing process for myvac technology and for TG4050 to be able to scale up and run several trials in parallel, including a potential registrational trial. Under the guidance of our Chief Technical Officer, Simone Steiner, who joined Transgene before this summer, we will continue to invest to ensure smooth execution to support further acceleration of the myvac program. We believe that scientific excellence, strong data and operational focus generated with TG4050 clearly differentiated Transgene in this highly competitive and attractive field. Hence, the rationale, as you can see in this slide, of our decision to focus our efforts and resources on our lead program myvac platform and today TG4050. With regards to our other programs, we will present a poster at ESMO in Berlin on the data generated by BT-001 in the Phase I trial as monotherapy and in combination with pembrolizumab. We have seen interesting responses in patients with refractory diseases, in particular, leiomyosarcoma patient and melanoma patient. Looking at leiomyosarcoma patients, you can see that BT-001 was able to positively change the tumor microenvironment. The science generated around this initial trial constituted the basis of discussion with clinicians to continue the development of this candidate in the intratumoral setting. Looking at our two other candidates, TG4001 and TG6050, we are assessing different scenario in a context where the overall financing environment for biotech company is pushing us to focus on key value-creating programs. And now I'm going to hand over to Lucie for some words on the financials. Lucie? Lucie Larguier: Yes. Thank you. So our financials are, as usual, in line with our forecast, thanks to strict monitoring of [ dilution ] and stringent cost control in today's environment. In terms of outlook, and I think it's positive, we have extended our financial rhythm, and our business is now funded until the end of December 2026, thanks to the credit facility and the engagement support from TGH, which is, in fact, [indiscernible]. I now hand over to Alessandro for a few concluding words. Alessandro Riva: So to conclude, I will say that we are now building increasing momentum on the myvac platform. The data we presented at ASCO in operable head and neck cancer with 100% survival at two years represent a solid proof of principle for TG4050 in an indication where a significant medical need remains in spite of a great improvement delivered by immune checkpoint inhibitors. Our vision is clear with a focus on individualized cancer vaccine. In the next couple of years, we will continue to present clinical catalysts in head and neck, the Phase I will deliver additional and informative immunogenicity data that will be presented in Q4 2025 at a scientific conference. You can also expect the follow-up at three years from the same study in the middle of 2026. The Phase II trial in operable head and neck cancer patients is well on track and data are expected in second half 2026 regarding the first immunogenicity data and in Q4 2027, the 2-year disease-free survival data. When all conditions are met, as discussed, we'll be able to start an additional Phase I trial in a new indication in operable setting. The individualized cancer vaccine field continues to evolve and start to be derisked from both scientific and clinical point of view. And when looking at the economics, operable head and neck cancer alone represent a market of more than $1 billion per year at peak. We continue to work harder to deliver on our strategy with important milestone in sight, we are confident that Transgene is well positioned for the next step. And now Lucie and I will take your questions. Operator, please. Operator: [Operator Instructions] And now we're going to take our first question from audio line. And it comes from the line of Clara Montoni from [indiscernible]. Unknown Analyst: This is [ Clara Montoni ] from [indiscernible]. Congrats for the update. I was wondering if you could remind us when do you expect to announce more on the TG4050 development plans? Will this be pivotal plans? And also, can you talk a bit more about or in the context of the recent approval of Neoaduvant and Adjuvant KEYTRUDA in localized head and neck cancer. So specifically, I was wondering if those 35% of patients relapse, do they have particular baseline features? Could you please expand on that? Alessandro Riva: Okay. Thank you, Clara. So first of all, in terms of more clarity and visibility related to the next step for TG4050 in head and neck and in particular, the potential pivotal Phase III trial. We plan to have some visibility by Q2, 2026. The reason being that, of course, we are starting the discussion with some expecting clinicians in the field of head and neck. We're going to finalize the proposal that, of course, will be discussed with the health authorities, and we plan to update the community on the potential next step kind of around the second quarter of 2026. So -- And with regards to your second question related to KEYTRUDA pembrolizumab in the KEYNOTE 689. So if you look at the New England Journal of Medicine publication, that is the only source of information that we have -- it doesn't appear that there is a particular prognostic factor that is underscored in terms of potential risk of relapses. So this is something that will have to be explored further. And also when we will have more data from the other trial with nivolumab, NivoPostOp [indiscernible], we are going to clarify this topic. So the [ idea ] that we have independently of the risk factors is that knowing that there are around 35% of patients that unfortunately continue to relapse despite the immune checkpoint inhibitor is really to try to find the way TG4050 can further improve the treatment outcome, [ dependency ], I would say, of the prognostic factors. Lucie Larguier: So we have other questions coming from the web -- my mailbox. We have one from Amar Singh from [ Intron ] Health. Will the Phase I trial of TG4050 in a new indication still be initiated in Q4 2025? And can you provide us with any detail on this next indication? Alessandro Riva: So the answer, as we said during the call, so we are already working towards the finalization of the protocol. We are in discussion with the health authorities. And as soon as we have the green light from the health authorities, and the financial condition are met. In other words, we have the right financing for the trial. We're going to start the trial. And of course, we are still aiming towards an initiation of the trial as quick as possible. As I said, it will depend from the regulatory authorities' feedback and from financing that we are considering as we speak. Lucie Larguier: Another question that we have, well, two questions from [indiscernible]. Could you please disclose the conference -- well, at which conference the new data on TG4050 will be presented in Q4 -- and is an early access program a realistic opportunity for TG4050 probably in line of 36 months data. Alessandro Riva: Okay. So we are going to disclose the full data set of the immunogenicity data at the ST conference in November in the United States of America. This is an important conference for immunology in cancer. So -- and we have submitted an abstract to the conference that has been accepted for presentation. And of course, we look forward to sharing this very important information from the Phase I study. So -- and in terms of the early access program, we think that it is rather early to activate this type of program. And we think that this is something that we could eventually assess in the near future with additional information and additional data. So that's. Yes. Lucie Larguier: And we have a final question that I received from [indiscernible] that somehow overlaps with [indiscernible] Joni's question, but it is up to you. So in the press release, you highlight that [indiscernible] is currently evaluating the most efficient regulatory pathway to accelerate the development of 4050 and bring it to patients with operable head and neck cancer as quickly as possible. Could you elaborate these thoughts or objectives? What are the challenges or the next step to have more visibility on the regulatory pathway or market environment? It's a pretty broad question. Alessandro Riva: Yes. So it's a very broad question and it's very similar to what also [ Piara ] asked. So I mean, the bottom line is that we believe that there is a very significant momentum for innovation with immunotherapy in head and neck cancer operable patients. We believe that the data that we have shown at ASCO, know this very compelling in order to think about the potential next step given the fact that pembrolizumab is going to become a kind of standard in the early setting head and neck cancer. So we are brainstorming as we speak with clinicians with expertise, of course, in the head and neck on the potential trial design that could also be considered pivotal in nature. So -- and then based on the feedback, we are going also to have discussion with the health authorities. As I mentioned in my presentation, this process will last around 6, 9 months. And by Q2 2026, we'll be able to share with the community what's going to be the next step in terms of the next trial for squamous head and neck cancer patients. Lucie Larguier: I don't have -- I think we've covered all the questions. We have an additional question from Marcias. Could we have an update on TG6050? And what could we expect for this compound in the next steps? Will you disclose the Phase I data in a future conference? Alessandro Riva: Yes, we are going to -- first of all, TG6050 is our IV oncolytic virus. We have completed the Phase I study in relapsed/refractory non-small cell lung cancer patients. We are going to share the information with the community on this asset. However, we don't think that this is going to be an oncolytic virus that will be accelerated in the context of our priortization that I mentioned in the presentation and in the context also of that we are observing in heavily pretreated patient population. So this is TG6050 is not our focus, and we prefer, as mentioned, focusing on the value creation assets that we shared in todays call. Lucie Larguier: Sorry. So I don't see any other questions -- sorry for my voice. Alessandro, maybe a closing statement. Alessandro Riva: Yes, we do. So it has been -- I would say it has been a very exciting first 6 months. We are already in September, I would say also the third quarter is getting very, very interesting. As we try to convey to you, Transgene is ideally positioned to deliver multiple clinical milestones for myvac platform and TG4050. So -- and really, we are very well positioned to execute and focus on our key priorities. Obviously, we remain committed to deliver -- [indiscernible] in patient, in particular in operable. And with this, I would like to conclude today's call. Have a great afternoon and evening and talk to you soon and see you soon. Bye. Lucie Larguier: Goodbye. Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
Operator: Good morning, everyone, and thank you for participating in today's conference call to discuss the Brand House Collective's financial results for the second quarter ended August 2, 2025. Joining us today are CEO, Amy Sullivan, and CFO, Andrea Courtois; and the company's External Director of Investor Relations, Caitlin Churchill. Following their remarks, we'll open the call for your questions. Before we go further, I would like to turn the call over to Ms. Churchill as she reads the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Caitlin, please go ahead. Caitlin Churchill: Thank you. Except for historical information discussed during this conference call, the statements made by company management are forward-looking and made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause The Brand House Collective's actual results in future periods to differ materially from forecasted results. Those risks and uncertainties are more fully described in the company's filings with the Securities and Exchange Commission. A webcast replay will also be available via the link provided in today's press release as well as on the company's website at kirklands.com. Now I'll turn the call over to the Brand House Collective's CEO, Amy Sullivan. Amy? Amy A. Sullivan: Good morning, and thank you for joining us today. We're at the beginning of a new chapter as we accelerate our transformation through our partnership with Bed Bath & Beyond. Our first store is open in Brentwood, additional store conversions are already underway and the early results validate the strength of the brand to chart a new path forward. Second quarter did bring unexpected challenges, but it also clarified our direction and strengthened our conviction in the future of each brand. Before Andrea reviews the results in detail, I'll share the key factors that shaped the quarter and the progress fueling our path to future growth. As noted in our press release, the second quarter was impacted by two significant events. First, the disruption at our Jackson, Tennessee distribution center following the tornado in late May, and second, the strategic and ongoing liquidation of select inventory as we optimize our category mix and prepare stores for Bed Bath & Beyond conversions. Together, these two events were the dominant drivers of the year-over-year decline in profitability and created significant pressure on our top line, particularly in our e-commerce channel. Looking ahead, we do expect continued liquidation of non-go-forward inventory as we accelerate store conversions. This is a necessary step unlocking liquidity by turning inventory into cash and redeploying that capital into the assortments that our customers expect in Bed Bath & Beyond Home. Our actions are deliberate and our capital is being deployed where it matters most to accelerate store conversions and strengthen our foundation for growth. Last month, we opened our first Bed Bath & Beyond Home store in Brentwood, Tennessee, and the response has been incredible. National Media coverage generated more than 250 million impressions amplifying the excitement customers showed from the moment the doors opened. Sales continue to exceed our expectations, driven by increases in traffic and average ticket. This new format honors the legacy of Bed Bath & Beyond as a house of brands with more than 30 trusted national brand names throughout bedroom, bathroom and kitchen alongside seasonally relevant home decor and furnishings through our Kirkland's Home brand. We are seeing significant growth in traffic and more importantly, new customer growth and that momentum gives us the confidence to accelerate our store conversions. The results make it clear. The Bed Bath & Beyond name is a powerful asset and the nameplate change is proving to be a high-return growth engine, driving performance for the brand itself while amplifying sales across our Kirkland's Home branded products. We will continue to leverage the Kirkland Home legacy by bringing the best of its assortments into our Bed Bath & Beyond Home stores giving customers curated solutions for every corner of their home. Brentwood is just the beginning. In fact, our next grand opening is this Saturday, September 20 in Spring Hill, Tennessee. Over the next six weeks, four more locations in the greater Nashville market will convert to Bed Bath & Beyond Home, providing us with a range of store sizes and formats that allow us to fine-tune our assortment and capital allocation strategy to ensure we have the correct formula for every store in our fleet. Over the next 24 months, we plan to convert all Kirkland's Home stores into Bed Bath & Beyond stores to capture this momentum and scale for long-term growth. By leveraging our existing infrastructure in stores, supply chain and product development, we're able to execute this as a capital-light transformation. Each conversion is expected to cost less than $100,000 in CapEx per store, which allows us to scale quickly, stay efficient and maximize return on capital. As we've discussed before, our vision extends across more than Bed Bath & Beyond Home to the broader portfolio of Bed Bath & Beyond brands, including buybuy BABY and Overstock. Both strategies are still in development, and I'm incredibly excited about the opportunity ahead for buybuy BABY, which will be the next omnichannel initiative we build from the ground up with our first new store expected in 2026. As announced yesterday, we are also in the early stages of planning an expansion of Kirkland's Home into the wholesale market, which would bring our designs to independent retailers nationwide. In addition to creating a new growth channel, wholesale could add scale, improve supply chain efficiency and strengthen the unit economics of our products. We could not be more excited for this next chapter, our partnership with Bed Bath & Beyond is the cornerstone of this transformation, and Marcus and I share a strong omnichannel vision for how these brands grow. That shared conviction gives us the confidence to accelerate conversions and unlock the momentum we're already seeing. Let me now introduce Andrea, who joined us in late July with more than two decades of financial expertise in planning, analysis and inventory management. She has already established herself as a key partner in our transformation and will play a critical role in driving our long-term growth and success. Andrea? Andrea Courtois: Thank you, Amy, and good morning, everybody. I am excited to be a part of the Brand House team in such a pivotal moment in our business. As Amy mentioned, we could not be happier with the reception of the first Bed Bath & Beyond Home store has had since opening in early August, and we are all energized for the path ahead. With that said, our second quarter results reflect headwinds in our Kirkland's business as we navigated unforeseen circumstances with the impact of tornado had on our distribution center in late May and began purposeful and disciplined liquidation efforts to optimize inventory ahead of expanding our Bed Bath & Beyond assortments. For the second quarter, net sales were $75.8 million compared to $86.3 million in the prior year quarter. The decrease was driven by 9.7% decline in comparable sales as well as the decline in store count of approximately 5%. Our stores had a slightly positive comparable sales growth for the quarter, driven by increases in traffic and conversion, which were partially offset by lower average transaction due to liquidation efforts I mentioned. Our positive store comp was offset by a decrease of 38.5% of comparable sales in e-commerce. Our e-commerce business continues to face challenges and was also impacted by the tornado disruption to our distribution center in late May. We estimate this disruption negatively impacted our e-commerce sales by 750 basis points and total comparable sales by 190 basis points. Gross margin decreased 410 basis points to 16.3% of sales primarily driven by a decline in merchandise margin and occupancy deleverage. The decline in merchandise margin was primarily due to 130 basis points related to liquidation activity, 100 basis points related to the write-off of damaged inventory due to the tornado and 30 basis points related to incremental tariff costs. Our operating expenses increased slightly to $31.1 million from $31 million in the prior year quarter. During the quarter, we incurred $1.3 million in insurance costs related to the tornado damage. Given this incremental rental expense as well as the lower sales in the quarter as a percentage of sales, total operating expenses was 41.1% compared to 35.9% in the prior year quarter. Before we turn our attention to the net loss and adjusted net loss, please refer to the terminology and reconciliation between each of our adjusted metrics and the most directly comparable GAAP measurement in our earnings release issued earlier this morning. Net loss was $19.4 million for the quarter compared to $14.5 million in the prior year quarter. Adjusted net loss, which excludes estimated $2 million for the total impact of the tornado disruption was $17.8 million in the quarter, compared to an adjusted net loss of $13.9 million in the prior year. The decline compared to the prior year is primarily attributed to the impact of the headwinds associated with our e-commerce business, the liquidation activity reviewed and the incremental tariff costs incurred in the quarter. Adjusted loss per share was $0.90 compared to a loss of $1.11 in the prior year quarter. The year-over-year improvement in adjusted loss per share was entirely driven by the increase in share count from 13 million shares to 22.3 million shares due to the Beyond transaction that was completed in late third quarter of fiscal 2024. From a balance sheet perspective, we ended the quarter with $82 million in inventory, down 12% to the ending prior year Q2 ending inventory. The decrease was driven by a temporary pause in inventory shipments during the beginning of Q2 out of Asia due to tariff uncertainty. We have since received those goods, inventory is now in a similar position to the prior year and more in line to total comparable sales trends. We had total debt outstanding of $55.2 million at the end of the quarter, which is comprised of $41.5 million under a senior revolving line of credit and $13.7 million in debt to Beyond related to the term loan, convertible term loan and sale of a percentage of Kirkland's future revenues to Beyond net of debt issuance and original issue discount costs. As of September 16, 2025, the company had $49 million of outstanding debt with $10.8 million of availability after the minimum required excess availability covenant and $13.7 million in term loans to Beyond with $20 million available from Beyond. As a reminder, availability under our revolving credit facility fluctuates largely based on eligible inventory levels and as eligible inventory increases in the second and third fiscal quarters in support of our back house sales plans, our borrowing capacity increases correspondingly. In summary, as we have detailed, our second quarter results were largely impacted by two factors, the disruption of the tornado and the strategic and purposeful decision to liquidate goods in preparation for our conversion to Bed Bath & Beyond Home stores. As we look ahead in the second half of the year, where we do not expect any additional significant expenses related to the tornado damage, we do expect to continue our promotional activity, and we will see some incremental tariff costs beginning in the third quarter. Our teams are working hard to mitigate this impact, and we will remain focused and committed to setting the stage for the company's next phase of growth and our conversion strategy and plans through our partnership with Bed Bath & Beyond. I will now turn the call over to Amy for a few closing remarks before we open up the call for questions. Amy? Amy A. Sullivan: Thank you, Andrea. As we close today's call, I want to be clear. We are not simply executing a brand conversion, we are architecting an omnichannel retail transformation. Every detail of the customer experience matters from the products we design to the way we bring our story to life through marketing, all delivered with the operational excellence our customers expect. With Bed Bath & Beyond's continued partnership, a leadership team, we continue to strengthen and early results that exceeded our expectations and validated our proof of concept, we are accelerating our national rollout with conviction. I want to thank our team for their tireless work and our shareholders for their continued support as we move forward together. The best results are ahead of us, and our focus is firmly there. Operator, we are now ready to take questions. Operator: [Operator Instructions] The first question comes from Jeremy Hamblin with Craig-Hallum Capital Group. Jeremy Hamblin: I wanted to start with the Bed Bath conversions. And obviously, a really positive launch here of the first one in Nashville and excited to see how the next few rollout here. But I wanted to get back to -- I think you noted about $100,000 in conversion costs. I wanted to understand if the first one in Brentwood, was it a similar cost, if there was a little bit more invested into that. And just to get a sense for now that we've got a little bit of time with the opening, and I know it drew quite a bit of media attention certainly at kind of the first couple of weeks, but I wanted to get a sense for how trends are continuing to develop at that store. Amy A. Sullivan: Yes, I'll take that, Jeremy. So from a CapEx perspective for Brentwood, and remember, all of our store formats are slightly different, which is why we wanted to use Nashville for the initial pilot because it gives me 5 or 6 formats where I can really work through the formula of how we begin to convert these nationwide. And so for Brentwood, specifically, the CapEx was actually significantly less. That store is more newly remodeled within the Kirkland fleet, and so it really was as simple as a sign change on the front of the store and all of the other work we did internally as a team just to remerchandise the store using the existing fixtures and structures of the store. So that one was closer to $30,000 as we get through and look at other stores that might need a flooring change or something more significant to the construction, we still believe we can track in that $100,000 or less range as we convert. As I shared in my prepared remarks, the next one opening this Saturday required a little more because we changed out the floors, but again, still came under -- came in well under the $100,000 mark. So from a CapEx perspective, I feel really good about what we've projected in terms of the conversions. And then in terms of results, honestly, we were so thrilled and you noted the national media coverage that we got for the opening. And certainly, it was a good reminder of the power of the brand and how much people love in this Bed Bath & Beyond. And I'm pleased to say the results have continued. Traffic is up far significant to what a Kirkland store was. New customer acquisition is really strong and the sales are definitely holding in. And so, as we go through the peak season for what would have been in that store this time last year in Kirkland, we'll continue to monitor what mix of seasonal product should be in the store versus the legacy Bed Bath categories. But honestly, all categories are seeing big lifts and really seeing runaway success in things like bedroom and kitchen. Jeremy Hamblin: Got it, and then just you have a little over 300 locations today. As we go through this process and converting and you talked about a 24-month time frame, what portion of those just over 300 locations do you think ultimately will be converted versus, I would imagine some may best be just closed, but wanted to get a sense for ultimately a couple of years from now where you expect kind of the chain to be and kind of the mix of the various banners? Amy A. Sullivan: Yes. I would say we shared this a few times throughout the year and even on the fireside chat, we did with you all, we are going through literally location by location and looking at the real estate, the health of the center, the performance that it has done as a Kirkland store and layering on what we believe the target customer demographics to be for Bed Bath & Beyond and the future of our company and making sure that it matches the criteria that we need to see in real estate, and so we want to be very thoughtful about our choices there. We are currently planning to close about 25 stores that have natural lease expirations in January of 2026. So I suspect as we go forward and really continue navigating the review of real estate as well as making sure that the economics work for each location. I would estimate 250 to 275 of our existing Kirkland stores remaining in the mix over that time, and certainly, we're opportunistically looking for other locations. And so as we see success in a market, we want to make sure that we cover both the markets that we're in today as well as the markets that were true to Bed Bath legacy, you know our store fleet really well, Jeremy, and if you look at the Northeast, that is definitely an area where there's less dominance of Kirkland's, and we know that will be likely a very strong area for Bed Bath, and so of our existing fleet, I'd stick with that 250, 275 number over time, but just know that we do believe there's still upside to that in terms of our real estate portfolio geographically. Jeremy Hamblin: Great, and then I want to come back to the issue. Obviously, you guys had this terrible tornado that ripped through, it's had significant disruption to the business, but you're also going through this kind of reimagination, this rebirth of the brands, and I wanted to just get a sense for how we should be thinking about the expectations of the store momentum versus your e-com business and when you might expect the e-com portion of your business to see some stabilization. Obviously, we're coming into a key part of the -- from a seasonal perspective, whether you're talking about harvest or obviously, the holiday season. Do you have a sense for when you think that might be stable? I mean there's just obviously a lot of moving parts that are going on here with the conversions as well that I'm sure taking up quite a bit of attention. Amy A. Sullivan: Yes. So I mean, you're spot on in that we have had a struggling e-commerce business for the quarters prior. And obviously, the tornado worsened that impact in Q2 pretty significantly based on the damage to the distribution center and the fact that we were not shipping direct to consumer for several weeks during that quarter. What I would tell you, and we've been talking about this quite a bit this year is, we also want to make sure that the transactions that we're driving towards are the most profitable transactions that we can deliver, and so we're intentionally funding more efforts towards brick-and-mortar as we really try to clean up the balance sheet and improve our liquidity to fund conversions. And so I want to see our owned part of the business, the inventory we own versus the drop ship as well as the ability to drive buy online, pick up in store continue to accelerate as we go into the back half of the year, but we will remain intentional driving more of the brick-and-mortar business. And I think it's okay for the e-commerce business to normalize back down to sort of the declines we were seeing earlier in the year. That's where I'd like to see it go because, again, I don't want to continue to push a channel that is less profitable than what we're able to convert in stores. Jeremy Hamblin: Got it. Okay. That's helpful. And then you hinted at this, but in terms of just understanding the mechanics behind the sale of the intellectual property, and where kind of the balance sheet stands. I think by my math, is the debt level is about 60 -- just under $68 million, and then it looks like you have about $30 million or so of total liquidity currently? Can you just confirm. Amy A. Sullivan: Yes. Yes, that's correct. If you look at our ABL as well as our loan with Bed Bath & Beyond. Jeremy Hamblin: Okay. Great. And then one other item continues to be a bit of a hot button here. But tariff noise continues to be fairly significant, particularly for your industry. I wanted to get a sense for how we should be thinking about tariff impact here in Q3, Q4? And then there's this investigation about the furniture industry, which I know is not a huge portion of your business, but relevant, certainly and wanted to get a sense for what our expectations should be in the back half of the year in terms of total impact from tariffs? And then as we think about how this potentially plays out in 2026, which obviously is still a guessing game, but how do you feel about your exposures and potential for more domestic sourcing? Amy A. Sullivan: Yes. I would say, as we walk into Q3, obviously, that is when we're receiving the goods that were mostly impacted, particularly in China, and the China negotiations, and we shared this pretty early on, our partners really did meet us in the middle. So I feel like between cost negotiations with our Chinese factories, strategic pricing changes within our business that we've mitigated some of that from a China perspective. Obviously, we recognize there will be some margin pressure, pivoting to sort of what we're in the middle of right now negotiating through the impact in India, those negotiations are a little tougher at the moment. Again, won't be an impact to Q3, but something that we're navigating day by day. And then the interesting piece, I would say, is that as we're converting from Kirkland's, which is 85%, 90% of those goods are our own unique designs, and we're sourcing those directly overseas. As we're converting to Bed Bath & Beyond stores, we're obviously getting back into the domestic market in a pretty big way. And so I think there's opportunity to continue to balance that dependency as we convert stores, in fact, I am in New York this week, meeting with vendors to begin to buy quantities for the larger chain conversion. And we'll stay close on that, but it's certainly something top of mind. I do expect margin pressures in Q3 just based on the impact from what we've received thus far, but appreciative of the vendor partners for meeting us in the middle. And I think we'll continue to shift away from China as best we can as we move forward. Jeremy Hamblin: Are you able to quantify at all in terms of back half of the year expectation for impact on gross margin? Amy A. Sullivan: Andrea, do you want to give any color on that? Andrea Courtois: Jeremy, I think it's hard to quantify. I would say that you're looking at, in Q2, it was 30 basis points of impact to the business. I would say it will probably be a little bit more than that, probably in the 100 basis point range during Q3. Although in Q4, we're thinking there should be a limited impact. We're really seeing the biggest impact of the tariffs are going to be came in through the inventory coming in through the end of Q2 and the beginning of Q3, which should be selling mostly during the Q3 time period and the beginning of Q4. So really expecting the impact to hit that Q3 time period from a pressure on the gross margin, but as we spoke about in both of our highlights, we do plan to continue to strategically liquidate non-go-forward categories and really restructure our stores and get ready for conversion. So I would think about the margin as the liquidation piece potentially having a more impactful on the gross margin than they would necessarily on tariffs as we continue throughout the year. Jeremy Hamblin: Fantastic. Last one for me. Just as we look ahead to the conversions and coming back to the cost of that, the time line and having some momentum here and excitement built around bringing the brand back. How many do you think you might be able to do in 2026 versus 2027? Amy A. Sullivan: That is -- that's the golden question right now, Jeremy. We are -- we have just placed buys for 30 conversions for the first quarter of 2026. And we are, again, here in New York this week, chasing opportunistically to be back into the back-to-campus business in a significant way for Bed Bath & Beyond going into the back-to-campus season of 2026. So to be determined on the number of stores that will impact, but it is our goal for that to be wide and as many stores as we can influence going into that important season. And I think as I look back at the Bed Bath & Beyond history, the Q2 benefit that we could see compared to the Kirkland's seasonality is really significant. And so if I'm flashing forward to this time next year, I really see us being able to level out how the quarters play out and really begin to improve our profitability and our revenue in the first half of the year. So it is my goal to be in as many stores as possible based on the inventory that I can get over the next 6 to 8 weeks. So a lot of that will become really crystal clear as we're finishing out Q3 because the buys will need to place for back-to-campus of next year really need to be solved by the end of October. Jeremy Hamblin: Got it, and best wishes. Amy A. Sullivan: Thank you, Jeremy. Operator: At this time, this completes our question-and-answer session and concludes today's call. Thank you for your participation. You may now disconnect your lines.
Robert Bishop: Good morning, everyone, and apologies for the slight delay. Thank you for joining us for today's presentation. I'm Rob Bishop, Chief Executive Officer for New Hope Group. On my left, I'm joined by Rebecca Rinaldi, our CFO; and Dominic O'Brien on my right, who is our Executive General Manager and Company Secretary. This morning, we released our full year results for the 2025 financial year. Hopefully, you've had a chance to go through the presentation. But in any case, I'll step you through our key highlights for the year before we open up the line for a Q&A session. Despite a softening coal price and a challenging operating environment, 2025 was a strong year for New Hope, where we delivered another considerable increase in saleable coal production as we continue to execute our organic growth plans. Pleasingly, we've seen a significant improvement in safety this year with our 12-month moving average TRIFR decreasing by 35% to 3.22. It's positive to see these metrics improving, and we'll continue to focus on this area as we move into 2026. During the year, we navigated significant wet weather and logistics constraints at our operations in both Queensland and New South Wales. Despite these uncontrollable factors, the group delivered run-of-mine coal production of 16.4 million tonnes, up 33%; saleable coal production of 10.7 million tonnes, up 18% and coal sales of 10.5 million tonnes, up 21%. In terms of our financial highlights, we delivered an underlying EBITDA of $766 million and a statutory net profit after tax of $439 million. Both earnings results were largely impacted by lower realized pricing with the Newcastle export coal price hitting a 4-year low during the 2025 financial year. This year, our business generated $571 million in cash flow from operating activities, which funded investment in our organic growth pipeline and has enabled us to continue to deliver returns to our shareholders. On that note, I'm pleased to announce the Board has declared a fully franked final dividend of $0.15 per share. This brings total dividend for FY '25 to $0.34 per share, all of which are fully franked. Turning to safety. The safety of our people is a key priority, and we are focused on ensuring our people operate in an environment where they are unharmed. As I mentioned earlier, we have seen an improvement in our TRIFR and our All Injury Frequency Rate since we reported to the market last year. Pleasingly, our TRIFR now sits below the 5-year industry average for New South Wales open-cut coal mines. While there's still opportunity for improvement, it's pleasing to see the safety programs we put in place during the year have had a positive impact across our sites. Turning to our operational performance. This year, our Bengalla mine in New South Wales faced notable operational challenges due to significant weather events and logistics constraints across the Hunter Valley. These disruptions led to elevated shipping queues, increased rail cancellations and stock management challenges at site. Despite these headwinds, Bengalla mine delivered a solid performance, producing 7.9 million tonnes of saleable coal, just 2% lower than the previous year's output. Despite lower-than-expected production, Bengalla mine achieved an FOB cash cost, excluding royalties and trade coal, of $76.50 per sales tonne, within guidance range, and a 2% improvement from the previous period. The ramp-up of our New Acland mine progressed throughout the 2025 financial year, supported by commencement of night shift operations in the prep plant and increased workforce intake. As a result, the mine delivered 2.8 million tonnes of salable coal and continues to ramp up towards its target of becoming a 5 million tonnes per annum operation. Overall, strong operational performance at both sites contributed to an 18% increase in group saleable coal production, reaching 10.7 million tonnes. Group FOB cash costs improved by 8% to $82.40 per sales tonne. In terms of our financial performance, the group achieved an average sales price, including hedging, of $161 per tonne and an underlying margin of $64 per tonne. During the year, the thermal coal market was impacted by oversupply, economic uncertainty and a mild winter in Asia, resulting in a softening in coal price. Despite these market conditions, the group's low-cost assets remain resilient and continue to generate solid margins through the cycle. Our business generated $571 million in cash flows from operating activities, enabled continued investment in our assets, allowing us to return $347 million to our shareholders by way of fully franked dividends. This represents $0.41 per share paid during the period, which equates to a gross dividend yield of 12%. Our approach to capital management is underpinned by a disciplined focus on delivering sustainable returns to shareholders. Our two forms of capital returns are fully franked dividends and on-market share buyback. As at the end of 2025, the pace of the share buyback has slowed in conjunction with increase in the company's share price. As previously mentioned, our Board has declared a fully franked dividend of $0.15 per share. New Hope has a significant franking account balance, and we continue to utilize this value for our shareholders. Today and in conjunction with our results release, we announced the introduction of a Dividend Reinvestment Plan, providing shareholders with the option to reinvest their dividends. The DRP is in operation for the 2025 final dividend. Our group strategy is to safely, responsibly and efficiently operate our low-cost, long-life assets with a focus on disciplined capital management, providing valuable returns to our shareholders. We believe our investment proposition is underpinned by these six key areas, which I'll briefly touch on in the following slides. The outlook for our industry is strong. Our strategy is underpinned by the belief that demand for thermal coal produced from Australian operations will continue to play a vital role in providing reliable and secure energy supply to the world. Whilst we expect coal's share of global power generation to reduce over time, the sheer increase in global power demand will continue to support seaborne thermal coal exports into the future. In addition, the aging of existing thermal coal assets, combined with underinvestment in new projects suggest a potential supply shortfall and attractive pricing outlook for the industry. Regardless of pricing dynamics, our low-cost assets produce high-quality coal, providing resilience in cyclical environment and ensuring continued margin generation. In a year where the coal price has touched multiyear lows, our assets were still able to generate margins of circa 40%, which showcases our low-cost nature as well as the significant upside potential available to New Hope and ultimately, our shareholders. New Hope holds a key focus on delivering returns to shareholders. In the last year -- in the last 4 years, fully franked dividends have totaled $1.9 billion, which equates to nearly 55% of the company's market capitalization as at 31 July 2025. In addition, New Hope's share price has outperformed the ASX All Ordinaries by nearly 8x since its initial public offering in 2003. At New Hope, we take pride in our people and the communities in which we operate. We aim to effectively manage our economic, social and environmental impact to ensure the resilience of our business so that we can continue to create stakeholder value. Key aspect of being a responsible operator is rehabilitation. At our Bengalla and New Acland mines, we have disturbed approximately 3,000 hectares of land for mining operations and rehabilitated 36% of that disturbance. In addition, the majority of our land is used for agricultural operations once successfully rehabilitated. Looking ahead, we remain focused on the organic growth of our business throughout the continued ramp-up of New Acland mine, the sustained production at Bengalla mine and the development of Malabar's Maxwell Underground mine, all of which are low unit cost assets. Our pipeline targets a significant increase in coal production over the next 3 years, which represents low-risk, cost-effective growth. Looking ahead to the 2026 financial year, we are focused on remaining resilient, low-cost coal producer while executing our organic growth plans, which will enable us to continue to deliver shareholder value. Thank you very much. I'll now hand over to the operator to start the Q&A session. Operator: [Operator Instructions] Your first question is a phone question from Rob Stein from Macquarie. Robert Stein: Just looking at Slide 14 of your presentation, you've outlined the growth program or a growth profile. Just sort of chipping into it a little bit more, I noticed the Maxwell mine progressive ramp-up and the long-term rate there providing an indication of absolute volumes. Just wondering if you could comment on that as to how you see the ramp-up potential of the mine. And then similarly, just looking at the constant sustained basis for Bengalla, just thinking through the long-term CapEx requirements there. Robert Bishop: Sure. So I guess with our organic ramp-up, we're looking to double our production from -- I think your first question was in relation to Maxwell mine, Malabar's mine. That is already in ramp up. Bord and pillar pit is fully operational. And really, the increase in -- material increase in tonnes will come from the longwall pit or the Woodlands Hill pit when we should see first longwall coal first quarter calendar year 2026. So from that projection, and you can see the uplift on that chart, that should get up to around sort of 6 million to 7 million product tonnes from that operation around about sort of FY '29 onwards. So -- and then I guess, with regards to Bengalla, growth project there has been very successful. Both the prep plant and the pit has achieved targeted production from that growth project albeit hampered by uncontrollable events offside. So you would have seen in the report, we touched on weather events and resulting logistics impact. So that's hampered us in the final quarter of the FY '25 year, and it continued to hamper us into the beginning of this year, and we'll be putting out guidance for this year, I think, in mid-November. Robert Stein: So just as a brief follow-up, in Maxwell, you've got 6 -- sort of ramping up to the 6 million tonne rate there. That's what we should be looking at modeling and taking forward in terms of a view on the mine's potential? Robert Bishop: Yes, I think somewhere in the 6 million to 7 million is what the expectation is. I guess where that asset is at the moment, it's developing up the first longwall panel. So obviously, when you get into a longwall pit, despite all the exploration you can do, you don't really get to understand geological conditions until you're down there. So that's progressing well. And like I said, we're expecting to get the first year of the longwall in first quarter of next year. So assuming everything goes to plan, that should get up to sort of that circa 6 million to 7 million product per annum. Operator: [Operator Instructions] We'll now move to our webcast questions while we wait for any other phone questions to register. Your first webcast question reads, with thermal coal now having retraced back to $102 per tonne, what are your views on the state of the market. Anything we could look out for into the second half other than typical seasonality in coal demand in industrial production and renewable energy generation? Robert Bishop: Yes, that's quite right. And I think we've almost dipped under $100 for the Newcastle index. So pricing is certainly challenging at the moment. We've seen good, consistent supply across the globe of thermal coal. And we've also seen the impact of low coking coal prices affecting thermal coal with some semi-soft products being pushed into the thermal coal market. So if you overlay a fairly soft demand for this calendar year, that's obviously put downward pressure on pricing. As to what that's going to do moving forward, it's a good question. I think there could be some restocking as we go into the Northern Hemisphere winter, which is those typical cyclical changes which you mentioned. But I think our view is we don't see a significant increase in coal prices in sort of the next 6 months or so. I think that oversupply, which I talked about, that really needs to push itself out of the market, and we'll see what this Northern Hemisphere winter brings. Operator: Your next webcast question asks, during the new year, New Hope Group increased its equity interest in Malabar Resources Limited by 3% to 22.98%. Is the business looking to increase its equity interest in Malabar again this year? Robert Bishop: So I guess overarching, our key focus is our organic growth, which we've touched on at both Bengalla and Acland. Yes, we did take an additional 3% in the financial year just gone, and that was really off the back of an approach from another major shareholder. I guess with all M&A, we consider acquisitions as a put forward. But obviously, any acquisition we do would need to meet stringent returns, et cetera. And obviously, with the soft market at the moment, we'd need to take that into account. Operator: Your next webcast question asks, your final dividend is much higher compared to what your peers have announced. Are you able to sustain this level of dividend in the current coal price environment? Robert Bishop: Yes, that's a good question. And as always, we like to reward our shareholders with dividends. And I think the $0.15 fully franked, which we announced today, has been well received. I guess our underlying assets really put us in the position to reward shareholders, the low strip ratio and as a result, low cost, we put a lot of focus on cost control. And as a result, we continue to make a strong margin even in the cyclical lows, which we're seeing right now. So we're confident that's going to continue, and we'll see what this year lies ahead for us. Operator: There are no further webcast or phone questions at this time. I'll now hand back for any closing remarks. Robert Bishop: Well, thank you for joining. And again, apologies for the delay in our start, a few technical issues, but it's been a pleasure delivering this result, and we'll see you next time. Thank you.
Venus Zhao: Good morning, everyone, and welcome to CBL International Limited's Interim Results Presentation for the period ended June 30, 2025. Today's meeting will be conducted in English with simultaneous translation into Mandarin. Before we begin, I'd like to remind you that today's presentation will include forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. Thank you for joining us today. I'm Venus Zhao, Investor Relations and Public Relations Director of CBL International Limited. Presenting alongside with me are Dr. Teck Lim Chia, Chairman and Chief Executive Officer; and Mr. Nicholas Fung, Assistant Chief Financial Officer. We are excited to share our performance and achievements in first half 2025 and provide an outlook for fiscal year 2025. Let's begin with today's agenda. Our presentation will cover the following: first, company introduction; second, market trends and geopolitical impact; third, financial review; fourth, operational review; fifth, strategic initiatives and market outlook; and sixth, Q&A. Let me start with a brief introduction to CBL International. CBL International Limited, NASDAQ ticker, BANL, is the listing vehicle of Banle Group, a reputable marine fuel logistics company based in the Asia Pacific region that was established in 2015. We are a global marine fuel logistics provider operating under an asset-light business model. Our key services include bunkering services across strategic global ports, supplying both fossil fuels and sustainable fuels and serving container liners, bulk carriers and tankers. We are recognized as professional and trustworthy by our business counterparties, delivering flexible and integrated vessel refueling solutions. Our competitive advantages include: first, global ports network. We operate in over 65 ports across Asia Pacific, Europe, Africa and Central America; second, supplier relationships. We maintain strong relationships enable us to offer competitive fuel pricing, superior service and operational efficiency. Third, customer relationship. With our extensive service, we can provide one-stop refueling solutions for customers, ensuring seamless service and operational efficiency. Fourth, growth strategy. We are focused on expanding our service network, increasing sales volumes and integrating sustainable fuel solutions to meet evolving market needs. This short corporate video will give you a comprehensive overview of our company's operation. I hope this video provides insight into who we are and the exciting opportunities that lie ahead. Please enjoy. [Presentation] Venus Zhao: Okay. Let's come back to our presentation. We've maintained long-term strategic partnerships with global industry leaders and are recognized in the industry as a professional and trustworthy provider of flexible and integrated vessel refueling services. Through collaboration with reputable local partners, we consistently deliver high-quality services to our clients worldwide. This ensures access to efficient, reliable and competitively priced bunker fuel solutions, meeting the diverse needs of the global maritime industry. Now we move on to market trends and geopolitical impact. Let's continue. Seaborne trade and container volume have demonstrated steady growth as shown in this review of maritime transport by United Nation. According to UNCTAD, total seaborne trade grew by 2.5% in 2025, while containerized trade grew by 2.9%. Both are forecasted to maintain moderate annual growth rate through 2029. Ship supply increased by 6.1% in 2025, with demand grown by 3.5% to 4.5%. These numbers reflect a consistent recovery and expansion of global trade. CBL's bunkering operation network aligned strongly with this trend, with a presence in 13 out of the top 15 global container ports, including 9 of the top 10 ports such as Shanghai, Singapore and Ningbo-Zhoushan. On the customer front, CBL serves 9 out of the top 12 global container liners, which represent a combined around 60% market share in global container liners. Let's move on to the slides, which highlights geopolitical tensions and market impacts. Global maritime trade faced significant disruptions in first half of 2025 due to geopolitical tensions. First, let's review the whole global economic landscape. The broader economic environment remains uncertain. The recent decline in oil prices that were a source of market uncertainty directly eased our working capital. Seaborne trade showed moderate resilience, expanding by 1.5% in the first quarter and accelerating to a projected 2% in the second quarter. One of the notable disruptions in global shipping was the ongoing instability in the Red Sea, where vessels were rerouted via the Cape of Good Hope. This diversion extended Euro-Asia voyages by 10 to 14 days, resulting in an increased fuel consumption due to longer travel distances. Constantly, demand for bunkering services surged at alternative ports along this rerouted shipping lanes. The situation in Ukraine and the accompanying sanctions contributed to the instability in energy markets, prompting the European Union to see alternatives to Russian fuel supplies. The shift added volatility to global oil prices creating challenges in fuel supply and demand. U.S. trade policy, particularly the tariffs implemented in April 2025, significantly impacted global trade flows, leading to a shift in shipping volumes. These tariffs directed cargo from traditional routes, especially between China and the U.S. to alternative regions such as intra-Asia and Euro-Asia. This adjustment in this demand for bunkering services along these alternative corridors, particularly in the Asia Pacific and the Euro-Asia regions. Despite these challenges, the CBL team responded swiftly and strategically. We targeted the increased demand from rerouted vessels ensuring that our strategic supply chain could meet this demand effectively responded by capturing this increased demand resulting in a notable rise in sales volumes across Asia Pacific and Europe. Refraining from supplying vessels subject to the sanctions that were outlined in Lloyd's List containing United Nations Securities Council Consolidated List, maintained operational efficiency positioning CBL to navigate both the economic uncertainties. Let's move on to our financial highlights. Here are the first half 2025 financial highlights, showcasing CBL's strong performance. Total sales volume grew by 9.8% while revenue decreased by 4.4% to USD 255.2 million. Gross profit margin increased by 4 basis points to 1.02% and net loss narrowed by 38.8%. Our current ratio of 1.54 demonstrates healthy liquidity, while capital days at negative 4.44 highlights excellent cash cycle management. In the first half of 2025, CBL's revenue distribution and growth by geographic location, highlight key market trends. China accounted for 67.5% of total revenue, followed by Hong Kong at 27.8% and Malaysia at 2.1% with smaller contributions from Singapore, South Korea and others. Compared to the first half of 2024, revenue growth was seen 26% growth in China and 131% in others. CBL's strategic focus on establishing network to capture regional demands as they shifted supported by macro seaborne trade volume in China and Europe. Diving deeper into our financial results, revenue, CBL's total revenue decreased by 4.4%, reaching USD 265 million down from USD 277 million in the first half of 2024. The decrease was mainly attributable to the decrease in the marine fuel price, which was partially offset by the increase in the sales volume. Gross profit. Gross profit remained at a similar level, while gross profit margin slightly improved. We managed to maintain our gross profit with an increase in sales volume to cope with the challenging competition in the market. Operating expenses. Operating expenses decreased to 17% from USD 4.12 million to USD 3.42 million. The decrease was due to harvesting the results of our investment in the past year on enlarging port network, expanding our customer base and developing our biofuel operations and initiatives undertaken in the first half of 2025 to streamline operations. Net income. Net income narrowed from a loss of USD 1.62 million in the first half of 2024 to a loss of USD 0.99 million in the first half of 2025. This 38.8% improvement was mainly driven by the reduction of operating expenses through the costs savings and control initiatives in the group's operations during the period. CBL's high liquidity and financial flexibility have enabled sustainable growth in the first half of 2025. Working capital management, high liquidity strengthens the cash cycle and supports business operations. Bank facility, ample bank facilities. Our total facilities USD 50 million to fund future business expansion. Debt and leverage, focused on maintaining low debt levels provides flexibility for future growth. Just-in-time inventory management, optimize cash flow minimizes storage risk and enhances efficiency, minimal fixed assets maintaining a lean asset base ensures operational agility. Let's move on to operational review. Global development is part of CBL's 4-step strategy, and we have continued to see successful expansion since our IPO in 2023. As of June 30, 2025, CBL's global service network has expanded to 65 ports, an increase of 81%, marking a significant milestone in our growth strategy. The Asia Pacific region remained CBL's primary revenue driver, with key contributions from China, Hong Kong, Malaysia, Singapore and South Korea. Volume attributable to deliveries in Asia Pacific surged 9.1% year-on-year. Given several ports in Asia Pacific are major global shipping hubs, 13 of the world's top 15 container ports in 2024 according to the world's least bunkering operations in these regions account for a significant portion of deliveries. The expansion is especially evident in Europe, where our strategic focus on the ARA region has enhanced our market presence. We continue to develop our presence through our service network and maintain relationships with suppliers and customers. While current volumes in these regions remain steady, we are well positioned to scale operations in response to rising customer demand, ensuring we can meet market needs as they arise. In the first half of 2025, CBL achieved a 9.8% increase in sales volume despite a challenging macroeconomic environment marked by fluctuating oil prices and geopolitical instability. This growth was fueled by expansion of our service network. The successful acquisition of new customers and a strategic shift towards non-container liner segments. As of June 30, 2025, CBL serves 9 of the world's top 12 container shipping lines, which contributed to nearly 60% of global container fleet capacity. The company's expanding customer base and broader service portfolio have reinforced its market position. Customer diversification. Revenue share from top 12 liners increased to 60.1% versus 45.7% in the first half of 2024. Non-container sales, Bulk and Tanker accounted for 36.9%. Top 5 customer sales concentration declined to 60.4% in the first half of 2025 versus 66.7% in the first half of 2022. New customers from 2024 and the first half of 2025 contributed to 11.9% in the first half of 2025 sales. In the biofuel sector, CBL achieved a significant growth in sales and volume in the first half of 2025 and Biofuel sales saw an impressive increase of 154.7% year-on-year in the first half of 2025, with volume growth reaching 189.5%. This growth can be attributed to CBL's continued leadership in the sustainable fuel market driven by the increasing adoption of biofuels among our customers. CBL has remained at the forefront of biofuel adoption with increased sales volume in Singapore Malaysia, Hong Kong and various ports in China. Globally, CBL facilitated the first B24 supplies across several markets. Besides the launch of biofuel helped reduce the GHG emissions by 20% compared to traditional fuels. CBL has obtained ISCC EU and ISCC Plus certifications in early 2023. We supplied biofuel in Singapore since March 2025 and proactively support customers to meet IMO GHG targets with sustainable and cost-effective alternatives. Looking ahead, CBL plans to further diversify biofuel offerings and strengthen our market position in green marine fields. In addition, the company will explore more greenfield options such as LNG and methanol to meet the evolving sustainability regulations and industry demand. In the capital markets, CBL also made a remarkable progress with the following highlights. In January 2025 the company filed a shelf registration statement, which became effective on January 24, 2025, allowing for the offering of securities with an aggregate initial offering price of up to USD 50 million. Following this, on January (sic) [ February ] 28, 2025, the company initiated an at-the-market, ATM, offering with a total offering price of up to $2,604,166. The net proceeds from the ATM offering will be used for general corporate purposes, including acquisitions, business opportunities and debt repayment with management retaining discretion over the allocation. Additionally, on June 30, 2025, the company launched a share repurchase program approved by the Board of Directors authorizing repurchases of up to the lesser of USD 5 million or 5 million ordinary shares set to expire on April 15, 2028. Repurchases will be made in the open market with amounts and timing, depending on the market conditions and corporate needs. The company highly values the relationships with our investors. In the first half of 2025, we have participated in several investor events and conferences such as Lytham Partners Investor Conference, Noble Capital Market Virtual Equity Conference, 8th China IR Whitepaper Summit, SZSE 2025 Global Investor Conference. Besides, we also held media and analyst luncheon and Investor Happy Hour to further exchange insights with investors and media in person. CBL continues to actively communicate with different sites through various platforms, including AGM, newsletter, website and social media. Our efforts have received a market recognition. We have won the Most Creative Corporate Communication Award at the 2024 Valuable Capital Community Annual Selection, and the Best Digital Investor Relations Award and Best Investor Relations Director at the 8th China Excellence IR Awards. As an industry pioneer, CBL is committed to sustainability development and has initiated multiple steps with fruitful outcomes in ESG. In the first half of 2025 built a corporate model for sustainability development, focusing on a reliable and responsible marine fuel supply, customers' growth supports and life quality enhancement. Engaged a consultancy with the aim of enhancing our ESG practices in a comprehensive 4-stage approach. Conducted a materiality analysis on sustainability issues among internal and external stakeholders. Organized various maritime-related volunteering programs and initiatives to support ESG practices in community. Following the corporate responsibility road map, we will mainly focus on 3 parts: ESG goal setting, ESG rating platform and ESG disclosure. Looking forward, CBL will continue to take actions in ESG to achieve a sustainable development. More specifically, CBL's 2025 ESG plan and long-term commitment underscores the importance of adopting ESG practices to enhance transparency, implement sustainable initiatives, manage risk and meet stakeholder expectations. On the environmental front, CBL leads with its biofuel initiative aligned with IMO's 2023 strategy, blending marine fuel oil with 24% UCOME to reduce scope 3 supply chain emissions. The company also supports customers in achieving sustainability goals while ensuring its biofuel production, avoids deforestation, land use changes and competition with food production. In terms of social responsibility, CBL promotes equitable practices, including adherence to pay-for-performance principles, fostering diversity and inclusion with strong female representation and supporting employee development through education subsidies. CBL also prioritizes employee well-being with regular events and encourages community engagement by holding various training and programs, such as International Coastal Cleanup for World Oceans Day. On governance, CBL's practice is in alignment with IMO decarbonization targets and FuelEU maritime regulation. The company ensures fresh perspectives and independent oversight through annual director elections and rotation. The company also established strong reporting channels for misconduct, fraud, or violations of company policy ensuring swift management response and whistleblower protection. The plan is structured across 4 phases: Q1 to Q2 2025, establishing a sustainability strategy, governance framework and action plan; Q1 to Q3 2025, improving sustainability management and implementing the sustainable development plan; Q2 to Q3 2025, implementing our sustainable development plan; Q3 to Q4 2025, enhancing disclosure practices and strengthening investor relations. Now let's move on to strategic initiatives and outlook. Looking ahead to fiscal year 2025, our key initiatives include strengthen our service network, focusing on Asia Pacific and European markets, strengthening our presence in emerging markets, continue expanding ports coverage. Grow sales volume; continue to target new customers and new segments while maintaining strong relationships with current customers. enhance market position, stronger and more in-depth supplier relationships. Export sustainable fuels; Biofuel adoption as a core of CBL's sustainability strategy, focus on compliance with the latest carbon emissions regulations with further exploration of biofuel products and other sustainable fuels. The International Maritime Organization, IMO, agreed on its global greenhouse gas, GHG, framework in April with full implementation set for 2028. This decision further emphasized the urgency of reducing emissions, promoting biofuel adoption and encouraging future investment in ships capable of running on zero carbon fuels. In the first half of 2025, CBL has the following achievements, improving its performance across 3 key areas. First, to improve gross profit and narrow down net losses. The company plans to increase sales volume through network expansion and new customer acquisition while leveraging its network to mitigate supply chain disruptions. CBL will also focus on developing biofuels and exploring sustainable fuels such as methanol and LNG for higher margins. alongside achieving economies of scale to reduce unit costs. CBL's gross profit margin increased by 4 basis points and net loss has narrowed by 38.8% in the first half of 2025. Second, to maintain sufficient cash flow and manage working capital. CBL will prioritize a strong cash position, strengthen liquidity and closely monitor accounts receivable and payable. Accessing the capital market at the right time and increasing trade financing will further enhance financial flexibility to support growth initiatives. In the first half of 2025 CBL's current ratio improved from 1.51 to 1.54, while capital days improved by 1.8 days to minus 4.44 days. Finally, to enhance efficiency, CBL will utilize office automation and IT systems to streamline operations and explore advanced technologies for continuous improvement, cost saving, upgrading back-end systems and implementing real-time order tracking, data analytics. CBL's operational expenses has decreased by 17%. These efforts will improve customer service and operational efficiency, enhancing sustained progress and long-term growth. Thank you for your attention. We are now happy to take your questions. Please feel to share your queries, and I will facilitate the discussion along with Dr. Chia and Mr. Fung. Venus Zhao: [Operator Instructions] I can see the first question on the screen. The first question is, among growth areas, what was the most significant achievement achieved by CBL? How did the company produced results in this area? And what were the challenges? And how does CBL overcome them. This question is from [indiscernible] from Southwest Securities. I would like to direct this question to William. Teck Chia: Sure. Good morning. Thank you very much for joining our webcast this morning. Thank you, Mr. [ Wu ], for the questions, and thank you, Venus, to the presentations. Well, I think we all know, ocean is never short of challenges. Right now, we are actually facing geopolitical conflicts, Red Sea crisis, tariff war, switching to biofuel and other renewable energies. We have been seeing all these challenges one by one all coming together, but we have managed to keep and maintaining our growth. We have achieved a sales volume growth of almost 10% for the first half of 2025. And we have achieved continuous growth in the sales volume over the past few years. And amid all these challenges, we managed to keep down our expenses and reduce our loss. We will continue to strive to make more improvements. And CBL's significant achievements, we have made rapid and strategic expansions on our global service network, growing form 36 ports at the time of our NASDAQ IPO in the year 2023 to 65 ports by the first half of 2025. This expansion underscores our successful execution of a scalable, asset-light growth, our asset-light growth model and solidifies CBL's presence across key maritime regions, including the Asia Pacific, Europe, Central Americas and Africa. And our growth was actually driven by targeting entity into high-demand ports and strengthens our partnerships with major suppliers and customers. We focus on customer-driven diversifications, especially in bulk carriers and tankers, which is actually beyond our core container liner space. This move has actually allowed us to capture volume growth despite a very challenging market and a declining bunker price environment. And CBL has navigated through significant headwinds, including geopolitical disruptions, oil price fluctuations and intensified competition in key markets where we operate. By leveraging our agile and capital-light structure, we minimize the fixed cost while we're securing scalable supply partnerships as well as our early investment into biofuel capabilities such as the successful rollout of the ISCC certifications in China, in Hong Kong, Malaysia and Singapore, we're supplying these ports enable us to align with the tightening emissions regulations and customer demand for sustainable options. The strategic and operational agilities allow CBL to expand meaningfully without compromising our financial stabilities. We are turning challenges into differentiators and reinforcing our value propositions as a resilient and a future ready bunkering partner. Venus Zhao: Okay. [Operator Instructions] and will be allowed for management to address. Okay. I see the second question on screen. CBL reduced its net loss by 38.8% year-on-year in the first half of 2025 despite challenges in the macroeconomic environment and oil price volatility. What were the key drivers behind this improvement? And how sustainable are the measures for the second half of the year? This question is from [ Ryan Chen ] from [indiscernible] Financial. I would like to direct this question to Nick. Chi Kwan Fung: Thank you very much and thank you for everyone joining this event this morning. Well, in our first half of 2025, the improvement in bottom line of 38.8% was a result of efforts and resources invested to enhance our port network, expand our customer base and develop our biofuel operations over the past years. We now have to sustain our such investment. As a result, we increased our sales volume by double digits. In full year of 2024 as well as first half of 2025. We brought in new customers and lower our reliance on top 5 customers. Our biofuel sales have continued to demonstrate significant growth in the past 12 months. In addition, in the first half of 2025 by streamlining our operations, thus enhancing operational efficiency, we reduced our OpEx by 17%. Going forward, we continue to look for investment windows to further expand our network and especially for the sustainable fuel segments. In fact, we have taken more strategic approach to optimize our profitability. Thank you. Venus Zhao: Thank you, Nick. And then we will come to the third question. The third question on screen is, given the ongoing geopolitical tensions and disruptions in shipping routes, how is CBL positioned to capture demand from rerouted trade flows especially in the Euro-Asia and intra Asia corridors? This question is from Marcus Wong from Hang Seng Bank. I want to direct this question to William. Teck Chia: Thank you very much, Marcus, for raising these questions. And the ongoing instabilities in the Red Sea, which has led vessels to reroute via the Cape of Good Hope extending the Euro-Asia voyages by probably about 10 to 14 days. And as a result of that, increasing the fuel consumptions. These 3 directions has caused a surge in demand for bunkering services at alternative ports along these new routes. And CBL has actually targeted ourselves to meet these demands and to capitalize on the opportunities. While on the U.S. trade policy changes in April this year, has also redirected cargoes to different regions, the shift in the trade flows has increased the demand for bunkering services in Euro-Asias's and Intra-Asia's corridors. And luckily enough with our CBL's extensive supply network in these regions, we are seeing additional requirements for our services. Therefore, despite all these disruptions, we have responded effectively resulting in increased sales volumes in the Asia Pacific and other emerging markets. And CBL's bought supply network has also positioned ourselves to adapt to changing trade flows while we maintain efficient bunkering operations and also able to seize the opportunities in this new and alternate routes. Venus Zhao: Thank you, Mr. Lim Chia. Okay, please, all the investors, please type in your questions on the question for us, and I will read it now for management to address. So I can see the fourth question on the screen. Gross profit margins increased slightly to 1.02% in the first half of 2025. How does CBL plan to maintain or further improve margins as you continue expanding your supply network and customer base? This question is from [ Pauline Lau ] from Citibank. I would like to direct this question to Nick. Chi Kwan Fung: Okay. Thank you. Thank you, Pauline of Citibank for these questions. Well, in the first half of 2025, we managed to maintain our gross profit at the same level as compared to 2024. Our sales volume increased while our gross margin improved from 0.98% to 1.02%. We continue to improve our gross profit by increasing sales volume riding on the foundation we laid down in our expanded network, improved customer base and growth in non-container liner and biofuel segments. Furthermore, we keep on exploring new sustainable fuels such as methanol and LNG for higher margins and to achieve economies of scale to reduce unit cost. We believe our profitability will improve through those measures and actions. Amid market volatility, conflict and geopolitical tension, we still achieved steady growth of sales models. As we adopt our cost-plus model in our pricing, our gross margin increased when the sale -- with oil price come down in 2025 first half. Looking forward, if world trades recover to normal when tariff wars stabilize, we expect there may be further improvement in our gross margins. Venus Zhao: Thank you, Nick. I see more questions coming on the screen. And the next question will be non-container liner sales now account for 36.9% of revenue, reflecting successful diversification efforts. How does CBL plan to further grow this segment while maintaining strong relationships with container liners customers. This question is from [ Alvin Cheung ] from Prudential Brokerage Limited. I would like to direct this question to William. Teck Chia: Thank you, Alvin. Well, thanks to our network expansions in the last few years, we are able to provide reliable and flexible supply arrangement for our non-container liner customers like those bulk carriers and tankers. And also thanks to our network expansions in the last few years, we can effectively and efficiently serving the non-container liner customers where [ yard ] vessels has less predictable scheduling as compared to the container liners. But meanwhile, we continue to service 9 out of the top -- the world's top 12 container shipping liners, which represent nearly 60% of the global container fleet capacities. And CBL has been actively targeting new customers, including mid-tier shipowners, bulkers, tankers and others. Now our customer diversification has actually reached a significant milestone. and non-container liner sales has become an important segment for us, accounting for about 36.9% of our revenue. And our sales concentrations for the top 5 customers has also reduced to 60.4% from the previous 66.7% in the same period. Venus Zhao: Thank you, Mr. Chia. Okay. [Operator Instructions] So the next question will be operating expenses decreased by 17% in the first half of 2025. What were the primary cost efficiencies achieved? And how do this reflect the company's long-term strategy for expense management? This question is from [ Alan Wu ] from Phillip Securities. And I would like to divert this question to Nick. Chi Kwan Fung: Thank you, Alan, for raising these questions. Well, it has been our strategy to develop new ports, improve our customer base and diversify profit mix for the past 3 years, including 2024. Therefore, we deploy efforts and resources in this respect. In 2025, it actually is our harvest year rather than planting as compared to previous years in this regard. As some of these spendings are nonrecurring in nature, such as port operation preparation for new ports, market intelligence regarding new customers and new products such as biofuel and methanol. We keep the operating expenses down. This enabled us to achieve promising results. In the first half of 2025, we implement initiatives to streamline our operations and rationalizing our resources as a result we have savings in OpEx. To continue enhancing our operational efficiency, we utilize office automation and IT system to streamline operations, allocate resources to explore advanced technologies for continuous improvement. Cost saving and upgrade back-end system, implementing real-time order processing and data analysis, we'll keep investing for the future when good investment opportunities arrived. Venus Zhao: Thank you, Nick. Okay. We come to the next question. This question is, any expansion plan in the second half of 2025? And looking longer term, what does the 5-year plan look like for the business? And how do you expect its business model to evolve by 2030? This question is from Nelson Lee from ICBCI. And I would like to direct this question to William. Teck Chia: Thank you very much, Nelson, for these interesting questions. Well, I would say, despite the challenges posed by uncertain global economic conditions, geopolitical volatilities and regional crisis, our gross profit remained stable. And in the first half of this year, we had successfully reduced net losses, successfully diversified our customer base and successfully improved on our operational efficiency and cost management. These strategies and measures we implemented have proven effective in navigating us through these turbulent times. And our strategy will be continuing to strengthen service network, grow our sales volume and further explore the sustainable fuels. We will continue to focus on our extensive supply network in Asia Pacific and at the same time, looking at strengthening our presence in the emerging markets. We will also continue to target new customers and new segments while deepening our strong relationships with the current customers. We will continue to promote stronger and more in-depth suppliers' relationship as well. We will continue to ensure that we have the adequate financial resources for our expanded business. And as we can see, in the past 12 months, we have successfully secured more banking facilities to support our growth. And on the sustainable fuel side, biofuel adoptions is actually one of our core sustainability strategies. We shall focus on compliance with the latest carbon emissions regulations and to further explorations of biofuel products. At the same time, we will be also looking at other sustainable fuels as well. We are also regularly exploring different vertical and horizontal integration opportunities in order to strategically position ourselves to capitalize on the growth opportunities and as well as the support our customers in meeting the decarbonization goals. We are growing Banle to be a full-fledged bunkering service facilitators. We strive for customer segment diversification from customers, from containers to non-container customers, from fossil fuels to biofuel and renewable fuels from Asia to the world. We are proud to build Banle into a well-rounded bunkering service facilitators for the future. Venus Zhao: Thank you, Lim Chia. [Operator Instructions] Now we come to the next question. As the CEO of an international bunker service facilitator, what industry-specific observations and forecast do you see taking place on a global scale? And how are you preparing your company to capitalize on this development? This question is from [ Alan Lau ] from Jefferies, and I would like to direct this question to William. Teck Chia: Thank you very much, Alan, for the questions. Well, probably we can share a few industry observations and forecast that we see for your reference. First, we do see that there is resilience in the container shipping and the fleet expansions. Global fleet -- container fleet has actually increased by more than 10% in the year 2025 as compared to last year. This is actually driven by new vessel deliveries and -- as well as the demand for diverted growth. For example, the Red Sea disruptions that you require longer voyages, and therefore, you need more ships. However, this growth is actually tempered by trip policy volatilities, which might temporarily dampen volumes. But at the same time, we also see that it will spur regional trade realignment towards Intra-Asias's as well as the Euro-Asia's corridors. And second, probably on the geopolitical and the trade dynamics. Red Sea disruptions extended wages by 10 to 40 days, increased bunker demand at alternative routes as well as the U.S. tariff has redirected the trade flows, boosting Intra-Asia as well as the Euro-Asia's bunkering demand, but also creating some near-term volatilities. And third is what we see is the carbon emissions recovery as well as the regulatory accelerations. Carbon emissions in ocean shipping is actually improving post 2024 peaks aided by growth normalization as well as the adoptions for lower carbon fuels. And you can see that IMO in their 2023 GHG strategies in EU ETS and few EU marine times are actually exacerbating biofuel adoptions. The green marine fuel market is actually projected to grow at 50.4% CAGR from the year 2023 to the year 2030. So we see that there is a great demand in the market for green marines. And fourth on the biofuel and other sustainable fuel adoptions, the biofuel demand for CBL has actually surged 155% year-on-year in this first half of 2025. This is actually driven by the regulatory compliances as well as our customers' decarbonization goals. And also, on the other hand, is we see the Mediterranean ECA implementations in May this year requiring a 0.1% sulfur fuel. Therefore, it's boosting the ultra low sulfur fossil fuel as well as the bio-blended bunker demand. And coming to the CBL strategic preparations. First of all, we will continue on our network expansions and diversifications. We have currently scaled to 65 ports supply network globally, focusing on high-growth hubs in the Asia Pacific as well as the ARA regions in order for us to capture growth and demand. And to tailor with the traffic-driven trade shifts. This will also reduce our customer concentrations, expanding to other segments like the bulk carriers, the tankers and also other mid-tier shipowners. And second, we will also be pioneered in biofuels to ensure compliance readiness. And the company is actually expanding our partnerships and collaborations with biofuel suppliers, producers of UCOME as well as UCOME particularly in the Asia Pacific, where we have a very strong existing supply network, where we will maintain our ISCC EU as well as the ISCC Plus certifications to ensure the compliance with increasing stringent requirements in Europe and globally. We will also be sharing and assisting our customers onboarding and supporting them in easing the transitions for them to go into biofuels. This shall include the possible technical systems on handling and sharing the information on the combustion characteristics of the biofuel plants. Meantime, the company is also exploring any opportunities in suitable energy supply chain. And coming to financial resilience and flexibilities. We are always preparing ourselves for future developments of the company. We had secured ample banking facilities to fund our working capital and growth initiatives. And our market is challenging and competitive. However, we strongly believe our current business model has proven to be prudent and is able to navigate through all these oil prices volatilities. Coming to technologies and risk mitigations, we have been proactively leveraging with IT tools for our credit and risk management. We also implement real-time order tracking advanced monitoring systems to enhance operational efficiency. The company utilized market intelligence tools in order for us to avoid any [ sanctioned ] vessels, ensuring that we are in strict compliances and at the same time, minimizing the geopolitical risk. Well, as the CEO of the company, I see obvious trend that the maritime industry is navigating through the historical transitions towards a new frontier calling for sustainabilities and trade realignment. CBL is in position to capitalize through our agile network, biofuel expertise and disciplined financial management. CBL is regularly exploring different verticals and horizontal integration opportunities. The company is also firmly believing in the future demand for sustainable fuels and regional trade shifts. We are well prepared, well positioned to receive these transformations. Venus Zhao: Thank you, Lim Chia, for the very comprehensive explanation. And then due to limited time, we come to the last question. And this question is considering the U.S. new reciprocal tariffs update and effective on 7 August, what is the impact on CBL and the bunkering industry? This question is from Tony Fei from BOCI, and I would like to direct this question to William. Teck Chia: Thank you, Tony. Well, as CBL currently, we do not have operations in the U.S. ports. Our direct impact from the U.S. tariff changes is minimum. However, we do see that tariffs has redirected cargoes from traditional roads not apply between China and U.S. to alternative regions like Intra-Asias and Europe. This shift has increased demand for bunkering services along the alternative corridors as the areas that we have mentioned, Asia Pacific as well as the Euro Asia. We can see from [ Dana Liner's ] report saying that 7.8% increase in the export to the far east and a 2.3% rise in imports from the Far East to other regions. This is covering the period from January to May this year. We see these strict pattern changes has actually affected global shipping, particularly impacting the container sector due to their requirements for reroutings. And as for our company, the overall impact has been limited. We have managed to leverage these changes by our extensive network and able to meet the demand generated from these new trade flows. Therefore, monitoring the evolving global trading landscape remains a priority for us in the second half of the year. Thank you. Venus Zhao: Thank you, Mr. Chia. Okay. Thank you all the questions from investors, and this concludes our investor presentation for today, and thank you for your participation and support of CBL. If you would like to have further discussion with our management, please feel free to contact us any time for arrangement. Once again, thank you for your time today, and you may now disconnect. Thank you. Teck Chia: Thank you very much. Nicholas Fung: Thank you.
Operator: Good day, and thank you for standing by. Welcome to the Transgene 2025 Half Year Financial Results Conference Call and Webcast. [Operator Instructions] After the speaker's presentation, there will be the question and answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Lucie Larguier, Chief Financial Officer. Please go ahead, madam. Lucie Larguier: Thank you, Maria, and good afternoon, everyone. Thank you for joining us on today's call to discuss our progress over the First Half of 2025 as well as a half year results. You can access the press release issued today on the Investor page of our website. On today's call is Dr. Alessandro Riva, our Chairman and CEO. After Alessandro's discussion, we will take questions already on this telephone call and also on the web platform. Before we begin, I'd like to remind everyone that today's discussion contains forward-looking statements, which are subject to a number of risks and uncertainties. And with this, I now hand over the call over to Alessandro. . Alessandro Riva: Thank you, Lucie, and good afternoon, everyone. I would say that it has been an exciting first half of the year, not only for Transgene Individualized Therapeutic Vaccine, but also and more importantly, for the head and neck cancer community. We presented the full 24 months disease-free survival data for all Phase I patients treated in randomized Phase I trial in a rapid oral presentation at ASCO this year in a session that was dedicated to head and neck cancer. We are extremely proud that all operable head and neck squamous cell carcinoma patients treated with our Individualized Therapeutic Vaccine, TG4050 in the randomized Phase I trial remain disease-free after a median follow-up of 30 months, as you can see from the Kaplan-Meier course projected in this slide. And now on Slide 5, all the trial endpoints of the randomized Phase I study were met. Safety is extremely good. Immunogenicity has been demonstrated. And not only do we see the induction of a specific cellular immune response, but also we see that this response are durable and can still be seen after 24 months since the start of treatment. We will present additional immunological data from this trial at a scientific conference in Q4 2025, including insight into the phenotyping of patients' immune response. In addition, as you can see in this slide, the ongoing Phase II trial is progressing at a very good pace, and we are very confident that we will randomize the last patient in Q4 2025 allowing us to plan for the communication of the first immunogenicity data in the second semester 2026 and the 2-year efficacy data in the Q4 2027. I'm now going to Slide 6. TG4050 randomized Phase I data were presented at ASCO along with other 2 trials with immune checkpoint inhibitors in the adjuvant treatment of operable head and neck squamous cell carcinoma, the KEYNOTE 689 and the NivoPostOp trial. These 2 trials, as you can see, extremely encouraging data and pembrolizumab, as you know, is now approved for this patient population in the United States of America and probably soon in Europe. Nevertheless, 35% of patients relapse within two years after surgery and that is exactly where the future lies for TG4050, improving the outcomes for these patients that do not benefit durably from immune checkpoint inhibitors. Moving to Slide 7. So as you can see, we want to build on the positive Phase I data and the successful inclusion in the Phase II trial. And for this reason, we are discussing with clinicians the best way forward for TG4050 in the head and neck cancer so that we can bring this potential new treatment to patients in need as quick as possible. In addition, our myvac platform has broader potential in early solid tumor setting that goes beyond head and neck tumors. We want to continue to leverage this unique technology to address areas of high unmet medical need. And that's why in parallel, we continue to prepare a potential new Phase I trial in the early treatment of a solid tumor with biology that different from the head and neck tumors. We aim to initiate this study as soon as all conditions are met from a regulatory and financial point of view. As you know, and I'm on Slide 8, the manufacturing is key for Individualized Vaccine as it is key for CAR-T cell therapy. That's a topic that we started to address from the beginning of our work on myvac. We have demonstrated feasibility to deliver TG4050 to operable head and neck cancer patients in the context of a multicentric multinational Phase I/II trial. The next step for us is to continue optimizing the manufacturing process for myvac technology and for TG4050 to be able to scale up and run several trials in parallel, including a potential registrational trial. Under the guidance of our Chief Technical Officer, Simone Steiner, who joined Transgene before this summer, we will continue to invest to ensure smooth execution to support further acceleration of the myvac program. We believe that scientific excellence, strong data and operational focus generated with TG4050 clearly differentiated Transgene in this highly competitive and attractive field. Hence, the rationale, as you can see in this slide, of our decision to focus our efforts and resources on our lead program myvac platform and today TG4050. With regards to our other programs, we will present a poster at ESMO in Berlin on the data generated by BT-001 in the Phase I trial as monotherapy and in combination with pembrolizumab. We have seen interesting responses in patients with refractory diseases, in particular, leiomyosarcoma patient and melanoma patient. Looking at leiomyosarcoma patients, you can see that BT-001 was able to positively change the tumor microenvironment. The science generated around this initial trial constituted the basis of discussion with clinicians to continue the development of this candidate in the intratumoral setting. Looking at our two other candidates, TG4001 and TG6050, we are assessing different scenario in a context where the overall financing environment for biotech company is pushing us to focus on key value-creating programs. And now I'm going to hand over to Lucie for some words on the financials. Lucie? Lucie Larguier: Yes. Thank you. So our financials are, as usual, in line with our forecast, thanks to strict monitoring of [ dilution ] and stringent cost control in today's environment. In terms of outlook, and I think it's positive, we have extended our financial rhythm, and our business is now funded until the end of December 2026, thanks to the credit facility and the engagement support from TGH, which is, in fact, [indiscernible]. I now hand over to Alessandro for a few concluding words. Alessandro Riva: So to conclude, I will say that we are now building increasing momentum on the myvac platform. The data we presented at ASCO in operable head and neck cancer with 100% survival at two years represent a solid proof of principle for TG4050 in an indication where a significant medical need remains in spite of a great improvement delivered by immune checkpoint inhibitors. Our vision is clear with a focus on individualized cancer vaccine. In the next couple of years, we will continue to present clinical catalysts in head and neck, the Phase I will deliver additional and informative immunogenicity data that will be presented in Q4 2025 at a scientific conference. You can also expect the follow-up at three years from the same study in the middle of 2026. The Phase II trial in operable head and neck cancer patients is well on track and data are expected in second half 2026 regarding the first immunogenicity data and in Q4 2027, the 2-year disease-free survival data. When all conditions are met, as discussed, we'll be able to start an additional Phase I trial in a new indication in operable setting. The individualized cancer vaccine field continues to evolve and start to be derisked from both scientific and clinical point of view. And when looking at the economics, operable head and neck cancer alone represent a market of more than $1 billion per year at peak. We continue to work harder to deliver on our strategy with important milestone in sight, we are confident that Transgene is well positioned for the next step. And now Lucie and I will take your questions. Operator, please. Operator: [Operator Instructions] And now we're going to take our first question from audio line. And it comes from the line of Clara Montoni from [indiscernible]. Unknown Analyst: This is [ Clara Montoni ] from [indiscernible]. Congrats for the update. I was wondering if you could remind us when do you expect to announce more on the TG4050 development plans? Will this be pivotal plans? And also, can you talk a bit more about or in the context of the recent approval of Neoaduvant and Adjuvant KEYTRUDA in localized head and neck cancer. So specifically, I was wondering if those 35% of patients relapse, do they have particular baseline features? Could you please expand on that? Alessandro Riva: Okay. Thank you, Clara. So first of all, in terms of more clarity and visibility related to the next step for TG4050 in head and neck and in particular, the potential pivotal Phase III trial. We plan to have some visibility by Q2, 2026. The reason being that, of course, we are starting the discussion with some expecting clinicians in the field of head and neck. We're going to finalize the proposal that, of course, will be discussed with the health authorities, and we plan to update the community on the potential next step kind of around the second quarter of 2026. So -- And with regards to your second question related to KEYTRUDA pembrolizumab in the KEYNOTE 689. So if you look at the New England Journal of Medicine publication, that is the only source of information that we have -- it doesn't appear that there is a particular prognostic factor that is underscored in terms of potential risk of relapses. So this is something that will have to be explored further. And also when we will have more data from the other trial with nivolumab, NivoPostOp [indiscernible], we are going to clarify this topic. So the [ idea ] that we have independently of the risk factors is that knowing that there are around 35% of patients that unfortunately continue to relapse despite the immune checkpoint inhibitor is really to try to find the way TG4050 can further improve the treatment outcome, [ dependency ], I would say, of the prognostic factors. Lucie Larguier: So we have other questions coming from the web -- my mailbox. We have one from Amar Singh from [ Intron ] Health. Will the Phase I trial of TG4050 in a new indication still be initiated in Q4 2025? And can you provide us with any detail on this next indication? Alessandro Riva: So the answer, as we said during the call, so we are already working towards the finalization of the protocol. We are in discussion with the health authorities. And as soon as we have the green light from the health authorities, and the financial condition are met. In other words, we have the right financing for the trial. We're going to start the trial. And of course, we are still aiming towards an initiation of the trial as quick as possible. As I said, it will depend from the regulatory authorities' feedback and from financing that we are considering as we speak. Lucie Larguier: Another question that we have, well, two questions from [indiscernible]. Could you please disclose the conference -- well, at which conference the new data on TG4050 will be presented in Q4 -- and is an early access program a realistic opportunity for TG4050 probably in line of 36 months data. Alessandro Riva: Okay. So we are going to disclose the full data set of the immunogenicity data at the ST conference in November in the United States of America. This is an important conference for immunology in cancer. So -- and we have submitted an abstract to the conference that has been accepted for presentation. And of course, we look forward to sharing this very important information from the Phase I study. So -- and in terms of the early access program, we think that it is rather early to activate this type of program. And we think that this is something that we could eventually assess in the near future with additional information and additional data. So that's. Yes. Lucie Larguier: And we have a final question that I received from [indiscernible] that somehow overlaps with [indiscernible] Joni's question, but it is up to you. So in the press release, you highlight that [indiscernible] is currently evaluating the most efficient regulatory pathway to accelerate the development of 4050 and bring it to patients with operable head and neck cancer as quickly as possible. Could you elaborate these thoughts or objectives? What are the challenges or the next step to have more visibility on the regulatory pathway or market environment? It's a pretty broad question. Alessandro Riva: Yes. So it's a very broad question and it's very similar to what also [ Piara ] asked. So I mean, the bottom line is that we believe that there is a very significant momentum for innovation with immunotherapy in head and neck cancer operable patients. We believe that the data that we have shown at ASCO, know this very compelling in order to think about the potential next step given the fact that pembrolizumab is going to become a kind of standard in the early setting head and neck cancer. So we are brainstorming as we speak with clinicians with expertise, of course, in the head and neck on the potential trial design that could also be considered pivotal in nature. So -- and then based on the feedback, we are going also to have discussion with the health authorities. As I mentioned in my presentation, this process will last around 6, 9 months. And by Q2 2026, we'll be able to share with the community what's going to be the next step in terms of the next trial for squamous head and neck cancer patients. Lucie Larguier: I don't have -- I think we've covered all the questions. We have an additional question from Marcias. Could we have an update on TG6050? And what could we expect for this compound in the next steps? Will you disclose the Phase I data in a future conference? Alessandro Riva: Yes, we are going to -- first of all, TG6050 is our IV oncolytic virus. We have completed the Phase I study in relapsed/refractory non-small cell lung cancer patients. We are going to share the information with the community on this asset. However, we don't think that this is going to be an oncolytic virus that will be accelerated in the context of our priortization that I mentioned in the presentation and in the context also of that we are observing in heavily pretreated patient population. So this is TG6050 is not our focus, and we prefer, as mentioned, focusing on the value creation assets that we shared in todays call. Lucie Larguier: Sorry. So I don't see any other questions -- sorry for my voice. Alessandro, maybe a closing statement. Alessandro Riva: Yes, we do. So it has been -- I would say it has been a very exciting first 6 months. We are already in September, I would say also the third quarter is getting very, very interesting. As we try to convey to you, Transgene is ideally positioned to deliver multiple clinical milestones for myvac platform and TG4050. So -- and really, we are very well positioned to execute and focus on our key priorities. Obviously, we remain committed to deliver -- [indiscernible] in patient, in particular in operable. And with this, I would like to conclude today's call. Have a great afternoon and evening and talk to you soon and see you soon. Bye. Lucie Larguier: Goodbye. Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
Nick Wilkinson: So good morning, and an emotional welcome to the Dunelm prelims presentation covering our financial year to the end of June. My name is Nick Wilkinson. And Alison Brittain, Karen Witts and I are delighted to welcome you to the offices of Peel Hunt in London in what is my last results presentation. Whether you are here in person or joining virtually, I hope you're well, and thank you for your interest in the continuing story of Dunelm. It's our normal running order. I'll introduce the highlights. Karen will then go through the FY '25 financials and our guidance, and I'll be back to share more on our plans as we carry on growing Dunelm as the U.K.'s home of homes. So with images from our autumn/winter product collections, we'll get started. Our full year results show strong performance as we again successfully balanced growth and grip. Sales up by 3.8%, were ahead of the market, which was up only slightly, and we continue to move towards our next market share milestone of 10%. As reported by global data, our combined share now stands at 7.9%, which is up by 20 basis points on the prior year. The balance of our sales growth was particularly broad-based from a customer point of view, by which I mean we saw both higher volumes and higher average item values this year. Last year, we only saw higher volumes and not higher AIVs. And we saw both higher frequency as well as more active customers, which grew by 80 bps on the prior year. And in terms of grip, a strong gross margin and profit before tax of GBP 211 million reflects the strength of our operating model in a cost environment which is more challenging than we expected this time last year. And in a year when digital channel grew significantly, there's particularly good grip on digital profit levers. Operating cash flow was strong, supporting a higher than normal for us level of capital investment and therefore, good free cash flows. We've announced this morning an increased total ordinary dividend for the year of 44.5p. Alongside this is the continued development of our business, and FY '25 saw a number of firsts, our first store serving in London customers, our first sales outside of the U.K. with the acquisition of a third-generation family business, selling home textiles through a national network of small stores in Ireland. And we built in-house production for the first time in the Midlands for made-to-measure Venetians, roller blinds and shutters. All of these moves, along with getting to know the Designers Guild business, whose brand and IP we also acquired bring us new capabilities and new opportunities. These are seeds for future development, and many of them are complementary, coming together already in our Made-to-Measure business, which grew by 1/3 last year. Our nonfinancial highlights demonstrate our commitment to growing sustainably making good decisions for all of our stakeholders, doing the right thing for the long term is in our DNA from our founders. But make no mistake, these are areas where we're looking to create value. So while regulatory and consumer expectations may shift and fragment, we are clear sighted on our goals. In terms of reducing our impact on the planet, we relish the innovation opportunity that new materials and technology bring. We've made good progress in the year on Scope 1 carbon reduction and in reducing plastic packaging, but Scope 3, that's the impact of the products we design and source and our customers' use of them, Scope 3 progress is more challenging. We're sourcing lower impact materials, but there is more work to do at all tiers of the supply chain to measure and reduce both carbon and water consumption. It's also been a meaningful year for our role in communities. Being a good neighbor is not difficult, but it's not something that every business does. We've got 1.4 million Facebook followers on our store community pages, up 15% year-on-year, and they've helped us to organize campaigns to connect generous customers with great local causes. Alongside all of this, our national charity partnership with AgeUK is thriving. And with our colleagues, higher levels of retention and engagement, the start of progress on developing more leaders from ethnic minority backgrounds and increasing opportunities for colleagues to access lifelong training and personal development. A particular thank you, therefore, to all my colleagues listening today for everything you do to adapt and develop and to grow yourselves and thereby our business. And now over to Karen to walk you through the financials. Karen Witts: Thank you, Nick, and good morning, everybody. So, as usual, I'll start with a summary of our full year financial results, then I'll take you through our financial performance in more detail. This time around, I've included a schedule that sets out how we are thinking about costs, both the input costs that sit within gross margin and our operating costs to show how we also think about sustainably managing PBT margin. And then for completeness, I'll conclude with our guidance and our outlook for the year, and then I'll hand back over to Nick to focus on our strategic progress. We're very pleased to be reporting another good set of results, demonstrating ongoing progress and growth in a market that continues to be challenging. We grew sales in the year by 3.8% to GBP 1.8 million. We saw stronger growth in H2 than we did in the first half of the year, but we're not yet calling out a consumer recovery. Our sales were high quality, meaning that they were driven by a combination of volume and a higher average item value from product and category mix. We held retail prices largely stable over the year, absorbing most of the impact of high inflation in our cost base rather than passing it on to customers, and we were disciplined around promotional activity. This, in combination with strong operational cost grip drove a very strong gross margin of 52.4%, up 60 basis points year-on-year. Delivering with grip remains important as input costs continue to rise, particularly those driven by labor cost inflation. We're balancing these inflationary pressures by ensuring that we deliver more efficiencies. And at the same time, we believe in continued careful investment to sustain both short- and long-term growth. Profit before tax of GBP 211 million grew by 2.7% in the year with slightly higher earnings per share growth of 3.2%, reflecting the normalization of our effective tax rate after a once-off adverse impact last year. Our PBT margin remained broadly stable year-on-year at 11.9%. Cash generation remains strong. Operating cash flow was up 10% year-on-year with full year free cash flows of GBP 127 million after an increased level of CapEx. We ended the year with net debt of GBP 102 million, with a net debt-to-EBITDA ratio of 0.3x, comfortably within our target range of 0.2 to 0.6x. With healthy cash generation and ongoing confidence in our business model and prospects, the Board has declared a final ordinary dividend of 28p, taking the total ordinary dividend to 44.5p per share, up 2.3% year-on-year. We also paid a special dividend of 35p per share in April. So that takes our total declared distribution to shareholders in the year to 79.5p per share. This next slide sets out how our sales growth was delivered through broad-based growth in active customers with increased average item value, not driven by price increases and slightly higher frequency, resulting in another year of market share gains. As I said, we were pleased with the quality of our sales, which were delivered with a focus on bringing more of our ranges more conveniently to more of our customers, all while maintaining our outstanding value proposition and our focus on our good, better and best price quality tiers. Digital sales participation increased by 3 percentage points year-on-year and now makes up 40% of our total sales, reflecting the success of our ongoing efforts to improve our customers' digital experience. As a reminder, digital sales include Click & Collect sales, which are ordered online and fulfilled in store and which grew very strongly in the year, up by around 30% as we expanded the number of products available for in-store collection. As we reached more customers with our proposition, we grew our active base by 80 basis points. We saw particularly strong growth in our 16- to 24-year-old younger consumer cohort, and we grew well in the London region, where we opened our first inner London store in the year with another to be opened in quarter 2 in Wandsworth, Southwest London. We gained 20 basis points of market share year-on-year and now have 7.9% share of the U.K. market that grew only slightly. So we're still confident in reaching our medium-term market share milestones of 10%. As well as sales growth, we delivered further gross margin expansion with gross margin up by 60 basis points year-on-year. We have maintained our outstanding value proposition and kept retail prices broadly stable, understanding that most of our customers are feeling the impact of macroeconomic pressures. We've been disciplined around our approach to promotional activity in order to underpin the quality of sales growth. And we had a good quarter 4 when an early start to the summer season helped us to deliver a strong performance on seasonal sell-through and full price sales throughout our summer sale period. Freight costs and the impact of FX were broadly stable across the year, although towards the end of the year, we began to see a slightly favorable impact from foreign exchange. We expect a small overall net gain from freight and FX in FY '26. And as ever, we will keep optionality over pricing in order to deliver the right combination of value growth and profitability to our various stakeholders. The pressure on costs in the retail environment is well documented. Our operating cost base grew through a combination of volume-driven cost growth, inflation and investment, partly offset with efficiency and productivity gains. Volume increased variable costs by GBP 18 million. This related particularly to those costs associated with digital sales, including Click & Collect expansion and 2-person delivery related to strong furniture sales. We've had to deal with more than GBP 20 million of inflation, which is around 3% on our operating cost base, with most of this coming from increases in the national living wage and some from the national insurance contribution threshold and contribution increases in quarter 4, which will fully impact in FY '26. Because of this, we've worked hard on accelerating productivity gains, largely through what we call continuous improvement initiatives. including the efficient management of our performance marketing spend, optimizing our store operating model and making improvements to our supply chain operations, for example, by improving internal processes around returns. In total, we delivered GBP 22 million of productivities to help offset inflation and to limit the impact on our overall cost to sales ratio. We believe in an ongoing drumbeat of investment to realize opportunities for growth and efficiency. The incremental investment activity we expensed in the last year was focused on new store openings, further investments in made-to-measure capability, improving digital search capability and costs associated with acquisitions. As we're talking about costs, this is where I thought it might be helpful to describe how we think about them to show the various characteristics of costs in our business model and to give our current view of the direction of these costs over the next 12 months. As a management team, we think about all of our costs, whether they're reported in our gross margin or through operating costs. We like to live our value of acting like owners, and therefore, we make every pound count. Our focus is on delivering a broadly stable PBT margin over time rather than guiding specifically to gross margin as we think this better suits the evolving nature of our business. Our reported gross margin will continue to be strong, but we won't be guiding to it. Our costs can be impacted by external factors like freight, foreign exchange, raw materials and inflation, where we have limited direct control, but where we can create a degree of cost certainty through, for example, freight agreements or our hedging activity. We can also mitigate cost increases by using P&L levers like pricing and promotions and by making sourcing decisions. And we invest with regard to the balance of growth initiatives to productivity drivers. As we start FY '26, we believe that freight and FX will give us a small net tailwind. We see relatively stable raw material cost impacts at least for the first half of the year, but we will need to work hard to deliver efficiencies to help offset the impact of another 3% to 4% of inflation across our cost base. This is largely driven by the National Living Wage and National Insurance contribution increases. Continued sales growth will come with associated variable costs. These costs depend on where the growth comes from. So store labor costs, logistics costs and performance marketing costs will vary depending on sales by channel and product category. Across these various moving parts, we have flexibility in our P&L to make choices and to manage profitability to a broadly stable PBT margin. Profit before tax of GBP 211 million grew 2.7% year-on-year, while our PBT margin of 11.9% was broadly stable year-on-year. You will see that our effective tax rate of 25.9% is back within our guidance of 50 to 100 basis points above the headline rate of tax as FY '24 was impacted by a one-off tax -- deferred tax adjustment. And this has had a positive effect on diluted earnings per share, which grew by 3.2% to 76.8p. Our operating cash flow was strong, up 10% year-on-year, reflecting a good trading performance and well-controlled inventory, which is benefiting from the investment in and deployment of forecasting and replenishment tools, particularly in stores. As I explained in our interim presentation, CapEx of GBP 67 million is higher than we've seen recently, primarily driven by the acquisition of two freehold retail properties in attractive locations, which will connect us with more customers in areas where we're currently underrepresented. These opportunities are unpredictable, and we still expect most of our store openings to be leasehold. We remain a CapEx-light business, and we take significant amounts of investment through our P&L while still delivering that broadly stable margin. We ended the period with a net debt position of GBP 102 million, which at 0.3x EBITDA, it is comfortably within our target range, and this was after the payment of GBP 159 million of dividends in the year. To give more color to our GBP 67 million of CapEx this year, more than half of it was driven by our decision to take advantage of four strategic opportunities. These were primarily the two freehold properties in the Southeast of the country that I've described, and we'll start work to convert these to Dunelm stores this year. We also acquired a small business in Ireland with a portfolio of 13 stores. We're currently bringing new Dunelm product to our Irish customers and are refitting and rebranding the stores we have acquired as well as working on developing a full e-commerce offer for Ireland. Finally, we acquired the Designers Guild brand and design archive, which will give us an exciting opportunity over time to bring more beautiful fabric designs to our customers. And then more usually, we also continue to invest in new stores and refits, spending GBP 22 million on opening 6 new superstores, including 1 relocation, our first store in inner London and an 8 major refits. We aim to continue this approach on stores and refits in FY '26 with a view to opening 5 to 10 new superstores, a second inner London store, and we have more than 10 refits planned. It's important to us that we invest in the business for growth and efficiency. And we're also proud of our track record of strong shareholder returns in the form of a progressive ordinary dividend and further distributions from the surplus cash on the balance sheet. This year, the Board is declaring a final dividend of 28p per share, bringing the total dividend for the year to 44.5p per share, up 2.3% year-on-year. Ordinary dividend cover for the year was 1.73x, very slightly outside our target range of 1.75x to 2.25x, but comfortably covered by cash generation and a reflection of our confidence in the business. We also paid a special dividend of 35p per share in April, bringing the total distribution for the year to 79.5p. I'll now give our guidance and outlook for FY '26 before handing back to Nick for his strategic update. In terms of financial guidance, we will continue to invest in the business for growth and efficiency, and we're guiding to CapEx of around GBP 50 million for 5 to 10 new superstores, at least 1 in the London store and a continued program of store refits. We expect working capital to be broadly neutral over the year, but we expect a timing benefit of around GBP 90 million at the end of H1, just as we saw in the first half of FY '25. And finally, we expect our effective tax rate once again to be 50 to 100 basis points above the U.K. rate of corporation tax. Moving on to outlook. At this early stage of the year, we're pleased with trading so far and that despite some pretty warm weather, which has impacted store footfall, we're pleased that we've seen a positive response to our new autumn/winter ranges. Nevertheless, we're not yet seeing trends that would indicate a sustained consumer recovery. We will continue to progress our strategic initiatives. We're excited about our future plans, which as well as more new stores and investment for growth and productivity include our app, which will be available for download -- for customers to download this autumn. We're well placed to deliver sustainable, profitable growth despite entering another year of challenging inflationary pressures. And we are confident of making further market share gains as we progress towards our 10% medium-term milestone. And with that, thank you for your attention, and I'll now pass back to Nick for the last time. Nick Wilkinson: Thanks, Karen. So onwards. As you know, our ambition is to build Dunelm into the most trusted and valued brand for customers in homewares and furniture. We want to be The Home of Homes and a 10% share of our addressable market is simply the next milestone on that journey. To achieve this, we have three broad focus areas which frame our priorities and our investments. And in summary, outlined on the right-hand side of this page, we drive sustainable growth through the combination of elevated product, the development of our channels, to offer better shopping experiences to more customers and the harnessing of our operational capabilities to drive efficiency and effectiveness. These pillars are compounding, which necessitates a high degree of cross-team collaboration and of learning, something which our values and culture sets us up well to do. We're doing all of this in a period of lackluster consumer confidence, but we're happy to embrace the realities of how U.K. consumers are feeling right now. There's plenty of joy in our offer. And in the current environment, we're getting on with helping our customers create the joy of truly feeling at home and raising the bar on the value that we offer at every price quality tier, remembering that our average item value is still only just over GBP 10. As we enter a new year, we're accelerating and evolving those parts of our plan, which play to our multichannel and multi-category strengths. I think the benefits of operating both physical and digital channels proficiently are now well understood. Almost 30% growth in our Click & Collect sales last year is an illustration of this. At the same time, the benefits of being a multi-category specialist are also increasingly apparent. Coordinating our offer across categories allows our customers to better sell their homes, makes it more easy for them to shop with us and improves our marketing efficiency. Our current student campaign is a great example of this for some of our newest customers. So to bring our plans to life, I'll talk just briefly to a couple of examples in each of those three focus areas. And we'll start with furniture. It's been a strong contributor to our growth for many years now. And you've heard me say regularly how we're building capabilities here in product design and in sourcing. There's no better example of this than in upholstered chairs and sofas. From an early success in a chair that some of you may remember called Ila, we have grown a well-curated range of strong sellers. Ila lives on in the LC chair shown here with new colorways and materials this year. Beatrice is another best seller, recently evolving into Beatrice II, you've got the picture. Our supply chain is also getting more sophisticated. We deliver furniture through our own home delivery network to most of the U.K. and most of our range is available for quick delivery. If you order today, Tuesday, you'll have it before the weekend. Meanwhile, in our U.K. manufactured made-to-order collections, it's important not to overwhelm customers. That's why the 14,000 combinations we offer are presented as four simple steps. You choose the shape, the fabric, the padding and the feet of the sofa or chair you want us to make for you. With our supply chain increasingly advanced, our focus is now on evolving the furniture shopping experience in our channels with changes to our store presentation being tested this year. I'll make all of this sound rather methodical, but the results are dramatic. In upholstered chairs and sofas, our market share has more than doubled in the last 5 years. But with only 2.2% of product category worth over GBP 3 billion, there is plenty of headroom for further growth. Moving to our heritage textile categories where our market shares are higher, product development is still the starting point for raising the bar on our customer offer. I've listed three examples of this. Egyptian Cotton towels, we talked about in February, where we invested more quality in the yarn and manufacturing process and increased prices slightly while still being lower priced than comparable quality elsewhere. Results have been really good with growth in sales and gross margin. Hanging pack curtains is a current example. And to explain very briefly, we offer many price/quality tiers of curtains from good to better to our best made-to-measure curtains. Our good tier curtains are folded and packaged on shelf. Our better curtains are heavier weighted. So rather than fold them in packets, we hang them on rails in store. To this tier, we've now added more quality, weighted corners and deeper headings and a refreshed and updated color selection. The top image on the right-hand side is taken from our recent summer product event in Somerset House before we open the doors to press and influencers. As we double down on our product in these heartland categories, we are attracting customers who might otherwise go to nonspecialists. So we are evolving, evolving our packaging to more clearly explained product features as well as price, easier navigation of the range in store and more personalized content to inspire in our digital channels. Our soon-to-air Home of Color autumn campaign presents our depth and breadth of product in simple terms, giving consumers confidence across our categories from curtains to upholster chairs and beyond. On to our second focus area, connecting with more customers, and I'll start with online. Here, I've stepped right back to when we were in a phase that we called catch-up to show you in the graphic how enabled by improving data and tech capabilities, we've been constantly raising the bar on the digital customer experience that we are able to offer. With experimentation to improve customer experience, more choice, AI-driven search tools, more data to allow better personalization, we have excellent levers to carry on growing sustainably now and into the future. The phase we're entering next will see us doing more scaling up. And with the imminent launch of our app, we're also referring to this phase as joining up. Launching an app at this stage when we have good product data and good digital capabilities, we see a twofold opportunity. Firstly, the app will offer us more capability for product inspiration. That's because, and I know many of you know this really well, the app won't have the high cost of generating website traffic, so it's possible for us to play further up the customer funnel, focusing on product stories and ideas that appeal to customers who are browsing rather than necessarily looking to buy immediately. And because you're always signed into the app, we'll be able to show you better content that's more relevant to your preferences. That's exciting for us as a product specialist with many, many stories to tell. Secondly, the app will allow us to better develop our cross-channel experiences, easier to check availability in your preferred local store, more product information on the shelf, more personalized offers and in time, much more beyond. Good cross-channel shopping drives frequency and differentiation from single-channel players, which is why we love our stores. And as you'd expect, we've been very busy here. And as Karen explained, we've invested slightly more than normal in our stores in the last 12 months. London is simply a segment of our addressable market that we underserve. 10 years ago, we were very much just arriving in Greater London, opening stores close to the North and South circular roads. And those stores have done very well for us, but there's a lot more to go for. As you know, we've recently opened our first store in London borough, connecting us to new customers, and it's going to be joined by another similar sized store in Q2. And the two freehold developments we purchased last year will be large stores when they open just outside of London to the South. It's worth emphasizing that the different sizes of stores we operate are a function of site availability and catchment size. We favor large superstores, 20,000 square feet with a mezzanine to trade 30,000 square foot in total wherever practical, such as recently opened in our latest store in Manchester. But in Trowbridge, which is a smaller infill catchment in an area with longer drive times, we'll happily open a smaller superstore. Both sizes generate good paybacks and sustainable growth, giving us more optionality in a tight property market. This year, we expect to open 5 to 10 superstores and for the majority to be larger ones. We're also busy with store refits. These are ongoing programs of work to ensure our estate is upgraded on a regular basis. Refits allow us to introduce new ideas. And as I mentioned earlier, when I talked about product innovation, we're improving our store presentations and densities in furniture as a current focus. The best ideas we then roll out through the refits we do each year, such as our new cafe format or more quickly to many stores, such as the new self-checkout that we will roll out to all stores by the end of the year after this. And on to our third focus area, harnessing our operational capabilities, to drive efficiency and effectiveness. This one is not just about cost, it's also about growth. Karen has given you more on costs. So just one slide here of examples. Continuous improvement first. And I'd call out our performance marketing efficiencies as a good example of a small team doing smart things with data and experimentation to drive customer level transaction profitability. In our big labor areas, I'll highlight store operations as a good example of a large team doing smart things and managing a lot of change. In the last 6 weeks, we've introduced new store leadership structures, new delivery schedules and new Click & Collect processes. Self-checkouts are taking 70% of total transactions where we rolled them out. Tech and data-enabled changes like self-checkout and the new forecasting replenishment system we've successfully implemented are examples of moderate-sized programs that have grown our skills and confidence in good product discovery, tech delivery and business change. We've got many new initiatives that we're exploring, as you would expect. And 3 examples to share with you here. We like the benefits we've seen from the initial testing of RFID tagging in textiles to improve stock accuracy and store processes. We're developing with our committed suppliers and partners the optimum approach to adding more mechanization into our logistics operations. And we're excited by what we've already done with AI, site search, for example, and with some proofs of concept, we're currently running in new areas, the optimization of ultra-high-quality content images at scale as an example of this. I'm as excited as I am for the opportunities we have on grip as I am for growth for profitability and efficiency as well as for sales. So to sum up, it's fair to say that my ambition for the business is no less now than it was when I was preparing for my interview in 2017. With amazing colleagues, we've built and achieved a lot since then, but there is still so much more to do. A feature of my tenure has been the fast-changing macro environment. In sometimes stormy seas, my team and I have benefited greatly from inheriting a very strong business model. In turn, that's allowed us to continue investing, ensure we make our model even stronger, always adding quality as well as quantity. We now have a thriving digital business alongside our stores and scaling up digitally has been in lockstep with elevating our product offer, the two have fueled each other. And this combination, multi-channel and multi-category positions us strongly for the future. Analysts often ask me who our biggest competitors are. And when your share is only 8% and you face different players in different categories, the answer is really fragmented. We are surrounded, which we love. We respectfully compete against some of the best businesses in the world, but we feel strong for being multi-channel, and we feel strong for being multi-category. In shopping for their homes, U.K. consumers are multi-channel and they are multi-category. We also like to be different in our relationships. We want our customers to be themselves, not our image of what they should be, never judged in terms of budget or style. We do extraordinary things in our local communities and our committed suppliers are as much part of our business as our own teams of buyers and designers. All the team at Dunelm are ambitious and restless. They're looking forward to the arrival of Clodagh Moriarty, and I'm profoundly grateful to them for all they have taught me and how much they have grown over the years. On the right-hand side of this page, probably my favorite graph, showing our market share growth by category. This is the data up until calendar year 2024. But with only 8% of the market, the picture is of headroom, not of achievement. I know that all my Dunelm colleagues look at that graph and see what can be done and the opportunity to sell more. From furniture to hard goods like lighting to textiles we've been selling for over 40 years, we are, in many ways, still only just getting started. Just getting started is not the typical last line of a departing CEO, but it's my last lines and why I'm delighted to carry on as a long-term shareholder in this business. So on that note, we're going to go to Q&A, but I think Alison is going to say a few words before that. So [indiscernible]... Alison Brittain: Good morning, everybody. For those of you who don't know me, I'm hoping not very many, I'm Alison Brittain, I'm Dunelm's Chair. As many of you know, I don't normally speak at these results presentations, and I am promising you now that I will not make a habit of it. However, we are approaching a pivotal moment, a transition in leadership for our company. And so I thought it was worth me saying a few words about that. So I'd like to start by recognizing Nick for his enormous contribution and all that he's done for Dunelm in his 7.5-year tenure as CEO. As he himself said in his presentation, Dunelm's inherent strengths have been a constant throughout this time. However, he has undoubtedly used his own special blend of skills, experience and leadership to harness those strengths and to move the business forward. Beyond Dunelm's strong financial performance, Nick has overseen a significant transformation, building Dunelm's strengths and developing the business as a truly multichannel retailer. He's preserved the very best of the company's values whilst modernizing and developing its capabilities in what have often been extremely challenging external circumstances. So on behalf of the Board, I'd like to extend a huge thank you to Nick and to wish him every success for the future. As you've seen this morning, Nick's leaving the business in fantastic shape. And testament to this was the very high quality of candidates who wanted to succeed in. And of those, the outstanding candidates through the process was Clodagh Moriarty, who's known as Clo. I'm delighted that Clo will be joining us as our new CEO in just a few weeks' time. She brings extensive experience across a range of leadership positions, combining successful roles in retail, strategy, digital, technology and transformation. I have no doubt that her passion and energy alongside her expertise will be invaluable to Dunelm as we move forward. And Clo is joining the business at a great time. There's lots of opportunity in the business. She's joining a very strong, well-established executive team, and she has a supportive and experienced Board behind her. So I'm really excited to be working with her, and I know that she is equally excited to be getting started. So I hope that many of you with us today will get the chance to meet her in person over the coming months and before, of course, hearing from her properly at the interim results presentation in February.
Andrew O. Davies: Okay. We'll start then. So good morning, everyone, and thank you for joining our full year 2025 results presentation. For those of you who are here in person, and welcome to those joining us today by webcast and by audio as well. I'm Andrew Davies, I'm Chief Executive of Kier Group. And somewhat pointedly for me, this marks my last Kier results presentation. I'm joined today by Simon Kesterton, our Chief Financial Officer; and also by Stuart Togwell, currently our GMD for Construction, who will become the Chief Executive on the 1st of November this year. So just quickly before we go through the results, Stuart, if I can invite you to introduce yourself to those who you may not have yet met, Stuart? Stuart Togwell: Good morning, everyone. I'm Stuart Togwell. I'm delighted to see you all this morning, and I'm really proud and excited to become the next Chief Exec of the Kier Group. I've worked in this industry that I love for over 39 years now, the last 6 years of which has been working closely with Andrew and Simon in Kier. Initially, I came in as the Group Commercial Director, where I introduced the risk management and the operational discipline that we still use today. The last 2 years, I've been in the GMD for the Construction business and have also been a member of the main Board. I'm looking forward to talking to some of you here in person after the presentation, but in the meantime, Back to you, Andrew. Andrew O. Davies: Okay. Thank you, Stuart. And let's move on now to our FY '25 results. So firstly, I'll walk you through the highlights from the last financial year and then hand you over to Simon to talk through the group's financial performance. And this will be followed by an operational review, an update on ESG and we'll finish off with our outlook and recap of the long-term sustainable growth plan. And then, of course, there will be an opportunity for questions and-answers at the end. So working through the disclaimer, and we move on to the results summary and highlights. So starting with the highlights for FY '25, which is the first year of the long-term sustainable growth plan that we launched last September. In the year, the group's order book grew to a record GBP 11 billion, reflecting contract wins across our business and providing us with multiyear revenue visibility. Specifically, the order group -- the order book currently covers 91% of our targeted FY '26 revenue and around 70% of FY '27's. Group saw continued overall revenue growth of 3%, which delivered an adjusted operating profit of GBP 159 million. And this result represents a margin of 3.9%, which is above our own initial expectations and also progressing well towards our long-term target level of between 4% to 4.5%. This higher level of profitability continues to convert strongly into cash at a rate above our long-term target, leaving us with a net cash position of GBP 204 million at June 2025. We also saw a significant improvement in average month end net debt for the year to GBP 49 million. So given the continued progress that our group has made, I'm pleased to say we've significantly increased our returns to shareholders in year. We're proposing to pay a final dividend of 5.2p per share, representing a full year dividend of 7.2p, 38% higher than last year. We also launched a GBP 20 million share buyback during the year, which, as we speak, is roughly 50% complete. Additionally, we increased the capital deployed in our Property business where we're on track to deliver our long-term target of 15% ROCE, thus further enhancing shareholder returns. So overall, I'm pleased to say, as leadership of Kier now transitions to Stuart, that we're a business in very good shape, our strategy is progressing well, driven by our great people and now underpinned by our high-quality order book and strengthened balance sheet. We're progressing well to deliver against our long-term sustainable growth plan. So for this -- now my last set of results, I thought it's worth reflecting on Kier's track record of consistent delivery in the past few years and how that performance underpins our conviction in our ability to deliver our long-term plans. In recent years, we've proved that we can deliver for our customers and shareholders alike. As you can see from these figures, we've seen significant growth in revenue, profits and earnings since 2021. This has been achieved with growing levels of cash flow and as a result, significant improvement in the levels of debt, whereby we are now touching -- in touching distance of reporting average net cash. At this point, I'll hand over to Simon, who will take you through the detailed financial results. Simon? Simon Kesterton: Thank you, Andrew. Good morning, everyone. Turning to Slide 7. This sets out our high-level results. Revenue in the period, as Andrew mentioned, is higher than FY '24 and reflects strong performance across the group, especially in the Infrastructure Services segment, which I'll cover more in detail in the next slide. We delivered an adjusted operating profit of GBP 159 million, up 6% in the year and at a margin of 3.9% as we progress well towards our long-term sustainable growth plan target of 4% to 4.5%. We continue to generate significant levels of operating cash flow with net cash at the end of June 2025 as a consequence, materially improved year-on-year, rising to GBP 204 million compared to GBP 167 million at June 2024. This performance includes a strong working capital performance as inflows follow revenue growth to normal levels, allowing us to deploy additional capital to our property business, which will drive future earnings growth. In terms of average month-end net debt, this has improved to just GBP 49 million from GBP 116 million in FY 2024. The group has also been able to significantly increase dividend payments and further grow returns to shareholders through the launch of our initial share buyback as well as invest in the property business, as mentioned. Turning to Slide 8. I'll walk you through the group's revenue growth. Starting on the left-hand side, you can see FY '24 revenue of GBP 4 billion. Infrastructure Services revenue grew by 7%, primarily due to growth from water and nuclear, supported by continued HS2 activity. Construction revenue was steady with continued delivery of Justice projects. We have worked to increase the quality and profitability of our Kier Places business, resulting in us exiting some lower-margin contracts. Finally, for property, we saw a significant increase in transactions compared to the prior year, although the positive impact of this is only seen in operating profit given the mix of transactions with our property business being a return on capital business rather than a return on revenue business. So overall, growth was 3%. And if you adjust for property and the FM contracts, closer to 4%. Moving now to the adjusted operating profit bridge. We start on the left-hand side with the previous year's adjusted operating profit of GBP 150 million. Overall, volume, price and mix have resulted in an increase of GBP 0.6 million. As we just mentioned, we saw an increase in the volume of property transactions in the year, which resulted in increasing profit by GBP 6 million. Cost inflation was more than offset by management actions that delivered GBP 11.6 million during the year. These savings related to projects such as improving supplier onboarding, site setup optimization and Kier 360 and reflect the success of our performance excellence program as we demonstrate sustainable growth across our businesses. In terms of cost generally, it's worth reminding you all that more than 60% of our order book is made up of target cost or cost reimbursable contracts. And if we do choose to give price certainty to our customers, it's only done after key risks and opportunities are understood. The overall result is growth in adjusted operating profit of 6% to GBP 159 million and a margin of 3.9% that is progressing well towards our long-term target of 4% to 4.5%. Adjusted items, including -- excluding noncash amortization, amounted to GBP 26 million in the year, GBP 1 million lower than the previous year. The main element relates to fire and cladding costs, GBP 17 million in the year. The property costs relate to the sale of a legacy office in Manchester, which completes our corporate office space reorganization. This slide illustrates how our sizable attractive market opportunity flows ultimately into our strong order book and the visibility that we have on it. The government has committed to improving and renewing the U.K.'s infrastructure and in June this year, reaffirmed its 10-year strategy, setting out total spending to 2035 of GBP 725 billion. Also in June, as part of their comprehensive spending review, the government detailed their priorities in the next 3 to 5 years. This strategy and projected spend map to the markets served by our business via frameworks. Kier is well placed to benefit as we currently hold positions on frameworks worth GBP 156 billion. These frameworks cover key areas of government focus, such as health, education, defense, water and nuclear. As you can see on this slide. It is these frameworks from which projects are awarded to preselected contractors that provide the path by which we fill our order book, driving revenue growth, giving us confidence in the successful delivery of the long-term sustainable growth plan. This slide considers our order book in more detail, standing now at a record GBP 11 billion, as Andrew mentioned. This order book gives us a clear view of future revenue and cash flows, representing 91% of FY '26 revenue already secured and around 70% of FY '27 revenue. As I've just said, 60% of our order book is under target cost or cost reimbursable contracts or otherwise subject to a 2-stage pricing process, which reduces considerably a contract's risk profile. Furthermore, as we've just seen, our order book is fed by our sustainable long-term framework agreements, where the value of the positions that we hold amount to GBP 156 billion. As you can appreciate, the combination of our strong order book underpinned by these framework positions illustrated here provides us with considerable visibility of future revenue streams and cash generation. Now let's turn to our cash flow. Adjusted EBITDA in the year grew 10% to GBP 228 million. We then have GBP 28 million of working capital inflow, a great performance. It's worth noting that last year saw 17% revenue growth, which drove a higher working capital inflow, while FY '25 saw revenue growth of our expected GDP plus levels. CapEx in the period amounted to GBP 65 million, with GBP 48 million of that relating to payments made under leases now capitalized under IFRS 16. Net interest and tax increased by GBP 13 million in the year due to interest payments to new bondholders, which commenced in August 2024. The group's deferred tax asset of GBP 137 million relates to losses made in previous years, allowing us to offset half of our tax charge in any one given year, and we anticipate it will take around 7 years to fully utilize this asset. All this means that we generated significant free cash flow of GBP 155 million in FY '25 with a conversion of 125%, significantly above our long-term sustainable growth target. This strong cash generation has allowed the group to grow our cash balance while significantly increasing shareholder returns. Starting on the left-hand side with closing cash of GBP 167 million at June 2024, we then have the FY '25 free cash flow of GBP 155 million that we've just seen on the previous slide. Next, we have the adjusting items of GBP 18 million, significantly lower as we've seen in the GBP 37 million paid in FY '24, followed by the payment of GBP 8 million to our smaller pension schemes. The level of cash generation after these items provides us with considerable scope for capital allocation. Firstly, regarding dividends. It's notable that FY '25 is the first year to include payment of both interim and final dividends totaling here GBP 24 million. Then we have GBP 51 million of capital deployed to the property business. Lastly, we have the purchase of Kier Group shares, both the shares bought under the share buyback program as well as the shares for the group's employee benefit trust. As a reminder, this trust acquires Kier shares from the market for use in settling the long-term incentive plan scheme shares and the share schemes when they vest. This results in a net cash position of GBP 204 million, a significant improvement, as we've mentioned, compared to the GBP 167 million at the start of the year. Now moving to Slide 15 and as a reminder of the significant progress we've made by effectively eliminating our average month-end net debt. Over the last 4 years, we've reduced our average net debt and debt-like items by over GBP 500 million, a significant improvement, resulting in just GBP 49 million of average net debt in FY '25. This slide sets out our long-term funding arrangements that we have in place to support our strategy while retaining flexibility to deliver future growth. The long-term financing of the group is provided through the GBP 250 million of 5-year senior notes expiring in 2029, combined with our GBP 150 million revolving credit facility, which runs to 2027. In January 2025, we fully repaid all of the outstanding USPP notes and GBP 111 million of the revolving credit facility matured, both in line with their agreements. For my penultimate slide, I'd just like to remind everyone of our capital allocation priorities. Overall, we're focused on optimizing shareholder returns while maintaining a disciplined approach to capital allocation and maintaining our strong balance sheet. In short, we target dividend cover of around 3x earnings through the cycle. We plan to invest further in our property business to generate consistent returns over time, deploying up to GBP 225 million of capital, targeting consistent long-term return on capital employed of 15%. With regard to acquisitions, we will continue to consider value-accretive acquisitions in core markets. Lastly, in January earlier this year, we announced an initial GBP 20 million share buyback program, further increasing returns made to our shareholders. I will finish with a look at our shareholder returns. As we saw earlier, Kier has an astonishing record of delivery in the period under Andrew's stewardship. Material improvements have been made to grow the order book, improve profits, grow cash flow and reduce net debt. All this combined with the substantial revenue visibility now provided by our order book and the pipeline of growth opportunities gives us confidence in the group's future prospects. It allows us to propose a final dividend of 5.2p or 7.2p in total for the year 2025, an increase of 38% versus the prior year and representing earnings cover of 3x, in line with our long-term sustainable growth targets. This, combined with the GBP 20 million initial share buyback shows that shareholders will continue to benefit from Kier's significant financial improvement as well as the renewed strength of the group's balance sheet. And now before the last time I hand over to Andrew for his operational review, I'd just like to say thank you very much to Andrew. Thank you for his efforts, for his hard work in leading and putting together a great team, which has been very successful. And thank you very much for being a pleasure to work with. Congratulations for all of that success. And then, of course, finally, to wish him all the best for the future. And now, for the last time, back to you, Andrew. Andrew O. Davies: Thank you, Simon, and a real thank you to you as well for all you've done for the company. So if we move now to the operational update, and we'll start with Infrastructure Services first. In 2025, we saw revenue growth of 7%, driven by HS2 capital works as well as growth from water and nuclear projects, where our previously announced contract wins are now converting to revenue. In particular, our Natural Resources, Nuclear Networks or NRNN business has continued to build on our strong position in water market as the operating companies in the sector commence the next investment cycle of AMP8. Adjusted operating profit was GBP 111 million, representing underlying growth of 4%, allowing for a one-off GBP 6 million customer gain in the prior year. It's widely acknowledged that the industry remains affected by delays at the start of the works under Control Period 7 for rail and the deferred announcement of the RIS3 program for highways. Nevertheless, the strength and breadth of our design and build business in highways, where we maintain and build national and local highways and our excellent customer relationships, combined with our strong order book allows us to continue to effectively manage risk and return in this segment, providing us with good current throughput and future visibility of revenues. If we turn to a slide which emphasizes the strong position Kier has across the U.K.'s water sector. So here, we have a clear growth opportunity in what is a regulated market, which, of course, sits outside the public spending envelope. The AMP8 investment cycle is now well underway with operating companies set to deliver a significantly larger investment worth circa GBP 104 billion to 2030, and that's double of AMP7. As we said in the past, with the market doubling, we expect Kier's activity to match that growth, thus doubling in the same time frame. The momentum and determination behind this level of investment is clear. An aging asset base, which needs replacing or refurbishing, increasingly stringent environmental regulations and the focus on extending the life of existing facilities through maintenance. The operating companies are thus turning to Tier 1 contractors to deliver these upgrade and maintenance programs, particularly those with specialist mechanical and engineering skills where Kier is demonstrably well placed to take advantage of this opportunity. And this slide sets out our U.K. footprint in water. We're one of the largest Tier 1 contractors supporting the regulated water companies with their asset optimization. As you can see, at June, we held positions on a total of 17 frameworks with 9 water companies worth a combined GBP 15 billion of spend opportunity. Moving next to our construction business, where we build schools, hospitals, prisons and defense projects for government as well as projects for the commercial sector. Also included here is Kier Places, our facilities management and housing maintenance business. Construction revenue remained steady overall at GBP 1.9 billion. During the year, we successfully delivered significant levels of work for the Ministries of both Justice and Education, alongside starting work for HMP Glasgow for the Scottish government, where activity levels will ramp up through 2026. We also acted to better position Kier Places for enhanced future returns through the exit of some of the lower-margin contracts, which Simon mentioned. The adjusted operating profit grew 8% to GBP 75 million, seeing the benefit of an improved business mix. And lastly, let's look at our property business, which invests and develops commercial and residential sites, largely operating through joint venture partnerships to deliver urban regeneration projects right across the U.K. Operating profit grew significantly, driven by the higher volume of transactions Simon mentioned in the year compared to 2024 -- FY '24. Indeed, many transactions were achieved in the second half of the year as we continue to build momentum and scale in this business, and we expect this seasonal profile to repeat in FY '26. Just a reminder, we remain focused on the disciplined expansion of the property business through selective investments and strategic joint ventures with capital employed totaling GBP 198 million at June 2025. Our long-term plan is to increase capital employed to GBP 225 million, and we expect that this stable capital and the maturing partnerships will result in the business exiting 2027 on or around its targeted ROCE of 15%. So let's turn to our sustainability framework. It's through this framework that we align our activity to our major clients, the U.K. government and regulated companies by focusing on 3 key pillars: people, places and planet. As a reminder, our purpose is to sustainably deliver infrastructure, which is vital to the U.K. As a strategic supplier to the U.K. government, ESG is fundamental to our ability to win work and secure positions on long-term frameworks. U.K. government contracts above GBP 5 million require net zero carbon and social value commitments. And in order to help achieve these goals, we focus on our people pillar, which targets to build a workforce which has the relevant skills and capabilities to deliver these goals, ensuring where possible that everyone receives equitable treatment that our people reflect the communities where we live and we operate. Secondly, leave a positive legacy in our communities through our places pillar. We do this through the projects we deliver and the people we employ within them, mindful always in addressing the challenges of inequality. And thirdly, as the stewardship of the planet is vital to all of us, we're reducing our carbon emissions and supporting our customers with their infrastructure requirements as they adapt to climate change. Our sites aim to protect and enhance nature as well as efficiently use resources on our projects. To just review our environmental progress as we see carbon reduction as both an obligation and an opportunity. Overall, we're seeing increased demand from customers to deliver projects sustainably, which is reflected in our Green Economy Mark accreditation. Our net zero targets for Scopes 1, 2 and 3 have been validated by SBTi. And in line with these, we have reduced Scope 1 and 2 emissions by 4% in FY '25 and by 71% since FY '19, which is our baseline year. We continue to reduce our emissions according to our carbon reduction plan. In terms of our efficiency, we achieved a 3% reduction in our waste intensity overall in the year. And secondly, we'll reflect on our social responsibility. Safety as ever is our license to operate, and we're pleased to report a 26% reduction in our accident incident rate in FY '25. Kier's performance depends ultimately on our ability to attract and retain a dedicated skilled workforce. During the year, this included 590 apprentices with over 10% of the workforce in formal training and development or earn and learn programs. Furthermore, over 40% of our graduate intake in the year were female as we focus on making Kier a diverse and inclusive place to work, reflecting the communities we work within and we serve. And turning to our supply chain partners. In FY '25, over 60% of our subcontractor spend was with small and medium-sized enterprises, while we continue to adhere to the prompt payment code. So before we come to our outlook, I thought I'd just remind everyone of our long-term growth plan, which is laid out here and provides clear visibility of the direction of the group. We target revenue growth above GDP, driven by the attractive market dynamics combined with our market-leading positions. We're targeting to reach an adjusted operating margin of 4% to 4.5%. For cash flow, we target around circa 90% conversion of operating profit and the achievement of average net cash position to allow us to invest surplus cash in those areas that will deliver increased shareholder returns. This includes a targeted sustainable dividend policy of circa 3% earnings cover through the cycle, which we have, of course, now delivered for this year. And now to finish with a short summary and our outlook. The group has continued to make significant operational and financial progress in the year, delivering revenue growth with margins ahead of expectations and progressing well towards long-term target range. We've continued to grow our order book to a record GBP 11 billion, providing us with significant multiyear visibility. This has allowed us to significantly increase the proposed dividend payment, and we're well progressed with the initial GBP 20 million share buyback program launched in January 2025. And building on our outperformance in FY '25, the group has started FY '26 financial year well and is trading slightly ahead of the Board's expectations. And on a personal note, it's been a privilege to lead Kier over the last 6.5 years and to see the group transformed into a strong and sustainable business with enhanced resilience and a reinforced financial position. That transformation has only been possible due to the capability, professionalism and frankly, hard work of Kier's teams and the support of our clients and our partners. I'd like to thank them all for their support and commitment in ensuring Kier's continued success in delivering infrastructure that is vital to the U.K. And in particular, I'd like, of course, to wish Stuart and Simon the very best for the future and thank them both. And with that, I will open up the meeting to questions and answers. And I suggest we do questions first from the room, and then we'll take questions from the conference call. Thank you. Robert Chantry: Rob Chantry at Berenberg. Obviously, congratulations on the delivery and your time in the business, Andrew. So 3 questions from me. So firstly, thoughts around, I guess, the debt position. Obviously, tremendous increase in delivery in recent years and kind of business moving towards an average net cash position. The '29 bonds trading well. Can you just remind us of the options available on the refi, any longer-term thoughts around capital structure given the cash delivery? I think secondly, clearly, you've been successful on getting on the GBP 15 billion of frameworks in water and water revenues set to double. Can you just talk, I guess, a bit more anecdotally around what surprised you about the evolution of that market in the past years? Has it been more competitive? Has there been things where you've done better than you might have expected, things that might be more challenging? Just how that market has evolved in terms of the contracting structure? And then thirdly, property, clearly, kind of good step up this year. You're talking about 15% ROCE by '28, so that's GBP 30 million, GBP 35 million of EBIT. Can you just give us an indication of kind of what's working particularly well in that division at the moment? Any indication of the shape of going from GBP 12 million EBIT this year towards GBP 30 million, GBP 35 million 3 years out would be very helpful. Andrew O. Davies: Simon, do you want to take the first and the third, maybe I'll do the middle one. Simon Kesterton: Absolutely. So thanks, Rob. In terms of debt position, I mean, we're very happy with the balance sheet, GBP 49 million of monthly average net debt is pretty much there, plus or minus zero. And as I've mentioned previously, I think we're comfortable really even going up to probably 0.5 turn plus or minus on the balance sheet of EBITDA in terms of monthly average net debt. In terms of the refi, yes, we did that in February 2024. So the first time we could refi the bond would be in February 2026. And you're right, it's trading very well. So that would give us an opportunity. And of course, we've got our half year results probably out March that year in 2026. So that might be a good opportunity if things remain the same to refinance. Andrew O. Davies: Property? Simon Kesterton: I can cover off property as well first. So in terms of shape, it's probably going to be back-end weighted, Rob. So I'd expect a small increment in this current financial year on last year before we really start towards the back end of FY '27, delivering that 15% return on capital employed. And that's just sort of the nature of when you invest, it takes 3 years before you start to see the returns. Andrew O. Davies: Rob, just on the water question you're asking, I mean, we do see our revenues doubling because the AMP8 has doubled. We've got material positions on all of the frameworks circa GBP 15 billion by advertised values positions on the frameworks, which we've won. So we feel we are confident that we will double alongside AMP8. The competitive environment is they have sought out -- the water companies sought out Tier 1 contractors to deliver some of the larger schemes, and that's why we've been selected by many of the larger water companies to deliver those. But there are -- there is plenty of space within this sector for other companies to operate. But I think we're probably one of the leading Tier 1 companies operating in that sector. So yes, we're very confident over the next 5 years, certainly on AMP8 and probably thereafter, but we'll see what happens on AMP9 that water is going to come a mainstay of this company. There's no doubt about it. Andrew? Andrew Nussey: Andrew Nussey from Peel Hunt. Two questions. First of all, for Simon. When we look at the profit bridge, obviously, inflation and management actions are pretty big chunks there. What are the thoughts in terms of '26 and '27 and the ability to keep driving management action to offset those inflation pressures is the first one. Simon Kesterton: Okay. Yes. So firstly, I think inflation, the number that you're seeing there, obviously, our projects are quite long term. So you're seeing the impacts of prior -- a couple of years ago inflation there. So I would expect, firstly, the inflation number to start to tail off a little bit. And then in terms of management actions, I don't think any question that we'll be able to continue to more than offset that. Andrew Nussey: Second question is actually for Stuart. Obviously, you've led the Construction division, which has been a leader in terms of modern methods of construction and digital tools. I'm just curious, when you move into the CEO role, what other opportunities can you see for those developments across the group? And what might that mean? Stuart Togwell: Okay. I'll stand up. I was enjoying sitting in the audience. I think the most important thing to start with in terms of we're not being complacent, although we're already sitting with GBP 11 billion order book. I'm a big fan in terms of AI and digital, first of all. in particular, the work we've been doing around digital twin in terms of how that drives energy efficiencies and also product improvements. But alongside that, in terms of Simon's team is already using bots at weekends to run around to look at administration improvements. Alongside that, to make sure it's really important with AI that we create a safe environment for us to use. So we're working with our IT providers in terms of how we can do that. And even more importantly is to make sure that when we do have that technology in the business, we have a workforce that is comfortable and can embrace that technology to make the most of it. Regarding MMC, again, we haven't been complacent. And what we've been looking at is rather than just concentrating on volumetric, we've been looking at all forms of MMC to ensure that we can come up with the appropriate solution for our customers. And there are 2 key themes that I would take around from MMC. First of all, if you don't have the design right, you lose the benefits of MMC. So one of the huge benefits we have across the group is we were already sitting with 700 designers that can help us. And the other point in terms of that is just to remember, that provides us the opportunity to working with new clients like the defense when they're bringing out volumetric and single-living accommodation in terms of 2D models, we can provide very cost-effective designs for them to actually start working through at scale. The other key factor on MMC is you got to have integration with the M&E. So again, in terms of care, we have our own in-house M&E company that can help bring those both design and M&E to the forefront of any MMC solution. Jonathan William Coubrough: Tony Coubrough from Deutsche Numis. Could I ask firstly on Living Places, you mentioned exiting some underperforming contracts. Were those always underperforming or had something changed there? And how does the portfolio look today? Another question would be on property. What was driving the increase in transactions? Was there any particular sector there? And then last one, probably a follow-up on MMC, where you're able to access R&D tax credits. Is that predominantly in where you've been using MMC and a bit of detail there, please? Andrew O. Davies: I'll take the first one, Simon, perhaps take the second and third. On the Living Places, the key to getting efficiencies in housing maintenance is density. So you may have some very effective contracts. But if you don't have the density, you won't get the utilizations you need to make the money you need. So we elected to exit certain contracts where we didn't feel we could get the density around those contracts to make it profitable. We're focusing now on areas where we can get the density in both reactive and planned maintenance as well. So I think that was a fairly straightforward set of actions, which the team just delivered very effectively. So we're pretty pleased where we find ourselves now. We do think in the future, that will be an area of growth as society seeks to upgrade affordable housing in particular. So we want to stay heavily connected to that. Simon, do you want to take the one on property, the transactions? Simon Kesterton: Yes. I mean, property, Jon, it's just across the board really. So the 3 segments that we serve, really pretty much equal in transactions. So nothing really standing out. And then in terms of R&D tax credits, this isn't just focused on MMC. I mean Stuart touched on it, 700 designers go to it, and it's between 100 and 200 projects a year that it's spread across. So it's not one big chunky claim. It's lots and lots of little claims. Adrian Kearsey: Adrian Kearsey, Panmure Liberum. Another question on property, if I may. Simon, you talked about the lead time for property being sort of 3 years in order to do a project sort of from start to finish. And so therefore, you've got a building visibility. Could you give us some idea within that sort of 3-year sort of time frame, what types of property are you looking to develop and deliver? And also what kind of development relationships you have and perhaps give us an indication of how much JVs are going to be used within that context? Simon Kesterton: Yes. So as in JVs, we use extensively. That allows us to keep the amount invested in any one project small and hence, spreads risk and helps keep liquidity in the portfolio. So we intend to use JVs extensively. Where we focus on is last mile logistics, mixed-use residential redevelopment projects and, of course, environmentally friendly offices as well. And so those are the 3 sectors that I think we'll continue to focus on going forward. Andrew O. Davies: You mentioned the 3-year gestation. That's what gives us the confidence because we're putting the increased capital into that. That will take a period to gestate whether it's 3 years or slightly more, slightly less. It's never a precise number like that, but that's where we get the confidence and where we're getting the performance is out to the pre-existing financial investments we've made. So we put more money into that in the same strategy in the similar sort of areas which are paying well for us. That's why we're confident this thing will grow to 2027, hitting the 15% ROCE target. Any more questions? Are there any questions online? Operator: [Operator Instructions] At present, we have no questions on the conference call. Andrew O. Davies: Okay. Then with that, I... Andrew Nussey: I just thought as perhaps one of the elder statesmen in the room, I really just like to acknowledge all your efforts on behalf of the city over the last few years. 2019 seems like quite a long time ago, but Slide 5 clearly articulated the progress. So I appreciate it's a team effort, but you put the band together. So on behalf of the city, well done. Andrew O. Davies: Andrew, that's very kind of you, thank you. That's probably why I have the gray hair I have hanging in there. But can I thank everybody in this room and my team present and past for the enormous efforts and support. And thank you for all your help and advice over the years. It's been hugely appreciated. And I think we've got a great company back to exactly where it needs to be. And again, wish Simon and in particular to Stuart, the very best of luck in the future. They won't need luck. They're a great team, and they'll continue to do the great work. So thank you all very much.
Operator: Hello, everyone, and welcome to Ispire Technologies Earnings Conference Call for the Fourth Quarter and Full Year for fiscal 2025. I would now like to introduce Phil Carlson, from KCSA Strategic Communications. Please go ahead, sir. Philip Carlson: Hello, everyone, and welcome to Ispire Technologies Earnings Conference Call for the fourth quarter and fiscal year 2025 ended June 30, 2025. At this time, I'd like to inform you that this conference call is being recorded and that all participants are in a listen-only mode. Following the company's prepared remarks we will be facilitating our question-and-answer session. Joining us today are Mr. Michael Wang, the company's Co-CEO; and Mr. Jie Yu, the company's CFO. Mr. Wang will start by reviewing the company's key fiscal fourth quarter and full year 2025 financial results and recent corporate highlights. Mr. Yu will then discuss the company's financial results in greater detail. Before I begin, I would like to remind you that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts in its announcement are forward-looking statements. Forward-looking statements are based on estimates and assumptions made by the company in terms of its experience and perception of historical trends, current conditions and expected future developments as well as other factors that the company believes are relevant. These forward-looking statements involve known and unknown risks and uncertainties, and many factors could cause the company's actual results or performance to differ materially from those expressed or implied by the forward-looking statements. Further information regarding this and other risk factors are included in the company's filings with the SEC. The company undertakes no obligation to update forward-looking statements to reflect subsequent or current events or circumstances or to changes in its expectation, except as may be required by law. I will now turn the call over to Mr. Wang. Mr. Wang, please go ahead. Michael Wang: Thank you, Phil, and welcome to everyone, who has joined us today. I'm pleased to be here reviewing our fiscal fourth quarter and full year 2025 results and recent corporate highlights. Fiscal year 2025 was a pivotal period for Ispire. We made important strategic decisions to position Ispire for sustainable long-term growth and executed on this transformation across several areas of the Ispire business. While our revenue declined during the fourth quarter and full year 2025, this was due to our strategic pivot away from the cannabis industry to focus more on the higher-value nicotine sector. This intentional shift reflects our disciplined approach to building a more sustainable and a profitable business model. We have been selective in our cannabis operations. While simultaneously investing in our nicotine manufacturing capabilities. This includes scaling up our production in Malaysia. Additionally, our investments in breakthrough technologies like IKE Tech and our G-Mesh technology are beginning to gain significant traction with the interest from major tobacco companies. Positioning us well for future growth as we move through the regulatory approval process. As I just mentioned, in fiscal 2025, we continue to invest strategically in the build-out of our facilities in Malaysia and have several very exciting business development opportunities that we hope to report on in the coming quarters. Our Malaysian operations are planned to have capacity for up to 80 production lines. Significantly growing our manufacturing abilities from the 6 lines we are currently operating. Our focus on production in Malaysia not only diversifies our production base and derisk our operations from geopolitical factors, but also positions us to capitalize on the growing global demand for precision dosing vaping. As I have discussed, on the cannabis front, we made the intentional decision to refocus on quality of customers versus quantity. Given the ongoing uncertainty and the financial challenges, facing all of the players in the cannabis industry. This approach prioritizes building sustainable, long-term partnerships over short-term volume gains. This has already translated into improvements with a cut to expenses in several areas. We reduced our net accounts receivable on a year-over-year basis by over 21% from fiscal 2024 to fiscal 2025. This is the first time in the company's history that the net accounts receivable declined year-over-year. In addition, we reduced our quarter-over-quarter gross accounts receivable by $6.9 million or 9.1% from Q3 of fiscal 2025 to Q4 of fiscal 2025. We also reduced our general and administrative expenses from $7.6 million in fiscal Q3 2025 to $6.7 million in fiscal Q4 2025. These improved metrics as a result of our focus on reducing fixed costs, while further streamlining our operations. During fiscal 2025, we undertook significant cost optimization measures, reducing annual expenses by a total estimated annual savings of $10.2 million. These actions have positioned our company to become a more focused and more agile organization, while enhancing our path to profitability. We expect the trend of declining costs to continue in the coming quarters as we maintain our focus on larger and higher-quality customers with the improved payment terms and as we strengthen our financial stability. On the regulatory front, we continue to advance our PMTA activities for our own devices, while awaiting updates on the groundbreaking component PMTA submission filed by our strategic joint venture, IKE Tech LLC. As we have previously discussed, this blockchain-based age verification technology represents a potential game changer for the industry, requiring continuous real-time authentication rather than the single point of purchase verification used by traditional systems. The FDA's review of what could be the first-ever component PMTA approval remains a critical milestone that would unlock modular deployment across hundreds of [ ENDS ] products. Fundamentally transforming the regulatory landscape for nicotine delivery systems. We remain committed to our role as a regulatory leader, continuing to invest in compliance initiatives that position us at the forefront of the key evolving market. Looking ahead, our international nicotine ODM business. Represents a key growth opportunity that is now gaining significant momentum after a slower-than-anticipated start -- this acceleration in our ODM business, combined with our expanding Malaysian manufacturing capabilities positions us well to capitalize on growing global demand for precision rating technology. As we continue to build out our international manufacturing footprint, we expect our ODM partnerships to be a substantial contributor to our revenue growth in the coming quarters. We are also currently engaged in discussions with several major international nicotine and tobacco providers, who are looking to diversify their supply chain systems. Well, we cannot yet review more specific details yet. We look forward to providing an update to the market when possible. As we execute on these strategic initiatives, we have also strengthened our leadership team with the appointment of Jie Yu as our new Chief Financial Officer in May. Jie brings extensive public company accounting experience and has demonstrated exceptional performance, as our Vice President of Finance since June 2023. Building deep knowledge of our operations and financial structures. This promotion reflects our commitment to maintaining strong financial stewardship as we navigate this period of transformation. To sum up, we delivered substantial progress across our key strategic priorities during the fourth quarter and fiscal year 2025, while maintaining financial discipline. Most importantly, our revenue decline this quarter was a result of our intentional strategic shift away from cannabis towards the higher-value mixing sector, positioning us for stronger and more sustainable growth ahead. I will now turn the call over to our new CFO, Jie Yu to review our financial results in more detail. Jie? Jie Yu: Thank you, Michael, for introducing me, and thank you to everyone for joining the call today. I'm pleased to be here to review Ispire's key financial results for the fourth quarter and the fiscal year 2025. As a reminder, I will refer to fiscal year 2025 as the year ended on June 30, 2025. All comparisons are to the prior fourth fiscal quarter or year ended June 30, 2024 unless otherwise stated. Dollar revenue for the fiscal year 2025 declined from $151.9 million to $127.5 million or by $24.4 million versus fiscal year 2024. As Michael has discussed, this was due to realignment of our business toward nicotine, while moving away from Cannabis customers, which we believe will deliver improved accounts receivable and more sustainable long-term growth. Taking a look at revenue by geographic regions. For fiscal 2025 European revenue totaled approximately $74.5 million, an increase of $8.8 million or 13.6% compared to $65.3 million last year. For fiscal 2025, North American revenue was approximately $32.6 million compared to $63.1 million in fiscal 2024. This was predominantly due to our strategic pivot away from cannabis and being more selective with larger and quality customers such as MSOs. For fiscal 2025 Revenue from Asia Pacific totaled approximately $12.3 million compared to $17.6 million last fiscal year. For fiscal 2025, revenue from other countries were $8.5 million, an increase of $2.6 million compared to $6 million in fiscal 2024. The majority of these sales are from South Africa. During fiscal 2025, gross profit declined to $22.7 million from $29.8 million for the year prior. Gross margins were 17.8% for fiscal year 2025, a decrease of 1.8% from 19.6% in fiscal 2024. As Michael has discussed, this was due to the strategic repositioning away from cannabis, which led to the revenue reduction for this period. Operating expenses over the 12 months period to June 30, 2025 were $60.5 million, up from $43.7 million for fiscal 2024. This increase was largely due to a rise in sales and marketing expenses with a ramp-up of marketing activities as well as an increase in bad debt expense for an allowance in credit losses, offset by a decrease in stock-based compensation expense due to CAR-T head count in streamlining North American operations and a reduction in R&D expenses. Importantly, since Q3 2025, general and administrative expenses declined by $0.9 million, this reflects the impact of our cost-cutting initiatives that Michael discussed in detail, which we expect it to continue into fiscal 2026. For fiscal 2025, net loss was $39.2 million compared to $40.8 million in fiscal 2024. Moving now to the balance sheet. At June 30, 2025, Ispire held cash of $24.4 million, a reduction of $10.7 million versus the previous year. With working capital balance of $0.4 million. For the 12 months to June 30, 2025 Net cash flow used by operating activities was $7.4 million compared to $18.3 million in the same period last year. Net cash used in investing activities for the 12 months to June 30, 2025 was $5.2 million compared to $3 million provided by investing activity in prior comparable period. Net cash provided by financing activities for 12 months to June 30, 2025 was $1.9 million compared to $10.1 million used in the same period last year. This concludes our review of the financial results for fiscal fourth quarter and full year 2025. I will now hand the call back over to Michael. Michael Wang: Thanks, Jie. In closing, I'm proud of the substantial organizational and operational transformation we achieved throughout our fiscal fourth quarter and the full year 2025. As I outlined today, we accomplished multiple critical strategic objectives this period. Further developing our Malaysian manufacturing capabilities dramatically accelerating our international ODM business with over $18 million in pipeline revenue. Strengthening our financial position through improved accounts receivable management and significant expense reductions and advancing our regulatory initiatives including ongoing PMTA progress. Furthermore, our successful pivot from cannabis to the higher-value global nicotine market, demonstrates our strategic agility and commitment to building a more profitable and sustainable business model. Looking ahead, Ispire is uniquely positioned to capture several transformative growth opportunities. Our exclusive Malaysian manufacturing authorization provides unparalleled competitive advantages in the global nicotine market. While our breakthrough technologies like IKE Tech's age gating system and our G-Mesh innovation, have the potential to reshape industry standards for safety and performance. Combined with our expanding ODM partnerships and strategic focus on regulatory compliance. We are exceptionally well positioned to emerge as a leader in the precision dosing vaping technology, while setting new benchmarks for responsible industry practices. Thank you to our investors for the trustee support through this pivotal transformation and to everyone, who joined us today. We look forward to reporting on our continued progress and exciting developments in the coming quarters. If you have any questions, please contact us through e-mail at ir@ispiretechnology.com. This completes our prepared remarks, and we are now open to questions. Operator, please go ahead. Operator: [Operator Instructions] Our first question comes from the line of Pablo Zuanic with Zuanic and Associates. Pablo Zuanic: Look, just the first question in terms of age gating technology. Can you tell us about what are the key milestones to look for here over the next few months or years what's the timetable? What's the realistic target date for approval, if you have any visibility on that, please? Michael Wang: Thank you, Pablo. Right now, the age gating technology is being, I would say, discuss not only within the United States, on a global basis, this has become a hot topic. So many countries are looking at this technology and progress, some could be much faster than others out there. Now back to the U.S. with this technology, we filed the component PMTA back in late-April. And within 4 weeks, we received the FDA's acceptance ladder, which is really speed-wise unprecedented. Never before did the FDA accept any applications regarding the nicotine business within 4 weeks. So of course, we are very encouraged with that speed. And this particular application is expected to be reviewed at so-called expedited basis. So we don't know exactly when the next step will happen but typically, a major next step is FDA's issuance of a letter called deficiency later. Generally, that's based on FDA's evaluation of your product. And if there are minor modifications or fixes that need to be done before the green light, typically FDA issues such deficiency letter I guess, to suggest the companies or brands to fix overcome the deficiency. So we within the U.S. FDA's response to Pablo, we don't know exactly when that letter would arrive. So that generally is the next step. It could be as quick as 3 months or as long as in some cases, over a year for other nicotine specific products. But this is a unique application. So certainly, it's the first case of so-called component PMTA that FDA is reviewing or has reviewed, so there is no prior experience regarding this. But we trust with youth access to e-cigarette being such a worldwide epidemic, we strongly believe lawmakers, regulators will find a suitable solution for this crisis per se. And we feel we are in the forefront of this solution offering, Pablo. Pablo Zuanic: Right. On the same topic, is it realistic to expect that perhaps in other major markets outside the U.S., maybe the EU that you could get approval for the age verification technology sooner than in the U.S. or the U.S. would probably happen first? Michael Wang: Pablo, of course, we are very optimistic about just project getting special attention from FDA for the purpose of solving this crisis and we certainly are hoping within short order, we would receive such letter from the FDA. That will be very encouraging to the industry and to us, specifically. However, at least 2 countries could potentially get ahead of FDA at this point. I'm not at liberty to share the name of those 2 countries, but the regulators are just embracing this technology with open arms. And in several other countries, we have been working with regulators as well. We don't have expected time line at this point, but 2 are moving real fast outside the U.S. Pablo Zuanic: Right. And I'm sorry, 1 more on the same topic, if I may. -- in terms of age verification. I know you said you believe that you're at the forefront of this technology. Can you talk about your patents, intellectual property, how are you protecting this because I'm assuming there are other companies that are also working on similar technologies, but as you think you will be first. But just remind us about the protections you have from an IP perspective? Michael Wang: Yes. Indeed, Pablo, we for every major development, we have filed the patents, especially in the United States and then EU, U.K. and China, et cetera. We now IP is a key enabler in this particular solution. So we own critical patents our IP in this space, especially in 1 key area, how the device communicate to the -- and then communicated to the back-end data processing to secure the mechanism, specifically for blockchain-based technology. So -- we strongly believe our IP defensibility is very strong. And we -- from the beginning of this project, we have been building IP as a key strategy not only in providing such solution, but more importantly, in defending such a solution. So both on the use for blockchain site and on the unique communication with data processing, generally government approved and compliant operators and such as CLEAR. Those are unique IP for us, Pablo. Pablo Zuanic: Right. Very much. If I may, I'm going to ask 2 more questions, and that's all for me. But the first 1 in terms of -- you had this -- you talked about the receivables. You had this big provision of $22 million, I think, in the fourth quarter. Was that related to just 1 client in 1 region. I don't know. If you can give a bit more color about that. It just seems like a big provision on receivables. And then the second one, I understand the pivot away from cannabis, but cannabis in the U.S. is still a $30 billion industry, vape it's about 25% of that. There's demand for vape parts. So we think that, that business is still there for someone to take, right? So I'm just -- maybe you can give more color in terms of -- I understand the economics are challenging, but there is the demand for vape parts. So just trying to understand the -- the pivot away from cannabis. But if you can answer those 2, that's all for me. Michael Wang: Okay. Pablo, I'll answer the second 1 first. The U.S. cannabis industry indeed, is very strong, and I think will continue to be a strong market from a revenue, from a sales point of view. However, we all know until cannabis is federally legalized and the correspondingly, there is a financial service or banking services available to the industry. Cash flow will continue to be the challenge. I think this is a typical case of a very promising industry with a lot of -- like you said, a lot of revenue, a lot of opportunities. We have been in this space for many years, and we have seen the challenges facing all the operators in terms of cash flow and it directly affects our business of the past. So to a large degree, our high amount of account receivable -- this has been largely driven by the cash flow challenges that our customers face. So yes, indeed, from a revenue point of view, there is continued opportunity here. However, we feel the cash flow challenges facing everybody is not facilitating to what we want to accomplish financially, at least in the near future, until the capital market becomes available to the cannabis industry. So legalization of course, will be step one. We are watching the development on that front. When the right moment comes, we will come back to the industry. So it's just -- in the near term, we don't see any ways of cash flow improvement. So that's why we made it a pivot. Pablo, sorry, remind me your first question again? Pablo Zuanic: In terms of the receivables, I mean, if I -- I think -- I mean, I went through the financials, I miss the details, but -- it seems there was a big provision of about EUR 22 million in the fourth quarter. And I'm just trying to understand was that related to just 1 client in 1 region or just bigger precaution in general. It just seemed like a big provision compared to other quarters. Michael Wang: Yes. Pablo, yes, that bad debt provision is not based on a few large accounts. It's really quite a cumulative effect of all the customers we did the business within the last 2-plus years after going public. So not a particular customer stands up to answer your question. Operator: [Operator Instructions] Our next question comes from the line of Nick Anderson with ROTH Capital Partners. Nicholas Anderson: First 1 for me is just on the U.K. supply agreement, you're starting to really monetize that deal. I was just wondering if you could maybe share the early feedback from that client and how the agreement is going in terms of order trends? And just going forward, is this the SKU you'll use to shop around to other larger clients? Or are there more additional iterations coming? Thank you. Michael Wang: Nick. So this particular ODM client, when we're launching this project now late calendar 2024. We had a version 1 of the product -- and correspondingly, as we all know, the U.K. disposable bans affected the dynamic in the e-cig industry in that particular market. And throughout the last 12 months, there have been several significant changes in the market trend. So -- as a result of such a dynamic, version 1 really didn't take off as the client originally expected. So earlier this year, collectively, we made several changes to their design and upgraded its product significantly. And we officially launched it right during the summer this year. Initial feedback is very, very encouraging. To a large degree, in my prepared speech, I mentioned that there was a backlog of $18 million from this space is really largely tied to this particular customer. So merchant tool is truly, truly taking off, and I feel it will meet the original target that the customer set more than a year ago for this product. Of course, I think, we are still working on the next iteration, we expect to Ispire towards the end of this calendar year. This is such a dynamic industry, competitive industry. Literally, if you don't introduce new products faster than other brands it is really, really challenging for the players. So we are trying to make our particular customer very, very competitive. Nicholas Anderson: Got it. I appreciate that color. Next 1 for me, just on the tariff landscape. You mentioned several larger companies looking to diversify their supply chain -- what do you expect just in terms of potentially onboarding some of these larger clients? And has that changed kind of the expansion road map for your Malaysian facility? Michael Wang: Okay. Yes. many companies, including brands, including manufacturers have been shifting production outside of China. Of course, largely to the Southeast Asian countries. So tariff was truly a consideration there. And from our point of view, we did see large, I would say, number of inbound increase from brands and even manufacturing competitors. So we have seen that part -- and certainly, we have been preparing for this moment a couple of years back with the selection from Malaysia as our key manufacturing base. So as we have been talking about for the last 2 years, Malaysian operation has been carefully scaled. We wanted to go faster, but we need to -- to obtain regulatory approval, this will take time so our expansion there is timed by how quickly, we get government permit and approval. So -- but on the other hand, with that careful consideration, we built 2 facilities, 1 small, 1 large, and 2 for demand that we anticipated a couple of years back regarding geopolitical situations. So -- right now, we are seriously considering a third facility, which will be much, much larger in nature to entertain what you just described as some potential large ODM projects. So it's slow going. Of course, we need to be mindful of the regulatory requirements and the compliance. But with the presence of a such large opportunities. It's important for us to get ahead of the wave of opportunities and get facilities in place before we scale. So we are working on building out the production line in the second facility that could house up to 80 e-cigarette production lines. So we are modifying that as the second building. So the first building, we already talked before, there were only 6 lines in that building far too small to support such expanding global e-cigarette ODM business. So second one comes handy for us. But still not enough to handle all the opportunities we could potentially entertain. Nicholas Anderson: Got it. Last 1 for me. Just wanted to build off the last cannabis question you answered. I appreciate the color you gave. Rationalization is playing out, and we understand the difficulties in that segment. Would you say the 4Q cannabis revenue number is a more realistic run rate for your U.S. business going forward? Just wondering what that segment could look like this coming year. And just off that, if rescheduling does happen, would it change the way you're looking at U.S. cannabis? Michael Wang: Okay. So yes, cannabis revenue, Q4 is really on the low side. Right now, we are already going at a higher speed per se, volume-wise, -- so I would say financial -- fiscal Q4 2025 is the bottom for our cannabis business and that largely had to do with -- as we pivoted. We purposely ended many customer relationships. So that was really giving us the biggest impact on revenue growth. Q4 really reached the very bottom, and we started gaining new customers who would need for, let's say, quality assessment. So plus, we, of course, are continuing with new product development before the end of the year, we'd have several new products were launched -- so combined with what we call high-quality customer base, but we think the new products will also bring additional revenue. So your second part of the question regarding risk scheduling. Yes, when the risk scheduling would take place, we would certainly evaluate the opportunity of beefing up the investment in the cannabis sector. Nick? Operator: Thank you. Ladies and gentlemen, this concludes our question-and-answer session and concludes our call today. We thank you for your interest and participation. You may now disconnect your lines.
Andrew O. Davies: Okay. We'll start then. So good morning, everyone, and thank you for joining our full year 2025 results presentation. For those of you who are here in person, and welcome to those joining us today by webcast and by audio as well. I'm Andrew Davies, I'm Chief Executive of Kier Group. And somewhat pointedly for me, this marks my last Kier results presentation. I'm joined today by Simon Kesterton, our Chief Financial Officer; and also by Stuart Togwell, currently our GMD for Construction, who will become the Chief Executive on the 1st of November this year. So just quickly before we go through the results, Stuart, if I can invite you to introduce yourself to those who you may not have yet met, Stuart? Stuart Togwell: Good morning, everyone. I'm Stuart Togwell. I'm delighted to see you all this morning, and I'm really proud and excited to become the next Chief Exec of the Kier Group. I've worked in this industry that I love for over 39 years now, the last 6 years of which has been working closely with Andrew and Simon in Kier. Initially, I came in as the Group Commercial Director, where I introduced the risk management and the operational discipline that we still use today. The last 2 years, I've been in the GMD for the Construction business and have also been a member of the main Board. I'm looking forward to talking to some of you here in person after the presentation, but in the meantime, Back to you, Andrew. Andrew O. Davies: Okay. Thank you, Stuart. And let's move on now to our FY '25 results. So firstly, I'll walk you through the highlights from the last financial year and then hand you over to Simon to talk through the group's financial performance. And this will be followed by an operational review, an update on ESG and we'll finish off with our outlook and recap of the long-term sustainable growth plan. And then, of course, there will be an opportunity for questions and-answers at the end. So working through the disclaimer, and we move on to the results summary and highlights. So starting with the highlights for FY '25, which is the first year of the long-term sustainable growth plan that we launched last September. In the year, the group's order book grew to a record GBP 11 billion, reflecting contract wins across our business and providing us with multiyear revenue visibility. Specifically, the order group -- the order book currently covers 91% of our targeted FY '26 revenue and around 70% of FY '27's. Group saw continued overall revenue growth of 3%, which delivered an adjusted operating profit of GBP 159 million. And this result represents a margin of 3.9%, which is above our own initial expectations and also progressing well towards our long-term target level of between 4% to 4.5%. This higher level of profitability continues to convert strongly into cash at a rate above our long-term target, leaving us with a net cash position of GBP 204 million at June 2025. We also saw a significant improvement in average month end net debt for the year to GBP 49 million. So given the continued progress that our group has made, I'm pleased to say we've significantly increased our returns to shareholders in year. We're proposing to pay a final dividend of 5.2p per share, representing a full year dividend of 7.2p, 38% higher than last year. We also launched a GBP 20 million share buyback during the year, which, as we speak, is roughly 50% complete. Additionally, we increased the capital deployed in our Property business where we're on track to deliver our long-term target of 15% ROCE, thus further enhancing shareholder returns. So overall, I'm pleased to say, as leadership of Kier now transitions to Stuart, that we're a business in very good shape, our strategy is progressing well, driven by our great people and now underpinned by our high-quality order book and strengthened balance sheet. We're progressing well to deliver against our long-term sustainable growth plan. So for this -- now my last set of results, I thought it's worth reflecting on Kier's track record of consistent delivery in the past few years and how that performance underpins our conviction in our ability to deliver our long-term plans. In recent years, we've proved that we can deliver for our customers and shareholders alike. As you can see from these figures, we've seen significant growth in revenue, profits and earnings since 2021. This has been achieved with growing levels of cash flow and as a result, significant improvement in the levels of debt, whereby we are now touching -- in touching distance of reporting average net cash. At this point, I'll hand over to Simon, who will take you through the detailed financial results. Simon? Simon Kesterton: Thank you, Andrew. Good morning, everyone. Turning to Slide 7. This sets out our high-level results. Revenue in the period, as Andrew mentioned, is higher than FY '24 and reflects strong performance across the group, especially in the Infrastructure Services segment, which I'll cover more in detail in the next slide. We delivered an adjusted operating profit of GBP 159 million, up 6% in the year and at a margin of 3.9% as we progress well towards our long-term sustainable growth plan target of 4% to 4.5%. We continue to generate significant levels of operating cash flow with net cash at the end of June 2025 as a consequence, materially improved year-on-year, rising to GBP 204 million compared to GBP 167 million at June 2024. This performance includes a strong working capital performance as inflows follow revenue growth to normal levels, allowing us to deploy additional capital to our property business, which will drive future earnings growth. In terms of average month-end net debt, this has improved to just GBP 49 million from GBP 116 million in FY 2024. The group has also been able to significantly increase dividend payments and further grow returns to shareholders through the launch of our initial share buyback as well as invest in the property business, as mentioned. Turning to Slide 8. I'll walk you through the group's revenue growth. Starting on the left-hand side, you can see FY '24 revenue of GBP 4 billion. Infrastructure Services revenue grew by 7%, primarily due to growth from water and nuclear, supported by continued HS2 activity. Construction revenue was steady with continued delivery of Justice projects. We have worked to increase the quality and profitability of our Kier Places business, resulting in us exiting some lower-margin contracts. Finally, for property, we saw a significant increase in transactions compared to the prior year, although the positive impact of this is only seen in operating profit given the mix of transactions with our property business being a return on capital business rather than a return on revenue business. So overall, growth was 3%. And if you adjust for property and the FM contracts, closer to 4%. Moving now to the adjusted operating profit bridge. We start on the left-hand side with the previous year's adjusted operating profit of GBP 150 million. Overall, volume, price and mix have resulted in an increase of GBP 0.6 million. As we just mentioned, we saw an increase in the volume of property transactions in the year, which resulted in increasing profit by GBP 6 million. Cost inflation was more than offset by management actions that delivered GBP 11.6 million during the year. These savings related to projects such as improving supplier onboarding, site setup optimization and Kier 360 and reflect the success of our performance excellence program as we demonstrate sustainable growth across our businesses. In terms of cost generally, it's worth reminding you all that more than 60% of our order book is made up of target cost or cost reimbursable contracts. And if we do choose to give price certainty to our customers, it's only done after key risks and opportunities are understood. The overall result is growth in adjusted operating profit of 6% to GBP 159 million and a margin of 3.9% that is progressing well towards our long-term target of 4% to 4.5%. Adjusted items, including -- excluding noncash amortization, amounted to GBP 26 million in the year, GBP 1 million lower than the previous year. The main element relates to fire and cladding costs, GBP 17 million in the year. The property costs relate to the sale of a legacy office in Manchester, which completes our corporate office space reorganization. This slide illustrates how our sizable attractive market opportunity flows ultimately into our strong order book and the visibility that we have on it. The government has committed to improving and renewing the U.K.'s infrastructure and in June this year, reaffirmed its 10-year strategy, setting out total spending to 2035 of GBP 725 billion. Also in June, as part of their comprehensive spending review, the government detailed their priorities in the next 3 to 5 years. This strategy and projected spend map to the markets served by our business via frameworks. Kier is well placed to benefit as we currently hold positions on frameworks worth GBP 156 billion. These frameworks cover key areas of government focus, such as health, education, defense, water and nuclear. As you can see on this slide. It is these frameworks from which projects are awarded to preselected contractors that provide the path by which we fill our order book, driving revenue growth, giving us confidence in the successful delivery of the long-term sustainable growth plan. This slide considers our order book in more detail, standing now at a record GBP 11 billion, as Andrew mentioned. This order book gives us a clear view of future revenue and cash flows, representing 91% of FY '26 revenue already secured and around 70% of FY '27 revenue. As I've just said, 60% of our order book is under target cost or cost reimbursable contracts or otherwise subject to a 2-stage pricing process, which reduces considerably a contract's risk profile. Furthermore, as we've just seen, our order book is fed by our sustainable long-term framework agreements, where the value of the positions that we hold amount to GBP 156 billion. As you can appreciate, the combination of our strong order book underpinned by these framework positions illustrated here provides us with considerable visibility of future revenue streams and cash generation. Now let's turn to our cash flow. Adjusted EBITDA in the year grew 10% to GBP 228 million. We then have GBP 28 million of working capital inflow, a great performance. It's worth noting that last year saw 17% revenue growth, which drove a higher working capital inflow, while FY '25 saw revenue growth of our expected GDP plus levels. CapEx in the period amounted to GBP 65 million, with GBP 48 million of that relating to payments made under leases now capitalized under IFRS 16. Net interest and tax increased by GBP 13 million in the year due to interest payments to new bondholders, which commenced in August 2024. The group's deferred tax asset of GBP 137 million relates to losses made in previous years, allowing us to offset half of our tax charge in any one given year, and we anticipate it will take around 7 years to fully utilize this asset. All this means that we generated significant free cash flow of GBP 155 million in FY '25 with a conversion of 125%, significantly above our long-term sustainable growth target. This strong cash generation has allowed the group to grow our cash balance while significantly increasing shareholder returns. Starting on the left-hand side with closing cash of GBP 167 million at June 2024, we then have the FY '25 free cash flow of GBP 155 million that we've just seen on the previous slide. Next, we have the adjusting items of GBP 18 million, significantly lower as we've seen in the GBP 37 million paid in FY '24, followed by the payment of GBP 8 million to our smaller pension schemes. The level of cash generation after these items provides us with considerable scope for capital allocation. Firstly, regarding dividends. It's notable that FY '25 is the first year to include payment of both interim and final dividends totaling here GBP 24 million. Then we have GBP 51 million of capital deployed to the property business. Lastly, we have the purchase of Kier Group shares, both the shares bought under the share buyback program as well as the shares for the group's employee benefit trust. As a reminder, this trust acquires Kier shares from the market for use in settling the long-term incentive plan scheme shares and the share schemes when they vest. This results in a net cash position of GBP 204 million, a significant improvement, as we've mentioned, compared to the GBP 167 million at the start of the year. Now moving to Slide 15 and as a reminder of the significant progress we've made by effectively eliminating our average month-end net debt. Over the last 4 years, we've reduced our average net debt and debt-like items by over GBP 500 million, a significant improvement, resulting in just GBP 49 million of average net debt in FY '25. This slide sets out our long-term funding arrangements that we have in place to support our strategy while retaining flexibility to deliver future growth. The long-term financing of the group is provided through the GBP 250 million of 5-year senior notes expiring in 2029, combined with our GBP 150 million revolving credit facility, which runs to 2027. In January 2025, we fully repaid all of the outstanding USPP notes and GBP 111 million of the revolving credit facility matured, both in line with their agreements. For my penultimate slide, I'd just like to remind everyone of our capital allocation priorities. Overall, we're focused on optimizing shareholder returns while maintaining a disciplined approach to capital allocation and maintaining our strong balance sheet. In short, we target dividend cover of around 3x earnings through the cycle. We plan to invest further in our property business to generate consistent returns over time, deploying up to GBP 225 million of capital, targeting consistent long-term return on capital employed of 15%. With regard to acquisitions, we will continue to consider value-accretive acquisitions in core markets. Lastly, in January earlier this year, we announced an initial GBP 20 million share buyback program, further increasing returns made to our shareholders. I will finish with a look at our shareholder returns. As we saw earlier, Kier has an astonishing record of delivery in the period under Andrew's stewardship. Material improvements have been made to grow the order book, improve profits, grow cash flow and reduce net debt. All this combined with the substantial revenue visibility now provided by our order book and the pipeline of growth opportunities gives us confidence in the group's future prospects. It allows us to propose a final dividend of 5.2p or 7.2p in total for the year 2025, an increase of 38% versus the prior year and representing earnings cover of 3x, in line with our long-term sustainable growth targets. This, combined with the GBP 20 million initial share buyback shows that shareholders will continue to benefit from Kier's significant financial improvement as well as the renewed strength of the group's balance sheet. And now before the last time I hand over to Andrew for his operational review, I'd just like to say thank you very much to Andrew. Thank you for his efforts, for his hard work in leading and putting together a great team, which has been very successful. And thank you very much for being a pleasure to work with. Congratulations for all of that success. And then, of course, finally, to wish him all the best for the future. And now, for the last time, back to you, Andrew. Andrew O. Davies: Thank you, Simon, and a real thank you to you as well for all you've done for the company. So if we move now to the operational update, and we'll start with Infrastructure Services first. In 2025, we saw revenue growth of 7%, driven by HS2 capital works as well as growth from water and nuclear projects, where our previously announced contract wins are now converting to revenue. In particular, our Natural Resources, Nuclear Networks or NRNN business has continued to build on our strong position in water market as the operating companies in the sector commence the next investment cycle of AMP8. Adjusted operating profit was GBP 111 million, representing underlying growth of 4%, allowing for a one-off GBP 6 million customer gain in the prior year. It's widely acknowledged that the industry remains affected by delays at the start of the works under Control Period 7 for rail and the deferred announcement of the RIS3 program for highways. Nevertheless, the strength and breadth of our design and build business in highways, where we maintain and build national and local highways and our excellent customer relationships, combined with our strong order book allows us to continue to effectively manage risk and return in this segment, providing us with good current throughput and future visibility of revenues. If we turn to a slide which emphasizes the strong position Kier has across the U.K.'s water sector. So here, we have a clear growth opportunity in what is a regulated market, which, of course, sits outside the public spending envelope. The AMP8 investment cycle is now well underway with operating companies set to deliver a significantly larger investment worth circa GBP 104 billion to 2030, and that's double of AMP7. As we said in the past, with the market doubling, we expect Kier's activity to match that growth, thus doubling in the same time frame. The momentum and determination behind this level of investment is clear. An aging asset base, which needs replacing or refurbishing, increasingly stringent environmental regulations and the focus on extending the life of existing facilities through maintenance. The operating companies are thus turning to Tier 1 contractors to deliver these upgrade and maintenance programs, particularly those with specialist mechanical and engineering skills where Kier is demonstrably well placed to take advantage of this opportunity. And this slide sets out our U.K. footprint in water. We're one of the largest Tier 1 contractors supporting the regulated water companies with their asset optimization. As you can see, at June, we held positions on a total of 17 frameworks with 9 water companies worth a combined GBP 15 billion of spend opportunity. Moving next to our construction business, where we build schools, hospitals, prisons and defense projects for government as well as projects for the commercial sector. Also included here is Kier Places, our facilities management and housing maintenance business. Construction revenue remained steady overall at GBP 1.9 billion. During the year, we successfully delivered significant levels of work for the Ministries of both Justice and Education, alongside starting work for HMP Glasgow for the Scottish government, where activity levels will ramp up through 2026. We also acted to better position Kier Places for enhanced future returns through the exit of some of the lower-margin contracts, which Simon mentioned. The adjusted operating profit grew 8% to GBP 75 million, seeing the benefit of an improved business mix. And lastly, let's look at our property business, which invests and develops commercial and residential sites, largely operating through joint venture partnerships to deliver urban regeneration projects right across the U.K. Operating profit grew significantly, driven by the higher volume of transactions Simon mentioned in the year compared to 2024 -- FY '24. Indeed, many transactions were achieved in the second half of the year as we continue to build momentum and scale in this business, and we expect this seasonal profile to repeat in FY '26. Just a reminder, we remain focused on the disciplined expansion of the property business through selective investments and strategic joint ventures with capital employed totaling GBP 198 million at June 2025. Our long-term plan is to increase capital employed to GBP 225 million, and we expect that this stable capital and the maturing partnerships will result in the business exiting 2027 on or around its targeted ROCE of 15%. So let's turn to our sustainability framework. It's through this framework that we align our activity to our major clients, the U.K. government and regulated companies by focusing on 3 key pillars: people, places and planet. As a reminder, our purpose is to sustainably deliver infrastructure, which is vital to the U.K. As a strategic supplier to the U.K. government, ESG is fundamental to our ability to win work and secure positions on long-term frameworks. U.K. government contracts above GBP 5 million require net zero carbon and social value commitments. And in order to help achieve these goals, we focus on our people pillar, which targets to build a workforce which has the relevant skills and capabilities to deliver these goals, ensuring where possible that everyone receives equitable treatment that our people reflect the communities where we live and we operate. Secondly, leave a positive legacy in our communities through our places pillar. We do this through the projects we deliver and the people we employ within them, mindful always in addressing the challenges of inequality. And thirdly, as the stewardship of the planet is vital to all of us, we're reducing our carbon emissions and supporting our customers with their infrastructure requirements as they adapt to climate change. Our sites aim to protect and enhance nature as well as efficiently use resources on our projects. To just review our environmental progress as we see carbon reduction as both an obligation and an opportunity. Overall, we're seeing increased demand from customers to deliver projects sustainably, which is reflected in our Green Economy Mark accreditation. Our net zero targets for Scopes 1, 2 and 3 have been validated by SBTi. And in line with these, we have reduced Scope 1 and 2 emissions by 4% in FY '25 and by 71% since FY '19, which is our baseline year. We continue to reduce our emissions according to our carbon reduction plan. In terms of our efficiency, we achieved a 3% reduction in our waste intensity overall in the year. And secondly, we'll reflect on our social responsibility. Safety as ever is our license to operate, and we're pleased to report a 26% reduction in our accident incident rate in FY '25. Kier's performance depends ultimately on our ability to attract and retain a dedicated skilled workforce. During the year, this included 590 apprentices with over 10% of the workforce in formal training and development or earn and learn programs. Furthermore, over 40% of our graduate intake in the year were female as we focus on making Kier a diverse and inclusive place to work, reflecting the communities we work within and we serve. And turning to our supply chain partners. In FY '25, over 60% of our subcontractor spend was with small and medium-sized enterprises, while we continue to adhere to the prompt payment code. So before we come to our outlook, I thought I'd just remind everyone of our long-term growth plan, which is laid out here and provides clear visibility of the direction of the group. We target revenue growth above GDP, driven by the attractive market dynamics combined with our market-leading positions. We're targeting to reach an adjusted operating margin of 4% to 4.5%. For cash flow, we target around circa 90% conversion of operating profit and the achievement of average net cash position to allow us to invest surplus cash in those areas that will deliver increased shareholder returns. This includes a targeted sustainable dividend policy of circa 3% earnings cover through the cycle, which we have, of course, now delivered for this year. And now to finish with a short summary and our outlook. The group has continued to make significant operational and financial progress in the year, delivering revenue growth with margins ahead of expectations and progressing well towards long-term target range. We've continued to grow our order book to a record GBP 11 billion, providing us with significant multiyear visibility. This has allowed us to significantly increase the proposed dividend payment, and we're well progressed with the initial GBP 20 million share buyback program launched in January 2025. And building on our outperformance in FY '25, the group has started FY '26 financial year well and is trading slightly ahead of the Board's expectations. And on a personal note, it's been a privilege to lead Kier over the last 6.5 years and to see the group transformed into a strong and sustainable business with enhanced resilience and a reinforced financial position. That transformation has only been possible due to the capability, professionalism and frankly, hard work of Kier's teams and the support of our clients and our partners. I'd like to thank them all for their support and commitment in ensuring Kier's continued success in delivering infrastructure that is vital to the U.K. And in particular, I'd like, of course, to wish Stuart and Simon the very best for the future and thank them both. And with that, I will open up the meeting to questions and answers. And I suggest we do questions first from the room, and then we'll take questions from the conference call. Thank you. Robert Chantry: Rob Chantry at Berenberg. Obviously, congratulations on the delivery and your time in the business, Andrew. So 3 questions from me. So firstly, thoughts around, I guess, the debt position. Obviously, tremendous increase in delivery in recent years and kind of business moving towards an average net cash position. The '29 bonds trading well. Can you just remind us of the options available on the refi, any longer-term thoughts around capital structure given the cash delivery? I think secondly, clearly, you've been successful on getting on the GBP 15 billion of frameworks in water and water revenues set to double. Can you just talk, I guess, a bit more anecdotally around what surprised you about the evolution of that market in the past years? Has it been more competitive? Has there been things where you've done better than you might have expected, things that might be more challenging? Just how that market has evolved in terms of the contracting structure? And then thirdly, property, clearly, kind of good step up this year. You're talking about 15% ROCE by '28, so that's GBP 30 million, GBP 35 million of EBIT. Can you just give us an indication of kind of what's working particularly well in that division at the moment? Any indication of the shape of going from GBP 12 million EBIT this year towards GBP 30 million, GBP 35 million 3 years out would be very helpful. Andrew O. Davies: Simon, do you want to take the first and the third, maybe I'll do the middle one. Simon Kesterton: Absolutely. So thanks, Rob. In terms of debt position, I mean, we're very happy with the balance sheet, GBP 49 million of monthly average net debt is pretty much there, plus or minus zero. And as I've mentioned previously, I think we're comfortable really even going up to probably 0.5 turn plus or minus on the balance sheet of EBITDA in terms of monthly average net debt. In terms of the refi, yes, we did that in February 2024. So the first time we could refi the bond would be in February 2026. And you're right, it's trading very well. So that would give us an opportunity. And of course, we've got our half year results probably out March that year in 2026. So that might be a good opportunity if things remain the same to refinance. Andrew O. Davies: Property? Simon Kesterton: I can cover off property as well first. So in terms of shape, it's probably going to be back-end weighted, Rob. So I'd expect a small increment in this current financial year on last year before we really start towards the back end of FY '27, delivering that 15% return on capital employed. And that's just sort of the nature of when you invest, it takes 3 years before you start to see the returns. Andrew O. Davies: Rob, just on the water question you're asking, I mean, we do see our revenues doubling because the AMP8 has doubled. We've got material positions on all of the frameworks circa GBP 15 billion by advertised values positions on the frameworks, which we've won. So we feel we are confident that we will double alongside AMP8. The competitive environment is they have sought out -- the water companies sought out Tier 1 contractors to deliver some of the larger schemes, and that's why we've been selected by many of the larger water companies to deliver those. But there are -- there is plenty of space within this sector for other companies to operate. But I think we're probably one of the leading Tier 1 companies operating in that sector. So yes, we're very confident over the next 5 years, certainly on AMP8 and probably thereafter, but we'll see what happens on AMP9 that water is going to come a mainstay of this company. There's no doubt about it. Andrew? Andrew Nussey: Andrew Nussey from Peel Hunt. Two questions. First of all, for Simon. When we look at the profit bridge, obviously, inflation and management actions are pretty big chunks there. What are the thoughts in terms of '26 and '27 and the ability to keep driving management action to offset those inflation pressures is the first one. Simon Kesterton: Okay. Yes. So firstly, I think inflation, the number that you're seeing there, obviously, our projects are quite long term. So you're seeing the impacts of prior -- a couple of years ago inflation there. So I would expect, firstly, the inflation number to start to tail off a little bit. And then in terms of management actions, I don't think any question that we'll be able to continue to more than offset that. Andrew Nussey: Second question is actually for Stuart. Obviously, you've led the Construction division, which has been a leader in terms of modern methods of construction and digital tools. I'm just curious, when you move into the CEO role, what other opportunities can you see for those developments across the group? And what might that mean? Stuart Togwell: Okay. I'll stand up. I was enjoying sitting in the audience. I think the most important thing to start with in terms of we're not being complacent, although we're already sitting with GBP 11 billion order book. I'm a big fan in terms of AI and digital, first of all. in particular, the work we've been doing around digital twin in terms of how that drives energy efficiencies and also product improvements. But alongside that, in terms of Simon's team is already using bots at weekends to run around to look at administration improvements. Alongside that, to make sure it's really important with AI that we create a safe environment for us to use. So we're working with our IT providers in terms of how we can do that. And even more importantly is to make sure that when we do have that technology in the business, we have a workforce that is comfortable and can embrace that technology to make the most of it. Regarding MMC, again, we haven't been complacent. And what we've been looking at is rather than just concentrating on volumetric, we've been looking at all forms of MMC to ensure that we can come up with the appropriate solution for our customers. And there are 2 key themes that I would take around from MMC. First of all, if you don't have the design right, you lose the benefits of MMC. So one of the huge benefits we have across the group is we were already sitting with 700 designers that can help us. And the other point in terms of that is just to remember, that provides us the opportunity to working with new clients like the defense when they're bringing out volumetric and single-living accommodation in terms of 2D models, we can provide very cost-effective designs for them to actually start working through at scale. The other key factor on MMC is you got to have integration with the M&E. So again, in terms of care, we have our own in-house M&E company that can help bring those both design and M&E to the forefront of any MMC solution. Jonathan William Coubrough: Tony Coubrough from Deutsche Numis. Could I ask firstly on Living Places, you mentioned exiting some underperforming contracts. Were those always underperforming or had something changed there? And how does the portfolio look today? Another question would be on property. What was driving the increase in transactions? Was there any particular sector there? And then last one, probably a follow-up on MMC, where you're able to access R&D tax credits. Is that predominantly in where you've been using MMC and a bit of detail there, please? Andrew O. Davies: I'll take the first one, Simon, perhaps take the second and third. On the Living Places, the key to getting efficiencies in housing maintenance is density. So you may have some very effective contracts. But if you don't have the density, you won't get the utilizations you need to make the money you need. So we elected to exit certain contracts where we didn't feel we could get the density around those contracts to make it profitable. We're focusing now on areas where we can get the density in both reactive and planned maintenance as well. So I think that was a fairly straightforward set of actions, which the team just delivered very effectively. So we're pretty pleased where we find ourselves now. We do think in the future, that will be an area of growth as society seeks to upgrade affordable housing in particular. So we want to stay heavily connected to that. Simon, do you want to take the one on property, the transactions? Simon Kesterton: Yes. I mean, property, Jon, it's just across the board really. So the 3 segments that we serve, really pretty much equal in transactions. So nothing really standing out. And then in terms of R&D tax credits, this isn't just focused on MMC. I mean Stuart touched on it, 700 designers go to it, and it's between 100 and 200 projects a year that it's spread across. So it's not one big chunky claim. It's lots and lots of little claims. Adrian Kearsey: Adrian Kearsey, Panmure Liberum. Another question on property, if I may. Simon, you talked about the lead time for property being sort of 3 years in order to do a project sort of from start to finish. And so therefore, you've got a building visibility. Could you give us some idea within that sort of 3-year sort of time frame, what types of property are you looking to develop and deliver? And also what kind of development relationships you have and perhaps give us an indication of how much JVs are going to be used within that context? Simon Kesterton: Yes. So as in JVs, we use extensively. That allows us to keep the amount invested in any one project small and hence, spreads risk and helps keep liquidity in the portfolio. So we intend to use JVs extensively. Where we focus on is last mile logistics, mixed-use residential redevelopment projects and, of course, environmentally friendly offices as well. And so those are the 3 sectors that I think we'll continue to focus on going forward. Andrew O. Davies: You mentioned the 3-year gestation. That's what gives us the confidence because we're putting the increased capital into that. That will take a period to gestate whether it's 3 years or slightly more, slightly less. It's never a precise number like that, but that's where we get the confidence and where we're getting the performance is out to the pre-existing financial investments we've made. So we put more money into that in the same strategy in the similar sort of areas which are paying well for us. That's why we're confident this thing will grow to 2027, hitting the 15% ROCE target. Any more questions? Are there any questions online? Operator: [Operator Instructions] At present, we have no questions on the conference call. Andrew O. Davies: Okay. Then with that, I... Andrew Nussey: I just thought as perhaps one of the elder statesmen in the room, I really just like to acknowledge all your efforts on behalf of the city over the last few years. 2019 seems like quite a long time ago, but Slide 5 clearly articulated the progress. So I appreciate it's a team effort, but you put the band together. So on behalf of the city, well done. Andrew O. Davies: Andrew, that's very kind of you, thank you. That's probably why I have the gray hair I have hanging in there. But can I thank everybody in this room and my team present and past for the enormous efforts and support. And thank you for all your help and advice over the years. It's been hugely appreciated. And I think we've got a great company back to exactly where it needs to be. And again, wish Simon and in particular to Stuart, the very best of luck in the future. They won't need luck. They're a great team, and they'll continue to do the great work. So thank you all very much.
Operator: Good morning, ladies and gentlemen. Welcome to DAVIDsTEA's Second Quarter Results Webcast for fiscal 2025. Today's webcast is being recorded [Operator Instructions] Before we get started, I would like to remind you of the company's safe harbor language. This webcast includes forward-looking statements about expectations for the performance of the business in the coming quarter and year. Each forward-looking statement contained in this webcast is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Additional information regarding these factors appears under the heading Risk Factors and Uncertainties in the Management's Discussion and Analysis of Financial Condition and Results of Operations, the MD&A, which was filed with Canadian regulatory authorities and is available on www.sedarplus.ca. The forward-looking statements in this discussion speak only as of today's date, and the company undertakes no obligation to update or revise any of these statements. If any non-IFRS financial measure is used during this webcast, a reconciliation to the most directly comparable IFRS financial measure will be detailed in the MD&A. As a reminder, all dollar amounts referred to are in Canadian dollars unless otherwise indicated. Now I would like to turn the call over to Sarah Segal, Chief Executive Officer and Chief Brand Officer of DAVIDsTEA. Sarah Segal: Thank you, operator. Good morning, everyone, and thank you for joining us today. DAVIDsTEA stayed the course with its omnichannel growth strategy in the second quarter of 2025, supported by retail stores and wholesale channel sales increases of 9.1% and 2.5% year-over-year, respectively. Overall, we reported a net loss of $1.6 million on sales of $11.1 million in the second quarter, which is typical of our seasonally driven business. While our online sales have not grown to target, we are encouraged by the halo effect of our retail locations, which continue to drive brand awareness and customer engagement. As we expand our store footprint, we are intensifying our community and brand marketing efforts across both digital and physical media to ensure we remain top of mind with consumers heading into our peak selling season. If you recall, we generate more than 60% of our annual sales volume in the third and fourth quarters. For example, we have invested in online advertising, billboard ads, wellness influencers, affiliate programs and promotional events to raise brand awareness with consumers as they seek to buy gifts for themselves and their friends during the upcoming holiday period. We expect these initiatives to generate a strong return on investment and contribute to profitable growth. Against this backdrop, our business continues to operate in a challenging environment characterized by the imposition of tariffs in the U.S., higher unemployment and inflationary pressure, but our brand has demonstrated remarkable resiliency against these macroeconomic headwinds. Looking ahead, we fully intend to make retail stores the focal point of our omnichannel growth strategy. After all, the best advertising for DAVIDsTEA is a new store, which continues to provide a superior personal experience through our knowledgeable tea guides. We believe this positive in-store consumer experience in turn, will continue to convert non-tea drinkers or casual tea drinkers into devoted tea lovers. Accordingly, we are currently renovating our flagship store in Montreal South Shore and remain on track to reopen in mid-November. This represents an exciting first step in our renewed retail expansion strategy. We have also signed a second lease agreement in Quebec City. The opening of a store at Laurier in Quebec City's provincial capital will supplement our current offering at Les Galeries de la Capitale. In addition, we are planning to unveil a third store at the Square One Mall in Mississauga, one of the premier shopping centers in Canada come July 2026. This store will be based on a new concept that is more open, including an accessible tea bar that enables consumers to sample a wide variety of premium teas and blends with curated signature drinks that change seasonally. So notwithstanding these 3 store openings over the next 12 months, we are currently negotiating with high-end mall owners across Canada to introduce additional new stores within our portfolio and be well on our way to significantly increasing our store footprint over the next 3 years. In summary, DAVIDsTEA stayed the course with its omnichannel growth strategy in the second quarter of 2025. We reported as expected financial results in what can best be described as a stable quarter with preparations to conclude the year on target. More importantly, we are firmly on a path to increasing our store footprint over the next 12 months while also increasing our marketing efforts in new and exciting demographics with a focus on experiential marketing to ensure that DAVIDsTEA brand is top of mind with consumers. Ultimately, with these actions, we have our sights set on delivering sustained and profitable growth in the periods ahead. I will now turn the webcast over to Frank Zitella, President, Chief Financial and Operating Officer of DAVIDsTEA. Frank Zitella: Thank you, Sarah, and good morning, everyone. Consolidated sales improved 0.5% to $11.1 million in the second quarter of 2025. This slight year-over-year increase can be attributed to higher brick-and-mortar and wholesale channel sales, partially offset by lower online revenues. On a channel basis, brick-and-mortar sales grew by $0.4 million or 9.1% to $4.6 million in Q2 of 2025, driven by the contributions of 2 additional stores in the Montreal area and positive comparable store sales growth of 0.6%. Wholesale channel sales, meanwhile, rose by $0.1 million or 2.5% to $1.5 million in the second quarter as we restocked grocery stores, pharmacy chains and big box stores with our core products. For their part, online sales decreased by $0.4 million year-over-year or 6.7% to $5.1 million as macroeconomic headwinds and noise surrounding tariffs were a drag on e-commerce revenues. Geographically, Canada represented 90% of total sales in the second quarter of 2025, while the U.S. accounted for 10%. Revenue south of the border decreased by $0.3 million year-over-year. Gross profit remained stable at $5.3 million or 47.2% of sales in the second quarter of 2025 as a slight decline in product margin was offset by lower freight, shipping and fulfillment cost per unit. Selling, general and administrative expenses decreased by $0.1 million or 1.9% to $6.6 million in the second quarter of 2025. The slight year-over-year improvement was driven by improved IT expenses, resulting from the successful conversion of our full technology stack to a lower cost operating system. During the quarter, we also reversed previously incurred IT expenses. In addition, we reported an impairment charge on property, equipment and intangible assets in Q2 of 2024 that did not reoccur in the most recent quarter. These savings were mostly offset by increased marketing expenses in the second quarter of 2025, which Sarah referred to in her prepared remarks, along with higher wages and employee benefits. In terms of profitability, net loss remained stable at $1.6 million in the second quarter, while adjusted EBITDA amounted to negative $0.2 million compared to negative $0.3 million in the same period last year. Moving on to liquidity and capital resources. DAVIDsTEA's cash position improved to $7.6 million in the second quarter of 2025 from $6.7 million in the second quarter of 2024. On a sequential basis, our cash declined from $10.4 million in the first quarter of 2025 due to the seasonality of our business. Cash flow used from operations, meanwhile, amounted to $1.5 million in the second quarter of 2025 compared to $1 million in the same period of 2024. The year-over-year increase in cash used was mainly due to higher inventories in preparation in the upcoming selling season, partially offset by greater trade and other payables compared to the prior year quarter. In closing, the entire DAVIDsTEA team is brimming with excitement for the upcoming selling season with brand-new collections and innovative gifts prepared for our loyal customers. Behind the relentless push to elevate the wellness of tea drinking across our brick-and-mortar online and wholesale channel sales, we remain focused on delivering profitability on a sustainable basis. Consequently, all investments undertaken, including those to raise brand awareness and to be top of mind with consumers are judiciously scrutinized to deliver significant ROI over time. Finally, we announced that Ernst & Young LLP, Chartered Professional Accountants, resigned as auditors of DAVIDsTEA at the company's request and that the Board of Directors appointed Richter LLP Chartered Professional Accountants as the company's new auditors. DAVIDsTEA thanks Ernst & Young for its service as auditors since fiscal 2011. This concludes our review of second quarter results for fiscal 2025. We encourage investors wishing to obtain additional color about DAVIDsTEA to contact Investor Relations to coordinate access to management. Thank you for joining us today.