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Leon Devaney: Good morning. Our presentation today covers Central Petroleum's annual results for 2025. I'm Leon Devaney, CEO and Managing Director of Central Petroleum, and I am joined by our CFO, Damian Galvin. Throughout today's presentation, you are welcome to submit questions online, which we will address at the end. Please ensure you read the legal disclaimer that applies to this presentation. Last week, we released our 2025 annual report. Consistent with our quarterly reports, the company has achieved several key milestones that highlight strong operational and financial progress. A major success was the conclusion of a competitive gas marketing effort that resulted in a significant multiyear gas sales agreement that derisks and strengthens the company's future cash flows. Operationally, 2 new production wells were drilled and brought online at Mereenie. These wells were completed ahead of schedule, under budget and delivered production rates well above initial expectations, demonstrating effective project execution and strong asset performance. On the financial front, the company restructured its debt with a revised amortization schedule extending to 2030, eliminating refinancing risk and increasing our financial flexibility. As a result of these achievements, the company has the capacity to undertake a share buyback program, marking its first shareholder return event since listing nearly 20 years ago. I'll now hand over to Damian to go through our annual results in more detail. Damian Galvin: Thanks, Leon. FY 2025 has certainly proven to be a pivotal year for the company, and the results won't come as a surprise for those who have been following our quarterly results. Our bottom line statutory profit of $7.7 million is, I think, in many ways, more satisfying than the $12.4 million profit we posted last year, that's because last year's profit included $13.8 million profit from selling our interest in the Range [indiscernible] gas permit in Queensland. So when you strip out those one-off profits, you get a much better feel for how the business has turned around. So the underlying profit is $6.5 million this year compared with an underlying loss of $1.4 million the year before. So that's a significant turnaround. And more than 2/3 of that profit was recorded in the second half of this year as our new -- as those new gas sale contracts came into effect. Now the improvement in performance, it's evident across most of the metrics. You start with the revenues, $43.6 million. That's up 17% from last year, largely due to the increase in realized price, which was up 19% to $9.02 per gigajoule equivalent over the full year. And that flows through to the increased sales margins and the underlying EBITDAX, which was up 43% at $19.6 million. So some other items in there. The result also benefits from lower corporate and admin costs and reduced exploration activity this year. Higher interest rates have kept finance costs relatively steady, and we recognized a profit of $1.3 million on the sale of some surplus land near Alice Springs. So an excellent result for [indiscernible] have a closer look at some of the main drivers. The catalyst for the transformation lies with the new gas contracting strategy that we implemented early last year. And the impact from that on revenues was twofold. So firstly, the new contracts resulted in more reliable volumes. In the first half of the year, we had the benefit of those available contracts wholly within the Northern Territory, and they were mitigating the impact from the extended closure of the Northern Gas Pipeline. In the second half of the year, we had new contracts that also provided reliable offtake within the Northern Territory when we couldn't deliver gas to our customers due to pipeline closures. Secondly, those new contracts, which replaced the legacy contracts from 1 January this year, they're at higher prices. And the chart on the right shows the 27% jump in the second half average prices. And that flows through to the bottom line and cash flows. And I'll come back to margins shortly. Now the 17% increase in revenues was also boosted by record demand for gas from the Dingo field and the 2 new Mereenie wells, which were online from quarter 3, providing much needed additional volume. In terms of other revenue, we also recognized $1.3 million from the release of take-or-pay proceeds, and we're able to pass through some of the increased Northern Territory regulatory costs to some customers and we recovered $600,000. Coming back to volumes. The 2 new Mereenie wells were successfully drilled and commissioned. They're ahead of schedule, are under budget, and they've outperformed the pre-drill expectations. So it was a great result, and we're very happy with the outcome from those wells. Oil production at Mereenie was also higher. It was up 14%, and that was largely as a result of the flare gas compressor that we commissioned and installed late in the previous financial year. However, the oil offtake was partially constrained in the fourth quarter and that did have a knock-on effect on gas production, and we've implemented some solutions recently so that volume shouldn't be affected going forward. We do continue to see some seasonal demand fluctuations, particularly when the NGP is closed. And you can see on the chart, the lower volumes experienced in late winter, early spring, both last year, which is on the far left of the chart and also in the current quarter, which is on the far right. The difference this year is that we've protected our cash flows through take-or-pay arrangements in our recent gas supply agreements. So while we're expecting the September quarter gas volumes to be about 8% lower than the June quarter, cash flows will be less affected. The higher prices have flowed through to margins. So if you exclude depreciation, our gross margins increased by 26%. They're up from $3.65 per gigajoule equivalent last year up to $4.60 this year. Our cost of sales, they rose about 6% on a per unit basis. And some of that's due to the higher cost of our return to overlift gas, and the cost is linked to the sales price, so it's naturally higher. The improved margin that we saw was really just from 6 months of improved contract pricing. So we could expect a further improvement for the full year to June next year. And that's also going to benefit further once the overlifted gas is all returned in May next year. Our focus on cost control continues, though, and we do pride ourselves on being a low-cost operator. For example, the chart on the bottom left shows the progress that we've made in reducing our net corporate and administration costs. They are down 39% from last year and 60% lower over the last 2 years. The improved financial performance and cash flows has us in a much stronger financial position than previously. Cash at June 30 was $27.5 million and net cash, that is cash less debt was $3.9 million. That's our highest in over a decade. Our loan facility is in good shape. It's locked in until 2030. We don't have any mandatory principal repayments until March 2027, but we do have the ability to make earlier repayments if we choose to do so. So this stronger balance sheet has enabled us to commence our first program of shareholder returns through an on-market share buyback. We could buy back up to 10% of issued capital over the next 12 months, and this would cost a relatively modest $4 million at current prices or $2 million if we only bought back 5%. Now we've appointed Morgans to manage this process for us, although it should be noted that the total number of shares ultimately bought back over the 12-month period may be significantly less than the 10% cap. And our trading activity will be dependent on considering various factors, including, for example, the prevailing share price, market liquidity, regulatory requirements and trading constraints under the ASX listing rules, maturity of potential commercial transactions that could be material to the share price and other capital allocation opportunities, including growth opportunities and debt repayment. So although we haven't yet been able to start buying on market, consistent with that buyback strategy to reduce issued capital at the current market prices. We've cash settled some of the vested equity incentives, which would otherwise have converted to shares this month, and that's about 8 million shares that we've effectively taken off the market already. Now another achievement that might have gone unnoticed in the annual report was the reserves upgrade, and that arose from the outperformance of those 2 new Mereenie wells and also the continuing ongoing consistent performance of the Dingo field. So the upgrade of proved and probable as 2P gas and oil reserves means we effectively replaced 96% of our FY 2025 production. And so that's an indication of the ongoing reliability and producibility of these Amadeus Basin fields. Look, in summary, it's a satisfying result across the board. It's got us in a strong financial position. So with that, let's let FY 2025 fade away into the rearview mirror, and I'll hand you back to Leon. Leon Devaney: Thanks, Damian. While we were pleased with last year's performance, our focus remains on maintaining momentum and enhancing shareholder value, including improving the share price. With a cash balance exceeding $25 million and a strong portfolio of firm gas contracts, we are well positioned to pursue both growth and shareholder returns. In addition to the share buyback program, we are evaluating more substantial forms of shareholder returns such as sustainable dividends as part of a broader capital allocation strategy that balances near-term value with long-term growth. Our existing producing assets continue to be a vital avenue for increasing shareholder value with opportunities to rapidly boost production through the drilling of new wells. We have made significant progress in planning and securing approvals for future drilling programs at Palm Valley and Mereenie. These investments are obviously dependent on obtaining long-term gas contracts at acceptable margins, so we will persist in actively marketing these volumes to potential customers. Additionally, we are advancing efforts to restart exploration in our sub-salt permits with the initial activity likely to be an appraisal well at Mount Kitty, a discovery with high helium and hydrogen potential. Concurrently, we are progressing farm-out discussions for conventional exploration in the Western Amadeus Basin, focusing on EP115, which is on trend with our existing producing fields at Mereenie and Palm Valley. Beyond our current portfolio, we remain open to lower-risk, high-impact growth opportunities that align with our core strengths and support reserve expansion and revenue diversification. In conclusion, we are confident in our ability to sustain the momentum generated over the past year well into the future. We have significant opportunities for capital allocation, including further returns to shareholders. And as mentioned earlier, we are diligently working to deliver some of these growth opportunities over the coming months. I want to assure our shareholders that as we pursue growth, we will remain disciplined, ensuring that any transaction adds value and effectively leverages the strong financial foundations we have built. That's the end of the formal presentation, so we can now move on to questions and answers. Damian Galvin: Thanks, Leon. So we do have a few questions here this morning. So happy just jump straight into them. I guess the one we often come across probably a statement more than a question, shares which pay dividends are viewed favorably by investors, obviously. And I think as Leon mentioned in his list of capital allocations, it's one of the -- one of the option that's been very seriously considered at this time, but it is being considered in conjunction with those other alternative uses for capital. So certainly, we're keen to get to a dividend as soon as we can, and it's certainly under consideration. Leon Devaney: Yes. Just to add to that, I think Slides 9 and 10 list some of those capital allocation options that we are working through. We'd like to see how those play through over the next couple of months. But certainly, with the cash balance and the cash flows we have, dividends are on the radar and something we understand would be obviously well received by shareholders and certainly could have an opportunity to rerate the stock. So something we're very carefully considering at this point. Damian Galvin: Okay. Question about our helium prospects, [indiscernible]. When will exploration resume? Leon Devaney: Great question. We are very focused on getting that kicked off. Obviously, it's been stalled for a long time. There is some complexity with the joint venture and our operator in terms of getting that program going. We think we have a strategy and a plan in place to kick start that and get it going again in the near term. If we're successful in that, the target timing would be a Mount Kitty well by mid-2027. That's what we'd be shooting for. Again, there's quite a bit of work we need to do to put that in place and make that happen. But that is a focus, and we have been working very hard in the background to get that going and get a well drilled there. We think it's an exciting prospect, a significant upside for the company. So we're quite keen to get going on that permit and Mount Kitty in particular. Damian Galvin: Okay. Could you clarify what the expected boost in cash flow might be once gas overlift is all returned? So gas overlift, that should all be returned by May next year. So we're getting close now. I think we're returning at about 2 terajoules a day. So if you calculate her out and $9 or $10 gas price, I think we're up around in excess of $6 million a year in extra revenue. So we're certainly looking forward to that boost coming in June next year. In terms of other questions, what else we've got? Can you please give us some indication on timing of drilling new Palm Valley wells? Leon Devaney: We're -- as I mentioned, we're obviously progressing planning and approval. So we're doing a lot of the long lead stuff in terms of getting prepped and ready for a drill-ready positioning for that field. We see a lot of value in being able to quickly bring new production from Palm Valley into the market as a 50% interest holder in Palm Valley and with the production we've seen in the prior wells that we've drilled there, it is a very compelling case for us to invest and increase production and sell that gas. So one of the top priorities we do have is getting that drilling approved, prepared, and fit for it. Now the critical piece of that puzzle, obviously, is ensuring that we do have a market for it. The market, as I've mentioned consistently over the past couple of years has been in a state of change. That change is still continuing, both with production from the Blacktip field, but also appraisal activity at the Beetaloo. Notwithstanding that, we are in active discussions with potential customers, and we are trying very hard to put in place a gas supply agreement for the additional volumes from Palm Valley at acceptable margins that we think are in the best interest of shareholders. And once we're in a position to have that contract in place and underwrite those volumes, we'll be looking to drill those wells very quickly. That's certainly our intent at Central. Obviously, it needs shareholder or joint venture approval with our joint venture partners at Palm Valley. Damian Galvin: Okay. There was a question here. What is the situation with joint ventures? I'm not sure whether [indiscernible] production joint ventures or exploration ones. But is there any sort of clarity around -- I think we're all similarly minded at the moment. Leon Devaney: Yes. I think we've got great alignment with the joint ventures that we are working with on -- across our fields. They're like-minded with us. They're looking to extract value from the operating assets or looking for ways to grow and increase production and sell that into a market that we see as desperately needing firm gas supply. So we've got great alignment. They're contributing significantly to our efforts in the fields. So we couldn't be happier. We're quite pleased with the joint venture arrangements we do have. Obviously, in the sub-salt space, the joint venture has been more challenging in terms of progressing appraisal activity. That's something that we've been working very hard on. We do have a good working relationship with Santos, who is operator, and we think we're making progress on that front, as I've mentioned earlier. So hopefully, we'll have some good news coming in relation to that joint venture over the coming months as well. Damian Galvin: Okay. Could you elaborate on why Dingo production performed so strongly? Is there a possibility that further wells and contracting gas could be on the cards? Leon Devaney: Yes, it's really a market issue for Dingo. It's selling directly into a power station. That power station obviously has a gas requirement that is subject to the energy demands in the Alice Springs area. That demand has increased and their requirements for gas has increased. There are alternative supplies they do have. And so depending on how they adjust their portfolio, that will drive the demand that they require from the Dingo field. Having said that, we do have a very strong take-or-pay position at Dingo and you would see take-or-pay payments being made at the beginning of each calendar year that reflect any volumes that they haven't taken under contracts. So from our perspective, the cash flows from Dingo are very steady and reliable. And we're looking forward to continuing to meet the contract. And if there are opportunities to grow that field or expand that field and add more volume into that Alice Springs market, we're certainly open to it. And there have been conversations in that front with the NT government and PWC, and we'll certainly be exploring that going forward to see if there's opportunities out that are a win-win for both parties. Damian Galvin: Okay. Can you run us through longer-term contracts market that is 2028 onwards? Any changes there? Leon Devaney: No, as I've mentioned quite a few times in previous webinars, the longer-term gas market is probably where there's considerable uncertainty, particularly, as I mentioned, with respect to longer-term production from Blacktip, which has historically been a baseload gas supplier for the NT. That's a decline or appears to be in decline. And we've also got the Beetaloo, which is undertaking appraisal. We don't know what the results of those appraisal tests really are at this point. I think a lot more information is going to be coming out over the next 6 months. It is an uncertain market when you start moving out to 2028. Our focus has been ensuring that certainly in 2026, 2027, we've got ourselves in a very strong contracted position. We do have contracts extending out through to 2030, which does help. But we do have additional volumes that we are trying to contract from 2028 and beyond. Those are the Arafura contract volumes that we backed out of earlier this year. There is interest. It is a bit early. It's a couple of years away. So it is a bit early in terms of contracting those volumes with counterparties. We are also talking to projects in the NT that might require that gas or certainly are interested in that gas, including Arafura as a potential customer going forward. So it is a very active part of our marketing effort and strategy, but it is something that will obviously take time. We'll lock those in when we think the time is appropriate. And we think contracting gas at that point in time is in the best interest of shareholders. Damian Galvin: Okay. Thanks, Leon. Probably also, there was a question here around how the Beetaloo Basin was looking and progressing. So I think you probably covered that off. Leon Devaney: Yes, I didn't spend a lot of time on this particular webinar going into the market. There's not a lot to update. We did a webinar last month, I think it was. There hasn't been a whole lot of information in terms of flow rates coming out of either of the appraisal programs happening at the Beetaloo. And the Blacktip production, similar to what we experienced last month in terms of turndown from nominations due to reduced demand in the NT. It's very hard to understand Blacktip's production at a field level, given some of that could be a result of a turndown as well. So really, at this point, there's not a lot of additional information to be able to get more visibility. I think we'll need to continue to watch this space. And as I said, over the next 6 months, I think or so, getting some more information, and we'll see how it all plays out. . Damian Galvin: Okay. Question here around hydrogen. Are the JVs looking at directing any hydrogen finds into ammonia production? Leon Devaney: Well, obviously, we've got to find hydrogen and be able to demonstrate we can produce it at commercial rates. And I think that is the focus. That's certainly the focus of our sub-salt exploration activity, hydrogen and helium. Obviously, we have hydrocarbons, and we're very familiar with being able to commercialize that. We think that's going to form an important part of the business case for those prospects. But our first step is to get these appraisal wells in, particularly Mount Kitty, demonstrate we can have a commercial flow rate. And once we understand what that looks like and understand with more granularity the gas composition, we can then start to formulate a business strategy around how we commercialize and develop prospects. So it's certainly an area that we see as a potential revenue stream for the company going forward. But we have a period of time before we're actually in a position to say how or with any certainty what that will look like or how it will be developed. Damian Galvin: So I think there was a couple there just around share price and where we're at. I think one of them was why is Context Morningstar valuing the company at $0.06? I guess the short answer to that is I probably just run some AI bot on it that's taken the current share price. I would point you towards the analysis on our website from MST Access. They've got a full research paper there. I think they land at $0.20, which brings us to another question. I can't understand why the CTP share price has not progressed well north of $0.20 per share in the last 5 years or so. I realize all CSG producers are in a similar position, but I would have thought with your gas sale contracts and producing field it would be a little different. Leon Devaney: Yes. I'd go back to really what has been the theme, I think, of this presentation. We've had a great 2025. Our plan and our focus is to -- certainly one of the key objectives that we're quite focused on is to get the share price up. The ways we're going to do it, we've talked about in this presentation, that's to continue the momentum we've had in 2025, continue to deliver safe, strong performance at our operating fields, generate the kind of financial outcomes that we've seen in 2025 and hopefully improve on those, continue to strengthen our balance sheet, and obviously, with the GBA coming off in a few months, that will provide a fairly significant kick start to that as well. And then look at capital allocation options, including shareholder returns. There's opportunities there for us to demonstrate and actually in a concrete way, return more significantly capital to shareholders through sustainable dividends, for example, that could be a good catalyst for the share price. But we have a number of growth opportunities as well that we're looking at. We're very active in discussions with a broad range of things that we think are material and could be quite beneficial for the company and could have an impact on the share price going forward if we're able to complete those and get those across the line. So really, we're working quite hard on a basket of things and our focus is on creating shareholder value. But specifically, as part of that, we think that, that is the opportunity and a pathway to get that share price elevated and increasing to reflect the value of the company. Damian Galvin: Yes. I think probably we all share the frustration of shareholders around the share price and it probably reflected in our decision to allocate some capital towards share buyback at these prices is a good use of capital. So something we're working on across the board. Okay. A couple of other more questions here. What about the company Omega Oil and Gas in Surat Basin? Any comment on this development? Leon Devaney: Obviously, they've had some fantastic success and I understand they've done a fairly significant capital raise. I think what it does show is that despite the challenges in our sector, there's great opportunity for significant growth, significant value enhancement in smaller companies where you're able to successfully find resources and demonstrate that you can potentially commercialize that. And if it's of a substantial size, then clearly, that has a major impact on the valuation of companies. So I think success will be rewarded in this market. And that's one of the key things that we're looking to do at Central, whether it's through creating some visible tangible benefits to shareholders through shareholder returns to demonstrate the success we've been having with the operating assets that we do have in place, improving on those operating assets or in the growth opportunities that we have in front of us, picking and finding the right ones, being smart about it, being smart about how we structure it, how we approach it, finding success and essentially following a similar path where I think Central certainly has the opportunity to go and have a substantial increase in share price if we're successful. Damian Galvin: Question here. Could we see the FY '26 result being boosted by that gas overlift coming off that is like FY '25 being skewed towards a much better second half from the new gas contracts. I think the answer to that is probably won't see a big boost in FY '26 because that gas balancing agreement we expect all that gas to be returned by about May. So it's really only probably 1 month of upside that I'd expect to see on cash flow. So probably not for FY '26. Leon Devaney: Not substantially. But certainly, as we look forward to future financial results, that share buyback is a significant liability that will come off. As Dami mentioned, it's in the order of $6 million to $7 million at current portfolio pricing. That's in the order of a $0.01 per share type of thing. So it's a substantial number for the company. It's something that we have been paying off diligently over the past years, and we're looking forward to that being lifted, and it will have a big impact as we move forward into fiscal year 2027. Damian Galvin: Okay. In light of the Omega Gas comments, would Central bid on new Queensland acreage if it made strategic sense? Leon Devaney: Yes, we are open to opportunities that we think are lower risk, high impact. We're not restricted to opportunities just in the NT. Obviously, that's where we have a core skill set and our existing footprint. But we are casting a wider net and looking at opportunities up and down the East Coast and are in discussions for those. Obviously, there's a lot of opportunity in the market, particularly where you have transitions, whether it's gas market transitions or other events. We've been very disciplined in terms of filtering through those. There's no shortage of opportunities to throw money at, and we're in a great position with our cash balance and cash flow to have that kind of money. So obviously, we're of interest to parties that are trying to farm out or divest. But we do have a very, I think, clear understanding of what we think will add value to the company, what fits this company and where we can create value and what is in the best interest of shareholders. So we are very selective in what we look at and what we engage in, in terms of further investigation. But there are opportunities out there, and it could be in Queensland, it could be South Australia, it could be anywhere on the East Coast, and it could be further afield than that potentially. But our bread and butter, obviously, is, at this point, onshore and the East Coast is a familiar market to us. But having said that, we are open to good opportunities at the right price with the right risk profile, and it's something that we're working very hard to screen and see if we can uncover opportunities that are in the best interest of shareholders. We've had a good track record on that as well. If you look at what we've done with the Range project, we didn't put any capital into it. We had a $12 million profit from that. So that turned out actually quite positive for the company. It didn't go as quickly. We were hoping to get into development, but that was a positive investment for us. The Peak deal, obviously, that fell over. That was unfortunate, but it was really a lost opportunity as opposed to a loss for us. So we've certainly got to make sure going forward that the deals that we do enter into we cover off and really make sure that the credit risk and the ability of the counterparties is there to perform as we expect when we go into a joint venture or a farm-in opportunity. Damian Galvin: All right, I think that's all the questions for today. Leon Devaney: Great. Sounds good. Well, I appreciate everyone's attention and look forward to updating all of you as we go forward through the end of this year. I think it's going to be a very exciting next few months. And we're very confident that some good things will be happening and look forward to sharing that with you as we go forward. Damian Galvin: Thank you very much.
Eric Lakin: Good morning. I'd like to welcome everyone in the room and on the webcast to the TT Electronics 2025 Half Year Results Presentation. I'm delighted to be here today to present the results as Chief Executive of TT. This follows a permanent appointment decision by the Board of Directors last month, and I'm grateful for the trust placed in me by the Board and for their support. I'm also very happy to introduce you to Richard Webb, our Interim CFO, who joined us in May this year. It's been a remarkably busy 5 months since the 2024 results were announced in April, and we have made significant progress since then. In the first section today, I will cover the headlines for the half, including the key financials and an update on the actions taken to stabilize the business. Then Richard will take us through the results in more detail. In my second section, I will share more of my early impressions of TT's business. I'll also talk about the overall direction of travel and provide more color on the outlook for the remainder of the current year. We will then take Q&A. Before I start, however, I wish to recognize and thank all of my colleagues for their hard work, commitment and support during what has been a challenging time with significant change. Overall, TT has made solid progress over the past few months, including significant strides with the business improvement in North America, and we're on track to meet expectations for the full year. Our European region has once again performed well as momentum continues, benefiting from our strong long-term positions on several Aerospace & Defense programs. For the Asian region, business operating margins held up through our Lean business program in Suzhou despite being impacted by some order delays for certain customers. With regard to our North American business, there have clearly been a number of challenges to navigate over the past 12 to 18 months. In the first half of this year, we have taken prompt action to stabilize this North America region. In April, we announced that we were launching a strategic review of the underperforming components business. As a result of this ongoing review, we took the decision in June to close our loss-making Plano site in Texas, which lost around GBP 6 million last year. We also established a separate management team for components to focus and provide greater oversight. We stepped up action to turn around the loss-making Cleveland site. We deployed external consultants to undertake a full operational review of the business, which has now concluded, and the local management team is now at full strength. I feel confident that we have turned a corner with the performance of this business. More about that later. Our drive for inventory reduction continues to progress well, which contributed to an excellent cash conversion outcome of 135% in the half and leverage of 1.9x, which is within our target range of 1 to 2x and slightly ahead of our previous guidance. Richard will cover this in more detail. Overall, I would summarize the first half as a transitional period. While the performance in the half doesn't reflect many of the operational improvement actions taken, these actions do underpin both the second half improvement in profitability and future run rate profits. Importantly, we continue to expect full year adjusted operating profit to be in line with market expectations. So let's take a closer look at the operational turnaround projects in turn. Firstly, the Components' strategic review. The Components business has a different operating model and characteristics from the other TT businesses of Power Electronics and Manufacturing Services. We are, therefore, undertaking a strategic review that was started in the second quarter. Components is a more transactional higher-volume business with shorter lead times and therefore, has less future visibility than other parts of TT. The route to market is predominantly through distribution channels, which also tends to exacerbate the stocking and destocking trends. Consequently, I believe it is the right decision to give this business separate management focus within TT, and we are already seeing benefits from this new structure, including tailored initiatives for pricing, marketing and product development. This will ultimately drive improved performance through volume, margin and overhead recovery, especially when we see a positive turn in the industry cycle. We continue to monitor levels of our Components' product inventory held by distribution partners. And as you can see from this graph, encouragingly, the stock levels have been showing a consistent downward trend. Although we haven't yet seen a significant uplift in new order intake, it is encouraging to see a stabilization of order levels. A key action to improve the performance of the Components business was the decision to close the Plano site to stem the losses. Production is planned to discontinue by the end of this year. The factory is currently fulfilling demand from last time buy orders, which also helps underpin the second half improvement for the business. We are now expecting cash closure costs of around GBP 4 million, which is lower than originally anticipated and delivers a payback of less than 1 year. Now for an update regarding the ongoing activities to improve performance at the Cleveland, Ohio site. There has been a lot of activity at this site, and I'm pleased to share some recent data. In fact, Richard and I were there last week along with the Board, and we were heartened to see the significant progress being made. I'm glad to report we have turned the corner in Cleveland, having implemented a detailed improvement plan, which was developed with our local site team in collaboration with the external consultants. The plan incorporates multiple margin and cash flow initiatives, including pricing, production planning, inventory optimization, procurement and efficiency measures manufacturing processes at the site have become more efficient, supported by improved factory layout, process optimization and waste reduction. You can see the outcome of these initiatives in the two charts on this slide, which show encouraging trends. In the blue column chart, productivity, which is defined as standard hours earned divided by total labor hours paid, has been consistently improving during the year and has now reached our target level. June was an expected temporary dip due to a planned 1-week factory shutdown to improve the layout and flow. Productivity improvement has been delivered partly through a reduction in scrap and rework hours, which can be seen in the purple column chart. In addition, we have further reduced headcount at the site, which is down 17% since the beginning of the year. More efficient operations has led to improving service levels to our customers, including on-time delivery, which puts us in a better position to tighten our commercial terms for legacy low-margin contracts. The benefit of this work stream will be delivered over several months as existing contract terms come up for renewal. We have also completed a comprehensive balance sheet review, which has resulted in a largely noncash restructuring charge in the first half of GBP 5.7 million, predominantly related to aged and obsolete inventory. Now that the external consultants have completed their assignment, the improvement project work streams are owned by the Cleveland team. There is full commitment from this team to continue to deliver on the improvement plan, and it was very encouraging to hear updates from them last week. So hopefully, that gives you a good feel for the progress with our short-term priorities, especially as we focus on improving the operational performance in North America. Now I'd like to hand over to Richard to go through the first half numbers in more detail. Richard Webb: Thank you, Eric, and good morning, everyone. This is my first set of results with TT having joined the group in May, and I'm really pleased to be part of the great TT team. It's been a busy few months, but I'm pleased with what has been achieved and the actions taken to stabilize the business. Clearly, it's been a mixed half with continued strong profit progression in Europe, offset by specific challenges at two North American sites and order delays for our Asia business. Now moving on to the group financial metrics. Throughout the presentation, I'll refer to organic performance. This reflects the performance on a constant currency basis and with the impact of last year's Project Albert divestment removed. Revenue was down by 6% organically. If we exclude the Plano site from both periods, we would have been down by 4.3% organically. As already communicated, Plano will be closed by the end of the year. Adjusted operating profit declined by 29.7% organically to GBP 13 million as strong operational gearing in Europe was more than offset by 2 loss-making North American sites. Adjusted operating margins dropped by 180 basis points on an organic basis to 5.5%. Adjusted EPS declined to 1.9p, reflecting the reduction in operating profit and the impact of a much higher effective tax rate in the current year as we cannot currently recognize a deferred tax asset for the U.S. We've taken the prudent decision to focus on strengthening the balance sheet and have decided to continue the pause on the dividend and will not be paying an interim dividend. Return on invested capital was flat at 10%. This metric benefited from a reduced denominator following the December 2024 impairments of North American goodwill on components assets. And just to flag, half 1 2024 has been restated, mirroring the restatement of the 2024 full year we highlighted in our announcement of the 10th of April. This all relates to North America. On this slide, we're showing the revenue bridge, which adjusts for the Albert divestment and FX and shows the makeup of the 6% organic revenue decline. Our positioning on long-term programs in the strong Aerospace & Defense end market has driven the growth in Europe, offset by the issues at two sites, Plano and Cleveland in North America and the order delays impacting our Asia business. Similarly, for adjusted operating profit, you can clearly see the strong drop-through on the European revenue growth. However, this was more than offset by circa GBP 3.5 million of losses at Plano and the Cleveland challenges, which Eric explored earlier. On a more positive note, we're really pleased with the strong cash conversion of 135% in the first half. Net debt, excluding leases, reduced further to GBP 73 million. This is a GBP 36 million reduction since the end of June last year, and we're very happy with the good progress on cash conversion and debt reduction. Free cash flow was GBP 6.4 million. Over the last 18 months, there's been a significant focus on reducing our inventory levels, and this initiative resulted in a GBP 5 million contribution to the half 1 cash flow, putting us well on track to delivering the commitments to a GBP 15 million reduction in inventory by the end of 2026. We closed the half with covenant leverage at 1.9x. As profits recover and cash generation continues, we expect to see a slight further reduction in leverage over the remainder of this year. Looking at the cash conversion in a bit more detail. Working capital movements were a net inflow of GBP 0.9 million in the half. This comprises the GBP 5 million of underlying inventory reduction mentioned just now, partially offset by a GBP 3 million creditor reduction and a GBP 1 million receivables increase. It's a much better picture than half 1 last year, where there was an GBP 18 million working capital outflow. We expect working capital movements in half 2 to remain broadly neutral. Before we move on to the performance of the regions, it's worth looking at end market revenue, which shows similar themes to 2024. Aerospace & Defense continues to grow strongly with the main benefit showing through in our European performance. Healthcare was down 6% organically, driven by the well-documented reduction in U.S. research grants and funding into the sector. Automation and Electrification declined by 14% organically, reflecting end market weakness for our customers. And finally, Distribution, which is where we have continued to experience our main challenges, with a 17% organic reduction. The biggest impact was in the North America region, particularly for our Plano site. As Eric mentioned earlier, we are now seeing distributor inventory levels stabilize. Now moving on to the regional performance. The European region continues to perform well, reflecting our long-term positioning with key customers in the A&D sector. We have built on a strong 2024 performance to deliver a 5% revenue increase on an organic basis and a 34% organic increase in adjusted operating profit. Operating margins have further improved, up 330 basis points, to 15.6%, benefiting from a favorable product mix in the half, good operational leverage on growth and further efficiency improvements coming through. Order cover for the region remains very strong, and we expect to deliver further organic revenue growth for the year as a whole. Clearly, North America has faced another difficult half given the slow components market and the execution challenges at our Cleveland site. However, as Eric has explained, action has been taken. And although not visible in the first half results, we expect to see evidence of these actions in our second half performance. Revenue was down 10% on an organic basis with some good growth in Kansas City, where a successful turnaround has been achieved from the challenges noted last September, more than offset by declines in Cleveland and in Components. If we exclude Plano from both periods, the organic revenue decline is 5.8%. The GBP 5 million loss in the region includes a circa GBP 3.5 million loss at the Plano site, which will be closed in the second half. In the half, we have booked restructuring costs taken below adjusted operating profit with GBP 6.7 million booked in relation to the Plano site closure and GBP 5.7 million for restructuring of Cleveland, which is mainly inventory related. As we look into the second half, a combination of higher revenue, management actions taken, such as the Plano closure and the Cleveland improvement plan means we expect the region to return to profitability in the second half, although the region is expected to be loss-making for the year as a whole. Finally, Asia, which has made another good contribution to the group despite lower levels of revenue, reflecting order delays due to geopolitical and related uncertainties. On an organic basis, revenue was down by 9%. Operating profit reduced by 14% organically, driven by the adverse impact of volume reductions. 2025 is a transition year for the region with the ongoing transfer of production for a major customer at their request from China to Malaysia. This is progressing to plan. The region is still delivering a strong margin performance with margins broadly maintained at 13.2%. Revenue in the second half is expected to be slightly lower as the order delays are expected to continue. The drop-through impact will result in half 2 margins being marginally lower than half 1. I wanted to highlight on this slide the ongoing balance sheet derisking. Inventory has reduced by GBP 22 million in total. GBP 5 million was a result of the sustained hard work on our ongoing inventory reduction initiatives, as I mentioned for the cash conversion slide earlier. These initiatives are expected to further reduce inventory in the second half, and we are on target for achieving the previously stated GBP 15 million reduction by the end of 2026. This is on top of the GBP 14 million reduction in inventory delivered in 2024. Separately, the Plano closure announcement has resulted in around GBP 5 million of inventory being written off below adjusted operating profit and the comprehensive balance sheet review at Cleveland also resulted in a circa GBP 5 million of inventory being written off, also below adjusted operating profit. As previously flagged, profit in 2025 is expected to be weighted to the second half. This slide gives some of the building blocks, not drawn to scale, to deliver the step-up in second half profitability. The Plano and Cleveland sites were significant drags on half 1 profitability. The decision to close the Plano facility and subsequent last time buy activity into the site in half 2 will provide a positive contribution. The Cleveland improvement plan will start to deliver improved performance. We have also factored in the impact of the ongoing order delays for our Asia business. We expect full year adjusted operating profit to be in line with market expectations. With that, I'll hand back to Eric. Eric Lakin: Thanks, Richard. So having spent much of the presentation so far looking back and reviewing the turnaround activities and progress, what's next? It is still early days in my tenure, which has been focused significantly on steadying the ship, but I do want to share with you some of my early take and direction of travel. TT has foundational capabilities, but there remain areas where we still need to improve our operational efficiency and leverage all of our assets across the business. We must continue to develop our people, products and market positioning to drive sustainable shareholder value in the long term. I'll shortly be covering examples of where we have been investing, technology, for future growth. In the meantime, our short-term priorities are clear. We must complete the fix of operational issues, complete the Components business strategic review, including performance improvement and restore confidence and deliver on our commitments to all stakeholders. I also want to mention that early on in post, I empowered the three regional heads by bringing them onto the executive team. This brought clear lines of responsibility and accountability and encourages collaboration across the organization. The executive team also now includes a leader for the Components business. Beyond our short-term focus, we also need to look further out strategically and drive top line growth. I've been impressed by many things that I've observed, getting to know our business and our employees over the last few months, which I think goes to the heart of the underlying investment case. TT is focused on structural growth end markets driven by megatrends and rising demands. While there have been some short-term softness related to geopolitical uncertainties, I believe ultimately that these are the right strategic markets to be in. Our engineering, manufacturing and sales teams have deep domain and application knowledge across these sectors. TT has particularly strong capabilities in Power Electronics, including Conditioning and Conversion and Electronic Manufacturing Services, known as EMS. TT offers high specification, highly customized electronics for mission-critical applications, which provide strategic advantage through differentiation. We collaborate with our blue-chip customers on long-term programs, and I believe there's a real opportunity to accelerate targeted investment in innovative technologies and products compatible with customer needs. A good representation of TT's strength is demonstrated by some significant recent customer wins, including a GBP 23 million contract this month with long-standing customer Kongsberg. Next, I want to remind you of the broad customer relationships we have across our end markets, which is so important for the business. We are proud to work with many blue-chip customers with whom we have long-term relationships. In fact, our top 10 customers have all been working with us for over a decade and many have been partners for 20 years or more. First, in Healthcare, Asia has secured some notable contract wins this year, reinforcing our regional strategy supporting life sciences OEMs with local production capabilities. In North America, our Minneapolis site is working with a medical equipment partner on next-generation surgical device development that use electromagnetic tracking technology. In Aerospace & Defense, we see continued growth opportunities with the NATO commitment to raise Defense spending targets from 2% of GDP to 5% by 2035. And we're also seeing momentum in civil aviation, driving demand for new aircraft and spares. For Automation and Electrification, we are well placed for growth through the cycle with strong brands across different specialist sectors, including semi equipment, power, security, rail and data centers. This chart may be familiar to you, but it illustrates our business model and customer spend patterns and how we seek to partner to support our customers from the concept stage through to full-scale production, leveraging our global footprint for engineering and manufacturing at each stage of the product life cycle. This development path varies by market and some programs can extend for many years with high barriers to entry in regulated markets, which provides visibility over long-term revenue streams. We have established a group-wide engineering and R&D function to leverage TT's expertise across all regions with product road maps for all sites. I've been greatly impressed with the technology and industry experts at our sites who help develop solutions for our customers' challenges. The image on the left shows how TT combine a fully integrated offering. For example, the use of our magnetics devices on our PCB assemblies, which along with our hybrid microelectronic devices can be designed into high-level assemblies. A core product of TT is our power units, which can incorporate our own PCBs as well as TT connectors and cable assemblies. On the right, it is an example of our customer-led approach to investment. Silver sintering is a key manufacturing capability that enables cutting-edge power modules for critical applications to be fabricated using the latest silicon carbide semiconductor devices. This represents the next-generation technology, enabling higher power with superior reliability and thermal performance within a smaller, lighter package, which are particularly valued by Aerospace customers. Another investment example is Altitude DC, our high-voltage direct current power system that was launched at the Farnborough Air Show last summer. We developed this in collaboration with the Aerospace Technology Institute as well as shared investment with them. This platform provides efficient and reliable power conversion solutions to enable longer duration flights at higher altitudes in civil aerospace, defense and air mobility vehicles. The modular design means reduced development time and costs and simplifies the qualification process. So that's just a couple of examples I wanted to share with you to illustrate our investment in the future. Let's finish with an outlook for the remainder of the year. We are clear on our short-term focus to deliver improvement in operational performance and margin and have taken decisions to accelerate this. This includes a component strategic review and the planned closure of Plano as well as the Cleveland turnaround project. Very important to me this year is -- and the future for TT is that North America is expected to show a step change in performance, leading to a return to profitability in the second half. Yes, it's still expected to be loss-making for the year as a whole, but it's good to have positive momentum in the region. This sequential improvement, together with further second half progress in Europe and a resilient contribution in Asia is expected to underpin a significant uplift in profitability in the second half of this year compared to H1. As stated earlier, we expect adjusted operating profit to be in line with market expectations. While our short-term priorities are clear, I plan to share further thoughts for the longer-term strategy in the new year. In conclusion, following my first few months in the business, I am convinced that we have a robust platform for growth with leading products and capabilities, deep customer partnerships in attractive end markets, and this makes me excited for TT's future. So now we're happy to open up to questions, initially from those in the room. There's also a facility for those on the webcast to submit questions, which we'll cover after those in the room. Thank you. Eric Lakin: Okay. First hand up. Mark Jones: I'm sure that's working. Mark Davies Jones from Stifel. Could I ask about the Asian business, please? Because clearly, the U.S. has been a priority and you're getting scripts with that, but delays seem to be drifting onwards in Asia. When does delay come -- become work that's not coming your way? And if you're relocating business from Suzhou to Malaysia, what does that mean in terms of ongoing capacity utilization at the China plant? Eric Lakin: Yes. Thanks, Mark. So overall for Asia, First, in terms of the production transfer, that's going very well and to plan. That was quite a significant transition for one customer in particular. It represented GBP 20 million or more of annual revenues. That will be complete this year. There was some safety stock that was purchased last year in the first half of this year. So that will contribute to some short-term softness as that safety stock is sold and consumed by the customer. I mean, overall, that does mean there is capacity for the Suzhou site. We have 4 SMT lines there and a very capable workforce. We have taken some modest adjustment to the headcount there to counter the transfer of business from Suzhou to Kuantan. But the underlying growth, if we look at the -- there's two large customers in particular, where we're seeing some softness in end customer demand patterns, partly due to the geopolitical uncertainty we've been talking about, specifically with the ongoing uncertainty around tariffs, it's difficult to know where they will be in 3, 6, 9 months' time. Some of the decisions made to agree the supply chain and location of fabrication has meant that there are some delays in those orders, which feeds into short-term softness in revenue. The good news is we're not losing business. We have a diverse portfolio with different geographies to provide offshore, both China and Malaysia, but also nearshore with Mexico, with the Mexicali EMS facility, but also indeed Cleveland. We're having increasing discussions with some of our key accounts and new accounts about onshoring production and EMS into the Cleveland site. So we're doubling down on our regional Asia for Asia projects. In fact, we're increasing our resource for business development headcount in Asia, including China, to grow our book of business with local customers in China. And we're having some good early traction with wins within the region so far. So I think I see it as temporary short-term softness in Asia, which we've not seen before due to specific end customer demand patterns and uncertainty. But over time, and as we go into certainly the second half of next year, we see a return to growth from our existing customers, but also as we see benefits for new business opportunities and new customers. Mark Jones: And maybe one for Richard. Lot of moving parts in the numbers. I wouldn't say I've read every page of the release yet from this morning. But in terms of setting the baseline for revenues, obviously, you restated the first half. Have we got full restatements on the same basis for the full year numbers? And how much of that revenue is Plano? So how much drops out next year from that? Richard Webb: So we're not going to give specific guidance on Plano specifically. But in terms of the restatement, so we've restated 2024 half 1 on a consistent basis with the 2024 full year restatement, which is about GBP 1.1 million of revenue that was taken out of the 2024 half 1. Vanessa Jeffriess: Vanessa Jeffriess from Jefferies. Just to start on a really positive note in Aerospace & Defense, obviously, seeing a lot of momentum there. Can we continue to expect double-digit growth over the next couple of years? And is the margin improvement in Europe all from operating leverage? Or is there more self-help to come through? Eric Lakin: Yes. So in terms of the first question, we're seeing continued growth momentum in Aerospace & Defense, as you'd expect, particularly on the Defense side. That's largely in Europe, but also increasingly in North America as well. We're getting defense contract wins in Kansas and Cleveland. I mean, this month, in particular, is a particularly strong month. We'll have -- this year will represent a record order intake for our Europe business. So certainly very strong demand and a lot of these contracts are multiple years. It gives us good visibility over the future years and particularly underpins a continued growth into next year. I couldn't -- I wouldn't comment on double-digit growth for the next 2 years because it's -- you're starting from a higher base, but we certainly expect continued growth over the next couple of years, if not beyond, which is very good from that tailwind. And ongoing discussions with customers, we expect to see more of that. I think in terms of the operational leverage, it's largely down to increased revenue and over a well-maintained cost base. There's some other initiatives as well in there, partly mix. We have some increase in some spares, which is higher margin, but also some other self-help initiatives, including some pricing reviews and changes, which helps the margin as well. Vanessa Jeffriess: And then on Asia -- obviously, you've just explained all the drivers behind the delays. But I think it's fair to say that your decline was maybe a little bit bigger than some of your peers. Coming into the business, do you think that you are as well set as peers to deal with the volatility that's arisen from tariffs? Richard Webb: Yes. It's -- I mean it's a fair observation. I'd say we've got specific large customers that have impacted the revenue for this year. And in particular, it's the extra stocking and safety stock from last year is partly contributing to that. And we're seeing, as I mentioned, some order delays. And some of these -- we're having live discussions with them right now. They're looking ahead and trying to understand, for example, U.S. import duty from Malaysia is currently 24%. Is it going to go down to 15%, 10% or less or stay where it is? So the -- we're set up, so we don't incur direct tariff costs through our Incoterms, it's a customer that bears those costs. So we don't see that, but our customers do. And it can be, in some cases, quite significant. So they are choosing to consider where to place business with us and whether that's Asia or Mexicali or Cleveland. So we are seeing that perhaps more acutely than the general market because of the nature of some of our customers. There is some also compounding that some specific end customer softness, particularly in healthcare, you've got some reduced R&D spend in North America, which is affecting some of the equipment devices that we sell into in OEMs. And for other specific reasons, some current softness in the automation electrification space. But we don't expect those conditions to prevail for the indefinite future and expect -- I think -- we expect certainly, by the middle of next year, return to growth for the Asia region. Vanessa Jeffriess: And then just finally, on North America, you said that for a while that there's been no customer losses. But maybe if you can talk about how your customers are responding to hearing the business under review, under separate management? Eric Lakin: For the Components business specifically? Vanessa Jeffriess: Yes. Eric Lakin: It's -- yes, I think the -- I mean, the immediate impact was quite acute in Plano. We've got some last time buys, which I mentioned at premium pricing, which is obviously contributing to the second half uplift. But more generally, what -- because it's quite a different business, as I've explained, it hasn't really had the focus to support our customers as it might have done in the past under the previous divisional structure. So by addressing that and having separate management and focus on individual customer conversations, both with the distributors, which is most of the -- mostly sold through indirect channels but also end customers. We have a lot of touch points with them on engineering, product design, pricing. We're already seeing the benefits of that anecdotally and more generally. And we've just had very little marketing, for example, in that business when you're competing with much larger competitors, Bourns, Vishay and so on. It's really important to keep getting the message out there of new products and the capabilities and the specifications of those products. So that's certainly helping. In terms of the fact that it's under strategic review, we're not -- I mean, it's not really impacting our day-to-day business. I mean my position on that is we're keeping options that -- the priority is to improve performance. And whatever we choose to do in the future, whether or not we decide with the best owners, it will only help that. Unknown Analyst: Just starting with capital allocation. Clearly, deleveraging has been a key aspect of that. I was just wondering if we could get any color on what -- whether there's kind of any key milestones we should look out for the resumption of the dividend? I'll just start with that one. Eric Lakin: Yes, fair question. Yes, so I'm not going to predict when we would resume the dividend at this point. But it's fair to say some of our investors really value the dividend, and it's a good discipline as well to distribute surplus cash. We will review it at the end of the year. And as Richard outlined, we expect to continue to deleverage at the end of the year, and we'll reflect on the -- I mean, the priority is to get balance sheet strength and support the lending banks and make sure that we got very good covenant headroom. But at the right time, we'll certainly look to reintroduce the dividend. Unknown Analyst: Perfect. And just one more, if I may. I mean, it feels like the business is stabilizing as you've kind of alluded to in your presentation. I guess I'm just keen to get more of a sense of how you're kind of managing the culture through what's been obviously a very turbulent time. And are you still able to kind of attract and retain the best talent? And what are you doing around that? Eric Lakin: Yes, that's an interesting question. Yes, it's really important for the organization because it often gets overlooked with a huge amount of change and disruption at the top management team within the organization, with the plant closure as well. I've made it a very high on the list to communicate a lot internally. We have regular meetings. We've reinstated pulse surveys around engagement and responding to those -- the most useful part about that is you get the sense of how people are feeling and what to do about it. And the [ heart ] of it, as you'd expect, is communicate, communicate. And we're doing lots of explaining what we're doing, why we're doing it and the benefits of what we're doing and making the business stronger. And that's really, I think, resonating. We're seeing improvement in the survey results that are coming through. And I make a point of having regular town halls, both all hands and the sites I go to. And I think what's the -- how does that manifest? The attrition rates we are seeing are higher than I'd like them to be generally. But if you look across the manufacturing sector as a whole globally, we are no worse, about -- better than the average. So it is a challenge, particularly some of the sites we're at. It's notoriously difficult to attract and retain people at all levels, including direct labor. But I think we're actually -- we're measuring up okay. There's room for improvement. But I'm feeling it's getting appropriate attention because it really matters, obviously, business is heart of it is our people. Harry Philips: It's Harry Philips, Peel Hunt. A couple of questions, please. The -- just thinking about tariffs in Asia and what have you and obviously, the relocation of some business into Malaysia. And I appreciate sort of -- it's directly outside your control, but do you envisage sort of going forward that there might be more sort of moves out of China by some of your customers and the need to follow? So I suppose the question is, how much sort of residual capacity have you got outside China to sort of facilitate that change? Eric Lakin: Yes. No, great question. We have -- I mean, specifically, that one customer move was largely triggered, not so much by tariffs, by the U.S. CHIPS Act and wanting to not have China in the supply chain and IP. So we've addressed that, and that's been well received by the customer. Not seeing any signs of other customers needing to do that in the other sectors we're in. So it really becomes -- and obviously, the quality, in particularly our Suzhou factory is best-in-class. So generally, the decisions being made are economic. And we're not seeing any -- expecting other known transfers from Suzhou. I think, in terms of capacity, we've deliberately made a point of investing in capacity to support changes. So we -- the SMT line in Kuantan is now being well utilized also in Mexicali, EMS, and we've got spare capacity in the PCB assembly for the Cleveland site. So we're well placed. I mean our issue fundamentally is we need more orders and grow the revenue and volume. And that's the most fundamental way of improving our operating profit margin, by getting the leverage up and covering our overheads. So we are not short of capacity. That's not a constraining factor. So one of the things I'm doing now is a reorganization of the sales and marketing team, and we're investing more in business development resource across all regions, in particular in Asia and North America, to fill the factories. So we're well placed for any further moves or increases in orders. Harry Philips: And then second question is just on working capital, so apologies in advance. Just -- I think your comment was that working capital will be broadly flat second half. And I'm just thinking, against the context of last time buy Plano, where clearly, by the year-end, you'd expect obviously cash in, if you like, against that last time buy, maybe it runs over a little bit into next year, but sort of -- and then also the rundown in the sort of safety stock. You were talking about in the context of the Asian switch, which doesn't sort of makes flat working capital sort of seem -- well, I would hope to expect maybe a reduction rather than just simply running at the same levels. Richard Webb: So we're not going to see sort of 135% of cash conversion for the full year as a whole, but we will see very strong cash conversion. So there will be a kind of positive contribution for the full year. We will be seeing kind of balance sheet delevering continue, and we'll be within the kind of range of 1.5 to 2x but will be a kind of decrease from where we are at, 1.9x. So there will be a kind of good strong full year cash conversion for the group. Eric Lakin: Yes. I mean specifically on second half working capital movement, I don't want to share -- go into the details. But I think there's certainly, the last time buy opportunity you referenced, and that is very much back-end year loaded. So a lot of the receivables we picked up in the second half of the year. So I wouldn't be surprised to see a growth in receivables at the end of the year. But it's -- we continue to drive down all parts of working capital where we can. And there's more to go with inventory reduction over time as well. Okay. Any other questions in the room? Otherwise, Kate, have you got any on the webcast? Kate Moy: Yes. A question from Joel at Investec, and we touched on it a little bit. But can you talk a little more about the weakness in the automation segment? And to what extent is that an end market customer issue as opposed to a TT-specific issue? Eric Lakin: Yes. So I mean, it's -- I would say, broadly, it is specific end customer demand softness. If I look at the -- in effect automated electrification is a lot of specialty industrial sectors that includes semiconductor equipment, in particular, rail, power, also bespoke postal equipment, smart card readers, ePassport. And we've got -- there's a handful of customers that they've just got current reduction in their end customer demand for different reasons. It's not -- certainly not a TT issue. We haven't had any issues in terms of production, supply, quality, on-time delivery. And so we are delivering to the customers' demand, requirements and production plan. And -- but ultimately, as I said, that sector should be growing. We're seeing -- I mean, it's probably without exaggerating the point, the semiconductor equipment market, some parts of the semi sector are going extremely well, as you'd expect, given the demand for increased amount of semi chips and AI and so on. Within that, though, the second order of the growth in the semiconductor equipment does vary by customer. And the U.S. CHIPS Act whilst offering significant opportunity, I think the last number was around $100 billion investment, there's so much uncertainty around that, and it takes time and a lot of planning to build up new fabs in the U.S. It has caused a pause in demand for a couple of our customers. So that's a contributing factor. So again, we expect long-term trends to improve, but short-term softness. So that's it from the webcast. Any final questions in the room? In which case, thank you all very much for coming. It's great to see a full turnout. That's heartening. Thanks for the questions, and I look forward to chatting to you later on. Okay. See you next time. Richard Webb: Thanks, everyone. Eric Lakin: Thanks.
Operator: Good afternoon, and welcome to the Pharos Energy plc investor presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Katherine Roe, CEO. Good morning. Katherine Roe: Thank you, Lillian. Good afternoon, everybody. Thank you for taking the time to join our presentation today, busy time with results. So we appreciate you taking the time. We will be running through a short presentation to deliver some of the key things that we've been working on, the catalysts for moving forward, what shareholders and investors have to look forward to as well as the performance for the first half of this year. So good afternoon, and welcome again. I'd like to start with a bit of an overview. We've said here a year of strategic operational and financial delivery. Obviously, first and foremost, this is a first half interim results presentation. But I joined as CEO last year and presented my first set of interim results this time last year, and we are here today as my second set. So I thought it might just be helpful to start off with a recap on what we've achieved in that time frame. I think for those of you that joined last year, we were very clear about the near-term priorities and focus for our business in terms of what we needed to achieve with the existing assets. So on the left-hand side here, we just recap on those. We have 2 jurisdictions with producing assets in both Vietnam and Egypt. We have exploration potential in both of those jurisdictions as well. Vietnam is the producer of the majority of our production is the core part of our business. And it was really critical that we secured those license extensions for our 2 producing fields, and those were achieved in December last year. What's really important about that is the unlocking of the significant work program that we are about to commence in the coming weeks in Vietnam, not just to arrest the natural decline of these assets but also to try to deliver incremental production volumes and growth from next year onwards. We'll come on a little bit more later in the presentation on that drilling campaign. In Vietnam, we also have a high-impact frontier exploration. Some of you may be aware of this that we've discussed before in Blocks 125, 126. This is deepwater offshore frontier exploration. And we also achieved a 2-year license extension, which gives us until the end of 2027. Why is that important? Because we really need to seek a farm-in partner in order to give us the ability to drill our first prospect, which we would ideally like to do next year. We put ourselves in the best possible position to do that. We've started a new structured formal process, partially to feed in some of the historic bilateral conversations, but also to attract some fresh interest. And we have also managed to secure long lead items and that 2-year extension to provide maximum optionality to find a partner. So that was also achieved. That extension was granted to us in June of this year. Just announced yesterday, we have successfully agreed new fiscal terms for our existing licenses in Egypt. We have far better economics, far better improved terms and importantly, additional time on those licenses by consolidating into one new fresh agreement. You'll see here that's given us an immediate uplift in value. We have a 25% uplift in 2P, largely a function of that additional time on the licenses. And again, importantly, going forward, it means a very healthy and attractive financial framework for further reinvestment, which we haven't been doing so far this year. We're -- also important to us to achieve the strength in our balance sheet after many years of having to service that legacy RBL facility. That was repaid last year. We remain debt-free and building cash on the balance sheet, as Sue will come on to. Again, flexible financial and strategic optionality. We have fully funded capital investment programs from our internally generated free cash flow and obviously not having to service debt allows us even more flexibility. It also means we have a clean balance sheet, which provides further flexibility going forward if we needed to leverage. Very important to us that we maintain the shareholder dividend. This has been part of our policy for some years, and we are now trying to strike the right balance between continuing that return to shareholders through the dividend whilst also trying to achieve a capital return by reinvesting back into our assets. We also achieved a strengthening in the Board. We appointed a new Chairman to the Board in June. That's received alignment with our major shareholders and is working well with the rest of the Board. And there's alignment in terms of strategic progress of our business, what next. And that leads quite nicely into the right-hand side here of what is next, what do we have to look forward to? Where does the growth in our business come from. So really, really important in this 6-well drilling campaign in Vietnam. It's the largest investment campaign that we've had into our existing assets since the original development. So really, really important. We believe it's capable of extracting and delivering additional value through those increased production from next year and beyond. We'll talk a little bit more about that. And as I mentioned, we also have this formal process ongoing for the exploration, which is, again, a new fresh look at how best to find a partner to deliver hopefully, a drilling campaign next year. Egypt, more noncore part of the business, but still equally valuably. Those new terms make a huge difference in terms of our economics and provide that attractive framework. We're now going to work with our partner in country to put together the near-term drilling program. And again, all designed to increase production from the existing volumes that we see today. It does remain an absolute priority for us at Pharos to see a material recovery in our existing receivables balance. And Sue will talk a little bit about our current receivables position. And we are in discussions with EGPC, our government stakeholder about seeing that materially reduced, giving us the confidence and the ability to reinvest, but only in a very disciplined and self-funded framework. I think having said all of that, we do still recognize that we need to add scale to our business. We're in very good shape. We've got lots to look forward to with organic growth, but we would also like to add to that. And we're now in the fortunate position that we're operationally and financially strong enough to look at additional opportunities that fit the strategy and can build additional scale. And that's very much a priority as we move forward. So I just wanted to set the scene with where we are. I'll hand over to Sue on some of the interim results and then come back. Thank you. Sue Rivett: Thanks, Katherine. So just in terms of the first half -- just some highlights there from the first half. So revenue, we were able to maintain our position there of just over $65 million for the first half, which compares very similar with 2024. That was actually despite a sort of $12 reduction in Brent price in the period. And really, that revenue has been maintained because we were able to bring in some of our inventory that we held at the year-end. So that inventory supporting the revenue number there. In terms of the net cash, again, a good build from first half '24 to $22.6 million as we left the half year. Cash flow from operations, $16.1 million. That's down quite a bit from the '24 number. If you recall, in March '24, we received a one-off dollar payment, $10 million from EGPC. We didn't receive that in the first half this year. We are very much after that in the second half. And we've just come back from Egypt, Katherine, myself and our new Chair, and we believe, hopefully, there is something coming very shortly into the second half there. So hopefully, we'll prop up that in the second half. In terms of the hedging, despite having got rid of the -- or paid down the RBL, we still have a 26% hedging position there for the second half, just supporting us with a floor of $60. So again, very helpful to have in our portfolio. In terms of the Egyptian receivables, $33.5 million as we finished the half year. That's down since then as we've managed to collect a bit more receivables in this third quarter. So as I say, $5.6 million in this quarter that we've just received, but we are hopeful that we will get a reasonable dollar amount in the coming month or 2. And just to say, in terms of the production guidance, we've narrowed the guidance from 5 to -- it was originally 5,000, we brought that up and it was originally 6,000, then we brought that down. So just narrowing that guidance as we know more as we get towards the year-end. And if we can move to the next slide. Thank you. So in terms of the cash flow itself, so $34 million in there from inflow from operations, of course, taxes to governments and which gets you down to the $16.1 million, which you mentioned of the OCF. A modest capital program in the first half, $8.2 million. Essentially, the big capital program comes in the second half as we start that drilling campaign, that 6-well drilling campaign in Vietnam, which Katherine will pick up later. In terms of where we finished for free cash flow, so $7.5 million. We have had $0.7 million in from contingent consideration from our partner. There is a further $2.5 million due from them, which should come into the second half. So something to bring into the second half there. And if we can move to -- in terms of shareholder returns, as you know, we're committed to a sustainable dividend for our shareholders there. We have announced a 10% increase in prior year dividend, so just under 0.4 per share, which will be paid in January. And just to say that the buyback, which we've been running for some time, completed in January, and we haven't renewed that at this point. And with that, I'll hand back to Katherine. Katherine Roe: Thank you, Sue. So we've just got a couple of slides here just on activity for the second half, looking forward into what are we doing with our assets and how do we maximize value to drive those -- that production growth that I talked about at the beginning. Just here on Vietnam, you can see on the left-hand side to start with our first half production comfortably within our annual guidance range, and it's very steady, stable production, very low breakeven. So even in this challenging macro environment that we find ourselves in with sort of fluctuating Brent price, we are continuing with healthy production and healthy free cash generation. We expect that production to remain stable throughout the rest of this year. But of course, where do we see next year and beyond for these producing fields, can we achieve more growth? Yes, we think we can, but it requires this capital program to do so. So just taking TGT first there, our first field. You can see the existing production from those green blobs, the callout boxes are our infill wells that are part of our program and the yellow are the appraisal wells. So we have a 4-well program in TGT. We will most likely start with an infill well in the next few weeks. We have 2 rigs. They're on their way. We have all of the drilling preparations underway. This has been going on for this year in order to get prepared, and we're expecting to spud our first well of this program, as I say, in early to mid-October. What's really important here is that bottom left corner of the field. And again, the yellow call-out boxes, 18X is our first identified appraisal well, which we're likely to spud this year. If that's successful, we are looking to unlock that to date undeveloped part of the field. They are challenging wells. There is risk to this. And obviously, we need to see how we get on with that appraisal well. If we are successful, it potentially opens up that additional development that you see there in the white call-out boxes, and that will really drive incremental volumes and production. We're likely to know the outcome of this drilling campaign in Q1, Q2 next year because they are challenging wells, does take time. So whilst a lot of the activity will happen this side of Christmas, we'll be sharing the outcome in the first half of next year. Similar story in CNV, the next field there. We have one committed appraisal well, and we expect to do one infill well again in Q4 of this year, hopefully, again, successful to unlock further potential. I did mention Blocks 125 and 126. I think it is worth saying, again, that we have deliberately put a structured framework around this process. We do believe that there are some new interested parties partly helped by the macro environment being a little bit more conducive to high-risk exploration, again, frontier exploration. There are very few frontier basins left to explore, and that certainly attracted a bit more interest than might have done a few years ago. So we have got some encouraging discussions. We've been guiding that we would like to be able to give an update on that process before the end of the year. But we've done everything we can to put ourselves in the best possible position. We've secured those -- that 2-year license extension to give us time. We've committed to the long lead items. We have all of the data information. We have a full physical data room. So we have everything that we can do to ensure we have the best possible chance of finding a suitable partner and seeing the drilling of that first prospect, hopefully next year. So lots to look forward to in Vietnam, very exciting. We have excellent alignment with our joint operating company, which is ourselves and our partners. Our partner includes PetroVietnam, the government. So again, hopefully, the delivery of the license extension just helps to tangibly show the strength of that relationship with the government. It's absolutely critical to how we do business. And that, again, is coming through and strong alignment on this drilling campaign, and we're all excited to see the outcome. So that's Vietnam. Just moving on to Egypt. As I mentioned, we announced yesterday that we have improved fiscal terms agreed with the government. Again, really important that stakeholder relationship with EGPC, our government entity in Egypt, very collaborative approach to ensure that we have terms that work for us, and they have a committed developed -- a committed work program that allows us to -- incentivizes us to put further reinvestment back into our existing assets. We have been given an extension of time, as you can see there, and that's really helped drive that immediate uplift in value. So on the back of our announcement yesterday, we have a 25% uplift in 2P reserves from the end of last year, and that's really based on that long extra time on the licenses, but also very much on the improved fiscal terms. We've put on the right-hand side here just a bit of the time line. It is a long process. There are peers that you might have seen that have gone through a similar process. It is very iterative and requires a lot of discussion and collaboration with the government. So it's not easy to get to where we've got to, and we're really pleased that we have. Really also importantly is that we have managed to agree a retroactive effective date. And what this means is that we do not need to wait for formal parliamentary ratification before those new terms apply. So those new terms can take effect from formal Board approval, which we're expecting in the next week and equally helps to start our planning for that reinvestment program. So it works for us and it also works for the government. We have shared the exact terms of that agreement in our announcement yesterday, if you want to see the detail of that. But we put the key points here, increase in cost oil, significantly higher profit oil share and that signature bonus has been agreed from a relatively different place from where we started. But ultimately, it can be offset against our receivables. So it's a noncash commitment. So I think what does that mean for capital allocation? So just take you on to this slide. We've presented this before about our capital allocation for this year. We do take capital allocation very seriously. We have to be disciplined, and we have to ensure we have enough financial flexibility to run the business and weather any shocks that we might see, particularly in our sector and given the global challenges that we all face. So we balance that with a sensible careful reinvestment back into the existing assets. And then also the other piece is the shareholder return through the sustainable dividend, which is really important to us. Majority of the capital this year is going into that Vietnam campaign. Again, really important to note that, that's the largest investment campaign we've had since the initial development. So we really think that we will see some value coming out of that. And we're fortunate that we're able to fully fund our investment program from internally generated cash flow. So it's a fully funded program without needing any dilution or additional leverage. What we're just showing here in the pie chart is where that just sits in terms of this year and next year. It's a '25 program, but some of the actual expense will fall into 2026. That's just a function of timing as we move through and start drilling and incurring the cost of that program. We've just put on the bottom half here what that program looks like and what that CapEx relates to, but we've just covered that. So hopefully, that's clear. I think just on the outlook, again, for those of you less familiar, really worth reinforcing the low breakeven position we have in Vietnam. We're very fortunate when there's challenges to the oil price, we not only get a premium to Brent in Vietnam, but we have that low breakeven. So oil price has to fall a long way before Vietnam becomes economic, and that's clearly not something that we're concerned with. And that license extension that we achieved just before the end of last year allows us to have healthy economics on that capital reinvestment program. Egypt has been a low CapEx first half, and we have seen relatively underwhelming production volumes. We are a little bit lower than expected, and that partly contributes to that narrowed guidance for the year that Sue referenced earlier. And that's partly deliberate because we needed to see those improved fiscal terms, improved economics and also very, very key reduction in the receivables balance before we can justify and defend further reinvestment. We're making really good progress, new terms into effect yesterday. And as Sue mentioned, we're in live discussions with our partner, the government partner in terms of reducing that receivables balance. It is a constant risk in Egypt, but we do understand that there will be liquidity coming into Egypt, particularly for the oil and gas sector. So we hope to benefit from that, and we'll obviously be sharing that with the market when we can. So I think that wraps things up from us. We do have a brief outlook here, which just summarizes what we're trying to do. We call it protected growth because we have a very robust protected platform, but also the ability to grow additional volumes from our existing assets organically, but also starting to look at how we can add to the portfolio to build that scale that we mentioned. We are very fortunate that we've got good quality assets that are capable of delivering that free cash flow. We just need to build on that. And that's very much the priority going forward. So supported our downside, lots to look forward to on the growth. And hopefully, we've demonstrated that we do that in a disciplined way and remain focused on delivery and execution and ensuring that we can deliver on the things that we say we can. So thank you for listening. We appreciate the support of all our shareholders and those that are looking at investing in Pharos. We do believe we are differentiated from a lot of our peers. And we're obviously here to take any of your questions. So thank you again for listening, and I think we'll hand over to the Q&A. Operator: [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 via investor dashboard. As you can see, we have received a number of questions throughout today's presentation. And Minh-Anh, if I could hand back to you to share the Q&A, and then I'll pick up from you at the end. Minh-Anh Nguyen: That's great. Thank you, Lilly, and thank you, Katherine and Sue. I will now go through some of the questions that were pre-submitted to the company. Starting off with Vietnam. We were hoping that the license extensions in Vietnam may have led to a more aggressive development drilling campaign. Why has the development drilling campaign been timid? It hasn't been anything more than what we've seen on average over the past number of years, i.e., 2 to 4 wells. Katherine Roe: Thanks, Minh-Anh. I can probably take that. I think it's really important, again, to note that you need the right economic framework in order to reinvest so that you have a return on your invested capital. And we needed the license extensions in Vietnam to justify and support reinvesting back into the asset with significant drilling. These are complex wells. It's not straightforward drilling. We do have a lot of expertise and experience having been producing in Vietnam for 20 years, but we do still need to be very careful about the investment program and the return on capital. So what I would say is that the license extensions achieved just before Christmas allowed us that leeway, that runway of time to recover costs, but also to have sufficient economics. And we've driven very hard. The license extensions were approved in December. By early January, we were already in the planning stages. And this is the earliest that we can drill in October given the weather window and the long lead items. So there's been a very, very big push, I would say, between ourselves, PetroVietnam and our partner to drill as quickly as possible. And so I do think it's aggressive. I think it's aggressive and it's exciting, and it's the first time in many years that we've done a campaign of this scale in nature. And as I say, you really needed the right economics and environment to justify deploying that capital. So I think the outcome of this 6-well program will be really interesting for us. Minh-Anh Nguyen: Thank you, Katherine. When is Block 125 going to be drilled? Katherine Roe: Well, I think I partly answered that in the presentation. We do have an identified prospect. So we would really like to be in a position to drill next year. Again, there's certain planning required and we do need a partner, which is what we're in the process of trying to secure at the moment. We do have the license until the end of '27. So we could drill this year or drill next year or 2027. Obviously, we'd rather sooner if we can have everything lined up. But what we have done is put ourselves in the best possible place we can. We are dependent on rig availability and that farm-in partner being appropriate and agreeing appropriate terms. So that's what we're hoping for. But we've just given ourselves optionality. We can't control everything, but we can put ourselves in the best possible position and give ourselves maximum optionality, and we feel we've done that at this point. Minh-Anh Nguyen: Thank you. On the same topic, if blocks 125, 126 are as good as the company has been saying, why has industry uptake been so poor? We've been trying to farm them out for nearly half a decade. Katherine Roe: I can take that as well. I'm not sure it's been half a decade. I know it has been several years. I would say it's difficult to attract interest in a frontier basin, deepwater. This is an expensive risky drilling campaign. I think exploration for frontier basins has been challenging for the macro environment. A lot of the majors have not been focused on this over the last few years. And where they have, there have been other parts, maybe West Africa, for example, where a lot of that capital has been allocated. There is a discrete amount of capital for deepwater offshore exploration drilling. But I think what we're seeing now is a change in that macro environment. Exploration is very much back on the agenda for a lot of the majors. And that's a new bit of interest that we're seeing coming through. And there just aren't very many frontier basins, undiscovered frontier basins left in the world. So it's a lot about timing. and a lot about sort of getting the right person at the right time, and that feels like a bit of a shift. Minh-Anh Nguyen: That's great. Thank you. The next question is, given where the share price language at the moment, surely the most value-accretive acquisition the company could make is buying itself. What are the Board's latest thoughts on reinstating the share buyback or better still enacting a tender offer to buy out the persistent seller? Katherine Roe: Yes. I mean share buyback is always -- it's always part of our Board discussions. It's there as an agenda item all the time, particularly in relation to capital allocation. So when we discuss best use of capital. We have, as you probably know, or for those of you don't, we had a share buyback program for many years. When we were not in this position to reinvest in the assets because of the economic environment, we also had less financial flexibility and our own liquidity due to the legacy debt. So now we're in a position where we're in the right framework ourselves financially, but also the economics in Vietnam and Egypt, where we can reinvest back into those assets. And we believe that will drive more growth. Share buybacks are -- there are pros and cons. We have low liquidity. There's only an element of how much you can actually buy back. And at this point, we do want to put our capital to work. We think that capital can work harder by reinvesting back into the existing assets. That obviously doesn't mean that we're not very conscious of shareholder returns, which is why we also ensure that we sustain the dividend. And if at any given point, we calculate that the share buyback provides a better return to shareholders, then that's what we would do. We would reinstate that. Minh-Anh Nguyen: That's great. Thank you, Katherine. Moving on to the financials. On a previous webinar, you stated that the best time to secure debt is when you don't need it. It was also mentioned that different types of debt instruments were being discussed and considered. Can you please give an idea of the progress made in this regard? And when do you think the company may be in a position to give us a detailed update on this? Sue Rivett: Yes. I mean it is one thing that we've been looking at, obviously, after getting rid of the -- or paying down the RBL last year. And clearly something in our toolkit, if you like, with a balance sheet that hasn't got any debt in it, a great opportunity for the potential M&A activity. So yes, we have been looking out in the market. Clearly, there is interest in the market. And I think once we identify some good opportunities, then I think we should be able to get that to come home, if you like. I don't know if you want to say anything else. Katherine Roe: No, I agree, Sue. I think we -- the exercise that we've been through demonstrates there's access to capital for us at the right time and for the right transaction. And that obviously helps support some of the conversations, having robust production and an unlevered balance sheet gives us that toolkit, as you say. Sue Rivett: I mean we'd only do it for the right opportunity. I think that's the key. Minh-Anh Nguyen: That's great. Thank you, Sue. The next question is, Capricorn Energy has informed the market that EGPC communicated to them that it intends to make payments of approximately $130 million through the remainder of 2025, which is approximately 90% of their 2024 revenues and more than double the amount they received in 2024 from EGPC. Have you received similar assurances from EGPC? Katherine Roe: The short answer is yes. It's a conversation that we have with EGPC as do all of our peers. We do -- as I said before, we do understand that liquidity is coming into Egypt, particularly for our sector. And ourselves, Capricorn and all of the international oil and gas companies are in the same position. So we do expect a material reduction in our receivables in the near term. Minh-Anh Nguyen: That's very helpful. Along the same line, are there any levers that can be pulled to expedite the receipts of the Egyptian receivables other than choosing to continue to hibernate? Katherine Roe: Well, I think having agreed these new fiscal terms on the consolidation, having that, clearly, the idea from the government's perspective is that comes with a committed work program. It is phased, and we have deliberately agreed a relatively modest program that we not only hope to meet but also exceed. But it depends on recovery of receivables. And certainly, the timing of that investment will be dependent on that recovery of receivables. So that's the leverage, if you like. Yes. Minh-Anh Nguyen: That's very helpful. Thank you, Katherine. The next question is, have you had further discussions with the activist investor who attempted to vote at the majority of the Board of Directors? What are his concerns? What strategic shifts is he looking for? Activism by unknown activists who hasn't communicated via an open letter with the wider investor base is very concerning to private investors. Katherine Roe: Thank you. And I would say that we talk regularly with all of our shareholders, including our largest shareholder. We don't hide away from communication. We do try to be as accessible as a management team and Board as possible. So yes, we have active dialogue. I think it's really, really important. At the end of the day, we're here to run the business on behalf of shareholders. It's really important to us that we listen, understand shareholder concerns, frustrations, ambitions, et cetera. We did have a change in our Chairman, and he has, again, settled very well and been well received by our major shareholders. So we feel that we have stability and there's been no concern at this stage at the Board level regarding that shareholder. We have a resilient, strong and stable Board, which importantly is aligned about the future for our business. Minh-Anh Nguyen: Thank you, Katherine. Is the key jurisdiction for any potential inorganic growth, Southeast Asia? Katherine Roe: I think the answer to that is we need to leverage what we're good at. If we sit back and think what are we good at Pharos, we've been in country in Vietnam for 20-plus years, and we have a very strong stakeholder relationship with PetroVietnam. We're well regarded in country. We can clearly see the support that we get with the license extension. So we'd like to do more, leverage that relationship. That does expand into Southeast Asia as well because it's a high-growth region, lots of opportunities. It's where we're seeing that GDP growth in the Southeast Asian economies, and they all, again, are seeing that need for increased energy. So there are lots of opportunities in Southeast Asia, and that is more of a priority at this stage. But again, it all comes down to the type of transaction and the return that it can deliver. And we're very focused on that. And I think that's what we try to get across when we say disciplined and focused. Minh-Anh Nguyen: Wonderful. Thank you, Katherine. I will now move on to read out some of the questions that were submitted live to the company during the presentation. First question is from Sam S. Can you please provide the key differences between the new structured formal process versus what was carried out previously? Katherine Roe: Sure. Yes. Previously, with the farm-out of 125, 126, I think there's been a consistent message throughout Pharos' history that a partner is required. Again, it's a real challenge for a small business to drill that well, sole risk that well just from a cost and a risk reward perspective. So we've always been trying to find a partner. The difference is historically, it's been done on a bilateral basis, which means that conversations have been happening between Pharos and parties at any given time. And what's new here is that we've tried to put a formal structure around. We have a third-party adviser running the process for us. That creates a bit of competitive tension. It creates some time frames. It creates structure in terms of the steps between entering into a CA, a confidentiality agreement to receiving data to visiting the physical data room, et cetera. So it just creates a little bit more of a formal process. And I think what it's achieved for us is a wider and deeper testing of the market and accessing people that we wouldn't necessarily have been able to access on our own. So that's what's different. Minh-Anh Nguyen: That's great. Thank you, Katherine. The next question from Peter. Can you give us an idea of the scale of the upside in TGT and CNV that could be unlocked with the appraisal wells? Katherine Roe: Yes. I mean it's hard to put a number on that, which is why we haven't to date. But as I say, we think it could be materially beyond arresting the decline of current production. So what does that mean? You'll see we're sort of relatively stable at the 4,000, 5,000. We want to see that growing. So we want to be seeing 6, 7-plus thousand barrels a day from those fields if we have appraisal success. Minh-Anh Nguyen: That's great. Thank you. A few questions from Keith about 125. What are the parameters you seek in terms of number of wells committed, et cetera? What are the target expectations for the well of the identified in 125? Katherine Roe: I think all of this depends on the negotiation with the partner at the time. It depends who the partner is. If there's an ability for a couple of the majors, they have a different budget and they can commit to not only just the exploration program, but possibly a development program in a success case. We have a 1-well commitment. So that is obviously the priority to cover the first initial exploration well. But when we look at and show potential partners our detail and our work, we have a couple of different prospects. So it really depends, and we're not quite at the stage that we can share that detail. Minh-Anh Nguyen: That's helpful, Katherine. Switching on to financials. Why are you still carrying a hedging position? The company was unhedged prior to the RBL. Sue Rivett: Yes. No, it's a good question and obviously one that we ask ourselves internally. I think the key for hedging is it supports your underbelly. So when you're stress testing at very different oil prices, we've seen crashes in the oil price before, et cetera. I think it's an important tool to make sure that you're supporting, as I say, your underbelly, as I call it. But I think you want to keep quite a bit in the top side for clearly, if share prices pop up not share price. But if Brent price pops up, you want to see that ability to take some of that. So this is really about supporting the underside. Katherine Roe: Yes. Protecting without reducing our exposure. Sue Rivett: Yes. Absolutely. Minh-Anh Nguyen: The next question is, what is more risky about the 6-well program this time? Katherine Roe: The risk is really around the appraisal wells. So of the 6 well program, 4 of those infills, they're relatively well understood and low risk. So the risk is really around the appraisal because it's looking at a different part of the field that is previously not producing. So where that appraisal well, for example, in TGT 18X, that is not currently a producing part of the field. So that's where the risk lies. And likewise, in CNV, which CNV is even more of a complex well. It's complex geologically, but also operationally. So there's some risk there. But I would say the infill wells are relatively straightforward. We've got a lot of experience of having done those. So I hope that answers that question. Minh-Anh Nguyen: Thank you, Katherine. I believe that is all the time we have for today. So I will now hand it back to the Investor Meet Company team. Operator: Katherine, Sue thank you for answering all those questions you can 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 I know is particularly important to the company, Katherine, could I please ask you for a few closing comments? Katherine Roe: Thank you. And I just want to say thank you again to everybody for taking the time to listen. We do appreciate it, and we look forward to updating the market and shareholders with new news as we move forward. It's a really important half for us as we move towards the end of the year. So we look forward to further updates, and thank you again for your time. Operator: Katherine, Sue 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 it'll be greatly valued by the company. On behalf of the management team of Pharos Energy plc, we'd like to thank you for attending today's presentation, and good afternoon to you all.
Andrew Higginson: Good morning, everybody, and welcome to the JD Sports Half Year Results. I'm delighted to say that it's a set of results where we're on track for the year as we stand here today. And I just really wanted to make a couple of introductory remarks before I hand over to the team. It's been a tough couple of years really in lots of ways. There's been a lot of challenges we're facing too. The markets have not been great. Consumer markets have been uncertain. I think we all know about the political and economic background in our major markets. And of course, the cost base here in the U.K., in particular, with the national insurance rises and various other things have been very challenging. We've also internally, of course, had governance challenges that we've had to sort of face into as well, which have required investment and turnaround. And I really just wanted to start by commending the team really. The strategy is very much on track at the moment. I think they've shown great resilience in the face of a lot of those challenges. And of course, we're making great progress. The governance, in particular, I think commend Dominic and his team for the work they've done around the financial controls in the business and all led by Régis, of course. And of course, the integration of things like the supply chain, the progress we've made on governance, the good work that we've done around the integration of the acquisitions we've made and, of course, the great work we've done on our brands. And if you need an example of that, go and see the Trafford Centre and see how that's moved JD on here and it's probably its most mature market. I think all of that is very commendable. So you're seeing here today some of the results of that hard work and with more to come. But I just wanted to say thank you to all of the team in JD for the hard work that's gone on. It's never easy when markets are difficult, but I think they're doing great stuff. So thank you very much, and I'll hand over now to Régis. Regis Schultz: Thank you, Andy. Thank you for your kind words. So good morning, everyone, and thank you very much for joining us. I'm Régis Schultz, CEO of JD Group, and we are here joined by Dominic Platt, our CFO; and Mike Armstrong, our JD Global Managing Director. I will start with our key message and highlights from the first half. I will then hand over to Dominic to go through the financials. And finally, I will take you through the key business update. As a reminder, at our April strategy update, we set out some clear priority for the short and medium term. First, to deliver the vision to be the leading sport fashion powerhouse. Second, to build the infrastructure and the governance you will expect from a company of our size and a world leader. And third, to focus on cash generation and shareholder return. So I'm pleased to say that our first half results reflect our priority and demonstrate our operating and financial discipline against what was a tough trading environment. We are building a track record of focus and consistent execution against our strategic objective. As a result, we are gaining market share in North America, in Europe and building on the very significant opportunity we see in both regions to develop JD brand and leverage our complementary concept businesses. To finish our key message, we said we will provide you an update on the U.S. tariff impact. Dominic will go into more details on this, but you will be pleased to know that we see limited impact in the current reporting year. Let me now hand over to Dominic to run through the first half financial results with you. Thank you. Dominic Platt: Good morning, everybody, and thank you, Régis and Andy. So let's start with our summary financials for the group here on Slide 6. At constant FX rates, total sales were 20% higher year-on-year, reflecting a full half of sales from Hibbett and Courir, who were acquired in July and November, respectively, last year. Stripping these businesses out, organic sales growth was 2.7%, comprising 2.5% lower like-for-like sales and 5.2% growth from net new space. Against a tough backdrop in all our markets, we maintained our trading disciplines. Gross margin was 48%, 60 basis points behind the prior year. Excluding Hibbett and Courir, which are slightly lower-margin businesses, gross margin was 40 basis points lower year-on-year. This was driven by controlled price investments, particularly in our online offer to increase customer engagement and conversion. Turning to operating profit. As a reminder, earlier this year, we updated our definition of operating profit to include IFRS 16 lease interest, as we believe including all property-related costs gives a truer picture of the operating margin of each part of the business. On this basis, operating profit of GBP 369 million was 6.3% lower at constant FX rates. Excluding Hibbett and Courir, operating costs were 4.7% higher at constant FX rates, and this was driven entirely by new stores. Through structural cost reductions and flexing the staffing levels and discretionary spend, we managed to fully offset the impact of higher labor rates and technology costs as well as noncash mark-to-market charge of GBP 14 million in H1. More on that later. Overall, the group's operating margin was 6.2%, 170 basis points lower versus the prior year at constant FX rates. Profit before tax and adjusting items was GBP 351 million, 11.8% lower at constant FX rates and in line with our profit phasing guidance. Included in this is a GBP 22 million increase in net finance expense, excluding lease interest, which was driven by lower cash balances and debt financing related to acquisitions. Our adjusted earnings per share were 8.5% lower year-on-year at constant FX rates. For completeness, the statutory PBT was GBP 138 million, 9.5% higher year-on-year. This reflects lower adjusting items or exceptional items as we all used to know them. These are essentially limited to noncash revaluation of our Genesis put option together with the amortization of acquired intangibles. The Board has declared an interim dividend of 0.33p per share, consistent with the prior year. In line with our dividend policy, this represents 1/3 of the final dividend for FY '25. And last but certainly not least, we delivered a 5% increase in operating cash flow to GBP 546 million, demonstrating yet again the highly cash-generative nature of our business. Turning now to our revenue bridge from last half year to this. The left-hand side rebases H1 '25 for FX headwinds of 2 percentage points as well as some small disposals from last year. As I mentioned earlier, like-for-like sales were 2.5% lower and new stores contributed 5.2 percentage points to sales. This includes annualizations from stores opened last year and also the fact that we opened 4 flagship stores in the period, including the Trafford Centre in Manchester, which is strongly outperforming against its plan. So overall, organic sales growth was 2.7% at constant FX rates. We believe this is faster than the growth of our addressable markets, driven by market share gains in North America and Europe. Finally, Hibbett and Courir added GBP 869 million of sales for overall sales growth of 20%. As you can see from this slide, the JD Group is a very well-balanced and diversified global business. 71% of our sales come from North America and Europe, our key growth markets. Following the Hibbett acquisition, North America is our largest market, representing 39% of group sales. Our channel and category mix varies by region, which provides us with opportunities for growth. For example, our largest region for online sales penetration is the U.K. at around 25%, with other regions overall in the mid-teens. We're building a fully flexible omnichannel proposition in all our regions, offering customers a seamless service for purchasing, delivery and return, whether they choose to use our stores or online channels or as we are increasingly seeing a combination of the 2. Within our omnichannel proposition, organic store sales grew by 3.6%, reflecting the continued resilience of our full-price business model and our store opening program. Online sales were 1.6% lower with good growth in North America and Europe, offset by a weaker online performance in the U.K. While U.K. store sales were positive year-on-year, the U.K. online market as a whole was slightly more promotional during the period, especially in the second quarter, driven by short-term discounting to clear inventory. To maintain our competitiveness, we made some controlled investments in our prices and have seen an improvement in customer engagement online in recent weeks. Turning to category. Our agile and multi-brand model really comes into play across our combined footwear and apparel proposition. When we exclude Hibbett and Courir, which are more footwear-centric fascias, apparel participation increased to 31%, with footwear decreasing to 58% of sales. In footwear, we continue to see a fundamental shift in the global footwear product cycle, given the transition between newer franchises and some significant end-of-cycle product lines. Notwithstanding this, we saw strong growth across brands more in the middle of the cycle, which reflects the strength of our multi-brand model. The early signals of new product franchises in terms of both launches and pipeline are encouraging, albeit they are a small part of sales today. Overall, organic footwear sales were 1% lower year-on-year. The apparel product cycle is very different compared to footwear. Our apparel proposition is in excellent shape, supported by innovation and our own brands, and we believe there is significant scope to leverage this for growth, particularly in North America, where our apparel mix is low compared to other regions. Despite tough comparatives from replica shirt sales in the U.K. and Europe, due to the Euro 24 football tournament last year, organic apparel sales were 6% higher year-on-year. Our other category, which includes outdoor living equipment and gym memberships, maintained its share at 4% of sales mix. Turning now to our geographic regions. As a reminder, we have 2 different lenses on how we look at the JD Group. First, as you know, segmentation by fascia JD, our Complementary Concepts, our Sporting Goods and Outdoor fascias. This is our primary lens because it aligns to our strategy. And most importantly, it's how our customers and brand partners engage with the JD Group. The geographic split that you see on this slide helps to focus internally on creating the most efficient operating model to support our range of fascias in each region and, in the process, maximizing the returns we make on our investments. So starting with sales by region. As reported in our trading update in August, like-for-like sales in H1 were resilient in Europe, supported by our JD and Sporting Goods fascias. We are encouraged by improved like-for-like trends quarter-on-quarter in both North America and Asia Pacific. In the U.K., we see organic sales as a better KPI than LFL, given the ongoing evolution of our store footprint with bigger and better stores. Régis will cover this in his slides later. U.K. organic sales were 1.7% lower in H1, affected by tough prior year comparatives due to the Euro 24 football tournament. Turning to margins. The group operating margin of 6.2% reflects the H2 weighted nature of our annual sales. By region, the North American margin was 340 basis points lower year-on-year. This was influenced by 2 significant but short-term factors. First, the ongoing wind down of the Finish Line fascia. During the first half, Finish Line invested in price within its online offering to maintain competitiveness. It also closed 15 stores and transferred a further 22 to JD in the period. Those conversions continue to see significant uplifts in performance and profitability as the JD concept continues to resonate with North American customers. The remaining 220 Finish Line stores will be wound down over time, but will weigh on the North American margin in the short term. And second, the impact of Hibbett year-on-year. Last year, having completed the Hibbett acquisition on the 25th of July, the business recorded a spectacular first week due to back-to-school demand, making a significant proportion of its annual profit under our ownership in that 7-day window. Aside from these factors, as I mentioned earlier, Hibbett is a slightly lower margin business than the other North American fascias. The integration of the business is progressing well, and it's a key component in our multiyear program to create an integrated platform for the nationwide growth of all our fascias in North America with an efficient supply chain and back office. We're on track to deliver annualized cost synergies of $25 million with half to 2/3 of this, so about GBP 10 million to GBP 12 million expected in H2. In Europe, we saw a decline in the operating margin of 40 basis points. The main factor to call out here were our controlled price investments, particularly in the online offer, which saw good results in terms of customer traffic and conversion. As our supply chain investments in Europe come to an end in FY '27, we will see the operating margin in this region start to step forward towards the higher single-digit levels we have elsewhere. To remind you of our broader medium-term guidance for the group, we expect to see over GBP 20 million of cost benefits related to technology and supply chain double running costs across FY '27 and FY '28. And finally, the U.K. margin was lower by 130 basis points. This reflects the tough trading conditions, as highlighted, as well as higher technology, labor and costs related to new stores. We have and continue to make strong progress on our plans to enhance sales productivity and cost efficiency in the U.K., and Régis will touch on that more later. So on to the group profit bridge. Starting from the left-hand side, lower like-for-like sales at a constant gross margin contributed GBP 33 million to the decline, and that's net of GBP 27 million of attributable variable OpEx savings. We then have a further GBP 25 million from the like-for-like gross margin rate reduction. The next bar shows a GBP 10 million net OpEx increase, which includes the higher salary and national insurance rates as well as technology investments that we flagged back in May. It's a net number because we've also included structural OpEx reductions in the year. Alongside the higher mark-to-market charge of GBP 13 million, we offset these increases in full with our variable cost reductions, as you can see with the arrows on this slide. For the year as a whole, as we stated in our FY '25 results in May, we expect incremental OpEx of over GBP 50 million, including higher labor and national insurance costs and tech spend. And we're on track with our guidance of partly offsetting this through GBP 30 million of structural cost reductions and U.S. integration synergies of around GBP 10 million to GBP 12 million. I would also highlight that we expect part of the mark-to-market charge to unwind in the second half. The contribution from new stores and annualizations of GBP 24 million in H1, Hibbett and Courir added GBP 32 million. And finally, we saw a GBP 22 million increase in net finance expense, excluding lease interest. As I mentioned earlier, this was largely due to the interest on debt component of our acquisition financing, which anniversaries in the second half. On this slide, we set out our summary cash flows for the period. Depreciation and amortization was GBP 467 million, up GBP 120 million from the prior year. This increase was driven primarily by Hibbett and Courir, together with the impact of new stores and our supply chain investments. Lease repayments were GBP 230 million. As a result, the group's operating cash flow was GBP 546 million, up 5% versus the prior year. The change in working capital resulted in a net outflow of GBP 312 million. This was due to an increase in inventory of GBP 314 million, reflecting the rebuild of stock following the seasonally low year-end balance sheet position. Gross capital expenditure in the period was GBP 216 million, down GBP 29 million on the prior year, reflecting the tapering off of our supply chain investment phase. Tax, interest and other cash payments were GBP 86 million, leading to an overall free cash flow of minus GBP 68 million, and that's an improvement of GBP 35 million on last year. To reiterate, given the seasonality of our business, we expect to generate significant free cash flow in the second half. Dividend payments related to last year's final dividend were GBP 34 million, and our first share buyback program of GBP 100 million completed in July. Overall, we saw a reduction in net cash of GBP 177 million, leading to net debt before lease liabilities on the balance sheet of GBP 125 million. Turning to Slide 12 and to reiterate the continued strength of our balance sheet and cash generation. We continue to manage our inventory effectively and in a disciplined manner. Net inventory increased by 14% year-on-year. This mainly reflects the acquisition of Courir, but also proactive stock management ahead of our distribution center transitions and City Gear store conversions. Régis will provide more detail on this later. Overall, we're well positioned on inventory heading into our peak trading period. Turning now to net debt. With cash of GBP 502 million and borrowings of GBP 627 million, our net debt at period end was GBP 125 million before lease liabilities. We expect to move to a net cash position by the end of the financial year. Factoring in IFRS 16 lease liabilities, our net debt was just over GBP 3 billion, representing net leverage of 1.7x. And taking into account the Genesis buyout option in FY '30 and FY '31, pro forma net leverage remains around investment-grade levels. In July this year, we completed a comprehensive debt refinancing. So including our new undrawn RCFs, our total liquidity at period end was just under GBP 1.4 billion. Finally, on shareholder returns. In April, we updated on our strategy and our capital allocation priorities. And with this, a commitment to enhance shareholder returns. In accordance with these priorities and reflecting our expectation of strong free cash flow generation, we announced a second GBP 100 million share buyback program in August. We expect the program to commence in the coming days. And at current share price levels, we believe buybacks represent a compelling return on equity for shareholders. And finally, for completeness, the Board has also declared an interim dividend of 0.33p per share. So now let me take a moment to address the impact of U.S. tariffs on our business, which we said we'd provide an update on today. The overall message here is that we see limited financial impact in FY '26, though unsurprisingly, uncertainty remains going forward. First, a reminder of our direct exposure. This is the impact on our sourcing of own brands and licensed products as well as store fixtures and fittings. Our own brand accounts for less than 10% of our U.S. sales, and we've already taken effective steps to diversify the sourcing base. As a result, the direct impact to JD of higher U.S. tariffs is not material, estimated at less than $10 million on an annualized basis. Turning now to our indirect exposure. We spent several months closely monitoring the actions our brand partners are taking to mitigate tariff impacts and any shifts in U.S. consumer behavior. From a brand partner perspective, with a significant proportion of their sourcing concentrated in Southeast Asia, we're seeing them taking proactive steps across the supply chain to mitigate cost pressures and maintain competitive pricing. And where retail price increases have occurred, they've generally been targeted with a broadly neutral reaction from customers so far. So based on what we've seen to date, we therefore anticipate a limited financial impact from U.S. tariffs in the current financial year. This is supported in part by inventory purchased prior to the implementation of tariffs. Looking beyond FY '26, uncertainty remains over broader tariff as well as over U.S. consumer sentiment, as you might expect. We will, of course, provide updates as and when the landscape evolves further. So finally, on our outlook and guidance, we expect our full year profit before tax and adjusted items to be in line with current market expectations. Our H1 results demonstrate our operating and financial discipline against a tough market backdrop. You can expect more of the same in H2 with continued effective management of our costs and cash. We remain cautious on the trading environment, reflecting continued pressures on consumer finances, elevated unemployment risk and the ongoing footwear product cycle transition. Now as a reminder, as we settle into our new reporting pattern, there's no update on current trading today, and we'll report our Q3 numbers on the 20th of November. Finally, as I highlighted on the previous slide, we anticipate the financial impact from U.S. tariffs to be limited in this financial year. So with my review concluded, let me hand back to Régis, who will provide the business update. Regis Schultz: Thank you, Dominic. Let's move now to the business update. First, a quick reminder of our investment case. So JD Group operates on a large and global scale with footprint in over 50 countries. Our market, sports fashion, will continue to grow over time, benefiting from ongoing casualization and active lifestyle trend. JD Group is a leading player in all key geographies we operate and is targeting further market share gain, particularly in North America and Europe, where we see significant organic growth opportunity. JD Group has a strong and agile multi-brand model, allowing us to propose the best products to our customer and to navigate trends and brand it seamlessly. JD Group is an omnichannel retailer, leveraging the best of the online and off-line world for our customer. JD Group is building the infrastructure and the governance needed for a group of our size and scale. In the last 3 years, we have invested significantly in our supply chain, in our technology as well as strengthening our system control and talent. We will, therefore, unlock operational efficiency across the group. This puts us in a position to deliver profit growth ahead of sales over the medium term. JD Group is a highly cash-generative business with a powerful balance sheet. With disciplined capital allocation, we have headroom to invest for growth while delivering enhanced return to our shareholders that translates to a GBP 200 million share buyback program for this year. Everything we do, everything JD does, starts with the consumer, the JD customer, the young customer, the 16 to 24 years old customer. JD's greatest strength is our ability to see the world through the mindset of our customers. Our close relationship with the young customer gives us a strong partnership with the brands we sell. This unique brand partnership provides us the ability to offer the latest and the greatest product to our customer. Our concept, the JD Theater, is modern, vibrant, multi-brand, premium, mixing sport fashion and music. We leverage the magic within our store to bring our proposition to life in an environment that elevate our brand partner stories and delight our customer. Before you ask me the question, how is our customer feeling right now? I would say that the current level of uncertainty is impacting customer confidence across our different markets. But more importantly for us, as we have said previously, unemployment is a key factor for our young customer. And we are starting to see early negative signs on it, especially Europe, U.K. Something for us to monitor in the coming months. Meanwhile, when we are delivering new exciting product, we see our customer coming into our store. Talking about product, let's turn to a very familiar slide, which demonstrates the power of our multi-brand model and our agility to navigate trends and brand it. Looking at the mix of our sales in footwear on the left and apparel on the right. First, you will see that we are not building our range per brand. We are doing it by style, by category to focus on customer need. If you take footwear, we have 4 key categories. It's a simplified version of what we do internally. You have running, performance and retro basketball, skate, we have included Terrace in this, classic or tennis and other. And you can see the movement between the category. For example, retro basketball went from 20% of our sales in financial year '20 to almost 40% of our sales 2 years ago, before slipping back in the last 18 months. On the other hand, running has moved back above the 50% mark where it was in financial year '20, especially with the development of performance running with On, Hoka, Salomon, adidas EVO, and the new Nike running product, Vomero 18 and Pegasus. Thanks to our agility, to our flexible merchandising, to our buying excellence, we are navigating, anticipating the product cycle, the change of trend and the evolution of branding it. And this is critical in the current challenging product cycle. As we always say, we will win with the winner. Turning to apparel. You can see how we have pivoted our offer towards performance apparel and street fashion. Performance apparel, mostly exclusive product designed by us, designed for us with the brand, show our agility to capture and create growth by extending our reach and leveraging our brand relationship with a big player and with emerging brands. This has been done very quickly as we have more than doubled our sales in performance every year in the last 3 years and grew over 5x over the last 5 years. Our growth in street fashion is another example of our agility to extend to new category by developing our own brands to respond to customer trends. As you have seen from Dominic in our H1 results, our focus on apparel gives us a unique competitive advantage, and our investment in space, resources and talent is clearly paying off. Our apparel strategy is a key differentiator, a key competitive advantage in every market we operate, and it brings to life our unique lifestyle proposition. In the first half of our financial year, we have made strong progress against our key mid- and long-term priorities. In North America, our focus is to develop the JD brand, to leverage our complementary fascia, and to deliver the back-office synergy following the acquisition of Hibbett. In Europe, we are leveraging our multi-fascia strategy to gain profitable market share with JD to address a young customer, Courir to reach more female, older customer, and Sprinter and Cosmos to a more family sport customer. We focus on key country, France, Iberia, Italy, Benelux, Greece and Poland, where we have a leading market position to drive efficiency and profitability. We are building a more efficient supply chain with the automation of our JD European DC in Ireland. In the U.K., our focus is to have fewer, bigger and better stores, to be more productive and to optimize our central overheads. We have made a lot of progress in the first half of the year, which I will now take you through in more details. In U.S., we are developing the JD brand, gaining again market share in H1 and increasing the awareness of our brand. Our #1 brand awareness action is to open stores. In H1, we have opened a net of 52 stores in the U.S. This includes 22 conversions from Finish Line to JD Fashion, delivering on average more than 20% uplift in sales. Second priority is to target key markets in the U.S. with community marketing activation, local advertising like billboards, buses, local sponsorship and ambassador. Third priority is about national influencer targeting digital media, performance, search and shopping. Mike will provide and can provide more color on the program during the Q&A session. As a result, as you can see on the slide, we are delivering a significant increase in national aid brand awareness from 34% 2 years ago to 59%. And this is even more marked in our key battleground markets such as New York. More impressively and impactful, 26% of the consumer are purchasing JD, almost triple versus 3 years ago. North America is the largest market in the world, and it is now our largest market, accounting for almost 40% of group sales in H1. Our different fascias provide us with a full reach of the American customer from coast to coast with DTLR on the East Coast to Shoe Palace on the West Coast, from top mall key trading part with JD to local community with Hibbett from all ethnicity and all gender. The acquisition of Hibbett has been transformative as it gives us an extensive geographic and democratic reach in U.S., creating scale for our strategic partner, the large and emerging sportswear brand. We see great opportunity in North America for the development of both the JD brand and our complementary fascias. As part of Hibbett acquisition, we acquired City Gear stores, a chain of 200 city specialist stores situated in the Southeast with a similar customer base than DTLR. As explained in the details in April, we will convert all the City Gear stores, the 198 stores, to DTLR, giving us an opportunity to improve our sales and profit. City Gear has a return of USD 250 per square foot, whilst DTLR average more than double at around USD 500. So a lot of value to harvest for us. We have already transferred the City Gear operation to DTLR back in June, and the system cut over on time, on budget and with no issue, another demonstration of our operational excellence. At the same time, we are starting the conversion program with an initial 6-store conversion trial. As of last week, that shows a strong uplift in sales around the plus 60%. Second priority is synergies and leveraging our scale in the U.S. As mentioned by Dominic, we are on track in terms of action and the planned synergies. On back office and system change, our U.S. businesses are moving quickly with the ongoing implementation of Workday for finance and HR, leveraging our Hibbett expertise. With our new scales in North America, we are starting to see significant benefit in areas such as transport, logistics, insurance, and we are bringing learning from JD to develop Hibbett range and merchandising. Hibbett delivered a positive Q2 like-for-like, the first for some time. Another source of synergy, the supply chain of the distribution center. We are converting our U.S. DC to become multi-fascia to deliver significant cost savings in the future as well as a quicker replenishment for our store by covering the country from East to West. Our first multi-fascia DC will be live beginning of next financial year with a new West Coast DC in Morgan Hill, near San Jose, and to be followed quickly by Alabaster, the historical DC of Hibbett in Alabama. Turning to the development in Europe. We are leveraging our multi-fascia strategy to gain profitable market share. We have refined our plan and focus on key countries: France, Iberia, Italy, Benelux, Greece, Poland, where we have a leading market position to drive scale, efficiency and profitability. As mentioned in April, Germany, the Nordics have been more challenging due to high cost to operate and less appetite from the consumer for sports fashion. So we have taken this learning and are directing future investment on the market where we see more room for profitable growth. In H1, we have focused JD store opening program in Spain, Italy, France and Portugal with a net increase of 35 stores. Overall, I'm pleased to report that we gained market share in the first 6 months. The integration of Courir is proceeding according to plan. Courir operates 307 stores across 6 European countries, including its own market in France, where a majority of the stores are located, as well as 33 franchise stores across 9 further countries. We see the potential to develop Courir in Europe by leveraging our existing infrastructure. We have successfully entered Italy in the first half with 3 stores opening, and we are preparing to reenter Portugal. We also have our European sporting goods fascia in Iberia, Greece and Cyprus. Those business provide us with scale, infrastructure and a different customer. In H1, they saw sales growth of plus 1.2% and 6 net new store openings, taking the total store number to almost 400. And finally, an update on our European supply chain project, a long project around Heerlen DC in the Netherlands continue to ramp up, and it will launch automation in the coming days. In fact, on Monday, we will start the automation. Initially, this will be for store replenishment with online to follow in the first half of next year. To give you an idea of the scale of the operation, the target is a throughput of 100 million units a year. Automation will unlock significant efficiency within Europe, including faster fulfillment, better stock availability and a reduction in the fulfillment cost per unit. It will eliminate our current dual running cost in Europe and the unnecessary cost and duty of shipping to Europe from the U.K. To minimize the risk of disruption during our upcoming peak trading period, we will maintain our dual running with our site in Belgium until beginning of next year. And then as Dominic said earlier, we are on track to deliver over GBP 20 million of cost benefits relating to the supply chain double running costs across financial year '27 and '28. Before we turn to look at the U.K., I want to give you a behind the scene tour of the build of what is our biggest JD store in the world in Manchester's iconic Trafford Centre. We believe it is also on track to become one of the world's largest sports fashion store by sales with a triple figure turnover in U.S. dollar. This destination store opened in June and set a new benchmark in innovation and merchandising for JD worldwide. It will bring to life the JD Theater, as mentioned earlier, and this small video gives you just a taste. Enjoy it. [Presentation] Regis Schultz: It is a 4,000 square meter store. It means that we could play with a lot of new brands, new products. Trafford Centre has 19 customer engagement areas. This includes customization, sneaker refurbishment, social media recording studio, even a barber, not for me. And I'm looking forward to host you and to see you in JD Theater of Dream in Manchester. As you know, U.K. is our most established market. As a result, our primary focus is on enhanced productivity, larger through fewer, bigger, better store, optimizing the store footprint in the best location and reinvesting in the best location and in our current estate to make sure that our store continues to be the best in town. In line with our strategy in H1, we saw a net reduction in U.K. store numbers of 13, but an overall increase in selling space. Productivity is also about driving operational efficiency and cost savings. So to highlight just a few for you. With our DC, we are now seeing the benefit of closing Derby last year and reviewing our transport costs, bringing in further savings and driving more efficiency in Kingsway. Then we have some of our tech infrastructure key projects starting to land. Our new HR system, Dayforce, has launched in the U.K., which will start to bring scheduling benefit in store as well as overhead saving in our head office. We are also using technology to support both colleagues and customers. We are, as we speak, implementing RFID in all our stores to facilitate click and collect, ship from store transaction, and making replenishment much more efficient for our people, saving critical minutes in store tax. This is alongside the self-service checkout and mobile point-of-sales terminals that we are starting to roll out. And I will add one that Dominic is particularly proud of, reducing our audit fees, having enhanced our process and system in finance. As a final update, we see loyalty as a key driver of our sales. Our now established global loyalty program, JD STATUS is progressing well. And in the U.K. alone, it's capturing more than 25% of our turnover. STATUS serves as a foundation for developing a more targeted and personalized relationship with our customers. In H1, we ran test of personalized offer during campaign period, which resulted in significant incremental sales. This gives us a strong indication regarding the scope and the potential for future development. As a conclusion, in a tough trading environment, we are staying focused on our strategic priorities, our operating and financial discipline. This is demonstrated by our market share gain in H1 and our operating cash flow up. We are cautious about the trading environment in the second half of the year. We expect full year profit before tax and adjusted items to be in line with current market expectation. We are focused on delivering a strong free cash flow, and we have confidence in the medium-term growth prospect of our industry. We are reaffirming our commitment to enhance shareholder return, and we will soon start our second GBP 100 million share buyback program. Before I hand over for our Q&A session, I'd like to thank all my colleagues for their hard work and dedication. Their commitment and their agility are moving us forever forward. Thank you. Mike, over to you. Unknown Executive: All right. Thank you very much, Régis. We're going to start the Q&A now. I'll wait for my colleagues with the microphones. So Lorraine, could you start with Grace, please? Grace Smalley: It's Grace Smalley from Morgan Stanley. My first question would just be on apparel. You mentioned there the improved product assortment after a period of weakness. I'd just be interested to hear more details on what exactly has changed in the apparel assortment? What's making you more optimistic on that category? And Régis, I think in the past, you've spoken about a more competitive environment in apparel, just how you see that competitive landscape today? And then my second question would be on the footwear side. I love the new slide with the different categories. If you could just talk about, based on your consumer insights, what you're seeing from the brand's product pipeline into next year? How you see those trends evolving? Do you expect running to continue to take market share? What you're seeing in basketball, terrace and skate as well would be very interesting. Andrew Higginson: I think the best to answer is Michael Armstrong. Michael Armstrong: Yes. I think, apparel -- I mean, if you remember right, 12 months ago, we were sitting telling you the apparel market was really challenging. And I think what we find is because there was a bit of a shift in the market a couple of years ago and particularly with the bigger brands, we work on generally about an 18-month time line. So there's a lag between when the market shifts for us to be able to capitalize on that shift to get at the market, the shift in the market with the bigger brands. We've just seen the brands catch up with the consumer. That's really all it is. We had a really strong -- we still have a really strong business in the performance categories, as you can see on the slides. And we've had some new entrants come in, in that space, which have worked extremely well for us like Trailberg, Able, Montirex still continues to be amazing. We've got a really good business with Under Armour. And on the fashion, more lifestyle side of things, that's where we're seeing the real upside. Adidas is looking really good on apparel. We introduced a new own brand called Unlike Humans. So there's just a lot going on. It's just quite an exciting place right now. And on footwear, as Régis mentioned, we're still just managing out of this period where we had 3 really big items dominating the footwear business to a marketplace where consumers want to try and test new products. There's a lot of new -- not new brands, but brands that are reestablishing themselves in the marketplace. Again, because of the supply chain time lines, we're not necessarily fully able to get at everything that we would want to get at today, because there's a 12-, 18-month lag on everything. Over time, we'll start to catch up on that stuff. But what we're seeing right now is still the market is very fluid. You can see the backdrop is generally pretty challenging, the appetite isn't necessarily the same as it was during the COVID years. So getting those newer models and brands up to speed as quickly as the big franchises that they claim is still a challenge for us. I think the other thing worth mentioning is, obviously, we went through a bit of a honeymoon period with women's footwear. She was consuming a lot of product, and that softened. So that has had a bit of an impact on us as well. Unknown Executive: Okay. Let's move to Jonathan at Peel Hunt. Jonathan Pritchard: Jonathan Pritchard at Peel Hunt. Just on the brand awareness point, obviously, you've outlined to a degree what you're doing. But what really has changed, because those numbers are pretty impressive that you've gone from, I think, 34% to 59%. What has been the golden bullet as it were for that? Michael Armstrong: Again, I think we just mentioned store openings. We've got a good footprint in all the best malls, now in the majority of the best malls. We've opened a few new flagship stores, Las Vegas as an example. But I think a lot of the great work the team have been doing over the last 2 years has started -- we started to benefit from that, particularly in the communities. The brand awareness, aided brand awareness in the key markets for us, New York, Texas, Miami is significantly higher than that. And a lot of that is around the work we do in the communities, it's local sponsorships, activations, partnerships. We're just starting to benefit from that now. Jonathan Pritchard: Again, just to follow on from Grace's question, and it does follow on a little bit from what you've just said. But apparel, the mindset of the U.S. consumer for you and apparel, obviously, it's pretty much half and half of sales in the U.K., getting there in Europe, but quite a bit behind that in the States. Do people still -- have people started to genuinely think of JD as an apparel retailer? Or is it still a work in progress? Michael Armstrong: The category in the U.S. is still very much dominated by footwear, but we are building momentum. The apparel business has been the growth driver for us this year in the U.S. with the backdrop of the challenges that we have in footwear being the same in Europe as they are in the U.S. So we think we are starting to make really good progress. Regis Schultz: I think in U.S., it's linked to the market leader, which is only footwear. So I think that the more people know JD, the more they understand the fact that we are not a footwear and we are full lifestyle. So the awareness is helping the apparel business, too. So the two work together. Unknown Executive: We go to Richard Chamberlain from RBC. Richard Chamberlain: Richard Chamberlain, RBC. Three for me, please. I wondered if you can say how Europe online performed in the period. I appreciate you've obviously got the automation benefit still to come through. And then again, on Europe, Régis, what are the plans for the Courir store estate going forward? How do you see that shaping? And then third, I was intrigued by your comment in the U.S. about sort of neutral reaction from consumers to price increases or tariff-induced price increases there. Do you think we're going through a sort of temporary window where consumers just haven't reacted yet, so those price increases, or is there something else behind that, like an improving product pipeline or something that's actually still stimulating demand and having to offset those price increases? Regis Schultz: So European online is doing well, I think, but we are starting from a low base. So I think that we are -- we have implemented in the last 18 months much more ship from store and that's created a big difference, because in the past we were shipping a lot of things from U.K. So we were not competitive in terms of time to get to the consumer. So we've seen a growth in terms of our online business in Europe thanks to a better service. And the thing that is coming with Heerlen now coming to first half will become to fulfill online order. We'll continue to do that. So we are just playing catch-up. But we're starting from a low base, but growing. In terms of store estate for Courir, I think what we see is that Courir will continue to develop out of France. So France, we maxed out in terms of number of stores. So we covered all, except the one that we had to divest because of the antitrust. So now we are re-coming to the same part, which it's stupid things around that, but that's life, that's the way it works. And we will expand in Italy and Portugal. So Portugal, it's to be back in Portugal; and Italy, it's a growth country for us. For JD, it's a key country. And I think that we see the benefit of expanding our offer a little bit to offer the same as we offer in France, in Spain, in Portugal, with Courir and JD. So that's the plan. In terms of the price impact, so as you know, what has happened in the U.S., it's a targeted price increase. When the product is good, price is not the issue. So I think what is still to be seen is what will impact when, because at the end, everything will translate into price. For the moment, it has been targeted on products that everyone feels that it will support a price increase. What will happen when a lot of other price will start to come to the system? That's another question, because for the moment -- and it's more not an industry question, it's more an economic question. I think that a lot of U.S. companies have really swallowed the tariff at one point of time, this will come to the consumer, what will impact at that time. But what we know, and that's the last 3 years' experience, that the U.S. consumer is the most resilient in the world. They just keep buying. So hopefully, it will continue. Unknown Executive: Let's go to Ashton Olds. Ashton Olds: A couple of questions from me. I guess the first one, just on the European margin. I think you mentioned that you get around a 20 million benefit from Heerlen. I guess what's the road map towards high single-digit margins beyond that? Is it cost out? Or is it sales led? The second question I have is just on sort of the online approach. You mentioned that gross margin at the group level was down 40 basis points from investment in price. Online sales were down slightly. I appreciate the market is not really helping. But just could you elaborate on your approach to online and whether there's more that you can do there? And then I think Dominic, you mentioned with regards to tariffs that you helped by purchasing ahead of tariffs. I'm not sure if I got that right. But I suppose as we look into FY '27, when you are purchasing at more normal rates, what should we think of the moving parts there? Is it gross margin down? Or is it more pricing to come? Regis Schultz: So I think Dominic will take the first and the third, and I will take the online at the end. Dominic Platt: Okay. So I mean in terms of European margin, it's a multifaceted story. We obviously saw the half 1 margin there. Overall, it's around 4%, 5% operating margin. There are a number of things we're doing, which give us confidence. We can see that improving over time. I think the first is sales led. As we grow scale in the market, we're taking market share, we'll start to see more sales on a fixed cost base, so that flows through in part. Second is efficiency, and that comes in things like supply chain. So at the moment, we are bearing significant costs by having 3 warehouses in Europe for JD, plus shipping stuff from the U.K. as we bring Heerlen online over the next -- before peak for stores next year for online delivery. We start then to step away from the double running costs and distribution in the U.K. will always remain a little bit, but in the grand scheme of things, not very much. That will play through to a better cost base and a more efficient cost base, but also better service to customers. As Régis said, at the moment, in some cases, if you buy something in Lisbon, you may have to wait 6 days for it to get to you from Rochdale, which isn't a great service. As we do more of that through Heerlen, that will improve the customer piece. And then the final piece is picking up on what Régis said around being more targeted in the markets where we invest in. As we learn more about where our concept resonates better with customers, we can tailor our investment to make sure we're getting the best returns on our investment and taking action to improve performance where it's slightly weaker. So a combination of those things over a period of time should see us having the European margin moving closer to that sort of higher single digit that we see in some of our other markets. Should I do tariffs as well? Regis Schultz: Yes. Dominic Platt: So just on the tariff point, there's always a lead time when you buy goods. So when you're buying for Q3, a lot of that was bought well before even the tariffs were announced. So that means we do get the benefit of that. And I think it's the same in many industries, you get the benefit of that in this financial year for us. Looking through to FY '27, I think it's too early to tell. And I think as we go through and look at what our buys are going to be, look at what our terms and conditions with our brand partners are going to be, we'll have a better feel. So we'll provide an update on that in the new year. Regis Schultz: Concerning online, I think that it's mainly -- so as I said before, I think online in U.S. and Europe is doing well. I think in U.K., it has been more challenging. And I think that especially in terms of traffic and conversion, and that's where we have been investing more in price in order to make sure that we are competitive in a very promotional market. So that's the thing. And as it is weighted -- the U.K. weight is much higher, that has an impact on the online margin. Unknown Executive: Okay. Let's move to the side, please. Dom, let's go to Will in the middle, and then Kate Calvert in front. William Woods: William Woods from Bernstein. Two questions. The first one is just on the ongoing shift in the footwear product cycle. You mentioned women's footwear softening. Do you think there's anything more fundamental going on in that cycle? Or do you think it's just the classic brand and style cycle happening? And I suppose when you look at the apparel business, do you think that cycle still applies there. So we'll go through the same with sports fashion and performance, that you've grown quite well, in the next couple of years? And then the second one is, obviously, you've done a lot of work on U.K. productivity through few bigger stores, customization and loyalty, et cetera. Are you applying any of those learnings to the U.S. and Europe? And I suppose I'm particularly thinking about the new stores that you're opening. Are you changing what you're doing because of what you've learned from the U.K. at this stage? Regis Schultz: Mike, I would... Michael Armstrong: Yes. I mean I think with reference to women's, I mean, women generally compared to men have a lot more choice, and they like to change the mind more. And as I said, they're consuming a lot of sports shoes and she's finding other things to buy right now. That's just the nature of women's fashion, right? We'll have another up-cycle sometime soon, but we don't know when. We'll just take it when it comes. I think when it comes to apparel cycle, all I can say is we've got a very adaptable business model. We've got a wide range of brands that we can access. We have the ability to build what we need to build from a product point of view with pretty much every brand. We have complete flexibility in that respect, which again, none of our competitors have that. So we're very agile. And we have our own brand portfolio and licensed brand portfolio as well that chip in and help us deliver good things like speed to market and sort of a pricing architecture as well. Regis Schultz: And second question around the learning from U.K. Michael Armstrong: Yes, the stores -- I mean, I think specifically to the U.K., how consumers are shopping is clearly changing. And I think especially when you look at JD as a business, and we have seen some fairly significant price increases in our world over the last 3 or 4 years. So I think the expectations of the consumer now have changed slightly when they are buying a pair of shoes, which is GBP 150, they want a great experience. And we're also seeing, in particular, the traffic declines primarily are coming from high street locations, and we are seeing a big shift. We're not seeing the same declines, we're not necessarily seeing a big shift into the retail parks and the mega malls, and it's really the retail parks that have grown the most within our store estate over the last 2 or 3 years, which has grown the space significantly. The learning from Trafford Centre for us is that it's the same point, consumers just want a great experience. And what we have found is the impact of creating that fabulous store has been far greater than what we expected, outwards of like 30-mile catchment area. So there's a lot of learnings in that for the future in terms of how we look at the store estate generally. William Woods: I suppose, does that change the U.S. and European strategy? Or do you think you're just experiencing slightly different trends in the market? Michael Armstrong: It doesn't change, it influences and helps us maybe make some different decisions in the future. Kate Calvert: Kate Calvert from Investec. A couple from me. First one, sorry to return to inflation and tariffs, but what sort of level of inflation are the brands putting through at the moment in the U.S.? And do you think it's enough to have offset the sort of the initial 10% increase? So we're kind of yet to see the August increases. And what sort of inflation is going through in Europe and the U.K. at the moment? And in terms of my second question is just on gross margin. Gross margin ex acquisitions was down 40 bps. I suppose the question is really on direction in terms of the trend of the gross margin because obviously, apparel has been much stronger, and you have gone through quite a few years of good full price sales. So do you think we're kind of back to a more normalized gross margin post-COVID? Regis Schultz: I will do the first one and you do the second one. So I think on inflation, I think that, as we said before, roughly what happened with tariff is 1/3 has been swallowed by the manufacturer, 1/3 has been through the supply chain and the manufacturer, and 1/3 to the consumer. That's roughly what has happened. So the part which has been -- and in total, the tariff impact for our industry is on average a sort of 10% if you put everything to the consumer. So what has been passed to the consumer is around 2% to 3% if you take that on total. So that's type of magnitude. But that has been done on some products, not all, and with a very targeted view and has no impact in terms of volume. The question will be, the 70%, which has not been passed to the consumer, at one point of time will be in the system, when you go to new products and those. But that is what will impact at that moment. And I think we are more -- we are not so nervous about our industry. I'm more nervous about the global impact in terms of what happens to the U.S. consumer when they discover that everything goes up in terms of price, because that will happen over time. It's not happening now, but it's going to happen. That's a key question that we don't have the answer. But for our industry, I think the way it has been managed, I think it has been well managed, and I think that we've seen no impact for the time being. Dominic Platt: So on the margin point, Kate, I think in the first half, the 40 basis points really reflects more tactical moves than something structural. And if you look at where it happened, it's sort of online in Europe, where we just need to be more -- chose to be more competitive in a more promotional market. And in the U.S., something we talked about at the year-end, I think, around Finish Line, which is as it winds down, is less differentiated. So price plays more of a role than would be the case in JD and some of our other fascias. I think you hinted that, but maybe didn't mean that with more apparel, is that lower margin. Actually, apparel and footwear, similar margins for us. And apparel is supported by having a higher proportion of own label. And as Mike said earlier on, they play a really crucial role in the overall offering we bring to customers, unlike humans and others. So that itself isn't the driver. Actually, the main driver is really the product cycle. In a cycle where people want the product, we're a full price retailer, we get the margins and we get the price. Where it's slightly softer, you just have to be -- you have to respond to that a little bit at the margins, and that's what we're seeing. So I don't think there's a structural shift. I think it is just reflecting where we are at this point in time on some of our products. Kate Calvert: Can I just come back on the gross margin question just in terms of the full price sales. So I mean as you came out of COVID, because there's a lot of stock shortage, you had very high full price sales. I know you're being tactical at the moment, but do you think the underlying has got back to a more normalized level just generally in the industry and everything? Michael Armstrong: Yes. I think -- I mean, the position that we're in just now, there is a shift slightly back towards apparel in the mix, which will be beneficial. We don't know how long that's going to -- that run is going to maintain itself, obviously. But I'll just reiterate what Dominic said, it really does just come down to the product cycle and the appetite for that product at full price. What we're seeing right now is the good stuff is really good. The stuff in the middle is slightly more challenging to sell at full price. We would like to assume that if the market can course correct and, along with our brand partners, we can drive that demand into new franchises, that will see a higher level of full price sell-through. There's no question. It does come down to the brands and the ability to create energy in the marketplace as much as anything. Regis Schultz: And to be precise, on your question, which is around COVID, I think it's already done. So it's no more the COVID where we were at one point. So I think it has been going down slightly, but surely. So I think we are in a stable, yes. Unknown Executive: Let's move to Warwick behind you. Alexander Richard Okines: I'm Warwick Okines, BNP Paribas. One question for Dominic actually. Could you talk a bit more about the H2 profit expectations? First half PBT down about GBP 50 million, second half implied about plus GBP 10 million. What drives this swing? You talked about a few items like mark-to-market finance charges and Hibbett synergies. But maybe you could just flesh out that swing, please. Dominic Platt: Good question, Warwick. So look, I mean, if you look at the first half and the profit bridge helps there and some of the things that you saw, the headwinds there. We'll still get a benefit from acquisitions, slightly less in the second half. Obviously, we've got Courir coming in for a few months. Interest was a drag in the first half. Actually, as we anniversary the acquisitions, that could become a slight positive in the second half. So half-on-half, quite a big swing. Mark-to-market, we expect some of that to unwind in the second half. So again, half-on-half, quite a big swing. And then new space with Trafford and others coming online, we've had a lot of sort of preopening costs related to that in the first half. We should see that stepping up a bit into the second half. And I think the phasing of our OpEx synergies is weighted towards the second half rather than the first half. Although as you saw on the slide, I think we've done a very good job in the first half in terms of neutralizing some of those headwinds. So taking all of those things together, actually, you see a step forward in those points, in some cases, mechanical, offsetting -- more than offsetting the ongoing pressure from like-for-like and margin through the second half. Unknown Executive: Just before we go to Anne next to you, Warwick, a quick question on the lines from Richard Taylor at Barclays. A question for Dominic is that can you explain why the Genesis option has been revalued upwards by GBP 160 million? Dominic Platt: Yes, I can. At the full year, we explained that as a result of the change in the payment dates, we've moved it out from '25, '26, starting in '25 to '30, '31, that would result in about a GBP 250 million increase that was in the annual report. The actual increase at the first half is GBP 163 million. So we've got the GBP 250 million uplift, but then there's a currency impact on the overall option, bringing that down to GBP 163 million for the first half. So broadly in line with what we explained. Regis Schultz: I think you have been clear. So just for everyone because it's -- we have the option to buy back the 20% that is owned by the Mersho family. And the initial agreement was to do that in 4 years, from this year to 2028. Dominic Platt: '29. Regis Schultz: '29. We just moved back to 2 years between 2030 and '31. That's correct. So that's what Dominic was referring to. And we did that in order to manage our cash flow and to manage the best way to do that. Dominic Platt: That's the context. Anne Critchlow: It's Anne Critchlow from Berenberg. A question on tech infrastructure. So I appreciate you're in a catch-up mode at the moment on infrastructure. But just wondering what the potential might be to invest in, say, systems for pricing and promotions or allocation of product by store, various AI systems we're hearing about from other retailers. And also whether there's any time line for an RFID rollout from the U.K. to the rest of the world, and any implications in CapEx for that? Regis Schultz: Yes. So I think on tech, we've done a lot. And I think that unfortunately, it is mostly OpEx than CapEx. So we have done -- the big one was our HR system in the U.K., which is done, which is Dayforce. We are looking at finance system and HR system in U.S., which is Workday. So that's as we speak. In terms of our merchandising tool, we are looking at the implementation of o9, which will include AI tools to do that. We are not so keen on pricing and all that stuff for the time being, because I think we -- we believe that with our buyer, we are doing the job and a fantastic job around that. And RFID is that the rollout is in U.K., but will go to the rest of the world just after. So it's just that we start everything in U.K. So we are pretty advanced. There will be the self-checkout, the same. Most of that is OpEx. So that's why our OpEx has been inflated by around GBP 20 million in the last 2 years around system and all that stuff. So it's not a big impact on CapEx, but a significant impact in terms of our OpEx. Unknown Executive: And please can you pass to Alison. Alison Lygo: Alison Lygo from Deutsche Numis. So just a couple of mine left. Can I ask on the working capital, please, just in terms of the stock build we saw in the first half. Could you talk a bit about where that's gone in terms of the stock? And I suppose what you're thinking about in terms of requirement for H2, particularly in terms of anything further required for investing or pivoting the range in the new acquisitions? And then the second one, just on City Gear and that change into DTLR. So interest as to how much you're kind of changing in that proposition. Are we talking here about -- like you're talking about some relatively large uplifts. Are you really changing the range? What are you doing in terms of store fit out? Yes, and I guess what the kind of potential CapEx behind that might look like? Regis Schultz: Yes, I will do the City Gear and you do the stock one. So City Gear, so what we are doing with City Gear. So we have done a test of 6 stores where we have done a full conversion with new merchandising, new refurbishment, in fact, and that sort of costs around GBP 200,000 per store. And that is with the full rebranding and merchandising. What we have done for all the estate is to put that under the management of the DTLR team. So that implies the fact that we are slowly but surely changing the range, but we do that in a very -- when the product gets out of stock, we bring new products. So that is what we're doing. And there is a limit around that, and that's why we will have a program beginning of next year to refurbish a significant part of the estate and doing what we have done with the 6 tech stores. But we didn't want to rush too quickly. We just wanted to make sure that we do the system, the management and all that stuff in order to put the basis before doing a conversion. We learned a lot from the Finish Line program. And what we are applying there is what has been very successfully applied by JD team when we move from Finish Line to JD. We do the same recipe and with the same potential, because you have a double turnover per square foot. So there is no reason. And the level of investment is lower because DTLR concept is much less sophisticated than the JD one. So if you want to model it, it's USD 250,000 to invest in a store and with an uplift, which for the moment is around 50%, 60%. Dominic Platt: On the stock point, yes, I mean, stock was up 14% in the first half. A large part of that was Courir, which we didn't have in the numbers last year. But we also were carrying more stock as we went into the first half. We've got quite a bit of distribution center changes coming. So we want to make sure we're well set up for those, and that does sometimes result in a sort of slightly elevated position. And just picking up on the City Gear piece, as we start to range those stores more with what DTLR and Shoe Palace use versus what they had, you end up with a slight sort of overlap. But that's manageable, and it's something we've done in the past. I think heading towards peak, there's no material shift in pivoting in terms of stock we're bringing in. We're actually coming to the biggest part of our year now. And as we go into that, we feel comfortable overall with the quality of the stock that we have. And the real position to look at our stock is at the year-end once we've been through peak. Unknown Executive: Okay. We've got time for 2 more. So we'll go with Wendy, first of all. M. Liu: Wendy Liu from JPMorgan. I have two, please. One is a follow-up on the footwear cycle. You mentioned about there's a couple of promising smaller franchises. I was wondering if you can expand on that. Are you talking about specific brands? Or are you talking about particular categories? Is it running? Is it more lifestyle? So this is question number one. Number two, I understand you don't comment on current trading, but I was wondering if you can share a few observations about what you're seeing in different markets in terms of customer behavior. You mentioned about early signs of unemployment in the U.K. and the U.S., if I hear that correctly. I was wondering if you can expand on that. And I guess, broadly, what are you seeing in the various markets from what you can see today? Regis Schultz: Yes, I will start for the current -- yes, as you say, we don't update on current trading. I think what we said around customer, we see the level of uncertainty is high and which is never good for consumption. And we know that the key KPI we are looking at is unemployment, because our young customer is the first one to be impacted by that. And for the time being, nothing has happened, but we see the signs are more negative than positive. That's what we are at. So for the time being, it has not been -- nothing has happened on this side, but we're really looking at that, and that will be a negative for us if that happened. So that's what we flagged. I think that at the same moment, and we are in an industry where it's about fashion, it's about new products. So if the new product is good, consumers find the money to buy it. So that's what I will say. I think on the footwear, I think that... Michael Armstrong: Yes. I think you mentioned a lot of the things that are happening in the market already. We're seeing the market shift back to where it was around 2019, 2020, running back to being the dominant category. The brands that play in that space are -- we know who they are. You've got a few of the smaller brands gaining about momentum just now, Saucony, Salomon, those guys. But really, it's On running, ASICS, New Balance, Adidas are doing some really good stuff in the performance categories. And we've seen some new product from Nike that's hit the ground running. Unknown Executive: Wendy, could you pass to David right behind you? David Hughes: David Hughes from Shore Capital. Just on the U.S. and obviously, the margin drop, you talked about a part of that being driven by the Finish Line conversions. Could you just touch on what part of the conversion is driving that margin drop, and how long you kind of expect that to carry on since you're still going through with quite a lot of conversions left to do? And also with the City Gear conversions, would we accept similar margin pressure in the U.S. as a result? Regis Schultz: No, what we are seeing is not the conversion that is driving the margin. Finish Line is our biggest online business in the U.S. so far. It's no more. It was still 3 months ago, now it's JD, but it has been -- so on this Finish Line online business, that's where -- because the brand doesn't have any more resonance with the consumer less store. This is where we have been more aggressive promotionally to drive sales. That's what we were referring. So it's not about the conversion. It's more that the brand City Gear website doesn't exist anymore. So we will not have this issue. But our biggest online business for a long time has been Finish Line in the U.S. And this is where we see being more challenging for us, because we have no more store presence, or the store presence is reducing. So the appetite for the consumer for the Finish Line brand is reducing. So in order to drive volume, we need to be more aggressive on promotions. That's what we're referring to. So it's not about -- but the good news is that JD now website in the U.S. is bigger than Finish Line, which is a great achievement of the team. Unknown Executive: Any final questions still from the from the floor. There's nothing on the lines either. So in that case, we will close the meeting there. So thanks very much for joining us, everyone. I appreciate your support. Thank you. Regis Schultz: Thank you. Dominic Platt: Thank you.
Andrew Higginson: Good morning, everybody, and welcome to the JD Sports Half Year Results. I'm delighted to say that it's a set of results where we're on track for the year as we stand here today. And I just really wanted to make a couple of introductory remarks before I hand over to the team. It's been a tough couple of years really in lots of ways. There's been a lot of challenges we're facing too. The markets have not been great. Consumer markets have been uncertain. I think we all know about the political and economic background in our major markets. And of course, the cost base here in the U.K., in particular, with the national insurance rises and various other things have been very challenging. We've also internally, of course, had governance challenges that we've had to sort of face into as well, which have required investment and turnaround. And I really just wanted to start by commending the team really. The strategy is very much on track at the moment. I think they've shown great resilience in the face of a lot of those challenges. And of course, we're making great progress. The governance, in particular, I think commend Dominic and his team for the work they've done around the financial controls in the business and all led by Régis, of course. And of course, the integration of things like the supply chain, the progress we've made on governance, the good work that we've done around the integration of the acquisitions we've made and, of course, the great work we've done on our brands. And if you need an example of that, go and see the Trafford Centre and see how that's moved JD on here and it's probably its most mature market. I think all of that is very commendable. So you're seeing here today some of the results of that hard work and with more to come. But I just wanted to say thank you to all of the team in JD for the hard work that's gone on. It's never easy when markets are difficult, but I think they're doing great stuff. So thank you very much, and I'll hand over now to Régis. Regis Schultz: Thank you, Andy. Thank you for your kind words. So good morning, everyone, and thank you very much for joining us. I'm Régis Schultz, CEO of JD Group, and we are here joined by Dominic Platt, our CFO; and Mike Armstrong, our JD Global Managing Director. I will start with our key message and highlights from the first half. I will then hand over to Dominic to go through the financials. And finally, I will take you through the key business update. As a reminder, at our April strategy update, we set out some clear priority for the short and medium term. First, to deliver the vision to be the leading sport fashion powerhouse. Second, to build the infrastructure and the governance you will expect from a company of our size and a world leader. And third, to focus on cash generation and shareholder return. So I'm pleased to say that our first half results reflect our priority and demonstrate our operating and financial discipline against what was a tough trading environment. We are building a track record of focus and consistent execution against our strategic objective. As a result, we are gaining market share in North America, in Europe and building on the very significant opportunity we see in both regions to develop JD brand and leverage our complementary concept businesses. To finish our key message, we said we will provide you an update on the U.S. tariff impact. Dominic will go into more details on this, but you will be pleased to know that we see limited impact in the current reporting year. Let me now hand over to Dominic to run through the first half financial results with you. Thank you. Dominic Platt: Good morning, everybody, and thank you, Régis and Andy. So let's start with our summary financials for the group here on Slide 6. At constant FX rates, total sales were 20% higher year-on-year, reflecting a full half of sales from Hibbett and Courir, who were acquired in July and November, respectively, last year. Stripping these businesses out, organic sales growth was 2.7%, comprising 2.5% lower like-for-like sales and 5.2% growth from net new space. Against a tough backdrop in all our markets, we maintained our trading disciplines. Gross margin was 48%, 60 basis points behind the prior year. Excluding Hibbett and Courir, which are slightly lower-margin businesses, gross margin was 40 basis points lower year-on-year. This was driven by controlled price investments, particularly in our online offer to increase customer engagement and conversion. Turning to operating profit. As a reminder, earlier this year, we updated our definition of operating profit to include IFRS 16 lease interest, as we believe including all property-related costs gives a truer picture of the operating margin of each part of the business. On this basis, operating profit of GBP 369 million was 6.3% lower at constant FX rates. Excluding Hibbett and Courir, operating costs were 4.7% higher at constant FX rates, and this was driven entirely by new stores. Through structural cost reductions and flexing the staffing levels and discretionary spend, we managed to fully offset the impact of higher labor rates and technology costs as well as noncash mark-to-market charge of GBP 14 million in H1. More on that later. Overall, the group's operating margin was 6.2%, 170 basis points lower versus the prior year at constant FX rates. Profit before tax and adjusting items was GBP 351 million, 11.8% lower at constant FX rates and in line with our profit phasing guidance. Included in this is a GBP 22 million increase in net finance expense, excluding lease interest, which was driven by lower cash balances and debt financing related to acquisitions. Our adjusted earnings per share were 8.5% lower year-on-year at constant FX rates. For completeness, the statutory PBT was GBP 138 million, 9.5% higher year-on-year. This reflects lower adjusting items or exceptional items as we all used to know them. These are essentially limited to noncash revaluation of our Genesis put option together with the amortization of acquired intangibles. The Board has declared an interim dividend of 0.33p per share, consistent with the prior year. In line with our dividend policy, this represents 1/3 of the final dividend for FY '25. And last but certainly not least, we delivered a 5% increase in operating cash flow to GBP 546 million, demonstrating yet again the highly cash-generative nature of our business. Turning now to our revenue bridge from last half year to this. The left-hand side rebases H1 '25 for FX headwinds of 2 percentage points as well as some small disposals from last year. As I mentioned earlier, like-for-like sales were 2.5% lower and new stores contributed 5.2 percentage points to sales. This includes annualizations from stores opened last year and also the fact that we opened 4 flagship stores in the period, including the Trafford Centre in Manchester, which is strongly outperforming against its plan. So overall, organic sales growth was 2.7% at constant FX rates. We believe this is faster than the growth of our addressable markets, driven by market share gains in North America and Europe. Finally, Hibbett and Courir added GBP 869 million of sales for overall sales growth of 20%. As you can see from this slide, the JD Group is a very well-balanced and diversified global business. 71% of our sales come from North America and Europe, our key growth markets. Following the Hibbett acquisition, North America is our largest market, representing 39% of group sales. Our channel and category mix varies by region, which provides us with opportunities for growth. For example, our largest region for online sales penetration is the U.K. at around 25%, with other regions overall in the mid-teens. We're building a fully flexible omnichannel proposition in all our regions, offering customers a seamless service for purchasing, delivery and return, whether they choose to use our stores or online channels or as we are increasingly seeing a combination of the 2. Within our omnichannel proposition, organic store sales grew by 3.6%, reflecting the continued resilience of our full-price business model and our store opening program. Online sales were 1.6% lower with good growth in North America and Europe, offset by a weaker online performance in the U.K. While U.K. store sales were positive year-on-year, the U.K. online market as a whole was slightly more promotional during the period, especially in the second quarter, driven by short-term discounting to clear inventory. To maintain our competitiveness, we made some controlled investments in our prices and have seen an improvement in customer engagement online in recent weeks. Turning to category. Our agile and multi-brand model really comes into play across our combined footwear and apparel proposition. When we exclude Hibbett and Courir, which are more footwear-centric fascias, apparel participation increased to 31%, with footwear decreasing to 58% of sales. In footwear, we continue to see a fundamental shift in the global footwear product cycle, given the transition between newer franchises and some significant end-of-cycle product lines. Notwithstanding this, we saw strong growth across brands more in the middle of the cycle, which reflects the strength of our multi-brand model. The early signals of new product franchises in terms of both launches and pipeline are encouraging, albeit they are a small part of sales today. Overall, organic footwear sales were 1% lower year-on-year. The apparel product cycle is very different compared to footwear. Our apparel proposition is in excellent shape, supported by innovation and our own brands, and we believe there is significant scope to leverage this for growth, particularly in North America, where our apparel mix is low compared to other regions. Despite tough comparatives from replica shirt sales in the U.K. and Europe, due to the Euro 24 football tournament last year, organic apparel sales were 6% higher year-on-year. Our other category, which includes outdoor living equipment and gym memberships, maintained its share at 4% of sales mix. Turning now to our geographic regions. As a reminder, we have 2 different lenses on how we look at the JD Group. First, as you know, segmentation by fascia JD, our Complementary Concepts, our Sporting Goods and Outdoor fascias. This is our primary lens because it aligns to our strategy. And most importantly, it's how our customers and brand partners engage with the JD Group. The geographic split that you see on this slide helps to focus internally on creating the most efficient operating model to support our range of fascias in each region and, in the process, maximizing the returns we make on our investments. So starting with sales by region. As reported in our trading update in August, like-for-like sales in H1 were resilient in Europe, supported by our JD and Sporting Goods fascias. We are encouraged by improved like-for-like trends quarter-on-quarter in both North America and Asia Pacific. In the U.K., we see organic sales as a better KPI than LFL, given the ongoing evolution of our store footprint with bigger and better stores. Régis will cover this in his slides later. U.K. organic sales were 1.7% lower in H1, affected by tough prior year comparatives due to the Euro 24 football tournament. Turning to margins. The group operating margin of 6.2% reflects the H2 weighted nature of our annual sales. By region, the North American margin was 340 basis points lower year-on-year. This was influenced by 2 significant but short-term factors. First, the ongoing wind down of the Finish Line fascia. During the first half, Finish Line invested in price within its online offering to maintain competitiveness. It also closed 15 stores and transferred a further 22 to JD in the period. Those conversions continue to see significant uplifts in performance and profitability as the JD concept continues to resonate with North American customers. The remaining 220 Finish Line stores will be wound down over time, but will weigh on the North American margin in the short term. And second, the impact of Hibbett year-on-year. Last year, having completed the Hibbett acquisition on the 25th of July, the business recorded a spectacular first week due to back-to-school demand, making a significant proportion of its annual profit under our ownership in that 7-day window. Aside from these factors, as I mentioned earlier, Hibbett is a slightly lower margin business than the other North American fascias. The integration of the business is progressing well, and it's a key component in our multiyear program to create an integrated platform for the nationwide growth of all our fascias in North America with an efficient supply chain and back office. We're on track to deliver annualized cost synergies of $25 million with half to 2/3 of this, so about GBP 10 million to GBP 12 million expected in H2. In Europe, we saw a decline in the operating margin of 40 basis points. The main factor to call out here were our controlled price investments, particularly in the online offer, which saw good results in terms of customer traffic and conversion. As our supply chain investments in Europe come to an end in FY '27, we will see the operating margin in this region start to step forward towards the higher single-digit levels we have elsewhere. To remind you of our broader medium-term guidance for the group, we expect to see over GBP 20 million of cost benefits related to technology and supply chain double running costs across FY '27 and FY '28. And finally, the U.K. margin was lower by 130 basis points. This reflects the tough trading conditions, as highlighted, as well as higher technology, labor and costs related to new stores. We have and continue to make strong progress on our plans to enhance sales productivity and cost efficiency in the U.K., and Régis will touch on that more later. So on to the group profit bridge. Starting from the left-hand side, lower like-for-like sales at a constant gross margin contributed GBP 33 million to the decline, and that's net of GBP 27 million of attributable variable OpEx savings. We then have a further GBP 25 million from the like-for-like gross margin rate reduction. The next bar shows a GBP 10 million net OpEx increase, which includes the higher salary and national insurance rates as well as technology investments that we flagged back in May. It's a net number because we've also included structural OpEx reductions in the year. Alongside the higher mark-to-market charge of GBP 13 million, we offset these increases in full with our variable cost reductions, as you can see with the arrows on this slide. For the year as a whole, as we stated in our FY '25 results in May, we expect incremental OpEx of over GBP 50 million, including higher labor and national insurance costs and tech spend. And we're on track with our guidance of partly offsetting this through GBP 30 million of structural cost reductions and U.S. integration synergies of around GBP 10 million to GBP 12 million. I would also highlight that we expect part of the mark-to-market charge to unwind in the second half. The contribution from new stores and annualizations of GBP 24 million in H1, Hibbett and Courir added GBP 32 million. And finally, we saw a GBP 22 million increase in net finance expense, excluding lease interest. As I mentioned earlier, this was largely due to the interest on debt component of our acquisition financing, which anniversaries in the second half. On this slide, we set out our summary cash flows for the period. Depreciation and amortization was GBP 467 million, up GBP 120 million from the prior year. This increase was driven primarily by Hibbett and Courir, together with the impact of new stores and our supply chain investments. Lease repayments were GBP 230 million. As a result, the group's operating cash flow was GBP 546 million, up 5% versus the prior year. The change in working capital resulted in a net outflow of GBP 312 million. This was due to an increase in inventory of GBP 314 million, reflecting the rebuild of stock following the seasonally low year-end balance sheet position. Gross capital expenditure in the period was GBP 216 million, down GBP 29 million on the prior year, reflecting the tapering off of our supply chain investment phase. Tax, interest and other cash payments were GBP 86 million, leading to an overall free cash flow of minus GBP 68 million, and that's an improvement of GBP 35 million on last year. To reiterate, given the seasonality of our business, we expect to generate significant free cash flow in the second half. Dividend payments related to last year's final dividend were GBP 34 million, and our first share buyback program of GBP 100 million completed in July. Overall, we saw a reduction in net cash of GBP 177 million, leading to net debt before lease liabilities on the balance sheet of GBP 125 million. Turning to Slide 12 and to reiterate the continued strength of our balance sheet and cash generation. We continue to manage our inventory effectively and in a disciplined manner. Net inventory increased by 14% year-on-year. This mainly reflects the acquisition of Courir, but also proactive stock management ahead of our distribution center transitions and City Gear store conversions. Régis will provide more detail on this later. Overall, we're well positioned on inventory heading into our peak trading period. Turning now to net debt. With cash of GBP 502 million and borrowings of GBP 627 million, our net debt at period end was GBP 125 million before lease liabilities. We expect to move to a net cash position by the end of the financial year. Factoring in IFRS 16 lease liabilities, our net debt was just over GBP 3 billion, representing net leverage of 1.7x. And taking into account the Genesis buyout option in FY '30 and FY '31, pro forma net leverage remains around investment-grade levels. In July this year, we completed a comprehensive debt refinancing. So including our new undrawn RCFs, our total liquidity at period end was just under GBP 1.4 billion. Finally, on shareholder returns. In April, we updated on our strategy and our capital allocation priorities. And with this, a commitment to enhance shareholder returns. In accordance with these priorities and reflecting our expectation of strong free cash flow generation, we announced a second GBP 100 million share buyback program in August. We expect the program to commence in the coming days. And at current share price levels, we believe buybacks represent a compelling return on equity for shareholders. And finally, for completeness, the Board has also declared an interim dividend of 0.33p per share. So now let me take a moment to address the impact of U.S. tariffs on our business, which we said we'd provide an update on today. The overall message here is that we see limited financial impact in FY '26, though unsurprisingly, uncertainty remains going forward. First, a reminder of our direct exposure. This is the impact on our sourcing of own brands and licensed products as well as store fixtures and fittings. Our own brand accounts for less than 10% of our U.S. sales, and we've already taken effective steps to diversify the sourcing base. As a result, the direct impact to JD of higher U.S. tariffs is not material, estimated at less than $10 million on an annualized basis. Turning now to our indirect exposure. We spent several months closely monitoring the actions our brand partners are taking to mitigate tariff impacts and any shifts in U.S. consumer behavior. From a brand partner perspective, with a significant proportion of their sourcing concentrated in Southeast Asia, we're seeing them taking proactive steps across the supply chain to mitigate cost pressures and maintain competitive pricing. And where retail price increases have occurred, they've generally been targeted with a broadly neutral reaction from customers so far. So based on what we've seen to date, we therefore anticipate a limited financial impact from U.S. tariffs in the current financial year. This is supported in part by inventory purchased prior to the implementation of tariffs. Looking beyond FY '26, uncertainty remains over broader tariff as well as over U.S. consumer sentiment, as you might expect. We will, of course, provide updates as and when the landscape evolves further. So finally, on our outlook and guidance, we expect our full year profit before tax and adjusted items to be in line with current market expectations. Our H1 results demonstrate our operating and financial discipline against a tough market backdrop. You can expect more of the same in H2 with continued effective management of our costs and cash. We remain cautious on the trading environment, reflecting continued pressures on consumer finances, elevated unemployment risk and the ongoing footwear product cycle transition. Now as a reminder, as we settle into our new reporting pattern, there's no update on current trading today, and we'll report our Q3 numbers on the 20th of November. Finally, as I highlighted on the previous slide, we anticipate the financial impact from U.S. tariffs to be limited in this financial year. So with my review concluded, let me hand back to Régis, who will provide the business update. Regis Schultz: Thank you, Dominic. Let's move now to the business update. First, a quick reminder of our investment case. So JD Group operates on a large and global scale with footprint in over 50 countries. Our market, sports fashion, will continue to grow over time, benefiting from ongoing casualization and active lifestyle trend. JD Group is a leading player in all key geographies we operate and is targeting further market share gain, particularly in North America and Europe, where we see significant organic growth opportunity. JD Group has a strong and agile multi-brand model, allowing us to propose the best products to our customer and to navigate trends and brand it seamlessly. JD Group is an omnichannel retailer, leveraging the best of the online and off-line world for our customer. JD Group is building the infrastructure and the governance needed for a group of our size and scale. In the last 3 years, we have invested significantly in our supply chain, in our technology as well as strengthening our system control and talent. We will, therefore, unlock operational efficiency across the group. This puts us in a position to deliver profit growth ahead of sales over the medium term. JD Group is a highly cash-generative business with a powerful balance sheet. With disciplined capital allocation, we have headroom to invest for growth while delivering enhanced return to our shareholders that translates to a GBP 200 million share buyback program for this year. Everything we do, everything JD does, starts with the consumer, the JD customer, the young customer, the 16 to 24 years old customer. JD's greatest strength is our ability to see the world through the mindset of our customers. Our close relationship with the young customer gives us a strong partnership with the brands we sell. This unique brand partnership provides us the ability to offer the latest and the greatest product to our customer. Our concept, the JD Theater, is modern, vibrant, multi-brand, premium, mixing sport fashion and music. We leverage the magic within our store to bring our proposition to life in an environment that elevate our brand partner stories and delight our customer. Before you ask me the question, how is our customer feeling right now? I would say that the current level of uncertainty is impacting customer confidence across our different markets. But more importantly for us, as we have said previously, unemployment is a key factor for our young customer. And we are starting to see early negative signs on it, especially Europe, U.K. Something for us to monitor in the coming months. Meanwhile, when we are delivering new exciting product, we see our customer coming into our store. Talking about product, let's turn to a very familiar slide, which demonstrates the power of our multi-brand model and our agility to navigate trends and brand it. Looking at the mix of our sales in footwear on the left and apparel on the right. First, you will see that we are not building our range per brand. We are doing it by style, by category to focus on customer need. If you take footwear, we have 4 key categories. It's a simplified version of what we do internally. You have running, performance and retro basketball, skate, we have included Terrace in this, classic or tennis and other. And you can see the movement between the category. For example, retro basketball went from 20% of our sales in financial year '20 to almost 40% of our sales 2 years ago, before slipping back in the last 18 months. On the other hand, running has moved back above the 50% mark where it was in financial year '20, especially with the development of performance running with On, Hoka, Salomon, adidas EVO, and the new Nike running product, Vomero 18 and Pegasus. Thanks to our agility, to our flexible merchandising, to our buying excellence, we are navigating, anticipating the product cycle, the change of trend and the evolution of branding it. And this is critical in the current challenging product cycle. As we always say, we will win with the winner. Turning to apparel. You can see how we have pivoted our offer towards performance apparel and street fashion. Performance apparel, mostly exclusive product designed by us, designed for us with the brand, show our agility to capture and create growth by extending our reach and leveraging our brand relationship with a big player and with emerging brands. This has been done very quickly as we have more than doubled our sales in performance every year in the last 3 years and grew over 5x over the last 5 years. Our growth in street fashion is another example of our agility to extend to new category by developing our own brands to respond to customer trends. As you have seen from Dominic in our H1 results, our focus on apparel gives us a unique competitive advantage, and our investment in space, resources and talent is clearly paying off. Our apparel strategy is a key differentiator, a key competitive advantage in every market we operate, and it brings to life our unique lifestyle proposition. In the first half of our financial year, we have made strong progress against our key mid- and long-term priorities. In North America, our focus is to develop the JD brand, to leverage our complementary fascia, and to deliver the back-office synergy following the acquisition of Hibbett. In Europe, we are leveraging our multi-fascia strategy to gain profitable market share with JD to address a young customer, Courir to reach more female, older customer, and Sprinter and Cosmos to a more family sport customer. We focus on key country, France, Iberia, Italy, Benelux, Greece and Poland, where we have a leading market position to drive efficiency and profitability. We are building a more efficient supply chain with the automation of our JD European DC in Ireland. In the U.K., our focus is to have fewer, bigger and better stores, to be more productive and to optimize our central overheads. We have made a lot of progress in the first half of the year, which I will now take you through in more details. In U.S., we are developing the JD brand, gaining again market share in H1 and increasing the awareness of our brand. Our #1 brand awareness action is to open stores. In H1, we have opened a net of 52 stores in the U.S. This includes 22 conversions from Finish Line to JD Fashion, delivering on average more than 20% uplift in sales. Second priority is to target key markets in the U.S. with community marketing activation, local advertising like billboards, buses, local sponsorship and ambassador. Third priority is about national influencer targeting digital media, performance, search and shopping. Mike will provide and can provide more color on the program during the Q&A session. As a result, as you can see on the slide, we are delivering a significant increase in national aid brand awareness from 34% 2 years ago to 59%. And this is even more marked in our key battleground markets such as New York. More impressively and impactful, 26% of the consumer are purchasing JD, almost triple versus 3 years ago. North America is the largest market in the world, and it is now our largest market, accounting for almost 40% of group sales in H1. Our different fascias provide us with a full reach of the American customer from coast to coast with DTLR on the East Coast to Shoe Palace on the West Coast, from top mall key trading part with JD to local community with Hibbett from all ethnicity and all gender. The acquisition of Hibbett has been transformative as it gives us an extensive geographic and democratic reach in U.S., creating scale for our strategic partner, the large and emerging sportswear brand. We see great opportunity in North America for the development of both the JD brand and our complementary fascias. As part of Hibbett acquisition, we acquired City Gear stores, a chain of 200 city specialist stores situated in the Southeast with a similar customer base than DTLR. As explained in the details in April, we will convert all the City Gear stores, the 198 stores, to DTLR, giving us an opportunity to improve our sales and profit. City Gear has a return of USD 250 per square foot, whilst DTLR average more than double at around USD 500. So a lot of value to harvest for us. We have already transferred the City Gear operation to DTLR back in June, and the system cut over on time, on budget and with no issue, another demonstration of our operational excellence. At the same time, we are starting the conversion program with an initial 6-store conversion trial. As of last week, that shows a strong uplift in sales around the plus 60%. Second priority is synergies and leveraging our scale in the U.S. As mentioned by Dominic, we are on track in terms of action and the planned synergies. On back office and system change, our U.S. businesses are moving quickly with the ongoing implementation of Workday for finance and HR, leveraging our Hibbett expertise. With our new scales in North America, we are starting to see significant benefit in areas such as transport, logistics, insurance, and we are bringing learning from JD to develop Hibbett range and merchandising. Hibbett delivered a positive Q2 like-for-like, the first for some time. Another source of synergy, the supply chain of the distribution center. We are converting our U.S. DC to become multi-fascia to deliver significant cost savings in the future as well as a quicker replenishment for our store by covering the country from East to West. Our first multi-fascia DC will be live beginning of next financial year with a new West Coast DC in Morgan Hill, near San Jose, and to be followed quickly by Alabaster, the historical DC of Hibbett in Alabama. Turning to the development in Europe. We are leveraging our multi-fascia strategy to gain profitable market share. We have refined our plan and focus on key countries: France, Iberia, Italy, Benelux, Greece, Poland, where we have a leading market position to drive scale, efficiency and profitability. As mentioned in April, Germany, the Nordics have been more challenging due to high cost to operate and less appetite from the consumer for sports fashion. So we have taken this learning and are directing future investment on the market where we see more room for profitable growth. In H1, we have focused JD store opening program in Spain, Italy, France and Portugal with a net increase of 35 stores. Overall, I'm pleased to report that we gained market share in the first 6 months. The integration of Courir is proceeding according to plan. Courir operates 307 stores across 6 European countries, including its own market in France, where a majority of the stores are located, as well as 33 franchise stores across 9 further countries. We see the potential to develop Courir in Europe by leveraging our existing infrastructure. We have successfully entered Italy in the first half with 3 stores opening, and we are preparing to reenter Portugal. We also have our European sporting goods fascia in Iberia, Greece and Cyprus. Those business provide us with scale, infrastructure and a different customer. In H1, they saw sales growth of plus 1.2% and 6 net new store openings, taking the total store number to almost 400. And finally, an update on our European supply chain project, a long project around Heerlen DC in the Netherlands continue to ramp up, and it will launch automation in the coming days. In fact, on Monday, we will start the automation. Initially, this will be for store replenishment with online to follow in the first half of next year. To give you an idea of the scale of the operation, the target is a throughput of 100 million units a year. Automation will unlock significant efficiency within Europe, including faster fulfillment, better stock availability and a reduction in the fulfillment cost per unit. It will eliminate our current dual running cost in Europe and the unnecessary cost and duty of shipping to Europe from the U.K. To minimize the risk of disruption during our upcoming peak trading period, we will maintain our dual running with our site in Belgium until beginning of next year. And then as Dominic said earlier, we are on track to deliver over GBP 20 million of cost benefits relating to the supply chain double running costs across financial year '27 and '28. Before we turn to look at the U.K., I want to give you a behind the scene tour of the build of what is our biggest JD store in the world in Manchester's iconic Trafford Centre. We believe it is also on track to become one of the world's largest sports fashion store by sales with a triple figure turnover in U.S. dollar. This destination store opened in June and set a new benchmark in innovation and merchandising for JD worldwide. It will bring to life the JD Theater, as mentioned earlier, and this small video gives you just a taste. Enjoy it. [Presentation] Regis Schultz: It is a 4,000 square meter store. It means that we could play with a lot of new brands, new products. Trafford Centre has 19 customer engagement areas. This includes customization, sneaker refurbishment, social media recording studio, even a barber, not for me. And I'm looking forward to host you and to see you in JD Theater of Dream in Manchester. As you know, U.K. is our most established market. As a result, our primary focus is on enhanced productivity, larger through fewer, bigger, better store, optimizing the store footprint in the best location and reinvesting in the best location and in our current estate to make sure that our store continues to be the best in town. In line with our strategy in H1, we saw a net reduction in U.K. store numbers of 13, but an overall increase in selling space. Productivity is also about driving operational efficiency and cost savings. So to highlight just a few for you. With our DC, we are now seeing the benefit of closing Derby last year and reviewing our transport costs, bringing in further savings and driving more efficiency in Kingsway. Then we have some of our tech infrastructure key projects starting to land. Our new HR system, Dayforce, has launched in the U.K., which will start to bring scheduling benefit in store as well as overhead saving in our head office. We are also using technology to support both colleagues and customers. We are, as we speak, implementing RFID in all our stores to facilitate click and collect, ship from store transaction, and making replenishment much more efficient for our people, saving critical minutes in store tax. This is alongside the self-service checkout and mobile point-of-sales terminals that we are starting to roll out. And I will add one that Dominic is particularly proud of, reducing our audit fees, having enhanced our process and system in finance. As a final update, we see loyalty as a key driver of our sales. Our now established global loyalty program, JD STATUS is progressing well. And in the U.K. alone, it's capturing more than 25% of our turnover. STATUS serves as a foundation for developing a more targeted and personalized relationship with our customers. In H1, we ran test of personalized offer during campaign period, which resulted in significant incremental sales. This gives us a strong indication regarding the scope and the potential for future development. As a conclusion, in a tough trading environment, we are staying focused on our strategic priorities, our operating and financial discipline. This is demonstrated by our market share gain in H1 and our operating cash flow up. We are cautious about the trading environment in the second half of the year. We expect full year profit before tax and adjusted items to be in line with current market expectation. We are focused on delivering a strong free cash flow, and we have confidence in the medium-term growth prospect of our industry. We are reaffirming our commitment to enhance shareholder return, and we will soon start our second GBP 100 million share buyback program. Before I hand over for our Q&A session, I'd like to thank all my colleagues for their hard work and dedication. Their commitment and their agility are moving us forever forward. Thank you. Mike, over to you. Unknown Executive: All right. Thank you very much, Régis. We're going to start the Q&A now. I'll wait for my colleagues with the microphones. So Lorraine, could you start with Grace, please? Grace Smalley: It's Grace Smalley from Morgan Stanley. My first question would just be on apparel. You mentioned there the improved product assortment after a period of weakness. I'd just be interested to hear more details on what exactly has changed in the apparel assortment? What's making you more optimistic on that category? And Régis, I think in the past, you've spoken about a more competitive environment in apparel, just how you see that competitive landscape today? And then my second question would be on the footwear side. I love the new slide with the different categories. If you could just talk about, based on your consumer insights, what you're seeing from the brand's product pipeline into next year? How you see those trends evolving? Do you expect running to continue to take market share? What you're seeing in basketball, terrace and skate as well would be very interesting. Andrew Higginson: I think the best to answer is Michael Armstrong. Michael Armstrong: Yes. I think, apparel -- I mean, if you remember right, 12 months ago, we were sitting telling you the apparel market was really challenging. And I think what we find is because there was a bit of a shift in the market a couple of years ago and particularly with the bigger brands, we work on generally about an 18-month time line. So there's a lag between when the market shifts for us to be able to capitalize on that shift to get at the market, the shift in the market with the bigger brands. We've just seen the brands catch up with the consumer. That's really all it is. We had a really strong -- we still have a really strong business in the performance categories, as you can see on the slides. And we've had some new entrants come in, in that space, which have worked extremely well for us like Trailberg, Able, Montirex still continues to be amazing. We've got a really good business with Under Armour. And on the fashion, more lifestyle side of things, that's where we're seeing the real upside. Adidas is looking really good on apparel. We introduced a new own brand called Unlike Humans. So there's just a lot going on. It's just quite an exciting place right now. And on footwear, as Régis mentioned, we're still just managing out of this period where we had 3 really big items dominating the footwear business to a marketplace where consumers want to try and test new products. There's a lot of new -- not new brands, but brands that are reestablishing themselves in the marketplace. Again, because of the supply chain time lines, we're not necessarily fully able to get at everything that we would want to get at today, because there's a 12-, 18-month lag on everything. Over time, we'll start to catch up on that stuff. But what we're seeing right now is still the market is very fluid. You can see the backdrop is generally pretty challenging, the appetite isn't necessarily the same as it was during the COVID years. So getting those newer models and brands up to speed as quickly as the big franchises that they claim is still a challenge for us. I think the other thing worth mentioning is, obviously, we went through a bit of a honeymoon period with women's footwear. She was consuming a lot of product, and that softened. So that has had a bit of an impact on us as well. Unknown Executive: Okay. Let's move to Jonathan at Peel Hunt. Jonathan Pritchard: Jonathan Pritchard at Peel Hunt. Just on the brand awareness point, obviously, you've outlined to a degree what you're doing. But what really has changed, because those numbers are pretty impressive that you've gone from, I think, 34% to 59%. What has been the golden bullet as it were for that? Michael Armstrong: Again, I think we just mentioned store openings. We've got a good footprint in all the best malls, now in the majority of the best malls. We've opened a few new flagship stores, Las Vegas as an example. But I think a lot of the great work the team have been doing over the last 2 years has started -- we started to benefit from that, particularly in the communities. The brand awareness, aided brand awareness in the key markets for us, New York, Texas, Miami is significantly higher than that. And a lot of that is around the work we do in the communities, it's local sponsorships, activations, partnerships. We're just starting to benefit from that now. Jonathan Pritchard: Again, just to follow on from Grace's question, and it does follow on a little bit from what you've just said. But apparel, the mindset of the U.S. consumer for you and apparel, obviously, it's pretty much half and half of sales in the U.K., getting there in Europe, but quite a bit behind that in the States. Do people still -- have people started to genuinely think of JD as an apparel retailer? Or is it still a work in progress? Michael Armstrong: The category in the U.S. is still very much dominated by footwear, but we are building momentum. The apparel business has been the growth driver for us this year in the U.S. with the backdrop of the challenges that we have in footwear being the same in Europe as they are in the U.S. So we think we are starting to make really good progress. Regis Schultz: I think in U.S., it's linked to the market leader, which is only footwear. So I think that the more people know JD, the more they understand the fact that we are not a footwear and we are full lifestyle. So the awareness is helping the apparel business, too. So the two work together. Unknown Executive: We go to Richard Chamberlain from RBC. Richard Chamberlain: Richard Chamberlain, RBC. Three for me, please. I wondered if you can say how Europe online performed in the period. I appreciate you've obviously got the automation benefit still to come through. And then again, on Europe, Régis, what are the plans for the Courir store estate going forward? How do you see that shaping? And then third, I was intrigued by your comment in the U.S. about sort of neutral reaction from consumers to price increases or tariff-induced price increases there. Do you think we're going through a sort of temporary window where consumers just haven't reacted yet, so those price increases, or is there something else behind that, like an improving product pipeline or something that's actually still stimulating demand and having to offset those price increases? Regis Schultz: So European online is doing well, I think, but we are starting from a low base. So I think that we are -- we have implemented in the last 18 months much more ship from store and that's created a big difference, because in the past we were shipping a lot of things from U.K. So we were not competitive in terms of time to get to the consumer. So we've seen a growth in terms of our online business in Europe thanks to a better service. And the thing that is coming with Heerlen now coming to first half will become to fulfill online order. We'll continue to do that. So we are just playing catch-up. But we're starting from a low base, but growing. In terms of store estate for Courir, I think what we see is that Courir will continue to develop out of France. So France, we maxed out in terms of number of stores. So we covered all, except the one that we had to divest because of the antitrust. So now we are re-coming to the same part, which it's stupid things around that, but that's life, that's the way it works. And we will expand in Italy and Portugal. So Portugal, it's to be back in Portugal; and Italy, it's a growth country for us. For JD, it's a key country. And I think that we see the benefit of expanding our offer a little bit to offer the same as we offer in France, in Spain, in Portugal, with Courir and JD. So that's the plan. In terms of the price impact, so as you know, what has happened in the U.S., it's a targeted price increase. When the product is good, price is not the issue. So I think what is still to be seen is what will impact when, because at the end, everything will translate into price. For the moment, it has been targeted on products that everyone feels that it will support a price increase. What will happen when a lot of other price will start to come to the system? That's another question, because for the moment -- and it's more not an industry question, it's more an economic question. I think that a lot of U.S. companies have really swallowed the tariff at one point of time, this will come to the consumer, what will impact at that time. But what we know, and that's the last 3 years' experience, that the U.S. consumer is the most resilient in the world. They just keep buying. So hopefully, it will continue. Unknown Executive: Let's go to Ashton Olds. Ashton Olds: A couple of questions from me. I guess the first one, just on the European margin. I think you mentioned that you get around a 20 million benefit from Heerlen. I guess what's the road map towards high single-digit margins beyond that? Is it cost out? Or is it sales led? The second question I have is just on sort of the online approach. You mentioned that gross margin at the group level was down 40 basis points from investment in price. Online sales were down slightly. I appreciate the market is not really helping. But just could you elaborate on your approach to online and whether there's more that you can do there? And then I think Dominic, you mentioned with regards to tariffs that you helped by purchasing ahead of tariffs. I'm not sure if I got that right. But I suppose as we look into FY '27, when you are purchasing at more normal rates, what should we think of the moving parts there? Is it gross margin down? Or is it more pricing to come? Regis Schultz: So I think Dominic will take the first and the third, and I will take the online at the end. Dominic Platt: Okay. So I mean in terms of European margin, it's a multifaceted story. We obviously saw the half 1 margin there. Overall, it's around 4%, 5% operating margin. There are a number of things we're doing, which give us confidence. We can see that improving over time. I think the first is sales led. As we grow scale in the market, we're taking market share, we'll start to see more sales on a fixed cost base, so that flows through in part. Second is efficiency, and that comes in things like supply chain. So at the moment, we are bearing significant costs by having 3 warehouses in Europe for JD, plus shipping stuff from the U.K. as we bring Heerlen online over the next -- before peak for stores next year for online delivery. We start then to step away from the double running costs and distribution in the U.K. will always remain a little bit, but in the grand scheme of things, not very much. That will play through to a better cost base and a more efficient cost base, but also better service to customers. As Régis said, at the moment, in some cases, if you buy something in Lisbon, you may have to wait 6 days for it to get to you from Rochdale, which isn't a great service. As we do more of that through Heerlen, that will improve the customer piece. And then the final piece is picking up on what Régis said around being more targeted in the markets where we invest in. As we learn more about where our concept resonates better with customers, we can tailor our investment to make sure we're getting the best returns on our investment and taking action to improve performance where it's slightly weaker. So a combination of those things over a period of time should see us having the European margin moving closer to that sort of higher single digit that we see in some of our other markets. Should I do tariffs as well? Regis Schultz: Yes. Dominic Platt: So just on the tariff point, there's always a lead time when you buy goods. So when you're buying for Q3, a lot of that was bought well before even the tariffs were announced. So that means we do get the benefit of that. And I think it's the same in many industries, you get the benefit of that in this financial year for us. Looking through to FY '27, I think it's too early to tell. And I think as we go through and look at what our buys are going to be, look at what our terms and conditions with our brand partners are going to be, we'll have a better feel. So we'll provide an update on that in the new year. Regis Schultz: Concerning online, I think that it's mainly -- so as I said before, I think online in U.S. and Europe is doing well. I think in U.K., it has been more challenging. And I think that especially in terms of traffic and conversion, and that's where we have been investing more in price in order to make sure that we are competitive in a very promotional market. So that's the thing. And as it is weighted -- the U.K. weight is much higher, that has an impact on the online margin. Unknown Executive: Okay. Let's move to the side, please. Dom, let's go to Will in the middle, and then Kate Calvert in front. William Woods: William Woods from Bernstein. Two questions. The first one is just on the ongoing shift in the footwear product cycle. You mentioned women's footwear softening. Do you think there's anything more fundamental going on in that cycle? Or do you think it's just the classic brand and style cycle happening? And I suppose when you look at the apparel business, do you think that cycle still applies there. So we'll go through the same with sports fashion and performance, that you've grown quite well, in the next couple of years? And then the second one is, obviously, you've done a lot of work on U.K. productivity through few bigger stores, customization and loyalty, et cetera. Are you applying any of those learnings to the U.S. and Europe? And I suppose I'm particularly thinking about the new stores that you're opening. Are you changing what you're doing because of what you've learned from the U.K. at this stage? Regis Schultz: Mike, I would... Michael Armstrong: Yes. I mean I think with reference to women's, I mean, women generally compared to men have a lot more choice, and they like to change the mind more. And as I said, they're consuming a lot of sports shoes and she's finding other things to buy right now. That's just the nature of women's fashion, right? We'll have another up-cycle sometime soon, but we don't know when. We'll just take it when it comes. I think when it comes to apparel cycle, all I can say is we've got a very adaptable business model. We've got a wide range of brands that we can access. We have the ability to build what we need to build from a product point of view with pretty much every brand. We have complete flexibility in that respect, which again, none of our competitors have that. So we're very agile. And we have our own brand portfolio and licensed brand portfolio as well that chip in and help us deliver good things like speed to market and sort of a pricing architecture as well. Regis Schultz: And second question around the learning from U.K. Michael Armstrong: Yes, the stores -- I mean, I think specifically to the U.K., how consumers are shopping is clearly changing. And I think especially when you look at JD as a business, and we have seen some fairly significant price increases in our world over the last 3 or 4 years. So I think the expectations of the consumer now have changed slightly when they are buying a pair of shoes, which is GBP 150, they want a great experience. And we're also seeing, in particular, the traffic declines primarily are coming from high street locations, and we are seeing a big shift. We're not seeing the same declines, we're not necessarily seeing a big shift into the retail parks and the mega malls, and it's really the retail parks that have grown the most within our store estate over the last 2 or 3 years, which has grown the space significantly. The learning from Trafford Centre for us is that it's the same point, consumers just want a great experience. And what we have found is the impact of creating that fabulous store has been far greater than what we expected, outwards of like 30-mile catchment area. So there's a lot of learnings in that for the future in terms of how we look at the store estate generally. William Woods: I suppose, does that change the U.S. and European strategy? Or do you think you're just experiencing slightly different trends in the market? Michael Armstrong: It doesn't change, it influences and helps us maybe make some different decisions in the future. Kate Calvert: Kate Calvert from Investec. A couple from me. First one, sorry to return to inflation and tariffs, but what sort of level of inflation are the brands putting through at the moment in the U.S.? And do you think it's enough to have offset the sort of the initial 10% increase? So we're kind of yet to see the August increases. And what sort of inflation is going through in Europe and the U.K. at the moment? And in terms of my second question is just on gross margin. Gross margin ex acquisitions was down 40 bps. I suppose the question is really on direction in terms of the trend of the gross margin because obviously, apparel has been much stronger, and you have gone through quite a few years of good full price sales. So do you think we're kind of back to a more normalized gross margin post-COVID? Regis Schultz: I will do the first one and you do the second one. So I think on inflation, I think that, as we said before, roughly what happened with tariff is 1/3 has been swallowed by the manufacturer, 1/3 has been through the supply chain and the manufacturer, and 1/3 to the consumer. That's roughly what has happened. So the part which has been -- and in total, the tariff impact for our industry is on average a sort of 10% if you put everything to the consumer. So what has been passed to the consumer is around 2% to 3% if you take that on total. So that's type of magnitude. But that has been done on some products, not all, and with a very targeted view and has no impact in terms of volume. The question will be, the 70%, which has not been passed to the consumer, at one point of time will be in the system, when you go to new products and those. But that is what will impact at that moment. And I think we are more -- we are not so nervous about our industry. I'm more nervous about the global impact in terms of what happens to the U.S. consumer when they discover that everything goes up in terms of price, because that will happen over time. It's not happening now, but it's going to happen. That's a key question that we don't have the answer. But for our industry, I think the way it has been managed, I think it has been well managed, and I think that we've seen no impact for the time being. Dominic Platt: So on the margin point, Kate, I think in the first half, the 40 basis points really reflects more tactical moves than something structural. And if you look at where it happened, it's sort of online in Europe, where we just need to be more -- chose to be more competitive in a more promotional market. And in the U.S., something we talked about at the year-end, I think, around Finish Line, which is as it winds down, is less differentiated. So price plays more of a role than would be the case in JD and some of our other fascias. I think you hinted that, but maybe didn't mean that with more apparel, is that lower margin. Actually, apparel and footwear, similar margins for us. And apparel is supported by having a higher proportion of own label. And as Mike said earlier on, they play a really crucial role in the overall offering we bring to customers, unlike humans and others. So that itself isn't the driver. Actually, the main driver is really the product cycle. In a cycle where people want the product, we're a full price retailer, we get the margins and we get the price. Where it's slightly softer, you just have to be -- you have to respond to that a little bit at the margins, and that's what we're seeing. So I don't think there's a structural shift. I think it is just reflecting where we are at this point in time on some of our products. Kate Calvert: Can I just come back on the gross margin question just in terms of the full price sales. So I mean as you came out of COVID, because there's a lot of stock shortage, you had very high full price sales. I know you're being tactical at the moment, but do you think the underlying has got back to a more normalized level just generally in the industry and everything? Michael Armstrong: Yes. I think -- I mean, the position that we're in just now, there is a shift slightly back towards apparel in the mix, which will be beneficial. We don't know how long that's going to -- that run is going to maintain itself, obviously. But I'll just reiterate what Dominic said, it really does just come down to the product cycle and the appetite for that product at full price. What we're seeing right now is the good stuff is really good. The stuff in the middle is slightly more challenging to sell at full price. We would like to assume that if the market can course correct and, along with our brand partners, we can drive that demand into new franchises, that will see a higher level of full price sell-through. There's no question. It does come down to the brands and the ability to create energy in the marketplace as much as anything. Regis Schultz: And to be precise, on your question, which is around COVID, I think it's already done. So it's no more the COVID where we were at one point. So I think it has been going down slightly, but surely. So I think we are in a stable, yes. Unknown Executive: Let's move to Warwick behind you. Alexander Richard Okines: I'm Warwick Okines, BNP Paribas. One question for Dominic actually. Could you talk a bit more about the H2 profit expectations? First half PBT down about GBP 50 million, second half implied about plus GBP 10 million. What drives this swing? You talked about a few items like mark-to-market finance charges and Hibbett synergies. But maybe you could just flesh out that swing, please. Dominic Platt: Good question, Warwick. So look, I mean, if you look at the first half and the profit bridge helps there and some of the things that you saw, the headwinds there. We'll still get a benefit from acquisitions, slightly less in the second half. Obviously, we've got Courir coming in for a few months. Interest was a drag in the first half. Actually, as we anniversary the acquisitions, that could become a slight positive in the second half. So half-on-half, quite a big swing. Mark-to-market, we expect some of that to unwind in the second half. So again, half-on-half, quite a big swing. And then new space with Trafford and others coming online, we've had a lot of sort of preopening costs related to that in the first half. We should see that stepping up a bit into the second half. And I think the phasing of our OpEx synergies is weighted towards the second half rather than the first half. Although as you saw on the slide, I think we've done a very good job in the first half in terms of neutralizing some of those headwinds. So taking all of those things together, actually, you see a step forward in those points, in some cases, mechanical, offsetting -- more than offsetting the ongoing pressure from like-for-like and margin through the second half. Unknown Executive: Just before we go to Anne next to you, Warwick, a quick question on the lines from Richard Taylor at Barclays. A question for Dominic is that can you explain why the Genesis option has been revalued upwards by GBP 160 million? Dominic Platt: Yes, I can. At the full year, we explained that as a result of the change in the payment dates, we've moved it out from '25, '26, starting in '25 to '30, '31, that would result in about a GBP 250 million increase that was in the annual report. The actual increase at the first half is GBP 163 million. So we've got the GBP 250 million uplift, but then there's a currency impact on the overall option, bringing that down to GBP 163 million for the first half. So broadly in line with what we explained. Regis Schultz: I think you have been clear. So just for everyone because it's -- we have the option to buy back the 20% that is owned by the Mersho family. And the initial agreement was to do that in 4 years, from this year to 2028. Dominic Platt: '29. Regis Schultz: '29. We just moved back to 2 years between 2030 and '31. That's correct. So that's what Dominic was referring to. And we did that in order to manage our cash flow and to manage the best way to do that. Dominic Platt: That's the context. Anne Critchlow: It's Anne Critchlow from Berenberg. A question on tech infrastructure. So I appreciate you're in a catch-up mode at the moment on infrastructure. But just wondering what the potential might be to invest in, say, systems for pricing and promotions or allocation of product by store, various AI systems we're hearing about from other retailers. And also whether there's any time line for an RFID rollout from the U.K. to the rest of the world, and any implications in CapEx for that? Regis Schultz: Yes. So I think on tech, we've done a lot. And I think that unfortunately, it is mostly OpEx than CapEx. So we have done -- the big one was our HR system in the U.K., which is done, which is Dayforce. We are looking at finance system and HR system in U.S., which is Workday. So that's as we speak. In terms of our merchandising tool, we are looking at the implementation of o9, which will include AI tools to do that. We are not so keen on pricing and all that stuff for the time being, because I think we -- we believe that with our buyer, we are doing the job and a fantastic job around that. And RFID is that the rollout is in U.K., but will go to the rest of the world just after. So it's just that we start everything in U.K. So we are pretty advanced. There will be the self-checkout, the same. Most of that is OpEx. So that's why our OpEx has been inflated by around GBP 20 million in the last 2 years around system and all that stuff. So it's not a big impact on CapEx, but a significant impact in terms of our OpEx. Unknown Executive: And please can you pass to Alison. Alison Lygo: Alison Lygo from Deutsche Numis. So just a couple of mine left. Can I ask on the working capital, please, just in terms of the stock build we saw in the first half. Could you talk a bit about where that's gone in terms of the stock? And I suppose what you're thinking about in terms of requirement for H2, particularly in terms of anything further required for investing or pivoting the range in the new acquisitions? And then the second one, just on City Gear and that change into DTLR. So interest as to how much you're kind of changing in that proposition. Are we talking here about -- like you're talking about some relatively large uplifts. Are you really changing the range? What are you doing in terms of store fit out? Yes, and I guess what the kind of potential CapEx behind that might look like? Regis Schultz: Yes, I will do the City Gear and you do the stock one. So City Gear, so what we are doing with City Gear. So we have done a test of 6 stores where we have done a full conversion with new merchandising, new refurbishment, in fact, and that sort of costs around GBP 200,000 per store. And that is with the full rebranding and merchandising. What we have done for all the estate is to put that under the management of the DTLR team. So that implies the fact that we are slowly but surely changing the range, but we do that in a very -- when the product gets out of stock, we bring new products. So that is what we're doing. And there is a limit around that, and that's why we will have a program beginning of next year to refurbish a significant part of the estate and doing what we have done with the 6 tech stores. But we didn't want to rush too quickly. We just wanted to make sure that we do the system, the management and all that stuff in order to put the basis before doing a conversion. We learned a lot from the Finish Line program. And what we are applying there is what has been very successfully applied by JD team when we move from Finish Line to JD. We do the same recipe and with the same potential, because you have a double turnover per square foot. So there is no reason. And the level of investment is lower because DTLR concept is much less sophisticated than the JD one. So if you want to model it, it's USD 250,000 to invest in a store and with an uplift, which for the moment is around 50%, 60%. Dominic Platt: On the stock point, yes, I mean, stock was up 14% in the first half. A large part of that was Courir, which we didn't have in the numbers last year. But we also were carrying more stock as we went into the first half. We've got quite a bit of distribution center changes coming. So we want to make sure we're well set up for those, and that does sometimes result in a sort of slightly elevated position. And just picking up on the City Gear piece, as we start to range those stores more with what DTLR and Shoe Palace use versus what they had, you end up with a slight sort of overlap. But that's manageable, and it's something we've done in the past. I think heading towards peak, there's no material shift in pivoting in terms of stock we're bringing in. We're actually coming to the biggest part of our year now. And as we go into that, we feel comfortable overall with the quality of the stock that we have. And the real position to look at our stock is at the year-end once we've been through peak. Unknown Executive: Okay. We've got time for 2 more. So we'll go with Wendy, first of all. M. Liu: Wendy Liu from JPMorgan. I have two, please. One is a follow-up on the footwear cycle. You mentioned about there's a couple of promising smaller franchises. I was wondering if you can expand on that. Are you talking about specific brands? Or are you talking about particular categories? Is it running? Is it more lifestyle? So this is question number one. Number two, I understand you don't comment on current trading, but I was wondering if you can share a few observations about what you're seeing in different markets in terms of customer behavior. You mentioned about early signs of unemployment in the U.K. and the U.S., if I hear that correctly. I was wondering if you can expand on that. And I guess, broadly, what are you seeing in the various markets from what you can see today? Regis Schultz: Yes, I will start for the current -- yes, as you say, we don't update on current trading. I think what we said around customer, we see the level of uncertainty is high and which is never good for consumption. And we know that the key KPI we are looking at is unemployment, because our young customer is the first one to be impacted by that. And for the time being, nothing has happened, but we see the signs are more negative than positive. That's what we are at. So for the time being, it has not been -- nothing has happened on this side, but we're really looking at that, and that will be a negative for us if that happened. So that's what we flagged. I think that at the same moment, and we are in an industry where it's about fashion, it's about new products. So if the new product is good, consumers find the money to buy it. So that's what I will say. I think on the footwear, I think that... Michael Armstrong: Yes. I think you mentioned a lot of the things that are happening in the market already. We're seeing the market shift back to where it was around 2019, 2020, running back to being the dominant category. The brands that play in that space are -- we know who they are. You've got a few of the smaller brands gaining about momentum just now, Saucony, Salomon, those guys. But really, it's On running, ASICS, New Balance, Adidas are doing some really good stuff in the performance categories. And we've seen some new product from Nike that's hit the ground running. Unknown Executive: Wendy, could you pass to David right behind you? David Hughes: David Hughes from Shore Capital. Just on the U.S. and obviously, the margin drop, you talked about a part of that being driven by the Finish Line conversions. Could you just touch on what part of the conversion is driving that margin drop, and how long you kind of expect that to carry on since you're still going through with quite a lot of conversions left to do? And also with the City Gear conversions, would we accept similar margin pressure in the U.S. as a result? Regis Schultz: No, what we are seeing is not the conversion that is driving the margin. Finish Line is our biggest online business in the U.S. so far. It's no more. It was still 3 months ago, now it's JD, but it has been -- so on this Finish Line online business, that's where -- because the brand doesn't have any more resonance with the consumer less store. This is where we have been more aggressive promotionally to drive sales. That's what we were referring. So it's not about the conversion. It's more that the brand City Gear website doesn't exist anymore. So we will not have this issue. But our biggest online business for a long time has been Finish Line in the U.S. And this is where we see being more challenging for us, because we have no more store presence, or the store presence is reducing. So the appetite for the consumer for the Finish Line brand is reducing. So in order to drive volume, we need to be more aggressive on promotions. That's what we're referring to. So it's not about -- but the good news is that JD now website in the U.S. is bigger than Finish Line, which is a great achievement of the team. Unknown Executive: Any final questions still from the from the floor. There's nothing on the lines either. So in that case, we will close the meeting there. So thanks very much for joining us, everyone. I appreciate your support. Thank you. Regis Schultz: Thank you. Dominic Platt: Thank you.
Leon Devaney: Good morning. Our presentation today covers Central Petroleum's annual results for 2025. I'm Leon Devaney, CEO and Managing Director of Central Petroleum, and I am joined by our CFO, Damian Galvin. Throughout today's presentation, you are welcome to submit questions online, which we will address at the end. Please ensure you read the legal disclaimer that applies to this presentation. Last week, we released our 2025 annual report. Consistent with our quarterly reports, the company has achieved several key milestones that highlight strong operational and financial progress. A major success was the conclusion of a competitive gas marketing effort that resulted in a significant multiyear gas sales agreement that derisks and strengthens the company's future cash flows. Operationally, 2 new production wells were drilled and brought online at Mereenie. These wells were completed ahead of schedule, under budget and delivered production rates well above initial expectations, demonstrating effective project execution and strong asset performance. On the financial front, the company restructured its debt with a revised amortization schedule extending to 2030, eliminating refinancing risk and increasing our financial flexibility. As a result of these achievements, the company has the capacity to undertake a share buyback program, marking its first shareholder return event since listing nearly 20 years ago. I'll now hand over to Damian to go through our annual results in more detail. Damian Galvin: Thanks, Leon. FY 2025 has certainly proven to be a pivotal year for the company, and the results won't come as a surprise for those who have been following our quarterly results. Our bottom line statutory profit of $7.7 million is, I think, in many ways, more satisfying than the $12.4 million profit we posted last year, that's because last year's profit included $13.8 million profit from selling our interest in the Range [indiscernible] gas permit in Queensland. So when you strip out those one-off profits, you get a much better feel for how the business has turned around. So the underlying profit is $6.5 million this year compared with an underlying loss of $1.4 million the year before. So that's a significant turnaround. And more than 2/3 of that profit was recorded in the second half of this year as our new -- as those new gas sale contracts came into effect. Now the improvement in performance, it's evident across most of the metrics. You start with the revenues, $43.6 million. That's up 17% from last year, largely due to the increase in realized price, which was up 19% to $9.02 per gigajoule equivalent over the full year. And that flows through to the increased sales margins and the underlying EBITDAX, which was up 43% at $19.6 million. So some other items in there. The result also benefits from lower corporate and admin costs and reduced exploration activity this year. Higher interest rates have kept finance costs relatively steady, and we recognized a profit of $1.3 million on the sale of some surplus land near Alice Springs. So an excellent result for [indiscernible] have a closer look at some of the main drivers. The catalyst for the transformation lies with the new gas contracting strategy that we implemented early last year. And the impact from that on revenues was twofold. So firstly, the new contracts resulted in more reliable volumes. In the first half of the year, we had the benefit of those available contracts wholly within the Northern Territory, and they were mitigating the impact from the extended closure of the Northern Gas Pipeline. In the second half of the year, we had new contracts that also provided reliable offtake within the Northern Territory when we couldn't deliver gas to our customers due to pipeline closures. Secondly, those new contracts, which replaced the legacy contracts from 1 January this year, they're at higher prices. And the chart on the right shows the 27% jump in the second half average prices. And that flows through to the bottom line and cash flows. And I'll come back to margins shortly. Now the 17% increase in revenues was also boosted by record demand for gas from the Dingo field and the 2 new Mereenie wells, which were online from quarter 3, providing much needed additional volume. In terms of other revenue, we also recognized $1.3 million from the release of take-or-pay proceeds, and we're able to pass through some of the increased Northern Territory regulatory costs to some customers and we recovered $600,000. Coming back to volumes. The 2 new Mereenie wells were successfully drilled and commissioned. They're ahead of schedule, are under budget, and they've outperformed the pre-drill expectations. So it was a great result, and we're very happy with the outcome from those wells. Oil production at Mereenie was also higher. It was up 14%, and that was largely as a result of the flare gas compressor that we commissioned and installed late in the previous financial year. However, the oil offtake was partially constrained in the fourth quarter and that did have a knock-on effect on gas production, and we've implemented some solutions recently so that volume shouldn't be affected going forward. We do continue to see some seasonal demand fluctuations, particularly when the NGP is closed. And you can see on the chart, the lower volumes experienced in late winter, early spring, both last year, which is on the far left of the chart and also in the current quarter, which is on the far right. The difference this year is that we've protected our cash flows through take-or-pay arrangements in our recent gas supply agreements. So while we're expecting the September quarter gas volumes to be about 8% lower than the June quarter, cash flows will be less affected. The higher prices have flowed through to margins. So if you exclude depreciation, our gross margins increased by 26%. They're up from $3.65 per gigajoule equivalent last year up to $4.60 this year. Our cost of sales, they rose about 6% on a per unit basis. And some of that's due to the higher cost of our return to overlift gas, and the cost is linked to the sales price, so it's naturally higher. The improved margin that we saw was really just from 6 months of improved contract pricing. So we could expect a further improvement for the full year to June next year. And that's also going to benefit further once the overlifted gas is all returned in May next year. Our focus on cost control continues, though, and we do pride ourselves on being a low-cost operator. For example, the chart on the bottom left shows the progress that we've made in reducing our net corporate and administration costs. They are down 39% from last year and 60% lower over the last 2 years. The improved financial performance and cash flows has us in a much stronger financial position than previously. Cash at June 30 was $27.5 million and net cash, that is cash less debt was $3.9 million. That's our highest in over a decade. Our loan facility is in good shape. It's locked in until 2030. We don't have any mandatory principal repayments until March 2027, but we do have the ability to make earlier repayments if we choose to do so. So this stronger balance sheet has enabled us to commence our first program of shareholder returns through an on-market share buyback. We could buy back up to 10% of issued capital over the next 12 months, and this would cost a relatively modest $4 million at current prices or $2 million if we only bought back 5%. Now we've appointed Morgans to manage this process for us, although it should be noted that the total number of shares ultimately bought back over the 12-month period may be significantly less than the 10% cap. And our trading activity will be dependent on considering various factors, including, for example, the prevailing share price, market liquidity, regulatory requirements and trading constraints under the ASX listing rules, maturity of potential commercial transactions that could be material to the share price and other capital allocation opportunities, including growth opportunities and debt repayment. So although we haven't yet been able to start buying on market, consistent with that buyback strategy to reduce issued capital at the current market prices. We've cash settled some of the vested equity incentives, which would otherwise have converted to shares this month, and that's about 8 million shares that we've effectively taken off the market already. Now another achievement that might have gone unnoticed in the annual report was the reserves upgrade, and that arose from the outperformance of those 2 new Mereenie wells and also the continuing ongoing consistent performance of the Dingo field. So the upgrade of proved and probable as 2P gas and oil reserves means we effectively replaced 96% of our FY 2025 production. And so that's an indication of the ongoing reliability and producibility of these Amadeus Basin fields. Look, in summary, it's a satisfying result across the board. It's got us in a strong financial position. So with that, let's let FY 2025 fade away into the rearview mirror, and I'll hand you back to Leon. Leon Devaney: Thanks, Damian. While we were pleased with last year's performance, our focus remains on maintaining momentum and enhancing shareholder value, including improving the share price. With a cash balance exceeding $25 million and a strong portfolio of firm gas contracts, we are well positioned to pursue both growth and shareholder returns. In addition to the share buyback program, we are evaluating more substantial forms of shareholder returns such as sustainable dividends as part of a broader capital allocation strategy that balances near-term value with long-term growth. Our existing producing assets continue to be a vital avenue for increasing shareholder value with opportunities to rapidly boost production through the drilling of new wells. We have made significant progress in planning and securing approvals for future drilling programs at Palm Valley and Mereenie. These investments are obviously dependent on obtaining long-term gas contracts at acceptable margins, so we will persist in actively marketing these volumes to potential customers. Additionally, we are advancing efforts to restart exploration in our sub-salt permits with the initial activity likely to be an appraisal well at Mount Kitty, a discovery with high helium and hydrogen potential. Concurrently, we are progressing farm-out discussions for conventional exploration in the Western Amadeus Basin, focusing on EP115, which is on trend with our existing producing fields at Mereenie and Palm Valley. Beyond our current portfolio, we remain open to lower-risk, high-impact growth opportunities that align with our core strengths and support reserve expansion and revenue diversification. In conclusion, we are confident in our ability to sustain the momentum generated over the past year well into the future. We have significant opportunities for capital allocation, including further returns to shareholders. And as mentioned earlier, we are diligently working to deliver some of these growth opportunities over the coming months. I want to assure our shareholders that as we pursue growth, we will remain disciplined, ensuring that any transaction adds value and effectively leverages the strong financial foundations we have built. That's the end of the formal presentation, so we can now move on to questions and answers. Damian Galvin: Thanks, Leon. So we do have a few questions here this morning. So happy just jump straight into them. I guess the one we often come across probably a statement more than a question, shares which pay dividends are viewed favorably by investors, obviously. And I think as Leon mentioned in his list of capital allocations, it's one of the -- one of the option that's been very seriously considered at this time, but it is being considered in conjunction with those other alternative uses for capital. So certainly, we're keen to get to a dividend as soon as we can, and it's certainly under consideration. Leon Devaney: Yes. Just to add to that, I think Slides 9 and 10 list some of those capital allocation options that we are working through. We'd like to see how those play through over the next couple of months. But certainly, with the cash balance and the cash flows we have, dividends are on the radar and something we understand would be obviously well received by shareholders and certainly could have an opportunity to rerate the stock. So something we're very carefully considering at this point. Damian Galvin: Okay. Question about our helium prospects, [indiscernible]. When will exploration resume? Leon Devaney: Great question. We are very focused on getting that kicked off. Obviously, it's been stalled for a long time. There is some complexity with the joint venture and our operator in terms of getting that program going. We think we have a strategy and a plan in place to kick start that and get it going again in the near term. If we're successful in that, the target timing would be a Mount Kitty well by mid-2027. That's what we'd be shooting for. Again, there's quite a bit of work we need to do to put that in place and make that happen. But that is a focus, and we have been working very hard in the background to get that going and get a well drilled there. We think it's an exciting prospect, a significant upside for the company. So we're quite keen to get going on that permit and Mount Kitty in particular. Damian Galvin: Okay. Could you clarify what the expected boost in cash flow might be once gas overlift is all returned? So gas overlift, that should all be returned by May next year. So we're getting close now. I think we're returning at about 2 terajoules a day. So if you calculate her out and $9 or $10 gas price, I think we're up around in excess of $6 million a year in extra revenue. So we're certainly looking forward to that boost coming in June next year. In terms of other questions, what else we've got? Can you please give us some indication on timing of drilling new Palm Valley wells? Leon Devaney: We're -- as I mentioned, we're obviously progressing planning and approval. So we're doing a lot of the long lead stuff in terms of getting prepped and ready for a drill-ready positioning for that field. We see a lot of value in being able to quickly bring new production from Palm Valley into the market as a 50% interest holder in Palm Valley and with the production we've seen in the prior wells that we've drilled there, it is a very compelling case for us to invest and increase production and sell that gas. So one of the top priorities we do have is getting that drilling approved, prepared, and fit for it. Now the critical piece of that puzzle, obviously, is ensuring that we do have a market for it. The market, as I've mentioned consistently over the past couple of years has been in a state of change. That change is still continuing, both with production from the Blacktip field, but also appraisal activity at the Beetaloo. Notwithstanding that, we are in active discussions with potential customers, and we are trying very hard to put in place a gas supply agreement for the additional volumes from Palm Valley at acceptable margins that we think are in the best interest of shareholders. And once we're in a position to have that contract in place and underwrite those volumes, we'll be looking to drill those wells very quickly. That's certainly our intent at Central. Obviously, it needs shareholder or joint venture approval with our joint venture partners at Palm Valley. Damian Galvin: Okay. There was a question here. What is the situation with joint ventures? I'm not sure whether [indiscernible] production joint ventures or exploration ones. But is there any sort of clarity around -- I think we're all similarly minded at the moment. Leon Devaney: Yes. I think we've got great alignment with the joint ventures that we are working with on -- across our fields. They're like-minded with us. They're looking to extract value from the operating assets or looking for ways to grow and increase production and sell that into a market that we see as desperately needing firm gas supply. So we've got great alignment. They're contributing significantly to our efforts in the fields. So we couldn't be happier. We're quite pleased with the joint venture arrangements we do have. Obviously, in the sub-salt space, the joint venture has been more challenging in terms of progressing appraisal activity. That's something that we've been working very hard on. We do have a good working relationship with Santos, who is operator, and we think we're making progress on that front, as I've mentioned earlier. So hopefully, we'll have some good news coming in relation to that joint venture over the coming months as well. Damian Galvin: Okay. Could you elaborate on why Dingo production performed so strongly? Is there a possibility that further wells and contracting gas could be on the cards? Leon Devaney: Yes, it's really a market issue for Dingo. It's selling directly into a power station. That power station obviously has a gas requirement that is subject to the energy demands in the Alice Springs area. That demand has increased and their requirements for gas has increased. There are alternative supplies they do have. And so depending on how they adjust their portfolio, that will drive the demand that they require from the Dingo field. Having said that, we do have a very strong take-or-pay position at Dingo and you would see take-or-pay payments being made at the beginning of each calendar year that reflect any volumes that they haven't taken under contracts. So from our perspective, the cash flows from Dingo are very steady and reliable. And we're looking forward to continuing to meet the contract. And if there are opportunities to grow that field or expand that field and add more volume into that Alice Springs market, we're certainly open to it. And there have been conversations in that front with the NT government and PWC, and we'll certainly be exploring that going forward to see if there's opportunities out that are a win-win for both parties. Damian Galvin: Okay. Can you run us through longer-term contracts market that is 2028 onwards? Any changes there? Leon Devaney: No, as I've mentioned quite a few times in previous webinars, the longer-term gas market is probably where there's considerable uncertainty, particularly, as I mentioned, with respect to longer-term production from Blacktip, which has historically been a baseload gas supplier for the NT. That's a decline or appears to be in decline. And we've also got the Beetaloo, which is undertaking appraisal. We don't know what the results of those appraisal tests really are at this point. I think a lot more information is going to be coming out over the next 6 months. It is an uncertain market when you start moving out to 2028. Our focus has been ensuring that certainly in 2026, 2027, we've got ourselves in a very strong contracted position. We do have contracts extending out through to 2030, which does help. But we do have additional volumes that we are trying to contract from 2028 and beyond. Those are the Arafura contract volumes that we backed out of earlier this year. There is interest. It is a bit early. It's a couple of years away. So it is a bit early in terms of contracting those volumes with counterparties. We are also talking to projects in the NT that might require that gas or certainly are interested in that gas, including Arafura as a potential customer going forward. So it is a very active part of our marketing effort and strategy, but it is something that will obviously take time. We'll lock those in when we think the time is appropriate. And we think contracting gas at that point in time is in the best interest of shareholders. Damian Galvin: Okay. Thanks, Leon. Probably also, there was a question here around how the Beetaloo Basin was looking and progressing. So I think you probably covered that off. Leon Devaney: Yes, I didn't spend a lot of time on this particular webinar going into the market. There's not a lot to update. We did a webinar last month, I think it was. There hasn't been a whole lot of information in terms of flow rates coming out of either of the appraisal programs happening at the Beetaloo. And the Blacktip production, similar to what we experienced last month in terms of turndown from nominations due to reduced demand in the NT. It's very hard to understand Blacktip's production at a field level, given some of that could be a result of a turndown as well. So really, at this point, there's not a lot of additional information to be able to get more visibility. I think we'll need to continue to watch this space. And as I said, over the next 6 months, I think or so, getting some more information, and we'll see how it all plays out. . Damian Galvin: Okay. Question here around hydrogen. Are the JVs looking at directing any hydrogen finds into ammonia production? Leon Devaney: Well, obviously, we've got to find hydrogen and be able to demonstrate we can produce it at commercial rates. And I think that is the focus. That's certainly the focus of our sub-salt exploration activity, hydrogen and helium. Obviously, we have hydrocarbons, and we're very familiar with being able to commercialize that. We think that's going to form an important part of the business case for those prospects. But our first step is to get these appraisal wells in, particularly Mount Kitty, demonstrate we can have a commercial flow rate. And once we understand what that looks like and understand with more granularity the gas composition, we can then start to formulate a business strategy around how we commercialize and develop prospects. So it's certainly an area that we see as a potential revenue stream for the company going forward. But we have a period of time before we're actually in a position to say how or with any certainty what that will look like or how it will be developed. Damian Galvin: So I think there was a couple there just around share price and where we're at. I think one of them was why is Context Morningstar valuing the company at $0.06? I guess the short answer to that is I probably just run some AI bot on it that's taken the current share price. I would point you towards the analysis on our website from MST Access. They've got a full research paper there. I think they land at $0.20, which brings us to another question. I can't understand why the CTP share price has not progressed well north of $0.20 per share in the last 5 years or so. I realize all CSG producers are in a similar position, but I would have thought with your gas sale contracts and producing field it would be a little different. Leon Devaney: Yes. I'd go back to really what has been the theme, I think, of this presentation. We've had a great 2025. Our plan and our focus is to -- certainly one of the key objectives that we're quite focused on is to get the share price up. The ways we're going to do it, we've talked about in this presentation, that's to continue the momentum we've had in 2025, continue to deliver safe, strong performance at our operating fields, generate the kind of financial outcomes that we've seen in 2025 and hopefully improve on those, continue to strengthen our balance sheet, and obviously, with the GBA coming off in a few months, that will provide a fairly significant kick start to that as well. And then look at capital allocation options, including shareholder returns. There's opportunities there for us to demonstrate and actually in a concrete way, return more significantly capital to shareholders through sustainable dividends, for example, that could be a good catalyst for the share price. But we have a number of growth opportunities as well that we're looking at. We're very active in discussions with a broad range of things that we think are material and could be quite beneficial for the company and could have an impact on the share price going forward if we're able to complete those and get those across the line. So really, we're working quite hard on a basket of things and our focus is on creating shareholder value. But specifically, as part of that, we think that, that is the opportunity and a pathway to get that share price elevated and increasing to reflect the value of the company. Damian Galvin: Yes. I think probably we all share the frustration of shareholders around the share price and it probably reflected in our decision to allocate some capital towards share buyback at these prices is a good use of capital. So something we're working on across the board. Okay. A couple of other more questions here. What about the company Omega Oil and Gas in Surat Basin? Any comment on this development? Leon Devaney: Obviously, they've had some fantastic success and I understand they've done a fairly significant capital raise. I think what it does show is that despite the challenges in our sector, there's great opportunity for significant growth, significant value enhancement in smaller companies where you're able to successfully find resources and demonstrate that you can potentially commercialize that. And if it's of a substantial size, then clearly, that has a major impact on the valuation of companies. So I think success will be rewarded in this market. And that's one of the key things that we're looking to do at Central, whether it's through creating some visible tangible benefits to shareholders through shareholder returns to demonstrate the success we've been having with the operating assets that we do have in place, improving on those operating assets or in the growth opportunities that we have in front of us, picking and finding the right ones, being smart about it, being smart about how we structure it, how we approach it, finding success and essentially following a similar path where I think Central certainly has the opportunity to go and have a substantial increase in share price if we're successful. Damian Galvin: Question here. Could we see the FY '26 result being boosted by that gas overlift coming off that is like FY '25 being skewed towards a much better second half from the new gas contracts. I think the answer to that is probably won't see a big boost in FY '26 because that gas balancing agreement we expect all that gas to be returned by about May. So it's really only probably 1 month of upside that I'd expect to see on cash flow. So probably not for FY '26. Leon Devaney: Not substantially. But certainly, as we look forward to future financial results, that share buyback is a significant liability that will come off. As Dami mentioned, it's in the order of $6 million to $7 million at current portfolio pricing. That's in the order of a $0.01 per share type of thing. So it's a substantial number for the company. It's something that we have been paying off diligently over the past years, and we're looking forward to that being lifted, and it will have a big impact as we move forward into fiscal year 2027. Damian Galvin: Okay. In light of the Omega Gas comments, would Central bid on new Queensland acreage if it made strategic sense? Leon Devaney: Yes, we are open to opportunities that we think are lower risk, high impact. We're not restricted to opportunities just in the NT. Obviously, that's where we have a core skill set and our existing footprint. But we are casting a wider net and looking at opportunities up and down the East Coast and are in discussions for those. Obviously, there's a lot of opportunity in the market, particularly where you have transitions, whether it's gas market transitions or other events. We've been very disciplined in terms of filtering through those. There's no shortage of opportunities to throw money at, and we're in a great position with our cash balance and cash flow to have that kind of money. So obviously, we're of interest to parties that are trying to farm out or divest. But we do have a very, I think, clear understanding of what we think will add value to the company, what fits this company and where we can create value and what is in the best interest of shareholders. So we are very selective in what we look at and what we engage in, in terms of further investigation. But there are opportunities out there, and it could be in Queensland, it could be South Australia, it could be anywhere on the East Coast, and it could be further afield than that potentially. But our bread and butter, obviously, is, at this point, onshore and the East Coast is a familiar market to us. But having said that, we are open to good opportunities at the right price with the right risk profile, and it's something that we're working very hard to screen and see if we can uncover opportunities that are in the best interest of shareholders. We've had a good track record on that as well. If you look at what we've done with the Range project, we didn't put any capital into it. We had a $12 million profit from that. So that turned out actually quite positive for the company. It didn't go as quickly. We were hoping to get into development, but that was a positive investment for us. The Peak deal, obviously, that fell over. That was unfortunate, but it was really a lost opportunity as opposed to a loss for us. So we've certainly got to make sure going forward that the deals that we do enter into we cover off and really make sure that the credit risk and the ability of the counterparties is there to perform as we expect when we go into a joint venture or a farm-in opportunity. Damian Galvin: All right, I think that's all the questions for today. Leon Devaney: Great. Sounds good. Well, I appreciate everyone's attention and look forward to updating all of you as we go forward through the end of this year. I think it's going to be a very exciting next few months. And we're very confident that some good things will be happening and look forward to sharing that with you as we go forward. Damian Galvin: Thank you very much.
Operator: Thank you for standing by, and welcome to the Stitch Fix Fourth Quarter Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Cherryl Valenzuela, Head of Investor Relations. Please go ahead. Cherryl Valenzuela: Good afternoon, and thank you for joining us today for the Stitch Fix Fourth Quarter and Full Fiscal Year 2025 Earnings Call. With me on the call are Matt Baer, Chief Executive Officer; and David Aufderhaar, Chief Financial Officer. We have posted complete fourth quarter and full fiscal year 2025 financial results in a press release on the quarterly results section of our website, investors.stitchfix.com. A link to the webcast of today's conference call can also be found on our site. We would like to remind everyone that we will be making forward-looking statements on this call, which involve risks and uncertainties. Actual results could differ materially from those contemplated by our forward-looking statements. Reported results should not be considered as an indication of future performance. Please review our filings with the SEC for a discussion of the factors that could cause the results to differ. In particular, our press release issued and filed today as well as our annual report on Form 10-K for fiscal 2025, which we expect to file later this week. Also note that the forward-looking statements on this call are based on information available to us as of today's date. We disclaim any obligation to update any forward-looking statements, except as required by law. Please note that fiscal 2024 was a 53-week year due to an extra week in the fourth quarter. As such, the adjusted revenue growth rates we referenced on this call remove the impact of that extra week to provide a comparison that we believe more accurately reflect our performance. During this call, we will discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are provided in the press release on our Investor Relations website. These non-GAAP measures are not intended to be a substitute for our GAAP results. Finally, this call in its entirety is being webcast on our Investor Relations website, and a replay of this call will be available on the website shortly. And now let me turn the call over to Matt. Matt Baer: Thank you, Cherryl, and good afternoon, everyone. Over the last 2 years, we've been relentlessly executing our transformation strategy to deliver the most client-centric and personalized shopping experience. I'm incredibly proud of the significant progress we've made. We've fundamentally reshaped how we operate by strengthening the foundation of our business and embedding retail best practices. We've also made significant strides in reimagining our client experience. Our transformation is driving tangible results. We closed out fiscal '25 with a strong Q4, delivering 4.4% adjusted revenue growth. Revenue of $311.2 million exceeded our guidance and marked our second consecutive quarter of revenue growth. We once again gained market share in the U.S. apparel market this quarter according to Circana data. Adjusted EBITDA was $8.7 million or 2.8% of revenue. which also came in ahead of guidance. Our strong top line performance was the direct result of the improvements we've made to our client experience and assortment. Fix average order value grew 12% year-over-year, our eighth consecutive quarter of AOV growth. AOV growth was driven by higher items per Fix due to greater penetration of our larger fixed offering. AOV growth was also driven by fixed AUR that was up 7.6% year-over-year, as we continue to benefit from the newness and trend-right styles we brought to our merchandise assortment. Both our women's and men's lines of business accelerated revenue growth in Q4. Expansion into non-apparel categories and a greater infusion of established brands were the primary drivers. I'm especially proud of the continued strength of our men's business that delivered double-digit revenue growth in Q4 and a positive full year performance. Our core Fix channel continues to perform with Q4 revenue growth that outpaced our total growth. This is due in part to the encouraging initial results we're seeing from our new feature that allows clients to build a Fix around a freestyle item. This is a strategic move that blends the best of both channels to create a more seamless experience for our clients. As a result of the changes to our client experience and our thoughtful client acquisition strategy, we are encouraged by the trends we're seeing with new client acquisition, engagement of former clients and retention of our current clients. These shifts have led to improvements in year-over-year active client growth rates for 5 consecutive quarters. Bringing in the right clients to our service remains a key priority, and this is an area where we continue to see strength with 90-day new client LTVs at 3-year highs. Our recurring Fix shipments enrollment also remains up year-over-year, reflecting the resonance of our client experience improvements. FY '25 was a milestone year for Stitch Fix, where our consistent execution set us on a path to sustainable, profitable growth. In the last fiscal year, we achieved our highest contribution margin in the last decade. We expanded our adjusted EBITDA margin by 170 basis points and we completed another year with positive free cash flow and no debt. Now firmly in the growth phase of our transformation will continue in fiscal year '26 and to enhance our client experience, including through investments in generative AI and remain focused on 4 areas: creating more dynamic ways for our clients to engage with us, deepening our client stylist relationships, introducing increased Fix flexibility and strengthening our assortment. In line with these priorities, we recently began to roll out a new suite of innovations. These enhancements will further our efforts to deliver industry-leading personalization and convenience. First, we are leveraging generative AI to offer even greater personalization as well as new engagement opportunities. As a result of our services continuous feedback loop, we have billions of insights on our clients fit and style preferences. And we are using these insights coupled with the latest in GenAI technology to serve them in ways only we can. Our clients have shared with us that one of their biggest challenges is expressing what they want to their stylists. To address this, we recently began to roll out an AI style assistant which chats with clients while they develop their Fix request note. Using GenAI imagery as well as leading questions to help them articulate what they are looking for. Through the feedback we secure from the AI style assistant as well as our sophisticated algorithms and the expertise of our human stylists, we are now able to be much more precise with meeting each client's individual needs. In addition to launching our AI style assistant, we are also beginning to roll out a style visualization feature called [ Vision ] that provides clients with personalized GenAI imagery of their likeness in a variety of shoppable outfit recommendations incorporating the latest styles and trends. Second, we're further deepening client stylist relationships. I often think back to the golden age of retail when sales associates knew their customers by name, remember their preferences and could anticipate their needs. Those personal relationships have all but disappeared from shopping today. However, at Stitch Fix, they are alive and well. Our stylists serve as trusted partners to our clients. And now we're creating opportunities for clients and stylists to collaborate like never before through a new platform called Stylist Connect. Through the beta rollout of Stylist Connect to let clients can communicate with their stylists whenever they need assistance, whether to ask a question about Fix, get tips on the latest trends or work together on their next Fix. Client feedback on this feature has been incredibly positive, and we are also seeing higher order values from clients who have been part of the early rollout. Third, we're giving clients even more flexibility. One of the main reasons clients come to us is for the convenience and time savings we offer. We recently launched Family Accounts, which enable clients to shop for their partner or anyone else in their household all from 1 account. This helps families save hundreds of hours a year. Family Accounts join other ways we've embedded flexibility into the experience, including larger Fixes, themed Fixes and the ability for clients to build a Fix around a freestyle item. Lastly, we're further strengthening our assortment by leveraging GenAI in our private brand design process and adding new styles and brands. By integrating GenAI and private brand development, we are responding to trend signals more quickly and accelerating how we bring relevant styles to the market. We are uniquely positioned to do this because of the depth and quality of our data from the continuous direct and indirect feedback our clients provide. While we are enhancing our private brand development process, we're also expanding our portfolio of emerging and established brands. Since the start of FY '25, we've added more than 50 new brands, including Varley, Favorite Daughter, Alex Mill, [ Grown Women ], Pendleton, Madewell Men, Birkenstock, Gola, Abercrombie Kids and my kid's favorite, GOAT USA, with additional brands launching in the coming months. Building off the momentum of FY '25, we are operating from a position of strength, and our FY '26 guidance anticipates a return to full year revenue growth. We also expect active client year-over-year growth rates to continue to improve through the year, including a quarter-over-quarter increase in net adds. We will accomplish this while staying disciplined with our growth investments as we navigate an increasingly dynamic and complex environment. 2 years ago, when I stepped into the CEO role, I recognize that Stitch Fix offered a powerful and differentiated alternative to traditional retail whose potential had yet to be fully realized. I'm incredibly proud of the work the Stitch Fix team has done since then to further unlock that potential. At Stitch Fix, we know that the best retail experience is one that serves clients at a truly individual level, one where you know your clients so well that you don't just meet, but anticipate and ultimately exceed their needs and expectations. That's the level of service we aspire to provide every day harnessing the power of AI, almost 15 years of proprietary data are algorithms that get smarter with every interaction our assortment of leading brands and the human connection of our stylists who know each of their clients personally. With this competitive edge, we're well positioned to be the retailer of choice for apparel and accessories and to continue to grow faster than the overall U.S. apparel market. In closing, I want to thank our team for their incredible work and our clients, partners and long-term shareholders for their support. And with that, I'll turn it over to David for our financial results and outlook. David Aufderhaar: Thanks, Matt, and good afternoon, everyone. Our financial results in the fourth quarter and for the full year are a direct reflection of the strategic plan Matt outlined. We made disciplined choices to operate more efficiently, and that rigor enabled us to return to revenue growth earlier than expected, while driving significant leverage in our business. AOV growth was a highlight in FY '25. This was a main factor in our return to growth, but was only one of many clear signals of a healthier business overall. We're seeing encouraging trends in many areas, including more consistently bringing in highly engaged clients, retaining those clients for longer and selling them more items. This progress confirms that our strategic focus on the fundamentals from improving our inventory to enhancing the client experience, is the right path to drive sustainable, profitable growth. At the same time, we continue to deliver strong improvements to our cost structure. Over the last 3 years, we have removed a total of almost $500 million in SG&A spend, going from 53.1% of sales to 47.5%. Rationalizing our cost structure has become ingrained in our company culture. We achieved these operational efficiencies through a combination of large strategic initiatives and everyday expense management. We optimized our warehouse network and stylist workforce. We restructured our corporate head count to eliminate redundancies and flatten our organizational hierarchies. We focused our marketing spend on the most effective channels for growth and we reduced the remainder of our Fix cost structure. In FY '26, we will continue to identify additional savings opportunities that will allow us to reinvest in growth. Now let's turn to the numbers. FY '25 net revenue was $1.27 billion. On an adjusted basis, this was down 3.7% year-over-year, with revenue for the second half of the year, growing 2.5%. We drove further leverage in our business in FY '25. Gross margin was 44.4%, up 10 basis points year-over-year and our highest annual gross margin since FY '21. The increase was primarily driven by transportation leverage due to improvements in carrier mix and rate negotiations with key carriers. We also captured additional efficiencies across our operations and styling teams. This resulted in our highest full year contribution margin in the last decade. We reduced our overall SG&A spend by $124 million in FY '25. The decrease was primarily driven by lower compensation and benefits expense, including lower stock-based compensation expense and lower facilities costs. These actions allowed us to deliver adjusted EBITDA for the year of $49.1 million or 3.9% margin, up 170 basis points compared to FY '24. We generated $9.3 million of free cash flow in FY '25 and ended the year with $242.7 million in cash, cash equivalents and investments and no debt. Turning to our Q4 results. Q4 net revenue was $311.2 million. Revenue was up 4.4% year-over-year on an adjusted basis and down 4.2% quarter-over-quarter. As Matt mentioned, growth was largely driven by strength in AOV due to the increased penetration of our larger Fix offerings and our focus on trend and style right assortment. We ended Q4 with active clients of $2.3 million, down 7.9% year-over-year and down 1.9% quarter-over-quarter. As expected, sequential active client net losses increased this quarter due to seasonality, though the year-over-year comp improved for the fifth consecutive quarter. Revenue per active client was up 3% year-over-year to $549. This was the sixth quarter in a row, we have seen a year-over-year increase in RPAC, demonstrating that the clients we are acquiring and retaining are highly engaged. Gross margin for the quarter came in at 43.6%, down 100 basis points year-over-year and down 60 basis points quarter-over-quarter. The year-over-year change was driven primarily by higher transportation costs due to general rate increases from carriers such as USPS. Gross margin was also impacted by a mix shift towards non-apparel categories. Advertising came in at 9.5% of revenue in Q4, up 50 basis points year-over-year but down 70 basis points quarter-over-quarter as part of our broader reinvestment in revenue and active client growth. We'll remain thoughtful and disciplined in how we invest in this area. We ended Q4 with net inventory of $118.4 million, up 20.9% year-over-year and up 3.5% quarter-over-quarter as we expanded merchandise to support larger Fixes. Q4 adjusted EBITDA was $8.7 million or 2.8% margin, down 20 basis points year-over-year and down 60 basis points quarter-over-quarter. It exceeded our guidance largely due to flow-through from our stronger-than-expected top line performance. Turning to our outlook for Q1 and FY '26. For full year FY '26, we expect total revenue to be between $1.28 billion and $1.33 billion. We expect total adjusted EBITDA for the year to be between $30 million and $45 million, and we expect to be free cash flow positive for the full year. And for Q1, we expect total revenue to be between $333 million and $338 million. We expect Q1 adjusted EBITDA to be between $8 million and $11 million. I'd like to offer a few additional thoughts on our guidance. First, with respect to revenue, we are projecting full year revenue growth for the first time since FY '21 and in a macro environment that is pointing to a more challenging environment as we enter the holiday season. For active clients, we believe our methodical approach to rebuilding our client base is working. We expect to deliver a quarter-over-quarter increase in net adds in Q3 FY '26. We are projecting FY '26 gross margin to be between 43% and 44%. This reflects higher transportation costs and ongoing strategic investments in our client experience and assortment. Our teams have done an excellent job managing the impacts of tariffs by negotiating with suppliers and diversifying our sourcing, resulting in only a small impact to gross margins attributable directly to tariffs. We expect full year advertising cost to be between 9% and 10% of revenue as we continue to be opportunistic in this area, given the success we've had in acquiring healthier clients with higher LTVs. And finally, we plan to further shift more of our compensation mix from equity to cash. This will have an impact on adjusted EBITDA with a positive trade-off on net income. In closing, we are encouraged by the momentum in our business. While cognizant of the difficulties in the current macro environment, how we plan and execute is in our hands, and that is where our focus continues to be. We're operating at scale with a strong financial foundation and a uniquely agile business model anchored by a debt-free balance sheet, proprietary data science and AI and the ability to quickly adapt our marketing, merchandising and pricing levers. These give us the confidence to not only navigate the current environment but to see strategic opportunities and accelerate our path to long-term profitable and sustainable growth. With that, operator, we can open the line for Q&A. Operator: Certainly. And our first question for today comes from the line of Dana Telsey from Telsey Advisory Group. Dana Telsey: And nice to see the progress, Matt. As you think about the changes in the business, particularly on the top line and the additional brands that you've added lately, where are you seeing the most growth from? And how are tariffs impacting the AOV? And then I have another question after that for a follow-up. Matt Baer: Dana, I appreciate the question and the recognition for the continued growth. And I think to answer your question in 2 parts, the first in terms of what we're seeing from our assortment and then the second, the impact that we're seeing from tariffs, particularly any impact for AOV. As we noted in the prepared remarks, both our women's and our men's business accelerated their year-over-year revenue growth on an adjusted basis in the fourth quarter. And that was driven by expansion into non-apparel categories as well as the greater infusion of established brands we've added to our assortment. If you drill down into our women's business, we saw increased demand for footwear and that grew over 35%. We also saw significantly improved demand for denim especially wide leg denim. We also saw improved demand for skirts that would include miniskirts, maxi skirts and fleeted skirt styles. And we also continue to see strength in our athleisure business. If you drill down into our men's business, first, just to point out again that we had double-digit growth in Q4 within our men's business and a full year of positive revenue comp in fiscal '25 for our men's business. In the quarter, and similar to our women's business, we saw a very high demand for footwear and athleisure. And we also saw a strong performance from national brands like Travis Matthew, Adidas, Marine Layer and Tommy Bahama, just to name a few. I'll speak to the tariff piece a little bit and let David add any additional context. In the fourth quarter, none of the improvement in AUR, the 7.6% year-over-year growth or the growth in AOV of 12%, which was our eighth consecutive quarter of growth is attributable to tariffs. That's in large part due to the great work that our tariff task force did in order to mitigate any potential impacts in the fourth quarter of fiscal '25. Dana Telsey: Got it. And then the -- go on. David Aufderhaar: No, go ahead. Dana Telsey: And then on the uptick in the sales, where do you see you're taking the share from? And given the volatile outlook for holiday, how do you think about planning for holiday or its timing, whether it is what you're seeing from your customers? How do you see that? Matt Baer: Yes. I appreciate the question again. We're very proud of the fact that we continue to gain market share. and that coincides with our growth in the fourth quarter, growing 4.4% on an adjusted basis, considerably outperformed the overall market, something that we are very proud of. And to me, that indicates the fact just that our superior service is very clearly resonating with our clients. I'm very proud of the trends we're seeing in our active client growth rates the fact that those have improved for 5 consecutive quarters. I'm also really proud of the fact that for the new clients that we brought in, we see 90-day LTVs continue to be at 3-year highs. With regards to who we are taking market share from, at Stitch Fix, we're very much focused on delivering the most client-centric and personalized shopping experience. And in doing so, we're picking up share from all of the retailers that are letting consumers down. It's our superior service that is enabling us to take share from a wide variety of retailers who don't and actually cannot deliver on the personalization consumers want and expect and that is core to our business. In terms of what we're doing for holiday, we talked about this last year, we really leaned into holiday more meaningfully than we ever had before, and we plan to build on that success in our holiday this year. I believe we're better positioned this year compared to last, given the changes we've made to our experience. A few of those of note is the continued flexibility we brought into our experience. That's what themed fixes, larger fixes, the ability to build a Fix around the freestyle item, and one that I'm particularly excited about is the introduction of family accounts. One of the critical components of family accounts is that really unlocks gifting opportunities for us. We've also, as I noted before, continue to improve our assortment across private brands, emerging brands and well-known brands. so that we can ensure that we have the right assortment to drive promotions at healthy margins as well as ensure that we have the right assortment to serve our clients for all of the occasions that they might attend over the holiday time period. And also the new features like Vision and Stylist Connect that I mentioned, those will continue to provide clients with new ways to engage with us throughout the holiday season. We've also talked at times about the investments we've made into our promotional and CRM capabilities. Those will also help us remain competitive during this time. And ultimately, it comes down to the differentiation of our business model that just continues to give us a competitive edge and we're confident that we will continue to gain market share throughout the holiday time period. David Aufderhaar: And then, Dana, just to add one additional point to Matt's point, especially around active clients and how that might be part of the underlying growth from a revenue perspective. to his point, we're really encouraged by the continued improvement that we're seeing from a year-over-year comp standpoint. And when you play that trajectory forward for the client cohorts that we talked about, the new client adds, reengaging clients that have gone dormant and retaining our existing clients, there is that natural inflection point in clients. And that's one of the reasons why I called out earlier in our remarks that we see a quarter-over-quarter inflection in active clients in Q3. One of the other things we're seeing, I tend to give color on the most recent quarter. For Q1, we expect quarter-over-quarter active clients to be roughly sort of flat quarter-over-quarter to down approximately 0.5%. And so definitely just really encouraged with those trends. And again, this is part of that methodical approach that has worked really well for us of just focusing on deepening relationships with our clients and bringing in clients where this service really resonates with. And that's -- you also see that in some of the metrics where it's the eighth quarter in a row that we saw year-over-year growth in new client LTVs. And so just really encouraged with what we're seeing there as well, and that's one of the things we'll continue to focus on. Operator: [Operator Instructions] Our next question comes from the line of Sole Jay from UBS. Sole, you might have your phone on mute. We're still not hearing you. [Operator Instructions] And this does conclude the question-and-answer session of today's program. I'd like to hand the program back to Matt Baer, CEO, for any further remarks. Matt Baer: Appreciate that. To close, I'll just reiterate how proud I am of the results the team delivered this year and how confident I am in the future of Stitch Fix. The momentum that we have, it proves that we have the right strategy, it proves that we have the right team and it proves our ability to execute at the highest level. It's my fundamental belief that you gained market share by playing offense. At Stitch Fix, we continue to innovate. We continue to strive to exceed our clients' expectations, and we continue to face external headwinds head on. We know our clients intimately, and we serve them individually. We build enduring relationships, which give us a competitive advantage relative to the transactional relationship consumers have with other retailers. Our differentiated business model of expert stylist paired with our proprietary data and algorithms as well as our leading assortment and generative AI innovations position Stitch Fix to uniquely serve clients. In doing so, I believe that we'll continue to take share from those that struggle to deliver the level of personalization and convenience consumers desperately want and deserve. Everything we do at Stitch Fix is in service of the client and to deliver sustainable, profitable growth. We are judicious, methodical and unrelenting in that pursuit. We remain focused and committed to accelerating growth and becoming the retailer of choice for apparel and accessories. I believe this is an exciting time to be in retail. I also believe it's an even more exciting time to be at Stitch Fix, where we are writing the future of what retail will look like. We are operating from a position of strength and a solid financial foundation. I'm more confident than ever in our future. Appreciate your interest in our business, and I look forward to sharing our continued progress. Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Michael Hazell: Good morning, everybody, and welcome to Saga's results for the 6 months ended 31st of July 2025. My name is Mike Hazell, and I'm the group CEO, and I'm joined today by our Group CFO, Mark Watkins. I'll kick off with an overview of our first half performance. And then Mark will take you through the financials in detail. Finally, I'll provide a brief update on our strategy before we open for questions at the end. I'm pleased to report we've had a strong first half with a performance ahead of our expectations. We've seen first half revenues increase, profits perform ahead of our expectations and a significant reduction in net debt. Underpinning this performance was the continued momentum we are seeing in travel. Alongside a strong trading performance, we've also continued to deliver the strategic actions that we previously laid out. We completed our refinancing in February, putting in place a new 2031 corporate debt facility and repaying our 2026 bond maturity and the Roger De Haan loan facility. To support the delivery of our next phase of our strategy, we have reorganized our management team. The new leadership team in place across insurance and travel now in place. In July, we successfully completed the sale of our underwriting business with cash proceeds GBP 17 million ahead of our forecast, and we're making good progress on the preparations for the launches of both our Ageas and NatWest Boxed partnerships later this year. In doing so, we're making rapid progress towards a less complex, lower-risk business model with more predictable earnings that will allow us to focus on our core strengths of customer insight, marketing and data in support of our medium-term growth plans, particularly in travel. To that end, we were delighted to launch the latest addition to our river fleet earlier this year, responding to the demand we are seeing for our boutique cruising offer. I was on board the Spirit of the Moselle last month, and she's an amazing ship. Taken together, as we go through this morning, you will see clear progress being made on both underlying trading performance and our strategic execution plans. This gives me even greater confidence with regard to the GBP 100 million profit target we laid out in April. On this slide, I've highlighted some of our key trading metrics. I'm not going to speak to every line, but you can see even at a glance, the strength of our trading performance across travel and insurance and the foundations we have put in place for money, all of which set us up well for future growth. I'll now hand to Mark to go through our financial results in more detail. Mark Watkins: Thanks, Mike. Good morning, everyone. It's a pleasure to be here today. I'll spend the next few minutes covering the detail of the financial results before covering the outlook for the remainder of the year. Saga had a really good start to the year, delivering a strong financial performance in the first half, largely driven by our travel businesses and insurance broking. Underlying revenue, which excludes some accounting adjustments and one-off items, increased by 7% from the prior period. Underlying PBT from continuing operations of GBP 23.5 million is marginally behind the prior period, but importantly, is ahead of our expectations. This was largely driven by the continued growth in our travel businesses and an improved performance in insurance broking, offset by higher finance costs. This was expected due to the successful refinancing at the beginning of the year. The group continued to be highly cash generative in the first half with available operating cash flow of GBP 89.4 million in the period, a 64% increase. This does reflect some seasonal strength, which I'll touch on again in a moment. Net debt reduction continued, and the position at the 31st of July was GBP 515.1 million, GBP 102.1 million lower than 31st of July '24 and GBP 77.7 million lower than at the year-end. Alongside strong trading EBITDA growth, which grew 8%, this supported further deleveraging with a total leverage ratio now at 4.3x compared with 4.8x at the same point in the prior year. I'll now focus on the headline underlying profit contribution from each of our business units. Our Travel businesses continued to generate strong customer demand, delivering GBP 41.6 million of underlying PBT in the first half, a 33% increase on the year before. Our Insurance Broking business performed well in the first half. Despite the anticipated decline in earnings, performance was ahead of our expectations. The standout performance of this business is that after a number of years of decline, policy volumes for motor, travel and our private medical insurance have returned to growth. Other businesses and central costs marginally increased due to lower investment income as the group now holds a lower level of cash than it previously did. The result of this is that underlying profit before tax increased from GBP 27.2 million in the prior year to GBP 38.7 million. Insurance underwriting is now classified as discontinued, but the strong performance in the first half supported our ability to capture an additional GBP 17 million of cash from the sale, which completed on the 1st of July. I'll now spend some time covering each of our core businesses in a bit more detail, and I'll start with ocean cruise. Our Ocean Cruise business had an exceptional start to the year, growing underlying PBT by 23% and continuing to show extremely strong forward bookings. Revenue grew 8%, supported by an increased load factor and per diems. The load factor in the first 6 months of the year was 94%, which compares with 90% last year, and the per diems worth GBP 391, 8% higher than the year before. Underlying PBT of GBP 34.5 million was 23% higher than the prior period supported by cost discipline and lower finance costs. The lower finance costs reflect the continued repayment of the cruise facilities. This has now reduced to GBP 55.6 million per year due to the repayment of the first COVID deferral loan. Looking ahead to the full year, the booked load factor and per diems are very strong, currently 2 percentage points and 10% ahead of the same time in the prior year, respectively. For the '26-'27 season, the booked load factor is 3 percentage points ahead with the same time last year with the per diems continuing to increase at 13% ahead. Now turning to our River Cruise. In the first half, we successfully launched the Spirit of the Moselle, our third Spirit Class rivership. The timing of this launch meant we operated with marginally lower capacity in the period, driving revenue to be flat against the prior period. The 93% load factor in the first half was 7 percentage points higher than the last year and the per diem of GBP 364 was 7% higher, reflecting the strong demand for our river cruises. This supported growth in underlying PBT of 34% from GBP 2.9 million in the prior year to GBP 3.9 million. Bookings for the full year are strong and currently reflect a load factor of 87%. The per diems of GBP 351 is ahead of the same time last year, albeit lower than H1, reflecting expected seasonality. Bookings for next year are also in a good position with strong load factors maintained alongside growing per diems. Turning now to our holidays business. Revenue grew 14% against the prior year, supported by a 13% increase in the number of passengers traveling with us. Underlying profitability was also strongly ahead at GBP 3.2 million against only GBP 0.3 million in the prior period. This serves to validate our step-up in the level of marketing to support bookings. As you'll see from this slide, revenue growth is set to continue into the second half of the year, with current full year booked revenue 14% ahead of the prior year, with passengers 12% ahead. The team are now focusing their attention on driving demand for next year's bookings. Insurance Broking also showed an improved performance in the first half, generating underlying PBT of GBP 8.9 million. This performance supported an increased investment in policy growth ahead of the Ageas partnership with 3 of our 4 main products, after many years of decline, returning to growth. Motor grew by 26,000 policies and the combination of PMI and travel grew by 5,000. This investment is expected to continue into the second half, further driving policy volumes ahead of the go-live date with Ageas. The graph on the left-hand side shows the material drivers of the movements in underlying PBT. The motor contribution before overheads decreased by GBP 0.6 million, driven by higher renewal margins, particularly for 3-year fixed-price policies as market-wide net rates reduced, offset by higher investment into volumes. Home is the most significant driver of the overall decline with a GBP 6.2 million lower contribution as net rate inflation, which was more pronounced within our panel, led to a reduced competitiveness and 19% fewer policy sales. Private Medical Insurance benefited from lower net rate inflation together with the GBP 2.6 million profit share from the Bupa partnership. Travel insurance remained broadly flat with policy volumes growing in the period. Our insurance underwriting business, AICL, was sold to Ageas on the 1st of July and therefore is treated as discontinued throughout these results. As you can see, AICL performed strongly prior to disposal generating an underlying PBT of GBP 15.6 million. This supported our ability to generate an additional GBP 17 million of net cash from the disposal with AICL paying a GBP 10 million pre-completion dividend and there being a GBP 7 million positive adjustment through the completion mechanism. We received GBP 57.9 million on the completion date, representing 90% of the proceeds, with the remaining 10% due in October. There remains a further GBP 2.5 million payable on the go-live of the partnership. Debt reduction is a clear strategic priority for Saga, and I'm pleased with the progress made in the period. During the first half of the year, net debt reduced by GBP 77.7 million to GBP 515.1 million, with a leverage ratio of 4.3x also below the year-end level of 4.4x. Available operating cash flow for the first 6 months was GBP 89.4 million, 64.3% higher than the last year. This was driven by a step forward in cash generation from all of our businesses together with the GBP 10 million dividend paid by underwriting. Debt service costs have increased due to the HBS refinancing, which was drawn in February this year and restructuring costs have increased due to the AICL disposal and the Ageas partnership. While the cash generation is strong in the first half, it does include some positive seasonality from both the Ocean Cruise and Insurance Broking business. These are benefiting from positive working capital positions with Ocean holding a high level of customer advance receipts and policy growth in Insurance Broking also benefiting cash. So let's now turn our attention to the full year. Bookings for the full year in cruise are strong. We do, however, expect profitability in the second half to be marginally lower than the first, purely due to the normal seasonality within that business. The peak trading months for our Holidays business are typically August to October. And as a result, we expect the underlying profitability will be materially higher in H2 as we benefit from economies of scale and operational leverage. In Insurance Broking, we expect the trends that we saw towards the end of the first half of the year to continue for the second half, but a step-up in investment in the second half means that profitability will be lower than the first. What this all means for the group is that the momentum we have seen in the first half gives us confidence to move our guidance for the full year. We now expect the full year underlying PBT to be in line with the prior year and importantly, our net debt leverage ratio to be below that of the prior year. And with that, I'll hand back to Mike for an update on strategic progress. Michael Hazell: Thanks, Mark. Now I'm going to take you through more detail on the delivery of our strategic priorities and our growing confidence that we are paving the way for long-term sustainable growth. Underpinning everything we do is our brand and customer insight, so it's worth a moment to remind you how that makes us different. Saga is one of the best-known and most trusted brands in the U.K. This is built on our deep understanding of our target customer and our extensive customer database, which together provide us with a competitive advantage that sets us apart from our competitors. Nobody understands older people better than us. And we have more than 70 years of experience designing products and services exclusively for them. We know who they are, we know what they like and we know how best to communicate directly with them. This means that in the growing attractive and affluent market for people aged over 50, we are ideally placed to succeed. Our businesses leverage these advantages through a series of consistent principles that I have shown on the screen. With the customer at the heart of our strategy, we will deliver quality and value through a suite of differentiated unique products uniquely tailored for our customer group using the insight we have developed over decades of experience, all supported by our powerful marketing and publishing channels that drive deep customer engagement. Since joining Saga, I've redoubled our focus on these principles, all of which are now central to our growth. In April, we laid out our medium-term profit target of GBP 100 million and a leverage ratio of less than 2x by January 2030. A strong first half performance gives us even greater confidence in these targets and our time line to achieve them. Our four strategic priorities laid out the routes by which we would deliver these targets, and we continue to make good progress on each of them, progress that will be obvious as I now touch on each business. Travel is now the largest contributor to Saga's profits. In March, we announced that we had combined the leadership and operations of our previously separate Cruise and Holidays businesses under the leadership of Nigel Blanks, previously CEO of our Cruise division. No longer operating in silos, a single management team ensures consistent, excellent customer experience and a coherent marketing strategy across both Cruise and all of our Holidays. Best practice is shared across the different product lines and customers are more easily introduced to a wider range of holiday options for their next experience. Saga has been taking older people on holiday since 1951, and we are the experts in catering for their needs. Our customers are time rich and have money to spend. They like to travel outside of peak season, enjoying quieter destinations, sometimes though quite adventurous ones. What unites them all is that they know Saga can offer, when needed, a little more support than our peers to ensure they can really make the most of their holiday. We take our customers to places they might not otherwise go, tailoring the experience to meet their needs. We open the world to them and allow them to enjoy traveling for longer. By understanding these needs, we create holidays exclusively designed for this age group catering for them in a way that the mass market can't. By playing to our strengths, we separate ourselves from our competitors and all of our travel businesses are now growing as a result. Ocean Cruise remains at the heart of Saga's travel offer with its enduring popularity only getting stronger. Forward bookings remain strong and repeat bookings are consistently high. This performance is down to the quality of our product and our relentless focus on our guests. Tailor-made for our customers, built on decades of cruising experience, our customer satisfaction and TMPS scores are market-leading. Our 2 ships provide a tailored luxury experience within a boutique cruise environment, setting us apart from the mainstream providers or the mega ships, which constitute the wider market. Smaller and easier to navigate, our specialty designed ships provide a tailored experience for our customers' holiday from our nationwide chauffeur car pickup service at the start of their holiday to the number of single cabins we have catering for solo travelers, to the quality of service and hospitality onboard. We continually look to improve and refresh our proposition across dining, trips and entertainment. You can see on the screen a picture of our newly launched French restaurant, aboard the Spirit of Discovery. Refined but contemporary, it offers a fantastic dining experience and is proving extremely popular with our guests. We aim to do things differently catering for our distinct customer base. And in doing so, we generate strong demand for our product and loyalty to our brand. That demand is driving high load factors, more early bookings and increased per diems, the amount of customers pay per day, as our need to discount reduces. But importantly, our customers still recognize the great value for money they are getting. This is a trend we are confident will continue as we carry on giving customers what only Saga knows how to do. River cruise holidays are perfect for our customers, sitting between our active land-based touring options and our no-fly hassle-free ocean cruise experiences, River cruising offers a gentle river-based touring option without the need for lengthy coach journeys and multiple changes in hotel. Customers wake up each day at an exciting new destination. We moved our River Cruise business under the leadership of the Ocean Cruise team earlier this year -- sorry, several years ago and have been aligning the service experience across the 2 propositions. As you can see from the page, the results have been very successful, with load factors, per diems and customer satisfaction all performing very well. Building on this success, we're adding more ships. And this summer, launched our newest vessel, the Spirit of the Moselle. This is an outstanding contemporary ship, especially designed by us for our customers. Its sleek exteriors and modern interior design is already proving incredibly popular with our customers, demonstrating the opportunity we have to scale up our river cruise business. Our next river ship is already in development and due to launch in summer 2027 as part of our ongoing growth ambition for this part of our business. Our cruise performance has somewhat out-shown our holidays business in recent years, but we've been making great progress there, too. And there are clear opportunities to build on this under our new leadership structure. At Saga, we offer holiday options that meet customers' needs whatever their age. We tend to find a younger, more active customer attracted to our land-based touring holidays, often as a gateway to a more relaxed river cruise in the future. Other customers look to enjoy a hotel stay at an interesting destination through one of our specially selected hotel stays, complete with Saga host on site to make sure they get the most out of their holiday. Whatever their choice, we understand that older customers are drawn to different aspects of travel to those generally catered for by the mass market. With more time available to them, older customers will typically choose to stay a little longer to more deeply experience the destination they are visiting. They're interested in understanding the language, enjoying local cuisine and visiting culturally significant sites. Beaches and swimming pools are nice, but our customers would typically prefer a nice meal overlooking amazing scenery without the sound of children splashing around behind them. Our holidays offer had over time become a little too generic, missing this opportunity to fully play to the differing demands of our customers, something that our cruise businesses have been doing brilliantly. Now under the leadership of Nigel Blanks, previously CEO of our Cruise division, we are bringing the focus more squarely back on our customers and differentiated experiences tailored for them. Recognizing the type of holidays our customers want, we are expanding our range of special interest holidays, think bird watching, food and wine, history, archeology and so on. It's early days. But as you can see, this refocus, which will take a while to fully flow through to our program, has already started to work. Revenues and profits are continuing to grow from an already strong performance last year and satisfaction levels have materially improved. Customers tell us they love our nationwide chauffeur car service and so from April, our chauffeur service will be included in all Saga Holidays as standard, meaning that whatever their holiday choice, the Saga experience starts from the moment they leave their house. Our insurance business is in a transitional year, as we prepare for our Ageas partnership. Nonetheless, we've made significant steps forward towards our new simplified lower-risk operating model and traded well in the meantime. Under the new leadership team we put in place earlier this year, led by Lloyd East. We've been investing in price and marketing to support long-term growth and prepare us for the Ageas partnership. And the results have been strong. Three out of our 4 policy lines are now growing after several years of decline and our customer satisfaction scores reflect the refocus on customer that Lloyd and his team are bringing. Much credit goes to our insurance colleagues for Saga's Insurance business being ranked in the top 50 organizations for customer satisfaction by the Institute of Customer Service, only 1 of 2 insurers to be named in that group. Preparations for our Ageas partnership have continued at pace, as we work towards a significantly simplified lower risk insurance business model. We completed the sale of our underwriting business in July, meaning that Saga is no longer exposed to underwriting risk, and we will transition a large part of our broking operations to Ageas later this year as we go live with that home and motor partnership. I'm particularly excited about how new products and services can drive future growth. In particular, we are focused on creating more ways to engage on a deeper level with our customers more frequently. Take our money business, for example, the partnership we signed with NatWest earlier this year is exciting in its own right, given that we are expanding our suite of differentiated products. But more than this, it's symbolic of how we could pursue additional innovative partnerships across different business lines in the future. Elsewhere, we've already been deepening our customer relationships with lesser-known products within the Saga portfolio. For example, our Saga wine club, Vintage by Saga, with more than 10,000 customers regularly buying wine from us. Similarly, our Saga Connections introductions service for older people engages with 13,000 subscribers checking their connections on the website multiple times a week, significantly increasing their exposure to Saga and our wider product set. These are great ways for us to remain front of mind with customers beyond their annual holiday or insurance renewal. While our primary focus remains on our core travel and insurance propositions, you can see the obvious crossover from those businesses to these types of additional service. So there are undoubtedly opportunities to cross-pollinate and build on areas like this that amplify our customers' engagement with Saga. Our publishing business lies at the heart of our customer engagement strategy. Celebrating the lifestyles of older people, it provides deep and regular engagement with our target customer group and in a digital world is increasingly a powerful source of insight into what is on their minds and what attracts their interest. As you can see from this page, comprising our award-winning magazine, newsletters, website and online articles, it's a fantastic aspirational communication channel, positively portraying the lifestyles and interests of older people. This month's magazine encapsulates that perfectly. You will have seen coverage of our interview with Pierce Brosnan and Helen Mirren right across the mainstream press. And in every instance, crediting Saga Magazine in the reporting. And we have a real opportunity to build on this amazing content, given the early success we are seeing across our digital channels and platforms. Our print magazine is already the largest paid subscription magazine in the U.K. By servicing this content on our website and refreshing it regularly, we're now driving highly engaged customers into the heart of our business, where they spend more time and come back again to see what else we've got to say. They sign up for more content, allowing us to then communicate with them more broadly. We're now seeing 1.3 million monthly visits to our magazine website, 37% of which are new to Saga and these numbers are growing every month. Building on this brilliant content, we're sending around 10 million newsletters each month, covering anything from lifestyle tips to personal finance matters and seeing opening rates of up to 49%, a clear indication of the quality and relevance of that content. By refreshing our website, both our Saga homepage and the magazine side, we are driving traffic into the Saga environment, exposing customers to individual businesses and the messaging while they browse. You should recognize this slide from April where Mark and I laid out our medium-term targets. So I wanted to update you on our progress. We previously guided that UPBT for '25-'26 would be lower than that of '24-'25, largely due to the increase in finance costs. You will have seen from Mark's slide that as a result of our strong first half performance, we now expect UPBT to be in line with '24-'25. Trading EBITDA is now expected to be ahead of '24-'25 demonstrating the strong trading momentum that we've seen. And with leverage falling, we now expect year-end to be below that of '24-'25. So while it's too early to update any medium-term projections, we have clearly made a strong start and are ahead of where we expected to be this year giving us even greater confidence as to the level and timing of those medium-term targets. Finally to wrap up before we move to questions: We've made significant progress in the first 6 months of this year. We've delivered a strong financial performance, particularly in travel, and we have significantly reduced our debt. Alongside this, we've achieved some significant strategic milestones toward our more customer-focused, simplified business model going forward. That puts us in a great position as we head towards the full year. Looking ahead, we expect to go-live with our Ageas partnership in Q4 2025, beckoning the start of a significantly less complex and lower-risk insurance model for us next year. We will continue to build on the momentum we are seeing across our travel businesses, leveraging the benefits we are now seeing from the combined operations that we've put in place. And we'll go-live with our NatWest Box partnership at the end of this year, which will start us down the path of engaging customers in more differentiated products and services beyond our travel and insurance offerings. In short, we'll keep delivering on what we said we would do. We'll now go to Q&A, taking questions in the room before moving online. Timothy Barrett: Tim Barrett from Deutsche Numis. I had a couple of things, please. A question on Ocean Cruise. Could you give us an idea on how we should benchmark your performance there? And specifically, GBP 437 on the forward book looks really impressive, just wondering how you would encourage us to think about next year as a whole? And then interested in what you said about the database. Could you talk about scaling that and what size it is? I guess, how the database is growing? That would be great. Michael Hazell: Sure. So taking the ocean point first. So what we're seeing on ocean is really strong load factor growth and performance. Clearly, that's been growing year after year. We're getting to the point now where we're well into the 90%. What that translates into is a very powerful performance in per diems. The per diem growth is coming from a combination of the demand and people competing to get on to their favorite ship and their favorite cabin and their favorite holiday. But we're also seeing that translating into earlier bookings which means we then didn't need to discount less to drive that demand. So that, together with improving the itineraries, improving the onboard experience, improving the onshore excursions, all of those things add greater value, which drives that per diem growth. So as we now get to the point where it's pretty clear that there's only so far you can take a load factor growth, it will continue to grow a bit. But actually, the growth opportunity from here is continuing to add more value, discount less and drive that per diem growth. So very confident that now we've got the load factors in that sweet spot that per diem growth will now continue through a combination of demand management, less discounting and adding more value as the proposition improves year after year after year. So that's the way to think about per diems. In terms of our database, we've got the largest database for older people in the country, we've got 9.7 million people on that database. It's a really powerful insight tool. We've got contact details and can communicate to 7.7 million of those customers. So you can think of it, first and foremost, in 2 aspects. The power of that database to enable us to understand older people and curate our product proposition for those customers, whether it be on holidays, insurance or anything else, that is a really powerful tool for us, made even more powerful by our publishing business, whereby we can talk to them post articles, if you want to know who might be interested in pet products, send out a newsletter with a pet article and see who opens it. You'll then very quickly understand what resonates with those customer groups. You'll then understand who's got a dog. But we're actually getting even cleverer. With the benefit of AI now what we've been able to do is back, what's the word I'm looking for, tag all of our historic articles to get a better understanding of what type of article works for what type of customers. So it's not just about was it an article about dogs or was it an article about cats and so on. But actually, some customers respond better to a top 10 list of X, other like an interview style article. So what we can do is both, understand more about the customers and what they're engaging with in that publishing business and then curate and tailor our articles going forward to make sense of that. All with a view of a virtuous circle us communicating with our customers and then learning more about those customers in the process. Obviously, the other side of that is, it's a very powerful marketing tool off the back of that. So we've got the insight on the one hand, but we've got 7.7 million customers that we can communicate with about the products that we offer. So it is something that we're driving hard. What we have done more recently, and I touched in my presentation is, we're starting to make our Saga homepage a destination for customers online, putting brilliant publishing content on there, so that customers are seeing the content somewhere in the web, in the newsletter or simply because they've come to Saga. They see the brilliant content and then they come back the next day or even later in the day to see what else we might be saying because it talks to older people in a way that other people don't. Clearly, in surfacing, both on the homepage and then those articles, what we're able to do is flash up relevant product content alongside it to then drive those customers into our business units. So when I say we're bringing publishing to the heart of the business, it's not in an off-line way, it really is as an introduction into our business with that insight powering the products that we offer and the services we deliver alongside them. Sahill Shan: Sahill here from Singer Capital Markets. Three questions from me, if that's okay. On the money side of the business, I appreciate it's relatively small at the moment. But you made progress in terms of partnerships. How should we be thinking about how that's likely to play out or you're planning to play out over the next few years or so? Just help me understand, I think there was a waterfall chart. And within them, was quite a decent chunk in terms of contribution going forward, the building blocks to actually get that kind of profitability going forward. So that's on the money side of things. Secondly, just more generically, clearly, you're doing fantastically well on the cruise business at the moment. Can you just help us understand and just give us an overview of the state of play of the cruise market at this moment in time, particularly the area that you're focusing on? And are there any competitive threats that we need to be thinking about? And finally, just ahead of the launch of the relationship with Ageas in Q4, how is that going in terms of the lead up to that particular launch? That would be really helpful. Michael Hazell: Sure. So if I take the money business, and thanks for raising that because I think that's a really exciting opportunity for us. But you're right to call out the bar in that building block. It's there quite deliberately because we can see the opportunity that is a medium-term opportunity. The NatWest partnership goes live later this year. We've got around 180,000 customers engaging with our money products even today. But in the short term, it's not about driving profitability. It's about scaling up, driving engagement, talking to customers regularly for that wider Saga environment. But clearly, as we build that proposition over time, then the focus shifts from the early scaling up to then converting that into more profits and returns on that investment. So I'd encourage you to think about that as a long-term opportunity with a short-term scale up. In terms of the cruise market, look, I think it's dangerous right the way across our holidays proposition to think about the market rather than understanding that we do something different to the market, and that's what I'd encourage you to think about. Nobody is doing what we do. We've got 2 ships, and I said it in my presentation, that are tailored uniquely for older people, and we tailor our entire proposition for that market. When you look at the wider market, they are either in a mass market, larger scale cruising environment or they're operating outside of the ex U.K., i.e., you've got to fly cruise. Nobody is offering that, no fly boutique cruise experience to U.K. customers exclusive for people over 50 in the way that we do. So when we talk about what's the wider market? Actually, the wider market will have its own sort of ebbs and flows. What we are seeing for our customers is consistent and growing demand year after year for what we do brilliantly. In terms of competitive threats, I think that therein lies the answer. We do something different right the way across our holidays proposition, whether it be cruise, ocean crews, river or holidays. We win by being Saga, understanding older people better than anybody else and then curating products and services in a way that nobody else actually wants to because they're catering for a mass market, and you'll see that as we move into this new phase for Saga, where we've moved away from fixing the business, which we've been focused on for the last couple of years. This point around we do what Saga does, we understand older people better than anybody else and right the way through all of our product propositions and indeed anything new that we offer, you're going to see us, first and foremost, thinking about the customer how their needs are different and then playing that out. And therefore, when you think about that competitive advantage that brings, it's not so much about what the wider market is doing about what we can bring that is different to that wider market. And Ageas. So just to remind you on the Ageas for those that won't be close to it, really exciting opportunity, will transform our insurance business model. So it's a home and motor partnership where Ageas will bring the operations and the insurance infrastructure scale and investment as a first-class insurer in the U.K. After their acquisition of they will be in the top 3 U.K. insurers. They do that brilliantly. What we do brilliantly is understand older people market in a way that other people can't using our database and our experience of marketing to older people and help Ageas design products and services for those older customers. Put that together, you've got the perfect combination of Saga doing what it does brilliantly and Ageas is doing what it does brilliantly as a first-class insurer. So really exciting opportunity, but not just because of the overall opportunity to grow but also because it frees us up to focus on what we do best and allows Ageas to focus on what they do best. So in striking this partnership, we will and are rapidly implementing a much more simple and lower risk business model, whereby we no longer take underwriting risk. We completed the sale of our underwriter in July. And by the end of the year, we'll be live with the Ageas partnership, whereby they run the policy administrations, they run the back end, they run the infrastructure and so on and they have all the regulatory complexities that come with that, we will become a customer-focused marketing driver of that business and, therefore, be able to focus on what we do well. So as well as the growth opportunities, that simplification objective that frees us up to focus on what we do best is a really powerful aspect of that. So underwriting completed end of July, the wider partnership due to go live at the end of the year, and everything is on track. Any other questions in the room before we move to online? Any questions online, Chantel? Unknown Attendee: Yes, a couple. Under holidays, how are the Saga and Titan brands being developed differently? And also, how is the destination mix changing under holidays? Michael Hazell: Okay. Thank you for that question, whoever that came from. So yes, really, really important point. So we have the opportunity to win twice in holidays because we've got a brilliant Titan brand, which is an open-age holiday business, touring business, that's got great heritage in touring and then we have the wider Saga proposition that both does touring, holidays and obviously, our cruising business. But it's really important that we recognize those are two different businesses. And therefore, what we have been developing over the last couple of years and will continue to develop is differentiation across those two propositions because actually, in the past, we've been dangerously close to offering the same or similar experiences on Titan tour as you would a Saga tour. And going forward, we definitely want to separate the two out so that you get something different as a different type of customer for Saga as you would from Titan. So where you see Saga on the badge, you'll see all of the things that we curate for that older customer base that comes through in with the Saga customer. And then likewise, those customers that are looking for a complementary proposition that may be slightly younger and more active will engage with the Titan brand potentially as a feeder to engaging with Saga at a later stage when they see what the wider service and product proposition we can offer under the Saga banner looks like. So great opportunity. It's a complementary product set between the two. And in terms of destinations, look, we'll talk more about product development and proposition in the future as Nigel and the team get their feet under the desk. Our immediate focus on proposition has been to really double down on what our customers look for from a business that offers something different for older people. And that starts with special interest holidays. So as I said in my speech, older customers go on holiday for something different. They're not typically looking to go and lie on a beach or lie by a swimming pool. They're looking for something that engages their brain, maybe participate in their hobbies and just have a great experience beyond simply the pool side. So special interest is always something that we've offered, but we are increasing the range of special interest holidays and seeing increased demand for our special interest holidays. So we're seeing more people engaging with our special interest holidays quite a mouthful, but I'll keep saying it. And as we add in more special interest opportunities going forward or experiences going forward, then we're seeing increased demand as a result of that. So we're seeing more demand for what we've got, and we're driving more growth in that demand by adding in more. Unknown Attendee: Okay. I've got a couple more. That's from Peel Hunt, from Ivon Jones. Say ocean cruise, how are the dry dock timings managed? And were the cruises impacted by the Middle East over the summer and what was the financial impact? Michael Hazell: Okay. Taking the latter easily. We're not impacted by the Middle East disruption. The way to think about our ocean cruise is, it's a floating hotel, and therefore, we float wherever that we want to in any given year. So Middle East is not a big part of our itinerary. And therefore, we flex that itinerary every year to make sense of what we're seeing in the demand, but also the geopolitical environment. So actually a really flexible market for us. And despite all of the disruption in recent years, you've seen that we've gone from strength to shrink without any disruption there. In terms of dry dock timing. We had a dry dock in the first half of this year and we had the other ship, and I forget which way around it is, but the other ship had a dry dock in the second half of last year. And you'll see that just having a slight impact on the load factors in any given year. So that therefore, effectively, the dry docks are now out of the way, and I'm going to look at Nigel, this is why I bring the team here. The cycle for dry docks are every... Nigel Blanks: It's effectively every -- we do 2 docking every 5 years, a wet dock and a dry dock. Wet dock clearly ships those in water, dry dock comes fully out, so that's what we do, our statutory and compliance work. Michael Hazell: So it's a 5-year cycle. Was that the 2 questions? Great. Any other questions online? Unknown Attendee: One more from Ivor. Travel marketing, how are they being deployed and how is that changing? Michael Hazell: So there's a few things on travel marketing. Firstly, by combining the two travel businesses, cruise and holidays, we get much bigger bang for our buck because we're able to optimize our marketing right the way across our travel proposition rather than focusing on cruise marketing overhead or holidays marketing over here. So that is increasing the penetration of our marketing spend right the way across the business. The profile of marketing is slightly different this year to previous years. We focused our marketing in the current year on driving our current year bookings, and you'll see that passenger numbers in here are 13% ahead of the strong year that we had last year. What that means is as we go into the second half of this year, we'll shift our focus into marketing next year, but it does mean that the year-on-year booking profile is slightly different, which is why you're seeing that next year bookings are slightly behind where we were this time last year for the year ahead, not concerned about that. That's simply because we've rightly focused on driving this year, driving the growth into this year, which will then mean that translates into repeat business for next year and then we drive the next year's bookings in the second half of the year. So very confident in the outlook, and that's a business that's growing very well. Outside of the sort of coherent marketing approach right the way across travel, what we are also now doing is really driving up our holiday marketing, more tailored for our customers, again, by looking at all of what works and what doesn't work right the way across our holiday propositions, we can take learnings from one part of the business into the others. So I would say that in our holidays business, we've probably been a little overexposed to digital marketing and a little underexposed to analog marketing. That means that if you recognize our customer base, they tend to respond more to the white male catalog marketing than they will do to digital marketing. There's room for both, but our cruise business has got brilliant experience in doing that. The Marketing Director that was sitting across cruise is now sitting across the whole of our Travel business, bringing those learnings into the Holidays business. So we're rebalancing the spend between digital and analog, importantly. But we're also out on radio. You'll notice that insurance is now actively marketing on TV as well, that brings us a halo effect. So right the way across the board, you'll see Saga present not just in travel, but more generally, putting your head above the parapet, which I think is a real sign of where the business now is. We're coming out, we've got a strong footing, we've got our funding in place, we've got our growth trajectory ahead of us, and we're now trading the business hard and investing in that growth, and clearly, it's working. Any other questions online or should I say from Ivor? Good. All right. Any other questions in the room? Doesn't sound like there's any more online. Okay. Just to wrap up then, thank you for joining today. Look, I think we've made really good progress. You can see that we're trading well, which sets us up really well for the trajectory we're on. But really importantly, that's going to be underpinned by the delivery of our strategic actions, and we're getting on with that stuff as well, which means when we talk about those medium-term targets that we set out in April, we're even more confident here today that we'll deliver on those targets, GBP 100 million profit and less than 2x leverage by January 2030. So great fun, and we're getting it done. Thank you, everybody.
Operator: Good afternoon. My name is John, and I will be your conference operator today. I would like to welcome everyone to the KB Home 2025 Third Quarter Earnings Conference Call. [Operator Instructions] This conference call is being recorded, and a replay will be accessible on the KB Home website until October 24, 2025. And I will now turn the call over to Jill Peters, Senior Vice President, Investor Relations. Thank you, Jill. You may now begin. Jill Peters: Thank you, John. Good afternoon, everyone, and thank you for joining us today to review our results for the third quarter of fiscal 2025. On the call are Jeff Mezger, Chairman and Chief Executive Officer; Rob McGibney, President and Chief Operating Officer; Rob Dillard, Executive Vice President and Chief Financial Officer; Bill Hollinger, Senior Vice President and Chief Accounting Officer; and Thad Johnson, Senior Vice President and Treasurer. During this call, items will be discussed that are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future results, and the company does not undertake any obligation to update them. Due to various factors, including those detailed in today's press release and in our filings with the Securities and Exchange Commission, actual results could be materially different from those stated or implied in the forward-looking statements. In addition, an explanation and/or reconciliation of the non-GAAP measure of adjusted housing gross profit margin, which excludes inventory-related charges and any other non-GAAP measure referenced during today's discussion to its most directly comparable GAAP measure can be found in today's press release and/or on the Investor Relations page of our website at kbhome.com. And with that, here is Jeff Mezger. Jeffrey Mezger: Thank you, Jill. Good afternoon, everyone. We are pleased with the solid financial results that we achieved in our third quarter, meeting or exceeding our guidance ranges across our key metrics as we continue to navigate the current environment. And with a healthy balance sheet and significant cash flow, our flexibility remains strong. While we continue to invest in new communities to position ourselves for future growth, we are also returning a significant amount of cash to our shareholders. We repurchased more than $188 million of our shares in the third quarter, near the high end of our guided range, contributing to total repurchases of roughly $440 million year-to-date. This total represents approximately 11% of our outstanding share count at the beginning of the fiscal year, which was repurchased at an average price that is below our current book value. We believe this is an excellent use of our cash and highly accretive to both our earnings and book value per share. Including dividends, we have now returned more than $490 million in capital to our shareholders this year. From an operational standpoint, we had some critical achievements in terms of materially reducing our build times, which helped to generate closings that were slightly above our expectations and also continuing to lower our direct costs. These accomplishments were realized while maintaining outstanding customer satisfaction levels. As for the details of our results, we produced total revenues of over $1.6 billion and diluted earnings per share of $1.61. We delivered higher profitability on our revenues than we had projected with a gross margin of 18.9%, excluding inventory-related charges, above the high end of our guided range. With a continued focus on prudently managing our costs and aligning our overhead structure with our delivery volume, we held SG&A expenses to 10% of our housing revenues. The outperformance of these two metrics relative to guidance drove an adjusted operating income margin of 8.8%. We grew our book value per share to over $60, an 11% year-over-year increase. Moving on to market conditions. The longer-term outlook for the housing market remains favorable, driven by demographics and the ongoing undersupply of homes. With respect to current conditions, we are pleased to see stability in demand in June, which continued as our third quarter progressed. We are encouraged by the decline in mortgage interest rates, which should support greater demand for homeownership. We produced 2,950 net orders in the third quarter, maintaining the pricing approach we implemented earlier this year. Our focus is on offering the most compelling value at a transparent price while limiting the use of incentives. When we discuss with buyers the alternative of the lower sales price we offer versus a much higher price that can be offset by incentives, buyers recognize that they have a better opportunity for building wealth through equity over time with our home that has the lower starting price point. We continue to focus on optimizing our assets to generate the highest returns, balancing pace and price on a community-by-community basis relative to local market conditions. We exceeded our community count guidance, which, together with a stable cancellation rate, contributed to a monthly absorption pace per community of 3.8 net orders. This pace was lower than our third quarter pace of the past couple of years. And as a result, our net orders were below our internal sales goal. Our fourth quarter sales approach will emphasize our built-to-order homes while continuing to sell through our inventory. As we discussed on our last earnings call, our goal is to steer our business back to our historical range of built-to-order homes, which has averaged close to 70% over more than a decade from around 50% currently. It is our core competency and a key competitive differentiator. And with the significant reduction in our build times, that has become a more compelling selling proposition. We offer buyers an attractive home at an affordable price with features we know they value based on our survey data. Our buyers can then meaningfully influence their final sales price in selecting their lot, floor plan and exterior elevation as well as personalized design studio selections, aligning their monthly payment with their budget. This choice model contributes to our high customer satisfaction scores as buyers draw value from our process and is a key driver of our monthly absorption pace, which is among the highest in our industry. As our build-to-order mix grows, we believe it will support a higher gross margin as these homes currently generate a gross margin that is 250 to 500 basis points higher than our inventory homes. In addition, increasing our built-to-order mix will help us establish a larger backlog, which provides greater visibility into future closing projections. As we have shared in past years, our fourth quarter is typically one in which we elect not to take aggressive steps to capture inventory sales as it is a seasonally slower period and discounting by the speculative home builders pursuing year-end deliveries tends to be elevated in the final months of their fiscal years. Our land positions are valuable, and there is merit to exhibiting discipline when incremental volume gains are low. We do not intend to sell at any price to make up for the shortfall in net orders in our third quarter. Taking this into consideration, we are projecting $1.65 billion in housing revenues in our 2025 fourth quarter and $6.15 billion in housing revenues for our 2025 fiscal year, both at the midpoints of our guidance ranges. Let me pause here for a moment and ask Rob McGibney to provide more details on market conditions as well as an operational update. Rob? Rob McGibney: Thank you, Jeff. One of the key operational themes of our third quarter was our strong execution. Our divisions continue to perform well on the fundamentals of our business, maintaining high customer satisfaction levels, consistently improving build times, further lowering direct cost and balancing pace and price to optimize each asset. In addition, we successfully opened 32 new communities during the quarter. The significant progress we made in continually reducing build times during the third quarter helped to drive better financial performance from capturing slightly more deliveries than we had planned. Traffic in our communities was steady, and our cancellation rate was stable at 17%, supporting net orders at an average absorption pace of 3.8 per month per community. We continue to utilize a simplified approach to sales, focused more on offering a transparent price rather than incentives to provide the most compelling value that is competitive with resale pricing. By advertising the true base price on our website, we let buyers know exactly what to expect before they ever visit a community without the need for back-and-forth negotiations to uncover the real deal. It is a clear upfront way of doing business that makes the home buying process easier and more straightforward. As a result, we believe we draw more traffic to our communities than we might otherwise attract if our pricing was dependent on incentives. In the third quarter, pricing in our communities was as stable as we've seen this fiscal year, with 70% of our communities experiencing steady or increased prices and the other 30% price reductions as we continue to balance pace and price to optimize our assets. We are encouraged by the stabilization and believe our communities are well positioned in the current market. In terms of affordability, it has improved compared to the start of our third quarter, driven by the decrease in mortgage interest rates, which have fallen roughly 60 basis points. This equates to approximately $30,000 of additional purchasing power at our average sales price, a significant boost for a first-time or first-time move-up buyer, which comprise about 70% of our homebuyers. I will add to Jeff's comments on our fourth quarter sales approach by reiterating our focus on optimizing our assets as we maintain an appropriate selling cadence in our communities, including sales of inventory homes. We do not need to chase incremental volume in a seasonally inelastic demand period where speculative builders are discounting heavily to close out their fiscal years. In those conditions, the additional sales produced tend to be limited and they come at a great cost to our margins. We have approximately 3,000 homes in backlog that can be delivered in our 2025 fourth quarter, leaving just over 500 same quarter sales and closings needed to achieve our implied fourth quarter delivery guidance. This is less than the number of homes that we sold and delivered in the fourth quarter of last year and equates to less than one sale per community per month. At quarter end, we had 264 active communities, up 4% year-over-year, contributing to an average of 259, an increase of 3% as compared to the prior year period. The third quarter marked our best performance in several years in opening communities and the number of communities we opened was the highest in any quarter in more than a year. We typically see an above-average sales pace in new communities and the sales performance of our third quarter openings was strong with an absorption pace that outperformed our overall average pace for the quarter. We expect to end our 2025 fiscal year with 260 active selling communities with a projected ramp-up in early 2026 in time for the spring selling season. We moderated our starts in the third quarter with 2,761 homes started as part of our effort to rotate our business back to a higher mix of built-to-order homes over time. We ended the quarter with 6,550 homes in production, including models, of which 52% were sold. Further improving our build times was another area of strong execution by our divisions in the third quarter with a 10-day reduction sequentially to 130 calendar days. Compared to our annual build times going back a decade, we are building homes at some of our best levels today. Although continuous improvement becomes more difficult as we move further away from the peak, our divisions have been producing results each quarter with a focus on returning to a company-wide average of 120 days or better from start to home completion. We are quickly approaching this point at 122 days for built-to-order homes, and some of our divisions are already below our target level. The benefits of lower build times are numerous, including a more compelling selling proposition for our customers purchasing a built-to-order home relative to the 60 days it typically takes to complete an existing or speculative home purchase, better inventory turns and monetizing our assets quicker. The focus from our divisions, together with our national purchasing team to drive lower cost as well as our value engineering and studio simplification efforts collectively contributed to direct costs that were about 2% lower sequentially and 3% lower year-over-year on our homes started during the third quarter helping to offset the impact of higher land cost. Before I wrap up, I will review the credit profile of our buyers who finance their mortgages through our joint venture, KBHS Home Loans. We maintained a high capture rate with 83% of buyers who finance their homes in the third quarter using KBHS. Higher capture rates help us manage our backlog more effectively and provide more certainty in closing dates, which benefits our company as well as our buyers. In addition, we see higher customer satisfaction levels from buyers who use our joint venture versus other lenders. The average cash down payment was stable, both sequentially and year-over-year at 16%, equating to over $76,000. On average, the household income of customers who use KBHS was more than $130,000, and they had a FICO score of 740. Even with 1/2 of our customers purchasing their first home, we are still attracting buyers with strong credit profiles who can qualify for their mortgage while making a significant down payment or pay in cash. 11% of our deliveries in the third quarter were to all cash buyers. In conclusion, we are focused on delivering results and our third quarter performance reflected strong operational execution across multiple dimensions. We believe our communities are well positioned in their submarkets, and we are approaching sales in a simple and transparent way, which we feel best serves our buyer. Our divisions are committed to achieving our projected fourth quarter results for a solid finish to fiscal 2025. And with that, I'll turn the call back over to Jeff. Jeffrey Mezger: Thanks, Rob. With respect to our lot position, we own or control over 65,000 lots, 42% of which are controlled. Our footprint is focused on markets that we believe are positioned for long-term economic and demographic growth, and we've been selective with our land positions in these markets. Our lot pipeline is healthy and at a sufficient level to support our community count growth targets. We regularly review the land deals in our pipeline to ensure that the rationale for each deal is still sound. During the third quarter, we canceled contracts to purchase approximately 6,800 lots, representing about 45 communities that no longer meet our underwriting criteria. We feel we have ample opportunity in our served markets to add to our controlled lot count with lots that have better economics and terms. And with our lot position at quarter end, we can wait until we find better prospects. One of the key benefits of our build-to-order approach is that it provides visibility into the need and timing for replacement communities based on each community's pace and expected sellout date, which is beneficial in our effort to be capital efficient. We are also developing lots in smaller phases wherever possible and balancing development with our starts pace to manage our inventory of finished lots. We remain consistent in our balanced approach toward allocating the healthy cash flow that our business generates. We are achieving our priorities of positioning our business for future growth, managing our leverage within our targeted range and rewarding our shareholders through share repurchases and our quarterly cash dividend. We are maintaining our land investments at a level that will support our current growth projections and invested $514 million in land acquisition and development in the third quarter with almost 80% going toward development and fees on the land we already own. We are beginning to see a more constructive land market as prices have softened somewhat, and we were able to obtain more favorable terms. As I mentioned earlier, we continue to view the long-term outlook for the housing market favorably and have the flexibility to resume a higher level of investment at any time. With the earnings that we have generated to date in fiscal '25, land acquisition and development spend that is 7% lower year-over-year and the improvement in our build times unlocking cash, we have returned more than $490 million in capital to our shareholders in the first 9 months of fiscal 2025. This includes approximately $440 million in share repurchases at an average price of $56.30 per share, which, as I noted earlier, is below our current book value. At these levels, the repurchases are an excellent use of capital and will enhance both our future earnings per share and our return on equity. In closing, I want to thank the entire KB Home team for their commitment to serving our homebuyers and driving the best possible performance from our business in the current market. We believe we have the most talented operators in the industry, and we were honored to be the only homebuilder named to Time Magazine's 2025 list of World's Best Companies. One of the three dimensions that define the companies recognized on this list was employee satisfaction based on anonymous survey data of a large sample of employees. For this reason, the recognition is particularly meaningful to us. Our divisions are executing well and producing results across some of the most impactful operational areas of our business by reducing build times and direct costs and opening new communities on time. We continue to approach our land opportunities through a thoughtful and selective lens with a healthy lot position that has our business primed for growth. Year-to-date, we've returned the highest level of capital to our shareholders for a nine-month period in our company's history. Over the past four years, our cumulative return of cash for share repurchase and dividends as a percent of market cap leads the industry. We plan to continue our share repurchase program in both our '25 fourth quarter and in fiscal 2026. Our balance sheet is strong. We have significant financial flexibility and an experienced team that is committed to producing results going forward. And now I will turn the call over to Rob Dillard for the financial review. Robert Dillard: Thanks, Jeff. I'm pleased to report on the third quarter 2025 results. As Jeff and Rob stated, we're managing the business with discipline in an effort to drive employee engagement, customer satisfaction and long-term shareholder value. We believe that we are well positioned to deliver solid results in the present operating environment with our dedicated customer focus, leading brand, transparent pricing strategy and differentiated built-to-order product. In the third quarter of 2025, we generated total revenues of $1.62 billion. Housing revenues exceeded the midpoint of our guidance range at $1.61 billion, an 8% decrease from the prior year. We delivered 3,393 homes in the quarter, which exceeded the midpoint of our implied guidance, largely due to reduced build times. While we experienced consistent traffic at our communities, net orders totaled 2,950, a 4% decline. Lower orders and improved build times, which reduced backlog more quickly and efficiently contributed to a 24% reduction in our ending backlog to about 4,300 homes. In the third quarter, our overall average selling price was relatively consistent on a year-over-year basis and decreased 1% to $475,700. Mix was a factor as lower average selling prices in the Central and Southeast regions were largely offset by increases in our West Coast and Southwest regions. Housing gross profit margin was 18.2% and adjusted housing gross profit margin, which excludes inventory-related charges, was 18.9%. This strong margin performance exceeded the high end of our guidance range, mainly due to our continued success at managing costs. Adjusted housing gross profit margin was 180 basis points lower than a year earlier due to pricing pressure, higher relative land cost and geographic mix, partially offset by lower construction costs. SG&A expenses as a percent of housing revenues were 10%, a 20 basis point increase from a year ago, primarily due to decreased operating leverage. We're actively managing SG&A for the current market environment and have reduced our headcount to align with volume levels. This focus led to a favorable result relative to our guidance range. Homebuilding operating income for the third quarter decreased to $131 million or 8.1% of homebuilding revenues and homebuilding operating income, excluding inventory-related charges, was $143 million or 8.8% of homebuilding revenues. Total pretax income was $143 million or 8.8% of total revenues. We reported net income of $110 million or $1.61 per diluted share, benefiting from solid operating performance and a 12% reduction in our weighted average diluted shares outstanding from the prior year. Consistent with our strategy to optimize every asset, we are maintaining discipline on price and pace and have adjusted our guidance for 2025 to reflect this priority. In the fourth quarter of 2025, we expect to generate housing revenues between $1.6 billion and $1.7 billion. For the full year, we now expect housing revenues between $6.1 billion and $6.2 billion. We expect a fourth quarter average selling price between $465,000 and $475,000 and a full-year 2025 average selling price of approximately $483,000. This variation in projected average selling price is primarily due to regional mix. Housing gross profit margin, assuming no inventory-related charges, is expected to be between 18% and 18.4% for the fourth quarter and between 19.2% and 19.3% for the full year. This expected year-over-year margin reduction is due to market conditions, higher land costs, including development and fees as well as mix variation which we expect to be partially offset by lower construction costs. The fourth quarter SG&A ratio is expected to be between 9.3% and 9.7% and the full year SG&A ratio is expected to be between 10.2% and 10.3%. We expect the fourth quarter homebuilding operating income margin of between 8.5% and 8.9%, and we expect the full year operating income margin of approximately 8.9%. These projections assume no inventory-related charges. Our effective tax rate for the fourth quarter and the full year is expected to be slightly above 23% as energy tax credits and other adjustments are expected to remain approximately at their current levels. Turning now to the balance sheet. Our balanced capital strategy is focused on minimizing the cost of capital, maximizing flexibility, optimizing returns from investment in land and returning capital to reward shareholders. We believe that we are well capitalized for the current market. We continue to invest in land to drive future growth with a continued focus on the highest return opportunities while also returning more capital to shareholders in the form of share repurchases. We had inventories consisting of land in various stages of development and home completed or under construction totaling $5.8 billion at the end of the third quarter. We invested over $514 million in land development and fees during the third quarter compared to $845 million in the third quarter of 2024. In the first nine months of 2025, we invested over $1.9 billion in land development and fees compared to $210 million in the corresponding period of 2024. With our inventory position, we own or control over 65,000 lots, including 27,000 lots that we have the option to purchase. We believe that we are well positioned to benefit from improving market conditions. At quarter end, we had total liquidity of $1.2 billion or $331 million of cash and $832 million available under our revolving credit facility. The current $250 million outstanding on the revolving credit facility is associated with seasonal working capital investment. Our strategy is to maintain our strong BB positive credit profile as we believe it facilitates reliable access to capital at low cost and significant flexibility. We'll continue to target a total debt-to-capital ratio in the neighborhood of 30% to support this rating, and we are comfortable with our current 33.2% ratio. This strong balance sheet enables us to provide shareholders with a healthy dividend, which currently has an approximately 1.6% yield as well as return capital to shareholders in the form of share repurchases. In the third quarter, we repurchased 3.3 million shares at an average price of $57.12 for a return of capital of more than $188 million, which combined with dividends, resulted in a total return of capital of $205 million. Over the first nine months of 2025, we have repurchased approximately 7.8 million shares or approximately 11% of outstanding shares at the beginning of the year. With this strategy and our solid earnings, we have increased our earning book value per share to $60.25, an 11% increase over the prior year. Over the past four years, we've returned over $1.8 billion to shareholders in the form of dividends and share repurchases. We have now repurchased over 34% of our outstanding common stock since implementing our share buyback program in late 2021. We believe that this is the highest percentage of shares repurchased based on market capitalization among our homebuilder peers over this period and is an indication of our shareholder-focused strategy. We expect to repurchase between $50 million and $150 million of common stock in the fourth quarter, subject to our outlook for operating environment, capital market conditions and land investment opportunities, among other factors. In conclusion, we're pleased with our solid results and disciplined operating strategy, and we expect to optimize shareholder value over the long term by augmenting these results with shareholder-focused capital strategy that balances investing for growth, optimizing returns and increasing returns to shareholders. With that, we'll now take your questions. John, would you please open the line? Operator: Yes. Thank you. We'll now conduct a question-and-answer session. [Operator Instructions] And the first question comes from the line of Stephen Kim with Evercore ISI. Stephen Kim: Appreciate all the commentary and guidance. Yes, and good results here in a tough environment. I did want to ask you a little bit about the order ASP, if I could. It was -- it's kind of been down pretty significantly sequentially. I know you've talked about the simple -- more transparent pricing model. But I was curious, I think you gave a comment that 70% of your communities had stable to increasing prices. And I wanted to square that with the 4% sequential decline in the order ASP. So maybe help us understand sort of maybe how we can reconcile that and what your outlook is for the order ASP as we get into the fourth quarter and into next year. Is this level of ASP a level you're generally comfortable with? Or do you still think it has downward movement? Rob McGibney: Well, a lot of where it's going to head is going to depend on market conditions and where things are headed. And we talked in our prepared remarks about optimizing each asset. We're going to continue to do that. We've also had success on moving costs down as well as some of this has been shifting down. But I think a lot of what you're seeing in the ASP is just mix driven. If you look at year-over-year, we've got more deliveries coming out of the Southeast and a lower percentage coming out of California. And then there's mix -- sorry, out of the West. And then there's even mix within the West, too, where we've got ramp-up in deliveries coming out of Boise and Seattle that have some lower ASPs generally than the rest of California. So, Steve, I think a lot of what you're seeing there is mix. And as far as comfort with the ASP, obviously, we're focused on the margin piece of that. So to the extent we can continue to drive cost down and offset any decreases that we've had to do, we'll be happy with that. Stephen Kim: Yes, that's helpful. I mean, I guess what I'm hearing you say, Rob, is that nobody should read into the sequential order price decline as a leading indicator of a step down in the margins. There's really more mix effects going on. So I appreciate that. Speaking about the demand, we've kind of had a number of weeks here where the mortgage rate has sort of moved down pretty meaningfully. I was wondering if you could comment on sort of what you've seen. We've heard that there's been a pickup in traffic pretty much across a lot of builders we speak to and people are kind of waiting for the conversion into sales. I was wondering if you could comment on what you are seeing with respect to the conversion of traffic and whether or not you would be more inclined at this point to push price if demand comes in stronger or if you would be more inclined at this point to maybe push volume given the fact that you've pulled your volume down a lot most recently? Rob McGibney: I guess the way that we would react to it really depends on the community. If it's a community, we've got a lot of runway in front of us, we see an opportunity to get higher volumes with more demand we'll probably be less aggressive on price and get a little more volume. If I contrast that with some of the, we call them jewel box communities we've got in California that are infill type communities that are difficult to replace. We're going to continue leaning on price and margin. As far as the way the buyers have reacted, I mentioned in my prepared remarks, it's a huge impact to the buyer in terms of affordability. I mean, $30,000 of purchasing power at our ASP is big. We've seen traffic stay steady. Orders have been good, but I wouldn't say that we've seen a big uptick yet or maybe the uptick that we would expect to see from such a change in mortgage rates. And I think to some extent, buyers are in maybe a bit of a wait-and-see mode. maybe waiting for rates to come down further. Maybe they were waiting around for the actual Fed event expecting that to have some immediate impact on rates. But the thing that we're focused on is really our messaging and the way that we're approaching this in the sales offices. And with our build-to-order model, we're really talking to all of our customers about their ability to buy a built-to-order home. And if they believe rates are coming down in the future, then it's perfect because we've got a onetime float down option for them. And if that happens, they can take advantage of that. And I think that's something that is unique to our approach, and we're leveraging that everywhere we can. Operator: Our next question comes from the line of John Lovallo with UBS. John Lovallo: The first one is, if we think about sort of the third quarter gross margin beat versus expectations and about 20 basis points on the high end and maybe a slightly lower-than-anticipated fourth quarter gross margin. I'm curious if there was some toggle on delivery timing or mix between the quarters relative to internal expectations, given the fact that the full year gross margin is maybe up a touch from where you had thought before. Robert Dillard: Yes, John, that's a good question. It's something we think about a lot, but it actually wasn't really in play there. I mean the real drivers there were -- there was some mix there, but it was really, really strong performance on the construction side and getting the right products sold. So we feel really good about how the third quarter ended from a margin perspective. we're being really thoughtful about what fourth quarter is going to do as we're still working through inventory and transitioning to more BTO. John Lovallo: Understood. And then maybe with that in mind, how should we sort of think about the year-over-year and sequential movement in stick and brick costs in land into the fourth quarter? And to the extent that you can comment on what you're expecting in 2026, that would be helpful. Robert Dillard: Yes. In fourth quarter, we're not expecting like a trend shift from the third quarter in terms of the year-over-year impact of land or sticks and bricks. Like I think that we've been able to offset most of that with construction productivity, but you're seeing that kind of having an impact on the margins for sure. I think going forward, we think that there's still opportunity to continue to offset that. And as Rob said, from a community-by-community perspective, there's a lot of play in price there as well. Operator: Our next question comes from the line of Rafe Jadrosich with Bank of America. Rafe Jadrosich: If we go back historically on this third quarter call, you've sort of given an outlook on the out year revenue, at least like a preliminary view. I understand that that's a pretty volatile environment. So it might be a little bit tougher right now. But can you maybe just help us and maybe puts and takes like kind of going into next year as you shift back to BTO, just how we might think about the revenue outlook for next year or if you're still providing that? Jeffrey Mezger: Rafe, and we're not going to give guidance on this call for next year. But directionally, we shared we're going to have an uptick in community count in time for the spring selling season. And with rates coming down and improving affordability at some point in time, that has to have a favorable impact, and we just don't know when or how strong it will be. So, our expectation is that as we look ahead to next year, affordability improves, community count is up. We'll be setting up a solid year again. And as we shift to more build-to-order and work through the last of the inventory, we expect that our margins will improve over time. Rafe Jadrosich: That's helpful. And then just on the fourth quarter, the guidance implies, I think, pretty good leverage on SG&A or at least better than normal seasonality. Can you talk about, one, do I have that right? And then maybe what's driving some of that improvement sequentially as you go into the fourth quarter? Jeffrey Mezger: Detail on that? Robert Dillard: Yes. It's not really leverage as much as it is actually the gross number is expected to be down 15% on a year-over-year basis quarterly. And a lot of that is just kind of the fixed costs we've taken out of the business and how the yearly kind of total compensation scheme is going to play through the SG&A profile. Operator: Our next question comes from the line of Alan Ratner with Zelman & Associates. Alan Ratner: Thanks for all the detail so far and nice performance in a tough market. I would love to chat a little bit about the goal or the target to get back to your more historical BTO share. I think this is a market where a lot of builders that have historically been more heavy on BTO have seen that share decline, and there's a lot of spec inventory out there that you're competing with. And I'm just curious, as you move towards that pivot, have you made any headway there yet either throughout this quarter or maybe even thus far in September in terms of the mix of your orders? Is it skewed a little bit more towards BTO? And I guess from a profitability perspective, can you talk about the current margin differentials between your BTO business and specs today? Jeffrey Mezger: I can make a few comments, Alan, then I'll pass it to Rob McGibney. We were 70% or more sold as recently as 2022. And if you look at what the industry has dealt with, starting in 2022, that's when the supply crunch hit, build times really extended. We got as high as 11 months to build in many cities. And it's hard to have a compelling build-to-order story when it's 11 months out, the buyer can't even lock a rate that long. So you can't tell them what their rate or their payment will be, and they're not going to hang around 11 months to get their personalized home. So we had to do something, and we opted to introduce more inventory into our WIP. And frankly, over the last couple of years, that's been the hardest houses for us to sell because our culture and our wiring as a sales team is to focus on the values of build-to-order. And past that then rates start to run up and it compounded the problem a little bit more for us. So rates have come back down. Our build times have come right back down to historical. It's a far more compelling value. And we're just not going to introduce a lot of inventory into the ground. We're going to focus on the build-to-order side. We've seen some incremental improvement in the build-to-order mix. And we're just -- we expect to see a lot more as we get into '26. So margin-wise, Rob, do you want to add any more comments or you want to get into the margin difference? Rob McGibney: Yes. We mentioned in our prepared remarks that the margin difference is some -- depending on the community and the plan, it can be from 250 to 400 basis points. So it's a significant difference. And today, as Jeff mentioned, we're in an environment where we have the inventory because we started it, and we've got to take a balanced approach to moving through that. But as we look forward, especially as we bring on new communities, we're focused solely on BTO. And so I think it's not going to be an overnight change, but over time, and I think we'll make really good progress towards that as we get into the early part of '26. We expect to shift back to that 70-30 or better ratio at higher margins. Alan Ratner: Got it. That's really helpful, Rob. And then in terms of the 4Q margin guide, I think if I'm doing the math, it's down about 70 bps sequentially. Given your comments about pricing being pretty stable through the quarter in the majority of your communities, should I interpret that sequential decline is more kind of flushing through some of the remaining spec you have and that mix headwind and then hopefully, as you get into '26, that reverses? Jeffrey Mezger: A couple of things, Alan. There's a lag effect from sale to when everything runs through into revenue. So a lot of the deliveries were on houses that were sold in the spring selling season when it got pretty competitive out there. So there is a lag, and you're seeing more of that than you are an assumption that we're going to go deeper on inventory. In fact, we stated in our prepared comments, we're not going to chase the units by "dumping inventory with a heavy discount. We'd rather be prudent with it and strategic and take our time and cover the inventory in the better selling season in January, February and March. So, I can't remember what the other part of his question was. I was going to kick it to you. Was it... Robert Dillard: The margin differential. Jeffrey Mezger: Yes. Robert Dillard: It is -- a fair amount of it is still mix, Alan. You're totally right. And some of it is like market conditions, but really a lot of it is just the mix. Operator: And our next question comes from the line of Matthew Bouley with Barclays. Elizabeth Langan: You have Elizabeth Langan on for Matt today. I was wondering if you could touch -- you mentioned that you've had success in lowering direct costs. I was wondering if you could touch on what those direct costs are and like if there are any categories that you would call out where you're having a little bit more success with that? Rob McGibney: It's really across the board. Clearly, lumber costs have come down. So that's been a tailwind for us. It's a fair lumber is a pretty large component of the overall construction cost, but it's certainly not just limited to the commodity side of it. across many -- I'd say probably most of our markets, we've seen starts come down pretty significantly over the last several months, and we're using that as an opportunity to work with our trade partners. And they're hungry for work, which gives us an opportunity to drive down costs lower as we feed starts into the system. So on the cost side, whether it's -- really, we're looking at all of the direct costs. When sales prices get pressured, we're looking for any opportunity we can to lower costs, whether that's direct or SG&A. But I'd say, overall, it's pretty broad-based across all of the direct cost components that go into our homes. And there's part of it that's just renegotiating because market conditions have changed and starts have come down and part of it is true value engineering and changing the product that we build. So I'd say it's probably a pretty even split between those components of the improvement that we've seen. Elizabeth Langan: Okay. And just to kind of follow up on the general dynamics of those negotiations. Is that something that would carry on into 2026 in terms of seeing those benefits? Or is it something where it's more real time and so you might see depending on the demand and if there's a recovery in starts next year? Rob McGibney: Yes. The more recent reductions we've seen in lumber, that's going to show up in our deliveries in early next year. The rest of it, I'd say we're -- it's not ever something that we stopped focusing on, but the market isn't always willing to accept that. A few years ago, we were going through labor and supply chain crunches, we were still trying to fight the lower direct costs, just weren't making much headway. But we've been able to have more success with that now. And it is somewhat dependent on market conditions. But while starts and volumes are down, we're going to keep working to leverage that into lower cost. If there's a really healthy spring selling season, I would expect that we're going to have less success. But at the same time, our house prices are going to be going up. So, that's how I view it. Operator: Our next question comes from the line of Mike Dahl with RBC Capital Markets. Michael Dahl: Just first, a follow-up on the recent demand dynamics. Just to kind of put a finer point on it, this is normally a time of year where you see some seasonal ebb in your absorption pace. So when you say that demand was steady through the quarter, you haven't necessarily seen an uptick in 4Q to date. Can you be more specific about what your -- maybe what your monthly sales pace cadence has been, including how you're tracking in September? Jeffrey Mezger: Yes. Mike, as we shared in the comments and you look back through the third quarter, it was pretty consistent for us. June was the best month, but July and August were close. So we would -- depending on timing of openings and sell-outs and all that, orders were pretty consistent. So, I would say it was stable for us through the quarter. We haven't seen much of a shift yet in September. So it's only two weeks for us. So, I don't want to make any comments on September, but it's more of the same. Michael Dahl: Okay. Got it. And then, Jeff, I guess, bigger picture, when you think about the timing of this shift in, hey, let's get back to the build-to-order and coupled with your comments around we don't know when the inflection will be, but we do think there's one out there. It seems like that strategy when you're going into next year with the backlog that in unit and dollar terms looks like it will be down pretty meaningful. It seems like that strategy is really reliant on there being some reasonably good inflection in demand next year. Otherwise, you might have kind of a pretty big gap out year in your revenues. So, I don't know if you want to address that a little bit more, but also then a specific question would be if mortgage rates don't come down because we have seen an uptick then over the past week or so. So, if you don't get the relief, would -- as you go into next year, do you pivot back? Or how do you think about that strategy if we don't actually get the type of relief you're looking for? Jeffrey Mezger: Yes. Well, there's a few components to your question, Mike, and it's a good one. Our backlog will be down at the end of the year. Fourth quarter sales and fourth quarter deliveries obviously influence that, but it will be down a similar range to how much our build time is down. So it actually positions us for similar pull-throughs based on the backlog heading into '26. Every year, as we go into the year, the spring selling season dictates how good or how poor your results may be for the year. And part of -- it's not like we just flip a switch and say we want to be built to order. With the inventory that we put out there, you create competition among yourself with the consumer and your sales teams when you're trying to sell inventory and build-to-order. And with the margin erosion to cover the inventory, it gets in the way of selling build-to-order. And we're already seeing communities where you rotate out of the aged inventory, you're just focused on your core value and your best value to the customer, and it works just fine. So we're really not expecting a trough, as you called it. I think you'll see pretty consistent performance. And depending on the spring, we'll share that with you in the spring time, but that's really what will drive the second half of next year. Operator: And our next question comes from the line of Michael Rehaut with JPMorgan. Andrew Azzi: This is Andrew Azzi on for Michael Rehaut. I just wanted to drill down a little bit in terms of the inventory charges and such, if you could comment on the land environment and your ability to find new lots for future growth, especially as the industry kind of developing a stronger appetite for the land-light model? Jeffrey Mezger: Well, as we shared, the land markets are rolling over a little bit. We're seeing some cities where prices have come down a little. You definitely can get more terms, meaning you can close with a better entitlement in place. so you can get to turning the dirt and developing the lots quicker. So that's a good thing. So that's helping us on the land market. Relative to what we shared in the quarter on the abandonments, we walked on deals that we've had tied up and with the ships in the market, they don't hit our underwriting hurdles. So we elected to abandon them and write off the entitlement and pursuit costs that we had incurred. And we know that in some cases, we could go back in and buy the same asset with better price and better terms. We've seen some of that already, but that's a future move. But it's our expectation with starts being way down and what went on in the market this year, we think that the land market will be a little friendlier as we look ahead. Andrew Azzi: That makes a lot of sense. I appreciate that. And are there any kind of markets where you're seeing -- I'd love to kind of drill down to see how things are progressing by markets, if you can make a few call-outs and if you're seeing any -- specifically any increased competition from resale or anything like that? Rob McGibney: It's a pretty broad question, but I'll do my best to give you a quick overview here. I'd say just in general, demand across the whole footprint of our business remains somewhat mixed. There's clear areas of strength, some that remain softer and other markets that seem to be improving or stabilizing faster. It's just -- it's difficult to paint any one metro or region with a broad brush in terms of demand, it's just nuanced based on the submarkets within that metro and then there's even another layer of nuance within those submarkets themselves. But in the quarter from a demand or sales perspective, some of our stronger markets were Inland Empire, Riverside and San Bernardino. North Bay and the Central Valley in California was strong. Las Vegas, Houston, Charlotte, all posted pretty solid demand during the quarter. A couple of the more challenged ones were some of our higher-priced communities, I would say, in coastal California. Seattle was a pretty difficult market for us in Q3, but that tends to follow a little different seasonal pattern, and we've seen demand improve there more recently. Denver is one of the markets that's more challenged. You just had home prices that surged big time with -- after COVID and the incomes didn't keep up, and you've got supply there meaningfully up. I think the good news there in other markets like that, we're seeing starts come down significantly, 15% to 20%. So I view that as positive as the industry in general, showing some discipline by not adding further supply to some of those weaker markets. You mentioned resale inventory in Florida and Texas, I think we were the first ones, just the states where we saw resale and new home inventory increase. And we responded to that with targeted price adjustments and then cost reductions that supported better absorption. And if you look at Florida, I think our orders in Q3 were actually higher than in Q2. So seeing some signs, I think, of stabilization there and the work that we've done has resulted in better absorption. So now we're focused on lifting price where we can. We've actually found, in some cases, we've gone above what we needed to. So in order to optimize those assets, we're now increasing price. Texas is pretty similar, but again, it's different by metro. Houston, it's remained relatively strong, really didn't have the run-up that we saw in San Antonio and Austin where prices moved up, and we've got more resale building -- the resale was building higher there. But I think Texas and Florida in general, I would say, are stabilizing markets, and that's a good sign for us, and we're seeing that as a result in our communities as well. Operator: Our next question comes from the line of Trevor Allinson with Wolfe Research. Trevor Allinson: I want to ask a question about the Southeast region specifically. Order prices were down almost 6% sequentially, but volumes were actually quite good. They're up about 7% quarter-over-quarter. Rob, I think you were just referring to some of that in Florida. That's quite a bit better than normal seasonality. You've talked about not chasing volume. But was the strategy different in the Southeast in the quarter, just to liquidate some inventory? Or what drove the order ramp there, but a pretty big ASP decline sequentially? Rob McGibney: Yes. It wasn't really chasing the inventory. I think that was a market that we saw the resale inventory and new home inventory start to accumulate and sales had really slowed for us in Q2, which was normally our best time of the year. So we took action, and we reduced price. I think that's what's showing up in the numbers that you're seeing. But I think the good news for us is that worked, which now you're seeing the orders come back up as a result of that. It's also, as I mentioned earlier, one of the markets where we've seen the biggest decline in starts. So we've had some of our best results in cost reductions there, too. And now as I'm calling that is starting to stabilize, we've got that combination. And I think we found that we found the market. We've driven cost down and now we're starting to take it back the other way. So I'm not necessarily calling it's an inflection point for the whole state of Florida, but we've been encouraged by what we've seen recently. Trevor Allinson: Okay. Makes a lot of sense. And then Jeff, I wanted to follow up on your comment about starting to see land prices soften. Can you just talk about how widespread that is? Any specific geographies where that's most common? And can you help us with some sort of number on the magnitude of declines that you're seeing in the markets where you are seeing it. Jeffrey Mezger: Well, I would say that there's a slight easing. We're not seeing rapid drops, but we are seeing some easing, and we're -- the power of no is working. We've had deals tied up where we've said no and walked and lo and behold, they come back at a lower price. So it tells you that the land sellers are recognizing it's a little less strong than it was for them, and they need to move their inventory too. And I'd say we're seeing that pretty much across the system. None of them are big magnitudes. They're not market movers, but they are incrementally starting to ease. So we're encouraged with that. Operator: And our final question will come from the line of Susan Maklari with Goldman Sachs. Susan Maklari: My first question is on the design studios. As you think about the shift back to more BTO, can you talk about how you can position the design studios? Is there anything that you're focused on from that element of the business in order to help drive that shift and attract the consumer back to that side of the business relative to the specs that are out there? Rob McGibney: Yes. Good question. I don't think we need to change anything as far as our approach to the studio. It's just leveraging what we've always done. And we really use the studio as a tool to help us sell homes. And we want to start by offering the best base price we can with a quality home that's designed based on our market survey and the data that we have as kind of a starting point and then really use the studio to let people personalize their home there if they choose to. So I think that there's a lot of personalization options and choices that we offer, and we're always kind of rotating through that to make sure that they stay current and they're up to date with what people want. But I don't really see it as a shift in the way that we're approaching that business. We just want to drive more of the business to build-to-order and leveraging the studio. Susan Maklari: Yes. Okay. That's helpful. And then maybe turning to capital allocation. You mentioned the continued focus on shareholder returns, especially the share repurchases. Just any thoughts on how we should be thinking about the magnitude and what we can expect there as we finish up this year and look to the next year and how you're balancing that relative to the budget that you put out for land development and acquisitions? Robert Dillard: Yes, Susan, that's a good question. we're very thoughtful about kind of how we're allocating capital. You can see this year, we've been really thoughtful and responsive to ensuring that we can continue to fund growth, but do it in a smart way and ensure that we're rewarding shareholders as well. And the capital return and the cash flow that we're generating right now is really healthy. And so we feel like in the future, we'll be able to continue to reward shareholders at a similar rate, but we haven't quite yet figured out the magnitude. And I think that there's also a component of that, which is market driven by how attractive the land market is. So we feel really good about our land position going into next year and feel really good about how it's set us up for the next three to four years. And I think that, that's going to give us a lot of flexibility in terms of returning capital. Operator: Ladies and gentlemen, this concludes today's teleconference. Thank you for your participation. You may now disconnect your lines.
Operator: Good afternoon, and welcome to the Pharos Energy plc investor presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Katherine Roe, CEO. Good morning. Katherine Roe: Thank you, Lillian. Good afternoon, everybody. Thank you for taking the time to join our presentation today, busy time with results. So we appreciate you taking the time. We will be running through a short presentation to deliver some of the key things that we've been working on, the catalysts for moving forward, what shareholders and investors have to look forward to as well as the performance for the first half of this year. So good afternoon, and welcome again. I'd like to start with a bit of an overview. We've said here a year of strategic operational and financial delivery. Obviously, first and foremost, this is a first half interim results presentation. But I joined as CEO last year and presented my first set of interim results this time last year, and we are here today as my second set. So I thought it might just be helpful to start off with a recap on what we've achieved in that time frame. I think for those of you that joined last year, we were very clear about the near-term priorities and focus for our business in terms of what we needed to achieve with the existing assets. So on the left-hand side here, we just recap on those. We have 2 jurisdictions with producing assets in both Vietnam and Egypt. We have exploration potential in both of those jurisdictions as well. Vietnam is the producer of the majority of our production is the core part of our business. And it was really critical that we secured those license extensions for our 2 producing fields, and those were achieved in December last year. What's really important about that is the unlocking of the significant work program that we are about to commence in the coming weeks in Vietnam, not just to arrest the natural decline of these assets but also to try to deliver incremental production volumes and growth from next year onwards. We'll come on a little bit more later in the presentation on that drilling campaign. In Vietnam, we also have a high-impact frontier exploration. Some of you may be aware of this that we've discussed before in Blocks 125, 126. This is deepwater offshore frontier exploration. And we also achieved a 2-year license extension, which gives us until the end of 2027. Why is that important? Because we really need to seek a farm-in partner in order to give us the ability to drill our first prospect, which we would ideally like to do next year. We put ourselves in the best possible position to do that. We've started a new structured formal process, partially to feed in some of the historic bilateral conversations, but also to attract some fresh interest. And we have also managed to secure long lead items and that 2-year extension to provide maximum optionality to find a partner. So that was also achieved. That extension was granted to us in June of this year. Just announced yesterday, we have successfully agreed new fiscal terms for our existing licenses in Egypt. We have far better economics, far better improved terms and importantly, additional time on those licenses by consolidating into one new fresh agreement. You'll see here that's given us an immediate uplift in value. We have a 25% uplift in 2P, largely a function of that additional time on the licenses. And again, importantly, going forward, it means a very healthy and attractive financial framework for further reinvestment, which we haven't been doing so far this year. We're -- also important to us to achieve the strength in our balance sheet after many years of having to service that legacy RBL facility. That was repaid last year. We remain debt-free and building cash on the balance sheet, as Sue will come on to. Again, flexible financial and strategic optionality. We have fully funded capital investment programs from our internally generated free cash flow and obviously not having to service debt allows us even more flexibility. It also means we have a clean balance sheet, which provides further flexibility going forward if we needed to leverage. Very important to us that we maintain the shareholder dividend. This has been part of our policy for some years, and we are now trying to strike the right balance between continuing that return to shareholders through the dividend whilst also trying to achieve a capital return by reinvesting back into our assets. We also achieved a strengthening in the Board. We appointed a new Chairman to the Board in June. That's received alignment with our major shareholders and is working well with the rest of the Board. And there's alignment in terms of strategic progress of our business, what next. And that leads quite nicely into the right-hand side here of what is next, what do we have to look forward to? Where does the growth in our business come from. So really, really important in this 6-well drilling campaign in Vietnam. It's the largest investment campaign that we've had into our existing assets since the original development. So really, really important. We believe it's capable of extracting and delivering additional value through those increased production from next year and beyond. We'll talk a little bit more about that. And as I mentioned, we also have this formal process ongoing for the exploration, which is, again, a new fresh look at how best to find a partner to deliver hopefully, a drilling campaign next year. Egypt, more noncore part of the business, but still equally valuably. Those new terms make a huge difference in terms of our economics and provide that attractive framework. We're now going to work with our partner in country to put together the near-term drilling program. And again, all designed to increase production from the existing volumes that we see today. It does remain an absolute priority for us at Pharos to see a material recovery in our existing receivables balance. And Sue will talk a little bit about our current receivables position. And we are in discussions with EGPC, our government stakeholder about seeing that materially reduced, giving us the confidence and the ability to reinvest, but only in a very disciplined and self-funded framework. I think having said all of that, we do still recognize that we need to add scale to our business. We're in very good shape. We've got lots to look forward to with organic growth, but we would also like to add to that. And we're now in the fortunate position that we're operationally and financially strong enough to look at additional opportunities that fit the strategy and can build additional scale. And that's very much a priority as we move forward. So I just wanted to set the scene with where we are. I'll hand over to Sue on some of the interim results and then come back. Thank you. Sue Rivett: Thanks, Katherine. So just in terms of the first half -- just some highlights there from the first half. So revenue, we were able to maintain our position there of just over $65 million for the first half, which compares very similar with 2024. That was actually despite a sort of $12 reduction in Brent price in the period. And really, that revenue has been maintained because we were able to bring in some of our inventory that we held at the year-end. So that inventory supporting the revenue number there. In terms of the net cash, again, a good build from first half '24 to $22.6 million as we left the half year. Cash flow from operations, $16.1 million. That's down quite a bit from the '24 number. If you recall, in March '24, we received a one-off dollar payment, $10 million from EGPC. We didn't receive that in the first half this year. We are very much after that in the second half. And we've just come back from Egypt, Katherine, myself and our new Chair, and we believe, hopefully, there is something coming very shortly into the second half there. So hopefully, we'll prop up that in the second half. In terms of the hedging, despite having got rid of the -- or paid down the RBL, we still have a 26% hedging position there for the second half, just supporting us with a floor of $60. So again, very helpful to have in our portfolio. In terms of the Egyptian receivables, $33.5 million as we finished the half year. That's down since then as we've managed to collect a bit more receivables in this third quarter. So as I say, $5.6 million in this quarter that we've just received, but we are hopeful that we will get a reasonable dollar amount in the coming month or 2. And just to say, in terms of the production guidance, we've narrowed the guidance from 5 to -- it was originally 5,000, we brought that up and it was originally 6,000, then we brought that down. So just narrowing that guidance as we know more as we get towards the year-end. And if we can move to the next slide. Thank you. So in terms of the cash flow itself, so $34 million in there from inflow from operations, of course, taxes to governments and which gets you down to the $16.1 million, which you mentioned of the OCF. A modest capital program in the first half, $8.2 million. Essentially, the big capital program comes in the second half as we start that drilling campaign, that 6-well drilling campaign in Vietnam, which Katherine will pick up later. In terms of where we finished for free cash flow, so $7.5 million. We have had $0.7 million in from contingent consideration from our partner. There is a further $2.5 million due from them, which should come into the second half. So something to bring into the second half there. And if we can move to -- in terms of shareholder returns, as you know, we're committed to a sustainable dividend for our shareholders there. We have announced a 10% increase in prior year dividend, so just under 0.4 per share, which will be paid in January. And just to say that the buyback, which we've been running for some time, completed in January, and we haven't renewed that at this point. And with that, I'll hand back to Katherine. Katherine Roe: Thank you, Sue. So we've just got a couple of slides here just on activity for the second half, looking forward into what are we doing with our assets and how do we maximize value to drive those -- that production growth that I talked about at the beginning. Just here on Vietnam, you can see on the left-hand side to start with our first half production comfortably within our annual guidance range, and it's very steady, stable production, very low breakeven. So even in this challenging macro environment that we find ourselves in with sort of fluctuating Brent price, we are continuing with healthy production and healthy free cash generation. We expect that production to remain stable throughout the rest of this year. But of course, where do we see next year and beyond for these producing fields, can we achieve more growth? Yes, we think we can, but it requires this capital program to do so. So just taking TGT first there, our first field. You can see the existing production from those green blobs, the callout boxes are our infill wells that are part of our program and the yellow are the appraisal wells. So we have a 4-well program in TGT. We will most likely start with an infill well in the next few weeks. We have 2 rigs. They're on their way. We have all of the drilling preparations underway. This has been going on for this year in order to get prepared, and we're expecting to spud our first well of this program, as I say, in early to mid-October. What's really important here is that bottom left corner of the field. And again, the yellow call-out boxes, 18X is our first identified appraisal well, which we're likely to spud this year. If that's successful, we are looking to unlock that to date undeveloped part of the field. They are challenging wells. There is risk to this. And obviously, we need to see how we get on with that appraisal well. If we are successful, it potentially opens up that additional development that you see there in the white call-out boxes, and that will really drive incremental volumes and production. We're likely to know the outcome of this drilling campaign in Q1, Q2 next year because they are challenging wells, does take time. So whilst a lot of the activity will happen this side of Christmas, we'll be sharing the outcome in the first half of next year. Similar story in CNV, the next field there. We have one committed appraisal well, and we expect to do one infill well again in Q4 of this year, hopefully, again, successful to unlock further potential. I did mention Blocks 125 and 126. I think it is worth saying, again, that we have deliberately put a structured framework around this process. We do believe that there are some new interested parties partly helped by the macro environment being a little bit more conducive to high-risk exploration, again, frontier exploration. There are very few frontier basins left to explore, and that certainly attracted a bit more interest than might have done a few years ago. So we have got some encouraging discussions. We've been guiding that we would like to be able to give an update on that process before the end of the year. But we've done everything we can to put ourselves in the best possible position. We've secured those -- that 2-year license extension to give us time. We've committed to the long lead items. We have all of the data information. We have a full physical data room. So we have everything that we can do to ensure we have the best possible chance of finding a suitable partner and seeing the drilling of that first prospect, hopefully next year. So lots to look forward to in Vietnam, very exciting. We have excellent alignment with our joint operating company, which is ourselves and our partners. Our partner includes PetroVietnam, the government. So again, hopefully, the delivery of the license extension just helps to tangibly show the strength of that relationship with the government. It's absolutely critical to how we do business. And that, again, is coming through and strong alignment on this drilling campaign, and we're all excited to see the outcome. So that's Vietnam. Just moving on to Egypt. As I mentioned, we announced yesterday that we have improved fiscal terms agreed with the government. Again, really important that stakeholder relationship with EGPC, our government entity in Egypt, very collaborative approach to ensure that we have terms that work for us, and they have a committed developed -- a committed work program that allows us to -- incentivizes us to put further reinvestment back into our existing assets. We have been given an extension of time, as you can see there, and that's really helped drive that immediate uplift in value. So on the back of our announcement yesterday, we have a 25% uplift in 2P reserves from the end of last year, and that's really based on that long extra time on the licenses, but also very much on the improved fiscal terms. We've put on the right-hand side here just a bit of the time line. It is a long process. There are peers that you might have seen that have gone through a similar process. It is very iterative and requires a lot of discussion and collaboration with the government. So it's not easy to get to where we've got to, and we're really pleased that we have. Really also importantly is that we have managed to agree a retroactive effective date. And what this means is that we do not need to wait for formal parliamentary ratification before those new terms apply. So those new terms can take effect from formal Board approval, which we're expecting in the next week and equally helps to start our planning for that reinvestment program. So it works for us and it also works for the government. We have shared the exact terms of that agreement in our announcement yesterday, if you want to see the detail of that. But we put the key points here, increase in cost oil, significantly higher profit oil share and that signature bonus has been agreed from a relatively different place from where we started. But ultimately, it can be offset against our receivables. So it's a noncash commitment. So I think what does that mean for capital allocation? So just take you on to this slide. We've presented this before about our capital allocation for this year. We do take capital allocation very seriously. We have to be disciplined, and we have to ensure we have enough financial flexibility to run the business and weather any shocks that we might see, particularly in our sector and given the global challenges that we all face. So we balance that with a sensible careful reinvestment back into the existing assets. And then also the other piece is the shareholder return through the sustainable dividend, which is really important to us. Majority of the capital this year is going into that Vietnam campaign. Again, really important to note that, that's the largest investment campaign we've had since the initial development. So we really think that we will see some value coming out of that. And we're fortunate that we're able to fully fund our investment program from internally generated cash flow. So it's a fully funded program without needing any dilution or additional leverage. What we're just showing here in the pie chart is where that just sits in terms of this year and next year. It's a '25 program, but some of the actual expense will fall into 2026. That's just a function of timing as we move through and start drilling and incurring the cost of that program. We've just put on the bottom half here what that program looks like and what that CapEx relates to, but we've just covered that. So hopefully, that's clear. I think just on the outlook, again, for those of you less familiar, really worth reinforcing the low breakeven position we have in Vietnam. We're very fortunate when there's challenges to the oil price, we not only get a premium to Brent in Vietnam, but we have that low breakeven. So oil price has to fall a long way before Vietnam becomes economic, and that's clearly not something that we're concerned with. And that license extension that we achieved just before the end of last year allows us to have healthy economics on that capital reinvestment program. Egypt has been a low CapEx first half, and we have seen relatively underwhelming production volumes. We are a little bit lower than expected, and that partly contributes to that narrowed guidance for the year that Sue referenced earlier. And that's partly deliberate because we needed to see those improved fiscal terms, improved economics and also very, very key reduction in the receivables balance before we can justify and defend further reinvestment. We're making really good progress, new terms into effect yesterday. And as Sue mentioned, we're in live discussions with our partner, the government partner in terms of reducing that receivables balance. It is a constant risk in Egypt, but we do understand that there will be liquidity coming into Egypt, particularly for the oil and gas sector. So we hope to benefit from that, and we'll obviously be sharing that with the market when we can. So I think that wraps things up from us. We do have a brief outlook here, which just summarizes what we're trying to do. We call it protected growth because we have a very robust protected platform, but also the ability to grow additional volumes from our existing assets organically, but also starting to look at how we can add to the portfolio to build that scale that we mentioned. We are very fortunate that we've got good quality assets that are capable of delivering that free cash flow. We just need to build on that. And that's very much the priority going forward. So supported our downside, lots to look forward to on the growth. And hopefully, we've demonstrated that we do that in a disciplined way and remain focused on delivery and execution and ensuring that we can deliver on the things that we say we can. So thank you for listening. We appreciate the support of all our shareholders and those that are looking at investing in Pharos. We do believe we are differentiated from a lot of our peers. And we're obviously here to take any of your questions. So thank you again for listening, and I think we'll hand over to the Q&A. Operator: [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 via investor dashboard. As you can see, we have received a number of questions throughout today's presentation. And Minh-Anh, if I could hand back to you to share the Q&A, and then I'll pick up from you at the end. Minh-Anh Nguyen: That's great. Thank you, Lilly, and thank you, Katherine and Sue. I will now go through some of the questions that were pre-submitted to the company. Starting off with Vietnam. We were hoping that the license extensions in Vietnam may have led to a more aggressive development drilling campaign. Why has the development drilling campaign been timid? It hasn't been anything more than what we've seen on average over the past number of years, i.e., 2 to 4 wells. Katherine Roe: Thanks, Minh-Anh. I can probably take that. I think it's really important, again, to note that you need the right economic framework in order to reinvest so that you have a return on your invested capital. And we needed the license extensions in Vietnam to justify and support reinvesting back into the asset with significant drilling. These are complex wells. It's not straightforward drilling. We do have a lot of expertise and experience having been producing in Vietnam for 20 years, but we do still need to be very careful about the investment program and the return on capital. So what I would say is that the license extensions achieved just before Christmas allowed us that leeway, that runway of time to recover costs, but also to have sufficient economics. And we've driven very hard. The license extensions were approved in December. By early January, we were already in the planning stages. And this is the earliest that we can drill in October given the weather window and the long lead items. So there's been a very, very big push, I would say, between ourselves, PetroVietnam and our partner to drill as quickly as possible. And so I do think it's aggressive. I think it's aggressive and it's exciting, and it's the first time in many years that we've done a campaign of this scale in nature. And as I say, you really needed the right economics and environment to justify deploying that capital. So I think the outcome of this 6-well program will be really interesting for us. Minh-Anh Nguyen: Thank you, Katherine. When is Block 125 going to be drilled? Katherine Roe: Well, I think I partly answered that in the presentation. We do have an identified prospect. So we would really like to be in a position to drill next year. Again, there's certain planning required and we do need a partner, which is what we're in the process of trying to secure at the moment. We do have the license until the end of '27. So we could drill this year or drill next year or 2027. Obviously, we'd rather sooner if we can have everything lined up. But what we have done is put ourselves in the best possible place we can. We are dependent on rig availability and that farm-in partner being appropriate and agreeing appropriate terms. So that's what we're hoping for. But we've just given ourselves optionality. We can't control everything, but we can put ourselves in the best possible position and give ourselves maximum optionality, and we feel we've done that at this point. Minh-Anh Nguyen: Thank you. On the same topic, if blocks 125, 126 are as good as the company has been saying, why has industry uptake been so poor? We've been trying to farm them out for nearly half a decade. Katherine Roe: I can take that as well. I'm not sure it's been half a decade. I know it has been several years. I would say it's difficult to attract interest in a frontier basin, deepwater. This is an expensive risky drilling campaign. I think exploration for frontier basins has been challenging for the macro environment. A lot of the majors have not been focused on this over the last few years. And where they have, there have been other parts, maybe West Africa, for example, where a lot of that capital has been allocated. There is a discrete amount of capital for deepwater offshore exploration drilling. But I think what we're seeing now is a change in that macro environment. Exploration is very much back on the agenda for a lot of the majors. And that's a new bit of interest that we're seeing coming through. And there just aren't very many frontier basins, undiscovered frontier basins left in the world. So it's a lot about timing. and a lot about sort of getting the right person at the right time, and that feels like a bit of a shift. Minh-Anh Nguyen: That's great. Thank you. The next question is, given where the share price language at the moment, surely the most value-accretive acquisition the company could make is buying itself. What are the Board's latest thoughts on reinstating the share buyback or better still enacting a tender offer to buy out the persistent seller? Katherine Roe: Yes. I mean share buyback is always -- it's always part of our Board discussions. It's there as an agenda item all the time, particularly in relation to capital allocation. So when we discuss best use of capital. We have, as you probably know, or for those of you don't, we had a share buyback program for many years. When we were not in this position to reinvest in the assets because of the economic environment, we also had less financial flexibility and our own liquidity due to the legacy debt. So now we're in a position where we're in the right framework ourselves financially, but also the economics in Vietnam and Egypt, where we can reinvest back into those assets. And we believe that will drive more growth. Share buybacks are -- there are pros and cons. We have low liquidity. There's only an element of how much you can actually buy back. And at this point, we do want to put our capital to work. We think that capital can work harder by reinvesting back into the existing assets. That obviously doesn't mean that we're not very conscious of shareholder returns, which is why we also ensure that we sustain the dividend. And if at any given point, we calculate that the share buyback provides a better return to shareholders, then that's what we would do. We would reinstate that. Minh-Anh Nguyen: That's great. Thank you, Katherine. Moving on to the financials. On a previous webinar, you stated that the best time to secure debt is when you don't need it. It was also mentioned that different types of debt instruments were being discussed and considered. Can you please give an idea of the progress made in this regard? And when do you think the company may be in a position to give us a detailed update on this? Sue Rivett: Yes. I mean it is one thing that we've been looking at, obviously, after getting rid of the -- or paying down the RBL last year. And clearly something in our toolkit, if you like, with a balance sheet that hasn't got any debt in it, a great opportunity for the potential M&A activity. So yes, we have been looking out in the market. Clearly, there is interest in the market. And I think once we identify some good opportunities, then I think we should be able to get that to come home, if you like. I don't know if you want to say anything else. Katherine Roe: No, I agree, Sue. I think we -- the exercise that we've been through demonstrates there's access to capital for us at the right time and for the right transaction. And that obviously helps support some of the conversations, having robust production and an unlevered balance sheet gives us that toolkit, as you say. Sue Rivett: I mean we'd only do it for the right opportunity. I think that's the key. Minh-Anh Nguyen: That's great. Thank you, Sue. The next question is, Capricorn Energy has informed the market that EGPC communicated to them that it intends to make payments of approximately $130 million through the remainder of 2025, which is approximately 90% of their 2024 revenues and more than double the amount they received in 2024 from EGPC. Have you received similar assurances from EGPC? Katherine Roe: The short answer is yes. It's a conversation that we have with EGPC as do all of our peers. We do -- as I said before, we do understand that liquidity is coming into Egypt, particularly for our sector. And ourselves, Capricorn and all of the international oil and gas companies are in the same position. So we do expect a material reduction in our receivables in the near term. Minh-Anh Nguyen: That's very helpful. Along the same line, are there any levers that can be pulled to expedite the receipts of the Egyptian receivables other than choosing to continue to hibernate? Katherine Roe: Well, I think having agreed these new fiscal terms on the consolidation, having that, clearly, the idea from the government's perspective is that comes with a committed work program. It is phased, and we have deliberately agreed a relatively modest program that we not only hope to meet but also exceed. But it depends on recovery of receivables. And certainly, the timing of that investment will be dependent on that recovery of receivables. So that's the leverage, if you like. Yes. Minh-Anh Nguyen: That's very helpful. Thank you, Katherine. The next question is, have you had further discussions with the activist investor who attempted to vote at the majority of the Board of Directors? What are his concerns? What strategic shifts is he looking for? Activism by unknown activists who hasn't communicated via an open letter with the wider investor base is very concerning to private investors. Katherine Roe: Thank you. And I would say that we talk regularly with all of our shareholders, including our largest shareholder. We don't hide away from communication. We do try to be as accessible as a management team and Board as possible. So yes, we have active dialogue. I think it's really, really important. At the end of the day, we're here to run the business on behalf of shareholders. It's really important to us that we listen, understand shareholder concerns, frustrations, ambitions, et cetera. We did have a change in our Chairman, and he has, again, settled very well and been well received by our major shareholders. So we feel that we have stability and there's been no concern at this stage at the Board level regarding that shareholder. We have a resilient, strong and stable Board, which importantly is aligned about the future for our business. Minh-Anh Nguyen: Thank you, Katherine. Is the key jurisdiction for any potential inorganic growth, Southeast Asia? Katherine Roe: I think the answer to that is we need to leverage what we're good at. If we sit back and think what are we good at Pharos, we've been in country in Vietnam for 20-plus years, and we have a very strong stakeholder relationship with PetroVietnam. We're well regarded in country. We can clearly see the support that we get with the license extension. So we'd like to do more, leverage that relationship. That does expand into Southeast Asia as well because it's a high-growth region, lots of opportunities. It's where we're seeing that GDP growth in the Southeast Asian economies, and they all, again, are seeing that need for increased energy. So there are lots of opportunities in Southeast Asia, and that is more of a priority at this stage. But again, it all comes down to the type of transaction and the return that it can deliver. And we're very focused on that. And I think that's what we try to get across when we say disciplined and focused. Minh-Anh Nguyen: Wonderful. Thank you, Katherine. I will now move on to read out some of the questions that were submitted live to the company during the presentation. First question is from Sam S. Can you please provide the key differences between the new structured formal process versus what was carried out previously? Katherine Roe: Sure. Yes. Previously, with the farm-out of 125, 126, I think there's been a consistent message throughout Pharos' history that a partner is required. Again, it's a real challenge for a small business to drill that well, sole risk that well just from a cost and a risk reward perspective. So we've always been trying to find a partner. The difference is historically, it's been done on a bilateral basis, which means that conversations have been happening between Pharos and parties at any given time. And what's new here is that we've tried to put a formal structure around. We have a third-party adviser running the process for us. That creates a bit of competitive tension. It creates some time frames. It creates structure in terms of the steps between entering into a CA, a confidentiality agreement to receiving data to visiting the physical data room, et cetera. So it just creates a little bit more of a formal process. And I think what it's achieved for us is a wider and deeper testing of the market and accessing people that we wouldn't necessarily have been able to access on our own. So that's what's different. Minh-Anh Nguyen: That's great. Thank you, Katherine. The next question from Peter. Can you give us an idea of the scale of the upside in TGT and CNV that could be unlocked with the appraisal wells? Katherine Roe: Yes. I mean it's hard to put a number on that, which is why we haven't to date. But as I say, we think it could be materially beyond arresting the decline of current production. So what does that mean? You'll see we're sort of relatively stable at the 4,000, 5,000. We want to see that growing. So we want to be seeing 6, 7-plus thousand barrels a day from those fields if we have appraisal success. Minh-Anh Nguyen: That's great. Thank you. A few questions from Keith about 125. What are the parameters you seek in terms of number of wells committed, et cetera? What are the target expectations for the well of the identified in 125? Katherine Roe: I think all of this depends on the negotiation with the partner at the time. It depends who the partner is. If there's an ability for a couple of the majors, they have a different budget and they can commit to not only just the exploration program, but possibly a development program in a success case. We have a 1-well commitment. So that is obviously the priority to cover the first initial exploration well. But when we look at and show potential partners our detail and our work, we have a couple of different prospects. So it really depends, and we're not quite at the stage that we can share that detail. Minh-Anh Nguyen: That's helpful, Katherine. Switching on to financials. Why are you still carrying a hedging position? The company was unhedged prior to the RBL. Sue Rivett: Yes. No, it's a good question and obviously one that we ask ourselves internally. I think the key for hedging is it supports your underbelly. So when you're stress testing at very different oil prices, we've seen crashes in the oil price before, et cetera. I think it's an important tool to make sure that you're supporting, as I say, your underbelly, as I call it. But I think you want to keep quite a bit in the top side for clearly, if share prices pop up not share price. But if Brent price pops up, you want to see that ability to take some of that. So this is really about supporting the underside. Katherine Roe: Yes. Protecting without reducing our exposure. Sue Rivett: Yes. Absolutely. Minh-Anh Nguyen: The next question is, what is more risky about the 6-well program this time? Katherine Roe: The risk is really around the appraisal wells. So of the 6 well program, 4 of those infills, they're relatively well understood and low risk. So the risk is really around the appraisal because it's looking at a different part of the field that is previously not producing. So where that appraisal well, for example, in TGT 18X, that is not currently a producing part of the field. So that's where the risk lies. And likewise, in CNV, which CNV is even more of a complex well. It's complex geologically, but also operationally. So there's some risk there. But I would say the infill wells are relatively straightforward. We've got a lot of experience of having done those. So I hope that answers that question. Minh-Anh Nguyen: Thank you, Katherine. I believe that is all the time we have for today. So I will now hand it back to the Investor Meet Company team. Operator: Katherine, Sue thank you for answering all those questions you can 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 I know is particularly important to the company, Katherine, could I please ask you for a few closing comments? Katherine Roe: Thank you. And I just want to say thank you again to everybody for taking the time to listen. We do appreciate it, and we look forward to updating the market and shareholders with new news as we move forward. It's a really important half for us as we move towards the end of the year. So we look forward to further updates, and thank you again for your time. Operator: Katherine, Sue 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 it'll be greatly valued by the company. On behalf of the management team of Pharos Energy plc, we'd like to thank you for attending today's presentation, and good afternoon to you all.
Operator: Good day, everyone, and welcome to the Cintas Corporation Announces Fiscal 2026 First Quarter Results Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Jared Mattingley, Vice President, Treasurer and Investor Relations. Please go ahead, sir. Jared Mattingley: Thank you, Ross. Thank you for joining us. With me are Todd Schneider, President and Chief Executive Officer; Jim Rozakis, Executive Vice President and Chief Operating Officer; and Scott Garula, Executive Vice President and Chief Financial Officer. We will discuss our fiscal 2026 first quarter results. After our commentary, we will open the call to questions from analysts. The Private Securities Litigation Reform Act of 1995 provides a safe harbor from civil litigation for forward-looking statements. This conference call contains forward-looking statements that reflect the company's current views as to future events and financial performance. These forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from those we may discuss. I refer you to the discussion on these points contained in our most recent filings with the Securities and Exchange Commission. I'll now turn the call over to Todd. Todd Schneider: Thank you, Jared. We are pleased with our start to fiscal year 2026, reflecting the strength of our business model and the dedication of our employee partners. Our first quarter performance is a testament to the strength of our value proposition. First quarter total revenue grew 8.7% to $2.72 billion. The organic growth rate, which adjusts for the impacts of acquisitions and foreign currency exchange rate fluctuations, was 7.8%. This is right where we like to be. Each of our three route-based businesses had strong revenue growth in the quarter. Gross margin as a percent of revenue was 50.3%, a 20 basis point increase over the prior year. Operating income grew to $617.9 million, an increase of 10.1% over the prior year. Diluted EPS of $1.20 grew 9.1% over the prior year. Our culture continues to be our greatest competitive advantage. We've shown an ability throughout the years to perform well in a variety of macroeconomic environments. Our ongoing investments continue to help drive revenue growth and expand margins. These investments include technology to make it easier for our employee partners to do their jobs, whether that is growing the business or making us more efficient. Reflecting our strong first quarter performance, we are raising our fiscal 2026 financial guidance. We expect our revenue to be in the range of $11.06 billion to $11.18 billion, a total growth rate of 7% to 8.1%. We expect diluted EPS to be in the range of $4.74 to $4.86, a growth rate of 7.7% to 10.5%. With that, I'll turn it over to Jim to discuss the details of our first quarter results. James Rozakis: Thanks, Todd. I want to begin by discussing our strong revenue performance. Our employee partners continue to perform at a high level and demonstrate that our value proposition resonates with all types of customers. We are seeing great success in converting no-programmers, selling additional products and services to our existing customers as well as retaining our valued customers. Let me provide an example. Recently, there was a department of transportation located in Northwest that was a do-it-yourselfer or what we refer to as a no-programmer. The employees purchased more of their own clothing, while the highway department provided the required high visibility safety vest to be worn over their personal garments. They reached out and expressed challenges with their safety vest program, including the time and effort [ administering ] the program, budgeting difficulties and inconsistent compliance among workers. Cintas was able to offer a solution with our recently expanded line of Carhartt high-visibility safety apparel. These high visibility garments were well received by the employees and have allowed the highway department to receive the benefits of the Cintas rental program by providing an exclusive Carhartt branded rental garment for daily use, Cintas' reliable service, a reduction in administrative time and effort, more predictive budgeting, the convenience of a laundry service and improved safety compliance among their workers. This example illustrates how our value proposition continues to resonate with customers in many different verticals throughout various economic cycles and to customers of all types, including no-programmers. Now turning to our business segments. Organic growth by business was 7.3% for Uniform Rental and Facility Services, 14.1% for First Aid and Safety Services, 10.3% for Fire Protection Services and Uniform Direct Sale declined 9.2%. Gross margin percentage by business was 49.7% for Uniform Rental and Facility Services, 56.8% for First Aid and Safety Services, 48.9% for Fire Protection Services and 41.7% for Uniform Direct Sale. Gross margin for the Uniform Rental and Facility Services segment increased 40 basis points from last year. This improvement is a result of strategic sourcing by the supply chain team and process improvement initiatives from our engineering and Black Belt teams. In addition, strong revenue growth is helping to generate leverage. Gross margin for the First Aid and Safety Services segment was 56.8%. We are pleased our investments to grow this business are generating strong double-digit revenue growth while maintaining attractive gross margin. Selling and administrative expenses as a percent of revenue was 27.5%, which was a 10 basis point decrease from last year. With that, I'll turn it over to Scott to discuss our operating income, capital allocation performance and 2026 guidance assumptions. Scott Garula: Thanks, Jim, and good morning, everyone. First quarter operating income was $617.9 million compared to $561 million last year. Operating income as a percentage of revenue was 22.7% in the first quarter of fiscal 2026 compared to 22.4% in last year's first quarter. This was an increase of 30 basis points. Our effective tax rate for the quarter was 17.6% compared to 15.8% last year. The tax rates in both quarters were impacted by certain discrete items, primarily the tax accounting impact for stock-based compensation. Net income for the first quarter was $491.1 million compared to $452 million last year. This year's first quarter diluted EPS was $1.20 compared to $1.10 last year, an increase of 9.1%. Cash flow provided from operating activities was $414.5 million. Our strong cash generation allows us to have a balanced approach to capital allocation in order to create value for our shareholders. In the first quarter, we continued to invest in our businesses through capital expenditures of $102.0 million. Although not significant, we were able to make acquisitions in all 3 of our route-based businesses. We also returned capital to shareholders via our quarterly dividends and announced an increase of 15.4% in our quarterly cash dividend. This marks the 42nd consecutive year that we increased our dividend, meaning we have maintained that practice every year since going public in 1983. Also during the first quarter and as of September 23, we were active in the buyback program with repurchases of $347.4 million of Cintas shares. Earlier, Todd provided our updated guidance for the remainder of the year. That guidance assumes the following expectations: please note both fiscal 2025 and fiscal 2026 have the same number of workdays for the year and by quarter. Our guidance does not assume any future acquisitions, our guidance assumes a constant foreign currency exchange rate, the fiscal 2026 net interest expense of approximately $97.0 million, a fiscal 2026 effective tax rate of 20.0%, which is the same compared to our fiscal 2025. And finally, our guide does not include any future share buybacks or significant economic disruptions or downturns. With that, I'll turn it back to Todd for some closing remarks. Todd Schneider: Thank you, Scott. Looking ahead to the remainder of fiscal 2026, our outlook reflects continued confidence in our strategy and in the value we provide by helping customers meet their image, safety, cleanliness and compliance needs. We remain committed to delivering exceptional customer experiences and making the investments necessary to sustain growth for fiscal 2026 and well into the future. As always, I want to express my appreciation to our employee partners for their dedication to Cintas and our customers. Our culture remains our strongest competitive advantage. I'll now turn it back over to Jared. Jared Mattingley: Thanks, Todd. That concludes our prepared remarks. Now we are happy to answer questions from the analysts. Please ask just one question and a single follow-up if needed. Operator: [Operator Instructions]. And our first question comes from Manav Patnaik from Barclays Capital. Manav Patnaik: I just had a question. The highway example, I guess, you gave in converting from non-programmer to your customer was very helpful. In the context of more budget pressures if the macro weakens, I was hoping you could give us some historical anecdotal examples, maybe if that's a positive for you guys in terms of accelerating the pace of converting non-programmers to your clients? Todd Schneider: I think we've demonstrated we can grow in many ways. And certainly, in environments where people are under more pressure than we help customers in those circumstances to free up cash flow, we help them to -- for budgetary purposes, give them back more time. And when you think about an environment where in Jim's example, where the customer was struggling to manage the program. This frees them up and frees them up to focus on other areas. We like to talk about when you outsource to us, it allows our customers to then focus on their customers, gives them back time, gives them back certain times save them money, certainly smooths out budgeting and cash flow. So we've demonstrated we have the ability to do that. And we're able -- we're confident we're able to continue to convert no-programmers or the do-it-yourselfers over. And we've been doing that for many years, and we'll continue to do that as well. Manav Patnaik: Got it. And just as a follow-up, on the fire side, the decline in gross margins, I'm guessing, is that because the SAP implementation is in full swing now? Or just any updates on that, please? Todd Schneider: Yes. Certainly, we're busy working on SAP for our fire business, and there are additional costs that come along with that. But we're quite bullish on that business, and we're investing for the future in that business. And that includes all kinds of different investments with bench strength, operational capacity, technologies around that, not just SAP but other items. So that -- as we expand that business, we're going to continue to make investments. And those investments are smart and important for us to be successful, not just in the near term but in the long term as well. Operator: And our next question comes from George Tong from Goldman Sachs. Keen Fai Tong: Can you provide an update on the overall selling environment, including client budget trends and sales cycles? Todd Schneider: George, as far as customer behavior, we really -- there's nothing specific to call out. I wouldn't say there's any changes to sales cycles, nothing like that. It is -- we're certainly operating in a -- I'll call it, a somewhat uncertain environment but -- right now. But despite that uncertainty, the value proposition that we provide continues to resonate and can -- as I referred to earlier, can even improve during uncertain periods. The outsourcing can improve and steady the cash flow that I talked about. But we continue to sell good new business. We like that very much. Retention rates are still at very attractive levels. And the customer base that you asked about was steady. If anything, I would say, improved slightly during the quarter. Keen Fai Tong: Got it. That's helpful. And then you increased your revenue guidance as well as your EPS guidance. Can you elaborate on parts of the business that outperformed your initial expectations to drive this increase in the outlook? Todd Schneider: Great question, George. Thank you for that. The guide first off is right where we like to be. We're performing really well, and we like the momentum we have in the business. I'd just like to point out the implied growth in Qs 2 through 4 is higher than the opening guide at all points within the range. And we like the range that we're in, especially with this, as I mentioned, somewhat uncertain environment. But our 3 route-based businesses are all performing very well, and we like the momentum we have in each of those. And we're encouraged by that momentum. And again, our value proposition is continuing to resonate and has in all kinds of environments, and it's showing its strength in the current operating environment. Operator: And our next question comes from Tim Mulrooney from William Blair. Benjamin Luke McFadden: This is Luke McFadden on for Tim Mulrooney. So we've seen growth in on-farm payrolls decelerate somewhat meaningfully over the last few months. I'm curious if this showed up at all in net wearer levels across your rental business during the quarter. Todd Schneider: Yes, Luke, thanks for the question. Certainly, when we've seen that -- we're reading the same information that you're reading about the employment levels. But our team continues to execute at a very high level. I mentioned the uncertainty environment can create opportunities for us. And we've demonstrated that we can grow in excess of jobs growth in GDP. So we would way rather swim downstream and have jobs be incredibly abundant, but we've demonstrated that we can win in many ways. Certainly, converting over no-programmers is a very important component of our growth, selling additional products and services into our existing customers. I mentioned, we have -- our retention levels are really good. And we do take business from the competition, although that's not our major focus. M&A has been important to us over the past few quarters, and we can talk about that more, but we like the pipeline there, and pricing is included as well. But we have the ability to grow. And we'd love employment to pick up dramatically, but we're not counting on that, and we're going to continue to run our business and grow it successfully. Sure, we'd love for it to be easier, but it's -- we're doing it in an impressive manner. Benjamin Luke McFadden: Really helpful. And if I can just build off of that, I heard the comment earlier about strength just in terms of demand actually growing through the quarter. Could you perhaps just elaborate on that a little bit and maybe talk about just demand trends through the first few weeks of the second quarter here? Todd Schneider: Yes. Nothing really, I would say, different in the start of the quarter compared to the results that we're posting. But you see that our rental business is performing well. And you referred to earlier, the employment levels. Again, as I mentioned, we'd like to swim downstream with employment. But we're continuing to grow our business at attractive levels without that. But nothing -- no real changes in the demand from Q1 to 2 so far. But we like the momentum we have in each of our route-based businesses. Rental, as you saw, is performing well, but they're all performing well. So we're encouraged by that. Operator: And our next question comes from Andrew Steinerman from JPMorgan. Alexander EM Hess: This is Alex Hess on for Andrew. I wanted to start with the comment about -- to refocus on this of the customer base being steady or if anything, improving slightly. When you guys make that call out, like what are you actually looking to, to make that? Is that anecdotal? Is that based on any piece of data you look at? Like we all see the jobs number. We all see the macro data. Just trying to understand exactly what you're trying to point investors to when you make that call out? And then I'll ask my follow-up. Todd Schneider: Yes. Thank you, Alex. Yes. So wearers matter to us for sure, but we have many ways to grow our business. And I think it'd probably be appropriate. Jim, do you have an example to maybe share on how we go about doing that? James Rozakis: Yes, sure. I think that we could talk a little bit about our strategy to expand our relationship with our current customers. We brought that up a little bit on the last call. And effectively, we don't really matter -- it doesn't matter to us which business line we start with a customer. Our objective is to get a business line into a customer to create an exceptional customer experience, to build a relationship to become a trusted resource for that customer. So how does that play out over time? Well, we have -- I got an example here of a customer out in the Southwest, that was a manufacturing customer, has been a long-term customer of ours, utilizing our uniform rental program. They are going through an exciting time, and they're expanding their business, opening another line and opening another building. And during those conversations, our folks are actively involved in conversations with them on a day to day. And again, trusted resource. They asked about setting up the garments, the rental program, uniform rental program in the new building. And during those conversations, the customer expressed how busy they were. It's an exciting time, but obviously a lot on their plate, and they needed some help and asked what other items we can help out with. And we were able to go ahead and add facility service line to the new building. We were able to add our First Aid and Safety Services to the new building and Fire Protection Services to the new building. So this is an example of us being in the door, having a great relationship, the customer looking at us as a trusted resource and in a time of a lot of work and being a little bit slightly overwhelmed with the new assignment. They looked at us to say, how can you help? And we were able to go in and provide all those resources, add value to the relationship. And in many cases, this is things they've got to spend money on anyhow. So just diverting that spend to us because we've established ourselves as a trusted resource. Alexander EM Hess: Understood. Appreciate that. And then just thinking about positioning for -- I know everybody's got peak job fears right now, but maybe the other side of that if we are at something like trough unemployment or trough non-farm payroll growth and that reaccelerates, maybe helping us think to where you guys can go from here? And then if you don't mind, I'll throw in one quick more. Any comments on sort of the inventory in uniforms and service injection that we saw this quarter? Todd Schneider: Yes. So Alex, regarding employment, we're not in the prediction business of what will happen with there. I would -- that would delight us if our customers all were hiring a lot more people, but we're not forecasting for that. And then we're planning to grow our business in the -- I'll say, with the current environment. And our guide reflects, I think, attractive growth without the employment picture being real favorable. So yes, we'd love that. That would be super. Regarding the inventory item, Scott, do you want to take that? Scott Garula: Yes. Thanks, Todd. I would just answer that question that you've seen a nice steady uptick in growth in our rental business really over the last 4 quarters. We continue to see strong growth out of both our First Aid and Safety business as well as our Fire business. And when that happens, we've stated in the past that we're going to have a use of capital, and that would include the injection of garments for the Uniform Rental business. So I would say that's just reflective of the growth that you're seeing in all 3 of our route-based businesses. Operator: And our next question comes from Joshua Chan from UBS. Joshua Chan: Great job growing through a choppy environment. I guess I'm wondering, as you look at the different verticals within your business, are you seeing customers behave differently in some of the more stressed verticals, recognizing that you can kind of grow through any of the environment, but just wondering if there's any subtle behavior change kind of by vertical? Todd Schneider: Josh, good question. We're not seeing really any change in behavior in each of the verticals. Again, we think we've chosen those verticals really well. They're all accretive to our growth. And just as a reminder, we don't just sell into them. We organize around them and spend an inordinate amount of time with those customers trying to help them run their business. So -- but I wouldn't speak to any real change in behavior there. As a reminder, health care is a great vertical for us, the hospitality business as well, the education vertical and then the state and local governments. All are performing well and pretty consistently as well. Joshua Chan: Great. And I noticed that on the EPS guidance, it's a little wider at this juncture of the year than it was last year at this time. Is there any color regarding that or kind of the thought process behind that? Todd Schneider: No, I wouldn't say, Josh, I wouldn't read anything into that. We like where our guide is. We like where our business is performing. And as we think about that, it is a -- we're in a position where the guide would explain to you that we're in a spot where we think our incrementals are attractive. We're able to grow the business nicely. It's right where we like to be, meaning we're performing really well and like the momentum. The -- we've increased the guide at all points in the EPS within the range. Q2 through 4 implied guide also increases at all points within the range. And then also the incrementals are right where we like them to be at that stated 25% to 35% range. And it also implies margin expansion within there as well. This range, Josh, allows us to make investments that we need for the long term. And -- but being able to make those investments while improving margins at the exact same time, it's real strength of our business. Joshua Chan: Congrats on the raised guidance. Operator: And our next question comes from Jasper Bibb from Truist Securities. Jasper Bibb: I joined a little bit late, so apologies if you already covered this, but I was just hoping you could update us on what you're seeing on the tariff-driven expense growth front at this point, and maybe that's -- how that's compared to your initial expectations for the year. Todd Schneider: Jasper, thanks for joining the call, and that subject has not come up yet. So glad you asked. As you know, the situation around tariffs has been really dynamic, and we certainly aren't immune from any impact of higher costs as a result of tariffs. However, I'll say our global supply chain is a true competitive advantage for us. And our team really exemplifies our corporate culture. Our traits of positive discontent and competitive urgency, they fuel our process improvements and drive us, frankly, to be more efficient. So we don't simply accept product costs are increasing and then pass along to our customers. That's not our culture, and that's not how we run our business. But we also have some other built-in advantages there. We've got, as you can imagine, significant purchasing power. We also have great geographic diversity. We also -- 90% plus of our products, I have 2 or more providers. All of this gives us optionality. When tariffs go across the board, they go up, the geographic diversity can give you some advantage, but not as much. But our -- what doesn't change is our drive for process improvement and our drive for more efficiencies so that we can extract those out of our organization. And I'd just like to remind you that our guide contemplates the current environment for tariffs as well. Jasper Bibb: Got it. And then curious about sales cycles for no-programmers. Has there been any change there so far this year and what you're seeing in customer behavior? Todd Schneider: No real change on the sales cycle for no-programmers or frankly, in general. I'd say the sales cycle has remained pretty consistent, and we're continuing to invest for the future that we're prepared to be successful ongoing. Operator: And our next question comes from Andrew Wittmann from RW Baird. Andrew J. Wittmann: And maybe, Scott, one for you. On the First Aid segment gross margins, they were down a decent amount year-over-year. And I was wondering if you could help us understand what either happened this quarter that caused them to be down or maybe in the prior year, if there was a comp issue just so we have a better understanding about the gross margins there in First Aid. Scott Garula: Yes, Andrew, thanks for the question. I'll go back to some comments that Todd mentioned. Nothing really to call out here. We continue to invest in all of our route-based businesses, specifically in both our First Aid and Fire business. I think you're seeing the benefits of those investments show up in the double-digit growth rates that we're enjoying in both our First Aid and Fire business. Jim, I don't know if you want to comment further on that First Aid business. James Rozakis: I would - Andy, I appreciate the question. And so our gross margin for First Aid and Safety is actually flat sequentially. We did have a little bit of a challenging comp from Q1 of last fiscal year to this fiscal year. But we really love where that business is positioned, and we continue to make investments, specifically in areas like route capacity, leadership bench strength, technology, selling resources and managing trainees. So I would just call that more of a timing issue around the business isn't linear, and we want to make the investments for the future. We really like the outlook of that business. Andrew J. Wittmann: Got it. So just to build on that then, Jim, do you think that fiscal '26 is a higher investment year in some of these things like route leadership, management trainees, technology than it was in 2025? Obviously, '25 margins was a big story for the year. They were so impressive, way above the incrementals and I know that, tell me, this is kind of more like what you've talked about for the long term. But I'm just wondering like as you compare this year to last year in terms of the P&L investments that you're making, is this a higher year than last year? Is that part of the reason why we're seeing the margins be good, but not quite as good as last year in terms of the improvement year-over-year? James Rozakis: Andy, I would more call out a little bit of timing, meaning there's investments that are made periodically. I think you saw us begin to invest a little heavier in the fourth quarter of last fiscal year, continuing to put on those selling resources and adding the route capacity. So more of a timing issue. But yes, we are continuing to invest in that business, and we really like the outlook on it. Operator: And our next question comes from Jason Haas from Wells Fargo. Jun-Yi Xie: This is Jun-Yi on for Jason Haas. Curious, are you seeing any change in the competitive environment? I know historically, most of your wins come from no-programmers, but we're seeing a lot of your peers struggle in this environment with one of your peers laying off a big portion of their sales force recently. So curious if you see a growing opportunity to win share from your competitors. Todd Schneider: Yes. Thank you, Jun-Yi, for the question. The overall market remains very competitive. Our retention rates are still very strong. The new business wins come, as you know, from -- mostly from no-programmers more so than the competition. And we love that huge TAM of that unserved market that do-it-yourselfers or no-programmers. We will certainly take business from traditional competitors, but that's not really where our focus is, not where we focus our time and our efforts. We recognize that one of our particular competitors is working on their foundation. But again, it's not where our focus is. We see this huge TAM of opportunity with people that are do-it-yourselfers, the 16 million, 17 million businesses out there in the U.S. and Canada. We're servicing a little over 1 million. There is a massive opportunity. So that's really where we spend our time and the focus to help expand that market. And it's worked for us quite well, and that's our plan for the future as well. Jun-Yi Xie: Great. And for my follow-up, can you talk about what's driving the softness in the operating margins for the All Other segment? Todd Schneider: Well, the All Other segment, as you know, is the Fire and the Design Collective business. Our gross margin in the All Other is -- was up 10 bps sequentially, down 30 year-over-year. But we're investing appropriately in all of those businesses. And we like the returns that we're getting in our 3 route-based businesses specifically. And we're investing for the future because we see the opportunity that's out there. And so we're going to continue to, as Jim mentioned, invest in bench strength capacity. We're going to invest in leadership, management trainees, sales resources, all those. And we're doing that because we see the opportunity ahead. Certainly, we do have some additional costs with SAP in the Fire business as we are still going through that process. And -- but those are, again, our investments for the future. And we think the future is quite bright. So we're going to invest appropriately. Operator: And our next question comes from Ashish Sabadra from RBC. Ashish Sabadra: Maybe just a quick one on the Uniform Direct Sales. I know that can be pretty choppy quarter-to-quarter, but I was just wondering if you could talk more about some of the softness that we saw in the quarter, but also any comments on the trend going forward. Todd Schneider: Yes. Thank you, Ashish. The Uniform Direct Sale business is a strategic business for us, not so much in the size of it because it's only 2.6% of our revenue but in the nature of those customers, meaning we sell all of our route-based businesses into those customers. An example would be if you think about a hotel, the front of the house with the front desk, the [ bellhop, ] the concierge, if you're doing business with them in the front of the house, that can lead to the back of the house opportunities which tend to be in rental, which would be housekeeping, maintenance, culinary. So this is a strategic business for us. And it allows us, again, not just sell Rental, but to sell First Aid into those customers and to sell Fire as well. So very important. Certainly, the Uniform Direct Sale business can be a bit lumpy with rollouts of large programs. But we like the business, and it's a strategic business for us. Ashish Sabadra: That's very helpful information. Maybe just switching gears on M&A. Wondering if you could talk about the M&A pipeline, not just for more tuck-in deals, but also larger deals. And would you consider diversifying into newer areas? Any color on that front? Todd Schneider: Yes. Thanks for the question, Ashish. First off, M&A is important to us. We have, I think, demonstrated that we can leverage our balance sheet to buy really good companies. And when we do that, we either get a really good capacity or we get really good synergies, sometimes a combination. So M&A is important to us. We didn't have as much M&A in Q1 as what we have over the last 12 months. But the funnel looks good. We like where we are, and it will be an important component for us. That being said, it's tough to predict those items. And because when a seller wants to sell, it's up to them, and we just want to make sure we're there and have great relationships and do exactly what we say we'll do so that we can make sure that the pipeline looks attractive. As far as getting outside of our current businesses, we're always looking at those opportunities. But the great news is we don't have to. The opportunity that we have in our current business is immense. So we're primarily focused there. But we're certainly always evaluating opportunities. Operator: And our next question comes from Faiza Alwy from Deutsche Bank. Faiza Alwy: Yes. I wanted to ask about the First Aid business again. And I'm curious, as you're making these investments sort of how your outlook for top line growth here has maybe changed or evolved? Because you've talked about you're seeing the opportunity. I know historically, we've thought about this business as a maybe low double-digit grower. So curious how you think about top line growth moving forward over the next 3 to 5 years? Todd Schneider: Faiza, thanks for the question. We are making investments in that business, and we think we're doing so smartly. We do see it as a double digit -- low double-digit growth business, and it's performed really well over the last year. And we would expect that low double-digit number to be a good number for us. We are encouraged by how the business is performing, and we are going to continue to invest there, because the future is quite attractive for us. So we think about investments in the manner of, well, we want to make sure we're positioned for the long term. And so we're making those investments so that we can provide great customer service and position our employee partners to be highly successful. And doing so while increasing operating margins is, again, we think a real strength of our business. But we're investing in all of them of our route-based businesses, and the First Aid is performing very attractively, again, but I would think about it as a low double-digit growth business for us moving forward. Faiza Alwy: Understood. And then just you talked about timing as it relates to the investments. So -- and it sounded like even in the fourth quarter of last year because you talked about sequential margins being similar, give us a bit more color on the timing? Like is this -- are you -- when do you expect to be sort of through with those? And do you -- how should we think about the incremental margins in that business going forward? Todd Schneider: Yes. So Faiza, it is -- from a timing standpoint, we certainly have different initiatives in each of our businesses. First Aid is no different. We'll have certain rollouts of products, which might affect the mix. But we're planning to grow that business attractively. And I'll just remind you that, that 56.8% gross margin is really attractive. We're quite happy with it. We've had a significant increase over the last few years in that area. And we're going to continue to get leverage there. But it's a high level. And we think it's really good, and the mix of the business has been attractive for us. But we're providing more and more value to those customers. And then we're selling other items into those customers outside the First Aid business. So it all works quite nicely. And so I wouldn't be thinking of it as, oh geez, the First Aid margin is going to pop after certain timing. These are -- we'll get leverage. And we'll grow that business attractively and provide more value to customers, but we like where it is and in the future as well. Operator: And our next question comes from Stephanie Moore from Jefferies. Stephanie Benjamin Moore: I wanted to maybe follow up a question that was asked earlier in regards to M&A and kind of compare that to some commentary you made about growing your maybe other segments, Fire and Safety, for example. Maybe just talk about your appetite as you think about other areas within your total company as you look to expand? What is your appetite to further expand your Fire and Safety business? And how do you leverage both doing so organically as well as potentially opportunistic M&A? Todd Schneider: Yes. Stephanie, thank you for the question. Our Fire business, we think the future is quite bright there. And we are very active in M&A in that business and growing it organically. And those, again, can just like any M&A can be a little lumpy, but we're quite active there. And we make, I would say, acquisitions almost every quarter in that business. Some of them are smaller, many of them are smaller. Some might give us an additional footprint and many of them are also tuck-ins. And when we -- we love both. When we get the additional footprint, that gives us an opportunity to invest in sales organizations and other resources and to self-serve that many more customers. And then when we do tuck-ins in that business, we get synergies from back office and other areas. And then how we go about running a business tends to be that we're able to extract out some efficient -- inefficiencies and run it in a more productive manner. So that's all part of our strategy. We really like that business. And we are acquisitive and will continue to be. Stephanie Benjamin Moore: And then just one follow-up question. I think it's pretty well understood that based on your investments over 10-plus years, you have a very strong tech stack and have really invested back into your technology capability. So as you think about what you have in place now and the ability to leverage AI and machine learning and the likes of everything that we're talking about now, what are the conversations like internally as you think about the opportunity? Is it pretty incremental, just given you're already at such an advanced state from a technology standpoint to really leverage AI to either improve productivity or drive incremental business? Todd Schneider: Good question, Stephanie. As you pointed out, investing in technology has been a key part of our strategy for many, many years and certainly not slowing. Our investment in SAP has created a really valuable foundation for which we can build upon. So we're really focusing our investments to help us in those areas. And I'll just call it technology umbrella. AI is a component, analytics is a component, algorithms, large language models, all that is part of it. But we're focused in -- really in 2 areas, making it easier for our customers to do business with us, via managing their account, getting answers to questions faster, making it easier for them to purchase additional products and services, paying their bill would all be components of it. And then the second area is making our employee partners more successful, putting information in their hands to make them more valuable to the customer. Spending their time in a more productive manner by eliminating administrative time and pointing them in the right direction to where to spend their time with the right products, the right prospects, the right areas of the business. So it's all important to us. Very important. It's part of our investment for the future, and we think it's going to be -- we'll continue to invest and will be attractive for us. But you've seen some of it with SmartTruck, myCintas, the best product, best prospect. And there's -- that's all ongoing and not slowing down. And we see a real opportunity for -- to leverage that tech stack and to also leverage our engineering and Black Belt resources, our Six Sigma team, all goes into play with that. So it's not just a technology, it's positioning the technology to make it easier for our customers to do business with us and make our people that much more successful. Operator: And our next question comes from Scott Schneeberger from Oppenheimer. Scott Schneeberger: I had 2 questions. I guess I'll ask them both upfront, although they're quite different. The first one is kind of playing off on some of these M&A questions. In the past, many years ago, you all had considered going international to a much greater degree and kind of doing so via existing customers who may -- large multinationals, who may have needed service outside of the U.S. Just curious, is that -- it has been quiet on the M&A front. Is that a consideration? And if so, what would be your approach? And then the second question is just on myCintas portal, would just love to hear any update on how that's progressing, maybe mix of what percent of sales is running through that now? What percent of payments? Any other metrics you may be offered to provide because you've been at that for a little while, and I imagine it's providing good productivity leverage? Todd Schneider: Yes. Thank you, Scott. First off, on the M&A front, I wouldn't say it's been quiet on the M&A front. We had our very best year last year with the exception of -- in the last 20 years, with the exception of the year, we bought G&K. So we've been very active and the pipe continues to be attractive. On the international front, we certainly -- we have relationships, and we evaluate that on an ongoing basis. But the best news is we don't have to. We don't see a need to do that in order to grow our business. If the right opportunity showed up, we would, but we don't need to. We are -- as I mentioned, we're servicing a little over 1 million businesses and in the U.S. and Canada are 16 million, 17 million businesses. The white space of opportunity out there is immense. So we love the spot we're in, in the geography we're in. But that being said, we have those relationships, and we continue to cultivate those. And if the right opportunity presents itself, we would certainly evaluate it. And we have the ability. We have the bench. We have the culture. We have the balance sheet and the know-how and the ability to go to do something like that if we want to. Regarding the myCintas portal, that's really a platform that we use, not just for our customers for paying, but also for them to manage their account. And then we expanded so for other areas for our partners to be able to become that much more successful and productive to -- for handling customer requests. So that's -- I won't go into great detail about any metrics on that area for competitive reasons. But I'll just say it's an area where we continue to invest, and we see it as a competitive advantage, and our customers really like it. So when your customers like it and your employee partners like it, we think we've got something there and we're going to continue to invest because we see the opportunity to continue to provide additional value there. Operator: And our next question comes from Toni Kaplan from Morgan Stanley. Toni Kaplan: In light of all the news on visa requirements, are you expecting any impact from changes to impact your customers' hiring? I know it could be a little bit further out, but just wanted to understand how you're thinking about that. Todd Schneider: Yes. Toni, it's a good question. We're certainly paying attention to immigration policy, but I can't tell you that we're seeing any material impact at all. Is there some impact? There might be, but we're not really hearing it much from our customers. We're not seeing it in the results. And certainly, the H-1B subject is a -- more of a technology -- it seems as more of a technology subject. So no real impact from the visas or the immigration that we can really refer to. Toni Kaplan: Okay. Great. And then just a follow-up on All Other. You mentioned continuing to invest. We saw SG&A step up there in the quarter. Should we expect a similar level of investment throughout the year that would be really helpful to understand how SG&A, in particular, should continue to progress as we proceed through this fiscal year. Todd Schneider: Yes. We think our SG&A investment is appropriate right now where it is. So I don't think you'll see a ramp up or ramp down from there from that perspective. So we're -- we like the spot that we're in. We like the levels of bench that we're at. And we think in totality that we got a 10 basis point improvement on SG&A for the company going from 27.6% to 27.5% year over prior. So I wouldn't overreact to the All Other, more of just a timing subject there. But we think that we're in a good spot from an SG&A investment and plan to get leverage on that over time. Operator: And our next question comes from Kartik Mehta from Northcoast Research. Kartik Mehta: I know you've answered the question I'm going to ask in parts, but I thought maybe if I could get you to give a comprehensive answer or just maybe a summary of all the answers you gave would be a good perspective. And the economy, it seems like has changed in the last 6 months. And I'd be curious from your perspective, at least the key metrics you look at for each of the businesses, what you think has improved, what hasn't changed? And maybe what might have gotten a little worse? Todd Schneider: Yes, Kartik. Our business is performing really well, and we like the momentum. You've seen that the Rental business is continuing to improve. We're really encouraged by that. But each of our 3 route-based businesses are performing at a high level, Uniform Direct Sale business, the performance there in Q1 was a 30 basis point headwind for the company on growth. So if you solve for that, then the business would have grown at 9%. So that would be really good. So we like where we are. And as I mentioned earlier, Kartik, that we are investing for the future because we think the future is bright because of all the opportunity ahead for us and the position that we're trying to put our partners in -- our employee partners in and the value we're trying to provide for our customers. Kartik Mehta: And just a follow-up. You talked about M&A and obviously, you are very active in the M&A world. I'm wondering if you're changing any change in prices for M&A in either of the businesses and if maybe sellers are getting a little bit maybe lowering prices because of what's going on. Todd Schneider: Good question, Kartik. No, I wouldn't say there's any real change in prices. It's trying to predict when someone is ready to sell their business is really challenging. There's all kinds of items that come into play, succession planning, health, maybe what they look at for how their business is going to perform in the future. There's all kinds of things. So trying to predict that one is challenging. What we can control is making sure that we're in a position to leverage our relationships. And we've invested over the years to make sure that we are in a position to do that, and we'll continue to do that. Jim and I are very involved with those because of -- well, we've known many of those people for decades. So -- and we think that our reputation is such that we're well positioned for when those opportunities come to the table. Operator: And our next question comes from Leo Carrington from Citigroup. Leo Carrington: Just one follow-up for me. If you could elaborate, please, on the points you made on tariffs. I think you probably were focusing more on the uniform's rental costs, but have you seen any effects on your cost base in terms of CapEx? Any changes to your CapEx expectations? Todd Schneider: Yes. Thank you, Leo, for the question. The tariffs are -- as I mentioned, we're not immune from them. But our supply chain organization supports our entire business, not just our Rental business, and they're doing a great job. So when I talk about a great job, all those items of the geographic diversity, the -- having optionality with all the different providers that applies to each of our businesses, and as a result, we're finding ways to become more efficient. So that culture is shining through. And when you go through really challenging times, like what tariffs throw at you, it gives our organization opportunity to shine. And our supply chain is doing just that. And they're continuing to fight through what is a challenging environment. From a CapEx standpoint, we've -- our 4% targeted CapEx, I think you'll see that be consistent. We would expect that, that would be where we plan to be moving forward. Operator: And at this time, there are no further questions. I would like to now turn the call back over to Jared for closing remarks. Jared Mattingley: Thank you, Ross. Thank you for joining us this morning. We will issue our second quarter of fiscal 2026 financial results in December. We look forward to speaking with you again at that time. Thank you. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good day, everyone, and welcome to the Uranium Energy Corp.'s Fiscal 2025 Fourth Quarter and Year-End Results Conference Call. Today's call will be hosted by Amir Adnani, President and CEO. Also joining for the Q&A session of today's call are Josephine Man, Chief Financial Officer; Scott Melbye, Executive Vice President; and Brent Berg, Senior Vice President, U.S. Operations. [Operator Instructions] Please also note, today's event is being recorded. Today's call will run approximately 15 minutes for prepared remarks, followed by a Q&A. [Operator Instructions] At this time, I'd like to turn the floor over to Amir Adnani, President and CEO. Please go ahead. Amir Adnani: Thank you, operator, and good morning, everyone. For those not currently on the webcast, a presentation accompanying this conference call is available on the Presentations page of our website. Some of the commentary on today's call will include forward-looking statements and I would direct everyone to review Slide 2 of the presentation, which includes important cautionary notes. All right. Here we go. Fiscal 2025 was a breakthrough year as we delivered initial low-cost production in Wyoming, with approximately 130,000 pounds, at total cost of $36 per pound. We are now firmly in ramp-up mode with new Header Houses at Christensen Ranch online and Burke Hollow 90% complete, which will be America's next ISR mine. At the same time, we achieved substantial scale through the accretive acquisition of Rio Tinto's Sweetwater complex, establishing our third U.S. hub-and-spoke platform and expanding license capacity to 12.1 million pounds annually, making UEC the largest U.S. uranium company by estimated resources and total licensed production capacity. Our balance sheet remains strong, with $321 million in cash, inventory and equities, and no debt. We have 100% unhedged strategy to capture upside as prices rise and with the launch of UR&C, we are moving to become America's only vertically integrated uranium company, expanding downstream into refining and conversion. Moving to our financial highlights on Slide 4. We're encouraged by the strong position we find ourselves in today. As of July 31, 2025, UEC maintained a robust balance sheet with $321 million in cash, inventory and equities, based on market values and no debt. Our sales strategy for the first half of fiscal 2025 year resulted in $68.8 million in revenue and $24.5 million in gross profit from the sales of 810,000 pounds of U3O8 from our physical inventory at an average price above $82.50 per pound. In the second half of fiscal 2025, we have focused on building our inventory. We have 1,356,000 of U3O8 held in inventory, valued at $96.6 million at the uranium market price of $71.25 as at July 31, 2025. This inventory does not include the approximately 130,000 pounds of initial Wyoming production earlier discussed. Our 100% unhedged strategy maximizes our exposure to rising uranium prices and we're committed to building strategic inventory to supply the U.S. strategic uranium reserve and other government programs and global market demand. Our financial flexibility, combined with our low-cost ISR operations, allows us to scale production in step with market and policy signals. The strong uranium price environment driven by global demand for nuclear energy and U.S. policy support positions us to capitalize on these opportunities. Now moving to Slide 5 and zooming out. The last several years of over $1 billion in accretive acquisitions has built UEC into an enviable position, with global resources of over 230 million pounds in the measured and indicated categories and a further 100 million pounds in the inferred category. This does not include the Sweetwater complex. Furthermore, we boast the largest license production capacity in the U.S. with 12.1 million pounds per year across our plants. In our portfolio, we're focused on our 4 key pillars of production growth: Irigaray central processing plant or CPP, in Wyoming, Hobson CPP in Texas, Sweetwater CPP and the Roughrider project in Canada. We're actively advancing each of these growth pillars, which we'll speak about in further detail shortly. Following a string of bear market acquisitions, near cycle lows, we were able to establish UEC as the largest U.S. uranium company. This unparalleled scale is what has allowed us to identify the market need and opportunity for a single American company with scale and vertical integration, which means further growth into refining and conversion services. The launch of UR&C is designed to position UEC as the only U.S. company moving towards end-to-end capabilities in uranium mining, processing, refining and conversion for delivery of natural UF6 to enrichment plants for LEU and HALEU production. The timing couldn't be better, as U.S. nuclear policy is undergoing a seismic shift. President Trump's executive orders to quadruple nuclear energy, combined with Energy Secretary Chris Wright's call to eliminate reliance on Russian uranium supplies have created unprecedented tailwinds for restoring the U.S. nuclear fuel cycle. The planned facility would be a centerpiece of this effort, ensuring a secure domestic supply chain for nuclear fuel. We're moving this project forward in stages, subject to contingencies and look forward to providing updates, as it progresses. Moving to Slide 8. We will start with the Irigaray hub, as we provide a bit more detail on the ongoing initiative at our 4 production pillars. A key driver of our Wyoming production growth was the commissioning of 2 new ISR mine units at Christensen Ranch; Header Houses 10-7 and 10-8. We've also made significant progress on wellfield development with an active well installation in Wellfield 11, delineation drilling completed in Wellfield 12 and extensions planned in wellfields 8 and 10. Construction of 4 additional header houses in Wellfield 11 is underway, with power pools placed and buildings being set on their foundations. These efforts will form the backbone of our future production plans and as a result of this ramp-up, our Wyoming workforce has grown to 73 personnel, reflecting the scale of our operations in the Powder River Basin. Turning to South Texas. Our Burke Hollow project is on track to become America's next ISR mine. Construction is 90% complete, with a target completion date of November 2025. We're positioning for operational startup in December. This project represents a critical component of our South Texas hub-and-spoke production platform, which leverages our Hobson CPP. At Burke Hollow, we've made significant progress on the ion exchange facility and the first production area known as PAA-1. Key milestones, including the completion of injection and recovery wells, the installation and loading of ion exchange columns with resin and the drilling of a deep disposal well. The high-density polyethylene trunk line connecting the satellite facility to PAA-1 has been fused, pressure tested and connected to the plant. Concurrently, 3 phase power is being advanced to the site and equipment installation continues on schedule. With these advancements, our South Texas workforce has grown to 56 personnel, supporting our broader regional operations. Moving back to Wyoming, to focus on our newest asset, Sweetwater. As I mentioned previously, one of the most transformative events of fiscal 2025 was our $175 million acquisition of Rio Tinto's Sweetwater plant and Wyoming uranium assets, which established UEC's third U.S. hub-and-spoke production platform. This transaction added the Sweetwater plant, a conventional mill, 1 of only 3 in the U.S. with the project having approximately 175 million pounds of historic resources. The Sweetwater plant, with a license capacity of 4.1 million pounds of U3O8 per year, is a 3,000 ton per day mill that we plan to adapt for processing loaded ion exchange resins from ISR operations, unlocking significant synergies with our existing Wyoming assets. On August 1, 2025, the Sweetwater uranium complex was designated as a FAST 41 transparency project by the U.S. Federal Permitting Improvement Steering Council, following President Trump's executive order to increase American mineral production. This designation expedites ISR permitting for deposits on federal lands. Coming alongside the federal government, the Wyoming State government has agreed to match the permitting time lines, enabled through the FAST 41 program. With regards to project advancement at Sweetwater, we've initiated a new drilling program to define future ISR wellfield areas and we subsequently aim to publish a technical report summary, to incorporate these results, ensuring a comprehensive resource estimate. Now moving to Slide 11 to discuss Roughrider in more detail. In 2024, we drilled metallurgical holes across the west, east and far east zones, collecting core to confirm metallurgical testing. Since January 2025, we have conducted bulk solvent extraction, yellowcake precipitation, tailings neutralization and effluent treatment tests. These results will assist in completing our planned prefeasibility study for which we've issued requests for proposals to engage qualified firms. The PFS will be a critical step in advancing Roughrider toward development. Before I close out on our 2025 fiscal year results, I wanted to provide a brief overview of the current uranium market backdrop. As many of you know, we are entering into a supply squeeze where we have seen significant underinvestment into uranium mines over the last decade. Growing demand, coupled with this under investment, has led to a structural supply deficit that is projected to continue and widen, reaching a cumulative deficit of 1.7 billion pounds by 2045. In the U.S., we have seen unprecedented and bipartisan support for nuclear energy to combat this supply squeeze. Under the Trump administration, U.S. policy has shifted decisively toward restoring and expanding the domestic nuclear fuel cycle, as part of the broader strategy to bolster energy independence, resilience, dominance and national security. A key goal is to avoid reliance on foreign uranium, conversion and enrichment services, while supporting critical infrastructure, including artificial intelligence and military needs. President Trump has set an ambitious target to quadruple U.S. nuclear energy capacity by 2050, surpassing the World Nuclear Association's tripling goal and to advance roughly 10 new large-scale reactors by 2030. To strengthen the fuel cycle, the U.S. administration is invoking the Defense Production Act. To enter voluntary agreements with domestic companies for enriched uranium and is considering federal offtake commitments to create secure markets for newly expanded or built facilities. At the same time, regulatory and institutional reforms aim to accelerate licensing, fast-track projects, enable advanced reactor deployment and reduce dependence on foreign nuclear fuel sources. In summary, we have never seen a more positive policy environment for our industry. Amid this favorable policy backdrop, major technology companies are increasingly turning to nuclear energy as a reliable carbon-free power source, to meet the soaring electricity demands of AI and large-scale data centers. This growing interest underscores nuclear's emerging role as a cornerstone of the U.S. digital infrastructure strategy. This includes major investments into nuclear energy from every hyperscaler, the latest being NVIDIA's investment into TerraPower, in Wyoming to support the Natrium reactor. We're now witnessing an unprecedented flow of private capital into nuclear projects, from hyperscaler power purchase agreements to advanced reactor investments, reinforcing the critical need for U.S. origin uranium and conversion capacity. To wrap up, fiscal 2025 was a year of execution and transformation for UEC. We achieved initial production in Wyoming, advanced Burke Hollow to near completion and expanded our U.S. platform through the Sweetwater acquisition. The launch of UR&C is designed to position us as a leader in the U.S. nuclear fuel cycle and our strong balance sheet provides the flexibility to execute on our growth strategy. With unprecedented policy support and a tightening uranium market, we feel UEC is uniquely positioned to meet the growing demand for secure domestic uranium supply. We're excited about the opportunities ahead and look forward to delivering further value to our shareholders. Before I turn it back to the operator, a couple of points. First of all, today's call is scheduled to end around noon Eastern time. If we don't get to your question, please don't hesitate to reach out to our Investor Relations team, and we'll be happy to follow up directly. Second, please note that I'm joined today by Josephine Man, our Chief Financial Officer; Scott Melbye, our Executive Vice President; and Brent Berg, our Senior Vice President of U.S. Operations. Together, the 4 of us are backed by a UEC team with more than 900 years of combined experience in the uranium industry. That depth of experience is what drives our daily execution across operations, finance and strategy. With that, we'll open the call to questions. Operator, please go ahead. Operator: [Operator Instructions] And our first question today comes from Brian Lee from Goldman Sachs. Brian Lee: Thanks for hosting this call. I know there's a lot of focus around your ramp-up efforts here and moving from kind of asset status to producer status. So helpful to kind of start to see the early milestones and what's happening from a production standpoint. So kind of really my first question, kudos on the production and the cost realization here in fiscal '25. I know you might not be ready to give full guidance metrics, Amir, but can you at least give us some sense of what target ranges are potentially reasonable outcomes as you think about the next 12 months? You're going from 130,000 pounds to Christensen Ranch sounds like it's accelerating. You have a lot of early-stage successful milestones, it sounds like, at Hobson and Sweetwater. So is it fair to say we're going to still be in the hundreds of thousands of pounds of production in '26? Or could we be thinking about even 1 million pounds plus? Sort of what are kind of the low and high-end outcomes that you could consider just based on how the next 12 months goes, both from a production standpoint, but also from a market price and demand standpoint? Amir Adnani: Brian, thanks for that question. And just again, operator, making sure you can hear me okay? Operator: Yes. Coming through loud and clear. Amir Adnani: Okay. Perfect. Brian, thank you again for that question. And something to touch on. When you look at these results and when you look at the ramp-up, the bulk of production that we're reporting here came from mine units or header houses 10-7 and 10-8, which, as we disclosed, really only came on in the last few months, 10-7 in April and 10-8 in June. So you can already see and appreciate that new header houses that are providing fresh new output and production are definitely putting us obviously on an uptrend. Burke Hollow is going to be another source of production growth and clearly, that's going to, as we indicated, be completed around, in terms of construction completion, by November and the operational startup in December. So any way you look at this, Brian, production is ramping up and is going to continue to ramp up and for context, Christensen Ranch and Burke Hollow are only 2 of 7 fully permitted projects in terms of satellite projects that we have in the pipeline that can support ongoing production growth and that does not include the sweetwater complex, which with this fast-tracking news and development, hopefully, we could get the permit amendments necessary to conduct ISR at Sweetwater and be able to develop that project, bring that online as well. When you look at our total license capacity of 12 million pounds or over 12 million pounds per year and when you look at our significant resources that I've already spoken to, you can see that this company's goal and ambitions are certainly to build a multimillion pound per year uranium producer. And obviously, that's a plan and objective that we'll look to achieve over the coming years. But very much in lock-step with market conditions, market pricing and government policy and particularly the developments we're seeing in the U.S. around the strategic uranium reserve. This fiscal year, we did not see the strongest uranium prices. In fact, we ended July 31 around $70 per pound. That was a signal to us that it was a great time to build and scale operations, but not to necessarily be making sales. And you saw that we intentionally held back production exactly for that reason and then you saw overnight the uranium prices are actually over $80 per pound. So just to come back and to finish the answer to your question there, Brian. This is our first call of many calls to come in terms of earning calls. As we have more of these calls, we look forward to more interactions to demonstrate and show how the production ramp-up is progressing. I think you could say that in 12 months, we've delivered on 2 or 3 key takeaways. Number one, low cost. We've achieved low cost coming out of the gate at a time where we've seen struggling operational restarts out there. UEC and these operations and our team demonstrate that we've got the efficiency and the personnel and the team and asset base to deliver low-cost production. These numbers we've reported today are amongst the lowest cost reported by any company over the last 1 or 2 years using U.S. ISR or ISR in general. Volumes will increase as we build additional header houses, as we build additional satellite projects, in quarters and years to come. And we have fully permitted projects to do that with. We're not limited by the long, long delays that are associated with permitting. So we're in the driver's seat with what we're doing. Brian Lee: Super helpful. I appreciate the comprehensive answer. Maybe just one more and I'll pass it on. You alluded to government policy. There's been a lot of headline developments. I know you yourself, Amir, spent a lot of time in D.C. So I wanted to touch upon a couple of things there. So any thoughts you can share on state of the state with respect to, there's been talk about a strategic uranium reserve in the U.S., anything you can share on what you're expecting timing, impact wise from potential Section 232 as it relates to uranium? And then thirdly, on this UR&C, I know it's still early stage, but -- and then there's probably multiple potential outcomes for how you move forward. What's your thought process in structuring that venture to include some sort of either government funding investment, offtake? Like, what are the different government involvement exercises that potentially could play into that? I know a lot of investors are focused on what happened with MP and I think just overnight with Lithium Americas. So how does UR&C and UEC potentially fit into that? And how are you trying to, if you have your choice, structure that with government involvement? Amir Adnani: Brian and I'll tackle that question in 2 ways. Let me just comment first with respect to the UR&C. That's our U.S. Uranium Refining & Conversion Corp. initiative. And then I'm going to hand it over to my colleague, Scott Melbye, to speak on some of the government policies that we're seeing developing in D.C. and on the Hill. Look, very clearly, and as we've stated, we've identified and seen for the last 1.5 years to 2 years that there is substantial bottlenecks in uranium refining and conversion, particularly in the U.S., but even on a global basis, especially if we're going to see a doubling and tripling or quadrupling of nuclear energy, as President Trump is calling for, not only is the current capacity not enough to meet current demand, but it's going to have to expand substantially from these levels. We're looking at similar models across the world. You look at how Chinese state-owned companies and Russian state-owned companies that we compete against, how they operate in the nuclear fuel cycle, they operate in a vertically integrated way. They don't just mine uranium in isolation or convert uranium in isolation. It's done under one banner and what we're trying to create here is really that American champion that can have end-to-end capabilities, which frankly has never existed before. But if we have ambitions to try to compete with Russia and China and if we're going to quadruple nuclear energy, that type of business model, that kind of company is necessary that can go from mining uranium to refining it and converting it and delivering the UF6 that enrichers need to support and enable further enrichment growth. And so this is one of a kind. This has never been done before in the U.S., but it's being done around the world by major nuclear players. Clearly, this has massive alignment with government policy. And we've seen this, and as you touched on, not only is government focused on these key areas of national security vulnerability with lithium, rare earths, antimony, but uranium and nuclear fuel has been identified several times, several ways by Department of Commerce, by Department of Energy as a national security issue that needs to be addressed. So we think the alignment is very much on mark. It's timely. We started this initiative in terms of laying the groundwork, the engineering work, the engineering studies over 1 year, 1.5 years ago. We have that first-mover advantage and the vertical integration is a key differentiator. We're the only company in the U.S. really tackling this issue end-to-end from uranium to conversion and we've structured this to be able to address partnership from strategic involvement, whether it's government, utilities or other strategic partners to be involved. When we look at how this gets evolved and to get more detail about the funding of it, Brian, obviously, as of right now, UEC is funding this 100% and UR&C is a 100% wholly owned subsidiary of UEC. But as we have meetings and trips and discussions in the coming weeks and months, we'll have more updates and information to share in that time and more news flow will come on this very exciting initiative and development. We're very excited by it. We think it's very well timed. It's early days. So again, we'll have more information on it. But let me also give the floor to Scott to speak a bit more on some of the U.S. government policy developments. Scott, over to you. Scott Melbye: Great. Thank you, Amir. Brian, with regards to the strategic uranium reserve, I think -- we were very encouraged to hear Secretary Wright's comments over in Vienna at the IAEA meetings, where he put forth pretty clearly in his remarks that the strategic uranium reserve is a policy that we should be pursuing to ensure energy security, national security and build up our domestic stockpile. So we feel that as the uranium producers of America, we've lobbied very heavily along those lines. We think the strategic uranium reserve is good policy where taxpayer dollars are transferred to assets on the balance sheet of strategic U.S. origin uranium reserve, that can serve both utility emergency, supply emergencies for the electric utility industry, but can also support our defense programs, the naval propulsion programs as well. We're also obviously looking forward to the end of the Russian imports, with the Russian uranium ban fully kicking in at the end of 2027. We're working very hard to extend that to China. We've seen some disturbing import-export data between Russia, China and China back into the United States that would indicate that they're, at worst, violating U.S. trade law and bringing in that Chinese uranium, which has really circumvented Russian supply, or quite simply just bad policy. So we're lobbying on that front to see -- we love global trade, but we draw the line at China and Russia in terms of strategic minerals. And then critical minerals designation. President Trump already considers uranium a critical mineral and is issuing executive orders along those lines. Really, the executive order to revitalize the industrial base to support a quadrupling of nuclear power in the United States is really focused on the fuel cycle, uranium conversion, enrichment. And one of the things that we've seen, the most material thing that we've seen so far is the fast-track. Permitting, the FAST 41, the transparency dashboard. Basically, the Trump administration is saying if you have a project that the federal government, either through inaction or action has held up your project, bring it to the White House and they'll get it on the dashboard and put firm time lines for the review and issuing of permits. Uranium is a critical mineral; if we want more of it sooner, this is what it's going to take. So we're very encouraged just across the board, the Trump administration support for nuclear power more generally and specifically supporting the uranium conversion enrichment. I think UEC, with our unhedged book and 12 million pound capacity, and hopefully now moving into a vertical integration into conversion will also give us some very specific support coming out of this administration. But we'll see in the coming weeks. We're going to be in Washington, D.C. quite a bit between now and the end of the year and hope to gain some clarity on that. Operator: And our next question comes from Heiko Ihle from H.C. Wainwright. Heiko Ihle: That was a very comprehensive answer here before, so one of my question's already been answered. But Amir and Scott, maybe if you want to provide a bit of color on -- the conversion business has obviously been ridiculously well received. You want to provide some color on the vertical integration that should allow you guys to go more downstream with that, please? Amir Adnani: Heiko, thanks for that question. And really, again, it goes back to what we were saying here in terms of the business model around vertical integration is a very battle-tested business model. This is again how the French -- how the Chinese, how the Russians are conducting the nuclear fuel cycle for maximum resiliency. The conversion business and downstream activities from uranium mining do also really help improve and expand on margins and we do generally see a different type of industrial-type margin downstream from uranium mining than mining itself. So really, when you kind of look at the business model of combining the ability to control the uranium mining and processing assets and infrastructure that UEC has put together, and as I mentioned at the beginning, the sheer size advantage, right? We're not talking about building conversion on top of a mediocre sized mining operation. We're talking about the largest resource base and license production capacity ever assembled in the U.S. by one company as the foundation of what we're building the conversion on top of. And that sheer size, combined with going downstream, we just think is the perfect one-two punch. And again, it speaks to the market opportunity. The bottlenecking conversion is real and that bottleneck in conversion, in fact, has arguably maybe to some extent, hurt the uranium price in terms of not allowing to uranium price to reach the all-time highs that we all believe it should get to. Conversion enrichment prices, conversely, are near their respective all-time highs. So this is really about providing diverse sources of revenue to the company as it develops multiple ways of delivering nuclear fuel supply and it's really about that entirety of the supply chain for the nuclear fuel that one company can control that makes that company more strategically valuable. And I think that's why this has been well received, Heiko, since we announced it, not just from a market point of view, but from conversations and feedback that we've received directly from the end users and the actual nuclear fuel market participants as well. Heiko Ihle: Fair enough. And then obviously, you guys have an insane amount of experience in the uranium space. Building on some of your comments from earlier, do you want to just maybe walk us through a bit where you see geopolitical factors go for the industry? I mean, obviously, demand for North American and especially for your product from South Texas is through the roof. But do you want to just maybe provide the audience with a bit of color on where you see that going and key factors that may be underappreciated or not so much seen by the market yet? Amir Adnani: Yes. And again, we'll do it in 2 parts. I'll go first, and then I'll let Scott speak to that too, especially within his role as the President of the Uranium Producers of America, that's our industry association. But as recent as yesterday, as recent as the last year, we have seen a premium on uranium that can be delivered to a buyer in the U.S. -- warehoused in the U.S., compared to other locations. When the Department of Energy purchased an initial round of uranium for the strategic uranium reserve to stand that up over 1.5 years ago, it paid an over 20% premium because of the way it's qualified. The U.S. reserve can only be filled through U.S. companies with U.S. production or U.S. inventory. And so we have certainly seen that this dependence on foreign uranium and nuclear fuel, where the U.S. is effectively importing 100% of its nuclear fuel requirements does create an opportunity to be a domestic supplier. But at the same time, that domestic supply initially carries a premium with it because of the scarcity factor. Over time, of course, as domestic supply expands production, conversion and enrichment, market pricing should be more aligned with global market prices. But there is a pinch point right now and the most acute undersupplied market when it comes to nuclear fuel is the biggest market in the world. The biggest market in the world is the U.S. for nuclear fuel consumption. Over 90 reactors operating makes this the largest market anywhere. And yet, again, there's this almost 100% dependency on foreign imports. Let's not forget, we have the Russian uranium band that has already passed and is law, and it kicks in December 2027, which is really around the corner. When you think about the fact that uranium mining, conversion, enrichment doesn't happen overnight, it takes years to permit, develop and build these operations. So that's part of the reason we have commenced our initiatives now, is to really be in a position to be there and be that domestic source of supply, especially as the Russian ban takes full effect in late 2027. But between now and then, I think we can expect to see a premium on U.S. sources of mining and conversion. Scott, would you like to add to that? Scott Melbye: Yes. Heiko, I think you know the market structural deficit that we face globally today, if we look over the next 2 years, the world is consuming about 50 million pounds more than it's producing with the global mines. And that structural deficit is only going to get bigger as we're now -- I left the World Nuclear Association meetings in London a week before last, where the base case for nuclear growth outlook through 2045 is a doubling of nuclear power. And that's just the start. If we go to the aspirational goal of tripling nuclear power at the World Nuclear Association set out for President Trump's quadrupling. So we need a lot, not just a little. In terms of new production, we need a lot. And it's also important to note that the world's largest producer today. It was the United States in 1980. It then was Canada on the strength of Saskatchewan. But today is Kazakhstan, producing over 40% of global production. They share 2 very big important borders with Russia and China, who have very fast, big growing programs of their own and they recognize the strategic value of Kazakhstan, not only their uranium, but their oil and gas. So I think going forward, I think we shouldn't expect -- I think already today, 80% of Kazakh uranium goes to Russia or China. So we need to be developing uranium resources in stable western jurisdictions and the United States clearly has been underdeveloped in recent years, not for lack of resources. The United States Geological Survey estimates that there's over 1 billion pounds of known and likely resources of uranium in the Western United States. So we're excited about this revitalization. We're happy to be at the forefront of it. But it really is a time where we're going to see U.S. uranium production really on a revitalization path, and it really is an attractive premium product today. Heiko Ihle: And Scott, I know we spoke yesterday, happy belated birthday again. Scott Melbye: Thank you. Operator: And our next question comes from Alexander Pearce from BMO. Alexander Pearce: Amit, Scott and team, so you flagged in the release earlier, you're working on upgrades for increasing the pace of drawing and drumming the uranium. Is it fair to say this is currently the bottleneck for the project, the drumming side? You mentioned you're bringing on new wellfields and that seems to be going very well. But can you give us a bit more update, more detail on the changes you're making within those upgrades? And how much do you expect to spend? And then maybe when you expect to complete those upgrades, so we can expect the uptick in drummed outlook? Amir Adnani: Alex, thank you for that. And I'll take that up first and then I'm going to invite Brent Berg to speak to that as well. But really, the way we saw this, Alex, was more to do with the fact that during fiscal Q4, with the intentional strategy we had on holding back inventory and the fact that we were not in any way required to make deliveries of the finished good, the dry drummed uranium. We really took advantage of that opportunity and moment in time to make further upgrades to the equipment that is on the processing side, the packaging side of the plant, so that we can make sure when we did basically go into even further ramp-up mode and when sales and deliveries became more mission-critical, that we were able to support 24/7 operations with 2 shifts basically. And so it was really more to do with taking advantage of that window to give ourselves even more capacity for downstream or later in time. And so to that end, I mean, as you know, keeping the uranium in precipitated form is every bit as good as whether it's dried and drummed. There's very nominal cost associated from going from precipitated to dried and drummed. And that's why we also presented some of the dried and drummed material to make sure that we were able to deliver and show what the initial production cost numbers are, which we're very pleased with. But I'll let Brent also speak a bit more in terms of the details of what we're doing with the thickeners and calciners. And Alex, to be clear, this is not a bottleneck right now. We could be drying and drumming uranium right now. We're simply increasing the capacity. And again, because we didn't have any deliveries to make, it gave us the time to do that work without putting the team under the pressure of doing both the upgrade and drying and drumming at the same time. But Brent, go ahead if you'd like to add to that. Brent Berg: Yes. Thanks, Amir. And Alex, I would add that refurbishment activities were undertaken earlier in the fiscal year at the Christensen Ranch satellite ion exchange plant. We rebuilt the ion exchange columns in the main plant. And that work led to continuous 24/7 operation and the ability to operate the plant at design capacity. So as Amir mentioned, in a similar manner, with no need for uranium sales, it was clearly an opportune time to upgrade the Irigaray central processing plant. At this stage, we're rebuilding 1 of 2 thickeners. It's a storage vessel for precipitated yellowcake prior to drying and packaging. And the refurbishment includes the replacement of internal components with new parts. Additionally, we will do some refurbishment to the calciner that we used to dry our product to increase throughput of dried yellowcake. And again, updates will include components as recommended by the manufacturer to really increase our operational efficiency moving forward. And these are upgrades that are happening now and in the coming weeks. Operator: Our next question comes from Katie Lachapelle from Canaccord Genuity. Katie Lachapelle: Most of my questions have actually already been answered, but maybe just one more on the inventory side. You ended the year with quite a considerable amount of inventory having deliberately held back some material in the second half. As you said, the decision to not sell was due to low prices, but we've since seen small prices rise, about 15%, since the end of your last quarter. So how are you guys thinking about inventory build going forward and the timing of future sales? Like is there a particular price point, say, north of $80, north of $85, that you would look to monetize some of this existing inventory? Or is the plan to continue to build inventory and hope for even higher prices? Amir Adnani: Katie, thank you for that question. The 2 things go hand in hand. So you're right about the inventory, but you also got to take note of the balance sheet. And the balance sheet with over $320 million of available liquidity, and no debt, is part of what allows us to have the ability to make calls like what we did here, right, where we thought $70 was just kind of a ridiculous price and it didn't make sense to make sales there and be able to be in a financial position to make that decision to intentionally hold back. And similarly, today, as you pointed out correctly, we've seen an interesting pop in the uranium price overnight. We're back over $80 this morning. And one of the other sequesters out there this morning is raising more money to buy physical uranium. But Katie, I would say, as of right now, we have our kind of focus squarely on pending developments coming out of Washington. I think with the comments that Scott Melbye made already about Secretary Chris Wright's comments about boosting the strategic uranium reserve and some of the potential news that might come around what that reserve and the timing of U.S. government purchases will look like, along with the fact that there's a Section 232 investigation on critical minerals and uranium that the results of which or recommendations by Department of Commerce are expected soon to be also sent to the White House, all of this really kind of creates an environment where we love the idea of sitting on as much U.S. warehouse uranium inventory as possible, with these developments and actions taking place, particularly again, in the U.S. So there isn't a price that we have in mind right this day. Just because uranium is at $80 doesn't mean we're rushing out and selling uranium at $80. We think there could be more interesting developments in the market, again, coming out of Washington that we want to be ready for. And I'll let Scott add to this point as well. Scott, go ahead. Scott Melbye: Yes. Katie, it's just we love the flexibility and we have the luxury of being able to hold again. As Amir said, we could have signed contracts over the last 3, 4 years that would have pressured us to produce faster, pressured us to sell into contracts that would be well below where the current spot and long-term prices are today. So we've never felt more comfortable being uncommitted and unhedged going into the market that we're seeing develop right now. Operator: Our next question comes from Joseph Reagor from ROTH Capital Partners. Joseph Reagor: Amir and team, so I guess first thing, just kind of a point of clarity. On the 130,000 pounds you produced at Christensen Ranch, you guys referred to it as dried and drummed, is it not considered part of your inventory because there's like one final finishing step? Or is it like some companies where they separate their inventory from the inventory that's at a converter, compared to the inventory that's on-site at a project? Amir Adnani: Joe, thanks for that question. It's the latter. We just wanted to clearly, given that you see had an inventory position that was previously purchased at market lows, we wanted to be very clear in making the distinction around that inventory and what is now, obviously, as we have transitioned into production, is a production-related inventory. But Josephine, did you want to add to that point as well? Josephine Man: Yes. Thanks, Amir. This is Josephine Man. So the finish -- the uranium concentrate that we mentioned about is included as part of the inventory on the balance sheet. So you can see that in the breakdown of the inventory, so that is part of the uranium concentrate from extraction. Joseph Reagor: Okay. I just want to make sure I was understanding it correctly. And then on UR&C, Amir, can you walk us through kind of how you see potential news flow as you advance that over, call it, the next 12 months? What can we as investors look for as far as updates from you guys? Amir Adnani: Yes. Joe, in no particular order, I would say, there are several tracks that we're running simultaneously. So one track involves the work that we're continuing to do with Fluor, and that's building on the past year's work of engineering, analysis and reports and studies and details and tech work that had already been completed that got us here. So one track will be engineering-related work by Fluor that will continue to do. And as updates become available there, that would be one source of news flow. Second track is we are in team-building mode to also continue to develop the dedicated team around the refining, conversion initiatives. So there will be information to share on that front. There are numerous discussions underway from government level discussions to off-takers, utilities, strategic partnerships and investments and investors, et cetera. all of which could be potential sources of updates as there's developments there. So again, multiple tracks and everything is happening on parallel tracks. And in no particular order, as we have developments and news from these various tracks, we could maybe be and hopefully be in a position to provide more updates. At least that's the goal, Joe, and how we're looking to push this forward. But we're pushing and really are pushing to move expeditiously. This is a very timely opportunity and the feedback we're getting from various groups that we're in discussions with is that this is something we need to move very quickly on because it's very necessary. Operator: Our next question comes from Kristian Koschany from National Bank Capital Markets. Kristian Koschany: I'm asking on behalf of Mohamed, who is on a site visit right now. I was just wondering if you could provide a bit more color on the cash costs and total costs, specifically what's included in the noncash costs and how we might expect the cash costs to progress as the Christensen ranch continues, and how the full rebuild of the yellowcake thickener and improvements to calciner might improve things or change things in the future? Amir Adnani: Yes. Thank you for that question. So again, and I'll let Josephine go a bit deeper, but again, at a high level, as you've seen with our numbers that we've reported so far, this low-cost production that we've achieved in such early innings of the production ramp-up is very noteworthy. It's industry-leading in terms of where it's come in. It really speaks to the efficiencies and the asset base and team that's operating here. Total cost per pound of $36.41, and I'll let Josephine break down the cash component of that and the noncash. But to address your other question, the work that's almost complete on the thickener and calciner upgrades, that should not have any impact on future production cost numbers. And if anything, like we said, it's meant to give us expanded capacity at the Irigaray plant. Josephine? Josephine Man: Yes. Thanks, Amir. So generally speaking, the total cash, cost per pound is comprised of, obviously, labor cost, chemical and utility costs that we incur at Christensen Ranch and also the Irigaray processing plants. And in terms of the noncash production cost, that mainly is coming from the depreciation of the mineral property acquisition costs from the time that we acquired Christensen Ranch from U1A so we allocate part of the allocation cost to the Christensen Ranch mine that we are producing at right now. Kristian Koschany: So would we expect that these costs that we saw in this quarter to be roughly what we would -- should be looking at going forward, or... Amir Adnani: Yes. Go ahead, Josephine. Josephine Man: Okay. Yes. So the noncash portion of the production cost is quite steady because we amortized on a straight-line basis in terms of the acquisition cost. In terms of the cash production costs, we are foreseeing that it will be quite stable as compared to the Q4 of the fiscal 2025. That's also impacted by the production volume that we are expecting to have in the coming quarters. Operator: And our next question comes from Justin Chan from SCP Resource Finance. Justin Chan: Brent, I want to thank you, Brent, for your time last week. Really appreciate it, and Derek and the team as well. Just a lot has been asked, but given your market-driven strategy, which has really played out really well so far, you haven't had contracts yet to deliver into or [indiscernible] market. I was just curious how you plan the Header House ramp-up and just your operational ramp-up given that you do have to manage volumes, but you also have -- your balance sheet gives you the luxury of being able to, let's say, set up off for the long run instead of rush production. I'm just curious how you guys are looking at the next year with Texas coming on and Wyoming, and at the current prices and also the direction things are trending? I guess, similar to the first question I asked, I don't need an exact production range, but I'm just curious how you see things and how much focus there is on ramping up quickly versus seeing where the market goes. Amir Adnani: Justin, thank you for that, and thank you for taking the time to tour our Wyoming operations last week. We appreciate that. I'll go first and then hand it over to Brent. I think there's kind of a few different sets of elements here to consider. So one is obviously the uranium price. And our view remains that just as we've seen conversion, enrichment prices near their respective all-time highs, we should see uranium prices at some point based on, again, the current supply-demand fundamentals and given the supply deficit we see globally, not just in the U.S. but everywhere, on uranium supply-demand studies. We really do believe that uranium prices need to, similarly to conversion, enrichment, probably reached their previous highs. And as that happens, we would look to obviously take a fuller sort of advantage of our permitted and existing capacity that we have of facilities, the processing plant, the resources, et cetera. Having said that, there's also a human resource limitation. So as we go through this update, you notice that we kind of proudly and, importantly, highlight the number of personnel that we have in our Wyoming and Texas workforce. And this is an industry globally that has been quiet and somewhat dormant for the last decade. So today, the entire industry is really facing human resource challenges as it ramps up. This is an area that we're very focused on, we're investing in, and we continue to, again, demonstrate that the size of the team is growing to support those future ambitions of increasing production. And as you, as a company, tackle and build new projects, I think there's a tremendous competitive advantage you're building and know-how around new construction. Look at the fact that -- and I'll let Brent speak to this, but I mean, you got to come and visit what we're doing at Burke Hollow. That is the newest uranium project anywhere in the world. That is the only new greenfield anywhere in the world that has been built from scratch. And it's 90% complete and, as we mentioned, should be operational by December. The team that we have that has been directly involved with that project from, by the way, day 1, going back to 2012, to now, by the end of completing this, we'll have a tremendous understanding around building new projects and commissioning new operations. And that becomes a lasting advantage for UEC as we go to additional satellite projects and increasing production. Brent, I'll let you take it over from there. Brent Berg: Sure. Thanks, Amir. And Justin, thanks for taking the time to visit our Wyoming operations. So as you know, UEC is continuing with our production ramp-up. Mine development continues in Wellfield 11 at Christensen Ranch where 4 header houses are currently under construction, [indiscernible] well installations nearing completion and surface construction is on schedule for startup of additional fresh production in the coming year. Additionally, we've been doing delineation drilling in Wellfield 12 as well as extensions to wellfields 8 and 10, and that will form the base of production at Christensen Ranch for the coming years. Down in Burke Hollow, as Amir mentioned, the project is 90% complete. The initial wellfield is now set up with pumps downhole and the team testing operation of those. The trunk line from the wellfield to the satellite being fused, pressure tested and hooked up to the satellite and final touches going on there. In terms of the team, I just got to say I'm blessed to have some really skilled people working on our team in both Wyoming and Texas. And I look forward to continuing to grow the team and ramp up production in both states. Thank you. Justin Chan: That was very comprehensive. And yes, maybe just one follow-up. If prices do kind of ramp up much faster here or perhaps there's some action from the administration that creates a U.S.-specific price or et cetera, I guess what would change from your operational plan, say, if uranium was $120 right now, how would that next year look different? Amir Adnani: Just simple, Justin, just rate, the rate of change on development and acceleration of wellfield delineation, rigs operating and construction activity on whether it's wellfields or header houses. So really, it's about also having that flexibility and optionality to adjust the rate accordingly to both market pricing and conditions. Justin Chan: Got you. And just given the constraints, for example, on the HR side, do you have a sense of how much faster you could do things? Amir Adnani: Yes, we do. I mean, I think, again, the benefit of being in a position where you're operating and you're ramping up, and the market can see that and the labor market can see that, frankly, we've really benefited from incoming inquiries from folks who are working in the industry or used to work in the industry and left the industry and are really attracted to the opportunity to come to UEC. They see the platform that we put together, they see the scale that we have. And there's an opportunity to see a real longevity when it comes to a career here. So everything we're doing in a way has become a self-fulfilling prophecy in terms of being acting as a real magnet for us for being able to continue to attract the talent. And again, as we see there's a need to accelerate, then we can also accelerate the uptake and intake of that HR sort of source and force that's coming to us. Justin Chan: Got you. So for example, do you think doubling your rollout rate would be conceivable within the year if prices were there? Or I'm just trying to get a sense of quantum. Amir Adnani: Look, our goals and ambitions are very much that. And we, again, we hope that the market conditions support that. We were somewhat frustrated by the way prices were subdued basically through to July 31 when we -- when our fiscal ended and we just thought the $70 uranium price made no sense. But sometimes the market can be that way, and before it starts to really reflect the supply/demand fundamentals. But luckily, we're seeing some sort of noticeable improvements here, as we've talked about with respect to price. And again, we have to see how it all plays out, but we wouldn't be surprised if we saw further improvements in price and that, again, giving us the backdrop with which we can continue to progress and ramp up our efforts. Operator: And ladies and gentlemen, with that, we will conclude today's question-and-answer session. I'd like to turn the floor back over to management for any closing remarks. Amir Adnani: Thank you. Again, thank you, everyone, for joining us today. Fiscal 2025 was truly a landmark year for UEC. We're just getting started. With our operational achievements, strategic acquisitions and the launch of UR&C, we envision a platform to lead America's nuclear fuel cycle. We look forward to updating you on our progress in the quarters ahead. Thank you, and have a great day. Operator: And ladies and gentlemen, that will conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.
Craig Baxter: Good morning, ladies and gentlemen, and welcome to EnQuest PLC's results for the first half of 2025. Throughout this webcast, you will have the opportunity to submit questions at any time, and we will look to answer as many of these as possible during the Q&A session at the end of the presentation. Without further ado, I will hand you over to our Chief Executive Officer, Amjad Bseisu. Amjad Bseisu: Thank you very much, Craig, and good morning, ladies and gentlemen. Welcome to our 2025 half year results presentation. Thank you very much for the time joining us today. My name is Amjad Bseisu. I'm the CEO of EnQuest. Joining me today is our Chief Financial Officer, Jonathan Copus; and Steve Bowyer, our U.K. North Sea Managing Director. Craig Baxter is also joining us, Head of Investor Relations and Corporate Affairs. Steve and Jonathan lead the high-performing teams across our business, and our operational performance has remained very strong in the first half of the year, as you will see. Let's start with the backdrop of U.K. The U.K. North Sea remains one of the most challenging environments in oil and gas as evolving fiscal and regulatory pressure continue to undermine global competitiveness. With the sector losing 1,000 jobs every month according to our industry OEUK outfit, crucial that the government urgently reforms energy profit study, which now delivers a fraction of the originally projected revenue. Only a fair, more predictable tax environment can help companies like ours to invest and secure a U.K. energy supply that protects jobs in this critical energy transition environment and allows success of the business. The opportunity is there now and today to enact positive change in the upcoming autumn budget. We are poised to play a leading part in enhancing the U.K.'s energy security and protecting the jobs that are vital to our country and also the energy transition ambitions. So let's start by looking at our fundamentals, which have been strong and that underpin the business. For those who are less familiar with EnQuest, EnQuest is an independent energy company with operations focused on the U.K. North Sea and Southeast Asia. We are listed in 2010, and our foundations are based on acquiring mature underdeveloped assets and from the majors and developing those assets and producing more out of those assets. We've done that in 9 hubs and continue now with the new expansion in Southeast Asia to have 7 operating assets. We've built a strong expertise in mature asset management, driving efficiencies, optimizing operations to extend lives. Over the years, our capability mix has expanded also to maximize recovery of oil through top quartile drilling and major project execution. We are also now proud to be recognized as we've built a very strong sector-leading decommissioning business. Over the past 12 months, we've also expanded our Southeast Asia business significantly. We are now in 4 countries, building on a strong reputation that we have forged over 11 years of successful operations in Malaysia and having been chosen the Operator of the Year 2 years in a row in Malaysia, something I think is the first to have. With the recent acquisition of Harbour's Vietnam business, we now have 7 assets, as I mentioned, with material reserves and resources in place, and we operate nearly all of our assets, deploying our operating expertise to maximize our value, which is our big business proposition. We also operate the Sullom Voe Terminal in the Shetland Island in Scotland, which is a very critical asset for us, both upstream as well as for our new energy decarbonization and renewable business, which is [ varied ]. We've got a number of assets which have also moved into decommissioning over the last few years and have reached the end of their useful economic life. So we have had from taking the assets to decommission the assets, a full cycle of asset management. As we're all aware, the energy transition -- the energy landscape is in transition. And to ensure our long-term success, we recognize that the business must continue to show resilience, creativity and adaptability. The combination of the core capabilities set for EnQuest set us apart from any of our peers. We are able to take these assets and produce more out of these assets and have proven that over the last 15 years. By lowering cost, improving uptime, these assets last longer and run in the hands of us as a better operator. Since our inception, we've extended the useful life of all 9 assets that we've operated. Next slide. Our strategy is underpinned by us being established as a top quartile operating company, both in the U.K. and in Southeast Asia. This is demonstrable across the whole life cycle, as I mentioned, of the assets from the beginning through decommissioning. During the first half of 2025, our production efficiency was 89% and would have been 94%, excluding a third-party infrastructure outage in Magnus, which is certainly upper quartile and maybe even best-in-class. With 96% of our 2P reserves under our operatorship, we maintain control over our asset management, which is a key factor for our excellence over the years. The operational control has been pivotal in our ability to extend the lives of every asset that we've operated and also provide us with a line of sight of material organic opportunities around our assets for optimizing our core assets. We've done that in Magnus, Kraken, PM8/Seligi and our other assets. We can now proudly say that our expertise extends to the decommissioning performance, where we've executed 81 wells since 2022. And the activity has been mostly focused on Thistle and Heather, where we recently completed also the largest lift of topsides in the U.K. of 15,300 tonnes in 2025, the heaviest lift planned in 2025. We have now completed the Heather disembarkation and look forward disembarkation of Thistle in early 2026. And again, as I said, we're very proud to have now the ability to say we are sector leading in the decommissioning area also alongside the other areas like drilling, project execution and operations. This new capability is a key enabler for us, both to transact in the U.K. and to maximize the value of our assets. As you will see from Jonathan's presentation, we've had a significant continuing deleveraging path during which we've directed our free cash flow to repay around $1.6 billion of debt. We remain very much ready for our transformative growth and looking to utilize our tax assets. Our net debt, as mentioned, continues to go down and was $377 million on the 30th of June. And our liquidity has increased from $475 million at the end of last year to $578 million at the end of June. We've been clear on our strategic focus on executing transactions, which we have done in Southeast Asia and using our U.K. tax asset of $3.3 billion to execute another transaction in the U.K. It's a matter of public records that we were in discussions with Serica earlier this year about a combination, which didn't come to fruition, but we remain engaged in negotiations across several other U.K. growth opportunities, and everyone at EnQuest is motivated to complete a value-accretive U.K. deal in the coming months, similar to the deals that we've done in Southeast Asia. We also remain active outside of the U.K., adding scale to our business in Southeast Asia. Next slide, where conditions are conducive to investments across the life cycle. Over the past 12 months, we've executed 5 growth transactions across Southeast Asia, and we've stated that we see this as part of a business reaching 35,000 barrels of oil equivalent production by the end of the decade. We have visibility now on getting to our goal through the acquisitions that we've made. These transactions include a full corporate acquisition in Vietnam, which brings flowing barrels which have produced over 5,000 barrels in the first half of this year. Development of existing infrastructure to unlock significant gas volumes. That's done in PM8 Seligi, where we have signed a gas sales agreement, and we will be starting to produce 70 million scfs a day early next year for production into the system. New developments like DEWA in Sarawak as well as in Brunei with -- the joint venture with the government -- 50-50 joint venture, which we've announced recently, which will be gas weighed into gas sales agreement and into LNG plants and a significant exploration and appraisal opportunity in Indonesia with us being as operator and bp and the LNG Tangguh Alliance being our very strategically important partner because we have access to the infrastructure there. Our growth in the region sees EnQuest in these new areas, adding 3 new countries to our main hub of Vietnam and emphasizing the strong reputation we've built over 10 years operating in Malaysia. I was extremely proud to see EnQuest again named as Operator of the Year in Malaysia, the first of any operator to achieve this accolade. And this is clear that PETRONAS' recognition of our credentials has opened the doors for us in many other countries. We've also received the award for decommissioning excellence in Southeast Asia, of which I'm extremely proud. The Southeast Asia team continues to deliver against our strategic growth aims, and we intend to build on our recent deal momentum with further M&A activity. I'll hand over to Jonathan to cover the financial performance for the first half of the year. Jonathan Copus: Thanks, Amjad. So just moving to my first slide. I think the first thing to say here is that financially speaking, the foundation of everything we do is our capital structure, and we are committed to maintaining both a strong and flexible capital structure. Now to that end, in the last 12 months, we have taken steps to simplify our balance sheet as well as continue paying down or reducing our net debt. At the moment, we have -- well, now we have a structure that is built primarily around our flexible RBL and also our foundation of bonds as well. When we think about capital discipline, we are focused on a few things. First of all, fast payback investment. That is where we can see opportunity organically within the portfolio. And alongside that, of course, we're also focused on growth, diversification and internationalization. And Amjad spoke about our transactional activity in Vietnam, but also ambitions both in the North Sea and Southeast Asia. And of course, we also paid our maiden dividend in June of this year. If we move on to the income statement, Amjad mentioned that in the first half, we had disruption at the -- third-party disruption at the Ninian facility. And that meant that we lost about 3,500 barrels a day of production in the first half. Now that's equivalent to about one cargo deferred and the value of that at prevailing prices would have been something like $40 million to $50 million. We also saw a 14% year-on-year reduction in Brent. However, we have a strong commodity hedge position and gains on that hedge book mean that in the period, we reported revenue of $549 million, which was a strong delivery. Cost of sales totaled $389 million. And within that, we held operating costs flat year-on-year, and that was despite an 11% weakening in the U.S. dollar. So again, a strong performance here in terms of costs. On a unit basis, of course, the numbers are again impacted by the Magnus outage. And including hedging, our unit OpEx for the period was $26.4 per BOE. Our adjusted EBITDA was $235 million. And the other number that jumps out of the income statement is our tax charge, which is significantly distorted by the 2-year extension to EPL and the deferred tax impact that we see coming through the income statement. So within that $239 million tax charge, $50 million of it was current and $189 million was deferred, $124 million of that figure being this 2-year extension to EPL, which has impacted our numbers, and you would have seen that impact across the sector as well. However, if you move to free cash flow, we delivered free cash flow in the period of $33 million. And from that, we paid our $15 million dividend, and we reduced our net debt to $377 million. CapEx in the period was $83 million. We spent $31 million on decommissioning. And at the 30th of June, our cash and available facilities had increased to $578 million, which is about $100 million rise on the position at the end of 2024. Now driving that increase was a positive redetermination outcome on our RBL, which we detail on the next slide. So through our year-end redetermination, we saw a 34% uplift in terms of our capacity on the RBL. And that reflects the tangibility, but also the consistent delivery and high levels of uptime on our assets as well. As Amjad mentioned, you can see that in recent years, we have reduced our net debt position by $1.6 billion. And that has taken very significant focus and very significant discipline, and it's something we're proud of. We have no debt maturities before 2027. And of course, the other key asset that we have as well are our tax assets. And those at the 30th of June totaled $2 billion in the recognized category with a further $1.2 billion that are yet to be recognized. Finally, turning to our guidance. We are reiterating all of our guidance points today. These are given on a pro forma basis: production 40,000 to 45,000 BOE a day; operating expenditure, $450 million for the year; CapEx of $190 million; decommissioning of $60 million; and of course, as I said, we paid our maiden dividend of $15 million. Looking to 2026, organic growth is our focus in terms of the core portfolio, and we have projects such as the Kraken EOR project and the optimization of Magnus production. In terms of operating expenditure, we are consistently focused on maintenance and maximizing our asset uptime and continuing the excellent production efficiencies, which we continue to see across the portfolio, both in the North Sea and Southeast Asia. And in terms of CapEx, we remain very focused on low-cost, quick payback opportunities. And in terms of shareholder returns, these sit within our capital priorities, and we aim to deliver every year a sustainable capital allocation framework that builds value for our shareholders. So now just handing over to Steve, who will cover the operations. Steve Bowyer: Good morning, everyone. Thank you, Jonathan. I'm Steve Bowyer, U.K. Managing Director. I'm pleased to report on a very strong operational year for the business. Our operational performance has been exceptional across all facets of the energy transition, and I'll talk you through how we've managed to do that and through the first part of the year, with the only blip in the year being the third-party outage at NCP and what I'm pleased to report that we worked very well and collaboratively with CNRI, the holder and operator of the Ninian Central platform to resolve the minor [indiscernible] on NCP in short order and making sure we delivered an alarm solution and got production back on within 5 weeks. Just to talk through our operating performance, underpinning everything we do is delivering safe results. We continue to strive for continuous improvement on our health and safety performance. As Amjad mentioned already, we've received awards in Malaysia, not just for our operating performance, but also for our HSE excellence where it's been very strong, and I'll talk through that when we get to the Southeast Asia section. And we've delivered 3-plus years LTI-free on Kraken, and we're 19-plus years LTI-free on GPA. So very strong performance across the assets. Our operational excellence comes through very strongly in our production efficiencies. Production efficiency of 94% is best-in-class. That excludes the NCP outage. But if you look at what we're in control of as EnQuest as operator, a phenomenal performance by the teams. And that's focused on prioritizing the right operational activities, making sure we understand the asset fully, invest in integrity and making sure our assets run as well as they possibly can. And when you consider within that portfolio is Magnus, which is over 40 years old, that's a phenomenal performance. Production is right in line with guidance for the first half of the year despite the NCP outage. Obviously, if you exclude Vietnam, which is 5,000 BOEs a day, so we're right in the middle of the range if you exclude Vietnam. And Amjad already mentioned, we're very proud again to be awarded Malaysia Operator of the Year, which I believe is the first. And I think in the market we're in, we all know the North Sea is quite difficult at the moment with the continued application of EPL and obviously, commodity prices being lower than potentially we'd expected, our strong cost discipline comes to the fore. So we have a track record of extending field lives significantly of 10-plus years. We've used that cost discipline and work very closely with the teams and good collaboration across all teams from supply chain through operations to ensure that we maintain costs flat despite material inflationary pressures and material FX impacts across the business. So really good work by the teams in a particularly challenging market. We remain at the forefront of the energy transition, decarbonizing our existing oil and gas assets and also making good progress on our SVT projects to reduce emissions by 90%. And at Veri Energy, although the transition takes a little bit longer than anyone had anticipated, we're making good progress on onshore wind and continuing to study carbon storage and excited about the potential through e-fuels. And as Amjad mentioned, it's key to be good at decommissioning. If you're going to be active in the energy transition and it's a key part of any future acquisition we do, our performance has been exceptional in decommissioning. We've P&A'd over 81 wells and since 2022, and that's effectively more than 35% of the Northern and Central North Sea P&A across the basin, and we've done that at 35% below the basin average cost. Big achievements as well. So although our wells P&A team is exceptional, good decommissioning comes down to strong project management. And our team there, as you'll see, have safely disembarked the Heather platform, and I'll show you a video later, which highlights how strong our operational capability is as you'll see the Heather fast lift actually in action. And as I talk through each of the assets, we'll start with Kraken. So Kraken continued its exceptional performance from 2024 and 2025. You can see production efficiency. Kraken is up at 96%, which is 30% above the basin average for FPSOs, which is phenomenal. We continue to optimize our emissions through going direct to the marine market for sales. We've managed to take the Bressay Gas tieback and progress that through towards FID. We're not at FID yet, but we have submitted a draft FDP to the NSTA, and we're clearly working with our partner, Waldorf to ensure we can get to an FID point. That project is really important for the future of Kraken. Not only does it reduce our emissions on Kraken, also delivers a material cost saving by reducing our reliance on diesel. In terms of future investment on Kraken, we're working on EOR, as Jonathan has mentioned, to enhance oil recovery. We see good potential upside through that, and we're also continuing to study infill drilling. So the future for Kraken will be EOR or infill drilling or a combination of the 2, and it may well end up being a combination of the 2 that we work on. And just to focus on costs again, the FPSO lease costs reduced at the start of 2Q 2025, which is an $80 million per annum saving, which is clearly very helpful. So really strong performance on Kraken and thanks to Bumi Armada for working very collaboratively with the teams on that asset. Flipping to Magnus. Late-life management asset expertise in play. The asset is over 40 years old. And as I mentioned earlier, we're way up at 95% if you exclude the NCP outage in terms of our operating efficiency, which is phenomenal. And that comes down to the teams really understanding the asset, great collaboration from the offshore teams right through the onshore teams. And if you look at our production that we managed to deliver through the early part of this year, post the NCP outage, we were up at 19,000 BOEs a day. We've sustained production around that level since mid-July, and that's a peak 3-month oil rate that we've seen on Magnus since 2020. But further than that, we've actually managed to take the water cut of the field, which is a measure of how efficient you are in terms of your reservoir recovery. We've taken that back to 85%, which was at pre-acquisition levels. So that's been done by excellent performance on drilling where we've brought the drilling and the well interventions of the recent wells in at cost and on target and tremendous work by the subsurface team working with the operations team and the production teams to ensure that we fully maximize delivery from that asset. And as you look forward on Magnus, obviously buoyed by recent performance, we're planning a future infill drilling program, looking to reestablish drilling back on Magnus later in 2026 and looking at potentially up to 6 wells in that program. Oil production, as we say, has been at peak rates. There's no planned maintenance. So being as efficient as we are, we actually took the opportunity to complete any Magnus shutdown work that we needed to do in 2025 during the NCP outage. So there's no further maintenance outages planned until 2026. And as I've mentioned, our reservoir management strategy has been extremely successful, ensuring that we maximize water injection and throughput and get the water into the right places and sweep as many barrels as we can out of that Magnus reservoir. Flipping into Southeast Asia, where our operating efficiency and our capability has been very well transferred across, you can see production efficiency of the assets at 93%. We've also completed the 4 infill well campaign and well restoration program and well workovers, increasing production by around 10% versus the first half 2024 average. Important as well is the Seligi 1B gas agreement, which expands our gas footprint and expands our reserves and our production. We've managed to accelerate first gas of that project Q1 2026, which will add 6,000 BOEs a day of gas from that point, which is really good work by the teams in Southeast Asia. And just to mention the strong HSE performance, 3 years and over 6 million man hours LTI fees is a great performance by the team. Amjad mentioned how we're expanding our Southeast Asia footprint. So we've got the DEWA PLC now. We're at early stages of studying that opportunity, but it's up to 500 Bcf gas in place, which is a really exciting expansion opportunity for the company. And we've got 2 further gas infill wells planned to be drilled in 2026 in our Malaysian portfolio. So really good performance, not just in the North Sea, but across Southeast Asia. Flipping to Vietnam, which we successfully completed the acquisition of in early July. Pleased to say that the operators handed the asset over in good shape with above expectation production through the first half of the year. We'll now, as Jonathan has mentioned, take our EnQuest skills to bear around getting into fast payback opportunities. We've seen an opportunity and the Vietnam team have highlighted that to bring back some wells into production early on [indiscernible] phase of the asset. So we'll be active on that asset now in terms of getting after the fast quick win payback opportunities. The team have come across and are fully energized and pleased to be part of the EnQuest team. So we're looking forward to extending the life of that asset and making sure we exploit the asset fully. It's a very accretive asset, life of field asset breakeven is about $40 per BOE, and it's high-value crude at a 10% premium to Brent. Just moving on to SVT. So this is a great example for the U.K. government as to how the energy transition should work. And so we're in play at the moment with 2 key projects. We've got the new stabilization facility and the connection to the U.K. grid. They allow us to extend the life of SVT and extend the life of the oil and gas facility and oil and gas production as far as possible. As I mentioned, we're very focused on energy transition projects and new energy projects through Veri Energy. As we all understand in the market now, they'll take a little bit longer to bring to bear, although we are making good progress on onshore wind. So clearly, we need to maintain the life of oil and gas assets as long as we can. We're very focused on that SVT where we can see life going out into the 2050s and that allows more than sufficient time for the new energy projects to come through, hopefully in late 2020s into the 2030s and start to actually act on the energy transition in the way it should be done with a managed and effective transition. In terms of decommissioning, so very strong performance, good validation by our peers who are very impressed with our performance. As I think I mentioned last time I spoke, we were awarded additional P&A operatorship and well abandonment operatorship by one of our peers, which is very good. The Heather P&A was successfully completed by the teams. We also completed safely the disembarkation from the platform. And I'll show you in a minute the Heather top size lift, which was completed with a fast lift. It took about 14 seconds to lift the full topsize facility from the jacket, which is very impressive and done safely. And more impressively, we're looking at basically 95% recycling of that topside facility at the Maersk yard in Denmark. So great work by Heather, and I'll talk a bit more about that before we launch the video. On Thistle, we've now completed all of the platform P&A operations, which is great in terms of Phase 1, 2 and all the conductor recoveries that we needed to do from the platform. As Amjad mentioned, we're on target to disembark in early 2026. And again, very successful performance across that asset. Both projects have remained pretty close to budget within about 5% of the original budgets, and that's been done in a very high inflationary market. So really good performance by the team to control the [indiscernible] costs. And again, Southeast Asia, we transfer our skills across. So really good to see the abandonment excellence award being given to the teams from PETRONAS and the Emerald awards, and that's a good benchmark for the teams. We've also, as I've mentioned, completed the P&A of 81 wells since 2022. We've done that at 35% of the benchmark cost, and we're pleased to have signed up a contract with Well-Safe, which is a multiyear contract, which allows us to complete decommissioning. As always, with EnQuest, our decommissioning, we keep operated control but very low exposure to the decommissioning cost, which is really important from a business management perspective. And we'll commence with low equity but very well-executed decommissioning on the Magnus field with some subsea well P&A, which is due to commence in 2027. In terms of going forward, we keep 95% operatorship of our decom. We've got our decom plans carefully managed. We've got excellent teams in place, and we're very comfortable with the capability we've delivered, which I think is seen as best-in-class across the industry. And just to mention Heather. So Heather was an exemplar asset in its production phase. It went through production of 47 years. The asset is 47 years old now, and I'm pleased to say that it's been an exemplar through the decommissioning phase as well. It's been many workers' homes for a long time. I think one of the employees remained on the asset for the full 47 years. So clearly, it's quite sad to see people moving on and losing their jobs as we P&A assets. But we do it in the right way and we do it as an exemplar of how the decommissioning field should be done, then it's something to be proud of. And you'll see through the video that's just a way to play how strong our decommissioning capability is and how good we are at executing decommissioning with our key supply chain providers. And clearly, the Pioneering Spirit, which executed the work did a phenomenal job of the fast lift. [Presentation] Steve Bowyer: I'll now pass you back to Amjad to conclude the presentation. Amjad Bseisu: Thank you very much, Steve. And that's, I guess, just a great video showing examples of exceptional work where things are very complex, but for everything to fit in exactly at the right time in the right place and the right conditions and the right measurements is, again, just something that shows how we have tremendous attention to detail and the ability to execute these very complex projects. Next slide. So again, delivering organic growth is key. We'll continue to progress and execute opportunities, which provide these growth both organically now that we have a much wider business set, including the acquisitions in Asia that give us more organic opportunities in Malaysia, where we have signed for access to the gas in PM8/Seligi, have signed the first agreement there. We have over 2 Tcf of resource there in the PM8/Seligi fields that we're able to access given the new commercial framework. And we have a ready partner in PETRONAS that needs gas. So I think we're very excited about that. DEWA, transformative opportunity in Sarawak to try and develop gas resources, as Steve mentioned, 500 Bcf. Brunei, a significant opportunity also to develop a gas field and get LNG production there, too. And in the U.K., we're looking forward to the Bressay development that Steve mentioned which again is -- gives us production, but also reduces -- importantly, reduces our emissions in our path to net zero as we've talked about. So we continue also to focus on our relative tax advantage in the U.K. and reemphasizing the expectation that we will grow the North Sea business materially, enable us to release these tax assets, and I think that's one of our key and primary goals and remains our primary goals. We remain committed to growth, as you've seen, but not at any cost. We're focused on creating value for shareholders, and we'll continue to be very disciplined in our M&A, underpinned by a strategy to invest capital where we identify the most favorable terms and returns. This way, we can bring our wide skill sets to bear and continue our track record of extending the economic life of all assets under the execution and operatorship that we have. Of course, our decommissioning expertise now is increasingly important and has become another tenet of our enablers going forward, both in looking at assets and in M&A. In all our endeavors, we also look to diversify the portfolio to improve our overall carbon intensity. And as you've seen, we're shifting a lot more to gas in the future in the commodity mix. We have a clear path in place to add value accretive scale to our business, and I'm energized by the opportunities which are ahead of us. As you've seen, we've seen tremendous growth in Asia, almost 300% growth from last year to next year, and we are continuing to look at growth opportunities in the U.K. and in Southeast Asia. Next slide. In conclusion, you can see our operational strengths are well suited to very mature oil and gas basins and are able -- we are able to transfer for this across geographies. At our core, EnQuest is an agile independent energy company focused on asset-rich regions in the U.K. and Southeast Asia. Since our listing 15 years ago, we have a proven model, acquiring mature and underdeveloped assets from majors and have enabled us to drive operational efficiencies to extend asset lives, maximize value even in complex operating conditions. With our deleveraged balance sheet, enhanced liquidity and significant U.K. tax assets, our strong fundamentals see us very well positioned to deliver transformative continuing value-accretive growth opportunities to our shareholders. Thank you all for your attention. We'll now move to Q&A, and I'll hand over to Craig on the Q&A section. Thank you, everyone. Craig Baxter: Thank you very much, Amjad, and thank you, gentlemen, for the presentation. I'm pleased to say we have a number of questions that have been submitted through the presentation. I'm going to keep you busy for a little bit longer, if that's all right. And we'll start off, if I may, with Alejandra Magana from JPMorgan. And Jonathan, I'll maybe come to you first, and I'm sure Amjad will want to comment on the second part of this question. Alejandra has asked us with regard to transformational U.K. acquisitions to expand a little bit on the financial flexibility that we have today in terms of balance sheet strength, liquidity and the undrawn facilities we can access to act on opportunities as they arise. And maybe this is one more for Amjad. She's looking for a bit of a sense of what we're seeing in the current market and what the sort of bid-ask spreads are in terms of valuation? Jonathan Copus: Sure. Yes. Let me kick off. Yes. So a lot of -- the aim of our deleverage pathway has been to not just reduce our net debt, but to simplify our balance sheet as well, and we've been successful in doing that. We had net debt of $377 million at the 30th of June. And within that figure, our cash balances were $331 million. As I mentioned, we also had a positive redetermination on our RBL. And that meant that the cash and available facilities at the 30th of June was $578 million. Now that provides a great platform to use for transacting. But more to the point, because our debt and our capital structure are simplified, it means that we can also act simply in terms of structuring deals. And that is a great positive in terms of derisking the kind of transactional pathway. I think the other thing that I would point to is that a number of these deals also have quite a long period between the effective date and completion. And you can see this in Vietnam, where the consideration paid was $85 million. The final cash payment was $22 million. So another moving part in terms of financing these deals are those interim cash flow pathways as well. So we certainly have the capacity to transact from a balance sheet point of view. Everything in our ethos around it, not just financially, but in terms of positioning is about being simple and straightforward. And we believe that gives us the best pathway in terms of engagement, but also moving conversations through to completion as well. Amjad, just hand over to you for other comments. Amjad Bseisu: Yes. So the comment on what do we see in current environment on M&A. I mean I think we see a slightly slowed down environment in the U.K. because of the fiscal uncertainty. And so there's been more joint ventures, and that's been kind of the M&A transaction of choice. We've seen a few transactions there with Repsol, NEO and Equinor, Shell and indeed, even Eni is more of a JV there, too. So we've seen that in the past. But I do think we're still seeing opportunities. We're still seeing our asset as a very critical asset and tax asset to move forward, and we are still in discussions on several fronts. In Southeast Asia, as you note, we have had 4 opportunities that we closed: 1 production, 2 developments and 1 appraisal exploration opportunity. And we continue to look at opportunities there. And we have -- we are now in 4 countries in Southeast Asia. So our footprint is growing quite rapidly. I would say we're probably one of the leading independents now in Southeast Asia. We've also tripled our production there in the last -- between last year and next year, so in the last 2 years effectively. And that also is a great testament to ability to grow quickly when we have the balance sheet to do it, as Jonathan mentioned. Craig Baxter: Thanks, Amjad. That's actually a perfect segue into Alejandra's other question, which is around Southeast Asia. And she's looking for a bit of color from you on the sort of the relative cash and cash flow and economic attractiveness of the growth. We've mentioned today in Southeast Asia versus what we see in the U.K., particularly when you factor in fiscal regimes, reinvestment requirements, et cetera. And as a bolt-on to that question, we've talked a little bit about the upside opportunities now that we have our hands on the Vietnam asset, there's obviously some upside there, both with the current assets and across the field. So maybe if you could touch on some of those, that would be very helpful? Amjad Bseisu: Okay. So on the U.K. versus Asia, I mean, they are very different propositions in terms of investment. U.K. gives you full access to cash flow with tax being paid. There is no royalty being paid in the U.K., but it's very sensitive to oil price. And as we've seen this year, the cash flows are lower because the oil price is lower. In Southeast Asia, the opportunities are more production sharing contract types where the cost recovery takes a big load of the contractor, which would be ourselves. So it's less sensitive to oil price movements versus the U.K. So U.K. is very sensitive to oil price movement. And with a high tax rate in the U.K., the investment -- organic investment gets much more challenging because, again, it's the volatility to oil price is very high. So I mean, we're still investing in the U.K., but we would invest more and we would like to invest more if the U.K. fiscal conditions improve. We continue to look at Asia opportunities. I think in Vietnam, we took over in July, and we are looking now to have a full field model analysis and opportunity analysis. I'm confident in the next few months, we'll see a segue to a program. We're already starting a program with our first workover in Southeast Asia in Vietnam, but we will look at a drilling program in the future. And we are looking to expand the Malaysia gas [indiscernible] phase. Our first phase is 70 million standard cubic foot a day from PM8/Seligi. We're looking to expand that significantly. And as you've seen in our analysis -- our results analysis, we also have a contract -- first phase of the DEWA, the development contract; also the first phase of Brunei. These are development opportunities subject to final investment decisions. But we get great comfort that those resources have been certified. And again, we -- in our hands, it will be lower cost to develop them. And that's why they are in our hands because we'll have a much more efficient development approach to them. Craig Baxter: Thanks, Amjad. And staying with the new developments, a question from James Hosie at Shore Capital around the developments at DEWA and Block C in Brunei, whether EnQuest will be selling gas at a price linked to LNG spot prices and what you see the market is for those resources? And James' follow-up is also reverting back to Vietnam. It's around EnQuest's appetite to extend the license beyond the 2030 sunset that's currently in place. Amjad Bseisu: Yes. So on gas prices, in Malaysia, there's this Malaysian reference price. So as we've negotiated the first contract on PM8/Seligi, it's related -- the price would be related to Malaysian reference price, which is probably around $7 or $8 in Peninsular Malaysia. In Sarawak, it could be a multiple of that, but it's usually also relating to the Malaysian reference price. There is -- I mean, obviously, there's -- in Sarawak, there is an LNG plant and PETRONAS could buy the gas for the LNG, but the purchase is relating to the Malaysian reference price. In Brunei, the access is to LNG and the plan is to produce into the LNG plant in BSP, the Brunei LNG plant. So commercial discussions would be ongoing post the first phase of front-end engineering design and when we get to the CapEx and the economics of the project. So that would be the segue into that. And indeed, this is a very early phase in Indonesia, very, very early phase, but that would be the -- also access to the LNG plant in Tangguh is key for developing that resource -- the gas resources once those are in commercial quantities. So again, that would be an LNG development. Hence, the push for us to bring in the LNG partners -- Tangguh LNG partners. On the Vietnam extension, we are keen on looking to expand there, both our investment and extending the PSC. So I think we are -- we will get into discussions on that in the future once our investment program is crystallized. Craig Baxter: Thanks, Andrew. finishing up on Southeast Asia for the moment, unless other questions, of course, come in. Sam at Peel Hunt has asked a little bit about your thoughts on the CapEx required to sort of develop out these resources. And obviously, we haven't put any numbers out there publicly. But just your thoughts, Amjad, how you see the investment landscape between the U.K. and Southeast Asia going forward? Amjad Bseisu: Yes. So you've seen the cash flows from Malaysia and Vietnam. So I think we actually have assets there now that have significant cash flow. So as Jonathan mentioned, between first of '24 and middle of '25, there was over $50 million cash flow from Vietnam. And the numbers in Malaysia are also very robust. And they will -- with the increase in production and the gas sales agreement, they will become robust. So the first thing I want to outline is we have 15,000 barrels a day next year of production. And so our cash flows will have gone up by the same factor of production roughly. So I think we'll have significant cash flows generated in the region itself. And so that will go a long way to actually providing the CapEx. Indeed, our first phase development, the first phase that we've had for the gas development, the 70 million standard cubic feet a day, which was contractually around $100 million, that has been generated internally, and we did not call on resources from corporate or external debt. And so that will be in place for gas to start next year. Now it's too early to identify both DEWA where we're a 40% partner -- 43%, and Brunei we're a 50% partner. But I feel the cash flows will be reasonable, and it's fit for purpose for EnQuest. That's why we're in those developments. So I think we -- between our cash flow and our facilities, we will be able to finance our share of those. Craig Baxter: Thanks, Amjad. That's very clear. Switching to the U.K. now, we've got a number of questions, and some of them I kind of aggregate up because they're on similar themes. A question, I guess, for Steve and Amjad. So we've got a few questions on the scale of Kraken EOR. Obviously, you've talked about that a little bit over the last few months and certainly today. And Steve, I think touched on the combination of infill drilling and EOR. But it would be interesting and there's a number of people asking to get a bit more from you on EOR as a project and how that fits for the next phase of Kraken operations. Let me start with you, Steve. Steve Bowyer: Yes. So we've made good progress on Kraken EOR. We're currently studying polymers, testing polymers and we've been updating reservoir models. And the sweep efficiency of Kraken without EOR has been pretty good. So it's complex. There are new polymers coming on the market as well. So I think we previously mentioned we're progressing that towards a decision tail end of this year. We're still on track with that, but we may push that into early next year as we start to study further the polymers and optimize that fully, but we still see quite a bit of upside through Kraken EOR. There's still infill drilling opportunities on Kraken as well. You know we drill-ready infill opportunities previously. They still exist and are still strong. So I think EOR will either apply across the whole reservoir once we've selected the right polymer or it will be selective in certain areas of the reservoir where we'll instead go after infill drilling. So still excited by EOR. It's still a great potential opportunity for Kraken. It's just it's complex in terms of understanding the polymer, understand how it reacts within the reservoir and making sure we get the right optimized way forward. Craig Baxter: Thanks, Steve. Anything you want to add to that, Amjad? Amjad Bseisu: I just think the opportunities in U.K. organically are still very strong. I think we believe -- I mean, as you've seen from Steve's presentation, Magnus has had a great performance due to the wells drilled there and also to the increase in efficiencies that we've had. And in Kraken, as Steve mentioned, there were 2 drill-ready wells, which we had delayed because of our partner issues, but I think those will be coming in the future. And I think we're still excited about the EOR. The EOR is a material opportunity. The numbers are very significant. It has been tried elsewhere, and we're going to -- we're going to be focused on getting that, like Steve said, maybe in the early part of the next year. Craig Baxter: Thanks, Amjad. So sticking with the U.K., but switching from Kraken to Magnus. Both Charlie at Canaccord and Mark Wilson at Jefferies have asked about the 6 well program planned at Magnus. And talking a little bit -- there's a request to kind of give a feel of what that could generate for Magnus production and also just the sort of cost versus return trade-off with that obviously being a U.K. investment program. And maybe start again with Steve and Amjad, you can give your views if you wouldn't mind? Steve Bowyer: Yes. So we run an active well hopper across all of our assets. We've always got well opportunities there. Obviously, we've got some very successful well results. The 2 wells were above our expectations that we drilled this year, and that just shows the strength of the subsurface team we've got. We've focused on the LKCF, which is a less exploited part of the Magnus reservoir, which is a lower water cut. We've had some success in that. We've got water injection going in there. And we do still see plenty of Magnus opportunities, which we would look to drill. The wells we've drilled recently, they have paybacks within about 12 months. The future wells identified are very similar. And obviously, with those returns, we see healthy returns through our Magnus infill drilling program. When we go back, we tend to want to drill in the sequence and batch of wells. The team have already got a number of those opportunities matured, and we'll be working to mature up the opportunities with a return of drilling probably mid- to end 2026 on Magnus, where we'll mobilize and there will be a bit of time to get the rig back up and ready to run. But we're pretty confident we've got good opportunities already identified and more to mature on Magnus. So quite excited about the future of Magnus. And there'll be similar scale to the existing opportunities we drill where they're somewhere between about 1 million to 3 million barrel recovery wells, and those work out very well economically with our position in terms of our financial and fiscal position. So they are very robust in respect for VPL. Craig Baxter: Amjad, are you going to add? Amjad Bseisu: No, I'll just add that we're quite excited about the LKCF, which we've just drilled a recent well. The recovery factor there is relatively low. It's 24%. So a very rich opportunity for growth. It's almost 400 million barrels of stope there, and we're very excited about looking at that further as Steve mentioned. Craig Baxter: Thanks. Staying with Magnus, [indiscernible] from Sona has asked a question. Obviously, we've seen the third-party outage that's affected Magnus production in the first half of the year. So Steve, maybe coming to you. Do you have any sort of update on the future of the Ninian infrastructure, the time line to decommissioning and what EnQuest is doing to mitigate that and obviously secure future production of Magnus? Steve Bowyer: Yes. So I think it's understood in the market that Ninian Central is due to COP 2027. It may be later than that. We've clearly been progressing a bypass opportunity, which is a subsea -- basically a rerouting of the subsea pipe work. And we're progressing feed on that and we'll be well ahead. So we're ready to bypass the Ninian platform long before it gets to COP. So working very collaboratively with CNR and Total. Obviously, the all wind field comes through the same system, and we're very well progressed so far with our design around how we would bypass Ninian. So the future of Magnus is pretty much secured. We're still to FID the project, but it's a no-brainer in terms of FID. And so good progress by the teams in terms of being prepared for that. And obviously, that's a key facet of extending the life of SVT and the projects we're doing there. So we see a very strong life for Magnus going forward. The subsea operation is kind of routine, it's bypass pipe work. So it's basically a subsea rerouting of the pipe work where we've already got block and bleeds where we can tie into. So pretty solid and robust project that we're progressing forward. Craig Baxter: Thanks, Steve. Jonathan, coming to you, if I may, a couple of questions from Mr. Wilson at Jefferies. We've talked a little bit around -- and Steve touched on material cost inflation has been managed in the business. You yourself, Jonathan talked about the group managing to keep operating costs flat. Can you talk a little bit to EnQuest's kind of approach there and which areas have been the most pleasing for you in terms of that achievement? And also, Mark has asked just for you to give a quick summary and reminder for those listening around the way in which our GBP 3.2 billion U.K. tax asset is split up into the 2 component parts? Jonathan Copus: Sure. Yes. I mean, cost management is sort of absolutely core to what we do. We talk about it being in our sort of DNA, right? And operating in the basin we do and focus on extending the life of late-life assets or underdeveloped assets. A huge part of this is about delivering these things at optimal cost as well. Now in an inflationary environment, one way we can manage that is through activity in supply chain. And so certainly, across our sort of production operation business, but also our decommissioning business, we are good at securing equipment and securing equipment for extended pieces of work. Steve talked about the 6 wells grouping. We've also talked on this call about the Well-Safe contract, which has multiyear options. So that means that because we can give service providers visibility on extended periods of usage, it means we get good prices for that equipment. So I think the team does a great job in terms of all of that. I think the other thing though that goes hand-in-hand with cost management is also making sure that we manage costs in the right way. What we're not interested in doing is undermining the production uptime on the assets as well. So it's also really important to be on top of maintenance and things like that. And one thing that really helps us in this respect is the fact that we operate 96% of our 2P reserves. So that means that we're in very strong control of how we spend our time and also how we spend our money and that puts us in a good place in terms of managing costs. And just to sort of reiterate that point that I made, which is holding operating costs flat despite the weaker U.S. dollar. That's a combination of cost optimization. It's also a product of being proactive in terms of hedging out our dollar position as well. So I think both have kind of helped us in that respect. Turning to the tax assets. So these are very simply held. They sit within 2 entities. And that is a really important point because the value of these tax assets is not just their value sitting in our organization, it's their value deployed, so principally transaction. So Lion's share of that $3.2 billion tax loss sits within EnQuest Heather Limited and that is where all of our producing assets sit, and those tax assets are $2 billion that sit within that EHL entity. And these are what are called recognized tax losses, which means they sit on our balance sheet. So you can see that in our accounts and our notes. The other portion are what are called unrecognized tax losses, and they're only unrecognized because it's about the pathway to recovery, which means we don't recognize deferred tax assets alongside them. Now they total a further $1.2 billion, but they also are on a pathway to recognition, and we would expect to be bringing those into our recognized tax loss pool in the coming periods. So I think there's 2 really important things to focus on the tax losses. One is the size, but the second one is the simplicity of how they're held, which means that they can be deployed quickly and efficiently. And that, of course, is a big part of creating value around production in our portfolio and production that we can bring into the portfolio as well through transactions. Craig Baxter: Thanks for that, Jonathan. That was very, very clear. James, a question coming from [indiscernible], is around, James acknowledges we're not going to talk too much around other companies' processes, but he's asked whether we're seeing any issues arising from the parent Waldorf being in administration of agreement work programs, et cetera, and whether there's an opportunity here. I do understand we can't be too specific about this, but I think it's worth maybe reiterating the way in which the Kraken JV is moving forward. Amjad, do you want to take that one? Amjad Bseisu: Yes. So I mean, I think clearly, the administration process delayed our Kraken wells that we were planning to do. And obviously, we came into a settlement late '23, early '24. So we -- so we will continue looking at those prospects in the future. I would say the discussions on the Bressay Gas and the submission of the FTP, as mentioned by Steve, has been more constructive. And I think we've had a more constructive dialogue with the new management now that the new management has changed in Waldorf. So I think we see progress, but it's tough to say anything more than that at present. I do think that the Bressay Gas going into Kraken is strategically important, but also important from an emissions perspective and meeting emission standards in the U.K. So I think there's an impetus for that going forward. And I do feel that -- again, it's a question of time, but I do feel that the new approach that Waldorf is taking is more constructive. I don't know, Steve, do you want to add anything to that? Steve Bowyer: Yes, no. At a working level, I think relations are good, and we're making good progress on discussions around Bressay Gas. So as you say, the new management certainly improved things, and we're seeing good engagement from Waldorf. So on a day-to-day basis, which I think was the question, there's no real impact. And as you've mentioned, Amjad, Bressay Gas is really important to both companies in terms of the emissions reduction and obviously reducing cost for the asset and also for us, secures the Bressay license, which is important for future oil development once we're in a market where we can invest in large developments again. Craig Baxter: Thanks, gentlemen. I'll wrap up with a couple of wider questions that I'll put to you, please, Amjad. And these are based on a number of questions we've received today in the Q&A. So the first of which is -- and I guess you knew this one was probably coming, but it was around the U.K. fiscal system and our engagement with government and whether you see any positive moves on the horizon as we head towards the late November autumn statement. If you could give some thoughts, Amjad, I'm sure that would be appreciated by those joining. Amjad Bseisu: Yes. No. So I think we -- I'm part of the fiscal forum, the U.K. fiscal forum, which discusses the new tax system. Steve has also been very involved with the OEUK as well as being on the Board of the OEUK, but as well as with the government on these discussions and setting up these discussions, both from an industry perspective and from an individual company perspective. And I would say the government, it has been very constructive -- the discussions with the government have been very constructive. I think the government understands the needs of the business and has indeed come up with a framework that is very palatable to the business in terms of the new type of windfall tax, which we are very much supportive of as an industry, I think. So the question is how quickly that's put in place. And if we can get something put in place relatively quickly, I think we would kind of reduce the risks that are significant on the business. Obviously, the U.K. fiscal environment now is very difficult for the business, and it's one of the most challenging in the world. And I think a change of that fiscal regime is needed. The government, I think, framework for the future is that they've discussed would be palatable. And I think it needs to be put in place as quickly as possible to just reduce the challenges of this -- of our industry, where we're losing 1,000 jobs a month according to the OEUK analysis and our basin is declining. So I do feel that we are part of the transition. We have reduced our emissions by 40%. We're going to reduce them further by these projects in NSF that are very clear and critical. We -- with the new stabilization facility, we're reducing the footprint from 1.5 million barrels a day to 40,000 barrels a day. So we'll decrease the size of the facility significantly. And with the long-term power, we're taking out the gas turbines and removing and moving to wind power, both either on the terminal or supplied by the terminal for backup power. So we will reduce our emissions there by 90%. So we need the investments in the U.K. to be generated from our upstream business, so we can actually enact these very important reduction measures. But more importantly, we don't want to export jobs. I mean the U.K. will continue to use oil and gas for many, many decades to come. And instead of importing those resources and exporting our jobs, it's important that we produce those resources internally in the U.K. and keep our jobs in the U.K. Craig Baxter: Thank you, Amjad. Amjad, I'm going to ask you to close, please. And this is in response to a number of questions that have been raised today from long-standing holders that you know like [ David Larson ] and [indiscernible] you met at AGMs over the years and others. And it's around -- it's around shareholders. And obviously, we're trading at a discount to our valuation. So it's a bit of an outlook from you, Amjad, as to what our shareholders can look forward to in the future with EnQuest? Amjad Bseisu: Well, I mean, we, at EnQuest have a very unique proposition because we have proven that we can take assets that are underdeveloped and late life or mature life assets and extract value out of them. And you can see we've done that over and over again. We've done that in 9 operated assets that we've taken. We've now also proven that we can be the best decommissioning company for assets in our area, but also in Southeast Asia. I think we have done, as Steve mentioned, a tremendous job in the U.K., the largest decommissioning company in the Central and Northern North Sea by a long shot, 81 wells decommissioned, 35% below the NSTA standards. We've got the award in Southeast Asia for the best decommissioning company in Malaysia. And so I think the -- with us being the right shepherd of these assets, even in decommissioning cycle, which I think is important, but all through from their mid-life to the decommissioning, I think we have a unique set of skills. Our acquisition costs when we have the right assets are low. As you've seen in Vietnam, we can actually acquire assets for relatively low amount, similar to what we did in Malaysia and similar to what we've done in the U.K. with Greater Kittiwake and Thistle and Heather. So I think the impetus is on the government to make the basin actually investable. And I think we have the capability and expertise that is clearly world-class and clearly best-in-class in the U.K. to invest in these new opportunities. So I'm looking forward to the U.K. when we're prodding the government to make a change because, again, we've seen a handful of companies either fail or stop production, and there's no need for that. It's self-inflicted wounds. And we also see the platform in Southeast Asia now that we are in 4 countries and continue growing in those 4 countries. So I do see -- I'm very hopeful for the future. I think our financial position is strong, and it's clearly improved significantly from 5 years ago when our debt levels are high. And I mean, the impetus and the catalyst will be -- in the U.K. will be a change in the fiscal regime, which we're looking forward to. But in the meantime, we're redeploying our capital in Asia where the returns are attractive and the risk reward is high. Craig Baxter: Thank you, Amjad. That's very clear. Thanks for that. Thank you for all your time, gentlemen, through the Q&A. So I propose we close here. Thank you very much. Amjad Bseisu: Thank you, everyone. Steve Bowyer: Thank you. Jonathan Copus: Thank you.
Michael Hazell: Good morning, everybody, and welcome to Saga's results for the 6 months ended 31st of July 2025. My name is Mike Hazell, and I'm the group CEO, and I'm joined today by our Group CFO, Mark Watkins. I'll kick off with an overview of our first half performance. And then Mark will take you through the financials in detail. Finally, I'll provide a brief update on our strategy before we open for questions at the end. I'm pleased to report we've had a strong first half with a performance ahead of our expectations. We've seen first half revenues increase, profits perform ahead of our expectations and a significant reduction in net debt. Underpinning this performance was the continued momentum we are seeing in travel. Alongside a strong trading performance, we've also continued to deliver the strategic actions that we previously laid out. We completed our refinancing in February, putting in place a new 2031 corporate debt facility and repaying our 2026 bond maturity and the Roger De Haan loan facility. To support the delivery of our next phase of our strategy, we have reorganized our management team. The new leadership team in place across insurance and travel now in place. In July, we successfully completed the sale of our underwriting business with cash proceeds GBP 17 million ahead of our forecast, and we're making good progress on the preparations for the launches of both our Ageas and NatWest Boxed partnerships later this year. In doing so, we're making rapid progress towards a less complex, lower-risk business model with more predictable earnings that will allow us to focus on our core strengths of customer insight, marketing and data in support of our medium-term growth plans, particularly in travel. To that end, we were delighted to launch the latest addition to our river fleet earlier this year, responding to the demand we are seeing for our boutique cruising offer. I was on board the Spirit of the Moselle last month, and she's an amazing ship. Taken together, as we go through this morning, you will see clear progress being made on both underlying trading performance and our strategic execution plans. This gives me even greater confidence with regard to the GBP 100 million profit target we laid out in April. On this slide, I've highlighted some of our key trading metrics. I'm not going to speak to every line, but you can see even at a glance, the strength of our trading performance across travel and insurance and the foundations we have put in place for money, all of which set us up well for future growth. I'll now hand to Mark to go through our financial results in more detail. Mark Watkins: Thanks, Mike. Good morning, everyone. It's a pleasure to be here today. I'll spend the next few minutes covering the detail of the financial results before covering the outlook for the remainder of the year. Saga had a really good start to the year, delivering a strong financial performance in the first half, largely driven by our travel businesses and insurance broking. Underlying revenue, which excludes some accounting adjustments and one-off items, increased by 7% from the prior period. Underlying PBT from continuing operations of GBP 23.5 million is marginally behind the prior period, but importantly, is ahead of our expectations. This was largely driven by the continued growth in our travel businesses and an improved performance in insurance broking, offset by higher finance costs. This was expected due to the successful refinancing at the beginning of the year. The group continued to be highly cash generative in the first half with available operating cash flow of GBP 89.4 million in the period, a 64% increase. This does reflect some seasonal strength, which I'll touch on again in a moment. Net debt reduction continued, and the position at the 31st of July was GBP 515.1 million, GBP 102.1 million lower than 31st of July '24 and GBP 77.7 million lower than at the year-end. Alongside strong trading EBITDA growth, which grew 8%, this supported further deleveraging with a total leverage ratio now at 4.3x compared with 4.8x at the same point in the prior year. I'll now focus on the headline underlying profit contribution from each of our business units. Our Travel businesses continued to generate strong customer demand, delivering GBP 41.6 million of underlying PBT in the first half, a 33% increase on the year before. Our Insurance Broking business performed well in the first half. Despite the anticipated decline in earnings, performance was ahead of our expectations. The standout performance of this business is that after a number of years of decline, policy volumes for motor, travel and our private medical insurance have returned to growth. Other businesses and central costs marginally increased due to lower investment income as the group now holds a lower level of cash than it previously did. The result of this is that underlying profit before tax increased from GBP 27.2 million in the prior year to GBP 38.7 million. Insurance underwriting is now classified as discontinued, but the strong performance in the first half supported our ability to capture an additional GBP 17 million of cash from the sale, which completed on the 1st of July. I'll now spend some time covering each of our core businesses in a bit more detail, and I'll start with ocean cruise. Our Ocean Cruise business had an exceptional start to the year, growing underlying PBT by 23% and continuing to show extremely strong forward bookings. Revenue grew 8%, supported by an increased load factor and per diems. The load factor in the first 6 months of the year was 94%, which compares with 90% last year, and the per diems worth GBP 391, 8% higher than the year before. Underlying PBT of GBP 34.5 million was 23% higher than the prior period supported by cost discipline and lower finance costs. The lower finance costs reflect the continued repayment of the cruise facilities. This has now reduced to GBP 55.6 million per year due to the repayment of the first COVID deferral loan. Looking ahead to the full year, the booked load factor and per diems are very strong, currently 2 percentage points and 10% ahead of the same time in the prior year, respectively. For the '26-'27 season, the booked load factor is 3 percentage points ahead with the same time last year with the per diems continuing to increase at 13% ahead. Now turning to our River Cruise. In the first half, we successfully launched the Spirit of the Moselle, our third Spirit Class rivership. The timing of this launch meant we operated with marginally lower capacity in the period, driving revenue to be flat against the prior period. The 93% load factor in the first half was 7 percentage points higher than the last year and the per diem of GBP 364 was 7% higher, reflecting the strong demand for our river cruises. This supported growth in underlying PBT of 34% from GBP 2.9 million in the prior year to GBP 3.9 million. Bookings for the full year are strong and currently reflect a load factor of 87%. The per diems of GBP 351 is ahead of the same time last year, albeit lower than H1, reflecting expected seasonality. Bookings for next year are also in a good position with strong load factors maintained alongside growing per diems. Turning now to our holidays business. Revenue grew 14% against the prior year, supported by a 13% increase in the number of passengers traveling with us. Underlying profitability was also strongly ahead at GBP 3.2 million against only GBP 0.3 million in the prior period. This serves to validate our step-up in the level of marketing to support bookings. As you'll see from this slide, revenue growth is set to continue into the second half of the year, with current full year booked revenue 14% ahead of the prior year, with passengers 12% ahead. The team are now focusing their attention on driving demand for next year's bookings. Insurance Broking also showed an improved performance in the first half, generating underlying PBT of GBP 8.9 million. This performance supported an increased investment in policy growth ahead of the Ageas partnership with 3 of our 4 main products, after many years of decline, returning to growth. Motor grew by 26,000 policies and the combination of PMI and travel grew by 5,000. This investment is expected to continue into the second half, further driving policy volumes ahead of the go-live date with Ageas. The graph on the left-hand side shows the material drivers of the movements in underlying PBT. The motor contribution before overheads decreased by GBP 0.6 million, driven by higher renewal margins, particularly for 3-year fixed-price policies as market-wide net rates reduced, offset by higher investment into volumes. Home is the most significant driver of the overall decline with a GBP 6.2 million lower contribution as net rate inflation, which was more pronounced within our panel, led to a reduced competitiveness and 19% fewer policy sales. Private Medical Insurance benefited from lower net rate inflation together with the GBP 2.6 million profit share from the Bupa partnership. Travel insurance remained broadly flat with policy volumes growing in the period. Our insurance underwriting business, AICL, was sold to Ageas on the 1st of July and therefore is treated as discontinued throughout these results. As you can see, AICL performed strongly prior to disposal generating an underlying PBT of GBP 15.6 million. This supported our ability to generate an additional GBP 17 million of net cash from the disposal with AICL paying a GBP 10 million pre-completion dividend and there being a GBP 7 million positive adjustment through the completion mechanism. We received GBP 57.9 million on the completion date, representing 90% of the proceeds, with the remaining 10% due in October. There remains a further GBP 2.5 million payable on the go-live of the partnership. Debt reduction is a clear strategic priority for Saga, and I'm pleased with the progress made in the period. During the first half of the year, net debt reduced by GBP 77.7 million to GBP 515.1 million, with a leverage ratio of 4.3x also below the year-end level of 4.4x. Available operating cash flow for the first 6 months was GBP 89.4 million, 64.3% higher than the last year. This was driven by a step forward in cash generation from all of our businesses together with the GBP 10 million dividend paid by underwriting. Debt service costs have increased due to the HBS refinancing, which was drawn in February this year and restructuring costs have increased due to the AICL disposal and the Ageas partnership. While the cash generation is strong in the first half, it does include some positive seasonality from both the Ocean Cruise and Insurance Broking business. These are benefiting from positive working capital positions with Ocean holding a high level of customer advance receipts and policy growth in Insurance Broking also benefiting cash. So let's now turn our attention to the full year. Bookings for the full year in cruise are strong. We do, however, expect profitability in the second half to be marginally lower than the first, purely due to the normal seasonality within that business. The peak trading months for our Holidays business are typically August to October. And as a result, we expect the underlying profitability will be materially higher in H2 as we benefit from economies of scale and operational leverage. In Insurance Broking, we expect the trends that we saw towards the end of the first half of the year to continue for the second half, but a step-up in investment in the second half means that profitability will be lower than the first. What this all means for the group is that the momentum we have seen in the first half gives us confidence to move our guidance for the full year. We now expect the full year underlying PBT to be in line with the prior year and importantly, our net debt leverage ratio to be below that of the prior year. And with that, I'll hand back to Mike for an update on strategic progress. Michael Hazell: Thanks, Mark. Now I'm going to take you through more detail on the delivery of our strategic priorities and our growing confidence that we are paving the way for long-term sustainable growth. Underpinning everything we do is our brand and customer insight, so it's worth a moment to remind you how that makes us different. Saga is one of the best-known and most trusted brands in the U.K. This is built on our deep understanding of our target customer and our extensive customer database, which together provide us with a competitive advantage that sets us apart from our competitors. Nobody understands older people better than us. And we have more than 70 years of experience designing products and services exclusively for them. We know who they are, we know what they like and we know how best to communicate directly with them. This means that in the growing attractive and affluent market for people aged over 50, we are ideally placed to succeed. Our businesses leverage these advantages through a series of consistent principles that I have shown on the screen. With the customer at the heart of our strategy, we will deliver quality and value through a suite of differentiated unique products uniquely tailored for our customer group using the insight we have developed over decades of experience, all supported by our powerful marketing and publishing channels that drive deep customer engagement. Since joining Saga, I've redoubled our focus on these principles, all of which are now central to our growth. In April, we laid out our medium-term profit target of GBP 100 million and a leverage ratio of less than 2x by January 2030. A strong first half performance gives us even greater confidence in these targets and our time line to achieve them. Our four strategic priorities laid out the routes by which we would deliver these targets, and we continue to make good progress on each of them, progress that will be obvious as I now touch on each business. Travel is now the largest contributor to Saga's profits. In March, we announced that we had combined the leadership and operations of our previously separate Cruise and Holidays businesses under the leadership of Nigel Blanks, previously CEO of our Cruise division. No longer operating in silos, a single management team ensures consistent, excellent customer experience and a coherent marketing strategy across both Cruise and all of our Holidays. Best practice is shared across the different product lines and customers are more easily introduced to a wider range of holiday options for their next experience. Saga has been taking older people on holiday since 1951, and we are the experts in catering for their needs. Our customers are time rich and have money to spend. They like to travel outside of peak season, enjoying quieter destinations, sometimes though quite adventurous ones. What unites them all is that they know Saga can offer, when needed, a little more support than our peers to ensure they can really make the most of their holiday. We take our customers to places they might not otherwise go, tailoring the experience to meet their needs. We open the world to them and allow them to enjoy traveling for longer. By understanding these needs, we create holidays exclusively designed for this age group catering for them in a way that the mass market can't. By playing to our strengths, we separate ourselves from our competitors and all of our travel businesses are now growing as a result. Ocean Cruise remains at the heart of Saga's travel offer with its enduring popularity only getting stronger. Forward bookings remain strong and repeat bookings are consistently high. This performance is down to the quality of our product and our relentless focus on our guests. Tailor-made for our customers, built on decades of cruising experience, our customer satisfaction and TMPS scores are market-leading. Our 2 ships provide a tailored luxury experience within a boutique cruise environment, setting us apart from the mainstream providers or the mega ships, which constitute the wider market. Smaller and easier to navigate, our specialty designed ships provide a tailored experience for our customers' holiday from our nationwide chauffeur car pickup service at the start of their holiday to the number of single cabins we have catering for solo travelers, to the quality of service and hospitality onboard. We continually look to improve and refresh our proposition across dining, trips and entertainment. You can see on the screen a picture of our newly launched French restaurant, aboard the Spirit of Discovery. Refined but contemporary, it offers a fantastic dining experience and is proving extremely popular with our guests. We aim to do things differently catering for our distinct customer base. And in doing so, we generate strong demand for our product and loyalty to our brand. That demand is driving high load factors, more early bookings and increased per diems, the amount of customers pay per day, as our need to discount reduces. But importantly, our customers still recognize the great value for money they are getting. This is a trend we are confident will continue as we carry on giving customers what only Saga knows how to do. River cruise holidays are perfect for our customers, sitting between our active land-based touring options and our no-fly hassle-free ocean cruise experiences, River cruising offers a gentle river-based touring option without the need for lengthy coach journeys and multiple changes in hotel. Customers wake up each day at an exciting new destination. We moved our River Cruise business under the leadership of the Ocean Cruise team earlier this year -- sorry, several years ago and have been aligning the service experience across the 2 propositions. As you can see from the page, the results have been very successful, with load factors, per diems and customer satisfaction all performing very well. Building on this success, we're adding more ships. And this summer, launched our newest vessel, the Spirit of the Moselle. This is an outstanding contemporary ship, especially designed by us for our customers. Its sleek exteriors and modern interior design is already proving incredibly popular with our customers, demonstrating the opportunity we have to scale up our river cruise business. Our next river ship is already in development and due to launch in summer 2027 as part of our ongoing growth ambition for this part of our business. Our cruise performance has somewhat out-shown our holidays business in recent years, but we've been making great progress there, too. And there are clear opportunities to build on this under our new leadership structure. At Saga, we offer holiday options that meet customers' needs whatever their age. We tend to find a younger, more active customer attracted to our land-based touring holidays, often as a gateway to a more relaxed river cruise in the future. Other customers look to enjoy a hotel stay at an interesting destination through one of our specially selected hotel stays, complete with Saga host on site to make sure they get the most out of their holiday. Whatever their choice, we understand that older customers are drawn to different aspects of travel to those generally catered for by the mass market. With more time available to them, older customers will typically choose to stay a little longer to more deeply experience the destination they are visiting. They're interested in understanding the language, enjoying local cuisine and visiting culturally significant sites. Beaches and swimming pools are nice, but our customers would typically prefer a nice meal overlooking amazing scenery without the sound of children splashing around behind them. Our holidays offer had over time become a little too generic, missing this opportunity to fully play to the differing demands of our customers, something that our cruise businesses have been doing brilliantly. Now under the leadership of Nigel Blanks, previously CEO of our Cruise division, we are bringing the focus more squarely back on our customers and differentiated experiences tailored for them. Recognizing the type of holidays our customers want, we are expanding our range of special interest holidays, think bird watching, food and wine, history, archeology and so on. It's early days. But as you can see, this refocus, which will take a while to fully flow through to our program, has already started to work. Revenues and profits are continuing to grow from an already strong performance last year and satisfaction levels have materially improved. Customers tell us they love our nationwide chauffeur car service and so from April, our chauffeur service will be included in all Saga Holidays as standard, meaning that whatever their holiday choice, the Saga experience starts from the moment they leave their house. Our insurance business is in a transitional year, as we prepare for our Ageas partnership. Nonetheless, we've made significant steps forward towards our new simplified lower-risk operating model and traded well in the meantime. Under the new leadership team we put in place earlier this year, led by Lloyd East. We've been investing in price and marketing to support long-term growth and prepare us for the Ageas partnership. And the results have been strong. Three out of our 4 policy lines are now growing after several years of decline and our customer satisfaction scores reflect the refocus on customer that Lloyd and his team are bringing. Much credit goes to our insurance colleagues for Saga's Insurance business being ranked in the top 50 organizations for customer satisfaction by the Institute of Customer Service, only 1 of 2 insurers to be named in that group. Preparations for our Ageas partnership have continued at pace, as we work towards a significantly simplified lower risk insurance business model. We completed the sale of our underwriting business in July, meaning that Saga is no longer exposed to underwriting risk, and we will transition a large part of our broking operations to Ageas later this year as we go live with that home and motor partnership. I'm particularly excited about how new products and services can drive future growth. In particular, we are focused on creating more ways to engage on a deeper level with our customers more frequently. Take our money business, for example, the partnership we signed with NatWest earlier this year is exciting in its own right, given that we are expanding our suite of differentiated products. But more than this, it's symbolic of how we could pursue additional innovative partnerships across different business lines in the future. Elsewhere, we've already been deepening our customer relationships with lesser-known products within the Saga portfolio. For example, our Saga wine club, Vintage by Saga, with more than 10,000 customers regularly buying wine from us. Similarly, our Saga Connections introductions service for older people engages with 13,000 subscribers checking their connections on the website multiple times a week, significantly increasing their exposure to Saga and our wider product set. These are great ways for us to remain front of mind with customers beyond their annual holiday or insurance renewal. While our primary focus remains on our core travel and insurance propositions, you can see the obvious crossover from those businesses to these types of additional service. So there are undoubtedly opportunities to cross-pollinate and build on areas like this that amplify our customers' engagement with Saga. Our publishing business lies at the heart of our customer engagement strategy. Celebrating the lifestyles of older people, it provides deep and regular engagement with our target customer group and in a digital world is increasingly a powerful source of insight into what is on their minds and what attracts their interest. As you can see from this page, comprising our award-winning magazine, newsletters, website and online articles, it's a fantastic aspirational communication channel, positively portraying the lifestyles and interests of older people. This month's magazine encapsulates that perfectly. You will have seen coverage of our interview with Pierce Brosnan and Helen Mirren right across the mainstream press. And in every instance, crediting Saga Magazine in the reporting. And we have a real opportunity to build on this amazing content, given the early success we are seeing across our digital channels and platforms. Our print magazine is already the largest paid subscription magazine in the U.K. By servicing this content on our website and refreshing it regularly, we're now driving highly engaged customers into the heart of our business, where they spend more time and come back again to see what else we've got to say. They sign up for more content, allowing us to then communicate with them more broadly. We're now seeing 1.3 million monthly visits to our magazine website, 37% of which are new to Saga and these numbers are growing every month. Building on this brilliant content, we're sending around 10 million newsletters each month, covering anything from lifestyle tips to personal finance matters and seeing opening rates of up to 49%, a clear indication of the quality and relevance of that content. By refreshing our website, both our Saga homepage and the magazine side, we are driving traffic into the Saga environment, exposing customers to individual businesses and the messaging while they browse. You should recognize this slide from April where Mark and I laid out our medium-term targets. So I wanted to update you on our progress. We previously guided that UPBT for '25-'26 would be lower than that of '24-'25, largely due to the increase in finance costs. You will have seen from Mark's slide that as a result of our strong first half performance, we now expect UPBT to be in line with '24-'25. Trading EBITDA is now expected to be ahead of '24-'25 demonstrating the strong trading momentum that we've seen. And with leverage falling, we now expect year-end to be below that of '24-'25. So while it's too early to update any medium-term projections, we have clearly made a strong start and are ahead of where we expected to be this year giving us even greater confidence as to the level and timing of those medium-term targets. Finally to wrap up before we move to questions: We've made significant progress in the first 6 months of this year. We've delivered a strong financial performance, particularly in travel, and we have significantly reduced our debt. Alongside this, we've achieved some significant strategic milestones toward our more customer-focused, simplified business model going forward. That puts us in a great position as we head towards the full year. Looking ahead, we expect to go-live with our Ageas partnership in Q4 2025, beckoning the start of a significantly less complex and lower-risk insurance model for us next year. We will continue to build on the momentum we are seeing across our travel businesses, leveraging the benefits we are now seeing from the combined operations that we've put in place. And we'll go-live with our NatWest Box partnership at the end of this year, which will start us down the path of engaging customers in more differentiated products and services beyond our travel and insurance offerings. In short, we'll keep delivering on what we said we would do. We'll now go to Q&A, taking questions in the room before moving online. Timothy Barrett: Tim Barrett from Deutsche Numis. I had a couple of things, please. A question on Ocean Cruise. Could you give us an idea on how we should benchmark your performance there? And specifically, GBP 437 on the forward book looks really impressive, just wondering how you would encourage us to think about next year as a whole? And then interested in what you said about the database. Could you talk about scaling that and what size it is? I guess, how the database is growing? That would be great. Michael Hazell: Sure. So taking the ocean point first. So what we're seeing on ocean is really strong load factor growth and performance. Clearly, that's been growing year after year. We're getting to the point now where we're well into the 90%. What that translates into is a very powerful performance in per diems. The per diem growth is coming from a combination of the demand and people competing to get on to their favorite ship and their favorite cabin and their favorite holiday. But we're also seeing that translating into earlier bookings which means we then didn't need to discount less to drive that demand. So that, together with improving the itineraries, improving the onboard experience, improving the onshore excursions, all of those things add greater value, which drives that per diem growth. So as we now get to the point where it's pretty clear that there's only so far you can take a load factor growth, it will continue to grow a bit. But actually, the growth opportunity from here is continuing to add more value, discount less and drive that per diem growth. So very confident that now we've got the load factors in that sweet spot that per diem growth will now continue through a combination of demand management, less discounting and adding more value as the proposition improves year after year after year. So that's the way to think about per diems. In terms of our database, we've got the largest database for older people in the country, we've got 9.7 million people on that database. It's a really powerful insight tool. We've got contact details and can communicate to 7.7 million of those customers. So you can think of it, first and foremost, in 2 aspects. The power of that database to enable us to understand older people and curate our product proposition for those customers, whether it be on holidays, insurance or anything else, that is a really powerful tool for us, made even more powerful by our publishing business, whereby we can talk to them post articles, if you want to know who might be interested in pet products, send out a newsletter with a pet article and see who opens it. You'll then very quickly understand what resonates with those customer groups. You'll then understand who's got a dog. But we're actually getting even cleverer. With the benefit of AI now what we've been able to do is back, what's the word I'm looking for, tag all of our historic articles to get a better understanding of what type of article works for what type of customers. So it's not just about was it an article about dogs or was it an article about cats and so on. But actually, some customers respond better to a top 10 list of X, other like an interview style article. So what we can do is both, understand more about the customers and what they're engaging with in that publishing business and then curate and tailor our articles going forward to make sense of that. All with a view of a virtuous circle us communicating with our customers and then learning more about those customers in the process. Obviously, the other side of that is, it's a very powerful marketing tool off the back of that. So we've got the insight on the one hand, but we've got 7.7 million customers that we can communicate with about the products that we offer. So it is something that we're driving hard. What we have done more recently, and I touched in my presentation is, we're starting to make our Saga homepage a destination for customers online, putting brilliant publishing content on there, so that customers are seeing the content somewhere in the web, in the newsletter or simply because they've come to Saga. They see the brilliant content and then they come back the next day or even later in the day to see what else we might be saying because it talks to older people in a way that other people don't. Clearly, in surfacing, both on the homepage and then those articles, what we're able to do is flash up relevant product content alongside it to then drive those customers into our business units. So when I say we're bringing publishing to the heart of the business, it's not in an off-line way, it really is as an introduction into our business with that insight powering the products that we offer and the services we deliver alongside them. Sahill Shan: Sahill here from Singer Capital Markets. Three questions from me, if that's okay. On the money side of the business, I appreciate it's relatively small at the moment. But you made progress in terms of partnerships. How should we be thinking about how that's likely to play out or you're planning to play out over the next few years or so? Just help me understand, I think there was a waterfall chart. And within them, was quite a decent chunk in terms of contribution going forward, the building blocks to actually get that kind of profitability going forward. So that's on the money side of things. Secondly, just more generically, clearly, you're doing fantastically well on the cruise business at the moment. Can you just help us understand and just give us an overview of the state of play of the cruise market at this moment in time, particularly the area that you're focusing on? And are there any competitive threats that we need to be thinking about? And finally, just ahead of the launch of the relationship with Ageas in Q4, how is that going in terms of the lead up to that particular launch? That would be really helpful. Michael Hazell: Sure. So if I take the money business, and thanks for raising that because I think that's a really exciting opportunity for us. But you're right to call out the bar in that building block. It's there quite deliberately because we can see the opportunity that is a medium-term opportunity. The NatWest partnership goes live later this year. We've got around 180,000 customers engaging with our money products even today. But in the short term, it's not about driving profitability. It's about scaling up, driving engagement, talking to customers regularly for that wider Saga environment. But clearly, as we build that proposition over time, then the focus shifts from the early scaling up to then converting that into more profits and returns on that investment. So I'd encourage you to think about that as a long-term opportunity with a short-term scale up. In terms of the cruise market, look, I think it's dangerous right the way across our holidays proposition to think about the market rather than understanding that we do something different to the market, and that's what I'd encourage you to think about. Nobody is doing what we do. We've got 2 ships, and I said it in my presentation, that are tailored uniquely for older people, and we tailor our entire proposition for that market. When you look at the wider market, they are either in a mass market, larger scale cruising environment or they're operating outside of the ex U.K., i.e., you've got to fly cruise. Nobody is offering that, no fly boutique cruise experience to U.K. customers exclusive for people over 50 in the way that we do. So when we talk about what's the wider market? Actually, the wider market will have its own sort of ebbs and flows. What we are seeing for our customers is consistent and growing demand year after year for what we do brilliantly. In terms of competitive threats, I think that therein lies the answer. We do something different right the way across our holidays proposition, whether it be cruise, ocean crews, river or holidays. We win by being Saga, understanding older people better than anybody else and then curating products and services in a way that nobody else actually wants to because they're catering for a mass market, and you'll see that as we move into this new phase for Saga, where we've moved away from fixing the business, which we've been focused on for the last couple of years. This point around we do what Saga does, we understand older people better than anybody else and right the way through all of our product propositions and indeed anything new that we offer, you're going to see us, first and foremost, thinking about the customer how their needs are different and then playing that out. And therefore, when you think about that competitive advantage that brings, it's not so much about what the wider market is doing about what we can bring that is different to that wider market. And Ageas. So just to remind you on the Ageas for those that won't be close to it, really exciting opportunity, will transform our insurance business model. So it's a home and motor partnership where Ageas will bring the operations and the insurance infrastructure scale and investment as a first-class insurer in the U.K. After their acquisition of they will be in the top 3 U.K. insurers. They do that brilliantly. What we do brilliantly is understand older people market in a way that other people can't using our database and our experience of marketing to older people and help Ageas design products and services for those older customers. Put that together, you've got the perfect combination of Saga doing what it does brilliantly and Ageas is doing what it does brilliantly as a first-class insurer. So really exciting opportunity, but not just because of the overall opportunity to grow but also because it frees us up to focus on what we do best and allows Ageas to focus on what they do best. So in striking this partnership, we will and are rapidly implementing a much more simple and lower risk business model, whereby we no longer take underwriting risk. We completed the sale of our underwriter in July. And by the end of the year, we'll be live with the Ageas partnership, whereby they run the policy administrations, they run the back end, they run the infrastructure and so on and they have all the regulatory complexities that come with that, we will become a customer-focused marketing driver of that business and, therefore, be able to focus on what we do well. So as well as the growth opportunities, that simplification objective that frees us up to focus on what we do best is a really powerful aspect of that. So underwriting completed end of July, the wider partnership due to go live at the end of the year, and everything is on track. Any other questions in the room before we move to online? Any questions online, Chantel? Unknown Attendee: Yes, a couple. Under holidays, how are the Saga and Titan brands being developed differently? And also, how is the destination mix changing under holidays? Michael Hazell: Okay. Thank you for that question, whoever that came from. So yes, really, really important point. So we have the opportunity to win twice in holidays because we've got a brilliant Titan brand, which is an open-age holiday business, touring business, that's got great heritage in touring and then we have the wider Saga proposition that both does touring, holidays and obviously, our cruising business. But it's really important that we recognize those are two different businesses. And therefore, what we have been developing over the last couple of years and will continue to develop is differentiation across those two propositions because actually, in the past, we've been dangerously close to offering the same or similar experiences on Titan tour as you would a Saga tour. And going forward, we definitely want to separate the two out so that you get something different as a different type of customer for Saga as you would from Titan. So where you see Saga on the badge, you'll see all of the things that we curate for that older customer base that comes through in with the Saga customer. And then likewise, those customers that are looking for a complementary proposition that may be slightly younger and more active will engage with the Titan brand potentially as a feeder to engaging with Saga at a later stage when they see what the wider service and product proposition we can offer under the Saga banner looks like. So great opportunity. It's a complementary product set between the two. And in terms of destinations, look, we'll talk more about product development and proposition in the future as Nigel and the team get their feet under the desk. Our immediate focus on proposition has been to really double down on what our customers look for from a business that offers something different for older people. And that starts with special interest holidays. So as I said in my speech, older customers go on holiday for something different. They're not typically looking to go and lie on a beach or lie by a swimming pool. They're looking for something that engages their brain, maybe participate in their hobbies and just have a great experience beyond simply the pool side. So special interest is always something that we've offered, but we are increasing the range of special interest holidays and seeing increased demand for our special interest holidays. So we're seeing more people engaging with our special interest holidays quite a mouthful, but I'll keep saying it. And as we add in more special interest opportunities going forward or experiences going forward, then we're seeing increased demand as a result of that. So we're seeing more demand for what we've got, and we're driving more growth in that demand by adding in more. Unknown Attendee: Okay. I've got a couple more. That's from Peel Hunt, from Ivon Jones. Say ocean cruise, how are the dry dock timings managed? And were the cruises impacted by the Middle East over the summer and what was the financial impact? Michael Hazell: Okay. Taking the latter easily. We're not impacted by the Middle East disruption. The way to think about our ocean cruise is, it's a floating hotel, and therefore, we float wherever that we want to in any given year. So Middle East is not a big part of our itinerary. And therefore, we flex that itinerary every year to make sense of what we're seeing in the demand, but also the geopolitical environment. So actually a really flexible market for us. And despite all of the disruption in recent years, you've seen that we've gone from strength to shrink without any disruption there. In terms of dry dock timing. We had a dry dock in the first half of this year and we had the other ship, and I forget which way around it is, but the other ship had a dry dock in the second half of last year. And you'll see that just having a slight impact on the load factors in any given year. So that therefore, effectively, the dry docks are now out of the way, and I'm going to look at Nigel, this is why I bring the team here. The cycle for dry docks are every... Nigel Blanks: It's effectively every -- we do 2 docking every 5 years, a wet dock and a dry dock. Wet dock clearly ships those in water, dry dock comes fully out, so that's what we do, our statutory and compliance work. Michael Hazell: So it's a 5-year cycle. Was that the 2 questions? Great. Any other questions online? Unknown Attendee: One more from Ivor. Travel marketing, how are they being deployed and how is that changing? Michael Hazell: So there's a few things on travel marketing. Firstly, by combining the two travel businesses, cruise and holidays, we get much bigger bang for our buck because we're able to optimize our marketing right the way across our travel proposition rather than focusing on cruise marketing overhead or holidays marketing over here. So that is increasing the penetration of our marketing spend right the way across the business. The profile of marketing is slightly different this year to previous years. We focused our marketing in the current year on driving our current year bookings, and you'll see that passenger numbers in here are 13% ahead of the strong year that we had last year. What that means is as we go into the second half of this year, we'll shift our focus into marketing next year, but it does mean that the year-on-year booking profile is slightly different, which is why you're seeing that next year bookings are slightly behind where we were this time last year for the year ahead, not concerned about that. That's simply because we've rightly focused on driving this year, driving the growth into this year, which will then mean that translates into repeat business for next year and then we drive the next year's bookings in the second half of the year. So very confident in the outlook, and that's a business that's growing very well. Outside of the sort of coherent marketing approach right the way across travel, what we are also now doing is really driving up our holiday marketing, more tailored for our customers, again, by looking at all of what works and what doesn't work right the way across our holiday propositions, we can take learnings from one part of the business into the others. So I would say that in our holidays business, we've probably been a little overexposed to digital marketing and a little underexposed to analog marketing. That means that if you recognize our customer base, they tend to respond more to the white male catalog marketing than they will do to digital marketing. There's room for both, but our cruise business has got brilliant experience in doing that. The Marketing Director that was sitting across cruise is now sitting across the whole of our Travel business, bringing those learnings into the Holidays business. So we're rebalancing the spend between digital and analog, importantly. But we're also out on radio. You'll notice that insurance is now actively marketing on TV as well, that brings us a halo effect. So right the way across the board, you'll see Saga present not just in travel, but more generally, putting your head above the parapet, which I think is a real sign of where the business now is. We're coming out, we've got a strong footing, we've got our funding in place, we've got our growth trajectory ahead of us, and we're now trading the business hard and investing in that growth, and clearly, it's working. Any other questions online or should I say from Ivor? Good. All right. Any other questions in the room? Doesn't sound like there's any more online. Okay. Just to wrap up then, thank you for joining today. Look, I think we've made really good progress. You can see that we're trading well, which sets us up really well for the trajectory we're on. But really importantly, that's going to be underpinned by the delivery of our strategic actions, and we're getting on with that stuff as well, which means when we talk about those medium-term targets that we set out in April, we're even more confident here today that we'll deliver on those targets, GBP 100 million profit and less than 2x leverage by January 2030. So great fun, and we're getting it done. Thank you, everybody.
Eric Lakin: Good morning. I'd like to welcome everyone in the room and on the webcast to the TT Electronics 2025 Half Year Results Presentation. I'm delighted to be here today to present the results as Chief Executive of TT. This follows a permanent appointment decision by the Board of Directors last month, and I'm grateful for the trust placed in me by the Board and for their support. I'm also very happy to introduce you to Richard Webb, our Interim CFO, who joined us in May this year. It's been a remarkably busy 5 months since the 2024 results were announced in April, and we have made significant progress since then. In the first section today, I will cover the headlines for the half, including the key financials and an update on the actions taken to stabilize the business. Then Richard will take us through the results in more detail. In my second section, I will share more of my early impressions of TT's business. I'll also talk about the overall direction of travel and provide more color on the outlook for the remainder of the current year. We will then take Q&A. Before I start, however, I wish to recognize and thank all of my colleagues for their hard work, commitment and support during what has been a challenging time with significant change. Overall, TT has made solid progress over the past few months, including significant strides with the business improvement in North America, and we're on track to meet expectations for the full year. Our European region has once again performed well as momentum continues, benefiting from our strong long-term positions on several Aerospace & Defense programs. For the Asian region, business operating margins held up through our Lean business program in Suzhou despite being impacted by some order delays for certain customers. With regard to our North American business, there have clearly been a number of challenges to navigate over the past 12 to 18 months. In the first half of this year, we have taken prompt action to stabilize this North America region. In April, we announced that we were launching a strategic review of the underperforming components business. As a result of this ongoing review, we took the decision in June to close our loss-making Plano site in Texas, which lost around GBP 6 million last year. We also established a separate management team for components to focus and provide greater oversight. We stepped up action to turn around the loss-making Cleveland site. We deployed external consultants to undertake a full operational review of the business, which has now concluded, and the local management team is now at full strength. I feel confident that we have turned a corner with the performance of this business. More about that later. Our drive for inventory reduction continues to progress well, which contributed to an excellent cash conversion outcome of 135% in the half and leverage of 1.9x, which is within our target range of 1 to 2x and slightly ahead of our previous guidance. Richard will cover this in more detail. Overall, I would summarize the first half as a transitional period. While the performance in the half doesn't reflect many of the operational improvement actions taken, these actions do underpin both the second half improvement in profitability and future run rate profits. Importantly, we continue to expect full year adjusted operating profit to be in line with market expectations. So let's take a closer look at the operational turnaround projects in turn. Firstly, the Components' strategic review. The Components business has a different operating model and characteristics from the other TT businesses of Power Electronics and Manufacturing Services. We are, therefore, undertaking a strategic review that was started in the second quarter. Components is a more transactional higher-volume business with shorter lead times and therefore, has less future visibility than other parts of TT. The route to market is predominantly through distribution channels, which also tends to exacerbate the stocking and destocking trends. Consequently, I believe it is the right decision to give this business separate management focus within TT, and we are already seeing benefits from this new structure, including tailored initiatives for pricing, marketing and product development. This will ultimately drive improved performance through volume, margin and overhead recovery, especially when we see a positive turn in the industry cycle. We continue to monitor levels of our Components' product inventory held by distribution partners. And as you can see from this graph, encouragingly, the stock levels have been showing a consistent downward trend. Although we haven't yet seen a significant uplift in new order intake, it is encouraging to see a stabilization of order levels. A key action to improve the performance of the Components business was the decision to close the Plano site to stem the losses. Production is planned to discontinue by the end of this year. The factory is currently fulfilling demand from last time buy orders, which also helps underpin the second half improvement for the business. We are now expecting cash closure costs of around GBP 4 million, which is lower than originally anticipated and delivers a payback of less than 1 year. Now for an update regarding the ongoing activities to improve performance at the Cleveland, Ohio site. There has been a lot of activity at this site, and I'm pleased to share some recent data. In fact, Richard and I were there last week along with the Board, and we were heartened to see the significant progress being made. I'm glad to report we have turned the corner in Cleveland, having implemented a detailed improvement plan, which was developed with our local site team in collaboration with the external consultants. The plan incorporates multiple margin and cash flow initiatives, including pricing, production planning, inventory optimization, procurement and efficiency measures manufacturing processes at the site have become more efficient, supported by improved factory layout, process optimization and waste reduction. You can see the outcome of these initiatives in the two charts on this slide, which show encouraging trends. In the blue column chart, productivity, which is defined as standard hours earned divided by total labor hours paid, has been consistently improving during the year and has now reached our target level. June was an expected temporary dip due to a planned 1-week factory shutdown to improve the layout and flow. Productivity improvement has been delivered partly through a reduction in scrap and rework hours, which can be seen in the purple column chart. In addition, we have further reduced headcount at the site, which is down 17% since the beginning of the year. More efficient operations has led to improving service levels to our customers, including on-time delivery, which puts us in a better position to tighten our commercial terms for legacy low-margin contracts. The benefit of this work stream will be delivered over several months as existing contract terms come up for renewal. We have also completed a comprehensive balance sheet review, which has resulted in a largely noncash restructuring charge in the first half of GBP 5.7 million, predominantly related to aged and obsolete inventory. Now that the external consultants have completed their assignment, the improvement project work streams are owned by the Cleveland team. There is full commitment from this team to continue to deliver on the improvement plan, and it was very encouraging to hear updates from them last week. So hopefully, that gives you a good feel for the progress with our short-term priorities, especially as we focus on improving the operational performance in North America. Now I'd like to hand over to Richard to go through the first half numbers in more detail. Richard Webb: Thank you, Eric, and good morning, everyone. This is my first set of results with TT having joined the group in May, and I'm really pleased to be part of the great TT team. It's been a busy few months, but I'm pleased with what has been achieved and the actions taken to stabilize the business. Clearly, it's been a mixed half with continued strong profit progression in Europe, offset by specific challenges at two North American sites and order delays for our Asia business. Now moving on to the group financial metrics. Throughout the presentation, I'll refer to organic performance. This reflects the performance on a constant currency basis and with the impact of last year's Project Albert divestment removed. Revenue was down by 6% organically. If we exclude the Plano site from both periods, we would have been down by 4.3% organically. As already communicated, Plano will be closed by the end of the year. Adjusted operating profit declined by 29.7% organically to GBP 13 million as strong operational gearing in Europe was more than offset by 2 loss-making North American sites. Adjusted operating margins dropped by 180 basis points on an organic basis to 5.5%. Adjusted EPS declined to 1.9p, reflecting the reduction in operating profit and the impact of a much higher effective tax rate in the current year as we cannot currently recognize a deferred tax asset for the U.S. We've taken the prudent decision to focus on strengthening the balance sheet and have decided to continue the pause on the dividend and will not be paying an interim dividend. Return on invested capital was flat at 10%. This metric benefited from a reduced denominator following the December 2024 impairments of North American goodwill on components assets. And just to flag, half 1 2024 has been restated, mirroring the restatement of the 2024 full year we highlighted in our announcement of the 10th of April. This all relates to North America. On this slide, we're showing the revenue bridge, which adjusts for the Albert divestment and FX and shows the makeup of the 6% organic revenue decline. Our positioning on long-term programs in the strong Aerospace & Defense end market has driven the growth in Europe, offset by the issues at two sites, Plano and Cleveland in North America and the order delays impacting our Asia business. Similarly, for adjusted operating profit, you can clearly see the strong drop-through on the European revenue growth. However, this was more than offset by circa GBP 3.5 million of losses at Plano and the Cleveland challenges, which Eric explored earlier. On a more positive note, we're really pleased with the strong cash conversion of 135% in the first half. Net debt, excluding leases, reduced further to GBP 73 million. This is a GBP 36 million reduction since the end of June last year, and we're very happy with the good progress on cash conversion and debt reduction. Free cash flow was GBP 6.4 million. Over the last 18 months, there's been a significant focus on reducing our inventory levels, and this initiative resulted in a GBP 5 million contribution to the half 1 cash flow, putting us well on track to delivering the commitments to a GBP 15 million reduction in inventory by the end of 2026. We closed the half with covenant leverage at 1.9x. As profits recover and cash generation continues, we expect to see a slight further reduction in leverage over the remainder of this year. Looking at the cash conversion in a bit more detail. Working capital movements were a net inflow of GBP 0.9 million in the half. This comprises the GBP 5 million of underlying inventory reduction mentioned just now, partially offset by a GBP 3 million creditor reduction and a GBP 1 million receivables increase. It's a much better picture than half 1 last year, where there was an GBP 18 million working capital outflow. We expect working capital movements in half 2 to remain broadly neutral. Before we move on to the performance of the regions, it's worth looking at end market revenue, which shows similar themes to 2024. Aerospace & Defense continues to grow strongly with the main benefit showing through in our European performance. Healthcare was down 6% organically, driven by the well-documented reduction in U.S. research grants and funding into the sector. Automation and Electrification declined by 14% organically, reflecting end market weakness for our customers. And finally, Distribution, which is where we have continued to experience our main challenges, with a 17% organic reduction. The biggest impact was in the North America region, particularly for our Plano site. As Eric mentioned earlier, we are now seeing distributor inventory levels stabilize. Now moving on to the regional performance. The European region continues to perform well, reflecting our long-term positioning with key customers in the A&D sector. We have built on a strong 2024 performance to deliver a 5% revenue increase on an organic basis and a 34% organic increase in adjusted operating profit. Operating margins have further improved, up 330 basis points, to 15.6%, benefiting from a favorable product mix in the half, good operational leverage on growth and further efficiency improvements coming through. Order cover for the region remains very strong, and we expect to deliver further organic revenue growth for the year as a whole. Clearly, North America has faced another difficult half given the slow components market and the execution challenges at our Cleveland site. However, as Eric has explained, action has been taken. And although not visible in the first half results, we expect to see evidence of these actions in our second half performance. Revenue was down 10% on an organic basis with some good growth in Kansas City, where a successful turnaround has been achieved from the challenges noted last September, more than offset by declines in Cleveland and in Components. If we exclude Plano from both periods, the organic revenue decline is 5.8%. The GBP 5 million loss in the region includes a circa GBP 3.5 million loss at the Plano site, which will be closed in the second half. In the half, we have booked restructuring costs taken below adjusted operating profit with GBP 6.7 million booked in relation to the Plano site closure and GBP 5.7 million for restructuring of Cleveland, which is mainly inventory related. As we look into the second half, a combination of higher revenue, management actions taken, such as the Plano closure and the Cleveland improvement plan means we expect the region to return to profitability in the second half, although the region is expected to be loss-making for the year as a whole. Finally, Asia, which has made another good contribution to the group despite lower levels of revenue, reflecting order delays due to geopolitical and related uncertainties. On an organic basis, revenue was down by 9%. Operating profit reduced by 14% organically, driven by the adverse impact of volume reductions. 2025 is a transition year for the region with the ongoing transfer of production for a major customer at their request from China to Malaysia. This is progressing to plan. The region is still delivering a strong margin performance with margins broadly maintained at 13.2%. Revenue in the second half is expected to be slightly lower as the order delays are expected to continue. The drop-through impact will result in half 2 margins being marginally lower than half 1. I wanted to highlight on this slide the ongoing balance sheet derisking. Inventory has reduced by GBP 22 million in total. GBP 5 million was a result of the sustained hard work on our ongoing inventory reduction initiatives, as I mentioned for the cash conversion slide earlier. These initiatives are expected to further reduce inventory in the second half, and we are on target for achieving the previously stated GBP 15 million reduction by the end of 2026. This is on top of the GBP 14 million reduction in inventory delivered in 2024. Separately, the Plano closure announcement has resulted in around GBP 5 million of inventory being written off below adjusted operating profit and the comprehensive balance sheet review at Cleveland also resulted in a circa GBP 5 million of inventory being written off, also below adjusted operating profit. As previously flagged, profit in 2025 is expected to be weighted to the second half. This slide gives some of the building blocks, not drawn to scale, to deliver the step-up in second half profitability. The Plano and Cleveland sites were significant drags on half 1 profitability. The decision to close the Plano facility and subsequent last time buy activity into the site in half 2 will provide a positive contribution. The Cleveland improvement plan will start to deliver improved performance. We have also factored in the impact of the ongoing order delays for our Asia business. We expect full year adjusted operating profit to be in line with market expectations. With that, I'll hand back to Eric. Eric Lakin: Thanks, Richard. So having spent much of the presentation so far looking back and reviewing the turnaround activities and progress, what's next? It is still early days in my tenure, which has been focused significantly on steadying the ship, but I do want to share with you some of my early take and direction of travel. TT has foundational capabilities, but there remain areas where we still need to improve our operational efficiency and leverage all of our assets across the business. We must continue to develop our people, products and market positioning to drive sustainable shareholder value in the long term. I'll shortly be covering examples of where we have been investing, technology, for future growth. In the meantime, our short-term priorities are clear. We must complete the fix of operational issues, complete the Components business strategic review, including performance improvement and restore confidence and deliver on our commitments to all stakeholders. I also want to mention that early on in post, I empowered the three regional heads by bringing them onto the executive team. This brought clear lines of responsibility and accountability and encourages collaboration across the organization. The executive team also now includes a leader for the Components business. Beyond our short-term focus, we also need to look further out strategically and drive top line growth. I've been impressed by many things that I've observed, getting to know our business and our employees over the last few months, which I think goes to the heart of the underlying investment case. TT is focused on structural growth end markets driven by megatrends and rising demands. While there have been some short-term softness related to geopolitical uncertainties, I believe ultimately that these are the right strategic markets to be in. Our engineering, manufacturing and sales teams have deep domain and application knowledge across these sectors. TT has particularly strong capabilities in Power Electronics, including Conditioning and Conversion and Electronic Manufacturing Services, known as EMS. TT offers high specification, highly customized electronics for mission-critical applications, which provide strategic advantage through differentiation. We collaborate with our blue-chip customers on long-term programs, and I believe there's a real opportunity to accelerate targeted investment in innovative technologies and products compatible with customer needs. A good representation of TT's strength is demonstrated by some significant recent customer wins, including a GBP 23 million contract this month with long-standing customer Kongsberg. Next, I want to remind you of the broad customer relationships we have across our end markets, which is so important for the business. We are proud to work with many blue-chip customers with whom we have long-term relationships. In fact, our top 10 customers have all been working with us for over a decade and many have been partners for 20 years or more. First, in Healthcare, Asia has secured some notable contract wins this year, reinforcing our regional strategy supporting life sciences OEMs with local production capabilities. In North America, our Minneapolis site is working with a medical equipment partner on next-generation surgical device development that use electromagnetic tracking technology. In Aerospace & Defense, we see continued growth opportunities with the NATO commitment to raise Defense spending targets from 2% of GDP to 5% by 2035. And we're also seeing momentum in civil aviation, driving demand for new aircraft and spares. For Automation and Electrification, we are well placed for growth through the cycle with strong brands across different specialist sectors, including semi equipment, power, security, rail and data centers. This chart may be familiar to you, but it illustrates our business model and customer spend patterns and how we seek to partner to support our customers from the concept stage through to full-scale production, leveraging our global footprint for engineering and manufacturing at each stage of the product life cycle. This development path varies by market and some programs can extend for many years with high barriers to entry in regulated markets, which provides visibility over long-term revenue streams. We have established a group-wide engineering and R&D function to leverage TT's expertise across all regions with product road maps for all sites. I've been greatly impressed with the technology and industry experts at our sites who help develop solutions for our customers' challenges. The image on the left shows how TT combine a fully integrated offering. For example, the use of our magnetics devices on our PCB assemblies, which along with our hybrid microelectronic devices can be designed into high-level assemblies. A core product of TT is our power units, which can incorporate our own PCBs as well as TT connectors and cable assemblies. On the right, it is an example of our customer-led approach to investment. Silver sintering is a key manufacturing capability that enables cutting-edge power modules for critical applications to be fabricated using the latest silicon carbide semiconductor devices. This represents the next-generation technology, enabling higher power with superior reliability and thermal performance within a smaller, lighter package, which are particularly valued by Aerospace customers. Another investment example is Altitude DC, our high-voltage direct current power system that was launched at the Farnborough Air Show last summer. We developed this in collaboration with the Aerospace Technology Institute as well as shared investment with them. This platform provides efficient and reliable power conversion solutions to enable longer duration flights at higher altitudes in civil aerospace, defense and air mobility vehicles. The modular design means reduced development time and costs and simplifies the qualification process. So that's just a couple of examples I wanted to share with you to illustrate our investment in the future. Let's finish with an outlook for the remainder of the year. We are clear on our short-term focus to deliver improvement in operational performance and margin and have taken decisions to accelerate this. This includes a component strategic review and the planned closure of Plano as well as the Cleveland turnaround project. Very important to me this year is -- and the future for TT is that North America is expected to show a step change in performance, leading to a return to profitability in the second half. Yes, it's still expected to be loss-making for the year as a whole, but it's good to have positive momentum in the region. This sequential improvement, together with further second half progress in Europe and a resilient contribution in Asia is expected to underpin a significant uplift in profitability in the second half of this year compared to H1. As stated earlier, we expect adjusted operating profit to be in line with market expectations. While our short-term priorities are clear, I plan to share further thoughts for the longer-term strategy in the new year. In conclusion, following my first few months in the business, I am convinced that we have a robust platform for growth with leading products and capabilities, deep customer partnerships in attractive end markets, and this makes me excited for TT's future. So now we're happy to open up to questions, initially from those in the room. There's also a facility for those on the webcast to submit questions, which we'll cover after those in the room. Thank you. Eric Lakin: Okay. First hand up. Mark Jones: I'm sure that's working. Mark Davies Jones from Stifel. Could I ask about the Asian business, please? Because clearly, the U.S. has been a priority and you're getting scripts with that, but delays seem to be drifting onwards in Asia. When does delay come -- become work that's not coming your way? And if you're relocating business from Suzhou to Malaysia, what does that mean in terms of ongoing capacity utilization at the China plant? Eric Lakin: Yes. Thanks, Mark. So overall for Asia, First, in terms of the production transfer, that's going very well and to plan. That was quite a significant transition for one customer in particular. It represented GBP 20 million or more of annual revenues. That will be complete this year. There was some safety stock that was purchased last year in the first half of this year. So that will contribute to some short-term softness as that safety stock is sold and consumed by the customer. I mean, overall, that does mean there is capacity for the Suzhou site. We have 4 SMT lines there and a very capable workforce. We have taken some modest adjustment to the headcount there to counter the transfer of business from Suzhou to Kuantan. But the underlying growth, if we look at the -- there's two large customers in particular, where we're seeing some softness in end customer demand patterns, partly due to the geopolitical uncertainty we've been talking about, specifically with the ongoing uncertainty around tariffs, it's difficult to know where they will be in 3, 6, 9 months' time. Some of the decisions made to agree the supply chain and location of fabrication has meant that there are some delays in those orders, which feeds into short-term softness in revenue. The good news is we're not losing business. We have a diverse portfolio with different geographies to provide offshore, both China and Malaysia, but also nearshore with Mexico, with the Mexicali EMS facility, but also indeed Cleveland. We're having increasing discussions with some of our key accounts and new accounts about onshoring production and EMS into the Cleveland site. So we're doubling down on our regional Asia for Asia projects. In fact, we're increasing our resource for business development headcount in Asia, including China, to grow our book of business with local customers in China. And we're having some good early traction with wins within the region so far. So I think I see it as temporary short-term softness in Asia, which we've not seen before due to specific end customer demand patterns and uncertainty. But over time, and as we go into certainly the second half of next year, we see a return to growth from our existing customers, but also as we see benefits for new business opportunities and new customers. Mark Jones: And maybe one for Richard. Lot of moving parts in the numbers. I wouldn't say I've read every page of the release yet from this morning. But in terms of setting the baseline for revenues, obviously, you restated the first half. Have we got full restatements on the same basis for the full year numbers? And how much of that revenue is Plano? So how much drops out next year from that? Richard Webb: So we're not going to give specific guidance on Plano specifically. But in terms of the restatement, so we've restated 2024 half 1 on a consistent basis with the 2024 full year restatement, which is about GBP 1.1 million of revenue that was taken out of the 2024 half 1. Vanessa Jeffriess: Vanessa Jeffriess from Jefferies. Just to start on a really positive note in Aerospace & Defense, obviously, seeing a lot of momentum there. Can we continue to expect double-digit growth over the next couple of years? And is the margin improvement in Europe all from operating leverage? Or is there more self-help to come through? Eric Lakin: Yes. So in terms of the first question, we're seeing continued growth momentum in Aerospace & Defense, as you'd expect, particularly on the Defense side. That's largely in Europe, but also increasingly in North America as well. We're getting defense contract wins in Kansas and Cleveland. I mean, this month, in particular, is a particularly strong month. We'll have -- this year will represent a record order intake for our Europe business. So certainly very strong demand and a lot of these contracts are multiple years. It gives us good visibility over the future years and particularly underpins a continued growth into next year. I couldn't -- I wouldn't comment on double-digit growth for the next 2 years because it's -- you're starting from a higher base, but we certainly expect continued growth over the next couple of years, if not beyond, which is very good from that tailwind. And ongoing discussions with customers, we expect to see more of that. I think in terms of the operational leverage, it's largely down to increased revenue and over a well-maintained cost base. There's some other initiatives as well in there, partly mix. We have some increase in some spares, which is higher margin, but also some other self-help initiatives, including some pricing reviews and changes, which helps the margin as well. Vanessa Jeffriess: And then on Asia -- obviously, you've just explained all the drivers behind the delays. But I think it's fair to say that your decline was maybe a little bit bigger than some of your peers. Coming into the business, do you think that you are as well set as peers to deal with the volatility that's arisen from tariffs? Richard Webb: Yes. It's -- I mean it's a fair observation. I'd say we've got specific large customers that have impacted the revenue for this year. And in particular, it's the extra stocking and safety stock from last year is partly contributing to that. And we're seeing, as I mentioned, some order delays. And some of these -- we're having live discussions with them right now. They're looking ahead and trying to understand, for example, U.S. import duty from Malaysia is currently 24%. Is it going to go down to 15%, 10% or less or stay where it is? So the -- we're set up, so we don't incur direct tariff costs through our Incoterms, it's a customer that bears those costs. So we don't see that, but our customers do. And it can be, in some cases, quite significant. So they are choosing to consider where to place business with us and whether that's Asia or Mexicali or Cleveland. So we are seeing that perhaps more acutely than the general market because of the nature of some of our customers. There is some also compounding that some specific end customer softness, particularly in healthcare, you've got some reduced R&D spend in North America, which is affecting some of the equipment devices that we sell into in OEMs. And for other specific reasons, some current softness in the automation electrification space. But we don't expect those conditions to prevail for the indefinite future and expect -- I think -- we expect certainly, by the middle of next year, return to growth for the Asia region. Vanessa Jeffriess: And then just finally, on North America, you said that for a while that there's been no customer losses. But maybe if you can talk about how your customers are responding to hearing the business under review, under separate management? Eric Lakin: For the Components business specifically? Vanessa Jeffriess: Yes. Eric Lakin: It's -- yes, I think the -- I mean, the immediate impact was quite acute in Plano. We've got some last time buys, which I mentioned at premium pricing, which is obviously contributing to the second half uplift. But more generally, what -- because it's quite a different business, as I've explained, it hasn't really had the focus to support our customers as it might have done in the past under the previous divisional structure. So by addressing that and having separate management and focus on individual customer conversations, both with the distributors, which is most of the -- mostly sold through indirect channels but also end customers. We have a lot of touch points with them on engineering, product design, pricing. We're already seeing the benefits of that anecdotally and more generally. And we've just had very little marketing, for example, in that business when you're competing with much larger competitors, Bourns, Vishay and so on. It's really important to keep getting the message out there of new products and the capabilities and the specifications of those products. So that's certainly helping. In terms of the fact that it's under strategic review, we're not -- I mean, it's not really impacting our day-to-day business. I mean my position on that is we're keeping options that -- the priority is to improve performance. And whatever we choose to do in the future, whether or not we decide with the best owners, it will only help that. Unknown Analyst: Just starting with capital allocation. Clearly, deleveraging has been a key aspect of that. I was just wondering if we could get any color on what -- whether there's kind of any key milestones we should look out for the resumption of the dividend? I'll just start with that one. Eric Lakin: Yes, fair question. Yes, so I'm not going to predict when we would resume the dividend at this point. But it's fair to say some of our investors really value the dividend, and it's a good discipline as well to distribute surplus cash. We will review it at the end of the year. And as Richard outlined, we expect to continue to deleverage at the end of the year, and we'll reflect on the -- I mean, the priority is to get balance sheet strength and support the lending banks and make sure that we got very good covenant headroom. But at the right time, we'll certainly look to reintroduce the dividend. Unknown Analyst: Perfect. And just one more, if I may. I mean, it feels like the business is stabilizing as you've kind of alluded to in your presentation. I guess I'm just keen to get more of a sense of how you're kind of managing the culture through what's been obviously a very turbulent time. And are you still able to kind of attract and retain the best talent? And what are you doing around that? Eric Lakin: Yes, that's an interesting question. Yes, it's really important for the organization because it often gets overlooked with a huge amount of change and disruption at the top management team within the organization, with the plant closure as well. I've made it a very high on the list to communicate a lot internally. We have regular meetings. We've reinstated pulse surveys around engagement and responding to those -- the most useful part about that is you get the sense of how people are feeling and what to do about it. And the [ heart ] of it, as you'd expect, is communicate, communicate. And we're doing lots of explaining what we're doing, why we're doing it and the benefits of what we're doing and making the business stronger. And that's really, I think, resonating. We're seeing improvement in the survey results that are coming through. And I make a point of having regular town halls, both all hands and the sites I go to. And I think what's the -- how does that manifest? The attrition rates we are seeing are higher than I'd like them to be generally. But if you look across the manufacturing sector as a whole globally, we are no worse, about -- better than the average. So it is a challenge, particularly some of the sites we're at. It's notoriously difficult to attract and retain people at all levels, including direct labor. But I think we're actually -- we're measuring up okay. There's room for improvement. But I'm feeling it's getting appropriate attention because it really matters, obviously, business is heart of it is our people. Harry Philips: It's Harry Philips, Peel Hunt. A couple of questions, please. The -- just thinking about tariffs in Asia and what have you and obviously, the relocation of some business into Malaysia. And I appreciate sort of -- it's directly outside your control, but do you envisage sort of going forward that there might be more sort of moves out of China by some of your customers and the need to follow? So I suppose the question is, how much sort of residual capacity have you got outside China to sort of facilitate that change? Eric Lakin: Yes. No, great question. We have -- I mean, specifically, that one customer move was largely triggered, not so much by tariffs, by the U.S. CHIPS Act and wanting to not have China in the supply chain and IP. So we've addressed that, and that's been well received by the customer. Not seeing any signs of other customers needing to do that in the other sectors we're in. So it really becomes -- and obviously, the quality, in particularly our Suzhou factory is best-in-class. So generally, the decisions being made are economic. And we're not seeing any -- expecting other known transfers from Suzhou. I think, in terms of capacity, we've deliberately made a point of investing in capacity to support changes. So we -- the SMT line in Kuantan is now being well utilized also in Mexicali, EMS, and we've got spare capacity in the PCB assembly for the Cleveland site. So we're well placed. I mean our issue fundamentally is we need more orders and grow the revenue and volume. And that's the most fundamental way of improving our operating profit margin, by getting the leverage up and covering our overheads. So we are not short of capacity. That's not a constraining factor. So one of the things I'm doing now is a reorganization of the sales and marketing team, and we're investing more in business development resource across all regions, in particular in Asia and North America, to fill the factories. So we're well placed for any further moves or increases in orders. Harry Philips: And then second question is just on working capital, so apologies in advance. Just -- I think your comment was that working capital will be broadly flat second half. And I'm just thinking, against the context of last time buy Plano, where clearly, by the year-end, you'd expect obviously cash in, if you like, against that last time buy, maybe it runs over a little bit into next year, but sort of -- and then also the rundown in the sort of safety stock. You were talking about in the context of the Asian switch, which doesn't sort of makes flat working capital sort of seem -- well, I would hope to expect maybe a reduction rather than just simply running at the same levels. Richard Webb: So we're not going to see sort of 135% of cash conversion for the full year as a whole, but we will see very strong cash conversion. So there will be a kind of positive contribution for the full year. We will be seeing kind of balance sheet delevering continue, and we'll be within the kind of range of 1.5 to 2x but will be a kind of decrease from where we are at, 1.9x. So there will be a kind of good strong full year cash conversion for the group. Eric Lakin: Yes. I mean specifically on second half working capital movement, I don't want to share -- go into the details. But I think there's certainly, the last time buy opportunity you referenced, and that is very much back-end year loaded. So a lot of the receivables we picked up in the second half of the year. So I wouldn't be surprised to see a growth in receivables at the end of the year. But it's -- we continue to drive down all parts of working capital where we can. And there's more to go with inventory reduction over time as well. Okay. Any other questions in the room? Otherwise, Kate, have you got any on the webcast? Kate Moy: Yes. A question from Joel at Investec, and we touched on it a little bit. But can you talk a little more about the weakness in the automation segment? And to what extent is that an end market customer issue as opposed to a TT-specific issue? Eric Lakin: Yes. So I mean, it's -- I would say, broadly, it is specific end customer demand softness. If I look at the -- in effect automated electrification is a lot of specialty industrial sectors that includes semiconductor equipment, in particular, rail, power, also bespoke postal equipment, smart card readers, ePassport. And we've got -- there's a handful of customers that they've just got current reduction in their end customer demand for different reasons. It's not -- certainly not a TT issue. We haven't had any issues in terms of production, supply, quality, on-time delivery. And so we are delivering to the customers' demand, requirements and production plan. And -- but ultimately, as I said, that sector should be growing. We're seeing -- I mean, it's probably without exaggerating the point, the semiconductor equipment market, some parts of the semi sector are going extremely well, as you'd expect, given the demand for increased amount of semi chips and AI and so on. Within that, though, the second order of the growth in the semiconductor equipment does vary by customer. And the U.S. CHIPS Act whilst offering significant opportunity, I think the last number was around $100 billion investment, there's so much uncertainty around that, and it takes time and a lot of planning to build up new fabs in the U.S. It has caused a pause in demand for a couple of our customers. So that's a contributing factor. So again, we expect long-term trends to improve, but short-term softness. So that's it from the webcast. Any final questions in the room? In which case, thank you all very much for coming. It's great to see a full turnout. That's heartening. Thanks for the questions, and I look forward to chatting to you later on. Okay. See you next time. Richard Webb: Thanks, everyone. Eric Lakin: Thanks.
Anne-Sophie Jugean: Good evening, and welcome to Quadient's Half Year 2025 Results Presentation. I am Anne-Sophie Jugean, Quadient's Head of Investor Relations. Today's presentation will be hosted by Geoffrey Godet, CEO; and Laurent Du Passage, CFO. The agenda for today's call is on Slide 3. As usual, there will be an opportunity to ask questions at the end of the presentation. You can submit your questions in writing through the web or ask questions live by dialing into the conference call. Thank you very much. And with that, over to you, Geoffrey. Geoffrey Godet: Thank you, Anne-Sophie. Good evening. The first half of 2025 showed a solid performance from our two growth engines, Digital and Lockers, with a double-digit growth in recurring revenue. Both solutions are firmly on a strong and predictable revenue growth trajectory. From a profitability standpoint, lockers' EBITDA margin also confirmed its fast-improving trend. And both solutions are expected to deliver EBITDA margin increase for the full year 2025 and also for 2026. The end of the U.S. postal decertification program that we mentioned last time impacted our mail hardware sales in the U.S., leading to a temporary lower revenue in the period for Mail Solution. All players in the industry have experienced similar declines. More importantly, we managed to protect the profitability of our Mail Solution. Thanks to the cross-selling between our solutions and also the contribution from the recent integration of the Frama acquisition that we did a little more than a year ago. As a result, for the first half of 2025, we delivered EUR 517 million in revenue, which represents a 3% organic decline compared to the same period last year. Despite the decline in mail revenue, current EBIT for the period was stable at EUR 60 million. So let's now turn to the details of our H1 result with Laurent. Laurent Du Passage: Thank you, Geoffrey. Overall, Quadient delivered EUR 517 million in total revenue in the first half of 2025, representing a 3% organic decline compared to last year. This reflects a 13.4% organic drop in noncurrent revenue, affected by the lower mail product placements in the U.S. compared to last year, decertification period. Mail performance was very much in line with Q1 and also consistent with overall market trends. That said, our subscription-related revenue continued to grow and now stands at EUR 384 million, representing 74% of total revenue, up from 72% last year. From a geographical perspective, North America has been declining by EUR 10 million compared to last year, resulting from a EUR 19 million decline in Mail, while our other solutions continue to grow. Europe performance in H1 is in line with previous year, with a notable exception, U.K. and Ireland, overperforming the rest of Europe as it benefits from strong dynamics in both Lockers and Digital. International has also been overperforming, thanks to large local deals. Let's now turn to the revenue bridge by solution on the next slide. This bridge clearly highlights the strong and continued momentum in both Digital and Locker Solutions, while Mail experienced a sharper decline of EUR 31 million in the middle. Out of this EUR 31 million, EUR 16 million are coming from that lower U.S. hardware placements. Just as in Q1, Lockers delivered double-digit growth and Digital grew above 7%, while Mail declined by around 8% year-over-year. The scope effect added EUR 9 million on the left, mainly coming from the acquisition of Package Concierge in December 2024 and to a lesser extent from the Serensia acquisition in June 2025. On the right-hand side, you can see the EUR 10 million negative currency effect entirely coming from Q2 due to U.S. dollar. Moving now to the next slide on current EBIT. So Slide 9. Despite higher decline in Mail, Quadient delivered a stable current EBIT, thanks to a slight growth of EBITDA in Digital, a limited decline in Mail, thanks to our cost adjustments as well as significant improvement in Lockers, which is up by EUR 5 million year-over-year. The reported current EBIT for H1 2025 stands at EUR 60 million. It's nearly unchanged compared to the EUR 61 million from last year with a slight positive organic growth, 0.1%, offset by the currency effect of EUR 1.7 million on the right-hand side compared to last year. So now we'll move into the details of the performance by solution. Over to you, Geoffrey. Geoffrey Godet: Let's move now to our H1 2025 accomplishment in our Digital automation platform. Our leadership was further reaffirmed in Q2 '25 with top position in both CCM and CXM Aspire Leaderboards. But I'm also proud to share that Quadient earned the highest score in both AI vision and road map as well as the AI maturity. This leads to be recognized by QKS as the most valuable pioneer in the CCM AI Maturity Matrix. This recognition proves that at Quadient AI is not a buzzword. We're not experimenting. We're scaling AI in ways that set high standards for the industry. The real challenge with AI, as you know, is to deliver measurable value and such at scale. Too often, AI in business today gets reduced to hype, pilots or sometimes even disconnected use cases. At Quadient, we focus not on what AI could do someday, but on what it does today to create sustainable value and accelerate customer success. Our investments in AI position Quadient ahead of the competitors and show the direction for the whole industry. We also advanced strongly in the account payable AP metrics compared to 2024, especially in technology excellence, where we're now firmly also amongst the leaders of the industry. And finally, I wanted to highlight that Quadient received also the IDC SaaS award for customer satisfaction in the Account Receivable Automation segment. That's based on the highest scores across 32 customer metrics from product value and usage implementation and customer relationship. So if we step back, taken together, these recognitions show one thing very clearly, Quadient Digital is delivering innovation, customer value and market leadership across every segment we play in. Our go-to-market approach, as you know, has been built on two strong pillars, acquisition and expansion. On the acquisition side, Quadient Digital delivered strong momentum in the first half of '25. We added this time 1,100 new customers, new logos, right, with strong dynamics from large accounts and also on the mid-segment, over 30% growth that is coming from the cross-selling from our Mail customers into our digital platform. We also secured some several new large enterprise logo, and that includes two large enterprise deals that are each worth more than $1 million. In particular, the one deal that I want to mention to you was a Spanish Bank, which is quite interesting because once it will be fully implemented, they will be one of the largest user of our digital platform, hoping to generate more than EUR 15 billion. I just want to stress that EUR 15 billion communication annually. If we move onto second pillar on the expansion side, we continue to build value with our more than 16,000 existing digital customers. Following the acquisition -- on another note, sorry, following the acquisition of the e-invoicing platform that we did of Serensia in June of this year, the positive momentum is accelerating. First, Serensia has successfully passed the French tax authority invoicing platform test that was in July. And since July, it is now an Accredited Platform. And as such, it has already been selected by major accounts and white-label resellers as their Accredited Platform and such ahead of the invoicing compliance date for next year. Now what it means for Quadient is that we're already guaranteed now to manage over 200 million of invoices annually in 2026 and moving forward, securing at least over 10% of the addressable market in terms of numbers of invoice that will be managed annually. In terms of upsell, I also wanted to share with you another strong example of the benefit of the approach of Quadient of having a best-of-suite approach. This customer story has everything that we could wish for. It's a competitor takeout and it's also a multiproduct, multi-module sell. We signed a deal in H1 with a leading cloud-based electronic healthcare record provider in North America with a full platform bundle, and that included our account payable module, our account receivable module, our hybrid mail distribution module, our CCA module. Over to you, Laurent? Laurent Du Passage: As in Q1, we continued to deliver double-digit organic growth in subscription-related revenue for our Digital business with particularly strong performance in North America and the U.K. Our annual recurring revenue or ARR has increased to EUR 241 million, representing an organic growth of over 10% on a 12-month basis compared to the January 2025 mark. EBITDA on the right-hand side for H1 2025 remained stable year-over-year despite the integration of Serensia and higher commercial expense tied to strong bookings. Looking ahead, we expect profitability to increase for the full year, higher than the 17.5% margin reported for 2024. In summary, Quadient's focus on recurring revenue streams and successful integration of new acquisitions are driving the sustainable growth and supporting our long-term profitability targets. Turning now to Mail on Slide 14. Geoffrey Godet: Thank you, Laurent. Mail had a difficult H1 caused by special circumstances in the U.S. and the U.S. is our main and most resilient market traditionally. The root cause of the H1 decline came primarily from the earlier-than-expected end of the U.S. decertification program. And with all Mail market players experiencing a similar level of both hardware and/or total revenue decline in H1, to get in bit more details and be more precise, the U.S. decertification program officially ended in Q1 2025. But the initial deceleration in terms of opportunities came as early as the end of last year -- sorry, of the first semester of last year in 2024. So that was roughly 6 months earlier than we had anticipated. With over 50% of the competitive base, generally speaking, the entire market, right, that has been updated in the last 2 years as a result of that program, the resulting factor is a lower numbers of [indiscernible] to sign or to renew deals in H1 2025. This is the primary driver of the decline in Mail hardware sales in H1 that you can see in this graph with North America accounting for more than 80% of the drop in mail product placements. Moving forward, Quadient anticipate that hardware sales performance is going to improve and is going to improve in the coming quarters as the echo effect of the post-COVID rebound 5 years later, will create higher opportunities for equipment renewals. The fundamentals of our mail market remain the same. The usage volume and the usage on the machine in H1 are unchanged. Our forecast for midterm mail volume usage globally is also confirmed. So naturally and consequently, we foresee a rebound in U.S. hardware sales in H2 and in 2026, and we'll see a return to a more muted revenue decline for Mail Solution over the medium term. And this is what allows us to confirm our 2030 guidance on Mail revenue of around EUR 600 million. Laurent? Laurent Du Passage: Thank you. On Slide 15 now, as we announced, the Q2 trends were very similar to those in Q1. So for H1, Mail hardware sales declined by 17.5%, primarily driven by a strong comparison base in the U.S., as explained by Geoffrey, due to last year decertification, which ended in Q1 '25. Despite these headwinds, Mail EBITDA margin improved by 0.8 points compared to H1 '24. This was supported by the successful integration of Frama, which delivered the expected benefits, the enhanced commercial productivity with Digital and a mix effect from lower hardware placements with limited impact from U.S. tariffs. Overall, while top line trends reflect the current market challenges, our focus on operational efficiency and integration synergies has enabled us to maintain strong profitability in the Mail segment. Now moving back to Lockers with Geoffrey. Geoffrey Godet: Expansion of our Lockers platform accelerated in H1 as well, both in terms of the size of the network and in terms of its usage. Our overall installed base now is reaching 26,600 lockers globally as we added naturally, I think, more than 1,100 lockers in H1 alone. In the U.K., the deployment of our network has continued to focus on premium location, and we have signed new partnerships with Shell petrol stations, but also a retailer chain, The Range, so that they could install our lockers. In H1, we also saw further initiatives that drives the volume in our lockers. So if we take another example, in Japan, we extended our partnership with JR East, Smart Logistics. So now users are going to be able to both receive and send parcels through the lockers installed in the train station themselves. Moving to Slide 17. If we look at the European networks, we can clearly see the benefit of having an at-scale network as a key driver for the growth in usage. The graph on the left highlights the steady acceleration in locker installation across Europe, in particular for open networks since January 2024. Over the past 18 months, the installed base has tripled with mostly premium locations, as I just mentioned to you, some of those new partners. Now let's look at the graph on the right side because that's a clear demonstration, I think, of the successful J-curve of developing and how it develops for our open networks. From the threefold growth in installation, we have been able to generate a 13-fold increase. So just let me repeat, a 13-fold increase in volumes over the same period of time as now users and carriers and consumers are increasing their usage of our lockers. With that, I'll now hand it over to Laurent. Laurent Du Passage: Thank you. On Slide 18, let me start with just showing you the longer-term track record of our Locker business. On this slide, we have shown the evolution of the key financials and operational metrics for our Locker business over the past 3.5 years. The quarterly revenue evolution emphasis strong revenue momentum as Lockers already is a EUR 100 million revenue business on a 12-month basis. An increase in the share of subscription-related revenue with 4 consecutive quarters of strong double-digit organic growth. Now moving to the other graph, let's review the EBITDA evolution shows a low point in 2022, which was impacted, if you remember, by adverse transportation cost impact at the time. Most importantly, EBITDA breakeven was achieved in fiscal year 2024 last year. With a regular and strong increase of EBITDA margin since 2023, the H2 '25 is expected to be both sequentially and above year-on-year, and we are well on track to reach the above 10% EBITDA margin by 2026. Moving now to Slide 19. We continue to deliver that strong momentum in both revenue and profitability in H1. Reported growth reached 30%, including the positive impact from Package Concierge acquisition, which contributed EUR 8 million. Organic growth continues to be double digit in Q2 like it was in Q1 and despite the software hardware performance in North America in Q2. We also achieved a double-digit organic growth in subscription-related revenue, driven by the outstanding volume ramp-up in open networks across U.K. and France as well as continued momentum in the U.S. residential segment. On the right-hand side, our EBITDA has significantly improved, I mean for the first half compared to last year. It's up by EUR 5 million. It's more than 10 points better than last year. And this was fueled by rising recurring revenue and increased usage as well as the accretive contribution from Package Concierge. On Slide 20, moving now to Quadient financials. In this slide, you have just a summary of the different metrics we did review, summing up to the EUR 517 million published revenue or 21% EBITDA and the EUR 60 million current EBIT at the bottom. Moving now to Slide 22. We see the P&L. Income before tax is particularly improved in H1 '25. It's 50% more than last year, thanks to lower optimization expenses than last year, which I remind you included an IT project write-off and some office optimization. And we have also a stable financial expense. H1 '25 income tax is normalized, while H1 last year included a EUR 15 million tax benefit. We even have a negative cost in tax last year. It results in a net income at EUR 21 million for this period compared to the EUR 24 million last year. Let's move now to Slide 23 and the free cash flow. Free cash flow stands at minus EUR 8 million despite the seasonality that we know of our working capital and the debt interest payment and tax one-offs. We have two one-offs this semester. Lower mail hardware placement have benefited to the cash flow, on the other hand, thanks to the lease portfolio decline and lower CapEx for Mail, which we'll review in more detail on the next slide. On the acquisition side, you can see the impact of Frama acquisition last year in H1 and Serensia this year. Moving now to the next slide to see details on CapEx. The evolution of CapEx presented here, excluding IFRS 16 CapEx moving forward as in fact, IFRS 16 is not reflecting such a cash out. Well, this evolution reflects the dynamic by solution we explained before, a stabilization of sustained, I would say, investment in Digital, which is mostly related to R&D, the EUR 12 million, increase in Lockers for the benefit of our open-network rollout notably in U.K. that increased to EUR 14 million. And last but not least, the reduction in mail CapEx due to the lower placement in franking machine tied to the end of the decertification and the reduced activity. Moving now to Slide 25 on net debt and leverage as of the first half of '25 our net debt declined to EUR 712 million. It's clearly favorably impacted by the USD weakening against Europe. The leverage ratios are down. It's at 2.9 including leasing and 1.6 excluding leasing from the 3.0 and 1.7 respectively at the end of January. This improvement reflects the resilience of our EBITDA, with a continued discipline on the balance sheet. Over the past 18 months, if you look at the figures, we have seen that the leverage kept -- was kept stable or declining. And this despite the EUR 45 million of acquisitions we made over the period. Our leverage ratios continue to stand well below our maximum covenant levels, ensuring long-term financial stability for Quadient. Moving now to Slide 26. During the first half of '25, we raised EUR 50 million in new facilities, a U.S. private placement issued in July. Thanks to the shelf facility signed earlier this year. We also completed the repayment of our 2025 bond and Schuldschein in February. Our liquidity position remained strong with EUR 123 million in cash at the end of July and a EUR 300 million on joint credit facility, which has been extended to 2030. The customer leasing portfolios stand at EUR 556 million, it is down by EUR 67 million, which in fact is due for EUR 43 million to ForEX. And we see the maturity and the bottom was spread over the coming years. Back to you now, Geoffrey, for the conclusion. Geoffrey Godet: Thank you, Laurent. This H1 2025 performance, I think demonstrated clearly the solid dynamics of our two growth engines, Digital and Lockers, offsetting the temporary U.S. softer mail impact that we described today with a stable current EBIT. For the second half of the year, we expect Quadient revenue to increase compared to H1, and this will be supported by a few things. The first thing is the continued, sustained strong momentum in Digital and also in the Lockers. It will also be supported by a rebound in U.S. Mail for us, although it's tougher than initially expected. We also expect a further increase in profitability in H2 versus H1 this year. How does it going to be supported? We're going to have a strong increase in Digital and also the low-cost contribution in H2. And Mail EBITDA margin is going to remain at a high level as well, thanks to the continued cost adaptation and despite the impact from the U.S. tariff in particular. So consequently, and taking into account the global macroeconomic uncertainties that we all have experienced, we are updating our full year 2025 guidance. And we now expect the full year revenue to decline by a low single-digit on an organic basis. And the full year current EBIT to come in a range from stable to low single-digit decline on an organic basis. If we look at the midterm guidance, we are confirming all our 2030 guidance, and we're also confirming the full year 2026 EBITDA margin targets and such for our three solutions. So with EBITDA margin expected to be above 20% for Digital, above 25% for Mail and above 10% for the Lockers. Based on the 2024 result and on the revised guidance for '25, we're currently suspending all other elements of the guidance from being part of the previous '23-'26 trajectory. So thank you. And with that, we're ready to take your questions, as usual, for the Q&A, Anne-Sophie. Anne-Sophie Jugean: Thank you, Geoffrey. [Operator Instructions] There are no audio questions at this time, so I hand the conference back to the speakers for any questions sent via the webcast. Thank you. Thank you. So we have a first written question. So the question is, why did you suspend your guidance for Lockers and Digital on the revenue side for the 2023-2026 period. Geoffrey Godet: That's a good question and Laurent feel free to comment. It just is too early to give the full guidance of '26. So it's likely something we will share with you and we'll get to March 2026 after the full year presentation. The real things that made us suspend the guidance is really related to the U.S. Mail performance that we have this year and the level of uncertainty that we still have as it relates to the pace of the rebound that we'll get in the U.S. main market for H2 and for the pace, obviously, the beginning of 2026, in particular. All the other elements of our business, including the performance that we have in the Mainland Europe that is at the same level as we expected in the previous years. The performance on our digital activities as well as our local activities are in line with our expectations. And this is why also we're able from a profitability or margin perspective to be able to -- ahead of time to confirm the trajectory. That being said, we live in a world with quite a lot of uncertainties. So it will be, I think, good for us to be able to -- until March to be able to precise the revenue trajectory or solution once we get there. Anne-Sophie Jugean: Thank you, Geoffrey. So the next question is on Digital. So could you please provide further details on the decline of EBITDA in the Digital segment? What are the expectations for the second half of the year. Laurent Du Passage: So I'll take this one, Geoffrey. So EBITDA for Digital is growing. So it's plus EUR 1 million compared to last year. That's what we saw in the bridge. And yes, we still have some growth and scale. I think you're referring maybe to the EBITDA margin that is slightly down. You have this dilutive slight impact from Serensia and the integration cost as well that is a factor. And the second factor is obviously some strong bookings that have impacted the commission side. We are very confident on the second half. We still have the growth in recurring revenue that is highly contributive and we have a level of OpEx that is not expected to significantly increase in H2. As you remember, we have usually payroll increase at the beginning of the fiscal year. So it should really benefit to the Digital segment and will end up higher than the 17.5% that we had on the full year last year. Anne-Sophie Jugean: Thank you, Laurent. So the next question is on U.S. tariffs. So regarding the tariffs, are you more impacted than your Pitney Bowes and competitor as being a non-U.S. provider. Geoffrey Godet: It's a good question, and it's difficult to know because we haven't looked at the information if Pitney Bowes has actually shared the amount. They have more volume than us in terms of equipment being a larger player. So they may have been more impacted in absolute value, and it depends obviously on how and where they source their -- the production and the manufacturing and reassembly of the activities. I think they are not producing in the U.S., so they are likely to be subject to tariff like any of the other players like FP and ourselves. That being said, the rate could vary from the one that could be potentially manufacturing in Europe, like some of our competitors in Mexico, which I think may be the case for Pitney Bowes and Asia, like it could be for us. So I hope that answered your question. Anne-Sophie Jugean: Thank you, Geoffrey. The next question is at which leverage would you consider resuming your share buyback program? Laurent Du Passage: So I am getting this one, Geoffrey. When we have the Capital Market Day last year, we mentioned that it would be below the 1.5 leverage, excluding leasing by the end of 2026. We are still at 1.6. So clearly, it's about forecasting and projecting what will be this evolution across the coming quarters. So, so far, we have -- you have seen we still have CapEx, notably in Lockers and the rollout, obviously, of the network. But clearly, it's something we continue to monitor and continue to arbitrate with the trajectory and how much security or guarantee we have to reach that 1.5 that we want to meet at the end of next year. Anne-Sophie Jugean: Thank you, Laurent. So the next question, is there outstanding earnout on your latest acquisitions? Geoffrey Godet: No. That was a straight answer, no. Anne-Sophie Jugean: So moving on to the next question. Have you completed the office optimization process? Laurent Du Passage: Yes. Geoffrey Godet: Yes, we have mostly completed the program completely. We may have -- always -- we're always looking at eventually when we renew lease and have opportunities to adapt to the scale of the business. In some cases, we have a little more people that we have hired. In other cases, people that took the benefit of the flexibility and the program that we provide them to let them work from home. So some time, we adjust down. So there might -- could be some more savings coming. Laurent Du Passage: Absolutely. And just to complete one thing, Geoffrey, when you -- notably, when you -- when we do acquisitions, obviously, we are seeking sometimes to make sure that we merged some offices, so that might be additional, I would say, optimizations. But for our existing offices, I would say we did really the bulk of the work at this stage. Anne-Sophie Jugean: Thank you, Laurent. So the next question is -- Quadient is a key player in the CCM market. What is your view on the recent acquisition of Smart Communications by Cinven this summer. Geoffrey Godet: It's a good question. So to be specific, our understanding is that the current -- the previous owner of one of our competitors, Smart Communication saw the controlling interest, so -- not the entire company to another private equity or Cinven for a valuation that I believe is estimated at EUR 1.8 billion for the entire business for a company that is much smaller than Quadient Digital today from what we know. This means it implies a high multiple on this transaction. And it shows that this company was highly valuable. So the first thing is congratulation for this transaction. But the best news is that I see that as a win for Quadient and Quadient Digital because it shows that the segment that Quadient Digital has decided to play and focus strategically in. So among them, obviously, we have our CCM activities, the one we're discussing now. But also, as you know, some of the financial automation segment, hybrid mail, the account payable, the e-invoicing with the acquisition of Serensia, all those segments, obviously, highly sought four segments with investors willing to pay high valuation because it shows the value that those segments provide. So that means that all the segments of Quadient because we've seen some previous transactions, I think more recently in the last 6 months with transactions from Bridgepoint on Esker, but also the transaction in the U.S. around AvidXchange. So it shows it continues to show that those segments are quite valuable for us. So that's the first thing. The second thing is that I see also that as a win for Quadient because we're obviously recognized by some of the industry analysts that I mentioned to you as the leader, and we continue to show the win in the industry. So I'm quite happy that this segment is recognized, and we have the opportunity to lead the segment naturally in this environment. So overall, it's a great news for the market and for Quadient Digital and for the player. Anne-Sophie Jugean: Thank you, Geoffrey. So moving on to Lockers for the last question. What will be the current local usage in France and U.K.? What would be the target for the average full year 2025? Laurent Du Passage: So first, we don't go to that level of detail because we have a lot of metrics that would be communicated. I think what's important to recall is, is the volume in absolute value, which I think is a key metric for us because, in fact, the more you will roll out Lockers or you see you have a ramp up for each locker, so -- looking just at the average of the utilization rate of all the rolled out lockers is not necessarily the right metric, I would say, because basically, if you just expanded for, let's say, 200 just in the past month, then you will drop basically your average utilization rate. So I think we need to focus also on the total volume of parcel that Geoffrey commented earlier. And I think, yes, we still have some room in the existing lockers, but the usage rate is ahead of our plan, so very satisfactory to us. And we see a good traction of existing carriers that are committing or double -- I mean increasing their capacity requirements. Geoffrey Godet: I think I could even add with a certain level of confidence is that the usage -- that we currently see with the usage trend and path that we see in the U.K. is actually above the trend and the level that we're seeing in Japan. So this is why, as we know, we have a quite profitable base today in Japan. So we're quite excited about the prospect of having such a usage trend evolution in the U.K. in particular. Anne-Sophie Jugean: And we have one last question. What are the EBITDA margin prospects for mail? Could the 2025 EBITDA margin for mail be flat compared to 2024? Laurent Du Passage: So as you could see in H1, clearly, we had an improvement in EBITDA margin despite the decline in top line. And we mentioned the several factors, out of which, obviously, our ability to scale the OpEx, is not the only reason, but that's one of the reasons. Also, there is a bit of a mix effect. H2 EBITDA will be higher than H1 EBITDA. So we have clearly room in H2 to generate a significant amount of EBITDA and continue to be maintaining the level above the 25% by next year, which is the commitment we took last year and will maintain. We will -- the H2 compared to H2 last year, yes, there will be an impact from the tariffs. I mean we know that. The ability of pushing that impact to the customer is something where basically we need to assess and view. So we will not -- and we don't go into a detail of EBITDA by solution by semester obviously. But you can be sure that it's going up compared to H1 and that will maintain the 25% mark as a minimum for this year and for next year. Anne-Sophie Jugean: Thank you, Laurent. So we have no further questions at this time, so we can close the call. Thank you very much for attending this presentation and for your questions. Our next call will be on the 2nd of December for our Q3 2025 sales release. In the meantime, we look forward to meeting some of you in the coming days during our road shows. Thank you, and have a good evening. Geoffrey Godet: Thank you. Laurent Du Passage: Thank you.
Operator: Good morning, and welcome to the Worthington Enterprises First Quarter Fiscal 2026 Earnings Conference Call. [Operator Instructions] This conference is being recorded at the request of Worthington Enterprises. If anyone objects, you may disconnect at this time. I'd now like to introduce Marcus Rogier, Treasurer and Investor Relations Officer. Mr. Rogier, you may begin. Marcus Rogier: Thank you, Rob. Good morning, everyone, and thank you for joining us for Worthington Enterprises First Quarter Fiscal 2026 Earnings Call. On the call today are Joe Hayek, our President and Chief Executive Officer; and Colin Souza, our Chief Financial Officer. Before we begin, I'd like to remind everyone that certain statements made during today's call are forward-looking in nature and subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. For more information on these risks and uncertainties, please refer to our earnings release issued yesterday after the market close, which is available on the Investor Relations section of our website. Additionally, our remarks today will include references to non-GAAP financial measures. Reconciliations of these measures to the most directly comparable GAAP measures can also be found in the earnings release. Today's call is being recorded, and a replay will be available later on our website at worthingtonenterprises.com. With that, I'll turn the call over to Joe for opening remarks. Joseph Hayek: Thank you, Marcus, and good morning, everyone. Welcome to Worthington Enterprises Fiscal 2026 First Quarter Earnings Call. We had a very solid start to our fiscal year due to the collective efforts of our teams. And I want to start by saying thank you to all my colleagues for their dedication to each other, our company, our customers and our shareholders. In the quarter, we delivered strong year-over-year growth in sales, adjusted EBITDA and earnings per share. Our sales in Q1 were up 18% over last year and up 10% year-over-year, excluding sales from recently acquired Elgen. The gross margin was 27.1% in Q1 versus 24.3% last year. This improvement is after the adverse impact of a $2.2 million purchase accounting charge related to inventory acquired from Elgen. Adjusted EBITDA margin in the quarter was 21.4% versus 18.8% in Q1 a year ago. I said this related to our Q4 results when we were together in June, but our results in Q1 again reflect our strategy and action. Despite numerous headwinds, including cautious consumers and a hot summer that impacted outdoor activities and tariff costs and high interest rates that are impacting residential and commercial repair, remodeling and construction activity, we grew our year-over-year adjusted EBITDA by 34%. Our SG&A expenses were $4.5 million in the quarter, but flat, excluding the addition of Elgen, despite our organic growth in sales and gross profit. As we continue our efforts to optimize our current businesses and grow Worthington, we do so not just as stewards of Worthington's proud history, but as drivers of innovation and strategies that will power our future. We're committed to building a sustainable growth platform, and we will continue to leverage the Worthington Business System and its 3 growth drivers, innovation, transformation and acquisitions to maximize both our near- and long-term success. We've generated tremendous momentum with new product launches, including the Balloon Time Mini, A2L refrigerant cylinders and new Halo Griddles. These new products are enabling us to take market share, grow new markets and win new customers. Our transformation efforts continue to be driven by value stream analysis, automation and new ways of thinking, but our goals do not change. We prioritize safety, asset utilization and cost optimization. The ongoing 80/20 initiative in our water business is having a positive impact, and we're planning for additional 80/20 work streams in other areas of our business. We believe our culture is a differentiator, and we're focused on acquiring companies with great teams that have developed sustainable competitive advantages in niche markets. Our acquisition of Elgen in June is an example of that. We're pleased with our integration of Elgen thus far, and we're excited about its growth prospects. That team has embraced our safety culture, and we're focused on capturing synergies and pursuing growth opportunities in multiple areas. Last June, we acquired Ragasco, a pioneer and world leader in lightweight composite LPG cylinders. Ragasco recently celebrated 25 years in business and has manufactured and sold over 25 million cylinders into over 100 countries around the world. Their people, culture and ongoing initiatives around safety, innovation and quality are second to none. We're very happy that they're part of Worthington, and a group of us is looking forward to celebrating with that team in person in Norway next week. Earlier in September, we published our second sustainability report at Worthington Enterprises, and the content of that report makes us proud. For instance, we continue to outperform our industry benchmarks in safety with a total incident case rate 40% lower than our peers. We're constantly trying to improve. And in fiscal '25, we renamed our safety culture LiveSafe. It is based on proactive mindsets, processes and actions that ensure our teams can be the best version of themselves at work and at home. While many of our end markets continue to face headwinds, we're performing very well and believe our best days are ahead of us. Leveraging our people-first performance-based culture, market-leading brands, a start-up mindset, the Worthington Business System and our strong balance sheet, we will continue to improve everyday life by elevating spaces and experiences in a way that creates meaningful value for our employees, customers and investors. I will now turn it over to Colin, who will take you through some details related to our financial performance in the quarter. Colin Souza: Thank you, Joe, and good morning, everyone. We delivered strong financial results in Q1, getting our fiscal year off to a solid start. On a GAAP basis, we reported earnings of $0.70 per share compared to $0.48 per share in the prior year quarter. The current quarter included pretax restructuring and other expenses of $2 million or $0.04 per share compared to similar charges of $0.02 per share in the prior year quarter. Excluding these items, adjusted earnings were $0.74 per share, up from $0.50 per share in the prior year quarter. Q1 also included a onetime pretax purchase accounting charge of $2.2 million related to the stepped-up value of inventory at Elgen, which negatively impacted profitability in the quarter. Consolidated sales for the quarter were $304 million, up 18% compared to $257 million in the prior year quarter. The increase was primarily driven by higher volumes in our Building Products segment, along with the inclusion of Elgen, which contributed $21 million following its acquisition in June. Gross profit increased significantly to $82 million, up from $62 million with gross margin expanding approximately 280 basis points to 27.1% despite the $2.2 million purchase accounting charge at Elgen. Adjusted EBITDA for the quarter was $65 million, up from $48 million in Q1 of last year, and adjusted EBITDA margin in the quarter was 21.4% compared to 18.8% in the prior year quarter. On a trailing 12-month basis, adjusted EBITDA now stands at $280 million with a TTM adjusted EBITDA margin of 23.3%. Turning to our cash flow and capital allocation. We continue to invest in our operations while maintaining a disciplined and balanced approach. During the quarter, we invested $13 million in capital expenditures, including $9 million related to our ongoing facility modernization project. We also returned capital to shareholders, paying $9 million in dividends and repurchasing 100,000 shares of our common stock for $6 million at an average price of $62.59 per share. Our joint ventures provided $36 million in dividends, representing a 100% cash conversion rate on equity income. Cash flow from operations for the quarter was $41 million and free cash flow was $28 million. On a trailing 12-month basis, free cash flow totaled $156 million, representing a 94% free cash flow conversion rate relative to our adjusted net earnings. As a reminder, this figure includes elevated capital expenditures related to our facility modernization projects, which totaled $29 million over the same period. We have approximately $35 million of modernization spend remaining with the majority expected to be completed during fiscal 2026 and capital expenditures returning to more normalized levels thereafter. As that spend tapers down, we expect to see further improvement in free cash flow conversion over time. Turning to our balance sheet and liquidity. We closed the quarter with $306 million in long-term funded debt, carrying an average interest rate of 3.6% and $167 million in cash. Our leverage remains extremely low with ample liquidity supported by a $500 million undrawn credit facility. Net debt at quarter end was $139 million, resulting in a net debt to trailing adjusted EBITDA ratio of approximately 0.5 turn. Yesterday, our Board of Directors declared a quarterly dividend of $0.19 per share payable in December 2025. Let me now turn to our segment performance, where both businesses delivered results -- solid results to start the fiscal year. In Consumer Products, sales in Q1 were $119 million, up 1% compared to the prior year quarter as a favorable shift in product mix was mostly offset by lower volumes. Adjusted EBITDA was $16 million with a 13.6% margin compared to $18 million and 15.1% in Q1 last year. The year-over-year decline was primarily driven by lower gross margin due to tariff charges and lower volumes. The broader consumer environment remains cautious and demand continues to be closely correlated to point-of-sale activity. That said, our brands are strong, our channels are stable and our products are not large ticket items. They are affordable, essential and play a meaningful role in elevating everyday experiences around outdoor living, celebration and home improvement. We're proud of how our Consumer Products team continues to perform and deliver value for customers despite macro headwinds. Looking ahead, we believe the business is well positioned to benefit as consumer sentiment improves and demand returns to more normalized levels, supported by our market-leading brands, strong customer relationships and a transformational mindset. In Building Products, Q1 sales grew 32% year-over-year to $185 million, up from $140 million in the prior year quarter. Growth was driven by higher volumes and contributions from Elgen, which closed in June and contributed $21 million in sales for Q1. Excluding Elgen, net sales were up 17%, reflecting continued strength in our cooling and construction products, where we are supporting the refrigerant industry's transition to more environmentally friendly refrigerants, along with growth in our heating and cooking products, where we've enhanced our capacity and throughput as a result of the facility modernization investments made over the last year. Adjusted EBITDA for the quarter was $58 million with an adjusted EBITDA margin of 31.3% compared to $40 million and 28.4% in Q1 last year. The improvement was primarily driven by volume growth in our wholly owned businesses, along with a modest year-over-year increase in equity income. Elgen's contribution to adjusted EBITDA was nominal as expected due to the previously mentioned nonrecurring purchase accounting charge. WAVE delivered another solid performance, contributing $32 million in equity earnings, up from $28 million in the prior year quarter. ClarkDietrich operating in a more challenging environment delivered a respectable $6 million in equity earnings compared to $9 million last year. The Building Products team is executing well and continues to do a great job delivering value-added and innovative solutions for our customers. We're also very pleased with our integration efforts thus far at Elgen. We remain excited about the potential growth at Elgen and believe their capabilities strengthen our presence in commercial HVAC and broaden our reach within the building envelope. At this point, we're happy to take any questions. Operator: [Operator Instructions] Your first question today comes from the line of Kathryn Thompson from TRG. Kathryn Thompson: I just have a couple of operational and then a bigger picture question. For your wholly owned Building Products segment, margins again were up in the quarter. I know that that's an initiative that you've been working on. But could you help us understand what drove the margin in the quarter and really kind of the glide path of where you see it going? And what would be a normalized level based on your current portfolio? Joseph Hayek: Sure, Kathryn, it's Joe. In Building Products, excluding WAVE and ClarkDietrich for a minute, I have no doubt that you or somebody else will get to those. But it's really a story of really nice execution in markets that are normalizing and normalized. We look at -- we had really solid growth in our heating and cooking business and really solid growth in our cooling and construction business as well. The water business also improved. The only business that was flattish was our European business, and that has more to do with some big orders and the general economic environment in Europe. But when we look at Building Products, we've talked about, I think, EBITDA margin for the one of the businesses was 10.5% this quarter. We've talked about that getting over time upwards to sort of 12-ish, 13%, not right away, but that's the trend that we continue to see. We're still a little seasonal, right? And when it's cold, there are more things going on. But it's really a credit to those teams. In fact, last week, for the first time in 6 years, we had our all-employee banquet and awards where we got together to celebrate some service anniversaries and some MVPs, both on the personal side. But we gave away the first John H. McConnell philosophy award, and we gave that and drove this award to be given to a team or a group or a facility that went above and beyond in our fiscal year related to safety and performance and really made a difference getting more towards our first corporate goal, which is to earn money for our shareholders and increase the value of their investment. And we were very, very happy to give that award to our facility in Paducah, Kentucky. That's fewer than 100 people. They made 900,000 A2L refrigerant cylinders last year, triple, almost triple what they did the year before. And so it's those kinds of market-driven opportunities that we're trying really hard to take advantage of, and that's what you're really seeing a lot of momentum in Building Products. Kathryn Thompson: That's helpful. Shifting to WAVE, another great quarter. And still up $30 million in terms of contribution. Touch again on the drivers for this outperformance? And is this a level to be expected for the next -- for out quarters? Colin Souza: Yes, Kathryn, this is Colin. So again, WAVE continues to perform very well, up year-over-year in terms of equity contribution for us and down slightly from Q4 for us. Q4 and Q1, those are their stronger quarters. But overall, within the business, their end markets, in particular, when they serve areas like education, health care, transportation, data centers, those are still very healthy, very strong and offsetting some of the weakness in areas like office and retail and you know WAVE's operating model and how they go to market, and it's really driving value to contractors and really working hard to take labor and time and ultimately cost out of the equation for those installs, and they do that extremely, extremely well, and they continue to show value to those customers, and it flows through to their performance. So steady as she goes with -- in terms of WAVE and how they're going to perform, we're very happy with how that's going so far. Kathryn Thompson: Okay. And then a final question if I may. This is the bigger picture question. So Worthington is often the only domestic manufacturer of some of your product lines. And tariffs are complicating the supply chain this year. And theoretically, Worthington should be in a better position relative to competitors with that domestic manufacturing footprint. In the last quarter, you touched briefly on having more conversations with customers, but it's difficult to quantify. Can you give an update on how that dynamic is progressing? Are there any further wins that Worthington can tie back to tariffs and just broader implications going forward? Joseph Hayek: Thanks, Kathryn. It's Joe. I'll take a shot at it and certainly Colin add in. Yes, tariffs are complex for everybody, and they have multiple touch points for us. In our consumer business, where we have some of those tools that are manufactured for us, we had to effectively write a check for a couple of million dollars in the quarter to Uncle Sam. But as you point out, in a lot of our business, some in consumer and a lot within building products, we are the primary or only domestic manufacturer for those products, and we compete with imports. And so having a more level playing field with respect to pricing is helpful. And we've always prided ourselves on trying to be commercially excellent and trying to be really easy to do business with. And so we have absolutely had and continue to have good conversations with our customers domestically. Our supply chain is going to be tighter than somebody that's manufacturing overseas. But we've always really strived to create value and understand our customers' pain points, try and make their lives easier so that they can better serve their customers. A large -- I mean, a lot of our products and 2/3-ish end up in the hands of contractors. And whether it's a distributor or whether it's a retailer, we try really hard to help our customers better serve their own customers, which really are what they and we care about. And so it is hard to pinpoint, but value candidly, is easier to drive when prices are competitive and people are sensitive to prices. And so we're able to keep prices at a very kind of reasonable level historically because we aren't subject to the tariffs other people might be. And so those conversations are ongoing. And we hope when we execute well that, that makes our value proposition that much more compelling. Operator: Your next question comes from the line of Daniel Moore from CJS Securities. Dan Moore: So I'll shift back to Building Products just for a second, very healthy organic growth. Can you just elaborate a little bit more on the pockets of strength? You mentioned cooling and construction products, some of the heating products. How much of it is market growth? How much of it is share gains? And as we think about moving forward, talk about the potential to outpace the market over the next 1, 2, 3 years? Joseph Hayek: Sure. I think it's a mix, Dan. Some of it is kind of market normalization. Some of it is -- and that would probably be more in heating and cooking and in water. Some of it is market share gains. We saw some of those in the heating and cooking business and some in cooling and construction. But then the markets are behaving more normally, maybe a bit more of a catch-up in heating and cooking, a little bit of growth in water. But then in refrigerants, right, in our cooling and construction business, if you go all the way back to 2021, the American Manufacturing Act late 2020, 2021 really mandated a shift in refrigerant to more environmentally friendly gases. And so you're seeing some of that load in and rollout over the past 6 or 8 months. And these things happen periodically. And so I do think that, that market has grown and ought to continue to grow maybe more than it historically would have due to some of those shifts. Dan Moore: Okay. That is helpful. And then if you can -- go ahead, I'm sorry. Joseph Hayek: No, you're good. Dan Moore: All right. Shifting to consumer. Maybe just talk about progress you're making in terms of new product lines and expanding distribution at retail. I'm thinking specifically about Balloon Time Mini, but you've got some of the other new products and initiatives where you're seeing the biggest increases in terms of retail customer penetration? And what's the runway for growth look like? Joseph Hayek: Sure. So with respect to consumer, revenue is up a little bit, profitability down. We did have a tariff impact that was effectively, I'll call it, more than the miss, if you will, relative to last year. We've seen point-of-sale tracking and really mirroring our own orders. And so our camping gas business and the tools business down a little bit, offset in large part by our celebrations business, our helium business, which we continue to execute very well in, in part because of some of the shifts that have gone on with Party City not being part of the mix and our customers getting more of those customers, Walmart, Target, other people like that. But then you mentioned a couple of things on the new product side, Dan. And so with Balloon Time Mini specifically, that continues to enable us to have great conversations with new customers, and we talked about Target, talked about CVS. Walgreens is a recent win, and you'll soon be able to find in a couple of thousand Walgreens stores, our products, both the Balloon Time Mini and the standard legacy Balloon Time product. We're delighted about that. And then Halo Griddles and Walmart, we talked about that historically, small numbers, but that's gone well. In fact, in the spring of 2026, that's kind of the beginning of, I'll call it, grilling or griddle season, you'll be able to find Halo Griddles at even more stores than you could in these past few months. So that team is working really hard and doing a fantastic job really understanding our markets, understanding our consumers, trying to reach consumers both independently and through our retail partners. And so we're really pleased with that. And consumer is probably more impacted sometimes than pieces of building products around people's ability to be mobile and to move. And so we get lower interest rates that translate into lower mortgage rates, which, as you know, have more to do with the longer end of the curve there. We expect that, that would add to our revenues and growth as well. Dan Moore: Very helpful. And Kathryn touched on WAVE. Maybe just quickly, ClarkDietrich, their contribution pulled back to kind of lowest levels since the start of the pandemic. Obviously, the environment is a little challenged there. Just talk about whether -- if this is the new normal, at least for now, where do we go from here over the next few quarters? Joseph Hayek: Yes. No, you're exactly right. And the way that we think of our portfolio of businesses, a lot of our businesses really are right in the middle of repair, remodel, maintenance. And so we don't depend on new construction spending as much as some folks might. In ClarkDietrich, it is a little dependent on new construction spending and the U.S. Census Bureau suggested recently that 14 months have passed since construction spending peaked in May of 2024. And so you do have that number and that growth figure a little depressed. ClarkDietrich is a market leader and they have continued to do well, but you have fewer opportunities that are out there, especially on the smaller contracting side. You do have infrastructure projects and data center projects and mega projects continuing to get greenlighted and to go, which is great. But you'd like to have that mix of smaller projects as well. And you'll see lower steel prices. And so you'll see people being very competitive trying to, in our cases, keep the lights on at some of these smaller companies. And so all that tends to lead to some margin compression for ClarkDietrich. We do see Dodge Momentum finally kind of picking up and looking good. That is a very leading indicator. A lot of times, you see a spike there. It takes 18 months plus for those to translate into sales for folks like ClarkDietrich. And so pretty well positioned, but we think it's flat to potentially down a little bit in the next quarter or 2 and just because you've got to get through this period of uncertainty where people aren't willing to or able to get construction projects going. We know that will change. It always changes. And ClarkDietrich tends to come out better on the other side, but we do have to get through this period, and it's hard for us to be able to forecast whether it lasts 2 weeks or a couple of months or 6 or 8, but that's kind of where we are with that business. Dan Moore: Okay. Last one, I'll jump back in queue. Just maybe talk about the M&A pipeline. As you described, free cash flow is solid and poised to inflect higher as the CapEx cycle winds down. So priorities for capital allocation and the outlook for potential either whether it's bolt-ons around Elgen Manufacturing, other areas that could be potential opportunities to deploy capital over the next kind of 12-plus months. Joseph Hayek: Sure. And our capital allocation priorities continue to center around being balanced with a bias towards growth. You'll see we paid $9 million in the dividend, and we continue to buy back shares selectively. But we have a bias for growth. And when we think about M&A and we think about our ability to continue to seek and add businesses that are high margin, low asset intensity, leaders in niche markets, we're pretty excited about it. And I'll let Colin maybe comment a bit more in sort of some details around the pipeline and how we're thinking about it. Colin Souza: Yes. And thanks, Joe. It's -- we feel like the pipeline is solid right now. The M&A markets are softer, but we're still finding those opportunities that are out there and spending time to really build those relationships and are excited about what that could become as we progress throughout the year. Our criteria, we're looking for leaders in niche areas across consumer and building products and that can demonstrate a sustainable competitive advantage, and that's our -- when we deploy our diligence process, that's what we're really looking to test. And a lot of those are in channels where we already have a big presence and a leadership position, and that gives us some ability to add value, whether it's through channel expertise or through manufacturing expertise or purchasing or price risk capabilities. So absolutely right, Dan. The acquisition of Elgen was a great one for us, and we're excited about that, and that also gives us opportunity to look around our business into adjacencies to see where there may be some more value ahead. So excited about M&A in the future. It's going to be an important lever for us in terms of capital allocation and growth. Operator: Your next question comes from the line of Brian McNamara from Canaccord Genuity. Brian McNamara: I don't think you guys disclosed volumes in the release, but you mentioned them qualitatively. Can you give us an idea of price versus volume growth for both segments in the quarter? Joseph Hayek: I'll take a quick shot at it. Volumes up in Building Products, price pretty stable. In Consumer, volumes were down, but mix shifted more heavily towards our celebrations business, which per unit cost more, and that was really the driver there. Colin Souza: Yes. And Brian, we did not disclose volumes. It becomes very complex, given the size of the products we're offering and then some of our recent acquisitions and different types of products. We're not just selling cylinders anymore. We're selling tools, we're selling components. So the volume data points become a little too cloudy to be able to speak to and lumpy. Brian McNamara: Got it. Okay. I know you got a tariff question earlier. I'm just curious, are you seeing tariff impacts and pricing in your markets? I think back in -- around Liberation Day, there was a reasonable school of thought that there was kind of enough inventory in the channel to get us to the fall, and we're kind of here now. Your home center customers are also being careful with their comments on pricing. But are you seeing price increases on the shelf from your internationally sourced competitors and price gaps widen there? And is that helping the company? Colin Souza: Yes. Brian, not yet. The tariffs are driving impact. Joe mentioned it a couple of million dollars in our business that we paid on the consumer side related to tariffs. I think a lot of companies are still trying to work through how to handle that and what to do and also kind of waiting and seeing how things unfold. So we're seeing that impact in our business, but at the shelf, it's a bit mixed. Brian McNamara: Great. And then finally, I know there's a $2.2 million purchase accounting charge in there, but gross margins are lumpy. I know you're targeting kind of 30% over the medium term. How should we think about gross margins in the coming quarters and any puts and takes there? Colin Souza: Yes. Brian, we did 27% this quarter, up from 24%. There was purchase accounting in both periods for the acquisition of Elgen and then on Ragasco. Strong volumes within Building Products, we talked about earlier, drove some of the volume increase as well as some of the incremental initiatives across the company that are paying off. Sequentially, gross margin was down. Q1 and Q2 are seasonally weaker for us compared to Q3 and Q4. So that wasn't unexpected. But as you said, our goal over time here is to drive gross margins north of 30% and driving our -- holding our costs flat and SG&A as a percent of sales down to 20%. So we feel like we're still on track with that, and our initiatives are driving some momentum and want that trend to continue. Joseph Hayek: Yes. And Brian, Colin is absolutely right. Those numbers, right, that we're striving towards and trying to get to, those are sort of annual numbers, and there'll be a little bit of puts and takes when you have seasonally slower periods like Q1 and Q2, your conversion costs will be naturally a bit higher. And so you'll probably overperform that in Q3 and Q4 relatively speaking. But our goal for that is more of an annual number. Operator: Your next question comes from the line of Susan Maklari from Goldman Sachs. Susan Maklari: My first question is going back to the operational efficiencies that you mentioned in your prepared remarks. You noted that you've seen some nice progress in the water business. I guess, can you talk a bit more about that? And how do we think about where else those efforts can go to across the business and what they could mean over time? Colin Souza: Yes, Susan, I think Joe mentioned in his remarks, 80/20 initiatives. We piloted that in the water business about 7 months ago. It's going very well. A lot of the focus there is how do we reduce complexity, increase focus and drive better results. So we're in the middle of that. We're excited and the teams are very, very engaged. And we've been pleased with what we've seen so far. And to Joe's comments earlier, we're starting to evaluate where could this apply next across our portfolio so we can continue to build that muscle and really drive this way of operating. Joseph Hayek: Yes. And Susan, just a couple of other thoughts. We do really like how that way of thinking is challenging our historic norms. We've been at it for almost 6 months and so, we've seen enough to know a couple of things. One, it's going to have a positive impact; and two, we'd like to do more of it. And so I think you'll see us be thoughtful about how best to roll it out. We don't want to kind of try and sort of boil the ocean, but we want to be thoughtful about it. And it's going to be a great tool in our kit as we go forward. But then the other piece, broader maybe than 80/20 is our constant evergreen initiatives on holding costs down. And in our facilities, there are goals every single month, every single quarter, every single year in terms of taking costs out. And across our facilities, and certainly within the corporate organization. Look, our health care costs continue to go up. Obviously, people get merit increases. But if you look at Q1 versus Q1 last year, we grew revenue, we grew gross profit. But absent the inclusion of Elgen's SG&A, our SG&A was flat year-over-year. And so that's a great testament to the work our teams are doing. That might not happen every single quarter, but it's something that we are very conscious of in that we believe, we have a great platform and we can grow our revenues and gross profits and keep the same kind of infrastructure and base. And we hope that over time, that is consistent with being able to grow margins. Susan Maklari: Yes. Okay. That's helpful color. And then turning to Elgen. Can you talk a bit about how that business can actually help in terms of hitting some of these targets that you've laid out, growing the business overall and especially thinking about perhaps the less discretionary nature of HVAC and what that could mean in a tougher macro and especially if things slow further from here? Colin Souza: Yes, Susan, it's -- we're very pleased with Elgen so far. It contributed, as I mentioned, $21 million in revenue and relatively breakeven from an EBITDA standpoint, which included the $2.2 million in purchase accounting. The stats we released on the business right when we acquired it, $115 million of revenue annually, $13 million in adjusted EBITDA, at the end of the day, this is a good example of our M&A strategy in action and our goal in expanding our portfolio in commercial HVAC and the structural framing. And we found this fantastic business that so far has been a great fit for us. Integration, we believe we're 90 days in. It's going very, very well. We have our operations teams together working side by side, the commercial teams, the purchasing teams. And what we're very pleased with is just the more time we spend with that business, we find a lot of really, really good talent at the company, and we're very pleased with how that's gone so far. And to your point, Susan, the commercial HVAC market, we believe, is attractive and it's resilient over time and provides above GDP type growth. And that's why it was a key target market of ours. And we found this opportunity with Elgen, where we can bring some value and sophistication from a steel manufacturing standpoint and purchasing and operational expertise. And we're getting to work with how we can continue to increase value with them at that company over time. And this is one of hopefully many that we do over time as an example here. Joseph Hayek: Yes. And Susan, your question is really a good one relative to growth opportunities and to the resiliency of that market. We certainly agree with the latter point. We think there are growth opportunities organically within Elgen, but also we look at cross-selling opportunities in our water business, some crossover with ClarkDietrich, some things related to WAVE. And so any time we continue to be able to add value with this sort of 2-step distribution market into HVAC and things that are above the ceiling or behind the walls, people are looking for kind of creative, innovative ways to consolidate their own spend, save money, and we think we can be a part of that solution for them. Susan Maklari: Yes. Okay. That's helpful, Joe. And then one more question, which is just when you think about the business broadly, how are you balancing the investments in the growth and the cost efforts relative to the potential that we do end up in a tougher macro next year and maybe we see the consumer still really being under pressure there? And just how are you thinking about those various factors that are all coming through and noting that there's a lot of uncertainty around there, but just any thoughts generally on that positioning and how you're thinking -- how you're approaching that? Joseph Hayek: Yes, it's a great question. And uncertainty is really a watch word that you see, we see that there are a lot of things out there in a lot of ways, what lower interest rates are meant to do is to stimulate growth. And you've seen interest rates at the very, very short end come down, but not on the kind of 5, 10, 30 year. And so people are still a little hesitant to -- even though reshoring is a priority, people are still a little hesitant to spend money and to put things into the ground and to invest in CapEx, et cetera. And so our -- the advantage we have in a lot of our businesses is we're pretty good at being -- trading down is the wrong way to think about it, but some of the things in our consumer business that we're really good at are substitutes if somebody isn't able to go on a trip or to stay in a hotel or travel internationally, they will spend more time outside. They will spend more time camping. And we're also doing a lot of work around direct-to-consumer initiatives and really sort of thinking about our placement in bricks and mortars because our solutions can, in fact, enable the DIYers who are going to think about those projects instead of something different or instead of hiring somebody. The more macro piece of that -- and again, a lot of our portfolio is repair, remodel, maintenance, a bit more insulated, but not totally insulated. And so we are continuing to invest in being a smarter, more nimble company that's around AI, that's around automation, that's around analytics, while absolutely kind of keeping an eye on a lid on sort of expenses that we think might not have the kinds of returns that we're looking for. And I think that's probably what a lot of people would do in an environment like this is something your cost of capital goes up, but your hurdle rate goes up because your risk quotient is higher. But all things being considered, we go back through and look at where our business sits, and we feel really good about what we're doing right now. And if the economy worsens, then we'll, I think, do just fine and probably outperform. But as markets recover, which they always will, we feel great about how we're positioned and what our solutions will mean kind of going forward into the mid- to longer term. Operator: [Operator Instructions] Your next question comes from the line of Walt Liptak from Seaport Research. Walter Liptak: Yes, great call so far. A lot of questions answered. I would like to try a follow-on on the HVAC refrigerant containers. And so I think it's been a couple of periods so far where you've been maybe doing well with your customers, increasing penetration. Is this the kind of thing where it's like a 1-year bump where you start getting on to more difficult comparisons at some point? Or is there enough customers, a big enough market where you can just continue to serve those customers really well and increase that penetration beyond like a 1-year bump in sales? Joseph Hayek: Yes. It's hard to predict what the future looks like. Walt, it's a very fair question. We think it's probably more the latter than the former. There are lots of things happening in these mandates for more environmentally friendly gases will continue to kind of proliferate. It's up to us to continue doing our level best to service our customers and service their customers. And so we're able to meet this increased demand. And if ultimately, you see things change in a year, it's likely that you would have something to potentially replace a load-in that runs its course. So never say never, but we're feeling relatively good about the future of that business while understanding that these types of things don't happen every quarter. Walter Liptak: Okay. Great. And then I wondered, you talked a lot on this call about the different forms of seasonality and how they impact the business. So as we're going -- so I wonder if you could just go through maybe not in a huge amount of detail, but some detail about the fall and winter and especially going into kind of the spring selling season, when do you start selling products into the spring selling season? When is there inventory lift? And what are the indications in consumer from your large customers? And then maybe in building products, too, what does the seasonality look like over the next couple of quarters? Colin Souza: Yes. So Walt, I'll take a shot at it, and Joe can fill in. I think just generally, it could vary from year-to-year, obviously, depending on what's happened throughout the year. Q1 and Q2 are typically seasonally weaker than Q3 and Q4. And it varies a little bit across consumer and building. And then in particular, as you get into Q2 and Q3, it could depend just on if there's weather-related events, if it's colder sooner or if there's hurricanes or snowstorms that would drive activity. And those, obviously, we can't predict from year-to-year, but they do happen in those time periods. So that's the high-level way we think about it, and then you have to go kind of category by category. Operator: And that concludes our question-and-answer session. I will now turn the call back over to the company for some closing remarks. Joseph Hayek: Thank you all for joining us this morning. Have a wonderful rest of your week, and we look forward to speaking with everybody soon. Thank you. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Anne-Sophie Jugean: Good evening, and welcome to Quadient's Half Year 2025 Results Presentation. I am Anne-Sophie Jugean, Quadient's Head of Investor Relations. Today's presentation will be hosted by Geoffrey Godet, CEO; and Laurent Du Passage, CFO. The agenda for today's call is on Slide 3. As usual, there will be an opportunity to ask questions at the end of the presentation. You can submit your questions in writing through the web or ask questions live by dialing into the conference call. Thank you very much. And with that, over to you, Geoffrey. Geoffrey Godet: Thank you, Anne-Sophie. Good evening. The first half of 2025 showed a solid performance from our two growth engines, Digital and Lockers, with a double-digit growth in recurring revenue. Both solutions are firmly on a strong and predictable revenue growth trajectory. From a profitability standpoint, lockers' EBITDA margin also confirmed its fast-improving trend. And both solutions are expected to deliver EBITDA margin increase for the full year 2025 and also for 2026. The end of the U.S. postal decertification program that we mentioned last time impacted our mail hardware sales in the U.S., leading to a temporary lower revenue in the period for Mail Solution. All players in the industry have experienced similar declines. More importantly, we managed to protect the profitability of our Mail Solution. Thanks to the cross-selling between our solutions and also the contribution from the recent integration of the Frama acquisition that we did a little more than a year ago. As a result, for the first half of 2025, we delivered EUR 517 million in revenue, which represents a 3% organic decline compared to the same period last year. Despite the decline in mail revenue, current EBIT for the period was stable at EUR 60 million. So let's now turn to the details of our H1 result with Laurent. Laurent Du Passage: Thank you, Geoffrey. Overall, Quadient delivered EUR 517 million in total revenue in the first half of 2025, representing a 3% organic decline compared to last year. This reflects a 13.4% organic drop in noncurrent revenue, affected by the lower mail product placements in the U.S. compared to last year, decertification period. Mail performance was very much in line with Q1 and also consistent with overall market trends. That said, our subscription-related revenue continued to grow and now stands at EUR 384 million, representing 74% of total revenue, up from 72% last year. From a geographical perspective, North America has been declining by EUR 10 million compared to last year, resulting from a EUR 19 million decline in Mail, while our other solutions continue to grow. Europe performance in H1 is in line with previous year, with a notable exception, U.K. and Ireland, overperforming the rest of Europe as it benefits from strong dynamics in both Lockers and Digital. International has also been overperforming, thanks to large local deals. Let's now turn to the revenue bridge by solution on the next slide. This bridge clearly highlights the strong and continued momentum in both Digital and Locker Solutions, while Mail experienced a sharper decline of EUR 31 million in the middle. Out of this EUR 31 million, EUR 16 million are coming from that lower U.S. hardware placements. Just as in Q1, Lockers delivered double-digit growth and Digital grew above 7%, while Mail declined by around 8% year-over-year. The scope effect added EUR 9 million on the left, mainly coming from the acquisition of Package Concierge in December 2024 and to a lesser extent from the Serensia acquisition in June 2025. On the right-hand side, you can see the EUR 10 million negative currency effect entirely coming from Q2 due to U.S. dollar. Moving now to the next slide on current EBIT. So Slide 9. Despite higher decline in Mail, Quadient delivered a stable current EBIT, thanks to a slight growth of EBITDA in Digital, a limited decline in Mail, thanks to our cost adjustments as well as significant improvement in Lockers, which is up by EUR 5 million year-over-year. The reported current EBIT for H1 2025 stands at EUR 60 million. It's nearly unchanged compared to the EUR 61 million from last year with a slight positive organic growth, 0.1%, offset by the currency effect of EUR 1.7 million on the right-hand side compared to last year. So now we'll move into the details of the performance by solution. Over to you, Geoffrey. Geoffrey Godet: Let's move now to our H1 2025 accomplishment in our Digital automation platform. Our leadership was further reaffirmed in Q2 '25 with top position in both CCM and CXM Aspire Leaderboards. But I'm also proud to share that Quadient earned the highest score in both AI vision and road map as well as the AI maturity. This leads to be recognized by QKS as the most valuable pioneer in the CCM AI Maturity Matrix. This recognition proves that at Quadient AI is not a buzzword. We're not experimenting. We're scaling AI in ways that set high standards for the industry. The real challenge with AI, as you know, is to deliver measurable value and such at scale. Too often, AI in business today gets reduced to hype, pilots or sometimes even disconnected use cases. At Quadient, we focus not on what AI could do someday, but on what it does today to create sustainable value and accelerate customer success. Our investments in AI position Quadient ahead of the competitors and show the direction for the whole industry. We also advanced strongly in the account payable AP metrics compared to 2024, especially in technology excellence, where we're now firmly also amongst the leaders of the industry. And finally, I wanted to highlight that Quadient received also the IDC SaaS award for customer satisfaction in the Account Receivable Automation segment. That's based on the highest scores across 32 customer metrics from product value and usage implementation and customer relationship. So if we step back, taken together, these recognitions show one thing very clearly, Quadient Digital is delivering innovation, customer value and market leadership across every segment we play in. Our go-to-market approach, as you know, has been built on two strong pillars, acquisition and expansion. On the acquisition side, Quadient Digital delivered strong momentum in the first half of '25. We added this time 1,100 new customers, new logos, right, with strong dynamics from large accounts and also on the mid-segment, over 30% growth that is coming from the cross-selling from our Mail customers into our digital platform. We also secured some several new large enterprise logo, and that includes two large enterprise deals that are each worth more than $1 million. In particular, the one deal that I want to mention to you was a Spanish Bank, which is quite interesting because once it will be fully implemented, they will be one of the largest user of our digital platform, hoping to generate more than EUR 15 billion. I just want to stress that EUR 15 billion communication annually. If we move onto second pillar on the expansion side, we continue to build value with our more than 16,000 existing digital customers. Following the acquisition -- on another note, sorry, following the acquisition of the e-invoicing platform that we did of Serensia in June of this year, the positive momentum is accelerating. First, Serensia has successfully passed the French tax authority invoicing platform test that was in July. And since July, it is now an Accredited Platform. And as such, it has already been selected by major accounts and white-label resellers as their Accredited Platform and such ahead of the invoicing compliance date for next year. Now what it means for Quadient is that we're already guaranteed now to manage over 200 million of invoices annually in 2026 and moving forward, securing at least over 10% of the addressable market in terms of numbers of invoice that will be managed annually. In terms of upsell, I also wanted to share with you another strong example of the benefit of the approach of Quadient of having a best-of-suite approach. This customer story has everything that we could wish for. It's a competitor takeout and it's also a multiproduct, multi-module sell. We signed a deal in H1 with a leading cloud-based electronic healthcare record provider in North America with a full platform bundle, and that included our account payable module, our account receivable module, our hybrid mail distribution module, our CCA module. Over to you, Laurent? Laurent Du Passage: As in Q1, we continued to deliver double-digit organic growth in subscription-related revenue for our Digital business with particularly strong performance in North America and the U.K. Our annual recurring revenue or ARR has increased to EUR 241 million, representing an organic growth of over 10% on a 12-month basis compared to the January 2025 mark. EBITDA on the right-hand side for H1 2025 remained stable year-over-year despite the integration of Serensia and higher commercial expense tied to strong bookings. Looking ahead, we expect profitability to increase for the full year, higher than the 17.5% margin reported for 2024. In summary, Quadient's focus on recurring revenue streams and successful integration of new acquisitions are driving the sustainable growth and supporting our long-term profitability targets. Turning now to Mail on Slide 14. Geoffrey Godet: Thank you, Laurent. Mail had a difficult H1 caused by special circumstances in the U.S. and the U.S. is our main and most resilient market traditionally. The root cause of the H1 decline came primarily from the earlier-than-expected end of the U.S. decertification program. And with all Mail market players experiencing a similar level of both hardware and/or total revenue decline in H1, to get in bit more details and be more precise, the U.S. decertification program officially ended in Q1 2025. But the initial deceleration in terms of opportunities came as early as the end of last year -- sorry, of the first semester of last year in 2024. So that was roughly 6 months earlier than we had anticipated. With over 50% of the competitive base, generally speaking, the entire market, right, that has been updated in the last 2 years as a result of that program, the resulting factor is a lower numbers of [indiscernible] to sign or to renew deals in H1 2025. This is the primary driver of the decline in Mail hardware sales in H1 that you can see in this graph with North America accounting for more than 80% of the drop in mail product placements. Moving forward, Quadient anticipate that hardware sales performance is going to improve and is going to improve in the coming quarters as the echo effect of the post-COVID rebound 5 years later, will create higher opportunities for equipment renewals. The fundamentals of our mail market remain the same. The usage volume and the usage on the machine in H1 are unchanged. Our forecast for midterm mail volume usage globally is also confirmed. So naturally and consequently, we foresee a rebound in U.S. hardware sales in H2 and in 2026, and we'll see a return to a more muted revenue decline for Mail Solution over the medium term. And this is what allows us to confirm our 2030 guidance on Mail revenue of around EUR 600 million. Laurent? Laurent Du Passage: Thank you. On Slide 15 now, as we announced, the Q2 trends were very similar to those in Q1. So for H1, Mail hardware sales declined by 17.5%, primarily driven by a strong comparison base in the U.S., as explained by Geoffrey, due to last year decertification, which ended in Q1 '25. Despite these headwinds, Mail EBITDA margin improved by 0.8 points compared to H1 '24. This was supported by the successful integration of Frama, which delivered the expected benefits, the enhanced commercial productivity with Digital and a mix effect from lower hardware placements with limited impact from U.S. tariffs. Overall, while top line trends reflect the current market challenges, our focus on operational efficiency and integration synergies has enabled us to maintain strong profitability in the Mail segment. Now moving back to Lockers with Geoffrey. Geoffrey Godet: Expansion of our Lockers platform accelerated in H1 as well, both in terms of the size of the network and in terms of its usage. Our overall installed base now is reaching 26,600 lockers globally as we added naturally, I think, more than 1,100 lockers in H1 alone. In the U.K., the deployment of our network has continued to focus on premium location, and we have signed new partnerships with Shell petrol stations, but also a retailer chain, The Range, so that they could install our lockers. In H1, we also saw further initiatives that drives the volume in our lockers. So if we take another example, in Japan, we extended our partnership with JR East, Smart Logistics. So now users are going to be able to both receive and send parcels through the lockers installed in the train station themselves. Moving to Slide 17. If we look at the European networks, we can clearly see the benefit of having an at-scale network as a key driver for the growth in usage. The graph on the left highlights the steady acceleration in locker installation across Europe, in particular for open networks since January 2024. Over the past 18 months, the installed base has tripled with mostly premium locations, as I just mentioned to you, some of those new partners. Now let's look at the graph on the right side because that's a clear demonstration, I think, of the successful J-curve of developing and how it develops for our open networks. From the threefold growth in installation, we have been able to generate a 13-fold increase. So just let me repeat, a 13-fold increase in volumes over the same period of time as now users and carriers and consumers are increasing their usage of our lockers. With that, I'll now hand it over to Laurent. Laurent Du Passage: Thank you. On Slide 18, let me start with just showing you the longer-term track record of our Locker business. On this slide, we have shown the evolution of the key financials and operational metrics for our Locker business over the past 3.5 years. The quarterly revenue evolution emphasis strong revenue momentum as Lockers already is a EUR 100 million revenue business on a 12-month basis. An increase in the share of subscription-related revenue with 4 consecutive quarters of strong double-digit organic growth. Now moving to the other graph, let's review the EBITDA evolution shows a low point in 2022, which was impacted, if you remember, by adverse transportation cost impact at the time. Most importantly, EBITDA breakeven was achieved in fiscal year 2024 last year. With a regular and strong increase of EBITDA margin since 2023, the H2 '25 is expected to be both sequentially and above year-on-year, and we are well on track to reach the above 10% EBITDA margin by 2026. Moving now to Slide 19. We continue to deliver that strong momentum in both revenue and profitability in H1. Reported growth reached 30%, including the positive impact from Package Concierge acquisition, which contributed EUR 8 million. Organic growth continues to be double digit in Q2 like it was in Q1 and despite the software hardware performance in North America in Q2. We also achieved a double-digit organic growth in subscription-related revenue, driven by the outstanding volume ramp-up in open networks across U.K. and France as well as continued momentum in the U.S. residential segment. On the right-hand side, our EBITDA has significantly improved, I mean for the first half compared to last year. It's up by EUR 5 million. It's more than 10 points better than last year. And this was fueled by rising recurring revenue and increased usage as well as the accretive contribution from Package Concierge. On Slide 20, moving now to Quadient financials. In this slide, you have just a summary of the different metrics we did review, summing up to the EUR 517 million published revenue or 21% EBITDA and the EUR 60 million current EBIT at the bottom. Moving now to Slide 22. We see the P&L. Income before tax is particularly improved in H1 '25. It's 50% more than last year, thanks to lower optimization expenses than last year, which I remind you included an IT project write-off and some office optimization. And we have also a stable financial expense. H1 '25 income tax is normalized, while H1 last year included a EUR 15 million tax benefit. We even have a negative cost in tax last year. It results in a net income at EUR 21 million for this period compared to the EUR 24 million last year. Let's move now to Slide 23 and the free cash flow. Free cash flow stands at minus EUR 8 million despite the seasonality that we know of our working capital and the debt interest payment and tax one-offs. We have two one-offs this semester. Lower mail hardware placement have benefited to the cash flow, on the other hand, thanks to the lease portfolio decline and lower CapEx for Mail, which we'll review in more detail on the next slide. On the acquisition side, you can see the impact of Frama acquisition last year in H1 and Serensia this year. Moving now to the next slide to see details on CapEx. The evolution of CapEx presented here, excluding IFRS 16 CapEx moving forward as in fact, IFRS 16 is not reflecting such a cash out. Well, this evolution reflects the dynamic by solution we explained before, a stabilization of sustained, I would say, investment in Digital, which is mostly related to R&D, the EUR 12 million, increase in Lockers for the benefit of our open-network rollout notably in U.K. that increased to EUR 14 million. And last but not least, the reduction in mail CapEx due to the lower placement in franking machine tied to the end of the decertification and the reduced activity. Moving now to Slide 25 on net debt and leverage as of the first half of '25 our net debt declined to EUR 712 million. It's clearly favorably impacted by the USD weakening against Europe. The leverage ratios are down. It's at 2.9 including leasing and 1.6 excluding leasing from the 3.0 and 1.7 respectively at the end of January. This improvement reflects the resilience of our EBITDA, with a continued discipline on the balance sheet. Over the past 18 months, if you look at the figures, we have seen that the leverage kept -- was kept stable or declining. And this despite the EUR 45 million of acquisitions we made over the period. Our leverage ratios continue to stand well below our maximum covenant levels, ensuring long-term financial stability for Quadient. Moving now to Slide 26. During the first half of '25, we raised EUR 50 million in new facilities, a U.S. private placement issued in July. Thanks to the shelf facility signed earlier this year. We also completed the repayment of our 2025 bond and Schuldschein in February. Our liquidity position remained strong with EUR 123 million in cash at the end of July and a EUR 300 million on joint credit facility, which has been extended to 2030. The customer leasing portfolios stand at EUR 556 million, it is down by EUR 67 million, which in fact is due for EUR 43 million to ForEX. And we see the maturity and the bottom was spread over the coming years. Back to you now, Geoffrey, for the conclusion. Geoffrey Godet: Thank you, Laurent. This H1 2025 performance, I think demonstrated clearly the solid dynamics of our two growth engines, Digital and Lockers, offsetting the temporary U.S. softer mail impact that we described today with a stable current EBIT. For the second half of the year, we expect Quadient revenue to increase compared to H1, and this will be supported by a few things. The first thing is the continued, sustained strong momentum in Digital and also in the Lockers. It will also be supported by a rebound in U.S. Mail for us, although it's tougher than initially expected. We also expect a further increase in profitability in H2 versus H1 this year. How does it going to be supported? We're going to have a strong increase in Digital and also the low-cost contribution in H2. And Mail EBITDA margin is going to remain at a high level as well, thanks to the continued cost adaptation and despite the impact from the U.S. tariff in particular. So consequently, and taking into account the global macroeconomic uncertainties that we all have experienced, we are updating our full year 2025 guidance. And we now expect the full year revenue to decline by a low single-digit on an organic basis. And the full year current EBIT to come in a range from stable to low single-digit decline on an organic basis. If we look at the midterm guidance, we are confirming all our 2030 guidance, and we're also confirming the full year 2026 EBITDA margin targets and such for our three solutions. So with EBITDA margin expected to be above 20% for Digital, above 25% for Mail and above 10% for the Lockers. Based on the 2024 result and on the revised guidance for '25, we're currently suspending all other elements of the guidance from being part of the previous '23-'26 trajectory. So thank you. And with that, we're ready to take your questions, as usual, for the Q&A, Anne-Sophie. Anne-Sophie Jugean: Thank you, Geoffrey. [Operator Instructions] There are no audio questions at this time, so I hand the conference back to the speakers for any questions sent via the webcast. Thank you. Thank you. So we have a first written question. So the question is, why did you suspend your guidance for Lockers and Digital on the revenue side for the 2023-2026 period. Geoffrey Godet: That's a good question and Laurent feel free to comment. It just is too early to give the full guidance of '26. So it's likely something we will share with you and we'll get to March 2026 after the full year presentation. The real things that made us suspend the guidance is really related to the U.S. Mail performance that we have this year and the level of uncertainty that we still have as it relates to the pace of the rebound that we'll get in the U.S. main market for H2 and for the pace, obviously, the beginning of 2026, in particular. All the other elements of our business, including the performance that we have in the Mainland Europe that is at the same level as we expected in the previous years. The performance on our digital activities as well as our local activities are in line with our expectations. And this is why also we're able from a profitability or margin perspective to be able to -- ahead of time to confirm the trajectory. That being said, we live in a world with quite a lot of uncertainties. So it will be, I think, good for us to be able to -- until March to be able to precise the revenue trajectory or solution once we get there. Anne-Sophie Jugean: Thank you, Geoffrey. So the next question is on Digital. So could you please provide further details on the decline of EBITDA in the Digital segment? What are the expectations for the second half of the year. Laurent Du Passage: So I'll take this one, Geoffrey. So EBITDA for Digital is growing. So it's plus EUR 1 million compared to last year. That's what we saw in the bridge. And yes, we still have some growth and scale. I think you're referring maybe to the EBITDA margin that is slightly down. You have this dilutive slight impact from Serensia and the integration cost as well that is a factor. And the second factor is obviously some strong bookings that have impacted the commission side. We are very confident on the second half. We still have the growth in recurring revenue that is highly contributive and we have a level of OpEx that is not expected to significantly increase in H2. As you remember, we have usually payroll increase at the beginning of the fiscal year. So it should really benefit to the Digital segment and will end up higher than the 17.5% that we had on the full year last year. Anne-Sophie Jugean: Thank you, Laurent. So the next question is on U.S. tariffs. So regarding the tariffs, are you more impacted than your Pitney Bowes and competitor as being a non-U.S. provider. Geoffrey Godet: It's a good question, and it's difficult to know because we haven't looked at the information if Pitney Bowes has actually shared the amount. They have more volume than us in terms of equipment being a larger player. So they may have been more impacted in absolute value, and it depends obviously on how and where they source their -- the production and the manufacturing and reassembly of the activities. I think they are not producing in the U.S., so they are likely to be subject to tariff like any of the other players like FP and ourselves. That being said, the rate could vary from the one that could be potentially manufacturing in Europe, like some of our competitors in Mexico, which I think may be the case for Pitney Bowes and Asia, like it could be for us. So I hope that answered your question. Anne-Sophie Jugean: Thank you, Geoffrey. The next question is at which leverage would you consider resuming your share buyback program? Laurent Du Passage: So I am getting this one, Geoffrey. When we have the Capital Market Day last year, we mentioned that it would be below the 1.5 leverage, excluding leasing by the end of 2026. We are still at 1.6. So clearly, it's about forecasting and projecting what will be this evolution across the coming quarters. So, so far, we have -- you have seen we still have CapEx, notably in Lockers and the rollout, obviously, of the network. But clearly, it's something we continue to monitor and continue to arbitrate with the trajectory and how much security or guarantee we have to reach that 1.5 that we want to meet at the end of next year. Anne-Sophie Jugean: Thank you, Laurent. So the next question, is there outstanding earnout on your latest acquisitions? Geoffrey Godet: No. That was a straight answer, no. Anne-Sophie Jugean: So moving on to the next question. Have you completed the office optimization process? Laurent Du Passage: Yes. Geoffrey Godet: Yes, we have mostly completed the program completely. We may have -- always -- we're always looking at eventually when we renew lease and have opportunities to adapt to the scale of the business. In some cases, we have a little more people that we have hired. In other cases, people that took the benefit of the flexibility and the program that we provide them to let them work from home. So some time, we adjust down. So there might -- could be some more savings coming. Laurent Du Passage: Absolutely. And just to complete one thing, Geoffrey, when you -- notably, when you -- when we do acquisitions, obviously, we are seeking sometimes to make sure that we merged some offices, so that might be additional, I would say, optimizations. But for our existing offices, I would say we did really the bulk of the work at this stage. Anne-Sophie Jugean: Thank you, Laurent. So the next question is -- Quadient is a key player in the CCM market. What is your view on the recent acquisition of Smart Communications by Cinven this summer. Geoffrey Godet: It's a good question. So to be specific, our understanding is that the current -- the previous owner of one of our competitors, Smart Communication saw the controlling interest, so -- not the entire company to another private equity or Cinven for a valuation that I believe is estimated at EUR 1.8 billion for the entire business for a company that is much smaller than Quadient Digital today from what we know. This means it implies a high multiple on this transaction. And it shows that this company was highly valuable. So the first thing is congratulation for this transaction. But the best news is that I see that as a win for Quadient and Quadient Digital because it shows that the segment that Quadient Digital has decided to play and focus strategically in. So among them, obviously, we have our CCM activities, the one we're discussing now. But also, as you know, some of the financial automation segment, hybrid mail, the account payable, the e-invoicing with the acquisition of Serensia, all those segments, obviously, highly sought four segments with investors willing to pay high valuation because it shows the value that those segments provide. So that means that all the segments of Quadient because we've seen some previous transactions, I think more recently in the last 6 months with transactions from Bridgepoint on Esker, but also the transaction in the U.S. around AvidXchange. So it shows it continues to show that those segments are quite valuable for us. So that's the first thing. The second thing is that I see also that as a win for Quadient because we're obviously recognized by some of the industry analysts that I mentioned to you as the leader, and we continue to show the win in the industry. So I'm quite happy that this segment is recognized, and we have the opportunity to lead the segment naturally in this environment. So overall, it's a great news for the market and for Quadient Digital and for the player. Anne-Sophie Jugean: Thank you, Geoffrey. So moving on to Lockers for the last question. What will be the current local usage in France and U.K.? What would be the target for the average full year 2025? Laurent Du Passage: So first, we don't go to that level of detail because we have a lot of metrics that would be communicated. I think what's important to recall is, is the volume in absolute value, which I think is a key metric for us because, in fact, the more you will roll out Lockers or you see you have a ramp up for each locker, so -- looking just at the average of the utilization rate of all the rolled out lockers is not necessarily the right metric, I would say, because basically, if you just expanded for, let's say, 200 just in the past month, then you will drop basically your average utilization rate. So I think we need to focus also on the total volume of parcel that Geoffrey commented earlier. And I think, yes, we still have some room in the existing lockers, but the usage rate is ahead of our plan, so very satisfactory to us. And we see a good traction of existing carriers that are committing or double -- I mean increasing their capacity requirements. Geoffrey Godet: I think I could even add with a certain level of confidence is that the usage -- that we currently see with the usage trend and path that we see in the U.K. is actually above the trend and the level that we're seeing in Japan. So this is why, as we know, we have a quite profitable base today in Japan. So we're quite excited about the prospect of having such a usage trend evolution in the U.K. in particular. Anne-Sophie Jugean: And we have one last question. What are the EBITDA margin prospects for mail? Could the 2025 EBITDA margin for mail be flat compared to 2024? Laurent Du Passage: So as you could see in H1, clearly, we had an improvement in EBITDA margin despite the decline in top line. And we mentioned the several factors, out of which, obviously, our ability to scale the OpEx, is not the only reason, but that's one of the reasons. Also, there is a bit of a mix effect. H2 EBITDA will be higher than H1 EBITDA. So we have clearly room in H2 to generate a significant amount of EBITDA and continue to be maintaining the level above the 25% by next year, which is the commitment we took last year and will maintain. We will -- the H2 compared to H2 last year, yes, there will be an impact from the tariffs. I mean we know that. The ability of pushing that impact to the customer is something where basically we need to assess and view. So we will not -- and we don't go into a detail of EBITDA by solution by semester obviously. But you can be sure that it's going up compared to H1 and that will maintain the 25% mark as a minimum for this year and for next year. Anne-Sophie Jugean: Thank you, Laurent. So we have no further questions at this time, so we can close the call. Thank you very much for attending this presentation and for your questions. Our next call will be on the 2nd of December for our Q3 2025 sales release. In the meantime, we look forward to meeting some of you in the coming days during our road shows. Thank you, and have a good evening. Geoffrey Godet: Thank you. Laurent Du Passage: Thank you.
Operator: Welcome to the Liontown Resources FY '25 Results call. Following the formal presentation, there will be a Q&A session for investors, analysts and media. Participants can ask both text and live audio questions during today's call. [Operator Instructions] If you have any issues asking a question via the web, a backup phone line is available. Dial-in details can be found on the request to speak page or on the home screen under asking audio questions. To view documents relevant to today's meeting, including more detailed instructions on how to use the platform, select the Documents icon. A list of all available documents will appear. When selected, the document will open within the Lumi platform. You will still be able to listen to the meeting while viewing the documents. Text questions can be submitted at any time, and the audio queue is now open. I will now hand over to Mr. Tony Ottaviano, Managing Director and CEO of Liontown Resources. Antonino Ottaviano: Thank you, Michelle, and welcome, everybody, to our full year financial results for financial year '25. With me today is our Chief Operating Officer, Ryan Hair. Welcome, Ryan. This is his first results presentation for Liontown. Secondly, there's our Chief Commercial Officer, Grant Donald; and also our Interim CFO, Graeme Pettit. '25 has been a milestone year for Liontown. Our first year of production at Kathleen Valley. Today, I'll take you through the performance for the year, our financial results, our sustainability achievements and importantly, how we are positioned for FY '27 -- '26 and beyond. So next slide, please, Michelle. It's the usual important information. Okay. So just a quick summary of where we stand at the moment. FY '25 has been a year of delivery. We've successfully constructed, commissioned and transitioned Kathleen Valley into production. We've generated nearly $300 million in revenue in our first year. Despite the tough market and therefore, the softer lithium prices, the impacts of a ramp-up, we still produced a positive underlying EBITDA of $55 million and held an operating cash flow at breakeven. This is a strong sign of the scale and quality of this asset. We've also strengthened the balance sheet with an equity raise completed after year-end, ensuring that we can see ourselves through this current price cycle and transition the underground in FY '26. Our sustainability foundations remain a key differentiator, a strong safety performance, 81% renewable power penetration, deeper partnerships with our Traditional Owners in the Tjiwarl. So we see ourselves looking forward in FY '26 and then beyond with a lower cost base and a platform for growth. Finally, with an asset such as Kathleen Valley, it presents a long-term value proposition with scale, quality and sustainability to endure the various price upticks as they go through the cycles. We continue to maintain our optionality should the cycles change to expand the asset. We can go to the next slide, please, Michelle. So FY '25, it's been a milestone year for us with strong financial outcomes. Firstly, our concentrate production, nearly 300,000 tonnes there of concentrate sales of 283,000 (sic) [ 283,443 ] tonnes, strong plant availability in a ramp-up year of 89%. And again, lithium recovery of 58%. But if you look at it as a tale of two halves, the second half, we averaged 60%. As I mentioned in my opening piece, our revenue nearly hit $300 million in this ramp-up year. And we finished the year with a strong cash balance of $156 million, which has been further strengthened by the capital raise and about 11,000 tonnes of salable concentrate on hand. Finally, our full -- second half unit operating cost of $800 (sic) [ $802 ] a tonne and our underlying EBITDA of $55 million. So if we go to the next slide, please, Michelle. I'll now turn the discussion over to our Interim CFO, Graeme Pettit, to take you through the financials. Graeme Pettit: Thank you, Tony, and good morning to everybody on the call. Starting with revenue and despite a volatile price environment with spodumene prices down 24% in the June quarter, Liontown delivered the $298 million in revenue in our foundational year. The average realized price for the year was USD 673 per DMT, which translated to AUD 10.50 in dollar terms. As Tony mentioned, underlying EBITDA of $55 million demonstrates a positive operating leverage even in weak prices. Our statutory NLAT of $193 million was largely driven by noncash items, including the $81 million NRV write-down of OSP stockpiles and $159 million of depreciation, which includes open pit mine costs being depreciated over a short mine life. Operating cash flow was breakeven in our first year, which was a great achievement in the context of ramp-up and lower prices. At year-end, we held $156 million in cash, which has since been strengthened post year-end following our $372 million equity placement in August. Next slide, please. Turning now to the reconciliation of our earnings. We reported a statutory net loss of $193 million, as mentioned. As you can see on this bridge, the majority of that loss reflects noncash and ramp-up related items rather than the underlying operating performance of the business. Touching on some key items. Firstly, NRV. As flagged in the June quarter, where we provided a range of $75 million to $85 million, the write-down came in at $81 million. As a reminder, this is a noncash accounting adjustment and mainly related to OSP ore that is associated with the open pit mine, which is scheduled to end in December this year. Depreciation of $159 million, which was the depreciation of open pit mine assets over the short open pit life as well as half a year of depreciation of the processing plant and related assets. The depreciation of underground-related assets is expected to commence during the third quarter of this year. On that basis, for FY '26, we'd expect depreciation to remain at similar levels before moderating in FY '27 and beyond. Just a quick point to note on income tax. We expect to commence the recognition of deferred taxes during FY '26 with the commencement likely linked to the declaration of commercial production at the underground mine. Underlying EBITDA of $55 million reconciles to $1 million positive cash flow from operating activities and the key adjustments are related to working capital movements. Next slide, please. Turning now to cash flow. In our first year of operations, operating cash flow was breakeven, which is a solid result given the 2 headwinds we faced of lower lithium prices through the year and naturally higher costs associated with the ramp-up of an operation. On financing, we received strong support from our partners with $250 million convertible notes from LG Energy Solution and $15 million from the WA government for lithium industry support program. These inflows supported liquidity through our ramp-up. On the investment side, we spent $331 million of CapEx, the majority of which related to growth and commissioning at Kathleen Valley, completing the processing plant and advancing underground mine development. All up, we closed the year with a cash balance of $156 million at 30 June. And importantly, post year-end, that position has been fortified with $372 million gross proceeds from the August capital raise, giving a pro forma cash balance of $528 million. Next slide, please. The chart you see here demonstrates the changing composition and quantum of Liontown's CapEx spend. For FY '26, the CapEx spend reflects the continued investment in the underground mine, establishing life of mine infrastructure. We expect total CapEx to remain at similar levels for FY '27 before declining in future years. Next slide, please for the project capital is now complete. It's now complete? Yes, it's complete. Finally, turning to the balance sheet. At 30 June, cash increased to $156 million, up from $123 million in the prior year. Since year-end, that position has been strengthened, as mentioned before. Property, plant and equipment rose by $142 million, reflecting the completion and commissioning of the Kathleen Valley processing plant and the continued investment in the underground mine. Payables decreased to $88 million, down $40 million year-on-year, consistent with the completion of project construction. Borrowings increased to $831 million, which included the fully drawn forward facility and the USD 250 million LG convertible notes. The convertible notes are classified as a current liability because LG may elect to convert the debt into equity in the company at their option. The only time a cash payment can occur is at the maturity of the notes in July 2029. Next slide, please. I'll quickly step through our debt position. So we've deliberately structured our funding to be low-cost, covenant-light and flexible with strong support from our offtake partners. On the left, you can see gross debt position over the past 3 years with the increase in FY '25 driven by the USD 250 LG convertible notes. On the right, the maturity profile shows these facilities are spread out. The chart highlights the maturity timing of the LG convertible notes. In the event that the notes are not converted into equity, Liontown would need to repay or refinance the notes in July 2029. The gearing ratio at 30 June being total debt over total debt plus equity was 59%. The gearing ratio reduces to 47% on a pro forma basis if we consider the impact of the August capital raising. I'll now hand back over to Tony. Antonino Ottaviano: So if we go to the next slide, please, Michelle. I think this is a reinstatement of our prior release around our capital allocation. As a business, we're very early in our maturity, but we're very strong in ensuring that we set the right foundations for how we manage our capital. And clearly, our most recent capital raise will be something we consider in the context of our capital allocation framework. So we're very alive with the requirements and making sure that the capital that we obtain is spent wisely and to the best value for our shareholders. So if we go to the next one, please. I'll now hand over to Ryan Hair. Ryan Hair: So our updated resources and reserve statements show the strength of the Kathleen Valley ore body. Despite the depletion and use of more current assumptions, reserves have increased slightly while resources remain broadly stable. Notably, the first 5 years of the ore reserve align with the updated 5-year mine plan released in November 2024. Also worth noting is that the mining scheduled in FY '26 is predominantly in measured resource and proven ore reserve. So if we go to the next slide, please, Michelle. So talking around sustainability. First and foremost, safety remains our top priority. We closed FY '25 with a TRIFR of 7.39, which is an improvement on last year, but still an area we know we need to do more work on. Our focus is on continuing to strengthen our safety systems and reinforcing our safety culture with the goal of driving this rate down further. On sustainability, we've embedded ESG into the heart of our operations. During the year, we advanced our long-term water stewardship strategy, commenced electrification pilots across our fleet and maintained strict environmental compliance. Importantly, with 81% renewable energy penetration, we are setting a benchmark for decarbonized mining. This achievement was recognized externally with Liontown awarded Excellence in Renewable Energy and Mining at the 2025 Decarbonized Mine Awards. So when we talk about highlights, it's not just about tonnes and dollars. It's also about delivering safe, sustainable operations that underpin long-term value for all stakeholders. Thanks, Michelle. Next slide. So just to recap previous guidance, FY '26 is a transition year. The open pit finishes up in December, and we moved to 100% underground mining operation. The key thing I want to reiterate from the FY '26 guidance is our strategy in this current quarter. During the quarter, we have executed scheduled shutdowns at both the dry and wet plants, which facilitated several process improvement projects. At the same time, we continue to process directly from lower-grade OSP stockpiles in addition to the open pit and underground ore. That means the current September quarter is planned to have lower production, lower recoveries and higher cash outflow, all of which has been captured in our FY '26 guidance. If we go to the next slide. This chart tells the same story visually. In the first half, the blend is predominantly lower-grade OSP and open pit ore. By the end of Q2, open pit mining is complete. From Q3 onwards, the feed mix shifts decisively. That's when our larger stopes start coming online with stope sizes increasing from roughly 10,000 to 15,000 tonnes today to over 40,000 tonnes in the second half. Ongoing mine development and access to the thicker ore zones underpins the run rate lift from 1 million tonnes per annum to 1.5 million by the June quarter. Notably, as we transition to predominantly underground ore, we continue to target 70% lithia recovery in the plant. So half 1 is about managing through the stockpiles, scheduled shutdowns and completing the open pit. Half 2 is about scaling the underground and realizing the ongoing benefits of clean underground feed, higher grade, higher recovery and a clear runway to lower cost production. In FY '27, we expect to be running at 2.8 million tonnes per annum of underground ore, which shows the scale and productivity that's built into the design. So the message here is simple. FY '26 is a bridge year. We're absorbing the transition in the first half, delivering the step-up in the second half and setting the foundation for lower term -- so long-term lower cost production from FY'27. Antonino Ottaviano: Thank you, Ryan. We'll now move over to the market outlook and Grant Donald will run us through that. Grant Donald: Thanks, Tony. I think fundamentally, we come back to the demand of lithium being a very strong environment. We've seen continued growth on the EV side. You see -- compared to last year, we've seen an increase of about 2.7 million EVs sold. That strong growth is coming across not just China, but we're starting to see very good growth coming out of Europe and the rest of the world, which is growing at a rate which is catching North America in relevance. And look, I think this sets the scene for continued growth. Importantly, the second factor that has been a very robust driver of growth outside of the EV space has been battery energy storage. As we see more grid scale systems coming in for renewables, such as Kathleen Valley's own renewable side, there is significant demand coming from batteries to effectively move some of that renewable electricity into periods that can be more fully utilized. That is going to be an increasingly significant driver of lithium demand growth. And what the chart in the middle shows here that out of every 4 units of growth from here, 1 in every 4 will be for stationary storage, which is material. The energy storage systems grew 54% so far year-on-year this year. If we move to the next slide. Thanks. This is really trying to emphasize that it's been a bit of a roller coaster this year on pricing for lithium. And I would argue that this has been possible because the market is actually quite finely balanced. If you look at lithium inventories, particularly within carbonate, which is what people track in a number of days, we've really traded in a range-bound area for the entirety of this year between 40 and 45 days of inventories on hand. As the market grows, clearly, those inventories on a number of days declines. And we've actually just started to see again, in line with past seasonal -- seasonality, we've seen those inventories drop below that range bound area and below 40 days. That demonstrates, I think, to me that lithium is quite finely balanced, and that means that it's very open to sentiment and speculative activity changing the pricing quite dramatically, and we've seen that in -- particularly in the last few months as various rumors and headlines have heavily influenced pricing. So as we sit here today and look forward, I think we're relatively encouraged by the data that we see. We see strong demand both from EVs and from stationary storage. We see declining inventories in China that is clearly a good setup for stronger pricing as we look ahead. Tony? Antonino Ottaviano: Thank you, Grant. So if we go to our final slide, Michelle, just to wrap things up. Again, FY '25 to summarize, has been about delivering today, but unlocking the full potential of Kathleen Valley into the future. Again, '25 was about delivery, successfully constructing, commissioning and transitioning Kathleen Valley into production. We had strong underlying EBITDA of $55 million. We've had a balance sheet, which we've improved as a result of the capital raise that we got ourselves in a very strong position to see through this cycle and build on this platform. And then finally, we're about long-term value. We've got an asset here that is scalable, it's high quality. We've built a foundation from which we can build. We've maintained optionality around our expansion options. So should the market change, we're in a position that we can capitalize on that improvement. And finally, we look as -- in accordance with our long-term strategy, we will look at opportunities to grow the business beyond just Kathleen Valley. So that brings our presentation to an end. I thank you, everyone, for listening. And now I'll open up for questions. Operator: Thank you, Tony. Antonino Ottaviano: And that's a great photo that shows one of our stopes. Thank you, Michelle. Operator: [Operator Instructions] Our first question is a text question from James [ Ballantine ]. Could you please expand further on downstream plans and BHP rumors? Antonino Ottaviano: Okay. Let's deal with the downstream first. As the listeners may be aware, we have very -- 2 strong partnerships with both Sumitomo and LG Energy Solutions around looking at our downstream strategy. At the moment, we are progressing those partnerships by looking at various options around where we could potentially locate a refinery, but more importantly the economics of refining. And we're closely monitoring that given the current market. In terms of rumors, I'd rather not speculate on rumors. So I'll leave it at that. Operator: Our next question is a text question from [ Conrad Porter ], who asks, how does LTR see sodium battery technology growth impacting on demand? Antonino Ottaviano: Thank you. Look, sodium ion batteries, we do not believe will be a significant player in the mobility thematic, primarily on 3 fronts. Firstly, the economics suggest that at the moment, you have lithium that is very, very competitive. Secondly, we do not believe they've got the performance that's required. They do have an advantage in colder climates. And they might have an advantage in smaller mobility, things like scooters and maybe motorcycles. But in the big end, I don't think they'll play a part. And the final piece is, if you believe in the circular economy, they don't recycle well. So on that basis, it's only CATL that actually are pushing sodium ion batteries. And when I look at CATL's future forecast, around the battery mix that they are planning to make, they don't feature prominently in their mix. Next question, Michelle. Operator: Our next question is from Glyn Lawcock from Barrenjoey. Antonino Ottaviano: We're here, Glyn. We're here. You're uncharacteristically sheepish. So... Glyn Lawcock: Yes, no I'm here, Tony. Sorry, it's been -- I'm having technical issues on my end. So hopefully, you can hear me now? Antonino Ottaviano: Yes, loud and clear. Glyn Lawcock: Yes. Sorry about that. I had to dial in, so apologies. So Tony, I had a couple of quick questions, if I could. Just a very quick one. D&A guide for FY '26 because there's a lot of moving parts. And as you say, underground will probably become commercial towards the end of the calendar year. Is there anything you can do to help us with D&A for '26. Antonino Ottaviano: Yes, I'll hand over to Graeme. Graeme Pettit: So Glyn, I think I did mention the expectation is that FY '26 should be broadly in line with FY '25 from a depreciation perspective with the underground and open pit basically exchanging places through the year from a depreciation perspective. Glyn Lawcock: And does it step up then in '27? Or should that then be a reasonable guide for midterm? Antonino Ottaviano: We expect to moderate thereafter. So '25 and '26 will be higher than the long-term rate. Graeme Pettit: Which is driven principally -- sorry Graeme here Glyn. Principally by the fact that open pit has a short life and had to be depreciated quickly. Glyn Lawcock: Yes. Okay. And then you've given guidance for '26 in terms of sustaining CapEx of, I think, it's 45% to 55%. When the underground is fully developed and running towards the end of this year, so what do we think underground mine development is going to run at to keep going? And I assume as you get deeper and the ore body gets wider, that might come down over time. But any sense of what underground mine development is going to run at Graeme. Graeme Pettit: So again, I think I mentioned that sort of '26 and '27 has the establishment of quite a bit of life of mine infrastructure for the underground mine. So we expect '26, '27 to be slightly higher and then a run rate from '28 onwards, somewhere in the order of $50 million to $70 million. Operator: Thank you for no further questions. Antonino Ottaviano: Okay. Well, thank you, Michelle, for moderating, and thank you, listeners, and for the questions. Bye-bye. Operator: Thank you all. That's all the questions we have time for today. Please reach out to the Liontown team if you have any follow-up questions. We thank you all for your time, and have a great day. You may now log out.
Operator: Thank you for standing by, and welcome to the Tuas Limited Full Year Financial Year 2025 Results. [Operator Instructions] I would now like to hand the conference over to Mr. Richard Tan, CEO. Please go ahead. Richard Tan: Thank you. Good morning, and thank you for joining us. I'm Richard Tan, Chief Executive Officer of SIMBA Telecom, the principal operating entity of the Tuas Group. Also on the call today are Mr. David Teoh, Executive Chairman of Tuas Limited; and Mr. Harry Wong, Chief Financial Officer of SIMBA Telecom. It's a pleasure to present the financial results for Tuas Limited for the fiscal year ended 31st July 2025, covering the period which started 1st August 2024. Let me briefly outline today's agenda as shown on Slide 2. We'll begin with Harry, who will walk through the financial performance and key metrics for the year. I'll then provide an update on our operational progress, strategic initiatives and outlook for FY '26. We'll conclude with a Q&A session to address any questions you may have. Please note that all financial figures discussed today are denominated in Singapore dollars. With that, I will now hand over to Harry to take us through the numbers. Harry Wong: Good morning, everyone. My name is Harry Wong, CFO of SIMBA Telecom. I'll be presenting the financials of the Tuas Group. On Slide 3, you will see that we achieved a notable improvement in the financial results during FY '25 when compared to FY '24. Revenue for the year is $151.3 million, up from $117.1 million last year. EBITDA increased by 8%, up from $49.7 million in the prior year to $68.4 million. We achieved a full year positive net profit after tax. Net profit after tax of $6.9 million is a significant improvement on the prior year's loss of $4.4 million and represents a major milestone for the group. Next, we look at the revenue and EBITDA on Slide 4. Revenue for the year ending 31st July 2025, increased 29% compared to FY '24. With the increasing scale of the business, EBITDA margin has improved to 45% of revenue. Gross ARPU for the year was $9.60. The key drivers of this EBITDA uplift continue to be an increased subscriber base and expanded plan mix catering to different customers' needs. Our plans include generous roaming data at every price point. Slide 5 shows our sustained mobile subscriber growth since FY '22. As of 31st July 2025, we have about 1.254 million subscribers, representing a 19% increase over the past 1 year. We estimate SIMBA's mobile subscriber market share to be around 12%. Slide 6 shows the mobile -- Slide 6 shows the broadband subscriber base. As of 31 July 2025, we have approximately 25,600 active services, adding 22,000 subscribers over the year. We proceed to the cash flow on Slide 7. We continue to show positive cash flow. Opening cash and term deposit balance was $55.3 million. Net cash generated from operating activities was $81.2 million. The main cash outflow comes from acquisition of plan and equipment and intangible assets of $55 million, largely mobile network and some fixed broadband infrastructure. This brings the ending cash and term deposits to $80.7 million as of 31st July 2025. Again, positive cash flow after CapEx for the year is a welcome achievement. With this, I will let Richard proceed with the business updates. Richard Tan: Thank you, Harry. The Singapore mobile market remains highly dynamic. Over the past financial year, SIMBA has focused on delivering enhanced value across all price points. This strategy has resonated strongly with consumers as reflected in our continued subscriber growth. Notably, our $12 plan has gained significant traction due to its generous APAC roaming inclusions. Coupled with free IDD, our portfolio of plans appeal to the mass market, frequent travelers and migrant workers alike. We have broadened our retail footprint to increase accessibility of SIMBA products. This includes island-wide availability at 7-Eleven convenience stores and sales counters across the 4 Changi Airport terminals. These strategic placements have driven growth in prepaid activations, particularly among inbound travelers. To support our expanding customer base, SIMBA continues to invest in network capacity and user experience. Our infrastructure enhancements are complemented by the rapid expansion of our 5G coverage, which remains on track to exceed IMDA's regulatory benchmarks. Slide 9 covers our fiber broadband business, which, although still in its early days, is scaling faster, driven by a clear and compelling value proposition which includes true 10 gigabit per second speed, lowest market price, latest Wi-Fi 7 technology, no upfront costs, free ONT and router. This simplified high-value offering is resonating with consumers, and we intend to build on this momentum. Moving to Slide 10. On 11th of August 2025, we announced the proposed 100% acquisition of M1 Limited, excluding its ICT business, for an enterprise value of SGD 1.43 billion on a debt-free and cash-free basis. This transaction will be funded through existing cash reserves, AUD 385 million completed equity raise; SGD 1.1 billion in fully underwritten acquisition debt financing; up to AUD 50 million via a share purchase plan, which is expected to close tomorrow, 21st September 2025. A key step required prior to completion of the acquisition, if approved by the Singapore regulator, the Infocomm Media Development Authority, which has responsibility for regulating competition issues for -- in the telecommunications industry in Singapore. This process requires an application to be made by the parties to the consolidation. Together with M1, we have prepared and submitted to the IMDA the long-form consolidation joint application, and we are hoping to get regulatory approval in the coming months. And finally, the business outlook. The financial year has begun on a firm note with sustained growth in both mobile and fiber broadband segments in line with our expansion. SIMBA's stand-alone CapEx is projected to be between $50 million and $55 million for the full year. We will also remain focused on margin optimization and disciplined cash management. I will now hand it back to the moderator for the Q&A session. Operator: [Operator Instructions] Your first question today comes from William Park with Citi. William Park: Hopefully, this one is for -- firstly, this one's for David. Just a big picture question around the technology and network engineering that you've been able to sort of implement in Singapore. And could you just step through whether that's given you sort of a leg up in starting up and expanding SIMBA in Singapore versus, say, when you used to run TPG Telecom back in Australia? Richard Tan: Maybe I will handle this question. Richard here. Yes, I think... David Teoh: It's better than Richard handle it because he is more familiar than me. So Richard, thanks. Richard Tan: Okay. Thanks, David. So the technology that we use, obviously, was -- or rather, let me take one step back. TPG -- it started as TPG, and obviously, we transitioned to SIMBA as we're all aware. And we built the entire platform, both hardware, software and the network without any legacy. That has given us, obviously, an advantage because there were a lot of issues that we did not have to deal with entirely. We started -- we had started with 4G, and there are a lot of the equipment that we made were easily upgradable to support 5G. So in summary, we are in a very, very good position, and this has obviously been reflected in the growth as well as our CapEx efficiency and OpEx efficiency. Not quite sure if I addressed your question, but please feel free to jump in. William Park: That's very clear. Can I just ask about the EBITDA margin? Clearly, 45.2% for the full year is sort of in line with what you guys have delivered in the first half. But I'd imagine in second half, there would have been costs associated with M1 acquisition. Could you provide some color around the quantum of those acquisition costs that you have incurred? And because I'm trying to get to sort of the EBITDA margin on a like-for-like basis without these acquisition costs. And would it -- that's sort of a floor margin that you guys are thinking about for SIMBA business going forward? Richard Tan: So as you know, it's still early days because a lot of the work that was done was previously on the due diligence part of it, which led to the announcement, which, again, all of you are aware about. We don't give out -- we don't give the breakdown of costs. But obviously, what we will do moving forward is ensure that analysts as well as investors have clarity in terms of what the -- how the business is trending without the other costs associated with the acquisition. So that's something that we'll provide information on moving forward. William Park: Yes. That will be very helpful. And just one last one for me. Just around broadband ARPU in second half appears to have stepped up a fair bit versus first half. Just wondering what's driven this, particularly given with all these promotional activities that's going on in Singapore and your competitor is taking a pretty aggressive pricing strategy. Just wondering what's driven that uplift in ARPU. And I know you guys don't provide sort of a margin profile for mobile and broadband separately, but just if you could sort of direct us around how we should be thinking about broadband margin sort of going forward? Richard Tan: Okay. So it's a good question, but I think it is clear that we have a very simple product with regards to fiber broadband. Originally, we started at $19.99 and then now it's $29.95. So what we are trying to say is that we have been transitioning a lot of our customers from the old plan, which was at 2.5 gigabit per second to the 10 gigabit per second. So that obviously is driving an increase in ARPU. So that's pretty much to it. Operator: Your next question comes from Hussaini Saifee with Maybank. Hussaini Saifee: I have several questions. I'll go through it one by one. First is a question on the acquisition side. I understand that a part of the M1 network is with Antina, which is a joint venture with your start-up. So just wanted to understand, do you have any preliminary discussion with your start-up on that side? Then how you are going to also integrate the SIMBA network onto their network and potentially sharing on the cost side and things like that? So just if you can give your view on the side, that will be helpful. Richard Tan: Okay. Thanks for your question. As mentioned, we are still in the early phases as far as the consolidation application is concerned. With regards to Antina, it's too early to comment right now. But obviously, what we have observed is that Antina has served M1 well in terms of its 5G strategy. So given that we are in the process of engaging IMDA on the long-form consolidation application, I think that's as much color I'm able to provide. Hussaini Saifee: Understood. Maybe then moving on to the potential approach of the enlarged SIMBA post consolidation. I just wanted to understand that given the competition in the market and given how the other MVNOs and the flanker brands have put the pricing down, how should we see the competition evolving post consolidation? Will the enlarged SIMBA -- I mean, is the market share going forward in your view to grow in this market? Or do you think that there is room for prices to go up? And I also wanted to get your view on are you comfortable with your market share? The enlarged market share is around 25% or so. Or would you like to maybe try to inch it up forward -- upwards? Richard Tan: Okay. I note that you refer to the enlarged market share. So I think that what we can say right now is that, firstly, we don't really talk a lot about competition. We focus more on our own growth. SIMBA stand-alone, as indicated earlier in my presentation, the year has become on a firm note, and we are progressing in terms of growing our subscriber base. As far as M1 is concerned, they have their strength in the postpaid handset bundling. And we note that they are obviously very active in that area as well. So again, on a combined basis, early days. I can't really say much; too premature. So I would like to leave it as that. Operator: Your next question comes from Darren Odell with TELUS Capital (sic) [ Peloton Capital ]. Darren Odell: Congratulations on the strong results. Just a couple of questions. Just on numbers. I did notice that the gross margin came off a bit in the second half [ versus ] the first half. Just wondering the [indiscernible] there and what we should be thinking about going forward. On top of that as well is the broadband adds in the second half, [ if going upward ] not as high as the first half adds. I'm just trying to figure out [indiscernible] or how should we think about [indiscernible] into the next financial year as well. Richard Tan: Sorry, you're coming in rather muffled. So I would have to kind of like guess what your questions are about. So I think you're asking about gross margins of second half versus first half? Darren Odell: Yes. Richard Tan: As you know, we have been working hard to maintain our growth margins. And as I've always indicated in our past presentations, we want to continue to grow as much as we can. So obviously, as we move from quarter-to-quarter or half-to-half, we will invest to ensure that we keep up with our growth momentum. That has always been our priority. Now with regards to broadband adds, could you please repeat your question again? Darren Odell: Just in the first half, the [indiscernible] number was high from [indiscernible] in the second half. I just wonder how should be thinking [indiscernible] for [indiscernible] why that [indiscernible] was first half to second half? Richard Tan: Some of it is seasonality. And as I've said, it depends on the promotions that we run. So as of this rate -- as of this moment, we are comfortable with the growth rates with regards to fiber broadband. Operator: Your next question comes from James Bales with Morgan Stanley. James Bales: My question relates to the previous one. Just on the outlook commentary on mobile and broadband subs continuing to grow. Is that referring to the percentage growth rate or absolute subs added? Richard Tan: Well, if you look at our track record for the past 5 years and how we're trending in terms of growth rate, I would just like to leave it that, that's the continued path, the trajectory that we -- at least the early indications are indicating. So I'm not going to talk whether it's absolute number in terms of percentage. But if you look at the trend itself that we are progressing as what we have done for the past 5 years. James Bales: Okay. Got it. And on one of the slides, you highlight the value proposition in your $12 a month mobile plan. But the ARPU actually declined in the second half versus a year ago and versus the first half. Can you maybe help us understand why when that value proposition looks so strong for the higher price plan, why you've seen ARPU go down? Richard Tan: I don't think ARPU went down noticeably, right, especially in this highly dynamic market. What we have noticed is that there are, for example, increased popularity for our $12 plan. So that's obviously very good for SIMBA. And we are also continuing to gain significant traction for our senior plans. So all in all, it all balances out to the ARPU, which we have presented as $9.60. James Bales: Okay. Got it. And then maybe just on CapEx. You've called out stand-alone CapEx of $50 million to $55 million. I guess we have to -- we're trying to sort of figure out what the -- what that could look like in a post M1 completion world. If that deal does complete, how material would the change in CapEx profile be? Richard Tan: It's really hard to comment right now because, as I said, while we have done some analysis, it's still very much in the early stages. So we would have to understand the M1 network architecture, get a deeper understanding of it and see how we can derive the synergies. So one thing is for sure, we will not compromise on network quality or user experience, either on a stand-alone basis or a combined basis, but we are very watchful in terms of how we spend CapEx and OpEx. So we aim to do the best. And as I've said, from what I can see right now is that on a stand-alone basis, it's $50 million to $50 million -- $50 million to $55 million, and that's in line with the capacity needed to support our subscriber growth. Operator: [Operator Instructions] Your next question comes from Nick Harris with Morgans. Nick Harris: Just my first one. I know, Richard, you obviously just commented that it's very early days with respect to M1. But could you give us some high-level thoughts from what you've seen today just to try and help us understand the similarities or differences between M1's telco network and systems versus SIMBA. And I guess, really, what I'm trying to get to is there an opportunity there for you to leverage SIMBA's cost advantage into M1? Anything you can say around that would be great. Richard Tan: I will share with you what I can because, obviously, both companies have built up quite an extensive 4G network. I think you heard earlier in the call about Antina. Antina handles the 5G rollout for both M1 and StarHub. So there are synergies, obviously, on the 4G mobile network that can be derived as far as the radio network is concerned, the transmission as well as the core network because equipment-wise, network-wise, there would be significant overlap. But however, having said that, the overlap is, in fact, very, very complementary because for example, spectrum is extremely complementary as well. On the 900, we can combine our 10 megahertz with M1's 5 megahertz. So that will deliver a very good foundation for mobile coverage and quality. So I'm sorry to repeat myself again, it's really early days. But for M1 and SIMBA coming together, we are really excited about the opportunity. Nick Harris: And maybe just an easier question then was just if I looked at the M1 accounts, they've historically generated some revenue out of Singapore. I was just trying to understand if that revenue is related to the IT business or their telco business and then obviously, the logic being, will TUA or SIMBA have some telco revenue outside of Singapore? That's it for me. Richard Tan: Yes. The overseas revenue is part of the our ICT business that will be spun off. Operator: Your next question comes from Hussaini Saifee with Maybank. Hussaini Saifee: Sure. Some follow-ups. A couple of follow-ups. First is on the spectrum side, Richard, maybe you can help that -- because if we look at consolidations across the globe, at the time of consolidation, companies [indiscernible] do end up giving a little bit of a spectrum back to the regulator. Do you see that as a potential outcome with this merger? Or do you think that it could be one of the outcome? That's question number one. And the second question is, I understand that it is early days, but if you can give us some targets on the synergies, which you can potentially get on the back of network consolidation. Richard Tan: Okay. I can't comment on spectrum because that would be under consideration, obviously, by the regulator. But on a combined basis, you will see that the spectrum distribution is, in fact, very fair across 3 on a combined basis. Other than that, I really can't say much with regards to spectrum or your other question with regards to targets and synergies. I appreciate the questions. But as I've said, when the consolidation happens, then hopefully, we aim to provide more color. Operator: There are no further questions at this time. I'll now hand back to Mr. Tan for closing remarks. Richard Tan: Thank you all for your time and for engaging with our business update. The Board and management of Tuas Limited deeply appreciates your continued support. We look forward to delivering further value and growth in the months ahead. Thank you once again. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.