加载中...
共找到 4,694 条相关资讯
Operator: Please standby. We are about to begin. Ladies and gentlemen, good day, and welcome to the Lamb Weston First Quarter 2026 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Debbie Hancock, Vice President of Investor Relations. Please go ahead. Debbie Hancock: Good morning, and thank you for joining us for Lamb Weston's First Quarter Fiscal 2026 Earnings Call. I'm Debbie Hancock, Lamb Weston's Vice President of Investor Relations. Earlier today, we issued our press release and posted slides that we will use for our discussion today. You can find both on our website, lambweston.com. Please note that during our remarks, we will make forward-looking statements about the company's expected performance that are based on our current expectations. Actual results may differ materially due to risks and uncertainties. Please refer to the cautionary statements and risk factors contained in our SEC filings for more details on our forward-looking statements. Some of today's remarks include non-GAAP financial measures. These non-GAAP financial measures should not be considered a replacement for and should be rather read together with our GAAP results. You can find the GAAP to non-GAAP reconciliations in our earnings release in the appendix to our presentation. Joining me today are Mike Smith, our President and CEO, and Bernadette Madarieta, our Chief Financial Officer. Let me now turn the call over to Mike. Mike Smith: Thank you, Debbie. Good morning, and thank you for joining us today. The Lamb Weston team delivered first quarter results that exceeded our expectations and show commercial momentum in our business. While we are early in our Focus to Win execution, we are energized and excited by the emerging evidence of results coming from the foundation that we began to lay earlier this calendar year. Our goal remains to drive profitable growth and win with customers by focusing on the principles that made Lamb Weston the industry gold standard: category-leading innovation, exceptional products, and customer-centric actions. We are early in the journey, but our North Star is clear. I want to thank our hard-working team globally for their excellent work. Let me provide a few key messages I would like to leave with you today. First, we delivered another quarter of strong volume growth. This is a result of excellent work across our organization, from innovation quality, consistency, and our focus on the customer. We are seeing positive customer momentum as we invest behind strategic differentiators. Second, we are acting with urgency to implement our new strategic plan, Focus to Win, including working to deliver our cost savings program, which is in its early innings but tracking to our plan of achieving at least $250 million of annual run rate savings by fiscal year-end 2028. Third, we have new innovative products coming this fall, and we are winning new business and growing with existing customers as our teams go to market with a more customer-centric Lamb Weston organization. Fourth, in response to sustained volume growth in North America, we are restarting a curtailed line. Lastly, we are acting with urgency to position Lamb Weston for long-term success and shareholder value creation, including by prioritizing the specific markets and products where we believe we have a sustainable competitive advantage. Now let's discuss the quarter in more detail. Our first quarter results were led by volume growth in both segments, price mix within our expectations, the benefits of our cost savings initiatives, and significant progress in improving working capital, reducing our capital investments, and driving strong free cash flow generation. As we roll out our Focus to Win strategy and drive operational and strategic changes across our business, we are doing so from a leadership position within a category of opportunity. Whether at home or away from home, let's take a minute to remind ourselves why fries. Traditional french fries are one of the most profitable items on restaurant menus. Fries are the most ordered item at US restaurants. They appeal to a broad range of consumers and are America's favorite order across every generation. The fry attachment rate, or how often someone orders fries with their meal, remains approximately two percentage points higher than before the pandemic. What that means is that when people go out to eat, they are ordering fries more often than in 2019. And we see positive trends around the globe. For example, global demand is growing with an estimated 44% of global menus offering fries. And as multinational and local market QSRs expand, they continue to see developing markets with fries, which is trending positive. Finally, global fry volume growth has outpaced total food growth versus 2019. In July, we launched Focus to Win, our new strategic plan to unlock near and long-term value. While it is early in our efforts, we are making progress. I see it in the focus our teams have and the decisions we are making. We have clearly identified savings plans, and our teams are executing. All this is happening as we work to be our customer's number one partner, a world-class potato company, and an industry-leading innovator. Looking at each of the pillars of our strategy, a few early examples include within strengthening customer partnerships, we have realigned our sales teams around our priority markets. In North America, we are augmenting our successful direct sales force with a broker model to expand our reach into underpenetrated channels of the business. The Lamb Weston organization is embracing a customer-centric mentality. We have secured several new wins around the world, including expanding our share in business and key away-from-home categories such as C-stores and cash and carry. And outside the US, we've increased our business with QSR customers. In terms of executional excellence, the supply chain organization is elevating Lamb Weston's operations. We have undertaken programs across manufacturing, logistics, and procurement that are not just driving cost savings but meaningfully improving our run rates, our quality, and our customer satisfaction metrics. In response to sustained volume growth in North America, as previously mentioned, we are restarting a curtailed line in the latter part of the second quarter to ensure we maintain strong customer fill rates. Our global footprint and the untapped capacity in our manufacturing network allow us to take on new business and provide additional support for our customers. Additionally, we began shipping from our new manufacturing facility in Marda Plata, Argentina. Approximately 80% of production will be destined for export, primarily for Latin America, including Brazil. Finally, setting the pace for innovation. We take great pride in our position as an innovation leader, and we are working to directly improve the customer and consumer experience, drive breakthrough innovations, and innovate how we operate. As I mentioned in July, we've established global innovation hubs to orchestrate disruptive innovation platforms. One in North America and one in The Netherlands for our international markets. This fall, we are launching exciting new products into retail that are aligned with customer trends. This includes flavor-forward offerings from Alexia, such as garlic and Parmesan crinkle-cut fries and dill pickle seasoned fries, as well as expanding our licensed brands with Paw Patrol waffle fries and Shaped Tops. And internationally, we continue the rollout of our really crunchy artisanal fries, which are performing exceptionally well. Before Bernadette provides a more in-depth review of the quarter, let's discuss the upcoming potato crop. We're harvesting and processing crops in our growing regions in both North America and Europe. Currently, we believe the crops in the Columbia Basin, Idaho, and Alberta are above historical average, and in the Midwest are near average as growing conditions in all regions have remained generally favorable. In Europe, growing conditions in the industry's main growing regions of The Netherlands, Belgium, Northern France, and Germany have also been favorable, leading to an above-average yield forecast for the region. We continue to expect our potato costs in Europe to be flat to slightly lower than the previous year's fixed price contracts. As a reminder, in North America, we've agreed to a mid-single-digit percent decrease in the aggregate in contract prices for the 2025 potato crop. We expect to realize the benefit of these lower potato prices beginning late in our fiscal second quarter. We'll provide our final assessment of the potato crops in North America and Europe when we report our second quarter results. I will now turn the call over to Bernadette to review the quarter and our outlook. Bernadette Madarieta: Thank you, Mike, and good morning, everyone. Our teams continue to perform at a high level as we began executing our new strategic plan and driving changes across the organization. In the quarter, we grew volumes, improved our manufacturing cost per pound, and delivered strong cash flow. Starting on Slide 11, first quarter net sales were essentially flat, increasing $5 million, including a $24 million favorable impact from foreign currency translation. On a constant currency basis, net sales declined 1% compared with the prior year. Volume increased 6%, driven by customer wins and retention, led primarily by gains in North America and Asia. In North America, the rate of new customer volumes scaled earlier than we planned. The total volume increase also included lapping an approximately $15 million charge taken in the '5 related to a voluntary product withdrawal. Turning to the industry, restaurant traffic at several customer channels was flat in the quarter, including overall QSR traffic. While some are growing, including QSR chicken, QSR hamburger, however, was down low single digits and declined another percent in August. Restaurant traffic outside the US has been mixed. Traffic in certain markets, including the UK, our largest international market, declined 4%. Our customers continue to lean into value and menu innovation, including limited-time offerings to drive traffic and meet consumer needs. Price mix at constant currency rates was in line with our expectations, declining 7% compared with the prior year. As a reminder, this includes the carryover impact of fiscal 2025 price and trade investments that went into effect in the second quarter of last year, as well as ongoing support of our customers. It also includes unfavorable channel product mix within our segments. Looking at our segments, North America net sales declined 2% compared with the prior year, primarily due to lower net selling prices. Price mix declined 7%, and volume increased 5%, supported by recent customer contract wins and growth across channels. In our International segment, net sales increased 4%, including a favorable $24 million impact from foreign currency translation. At constant currency rates, net sales were flat. Volume grew 6% in the quarter, and price mix at constant currency rates declined 6%. This was primarily related to pricing actions in key international markets to support our customers. Our international segment remains well-positioned for the long term, supported by new modern manufacturing facilities, a broad and innovative portfolio, and an expanding global footprint. In the first quarter, Asia, including China, led our volume growth, reflecting solid market performance. Growth was supported primarily by contributions from multinational chains. In Europe, we expect that a strong crop, soft restaurant market demand, and increased competitive actions will continue to pressure price mix for the balance of the year. And in Latin America, we began shipping from our new facility in Argentina in early second quarter. While we are actively onboarding customers, we expect it will take time before the facility reaches target utilization level. We've seen competitive activity increase in Latin America, most notably in Brazil. Moving on from sales, as expected, on Slide 12, you can see that adjusted gross profit declined. This was primarily due to unfavorable price mix. This was partially offset by higher sales volume and a decrease in manufacturing cost per pound due primarily to benefits from our cost savings initiatives and the benefit of lapping an approximately $39 million charge in the prior year related to a voluntary product withdrawal. We're pleased with the progress we're making against our cost savings initiatives, and we remain on track to deliver fiscal 2026 savings targets. Our broader goal with our manufacturing initiatives, however, is to embed sustainable process improvements that will continue to enhance our manufacturing performance beyond the immediate efficiencies we are seeing. Partially offsetting these benefits was about $15 million of increased fixed factory burden absorption and about $4 million of incremental costs related to the start-up of the new production facility in Argentina. While we anticipated a decline in gross profit this quarter, the decline was less than expected, due primarily to stronger than anticipated sales volumes and incremental benefits realized from our cost savings initiatives. Adjusted SG&A declined $24 million versus the prior year quarter. The decline reflects benefits from cost savings initiatives. It also includes $7 million of miscellaneous income, primarily related to an insurance recovery and property tax refunds that will not repeat in future quarters. Equity method investments were a loss of $600,000 in the quarter, down from earnings of $11 million in the prior year quarter. This reflects the current lower rate of sales volume from our equity affiliate at lower prices but also an unfavorable mix of sales. As a result, adjusted EBITDA was essentially flat with last year at $302 million. The favorable impact on net sales from currency translation was almost entirely offset by higher local currency expenses, particularly cost of sales in our global markets. Turning to segment EBITDA performance on Slide 13, adjusted EBITDA in our North America segment declined 6%, or $18 million versus the prior year quarter to $260 million, primarily related to price and trade investments in support of our customers, which was only partially offset by higher sales volumes, lower manufacturing cost per pound, and lower adjusted SG&A. Lower manufacturing cost per pound and adjusted SG&A both benefited from our cost savings initiatives. We also lapped an approximately $21 million charge for the voluntary product withdrawal in the prior year. In our International segment, adjusted EBITDA increased $6 million to $57 million. This year-over-year improvement primarily reflects the absence of last year's $18 million charge related to the voluntary product withdrawal, lower potato prices, cost savings from our cost savings initiatives, and a $4 million favorable impact from foreign currency translation. These benefits were mostly offset by supporting our customers with price investments, increased competitive actions in certain markets, and approximately $4 million of start-up costs associated with our new manufacturing facility in Argentina. Moving to liquidity and cash flows on Slide 14, our liquidity and cash position remain healthy. We ended the quarter with approximately $1.4 billion of liquidity, comprised of approximately $1.3 billion available under our revolving credit facility and $99 million of cash and cash equivalents. Our net debt was $3.9 billion, and our adjusted EBITDA to net debt leverage ratio was 3.1 times on a trailing twelve-month basis. In 2026, we generated $352 million of cash from operations, up $22 million versus the prior year quarter. Lower inventories were the primary driver of the increase. Free cash flow was strong at $273 million. As a reminder, our Focus to Win plan includes approximately $60 million of incremental cash flow from working capital, mainly from reducing inventory in both fiscal 2026 and '27, or $120 million in total. We believe we're on track to deliver the fiscal 2026 target. Capital expenditures for the quarter declined $256 million to $79 million as we completed our production facility expansion project. For fiscal 2026, our capital spending is expected to be approximately $500 million, with approximately $400 million in maintenance and modernization and $100 million for environmental projects, which are mostly for wastewater treatment. Turning to Slide 15, we remain committed to returning cash to shareholders. In the first quarter, we returned $62 million to shareholders. This included $52 million in cash dividends, and we repurchased $10 million of stock, leaving us with $348 million authorized under the plan. This brings the total cash we've returned to shareholders since the spin in 2016 to over $2 billion. Our capital allocation priorities continue to be anchored in investing in the business, its capabilities, and areas where we are working to competitively differentiate Lamb Weston to execute our business strategy while maintaining a strong balance sheet and opportunistically returning capital to shareholders with dividends and share repurchases. Let's turn to our outlook on Slide 16. We are reaffirming our outlook for fiscal 2026. As a reminder, this outlook includes the contribution of a fifty-third week, with an additional week falling in the fourth quarter. We continue to expect revenue at constant currency rates in the range of $6.35 billion to $6.55 billion, which is a 2% decline to a 2% increase. We expect year-over-year volume growth behind customer momentum in both segments. In our North America segment, we expect volume to grow in both the first and second half of the year. Note that while volumes in the first quarter came in above expectations, this reflects the acceleration of new customer activity that we planned for in later periods. In our international segment, we expect volume in the back half of the year to be essentially flat as we lap the new customer acquisitions from the prior year and we continue operating in a competitive environment. We also continue to anticipate price mix will be unfavorable at constant currency. As of the end of the quarter, we have secured approximately 75% of our global open contract volume at pricing levels generally consistent with expectations. As anticipated, unfavorable price mix will be more pronounced in the first half, reflecting the carryover pricing actions from fiscal 2025. The effect is expected to moderate in the second half of the year, supported by new contracts signed this year. Our adjusted EBITDA guidance range remains at $1 billion to $1.2 billion. As a reminder, adjusted EBITDA now excludes noncash share-based compensation expense. It is available in the reconciliation of non-GAAP financial measures that accompanies the earnings release we filed this morning. Despite the outperformance in the first quarter, with only one quarter behind us, we believe it's prudent to maintain our guidance range. While we previously excluded any impact from tariffs, the range now incorporates tariffs in the balance of the year, based on our latest view of enacted tariffs by the US and other governments. Additionally, given the outperformance of the first quarter's gross profit from higher than planned volume, we expect gross profit margins in the second quarter to be relatively flat with the first quarter. Due primarily to as expected first quarter input cost inflation being flat to slightly down compared with a year ago due to the steep increase in open market potato prices in Europe in the prior year, going forward, beginning in the second quarter, we expect low single-digit inflation, including the benefit of this year's lower raw potato prices. We also expect higher factory burdens from longer than expected planned maintenance downtime at one of our plants and additional start-up expenses and factory burden related to the start-up of Argentina plant to adversely affect our margin performance in our International segment in the second quarter. Turning to adjusted SG&A, our first quarter SG&A as a percentage of revenue was lower than our expectation for the full year. As I previously mentioned, the quarter included $7 million of miscellaneous income that will not repeat in future quarters. In addition, at year-end, we shared our plan to invest approximately $10 million of SG&A in innovation, advertising, and promotion expenses to support our long-term strategic plan. These investments are slated for the remainder of the year. While not in our guidance, the net sales and adjusted EBITDA we are updating our tax rate guidance from approximately 26% to a range of 26% to 27%. We now expect the tax rate in the first half to be in the low thirties, and the second half expectation remains in the low 20s. We do not expect that the recently enacted US federal tax legislation will have a material impact on our fiscal 2026 tax rate. And finally, our outlook reflects the progress we are making with our customers, the cost savings we are on track to deliver, and the early but positive results of the work by our teams to execute Focus to Win within a competitive market. I'll now turn the call back over to Mike. Mike Smith: Thank you, Bernadette. In closing, we are acting with urgency to execute our Focus to Win strategy, including delivering our cost savings program. We have continued to drive strong volume growth and are pleased with the momentum we are seeing with our customers. Our team is focused on improving capital efficiency and increasing cash flows as our growth investments are complete and reducing working capital. We have trend-forward products coming to the market, and the capacity and innovation to partner with our customers. And we are managing our business strategically, deploying resources, and focusing our efforts in the areas of the market where we have the most differentiation, which we are confident will best position us for sustained success. Finally, we've reaffirmed our outlook for fiscal 2026. We'll now be happy to answer your questions. Operator: Thank you. If you would like to ask a question, signal by pressing star 1 on your telephone keypad. Please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question. We'll go first to Andrew Lazar with Barclays. Andrew Lazar: Great. Thanks so much. Good morning, Mike and Bernadette. Mike Smith: Morning, Andrew. Andrew Lazar: Maybe to start, you noted that Lamb Weston has restarted a previously curtailed production line in the US. And I guess more broadly, I'm just curious how this squares with sort of the current supply-demand imbalance for the industry overall that you've talked about the last couple of quarters. And have you heard of any further industry capacity delays or outright cancellations beyond what you shared in the international sphere last quarter? Mike Smith: Yeah. I appreciate it, Andrew. You know, we need to restart this line really to keep up the demand signals that we're seeing on the business, the volume, and the customers that we're bringing on board. Really to maintain the customer fill rates. So, you know, all good signals. You've heard me say, historically, this industry has been pretty rational, and our market intelligence would suggest that not all the new announcements are gonna move forward at their original timing. You heard me talk about in July that, you know, we believe that some of those announced capacities aren't gonna move forward. It's either been delayed, postponed, or even canceled. The pace of new announcements has definitely slowed. I can't think of a new announcement that's been made since we reported earnings back in July. So I think, you know, we are seeing signs that this industry is being rational when it comes to capacity. Andrew Lazar: That's really helpful. Thanks. And then I know, Bernadette, last quarter, I think you talked about a low to mid-single-digit year-over-year decline in price mix for the first fiscal half of the year. I'm curious if that still holds. And if so, I guess it would mean a not inconsequential sequential improvement in price mix in fiscal 2Q, if I have that right. Bernadette Madarieta: Yes. No, thanks, Andrew. Foreign currency is having a little bit larger impact on our results. And in the first half, on a constant currency basis, we're expecting a mid-high single-digit decrease in price and then moderating to low to mid in the back half of the year. Andrew Lazar: Thanks so much. Mike Smith: Thanks, Andrew. Operator: Thanks, Andrew. We'll go next to Tom Palmer with JPMorgan. Tom Palmer: Good morning, and thanks for the question. First, I just wanted to kind of clarify some of the gross margin commentary about more flat quarter over quarter. The items you noted seem to be more related to the international segment, like the rising potato costs and the plant start-up costs? Maybe just in North America, an update there. Are we seeing more of kind of the normal seasonal increase to think about? As we shift from 1Q to 2Q? Or are there kind of items there to think about as well? Bernadette Madarieta: Thanks, Tom. As it relates to North America, it is a more seasonal increase. One thing, though, that we do need to consider as it relates to North America is the input cost of inflation. We are gonna see a little bit more in February, but we'll also start seeing some of the benefit related to the lower potato prices come in. But you're absolutely right that much of the change is related to the international segment. Tom Palmer: Okay. Thank you. And then I just wanted to clarify on the tariff commentary that it's now included in guidance but was not previously. What is your tariff exposure? And I think previously, you'd kind of discussed it as not being meaningful. Is there any update there? Bernadette Madarieta: Yeah. So most of our tariff exposure relates to any import of palm oil or other ingredients. And right now, on an annualized basis, we would expect it to be about $25 million. We primarily bring that in from Indonesia and Malaysia. There is going to be a vote in March, is my understanding, that it could be enacted that the Indonesia tariff rate would go away. But that's yet to be known. So we've gone ahead and we've included the full amount for that palm and other ingredients in our guidance for the remainder of the year. Tom Palmer: Great. Thank you. Operator: And once again, ladies and gentlemen, if you'd like to ask a question, signal by pressing star 1. Our next question comes from Peter Galbo with Bank of America. Peter Galbo: Hey, guys. Good morning. Thanks for the question. Mike Smith: Good morning, Peter. Peter Galbo: Bernadette, understanding kind of some of the nuance on the second quarter gross margin. But I guess if I just look at the first quarter performance, it wouldn't be all that different from history. I think it was a roughly flat gross margin Q on Q versus 4Q, which is kind of what the old Lamb Weston would have been even pre-COVID. So I think that the seasonality maybe follows. So I guess the question is, 2Q aside, should we be thinking about the historical seasonality on the gross margin line returning in the second half? At least as it relates to 3Q and 4Q. That would just be helpful as we kind of model out the rest of the year. Bernadette Madarieta: Yeah. That's exactly right, Peter. Based on the strength that we saw in Q1, we do expect gross margin to be flat about flat with Q2. And then similar to historical periods, we expect a seasonal step up in Q3 and then a seasonal decline in Q4. Peter Galbo: Okay. Great. And, Mike, I just wanted to touch on something you brought up in the slides. Noting on, I think, expanding the usage of brokers in North America. You know, historically, the strength of Lamb Weston was truly the direct sales force. I think it was a competitive advantage maybe you had that some of your competitors didn't. So I just want to understand the change in philosophy or the change in thinking and expanding out to using a broker network. How that's being, I guess, received internally by the direct Salesforce. I mean, again, it's a nuance, but it seems like a meaningful change to how you've operated versus history. Thanks very much. Mike Smith: Yeah. I appreciate the question, Peter. I think it's really important, and I want to make sure I'm clear on this. We are maintaining that direct sales force. So that, to your point, Peter, that team has been very helpful to this business over the course of the last several years as we moved to that model. We've seen success with it. This is now gonna give them the opportunity to continue to focus on the areas where they've been successful. We are augmenting that direct Salesforce with a broker in some of our underpenetrated channels, some of the areas that we haven't spent time focusing on in the past. The sales team, the leadership team on that side is super supportive and excited about it because it actually allows them to really focus on the areas that they have been focusing on and gives us a chance to look at some potential upside opportunity that we haven't really spent a lot of time on over the last several years. Peter Galbo: Awesome. Thanks so much, guys. Operator: Thanks, Peter. We'll go next to Max Gumport with BNP Paribas. Max Gumport: Hey. Thanks for the question. I was hoping you could unpack the contribution of customer wins to driving growth in North America. So first, just if you'd be able to quantify that roughly in point terms in terms of what that drove. And then with these gains really first starting to get called out in '25, is there any reason why that benefit doesn't stick in 2Q and 3Q? And then how would you think about that progressing from there? Thanks very much. Mike Smith: Yeah. You know, the team's working hard to pick up new customers, and as I said before, I think we're driving a whole another level of customer centricity here in our organization. You know, as Bernadette mentioned earlier, we've had some customers that we have converted earlier than expected, meaning that some of those customers started placing orders and shipping with us in Q1 that we didn't expect to necessarily happen until Q2. So you know, that's one reason you're seeing the larger step up in Q1 on volume versus what we expected. Bernadette Madarieta: Yeah. And that relates primarily to the North America segment. That's exactly right, Mike. And then as it relates to the international segment, keep in mind that we were lapping the prior year voluntary product withdrawal that we won't see going forward. Max Gumport: Okay. And then just coming back to the 1Q versus 2Q gross margin comments that rise to the NASH, but one other way I wanna just get my head around it would be clearly coming into the year, you expected a return to the normal which would have been a pretty meaningful, you know, few 100 basis points, I believe, step up from 1Q to 2Q. I think it's fair to say 1Q gross margin came in a couple 100 basis points above what you might have expected. And I realize you now expect inflation to accelerate from 1Q to February. Has your view on the absolute gross margin changed? Is that because of the timing of inflation, or is it really just a matter of paying meaningfully better than expected 1Q first margin? Thanks very much. Bernadette Madarieta: Yeah. So for the question. For the year, we're expecting to be fairly close to what we had originally expected. We didn't guide on gross margin per se, but you're exactly right that the cadence of the gross margin and the increase and decreases, that the primary change here is really that Q1 came in better than expected, and we're expecting more of a flat quarter over quarter gross margin between 1Q and 2Q. Max Gumport: Okay. Thanks very much. I'll leave it there. Operator: And our next question comes from Matt Smith with Stifel. Matt Smith: Hi, good morning. Thanks for taking my question. Mike, could you talk about the impact of restarting the curtailed line in the second quarter? Should we think of there being higher fixed cost absorption as that line comes on? Or is that a cleaner startup process relative to when you open a new plant? And then how do you think about that line going forward? Do you expect production to be maintained on that line, or have you learned that you can turn these on and turn them on based on different times of the year and when it's most efficient to use that capacity? Mike Smith: Yes. Great question, Matt. Let me just ground everyone and remind everyone. We curtailed more than just one line when we did our curtailment. So this is one of those lines that we're bringing back on. During the course of the time that line was down, we would, you know, kind of bump the kind of what we call it bump start the engines and the pumps and kind of keep things lubed up. And so it's easier to start these lines than starting a new production facility from scratch. Not a lot of cost to bringing up this new line. Fully anticipate that we're gonna continue to run this line. That's what our demand signals are telling us. And again, we have other curtailed lines that we have positioned should we see continued growth and momentum in the business. That we'll be able to action against into the future. Bernadette Madarieta: Yeah. And the only thing I'd add to that is so for the North America segment, we'll start to moderate at the end of the second quarter when we start up that line from a fixed factory burden perspective. But we'll see a larger impact internationally with the start-up of Argentina and then the higher factory burden from the longer than expected planned maintenance downtime in Q1. Matt Smith: Thank you, Bernadette. And as a follow-up, could you talk about the phasing of cost savings in fiscal 2026? I think cost savings came in above your expectation in the first quarter, but you still expect to be on track for the $100 million run rate in fiscal '26. Or exiting the year. Are you raising your expected cost savings for the year? Is it just more flowed through in the first quarter than you anticipated? Or maybe it was a larger contribution from the carry-in benefits from last year's restructuring savings? Just a little clarification out there. Thank you. Bernadette Madarieta: Sure. I'd be happy to provide some color on that. So you're right. We did drive cost savings a bit faster, which has about two-thirds of the benefit in the back half of the year when we initially announced the plan. There's still many priorities that we need to deliver, and we'll continue to provide updates as the year progresses. But for now, we're on track to deliver the $100 million target that we set for fiscal 2026. And again, about two-thirds of that is expected to affect gross profit, and about a third is expected to affect SG&A. Matt Smith: Thank you. I'll pass it on. Operator: And we'll go next to Scott Marks with Jefferies. Scott Marks: Hey. Good morning, Mike. Bernadette. Thanks so much for taking our questions. First thing I wanna ask about is, you gave some commentary earlier about some of the business wins you've had. You know, expanding some business with QSR customers, expanding in C-stores, and other away-from-home categories. Just wondering if you can speak a bit to what's been the driver of these wins? Has it been more of the price support that you're willing to invest behind it or maybe some other factor helping you kind of gain this business? Mike Smith: Yeah. Appreciate the question. You know, a lot of it has to do with how we're engaging in our customers in a change from how we were in the past. You know, we're spending a lot of time making sure that we're doing the right joint business planning, and that's not just lining up our salespeople to the customer. That's a complete cross-functional approach where our supply chain organization, our marketing organization, and others are spending time with these customers and really understanding what they are looking for in a valued partner, and we're now delivering that. We're seeing customers have a renewed focus on service, quality, and consistency rather than just price when it comes to North America. And I think you're seeing that. When you hear, you know, out or Bernadette mention that we're through 75% of our contracting for this fiscal year with customers. That's at a very high retention rate, which we're excited about. And then, obviously, bringing on some of those new customers is providing some tailwinds for the business. Scott Marks: Understood. And then maybe just on the traffic environment, you made some comments about QSR traffic. I think it was flat overall with some puts and takes across the different subsegments within. Just wondering if you can kind of share just overall backdrop what you're seeing in the US internationally, and what you're hearing from customers as we move through the rest of this, I guess, calendar and fiscal year. Mike Smith: Yeah. You know, QSR traffic was flat in the period. You know, as Bernadette mentioned, burger QSR traffic was down. That was after several months of sequential improvements, albeit still down. Chicken QSR was up, which is a great mix opportunity for us. You know, we're intrigued by some of the offerings that we're seeing from some of our customers in the marketplace in terms of value meals. Excited to see how those are gonna perform into the future. You know, we have great customers. They have really loyal consumers. And, you know, they're looking to drive traffic into their restaurants and in their stores. Bernadette Madarieta: Yeah. And, Mike, if I could just add on the international side, you know, QSR traffic being a bit mixed in the UK. I think I mentioned our largest market. It was down 4%. There were some other markets up, though, that were up slightly. France, Germany, Spain, but then there were others that were down. So a little bit mixed there on the international side. Operator: And we'll go next to Robert Moskow with TD Cowen. Jacob Henry: Hi. This is Jacob Henry on for Rob. Just one question for me. I'm wondering if you can provide any additional details on the pricing of the contracts you signed this quarter? Just curious how those came in versus expectations. I know you guys are winning a good amount of new business. Curious if you are finding you have to discount maybe more than you expected. Thanks. Mike Smith: Yeah. I appreciate the question. You know, as I said earlier, I mean, we're seeing in North America that customers are having that renewed focus around service quality, consistency, and the innovation that we're providing and all that customer centricity that I talked about earlier. It's not just price. Price in North America has been in line with our expectations. That being said, you know, we have supported customers in this challenging environment. You know, we've finished, like we said, 75% of those contracts have gone through the normal course. Another 25% is kind of the normal kind of process that we go through, and we'll start to see those wrap up through the end of the calendar year. You know, I think we've said in the past, last year, about two-thirds of our agreements came up for renewal. We had about a third of those that came up for renewal this year. I'd say, you know, when you think about the international markets, we continue to see a little bit more competitive dynamic. Some of that's related to new capital. Some of that's related to raw pricing in some of the markets. Some of that's related to just normal competitive dynamics. You know? And in Europe, you know, we talked a little bit about the crop and where our raws headed with those contracts. So again, all as expected. And we continue to, again, meet with our customers and show them a differentiated Lamb Weston when it comes to our customers. Bernadette Madarieta: Yeah. And we focused a lot on price, and I think the only other thing I'd add in as it relates to mix is that we are seeing a little bit of a change in mix in some of our channels, particularly in our retail channel with, you know, more focus towards the private label volume versus branded volume. Operator: Our next question comes from Steve Powers with Deutsche Bank. Steve Powers: Hey, great. Good morning. Mike, following up on your comments kind of throughout the call on just the importance of customer service and the efforts that you've all been able to make in terms of the supply chain enabling better customer service delivery on your part. I guess, when you think about the overall scorecard, and I'm focused mostly on North America in this question, but, you know, product quality, order fill rates, just all the different dynamics of customer service. Is that scorecard kind of at this point, universally green in your estimation, or are there areas where you still see room for further improvement that are priorities for the organization? Mike Smith: Yeah. I won't go into detail, Steve, in terms of what the scorecard and what we're tracking, but we do track our customer engagement and some of those key metrics on a regular basis, and we still have opportunities. And I think, you know, that's where my focus has been over the last several months is getting out in front of these customers and better understanding where we have opportunities and how we're gonna address those moving forward. In some ways, we've addressed that through some of the structural changes and changes. In some ways, we've addressed that through innovation, some of the items that we're coming out with. But, again, we're having those conversations. And listen. Never satisfied. We always wanna make sure that we're delivering a higher level of service for our customers, and we're gonna continue to do that. Steve Powers: Okay. Thank you for that. And then, Bernadette, I don't so apologies if I missed this, but just on the plants, the new facility in Argentina, how long do you expect that to take before it is up to target utilization levels? I'm not sure I caught that, and I don't know how the competitive activity you called out in Brazil impacts that. Just your outlook for the ramp-up in that facility. Thank you. Mike Smith: Yeah. And maybe before Bernadette jumps into that one, let me just update the group. You know, we actually have that plant now operational. And we're actively qualifying products for our customers. And transitioning, kind of ramping things up. That does take some time, but it is operational, and much of that capacity will be exported to the Brazilian market in that area. Steve Powers: Okay. Is there a timeline to kind of hit target utilization at this point? Mike Smith: Yeah. It takes time. I mean, you know, if you think about our other lines that we've started up, these aren't we don't fill up the lines on day one. And like I said, it takes some time to condition the lines as we call, shake them down a bit, and bring those new customers on and over. It will take us some time to bring that line up to speed. Steve Powers: Okay. Enough. Thanks, Mike. Operator: And we'll move next to Marc Torrente with Wells Fargo Securities. Marc Torrente: Hey, good morning, and thank you for the question. Just first on SG&A, it came in a bit lower than expectation. Part of that was the nonrecurring $7 million and then maybe some timing shift in strategic investments. So how should we think about the underlying run rate of SG&A going forward? And any phasing of net cost savings ahead? Thanks. Bernadette Madarieta: Yeah. Thanks, Marc. You know, in terms of SG&A, I think about one-third is what we've shared before of the savings are expected to benefit SG&A in fiscal '26, and that's off a $100 million base. And then you're exactly right. The benefit of cost savings in the first quarter did include the $7 million of one-time benefit that we won't see going forward. It will be affected by our cost savings benefits, but then keep in mind, you know, we've got the incremental costs associated with normalizing our stock compensation and then the $10 million in strategic investments that are timed for the latter half of this fiscal year. Marc Torrente: Okay. Got it. And then when new customer wins materialize a bit quicker than anticipated, which pulled forward some of the expected volume growth in the year. Maybe could you talk to visibility and other new customer wins that have yet to start? And ability to sustain volume momentum ahead even if, I guess, traffic across the industry remains muted? Mike Smith: Thanks. Yeah. You know, we're not gonna speak to any future customer wins that are coming up. I think the fact that we restarted the curtailed line in American Falls to make sure that we have the right customer fill rates and support our customers the right way is a great kind of breadcrumb to how we're feeling about the business. Bernadette Madarieta: Yeah. And I think it's important to note that while volumes in the first quarter did come in above expectations in North America, that does partly reflect a timing shift in the ramp-up of those new customers that was planned for later periods. So that was planned in our original guidance. It just came a little bit faster than expected. Operator: And we'll move next to William Royer with Bank of America. William Royer: Hi. Good morning. I just have two. The first, on the new customer wins, is some of this creating customer-specific products that may not have margins that are as high as your existing customers? I guess, how is the profitability of the new additions? Mike Smith: Yeah. I'm not gonna speak to the profitability on specific customers. Just know that we are picking up new customers. We're doing it the right way and with pricing that makes sense for the P&L moving forward. William Royer: Got it. And then just secondarily on the CapEx going forward, $500 million this year. When we look to out years, I think you mentioned $400 million this year of maintenance and $100 million of environmental. Should that be the range that we should be thinking about over the next two or three years subsequently? Bernadette Madarieta: Yeah. That's in the general ballpark. You know, I think we previously shared that we've got a five-year plan with the environmental expenditures. Currently planning for about $100 million per year over the next five years. But, again, we're continuing to look for ways that we might have opportunities to extend deadlines or, you know, work on other areas to reduce the cost of that compliance. Got it. But in total, you're correct. William Royer: Perfect. Thank you. Operator: Thank you. And ladies and gentlemen, that concludes our Q&A session today. I'll turn the conference back to Debbie Hancock for any additional or closing remarks. Debbie Hancock: Thank you, Lisa, and I want to thank everyone for joining us today. The replay of the call will be available on our website later this afternoon. Have a great day. Operator: That concludes our call today. Thank you for your participation. You may now disconnect. Have a great day.
Operator: Good afternoon, everyone. Welcome to NIKE, Inc. First Quarter Fiscal 2026 Conference Call. You will find it at investors.nike.com. Leading today's call is Paul Trussell, VP of Corporate Finance and Treasurer. Now I would like to turn the call over to Paul Trussell. Paul Trussell: Hello, everyone, and thank you for joining today to discuss NIKE, Inc. First quarter fiscal 2026 results. Joining us on today's call will be NIKE, Inc. President and CEO, Elliott Hill, and EVP and CFO, Matt Friend. Before we begin, we will make forward-looking statements based on current expectations. Let me remind you that participants on this call and those statements are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are detailed in NIKE's reports filed with the SEC. In addition, participants may discuss non-GAAP financial measures and nonpublic financial and statistical information. Please refer to NIKE's earnings press release or NIKE's website investors.nike.com, for comparable GAAP measures, and quantitative reconciliations. All growth comparisons on the call today are presented on a year-over-year basis and are currency neutral unless otherwise noted. We will start with prepared remarks and then open the call for questions. We would like to allow as many of you to ask questions as possible in our allotted time, so we would appreciate you limiting your initial question to one. Thank you for your cooperation on this. I will now turn the call over to NIKE, Inc. President and CEO, Elliott Hill. Elliott Hill: Thank you, Paul. It's great to be here with everyone today. Before we begin, I want to start with a thank you. I want to thank my NIKE, Inc. teammates around the world. Because of their passion, commitment, and determination, we made tangible progress from where we were eleven months ago. Driven by our win-now actions that focused our team on our culture, product, brand marketing, marketplace, and our ground game. This quarter, our win-now actions drove momentum in the areas we prioritized first: Running, North America, and wholesale partners. It showed that we are making the right choices. Consumers are responding. We are getting some wins under our belt. What you cannot see in the results is the effort that I have seen in our stores, distribution centers, and offices around the world. Since my return, not a day has gone by that I have not asked each of my teammates to commit themselves fully to building a better NIKE. That takes a lot of work. And this quarter in particular, we asked even more from our teams as we realigned approximately 8,000 teammates to our sport offense, which I will explain shortly. It's a massive achievement for everyone involved. What I want this audience to know is that our teams also understand how much we still must do to meet our full potential. Because the truth is, NIKE's journey back to greatness has only just begun. There is significant work ahead, especially in the areas of sportswear, Greater China, and NIKE Direct. And as I have said to the team, progress will not be perfectly linear, but the direction is. On our last call, I said it was time to turn the page. And I believe this quarter reflects the many ways we are doing just that. You have heard me say, it's imperative to bring our entire organization closer to the athletes we serve. That's why the sport offense is going to be so critical to our success. This new formation and ways of working will align our three brands, NIKE, Jordan, and Converse, into more nimble, focused teams by sport. We will gain sharper insights to fuel innovation in storytelling and connect with the communities of each sport in more meaningful ways. Collectively, we will have a better-coordinated attack with each brand forming a distinct identity and delivering a clear intention to serve different consumers. In the marketplace, organizing more by sport gives us a much clearer point of view. The House of Innovation in New York is a great example where we redesigned a retail experience by sport. I walked the floors in early September, and we are now able to take a consumer into a world of Jordan, a world of NIKE running, or a world of NIKE global football. It's an immersive sport experience. And the refresh has already led to double-digit revenue increases. That clarity works in small format doors as well. We recently redesigned our South Congress store in Austin to focus only on running and training, and sales have significantly increased. Ultimately, the sport offense will maximize NIKE, Inc.'s complete portfolio. It is designed to drive growth across all our dimensions. With three distinct brands, we believe the opportunity to serve so many athletes across sports, in retail channels at every price point is an advantage that no one else has in our industry. Now let's take a deeper look and tell where we are driving progress. Our running business gives us an early window into the kind of impact we expect out of the sport offense. Our running team moved fastest into our new formation and was the first to get sharper on the insights of their athletes. It turns out runners mostly want three things from their running shoes: Big cushioning, stability, or an everyday shoe that returns energy. In response, we have moved with a sense of urgency and completely redesigned the Pegasus, the Structure, and the Vomero to solve for these three insights. Integrating our industry-leading innovation platforms like NIKE Air, Flyknit, ZoomX, and ReactX. Having a consistent structure of silos and price points allows us to introduce at least one new major running footwear style each season. Our running business continues to be a strong proof point of progress. We are getting back to delivering a relentless flow of innovation that serves real athlete needs, and we are pulling it all the way through the marketplace in consumer-friendly ways. The early results have been positive, with NIKE running growing over 20% this quarter. Our opportunity is to quickly seize the benefits of a sport offense and apply them to more sport and sport culture, including global football, basketball, training, and sportswear. I will remind you that each sport is in a different stage of development. Our global football team is preparing for the energy of the 2026 World Cup and is ready to move forward. We will utilize the world's biggest sports stage to debut an exciting new apparel innovation platform that will later be leveraged across other sports. And we will connect with a younger consumer by launching several football streetwear collections. As we are doing in running, football boots are also fueled by three silos at multiple price points addressing the needs of three different styles of play. This quarter, we relaunched the revamped Phantom six with great sell-through and will follow that up with a new Tiempo in Q3 and a new material in Q4. And finally, we reset the football brand identity this quarter with our scary good campaign. From a football innovation and brand standpoint, we are ready to go. In the marketplace, we are moving quickly to improve our position to tell football innovation stories in more inspiring ways at point of sale. The longer-term vision is for the impact of the sport offense to be felt far beyond the traditional sports where we currently compete. We now have dedicated teams to bring our creativity to additional market opportunities. These are spaces for us to take design risk, to be innovative, and to be irreverent, which is so important to our brand's DNA. NIKE ACG, for example, has brought an athletic youthful approach to outdoor product for nearly thirty years. As more people stay active outdoors, we will invest in NIKE ACG to address the opportunity. This quarter, we launched an elite ACG race team who have helped us make high-performance outdoor product. Together, we just revealed some exciting innovation: A breathable apparel innovation platform called Radical Air with the ACG UltraFly and a trail-tuned super shoe. ACG professional racer, Caleb Olson, wore both innovations in his victory at the Western States one hundred race, finishing with the second fastest time in the history of the race. Our new partnership with SKIMS is another opportunity to bring something unexpected to a new consumer. NIKE's innovation expertise and SKIM's dedication to inclusive apparel has the potential to create performance training products with a very different look. We debuted the product line last week with 58 silhouettes, and early consumer response was very strong. The opportunity exists to create more dimension around the most established sports as well. Look at this year's US Open of Tennis as an example. Over the course of the three-week tournament, we celebrated the wins and on-court looks of Alvarez and Saba Lanka. We designed custom dresses for Naomi's incredible comeback and for Sharapova's induction into the tennis hall of fame. We excited sneaker fans with a retro launch of Agassiz Tech Challenge sneaker and we brought it all together in New York's house of innovation in an immersive tennis experience. In the past ten months alone, as part of our win-now actions, we have activated 12 sport takeover moments that connected the inspiring performances of our athletes and teams to commercial assortments in the marketplace. This quarter, that included the England women's national team winning the European championship, centers, Wimbledon title, Scottie's open championship title, and Chelsea, winning the Club World Cup. Sport, and the world's greatest moments will always be NIKE's runway. And only we can bring it all together across three brands, so many sports, performance, and lifestyle. This is NIKE maximizing the full power of our portfolio. While the sports performance teams are finding a higher gear, our sportswear teams have work to do to get sharper on the consumers we are serving. And we see it in our results. Our business continues to decline. Continuing to build a clear product construct in sportswear, as we are doing in our performance sports, remains a priority. We do have pockets of strength, especially in our deep vault of look of running footwear, but we are still in the process of putting our largest classic franchises into a healthier position for the NIKE, Jordan, and Converse brands. Air Force One is stabilizing. Air Jordan one inventory levels are returning to health. The dunk continues to be managed aggressively down in all geos, and the Chuck Taylor is in the early stages of a global market reset. With Converse, we just put new leadership in place and we are going to take aggressive actions to better position the brand for profitable growth in the future. Of the priority win-now actions, elevating the full marketplace is in the early innings. The positive is that North America, where we invested first, took some big steps forward this quarter. The team continues to give more consumers access to the brand in more premium environments. We reset over thirteen hundred running spaces in the quarter, from Dick's to Nordstrom's to Heartbreak Hill. And we are also pleased with the launch of the NIKE brand store on Amazon, where we are driving stronger engagement and sales than anticipated. While our North America teams are setting the tone, we are still far from our ultimate goal of elevating an integrated marketplace. Digital, and physical, wholesale and NIKE Direct, in all geographies. Greater China, as I mentioned on the last call, is facing structural challenges in the marketplace. Our business was down 10% for the quarter. Seasonal sell-through continues to underperform our plans, requiring larger investments to keep the marketplace clean. My leadership team and I were in China a few weeks ago. We traveled to three cities, spending time with our Greater China leadership team, consumers, and our partners. We are even more committed to the opportunity for growth in China. They are a nation that's passionate for the games of basketball and global football, and a nation that is embracing a healthy lifestyle through running and training. When we lead with exciting innovation, like the Vomero 18 or the Jordan game shoe, or have athletes like Jah and LeBron visit key markets, we drive traffic and demand. It is even more clear that our path to winning in China is through sport. Our team is moving with urgency to develop consistent plans across all sports and refresh some of our retail environments into distinct sport experiences. With over 5,000 mono brand stores in China, this will take investment, and it will take time. Globally, NIKE Digital is still working to find solid ground. We made the strategic decision to become less reliant on classic franchises and pull back on our promotions for the long-term health of our brands and marketplaces in all geographies. Organic traffic has slowed. We are working to find the right assortment and marketing mix to consistently bring consumers back to our digital ecosystem. For a company our size, with three brands that serves consumers in nearly 190 countries, not all sports, channels, or countries will recover on the same timelines. I spent a lot of time reflecting on the last several months. What keeps me grounded is every time I return from a major sporting event, meeting with athletes, or being in the marketplace, I'm even more convinced that the win-now actions are absolutely the right focus for our teams. With that said, we are also realistic that we are turning our business around in the face of a cautious consumer, tariff uncertainty, and teams that are still settling into the sport offense. We know we have a lot left to prove. What gives me confidence is that through the sport offense, we are hyper-focused on the athlete. The creative ideas keep coming. And we are covering a lot of ground in the marketplace. Like I said at the start, the NIKE team, we have a lot of fight in us. I look forward to what we are about to do together. Thank you, and I'll pass it to Matt. Matt Friend: Thanks, Elliott, and hello to everyone on the call. Ninety days ago, I said the '25 would reflect the largest financial impact from our win-now actions. And that we expected the headwinds to revenue and gross margin to begin to moderate from there. At the end of our first quarter, we are encouraged by the progress that we have made, as reflected in our results. And yet we still have much work to do. Today, I will review our financial results. Then I will highlight the progress we have made with our win-now actions across the geographies. Last, I will provide guidance for Q2, as well as some additional insights to bring shape to our near-term financial performance. I'll begin with our financial results. This quarter, revenues were up 1% on a reported basis and down 1% on a currency-neutral basis. NIKE Direct was down 5%, with NIKE Digital declining 12%, and NIKE stores down 1%. Wholesale grew 5%. Gross margins declined 320 basis points to 42.2% on a reported basis due to higher wholesale discounts, higher discounts in our NIKE factory stores, increased product costs, including new tariffs, and channel mix headwinds. 1% on a reported basis. This was driven by lower brand marketing expense reflecting prior year investment around key sports moments, partially offset by higher sports marketing expense. Operating overhead was flat compared to the prior year. Our effective tax rate was 21.1%, compared to 19.6% for the same period last year, primarily due to decreased benefit from stock-based compensation. Earnings per share was 49¢. Inventory decreased 2% versus the prior year as we have made steady progress on our plans for a healthy marketplace by the end of the '26. As I shared last quarter, and as you just heard from Elliott, our geographies are at different stages of progress against our win-now actions. And business recovery is trending on different timelines. Therefore, I will focus my geography remarks on the specific context and insights of our win-now progress. In North America, Q1 revenue grew 4%. NIKE Direct declined 3%, with NIKE Digital down 10% and NIKE Stores flat. Wholesale grew 11%, EBIT declined 7% on a reported basis. North America is building momentum through sustained brand activity across sports, leveraging our leading portfolio of sports marketing assets. North America is furthest ahead in taking steps to elevate and transform the marketplace for future growth. Running, training, and basketball each delivered double-digit growth. Sportswear grew in the quarter, but there is still work to do. With momentum in apparel and looks of running footwear, while managing a 30% decline in our classic footwear franchises. As it relates to the North America marketplace, wholesale returned to growth in the quarter, partially due to shipment timing in the prior year as well as higher liquidation volume to value channels. Additionally, the strategic actions taken to expand distribution and reach new consumer segments contributed to growth, are showing initial promise. Headway was also made in repositioning NIKE Digital, reducing the number of days of site-wide promotion by more than fifty and lowering markdown rates as well as increasing share of demand at full price. On inventory, North America drove continued progress through the first quarter. Units declined versus the prior year, while dollars were flat primarily due to the US tariffs. Closeout mix is approaching normalized levels. In EMEA, Q1 revenue grew 1%. Wholesale grew 4%. NIKE Direct declined 6% with NIKE Digital down 13% and NIKE stores up 1%. EBIT declined 7% on a reported basis. EMEA has largely cleaned the marketplace, even as promotional activity has increased across the industry. NIKE's momentum is building in sport, and with our wholesale partners. EMEA is furthest ahead in repositioning NIKE digital to a full-price business. However, traffic and demand remain soft. In Q1, our performance business continued to build momentum, driven by double-digit growth in running, and low single-digit growth in global football, and training footwear. Sportswear declined low single digits, as headwinds in our classic footwear franchises more than offset growth in apparel and new dimensions of footwear. Over the last ninety days, we've seen promotional activity increase in key countries across EMEA. In order to stay aligned with our partners and manage marketplace inventory, we selectively leveraged additional discounts on NIKE Direct. With respect to inventory, EMEA closed the quarter with units down mid-single digits versus the prior year and a normalized level of closeout mix. In Greater China, Q1 revenue declined 10%. NIKE Direct declined 12%, with NIKE Digital down 27%, and NIKE stores down 4%. Wholesale declined 9%, EBIT declined 25% on a reported basis. Greater China created energy with consumers in the quarter through new product innovation and NIKE athlete activations on the ground with Jaw, Sabrina, and LeBron. Aggressive marketplace actions have reduced owned and partner inventory. However, store traffic and in-season sell-through continues to be a headwind. Running is a bright spot in China, growing high single digits in the quarter, with strong consumer response to new innovations such as the PEG premium and the Vimero 18. In the marketplace, traffic declined versus the prior year. In both NIKE-owned and partner stores, resulting in lower in-season sell-through rates. Digital remains a highly promotional marketplace in Greater China, with consumer shopping moments extending longer on local platforms with deeper discounts. Inventory was down 11% versus the prior year. However, closeout mix remains elevated. Our priority in Greater China is to improve seasonal sell-through trends by refreshing store concepts around sport, creating greater brand distinction at retail, with more productive merchandising assortments, and reducing the mix of aged inventory with our partners. In APLA, Q1 revenue grew 1%, NIKE Direct declined 6%, with NIKE Digital down 8%, and NIKE stores down 5%. Wholesale grew 6%. EBIT declined 13% on a reported basis. APLA continues to deliver mixed results across countries, with pockets of elevated inventory requiring higher levels of promotional activity and proactive management of supply in the marketplace. In the quarter, Performance Dimensions delivered strong growth, led by double-digit growth in running, and high single-digit growth in training. This momentum was offset by low single-digit declines in our sportswear business. In the marketplace, NIKE Digital delivered sequential improvement in markdown rates across all territories. Inventory across APLA grew high single digits this quarter. And so we are taking additional actions to rebalance inventory levels with retail sales trends in certain countries and tightened buys on NIKE Direct. Next, I will spend a moment to provide an update on tariffs. Last quarter, I shared that the newly issued tariffs represented a meaningful cost headwind for NIKE. Since the new reciprocal tariffs are stacked on top of the mid-teens rate NIKE already paid on imports. And I also outlined the actions we are taking in response. Balancing impact on the consumer, our partners, our win-now actions, as well as the long-term positioning of our brands in the marketplace. Since our last earnings call, new reciprocal tariff rates have been increased for certain countries. And so with the new rates in effect today, we now estimate the gross incremental cost to NIKE on an annualized basis to be approximately $1.5 billion, up from the $1 billion we shared ninety days ago. Given the magnitude and timing of the most recent rate increases, we now expect the net headwind in fiscal 2026 to increase from approximately 75 basis points to 120 basis points to gross margin. We continue to evaluate and implement the actions I described last quarter to mitigate these new costs over time. We are monitoring developments closely, and I remain confident in our ability to leverage our strengths, our scale, and the deep experience of our leadership team to navigate through this disruption. Now I will turn to our second-quarter guidance. As Elliott said, we are operating in a dynamic environment, both for consumers and our global business. We remain focused on what we can control, principally to make forward progress on our win-now actions for the long-term health of our brands and to activate our sport offense. Our outlook reflects our best assessment of these factors based on the data that we have available today. We expect Q2 revenues to be down low single digits, including one point of benefit from foreign exchange. We expect Q2 gross margins to be down approximately 300 to 375 basis points, including a net headwind of 175 basis points from the new incremental tariffs. We expect Q2 SG&A dollars to be up high single digits, with an acceleration of demand creation investment and low single-digit increase in operating overhead. We expect other expense net of interest income to be an expense of $10 to $20 million in the second quarter. We expect the tax rate for the second quarter and the full year to be in the low 20% range due to anticipated changes in earnings mix. Finally, with an additional ninety days of execution against our win-now actions, I'll close with some insights that should bring shape to NIKE's financial performance for the balance of fiscal 2026. We see momentum building with our wholesale partners. Our spring order book is up versus the prior year, with growth led by sport. And as a result, we expect wholesale revenue to return to modest growth for fiscal 2026. At the same time, we continue taking steps to reposition NIKE Digital as a full-price business. Organic traffic continues to decline double digits. With a business in the prior year that was more concentrated on classic footwear franchises and sneaker launch, as well as a higher mix of off-price sales, traffic comps will remain under pressure. And so we do not expect NIKE Direct to return to growth for fiscal 2026. As it relates to our operating segments, we expect North America will continue to lead our global recovery, while Greater China will require more time due to the unique marketplace dynamics Elliott and I have outlined. Converse is under new leadership and resetting its marketplace and brand. Therefore, we expect revenue and gross margin headwinds from Greater China and Converse to continue throughout fiscal 2026. We have made steady progress on our plans for a healthy marketplace by the end of the first half. And so we expect to begin to see a modest headwind to revenue across both wholesale and NIKE Direct as we lap aggressive clearance activity in the prior year. Foreign exchange has become a tailwind to reported revenue, but we expect minimal benefit to gross margin in fiscal 2026 due to our hedged positions entering the year. We continue to expect SG&A to grow low single digits in fiscal 2026. Our win-now actions contain investment to reignite growth in the business, particularly in demand creation, as well as rebuilding both our sport and commercial offense. Overall, there are several puts and takes across different dimensions of our portfolio. We are encouraged with how we have started the year, but progress will not be linear. And there is still work to do to return to driving consistent, sustainable, profitable long-term growth. With that, I'll pass the call back to Elliott. Elliott Hill: Thanks, Matt. I'm going to close it out with some perspective on a special sport moment from the quarter that I believe represents the power of a unified team with a singular mission. In late July, I was at the final of the UEFA Women's European Championships in Basel, Switzerland. Defending champion England had already lived through an emotional roller coaster throughout the tournament. They lost their opener to France. They came back from a two-goal deficit to beat Sweden and scored in the final minute of extra time to beat Italy in the semifinal. And now they face Spain in the final, who beat them in the last World Cup final. I was sitting with the FA, the governing body of football in England, for the third straight knockout match the lionesses started slow. They were on their heels instead of attacking. They went into halftime down one nil. We began to question if they had anything left in the tank. But coming out of the half, something clicked. Coach Serena Wiechmann made the right substitutions, as she had all tournament. Chloe Kelly came off the bench, and pace picked up instantly. Hannah Hampton made several key saves. Lauren Hemp was flying all over the pitch. And everyone contributed. England's pressure led to the equalizer in regulation. And after a draw in extra time, Chloe proved to be clutch one more time to score the winning penalty kick in the shootout. The crowd erupted, her country erupted. And there they were, champions of Europe once again, delivering England's first major football trophy on foreign soil. The NIKE London team took that insight and built a campaign around the importance of home that stretched from billboards, T-shirts to the airplane that brought them back to their awaiting fans. The national pride for the lionesses was everywhere. NIKE was right there with them. When I talked to my team about passion, commitment, and determination, we do not have to look much further than England. It's a group that embraces their roles, an experienced coaching staff who adapts in the moment, players who refuse to give up. I mean, I found out later that Lucy Bronze played the entire tournament with a fractured tibia. A fractured tibia. That's resilience. That is a team that knows what it takes to make a comeback. We were all inspired here at NIKE, and you could be assured we're taking their lessons to heart. We're unified under the sport offense, and we're clear on what it will take to win and on the size of the prize ahead. With that, I'll open it up to questions. Operator: Thank you. If you would like to ask a question, please press 1 on your telephone keypad. If you are in the queue and would like to withdraw your question, simply press 1 again. Please ensure that your phone is not on mute when called upon. As a reminder, we ask that you please limit yourself to one question. Thank you. Your first question comes from Michael Binetti with Evercore ISI. Your line is open. Michael Binetti: Hey, guys. Thanks for all the detail today. Congrats on a nice quarter. Nice to see all the progress. Elliott, if you look at the spring order book and then that said it's positive, can you help us think about that within the context of the holiday book that you said was positive last quarter, maybe just qualitatively, even what's incremental on the build and composition of spring so you can track the progress out of season? And then last quarter, Matt, you said there's a commitment to returning to double-digit margins over time. Obviously, I'm sure you're looking at historical levels as a goal. It was a helpful backstop. How are you thinking about the medium-term margin levels you can target and maybe some of the phases of recovery and the inputs we should look at as you start that journey? Elliott Hill: Michael, thanks for the question. Here's what I'd start with. Let me start first with product. I think what we're doing a great job is we're getting back to leading with a sharp focus on sport. We're making certain we can leverage the entire portfolio, and you can see that whether, you know, how we're approaching performance and sportswear. NIKE running, I think, gives us our very best example of where we're having some success, and we did just announce that we grew over 20% in the quarter. So great success in running, and our teams are taking that offense. And how we're the learnings that we have in running, and we're applying it to other parts of our business, and we're running that playbook global football training, basketball, etcetera. We do have work still to do in sportswear. But I think the team is getting much sharper on the consumers that we're serving there. And so I'm really excited and encouraged by the work that we've done around the product. We've continued to work really hard from a brand marketing perspective. And then ultimately, clearly, we gotta pay it off like you're asking in the marketplace. And I think the team's doing a really nice job of elevating and then growing the entire marketplace. And so, you know, our goal is to serve consumers wherever and however they choose to shop across, you know, multiple channels, specialty sporting goods, athletic specialty, department store, family footwear, and NIKE Direct. And I think, again, the teams are seeing the power of running the complete offense across the entire marketplace. And North America, again, is our best example. Where we're seeing growth there. Overall, I know, our partners are gaining trust in us, and it shows our spring order book is up year over year. So excited with the progress that we're making from a product perspective, a marketing, and positioning perspective. And then how we're paying it off in a more thoughtful and integrated marketplace. Matt Friend: Michael. I would just add that the other dimension we provided last quarter is that, you know, North America, EMEA, and APLA order book is offsetting the headwinds that we have in Greater China. And we continue to see that trend carry through into the spring order book as well. As it relates to our margins, you know, the way I think about it is that fiscal year '26 our margins and the pressure on our margins are really reflective of three dynamics. We've got short-term product and channel mix headwinds, we've got the transitory impact from our win-now actions, and we've got the newly implemented tariffs. And the impact that that's having on our business in fiscal year '26. Given the progress that we're making, the steady progress on exiting the first half with a healthy marketplace, we do expect the benefit from less inventory clearance to start to take shape in our margins in the second half of this year. But I would say that our outlook for margins for '26 overall have moderated. That's because of the new tariff rates and the impact that that has on our business this fiscal 2026 before all of the actions that we're taking are able to annualize as well as some of the headwinds that I referenced related to the timeline to return to profitable growth in Greater China and Converse. As I look longer term, I think that, you know, we continue to believe that double-digit margins are something that are achievable. And we look no further than our history, you know, different size of business, different mix of business, different shape of business, different geography mix, different product mix. And, you know, I think we're getting clear on what the path to getting back to double-digit margins looks like. And it starts with reigniting organic growth. It requires us to see significant improvement in the full-price mix of our business, which the win-now actions that we're putting into place are setting us on stronger footing to do. And then lastly, as we return to organic growth, we will drive operating leverage on our supply chain costs, on our retail overhead, and on our general operating overhead. And while the new tariffs are creating near-term pressure on our margins, we have outlined the actions that we're taking there to address it over time. And while it's going to take us a little bit of time, we're confident that the win-now strategy actions are the right things to move us in this direction. Operator: The next question comes from Piral Dattania with RBC. Your line is open. Piral Dattania: Okay. Thank you very much for taking my question. Apologies if there's any background noise. I was just wondering if you could give any update as to how September has progressed because we're seeing mixed indicators out there in the marketplace and potentially some evidence that there was a bit of pull forward in terms of consumer demand into the back-to-school period in August, which should have benefited your Q1? So just curious about how you're seeing the current marketplace in September trading, if possible? Thank you very much. Elliott Hill: Yeah. Thanks for the question. Yeah. Here's what I'd say. There's no question that the environment in which we're working in and operating in is dynamic. And my message to our team is to continue to control what we can control. I'm confident that our teams and product brand marketing and the marketplace are closely monitoring our consumers around the world. We're watching for signals. We're staying close with our partners and we're looking at it even reading, you know, of course, our own door and digital performance across geos and countries and cities and, you know, it is dynamic, and I just keep telling the team remain focused on inspiring through sport because when we do line up, innovative product and emotional storytelling across the integrated marketplace, consumers respond. I mean, there's some great examples this quarter. Even into September, you know, when we did launch around running Vomero and the Vomero Plus, we had good sell-throughs. The work we did around the US Open, and on the ground and emotional storytelling, we had good sell-through. John LeBron in China. You know, when we do that, the consumer shows up. So yes, it's a dynamic environment. We're keeping our team focused on the win-now actions and really, that's our fastest path back to growth. And to hit on the timing element, you mentioned pull forward. I guess what I'd say is that our performance in the first quarter didn't have anything to do with pull forwards. I referenced wholesale growth in North America. Wholesale was up 11%. And one of the factors in the quarter was the amount of the fall season that we shipped in Q1 versus what we shipped in Q1 of the prior year. And so that did create a timing benefit year on year. As we look ahead to Q2, we guided revenue down low single digits. And I'd say that there are probably two drivers to that that are most significant. One is because we started the win-now actions following the holiday season last year, NIKE Digital is facing a more significant headwind in Q2. And we significantly cut back on the amount of promotional activity that we were doing in the channel. As we're lapping that this year, there's going to be a bigger headwind in Q2 than we had in Q1. And then secondarily, we're only planning for one point of FX benefit in Q2, whereas we saw two points of FX benefit in Q1. So, hopefully, that helps provide a little bit of dimension on some of the seasonality. The last thing I would say related to the seasonality or the comparison is that the actions that we're taking on the dunk that Elliott and I both referenced are more significant in Q2. And so that's also creating a quarter-over-quarter comparison, if you will, as you compare Q1 to Q2. There was a lot of dunk business in Q2 of last year, and we're managing that franchise back as Elliott mentioned and feel great about our plans. Operator: The next question comes from Matthew Boss of JPMorgan. Your line is open. Matthew Boss: Thanks, and congrats on the progress. So, Elliott, maybe could you help elaborate on some of the early wins under your belt that you cited? Notably the return to growth in North America and the material acceleration in running. And with that, I guess, could you speak to the structural foundation that you've now built that you believe is the key to expanding the strategy to other parts of the portfolio? Elliott Hill: Yep. Matthew, let me start. You really have to think about it at a high level in two parts. First part is the win-now. Those are the actions that we put in place. The focus that we gave our team within the first sixty days. And then the second part is what we just activated in early September, which is what we're calling the sport offense. And I'm going to try to outline the two, but you gotta think about them both together. Let me start first with win-now. You know the priorities there, but we put five priorities out there. Putting the athlete at the center of everything we're due, it came down it's about innovative, coveted products. It's about telling emotional inspiring stories. It's about paying it off in an integrated marketplace. And then activating our ground game. And we're seeing signals that it's working. You know, first and foremost, it's where we focus running, which we talked about in the prepared remarks. Up 20%. Our wholesale partners, we have growth there. Spring order book is up, and then North America. So that's where we're seeing some great success. Feel good about the brand impact. Our team is doing. Around sport moments, brand launches, brand campaigns. Some of our key product launches, etcetera. So good success against the win-now actions. With that said, we still have work to do in some parts of our business that we've touched on. We've got plans in place against China, our NIKE Direct digital commerce business, and our sportswear business. So that's what the teams are working on from a win-now perspective. When you think about the sport offense, and this is rather than us being organized by men's, women's, kids, we flipped the entire organization in early September to be aligned on the product creation side and the brand marketing side by brand and by sport. By country and account. Wholesale and direct, digital, and physical. And the whole idea is that those small cross-functional teams gain the insights from the athletes or the consumers that they serve in each segment, and then that will help us drive a make us more competitive and have stronger consumer connectivity. And, again, there's no question in my mind that putting sport and the athlete back at the center of everything that we do puts us back on offense. And, you know, again, while we have some great things underway, through our priority sports and the efforts to elevate the marketplace, we still have a lot of work to do but what inspires me most is our teams. They're embracing the change, and we're ready for the challenge. Operator: The next question comes from Brooke Roach with Goldman Sachs. Your line is open. Brooke Roach: Good afternoon, and thank you for taking the question. Elliott, as you contemplate the traffic headwinds you're seeing today in NIKE Digital, how much of the pressure is attributable to the strategic reduction in promotion, versus other factors? And as you look ahead, are the most important milestones we should be watching for to return that business to profitable growth? Elliott Hill: Brooke, thanks for the question. I'm going to step up above just a little bit for a second. On the NIKE Direct digital business. And what I'm challenging, Matt and I and the entire leadership team are challenging our team to do is to elevate and grow the entire marketplace, not just NIKE Direct Digital Commerce. We need to be and serve consumers wherever and however they choose to shop for our brands. And it really starts with that what I just touched on, the innovative relentless flow of innovative products. Across all three brands and all sports. And in every channel of business in which we do business. Specialty, sporting goods, athletic specialty, department stores, family footwear, and NIKE Direct, because being sharp on the consumers we're serving in each location, digital or physical, wholesale and direct, that drives consumer right assortments in the right depth, and we are elevating the presentations by at point of sale and that drives profitable growth for NIKE and for our partners. And, again, we're seeing some really good successes of that in North America. EMEA is coming and APLA. So, again, I'm excited about the team and the way we are elevating the entire marketplace. And, again, in terms of NIKE Direct, Digital Commerce, Matt, do you want to hit on anything? Matt Friend: Sure. You know, I referenced and have been referencing for a couple quarters now that we expected the organic traffic to be down double digits. And that's primarily because of the actions that we've taken to reposition the business fiscal year '26. We, you know, we highlighted this quarter that we've made progress across all of our geographies. We've reduced promo days. We've improved the markdown rates. We've reduced the classic show business. We've reduced the launch share of business. And we pulled back on paid media as it was largely driving bottom of funnel traffic to our platforms. EMEA and North America started first, Brooke, and they're the furthest ahead. APLA is making progress, and Elliott and I both referenced that Greater China marketplace is structurally different. And so the dynamics there are different from a digital perspective. I think that, you know, the progress that we're making is real. And I think one of the ways that you can measure that progress is looking at the momentum we're actually building with our wholesale partners because we needed to reposition digital alongside our partners and stop competing with our partners in order to be able to start building momentum on wholesale. And we're starting to see the early indicators and the early signals of that success alongside a strong product pipeline. So, you know, it's going to take us more time we both highlighted. We don't expect direct to return to growth in this fiscal year. But we do believe that direct should be a healthy part of our business in the future and it should be a more profitable part of our business in the future as we reposition it. Operator: The next question comes from Lorraine Hutchinson of Bank of America. Your line is open. Lorraine Hutchinson: Thank you. Good afternoon. I wanted to see if you could focus on China for a minute. Can you talk about the strategies that you're using to turn the digital business? And then also the cost and timeline of the store refresh? Elliott Hill: Lorraine, thanks for the question. Let me start maybe a little bit bigger picture on China really quickly. We believe in the long-term opportunity in China, and I said it in my prepared remarks, it starts with us leading with sport. You know, we see that sport continues to grow. It's a tailwind in that country, and we think it'll unlock further growth. We were just there, Matt and I and the leadership team, and we left with an even stronger belief in the future of the market. And we're confident that the win-now actions that were put in place will help us return the market over time back to growth. But as Matt said, with this year, we've got some work to do. You've already touched on it. There are structural differences in the marketplace. And that's why, really, China's on a different timeline. But here's how we think about winning in that marketplace. When we lead with sport, and starting with innovative product, running, training, basketball, especially outdoor basketball, and football, and when we supplement that assortment with our GeoExpress lane, which is our local for local product, we are seeing good results there. When we tell better stories, not only utilizing our global assets, but our local athletes, that also is paying dividends. And we're elevating the overall marketplace. As you pointed out, the digital marketplace is promotional. Those big consumer moments, eleven eleven, etcetera, and we're working to find the right path forward for our digital business. The physical marketplace is a monobrand. We're testing and resetting new consumer concepts. But we've got to be stronger operationally in those physical doors with the right assortments and the right depth, stronger presentation, and service, and that's how we're going to get back to driving sell-through. And, again, as I touched on, when we do do it right, it does resonate. We had some really good successes in running this quarter and then some basketball successes around John LeBron. So overall, you know, we're definitely in a bit of a turnaround, but Matt and I have been involved in some of those turnarounds before. Our teams are focused, moving with urgency, taking the right actions to clean up the marketplace, elevating overall model brand and digital, and we've got quarter by quarter plans in place to elevate the overall integrated marketplace. Matt Friend: And then cost and timeline, Lorraine, I would just say that we've made some significant investments in the China marketplace over the last three quarters in order to clean up inventory and set the business up for a foundation of success. When I look at our inventory being down NIKE's inventory being down 11%, versus the prior year, I think we're seeing the fruit of that, and we feel good about where marketplace inventory levels are as well. The challenge is what Elliott highlighted, which is that while we can invest to keep the marketplace clean and healthy, it's an expensive operating model if sell-throughs don't improve to the level that we need to see on a season in and season out basis. And so all of the actions that Elliott referenced are really our focus on trying to improve sell-through to create brand distinction in that marketplace, which will result in or should result in greater profitability. But in the near term, we think it's going to take time. And so that's why we believe that China will continue to be a headwind on the top line and on margin for the balance of fiscal year 2026. Last quarter, we referenced a few pilots that we were working on, and that our teams are working on, and we had a chance to see them when we were in China a few weeks ago. We're actually encouraged by the progress that the teams are making on these initial store pilots. But there's a little bit more work that needs to be done because while they're outperforming the broader fleet, we'd like to see them do a little better before we start to scale with our partners. And we've got great relationships with our partners in that marketplace. And so we're confident that once we get these pilots performing the way that we want to, both we and our partners are prepared to invest to turn the business in the direction that we want to head. Operator: The next question comes from John Kernan with TD Cowen. Your line is open. John Kernan: Thank you. Good afternoon, and congrats on the momentum with the turnaround. Matt, inventory down 2% on the balance sheet I think would imply units down even further. How would you characterize inventory in the wholesale channel and the timing of when wholesale discounts I think have been a pretty sizable headwind on gross margin when will they begin to pay? Matt Friend: John, I'd say that we feel really good about where we landed on inventory this quarter. Units were down in North America, EMEA, and in Greater China. We did see an increase in units in APLA, and that's the area where we're going to focus. We're pleased with the progress that we've made and the actions that we put into place to exit Q2 and enter the second half in a healthy position. I think that we would expect or we do expect that we should start to see some gross margin benefit in the second half from lapping these aggressive actions. We are expecting to see improvement within the wholesale channel. I think our partners' inventory, we feel really good about. And what I keep saying is that the best indicator of that is the forward-looking order book. Because our partners and we have a plan together as we've been driving sell-through, as we've been investing to move through inventory and get ourselves to a healthy place. And that's ultimately so that we can create capacity in our partners open to buy for the newness and the innovation and the things that our teams are most excited about, particularly on the performance side of the business. But also some new things that we've got coming on the sportswear side, like the Haver Rover and some of the other products that we've started to see some momentum with there. So I think overall, we feel really good about the progress that we're making there. I'll remind you that, you know, there are some other headwinds to gross margin in the second half that are going to mute this, and I referenced those earlier on the call. As it relates specifically to the way that we're managing the marketplace, we continue to be pleased with the progress we're making on the plan that we set. Elliott Hill: Here, how about if I just close it out really quickly with just some comments? We are more confident than ever that our win-now actions are the right path forward. In the first quarter, we saw progress in the areas that we prioritized first: running, North America, and wholesale. We're in the early stages, and our comeback will take time. And our progress won't be linear, especially in the areas such as sportswear, NIKE Direct, Greater China, and Converse. We are going to accelerate the win-now actions by activating our sport offense that I spent some time speaking to. As a reminder, we are organizing ourselves into smaller cross-functional teams by brand and by sport, by country, and by channel, wholesale and direct, digital and physical. Our teams are energized. They're inspired. And they're ready to compete. We're getting back to leveraging NIKE, Inc.'s unmatched portfolio of brands, sports, and countries to drive deeper consumer connections and profitable sustainable growth. Thank you very much. Operator: This concludes today's conference call. Thank you for joining. You may now disconnect.
Operator: Ladies and gentlemen, welcome to the conference call by MA's management team regarding its H1 2025 results. It will be structured in 2 parts. First, a presentation by emeis management team represented by Mr. Laurent Guillot, Group CEO; and Mr. Jean-Marc Boursier, Group CFO. [Operator Instructions] I will now hand over to the management team. Gentlemen, please go ahead. Laurent Guillot: Laurent Guillot speaking. Good morning to all of you, and I'm with Jean-Marc Boursier, our CFO. Thank you for attending this conference related to the presentation of our H1 earnings figures at the end of June '25. I hope it may sound clear to you along this presentation that we are particularly happy to deliver this set of figures, which provide not only the evidence of the turnaround underway in our operating performance. This is what we showed already at the end of July, but also mark a significant milestone since our disposal target have been once again largely exceeded. All of this news brought confidence embedding our financial structure improvement for the coming quarters and allowing us to provide midterm outlook for the years ahead. A few months ago, you may remember why we were publishing our full year earnings figures, we told you that the resumption of our sales growth and the rise in occupancy rate seen started to support our operating margins recovery from the beginning of the second half '24. We were particularly happy to show you the evidence that this operational recovery is well confirmed in the first half of '25. Occupancy rate have improved further everywhere and quite significantly, now nearing 88% on mature perimeter. With the price effect captured again this first half, the organic growth of our revenues posted a solid performance at 6.2%. This positive momentum on top line is mechanically feeding our operating margins, thanks to the good grip we had on operating expenses, leading to 29.5% growth in EBITDA at 79% on into like-for-like basis. For the first time for a while, at least a decade, our cash flow has turned positive. We are also happy to tell you that particularly active this past month with numerous operations, of which the announcement of the new real estate partnership [indiscernible] along with the creation of a new [indiscernible]. With relative cash from this operation of EUR 761 million our disposal target close to EUR 2.1 billion of disposals since mid-'22. As a remember, we communicated end of July EUR 1.15 or EUR 1.5 billion target before year-end is already achieved and then largely exceeded. This will mechanically improve materially our financial structure, lowering net debt significantly and improving our leverage ratio sharply. Jean-Marc will come back on these elements later. Last but not least, we not only confirm the outlook for '25, but we are able to confirm the supporting trends expected for '25. We are able today to confirm that this supportive trend expected for '25 will continue with a midterm outlook to 2028 on revenues and EBITDA on like-for-like basis we expect CAGR between '24 and [indiscernible] between 12% and 16% EBITDA. The positive momentum is set to continue ahead. So let's dig a little bit in the detail. We've already shown you the numbers in terms of occupancy rate improvement. Year-to-date, the upside capture is a bit stronger on nursing homes with occupancy rate in average a bit less than 200 basis points in 12 months. This positive momentum is not fading out, and we expect this to continue in Q3. This is obviously the result of multiple new processes we put in place, focus on quality and service policy who policy mention different patients and then [indiscernible] disease and special issue and the if you look at the performance we had in France, Jean-Marc will come back on that. This is significantly different compared to [indiscernible]. We are not only showing a continuing supporting momentum on revenue, but we are also posting a positive momentum on operating on operating performance , along with our recurring facts after reaching a trough in H1 '24 EBITDA has now entered its way toward normal with almost 80% growth in 1 year at constant perimeter. My point is to share with you today our confidence that this momentum will continue to feed our growth later this year and for the years ahead. We do expect positive contribution to our performance from the following elements. First, occupancy rate should be driven by favorable momentum, providing capacity -- providing the capacity to capture further positive price effect. Segmentation are reviewed regularly so to tell there are emeis offers to residents need and purchasing [indiscernible]. Operating expenses are increasingly monitored with a relative good ensuring a good allocation of workforce and cost. New processes and new tools should enhance our efficiency and better adapt our business to the reforms that we have seen the past years in different countries. We have also defined for each underperforming facility or underperforming unit dedicated action to restore performance in line with expectations. We share the best practices and [indiscernible] every day more efficient. It's fair to say that the set of figures is a good milestone on the road to an embedded recovery and we confirm our confidence for '25 and beyond. We did go up on added software EBITDA expected to go online collects between 15% and 18%. The trajectory for revenues and between 25% is how we expect going to do the momentum ahead of 25%. So we see increasing confidence for the future we have decided to go to get today midterm outlook for '25 and '28. The average annual growth of revenue on a like-for-like basis is now expected to be between 4% and 5% between '24 and '28. And the group average annual growth rate for EBITDA on a like-for-like basis is expected to be between 12% and 16% per year between '24 and '28. Before handing over to Jean-Marc, I would like also to share with you some of the major achievements we have secured so far in Q3. Since the end of July, we have secured EUR 1 billion in new disposal transaction. This is mainly due to the real estate partnership we announced last week with the creation of a new real estate company. The transaction will result in EUR 761 million in cash for the emeis group when it closes expected towards the end of the year. You may have understood that this innovative deal is expected to strongly enhance our financial structure, but it is also structured so to keep the likely benefit from the upside we can reasonably expect from the real estate cycle and from the recovery phase of our sector globally and [indiscernible] in particular. On top of this transaction we have secured a little bit more than EUR 200 million of other real estate deal since the end of Q3. At the same time, our team has been able to increase access to liquidity by more than EUR 200 million, notably through 2 factoring sectors, which is also enhancing our financial profile. These 2 transaction overall are major milestones that significantly strengthen the solidity of our financial structure, and this gave us even greater confidence in our operational performance, which is set to continue improving for the coming years. So now I hand over to Jean-Marc for a little bit more details on the numbers. Jean-Marc Boursier: Thank you, Laurent, and thank you all for attending this call this morning. We understand that the sound is not super good, so I will try to speak out loud and clear as possible. We are very pleased to present the publication today that we believe is particularly strong. 6 main points stand out in this publication. First, a very positive growth momentum in our revenue. Second, a significant improvement in operating margin. EBITDA is up, for instance, 72% and EBIT has improved by EUR 116 million in 1 year. Three, our net income is still negative, but the trend is improving significantly. Losses have been reduced by EUR 120 million in this semester, feeding our confidence for the coming quarters. Fourth, our free cash flow generation has improved sharply. The group, as said by Laurent is now free cash flow positive, an improvement by more than EUR 200 million in 1 year. Five, our net debt, excluding IFRS 16 and 5 is stable compared to the end of 2024, but is already down EUR 233 million when including IFRS 5. I remind you that this is a related to assets held for sale, so considering transaction for which negotiation are at very advanced stage. This decrease in net debt will continue even further by year-end when the closing of certain transactions such as the creation of our real estate company will occur. And sixth and final, the leverage ratio is also improving considerably even before considering the secured transaction that we -- let's start with hotels. I will be relatively quick on that slide since elements were already published for H1 at the end of July. Sales posted a substantial organic growth of 6.2%, driven by a combination of 3 factors, all of which having a positive impact. First, a price effect of plus 3.4%, in line with Q1; second, an occupancy rate effect of plus 1.8% and finally, for 0.9%, the effect of the ramp-up of recently opened facilities. This favorable growth trend can mostly be observed on nursing homes, plus 8.6%, while clinics have been more muted at only plus 1.8%. The group average occupancy rate rose by 1.7 points year-on-year to 87% versus 85.3% at the end of June 2024, continuing the gradual recovery in aggregate that began almost 18 months ago. This recovery was mainly driven by nursing homes, where the average occupancy rate rose by 1.9 points year-on-year to 86.5% versus 85.3% at the end of 2024 and even 82.1% at the end of 2023. As you can see on this graph in Central and Southern Europe, the levels achieved are now above or close to 92% pre-COVID levels, especially if we remove those computations, the ramp-up sites whose occupancy rates are obviously lower than those of mature sites for the time being. Note that excluding ramp-up facility, occupancy rate for the whole group would have been today at 88.2%. Although still below our ambition, we are happy to see this supportive momentum to be continuing. A few words about our 2 largest markets, Germany on one hand and French nursing homes. In France, it is interesting to note that the improvement in occupancy rate for nursing homes is gradually confirmed quarter after quarter since more marked each quarter versus the previous one. The gap in occupancy versus the previous year is growing every single quarter and is now 2 points while it was only 0.5 points above a year ago. This acceleration clearly illustrates, and you can see on the top right hand of the chart that the recovery in France is well underway since 2024 and is gaining momentum. This provides confidence for the coming quarters. In Germany, the recovery is following a steady and constant pace. Here again, the momentum doesn't seem to fade out, thus confidence in this market as well. In terms of operating margin, the improvement in performance is considerable. EBITDA, which we break down on this slide is up 18.4% and 19.5% on a like-for-like basis. So if we exclude the effect of the disposal of our activities in Czech Republic. By isolating pure operational performance, so excluding the effect of disposal, change in perimeter, change in real estate capital gains and exchange rates, for instance, we see that the performance is increasing by EUR 94 million on the first half of this year compared to last year. And this is a particularly strong trend, which is the result of solid organic growth on one hand and a limited increase in operating expenses, as you can see, only plus 3.1% like-for-like, whereas turnover is up 6.2%. As you can see on the next slide, if we look at the cost as a percentage of sales, you can see that staff costs have been reduced by 1 point, reflecting the measures that we progressively implemented during the past 12 months to optimize the allocation of our human resources. But at the same time, we also benefited from the initial effect of our cost rationalization measures in H1, which have led to a reduction in the intensity of all the costs as well. As a result, these measures are enabling us to maximize the conversion of revenue growth into operational profitability. Our EBITDA margin, although still below our target has increased consequently from 12.1% in H1 last year to 13.8% in H1 this year. And if we add on to that the steady performance of our rental expenses, we can rationalize the improvement in our EBITDA margin, which rose by more than 2 points to 5.4% EBITDA margin. Move the same here on the next slide, this chart illustrates that operating margin have started their way toward normalization. In million euro this note that the positive upside in sales plus EUR 136 million in H1 was largely transferred into EBITDAR by EUR 62 million and EBITDAR by EUR 66 million as an evidence that the operational leverage to the upside is strong and should continue to be strong again early. It's interesting to note that when looking at the EBITDAR by geography, the 2 main contributors to this growth in France and Northern Europe, given that Germany posted the most significant growth in Northern Europe. It should also be noted that the growth momentum in Central Europe is particularly masked by the sale of our activity in Czech Republic at the end of March. Indeed, EBITDAR in France grew by 36% and by 21% in Northern Europe. And there is still a significant room for further growth ahead since you can see on the right-hand side of the chart that EBITDAR margin in those markets are still largely lower than what we have as a reasonable target for the coming years. Although still below our ambition in terms of percentage of sales, the margin are everywhere moving in the right direction. If I continue our analysis of the P&L below EBITDA margin, the momentum remains very positive for us on almost every single line of the P&L. First, because external rental expenses excluding IFRS 16 have declined. This is due to acquisition finalized in 2024, notably in Italy and France, which brought real estate assets operated by the group into the group scope while previously owned by third parties. And as you can see, EBITDA excluding IFRS 16 rose by 72% and even 79% on a like-for-like basis. Second, when looking at EBIT, EBIT improved significantly as well and is now positive. It rose by EUR 16 million to EUR 102 million in H1 2025. And this is interesting to note that underlying depreciation and provision recorded a positive amount in the first half of the year. This is a sign that our provision for liability and charges have been historically prudently valued and that the risk environment is indeed improving for EBIT. Below EBIT, I would like to raise your attention on 2 things. First, financial expenses have continued to benefit from the effect of the latest capital increase carried out in February 2024 and financial expenses are down EUR 16 million versus H1 last year. Second [indiscernible] due to noncash adjustments such as certain residual depreciation on a few items possibly intended for sale. Let's move now on the cash flow statement. At the end of June compared to the first half of 2024, EBITDAR has increased by EUR 66 million to EUR 158 million. Net current operating cash flow has increased by EUR 74 million to EUR 62 million and free cash flow has improved by more than EUR 200 million to EUR 26 million. The lower you go on this slide, the strongest increase you will find. And this is, if I may, the result of the particular attention we pay to every single line of the cash flow statements. As a result, free cash flow is strongly increasing now into positive territories as a result of the combined effect of the group improved operational performance, the stability of maintenance CapEx and working capital, the successful execution of our divestment program and the gradual reduction in development CapEx, and I will come back to it in a few moments. The improvement of our cash flow generation is not a one-off. As you can see on this slide, this is part of a gradual trend that has been ongoing semester after semester since last year, and that should continue ahead. The graph on this page speaks for itself, illustrating the gradual result of our effort and the momentum that has characterized this first semester again. It is particularly interesting to note how capital intensity has been driven in recent years. First, it should be noted that maintenance CapEx and IT CapEx have remained quite stable overall. We share the conviction with Laurent that it is essential to maintain our assets in a condition that is consistent with the quality of care that we owe to our customers. At the same time, we have deeply reviewed the group's development strategy. Development CapEx have been reduced by nearly 80% in 2 years, reflecting our willingness to reduce project payback and therefore, increase development selectivity. I would also like to remind you that we have developed innovative and CapEx partnership, for instance, the forward sales scheme that allow us to maintain the operational benefits of certain projects while not having to bear those real estate CapEx on our balance sheet. A few words now about our disposal strategy. As Laurent told you earlier, we have been particularly active since the beginning of the third quarter, securing nearly EUR 1 billion in new disposals. The main contribution of this achievement is the creation of new real estate vehicle open to third-party investors for a total consideration of EUR 71 million. This day brings together assets with an operating value of EUR 1.2 billion at the end of 2024 for an average yield of around 6%. So the investment received from these investors represent approximately 62% of the total value. The 68 assets concerned located in France, Germany and Spain, as you can see on the map. Half of them are nursing homes and half are. The partnership, which is planned for at least 5 years, grants investors a minimum annual remuneration of 6%. In addition, depending on the value created by the [indiscernible], the value creation will be shared between them and the emeis Group. Our partners are targeting a total IRR of 12%, above which 90% of the value created will be retained by emeis. The governance of this [indiscernible] will allow the group to retain exclusive control of it, which means that it will be fully consolidated in our consolidated financial statements. This innovative preferred equity structure is particularly relevant for emeis, first, because it will strengthen our financial structure with an impact of approximately EUR 700 million reduction on the group net debt upon closing of the transaction. a significant decrease in our leverage ratio, which should fall to almost 13x pro forma versus 15x published today and I remind you, 1.5x at the end of December 2024. Second, because this structure is a strategic move for the group. This [indiscernible] is designed to provide real estate solution in the future. emeis will therefore be able to size the opportunity offered by the sharp increase in care needs over the next decade. And in the medium to long term, this [indiscernible] should attract new investors and should become the real estate operator that will meet real estate needs. And third, because this [indiscernible] is also an opportunistic move considering health care real estate cycle likely to -- the deal is structured to benefit from the expected upside for the coming years on real estate valuation and value creation. Because we strongly share the view that our midterm perspective are promising as our midterm guidance and the likelihood of seeing property valuation again is significant, we believe that the potential revaluation uplift on these assets is particular significant over the coming years. This deal structure will provide part of this upside contrary to more classical [indiscernible] operations. As a result, the wording of disposals completed or secured to date has reached EUR 2.1 billion since mid of 2022 as explained by Laurent. This is therefore largely above our initial target of EUR 1.5 billion with nearly EUR 1 billion in new transactions secured in Q3 and nearly EUR 1.6 billion in disposal that should be collected in the coming months, the majority of which by or around the end of the year. As a result of everything we said earlier today, the financial structure will continue to strengthen significantly in the coming months. While net debt, excluding IFRS 5 and IFRS 16 remain broadly stable between the end of December and the end of June. A reduction of nearly EUR 300 million resulting from the application of IFRS 5 provides an initial indication of the strengthening of our balance sheet. We cannot be much more precise than that, but this is linked to very well advanced negotiation ongoing today. In addition, the creation of the real estate partnership should reduce the pro forma net debt to around EUR 3.8 billion, representing a very significant reduction, and this is already underway expected around year-end. At the same time, the leverage ratio is improving very significantly also from 2x in H1 '24 to 19.5x at the end of December last year, then 15.5x at the end of June 2025, and this is mainly due to the operational recovery of our activity, resulting in a strong EBITDA growth. If we take into consideration the new real estate partnership, this ratio would be lower even further now approaching 13x. Thank you very much for your attention. And I hand over to Laurent to continue this presentation. Laurent Guillot: Well, thank you, Jean-Marc. I think I will try to speak a little bit louder apparent well the first discussion. What are the lessons from this presentation? First, the positive trend on top line continues with a strong organic growth, 6.2% overall and 8.7% on nursing home, supported by positive momentum on occupancy rate and positive pricing effect. So second is a strong momentum on operating margin, plus 19.5% for EBITDA and EUR 79 billion mostly driven in absolute terms by France and Northern Europe with strong performance, especially in our 2 biggest countries. As a consequence of this and along with other components, our free cash flow turned positive this semester for the very first time for a long time. Third, our EUR 1.5 billion disposal target before year-end '25 is now largely exceeded with EUR 2.1 billion now achieved or secured. This was reached partly thanks to a major real estate partnership recently signed, bringing EUR 761 million to the benefit of operation or also other transactions. Four, this will accelerate further the strengthening of our financial structure with a pro forma net debt of around EUR 3.8 billion versus EUR 4.7 billion 1 year ago and a leverage ratio nearing now 13x versus 23 last year in the same period. And fifth, the positive trend seen in H1 '25 is continuing. I reiterate our guidance for '25 expecting EBITDA to grow between 15% and 18% at constant perimeter and [indiscernible] to deliver midterm outlook. We are now expecting revenues to continue growing ahead between 4% and 5% again at constant perimeter from '24 to '28. And EBITDA dynamics is also set to go here on the same path as we go. We've got [indiscernible] with a CAGR between 12% and 16% at constant perimeter over the same period in between '24 and '28. So thank you for your attention. And now we'll be available to answer your questions you may have. Operator: [Operator Instructions] Laurent Guillot: First question, what is the plan in terms of distributing the proceeds from the '25 [indiscernible] disposal, EUR 1 million in Q3 that I was mentioning. Well, the purpose is really definitely to strengthen the financial position of the company. So it goes to reducing the debt and [indiscernible] no plan for proceeds and neither no plan to accelerate being CapEx stand or acquisition [indiscernible] of balance sheet. Another question. Can you elaborate on what is happening in Ireland [indiscernible] change management or would change your season procedure. People do not know we had the TV report a few months ago. Well, this was in, I would say, in frame of a political debate on the legitimacy of the private sector for the [indiscernible] sector. And also, we say very close to 20 years after a big event on the sector that happened in Ireland also and I would say what we did after this report is clearly we obviously both at the same time, the two facilities involved and the '26 [indiscernible] that we have in Ireland show that all our procedures, all our processes are well in place in this [indiscernible] over a period of time to stop the admissions in some activities and most of the cases because the process and the procedures have been very high [indiscernible] cooperation with a local authority, which is HIQA, we decided to reopen this [indiscernible]. So we are very confident and the team in place in Ireland is doing a great job that is improving [indiscernible] with small changes but at the same time, the job that we are doing in Ireland a good job. We never celebrate in our facilities any deviation from our standards. And when we find this, we obviously hire, then the people go there or the people that are involved. But I can assure you that we have always focused on of what we are doing in all the countries and Ireland is not different from the other countries. We strongly believe that this TV report was a not completely fair to the situation of our [indiscernible] in Ireland that's part of our business. But as always, we have [indiscernible] measures to improve discussion with the operators. What are the potential tax costs associated with the transfer of release of assets in connection with the creation of the real estate company. Jean-Marc, you've given the numbers in the presentation [indiscernible]. Jean-Marc Boursier: Yes. As you have heard me say, so we are receiving EUR 61 million from the investments, but the net debt is only around EUR 7 million and the difference is relating to three components. The first one is real estate duty and property taxes. The second component is income tax because assets are valued at a higher value than the book value. So we generated some income tax in some countries. And third related to [indiscernible] related to these conditions are around EUR 6 million. Laurent Guillot: [indiscernible] the back end loaded or rather linear, whether the underlying assumption on price of occupancy per year, what is the debt maturity level of reimbursement [indiscernible]. I take the first question, you take the [indiscernible]. We are still in a phase of the recovery is progressive. So you see that our guidance in terms of EBITDA improvement from '25 is 15% to 18%. And if you look at the guidance for the midterm, it's 12% to 16%. So it's more front-end loading because the recovery is faster at the beginning that had driven. And yet, while at the same time against that theory, we have towards 27%, 28%, we will have more pricing power because our facilities will be more, I'd say, occupancy where we've increased to reach almost normalized level. And this, at that time, we have more pricing power. So you see a little bit more coming from the cost at the beginning and a little bit more coming from the prices at the end with a positive impact throughout the period of occupancy rate improvement. And with regards to the second part of the question, what is the debt maturity and what are the amount of reimbursement for '25, '26 and '27. This hasn't changed and you will find all the details on Page 43 of this presentation. So we have recycled our debt maturity and reimbursement schedule as an appendix of this vision. Next question, where do you stand at debut financial covenant and what is the plan for 2027 [indiscernible]. We have one covenant, as you would already know, which is a minimum liquidity quarter after quarter of EUR 300 million, this hasn't changed. The net debt to EBITDA covenant that we had with some [indiscernible] have been renegotiated last year. So that was the existing at most. We are currently in negotiating with banks. The answer is yes for one single reason as you have noted in our press release for the real estate agent, there are two conditions precedent to the creation of this vehicle. The first one is an internal one. We need to obtain the approval by our unions, and we see [indiscernible] which we are doing in the proper way and second, we have to obtain also the approval by our creditors because some of these -- some of those assets have been pledged under the current credit agreements. So we need to obtain release of security that we are going to get some other assets in exchange, so we are currently negotiating the securities with our creditors to make sure that all of that can be finalized before [indiscernible] would be done in quick and efficient manner. I read the question with also a question for you so that we both can answer this one. Is there room for additional provisions also in H2 or in '26, could tell us a bit more nature of nonrecurring agents in the P&L of EUR 7 million to EUR 9 million, okay. So there are two questions in this question. The first one is related to provision tolerability and charges and net flows in our EBIT. As you have noticed, we have really some provision that was historical risk that we were facing in France, both as investment more precise than that, and we think that we will [indiscernible] could be potentially contemplate additional provision release [indiscernible] too early to say [indiscernible] we are well covered and why we are going to enjoy some provisions. With regards to nonrecurring expenses I told you this is a largely due to non-cash adjustments, little bit of costs related to the new transaction I was explaining with the vast majority is related to a noncash adjustment. [indiscernible] for some depreciation related to certain assets that we are intending to say that seem to too significant. Could you elaborate on Q3 outlook regarding the occupancy rate. [indiscernible] 3 weeks or 4 weeks from now, we have notification on our Q3 numbers, so we will we have more sales. But clearly, on the occupancy rate, the trend that we have seen till now is continuing with a real improvement and rate of increase compared to what we experienced in H1 is not very different. We continue to have a strong [indiscernible] in our main country, in Germany [indiscernible] so good trend and we continue to see a recovery in France in environment that involve an improvement [indiscernible] also in Q3 compared to investor. As you know, summer is always where we have a better win rate than the average of the year. So you should expect in Q3 compared to Q2, an improvement. What will be the level of maintenance CapEx in '25, '28 and development CapEx in the '26, '28. As you know -- a few things. Probably maintenance CapEx and IT CapEx that Jean-Marc showed you before, are at a low point, and we increase progressively this maintenance CapEx, modernize and continue to push for price increases of our services. It is pretty bold to be sure that we maintain a good level of maintenance and that we continue to enable service with more IT investment. So this kind of CapEx will increase a little bit more to a reasonable amount of money, and we'll continue to be looking to be a very, very control of our cost, so very slight and whether it's an increase on these networks and IT. On the other side, on development part, we have been very, very selective, most of the development now is happening through asset light projects where we have contracts with partners. And from that point of view, the vehicle, we just set up with our partners can be a way to do for further development with being at the same time free in this. So we continue to have some development CapEx. We continue to be very in control. You should not expect overall on the strong [indiscernible]. With your 4% to 5% revenue growth CapEx, how much [indiscernible] to improve occupancy rate pricing effect and also [indiscernible] if they are including in our target. You -- I mean, we do not communicate wholly on the shipment then but we can explain that maybe less and [indiscernible] then price effect, I gave some detail earlier, where you will have a little bit lower pricing effect at the beginning and an improvement in pricing effect on the significant path. And new openings, you have some remaining new openings obviously from the past and growth that are at the beginning of the period towards the end of the year, you have some impact bothering on new openings that have been done mostly asset free. Are you now done with these results; we will be open to [indiscernible] at a good price in order to continue to push ahead with [indiscernible]. This is exactly the point -- the question is mainly with what we are currently heading, I would say we have done with our project and with our commitment, so now, and as I was saying already in July also, we will be very opportunistic, should we have good prices, we would move on, at unattractive prices, we will keep with the asset now, very, very, very selective and very, very, very opportunistic should proposal come at a good price. How will the partnership be structured; has it been working rights or preferred shares [indiscernible]. Jean-Marc, do you want to take this one? Jean-Marc Boursier: And then maybe disclose [indiscernible] event. But just keep in mind that majority of working right with the retail [indiscernible] and this is the a reason why we will have the full control of this [indiscernible] consolidated in our books we might share the [indiscernible] we'll be doing something that we need [indiscernible] majority of the working rights with the capital values. Laurent Guillot: How should we model the growth in fiscal expenses [indiscernible] what would be the midterm categories. We don't probably provide guidance on this one, but clearly, given our cost structure, you look at them and you compare with our peers. The growth rate of [indiscernible] would be far below the CAGR of our top line is one of the reasons why we will have begun to move the EBITDA moving forward. This is particularly the case in France, where our staff ratio is still quite high and due to the -- I mean the decisions that we have taken at the beginning of the refoundation of the company to staff much better our facilities. Now we are entering a [indiscernible] we reduced this in ratio [indiscernible] especially in France than offshore. So we benefit from that also on the occupancy rate improvement. What consequences from the current political mess in France, security funding, pricing valuation, implementation of [indiscernible]. Well, I would not -- I don't know if this is a proper word, I would not use mess. We have huge [indiscernible] I have had 8 different Minister for [indiscernible], so you know it's not a particularly new situation that we are experiencing now. Generally, we would welcome any new initiatives and more resources to nursing home and health care system, especially from the private sector as we are more efficient, far more efficient in this sector, we'll wait to make savings, knowing the political environment in France, the forecast that we have given for the next few years is not improving any significant improvement of the regulatory environment for us in the next years. We are planning and we are working on self-help measures to deliver this performance, not on outside environment improvement. At the same time, we are working with our peers, private, public, NGOs to try to improve the regulation framework in France, but we don't count on it in the forecast given for the next quarters. Are you planning to pay the EUR 300 million physician payments [indiscernible]. Yes, onshore. No doubt about that. We planned [indiscernible] on the evolution of market share in the French sector. We will increase occupancy driven by the increase in market share [indiscernible] market share from. Yes, we are gaining market share. That is we start from a lower level compared others and at the same time, the company was in a turmoil in 2023. So from some respect, we are gaining back our share, and we are not playing out on prices on the overseas. We continue that this has been very significant decision from the beginning to decline prices, [indiscernible] for the long term, the best solution. So really, we are recovering our normal market share on occupancy rate. And we are not doing that on the extent of price [indiscernible] the answer is yes. As you have understood, there will be at least EUR 60 million about the [indiscernible]. Any further questions? Can you go back? Well, do you have any other points? Has that been very clear to you? Well, assume that there is no further point, so let me summarize very, very quickly. We continue to show a good business recovery, and we continue obviously to confirm our target for '25 but also, we've given new numbers of midterm outlook with a growth rate of 45% and EBITDA growth of 12% to 16%. At the same time, we have strongly improved our balance thanks to a significant transaction that will lead to a very significant deleveraging and again giving us a lot of trust and confidence for the future. So now we are all set to face the growth on this market because the needs in front of us both in terms of dependence and [indiscernible] surging very important in the next 5 years, and already we have a right balance sheet and we have the business recovery rate, so we are willing to tackle this growth period in front of us. Thanks, a lot. Thank you.
Antje Kelbert: Welcome to the Half Year Update call for HORNBACH Holding. My name is Antje Kelbert, Head of Investor Relations. Earlier today, at 7:00 a.m., we published our financial results for the first half of fiscal year 2025/'26, covering the period from 1st of March until the end of August 2025. I'm especially pleased to welcome our new Chief Financial Officer, Dr. Joanna Kowalska. With our deep industry expertise, and many years of experience in financial management, at KPMG and within the DIY retail sector at OBI Group. Joanna will be a great addition to the HORNBACH team. Since mid-August, she has taken over responsibility for the finance result and will be presenting today's results, guiding us through the presentation. We are also joined by CEO, Albrecht Hornbach, who has served as interim CFO during the transition period. Albrecht will be available for your questions during the Q&A session. Please note that this conference call, including the Q&A session will be recorded and made available along with the transcript on our company website. Kindly also take note of the disclaimer, which applies to the entire presentation and the Q&A session. [Operator Instructions] With that, I'm delighted to hand over to Joanna to walk us through the key developments and financial highlights of the first half year. Please go ahead. Joanna Kowalska: Good morning, everyone. Thank you, Antje for the kind introduction and a warm welcome. I'm truly delighted to be part of the HORNBACH team and to join you for today's half year update call. Since stepping into the role of the CFO about 6 weeks ago, I have been deeply engaged in learning about the many facets of our business. It's an exciting time, and I'm grateful for the support of my colleagues, especially Albrecht, who has been instrumental in helping me during the transition process. To HORNBACH, I bring over 17 years of experience within the European DIY retail sector alongside dedication to financial management and operational improvement. During my time at KPMG, I advised and audited many listed companies, and I'm truly delighted to contribute to HORNBACH's continued success as well as to long-term value creation for our shareholders. And I also look forward to getting to know all of you meeting with you over the coming months and continuing the open and constructive dialogue that HORNBACH is known for. And now let's dive into the key development and financial highlights. At a glance, we delivered further profitable organic growth in the first 6 months of our current fiscal year. Net sales grew by 4.4%, driven by a very satisfying spring season and solid summer period. In addition, we saw continued higher customer footfall. This growth was further supported by the store openings in Nuremberg and Duisburg, both in Germany around the start of the fiscal year. On a like-for-like basis, HORNBACH Baumarkt sales rose by 3.6%. Gross margin increased by 4.6%, in line with the sales growth. And the gross margin come in at -- sorry, 34.9%, matching the level from prior year's period. This development contributed to the adjusted EBIT growth of 2.5%. CapEx reflects the active execution of our expansion strategy with a focus on acquiring attractive properties and building a state-of-the-art DIY store network. Nevertheless, we achieved a good free cash flow. We are pleased with our performance in the first half of the current financial year. And despite ongoing macroeconomic burdens and soft consumer sentiment, particularly in Germany, we have achieved solid results, which are in line with our expectations. They also reinform our confidence in strength and resilience of our business model and underline our relevance to our customers. Therefore, we're confirming our full year guidance today. Before we dive deeper into financials for the first half of the fiscal year, let me start with a brief operational update. As you know, customer satisfaction is one of the most important KPIs to our business, a clear indicator of meeting our customer requirements and we truly believe that a great shopping experience and assortment, combined with a highly efficient operational setup is what drives our market relevance and long-term profitability. That's why we are especially proud of the results from the latest customer service. In Germany, the independent survey Kundenmonitor, ranked us #1 for overall customer satisfaction in the DIY sector. We also came out on the top in several other categories, including web shop, assortment relevance, selection, quality of the goods and private labels as well as service offered. In the Austrian addition of the Kundenmonitor, customer survey, we secured a leading position as well. We were ranked #1 overall in customer satisfaction, achieving strong results across multiple categories. And also in Netherlands, the survey Retail of the Year, named us The Best DIY Online Shop. That's an important recognition of our team's hard work and a clear sign that we are on the right track. We are also continuing to invest in infrastructure to support our organic growth and improve the shopping experience for our customers. Just recently, we opened 2 new stores, 1 in Bucharest, Colentina in Romania and another one in Eisenstadt in Austria. Both are modern big box DIY stores designed to give our customer everything we need for rare home improvement projects. These openings follow the launch of our new store in Duisburg, Germany, which opened in March, and there is more to come. Another store is set up to open in Timisoara in Romania, just tomorrow. All of these new locations demonstrate our commitment to expanding our store network and growing across all HORNBACH regions. With that in mind, let's take a closer look at the sales figures for the reporting period. As mentioned earlier, group net sales in the first half of the year were up by 4.4%, driven by a strong spring season and solid summer. Compared to the same period last year, we saw increased demand for our gardening products and construction materials. Customer frequency increased by 3.3%, reflecting a positive trend in store traffic. We also recorded a slight uptick in average ticket. After 2 years of stable performance, we are now back on a growth stat. And now let's shortly have a look at HORNBACH Baustoff Union, our subgroup has mainly serves professional customers in the construction industry. Looking at the sales development, we saw a slight sales decline of 0.8%. That said, we believe the construction sector in Germany may have reached its lowest point and could now be starting to recover. The latest official statistical figures show a modest upward trend in both order intake and building impairments. Looking at the geographic split on the right. Slightly more than half of the HORNBACH Baumarkt revenue, 52.7% comes from the 8 European countries outside of Germany representing an increase of approximately 1 percentage point compared to the previous year. Now let's turn our attention to like-for-like sales growth. Generally speaking, underlying demand across most European countries in the first half of the current fiscal year benefited from warm and mostly dry weather. That said, July was quite rainy in Central Europe, which had some impact on -- in Q2. For the group-as-a-whole, like-for-like sales growth reached 3.6% clearly above last year's period. Germany contributed 1.5%, which put us ahead of the German DIY sector that saw a slight overall decrease in sales of 0.7%. In other European countries, delivered a strong 5.6% growth rate. Here, the Netherlands really stood out with growth of over 10%. We successfully strengthened our position as a big box player in Netherlands. Customer particularly value our outstanding product availability in large quantities, which set us apart from competition. Thanks to store openings in recent years, our locations in Netherlands are younger in [indiscernible] and showing their [indiscernible] growth contribution. In Q2, all countries saw positive like-for-like sales development with the exemption of Germany, where performance were impacted by 2.8 fewer business days. Let me now present the most recent market share improvement. We continue to focus on growing our market share and strengthening our position across Europe. In all HORNBACH countries where market share data is available, we managed to expand our footprint in January and July 2025. In Germany, our largest and most competitive market, our share has now reached 15.5%, an increase of 0.6 percentage points compared to the prior year period. In the Netherlands, driven by a very positive footfall development, we gained 1.3 percentage points, bringing our total market share to 28.8%. In Czechia, we continued our positive momentum, increasing our market share to 38.5%. Austria and Switzerland also showed positive development. This truly reflects the dedication and outstanding performance of our teams on the ground who consistently go above and beyond to serve our customers. Let's now continue with a closer look to our E-commerce business. Customer engagement across our interconnected platforms remained strong, which confirms that these are now well established sales channels. E-commerce sales at HORNBACH Baumarkt grew by a strong 10.1% in the first half of the year. That pushed our E-commerce share of total sales up to 13.1%, both Direct Delivery and Click & Collect performed well, with growth rate of around 11% and 7%, respectively. And with that, I would like to take a closer look at costs and expenses in the P&L. Our gross profit increased by 4.6%, which is mostly in line with the growth in the net sales. Gross margin came in at 34.9%, matching the level of the same period last year. This reflects a good product mix and an innovative assortment. Now let's take a look at expenses. We are now seeing the full impact of wage increases across all countries, which led to a rise in absolute personnel costs. Personnel expenses totaled EUR 580 million, representing a 5.7% increase. This development is in line with expectations given the wage adjustments. While selling and store expenses increased in absolute terms, the expense ratio remained stable relative to total sales. And the same applies also to general administrative expenses ratio. Preopening costs rose by EUR 4 million, driven by new store openings. All of this contributes to a positive development of our adjusted EBIT, which I will present to you on the next slide. Overall, we improved our adjusted EBIT by 2.5% compared to the first half of last year, driven by successful spring season and solid summer performance. As a result, the adjusted EBIT margin remained broadly stable at 7.6%. Countries outside Germany contributed 62% to adjusted EBIT, making a 4 percentage point increase year-over-year. Once again, there were no significant nonoperating items or adjustments in the first half of the year. And now let's now move on to the cash flow statement. Our cash flow from operating activities increased significantly compared to previous year. The main driver was a lower cash outflow from changes in working capital. This was predominantly due to reduced use of our [indiscernible] program as well as stronger reduction of inventories than in the prior year period. Funds from operations remain at the same level as last year. Capital expenditure in the first half of the fiscal year totaled EUR 107 million, up from EUR 51 million in the same period last year. As planned, 56% of that was invested in land and real estate, mainly for the new store development. The remaining portion went toward store conversions, equipment and software. Free cash flow after net CapEx and dividend improved to EUR 129.6 million, reflecting the changes in working capital I just mentioned. Now let's take a look at our balance sheet. As of the end of August, HORNBACH once again delivered a robust balance sheet. The total balance sheet stood at EUR 4.6 billion, unchanged compared to February. Decreased inventories reflect the usual seasonal reduction after Spring. Our equity ratio increased slightly to 46.9%, maintaining a strong and healthy position. Our net debt-to-EBITDA ratio improved to 2.4x. All in all, that underlines the strength of our financial foundation and the resilience of our business model. We are confirming the guidance for the fiscal year '25/'26. We continue to expect net sales to be at or slightly above the level of prior year and adjusted EBIT to remain at the same level. However, given the strong earnings performance in Q1 and the solid development in Q2, we currently expect adjusted EBIT growth within the upper half of our guidance range. Before we open the floor to questions, I want to take a moment to highlight our continued focus on strategic priorities, cost management and sustainable growth. Through target investments and operational efficiency, we are building a solid foundation for the future. With our strong private labels, everyday low price strategy and clear commitment to sustainability, we aim to support our customers, maintain market leadership and deliver long-term value to our shareholders. In summary, we're well positioned to navigate the current macroeconomic and geopolitical challenges and to size medium- and long-term growth opportunities in the home improvement sector. That gives us strong confidence in HORNBACH's continued successful development. As I mentioned at the beginning, we are satisfied with our results for the first 6 months which are in line with our expectations. And with that, I will conclude my presentation and hand back to Antje for the Q&A session. Antje Kelbert: Thank you, Joanna for your views and remarks on our results. I now hand over to Bastian, our operator, to explain the technicalities of our Q&A session. Please go ahead. Operator: [Operator Instructions] So the first question comes from Thomas Maul from DZ Bank. Thomas Maul: Thomas Maul, at DZ Bank. I've got 2. The first one, you achieved a nice increase in gross margin. Maybe you can elaborate a bit more on the drivers, especially with regard to the innovative products you just mentioned. And what is actually the share of private labels in your assortment? And second question, can you please shed some light on current trading in September with regard to footfall, leverage basket sizes in Germany and abroad and yes, what are your expectations for gross margins in the months to come? Joanna Kowalska: Thomas. Thank you for your question. And happy to answer. I will take the first one on the margin. We improved our margin at, of course, in connection with the -- with our innovative product. During the year, we always change our assortment, nearly 20% of our assortment is changed during the year. And with the innovative assortment, we, of course, reach a better margin. And this is an effect of our, great [indiscernible] department. The second one -- the second question was how is -- how we expect the margin development in the half of the -- when I get you correctly? Thomas Maul: Yes. It's actually on footfall and basket size and also, yes, the development of gross margin. Joanna Kowalska: Okay. Okay. Thank you for the clarification. The footfall, we increased -- the footfall is increased in the first half of the year. We are gaining our market share in all countries. Therefore, of course, we hope that also there's a trend with -- remain also for the next half of the year. Of course, we are -- it's pretty clear that in Germany, the DIY sector faces near macro challenges, particularly in customer sentiment due to layouts in industry, many people are cautious about large projects. But nevertheless, nevertheless, customer traffic remained really strong, showing continued relevance of the DIY and Gardening. And we are pretty sure that our everyday low price strategy and strong private levels position us well, and we gained further market share -- we will again also cover market shares in the next half year. Your question was also about the private label share. So let me comment on this point. So this is about -- about 20%, yes. So in Germany, a little bit more -- sorry, I'd say it was 28% and in Germany, 28% and in average for the HORNBACH something about 2024. Operator: The next question comes from Jeremy Garnier from ODDO BHF. Jeremy Garnier: I have 2 questions. So yes, you begin to have strong market shares in all countries you're present in Europe. Do you plan to open new countries soon or to accelerate in some countries? And also M&A is still not an option for you? Joanna Kowalska: Jeremy, thank you for your question. Let me comment. Yes, we -- it's too early to go into the detail. But yes, we already announced the new country. So -- but I hope you can understand that we cannot comment in very detail at the moment. Jeremy Garnier: Okay. And regarding the working capital, it will improve during H1. Do you still have room to continue to improve the deliver of inventory and [indiscernible], what is your target? Joanna Kowalska: Of course, we always look for the working capital. And retail is about working capital management. And of course, we have a deeply look always at this issue. Of course, we have to consider the current situation also with the assortment changes therefore, sometimes you have a little bit more inventories, sometimes a little bit lower level. But nevertheless, of course, we have closed -- we look very, very focused on this issue. And we plan very good initiatives in respect of AI solutions with this matter. Of course, it will not be effective in this fiscal year. But nevertheless, our strategy is to use the AI solutions in the future to really focus on the working capital management and to really plan even better than in the past, the distributions, the logistic processes. We are on a good track in this matter. Operator: The next question comes from Ralf Marinoni from Quirin. Ralf Marinoni: First question is about your store in Romania. You mentioned that HORNBACH provides more than EUR 2 million for the expansion of public infrastructure to support development in the area and you have also created 120 new shops for the new market. So the question is, did you receive any government subsidies or tax benefits for this? And my second question is about the 4 new openings. Can you quantify the annual sales potential of 4 new markets when they are running at full steam? So I estimate it's clearly above EUR 100 million. Antje Kelbert: So I think the infrastructure you're mentioning -- sorry, it's Antje. The infrastructure around the normal stores. So we have streets and all those things that help us to connect also the store to our network to make it efficient and to help us around that. I think this is meant with the infrastructure thing. With respect to those subsidies, I'm not sure about that. We can take that afterwards, I think. Sorry on that. And expectations, for sure. But we do not disclose our business for each and every new store that will go on stream. However, we assume that this is a very good location because you know that the key thing to select location for us to have a good area, to have a good a little bit around -- surrounding there and so we expect that this will be a good addition there. Joanna Kowalska: And the second question was, what does a new store brings in terms of revenue, yes? Ralf Marinoni: Exactly, exactly. Joanna Kowalska: It's a -- it really depends on the location, on the square meters in -- on the country. We are happy to open each store, yes. But and it's always based on a detailed business case. So yes, the decision is made very, very cautious. And -- but I would don't like to disclose very detailed information on each contribution of the each market or store. I hope you understand. Ralf Marinoni: I understand. But maybe you can give us an indication with regard to profitability in your market in Romania. On the one hand, we have less purchasing power from the people there, which leads to less revenues compared to the stores like Germany also. But on the other hand, we have much smaller personnel cost. So maybe you can give us an indication for the EBIT margin and profitability in these stores in Romania. Antje Kelbert: Yes, you know that we do not disclose on a base of the different countries? So what you see is that the contribution from outside of Germany is very good. And as you can assume, we are also on track in Romania because it's a very interesting and attractive market. So this will also help to contribute that. Joanna Kowalska: I can only add. Of course, there are countries which contribute more and would contribute less. But nevertheless, all countries are on a very, very good track. We are really happy with the development and also in Romania. It's really, really good country and therefore, we have attractive location there, and we are happy to expand in this country. Operator: Next question comes from Miro Zuzak from JMS Invest. Miro Zuzak: I have a couple of questions. I'll take them one by one, if I may. The first one is regarding the situation in Germany. You mentioned during the presentation that you expect the German construction and renovation market to bottom out. Can you please substantiate this and elaborate on this? And what the indicators are that you're looking at? Antje Kelbert: Okay. So I think you're referring to construction market versus DIY market. I think this is an important thing. Joanna Kowalska: The building sector shows early signs of recovery, like a recent increase in building payments and orders, but we expect that activity will only start to increase next year. However, with HORNBACH Baumarkt, we are mostly active in the renovation and modernization business, which is -- which has different dynamics than the new construction. In this matter, we need to focus on such topics as renovation backlog, need for energy-efficient upgrade and demographic challenges. And this is what what we are looking very positively towards this issue because the need is there. We increased our market share. And therefore, even in Germany, we see really chances for us. Even... Miro Zuzak: But you don't feel like at this moment already a recovery, it's just an expectation that in the future next year or so, it will recover? Antje Kelbert: Yes. Albrecht Hornbach: Albrecht Hornbach speaking. It's more or less a sentiment, which leads to the meaning that beginning maybe with 2026, the construction market will rise again and that the [indiscernible] is reached now in the moment. But this concerns HORNBACH mainly, and it's not a matter for Baumarkt for the Do-it-yourself business. Do-it-yourself business, it's more contributed to renovation and what Joanna explained just before. And fortunately, we are rather independent from construction markets in 96% of our turnover. Miro Zuzak: Okay. Super, very clear. Another question regarding costs. If I look at the OpEx, just basically, the cost between gross profit and EBITDA, I see a jump of EUR 30 million in Q2 versus last year Q2. This was a much higher jump compared to the EUR 15 million in Q1. So the OpEx seems to have increased much more in Q2 compared to Q1. Is this going to continue in Q3 and Q4? Was there any like special effect or reason in there, which led to this higher increase compared to Q1? Joanna Kowalska: So the most important point is the increase in the personnel expenses, of course. As you know, last year, we had a lot of increases of the wages nearly in all countries, especially in Germany. And the effect, of course, we see now in the comparison of the half year. So the wages increased, of course. We -- just for your information, the total cost amounts to 5.7%. And we had an increase in full-time employees in connection with the new store openings. Therefore, we have 2 effects. The first one is the amount of the people and employees and another one is the increase of the wages itself. To your question, whether we expect more increases during the next months, I would answer the question like in this way. Of course, we do not expect such big increases as last year. Last year was something special, especially in Germany. We were talking about 7% increases in the wages. This is not planned for Germany now. Of course, there will be some increases to balance somehow the inflation rate, of course. But we expect lower increases than 3%. This is the most point which explains the difference. And there are 2 other points also which unfortunately contributed to our EBIT -- to our result. We had FX effect. As you know, we have derivatives, U.S. dollar derivatives and from the evaluation of the derivatives we have now. Last year, it was plus. And now we have lost from the derivatives. Therefore, we are talking about an effect of EUR 5 million, which is big, of course. And ... Miro Zuzak: Where are they booked -- sorry, by the way, are they in [indiscernible] or are they booked in the [indiscernible] are they in the financial results? Joanna Kowalska: They are booked in the financial result. Miro Zuzak: So that's below EBIT. Joanna Kowalska: Yes, yes. Yes. I thought your question was about the EBIT, EBITDA. Miro Zuzak: Well, I was asking about the OpEx, which would typically be above EBITDA. But anyway, No, that's fine, it's good to know, that would have been your next question. Joanna Kowalska: Okay. Okay. So the most effect is really the wages and the personnel costs. Miro Zuzak: Okay. I have 2 more questions -- I have one more question and one suggestion. So the first one is the U.S. dollar change, which was like significant, right? How much will it contribute to the gross profit margin in the next quarters to come? Or to put the question the other way around, how much of your [indiscernible] of your purchases are in U.S. dollars? Joanna Kowalska: It's a good question, and I'm really happy to answer this. We are lucky we are lucky in this respect that our -- we do not source a lot of products in U.S. dollar. Therefore, yes, it's even a lower amount than the 5% of our assortment. Therefore, we are not really impacted by the U.S. dollar in the margin. Nevertheless, of course, there are some. And our policy is always to hedge our direct U.S. dollar purchasing volume. 90% of our volumes are hedged. Therefore, for the future, I do not expect really changes in the margin. Jeremy Garnier: Okay. Maybe you can get some points of price decreases from your European suppliers, who buy in China or in the U.S. area, right, which is now 10% or 15% plus expense. One more -- just one suggestion, you have on Page 13 in your free cash flow definition. You don't include leasing, which makes a big difference. I think just -- it would be a more meaningful number from year list to include leasing because you show EUR 130 million free cash flow of the CapEx and dividends, I would include -- it's just my personal opinion. I would include leasing there, which brings the free cash flow to a more accurate EUR 70 million instead of EUR 130 million. That's probably more accurate. Joanna Kowalska: Okay. Yes, it's [indiscernible] you to hear your view on that. So thank you for this. Miro Zuzak: HORNBACH is always very solid and humble in terms of capital markets presentation, which I like. And therefore, I would show the lower number rather than a higher number in this case. Joanna Kowalska: Okay. Thank you for your [indiscernible]. Operator: So as there are no further questions at this time. I will hand back to Antje for any closing remarks on this conference call. Antje Kelbert: Yes. Thank you very much for your question. And I think we have at least I'll address. I would also like to thank you, Joanna, and Albrecht for your valuable contribution today. And in the coming weeks, you'll find us also at various capital market conferences. We are very much looking forward to engaging with you in personal conversation. So please come to us if there are any further questions arise. And the details of our plans for [ IR traveling ] is also available on our website. And as we now head into Autumn with its rich variety of colors and abundance, perhaps it will inspire you also to start a fresh DIY project around home and garden. Thank you again for your interest and time this morning, and we hope to see you soon and until then, take care. Thank you very much.
Operator: Good morning, and welcome to the Card Factory FY '26 Interim Results Presentation. Please welcome to the stage, CEO, Darcy Willson-Rymer. Darcy Willson-Rymer: Good morning, everybody, and welcome to our interim presentation for FY '26. Thank you for joining us today, especially those that are here in person with us at UBS, but also thank you for joining us online. So I'm Darcy Willson-Rymer. I'm the CEO of Card Factory. Joining me today is Matthias Seeger, who's our Chief Financial Officer. So following an overview of highlights from the first 6 months, Matthias will then provide a financial performance update for the first half of FY '26 and an outlook for the remainder of the year. I will then provide an update on the positive progress we continue to make delivering on our growth strategy. Matthias and I will be happy to answer your questions at the end. So the first half of this financial year has seen continued momentum across the key building blocks of growth. In particular, the acquisition of Funky Pigeon was a significant milestone for our business, and we're excited about the growth potential that this will unlock. We are now well positioned across our stores, online and U.K. and international wholesale partnerships program to deliver on our growth strategy as we develop Card Factory into a leading global celebrations destination. As we enter our busiest period of the year, there is confidence across the business that our value and quality offer will continue to resonate with customers looking to celebrate Halloween and the festive Christmas season. Many colleagues are listening today, and I'd like to personally thank each and every one of you for your unwavering commitment to the delivery and the energy, pace and dedication that you show day in and day out. Thank you. The first half of FY '26 saw resilient revenue performance with our core stores business continuing to perform positively. This was underpinned in half 1 by new store openings and a robust seasonal trading, which offset the impact of a softer summer high street footfall as a result of the warmer weather. In addition, the businesses we acquired in the U.S. and the Republic of Ireland last year are performing in line with expectations. As a result of this resilient performance, we are pleased to announce the interim dividend of 1.3p. As mentioned, a highlight of our growth strategy progress in the first half of FY '26 was the acquisition of Funky Pigeon, which supports our vision to create an online celebration destination for customers. With the acquisition complete, we can now work to accelerate our digital strategy, particularly in the card, attached-gifting market as Funky Pigeon provides us with increased operational capability, a quality technology platform and a large established customer base. Work is underway to unlock annual synergy benefits of more than GBP 5 million through the optimization of manufacturing and fulfillment, the integration of technology platforms and strategic project ranging, all of which are expected to be achieved through the remainder of this year and the next financial year ending January 2027. Looking ahead to the peak second half of the year, our expectations for the full year remain unchanged and building on the success of our half 1 seasonal performance, our peak trading plans are in place to deliver our expanded celebrations offer and strong value proposition, particularly across Halloween and the important Christmas season. As stated in previous announcements, PBT will follow a similar second half weighting profile as we've seen in FY '25, and this reflects the seasonality of sales, timing of investments and realization of inflation mitigation across through our Simplify and Scale program. So for more detail on this and our financial performance for the 6-month period, let me hand you over to Matthias. Matthias Seeger: Thank you, Darcy, and good morning. I'm going to take you through the results for the first 6 months and provide some additional perspective on the second half. We continue to write our own story. It's one of resilience, balanced growth, successful strategy delivery and of value creation for our shareholders. Our business has delivered a resilient financial performance despite a challenging economic environment. Total group revenue increased by 5.9%, which is at the top end of our guidance of mid-single-digit percentage growth. The underlying cash generation of the business was strong with free cash flow productivity within our target range of 70% to 80%. As discussed in our recent trading update, a decision to bring forward efficiency-focused investments, including an upgrade to our point-of-sale till systems contribute to adjusted PBT for the first half being down by GBP 1.3 million. The benefits of our Simplify and Scale program largely offset the impact of the significant increases in national living wage and national insurance contributions. The 2 acquisitions completed in the U.S. and in the Republic of Ireland in the second half of last year contributed positively in line with our expectations and the acquisition economics. Continuing our journey of delivering predictable, sustainable and growing returns to our shareholders, we are declaring an interim dividend of 1.3p per share. As I mentioned, total group revenue increased by 5.9% from GBP 233.8 million to GBP 247.6 million. Our core business, stores in the U.K. and in the Republic of Ireland, which account for 92% of sales delivered total store base growth of 2.9% with robust like-for-like sales growth of plus 1.5%. We added 30 net new stores to our estate in the last 12 months, accounting for 1.4% of the store base growth. Total greeting card sales remained strong, growing in the low single-digit percentages. Our partnership business more than doubled, underpinned by double-digit organic growth and incremental contributions of the 2 acquired businesses in the U.S. and in the Republic of Ireland. We're very pleased with the performance of these additions to the Card Factory Group. Online sales were negatively impacted by the closure of Getting Personal at the end of January this year as anticipated. At the prelims, we talked in detail about our unique retail business in the U.K. and the Republic of Ireland. To reiterate, at the heart of our business success is a business model built for resilience and long-term profitability. We help people celebrate life's occasions at affordable prices backed by a strong value proposition. We have been extending our product offering to achieve non-card categories to grow average basket value and drive like-for-like sales even when footfall is softer. We're reaching more customers in more locations by opening new stores in underserved areas. And our strategy is working. We had robust store base growth of plus 2.9% in the first 6 months with like-for-like growth and new stores contributing in roughly equal parts. In the first half, our share of gift and celebration essentials increased to 53.4% and the average basket value rose to GBP 4.95 this year from GBP 4.75 for half 1 last year, reflecting our evolving range. Our store network grew by 30 net new stores in half 1, including our milestone 1,100th store. As of the end of July, we had 1,103 stores with additional store openings leading to a total of 1,111 stores operating today. And we are well on track to deliver our target of 25 to 30 net new stores this fiscal year. Every new store extends our reach to more consumers and more locations and delivers high returns using our low capital model. Adjusted profit before tax is down versus last year, as we indicated in our August trading update. Excluding the net impact of the largely contained inflation and the accelerated investment in our point-of-sale upgrade, underlying performance showed strong progress driven by sales growth. We substantially mitigated the H1 inflationary headwinds of 4.4% on our total cost base through the benefits of our Simplify and Scale program. The recent acquisitions of Garven and Garlanna contributed positively as did the closure of Getting Personal. Half 1 PBT margin of 5.3% compares with last year's PBT margin of 6.2%. We expect PBT margin in half 2 to increase by more than 10 percentage points as it did last year. Half of this increase will be attributable to the half 2 operational leverage with the remainder delivered by a combination of the net benefits of Simplify and Scale and sales growth. I mentioned it before, we cannot control inflation, but we can control how we respond. Inflation will add again more than GBP 20 million to our cost base this year. This is a cost increase of 4.4% on total cost. Over the past years, we have proven we can mitigate inflation through our structured multiyear Simplify and Scale program. Simplify and Scale program focus on efficiencies, productivity and range development, including pricing by eliminating non-value-added and manual activities, reducing duplications, streamlining operations and optimizing ranges. All plans are in motion to fully offset the cost price inflation for FY '26. As with last year, most benefits will materialize in the second half. In half 1, we delivered total efficiencies of GBP 9 million from streamlining our end-to-end operations and optimizing our range, including pricing. This included in-sourcing, printing and distribution of store merchandising materials, optimization of warehousing and agency labor and achieving a 9% improvement -- efficiency improvement in our stores. Key plans for half 2 include automating support center back-office tasks and processes as well as further store labor efficiencies enabled by the new point-of-sale till system, including streamlining back of store activities and hybrid tils. Let me now provide some further perspective on half 2. The profile of revenue and profit between half 2 and half 1 this year is largely in line with last year. As a reminder, the phasing of the inflationary headwinds and investments has a disproportionate impact on the first half, while H2 benefits from the positive impact of the Simplify and Scale program, higher sales, operational leverage and stronger margin. We anticipate H2 sales at a similar rate as growth as in H1, including the additional -- excluding the additional sales from Funky Pigeon. The growth in the second half will be underpinned by total store sales growth and continuous contributions from previous acquisitions. Store sales growth reflects the net new store openings and the like-for-like growth supported by a strong product offering and trading plans. Turning to cash generation, use of cash and debt. Underlying free cash generation of GBP 37.9 million was strong over the past 12 months with a free cash flow conversion of 78% versus earnings. Capital expenditure of [ GBP 19.3 million ] was materially in line with our guidance of GBP 20 million to GBP 25 million. We invested in our new store openings, store refits and upgrading store layouts, PoS till system upgrades and enhancements to our online experience. Debt service remained broadly consistent with prior periods. We paid GBP 16.9 million in dividends, reflecting FY '25's interim and final dividend payment. Surplus cash after payment of dividends was reinvested in M&A and the acquisition of Garven and Garlanna as well as the onetime transaction cost of Funky Pigeon. Over 12-month period prior to the end of July this year, net debt increased by GBP 4.3 million due to the one-off items unrelated to business performance. Half 1 cash generation and use followed the typical seasonal profile as we build stock ahead of the main trading period, but performance improved substantially compared to last year due to improved working capital. For H1, capital expenditure of GBP 7.6 million was slightly up by GBP 1 million versus the prior year. Our leverage remains low at 1.0x at the end of July, well below our maximum leverage target of 1.5x and broadly in line with last year. At period end, the group had cash and headroom in its debt facilities of GBP 46 million with a GBP 75 million accordion option. After period end, we increased the group's RCF facility from GBP 125 million to GBP 160 million using GBP 35 million of the accordion option to part-fund the acquisition of Funky Pigeon and provide further headroom for the growth of our business. We are committed to creating value for our shareholders by delivering on our business growth strategy and plans. We deliver our plans and financial targets in a disciplined, balanced and sustainable way, returning cash to shareholders while investing to deliver the strategy and maintaining a strong balance sheet. We will grow sales in the mid-single-digit percentages and profit before tax in the mid- to high single-digit percentages. We are a highly cash-generative business with free cash conversion of 70% to 80%. Delivery of our target is underpinned by store like-for-like growth, new store openings, growth in online and partnerships in combination with mitigation, our cost price -- the cost price inflation through the Simplify and Scale program and a disciplined approach to investments. Our capital allocation policy has 4 guiding principles. We maintain a strong balance sheet within a clearly defined debt leverage range. We invest in a disciplined financially sound way to support our growth strategy. We provide regular progressive returns through interim and final dividends, and we fund dividends from free cash flow, managing surplus transparently and returning it to shareholders where appropriate. We are committed to providing attractive shareholder returns, as I mentioned, as the value of our business increases behind the disciplined execution of our robust strategy and plans and by returning cash to our shareholders. Predictable progressive dividends are a cornerstone of our capital allocation policy. Therefore, we are declaring an interim dividend of 1.3p per share. This is based on an expected progressive full year dividend, maintaining a cover ratio of approximately 3. Furthermore, we are announcing the intention to start a share purchase program. The objective is to mitigate dilution to shareholdings. The annual scope will be 3 million to 4 million shares. This will enhance EPS by about 1% every year. On the 14th of August, we completed the acquisition of Funky Pigeon. Darcy will provide you with a broader strategic perspective shortly. I will briefly summarize the key financials of the transaction and its impact on our guidance. The purchase price was GBP 24.1 million, implying an EBITDA multiple below 5 based on annual EBITDA of GBP 5 million. The acquisition was funded by extending our extended RCF debt facilities from GBP 125 million to GBP 160 million. Funky Pigeon adds GBP 32 million sales and GBP 5 million EBITDA to the group. Furthermore, we expect to generate more than GBP 5 million synergies through optimizing manufacturing, fulfillment, technology, operations and product ranges. These synergies will be delivered over the next 12 to 18 months and will fully materialize from February '27, i.e., in our fiscal year FY '28. For FY '26, we expect that 5.5 months of Funky Pigeon trading will increase sales by about 3% versus current guidance. Our guidance for FY '26 profit before tax remains unchanged as additional profit offset by additional financing and transition and integration costs. In this context, our leverage at the end of this fiscal year and January is expected to increase by 0.3x to about 1.0x, still well below our target of 1.5x. Our mid- to long-term guidance remains also unchanged with mid- to high single-digit PBT percentage growth every year. In summary, Card Factory sales performance was resilient against the backdrop of challenging market conditions and softer footfall. Our recent acquisitions are performing well and are accretive to the bottom line. We are well positioned to continue our growth in the second half. Our Simplify and Scale program has been instrumental in containing cost price inflation in half 1 with all plans in motion for half 2. We acknowledge that the second half is crucial. This weighing has been the new normal, and we have proven last year that we deliver our plans in half 2. We are excited about the high level of product newness and our strong commercial offering. And we are on track to deliver our plans for Simplify and Scale. Therefore, we remain confident to deliver on our full year expectations. And with that, I will hand back to Darcy for the strategy update. Thank you. Darcy Willson-Rymer: Thank you very much, Matthias. Let me now provide an update on the continued progress that we have made delivering on our opening our new future strategy in the first half of FY '26. Our strategy is transforming Card Factory into a leading global celebrations group with an extensive U.K. and Republic of Ireland store footprint and a growing international presence. We are building upon the continued growth and profitable performance of our store estate and our leadership position in the U.K. card market, where we continue to deliver year-on-year revenue growth. By continuing to successfully expand into the gift and celebration essentials categories, we are addressing a GBP 13.4 billion celebration occasions market. This will be further accelerated by the acquisition of Funky Pigeon as we deliver on our online vision of creating a digital destination offering an extended and complementary offer to our stores. Our partnership strategy is enabling us to build out our points of purchase in the U.K. and Ireland, reaching customers beyond our existing retail footprint. Internationally, we are looking to disrupt the English-speaking markets where we've identified an GBP 80 billion market opportunity, of which North America is the significant majority. Let me start by outlining how our growth strategy is enabling us to increase our share of the celebrations market in the U.K. and Ireland. To unlock this GBP 13.4 billion opportunity, we continue to evolve our range, which in the first half of this year saw 49% newness across all categories as we respond to changing consumer trends. Range innovation remains at the heart of our planning across all categories. This follows a test-and-learn approach, which most recently saw us launch a new in-house designed premium card range, which is allowing us to broaden our appeal to a more affluent demographic. By doing so, we are sustaining a higher average selling price while continuing to deliver superior value to our competitors. The success of the range development continues to drive category growth. A few highlights in the first half included 28% growth in our baby gift sales to GBP 1.3 million, a 23% growth in tableware to GBP 2.5 million and a 20% growth in stationery to GBP 3.2 million. To enable this growth in key celebration occasions category, our strategy closely aligns range development with store space optimization. So as an example, in half 1, this approach saw us condensed, but updated milestone age gift range introduced, which freed up additional space for new stationery ranges. So together, this contributed to a 20% like-for-like increase in stationery sales in half Y '26 and a 7% year-on-year uplift on our milestone age range despite the lower space allocation. Our growth strategy is enabling us to reach more customers in the U.K. and internationally, both in more store locations and online. In the U.K. and Ireland, we continue to expand our profitable store estate with 13 net new stores opened in the half year '26, surpassing the milestone of 1,100 stores. Our wholesale strategy continues to deliver success for our partners and ourselves, delivering double-digit revenue growth of 15.7% in half 1. The successful U.K. rollout of our full-service model to the entire U.K. and Republic of Ireland elder estate in FY '25 has seen the breadth of our offer expanded to cover seasonal card in the first half of the year across Mother's Day and Father's Day as well as gift bags as part of their special buy offers. We're also in the midst of our first international full-service model rollout to The Reject Shop in Australia, having successfully onboarded a third-party logistics provider in the region. This has also supported an initial entry into the New Zealand market via wholesale distributor arrangement. Whilst a modest regional expansion, this is in line with our target market growth strategy. On North America, we've made good progress in establishing the foundations for growing our business in this key territory, which is a card market 5x larger than the U.K. Our ongoing trial with a leading U.S. retailer has successfully demonstrated market demand, providing -- proving that our value-focused card offer resonates with the U.S. consumer and has enabled us to create a robust operational capability to service retailers in North America. We were delighted to announce the completion of the Funky Pigeon acquisition in August. This is a significant milestone for our business as it accelerates our digital strategy, which I've previously stated was not developing at the pace we desired. So let me provide you with the rationale behind the acquisition. While we are the leading card retailer in the U.K., we have headroom to grow our online market share. In particular, we have wanted to deliver a convenient and great value card with gift-attached offer online that leverages our existing market strength. At the same time, we want to take full advantage of our nationwide store estate where we have already made headway through our existing omnichannel capabilities. And as we continue to develop as a leading celebrations retailer, the opportunity is to extend our store-based party and celebration offer by providing both our in-store and online customers with the ability to seamlessly access an extended range through our omnichannel services. Whilst our direction of travel was clear, we were not making the progress at the pace we wanted. And the purchase of Funky Pigeon met the challenge by upweighting our technology capabilities and accelerating our card and gift-attached online offer alongside the benefit of a large established customer base. And as well as accelerating our digital strategy, the acquisition also creates a structurally profitable online business within Card Factory with a strong foundation for the strategic growth that we are seeking. As immediate near-term priorities, integration is well underway, and our focus is on 3 things. Firstly, we are reconfiguring the manufacturing and fulfillment approach to make best use of our manufacturing facility in Yorkshire, combined with the existing Funky Pigeon fulfillment facility in Guernsey. This will provide the flexibility we need to offer a seamless direct or in-store collection service for our customers at advantageous costs for us and our business. Secondly, we are undertaking at pace the strategic planning that will determine how we take full advantage of the Funky Pigeon platform. And finally, we're undertaking an extensive product review and planning so that we are offering the right range. These priorities will be achieved through the next 12 to 18 months. In addition, plans are in place to enhance data collection from our 24 million unique Card Factory store customers. This will allow us to increase our share of their celebration spend by leveraging data across the Funky Pigeon digital platform and our existing omnichannel offer. Looking ahead, I'd like to start by summarizing our plans for the important half 2 trading period. We enter our peak trading period extremely well prepared and best placed to meet customer needs due to our value and quality offer. Ahead of the key Christmas season, we have significantly expanded our great value Halloween range. This is now available in our stores with supporting online ranges and is fully aligned to consumer trends for this growing celebrations occasion. Our new Set to Celebrate program has rolled out ahead of peak trading period in all of our stores. This will drive high standards of operational execution and ensure a quality and consistent customer experience in our stores. We have a strong Christmas range built around our value proposition, which features over 80% newness on gift, 95% newness on celebration essentials and an expanded premium card range as part of our 30% newness on card. Operational preparations for the Christmas trading period are well advanced with a stock build on schedule and optimized replenishment processes in place. So in summary, we have delivered a resilient top line performance for the first half of FY '26 due to the positive performance of our stores, especially within the key spring seasons as well as the effective execution of our growth strategy and the positive contribution we are seeing from our acquired businesses in the U.S. and the Republic of Ireland. Initiatives identified through our continuous Simplify and Scale, productivity and efficiency program have mitigated almost half of the more than GBP 20 million FY '26 headwind cost inflation. This has included significant rises in national living wage and employer national insurance contributions as well as wider inflationary pressures. Robust plans are in place to mitigate the full impact through half 2. Despite the challenging consumer environment, our expectations for the full year are unchanged as we continue to deliver on our expanded celebrations offer and strong value propositions. PBT is expected to follow a similar profile to FY '25 with delivery weighted to the second half, reflecting seasonality of sales, timing of investments and the realization of inflation mitigation benefits through our Simplify and Scale program. Therefore, for the adjusted PBT in FY '26, we expect to deliver mid- to high single-digit percentage growth increase. By delivering on our growth drivers, we will continue to deliver sustainable, progressive returns to our shareholders. So thank you again for attending our results presentation. And Matthias and I will now be happy to take any questions that you may have. So thank you. There's a -- for the benefit of those who are online, there's a microphone in the side. So if you could use that, that would be great. We'll take questions in the room first and then go to a line. So Kate? Kate Calvert: Kate Calvert from Investec. I'll go for the traditional 3 questions. First question is just on your new store opening plans going into next year. Are you still planning for another net 25 to 30 stores? Do you want to [indiscernible] the question we just did or we'll just do them one -- Okay. Second question, you talked about leveraging your store data with Funky Pigeon data. Are you hinting at a loyalty card at some point given also the new EPOS system? And my third question is just on partnerships. Have you actually grown your business with your U.S. retailer year-on-year as you're going into the second half? And also, can you just update us on South Africa because I don't think you mentioned it at all as what's going on there? Darcy Willson-Rymer: Very good. Do you want to do stores then I'll do... Matthias Seeger: Yes. I mean we -- the answer -- simple answer is yes, yes. We are -- as we communicated, our plans are to open 25 to 30 net new store every year for the foreseeable future. We are on track to deliver this at this rate this year. Over the last 2 years prior to this year, we opened 58 new stores. So yes, we are on track, and we have line of sight of that. Darcy Willson-Rymer: And then in terms of your second question, in terms of the point about leveraging data, one of the things that we've got plans in place and we're working on is how do we collect the data from our 24 million unique customers that use us and therefore, collect the data in the way that we can then talk to them appropriately based on their needs. And the point of that is if the average U.K. person spends about GBP 258 a year on their celebrations of which we get about GBP 22. So it's about how do we get more of their celebration spend and how do we leverage both our stores and the online platform in order to do that. The specific mechanic of the data value exchange, we will test sort of various mechanics. On the specific point about loyalty card, a traditional loyalty card that sits in your wallet, probably not, given we're EDLP, but it's about how do we get the loyalty to get more of their celebration spend. In terms of partnerships, the year-on-year comparison actually have for that particular customer, we don't basically split it out. There isn't a like-for-like comparison because last year, all we did was put in sort of 40 to 50 Christmas cards across all stores in this year. We're trialing the -- in about 100 stores. What I can say is that the products that we're seeing -- so we are alongside another card supplier. We're seeing really good rates of sale. The particular customer we're dealing with is actually really happy with it. And so the range is resonating. And then sort of the next step is for us to convert that to the full service model, but that requires -- that just requires some technical work. So we're doing Aldi first, TRS second, and we'll do that 1 next. And then in South Africa. South Africa is a work in progress. We're seeing some good traction on getting some new business. So one of the large retailers that this business -- that the South Africa business never sold, we will be shipping to them sort of early next year, really good progress there. There's still quite a bit of work to do on the back office, which the team are on with. Go on. Hai Huynh: It's Hai from UBS. I have 3, if you don't mind. On the volumes perspective, so you've got 1.5% like-for-like. And you quoted 4.1% average basket value increase. Now I know that's partly range, partly pricing, but how do I read into the volumes behind that? Is that flat? Is that negative? And to meet your targets, how are you seeing that dynamic on pricing and volumes in the second half? Second question, could you walk me through the shape of the contribution from Funky Pigeon, if I'm interpreting this right? So you've got 5.5 months of revenue top line contributing this year. 5 -- and then the full contribution of PBT from that level in 2027, but the synergies will only start coming in, in FY '28, right? Or is there already some synergies expected towards the second half of FY '27? And lastly, CapEx going forward, there's a slight increase year-on-year, but that's partly due to the point of sale. Do you see it normalizing going forward given your leverage? Or what's your view on CapEx going forward? Matthias Seeger: Thank you for your questions. So first to address your questions on half 1, you stated correctly that our like-for-like was 1.5%, driven by ABV of 4.1%. About half of that was behind pricing. As we look forward into half 2, we expect one to see a normalization of footfall, though we expect it not to be at the same level as last year. But our multiyear experience -- historical experience is that during the festive seasons, footfall has been around the same level. Second, we do have a very strong program, both in product offering and trade program. Darcy has commented on that. Behind that, we do expect to see also a strong ABV progress, of which part of it will pricing. So looking at the round of all our commercial plans, including what we know historically from the season, we are very confident on our half 2 -- the execution of our half 2 plans. Let me take the CapEx question first. Our guidance has been and remains CapEx spending of GBP 20 million to GBP 25 million. Last fiscal year, we were at GBP 18.7 million below that over the last 12 months, straddling to fiscal year, it was GBP 19.3 million. That's well within the guidance, and we don't expect an update on the guidance with regards to that range of capital spending going forward. On Funky Pigeon, we've been completing the acquisition 6 weeks ago. We started the integration work. We are progressing on fine-tuning the plans to deliver our synergies. And what we are confident in that is that we will bring these synergies to the bottom line in their full scope starting February '27. What happens in between, we will need to further fine-tune to optimize the execution of the plans. Therefore, at this moment, I think it would be too early to comment on that. Adam Tomlinson: Adam Tomlinson from Berenberg. The first one is just on the cost savings for H1. So I think you've talked to about GBP 9 million cost savings achieved in H1. Just a little bit of color on that would be great just in terms of the breakdown. And within the EPOS system, I think it's Phase 2 now you're on for that. So just, again, a little bit of detail in terms of the benefits to come through from that will be very helpful, please. Second question is just on stores. With those new openings, just some color on where you're finding those sites, that split between maybe high street retail parks and the relative performance of those would be interesting. And then a question on gross margin. So that's coming down, I think, in H1 due to that mix impact. So just your expectations in terms of how we should think about that going forward? Matthias Seeger: I guess I get all the fun today. Cost savings, yes, indeed. As we discussed, we do have a multiyear structured savings program. And I think that's important to highlight that we are looking at -- in a systemic way about opportunities to -- that are unique to us across our end-to-end value chain and how we drive efficiencies for all our parts of the business. Out of the GBP 9 million, there was obviously a carryover -- small carryover effect from last year, savings that we initiated in the second half this year, complemented by new programs. We mentioned a few during my part. One was the in-sourcing of printing and supply of [ merching ] materials for our stores. The second one was the optimization of warehouse and agency labor. We also changed our -- by the way, our logistic partner, which resulted in savings. And we drove more efficiency into our store operation by reducing store hours by 9% year-on-year. All of what I just mentioned will carry on into half 2, obviously, and will be complemented by further savings. You mentioned our point-of-sale savings. We have completed the rollout of the PoS upgrade in early August through our acceleration. And that will give us tangible benefits in what I would call Phase 1 because it helps us to streamline our back of store activities and also the efficiency at the till itself. But equally important, it lays the foundation for better engagement with customers in the future, capturing customer data and offering additional services to customers in the future through the system. On store locations, I mean, we do have a proven approach of identifying -- a data-based approach of identifying underserved locations and as you know, we have a very thorough methodology of assessing the potential -- sales potential of a specific site as we operate so many sites in the U.K., and we have reference case and we assess each store opening on its own merit, including potential cannibalization to nearby stores and requiring a payback of less than 2 years based on a moderate low investment capital spending of GBP 80,000 to GBP 90,000 a year, which will give great returns to our shareholders because we operate a store much longer than 2 years, as a matter of fact, in excess of 10 years on average. With respect to the locations of store openings, we have been quite successful in opening stores in the Republic of Ireland to a disproportionate degree. But we are finding locations also in the U.K. across shopping centers, outlets, high street. I wouldn't single out any specific location that sticks out of that. With respect to the last question on gross margin, as we integrate new businesses, gross margin, product margins will slightly change versus our previous operations as costs show up in different lines of the P&L. Our partnership business obviously doesn't have to carry store costs. So you will see differences in product margin all the way trickling down to gross margin. What we are focusing on is making sure that they are earnings enhancing and therefore, increase our PBT. And for the recently acquired businesses of Garven and Garlanna, they are definitely increasing or enhancing our PBT margin. Unknown Analyst: Yes, 3 from me, please. If we come back to the product gross margin question first, actually. I mean, I think the year-on-year performance was down nearly 300 basis points. I was wondering if you could differentiate between what was mix, including partly through acquisitions and maybe talk a little bit about how your product margin performance has been on a like-for-like basis and whether or not there are any one-off factors in there, maybe including some x range clearance, any factors like that, which could be a factor to think about going forward? Second question, just in relation to working capital performance. It looks like you had a good earnings in the first half. How much of that is permanent? And how much of that is maybe some phasing benefits, which will just wash through over the year? And do you think that across the enlarged group with Funky Pigeon, do you think there's some opportunity to realize some efficiency across working capital, let's say, over a couple of years? Sorry, there was a third question just in relation to the savings as well, the efficiencies. Could you just quantify what, if any, year-on-year benefit you had within business rates? Matthias Seeger: All right. I'm going to continue to have all the fun. Right. You're right. When you look at the total company, product margin has been down year-on-year by about 200 basis points on the product margin level. The large part from that was on the mix effect that I referenced. But you also keenly noticed that we did have some sell-through programs, sellout programs and the range change that contributed part to that, that we would consider a one-off. We had a hard change on some of the range changes. We are moving to a soft change going forward. So I would consider that a one-off. And we also had a sellout program for some remnants, which I would also consider a one-off. And I think that neatly dovetails into how we look at working capital and one of the main components being inventory. Being -- having this end-to-end supply chain, we should have full visibility of all the inventory at all parts. And we do have major progress against that, but we still have further opportunity to really get to the full end-to-end, which means that we have more opportunities to optimize our inventory levels, and that's one of our focus points going forward to ensure that we have the right stock in the right place at the right time in the right amount. And therefore, yes, we see more opportunities and efficiencies in that area. And that includes in the future, of course, Funky Pigeon. So that includes stores, online as well as partnership. On the business rates, what we have seen is when we renewed our -- or putting it from a cost of occupancy, when we renewed our leases year-on-year, as you know, we have about 250 lease events, renewal events every year, we still see an opportunity to get to better lease terms. With respect to the business rates, they haven't changed, and we don't know yet, of course, going forward, what the detailed change in the business rates will be. Darcy Willson-Rymer: The only thing I'd add on the business rates before everybody gets too excited, of course, we have warehouses. We've got the factory as part of the vertically integrated model. So we'll see if the chance goes ahead with what is planned, we'll see some ups and downs in that before anybody gets carried away. Should we move to online? Operator: Yes. So we've had a large number of questions come through online, Darcy, Matthias. So we'll group some of these together into some common themes to try and get through as many as possible in the time we've got. So first up, are you still on track to deliver group total revenue of GBP 650 million and 14% PBT in FY '27 as outlined at the Capital Markets Day in 2023? And if not, can you please add some color as to why and what your revised expectations are? Darcy Willson-Rymer: Great. Thank you very much. So I think we spoke about this in quite some detail at the prelims. Effectively, given off the -- 2 things around the Capital Markets Day target and what we spoke about last time was, first of all, just given the very high inflationary environment that we landed ourselves in post COVID that wasn't in the plan. And also, of course, when we wrote the plan, we're in 2025 now. We know a lot more now than we knew back then. And effectively, at the prelims, what we did is we updated our guidance to basically say from that point onwards, you should expect mid-single-digit sales growth and mid- to high single-digit profit growth. And yes, so that's that. Operator: Okay. Thank you. And the next ones relate to questions that we've had around the online business. So firstly, what do you need to start competing more successfully in the online market? Is it technology, operations, marketing? And secondly, why was online not developing as desired? And what makes it tough to compete online? Darcy Willson-Rymer: Yes. I think the online story, I think, is reasonably well documented. But I think the challenges we face are -- you need to go back into the history, which is when sort of around about the IPO when Card Factory first went into online, they did it through the acquisition of Getting Personal, which was just a premium products business. That business model was based around paid search and the platform wasn't right for personalized card sort of, et cetera. So -- and then when they set up cardfactory.co.uk, it was set up as like a big store. So the majority of sales were coming through our store products, whereas in actual fact, that's not what we want online to be. So we have clarified the strategy around the 2 missions of direct recipient with attached gift and then the broader celebrations. Clearly, Funky Pigeon allows us to basically make a step change in that. And our view is it was better to buy rather than build. And now it is about the integration of that and the -- basically the execution of the strategy, and that is really about -- it's a combination of all 3, having the right technology, having the right product, having the right marketing. And of course, the big opportunity for Card Factory is leveraging the 24 million unique customers that we have that visit our stores because it's the same customer that shops in store that shops online, but yet we don't get a significant amount of their online spend. And it is about how we go about doing that. That's the mission and that's the challenge for us. Operator: Next up, can you please explain the FX derivative loss you've recorded during the period? Darcy Willson-Rymer: Great question. Matthias Seeger: Great question. Listen, we know how to develop celebration products. We know how to manufacture them. We know how to sell them. We are not professional FX traders, which is why our Board has approved a hedging policy, which ensures that FX doesn't impact our -- or the volatility in FX doesn't impact our business. As part of that, we are hedging over a 3-year time horizon. And we have essentially locked in this year and large part of next year. That helps us to ensure that we deliver on our PBT guidance. Now as part of that, we have derivative contracts, and we recognize them in line with the accounting guidelines at each ending day of a period. The dollar is at $1.35 and our derivative contracts are in the high $120s. Therefore, we have to recognize a loss that is a hypothetical loss and in that sense, will never materialize because -- well, the way to look at it, it's like forgone opportunity benefits, right? If the market stays at $1.35, then we would only benefit from a lower exchange rate. However, if the market changes and the dollar comes down to $1.30, actually that balance sheet loss will go away. So it's a bit of a complicated, unhelpful perspective to really understand business performance, which is why we are adjusting it or excluding it from our adjusted profit. Darcy Willson-Rymer: I think also just the most important point here is our ForEx policy about giving certainty to what we're doing and how the business has benefited from that over the last 5 years. Operator: There's a number of questions that have come in regarding acquisitions. So a couple to reel off here. Firstly, can you provide specific EBITDA margin and revenue growth projections for your 2 most notable recent acquisitions, Funky Pigeon and Garven over the next 2 to 3 years and outline the risks to their scalability in the U.S. and online markets? Secondly, will you be breaking out any sales from the recent U.S. acquisition? And can you share more information on its performance and integration and what the exact model is there? Beyond the U.K., do you have any plans to grow your online offering in other territories? And if so, which markets are you considering? And finally, are there any other acquisitions planned? Darcy Willson-Rymer: Very good. I think just to open up on the will we provide specific margins across particular customers in particular countries? The answer is no, we're not going to split that out. I think for reasonably obvious reasons in addition to the competitive sensitivity as well. But what I -- so -- but let's talk about some of them. So I think if we look at the Garven business. So we acquired that last year. That business is in the celebration essentials market. It's mostly roll, wrap and bags, but it does a little bit of gifting and a little bit of party, and they are selling to premium retailers, mostly own label. So they design, arrange for the manufacturing and then we sell at the factory gate to the U.S. retailers. So the U.S. retailers basically pick it up and pay for shipping and any tariffs due. So it's largely a design-led range in those categories. And that business is absolutely on track with the acquisition economics and our plans and it was slightly down because of tariffs, but up because of the opportunities that the team there found basically as a result of a bit of volatility in the market, and that business is performing well. And the sort of plans is to complete all of the learnings that we need to do on the card side, particularly when you make the changes we need to be able to migrate to a full service model. And then at some point, we'll back cards into the Garven business. And then our U.S. entity, it will be sort of -- we'll be ready to scale. I think in terms of what are the risks, the risks are, it's a large market with 2 incumbent players and compared to them, we're a small U.K. sort of business. And just the sheer way this is done in geography, that's where most of the risks lie. However, we remain confident, given how our product resonates in the market, how it compares in pricing plus the learnings that we've taken sort of out of Australia. So we remain confident of the opportunity in the U.S. In terms of online offer in other territories, not at this moment, I think we have to deliver on the integration of Funky Pigeon and we have to deliver on our growth plans for the U.K. market. And when we're satisfied that we've got the right momentum, we can then potentially think about something else. I think -- are any other acquisitions planned, I think we've always said the point of acquisitions was about things that will help us accelerate the strategy, that are accretive to shareholders, but our current focus now is on the integration and the delivery of the things that we have in order to accelerate the strategy. Did I -- yes. Operator: So penultimate question in relation to Funky Pigeon, 2 parts to this. Are you going to merge the tech platform and share developers across the Funky Pigeon and Card Factory online? And can you provide some more color around how you will drive value from Funky Pigeon and turn around the online offering? Darcy Willson-Rymer: I think in terms of -- we are definitely going to have one tech platform, and it will be the team are basically working through exactly how that's going to look and how that's going to be. But one of the synergies is around merging basically the tech platform. And then effectively, how do we drive value from it. It's the things that I've already mentioned. It's basically the strong online direct recipient offer that Funky Pigeon has, developing the extended party and celebrated range, leveraging both the existing Funky Pigeon customers that they have plus the marketing machine there and the 24 million unique Card Factory customers. So that's -- those are the plans. Operator: And final question, I appreciate we are at time. So apologies for any questions we've not had time to get to online. But the final ones related to buybacks. So when do you plan to start your share purchase program? And is there any plan to implement share buybacks as a way of returning capital to shareholders? Matthias Seeger: We announced a share purchase program. Again, the intention is to mitigate the dilution through the employee share issue program. We -- the order of magnitude is 3 million to 4 million shares every year. We intend this to be an annual program and it will start before the end of this year. Any further return of cash to shareholders will be discussed and agreed by the Board at the right time. But as we always have iterated, we are not in the business of holding back retaining cash. We will return -- either we will use surplus cash to invest to drive future growth of the business, delivering rate of returns beyond what a share purchase program, share buyback program could deliver and/or we look at other ways of returning cash to shareholders considering all options, including share buyback. Darcy Willson-Rymer: Brilliant. Thank you, everybody. Thanks for attending. Thanks for those that have joined us online and safe onward travels. Matthias Seeger: Thank you.
Greg Peterson: Good morning to those of you joining us for our webcast and for those of you here at the Fendt production facility in Marktoberdorf, Germany. My name is Greg Peterson, I head up Investor Relations for AGCO. It's my pleasure to welcome you to AGCO's sixth annual technology event. We're thrilled to have you with us as we showcase the innovations that are shaping the future of agriculture. These two days are all about transformation, how AGCO is leveraging technology to empower farmers, drive sustainability and unlock levels of productivity across the globe. Our focus will be on innovation, technology and our plans to grow the PTx business. We're hosting this event in Germany, the home of our high-tech Fendt brand for two reasons. The first is to showcase Fendt's or AGCO's high-margin growth initiative as we globalize the full line of our Fendt brand. And the second is to highlight the attractive demographics of the European market. With that, let me handle the safe harbor information. We will make forward-looking statements this morning, including statements about our strategic plans and initiatives as well as our financial impacts. We'll discuss demand, product development and capital expenditure plans and timing of those plans and expectations concerning the costs and benefits of those plans and timing of those benefits. We'll also cover future revenue, crop production, farm, income operating expenses, tax rates and other financial metrics. All of these are subject to risks that could cause actual results to differ materially from those suggested by the statements. Further information concerning these and other risks are included in AGCO's filings with the Securities and Exchange Commission. The SEC report that we filed, including AGCO's Form 10-K for the year ended December 31, 2024, and subsequent Form 10-Q filings include the risks that we are facing. AGCO disclaims any obligations to update any forward-looking statements, except as required by law, and we'll make a copy of this webcast available on our website. So this morning, we'll start out with an overview of our Fendt operations and the European demographics or the European market that make it very attractive. Christoph Gröblinghoff, who runs our European Fendt business will start off in that first section. Following Christoph, Eric Hansotia will give us a brief overview of AGCO's strategic initiatives. And then Andrew Sunderman, who's our General Manager of our PTx Trimble joint venture will have a deep dive on our PTx business. And then at the end of our presentation, we'll have about a 15-minute Q&A session. So with that, let's get started. [Presentation] Christoph Gröblinghoff: Good morning, and welcome at Fendt here to the AGCO TechDays. Good morning, Eric. So my name is, as Greg has said, Christoph Gröblinghoff, I'm Vice President and Managing Director of Fendt team. And I'm doing this with my three colleagues, what I just want to introduce. This is Ingrid Bußjäger-Martin, Dr. Josef Mayer, you have just seen him in the film; and Ekkehart Gläser. So we are running Fendt team. So thank you for being here also. What I now want to see here on the next three slides is to have an overview about what is AGCO in Europe markets, an overview about what Fendt is doing and maybe some cool experience what we are doing on Fendt customer experience. So let's move on to the first one. Europe is really a mature and innovative-driven market with strong demand for sustainable and precision technologies. The last 3 years, Europe was representing 28% of the EUR 170 billion revenue of global ag machine market, and this is really underscoring its strategic importance. Especially Western Europe leads in adoption of GPS-guided tractors, autonomous implements and IoT-enabled systems. Farm consolidation, especially here in Europe, is creating a growing need for precision tech and Fendt technology. Our market is less cyclical than all other markets. We have really a focus on sustainability, which will drive investment in precision technology and Fendt for smaller farm size and diverse activities of the farmers. And the farm, what Greg mentioned, you will see tomorrow is an example of that, where they not only produce farm crops, they also be active in renewable energy with the solar panel and biogas. And AGCO has really a strong foothold in the region. Last year, Europe was contributing 58% of our EUR 11.7 billion revenue and is making our largest and most resilient market. Let's have a deeper look inside. The competitiveness advantage in all regions are the following. AGCO is a market leader in a growing lead, and this is doing with Fendt, with Massey Ferguson and Valtra. And we have the strongest dealer network with 755 independent and strong viable business partners. And we have the widest coverage of OEMs in Europe through PTx. Why that competitiveness advantage will continue and grow in the future? This is clearly leading to the huge investment, what AGCO has really done in the last 5 to 10 years, the big investment in the CVT production here and the extended capacity in Marktoberdorf, the strong footprint of our parts depot in Ennery; Hohenmölsen, where we're producing a lot of cool products; Beauvais 4 now, the new Massey Ferguson Experience Center; and also our investment into Linnavuori, the heart of our eco engine is representing this. And as you can see down from the graph, Europe/Middle East has a narrowed range of year-over-year change in the tractor sales above 80 horsepowers, just only 28 percentage points. And now have a brief overview about what Fendt is. First, Fendt products are available in all markets really for professional farmers and contractors. And we are producing these machines and the factories are belonging to the Fendt brand in total in 11 sites. Let me begin from the West to the East and see first the 3 sites in U.S. It's Jackson, where we are producing the track tractors and the Rogator 900, a little below is Beloit, the Fendt Momentum, the plant for the U.S. American market will produce there in Hesston for our big square balers. Going down to the south to South America, it's Ibirubá, where we're producing the momentum for the South American market and Santa Rosa for our IDEAL. Then moving to the right, 6 factories in Europe. Beginning in the South, it's Italy, where we're producing our IDEAL combine and the straw walker; followed then by Asbach-Bäumenheim, close to this site here, we are producing caps and hoods; Feucht, the production site for tedders, rakes and mowers; Hohenmölsen, the assembly line for our Katana self-propelled forage harvester, the Rogator 600 and also be producing for components; Wolfenbüttel for the round baler; and last but not least, the heart of Fendt, it's Marktoberdorf, where AGCO is producing all this wonderful Fendt worldwide wheel tractors. On the next slide, we see what I mentioned before. Everything was founded in 1930. So you can remember what will happen 2013 and we are distributing all these wonderful products through 480 distributors worldwide and of them are 220 in Europe. We're doing this with more than 10,000 employees, 6,500 roughly are here in Europe and 4,800 here in Marktoberdorf in the Fendt home. And we have 11 product groups, and this is really representing and you can see Fendt is a real full liner. We have everything what farmers need now also be with the technology product of PTx. Let's then come to some examples of Fendt experience, what is really different for Fendt. And we will please begin with this topic. This year is Agritechnica. Every 2 years, the most biggest and really leading trade fair agriculture show is happening in Hannover. This year, we'll also be introducing 5 new product lines. It's beginning with the 300 series followed with a completely brand-new 500 series, which we also will, see an update on the 700 series, the completely new 800 series where really farmers are waiting on and an update on the 1000 series. And how we are doing this, I want to highlight here. For sure, we are doing this with press cons. We are inviting journalists on the field and having shown this. But what Fendt has done this year completely new was a Creator Day. So we have invited 24 creators or influencers coming also be into the field, close to Berlin. And also we're having the experience to drive and to test all the machines. And the coolest one was really after only 2 weeks, we had more than 19 million views or 1.4 million engagements. So it means comments, share links, et cetera. And we have streamed this on Instagram, TikTok, YouTube, whatever you want. And for us, influencers, I would say, not new, but we are playing that very successful, and they are the multipliers who directly spread out our new worldwide notes and that's really important for us to do this. And the coolest statement from the influencer was in the field, do you have enough streaming capacity? Yes, for sure, we put Starlink pole into the earth and all these influencers are testing everything and streaming out of the machine into the worldwide net. And another cool example I want to share here, maybe it's also been new for you, Fendt holiday weeks. What is this? In the summertime, we are closing, we have to close the factory here for 4 weeks, Ekkehart's factory for maintenance and refurbishment, everything that then for the other 48 weeks, the factory is running smooth. But we are taking the opportunity and open this big forum here for young families who have mostly have a farming background. And this year, it was completely record, more than 30,000 visitors was here, 23,000 have bought something in the merchandising shop. We have made a merchandising revenue of EUR 350,000 on caps and T-shirts and so on. We have given the younger generation you see down right, 8,300 pedal tractor driver licenses and a huge turnover wherever. And the point is why we are doing this, and this is really unique in our industry is kids are the next generation of farmers, and this is our customers. You cannot really imagine what it really means for us to do this. The last one I want to share here is we are now this year celebrating 30 years of anniversary of our transmission, our Vario transmission. And we are doing this also beyond Agritechnica this year. Everything has started exactly for 30 years on Agritechnica, 1994, 1995, sorry, where we then presented the tractor with a continuously variable transmission. It was a global sensation in the industry, and we have done this with the first 926 model, and this old model will also be stay this year on Agritechnica. Since this time, we have constantly developed the transmission. It's really still the best and best performing CVT gearbox in the industry. No one else has it. It is still our biggest advantage. And today or by the end of the year, we will produce more than 450,000 of the CVTs. And to mark this anniversary, we have restored 14 technical models, and these are really milestones that have enabled us to tell the story of Fendt. This has really happened this year in summertime. All these 14 models you see has worked well in the field and here, a small teaser of them. [Presentation] Eric Hansotia: Thank you, Christoph, and the whole Fendt leadership team. It's so clear why leaders drive Fendt. You just can start feeling the Fendt experience, and you'll be able to experience a lot more of that during the day as we tour the factory and get on some of the product. I'm going to hover up a little bit now and talk about the overall strategy of the company and some really big important milestones that we've crossed over the last few months. There's a diagram here that shows how all 5 things are coming together at the same time. The heart of it is our PTx business, our Precision Ag leadership business. Now when our leadership team came together, when we took over the leadership of the organization, we said, you know what? We want to set a vision for the company to be the trusted partner for industry-leading smart farming solutions. Essentially, that means we want to do a better job than anybody else for our farmers at having intelligent machines that can do difficult things for themselves. So that started with an acquisition of Precision Planting. We made 6 other acquisitions of small tech companies, doubled our engineering budget, but it really came home when we were able to acquire that ag assets of Trimble and bring that in and form the collection of all of that, which is now what we call PTx, precision technologies multiplied. Bringing those pieces together has created a $900 million starting platform, but that's not where we're headed. We're headed for a $2 billion outcome when we really start having the synergies and value come together from all of this. We're going to expand on that a lot today. But that's the first major pillar and the primary focus of the company. When we made this PTx acquisition about 1.5 years ago, it allowed us to make a second portfolio change. And that is to exit our lowest growth, lowest margin business, we call the Grain & Protein solutions. So we brought in a high-tech business, high margin, high growth, high value to customers and exited one that was a bit of a distraction for us. It wasn't so synergistic with our products, with our channel, those kinds of things. So we said we're going to be totally focused on Precision Ag. The third portfolio shift was that we were able to resolve all of the challenges we've had with the TAFE organization. So we've changed the supplier relationship and got a much more flexible supplier relationship for our farmers, but also changed the shareholder relationship. And we now have the opportunity to do share buybacks. First time under my leadership that we're able to do that. Now we know the investors, that all of you represent have said that's something that's important to you. And so with this change, we've announced $1 billion share buyback to show you the strength we're placing behind this shift in our portfolio. So those are the three things that changed what is AGCO. But then inside of that, there's two other changes. One is something we call Project Reimagine. It's something we started about 2 years ago, and it was the notion of saying, some of these new modern tools, let's rewire how we do all the work inside the company. So we've automated a lot of our work, outsourced some of it and offshored other bits. When you put all that together, there's been 700 projects. Every one of those projects not only makes us more efficient at a lower cost but makes the outcome better. Something gets better for our dealers, better for our farmers or better for our employees. They have new features, longer coverage, something like that. When you add all those up, it's essentially a $200 million reduction in our cost base off of about a $1 billion start. So fundamental rewiring of the company. And that's been really important under these uncertain times with tariffs and everything else. And finally, the other big strategic element that come in together is FarmerCore. FarmerCore is a whole redesign of the distribution strategy. So for 100 years, we've had the farmer come to the business, come to a brick-and-mortar business. All of our competitors have done the same. We said, well, wait a minute. That's not how the farmer wants to interact. We want -- the farmer wants the business to come to them. And so that's what we did. We invested in digital tools, working with our dealers so that they can invest in service trucks instead of brick-and-mortar and have all the work done on the farm. We service not only our products, but all of the products on the farm, servicing the farmer, not the product. So those are the five big strategic shifts that we have been working on a number of years, and they're all coming together now to form the company that we we've wanted. Today I talked about our vision. Today, we're going to have that come to life -- today and tomorrow, we're going to have that come to life for you. We're going to have you understand we aim to be the most farmer-focused company in the industry. And so in order to do that, we often talk to farmers about what their pain points are. And that's what we're going to start off with you folks. We want you to be able to understand the pain points in farming because since we don't do this every day, we want to make sure that, that's our foundation. Those are challenging things that the farmer has to do that are either complicated or very difficult to do manually that a machine can do better. Then we want to show you how by putting a technology solution to that issue, not only are we helping the farmer and solving it, making them more productive. But we're helping AGCO because the value we generate for the farm turns into value generated for the company, higher margin, more sales, more stickiness. So we'll show you impact, pain points, solution benefit to the farmer and benefit to AGCO. We feel like we've really now, with the PTx investments that we've made, we are of a mindset that is unlike anything else in the marketplace. On the one hand, we are dedicated -- now we have dedicated teams to solutions all the way around the cropping cycle broader than anybody else in the industry. We start preplanting with water solutions, soil -- automated soil sampling and data analytics. We're the leader in planting. We know planting better than anybody else in the planet. Then it goes into fertilizing and crop care during -- managing the crop during its growing cycle and then harvesting. And at the center of this is our new FarmENGAGE data platform that takes data from the machine and from the farm all the way around that cropping cycle to help the farmer analyze and optimize their farm. The big thing that's different about FarmENGAGE is it does this for all brands. So it ingests data from any brand of equipment, helps the farmer analyze that and then deploys data to any brand of equipment. We're unique in that regard. And the bringing on of the Trimble group, what makes us the largest, most powerful, most successful mixed fleet precision ag business and team in the planet. So there's a couple of elements that we've kind of put together to make sure that we're differentiating our approach on solving farmer problems. The first one is we're designing for autonomy first. So this set of teams that's been working all around the cropping cycle, for those of you who have been around AGCO for a while, you've heard me talk about the fact that we're automating one feature after another. We've listed all of these pain points. We've got over 300 of them that were trying to automate for the farmer. Put that in autopilot mode and let the machine handle it itself. Well, as you automate a number of features, you can group them together and automate a full task. And once that's available, you can let the machine handle that task on its own without an operator involved. So we're working on that mindset of automating features on the path to autonomy so that we're thinking autonomy first. At the center is this mixed fleet data platform because these machines are generating data. We want to be able to have a great platform for the operator to interface with and the farmer to interface with. And then the other unique thing is our retrofit channel. Again, this is something that only AGCO is investing in. We have our machinery channel for these fantastic Fendt and Valtra and Massey Ferguson machines. But separate from that and unique to us is an entirely separate set of dealers that all they focus on is the retrofit solution for the mixed fleet for any -- putting new technology on any brand of equipment that's out there. So they don't sell combines or planters or tractors. They only sell technology. They are a group of individuals that understand agronomy, farmers' pain points and how technology can solve those things. It's a different makeup of background. It's a different makeup of channel to solve a different type of farmer problem. We're the only ones in the market that have that. And so those are our differentiating secret sauce elements. We've been talking a lot about our growth drivers. AGCO is clearly focused on growing our business, adding more value in the marketplace. We've been talking about three primary areas. Now Christoph got you fired up about the Fendt experience. That's where we're starting here today. Fendt has historically been a European tractor business, if we think way back. So the group of us said, let's change that. And let's make it not a European tractor business but a leader in the global full line of equipment. So two dimensions changed. On the first hand, innovation happened all the way around the cropping cycle to deliver a full set of solutions that Christoph talked about. And secondly, we've invested in the distribution channel, especially in North America and South America, to be able to have the best of the best experience, best of the best product and best of the best dealer experience wherever -- we want to make sure that the most demanding farmers, no matter where you are in the world, get the very best Fendt experience. We've grown significantly. So you see our track record over the past years, and we're on pace to achieve our target of $1.7 billion by 2029. The second one we're going to talk a lot about today is Precision Ag. I talked about our history. We've grown steadily. And we're well on track to delivering our $2.0 billion target by 2029. And the third one that we're going to talk about today is parts and service. Now parts, we're already the leader in what we call parts fill. When the customer comes to the counter and asks for a part, is it there? If the answer is yes, then we get a yes on parts fill. If the answer is no, it's no. We lead and it's not our data, it's Carlyle data. It's an independent third-party organization that measures us versus all our competitors. Year after year after year, we are absolutely the leader in parts fill. We want to continue to grow on that. That was our foundation. On top of that foundation is a shift from reactive, hey, something happened, now I need a part, to proactive. We're going to anticipate when the customer needs a part, either for maintenance or for repair. So the shift from reactive to proactive along with continued data analytics, having our analytics engines be able to anticipate what our dealers need to stock and what farmers will need to purchase, had us very confident in this growth up to $2.3 billion. So kind of keeping the messaging the same, the strategy is right down the middle of where we've been talking about year-over-year in terms of our growth drivers. So let's talk a little bit more about our Fendt business. We've been -- the innovation team at Fendt has been spinning very, very fast. I talked about the need to grow our portfolio from a fantastic best of the best tractor product line to the best of the best full product line, and they've been doing this over the last few years, so much so that a little over half of our innovations have been for the North and South America market 23 launches, 12 of them for North and South America. I want to talk a little bit then about the circles on the right side of the chart here. You can see the three regions from top to bottom and then how much the product covers that region on the left and how much the dealer covers the open territory on the right. So let's start at our bottom. This is our most mature market. We've got the full market covered with dealer coverage, 99%. And we cover 84% of the products that the farmers want. There's a few things like planters and tillage equipment that we don't provide. We think the market is well covered there. But we provide everything else. So that's the framework. Now as we move up, in South America, we've got 80% of the market covered in terms of territory but 96% of what the products needed by our farmers. And finally, in North America, 81% of the market covered in terms of geography and 79% of the products covered. So the point being here is we've gone from nearly 0 a few years ago in terms of product and market coverage to nearly full coverage of product end market. And in fact, the product portfolio we have is the product portfolio that we intend to have. We're very happy with the product coverage. We're going to continue to evolve in an iterative way now on market coverage. But our big focus is not so much filling in those last few points of open territory. It's about penetrating successfully the territory we already have. You can see visually here a picture of the significant amount of investment and delivery of products all the way around the cropping cycle over these past several years. It's been a constant flow. Christoph talked about the number of launches we're going to have at Agritechnica. That's just what happens from the Fendt team, every year lots of product coming out to satisfy new solutions. But you don't want to just hear this for me. I think it's much more powerful to hear from one of our customers. So I've got a couple of them that volunteered to talk to you today. [Presentation] Eric Hansotia: And the second customer. [Presentation] Eric Hansotia: So there you go. We had talked about 3 growth drivers. That covers our Fendt growth driver. We're going to cover 2 more now, precision agriculture and service parts. And with that, I'm going to invite Andrew up here to talk about our growth in PTX. No, I'm going to do service parts. Sorry. So service parts, let's talk about service parts. There's -- I talked about the importance of parts fill and the importance of moving from reactive to proactive. This is a little bit more of a financial look at the service parts business. The red line reflects our growth in service parts each year, and you see that every year, it's positive. Now sometimes a little bit less, some years a little bit more compared to the black line, which is machinery growth. And you can see that's much more volatile. That moves with the general ag market. And so what we like about the growth in our service parts business predominantly is we're serving farmers. But secondly, for our investors, it provides a smoothing element of less volatility, and it's about twice the margin of the rest of our business. So that's why we want to -- there's just everybody wins as we grow this part of our business. Historically, we've been at about 15%. Our target is to get to about 20% of sales. We're on track to do that this year. And you say, well, what's going to drive that? I've mentioned a couple of areas, having the right part at the right time, that's parts fill. We've been demonstrating that over the last several years, but we've been building on it with some of our AI tools. So these -- we look at an installed fleet of machines out in the marketplace, and we say, what should a dealer stock to make sure that they've got just the optimal set of parts to make sure that they can serve the customer? So using machine learning models to be able to do really good recommendations to our dealers, it's called dealer managed inventory. More and more of our dealers sign up for that. We've got almost all of them on that now. And what they tell us is their part stock actually goes down but their parts sales go up. They're not investing in the wrong parts. They're investing in the right parts and they're making sure that they've got what they need. We've also been significantly investing in just the infrastructure of our parts business. I visited our parts business here a few months ago, and we're building out huge -- just did groundbreaking on a huge new parts warehouse in France. That's going to be the hub to serve not only predominantly the European market, but also a hub that supports our other markets as well. Also a lot of other automation and infrastructure in terms of $12 million investment there. And we've been investing in reman in Europe and in South America. Reman is essentially taking a component that's been used taking it back to a facility, refurbishing it and then being able to sell it to a farmer at a reduced price. It's fully upgraded to capabilities, but it's at a lower price point. And as farmers are putting more and more hours on their machines, reman is a bigger and bigger solution for them, especially in the higher locations of South America. And then finally is just more on-farm capabilities. As we're remotely monitoring the machine, we want to be able to anticipate, hey, we see you coming up on a service interval for maintenance. Why don't we help you order all the parts? Or we see -- through proactive alerts, we can see when there's air codes coming off the machine and say, we think that there's a component that's going to fail. Why don't we replace it before the failure? Those kind of proactive solutions are what's really helping our dealers grow their business but our farmers stay in the field more consistently. And now I've covered two of the three, we're going to turn it over to Andrew to cover the third on Precision Ag. Andrew Sunderman: Very good. Well, good morning, and good to be with everybody. If you're like me, there's no more exciting place than to be here in Marktoberdorf Germany to see the heart of the Fendt brand. And so I'm excited for you to experience the products and see the factory later today. As Eric mentioned, my name is Andrew Sunderman. And over the last 18 months, I've had the privilege of sharing our PTx strategy with you and providing you updates as we progressed on this journey. And this morning, I hope to do the same thing. As I get going though, I think it's important that we take a step back and really understand why we have the strategy that we have. This is a unique strategy that we have at AGCO and for PTx. And so it's important to understand how these growth drivers allow us to really deliver on what we've committed to in these strong growth aspirations. But PTx is centered around the customer, and so I want to start right there with the farmer. If we look at the bottom of the right-hand of this slide, you'll see the three things that really make our retrofit first strategy a key enabler for our growers. We focus on raising farmer profitability by solving some of their most challenging problems and doing so in a way that provides a fast return on their investment. We focus on driving sustainability, doing more with the resources and inputs that they have, driving higher yields, providing that return that our customers know is needed for a more profitable operation. And we really focus on how our farmers can continue to build off of the products one after the other that we allow them to incrementalize their investments, building the strongest precision ag and equipment portfolio for their operation, again, improving the efficiency and profitability better than any company out there. But it's not just about what we deliver for our customers. It also presents new opportunities for us as AGCO and for our dealers. We're able to increase our addressable market through our retrofit first approach, solving needs for both new equipment as well as the existing pieces of machinery that farmers have in their operations today. We're enabled to enhance our speed to market, delivering these solutions in a faster way that allows us to grow and demonstrate the abilities of these technologies year after year, becoming more mature and more advanced in our reliability of our product offering. And it also allows us to accelerate our overall precision adoption as we can get these products into the hands of farmers faster and allow them to improve their operations in a more meaningful way. Now we've talked about a couple of times how PTx is really serving as the backbone of AGCO's technology offering. But this isn't just through our retrofit offering of our PTx Trimble and Precision Planning products. These also serve as the backbone of the technology offerings for our Fendt, Massey Ferguson and Valtra brands as well as over 100 OEM customers, some of which will be with us here on Thursday to experience many of the same technology products that you'll see in the field tomorrow. So speaking about distribution, let's talk about this channel transformation that we've been undergoing for the past 18 months. Our PTx distribution strategy is built around the industry's only dedicated precision ag dealer network. Think about that, a group of dedicated dealers that are experts in the field of precision agriculture connecting with the needs of farmers, connecting with the needs of farmers to the technology solutions available from PTx. This is a unique part that really will enable the growth of PTx. Now we do this through two strong types of dealers. First is our PTx Elite dealer network, our dedicated precision ag dealers that are unmatched when it comes to matching the needs of customers' problems with the technologies that we offer and supporting precision ag technologies to keep farmers up and running in their most desperate times. These elite dealers have grown significantly since the start of PTx, and we still have a long way to go this year as, in 2025, we'll double our coverage of our PTx Elite dealers this year. But our PTx Elite dealers are complemented by a broad number of base technology dealers. Now our base technology dealers are oftentimes equipment dealers that utilize technology to enhance their existing -- their customers' existing machines or improve the capabilities of the machines that they deliver to new customers. Our base technology dealers are oftentimes made up of Fendt, Massey Ferguson and Valtra dealers as well as other OEM dealers, specifically those that carry case and new hauling equipment. This year alone, we've added more than 250 Fendt, Massey Ferguson and Valtra dealers as PTx-based dealers, improving our coverage and the availability of PTx products to dealers around the world. But as we've talked about, our strategy isn't just about serving customers through our dealer network, but also for those customers that look to purchase PTx technology on a new piece of machinery. We are the proud provider of technology to more than 100 OEM customers around the world and throughout the crop cycle. These OEMs look to PTx as their source for precision ag technologies to bring new enhancements and new capabilities to machinery from guidance and steering systems on tractors to planting solutions, seeding solutions as well as harvesting solutions. These two key levers from our distribution strategy really allow us to grow our market expansion and globalize this product portfolio that we have come to develop over many years. So speaking of product development, we've had a very fast-paced year all around innovation. When we set out on this journey, we were bringing to market on average 2 to 3 new products to the market in any given year. We then said we think we could be faster. We think we can be better, and we think we can deliver more value to customers. And so we set our targets on 5 new products to market in 1 year. This year, I'm excited to announce that we will deliver 11 new products to market from our PTx Trimble and Precision Planning brands that all provide clear return on investment and clear profitability improvements for our customers. Some of the products that I'd like to highlight are rooted in our Radicle Agronomics platform, transforming the way of nutrient management, bringing better data and insights into a decades old process; our OutRun autonomy product that you'll be able to see in the field tomorrow, which is revolutionizing the agriculture industry by allowing tasks to be completed in a fully autonomous manner; as Eric talked about, FarmENGAGE, which is connecting the mixed fleets, allowing our farmers to plan, monitor and analyze all aspects of their farming operation through one digital platform that I'll talk about more later; and our Symphony product, a new line of -- a completely new line of liquid application tools for sprayers around the world. These four product categories completely transform the PTx business and provide new platforms for us to develop on top of not just today, but for many years into the future. But these products provide more than just a benefit to our farmers. They also provide us to enable -- or they also enable us to have new revenue streams for us as a business, things such as recurring revenue models that we have implemented with our correction services, our OutRun autonomy products, FarmENGAGE, Panorama and Radicle, allow us to serve farmers in new ways that allow us to fit their buying preferences today and well into the future. As I talked about, one of our key products that we've launched this year is our FarmENGAGE data platform. Now this is a product that we've talked to you about many times before and it's something that we have been executing on our strategy on since late in 2024. For those of you that were able to join us at this year's Farm Progress Show, this product was launched to the global markets at the North America Farm Progress Show and really delivered on the first phase of our strategy. This first phase was all about connecting our platforms and connecting machines through one dedicated precision ag tool. We're able to provide common login, common user interface and really provide a way of enabling farmers to get their data into the hands of their trusted advisers through our connectivity center product offering. As we look forward to this year, we'll be adding a completely new set of capabilities to our FarmENGAGE product portfolio as we consolidate features from across both the task data management, the agronomic data management and now the machine data management all into one consolidated platform that we call FarmENGAGE. As we look to the future in our Phase 3, we'll bring this all together under a new unified look and feel that makes sure that farmers have all of the data at the tips of their fingers to better utilize this in their planning, monitoring and analyzing of their farming operations. This is something that as we've launched this to farmers, farmers have certainly seen the benefit of our differentiated approach that focuses on connecting any brand of machine in the farming operation, not just the brand of machinery that they purchase from their dealer. So we've talked about our channel strategy. We've talked about our product offering, but I want to talk a little bit about the markets that we're serving. As we look at our precision ag uptake and adoption across these various markets, not only do our channel strategy and our product offering give us the confidence to deliver on our growth aspirations, but so does the markets that we serve. As you look across the graph on the side of the slide here, you'll see there's a varying range of adoption of precision ag products across the varying regions. Europe and North America represent fairly mature markets for core precision ag products such as guidance and steering systems. But we have great opportunities in terms of how we control implements for the better use of the inputs and the outcomes from a yield standpoint that we look to offer, in Europe specifically, around our better control of chemical application and seeds presents us a great opportunity with our Precision Planting product portfolio. North America is oftentimes the tip of the spear for PTx in introducing new product innovations as we look across our nutrient management portfolio and our autonomy offering with OutRun. But also connected with our Fendt product portfolio, we now have the pairing of the most innovative tractor brand in the world together with the world's most innovative technology brand in the world. As we move to South America, we really have a great frontier of growing our PTx business and our Fendt, Massey Ferguson and Valtra brands. Together, these technology offerings, paired with a strong machinery product offering, allow us to engage with farmers in new ways, building off of a more localized expertise with our local manufacturing paired with technology that is designed specifically for the needs of South American markets, focusing on soybeans, sugarcane and many other local crops. But what's really driving, especially for our North America and South America markets, is not just the product offering, but also the way in which we bring these technology solutions to market with our FarmerCore initiative that Eric talked about a little bit earlier. Our FarmerCore initiatives allows us to meet farmers at where they are in their farming operation, bringing our technology solutions and machinery solutions directly to their farm for more localized on-farm support. These growth drivers will really allow PTx and AGCO to deliver on the growth aspirations and improve these technology adoptions, especially in these markets that are underserved today. Now we've talked a lot about many of our products, and we've shown you OutRun many times before. But I want to just highlight one video here with our OutRun product and how we're bringing autonomous capabilities to really transform agriculture in a way that is not only more accurate, but allows farmers to better utilize the labor and the resource pool that they have accessible in their market. So let's watch a quick video. [Presentation] Andrew Sunderman: Great. Well, I'm excited about the future of agriculture with products such as OutRun. And I hope that you'll see tomorrow and in many of our other events just what autonomy can mean for the future of agriculture. With that, I'm going to go ahead and hand it back to Eric to talk about how AI is transforming AGCO and agriculture. Eric Hansotia: Very good. Great job, Andrew. So you can see with all of the things going on and the track record we've already developed in PTx, we're very confident in the future of our differentiated approach delivering fantastic results for farmers and our investors. But with AI being such an important tool, we also wanted to just touch real quickly on the fact of where we're applying AI. It shows up in our product, it shows up in our business, and it also shows up directly with our customers. So with our business, we have got this thing called AI farmer. It essentially ingests all of the data from either industry sources or whenever we go visit a farmer and puts that into a data library. Then you can use essentially a large language model targeted right at that data set for engineers and other people to query that data and ask the data set about what features farmers would prefer and how they want to interface with machines where they're going with their business. So it's a great way to collect a lot of complicated information and help our engineers get more targeted solutions. In terms of development, our software engineers are using AI copilots to help create software much more fast and allow them to spend more time on innovation, get the base software from AI and then develop the innovation part on top of that. In terms of our products, Andrew talked about a couple of them, the precision planting SymphonyVision. That's the camera system that looks down at the crop, looks at 75 images and processes them per minute and identifies the difference between a weed or the plant and then directs the command to the nozzle to spray only the weed, saving about 70% of the chemical. And then our grain quality camera in our combine, constant looking those images, helping the combine self-adjust to make sure it's doing a perfect job of a clean green sample with little damage. And then similar to some other industries, we're also using AI in our customer support. And you think about all these machines that Christoph showed over all this time horizon, and someone calls it and say, I've got this model of machine with this certain issue. And the customer support first thing to do is to look, find the manual and the diagnostic then the repair then the parts. Now AI can just serve that up to the support person and speed that issue up, but also start handling a lot of these issues automatically. So AI is essentially working its way through the entire company. We want to be a frontier firm in terms of the use of AI. I've already covered that. We talk a little bit about the technology stations on the farm. You're going to see real-time machines that are doing everything that we talked about here today, all the way around the cropping cycle. There's going to be 5 stations for you to really witness firsthand. There's going to be a plan and prep stage where you're going to see autonomous tillage and then also another side of autonomous fertilizer application, where there's nobody in the tractor, the tractor gets driven to the field and then it figures out its optimal path and does the job without anybody in it. Second station will be about the most automated planter on the planet, and that's precision planting. We just know planting better than anybody else. So you'll see all of the automated features in terms of depth and seed spacing and hybrid and fertilizer treatment. And all of the things that the planter can do all on its own to make sure it's doing a perfect job in every spot on the field. Third one is going to be about crop protection. This is one I talked about, vision systems that can identify the weed and save 70% of the chemical. And finally, is the harvesting solution where you'll see the autonomous grain cart in operation. And at the center of this is going to be a station fully dedicated to FarmENGAGE. We'll talk about FarmENGAGE just outside the room. You'll see that action in the field, being able to design a task, send it to the machine, have the machine operate according to that task and then send as applied back to the farm data management system. So we'll be able to see a lot of this. Each station we'll be able to see the impact to the farm, what challenging issues were solved and what the impact was to the farmer. You add these all up and it's essentially a 17% gain in productivity or profitability for the farmer. It builds, you'll see, every bit of our tech stack in action, autonomy, automation, logistics, connectivity, guidance and sensing, all in real life. So with that, we've presented kind of the coverage of our three growth platforms, a deep dive on each one of them. We'd like to open up for any questions that you may have of us. Greg Peterson: And since we're webcasting, please wait for the microphone to get to you so the folks listening can hear the question, over there. Unknown Analyst: So one of your slides, I'm sure you saw this coming, but one of your slides, you talked about recurring revenue and various types of subscriptions and so forth. So I'm curious if you've evolved your thinking about how big an opportunity that can be for AGCO, and maybe you can add where you're starting from now. Eric Hansotia: Yes. So inherently, farmers in general has historically not liked subscriptions because they want to buy a machine when they have profitability and not buy a machine when they don't. But they're willing to do subscriptions in things that are evolving over time, where they can see the item gets better each year through over-the-air software upgrade. So FarmENGAGE is like that. Our soil sampling data is like that. Our autonomy kits are like that. So as you saw several of these solutions coming to market that behave that way for the farmer, we think that a subscription model is probably going to be one that they're going to prefer. So that's growing in its importance. Those are all still kind of at the bottom of the S curve, but we think it's going to be a meaningful portion of our business, several points of our overall business, but we haven't set a target exactly yet in terms of what it will be. But we think it's growing. Unknown Analyst: In one of your slides, you highlight mixed fleet data connectivity and the ability to gather data from some of your competitors. I think it was the last point in terms of those developments. Can you just talk about potential resistance from that kind of connectivity and what you're doing to counter that resistance? Eric Hansotia: Yes. We've got full access to the data availability of our main competitor machines. We don't see any resistance showing up there yet, and there's a big thirst from our customers because most of our customers have a mixed set of equipment on the farm, either multiple brands or multiple ages of equipment. And so this allows us to connect their entire fleet of equipment. Some customers -- some data platforms will ingest more than one brand, but essentially none of them send data back out to more than one brand. So this is the only two-directional mixed fleet data platform in the market and our farmers are very, very excited about this. So we think it's a big differentiator for us and a big help for our farmers. Kristen? Kristen Owen: I wanted to ask a little bit about the FarmENGAGE platform and sort of your goal for that is. Is that just table stakes? We see that this exists in the market, and so we have to have a solution. Or is there something else in terms of engagement or sort of getting deeper into the brands that, that platform serves for you guys? Eric Hansotia: Well, at first, I would say it's becoming a larger and larger value statement in terms of the buying behavior of our customers. They've loved our machines, but they say, but how good is your data platform? Those two things have to go together. And the importance of the data platform has been going up and up and up as these machines generate more and more data and the farmers become larger and larger. So we knew we had to be a leader, to be -- if we're going to be a leader in precision ag and smart machines, we had to be a leader in data platform. Of course, we're going to make it a mixed fleet data platform because that's our strategy for all of our precision ag business. And so it puts grease in the gears of our existing business, but we're also confident that it's going to open up new doors. We're going to sell this as its own subscription model to those farmers that don't have any of our equipment yet today. So it will open up doors to other farmers that we haven't served yet. We think that the value we're going to generate with this mixed data platform will be an entry point for us to be able to engage with new farmers that then opens a door to other solutions. Unknown Analyst: The penetration slide you showed, technology penetration, how much of that is the result of farm size versus resistance? What's driving and also meaning availability of products to serve the unique needs of the farmers in those individual regions? Eric Hansotia: Yes. So the -- I think that was the one -- you're referring to the one that Andrew covered, different penetration by region. It's a little bit of a mix. The farm size certainly helps because as you buy a module that costs, $25,000, let's say, the larger the farm you have, the more acres you're able to -- you get a faster ROI. So farm size consolidation, and consolidation is happening in every region, so that helps. But then there's just also how hungry is the farmer for improvement. And especially those areas where there hasn't been a lot -- there's two drivers of that. Either regulation forces it or lack of subsidies requires it. So in those markets where there's not as much subsidies, the farmers are exposed to the raw market and they just have to get more productive to be able to stay viable. In some of the more highly regulated markets, the regulations are pushing farmers saying, you have to do farming with less inputs. And so they figure, well, okay, I got to use technology to be able to still get good outcomes with less input. So those are the two main drivers, regulation and necessity because of less subsidies. Unknown Analyst: Just following on from that question. In terms of the 17% increase in farm profitability as a result of these measures. How has that trended over the last 2 years, given the difference in financing costs and everything else? And how would that differ between the different regions given the different types of sizes and farms? Eric Hansotia: We alternate between North America and Europe each year with our tech demos. And essentially, what we want to sell is those products are either in the market or will be soon. So that's one element. Those are all real life solutions. They're not science fair projects. They're also shown to those kind of results are for a typical farm in the area we are. So the results we're showing there, although they can be used everywhere else, they're showing up for a typical farm in Germany. We'll do the same thing when we're in the U.S. for a typical farm in the U.S. So those numbers you can kind of anchor into a farm size. We talked about hectares for acres. That was a little over, I think it was like 3,200 acres. That gives you a size of how big that farm operation is and the kind of returns that, that kind of a farmer would expect. Unknown Analyst: So you guys talked about the distribution transformation that's been underway for the last like 18 months or so. So I was wondering if you could unpack that a little bit more, what additional work do you need to do. Where -- I think you talked about three different kind of verticals with three different channels. Where is the biggest growth opportunity? And what are some of the KPIs that you are using to measure progress there? Eric Hansotia: And you're talking about PTx specifically? Or are you talking about FarmerCore? Unknown Analyst: PTx data. Eric Hansotia: I'm going to have Andrew take that one. Andrew Sunderman: Sure. Okay. So a question around distribution, so as we look at what's a key growth driver for that, I would say the first major unlock is our PTx Elite dealer network. So this is -- our elite dealer network refers to our dealers that once we're selling either only Precision Planting or only PTx Trimble products, that we are now working to say we want to build a dedicated network of dealers that sell both PTx Trimble and Precision Planting products. If we look at what that means, the Precision Planting network has been historically very strong in North America. The PTx Trimble dealer network has historically been very strong in Europe. And so by cross-activating, as we call it, these dealers, we increase our coverage of PTx Trimble products in North America and increase our coverage of Precision Planting right away in Europe. One of the -- certainly, from a metric standpoint, there's a couple of things we look at. One of those is coverage, although coverage says how many customers can we touch. But the more important metric that we measure our channel based off of is penetration. And so we want to make sure that our dealers are serving farmers in the markets that they are in and doing so in a very proficient way. When we look at that addressable market that I talked about, the addressable market isn't just a number of new machines sold, it's all machines in their local markets. And so making sure and supporting our dealers to make sure that we're walking on the farms, even though it may not be selling a new machine, is really important for that dedicated precision ag channel that we call our elite dealers. Does that answer your question? Great. Eric Hansotia: And maybe just to add a couple of numbers to that. If you take a look at -- like Andrew said, we had essentially two different networks coming together to form PTx overall. If you say, can a farmer get access to both product lines today, even if they have to go to two separate dealers, maybe we have over 90% coverage in all the regions except for South America and it's about 85% coverage in South America, meaning the farmer has now access to the full portfolio. What we're working on now is melting those two channels together into one full line channel, which is what Andrew talked about. And so that's the evolution of -- that's our next -- first metric was coverage. Next metric is now elite dealer penetration. What else? Question back here. Unknown Analyst: This isn't a technology question so I apologize for this. This level of subsidization in Europe, I mean, the stability given diversification, et cetera, is really remarkable and a real asset to your business. Do you worry about the risk that's being created by subsidies with -- is it caught up in some of these trade spats that are happening? How do you think about it? Eric Hansotia: I don't think it's so much caught up in the trade disputes going on. But I do -- we do have a close eye on it relative to affordability of that subsidy as it relates to Europe spending more on military defense. I think that's probably the bigger issue, that as Europe is making choices to increase the amount of spending they're doing on military, that has to come from somewhere. And there's some debate about what the impact may be on what's called CAP, the common agriculture policy that governs the subsidies in Europe. So we're watching that. The farmers have a huge powerful lobby in Europe. And so there's been attempts to change the diesel subsidies or change some of the impacts on use of pesticide and fertilizer. Those have met with a lot of resistance with farmers and the regulatory bodies have pulled back. So I think there's a good tension in the system to make sure we find the right balance, but that's probably the thing to watch more than a trade impact. Kristen, anything else you'd say? Okay. Kristen Owen: I also want to ask a little bit about distribution or more specifically, sort of bringing the Precision Planting technologies here to Europe, knowing that Trimble had sort of a legacy distribution channel here. How ready is that Precision Planting portfolio to bring to Europe given different crop types, different size of machines, et cetera? How should we think about that migration of Precision Planting now into the European Trimble channel? Eric Hansotia: Yes. So if you start the foundation, I'll have Andrew jump in here, but I'll get a start on it. About 5 years ago, something like that, we started installing a European base for Precision Planting. So we started doing field trials just like many of you who have been to our PTI farm in Illinois where we do about 200 trials a year on a 400-acre farm, we set up multiple farms all the way from France to Ukraine and did farming in Europe under European conditions to see side by side how does this technology compare to the competitors here. Because there's some different companies that compete here. So gathered a foundation of agronomic data, which is the foundation of everything that we do in PTx, so that's been established. Then secondly was to be able to create retrofit kit adaptations to the planters that are in the marketplace, so HORSCH and Vaderstad and Kinze and some of the brands that you see here that you don't necessarily see so much in North America. That was step two. Step three was establishing a dealer network. We are on our way. That got significantly accelerated with PTx Trimble. So those are the three ingredients that needed to come together. The last step now is to add what's called ISO bus compatibility to the technology. It makes it easier to interface with a lot of the European farming operations. That's in process. So those are kind of the four key ingredients, Andrew, anything else that I missed? Andrew Sunderman: Just the one that I would add is also solutions around the crop cycle. So as we look at the Precision Planting business, historically, that has been almost 100% rooted in planting technologies. As we've moved throughout the crop cycle, really focusing on Europe as well, having the seeding solutions, fertilizer application solutions and bringing to market our spraying solutions really now complement that product portfolio where we know that the planter market is not as large in Europe as what it is in North America. Eric Hansotia: Great add. Steve? Stephen Volkmann: Since we have you on a webcast, wonder if you might want to make any commentary about thoughts about where we are in the cycle, what '26 might look like. Just any comments in that area. Eric Hansotia: Yes. No, thank you for that question. Yes, I love this question. So in reality, I would say that in the 3 of the 4 markets, we still feel about where we did, Europe, North America -- Europe, South America and Asia. In North America, we've already said that it's probably the most wide range forecast situation we've had maybe ever. And as we look into the data and the behavior of our farmers, the sentiment index, boards, all those kind of things, the likelihood of us having a down year next year are increasing. So previously, you've heard me say we're probably going to see a recovery, an up year in all four markets. That's under pressure in North America. And I think there's a higher likelihood -- we haven't come out with specific guidance yet, but there's a higher likelihood that it will be a small down next year compared to and up next year. Just fundamental uncertainty is very strong right now. And the farmers, there's -- with the U.S. potentially supporting, Argentina in a bailout, that's got the North America farmers very upset because Argentina is now the supplier of soybeans to China. So there's just a lot of dimensions to this topic and has the U.S. farmer on hold. Greg Peterson: Time for one more. Unknown Analyst: On autonomy, what do you anticipate a farm looks like in 10 years and 15 years? And what is the journey to autonomy look like in terms of when does the farmer ultimately step off the field figuratively speaking? Eric Hansotia: I think they're going to start stepping off the field this year. So we're selling autonomous kits for harvesting and we're going to be -- you'll see them in tillage right behind that. So there's this intersection of technologically what can we automate. I talked about we have to automate all of those features, and you get a batch of features, then you can automate the task. But the other intersection is where can farmers trust us or trust the operation, trust the solution to step away from it? And so we've said we've got the most automated planter in the industry. It pretty much does everything on its own. So the technology piece is high, but the farmers' willingness to actually step away from planting and not be right there watching it all happen is still low. Because if you get planting wrong, there's nothing else in the cropping cycle that can make up for it. So it's -- we're watching for the intersection of those two things. But we've got the sequencing such that we said we're going to automate an element of all the way around the cropping cycle by 2030, and we're still committed to doing that. So we think as like guidance happened, once you, like, well, I don't know if I really need guidance. I get in an experience like I'm never going away from this. That's what farmers reaction has been to our autonomy kits. They see it in the harvesting application like, I'm not sure. Then they get in. And they're like this is fantastic. Why would I ever do it any other way? We think the same thing will happen with tillage. And then one after another, there will be -- the confidence will rise and rise and say, this just works. And it takes away a complicated task. So I can be doing something else. So I think if your question was 5 or 10 years from now, I think many of the more progressive farmers are going to having many of their tasks automated. Now they may still do certain applications and there's many different tasks on the farm. So I think there'll still be interaction, but this is going to grow, I think, steadily over the next few years. Greg Peterson: Thank you, Eric. Eric Hansotia: Thank you, everybody, for your engagement. We sure appreciate all that you've done and coming over here with us and hearing our story. But we're really excited to show you the factory and the field operations. Thanks, everybody. Greg Peterson: Great. For those joining us on the webcast, thank you very much for your attention, and that concludes our program for this morning. Thank you.
David Guengant: Head of IR of Solaria. I'm joined today by Arturo Diaz-Tejeiro Larranaga, our Chief Executive Officer. During this call, we'll discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. During this presentation, we'll begin with an overview of the results and main highlights and main development during this period given by our CEO, Arturo. Following this, we will move on to the Q&A session. I would also like to highlight that you have to submit all your questions via the web. So thank you very much again, and I will now hand over the word to Arturo. Jose Arturo Diaz-Tejeiro Larranaga: Thank you, David, and thank you to everyone joining this conference call. Like always, I will move extremely fast on the slides and the presentation, and we will go to the Q&A part session. And of course, in first half 2025, we have increased significantly exponentially our net profits. We have grown close to 100%. That is a record in the history of the company. And we have installed -- this is something significant because you know that during the last 2 years, we have done enormous efforts in order to connect new installations. We have connected during this quarter 300 megawatts. That is one of our key targets for this year, and we have connected during this quarter 300 megawatts. From an operational point of view, our business is running great because we closed, as you know, during this first half, a great deal with Stonepeak for Generia. And our infrastructure business is running great, and we have good numbers in this quarter that comes from our infrastructure division and generation is going in a good situation even with the low price situation that we are living in Spain. But we maintain same level if you compare first half with -- last year, we maintained the same level of generation. That is good because we haven't included new assets during the first half. The good point is that finally, we have connected 300 megawatts. And hopefully, during this quarter and next quarter, we are going to complete 3 gigawatts of capacity constructed and connected to the grid that it will be a great successful for the company. Points or key points of this presentation. And all the market is talking about batteries and new business that is growing in Europe, especially in Spain around batteries. Solar absolutely will be there. And during our Investor Day, we will give great -- we will give our business update about batteries business. And my comment about batteries is we are the key player today in Spain with batteries under construction that will be connected to the grid during October. For our Investor Day, we will have batteries connected to the grid. This is a great successful for the company because we will be able to play the game of battery in Spain and with high volume of batteries connected to the grid. And we will talk about our new division of data center during the Investor Day. And it's something that we are extremely exciting around data center business and the growth of this business. Today, first half presentation numbers in order to go directly to the numbers, growth, 3 gigawatts installed that we will finish for the end of this year. We are going to finish this year with 3 gigawatts of capacity connected to the grid. It's a great successful probably from volume point of view, Solaria will be the leader from volume point of view in the Iberian region of solar photovoltaic technology connected to the grid, 3 gigawatts, 3,000 megawatts connected to the grid. Under construction. Today, we have around 4.4 gigawatts of capacity connected to the grid or under construction. We have added new developments to our under construction pipeline. Oliva, Mantia, Villaviciosa, large installations that will be constructed during 2025, 2026 and 2027 and that will add 1.4 gigawatts of additional capacity during 2026 and first half of 2027. It's significant because it's an enormous volume of megawatts that includes not only solar, include BESS, include batteries, that jointly it's a great combination from business point of view, solar with batteries that will optimize price of electricity. Batteries, as I have mentioned, 3 important points around battery business. I could say like in the solar technology that solar probably is the best-in-class from a CapEx perspective, EUR 75,000 per megawatt hour, all connected. That is a record from a CapEx perspective view. And as I have mentioned, during October, we are going to connect our first battery to the grid. And for the Investor Day, we will have batteries functioning connected to the grid, and it's a great successful for us. It's something that changed completely our history because we are going to optimize the price of electricity. We could entry at night or in the afternoon with the situation, especially in Spain, high price of electricity in the afternoon, at night, and we could obtain enormous profits associated to these batteries. We are going to install more, absolutely. We are going to invest more in batteries. We are developing enormous volume of batteries globally in Spain, not only in Spain, we have included in this presentation slides associated with Italy, Germany, with the United Kingdom, but obviously focusing in Spain. We have an enormous volume of megawatts per hour of batteries that will entry during 2025, 2026. And we will be the leader in the short term in batteries in Spain. And this is extremely important short term. Battery is a great business today. We need to use this opportunity and timing is critical. You need to be the first and you need to be the most efficient. Not only batteries, wind, data center, the global business plan of Solaria, the global idea of Solaria is a global energy player that supply solar electricity, wind electricity that has demand that comes from data centers and that has demand that comes from batteries. And it's a global solution for customers that includes technology of generation and technologies of demand. And globally, in Europe, not only in Spain, focused in several countries of Europe, Spain, Italy, Portugal, Germany, United Kingdom. Generia. You know that 2 years ago, it sounds like a dream, Generia land company. Today, it's a real company that is functioning, and that will give to all of our shareholders strong successfuls because as you know, we have got a great agreement with Stonepeak. It's functioning. We are developing the pipeline of Generia. We are executing, and we are closing acquisition of land. It's the beginning. Obviously, the plan is extremely ambitious. And during 2025, 2026, 2027, you will see a lot of deals associated with Generia. Obviously, if you want to construct all of these assets, if you want to construct new batteries, new data centers or whatever you need financing, good financing terms. This is a good example like all the quarters we show to the market that we have a strong capacity to raise money, to raise project finance debt with our banks and partners. We have closed -- presently, we have closed a new deal with Sabadell Bank, 175 megawatts of solar PV capacity. The key points of this deal is probably 22 years, close to EUR 100 million of debt. That is a global CapEx of EUR 0.50 something and link with 70 megawatts PPA data center project. We will extend and we will give more information during the Investor Day. But in all case, this is something signed, real and that is functioning now, and we have under construction today the project associated with this deal. Europe, we have included several slides because usually people say solar is extremely focused in Spain. You are not out of Spain. It's not the truth. Spain today is obviously our key market in Europe, but we don't forget other countries that are critical for us, that are going to grow around batteries, data center, solar and wind. Italy. In Italy, we have made a strong effort during the last years. And I think that today, we have a really good pipeline. Hopefully, before the end of this year, we will receive final authorization for close to 1 gigawatt. That is a great successful because to start with 1 gigawatt will be great for us. It's a diversification of our business. In my mind, the perfect photo for the company should be to stay in Spain with global volume, but to maintain good volume in Italy, in Portugal, in Germany and to install generation in these 3 countries, in Italy, Portugal and Germany. And the Italian business is in a good situation today. Probably, as I have explained for the full year's presentation, we will give an update with 1 gigawatt ready to start with the construction. And it's great. At the same time, we are developing batteries, we are developing data center. And Germany. Germany is the same. In Germany, we are more focused in generation, especially in solar and some applications of wind, but especially in solar, is the beginning. We have a good amount of megawatts. It's in my mind, it's easier than Italy or Spain. It's different market, really professional, really mature market. And I think that in the past, we had a strong successful in solar in Germany, and we are going to replicate. And today, we have more than 500 megawatts in a good situation, fully authorized, and we will start construction soon, probably in 2026. Portugal. Portugal, this is a real global project. As you know, we have assets functioning today in Portugal. We have done several projects in the last years in Portugal with great successful. In Portugal, we have fully authorized a global project with close to 500 megawatts of solar and 200 -- close to 200 megawatts of wind. We are waiting for the final substation that should be done or that is depends of government -- of the national agency and depends of government. Hopefully, we could start with the construction in 2027. From permitting process point of view, it's fully complete. The key point here is that we depend on the connection infrastructure that should be constructed by . And I think that 2027, it's conservative schedule for starting with the construction. U.K. In U.K., we are not going to be involved in generation. We are going to be involved in other activities, other activities. Today, we are only talking about batteries, and we are only talking about data center. But I talk about other activities, and I'm not including here all the activities that we are working on in United Kingdom. Not in generation, we are not going to stay involved in generation. We are interested in other activities that we will explain to the market. Numbers I have mentioned, and I will move extremely fast. EBITDA, record of EBITDA, EUR 140 million. In order to give additional information to the market. As you remember, we gave a guideline for the year of EUR 245 million, EUR 255 million for the end of this year of EBITDA. I can say that we are extremely comfortable with this number. What does it mean? We have strong visibility that we are going to accomplish with the guideline of EBITDA for 2025. During the Investor Day, the 17th of November, we will give guideline for next years and the global business plan for next year. Production, we maintained levels of production. As I have explained at the beginning, we have maintained similar numbers from a generation point of view. Small reduction on production associated with less than radiation, especially in the first half of this year. I can say that the third quarter was good from radiation point of view on price is good. And especially second quarter of this year was not good from radiation point of view, small decrease associated with this solar radiation. Average selling price, even I could say -- I can say that it's better if you compare first half 2024, first half 2025. Contracted merchant, 75% today is contracted, 25% is merchant. And as we have explained, and it's not a surprise, we are going to maintain this mix and we are going to sign additional PPA contracts. And we are going to maintain this proportion of 75 -- sorry, contracted 25% merchants. EBITDA continues growing and is affected by 3 different activities by Infra business, by generation, by Generia. And I can say that as I have explained at the beginning, it's around 1/3 per activity. And it's -- all the activities are functioning great. Why I'm saying this because I have visibility of third quarter and I think numbers are functioning great. And as I have said previously, we have extremely high level of comfort of our guideline of EBITDA. Cash, we maintain the same level of cash like always. As you know, we are not rich, but we continue making strong investments, and we maintain our discipline around CapEx. That is one of the key points of our strategy. We have a global CapEx of less than EUR 0.38 per watt. That is probably best-in-class. And in my mind, we are going to improve in the next quarters. I think that probably for the first quarter of 2026, we will achieve a record in CapEx. When I talk about record, I think that number is going to surprise to the market, but we are going to improve a lot even our CapEx. And this is critical for us because, as you know, we are covering all of our CapEx with project finance. And this is critical for us to be effective, not only in the construction of solar installation in batteries, in wind, in all of our applications. And of course, EBITDA evolution is great. If you compare the last 5 years, it's impressive. It's not as we want to get because we want more, much more. We want to grow more. We want to be the leader. And unfortunately, during the last 2 years, we had delays in the construction. The good point today is that we are in the good moment, connecting megawatts, and we are going to finish with all the megawatts under construction connected to the grid, and it's great. And it's part of our guideline of last year, and we are going to accomplish. Solaria transformation plan sounds ambitious, but we are ambitious as always. And in November 17, we will present to the market our view about data center, batteries, where we are, where we'll be and what we are going to do for financing all, and it will be extremely interesting. You know Solaria today is a key player in Europe, focused on solar, wind, data center and batteries, and we will try to explain our global view of the market and where we are going to stay the next 3 years and where will be the company in the next 3 years. And before to entering the Q&A session, in order to give more information, we will be focused in the remuneration of the shareholders. We think that is something that we need to improve, and we need to stay focused there. We will continue acquiring shares. And as you know, in the first quarter, we have announced a program -- share buyback program. And we have today 2% of the shares of the company, and we are going to continue with the acquisition of shares at least until 10%. And we are going to maintain this discipline, and we are going to execute. And at the same time and in order to be fair with the market, understand this comment, but probably company in the next days could sign contracts, impressive contracts that will give visibility to our business plan and to all the activities of the company. And we will explain during the Investor Day of the 17th of November. Q&A, if you want. Operator: So thank you, Arturo. I will now open for Q&A session. And once again, thank you for your time. Just let us 1 minute. So the first question comes from Fernando Garcia from RBC. David Guengant: Could we elaborate on the sentence evaluating additional options to boost shareholder returns? Jose Arturo Diaz-Tejeiro Larranaga: I have explained that we want to stay focused on the remuneration of shareholders. And as I have mentioned, in the first quarter, we approved a share buyback program that we are executing, and I have given the details, and we are executing and we have 2% of shares of the company actually. About new remuneration on new options, we will discuss during the Investor Day, the 17th of November in London. David Guengant: Next question from Fernando. You have many of value creation avenues in solar PV, batteries, DC, international expansion and real estate. But you have less than EUR 50 million of cash position. What are your plans such as partnerships to avoid jeopardizing these growth optionalities? Jose Arturo Diaz-Tejeiro Larranaga: I think that we have demonstrated during last years that even with not too much cash that sometimes I recommend the company is to maintain not too much cash because when you have too much cash, you spend a lot of money. But this is my view that is not probably -- you are not agree with my view. But in order to explain, we have demonstrated that the key point from managing perspective, in my view, is to be efficient on CapEx, not to spend too much money and to be able to maintain a good CapEx that should be covered with project finance. This is my obligation. And we have demonstrated to the market during the last years that we are able to construct 3 gigawatts that we are able to develop a pipeline globally in all Europe, not only in Spain, that we are able to construct and to acquire batteries that we are able to acquire land, that we are able to acquire connection points for data centers and to acquire land for data centers. And we haven't sold nothing and not increasing capital. And this is a really good discipline that we have established inside the company. Our discipline will be maintained because it's the generation of value. You need to generate value to the shareholders, and it's my obligation. But you have seen with the Generia deal, for example, that we are able to generate value and to generate cash position with joint ventures. And I'm extremely satisfied with the joint venture closed with Stonepeak that is a key player in the market. And it's a great joint venture that will give enormous profits to the shareholders of Solar in the future. And we have raised EUR 125 million for the acquisition of land. And the valuation of the platform and the valuation of our pipeline and our capacity was good. I think that this kind of partnership, this kind of joint ventures are really good for Solaria that gives cash, gives support in the growth and recognize the value of the platform and the value of our pipeline. And it's something that we could repeat in data center, we could repeat in batteries, and we could repeat in other activities. But in order to answer correctly the question, yes, we are open to sign and to close joint ventures for batteries, for data centers and we are talking with players and we are working on it. David Guengant: Next question comes from Philippe Ourpatian from ODDO. Looking the Slide 6 related to our operating and under construction asset, is the time frame of 6.2 gigawatts dedicated to 2026 or later? Jose Arturo Diaz-Tejeiro Larranaga: And operating and under construction, 3 gigawatts will be connected to the grid for the end of this year. 1.4 gigawatts, it's under construction. We will announce probably during October, November, but it's something that in my mind is completely solved. We will announce a project finance associated with Villaviciosa and other developments that we have included that we have under construction, and we will cover with project finance, no problem. We -- it's a deal closed, but we will announce during October, November. And it's under construction, probably will be constructed during 2026 and 2027 connection. And we will add, especially in the third quarter and in the last quarter of this year, additional capacity to our construction pipeline that will be executed during 2026, first half of 2027. And now the innovation, if you want or something new is that we are going to include at the same time, batteries construction and batteries construction schedule. And today, our business has -- we have -- we are seeing here an extension of our business. We are not going to talk only about gigawatts of solar capacity. We are going to talk about gigawatts of solar capacity, gigawatts per hour of batteries and wind. It's like Solaria will be transforming a global player, constructing batteries, solar and wind. And as I have explained, from batteries point of view, for the Investor Day, we will have connected to the grid a number of batteries. David Guengant: Next question is coming from Beatrice Gianola from Mediobanca. Do we expect to sign new PPAs? Which is the outlook in terms of price for PPA in the Iberian market? And can we elaborate on returns expected for investment in battery storage in Spain? Jose Arturo Diaz-Tejeiro Larranaga: New PPAs, absolutely, yes. We will sign new PPAs, and we will announce to the market. And let me let me keep some information in my pocket. Let me keep some information in my pocket. Let me keep some information in my pocket. Let me surprise yourself. Let me surprise yourself and all the market in the next days, in the next days, in the next weeks. And we will talk. About batteries, I think that the return today in batteries in Spain is like it's unbelievable. Why? Because if you see price at night and you see price of electricity, especially at 12:00 in the evening or 11:00 in the evening, 10:00 in the evening, it's like it's crazy because today, we are suffering price of electricity of EUR 140, EUR 150. If you see these numbers that in my mind, it's crazy. The return of the battery is less than 1 year or 1.5 years with the current CapEx. It's always the same. It depends on your CapEx. And in CapEx, we announced a deal a few months ago with a price that we have renegotiated. We are improving prices of batteries. I think that we will see like in module, strong improvements in price of batteries. And from a CapEx perspective, I'm extremely quiet. I'm not nervous because we will be the key player from CapEx perspective on batteries and the return, I think it will be great. But reasonable return, double digit. We always are looking for double digits. If we don't have double digits, we don't invest. If we don't see a high level of double digits, when I talk about high level in solar assets is 12%, 13% project IRR in batteries, we are obligated to obtain more than this number. David Guengant: Next question from -- comes from Alexandre Roncier from Bank of America. Any update on the capacity market for Spain and timing? Jose Arturo Diaz-Tejeiro Larranaga: It's true that Spanish government is going to approve a capacity market. With the actual situation of prices, it's not necessary, but of course, welcome. If they approve, finally, it will be welcome. And it's an improving -- it's something that will improve the numbers around batteries. And it's not only battery, government is touching several points of the law. And if they modify, I think that is going to improve generation business. It's going to improve batteries business, probably will improve globally to all the renewable energy market. But market government, you depend on the government require time. I know that they are working on it, but who knows, if they are going to approve now or in October, November or whenever. We want -- I think that we need to move without any new law that could be approved like for our numbers, we are not including this capacity market. David Guengant: Next question coming from Fernando Lafuente from Alantra, Arthur Sitbon from Morgan Stanley, regarding storage revenue. What will be the price strategy for the first battery connected? Will you -- will we sell the electricity merchant, secondary market? And Arthur is also asking, can we break down some revenue source of the first batteries that we can connect to the grid this year? Jose Arturo Diaz-Tejeiro Larranaga: We are studying all the proposals for batteries. We have some proposals of people that wants to acquire our business, other people that wants to make a joint venture with us and to participate to give money, equity and for the acquisition of the batteries and to recognize value in our platform. That is probably the largest platform in Europe for batteries or the second one, I think, because from a private player had great successful in United Kingdom. But I think that probably Solaria in the stock market is the global player in Europe for batteries. And we are studying all the options. Today, for the batteries that we have under construction that will be connected to the grid in October and that for the Investor Day will be connected to the grid. Our strategy is to go to the merchant market and to obtain strong profits in the next month. I think that it's an easy job today. In the future, we'll be more sophisticated. Today, it's extremely simple business with the situation of price of electricity. But I'm not saying that deals will be our long-term strategy. I'm saying that we are going to use the exceptional situation of merchant price in the short term, but we could sign a joint venture associated with batteries. David Guengant: Next question is coming from Alberto Gandolfi from Goldman Sachs. Is 1 gigawatts of solar Villaviciosa, Oliva, Mantia, all permitted? If not, which permit do we have? And when do we plan to receive all the authorization? Jose Arturo Diaz-Tejeiro Larranaga: All permitted and under construction. We have explained the deal associated with Sabadell that cover a small part and it's associated with -- it's associated with the solar PV asset of Oliva. And it includes a data center of 75 megawatts. And you will see the evolution of this, but it's under construction, fully permitted. Villaviciosa, it's in the same situation, fully permitted, under construction, and we will announce the project finance deal in the short term, probably October, November, probably October because it's done. And we will announce the bank that is going to stay with us in this project. That includes Villaviciosa and other small projects that you have mentioned in your question. David Guengant: Next question is coming from Temi from Barclays. There were an article recently on the grid on Spain being 83% saturated. Can we please confirm our latest secure grid connection on the generation side? Jose Arturo Diaz-Tejeiro Larranaga: I think that we have a lot of grid connection secured in -- on the generation side. We have a lot of grid connection secured for data centers. We have a lot of grid connection secured for batteries. We have a lot of grid connection permits for wind. It's like from grid connection permitting point of view, we have get a great, great successful. You know because we have given all the information to the market during the last 2 years, but from generation for wind and solar, we have a lot of generation connection points. For data centers, we have close to 1.5 gigawatts and growing. It's like probably we are the key player in Iberia region. But I'm talking about Iberia all the time, but I think that we should start to talk about Europe because it's not only associated with Spain. But Spain today sounds good. And I think that at the end of this year, we will give more visibility in other countries. But we are a global platform in Europe. And Spain, obviously, we have -- I think we are probably the king from connection point of view. David Guengant: Last question comes from Jorge Alonso from Bernstein. What is our view on the Spanish market if BESS are massively adopted? How the power price will look like? Jose Arturo Diaz-Tejeiro Larranaga: Projection of power price is difficult and the projection of the situation of BESS in the long term is difficult because we have left a lot of bubbles around all the different business associated with renewables in Spain, but we will see the evolution. In batteries, in my mind, you need to be the first. You need to connect, not to talk, you need to connect. And to the -- the key point here, the key point today over the table is that we are going to stay in London the 17th of November with batteries connected to the grid. I will talk about the numbers and the EBITDA that we are residing in real time. And this is something that is value. And our effort is focused today on this. Connection, construction of new batteries. In the long term, if we suffer a massive volume of new installation of batteries, we will see. But battery is something that should have a strong return because if you don't have a strong return, you could have troubles in the long term. Our view is focus on CapEx efficiency and to be the first. And this is our view to be the first to construct with the best CapEx and to be extremely efficient in order to maximize value. And we will see evolution. Power price and power prices of electricity. It depends on demand. It depends on demand. This is a question associated especially with demand. Data center vehicles, electrical vehicles, industrial demand is growing. During this year, we have seen that the demand is growing. The electrical demand is growing. It's not in a bad situation. It's better than a few years ago. It's growing, but probably could grow a lot if Europe entering the data center business, for example. And not only focus on data center in the industrial part, we need to develop industry. And you received the message from my colleagues from the utilities from Endesa, Iberdrola and Naturgy, they receive massive questions of industrial players that wants to get connection points on the grid because they want to receive electricity, renewable energy, electricity. And Spain has a strong advantage from price point of view. We have cheap price of electricity, and it's an enormous advantage for the industry. And I'm completely sure that the situation will improve in the next years. And it's not only the demand come. When I talk about industry, I talk about hydrogen technology. Hydrogen is going to make enormous consumption of electricity. I'm talking about new industries. But I think that we are optimistic about the future price of electricity in Europe and Spain, Portugal, Italy and all the countries of Europe. It's like demand is going to answer, is answering, and we will see a strong demand in the future. Thank you very much and for being part of this conference call. And our Investor Relations team, David, will be available for any additional information that you may require. And hopefully, I hope to see you -- all of you in London, the 17th of November with a lot of surprises and news and business plan for the future and a lot of renewable energies. And we will see you in London. Thank you very much.
Antje Kelbert: Welcome to the Half Year Update call for HORNBACH Holding. My name is Antje Kelbert, Head of Investor Relations. Earlier today, at 7:00 a.m., we published our financial results for the first half of fiscal year 2025/'26, covering the period from 1st of March until the end of August 2025. I'm especially pleased to welcome our new Chief Financial Officer, Dr. Joanna Kowalska. With our deep industry expertise, and many years of experience in financial management, at KPMG and within the DIY retail sector at OBI Group. Joanna will be a great addition to the HORNBACH team. Since mid-August, she has taken over responsibility for the finance result and will be presenting today's results, guiding us through the presentation. We are also joined by CEO, Albrecht Hornbach, who has served as interim CFO during the transition period. Albrecht will be available for your questions during the Q&A session. Please note that this conference call, including the Q&A session will be recorded and made available along with the transcript on our company website. Kindly also take note of the disclaimer, which applies to the entire presentation and the Q&A session. [Operator Instructions] With that, I'm delighted to hand over to Joanna to walk us through the key developments and financial highlights of the first half year. Please go ahead. Joanna Kowalska: Good morning, everyone. Thank you, Antje for the kind introduction and a warm welcome. I'm truly delighted to be part of the HORNBACH team and to join you for today's half year update call. Since stepping into the role of the CFO about 6 weeks ago, I have been deeply engaged in learning about the many facets of our business. It's an exciting time, and I'm grateful for the support of my colleagues, especially Albrecht, who has been instrumental in helping me during the transition process. To HORNBACH, I bring over 17 years of experience within the European DIY retail sector alongside dedication to financial management and operational improvement. During my time at KPMG, I advised and audited many listed companies, and I'm truly delighted to contribute to HORNBACH's continued success as well as to long-term value creation for our shareholders. And I also look forward to getting to know all of you meeting with you over the coming months and continuing the open and constructive dialogue that HORNBACH is known for. And now let's dive into the key development and financial highlights. At a glance, we delivered further profitable organic growth in the first 6 months of our current fiscal year. Net sales grew by 4.4%, driven by a very satisfying spring season and solid summer period. In addition, we saw continued higher customer footfall. This growth was further supported by the store openings in Nuremberg and Duisburg, both in Germany around the start of the fiscal year. On a like-for-like basis, HORNBACH Baumarkt sales rose by 3.6%. Gross margin increased by 4.6%, in line with the sales growth. And the gross margin come in at -- sorry, 34.9%, matching the level from prior year's period. This development contributed to the adjusted EBIT growth of 2.5%. CapEx reflects the active execution of our expansion strategy with a focus on acquiring attractive properties and building a state-of-the-art DIY store network. Nevertheless, we achieved a good free cash flow. We are pleased with our performance in the first half of the current financial year. And despite ongoing macroeconomic burdens and soft consumer sentiment, particularly in Germany, we have achieved solid results, which are in line with our expectations. They also reinform our confidence in strength and resilience of our business model and underline our relevance to our customers. Therefore, we're confirming our full year guidance today. Before we dive deeper into financials for the first half of the fiscal year, let me start with a brief operational update. As you know, customer satisfaction is one of the most important KPIs to our business, a clear indicator of meeting our customer requirements and we truly believe that a great shopping experience and assortment, combined with a highly efficient operational setup is what drives our market relevance and long-term profitability. That's why we are especially proud of the results from the latest customer service. In Germany, the independent survey Kundenmonitor, ranked us #1 for overall customer satisfaction in the DIY sector. We also came out on the top in several other categories, including web shop, assortment relevance, selection, quality of the goods and private labels as well as service offered. In the Austrian addition of the Kundenmonitor, customer survey, we secured a leading position as well. We were ranked #1 overall in customer satisfaction, achieving strong results across multiple categories. And also in Netherlands, the survey Retail of the Year, named us The Best DIY Online Shop. That's an important recognition of our team's hard work and a clear sign that we are on the right track. We are also continuing to invest in infrastructure to support our organic growth and improve the shopping experience for our customers. Just recently, we opened 2 new stores, 1 in Bucharest, Colentina in Romania and another one in Eisenstadt in Austria. Both are modern big box DIY stores designed to give our customer everything we need for rare home improvement projects. These openings follow the launch of our new store in Duisburg, Germany, which opened in March, and there is more to come. Another store is set up to open in Timisoara in Romania, just tomorrow. All of these new locations demonstrate our commitment to expanding our store network and growing across all HORNBACH regions. With that in mind, let's take a closer look at the sales figures for the reporting period. As mentioned earlier, group net sales in the first half of the year were up by 4.4%, driven by a strong spring season and solid summer. Compared to the same period last year, we saw increased demand for our gardening products and construction materials. Customer frequency increased by 3.3%, reflecting a positive trend in store traffic. We also recorded a slight uptick in average ticket. After 2 years of stable performance, we are now back on a growth stat. And now let's shortly have a look at HORNBACH Baustoff Union, our subgroup has mainly serves professional customers in the construction industry. Looking at the sales development, we saw a slight sales decline of 0.8%. That said, we believe the construction sector in Germany may have reached its lowest point and could now be starting to recover. The latest official statistical figures show a modest upward trend in both order intake and building impairments. Looking at the geographic split on the right. Slightly more than half of the HORNBACH Baumarkt revenue, 52.7% comes from the 8 European countries outside of Germany representing an increase of approximately 1 percentage point compared to the previous year. Now let's turn our attention to like-for-like sales growth. Generally speaking, underlying demand across most European countries in the first half of the current fiscal year benefited from warm and mostly dry weather. That said, July was quite rainy in Central Europe, which had some impact on -- in Q2. For the group-as-a-whole, like-for-like sales growth reached 3.6% clearly above last year's period. Germany contributed 1.5%, which put us ahead of the German DIY sector that saw a slight overall decrease in sales of 0.7%. In other European countries, delivered a strong 5.6% growth rate. Here, the Netherlands really stood out with growth of over 10%. We successfully strengthened our position as a big box player in Netherlands. Customer particularly value our outstanding product availability in large quantities, which set us apart from competition. Thanks to store openings in recent years, our locations in Netherlands are younger in [indiscernible] and showing their [indiscernible] growth contribution. In Q2, all countries saw positive like-for-like sales development with the exemption of Germany, where performance were impacted by 2.8 fewer business days. Let me now present the most recent market share improvement. We continue to focus on growing our market share and strengthening our position across Europe. In all HORNBACH countries where market share data is available, we managed to expand our footprint in January and July 2025. In Germany, our largest and most competitive market, our share has now reached 15.5%, an increase of 0.6 percentage points compared to the prior year period. In the Netherlands, driven by a very positive footfall development, we gained 1.3 percentage points, bringing our total market share to 28.8%. In Czechia, we continued our positive momentum, increasing our market share to 38.5%. Austria and Switzerland also showed positive development. This truly reflects the dedication and outstanding performance of our teams on the ground who consistently go above and beyond to serve our customers. Let's now continue with a closer look to our E-commerce business. Customer engagement across our interconnected platforms remained strong, which confirms that these are now well established sales channels. E-commerce sales at HORNBACH Baumarkt grew by a strong 10.1% in the first half of the year. That pushed our E-commerce share of total sales up to 13.1%, both Direct Delivery and Click & Collect performed well, with growth rate of around 11% and 7%, respectively. And with that, I would like to take a closer look at costs and expenses in the P&L. Our gross profit increased by 4.6%, which is mostly in line with the growth in the net sales. Gross margin came in at 34.9%, matching the level of the same period last year. This reflects a good product mix and an innovative assortment. Now let's take a look at expenses. We are now seeing the full impact of wage increases across all countries, which led to a rise in absolute personnel costs. Personnel expenses totaled EUR 580 million, representing a 5.7% increase. This development is in line with expectations given the wage adjustments. While selling and store expenses increased in absolute terms, the expense ratio remained stable relative to total sales. And the same applies also to general administrative expenses ratio. Preopening costs rose by EUR 4 million, driven by new store openings. All of this contributes to a positive development of our adjusted EBIT, which I will present to you on the next slide. Overall, we improved our adjusted EBIT by 2.5% compared to the first half of last year, driven by successful spring season and solid summer performance. As a result, the adjusted EBIT margin remained broadly stable at 7.6%. Countries outside Germany contributed 62% to adjusted EBIT, making a 4 percentage point increase year-over-year. Once again, there were no significant nonoperating items or adjustments in the first half of the year. And now let's now move on to the cash flow statement. Our cash flow from operating activities increased significantly compared to previous year. The main driver was a lower cash outflow from changes in working capital. This was predominantly due to reduced use of our [indiscernible] program as well as stronger reduction of inventories than in the prior year period. Funds from operations remain at the same level as last year. Capital expenditure in the first half of the fiscal year totaled EUR 107 million, up from EUR 51 million in the same period last year. As planned, 56% of that was invested in land and real estate, mainly for the new store development. The remaining portion went toward store conversions, equipment and software. Free cash flow after net CapEx and dividend improved to EUR 129.6 million, reflecting the changes in working capital I just mentioned. Now let's take a look at our balance sheet. As of the end of August, HORNBACH once again delivered a robust balance sheet. The total balance sheet stood at EUR 4.6 billion, unchanged compared to February. Decreased inventories reflect the usual seasonal reduction after Spring. Our equity ratio increased slightly to 46.9%, maintaining a strong and healthy position. Our net debt-to-EBITDA ratio improved to 2.4x. All in all, that underlines the strength of our financial foundation and the resilience of our business model. We are confirming the guidance for the fiscal year '25/'26. We continue to expect net sales to be at or slightly above the level of prior year and adjusted EBIT to remain at the same level. However, given the strong earnings performance in Q1 and the solid development in Q2, we currently expect adjusted EBIT growth within the upper half of our guidance range. Before we open the floor to questions, I want to take a moment to highlight our continued focus on strategic priorities, cost management and sustainable growth. Through target investments and operational efficiency, we are building a solid foundation for the future. With our strong private labels, everyday low price strategy and clear commitment to sustainability, we aim to support our customers, maintain market leadership and deliver long-term value to our shareholders. In summary, we're well positioned to navigate the current macroeconomic and geopolitical challenges and to size medium- and long-term growth opportunities in the home improvement sector. That gives us strong confidence in HORNBACH's continued successful development. As I mentioned at the beginning, we are satisfied with our results for the first 6 months which are in line with our expectations. And with that, I will conclude my presentation and hand back to Antje for the Q&A session. Antje Kelbert: Thank you, Joanna for your views and remarks on our results. I now hand over to Bastian, our operator, to explain the technicalities of our Q&A session. Please go ahead. Operator: [Operator Instructions] So the first question comes from Thomas Maul from DZ Bank. Thomas Maul: Thomas Maul, at DZ Bank. I've got 2. The first one, you achieved a nice increase in gross margin. Maybe you can elaborate a bit more on the drivers, especially with regard to the innovative products you just mentioned. And what is actually the share of private labels in your assortment? And second question, can you please shed some light on current trading in September with regard to footfall, leverage basket sizes in Germany and abroad and yes, what are your expectations for gross margins in the months to come? Joanna Kowalska: Thomas. Thank you for your question. And happy to answer. I will take the first one on the margin. We improved our margin at, of course, in connection with the -- with our innovative product. During the year, we always change our assortment, nearly 20% of our assortment is changed during the year. And with the innovative assortment, we, of course, reach a better margin. And this is an effect of our, great [indiscernible] department. The second one -- the second question was how is -- how we expect the margin development in the half of the -- when I get you correctly? Thomas Maul: Yes. It's actually on footfall and basket size and also, yes, the development of gross margin. Joanna Kowalska: Okay. Okay. Thank you for the clarification. The footfall, we increased -- the footfall is increased in the first half of the year. We are gaining our market share in all countries. Therefore, of course, we hope that also there's a trend with -- remain also for the next half of the year. Of course, we are -- it's pretty clear that in Germany, the DIY sector faces near macro challenges, particularly in customer sentiment due to layouts in industry, many people are cautious about large projects. But nevertheless, nevertheless, customer traffic remained really strong, showing continued relevance of the DIY and Gardening. And we are pretty sure that our everyday low price strategy and strong private levels position us well, and we gained further market share -- we will again also cover market shares in the next half year. Your question was also about the private label share. So let me comment on this point. So this is about -- about 20%, yes. So in Germany, a little bit more -- sorry, I'd say it was 28% and in Germany, 28% and in average for the HORNBACH something about 2024. Operator: The next question comes from Jeremy Garnier from ODDO BHF. Jeremy Garnier: I have 2 questions. So yes, you begin to have strong market shares in all countries you're present in Europe. Do you plan to open new countries soon or to accelerate in some countries? And also M&A is still not an option for you? Joanna Kowalska: Jeremy, thank you for your question. Let me comment. Yes, we -- it's too early to go into the detail. But yes, we already announced the new country. So -- but I hope you can understand that we cannot comment in very detail at the moment. Jeremy Garnier: Okay. And regarding the working capital, it will improve during H1. Do you still have room to continue to improve the deliver of inventory and [indiscernible], what is your target? Joanna Kowalska: Of course, we always look for the working capital. And retail is about working capital management. And of course, we have a deeply look always at this issue. Of course, we have to consider the current situation also with the assortment changes therefore, sometimes you have a little bit more inventories, sometimes a little bit lower level. But nevertheless, of course, we have closed -- we look very, very focused on this issue. And we plan very good initiatives in respect of AI solutions with this matter. Of course, it will not be effective in this fiscal year. But nevertheless, our strategy is to use the AI solutions in the future to really focus on the working capital management and to really plan even better than in the past, the distributions, the logistic processes. We are on a good track in this matter. Operator: The next question comes from Ralf Marinoni from Quirin. Ralf Marinoni: First question is about your store in Romania. You mentioned that HORNBACH provides more than EUR 2 million for the expansion of public infrastructure to support development in the area and you have also created 120 new shops for the new market. So the question is, did you receive any government subsidies or tax benefits for this? And my second question is about the 4 new openings. Can you quantify the annual sales potential of 4 new markets when they are running at full steam? So I estimate it's clearly above EUR 100 million. Antje Kelbert: So I think the infrastructure you're mentioning -- sorry, it's Antje. The infrastructure around the normal stores. So we have streets and all those things that help us to connect also the store to our network to make it efficient and to help us around that. I think this is meant with the infrastructure thing. With respect to those subsidies, I'm not sure about that. We can take that afterwards, I think. Sorry on that. And expectations, for sure. But we do not disclose our business for each and every new store that will go on stream. However, we assume that this is a very good location because you know that the key thing to select location for us to have a good area, to have a good a little bit around -- surrounding there and so we expect that this will be a good addition there. Joanna Kowalska: And the second question was, what does a new store brings in terms of revenue, yes? Ralf Marinoni: Exactly, exactly. Joanna Kowalska: It's a -- it really depends on the location, on the square meters in -- on the country. We are happy to open each store, yes. But and it's always based on a detailed business case. So yes, the decision is made very, very cautious. And -- but I would don't like to disclose very detailed information on each contribution of the each market or store. I hope you understand. Ralf Marinoni: I understand. But maybe you can give us an indication with regard to profitability in your market in Romania. On the one hand, we have less purchasing power from the people there, which leads to less revenues compared to the stores like Germany also. But on the other hand, we have much smaller personnel cost. So maybe you can give us an indication for the EBIT margin and profitability in these stores in Romania. Antje Kelbert: Yes, you know that we do not disclose on a base of the different countries? So what you see is that the contribution from outside of Germany is very good. And as you can assume, we are also on track in Romania because it's a very interesting and attractive market. So this will also help to contribute that. Joanna Kowalska: I can only add. Of course, there are countries which contribute more and would contribute less. But nevertheless, all countries are on a very, very good track. We are really happy with the development and also in Romania. It's really, really good country and therefore, we have attractive location there, and we are happy to expand in this country. Operator: Next question comes from Miro Zuzak from JMS Invest. Miro Zuzak: I have a couple of questions. I'll take them one by one, if I may. The first one is regarding the situation in Germany. You mentioned during the presentation that you expect the German construction and renovation market to bottom out. Can you please substantiate this and elaborate on this? And what the indicators are that you're looking at? Antje Kelbert: Okay. So I think you're referring to construction market versus DIY market. I think this is an important thing. Joanna Kowalska: The building sector shows early signs of recovery, like a recent increase in building payments and orders, but we expect that activity will only start to increase next year. However, with HORNBACH Baumarkt, we are mostly active in the renovation and modernization business, which is -- which has different dynamics than the new construction. In this matter, we need to focus on such topics as renovation backlog, need for energy-efficient upgrade and demographic challenges. And this is what what we are looking very positively towards this issue because the need is there. We increased our market share. And therefore, even in Germany, we see really chances for us. Even... Miro Zuzak: But you don't feel like at this moment already a recovery, it's just an expectation that in the future next year or so, it will recover? Antje Kelbert: Yes. Albrecht Hornbach: Albrecht Hornbach speaking. It's more or less a sentiment, which leads to the meaning that beginning maybe with 2026, the construction market will rise again and that the [indiscernible] is reached now in the moment. But this concerns HORNBACH mainly, and it's not a matter for Baumarkt for the Do-it-yourself business. Do-it-yourself business, it's more contributed to renovation and what Joanna explained just before. And fortunately, we are rather independent from construction markets in 96% of our turnover. Miro Zuzak: Okay. Super, very clear. Another question regarding costs. If I look at the OpEx, just basically, the cost between gross profit and EBITDA, I see a jump of EUR 30 million in Q2 versus last year Q2. This was a much higher jump compared to the EUR 15 million in Q1. So the OpEx seems to have increased much more in Q2 compared to Q1. Is this going to continue in Q3 and Q4? Was there any like special effect or reason in there, which led to this higher increase compared to Q1? Joanna Kowalska: So the most important point is the increase in the personnel expenses, of course. As you know, last year, we had a lot of increases of the wages nearly in all countries, especially in Germany. And the effect, of course, we see now in the comparison of the half year. So the wages increased, of course. We -- just for your information, the total cost amounts to 5.7%. And we had an increase in full-time employees in connection with the new store openings. Therefore, we have 2 effects. The first one is the amount of the people and employees and another one is the increase of the wages itself. To your question, whether we expect more increases during the next months, I would answer the question like in this way. Of course, we do not expect such big increases as last year. Last year was something special, especially in Germany. We were talking about 7% increases in the wages. This is not planned for Germany now. Of course, there will be some increases to balance somehow the inflation rate, of course. But we expect lower increases than 3%. This is the most point which explains the difference. And there are 2 other points also which unfortunately contributed to our EBIT -- to our result. We had FX effect. As you know, we have derivatives, U.S. dollar derivatives and from the evaluation of the derivatives we have now. Last year, it was plus. And now we have lost from the derivatives. Therefore, we are talking about an effect of EUR 5 million, which is big, of course. And ... Miro Zuzak: Where are they booked -- sorry, by the way, are they in [indiscernible] or are they booked in the [indiscernible] are they in the financial results? Joanna Kowalska: They are booked in the financial result. Miro Zuzak: So that's below EBIT. Joanna Kowalska: Yes, yes. Yes. I thought your question was about the EBIT, EBITDA. Miro Zuzak: Well, I was asking about the OpEx, which would typically be above EBITDA. But anyway, No, that's fine, it's good to know, that would have been your next question. Joanna Kowalska: Okay. Okay. So the most effect is really the wages and the personnel costs. Miro Zuzak: Okay. I have 2 more questions -- I have one more question and one suggestion. So the first one is the U.S. dollar change, which was like significant, right? How much will it contribute to the gross profit margin in the next quarters to come? Or to put the question the other way around, how much of your [indiscernible] of your purchases are in U.S. dollars? Joanna Kowalska: It's a good question, and I'm really happy to answer this. We are lucky we are lucky in this respect that our -- we do not source a lot of products in U.S. dollar. Therefore, yes, it's even a lower amount than the 5% of our assortment. Therefore, we are not really impacted by the U.S. dollar in the margin. Nevertheless, of course, there are some. And our policy is always to hedge our direct U.S. dollar purchasing volume. 90% of our volumes are hedged. Therefore, for the future, I do not expect really changes in the margin. Jeremy Garnier: Okay. Maybe you can get some points of price decreases from your European suppliers, who buy in China or in the U.S. area, right, which is now 10% or 15% plus expense. One more -- just one suggestion, you have on Page 13 in your free cash flow definition. You don't include leasing, which makes a big difference. I think just -- it would be a more meaningful number from year list to include leasing because you show EUR 130 million free cash flow of the CapEx and dividends, I would include -- it's just my personal opinion. I would include leasing there, which brings the free cash flow to a more accurate EUR 70 million instead of EUR 130 million. That's probably more accurate. Joanna Kowalska: Okay. Yes, it's [indiscernible] you to hear your view on that. So thank you for this. Miro Zuzak: HORNBACH is always very solid and humble in terms of capital markets presentation, which I like. And therefore, I would show the lower number rather than a higher number in this case. Joanna Kowalska: Okay. Thank you for your [indiscernible]. Operator: So as there are no further questions at this time. I will hand back to Antje for any closing remarks on this conference call. Antje Kelbert: Yes. Thank you very much for your question. And I think we have at least I'll address. I would also like to thank you, Joanna, and Albrecht for your valuable contribution today. And in the coming weeks, you'll find us also at various capital market conferences. We are very much looking forward to engaging with you in personal conversation. So please come to us if there are any further questions arise. And the details of our plans for [ IR traveling ] is also available on our website. And as we now head into Autumn with its rich variety of colors and abundance, perhaps it will inspire you also to start a fresh DIY project around home and garden. Thank you again for your interest and time this morning, and we hope to see you soon and until then, take care. Thank you very much.
David Guengant: Head of IR of Solaria. I'm joined today by Arturo Diaz-Tejeiro Larranaga, our Chief Executive Officer. During this call, we'll discuss our business outlook and make forward-looking statements. These comments are based on our predictions and expectations as of today. During this presentation, we'll begin with an overview of the results and main highlights and main development during this period given by our CEO, Arturo. Following this, we will move on to the Q&A session. I would also like to highlight that you have to submit all your questions via the web. So thank you very much again, and I will now hand over the word to Arturo. Jose Arturo Diaz-Tejeiro Larranaga: Thank you, David, and thank you to everyone joining this conference call. Like always, I will move extremely fast on the slides and the presentation, and we will go to the Q&A part session. And of course, in first half 2025, we have increased significantly exponentially our net profits. We have grown close to 100%. That is a record in the history of the company. And we have installed -- this is something significant because you know that during the last 2 years, we have done enormous efforts in order to connect new installations. We have connected during this quarter 300 megawatts. That is one of our key targets for this year, and we have connected during this quarter 300 megawatts. From an operational point of view, our business is running great because we closed, as you know, during this first half, a great deal with Stonepeak for Generia. And our infrastructure business is running great, and we have good numbers in this quarter that comes from our infrastructure division and generation is going in a good situation even with the low price situation that we are living in Spain. But we maintain same level if you compare first half with -- last year, we maintained the same level of generation. That is good because we haven't included new assets during the first half. The good point is that finally, we have connected 300 megawatts. And hopefully, during this quarter and next quarter, we are going to complete 3 gigawatts of capacity constructed and connected to the grid that it will be a great successful for the company. Points or key points of this presentation. And all the market is talking about batteries and new business that is growing in Europe, especially in Spain around batteries. Solar absolutely will be there. And during our Investor Day, we will give great -- we will give our business update about batteries business. And my comment about batteries is we are the key player today in Spain with batteries under construction that will be connected to the grid during October. For our Investor Day, we will have batteries connected to the grid. This is a great successful for the company because we will be able to play the game of battery in Spain and with high volume of batteries connected to the grid. And we will talk about our new division of data center during the Investor Day. And it's something that we are extremely exciting around data center business and the growth of this business. Today, first half presentation numbers in order to go directly to the numbers, growth, 3 gigawatts installed that we will finish for the end of this year. We are going to finish this year with 3 gigawatts of capacity connected to the grid. It's a great successful probably from volume point of view, Solaria will be the leader from volume point of view in the Iberian region of solar photovoltaic technology connected to the grid, 3 gigawatts, 3,000 megawatts connected to the grid. Under construction. Today, we have around 4.4 gigawatts of capacity connected to the grid or under construction. We have added new developments to our under construction pipeline. Oliva, Mantia, Villaviciosa, large installations that will be constructed during 2025, 2026 and 2027 and that will add 1.4 gigawatts of additional capacity during 2026 and first half of 2027. It's significant because it's an enormous volume of megawatts that includes not only solar, include BESS, include batteries, that jointly it's a great combination from business point of view, solar with batteries that will optimize price of electricity. Batteries, as I have mentioned, 3 important points around battery business. I could say like in the solar technology that solar probably is the best-in-class from a CapEx perspective, EUR 75,000 per megawatt hour, all connected. That is a record from a CapEx perspective view. And as I have mentioned, during October, we are going to connect our first battery to the grid. And for the Investor Day, we will have batteries functioning connected to the grid, and it's a great successful for us. It's something that changed completely our history because we are going to optimize the price of electricity. We could entry at night or in the afternoon with the situation, especially in Spain, high price of electricity in the afternoon, at night, and we could obtain enormous profits associated to these batteries. We are going to install more, absolutely. We are going to invest more in batteries. We are developing enormous volume of batteries globally in Spain, not only in Spain, we have included in this presentation slides associated with Italy, Germany, with the United Kingdom, but obviously focusing in Spain. We have an enormous volume of megawatts per hour of batteries that will entry during 2025, 2026. And we will be the leader in the short term in batteries in Spain. And this is extremely important short term. Battery is a great business today. We need to use this opportunity and timing is critical. You need to be the first and you need to be the most efficient. Not only batteries, wind, data center, the global business plan of Solaria, the global idea of Solaria is a global energy player that supply solar electricity, wind electricity that has demand that comes from data centers and that has demand that comes from batteries. And it's a global solution for customers that includes technology of generation and technologies of demand. And globally, in Europe, not only in Spain, focused in several countries of Europe, Spain, Italy, Portugal, Germany, United Kingdom. Generia. You know that 2 years ago, it sounds like a dream, Generia land company. Today, it's a real company that is functioning, and that will give to all of our shareholders strong successfuls because as you know, we have got a great agreement with Stonepeak. It's functioning. We are developing the pipeline of Generia. We are executing, and we are closing acquisition of land. It's the beginning. Obviously, the plan is extremely ambitious. And during 2025, 2026, 2027, you will see a lot of deals associated with Generia. Obviously, if you want to construct all of these assets, if you want to construct new batteries, new data centers or whatever you need financing, good financing terms. This is a good example like all the quarters we show to the market that we have a strong capacity to raise money, to raise project finance debt with our banks and partners. We have closed -- presently, we have closed a new deal with Sabadell Bank, 175 megawatts of solar PV capacity. The key points of this deal is probably 22 years, close to EUR 100 million of debt. That is a global CapEx of EUR 0.50 something and link with 70 megawatts PPA data center project. We will extend and we will give more information during the Investor Day. But in all case, this is something signed, real and that is functioning now, and we have under construction today the project associated with this deal. Europe, we have included several slides because usually people say solar is extremely focused in Spain. You are not out of Spain. It's not the truth. Spain today is obviously our key market in Europe, but we don't forget other countries that are critical for us, that are going to grow around batteries, data center, solar and wind. Italy. In Italy, we have made a strong effort during the last years. And I think that today, we have a really good pipeline. Hopefully, before the end of this year, we will receive final authorization for close to 1 gigawatt. That is a great successful because to start with 1 gigawatt will be great for us. It's a diversification of our business. In my mind, the perfect photo for the company should be to stay in Spain with global volume, but to maintain good volume in Italy, in Portugal, in Germany and to install generation in these 3 countries, in Italy, Portugal and Germany. And the Italian business is in a good situation today. Probably, as I have explained for the full year's presentation, we will give an update with 1 gigawatt ready to start with the construction. And it's great. At the same time, we are developing batteries, we are developing data center. And Germany. Germany is the same. In Germany, we are more focused in generation, especially in solar and some applications of wind, but especially in solar, is the beginning. We have a good amount of megawatts. It's in my mind, it's easier than Italy or Spain. It's different market, really professional, really mature market. And I think that in the past, we had a strong successful in solar in Germany, and we are going to replicate. And today, we have more than 500 megawatts in a good situation, fully authorized, and we will start construction soon, probably in 2026. Portugal. Portugal, this is a real global project. As you know, we have assets functioning today in Portugal. We have done several projects in the last years in Portugal with great successful. In Portugal, we have fully authorized a global project with close to 500 megawatts of solar and 200 -- close to 200 megawatts of wind. We are waiting for the final substation that should be done or that is depends of government -- of the national agency and depends of government. Hopefully, we could start with the construction in 2027. From permitting process point of view, it's fully complete. The key point here is that we depend on the connection infrastructure that should be constructed by . And I think that 2027, it's conservative schedule for starting with the construction. U.K. In U.K., we are not going to be involved in generation. We are going to be involved in other activities, other activities. Today, we are only talking about batteries, and we are only talking about data center. But I talk about other activities, and I'm not including here all the activities that we are working on in United Kingdom. Not in generation, we are not going to stay involved in generation. We are interested in other activities that we will explain to the market. Numbers I have mentioned, and I will move extremely fast. EBITDA, record of EBITDA, EUR 140 million. In order to give additional information to the market. As you remember, we gave a guideline for the year of EUR 245 million, EUR 255 million for the end of this year of EBITDA. I can say that we are extremely comfortable with this number. What does it mean? We have strong visibility that we are going to accomplish with the guideline of EBITDA for 2025. During the Investor Day, the 17th of November, we will give guideline for next years and the global business plan for next year. Production, we maintained levels of production. As I have explained at the beginning, we have maintained similar numbers from a generation point of view. Small reduction on production associated with less than radiation, especially in the first half of this year. I can say that the third quarter was good from radiation point of view on price is good. And especially second quarter of this year was not good from radiation point of view, small decrease associated with this solar radiation. Average selling price, even I could say -- I can say that it's better if you compare first half 2024, first half 2025. Contracted merchant, 75% today is contracted, 25% is merchant. And as we have explained, and it's not a surprise, we are going to maintain this mix and we are going to sign additional PPA contracts. And we are going to maintain this proportion of 75 -- sorry, contracted 25% merchants. EBITDA continues growing and is affected by 3 different activities by Infra business, by generation, by Generia. And I can say that as I have explained at the beginning, it's around 1/3 per activity. And it's -- all the activities are functioning great. Why I'm saying this because I have visibility of third quarter and I think numbers are functioning great. And as I have said previously, we have extremely high level of comfort of our guideline of EBITDA. Cash, we maintain the same level of cash like always. As you know, we are not rich, but we continue making strong investments, and we maintain our discipline around CapEx. That is one of the key points of our strategy. We have a global CapEx of less than EUR 0.38 per watt. That is probably best-in-class. And in my mind, we are going to improve in the next quarters. I think that probably for the first quarter of 2026, we will achieve a record in CapEx. When I talk about record, I think that number is going to surprise to the market, but we are going to improve a lot even our CapEx. And this is critical for us because, as you know, we are covering all of our CapEx with project finance. And this is critical for us to be effective, not only in the construction of solar installation in batteries, in wind, in all of our applications. And of course, EBITDA evolution is great. If you compare the last 5 years, it's impressive. It's not as we want to get because we want more, much more. We want to grow more. We want to be the leader. And unfortunately, during the last 2 years, we had delays in the construction. The good point today is that we are in the good moment, connecting megawatts, and we are going to finish with all the megawatts under construction connected to the grid, and it's great. And it's part of our guideline of last year, and we are going to accomplish. Solaria transformation plan sounds ambitious, but we are ambitious as always. And in November 17, we will present to the market our view about data center, batteries, where we are, where we'll be and what we are going to do for financing all, and it will be extremely interesting. You know Solaria today is a key player in Europe, focused on solar, wind, data center and batteries, and we will try to explain our global view of the market and where we are going to stay the next 3 years and where will be the company in the next 3 years. And before to entering the Q&A session, in order to give more information, we will be focused in the remuneration of the shareholders. We think that is something that we need to improve, and we need to stay focused there. We will continue acquiring shares. And as you know, in the first quarter, we have announced a program -- share buyback program. And we have today 2% of the shares of the company, and we are going to continue with the acquisition of shares at least until 10%. And we are going to maintain this discipline, and we are going to execute. And at the same time and in order to be fair with the market, understand this comment, but probably company in the next days could sign contracts, impressive contracts that will give visibility to our business plan and to all the activities of the company. And we will explain during the Investor Day of the 17th of November. Q&A, if you want. Operator: So thank you, Arturo. I will now open for Q&A session. And once again, thank you for your time. Just let us 1 minute. So the first question comes from Fernando Garcia from RBC. David Guengant: Could we elaborate on the sentence evaluating additional options to boost shareholder returns? Jose Arturo Diaz-Tejeiro Larranaga: I have explained that we want to stay focused on the remuneration of shareholders. And as I have mentioned, in the first quarter, we approved a share buyback program that we are executing, and I have given the details, and we are executing and we have 2% of shares of the company actually. About new remuneration on new options, we will discuss during the Investor Day, the 17th of November in London. David Guengant: Next question from Fernando. You have many of value creation avenues in solar PV, batteries, DC, international expansion and real estate. But you have less than EUR 50 million of cash position. What are your plans such as partnerships to avoid jeopardizing these growth optionalities? Jose Arturo Diaz-Tejeiro Larranaga: I think that we have demonstrated during last years that even with not too much cash that sometimes I recommend the company is to maintain not too much cash because when you have too much cash, you spend a lot of money. But this is my view that is not probably -- you are not agree with my view. But in order to explain, we have demonstrated that the key point from managing perspective, in my view, is to be efficient on CapEx, not to spend too much money and to be able to maintain a good CapEx that should be covered with project finance. This is my obligation. And we have demonstrated to the market during the last years that we are able to construct 3 gigawatts that we are able to develop a pipeline globally in all Europe, not only in Spain, that we are able to construct and to acquire batteries that we are able to acquire land, that we are able to acquire connection points for data centers and to acquire land for data centers. And we haven't sold nothing and not increasing capital. And this is a really good discipline that we have established inside the company. Our discipline will be maintained because it's the generation of value. You need to generate value to the shareholders, and it's my obligation. But you have seen with the Generia deal, for example, that we are able to generate value and to generate cash position with joint ventures. And I'm extremely satisfied with the joint venture closed with Stonepeak that is a key player in the market. And it's a great joint venture that will give enormous profits to the shareholders of Solar in the future. And we have raised EUR 125 million for the acquisition of land. And the valuation of the platform and the valuation of our pipeline and our capacity was good. I think that this kind of partnership, this kind of joint ventures are really good for Solaria that gives cash, gives support in the growth and recognize the value of the platform and the value of our pipeline. And it's something that we could repeat in data center, we could repeat in batteries, and we could repeat in other activities. But in order to answer correctly the question, yes, we are open to sign and to close joint ventures for batteries, for data centers and we are talking with players and we are working on it. David Guengant: Next question comes from Philippe Ourpatian from ODDO. Looking the Slide 6 related to our operating and under construction asset, is the time frame of 6.2 gigawatts dedicated to 2026 or later? Jose Arturo Diaz-Tejeiro Larranaga: And operating and under construction, 3 gigawatts will be connected to the grid for the end of this year. 1.4 gigawatts, it's under construction. We will announce probably during October, November, but it's something that in my mind is completely solved. We will announce a project finance associated with Villaviciosa and other developments that we have included that we have under construction, and we will cover with project finance, no problem. We -- it's a deal closed, but we will announce during October, November. And it's under construction, probably will be constructed during 2026 and 2027 connection. And we will add, especially in the third quarter and in the last quarter of this year, additional capacity to our construction pipeline that will be executed during 2026, first half of 2027. And now the innovation, if you want or something new is that we are going to include at the same time, batteries construction and batteries construction schedule. And today, our business has -- we have -- we are seeing here an extension of our business. We are not going to talk only about gigawatts of solar capacity. We are going to talk about gigawatts of solar capacity, gigawatts per hour of batteries and wind. It's like Solaria will be transforming a global player, constructing batteries, solar and wind. And as I have explained, from batteries point of view, for the Investor Day, we will have connected to the grid a number of batteries. David Guengant: Next question is coming from Beatrice Gianola from Mediobanca. Do we expect to sign new PPAs? Which is the outlook in terms of price for PPA in the Iberian market? And can we elaborate on returns expected for investment in battery storage in Spain? Jose Arturo Diaz-Tejeiro Larranaga: New PPAs, absolutely, yes. We will sign new PPAs, and we will announce to the market. And let me let me keep some information in my pocket. Let me keep some information in my pocket. Let me keep some information in my pocket. Let me surprise yourself. Let me surprise yourself and all the market in the next days, in the next days, in the next weeks. And we will talk. About batteries, I think that the return today in batteries in Spain is like it's unbelievable. Why? Because if you see price at night and you see price of electricity, especially at 12:00 in the evening or 11:00 in the evening, 10:00 in the evening, it's like it's crazy because today, we are suffering price of electricity of EUR 140, EUR 150. If you see these numbers that in my mind, it's crazy. The return of the battery is less than 1 year or 1.5 years with the current CapEx. It's always the same. It depends on your CapEx. And in CapEx, we announced a deal a few months ago with a price that we have renegotiated. We are improving prices of batteries. I think that we will see like in module, strong improvements in price of batteries. And from a CapEx perspective, I'm extremely quiet. I'm not nervous because we will be the key player from CapEx perspective on batteries and the return, I think it will be great. But reasonable return, double digit. We always are looking for double digits. If we don't have double digits, we don't invest. If we don't see a high level of double digits, when I talk about high level in solar assets is 12%, 13% project IRR in batteries, we are obligated to obtain more than this number. David Guengant: Next question from -- comes from Alexandre Roncier from Bank of America. Any update on the capacity market for Spain and timing? Jose Arturo Diaz-Tejeiro Larranaga: It's true that Spanish government is going to approve a capacity market. With the actual situation of prices, it's not necessary, but of course, welcome. If they approve, finally, it will be welcome. And it's an improving -- it's something that will improve the numbers around batteries. And it's not only battery, government is touching several points of the law. And if they modify, I think that is going to improve generation business. It's going to improve batteries business, probably will improve globally to all the renewable energy market. But market government, you depend on the government require time. I know that they are working on it, but who knows, if they are going to approve now or in October, November or whenever. We want -- I think that we need to move without any new law that could be approved like for our numbers, we are not including this capacity market. David Guengant: Next question coming from Fernando Lafuente from Alantra, Arthur Sitbon from Morgan Stanley, regarding storage revenue. What will be the price strategy for the first battery connected? Will you -- will we sell the electricity merchant, secondary market? And Arthur is also asking, can we break down some revenue source of the first batteries that we can connect to the grid this year? Jose Arturo Diaz-Tejeiro Larranaga: We are studying all the proposals for batteries. We have some proposals of people that wants to acquire our business, other people that wants to make a joint venture with us and to participate to give money, equity and for the acquisition of the batteries and to recognize value in our platform. That is probably the largest platform in Europe for batteries or the second one, I think, because from a private player had great successful in United Kingdom. But I think that probably Solaria in the stock market is the global player in Europe for batteries. And we are studying all the options. Today, for the batteries that we have under construction that will be connected to the grid in October and that for the Investor Day will be connected to the grid. Our strategy is to go to the merchant market and to obtain strong profits in the next month. I think that it's an easy job today. In the future, we'll be more sophisticated. Today, it's extremely simple business with the situation of price of electricity. But I'm not saying that deals will be our long-term strategy. I'm saying that we are going to use the exceptional situation of merchant price in the short term, but we could sign a joint venture associated with batteries. David Guengant: Next question is coming from Alberto Gandolfi from Goldman Sachs. Is 1 gigawatts of solar Villaviciosa, Oliva, Mantia, all permitted? If not, which permit do we have? And when do we plan to receive all the authorization? Jose Arturo Diaz-Tejeiro Larranaga: All permitted and under construction. We have explained the deal associated with Sabadell that cover a small part and it's associated with -- it's associated with the solar PV asset of Oliva. And it includes a data center of 75 megawatts. And you will see the evolution of this, but it's under construction, fully permitted. Villaviciosa, it's in the same situation, fully permitted, under construction, and we will announce the project finance deal in the short term, probably October, November, probably October because it's done. And we will announce the bank that is going to stay with us in this project. That includes Villaviciosa and other small projects that you have mentioned in your question. David Guengant: Next question is coming from Temi from Barclays. There were an article recently on the grid on Spain being 83% saturated. Can we please confirm our latest secure grid connection on the generation side? Jose Arturo Diaz-Tejeiro Larranaga: I think that we have a lot of grid connection secured in -- on the generation side. We have a lot of grid connection secured for data centers. We have a lot of grid connection secured for batteries. We have a lot of grid connection permits for wind. It's like from grid connection permitting point of view, we have get a great, great successful. You know because we have given all the information to the market during the last 2 years, but from generation for wind and solar, we have a lot of generation connection points. For data centers, we have close to 1.5 gigawatts and growing. It's like probably we are the key player in Iberia region. But I'm talking about Iberia all the time, but I think that we should start to talk about Europe because it's not only associated with Spain. But Spain today sounds good. And I think that at the end of this year, we will give more visibility in other countries. But we are a global platform in Europe. And Spain, obviously, we have -- I think we are probably the king from connection point of view. David Guengant: Last question comes from Jorge Alonso from Bernstein. What is our view on the Spanish market if BESS are massively adopted? How the power price will look like? Jose Arturo Diaz-Tejeiro Larranaga: Projection of power price is difficult and the projection of the situation of BESS in the long term is difficult because we have left a lot of bubbles around all the different business associated with renewables in Spain, but we will see the evolution. In batteries, in my mind, you need to be the first. You need to connect, not to talk, you need to connect. And to the -- the key point here, the key point today over the table is that we are going to stay in London the 17th of November with batteries connected to the grid. I will talk about the numbers and the EBITDA that we are residing in real time. And this is something that is value. And our effort is focused today on this. Connection, construction of new batteries. In the long term, if we suffer a massive volume of new installation of batteries, we will see. But battery is something that should have a strong return because if you don't have a strong return, you could have troubles in the long term. Our view is focus on CapEx efficiency and to be the first. And this is our view to be the first to construct with the best CapEx and to be extremely efficient in order to maximize value. And we will see evolution. Power price and power prices of electricity. It depends on demand. It depends on demand. This is a question associated especially with demand. Data center vehicles, electrical vehicles, industrial demand is growing. During this year, we have seen that the demand is growing. The electrical demand is growing. It's not in a bad situation. It's better than a few years ago. It's growing, but probably could grow a lot if Europe entering the data center business, for example. And not only focus on data center in the industrial part, we need to develop industry. And you received the message from my colleagues from the utilities from Endesa, Iberdrola and Naturgy, they receive massive questions of industrial players that wants to get connection points on the grid because they want to receive electricity, renewable energy, electricity. And Spain has a strong advantage from price point of view. We have cheap price of electricity, and it's an enormous advantage for the industry. And I'm completely sure that the situation will improve in the next years. And it's not only the demand come. When I talk about industry, I talk about hydrogen technology. Hydrogen is going to make enormous consumption of electricity. I'm talking about new industries. But I think that we are optimistic about the future price of electricity in Europe and Spain, Portugal, Italy and all the countries of Europe. It's like demand is going to answer, is answering, and we will see a strong demand in the future. Thank you very much and for being part of this conference call. And our Investor Relations team, David, will be available for any additional information that you may require. And hopefully, I hope to see you -- all of you in London, the 17th of November with a lot of surprises and news and business plan for the future and a lot of renewable energies. And we will see you in London. Thank you very much.
Operator: Good afternoon, and welcome to the Directa Plus Plc half year results investor presentation. [Operator Instructions]. I would now like to hand you over to CEO, Giulio Cesareo. Giulio Cesareo: Good afternoon to you. Thank you, and good afternoon to everybody. My name is Giulio Cesareo. I'm the Founder and the CEO of the company. I have 40 years of experience in graphite and graphene arena, starting with 20 years in Union Carbide and 20 with Directa Plus. In front of me, that is our CFO, Giorgio please introduce yourself. Giorgio Bonfanti: Good afternoon, everybody. My name is Giorgio Bonfanti, I am the Group CFO of Directa Plus and I have been in this company more than 40 years, to go up to start many experience. Giulio Cesareo: [indiscernible] we will try to give you a concise view of what are the opportunities for the next class in the future. And I would like to start by telling that if you go on the website, you will see a similar content on an explosive expected growth of the graphene sector. All the different are talking of compound analytical rate between 20% and 40% for the next 10 years. With a significant focus following pre-vertical battery expense and environment. We consider Directa to be a leading company in this area. We have a process that has been during this year, redesign in engineered with the objective to generate new products, not just graphene but also graphite, and I will go deep on analysis of the process and of the product in the next few slides. Time to market is still very aggressive in the range of months. And we are signing significant partnership. One of these come forth and we will not have chart this close to mark that is very, very important for the future of the company and in the defense area. If we move to the process, I think that this is the slide covering the old cases but I will give you much more detail in a slide that has been prepared show the difference between the old and the new all-in-one comment. For your information, we have 116 granted patent set and 39 pending and one of those [indiscernible] of these patent as my name is inventor or co-investor. Giorgio Bonfanti: GiPave graphene. So our material is an enabling material. So it's a transfer a number of different properties across [indiscernible] and vertical [indiscernible] applications. So for example, from [indiscernible] to [indiscernible] properties, higher extra [indiscernible], improvement of chemical properties, I have absorb shrink capacity, plan [indiscernible] and the corrosion. So we had a number of different products across [indiscernible] group. Covered by stronger portfolio. We have a portfolio of 22 billion families, four of which are covering the production process and [indiscernible] covering process and applications. Let's jump [indiscernible] of the presentation, which will give you a few highlights on the maintenance of the first half of 2025. Having [indiscernible] operational performance. It is key for us and is a game changer. So we'll go more and deeper in the next month, but we are significant improvement on our production system that will allow us to have a reduction in operational costs and will be assets to new tariff process. So we will cover more in detail in that current part of the presentation. On the two main verticals, Environmental and Textile, just a couple of good comments that Environmental we keep working on the fracturing of Setcar after we acquired it for full ownership 1 year ago, and we have translated into solid results in the first half, and we signed also new important contracts using broad cover and the main material for acquiring the content media information on this front. And on this side, we keep working on more presence and a very important news as Giulio said is the fact that we secured for social contract [indiscernible] Environmental [indiscernible] departments. In terms of financials, in the first half of the year, we had revenue increase by 15%. This will have to the new focus, but more importantly we were able to reduce our EBITDA by 38%. This was the result of the continuous progress in terms of keep reviewing the production cost but also areas core control and optimization. Cash as of June 2025 was, of course, EUR 3 million, in line with mode station. And we keep working on carefully managing balancing investment growth with business opportunity. In the next slide, I will go more in detail on the main strategic actions we put in place. Giulio Cesareo: Put in place five strategic actions really to generate and capture the right momentum and the opportunity we see in the market. Let's start with the three levers underpinning the strategy. The first and most important nowadays is production we did a massive action on the production line reengineering and redesigning it. We have now full automation. We will have the chance to use new precursors we reach from 1 to 9 in the super expansion to reduce cost, but I will go with more detail in the next slide covering production it's important to stress the attention that we will give this system to reduce practically production costs and assess new market. With regard to sales that we are accelerating the market adoption in the existing vehicle the main for environment and excise, but especially with the new material in our end, we will be able to satisfy not the policy but the quality demand from certain applications was already performing totally by the price expectation of capital and also the too additional in the next slide. R&D is working very well in a very slow collaboration with production in sales and we were focused on real opportunities, real market and customary way. So we are not checking all the graphene opportunities without a real connection with the market. Now if we move to the slide covering production, as I told you, this is the most important move we made. And let me try to explain on the upper side of the slide, there is the old system on the bottom of the [indiscernible] one. What are the reasons to change from our system to the other? The reason are a very simple, inability to produce nano graphite. And the take on a more importance, we start to realize that some of our key competitors were capturing our market offering at nano graphite material. So we decided to move on all design that has six parameters so that was utilizing a kind of algorithm maximizing the input of energy to an significant amount of [indiscernible] placement. So I input local activity and a fixed number of morphology, moving to a new design where we prioritize what we can define the adaptive control logic. So we are able us to adapt the process during the production phase and to adapt the process also to defense [indiscernible]. This is key to get important -- very important reduction to get further increase. We have the full automation before the word -- minor automation in [indiscernible] department. We have a fast -- very fast setup change so we can move from one [indiscernible] to the other. And we have also a new training process that is able with very high pressure water to clean the entire production line and also to keep the material that normally was eliminated as a raw material for immense production. And we -- as I mentioned, we can work on the [indiscernible]. The last comment I want to make is that if you look at the third box in the bottom part of the slide, we are moving from the OpEx portion to what we call additional exfoliation and interlocking. What does it mean? We are able now to put together different materials. So we are able to cover a specific material with our graphene, adding binder and another product and satisfy mainly most is [indiscernible] in the battery arena. So the plant has been reconfigured as an integration platform fully automated. And doing this activity, we decided to certify [indiscernible] which is a very important step because nowadays, we can license the technology anywhere in the world and opportunities to license the technology right now. Giorgio Bonfanti: So as in said, we upgrade our production plans are a change for us because we'll have maybe two [indiscernible]. The first one is the fact that we review our direct production costs, as we said, did with our [indiscernible] revising [indiscernible] our price business to get either access to move to the market depending on the merits coming at location. And the second point is the fact that we will be able to produce new kind of products. So we'll have two different categories. The GiPave traditional products, we looking [indiscernible] for higher performance and higher price [indiscernible] somatic application in high potential. But at the same time, we will also ask as scenario [indiscernible] and branded materials margins. with higher volumes for industrial application. So we'll have a double offering. And in this slide, we try to summarize very briefly the main difference between the two categories. Giulio Cesareo: Yes. Let me tell you that the bond rate between graphene and nano graphite is many cases is very thin. And if you look at the upper part of this slide, below the layer, we have a nano [indiscernible]. So for us, different [indiscernible] is number of staff within [indiscernible] you can't pass a system that is designed to produce productivity at a proper level, we are able to really to practically reduce the number of debt and that creates a material that is top quality, but at low cost. The key markets are always between energy, advanced composite, textile, graphene [indiscernible]. But for example, in battery capitals, we are posed to produce a very interesting specific material our USA partner. And now we will move into the battery anode arena with the nano graphite. Position in the one side is tailor-made on the other is volume based and the compound annual growth for nano placement in graphene, between 35% and 40% and [indiscernible] between 10 and 15 all nano graphite. Giorgio Bonfanti: Okay. The next slide, we try to recap the most important opportunity in terms of sales and cost in our pipeline on this so many vertical. The first one is that on the [indiscernible] remediation. We had a couple of important opportunities. The first one is we find [indiscernible], which is the long-standing contract. We've been using [indiscernible] for a number of contract with them. Now there are people who [indiscernible], well they own in ground. It's a 20-year exposure. We actually commissioned 30,000 wells, and we are -- we have an open discussion with [indiscernible] value for sector, but this will be very [indiscernible] for us. The second one is with scenarios remain for a total with management contract. We submit an offer of EUR 2 million per year. So we are waiting for the outcome of the [indiscernible] will start from January 2026. On textile, we said, we keep working in the warframe applications because those are applications where we believe that our growth and technology can be appreciated the most. One key here is the fact that, as we said, that we won our first sole source contract with a leading governmental defense agencies. And not sure if you want to add. Giulio Cesareo: Yes, we are very proud because it's a very large agency. It's not an Italian agency. There is the previous -- we are not allowed to disclose any information because we committed ourselves personally to avoid any flow not of the informational side, but the leverage is on significant properties of our materials [indiscernible] by this agency to deploy [indiscernible] without intermediary products at Directa and start to work with us. Giorgio Bonfanti: The next one is on Setcar. Giulio Cesareo: Yes. Setcar [indiscernible] in progress [indiscernible] as objectives. The first one is the short term is almost completed. We have a new Board, a new governance. We report to a new general manager. We need financial sales, and we are looking for a couple of new executives to reinforce the organization. We continuously optimizing the workforce we projected to introduce new talent. Since June '24, we moved from 164, 465 people, down to June '25 to 144, and the objective by the end of this year is to be in the range of 130 or below. We are working on contract portfolio, removing the low-margin contract with a lot of focus on strategic agilities that are not anymore in the area of the Directa [indiscernible]. But the medium-term objective is to explore these opportunities keeping in the portfolio, customers and materials that either maximize Directa technological expertise or generating significant profit. Let me make an example, Setcar technology to decontaminated that transformer with PCB oil that is working very well in generating the profit we can move to a graphene technology, but this process is working well. The equipment is almost unique. So we don't want to lose this business opportunity. With regard to looking ahead, as I mentioned, refactoring still in progress. Timing, unfortunately, open exports to external factor. One example, we got a MIDIA order of EUR 1.5 million is -- has been structured on the part has the ability to decontaminate the drilling platform from hydrocarbons during all the activity, but the drilling platform was supposed to move from the Middle East to the Dead Sea and [indiscernible] of passing via Suez Channel. Nobody wants to insure them so they will have to make a longer freight, and this could generate a delay. The only other pending significant content for this year is the full contract that is in all the customer of Setcar. With regard to R&D, as I mentioned, we are focusing on real opportunities, existing market. We have six projects ongoing. One is covering the lens with global companies. We work to reinforce polymite composite in order to be using [indiscernible] transmission and we discovered that the lens adapt the [indiscernible] graphene is significantly improving the impact of the distance. So now we are targeting polycarbonate lenses that are a very significant market for the expense and safety. The other important area where we are moving quite fast is [indiscernible]. You probably know that [indiscernible] is [indiscernible] for every [indiscernible] very dangerous, and they are being utilized in different industries to leverage their properties to exist with water in oil. We are developing, and we finally design a filter to remove [indiscernible] from water. And we are already working in defense area. We are working in pharma area, facing and shaping the remove of contaminant in the pharma water, agriculture and semiconductors. And we have also develop with the support of the external farmer, a pilot the contamination units that can be offer to different industries and different customers. We are moving also back to the entire arena and starting with [indiscernible] tariff, but we are also testing and working with very large Taiwan factory and the test are still moving on. We have a big electronic conglomerate working with our glass polycarbonate enhanced for gaming devices. We have integration our new materials into batteries, working with our NAND [indiscernible] battery company and partner in [indiscernible] to U.S.A. next week to bring down some very close business opportunity with them. And last, we developed an HVAC system that will capture again of a normal conditioning system, not just the articles, but will have a make [indiscernible]. Giorgio Bonfanti: Just a couple of times mark on the market and outlook starting from the market, we would like to represent the chart on the left of this slide, which really shows that it was the market expect explore in terms of [indiscernible] graphene on the market. One key here to highlight is the patents, we believe that we are well positioned to manage from the market growth because we have on the market. They have a stronger portfolio and we have a strong know-how thanks to our work with me over the last few short. We are expert in producing the team. We need to rely on our departments in order to leverage on their team knowledge in the technical of a basis and the commercial network to accelerate the cooling [indiscernible] on the market. Giulio Cesareo: We got some closing in comments. The first one back to the upgraded production line. This is by far the most important move we made with the object to really consolidate the acquisition on basis. grow and there remains a core sector that we denied on batteries where as a mission we are having with some very interesting products and [indiscernible] opportunity. We consider the momentum very good. As I mentioned at the beginning, the index -- all the different index are showing an incredible attention to graphite and graphene, and some countries are also starting projects to be open graphite mine and to design a new graphene industry. And of course, we are open to offer our technology in license. And the Board really is convinced, I'm confident that we will deliver the year-on-year EBITDA improvement that the market is waiting for us. So let me say that without any doubt the future, it's no longer a different horizon, but it is unfolding now, and we are ready to chase it. I think that at this point, we can stop and wait for question. Operator: [Operator Instructions]. While the company take a few moments to read those questions it today, I would like to remind you the recording of this presentation, along with a copy of the slides [indiscernible] published Q&A can be accessed via your investor dashboard. Giulio and Giorgio as you have received a number of questions for today's presentation, Giorgio, you may now come back to you to share the Q&A, and I'll pick up at the end. Thank you. Giorgio Bonfanti: Okay. So I will read some questions. On the top of your H1 revenue is high, what capability do you have for 2025 and beyond? All we can say is that approximately EUR 6 million of our revenues on the related private current supply regarding the long-time variance that you've been working for more than 3 years now. So we believe that we have solid base of recurring customers. Of course, we should be not so comfortable for the next year in terms of revenue growth, as we said, we expect to keep growing with at least a double-digit growth as we eager to wait 2025 competition [indiscernible] for also next year. I feel there are a couple of questions about EBITDA. So the one that would say what are the robust to achieving breakeven [indiscernible] still make a full and another [indiscernible] similar questions. So I will have to suggest -- we [indiscernible] organization that we are inventory, maybe two different levels, different level response, that is [indiscernible] keep growth in the business, in the markets with the contract. I mean we believe that we have a good pipeline for the coming out year. In parallel to that, we are keep increasing our gross margin and reducing our production cost stocks and the intervention and upgrades to the line are fundamental, and we are achieving good results on that, but also come optimization with positive results. So we believe that we are eager to reach the EBITDA breakeven in the short term. Giulio Cesareo: And let me add that some of this new opportunity, especially the defense one, could really explode the turnover, if we will continue with this growing phase that is not just testing, but we are moving very close to significant number. Of course, we don't know exactly what is going to happen and when. But in any case, we see differently from the past that between starting an opportunity because we have the products because we have the material because when the patient we will have, in most of the cases, the price, the time is much, much closer -- on our side of [indiscernible] probably is doing the right thing on the other because the star global companies as dejected the concept and the largest behind the nano materials in graphene. Giorgio Bonfanti: Another question is our carbon is a sole technology across different countries, and we disclose key times to the market, we have acquired Setcar create a use case for the [indiscernible] of graphene on the market. So what couple and provide [indiscernible] services to the market, [indiscernible] and after that [indiscernible]. So the two ways, but it's probably more probable in July [indiscernible]. So we are putting place -- thanks to our [indiscernible] portfolio, we have put in place that we're working on potential market in the future of the results. Another question is how strong is your IP portfolio and how you would continue to [indiscernible] business? Giulio Cesareo: Yes, there are people [indiscernible] stronger. We are finding some ideas, but now, especially now with this [indiscernible] opportunities, we are investing a lot in rocks. So instead of filing that at the present point, we'll disclose some key information. We are keeping everything confidential. We are created the first business unit with a limited number of people. I mean we are very, very protected area covering the important information. Other places like [indiscernible] like some of the new materials, we will continue to file as we did in the past. Giorgio Bonfanti: The question is, what is your expected timeline for the rate revenues from the nano type product plan? Giulio Cesareo: We react to move almost or not immediately because I presented in one of the slide, the border between the two material is so thin that it's just a question to go back to some of the cash already tested our graphene material, offering them in nano graphite at an interesting new price, and we expect they will place the order. So we have a very clear on this. Giorgio Bonfanti: Okay. I think we answer all the questions. Operator: That's great. Giorgio and Giulio, if I may, just jump back in there and thank you for addressing all these questions from investors today. And of course, the company can review your questions submitted and will publish the responses on the investment company platform. With Giulio, before I redirect investors to provide you with their feedback, which is particularly importance to the company. Could you please just ask you foresee closing remarks to wrap up. Giulio Cesareo: Yes. Let me mention a statement quite the way up and the way down are one and the same. What we're [indiscernible] at are now the very steps of our [indiscernible]. This was mentioned by [indiscernible] 500 years before Christ. And I think it's really valid for ejecting company like Directa. And I would like to add a very short and various people comment on my side, come and ride with us. Operator: That's great Giulio, Giorgio. Thank you once again for updating the investors today. Could I please ask investors not to close this session as you have automatically redirected to provide your feedback and although that the Board cannot understand you and expectations, this will only take a few months complete and shortly at early by the company. On behalf of the management of Directa Plus Plc, we'd like to thank you for attending today's presentation, and good afternoon to you all.
Operator: Ladies and gentlemen, welcome to the Preliminary Results 2025 Conference Call. I'm Lorenzo, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mike Morgan, Group Chief Executive. Please go ahead. Mike Morgan: Thank you, Lorenzo, and good morning, and welcome to the presentation of Close Brothers 2025 Preliminary Results. I'll begin with an overview of the year. After that, I will hand over to Fiona McCarthy, our Group CFO, who will walk you through our financial performance, and then I'll return to update you on our strategic priorities and wrap up the presentation. We'll be happy to take your questions afterwards, both via the telephone conference line and over the webcast. You can submit your questions either during or after the presentation. This year has shown that change is possible and that we can move at pace. We've strengthened our capital position, reshaped the portfolio and addressed legacy issues. Our performance demonstrates the resilience of our business model and the impact of these actions. We're also encouraged by the growth opportunities across our chosen markets, which I'll touch on shortly. We significantly strengthened our capital position with over GBP 400 million of CET1 capital generated or preserved since March 2024. At the 31st of July 2025, we achieved a CET1 capital ratio of 13.8% or 14.3% following the sale of Winterflood. This is after taking account of the impact of the motor commissions provision and the actions taken to simplify the group and address legacy matters. We've already delivered GBP 25 million of annualized savings by the end of FY '25, ahead of initial guidance. Today, we're announcing that we will deliver at least another GBP 20 million of additional annualized savings in each of the next 3 years, a total of GBP 60 million. We have also simplified the group through the sale of Close Brothers Asset Management, Winterflood and Brewery Rentals. And we've repositioned our premium finance business towards commercial lines, where returns are more attractive. As part of this agenda, I can announce today that we are exiting our vehicle hire business, a loss-making business that is not aligned with our core specialist lending expertise. Together with the impact of declining asset values, this has resulted in an asset impairment charge of GBP 30 million. We have concluded legacy matters regarding Novitas through securing settlements with insurers at a small premium, allowing us to draw a line under the issue and move forward with the exit of this business. Our wide-ranging review of the business has also required us to take other challenging but necessary actions. We are implementing a proactive customer redress program in Motor Finance, where we have identified historical deficiencies in certain operational processes in relation to the early settlement of loans. This has resulted in a provision of GBP 33 million separate to the broader sector-wide redress scheme being considered by the FCA. Since identification of the issue, we have acted quickly to amend the relevant processes and are fully committed to ensuring affected customers are appropriately compensated. In terms of the Motor Finance provision, Fiona will take you through this in more detail. But in summary, the provision has been reassessed in light of all available information, including recent developments and remains unchanged. We welcome the positive outcome of the Supreme Court judgment, which provided much needed clarity to the industry and now await the outcome of the FCA consultation on the design and scope of an industry-wide redress scheme. The actions we have taken in the year created a sharper, more focused portfolio of specialist banking businesses, well positioned to deliver growth and stronger returns. Let me take a step back and show you how the group has been [indiscernible]. This time line illustrates our transition from a diversified merchant bank to today's more focused specialist bank and where we are heading next. First, the fundamental strengths of our business model, which haven't changed. They include our consistent lending criteria with disciplined underwriting and pricing applied through the cycle, a customer-centric approach built on long-standing relationships with straightforward products and services and prudent management of our financial resources. The more recent phase where we've essentially been resetting the business to drive stronger returns even while navigating the uncertainty around motor commissions. Recent events meant we had to protect this valuable franchise. We built and preserved a significant amount of capital through the management actions announced in March 2024. We've also taken decisive actions to address legacy issues, reduce costs and reshape our portfolio. While these actions clearly have a near-term impact on our financial performance, they put us firmly on the right path for our next phase towards stronger returns. And finally, looking ahead to the next phase, with our simplification agenda largely complete, our attention now turns to driving efficiency, which we have termed as optimize and capturing growth, which we have termed as grow. There is more we can do, and I will talk shortly about our plans to deliver a step change in profitability. In parallel, we are evaluating opportunities to optimize capital, funding and liquidity. We see attractive growth opportunities across our businesses. We intend to use our market presence, brand reputation and specialist expertise to win in the segments where we can truly differentiate and become the specialist lender of choice for SMEs in the U.K. and Ireland. Having walked through our journey so far, let's look at what this means for the story of the group going forward. We operate in strong positions within attractive and large target markets. The SME lending markets in the U.K. and Ireland remain underserved and underpenetrated. And that gives us clear opportunities to grow. Second, we're now a focused specialist bank serving a valuable customer franchise. Our customers need specialist expertise and strong customer relationships and our trusted brand and high-touch service model allow us to differentiate and win. And third, we recognize that returns are not yet where they should be. That is why we have clear plan and strategic priorities: simplify, optimize and grow. I'll come back later to give you more detail on each of these priorities, but the point is that we have now a simpler, more focused portfolio and a leadership team focused on delivery. We are well positioned to reduce costs, drive growth in our chosen markets and improve returns. I'm confident together, these actions set a clear path back to double-digit return on tangible equity by the 2028 financial year and rising thereafter. Thank you. And I will now hand over to Fiona to cover our financial performance in the 2025 financial year. Fiona McCarthy: Thank you, Mike, and good morning, everyone. I'll be taking you through financials this morning. Before I go into more detail, I would like to highlight that the financial information is being presented on a continuing operations basis. The headline numbers exclude Close Brothers Asset Management and Winterflood, which have been classified as discontinued operations in the group's income statement for the 2024 and 2025 financial years. They also exclude Close Brewery Rentals Limited and Close Brothers Vehicle Hire, which have been treated as adjusting items. We reported adjusted operating profit of GBP 144 million in the 2025 financial year, reflecting the impact of actions taken to strengthen our capital position and simplify the business and a return on average tangible equity of 7.1%. This equated to an operating loss before tax of GBP 122 million. This was mainly driven by the GBP 267 million of adjusting items, which includes the GBP 165 million provision in relation to motor finance commissions. It also includes operating losses before tax from the group's rentals businesses and a provision for a proactive customer remediation scheme in relation to early settlement of loans in Motor Finance and some additional cost items. I will go into more detail on the adjusting items later. Notwithstanding the loss, we've maintained strong capital funding and liquidity positions, ending the period with a CET1 capital ratio of 13.8%, which is 14.3% on a pro forma basis, including the expected benefit from the sale of Winterflood. In Banking, we delivered GBP 198 million of adjusted operating profit, reflecting a resilient underlying business performance and our continued focus on cost. The operating loss in group central functions increased to GBP 54 million, slightly below guidance. The loan book reduced 4%, primarily due to loan book moderation in the earlier part of the year. The net interest margin was strong at 7.2% and credit quality remained resilient with a bad debt ratio of 1%. As of 31st of July, we have achieved annualized cost savings of GBP 25 million against an initial target of GBP 20 million. I will come on to talk about costs in more detail later. Turning now to the provision in relation to motor finance commissions. In early August, the Supreme Court delivered its judgment in respect of Hopcraft. We welcome the outcome of the Supreme Court's judgment, but uncertainty remains until the FCA confirms the design and scope of an industry-wide redress scheme. An update from the FCA on its consultation is currently expected in early October. In the first half, we booked a provision charge of GBP 165 million in respect of motor finance commissions. We have reassessed this provision in light of recent developments, and it remains unchanged at GBP 165 million. I would note that this is the best estimate based on all currently available information and the ultimate cost to the group could be materially higher or lower. The operating loss for the year has been significantly impacted by adjusting items. Firstly, we have the provision charge related to motor commissions of GBP 165 million, which I've just covered and is unchanged from the first half. It covers estimated operational and legal costs and potential remediation for affected customers. There are a number of other adjusting items. Firstly, as Mike mentioned, we have decided to exit our Vehicle Hire business, which has been loss-making in a challenging market environment. Together with the impact of declining asset values, this has resulted in an impairment charge of GBP 30 million. The total operating loss of GBP 43 million in the financial year also includes an GBP 11 million underlying loss and a GBP 2.5 million impairment on intangible assets. The business will be wound down over 3 to 5 years. Secondly, we are also implementing a proactive customer remediation program in Motor Finance, where we have identified historical deficiencies in certain operational processes in relation to the early settlement of loans. This has resulted in a separate provision of GBP 33 million in the 2025 financial year. We have also incurred GBP 18.7 million of costs for complaints handling and other operational and legal costs in relation to motor commissions. This included increased resourcing to manage complaints and legal expenses, notably those related to the Supreme Court appeal as well as the unwinding of the time value discount in relation to the motor finance commissions provision. This was lower than the guidance provided at the half year 2025 results of GBP 22 million as we successfully deployed automation and artificial intelligence to enhance accuracy and speed in complaints handling. In the 2026 financial year, we expect these costs to be in the single-digit millions. In addition, the Brewery Rentals business, which was sold in July with completion occurring after the end of the financial year, reported an operating loss before tax of GBP 4.1 million. We also incurred GBP 2.3 million of restructuring costs, which mainly relate to redundancy and associated costs, in line with our guidance of GBP 2 million to GBP 3 million. And finally, we recognized GBP 0.2 million of amortization of intangible assets on acquisition. Turning now to the income statement, covering the performance on an adjusted basis. Adjusted operating income reduced 2%, driven by a marginal decline in Banking income as the loan book reduced and lower group net interest income. Adjusted operating expenses rose 3% as cost savings were offset by higher group expenses, mostly driven by legal and professional fees related to motor finance commissions. These amounted to circa GBP 10 million. Credit performance was resilient and impairment charges decreased 6% to GBP 92 million, which reflected an impairment credit in relation to Novitas. Overall, adjusted operating profit was down 14% to GBP 144 million. Profit after tax from discontinued operations, which includes CBAM and Winterflood, was GBP 49 million. The group will not pay a final dividend for the 2025 financial year. As previously stated, the decision to reinstate dividends will be reviewed once there is further clarity on motor finance commissions. Now highlighting the key metrics from across the Banking division on a continuing basis and excluding the Brewery Rentals and Vehicle Hire businesses. We saw a small decrease in income, mainly driven by loan book moderation measures as well as the runoff of the legacy Republic of Ireland Motor Finance business. The loan book declined 4% year-on-year to GBP 9.5 billion, driven by the temporary pause in U.K. motor lending, loan book moderation measures and lower activity in some of our markets in the second half. The net interest margin remained strong at 7.2%, although it was down 20 basis points, reflecting continued pressure on new business margins and changes in lending mix. Expenses increased 1% as cost savings were broadly offset by wage inflation and spend on technology and expansion of capabilities across the business. Overall, adjusted operating profit reduced 7% to GBP 198 million with a statutory operating loss of GBP 68 million for the full year, largely reflecting the GBP 267 million of adjusting items. Now looking at each of the businesses in turn. Firstly, Commercial. Income was broadly flat on the prior year, notwithstanding a 2% reduction to GBP 4.7 million and NIM marginally lower at 6.6% as the FY '25 average loan book was 2% higher. Expenses decreased by 1%, mainly driven by the benefits of cost-saving initiatives, including workforce rationalization in asset finance, partially offset by higher IT spend and depreciation. And the bad debt ratio decreased to 0.4%, driven by an impairment credit from Novitas. Adjusted operating profit increased 16% to GBP 112 million, largely driven by higher income in Novitas. Excluding Novitas, adjusted operating profit was broadly flat at GBP 96 million. Moving on to Retail. Income was down 6% due to lower loan books in both Motor and Premium Finance. The net interest margin decreased to 8.3%, driven by reduced fee income in Motor Finance and a competitive rate environment. Expenses increased 3%, primarily driven by Motor due to growth in the Irish business and inflationary pressures, partially offset by a modest reduction in premium from lower property, technology and volume-related costs. The bad debt ratio decreased marginally to 1.5%. And adjusted operating profit reduced 50% to GBP 19 million, reflecting the lower income in both businesses as well as higher costs in Motor Finance. The strategic repositioning announced in July will focus the growth of our Premium Finance business towards commercial lines insurance premium finance, where we see the strongest risk-adjusted returns and long-term growth potential, reducing our emphasis on personal lines insurance premium finance. Finally, in Property, income was down 2%, reflecting a year-on-year loan book reduction of 5% to GBP 1.9 billion. The NIM also decreased to 6.9%. This primarily reflected lower interest yield driven by the lower Bank of England rate, lower fee yield due to increasing facility utilization and changes in the lending mix with larger loans accounting for a greater share of new business. Expenses were down 3%, driven by lower staff costs and the bad debt ratio increased to 1.5%, reflecting increased individual provisions on a small number of developments driven by build cost inflation, slower unit sales and lower realized values. Adjusted operating profit was GBP 67 million. Moving to the loan book. Overall, the loan book reduced 4% to GBP 9.5 billion. This was driven by the temporary pause in U.K. motor lending and loan book moderation measures as well as lower activity in some of our markets in the second half. Notwithstanding this decline, customer demand remained robust and business was turned away in the first half due to the loan book moderation. Commercial book reduced 2% to GBP 4.7 billion. Asset was down GBP 98 million due to lower volumes and large terminations in the Industrial Equipment division. Invoice and Speciality Finance decreased 1% over the year, including a GBP 62 million reduction in net loans related to Novitas following the settlement of long-standing litigation in this business. Excluding Novitas, the invoice finance loan book was up 4%. The Retail loan book declined 5%. Notwithstanding continued robust underlying demand, the Motor Finance loan book decreased 1%, reflecting loan book moderation measures and a temporary pause in U.K. motor lending. The premium book declined 14%, reflecting the competitive market environment and reduced demand for premium finance from some of our broker partners. And the Property loan book decreased by 5% due to higher repayments and lower drawdowns as well as lower balances in commercial acceptances, reflecting a more challenging economic environment, which was particularly impacting the SME developer market. While the last financial year has been impacted by loan book moderation measures, we see continuing demand in our markets. We have repositioned the business to focus on segments where we see mid- to high single-digit growth potential through the cycle, leaving us well positioned to benefit as the economy and demand recover. Turning to our net interest margin, which remained strong overall at 7.2% as we maintained our focus on pricing discipline. On an underlying basis, which excludes the year-on-year increase in Novitas income and favorable movements in derivatives, the NIM reduced approximately 30 basis points to 7.1%. This reflected continued pressure on new business margins from elevated SME funding costs in a higher rate environment, together with the impact of the resulting changes in lending mix with larger, lower NIM loans accounting for a greater share of new business. As Mike has highlighted, one of our key priorities is improving returns. Whilst we will continue to manage the overall risk-adjusted returns, we remain committed to maintaining a strong NIM. Looking forward, we expect the net interest margin to be slightly lower than 7%, reflecting loan book mix impacts. Moving on to costs, where we've made good progress whilst recognizing there is much more to be done. Since March 2024, we have delivered GBP 25 million of annualized cost savings through streamlining of our technology, suppliers and property and workforce, which generated a GBP 15 million year-on-year P&L benefit in the 2025 financial year. Overall, adjusted operating expenses increased 3%. This was primarily driven by increased legal and professional fees reported in the group segment. In the 2026 financial year, these legal and professional fees are expected to reduce. In Banking, adjusted operating expenses increased 1%. Cost savings were broadly offset by wage inflation and spend on technology and expansion of capabilities across the business. In the 2026 financial year, Banking adjusted operating expenses are expected to be slightly higher, reflecting wage inflation and investment spend, largely offset by cost savings. The group is committed to maintaining cost savings momentum to deliver a step change in operating profitability. We will deliver at least GBP 20 million of additional annualized savings per annum at group level in each of the next 3 years. Mike will come back later on to talk about future costs in more detail. Turning now to our resilient credit performance. The bad debt ratio was stable at 1% and remained comfortably below our long-term average of 1.2% as we recognized GBP 92 million of impairment charges. This included an impairment credit in relation to Novitas and a reduction in Retail driven by more favorable macroeconomic impacts, partly offset by an increase in Property due to an increase in individually assessed provisions. Looking forward, we continue to closely monitor the evolving impacts of inflation and the cost-of-living pressures on our customers. We remain confident in the quality of our loan book, which is predominantly secured or structurally protected, prudently underwritten and diverse and supported by the deep expertise of our people. In FY '26, we expect our bad debt ratio to remain below our long-term average of 1.2%. Moving on to our balance sheet, where we continue to follow our prudent approach to managing financial resources. We maintained a strong balance sheet with total funding of GBP 12.7 billion. We consciously held a higher level of liquidity with GBP 2.8 billion of treasury assets and a liquidity coverage ratio of 1,012%. We have maintained strong access to funding markets and have raised GBP 300 million through a Motor Finance funding securitization. Our funding base is diverse across wholesale markets and a mix of retail and nonretail deposits. In line with our strategy, we continue to actively grow our customer deposit base in the year with Retail deposits up 20% to GBP 6.8 billion. We are continuing to benefit from diversification of our savings product offering. We launched Easy Access in 2023 and balances at 31st of July 2025 stood at over GBP 800 million. In line with our conservative approach, our deposits are predominantly term with only 13% of deposits available on demand. Our average cost of funding reduced marginally to 5.4%. And our credit ratings remain robust. They continue to reflect our inherent financial strength and consistent risk appetite, notwithstanding the current uncertainty around the FCA review of motor finance commissions. Finally, turning to our capital position. In March 2024, we announced a series of management actions aimed at strengthening the group's available CET1 capital by the end of the 2025 financial year. The CET1 capital ratio increased from 12.8% to 13.8%, mainly driven by the sale of CBAM, profits attributable to shareholders and a reduction in loan book RWAs. This was partly offset by the provision in relation to motor finance commissions, the early settlement provision in Motor Finance, the post-tax loss in the group's Vehicle Hire business and AT1 coupon payments. In addition, the sale of Winterflood is expected to increase the group's CET1 capital ratio by circa 55 basis points on a pro forma basis from 13.8% to 14.3%. The leverage ratio also increased to 12.9%. In January 2025, the PRA announced a 1-year delay to Basel 3.1 implementation, pushing the effective date to the 1st of January 2027. We continue to estimate that the implementation will result in an increase of up to 10% in the group's RWAs. The group expects to receive a full offset in Pillar 2a requirements at total capital level of the removal of the SME supporting factor. As such, we expect the U.K. implementation of Basel 3.1 to have a less significant impact on the group's overall capital headroom position than initially anticipated. In the near term, we expect to maintain our CET1 capital ratio above the top end of our medium-term target range of 12% to 13% based on our current assessment of the provision in respect of motor finance commissions. In conclusion, I want to reiterate that our underlying performance remains resilient. Our financial position remains strong, and we have a clear focus and commitment on driving strong, sustainable risk-adjusted returns. Thank you, and I'll now hand back over to Mike. Mike Morgan: Thank you, Fiona. I'd now like to turn to our strategic priorities again and give you an update on the progress we've made since we first set them out when I took over the role of CEO. Let me start with simplification. This was about creating a sharper, more focused portfolio of specialist lending businesses. And to do this, we applied 3 simple tests to each of our portfolios. First, is the business aligned with our business model? And does it therefore fit with the fundamental strengths which differentiate us? Second, does it offer the right returns and support the group's overall ambitions on returns? And third, does it operate in markets that are attractive for future growth, where we either have or can build a strong position and the ability to scale? With those tests in mind, we carefully evaluated our portfolio to maximize future returns and the outcome was clear. We sold CBAM, Winterflood and our Brewery Rentals business and repositioned our premium finance business towards commercial lines. These portfolio actions reduced our cost base by around GBP 230 million, enabling us to further streamline our operating model and central costs going forward. Today, we're also announcing the decision to wind down our Vehicle Hire business. It has been loss-making in a challenging market environment and has limited strategic fit with the rest of the group. This decision and the decline in asset values led to an impairment charge of GBP 30 million. Our simplification agenda is largely complete, and we can now focus on optimizing the business and delivering growth. Turning now to our optimization agenda, a key focus as we drive efficiency and improve returns. I will personally oversee the planning and execution of these cost initiatives. And we have mobilized senior leaders across the group to ensure execution at pace and alignment at every level. We have already delivered GBP 25 million of annualized cost savings by the end of FY '25 through streamlining of headcount, property and suppliers, and are committed to maintaining this momentum to deliver a step change in operating profitability. We will deliver at least GBP 20 million of additional annualized savings per annum in each of the next 3 years, totaling GBP 60 million overall. These savings will come from further consolidation and rationalization of centrally provided functions, outsourcing and offshoring and simplifying our technology. This includes automation and the use of AI. As a result, we expect group adjusted expenses to be within the GBP 410 million to GBP 430 million range by the 2028 financial year. We've already identified GBP 20 million of annualized savings expected by the end of FY '26. These will come from lower legal and professional fees linked to motor commissions and optimizing the cost base of our premium finance business after its recent strategic repositioning. We're also continuing to optimize headcount and property. And as a result, we expect group adjusted expenses to be in the GBP 440 million to GBP 460 million range. Turning to our growth agenda. We're sharpening our focus as a specialist bank to reinvest where we see the greatest potential. We are confident in the growth opportunity across our chosen markets. In the earlier part of the year to preserve capital, we had to turn away attractive new business that met our credit and pricing requirements, and this demonstrates the continuing demand in our core markets. Accordingly, we are taking steps to capture this. In Commercial, we're building on our strong market positions as the U.K.'s largest independent provider of both asset and invoice finance and deep sector expertise. We see clear opportunities to grow mature businesses like Invoice Finance and Energy, while scaling newer areas such as commercial mortgages and agriculture. In Retail, we're expanding Motor Finance through growth in Ireland and deeper partnerships with brokers and dealers. In Premium Finance, we're targeting new broker relationships and insurer partnerships with a renewed focus on commercial lines and strategic accounts. And in Savings, we're enhancing our digital offering and broadening our retail reach while continuing to support a diverse funding base. In Property, despite a tougher build-to-sell environment, structural demand for housing remains strong, and we're well placed to respond. We're broadening our offering into build-to-rent and purpose-built student accommodation and moving into larger build-to-sell loans where we see long-term opportunity and attractive returns. Taken together across Commercial, Retail and Property, we have repositioned the business to focus on markets where we see mid- to high single-digit growth potential through the cycle. This leaves us well placed to benefit as the economy and demand recover. With our strong market positions, reputation and specialist expertise, we're confident in our ability to win in the segments where we can truly differentiate and become the specialist lender of choice for SMEs in the U.K. and Ireland. Bringing all 3 strategic priorities together, we now have a clear pathway to double-digit RoTE rising thereafter. The bridge here shows how we move from today's RoTE to our medium-term ambition. First, simplification. The actions we have already taken are partially reflected in today's reported returns. Further improvement, however, will come from our reshaped, more focused and higher-returning portfolio. Second, optimization. The cost reduction program we've launched will deliver material savings, improving profitability. And third, growth. We have repositioned the business to focus on segments where we see mid- to high single-digit growth potential through the cycle. This leaves us well positioned to benefit as the economy and demand recover. In parallel, there is additional value to unlock through optimization of capital, funding and liquidity. We'll provide a full update on our pathway to rising return on tangible equity once there's clarity on the outcome of the FCA's consultation and its impact on the group, likely early next year or sooner if clarity comes earlier. This brings me to the end of today's presentation. We've taken decisive actions to protect our core business and have a strong capital position. We're moving at pace even while navigating the motor commissions' uncertainty. We've resolved legacy issues, reshaped the portfolio and simplified the group. We have a clear strategy and pathway to rebuild returns over the next 3 years. Our focus is on execution, supported by a leadership team with the right experience to deliver. Thank you. And I'll now be happy to take any questions that you may have. Operator: The first question comes from the line of Ben Toms from RBC. Benjamin Toms: First one is in relation to your GBP 33 million provision, the proactive remediation in Motor Finance from early settlement of loans. I don't want to oversimplify the issue, but it sounds like someone somewhere was doing a calculation wrong over a kind of material period of time. How confident are you the issue is now contained, both from a Motor Finance perspective? Can you also confirm that you've checked you're doing the calculation right in other product lines? How far back were customers impacted by the issue? Could there be a regulatory fine from this? And then secondly, if we just take a step back and we think about an underlying basis ex all of the noise, do you expect PBT to be up '26 over '25? And to what extent is management's remuneration now linked to hitting that double-digit RoTE in 2028? Mike Morgan: Okay. Thanks, Ben. I'll take the first question on the GBP 33 million. So this is an issue that we identified in Motor. It relates to the early settlement of [ loans ]. And what has happened over a period of time is that in instances where customers in settling a loan have overpaid, that overpayment has not, in all cases, been returned to customers. Now we've fixed the processes that sit around that. That process is peculiar to Motor Finance, and so I'm content it's contained within there. Clearly, it's not good, and I'm not pleased around this, Ben, but we have dealt with it. It goes back for quite a long period of time predating this management team. But what we have here is a large number of relatively low amounts going back over a period of time, and that's what this issue is. In terms of going forward, I'll ask Fiona to comment specifically on '26. Fiona McCarthy: Thank you, Mike. So Ben, we're not providing specific profit or AOP guidance for '26. I guess I'd encourage you to look at the guidance we provided more broadly. But what I would call out or just remind a couple of points, we put an announcement out about Premium repositioning into commercial lines back in July and the fact that we were, therefore, exiting or modifying our presence in the personal lines business and called out that, that would result in a runoff of the loan book there. That's circa 3% of our loan book and 4% of income. So we do expect that to run off over time. That will impact FY '26. The other element I'd call out is Novitas. So you'll see from our results that AOP in Novitas in FY '25 was GBP 16 million. That was partly a reflection of the settlement premium that Mike talked about earlier for the successful exit from the -- with the insurers, but also from income resulting from the unwind that we've seen in recent years, the unwind of the provision coming through. So both of those elements will provide a drag impact on FY '26 profitability, notwithstanding the growth that we've articulated and the cost savings that we've also outlined. Benjamin Toms: Just a follow up. So how incentivized the management now to hit that double-digit RoTE target in '28? Mike Morgan: I mean, management's remuneration is aligned in large part to a number of metrics, of which that is one of those. So that clearly getting returns up is critical to us. And so the obvious answer to that is that remuneration is aligned with that. Operator: [Operator Instructions] The next question comes from the line of Gary Greenwood from Shore Capital. Gary Greenwood: The first one was on the costs. And I'm just trying to sort of unpick what you previously said to what you're saying today. So I think you previously said on the premium finance that you're looking to take out GBP 20 million of costs there and there'll be a one-off cost of GBP 15 million to deliver that. So I'm just trying to tie that into the numbers that you've given today, the GBP 60 million. And I think you've talked about GBP 5 million to GBP 10 million of below-the-line costs in 2026. And then I guess also linked to that, just thinking about below-the-line costs, you've called out a couple today, but if you could just give us a feel for sort of overall what you think below-the-line charges are going to be in 2026 and then sort of whether there's going to be any tail sort of going through future years? And then the second question really was on reputation. And I guess, obviously, you've been through the mill over the last sort of 18 months or so. You've had to obviously sort of turn down business in the first half as you've highlighted. I just want to understand sort of how you sort of feel that's impacted the business from a reputational perspective and what you need to do to sort of win back confidence with customers and brokers. Mike Morgan: Thank you, Gary. Let me take the second one on reputation, first of all, and then I'll ask Fiona to pick up on the more specifics. I mean there is no doubt that over the last 18 months, the events that we have seen in the market have really shaken the organization quite significantly. Our plan was to put out capital targets of how we could build and build GBP 400 million. And I'm pleased to say that we have built that GBP 400 million buffer. And if you actually look where we stand today, we have a CET1 ratio of 13.8% or after Winterfloods, 14.3% against a 9% required level. So we've built up a very healthy buffer there. Probably the most disappointing aspect for me in all of this, Gary, has been the necessity to moderate loan book growth. And as we outlined at the half year, we have held back around about GBP 700 million of lending, which is deeply disappointing. It was generally to new, new customers rather than new existing. But nevertheless, it was disappointing. And of course, you have to bear in mind that following the Hopcraft judgment in October last year, we actually pulled out of Motor Finance for 10 days and then restarted again. I'm glad to say that the volumes now are back up to and actually ahead of where we were beforehand. So we can see that the demand is coming back. But nevertheless, it is disappointing not to support our customers. The reality for us, though, going forward, now in businesses having moved out of Vehicle Hire and moved out of Brewery Rental. We're in businesses which are core to what we want to do, and we believe that we can get growth of between 5% to 10% throughout the cycle there. The SME market is underserved in the U.K., and there is a real opportunity for the products and the services we provide. Remember as well, Gary, that typically Close Brothers would lend GBP 7 billion a year. We have a relatively short tenure on the loan book. So in the last year, we have lent GBP 7 billion. So there is a huge demand for what we do. And I'm very confident that going forward with this more focused sharper portfolio, we will see that demand return and we can grow. So that's my point on reputation. I think in terms of the specifics on the costs, do you want to pick that one up, Fiona? Fiona McCarthy: Yes. Thanks, Mike. Gary, so yes, just taking those in turn, as you mentioned in July, we outlined the Premium repositioning and that we would save cost of GBP 20 million over 5 years. And so absolutely, Gary, that GBP 20 million over 5 years, the appropriate proportion of that is embedded in the GBP 20 million annualized savings per annum over 3 years that we've articulated. So that is one component of the GBP 60 million there. In terms of the cost to achieve, we called out a lifetime cost to achieve that GBP 20 million of GBP 15 million of costs. That wasn't entirely an FY '26 cost item. And some of that, Gary, will flow through as an adjusting item in restructuring. Some of it is just part of our core investment portfolio as an enabler to those cost savings in Premium. So effectively, both the cost saving and the cost to achieve are included in what we've articulated today, both at the GBP 20 million per annum and the GBP 5 million to GBP 10 million that we've called out for restructuring costs in FY '26. And if I turn to the second part of your question on outlining what we believe the FY '26 adjusting items will be, per the guidance, we talk about single-digit millions of motor commissions costs. That compares to the GBP 18.7 million for FY '25 that you see reported. And on restructuring, we've called out the GBP 5 million to GBP 10 million, which is in support of the GBP 20 million per annum of cost savings. We have -- we do have the Vehicle Hire business below the line now, and that would continue to -- as we run that business down, its results and performance would continue to flow through adjusting. What I would say there, though, is that the GBP 30 million impairment that we have taken for Vehicle Hire that we believe that to be an appropriate and realistic best estimate of the loss that we will need to incur on this business. And in addition, we are in control and we'll manage that rundown. We have significant experience here. We sold over 1,500 vehicles in FY '25. So we are well versed in how to exit vehicles in this market and run that business down, and we will do so and manage that to optimize commercial value. Gary Greenwood: So there's still going to be the tail in terms of the charges beyond 2026, and that will be sort of further reset charges plus presumably sort of a smaller loss from that Vehicle Hire rundown, excluding the impairment charge. Is that the right way to think about it? Fiona McCarthy: So just to take those in turn, absolutely, in terms of the cost-out program, we would expect to continue to see restructuring costs flowing through beyond FY '26. At this point, I'm not pointing to any further losses coming through on the Vehicle Hire business. As I said, based on what we know and see now, we believe that the impairment sufficiently deals with that, but we will run that business down over the next 5 years and manage that carefully to optimize value. Operator: The next question comes from the line of Sanjena Dadawala from UBS. Sanjena Dadawala: Two, please. First, a bit more on the cost optimization program, including the phasing. So GBP 20 million of sales per annum over FY '26 to '28, but then putting it against the GBP 440 million to GBP 460 million guided for FY '26 from the GBP 445 million delivered in '25 suggests there's potentially front-loaded investment spend in this year and/or more cost inflation and then we get net savings going up to get to the GBP 410 million, GBP 430 million for FY '28. So if you could talk a bit more about that? And then secondly, some more detail around how the net loan book builds back up, given that there is a focus on segments with higher growth potential, but headwinds from Premium Finance repositioning and the potentially some lower demand near term, since the outlook for net loans will be important to determine the income trajectory and key to delivery of double-digit RoTE. Mike Morgan: Okay. Let me just touch on that second point further on the net loan. I think I touched on some of those points in the earlier answer I gave. But I do think that with this focus on the sectors that we are -- we believe are strategically aligned with our objectives, and we can get returns from those and create scale in those. We do feel there is good demand there. And as I say, we believe we can see over the cycle, 5% to 10% growth. Now it's fair to say, and you're quite right to point out, Sanjena, that there is some pressure around the SME segment right now. We're seeing interest rates that are higher for longer. Inflation remains stubborn. So costs are clearly -- we've got the impact of employers [ NI ] coming through from last September. We've got the minimum wage floating through. And of course, now we also have the budget coming through in late November. And what SMEs need is certainty. You can't plan if you don't have certainty. And if you're going to invest, you need to be able to plan. And so that's critical for them. And so right now, we are seeing a little bit of negative sentiment in that area. And of course, the media is pulling that out. So whilst we -- over the longer term and through the cycle, we'll sort of see 5% to 10% growth, clearly, that would be lower in the more immediate term. That would be my response on the loan book. In terms of the optimization, I'll let Fiona talk through the points in a bit more detail, but I'd just like to just sort of talk about it at a high level for a second. When I came into the role in January, we talked about these 3 strategic priorities, which I've just run through in my presentation, simplification, optimization and growing. And optimization is all around cost reduction and creating a scalable platform. As I said in my speech, this is something I will personally take responsibility for. We have brought a transformation manager in to work directly for me. The individual has many years' experience at that market, and it's something we are taking very, very seriously indeed. And that will be fundamental along with the growth to get us to the return on tangible equity of double digit. There are a number of ways we can take that cost out, just to give a little bit of flavor, looking at consolidation of functions, looking at outsourcing and offshoring, looking at simplification and rationalization of technology, looking at the rationalized -- further rationalization of Property portfolio. And I think what we're seeing quite significantly over the last year is the benefits that AI can bring. And one of the areas where we have benefited through motor commissions is the level of AI being employed in parts of our organization. Now so by way of example, if you look at the motor complaints that come in, 99% of those are dealt with through AI. So you'll get an unstructured letter coming through, and that can be translated into structured data and then dealt with. So AI is going to be fundamental going forward. So that gives you a sense of the flavor of what we'll be doing. But in terms of the specific numbers, Fiona, would you like to just talk to that? Fiona McCarthy: Absolutely. Sanjena, so just building on what Mike said there, we are committed to this -- the cost out that we've talked about, the GBP 20 million per annum over the next 3 years. We're committed to that. That doesn't fully reflect our ambition. We have a strong desire to do more than that, but that is what we feel is an incredible target effectively to put out today, but we will continue to build on that and challenge ourselves on that. In that context, Sanjena, and to your point, we've put guidance out there both for FY '26 and FY '28 in terms of the range of expenses. That absolutely does reflect the offset from inflationary pressures and other cost drivers. from the savings that we are targeting. And we -- at this point, we're guiding to, I guess, a reasonably wide range of GBP 410 million to GBP 430 million for FY '28. And so I just refer to my ambition point about where we aspire to get to, but we think the GBP 410 million to GBP 430 million is a very credible positioning at this point based on the GBP 20 million per annum of cost out and based on what we see in terms of inflation and other cost pressures. Operator: Ladies and gentlemen, that was the last question from the phone. I would like to turn the conference back over to Mike Morgan for webcast questions. Camila Sugimura: We have 2 questions from an investor. How does the Supreme Court ruling stand in light of the various scenarios you assumed when you took the GBP 165 million provision? Is it close to the base case or better or worse? And secondly, based on your current estimates, could you provide any relative guidance on worst case compensation costs? Mike Morgan: Let me deal with that generally, and then I'll ask you to talk about the modeling. I mean, clearly, we were pleased with the Supreme Court ruling. That was very, very helpful for us at Close Brothers. But of course, that simply means that we are back to the original position where we are while we're awaiting for the consultation to be issued by the FCA. And as we understand it, that will come out in October. It remains to be seen what will come out of that, and it's very difficult for us to give any guidance or thoughts until we can understand clearly where the FCA's thinking is on this. But in terms of our provisioning, Fiona, do you want to say a little bit more about that? Fiona McCarthy: Yes, absolutely. So I think what the -- as Mike said, the Supreme Court judgment is very welcome and very helpful. In terms of the provision modeling, what that effectively achieves is that it narrows down the range of possibilities and effectively removes one of the sort of more outlier worst-case scenarios that we included in the previous modeling based on that, the Hopcraft judgment being upheld, which naturally it wasn't, it was overturned by the Supreme Court. So we have effectively gone back to basics and reassessed based on all available facts and information what realistic and credible scenarios now are. And having done that work, and that does actually support our existing provision of GBP 165 million, but we have arrived at that in quite a different way. And as I said, with the [indiscernible] than we previously had. In terms of worst case, we're not sharing sort of ranges or worst-case outcomes here. But what I would say is that the GBP 165 million is our best estimate based on probability-weighted scenarios, including a range of outcomes. Camila Sugimura: We have another question from an investor. You referred to the Build-to-Sell market on Slide 26 on Property Finance. Please clarify the group's market share and ambition in this niche market. Mike Morgan: It's -- we have quite a dominant position for one of the smaller banks, but it's not a market share that -- figure that we would disclose publicly. So I'm afraid we wouldn't give that information. Okay. Well, look, if there are no more questions, thank you very much for taking part today, and have a good week. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your line. Goodbye.
Operator: Good morning, and welcome to the Card Factory FY '26 Interim Results Presentation. Please welcome to the stage, CEO, Darcy Willson-Rymer. Darcy Willson-Rymer: Good morning, everybody, and welcome to our interim presentation for FY '26. Thank you for joining us today, especially those that are here in person with us at UBS, but also thank you for joining us online. So I'm Darcy Willson-Rymer. I'm the CEO of Card Factory. Joining me today is Matthias Seeger, who's our Chief Financial Officer. So following an overview of highlights from the first 6 months, Matthias will then provide a financial performance update for the first half of FY '26 and an outlook for the remainder of the year. I will then provide an update on the positive progress we continue to make delivering on our growth strategy. Matthias and I will be happy to answer your questions at the end. So the first half of this financial year has seen continued momentum across the key building blocks of growth. In particular, the acquisition of Funky Pigeon was a significant milestone for our business, and we're excited about the growth potential that this will unlock. We are now well positioned across our stores, online and U.K. and international wholesale partnerships program to deliver on our growth strategy as we develop Card Factory into a leading global celebrations destination. As we enter our busiest period of the year, there is confidence across the business that our value and quality offer will continue to resonate with customers looking to celebrate Halloween and the festive Christmas season. Many colleagues are listening today, and I'd like to personally thank each and every one of you for your unwavering commitment to the delivery and the energy, pace and dedication that you show day in and day out. Thank you. The first half of FY '26 saw resilient revenue performance with our core stores business continuing to perform positively. This was underpinned in half 1 by new store openings and a robust seasonal trading, which offset the impact of a softer summer high street footfall as a result of the warmer weather. In addition, the businesses we acquired in the U.S. and the Republic of Ireland last year are performing in line with expectations. As a result of this resilient performance, we are pleased to announce the interim dividend of 1.3p. As mentioned, a highlight of our growth strategy progress in the first half of FY '26 was the acquisition of Funky Pigeon, which supports our vision to create an online celebration destination for customers. With the acquisition complete, we can now work to accelerate our digital strategy, particularly in the card, attached-gifting market as Funky Pigeon provides us with increased operational capability, a quality technology platform and a large established customer base. Work is underway to unlock annual synergy benefits of more than GBP 5 million through the optimization of manufacturing and fulfillment, the integration of technology platforms and strategic project ranging, all of which are expected to be achieved through the remainder of this year and the next financial year ending January 2027. Looking ahead to the peak second half of the year, our expectations for the full year remain unchanged and building on the success of our half 1 seasonal performance, our peak trading plans are in place to deliver our expanded celebrations offer and strong value proposition, particularly across Halloween and the important Christmas season. As stated in previous announcements, PBT will follow a similar second half weighting profile as we've seen in FY '25, and this reflects the seasonality of sales, timing of investments and realization of inflation mitigation across through our Simplify and Scale program. So for more detail on this and our financial performance for the 6-month period, let me hand you over to Matthias. Matthias Seeger: Thank you, Darcy, and good morning. I'm going to take you through the results for the first 6 months and provide some additional perspective on the second half. We continue to write our own story. It's one of resilience, balanced growth, successful strategy delivery and of value creation for our shareholders. Our business has delivered a resilient financial performance despite a challenging economic environment. Total group revenue increased by 5.9%, which is at the top end of our guidance of mid-single-digit percentage growth. The underlying cash generation of the business was strong with free cash flow productivity within our target range of 70% to 80%. As discussed in our recent trading update, a decision to bring forward efficiency-focused investments, including an upgrade to our point-of-sale till systems contribute to adjusted PBT for the first half being down by GBP 1.3 million. The benefits of our Simplify and Scale program largely offset the impact of the significant increases in national living wage and national insurance contributions. The 2 acquisitions completed in the U.S. and in the Republic of Ireland in the second half of last year contributed positively in line with our expectations and the acquisition economics. Continuing our journey of delivering predictable, sustainable and growing returns to our shareholders, we are declaring an interim dividend of 1.3p per share. As I mentioned, total group revenue increased by 5.9% from GBP 233.8 million to GBP 247.6 million. Our core business, stores in the U.K. and in the Republic of Ireland, which account for 92% of sales delivered total store base growth of 2.9% with robust like-for-like sales growth of plus 1.5%. We added 30 net new stores to our estate in the last 12 months, accounting for 1.4% of the store base growth. Total greeting card sales remained strong, growing in the low single-digit percentages. Our partnership business more than doubled, underpinned by double-digit organic growth and incremental contributions of the 2 acquired businesses in the U.S. and in the Republic of Ireland. We're very pleased with the performance of these additions to the Card Factory Group. Online sales were negatively impacted by the closure of Getting Personal at the end of January this year as anticipated. At the prelims, we talked in detail about our unique retail business in the U.K. and the Republic of Ireland. To reiterate, at the heart of our business success is a business model built for resilience and long-term profitability. We help people celebrate life's occasions at affordable prices backed by a strong value proposition. We have been extending our product offering to achieve non-card categories to grow average basket value and drive like-for-like sales even when footfall is softer. We're reaching more customers in more locations by opening new stores in underserved areas. And our strategy is working. We had robust store base growth of plus 2.9% in the first 6 months with like-for-like growth and new stores contributing in roughly equal parts. In the first half, our share of gift and celebration essentials increased to 53.4% and the average basket value rose to GBP 4.95 this year from GBP 4.75 for half 1 last year, reflecting our evolving range. Our store network grew by 30 net new stores in half 1, including our milestone 1,100th store. As of the end of July, we had 1,103 stores with additional store openings leading to a total of 1,111 stores operating today. And we are well on track to deliver our target of 25 to 30 net new stores this fiscal year. Every new store extends our reach to more consumers and more locations and delivers high returns using our low capital model. Adjusted profit before tax is down versus last year, as we indicated in our August trading update. Excluding the net impact of the largely contained inflation and the accelerated investment in our point-of-sale upgrade, underlying performance showed strong progress driven by sales growth. We substantially mitigated the H1 inflationary headwinds of 4.4% on our total cost base through the benefits of our Simplify and Scale program. The recent acquisitions of Garven and Garlanna contributed positively as did the closure of Getting Personal. Half 1 PBT margin of 5.3% compares with last year's PBT margin of 6.2%. We expect PBT margin in half 2 to increase by more than 10 percentage points as it did last year. Half of this increase will be attributable to the half 2 operational leverage with the remainder delivered by a combination of the net benefits of Simplify and Scale and sales growth. I mentioned it before, we cannot control inflation, but we can control how we respond. Inflation will add again more than GBP 20 million to our cost base this year. This is a cost increase of 4.4% on total cost. Over the past years, we have proven we can mitigate inflation through our structured multiyear Simplify and Scale program. Simplify and Scale program focus on efficiencies, productivity and range development, including pricing by eliminating non-value-added and manual activities, reducing duplications, streamlining operations and optimizing ranges. All plans are in motion to fully offset the cost price inflation for FY '26. As with last year, most benefits will materialize in the second half. In half 1, we delivered total efficiencies of GBP 9 million from streamlining our end-to-end operations and optimizing our range, including pricing. This included in-sourcing, printing and distribution of store merchandising materials, optimization of warehousing and agency labor and achieving a 9% improvement -- efficiency improvement in our stores. Key plans for half 2 include automating support center back-office tasks and processes as well as further store labor efficiencies enabled by the new point-of-sale till system, including streamlining back of store activities and hybrid tils. Let me now provide some further perspective on half 2. The profile of revenue and profit between half 2 and half 1 this year is largely in line with last year. As a reminder, the phasing of the inflationary headwinds and investments has a disproportionate impact on the first half, while H2 benefits from the positive impact of the Simplify and Scale program, higher sales, operational leverage and stronger margin. We anticipate H2 sales at a similar rate as growth as in H1, including the additional -- excluding the additional sales from Funky Pigeon. The growth in the second half will be underpinned by total store sales growth and continuous contributions from previous acquisitions. Store sales growth reflects the net new store openings and the like-for-like growth supported by a strong product offering and trading plans. Turning to cash generation, use of cash and debt. Underlying free cash generation of GBP 37.9 million was strong over the past 12 months with a free cash flow conversion of 78% versus earnings. Capital expenditure of [ GBP 19.3 million ] was materially in line with our guidance of GBP 20 million to GBP 25 million. We invested in our new store openings, store refits and upgrading store layouts, PoS till system upgrades and enhancements to our online experience. Debt service remained broadly consistent with prior periods. We paid GBP 16.9 million in dividends, reflecting FY '25's interim and final dividend payment. Surplus cash after payment of dividends was reinvested in M&A and the acquisition of Garven and Garlanna as well as the onetime transaction cost of Funky Pigeon. Over 12-month period prior to the end of July this year, net debt increased by GBP 4.3 million due to the one-off items unrelated to business performance. Half 1 cash generation and use followed the typical seasonal profile as we build stock ahead of the main trading period, but performance improved substantially compared to last year due to improved working capital. For H1, capital expenditure of GBP 7.6 million was slightly up by GBP 1 million versus the prior year. Our leverage remains low at 1.0x at the end of July, well below our maximum leverage target of 1.5x and broadly in line with last year. At period end, the group had cash and headroom in its debt facilities of GBP 46 million with a GBP 75 million accordion option. After period end, we increased the group's RCF facility from GBP 125 million to GBP 160 million using GBP 35 million of the accordion option to part-fund the acquisition of Funky Pigeon and provide further headroom for the growth of our business. We are committed to creating value for our shareholders by delivering on our business growth strategy and plans. We deliver our plans and financial targets in a disciplined, balanced and sustainable way, returning cash to shareholders while investing to deliver the strategy and maintaining a strong balance sheet. We will grow sales in the mid-single-digit percentages and profit before tax in the mid- to high single-digit percentages. We are a highly cash-generative business with free cash conversion of 70% to 80%. Delivery of our target is underpinned by store like-for-like growth, new store openings, growth in online and partnerships in combination with mitigation, our cost price -- the cost price inflation through the Simplify and Scale program and a disciplined approach to investments. Our capital allocation policy has 4 guiding principles. We maintain a strong balance sheet within a clearly defined debt leverage range. We invest in a disciplined financially sound way to support our growth strategy. We provide regular progressive returns through interim and final dividends, and we fund dividends from free cash flow, managing surplus transparently and returning it to shareholders where appropriate. We are committed to providing attractive shareholder returns, as I mentioned, as the value of our business increases behind the disciplined execution of our robust strategy and plans and by returning cash to our shareholders. Predictable progressive dividends are a cornerstone of our capital allocation policy. Therefore, we are declaring an interim dividend of 1.3p per share. This is based on an expected progressive full year dividend, maintaining a cover ratio of approximately 3. Furthermore, we are announcing the intention to start a share purchase program. The objective is to mitigate dilution to shareholdings. The annual scope will be 3 million to 4 million shares. This will enhance EPS by about 1% every year. On the 14th of August, we completed the acquisition of Funky Pigeon. Darcy will provide you with a broader strategic perspective shortly. I will briefly summarize the key financials of the transaction and its impact on our guidance. The purchase price was GBP 24.1 million, implying an EBITDA multiple below 5 based on annual EBITDA of GBP 5 million. The acquisition was funded by extending our extended RCF debt facilities from GBP 125 million to GBP 160 million. Funky Pigeon adds GBP 32 million sales and GBP 5 million EBITDA to the group. Furthermore, we expect to generate more than GBP 5 million synergies through optimizing manufacturing, fulfillment, technology, operations and product ranges. These synergies will be delivered over the next 12 to 18 months and will fully materialize from February '27, i.e., in our fiscal year FY '28. For FY '26, we expect that 5.5 months of Funky Pigeon trading will increase sales by about 3% versus current guidance. Our guidance for FY '26 profit before tax remains unchanged as additional profit offset by additional financing and transition and integration costs. In this context, our leverage at the end of this fiscal year and January is expected to increase by 0.3x to about 1.0x, still well below our target of 1.5x. Our mid- to long-term guidance remains also unchanged with mid- to high single-digit PBT percentage growth every year. In summary, Card Factory sales performance was resilient against the backdrop of challenging market conditions and softer footfall. Our recent acquisitions are performing well and are accretive to the bottom line. We are well positioned to continue our growth in the second half. Our Simplify and Scale program has been instrumental in containing cost price inflation in half 1 with all plans in motion for half 2. We acknowledge that the second half is crucial. This weighing has been the new normal, and we have proven last year that we deliver our plans in half 2. We are excited about the high level of product newness and our strong commercial offering. And we are on track to deliver our plans for Simplify and Scale. Therefore, we remain confident to deliver on our full year expectations. And with that, I will hand back to Darcy for the strategy update. Thank you. Darcy Willson-Rymer: Thank you very much, Matthias. Let me now provide an update on the continued progress that we have made delivering on our opening our new future strategy in the first half of FY '26. Our strategy is transforming Card Factory into a leading global celebrations group with an extensive U.K. and Republic of Ireland store footprint and a growing international presence. We are building upon the continued growth and profitable performance of our store estate and our leadership position in the U.K. card market, where we continue to deliver year-on-year revenue growth. By continuing to successfully expand into the gift and celebration essentials categories, we are addressing a GBP 13.4 billion celebration occasions market. This will be further accelerated by the acquisition of Funky Pigeon as we deliver on our online vision of creating a digital destination offering an extended and complementary offer to our stores. Our partnership strategy is enabling us to build out our points of purchase in the U.K. and Ireland, reaching customers beyond our existing retail footprint. Internationally, we are looking to disrupt the English-speaking markets where we've identified an GBP 80 billion market opportunity, of which North America is the significant majority. Let me start by outlining how our growth strategy is enabling us to increase our share of the celebrations market in the U.K. and Ireland. To unlock this GBP 13.4 billion opportunity, we continue to evolve our range, which in the first half of this year saw 49% newness across all categories as we respond to changing consumer trends. Range innovation remains at the heart of our planning across all categories. This follows a test-and-learn approach, which most recently saw us launch a new in-house designed premium card range, which is allowing us to broaden our appeal to a more affluent demographic. By doing so, we are sustaining a higher average selling price while continuing to deliver superior value to our competitors. The success of the range development continues to drive category growth. A few highlights in the first half included 28% growth in our baby gift sales to GBP 1.3 million, a 23% growth in tableware to GBP 2.5 million and a 20% growth in stationery to GBP 3.2 million. To enable this growth in key celebration occasions category, our strategy closely aligns range development with store space optimization. So as an example, in half 1, this approach saw us condensed, but updated milestone age gift range introduced, which freed up additional space for new stationery ranges. So together, this contributed to a 20% like-for-like increase in stationery sales in half Y '26 and a 7% year-on-year uplift on our milestone age range despite the lower space allocation. Our growth strategy is enabling us to reach more customers in the U.K. and internationally, both in more store locations and online. In the U.K. and Ireland, we continue to expand our profitable store estate with 13 net new stores opened in the half year '26, surpassing the milestone of 1,100 stores. Our wholesale strategy continues to deliver success for our partners and ourselves, delivering double-digit revenue growth of 15.7% in half 1. The successful U.K. rollout of our full-service model to the entire U.K. and Republic of Ireland elder estate in FY '25 has seen the breadth of our offer expanded to cover seasonal card in the first half of the year across Mother's Day and Father's Day as well as gift bags as part of their special buy offers. We're also in the midst of our first international full-service model rollout to The Reject Shop in Australia, having successfully onboarded a third-party logistics provider in the region. This has also supported an initial entry into the New Zealand market via wholesale distributor arrangement. Whilst a modest regional expansion, this is in line with our target market growth strategy. On North America, we've made good progress in establishing the foundations for growing our business in this key territory, which is a card market 5x larger than the U.K. Our ongoing trial with a leading U.S. retailer has successfully demonstrated market demand, providing -- proving that our value-focused card offer resonates with the U.S. consumer and has enabled us to create a robust operational capability to service retailers in North America. We were delighted to announce the completion of the Funky Pigeon acquisition in August. This is a significant milestone for our business as it accelerates our digital strategy, which I've previously stated was not developing at the pace we desired. So let me provide you with the rationale behind the acquisition. While we are the leading card retailer in the U.K., we have headroom to grow our online market share. In particular, we have wanted to deliver a convenient and great value card with gift-attached offer online that leverages our existing market strength. At the same time, we want to take full advantage of our nationwide store estate where we have already made headway through our existing omnichannel capabilities. And as we continue to develop as a leading celebrations retailer, the opportunity is to extend our store-based party and celebration offer by providing both our in-store and online customers with the ability to seamlessly access an extended range through our omnichannel services. Whilst our direction of travel was clear, we were not making the progress at the pace we wanted. And the purchase of Funky Pigeon met the challenge by upweighting our technology capabilities and accelerating our card and gift-attached online offer alongside the benefit of a large established customer base. And as well as accelerating our digital strategy, the acquisition also creates a structurally profitable online business within Card Factory with a strong foundation for the strategic growth that we are seeking. As immediate near-term priorities, integration is well underway, and our focus is on 3 things. Firstly, we are reconfiguring the manufacturing and fulfillment approach to make best use of our manufacturing facility in Yorkshire, combined with the existing Funky Pigeon fulfillment facility in Guernsey. This will provide the flexibility we need to offer a seamless direct or in-store collection service for our customers at advantageous costs for us and our business. Secondly, we are undertaking at pace the strategic planning that will determine how we take full advantage of the Funky Pigeon platform. And finally, we're undertaking an extensive product review and planning so that we are offering the right range. These priorities will be achieved through the next 12 to 18 months. In addition, plans are in place to enhance data collection from our 24 million unique Card Factory store customers. This will allow us to increase our share of their celebration spend by leveraging data across the Funky Pigeon digital platform and our existing omnichannel offer. Looking ahead, I'd like to start by summarizing our plans for the important half 2 trading period. We enter our peak trading period extremely well prepared and best placed to meet customer needs due to our value and quality offer. Ahead of the key Christmas season, we have significantly expanded our great value Halloween range. This is now available in our stores with supporting online ranges and is fully aligned to consumer trends for this growing celebrations occasion. Our new Set to Celebrate program has rolled out ahead of peak trading period in all of our stores. This will drive high standards of operational execution and ensure a quality and consistent customer experience in our stores. We have a strong Christmas range built around our value proposition, which features over 80% newness on gift, 95% newness on celebration essentials and an expanded premium card range as part of our 30% newness on card. Operational preparations for the Christmas trading period are well advanced with a stock build on schedule and optimized replenishment processes in place. So in summary, we have delivered a resilient top line performance for the first half of FY '26 due to the positive performance of our stores, especially within the key spring seasons as well as the effective execution of our growth strategy and the positive contribution we are seeing from our acquired businesses in the U.S. and the Republic of Ireland. Initiatives identified through our continuous Simplify and Scale, productivity and efficiency program have mitigated almost half of the more than GBP 20 million FY '26 headwind cost inflation. This has included significant rises in national living wage and employer national insurance contributions as well as wider inflationary pressures. Robust plans are in place to mitigate the full impact through half 2. Despite the challenging consumer environment, our expectations for the full year are unchanged as we continue to deliver on our expanded celebrations offer and strong value propositions. PBT is expected to follow a similar profile to FY '25 with delivery weighted to the second half, reflecting seasonality of sales, timing of investments and the realization of inflation mitigation benefits through our Simplify and Scale program. Therefore, for the adjusted PBT in FY '26, we expect to deliver mid- to high single-digit percentage growth increase. By delivering on our growth drivers, we will continue to deliver sustainable, progressive returns to our shareholders. So thank you again for attending our results presentation. And Matthias and I will now be happy to take any questions that you may have. So thank you. There's a -- for the benefit of those who are online, there's a microphone in the side. So if you could use that, that would be great. We'll take questions in the room first and then go to a line. So Kate? Kate Calvert: Kate Calvert from Investec. I'll go for the traditional 3 questions. First question is just on your new store opening plans going into next year. Are you still planning for another net 25 to 30 stores? Do you want to [indiscernible] the question we just did or we'll just do them one -- Okay. Second question, you talked about leveraging your store data with Funky Pigeon data. Are you hinting at a loyalty card at some point given also the new EPOS system? And my third question is just on partnerships. Have you actually grown your business with your U.S. retailer year-on-year as you're going into the second half? And also, can you just update us on South Africa because I don't think you mentioned it at all as what's going on there? Darcy Willson-Rymer: Very good. Do you want to do stores then I'll do... Matthias Seeger: Yes. I mean we -- the answer -- simple answer is yes, yes. We are -- as we communicated, our plans are to open 25 to 30 net new store every year for the foreseeable future. We are on track to deliver this at this rate this year. Over the last 2 years prior to this year, we opened 58 new stores. So yes, we are on track, and we have line of sight of that. Darcy Willson-Rymer: And then in terms of your second question, in terms of the point about leveraging data, one of the things that we've got plans in place and we're working on is how do we collect the data from our 24 million unique customers that use us and therefore, collect the data in the way that we can then talk to them appropriately based on their needs. And the point of that is if the average U.K. person spends about GBP 258 a year on their celebrations of which we get about GBP 22. So it's about how do we get more of their celebration spend and how do we leverage both our stores and the online platform in order to do that. The specific mechanic of the data value exchange, we will test sort of various mechanics. On the specific point about loyalty card, a traditional loyalty card that sits in your wallet, probably not, given we're EDLP, but it's about how do we get the loyalty to get more of their celebration spend. In terms of partnerships, the year-on-year comparison actually have for that particular customer, we don't basically split it out. There isn't a like-for-like comparison because last year, all we did was put in sort of 40 to 50 Christmas cards across all stores in this year. We're trialing the -- in about 100 stores. What I can say is that the products that we're seeing -- so we are alongside another card supplier. We're seeing really good rates of sale. The particular customer we're dealing with is actually really happy with it. And so the range is resonating. And then sort of the next step is for us to convert that to the full service model, but that requires -- that just requires some technical work. So we're doing Aldi first, TRS second, and we'll do that 1 next. And then in South Africa. South Africa is a work in progress. We're seeing some good traction on getting some new business. So one of the large retailers that this business -- that the South Africa business never sold, we will be shipping to them sort of early next year, really good progress there. There's still quite a bit of work to do on the back office, which the team are on with. Go on. Hai Huynh: It's Hai from UBS. I have 3, if you don't mind. On the volumes perspective, so you've got 1.5% like-for-like. And you quoted 4.1% average basket value increase. Now I know that's partly range, partly pricing, but how do I read into the volumes behind that? Is that flat? Is that negative? And to meet your targets, how are you seeing that dynamic on pricing and volumes in the second half? Second question, could you walk me through the shape of the contribution from Funky Pigeon, if I'm interpreting this right? So you've got 5.5 months of revenue top line contributing this year. 5 -- and then the full contribution of PBT from that level in 2027, but the synergies will only start coming in, in FY '28, right? Or is there already some synergies expected towards the second half of FY '27? And lastly, CapEx going forward, there's a slight increase year-on-year, but that's partly due to the point of sale. Do you see it normalizing going forward given your leverage? Or what's your view on CapEx going forward? Matthias Seeger: Thank you for your questions. So first to address your questions on half 1, you stated correctly that our like-for-like was 1.5%, driven by ABV of 4.1%. About half of that was behind pricing. As we look forward into half 2, we expect one to see a normalization of footfall, though we expect it not to be at the same level as last year. But our multiyear experience -- historical experience is that during the festive seasons, footfall has been around the same level. Second, we do have a very strong program, both in product offering and trade program. Darcy has commented on that. Behind that, we do expect to see also a strong ABV progress, of which part of it will pricing. So looking at the round of all our commercial plans, including what we know historically from the season, we are very confident on our half 2 -- the execution of our half 2 plans. Let me take the CapEx question first. Our guidance has been and remains CapEx spending of GBP 20 million to GBP 25 million. Last fiscal year, we were at GBP 18.7 million below that over the last 12 months, straddling to fiscal year, it was GBP 19.3 million. That's well within the guidance, and we don't expect an update on the guidance with regards to that range of capital spending going forward. On Funky Pigeon, we've been completing the acquisition 6 weeks ago. We started the integration work. We are progressing on fine-tuning the plans to deliver our synergies. And what we are confident in that is that we will bring these synergies to the bottom line in their full scope starting February '27. What happens in between, we will need to further fine-tune to optimize the execution of the plans. Therefore, at this moment, I think it would be too early to comment on that. Adam Tomlinson: Adam Tomlinson from Berenberg. The first one is just on the cost savings for H1. So I think you've talked to about GBP 9 million cost savings achieved in H1. Just a little bit of color on that would be great just in terms of the breakdown. And within the EPOS system, I think it's Phase 2 now you're on for that. So just, again, a little bit of detail in terms of the benefits to come through from that will be very helpful, please. Second question is just on stores. With those new openings, just some color on where you're finding those sites, that split between maybe high street retail parks and the relative performance of those would be interesting. And then a question on gross margin. So that's coming down, I think, in H1 due to that mix impact. So just your expectations in terms of how we should think about that going forward? Matthias Seeger: I guess I get all the fun today. Cost savings, yes, indeed. As we discussed, we do have a multiyear structured savings program. And I think that's important to highlight that we are looking at -- in a systemic way about opportunities to -- that are unique to us across our end-to-end value chain and how we drive efficiencies for all our parts of the business. Out of the GBP 9 million, there was obviously a carryover -- small carryover effect from last year, savings that we initiated in the second half this year, complemented by new programs. We mentioned a few during my part. One was the in-sourcing of printing and supply of [ merching ] materials for our stores. The second one was the optimization of warehouse and agency labor. We also changed our -- by the way, our logistic partner, which resulted in savings. And we drove more efficiency into our store operation by reducing store hours by 9% year-on-year. All of what I just mentioned will carry on into half 2, obviously, and will be complemented by further savings. You mentioned our point-of-sale savings. We have completed the rollout of the PoS upgrade in early August through our acceleration. And that will give us tangible benefits in what I would call Phase 1 because it helps us to streamline our back of store activities and also the efficiency at the till itself. But equally important, it lays the foundation for better engagement with customers in the future, capturing customer data and offering additional services to customers in the future through the system. On store locations, I mean, we do have a proven approach of identifying -- a data-based approach of identifying underserved locations and as you know, we have a very thorough methodology of assessing the potential -- sales potential of a specific site as we operate so many sites in the U.K., and we have reference case and we assess each store opening on its own merit, including potential cannibalization to nearby stores and requiring a payback of less than 2 years based on a moderate low investment capital spending of GBP 80,000 to GBP 90,000 a year, which will give great returns to our shareholders because we operate a store much longer than 2 years, as a matter of fact, in excess of 10 years on average. With respect to the locations of store openings, we have been quite successful in opening stores in the Republic of Ireland to a disproportionate degree. But we are finding locations also in the U.K. across shopping centers, outlets, high street. I wouldn't single out any specific location that sticks out of that. With respect to the last question on gross margin, as we integrate new businesses, gross margin, product margins will slightly change versus our previous operations as costs show up in different lines of the P&L. Our partnership business obviously doesn't have to carry store costs. So you will see differences in product margin all the way trickling down to gross margin. What we are focusing on is making sure that they are earnings enhancing and therefore, increase our PBT. And for the recently acquired businesses of Garven and Garlanna, they are definitely increasing or enhancing our PBT margin. Unknown Analyst: Yes, 3 from me, please. If we come back to the product gross margin question first, actually. I mean, I think the year-on-year performance was down nearly 300 basis points. I was wondering if you could differentiate between what was mix, including partly through acquisitions and maybe talk a little bit about how your product margin performance has been on a like-for-like basis and whether or not there are any one-off factors in there, maybe including some x range clearance, any factors like that, which could be a factor to think about going forward? Second question, just in relation to working capital performance. It looks like you had a good earnings in the first half. How much of that is permanent? And how much of that is maybe some phasing benefits, which will just wash through over the year? And do you think that across the enlarged group with Funky Pigeon, do you think there's some opportunity to realize some efficiency across working capital, let's say, over a couple of years? Sorry, there was a third question just in relation to the savings as well, the efficiencies. Could you just quantify what, if any, year-on-year benefit you had within business rates? Matthias Seeger: All right. I'm going to continue to have all the fun. Right. You're right. When you look at the total company, product margin has been down year-on-year by about 200 basis points on the product margin level. The large part from that was on the mix effect that I referenced. But you also keenly noticed that we did have some sell-through programs, sellout programs and the range change that contributed part to that, that we would consider a one-off. We had a hard change on some of the range changes. We are moving to a soft change going forward. So I would consider that a one-off. And we also had a sellout program for some remnants, which I would also consider a one-off. And I think that neatly dovetails into how we look at working capital and one of the main components being inventory. Being -- having this end-to-end supply chain, we should have full visibility of all the inventory at all parts. And we do have major progress against that, but we still have further opportunity to really get to the full end-to-end, which means that we have more opportunities to optimize our inventory levels, and that's one of our focus points going forward to ensure that we have the right stock in the right place at the right time in the right amount. And therefore, yes, we see more opportunities and efficiencies in that area. And that includes in the future, of course, Funky Pigeon. So that includes stores, online as well as partnership. On the business rates, what we have seen is when we renewed our -- or putting it from a cost of occupancy, when we renewed our leases year-on-year, as you know, we have about 250 lease events, renewal events every year, we still see an opportunity to get to better lease terms. With respect to the business rates, they haven't changed, and we don't know yet, of course, going forward, what the detailed change in the business rates will be. Darcy Willson-Rymer: The only thing I'd add on the business rates before everybody gets too excited, of course, we have warehouses. We've got the factory as part of the vertically integrated model. So we'll see if the chance goes ahead with what is planned, we'll see some ups and downs in that before anybody gets carried away. Should we move to online? Operator: Yes. So we've had a large number of questions come through online, Darcy, Matthias. So we'll group some of these together into some common themes to try and get through as many as possible in the time we've got. So first up, are you still on track to deliver group total revenue of GBP 650 million and 14% PBT in FY '27 as outlined at the Capital Markets Day in 2023? And if not, can you please add some color as to why and what your revised expectations are? Darcy Willson-Rymer: Great. Thank you very much. So I think we spoke about this in quite some detail at the prelims. Effectively, given off the -- 2 things around the Capital Markets Day target and what we spoke about last time was, first of all, just given the very high inflationary environment that we landed ourselves in post COVID that wasn't in the plan. And also, of course, when we wrote the plan, we're in 2025 now. We know a lot more now than we knew back then. And effectively, at the prelims, what we did is we updated our guidance to basically say from that point onwards, you should expect mid-single-digit sales growth and mid- to high single-digit profit growth. And yes, so that's that. Operator: Okay. Thank you. And the next ones relate to questions that we've had around the online business. So firstly, what do you need to start competing more successfully in the online market? Is it technology, operations, marketing? And secondly, why was online not developing as desired? And what makes it tough to compete online? Darcy Willson-Rymer: Yes. I think the online story, I think, is reasonably well documented. But I think the challenges we face are -- you need to go back into the history, which is when sort of around about the IPO when Card Factory first went into online, they did it through the acquisition of Getting Personal, which was just a premium products business. That business model was based around paid search and the platform wasn't right for personalized card sort of, et cetera. So -- and then when they set up cardfactory.co.uk, it was set up as like a big store. So the majority of sales were coming through our store products, whereas in actual fact, that's not what we want online to be. So we have clarified the strategy around the 2 missions of direct recipient with attached gift and then the broader celebrations. Clearly, Funky Pigeon allows us to basically make a step change in that. And our view is it was better to buy rather than build. And now it is about the integration of that and the -- basically the execution of the strategy, and that is really about -- it's a combination of all 3, having the right technology, having the right product, having the right marketing. And of course, the big opportunity for Card Factory is leveraging the 24 million unique customers that we have that visit our stores because it's the same customer that shops in store that shops online, but yet we don't get a significant amount of their online spend. And it is about how we go about doing that. That's the mission and that's the challenge for us. Operator: Next up, can you please explain the FX derivative loss you've recorded during the period? Darcy Willson-Rymer: Great question. Matthias Seeger: Great question. Listen, we know how to develop celebration products. We know how to manufacture them. We know how to sell them. We are not professional FX traders, which is why our Board has approved a hedging policy, which ensures that FX doesn't impact our -- or the volatility in FX doesn't impact our business. As part of that, we are hedging over a 3-year time horizon. And we have essentially locked in this year and large part of next year. That helps us to ensure that we deliver on our PBT guidance. Now as part of that, we have derivative contracts, and we recognize them in line with the accounting guidelines at each ending day of a period. The dollar is at $1.35 and our derivative contracts are in the high $120s. Therefore, we have to recognize a loss that is a hypothetical loss and in that sense, will never materialize because -- well, the way to look at it, it's like forgone opportunity benefits, right? If the market stays at $1.35, then we would only benefit from a lower exchange rate. However, if the market changes and the dollar comes down to $1.30, actually that balance sheet loss will go away. So it's a bit of a complicated, unhelpful perspective to really understand business performance, which is why we are adjusting it or excluding it from our adjusted profit. Darcy Willson-Rymer: I think also just the most important point here is our ForEx policy about giving certainty to what we're doing and how the business has benefited from that over the last 5 years. Operator: There's a number of questions that have come in regarding acquisitions. So a couple to reel off here. Firstly, can you provide specific EBITDA margin and revenue growth projections for your 2 most notable recent acquisitions, Funky Pigeon and Garven over the next 2 to 3 years and outline the risks to their scalability in the U.S. and online markets? Secondly, will you be breaking out any sales from the recent U.S. acquisition? And can you share more information on its performance and integration and what the exact model is there? Beyond the U.K., do you have any plans to grow your online offering in other territories? And if so, which markets are you considering? And finally, are there any other acquisitions planned? Darcy Willson-Rymer: Very good. I think just to open up on the will we provide specific margins across particular customers in particular countries? The answer is no, we're not going to split that out. I think for reasonably obvious reasons in addition to the competitive sensitivity as well. But what I -- so -- but let's talk about some of them. So I think if we look at the Garven business. So we acquired that last year. That business is in the celebration essentials market. It's mostly roll, wrap and bags, but it does a little bit of gifting and a little bit of party, and they are selling to premium retailers, mostly own label. So they design, arrange for the manufacturing and then we sell at the factory gate to the U.S. retailers. So the U.S. retailers basically pick it up and pay for shipping and any tariffs due. So it's largely a design-led range in those categories. And that business is absolutely on track with the acquisition economics and our plans and it was slightly down because of tariffs, but up because of the opportunities that the team there found basically as a result of a bit of volatility in the market, and that business is performing well. And the sort of plans is to complete all of the learnings that we need to do on the card side, particularly when you make the changes we need to be able to migrate to a full service model. And then at some point, we'll back cards into the Garven business. And then our U.S. entity, it will be sort of -- we'll be ready to scale. I think in terms of what are the risks, the risks are, it's a large market with 2 incumbent players and compared to them, we're a small U.K. sort of business. And just the sheer way this is done in geography, that's where most of the risks lie. However, we remain confident, given how our product resonates in the market, how it compares in pricing plus the learnings that we've taken sort of out of Australia. So we remain confident of the opportunity in the U.S. In terms of online offer in other territories, not at this moment, I think we have to deliver on the integration of Funky Pigeon and we have to deliver on our growth plans for the U.K. market. And when we're satisfied that we've got the right momentum, we can then potentially think about something else. I think -- are any other acquisitions planned, I think we've always said the point of acquisitions was about things that will help us accelerate the strategy, that are accretive to shareholders, but our current focus now is on the integration and the delivery of the things that we have in order to accelerate the strategy. Did I -- yes. Operator: So penultimate question in relation to Funky Pigeon, 2 parts to this. Are you going to merge the tech platform and share developers across the Funky Pigeon and Card Factory online? And can you provide some more color around how you will drive value from Funky Pigeon and turn around the online offering? Darcy Willson-Rymer: I think in terms of -- we are definitely going to have one tech platform, and it will be the team are basically working through exactly how that's going to look and how that's going to be. But one of the synergies is around merging basically the tech platform. And then effectively, how do we drive value from it. It's the things that I've already mentioned. It's basically the strong online direct recipient offer that Funky Pigeon has, developing the extended party and celebrated range, leveraging both the existing Funky Pigeon customers that they have plus the marketing machine there and the 24 million unique Card Factory customers. So that's -- those are the plans. Operator: And final question, I appreciate we are at time. So apologies for any questions we've not had time to get to online. But the final ones related to buybacks. So when do you plan to start your share purchase program? And is there any plan to implement share buybacks as a way of returning capital to shareholders? Matthias Seeger: We announced a share purchase program. Again, the intention is to mitigate the dilution through the employee share issue program. We -- the order of magnitude is 3 million to 4 million shares every year. We intend this to be an annual program and it will start before the end of this year. Any further return of cash to shareholders will be discussed and agreed by the Board at the right time. But as we always have iterated, we are not in the business of holding back retaining cash. We will return -- either we will use surplus cash to invest to drive future growth of the business, delivering rate of returns beyond what a share purchase program, share buyback program could deliver and/or we look at other ways of returning cash to shareholders considering all options, including share buyback. Darcy Willson-Rymer: Brilliant. Thank you, everybody. Thanks for attending. Thanks for those that have joined us online and safe onward travels. Matthias Seeger: Thank you.
Operator: Ladies and gentlemen, welcome to the conference call by MA's management team regarding its H1 2025 results. It will be structured in 2 parts. First, a presentation by emeis management team represented by Mr. Laurent Guillot, Group CEO; and Mr. Jean-Marc Boursier, Group CFO. [Operator Instructions] I will now hand over to the management team. Gentlemen, please go ahead. Laurent Guillot: Laurent Guillot speaking. Good morning to all of you, and I'm with Jean-Marc Boursier, our CFO. Thank you for attending this conference related to the presentation of our H1 earnings figures at the end of June '25. I hope it may sound clear to you along this presentation that we are particularly happy to deliver this set of figures, which provide not only the evidence of the turnaround underway in our operating performance. This is what we showed already at the end of July, but also mark a significant milestone since our disposal target have been once again largely exceeded. All of this news brought confidence embedding our financial structure improvement for the coming quarters and allowing us to provide midterm outlook for the years ahead. A few months ago, you may remember why we were publishing our full year earnings figures, we told you that the resumption of our sales growth and the rise in occupancy rate seen started to support our operating margins recovery from the beginning of the second half '24. We were particularly happy to show you the evidence that this operational recovery is well confirmed in the first half of '25. Occupancy rate have improved further everywhere and quite significantly, now nearing 88% on mature perimeter. With the price effect captured again this first half, the organic growth of our revenues posted a solid performance at 6.2%. This positive momentum on top line is mechanically feeding our operating margins, thanks to the good grip we had on operating expenses, leading to 29.5% growth in EBITDA at 79% on into like-for-like basis. For the first time for a while, at least a decade, our cash flow has turned positive. We are also happy to tell you that particularly active this past month with numerous operations, of which the announcement of the new real estate partnership [indiscernible] along with the creation of a new [indiscernible]. With relative cash from this operation of EUR 761 million our disposal target close to EUR 2.1 billion of disposals since mid-'22. As a remember, we communicated end of July EUR 1.15 or EUR 1.5 billion target before year-end is already achieved and then largely exceeded. This will mechanically improve materially our financial structure, lowering net debt significantly and improving our leverage ratio sharply. Jean-Marc will come back on these elements later. Last but not least, we not only confirm the outlook for '25, but we are able to confirm the supporting trends expected for '25. We are able today to confirm that this supportive trend expected for '25 will continue with a midterm outlook to 2028 on revenues and EBITDA on like-for-like basis we expect CAGR between '24 and [indiscernible] between 12% and 16% EBITDA. The positive momentum is set to continue ahead. So let's dig a little bit in the detail. We've already shown you the numbers in terms of occupancy rate improvement. Year-to-date, the upside capture is a bit stronger on nursing homes with occupancy rate in average a bit less than 200 basis points in 12 months. This positive momentum is not fading out, and we expect this to continue in Q3. This is obviously the result of multiple new processes we put in place, focus on quality and service policy who policy mention different patients and then [indiscernible] disease and special issue and the if you look at the performance we had in France, Jean-Marc will come back on that. This is significantly different compared to [indiscernible]. We are not only showing a continuing supporting momentum on revenue, but we are also posting a positive momentum on operating on operating performance , along with our recurring facts after reaching a trough in H1 '24 EBITDA has now entered its way toward normal with almost 80% growth in 1 year at constant perimeter. My point is to share with you today our confidence that this momentum will continue to feed our growth later this year and for the years ahead. We do expect positive contribution to our performance from the following elements. First, occupancy rate should be driven by favorable momentum, providing capacity -- providing the capacity to capture further positive price effect. Segmentation are reviewed regularly so to tell there are emeis offers to residents need and purchasing [indiscernible]. Operating expenses are increasingly monitored with a relative good ensuring a good allocation of workforce and cost. New processes and new tools should enhance our efficiency and better adapt our business to the reforms that we have seen the past years in different countries. We have also defined for each underperforming facility or underperforming unit dedicated action to restore performance in line with expectations. We share the best practices and [indiscernible] every day more efficient. It's fair to say that the set of figures is a good milestone on the road to an embedded recovery and we confirm our confidence for '25 and beyond. We did go up on added software EBITDA expected to go online collects between 15% and 18%. The trajectory for revenues and between 25% is how we expect going to do the momentum ahead of 25%. So we see increasing confidence for the future we have decided to go to get today midterm outlook for '25 and '28. The average annual growth of revenue on a like-for-like basis is now expected to be between 4% and 5% between '24 and '28. And the group average annual growth rate for EBITDA on a like-for-like basis is expected to be between 12% and 16% per year between '24 and '28. Before handing over to Jean-Marc, I would like also to share with you some of the major achievements we have secured so far in Q3. Since the end of July, we have secured EUR 1 billion in new disposal transaction. This is mainly due to the real estate partnership we announced last week with the creation of a new real estate company. The transaction will result in EUR 761 million in cash for the emeis group when it closes expected towards the end of the year. You may have understood that this innovative deal is expected to strongly enhance our financial structure, but it is also structured so to keep the likely benefit from the upside we can reasonably expect from the real estate cycle and from the recovery phase of our sector globally and [indiscernible] in particular. On top of this transaction we have secured a little bit more than EUR 200 million of other real estate deal since the end of Q3. At the same time, our team has been able to increase access to liquidity by more than EUR 200 million, notably through 2 factoring sectors, which is also enhancing our financial profile. These 2 transaction overall are major milestones that significantly strengthen the solidity of our financial structure, and this gave us even greater confidence in our operational performance, which is set to continue improving for the coming years. So now I hand over to Jean-Marc for a little bit more details on the numbers. Jean-Marc Boursier: Thank you, Laurent, and thank you all for attending this call this morning. We understand that the sound is not super good, so I will try to speak out loud and clear as possible. We are very pleased to present the publication today that we believe is particularly strong. 6 main points stand out in this publication. First, a very positive growth momentum in our revenue. Second, a significant improvement in operating margin. EBITDA is up, for instance, 72% and EBIT has improved by EUR 116 million in 1 year. Three, our net income is still negative, but the trend is improving significantly. Losses have been reduced by EUR 120 million in this semester, feeding our confidence for the coming quarters. Fourth, our free cash flow generation has improved sharply. The group, as said by Laurent is now free cash flow positive, an improvement by more than EUR 200 million in 1 year. Five, our net debt, excluding IFRS 16 and 5 is stable compared to the end of 2024, but is already down EUR 233 million when including IFRS 5. I remind you that this is a related to assets held for sale, so considering transaction for which negotiation are at very advanced stage. This decrease in net debt will continue even further by year-end when the closing of certain transactions such as the creation of our real estate company will occur. And sixth and final, the leverage ratio is also improving considerably even before considering the secured transaction that we -- let's start with hotels. I will be relatively quick on that slide since elements were already published for H1 at the end of July. Sales posted a substantial organic growth of 6.2%, driven by a combination of 3 factors, all of which having a positive impact. First, a price effect of plus 3.4%, in line with Q1; second, an occupancy rate effect of plus 1.8% and finally, for 0.9%, the effect of the ramp-up of recently opened facilities. This favorable growth trend can mostly be observed on nursing homes, plus 8.6%, while clinics have been more muted at only plus 1.8%. The group average occupancy rate rose by 1.7 points year-on-year to 87% versus 85.3% at the end of June 2024, continuing the gradual recovery in aggregate that began almost 18 months ago. This recovery was mainly driven by nursing homes, where the average occupancy rate rose by 1.9 points year-on-year to 86.5% versus 85.3% at the end of 2024 and even 82.1% at the end of 2023. As you can see on this graph in Central and Southern Europe, the levels achieved are now above or close to 92% pre-COVID levels, especially if we remove those computations, the ramp-up sites whose occupancy rates are obviously lower than those of mature sites for the time being. Note that excluding ramp-up facility, occupancy rate for the whole group would have been today at 88.2%. Although still below our ambition, we are happy to see this supportive momentum to be continuing. A few words about our 2 largest markets, Germany on one hand and French nursing homes. In France, it is interesting to note that the improvement in occupancy rate for nursing homes is gradually confirmed quarter after quarter since more marked each quarter versus the previous one. The gap in occupancy versus the previous year is growing every single quarter and is now 2 points while it was only 0.5 points above a year ago. This acceleration clearly illustrates, and you can see on the top right hand of the chart that the recovery in France is well underway since 2024 and is gaining momentum. This provides confidence for the coming quarters. In Germany, the recovery is following a steady and constant pace. Here again, the momentum doesn't seem to fade out, thus confidence in this market as well. In terms of operating margin, the improvement in performance is considerable. EBITDA, which we break down on this slide is up 18.4% and 19.5% on a like-for-like basis. So if we exclude the effect of the disposal of our activities in Czech Republic. By isolating pure operational performance, so excluding the effect of disposal, change in perimeter, change in real estate capital gains and exchange rates, for instance, we see that the performance is increasing by EUR 94 million on the first half of this year compared to last year. And this is a particularly strong trend, which is the result of solid organic growth on one hand and a limited increase in operating expenses, as you can see, only plus 3.1% like-for-like, whereas turnover is up 6.2%. As you can see on the next slide, if we look at the cost as a percentage of sales, you can see that staff costs have been reduced by 1 point, reflecting the measures that we progressively implemented during the past 12 months to optimize the allocation of our human resources. But at the same time, we also benefited from the initial effect of our cost rationalization measures in H1, which have led to a reduction in the intensity of all the costs as well. As a result, these measures are enabling us to maximize the conversion of revenue growth into operational profitability. Our EBITDA margin, although still below our target has increased consequently from 12.1% in H1 last year to 13.8% in H1 this year. And if we add on to that the steady performance of our rental expenses, we can rationalize the improvement in our EBITDA margin, which rose by more than 2 points to 5.4% EBITDA margin. Move the same here on the next slide, this chart illustrates that operating margin have started their way toward normalization. In million euro this note that the positive upside in sales plus EUR 136 million in H1 was largely transferred into EBITDAR by EUR 62 million and EBITDAR by EUR 66 million as an evidence that the operational leverage to the upside is strong and should continue to be strong again early. It's interesting to note that when looking at the EBITDAR by geography, the 2 main contributors to this growth in France and Northern Europe, given that Germany posted the most significant growth in Northern Europe. It should also be noted that the growth momentum in Central Europe is particularly masked by the sale of our activity in Czech Republic at the end of March. Indeed, EBITDAR in France grew by 36% and by 21% in Northern Europe. And there is still a significant room for further growth ahead since you can see on the right-hand side of the chart that EBITDAR margin in those markets are still largely lower than what we have as a reasonable target for the coming years. Although still below our ambition in terms of percentage of sales, the margin are everywhere moving in the right direction. If I continue our analysis of the P&L below EBITDA margin, the momentum remains very positive for us on almost every single line of the P&L. First, because external rental expenses excluding IFRS 16 have declined. This is due to acquisition finalized in 2024, notably in Italy and France, which brought real estate assets operated by the group into the group scope while previously owned by third parties. And as you can see, EBITDA excluding IFRS 16 rose by 72% and even 79% on a like-for-like basis. Second, when looking at EBIT, EBIT improved significantly as well and is now positive. It rose by EUR 16 million to EUR 102 million in H1 2025. And this is interesting to note that underlying depreciation and provision recorded a positive amount in the first half of the year. This is a sign that our provision for liability and charges have been historically prudently valued and that the risk environment is indeed improving for EBIT. Below EBIT, I would like to raise your attention on 2 things. First, financial expenses have continued to benefit from the effect of the latest capital increase carried out in February 2024 and financial expenses are down EUR 16 million versus H1 last year. Second [indiscernible] due to noncash adjustments such as certain residual depreciation on a few items possibly intended for sale. Let's move now on the cash flow statement. At the end of June compared to the first half of 2024, EBITDAR has increased by EUR 66 million to EUR 158 million. Net current operating cash flow has increased by EUR 74 million to EUR 62 million and free cash flow has improved by more than EUR 200 million to EUR 26 million. The lower you go on this slide, the strongest increase you will find. And this is, if I may, the result of the particular attention we pay to every single line of the cash flow statements. As a result, free cash flow is strongly increasing now into positive territories as a result of the combined effect of the group improved operational performance, the stability of maintenance CapEx and working capital, the successful execution of our divestment program and the gradual reduction in development CapEx, and I will come back to it in a few moments. The improvement of our cash flow generation is not a one-off. As you can see on this slide, this is part of a gradual trend that has been ongoing semester after semester since last year, and that should continue ahead. The graph on this page speaks for itself, illustrating the gradual result of our effort and the momentum that has characterized this first semester again. It is particularly interesting to note how capital intensity has been driven in recent years. First, it should be noted that maintenance CapEx and IT CapEx have remained quite stable overall. We share the conviction with Laurent that it is essential to maintain our assets in a condition that is consistent with the quality of care that we owe to our customers. At the same time, we have deeply reviewed the group's development strategy. Development CapEx have been reduced by nearly 80% in 2 years, reflecting our willingness to reduce project payback and therefore, increase development selectivity. I would also like to remind you that we have developed innovative and CapEx partnership, for instance, the forward sales scheme that allow us to maintain the operational benefits of certain projects while not having to bear those real estate CapEx on our balance sheet. A few words now about our disposal strategy. As Laurent told you earlier, we have been particularly active since the beginning of the third quarter, securing nearly EUR 1 billion in new disposals. The main contribution of this achievement is the creation of new real estate vehicle open to third-party investors for a total consideration of EUR 71 million. This day brings together assets with an operating value of EUR 1.2 billion at the end of 2024 for an average yield of around 6%. So the investment received from these investors represent approximately 62% of the total value. The 68 assets concerned located in France, Germany and Spain, as you can see on the map. Half of them are nursing homes and half are. The partnership, which is planned for at least 5 years, grants investors a minimum annual remuneration of 6%. In addition, depending on the value created by the [indiscernible], the value creation will be shared between them and the emeis Group. Our partners are targeting a total IRR of 12%, above which 90% of the value created will be retained by emeis. The governance of this [indiscernible] will allow the group to retain exclusive control of it, which means that it will be fully consolidated in our consolidated financial statements. This innovative preferred equity structure is particularly relevant for emeis, first, because it will strengthen our financial structure with an impact of approximately EUR 700 million reduction on the group net debt upon closing of the transaction. a significant decrease in our leverage ratio, which should fall to almost 13x pro forma versus 15x published today and I remind you, 1.5x at the end of December 2024. Second, because this structure is a strategic move for the group. This [indiscernible] is designed to provide real estate solution in the future. emeis will therefore be able to size the opportunity offered by the sharp increase in care needs over the next decade. And in the medium to long term, this [indiscernible] should attract new investors and should become the real estate operator that will meet real estate needs. And third, because this [indiscernible] is also an opportunistic move considering health care real estate cycle likely to -- the deal is structured to benefit from the expected upside for the coming years on real estate valuation and value creation. Because we strongly share the view that our midterm perspective are promising as our midterm guidance and the likelihood of seeing property valuation again is significant, we believe that the potential revaluation uplift on these assets is particular significant over the coming years. This deal structure will provide part of this upside contrary to more classical [indiscernible] operations. As a result, the wording of disposals completed or secured to date has reached EUR 2.1 billion since mid of 2022 as explained by Laurent. This is therefore largely above our initial target of EUR 1.5 billion with nearly EUR 1 billion in new transactions secured in Q3 and nearly EUR 1.6 billion in disposal that should be collected in the coming months, the majority of which by or around the end of the year. As a result of everything we said earlier today, the financial structure will continue to strengthen significantly in the coming months. While net debt, excluding IFRS 5 and IFRS 16 remain broadly stable between the end of December and the end of June. A reduction of nearly EUR 300 million resulting from the application of IFRS 5 provides an initial indication of the strengthening of our balance sheet. We cannot be much more precise than that, but this is linked to very well advanced negotiation ongoing today. In addition, the creation of the real estate partnership should reduce the pro forma net debt to around EUR 3.8 billion, representing a very significant reduction, and this is already underway expected around year-end. At the same time, the leverage ratio is improving very significantly also from 2x in H1 '24 to 19.5x at the end of December last year, then 15.5x at the end of June 2025, and this is mainly due to the operational recovery of our activity, resulting in a strong EBITDA growth. If we take into consideration the new real estate partnership, this ratio would be lower even further now approaching 13x. Thank you very much for your attention. And I hand over to Laurent to continue this presentation. Laurent Guillot: Well, thank you, Jean-Marc. I think I will try to speak a little bit louder apparent well the first discussion. What are the lessons from this presentation? First, the positive trend on top line continues with a strong organic growth, 6.2% overall and 8.7% on nursing home, supported by positive momentum on occupancy rate and positive pricing effect. So second is a strong momentum on operating margin, plus 19.5% for EBITDA and EUR 79 billion mostly driven in absolute terms by France and Northern Europe with strong performance, especially in our 2 biggest countries. As a consequence of this and along with other components, our free cash flow turned positive this semester for the very first time for a long time. Third, our EUR 1.5 billion disposal target before year-end '25 is now largely exceeded with EUR 2.1 billion now achieved or secured. This was reached partly thanks to a major real estate partnership recently signed, bringing EUR 761 million to the benefit of operation or also other transactions. Four, this will accelerate further the strengthening of our financial structure with a pro forma net debt of around EUR 3.8 billion versus EUR 4.7 billion 1 year ago and a leverage ratio nearing now 13x versus 23 last year in the same period. And fifth, the positive trend seen in H1 '25 is continuing. I reiterate our guidance for '25 expecting EBITDA to grow between 15% and 18% at constant perimeter and [indiscernible] to deliver midterm outlook. We are now expecting revenues to continue growing ahead between 4% and 5% again at constant perimeter from '24 to '28. And EBITDA dynamics is also set to go here on the same path as we go. We've got [indiscernible] with a CAGR between 12% and 16% at constant perimeter over the same period in between '24 and '28. So thank you for your attention. And now we'll be available to answer your questions you may have. Operator: [Operator Instructions] Laurent Guillot: First question, what is the plan in terms of distributing the proceeds from the '25 [indiscernible] disposal, EUR 1 million in Q3 that I was mentioning. Well, the purpose is really definitely to strengthen the financial position of the company. So it goes to reducing the debt and [indiscernible] no plan for proceeds and neither no plan to accelerate being CapEx stand or acquisition [indiscernible] of balance sheet. Another question. Can you elaborate on what is happening in Ireland [indiscernible] change management or would change your season procedure. People do not know we had the TV report a few months ago. Well, this was in, I would say, in frame of a political debate on the legitimacy of the private sector for the [indiscernible] sector. And also, we say very close to 20 years after a big event on the sector that happened in Ireland also and I would say what we did after this report is clearly we obviously both at the same time, the two facilities involved and the '26 [indiscernible] that we have in Ireland show that all our procedures, all our processes are well in place in this [indiscernible] over a period of time to stop the admissions in some activities and most of the cases because the process and the procedures have been very high [indiscernible] cooperation with a local authority, which is HIQA, we decided to reopen this [indiscernible]. So we are very confident and the team in place in Ireland is doing a great job that is improving [indiscernible] with small changes but at the same time, the job that we are doing in Ireland a good job. We never celebrate in our facilities any deviation from our standards. And when we find this, we obviously hire, then the people go there or the people that are involved. But I can assure you that we have always focused on of what we are doing in all the countries and Ireland is not different from the other countries. We strongly believe that this TV report was a not completely fair to the situation of our [indiscernible] in Ireland that's part of our business. But as always, we have [indiscernible] measures to improve discussion with the operators. What are the potential tax costs associated with the transfer of release of assets in connection with the creation of the real estate company. Jean-Marc, you've given the numbers in the presentation [indiscernible]. Jean-Marc Boursier: Yes. As you have heard me say, so we are receiving EUR 61 million from the investments, but the net debt is only around EUR 7 million and the difference is relating to three components. The first one is real estate duty and property taxes. The second component is income tax because assets are valued at a higher value than the book value. So we generated some income tax in some countries. And third related to [indiscernible] related to these conditions are around EUR 6 million. Laurent Guillot: [indiscernible] the back end loaded or rather linear, whether the underlying assumption on price of occupancy per year, what is the debt maturity level of reimbursement [indiscernible]. I take the first question, you take the [indiscernible]. We are still in a phase of the recovery is progressive. So you see that our guidance in terms of EBITDA improvement from '25 is 15% to 18%. And if you look at the guidance for the midterm, it's 12% to 16%. So it's more front-end loading because the recovery is faster at the beginning that had driven. And yet, while at the same time against that theory, we have towards 27%, 28%, we will have more pricing power because our facilities will be more, I'd say, occupancy where we've increased to reach almost normalized level. And this, at that time, we have more pricing power. So you see a little bit more coming from the cost at the beginning and a little bit more coming from the prices at the end with a positive impact throughout the period of occupancy rate improvement. And with regards to the second part of the question, what is the debt maturity and what are the amount of reimbursement for '25, '26 and '27. This hasn't changed and you will find all the details on Page 43 of this presentation. So we have recycled our debt maturity and reimbursement schedule as an appendix of this vision. Next question, where do you stand at debut financial covenant and what is the plan for 2027 [indiscernible]. We have one covenant, as you would already know, which is a minimum liquidity quarter after quarter of EUR 300 million, this hasn't changed. The net debt to EBITDA covenant that we had with some [indiscernible] have been renegotiated last year. So that was the existing at most. We are currently in negotiating with banks. The answer is yes for one single reason as you have noted in our press release for the real estate agent, there are two conditions precedent to the creation of this vehicle. The first one is an internal one. We need to obtain the approval by our unions, and we see [indiscernible] which we are doing in the proper way and second, we have to obtain also the approval by our creditors because some of these -- some of those assets have been pledged under the current credit agreements. So we need to obtain release of security that we are going to get some other assets in exchange, so we are currently negotiating the securities with our creditors to make sure that all of that can be finalized before [indiscernible] would be done in quick and efficient manner. I read the question with also a question for you so that we both can answer this one. Is there room for additional provisions also in H2 or in '26, could tell us a bit more nature of nonrecurring agents in the P&L of EUR 7 million to EUR 9 million, okay. So there are two questions in this question. The first one is related to provision tolerability and charges and net flows in our EBIT. As you have noticed, we have really some provision that was historical risk that we were facing in France, both as investment more precise than that, and we think that we will [indiscernible] could be potentially contemplate additional provision release [indiscernible] too early to say [indiscernible] we are well covered and why we are going to enjoy some provisions. With regards to nonrecurring expenses I told you this is a largely due to non-cash adjustments, little bit of costs related to the new transaction I was explaining with the vast majority is related to a noncash adjustment. [indiscernible] for some depreciation related to certain assets that we are intending to say that seem to too significant. Could you elaborate on Q3 outlook regarding the occupancy rate. [indiscernible] 3 weeks or 4 weeks from now, we have notification on our Q3 numbers, so we will we have more sales. But clearly, on the occupancy rate, the trend that we have seen till now is continuing with a real improvement and rate of increase compared to what we experienced in H1 is not very different. We continue to have a strong [indiscernible] in our main country, in Germany [indiscernible] so good trend and we continue to see a recovery in France in environment that involve an improvement [indiscernible] also in Q3 compared to investor. As you know, summer is always where we have a better win rate than the average of the year. So you should expect in Q3 compared to Q2, an improvement. What will be the level of maintenance CapEx in '25, '28 and development CapEx in the '26, '28. As you know -- a few things. Probably maintenance CapEx and IT CapEx that Jean-Marc showed you before, are at a low point, and we increase progressively this maintenance CapEx, modernize and continue to push for price increases of our services. It is pretty bold to be sure that we maintain a good level of maintenance and that we continue to enable service with more IT investment. So this kind of CapEx will increase a little bit more to a reasonable amount of money, and we'll continue to be looking to be a very, very control of our cost, so very slight and whether it's an increase on these networks and IT. On the other side, on development part, we have been very, very selective, most of the development now is happening through asset light projects where we have contracts with partners. And from that point of view, the vehicle, we just set up with our partners can be a way to do for further development with being at the same time free in this. So we continue to have some development CapEx. We continue to be very in control. You should not expect overall on the strong [indiscernible]. With your 4% to 5% revenue growth CapEx, how much [indiscernible] to improve occupancy rate pricing effect and also [indiscernible] if they are including in our target. You -- I mean, we do not communicate wholly on the shipment then but we can explain that maybe less and [indiscernible] then price effect, I gave some detail earlier, where you will have a little bit lower pricing effect at the beginning and an improvement in pricing effect on the significant path. And new openings, you have some remaining new openings obviously from the past and growth that are at the beginning of the period towards the end of the year, you have some impact bothering on new openings that have been done mostly asset free. Are you now done with these results; we will be open to [indiscernible] at a good price in order to continue to push ahead with [indiscernible]. This is exactly the point -- the question is mainly with what we are currently heading, I would say we have done with our project and with our commitment, so now, and as I was saying already in July also, we will be very opportunistic, should we have good prices, we would move on, at unattractive prices, we will keep with the asset now, very, very, very selective and very, very, very opportunistic should proposal come at a good price. How will the partnership be structured; has it been working rights or preferred shares [indiscernible]. Jean-Marc, do you want to take this one? Jean-Marc Boursier: And then maybe disclose [indiscernible] event. But just keep in mind that majority of working right with the retail [indiscernible] and this is the a reason why we will have the full control of this [indiscernible] consolidated in our books we might share the [indiscernible] we'll be doing something that we need [indiscernible] majority of the working rights with the capital values. Laurent Guillot: How should we model the growth in fiscal expenses [indiscernible] what would be the midterm categories. We don't probably provide guidance on this one, but clearly, given our cost structure, you look at them and you compare with our peers. The growth rate of [indiscernible] would be far below the CAGR of our top line is one of the reasons why we will have begun to move the EBITDA moving forward. This is particularly the case in France, where our staff ratio is still quite high and due to the -- I mean the decisions that we have taken at the beginning of the refoundation of the company to staff much better our facilities. Now we are entering a [indiscernible] we reduced this in ratio [indiscernible] especially in France than offshore. So we benefit from that also on the occupancy rate improvement. What consequences from the current political mess in France, security funding, pricing valuation, implementation of [indiscernible]. Well, I would not -- I don't know if this is a proper word, I would not use mess. We have huge [indiscernible] I have had 8 different Minister for [indiscernible], so you know it's not a particularly new situation that we are experiencing now. Generally, we would welcome any new initiatives and more resources to nursing home and health care system, especially from the private sector as we are more efficient, far more efficient in this sector, we'll wait to make savings, knowing the political environment in France, the forecast that we have given for the next few years is not improving any significant improvement of the regulatory environment for us in the next years. We are planning and we are working on self-help measures to deliver this performance, not on outside environment improvement. At the same time, we are working with our peers, private, public, NGOs to try to improve the regulation framework in France, but we don't count on it in the forecast given for the next quarters. Are you planning to pay the EUR 300 million physician payments [indiscernible]. Yes, onshore. No doubt about that. We planned [indiscernible] on the evolution of market share in the French sector. We will increase occupancy driven by the increase in market share [indiscernible] market share from. Yes, we are gaining market share. That is we start from a lower level compared others and at the same time, the company was in a turmoil in 2023. So from some respect, we are gaining back our share, and we are not playing out on prices on the overseas. We continue that this has been very significant decision from the beginning to decline prices, [indiscernible] for the long term, the best solution. So really, we are recovering our normal market share on occupancy rate. And we are not doing that on the extent of price [indiscernible] the answer is yes. As you have understood, there will be at least EUR 60 million about the [indiscernible]. Any further questions? Can you go back? Well, do you have any other points? Has that been very clear to you? Well, assume that there is no further point, so let me summarize very, very quickly. We continue to show a good business recovery, and we continue obviously to confirm our target for '25 but also, we've given new numbers of midterm outlook with a growth rate of 45% and EBITDA growth of 12% to 16%. At the same time, we have strongly improved our balance thanks to a significant transaction that will lead to a very significant deleveraging and again giving us a lot of trust and confidence for the future. So now we are all set to face the growth on this market because the needs in front of us both in terms of dependence and [indiscernible] surging very important in the next 5 years, and already we have a right balance sheet and we have the business recovery rate, so we are willing to tackle this growth period in front of us. Thanks, a lot. Thank you.
Operator: Good day, everyone, and welcome to the EON Resources, Inc. Special Conference Call discussion of $45.5 million funding and related Farmout Agreement. [Operator Instructions]. It is now my pleasure to turn the floor over to your host, Michael Porter. Sir, the floor is yours. Michael J. Porter: Thank you, Matthew. Good afternoon, ladies and gentlemen, and welcome to our Special Conference Call. Before I turn the call over to management, I have to read the forward-looking statements. This conference call includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involves risks and uncertainties that could cause actual results to differ materially from what is expected. Words such as expect, believe, anticipate, seek, might, plan, any variation in similar words and expressions are intended to identify such forward-looking statements. But in the absence of these words, it does not mean that a statement is not forward-looking. The company expectations are disclosed in the company's documents filed from time to time on EDGAR and with the Securities and Exchange Commission. Without further ado, I'd like to turn the call over to Dante. Dante, the floor is yours. Dante Caravaggio: Thank you, Mike. Good afternoon, everybody. We're getting to be old friends. This is probably the seventh or eighth, one of these things we've done as a group. I apologize upfront because I'm in an airport, and we're going to get a little bit of background noise. So I'm on company overview slide. And all I'm going to highlight there is -- all of our operations are in close proximity in that Southeast corner of New Mexico and New Mexico and Texas combined today make up most of the oil production for the United States. New Mexico is making 2 million barrels a day. Texas is making 6 million barrels a day. And we're in there bringing this thing in from the rear about 1,000 barrels a day. Over the last couple of days, we're at 960, 980 barrels a day and increasing. So today, our highlight is the deal that we closed a few weeks back. And we've got on the line with us, our attorney, David Smith. We've got our CFO, Mitch Trotter, and we've got our Vice President of Operations, Jesse Allen. Of course, we have our IR PR Manager, Mike Porter. So let me leave you with what I think you're going to take away after the next 20 or 30 minutes we're together. David is going to cover the multiparty closing that we had and the unique value and differentiated value this brought. So all along the way, we did our best to try to get a reduction in any cost for payoffs, which we did in the last 2 weeks. So you're going to get those details from David. Mitch is going to talk about the impact of this, this deal that we struck and close on our P&L and on our balance sheet. And then Jesse is going to talk quite a bit about the two items, they're going to really jack up our production. We think we're going from 1,000 to north of 5,000 by accelerating our expansion of waterflooding in the Seven Rivers formation, which most of our production is from today as well as the potential drilling of 90 wells in the San Andres formation, which these wells are forecasted to make 400 barrels to 500 barrels a day, each. So you multiply those numbers, you get a crazy large number. So let me cover a couple of other things. If you add all the value of reduction in debt, reduction in loans, reduction in liabilities and the impact to shareholders from the Farmout, this deal is worth over $150 million. So those details you're going to get as the speakers follow me. To our future, we've reduced major risk. When you have a bank loan with bank covenants, you run the risk of a default because you have to do everything that bank wants you to do. We are senior debt free. We don't have any bank covenants today. We don't have a $20 million debt item. We've got some $2 million and $3 million debt items from the normal course of running the business. But we are a quantum leap beyond where we were, I'll say, 3 weeks ago. I already talked about the Farmout and the amount of production that could bring. In this big beautiful deal that you're going to get into the details, we picked up $5 million in cash for the Farmout as a leasehold. We also picked up $2 million just to do, I'll say, miscellaneous works on the field to support the horizontal drilling effort. One item is just digitization of our logs. That will be picked up by this funding. So we're expecting our LOE and our G&As to reduce a bit just from the funding of this Farmout. With that, I guess, I'm going to just kind of summarize my list. The production is going up. The costs are going down. We're going to have more cash to play with. And what all this means is more opportunity to buy properties, to expand the massive field that we've got and the other little field that we've got. So we have right now a 16,000 acre property. We bought a 5,000-acre property earlier this year. And I think we're going to stay in that space for a bit, picking up 5,000 and 25,000 acre spaces, which don't catch the attention of an Exxon or Chevron or or an Occidental. So we're kind of happy right now. So with that, I'm going to turn it over to David Smith, our General Counsel. Thank you, David. David M. Smith, Esq.: Thank you, Dante. This is David Smith. I've been the General Counsel for the company since its inception. And some of you may recognize this. But we've acquired our first acquisition on November 15, 2023, 2 years ago, and we've accomplished so much in that time. I'm really excited to be able to give an overview of the funding highlights. It is a remarkable, incredible value to shareholders and the company, both on a present basis and future basis. I've been in the industry my entire career in or around it, either as an attorney or in land in my early days. And I've seen lots and lots of deals, but I've never seen one quite this good. And really from several different points, both in the funding capital that we received, the asset that we received in a present form and then also the future value to be brought, specifically with the Farmout. It's hard to imagine that we could duplicate the value being brought by this multiparty closing on September 9 by any other method other than how we accomplish it. It was a team effort, significant in that we had four industry players from different categories, all participate and get this closing done in one day under time constraints. So I'm very excited and very excited to speak to you about it today. So let me break it down a little bit. We got a total of $45.5 million in cash delivered to our company on the date of closing, September 9. We had much of it dedicated for different purposes. In regard to how that broke down in regard to funding, we had $20 million paid in for a 15% overriding royalty interest in our largest field, the Grayburg-Jackson Field. That was our initial acquisition in the company that own and ran that field, that's in Eddy County, New Mexico. With that 15% override, we were able also to purchase that, a 10% override that we had given at the time of our initial business combination to the seller of those assets. We had several obligations to the original seller that we have now satisfied through this closing as well after a 2-year period. We received another $20.5 million by the sale of a 5% overriding royalty interest in what's going to be the horizontal drilling under the Farmout in the San Andres formation in the Grayburg-Jackson Field. So that money went essentially to our bottom line for cash flow because we are not involved in having to spend that money for any other purpose right now. In fact, we have a 3-well carried interest in that Farmout. We also raised $5 million under the Farmout Agreement for the [ farmee ] to acquire the ability to undertake that Farmout, drill the wells and acquire interest in the San Andres formation. We also had received another $2 million, or up to $2 million for studies of the San Andres formation and the work-over of existing wells in the Grayburg-Jackson Field. So that's a significant benefit there. Again, we don't have to come up with the cash to pay those $2 million that's going to be funded by the farming. In regard to the use of the proceeds that were raised. We have retired $20.6 million in senior debt. That was to our secured bank who held all of the oil and gas properties in the Grayburg-Jackson field as collateral. As Dante had mentioned, we are out from under any kind of covenants negative or otherwise in regard to that debt. So we have much more freedom now in considering other transactions beneficial to the company. It's an excellent position to be in. We also received in that retirement of the senior debt, a $1.5 million cash discount for payment in cash at the time we did it. We also from the full proceeds retired $15 million in a seller note. At the time, with accrued interest, the actual obligation was closer to $20 million. So we were able to settle that suite or not suite -- settle the note for $7 million, receiving an approximate $13 million discount from the sellers from whom we bought the original properties back in November of 2023. Just a huge significant benefit. We also received a 10% overriding royalty interest by purchase from the seller in the Grayburg-Jackson field, giving us a higher net revenue interest in that field, that the sellers had retained at the time of our initial business combination in 2023. We had also received -- or paid a price that was substantially less than we had initially negotiated back in 2023. So a huge advantage there as well. We have paid other obligations, about $4 million from the proceeds that we received in the funding, including getting additional discounts, $600,000 in one instance that I'm aware of. So the discounts were equally impressive as to the funds actually received. One of the greatest values we received is we had issued 1.5 million -- we had issued dilutive preferred shares deemed convertible shares, that could have been converted at a value of $27 million to the sellers, that was an obligation that was signed in our closing of November 23. But we were able to settle that in this closing as well with 1.5 million common shares valued at about $500,000 at the time of the stock price trading for that $27 million obligation. So it's very exciting to be able to announce that. It's one of, what I would say is the highlights of my career. It's -- it was amazing to see our EON team work so hard and produce these kind of results for shareholders, which is why we come to work every day. So with that, I'm going to turn it over to Mitch Trotter, our Chief Financial Officer, and he'll be able to expand in that arena as well. Mitchell Trotter: All right. Thanks, David. Hello again. This is Mitch Trotter as he stated, the CFO, and I want to thank all those who are attending today. Many of you have been on past calls we've talked to individually. So as David stated, this was a great deal for EON. It was a great deal for our investor now. And it's a great deal for you, the shareholders. So let me fill in a little bit of what David and Dante have laid out by going through the estimated impacts to the financials from the funding and the Farmout Agreement. So what does all this mean to the balance sheet, paying off both senior debt instruments, buying back the 10% ORE, retiring the preferred shares. Just what does it mean to the balance sheet? Well, this is huge. This is a major cleanup of our balance sheet. $35.6 million of debt gone. $5 million of unpaid accrued interest gone. Payments of obligations and money for the field, it also means the minority interest and the preferred shares are gone with a lot less shares as David had stated than the potential highly dilutive preferred shares. So our equity section is now clean. So that's huge for our balance sheet. And what you're seeing here is a pro forma balance sheet, captures the essence of the closing as of Q2 had it happened. The final Q3 balance sheet may and probably will look a little different, but that's based on final GAAP analysis of all the multiple complex transactions where each one maybe slightly accounted for differently, but that's just how it is. But this gives you the essence of the deal. So let's go to the next slide. Let me touch on the P&L and the cash flow. Well, just like the balance sheet. This is a reset of our P&L and our cash flow in the positive manner. The only near -- real near-term impact to our income statement cash flows is from that 5% incremental ORE on the existing Seven Rivers waterflood, where we issued a 15%, but bought back to 10%. So the net impact to both the balance sheet -- the income statement and the cash flow this is positive. It is not a detriment at all to EON. The income statement goes up by net $300,000 per month. Revenues take a small hit of $100,000 a month, but interest expense and the funding goes down by $500,000 and then the rest is taxes. Same thing for the cash flows, where we have a $500,000 per month improvement. Our $670,000 per month debt amortization payment, is gone. It's gone including the covenants. They're gone. And that's huge for us. This also partially pays -- is partially offset, of course, by the ORE payment. So this is the near-term impact from the Seven Rivers ORE. As the waterflood, Seven Rivers production increases over the months to come and oil prices change, the payments are proportional with less risk to the company. And then what does this 5% Farmout ORE means? Well these payments are all -- this ORE is all factored into the horizontal drilling program, that doesn't start impacting financials until mid-2026. But again, the production and the price risk is mitigated by the use of ORE funding. In short, what this does is this funding and this change opens up all kinds of possibilities for EON, looking forward and going forward. So with that, I want to go over to Jesse and let him touch base on the Farmout. If you'll advance to Jesse's slide. Appreciate it. Jesse Allen: Thank you, Mitch. Good afternoon. Again, this is Jesse Allen, VP of Operations at EON Resources. Today, I'm going to talk a little bit about the Farmout details and a little bit about our partner, Virtus Energy Partners, and then I'll wrap up my talk with the impact that this Farmout agreement and the cash that we've been able to obtain has on our future oil and gas production. So with that, the essence of the Farmout deal is that we entered into an agreement with a subsidiary of Virtus Energy Partners, which is known as Virtus and they end up being the operator with a 65% working interest, and we retained a 35% working interest. What this really means is that we were able to -- we're going to be able to exploit a field within a field. And so what does that mean? That means we've got our current operations ongoing, which is the Seven Rivers waterflood. And now the development of the field within the field is the horizontal development of our San Andres interval. And so that's very important to understand. So we've got kind of a double barrel of production that will be our future. So what did we receive in all this? We actually -- as part of the deal, we received a $5 million consideration that earned Virtus, their 65% working interest. And so with that, what are some of the details within that Farmout agreement? Well, in first quarter of 2026 and into the second quarter, Virtus will be drilling 3-wells in which they carry 100% of the cost. We earned 35% interest in those wells, and Virtus pays all the costs. And what is -- and what are these wells going to make? Well, as Dante has mentioned, the wells are going to produce 300 to 500 barrels of oil a day per horizontal well. Costs will be in the range of $3.5 million to $4 million each, and we have the potential across our acreage here to drill 90 horizontal wells at a total capital cost 100% of $300 million. So this is a huge deal. And what makes it really, really great is that Virtus our partner, these guys were formerly the management team that ran Steward Energy and developed a premier San Andres right on the Texas and New Mexico state line. And the reason Virtus joined us is after looking at all the data that we had put together and all the analysis that we did, they felt like our acreage is as good, if not better, than the acreage they developed with Steward Energy. So that's also very important. They were very excited about this opportunity. And it's worth noting that as Steward Energy, they grew that production in the Stateline Field. We like to call it the Stateline Field to 30,000-plus barrels of oil a day. So we believe we're going to have that potential, if not more. In addition, what does this impact? What is the impact that this is all going to have on EON resources? Again, with expected production of 300 to 500 barrels a day per horizontal well, over the life of the drilling program, this will be a net production to EON of over 7,000 barrels of oil a day. But as we go into this partnership with Virtus, it's worth noting that in addition to the $5 million that Virtus provided to us in cash, there's also a $2 million expenditure that we're going to use to re-complete vertical wells and actually prove up how good, just how good the San Andres horizonal development is going to be. And that $2 million will be used to do those vertical completions at no cost to EON resources. That's to our total deal with Virtus was $7 million in cash. We'll use that $2 million to do some science and perfect exactly how we're going to complete these horizontal wells. And we expect to do these workovers that I speak of using the $2 million in the first quarter of 2026, maybe by the end of this year. We'll have to see how that all pans out. So with that, I am going to turn it back over to Dante for concluding comments. Dante Caravaggio: Well, thank you, Jesse. I'm going to do the wrap. And again, I apologize for some background noise here, but let me wrap it up. Existing operations are going to get the benefit of this deal by having more cash available for workovers and production rigs. Today, we're running 4 production rigs on our property, and we're trying to make sure every well produces, every injector injects and get that production up, we hope, by the end of this year to 1,200 maybe 1,250 in the same formation that we're producing out of today. Mostly the Seven Rivers. It's an absolute joy that we have shed that $35 million in debt that comes with bank covenants and restrictions. And my phone hasn't stopped ringing. So I believe before the end of the year, we are going to be doing some other big things. And we can't, of course, talk about that but we couldn't talk about that big deal in too much detail, although nobody believed this. But hopefully, some folks might believe that we are going to -- we're not done yet. We're not resting on our laurels and that we've got -- we got a lot more things to do. The Virtus guys are fabulous folks. Their name implies virtue and the pronunciation, they keep correcting me because it sounds like Virtus, but they wanted to be pronounced "Virtus". So I'll be working on that in coming months. Their production is not going to kick in to the middle of '26 because they have to go through the grind of permitting. Now we are mostly in federal lands. We do hope that the new administration cuts the time to permitting on federal lands from, say, 7, 8 months to hopefully 6 months and then we get going. We are going to see a kickup in income and EBITDA that probably isn't going to be really noticeable until the end of Q1, but it should be substantial because of all the things we've just talked about. As far as looking ahead and going forward, we don't think there's a better time to be buying oil properties. So if we can buy these things at under 3x EBITDA or 3x cash flow, we're buyers. And now that we don't have much debt, we have people that might extend us a little bit of credit. So we don't want to get in the same trap that we were before. But certainly, we're in a good spot right now, and we're looking ahead. So with that, I'm going to turn it over to, I think, Mike Porter, who's going to organize our Q&A. Michael J. Porter: Thank you, Dante. Matthew, would you please start the question-and-answer period? Operator: [Operator Instructions] Your first question is coming from David Edelman. Unknown Attendee: Yes. Thanks, Mitch and David. My question is given all the things you've done in the refinancing. How many shares will be outstanding at the end of the third quarter compared to, I think, about 36 million were outstanding at the end of the second quarter? Mitchell Trotter: This is Mitch. I'll answer that. We're about 43 million, and we'll get locked down today, but we had it as of this morning so that we could do our upcoming shareholders meeting end of October. So not dramatically different, but that includes the shares issued and everything else. Unknown Attendee: What will shareholders' equity be or how much higher will it be due to all the arrangements that were made under the new financing? Mitchell Trotter: A very good question. And I did my pro forma balance sheet, and it shows about $11 million range. Well, as David articulated about $10 million or so million came from pickup settling of some of the debt. And so we're estimating what's going to flow through the retained earnings for all the settlement and pickups. So I'd just say $10 million to $12 million should be the ballpark pickup at that point in time. Operator: [Operator Instructions] Thank you. That concludes our verbal Q&A. [Operator Instructions]. I will now turn the call over to Michael Porter for remaining questions. Michael J. Porter: Gentlemen, the first question from the web is, when will the company start having a positive cash flow? Mitchell Trotter: Okay. This is Mitch. I'll answer that one. Well, obviously, we have a huge pickup of $500,000 or more from just getting rid of the debt amortization and the incremental ORE. That puts us about in a breakeven position. And what's positive cash flow versus not, we're investing in the field. So from a straight every day, we're -- from operations, we're in a positive mode. But we do have expenses to workovers and all that, our capital expenditure. So I would say we're kind of in a breakeven right now, and ballpark... Dante Caravaggio: I'm going to add to that, if I could. We're spending too much on G&As and LOE. And so we are in a mode now where we -- to get this, I'll say, great deal done, we spent a lot on legal fees, on management time, on consultants, all that's going to zero. And I think all of it is at zero. But now we have three main cost areas, insurance, legal and auditing. We're doing our best to get those costs cut in half, I hope. I hope that in the LOE that as we look at shared services with Virtus, we bring our costs there down as well. So we want to get below $20 a barrel, lifting cost. And that's squarely in the center of our target. And as we look for acquisitions, remember, if we buy a property not too far from where we're operating today, we'll incur no G&A incremental. And if the -- there are synergies between operations it will bring down our existing LOE as well, our lease operating expense. So I'm expecting that even though Mitch is saying we're close to breakeven, we should be making money very shortly, as we drive costs out of the system. So I'll turn it back over there to Mike. Michael J. Porter: Next question is, is a buyout by a bigger player an option or not, if the valuation is interesting? Dante Caravaggio: Yes, I'll field it. I think we're too small. I just think we're too small. I think that if we're producing 20,000 barrels a day as a group. Between us and Virtus, offers will come. But this is also why in the agreement that we made with Virtus we didn't want them to have the ability to get a couple of good wells and then sellout. We want them to be married to us for years. So we have a 15-well minimum they must drill to earn the rights field-wide. So we think we're going to be in good shape to harvest these agreements for a while. Now it doesn't mean we won't sell, if we get an outrageous offer. I mean if someone wants to come and offer us $20 billion, they can have it. But I don't see that happening. Back to you. Michael J. Porter: Okay. Great job team. Now that the bank covenants are gone, are you still targeting 70%-ish hedging of production? David M. Smith, Esq.: Okay. Mitch, I'll take that one. First off, we believe in hedging at a certain level. So the answer is not 70%. Now who knows, we could -- like Dante said, have an acquisition that might have some debt. But that would be a field-specific thing. We are already in the process, and it'd be nice if oil prices were higher, but we're picking the days to start getting some hedges, and we've got through a chunk through the first quarter of '26. And -- but it's only like 25% of the hedging of the production, and it's -- everything is over $62.50, that's our minimum. We want it much higher. Now if we get a great big pop, like actually a couple of years ago, we locked in a lot of big prices. We'll do that. But I can see us building up to the 50% level as prices allow us to, but we're not going to rush into it. We need to have enough to weather a dip. And I don't think it's going to dip for too long that the Saudis won't go nuts enough, let's make it go back up. So we need to weather storms. And that's our philosophy at the moment. Okay. Back to you, Mike. Michael J. Porter: Thank you, sir. Another question. Dante, congratulations to you and your team for this outstanding deal that you closed. Here's my question. The potential BOPD increase you mentioned going from 1,000 to 5,000 barrels. Would that increase include the new wells drilled by Virtus or is that the potential increase just from your workovers and increase production from existing wells? Dante Caravaggio: Yes, I'll field it. And then Jess, you will correct me. But the Virtus wells, I think we can bank on 4,000 net barrels a day within 4 to 5 years. And I think our own water flooding, I think we can bank on a double 1,000 to 2,000 in the SBR and possibly more. So I'm throwing out a 5,000 barrel a day number as a combination of the 2 fields being developed in different formations. Now the upside of that, I mean, maybe it could go to 7 or better, but we're trying not to over forecast this stuff. I mean, I feel very comfortable the SBR can carry us to 2,000 barrels a day in the next 24 months. And I feel very good that the Virtus team can carry us to 4,000 barrels a day for our share of that production in 4 years. So -- but those are big numbers, a lot higher than where we're at today, and that gives us a lot of runway. Now we're not going to sit back with that. I mean I feel like with our size and our G&As, we really need to be at 2,000 barrels a day for shareholders to be dancing in the street and to take some of the pressure off us. Now we're going to do it a couple of ways. We're going to cut costs. We're going to look for a great deal under superb financing terms. And we're going to press forward on what works. So that's -- I hope that answers your question. Michael J. Porter: And the last question, in the releases, you mentioned returning a 10% royalty. Can you please explain what this means to the company? Dante Caravaggio: I'll let David chat about that, please. David Smith: And I was looking at the question here. Can you repeat that for me, Mike? Michael J. Porter: Yes, Sure. In the release, you mentioned returning a 10% royalty. Can you explain what this means? David M. Smith, Esq.: Yes. Several things. The overriding royalty interest is -- if you're familiar with overrides, a net payment out of proceeds without any cost expense. So that is the bottom line net revenue to us when that was conveyed back. Now we turned around and sold that in the overall transaction. And we were able then by selling that interest, bring in $20 million for that interest. And we netted approximately $6 million to $7 million off of that one transaction by being able to flip it in that direction. So the net effect to our revenue in the Grayburg-Jackson field was to lower it by 5% and only by 5% by having bought that back. We wouldn't have been able to economically be able to sell that 15% override that would put us at a very low net revenue interest, which we couldn't afford to do. So it was a key ingredient to getting this overall funding done. Dante Caravaggio: Yes. Let me -- I'm going to highlight a subtlety, that most people probably did not pick up. And we don't highlight this because I don't want to rub salt, in anybody's wound. But that override that we gave up when we bought the property, we received the credit on the purchase price of $30 million. We bought it back for $13 million, and then we sold it -- for really, you have to stick with me to follow this, we sold it for what would be the equivalent of $53 million and you're going to say, how did you do that? Well, that override was in all zones override, embedded in it was the San Andres. So if you stick with me, we sold a 5% override in the San Andres for $20 million. We sold a $13 million override in the Seven Rivers for $20 million, and then we retained the balance. So that -- now we're not that smart. We didn't realize at the time we did a lot of this, the value of the San Andres, we have to credit Virtus for opening our eyes to it and it came about as we were looking for a drilling partner because we did have our own geologic group, say, the San Andres, looks pretty good, and we ought to go for a pro from Dover, which turned out to be Lance Taylor and his team. So in the end, I just have to credit it to praying to rosary, but we got a gift from God, and we're dealing with some very nice people that have been palms up on honest with us, and we did the same. And in the end, our shareholders all benefited. So I'll turn it back over to David, if I said anything wrong, please correct me. David M. Smith, Esq.: Very good points, Dante, that's exactly right. Mike? Michael J. Porter: Yes, sir. Gentlemen, that's the end of all the questions. Dante, I'm turning it back over to you. Dante Caravaggio: Well, look, we appreciate our shareholders that are sticking with us. And we feel as bad as anyone, especially since I'm a major shareholder and our Chairman, the Salvucci family, our major shareholders, we are absolutely focused on getting the stock price up. So we don't want to pump shares into the market without bringing in way more value in terms of shareholder equity and earnings and cash flow at the same time. Now we are getting offers because others see the potential of the stock to go up to, I'll say, transact properties for shares. And it's not going to be easily done. We're going to need a spectacular property at a spectacular deal before we do that. It's much more preferred to take on debt or to sell another ore. So I think in the end, this team has honed its metal. We've come through the fire, the legal team, including our extended legal team were spectacular. Our vendors have been great to us. And all parties we've dealt with, First International Bank and Trust, CIC Partners have all been wonderful, and we remain on excellent terms. So that's the way we do business. That's the way our DNA is put together, and we want to be straight up with our shareholders. We are looking forward to a very big future, and you're not going to have to wait long for this positive cash flow and these earnings to show up in our Qs and our 10-Ks. So with that, I turn it back over to Mike here to close up. Michael J. Porter: Okay. Matthew, close off the meeting and thank you, everybody, for attending. Operator: Thank you, everyone. This concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.
Philip Caldwell: Good morning, everybody, and welcome to Ceres Power Interim Results for 2025. I'm Phil Caldwell, Chief Executive. And I'm joined by Stuart Paynter, CFO; and Patrick Yau, Head of Investor Relations. So without further ado, let's go through the first half year. First half of 2025 has been quite an exciting year for Ceres in a number of different ways. Probably biggest milestone for us is the start of production with Doosan in South Korea. And that's a milestone that we've anticipated for a long time. And it really is a pivotal point for the company, because it proves out R&D innovation all the way through to mass production and ultimately will lead to the payment of royalties and proves out the business model. So that's a big milestone for us achieved in this first half of the year. We're very pleased with progress with other partners as well. Delta Electronics has acquired land and factory facilities now to begin their scale up in Taiwan, committing around GBP 170 million investment into those large-scale manufacturing facilities for hydrogen energy solutions. We've had some landmarks with Shell as well on electrolysis, the largest solid oxide deployment in India, achieving record efficiencies. And our partnership with Thermax goes from strength to strength also in India, opening the HydroGenx Hub, which is going to actually test and validate systems and ultimately build systems in India as well. So a lot that we'll talk about this morning there. I think the markets are interesting as well. I'm sure you've seen the headlines, but the power markets are changing dramatically, probably in a way that we didn't anticipate 12 months ago. And it's really being catalyzed, if you like, by the near-term need for power, the time for power driven by things like AI data centers. So that market has shifted dramatically. And as a business, that's a big opportunity that we need to respond to as well. For Ceres, we're now very much in commercialization phase. As I mentioned, we've kind of crossed the Rubicon, if you like, from R&D into mass production. I mean, that's been coming for a long time. Our teams, our people have worked incredibly hard on that. And we're getting pretty good at this as well in terms of factory builds with our partners globally. And we really have this clear ambition to establish Ceres as the industry standard in solid oxide. We have a strong balance sheet and positive cash flow in the period, and Stuart will talk to the financials in a minute. And in response to what's going on in the markets and also the transition of where the company is moving from heavy investments in the R&D phase now through to commercialization and manufacturing, we are undertaking an alignment of resources and a business transformation initiative over the next few months leading to a year, which really will focus our partners more on initializing and executing on these commercial power market opportunities that we see and supporting partners as they go into mass production. I just want to remind you, you're probably pretty familiar with the technology. So the unique technology is the steel cell. This is the latest larger footprint, high-performing fundamental steel cell technology that we have at Ceres, that same cell now has a dual use. And we will be launching next year our latest stack platform. So that's a single product, single stack platform that will service both the power markets and the hydrogen markets. Now that's very important to us, because what that means is, we have a single platform, we have a very much focused R&D and product development pathway. And also the maturity, the scale, the supply chain build-out that we're doing for these first markets for power, ultimately will also directly result in the maturity, the cost down and everything that we need for the hydrogen market as well. So single cell, single stack platform. On the top here, you can start to see the first products coming through from our partnership with Doosan, our partnership with Weichai in China, our partnership with Delta in Taiwan. And also, we're making good progress on the hydrogen side of the business as well, particularly with Shell and Thermax in India and also our partnership with Denso in Japan as well. So just to give you an illustration, this is now becoming very real for Ceres. I think for some people, it's probably -- you understand the technology, you understand the potential of this, but seeing it in reality is what's now starting to happen. This is getting very real for Ceres. This is the first time probably that we're sharing with you the inside of that factory at Doosan. This is 300 meters long, highly automated state-of-the-art production facility in South Korea. It's a semi-clean room environment, all based upon the Ceres technology. It's an amazing facility, and we're very excited to hit that milestone. Doosan developing the power systems that will now go into things like commercial buildings, the data center markets and grid reinforcement in South Korea. We're making good progress with Weichai as well, developing larger power systems, again, on that commercial stationary power type applications. So very good progress in China. And then I mentioned Delta in Taiwan. This is a picture of the facility that they've recently purchased, which is -- just to give you a sense of scale, it's probably 4x the size of the Doosan factory as well. So you can start to see the potential of the scale-up of our partnerships. I want to say a few words about the two markets that we serve, the power market and the hydrogen market. If we start with the power market, AI-driven data centers, you've seen it in the news, it's driving what we believe is a killer application for solid oxide power. And you can't go anywhere without seeing headlines about investment in infrastructure, not just here in the U.K., but in the U.S. in places like on here, South Korea, Thailand. And one of the key themes of this is the need for power. We believe that this represents a very attractive market opportunity for solid oxide. In a near-term opportunity by 2030, we see the potential market for this being about 22 gigawatts. And it's a very underserved market today. Probably the only player that's addressing this market today is Bloom Energy in the U.S., which has a multibillion-dollar market cap. But we're starting to bring in to our partnerships, competitors that will actually enter this market. So we see that as very much the near-term focus. There's a clear market opportunity there. If you look at the 22 gigawatts, about 50% is projected to be data center, but also commercial buildings, industrial power shipping as well. And the split is 50% Asia Pacific, about 25% U.S., 25% rest of the world. Why do we believe the solid oxide is a killer app in this market? It's all about time-to-power. If you look at what's going on today, if you want to buy a gas turbine, you're waiting up to about 7 years now for gas turbine. There's been a lot of talk, particularly in the U.K. about small modular nuclear. You're not going to see small modular nuclear until about 2030, if you're looking, probably 2035. High-voltage grid connections, 5 to 15 years. So while there's a lot of talk about time-to-power, there's a gap. There's a near-term gap in the market. You could build a solid oxide fuel cell factory and develop products in under 3 years. That's what our partners are doing, far faster than you can address this time-to-power. In terms of resiliency, we have a very mature offering now that gives you 24/7 baseload and long stack life. We have low noise, very importantly, low emissions. So when you're talking about some of the things that you've seen in the data center market like deployment of gas turbines on a temporary basis, very quickly, they come up against emissions regulations. You can't deploy those kind of things for long. So it's low to zero emission technology. It lends itself very well to carbon capture as well. And it's highly fuel efficient. So it's over 60% electrical efficiency, so as efficient as any gas turbine. But also when you combine that with the heat or the cooling that you get off the back end of it, you get something which is 85%, 90% efficient. It's fuel flexible, natural gas today, hydrogen tomorrow, and it's modular, which means you can build out rapidly. And also, it's starting to benefit from policy decisions. We've seen this recently in the U.S. You've got the one big beautiful bill gives a 30% tax credit for solid oxide fuel cells. We see it in places like South Korea and many other places as well starting to have positive policy decisions to enable this time-to-power. This is just an illustration of how some of our partners are very much in this ecosystem. You may not be less familiar with Delta. Delta is now the third largest company in Taiwan. So when you think the biggest company is TSMC, Taiwan semiconductors, Delta is a very impressive company. This comes from their website. So you can see that they are already providers of things like power conditioning equipment, UPS equipment that feed into the data center market. And this schematic, I think, illustrates it very well. You have a fuel flexible input into solid oxide. You can combine it with carbon capture on the top, absorption chilling for cooling and also with the rest of the equipment, you have a ready-made solution that can service things like micro grids, AI data centers. Semiconductor manufacturing is really interesting as you go down to lower and lower nanometer kind of wafers, you need more and more power. So you're starting to see this whole electrification, industrial loading increasing this need for time-to-power. We have a lot of experience on this. This is with one of our partners that we did a hell of a lot of field work with. So we've got over 100,000 hours of real-world data center type application data for this and 28,000 load cycles. So, because of the nature of our technology, we can load cycle very well. So we have a very mature offering for this market. A few words about electrolysis. While we see the data center market and the power market as being the near-term market opportunity, we also are making good progress on electrolysis. I think, we've seen headwinds on hydrogen, and I think that will continue for the near term. However, it does open up a window of opportunity for solid oxide, which is a higher efficiency technology than what people are using today. Projections on hydrogen. Still, we believe that's a bigger market, but it's a longer-term market. This data is out to 2040. And again, we're very committed to the industrial applications, steel, ammonia, synthetic fuels. That's some of the work we've been doing with companies like Shell recently. The Shell milestone, we demonstrated 37 kilowatt hours per kilo. What does that mean in real terms? A typical low-temperature electrolyzer would need between 50, 55 kilowatt hours per kilo. So to generate the same amount of power, you need 50 wind turbines. In our case, you only need 37 or you get 30% more production from the same renewable assets. So, because you can integrate this into industrial processes as we've done with Shell, this lends itself very much to 50% of that electrolysis market, which is the industrial decarbonization. We are moving ahead with our partnership with Thermax in India. That's important to us because we have to compete with things like Chinese electrolyzers' longer term. So establishing low-cost manufacturing in hubs like India is very key to us. Also, it's a key market in terms of the ability to combine with renewable assets that they're putting in there and actually servicing things like the ammonia and the green steel markets in the future. This is an interesting piece of news that came out yesterday from one of our partnerships with DENSO. So we began our relationship with DENSO a year ago. We're very pleased that DENSO have announced the installation of their first SOEC hydrogen production with JERA, one of the biggest utilities in Japan. What this is doing is producing hydrogen for thermal power plants to reduce emissions there. So you can see quite a lot of progress, I think, in the first 6 months of the year. We're seeing this near-term market opportunity coming towards us on the power side, which we're very much focused on near term, and we continue to make very good progress on the electrolysis side. But I'm going to hand over to Stuart to talk you through the financials. Stuart Paynter: Thanks, Phil. Good morning, everyone. So let me just take you through the financials for the first half of the year and a little bit about our plans going forward. So financial review, revenue number, just over GBP 20 million, and we'll point to the gross margin percentage, which is industry-leading high gross margins given the fact we're pursuing our licensing model. These to remain high, gives us flexibility, which we'll take you through, generating a good gross profit number. And then, we're still a loss-making company, right? We're still investing in our stack platform, as Phil mentioned, and we'll take you through a little bit of the trend around that spend and how we're going to manage that going forward. Also, as Phil mentioned, we've been cash generative in the first half. This is a working capital internal financial efficiency play. And I think what we've done is we've managed to preserve more than GBP 100 million in cash at the half year through really tidying up the balance sheet. Of course, now we need to continue to deliver on the top line in order to drive future cash flows. The bottom right-hand number is an interesting one. This time last year, we came out and said that we were going to realign the business and do a little bit of a restructuring and generate about 15% of savings, both in OpEx and CapEx. And that measurement, as you can see is a slight increase on that 17% compared to the targets we set ourselves. That now forms the baseline of our costs. So anything you see from now on is based on this lower cost level. And just a bit on revenue and gross profit. You can see that we had a jump at the beginning of '24, and that represents the signing of Delta. We followed that up last year with the signing of Denso, and we're managing to maintain a relatively high revenue number given we're working our way through the backlog and the milestone generations for those two projects. This trend needs fuel and that fuel is signing of MLAs, and we are 100% focused on so doing, and we'll take you through a little bit of the plan about how we're going to optimize that going forward. Licensing model, of course, enables a sort of flexible cost base. And here, we're just talking about the OpEx in the last few halves and how it's come down. Like we said, we would deliver a 15% reduction in OpEx and CapEx. That translated to a 13% OpEx reduction, as you can see there. This now forms the baseline for which we go forward. We've done a few -- you'll notice if you're looking at the detailed interim report that we've started writing off some of the R&D that was previously being capitalized. So that's a slightly inflated number. So we've adjusted it there, and we'll continue to do that going forward. But this is a very important piece of the business model, the ability to keep a flexible cost base, and we'll go through a bit more of that in a moment. In terms of cash flows, I think this is a really interesting chart. This backs up what Phil was saying. We raised quite a lot of money in 2021. And you can see there, that the peak spend on the hydrogen investment we made was 2022. And that investment has been continuing but reducing. And we believe that with the cell, Phil showed you, and the next generation of technology, that's going to be available very soon, that we're going to commercially launch in 2026. We've come to -- we've crystallized a lot of the effort that's been made in '22, '23 and '24. So whilst I'm not going to sit here and promise we're going to be cash generative like we were in the first half, we're going to see a lesser amount of cash burn as we move forward, because even though we're going to continue to innovate, it's very important as a licensor, we're talking about lifetime and cost and very, very focused programs based on that one stack technology that we're going to launch in early 2026. Here's the licensing model. And the orange signpost is really where we are. So licensing fees are everything for us, and they'll continue to be very important for the next few years. But as Phil mentioned, that Doosan have now reached the start of mass production, and we expect royalties to flow there on. So we'll see that royalty base build, and that is sustainable profitability, the royalty base. The royalty stack is what we're after. In the meantime, we're going to continue to try and generate license fees as well, very important to make the maximum impact to our technology in the world as we're aiming for this technology to become the industry standard in solid oxide. So the orange signpost is where we are, and we believe that's a really important inflection point for us, because we're sort of through the R&D phase and into the commercialization phase now. And what does that mean? Well, in this morning's announcement, we did announce a business transformation program that we're going to launch within Ceres. That's going to take 12 months. And the aim is to utilize the fact that we've reached these various inflection points, the product that we've been talking about, Doosan's launch and royalty generation to realign the business resources around being more commercially focused and being able to maximize the impact of our product in terms of signing more MLAs. So we're going to support our existing partners. We're going to gain more partners and we're going to restructure ourselves. So we're in the right space to be able to achieve that goal. And we believe the output of that is going to be a reduction in operating expenses of around about 20%. And that will lead us on that clear path to profitability that we're looking for as royalties becomes a bigger part of the revenue streams. The first phase of this program will be done by the end of this calendar year. So there's a 3-month reorganization, which will go first. And then we'll work very hard on the ways of working and cultural alignment on the business for the next 9 months post that. But that kicks off today, and I think that's an important part of the position we are in the market at the moment. I think it's a real opportunity for us to maximize the position we currently find ourselves in. And with that, I'll hand back to a Phil on summary. Philip Caldwell: Thanks, Stuart. Yes. So just a few words in closing on the outlook for the year. So as Stuart said, this landmark start of production at Doosan means, we are transitioning from the very much 20-plus years of R&D through product development now into actually having products that are coming to market and a big milestone for us. We are seeing more and more incoming on power, with just respond to that market opportunity. That's being targeted by our partners as first product launches. If you look at Doosan, if you look at Delta, it's all about the power market to begin with, and then electrolysis will follow. We are making very good progress on electrolysis as well. As I mentioned, the relationship with Shell has been fantastic, great results there, great news coming out of Japan on progress there. So it really validates the capability of this technology to be a real step change in electrolysis in the future. Stuart has already talked about the business transformation plan. I think, we have that continued discipline on growing top line, but also managing our resources to really respond flexibly to the opportunities that we see. We maintain a strong balance sheet with the cash management and the cash inflows in the period, and that will continue. We did this morning adjust the revenue expectation for the year. I think, it's very hard to predict signing of new MLAs. So when you look at our revenues, they come from engineering services, signing technology transfers and then ongoing royalties. So for the year-to-date now, we are expecting a minimum of GBP 32 million. And anything that we sign now will be upside to that. The reason for the change here is, we honestly cannot predict exactly when we sign these deals, and also -- that also has an impact on revenue recognition, which, as you can imagine, is not trivial when you're actually dealing with these kind of contracts. But we are continuing to pursue several opportunities, and we'll keep you updated on progress as and when they arrive. So with that, I think Patrick, we may take some questions from. Patrick Yau: Yes, we have a couple of questions from the room. So if you have any questions, please wait for the roving microphone to arrive and ask your question, and then we'll have time, hopefully, for some questions online. Alex Smith: Alex from Berenberg. Just the focus on the power market, and you mentioned kind of the news flow in the U.S. and Bloom Energy. And are you seeing the pipeline of potential partners with that kind of U.S. tint that you kind of showed that pie chart of how big the Asian market is as well for the power data center AI market. Can you give a bit more color on where that pipeline is coming from? You mentioned a bit more incoming, that would be great. Philip Caldwell: Yes, sure. Look, I think what's happening with Bloom Energy is definitely attracted interest, and also the whole time-to-power thing has become pretty acute. I think when you look at the partnerships that we have, when you look at companies like Doosan, like Delta, you have to also remember they have U.S. operations. They're already servicing those markets for a lot of the products that we talked about in the data center market. So we have ways already into that market, but also we're looking for U.S. partners as well for that particular market. So that's -- I think, there's clearly a power gap there, and I think that does open the opportunity. I think -- what's interesting as well is on the electrolysis side, for example, the IRA bill has obviously had a lot of headwinds in the U.S. And we've really seen the U.S., I think, is now moving towards blue hydrogen rather than green hydrogen. But also what the Trump administration has done on the one big dutiful bill is definitely enable power generation for solid oxide, particularly with natural gas and carbon capture. So I think, that's a 10-year initiative that's just come in. So I think, some of the uncertainty around which way the U.S. is going, I think it's pretty clear now. We don't really see the U.S. as a market for green hydrogen. That's not where we're putting our commercial efforts, but we do see it as a potential market for power. Unknown Analyst: Just a couple of questions from me, if I may. You mentioned that it's quite hard to kind of predict when you might be able to recognize revenue when you do indeed sign an MLA. Can you just give us a bit more color around that in terms of the mechanics? I know that's probably hard to summarize, but just kind of a bit of an idea would be helpful. And the second one is just on the business transformation. I think, that makes a lot of sense and kind of preparing the business for its next kind of step. Can you just give us an idea of kind of what the cash costs might be around that to implement it? Philip Caldwell: Yes. So, when we talk about signing an MLA and an MLA is a manufacturing license, it's a very complex sale. And you are also not just selling a license in our case, GBP 40 million, GBP 50 million type deal. You're actually convincing a partner potentially to invest several hundred million in facilities in product development to enter a market. So it really is a corporate development type activity. And any of you that have worked in that kind of sphere realized that those decisions go all the way up to Board level and therefore, they take time. And they are subject to a calendar that you don't control. So the difficulty that we have as a business is, if we're trying to forecast revenue based on very discrete events, it gets somewhat difficult. Once we have those contracts, as you've seen with the likes of Delta and Denso, that gives us pretty predictable revenue flowing into the first half of this year, for example. So that's what's what makes it difficult. Now, we obviously have at any one time, several of these kind of conversations going on. And -- but it's very difficult to forecast exactly when they will come. I think the second complication, which is Stuart's world, which he knows and loves now is, once you actually get these kind of contracts, you have IFRS 15 and all kinds of moving standards, which seem to change quite dramatically. So when we have a contract, we have to also be very careful about how we recognize that. So it's not just the winning of a deal. You have to then to be able to specify or forecast how much of that deal you can recognize by when is quite a lot. So that's part of it as well. Stuart Paynter: I'll just follow-up by saying that single words in those contracts can make big differences in when revenue is recognized. So we go -- we diligently work through those contracts, but contracts are in negotiation, and there are gives and takes in those contracts. So when you come to the end, you then got to do a full review and see when your performance obligations are and try and decode that into revenue recognition. So it's not easy. As we do more and more deals, we become more experienced, we try and standardize the contracts where we can. But as Phil said, these are big corporate development deals, so it becomes tricky. The second part of your question on the costs of the first step of our transformation plan, which is the 3-month reorganization. This will be done by Christmas. And we're looking, as we said, we think on the back end of the reorganization to get an optimal structure, we can be about 20% less cost. To get there, there may be a one-off cost, but it's going to be relatively trivial compared to the saving, maybe it's GBP 1 million. Unknown Analyst: So a good payback in terms of an investment. Stuart Paynter: Yes. But we are not here searching for cost savings. What we're doing is making sure the company is optimally structured given the inflection we're going through. And we believe the output of that will be the cost reduction rather than chasing. We're not chasing a cost reduction. So it's definitely a transformation rather than rightsizing or anything like that. Patrick Yau: Are there any more questions from the floor before we move on to our online audience? No. Okay. Well, let me ask a couple of questions from the participants online. Phil, you mentioned that 2025 is a landmark year for the business. So what are the key milestones that investors should be looking out for to mark progress? Philip Caldwell: I think, it's continued milestones with existing partners. If you look at the partner progress this year with each of our partners, you're seeing evidence coming through Shell, Delta, Doosan. So I think that's continued. And then, I think it's also the potential to sign new partnerships as well. Patrick Yau: On Doosan, do we have any visibility into their sales pipeline at all? And can you elaborate on the types of markets that they're focusing on? Philip Caldwell: Doosan is a public company in Korea. So I think, obviously, I can't speak for them. But I think it's clear what their first markets. When you look at the Korean market, it's, again, a highly stimulated market as in SOFC is treated as quasi-renewable energy. And they have very clearly laid out targets in South Korea about, I think, it's 16 gigawatts of power by 2040. And every year, there's a process, there's auctions that are bid into, and Doosan has been in the past, very successful in those markets. So they tend to be grid reinforcement type activities, commercial power basically supporting electrification. Patrick Yau: Thank you, Phil. A question for you, Stuart. We're starting another cost savings program. So can you give an update on thoughts around cash burn, excluding licensing agreements in '25 and '26, how would cash burn look with one or two license wins, respectively? Stuart Paynter: Amid, so respectfully, I would correct the premise of the question. We're not going into a cost saving exercise. We're going to transform the business so we can commercially face into the power opportunities in front of us. That will lead to a reduction in operating costs. And for the -- to be most useful, given some of the uncertainty around revenue recognition and timing of deals, which Phil mentioned, I would just encourage the person who asked the question to go back and look at our operating cost base, which is here for the first half of the year and look at a roundabout a 20% reduction on that. That's going to be the cost base. What we can't do is sit here and predict accurately what revenue is going to be. So we believe that, that step, the optimization step leading to a 20% reduction will obviously reduce the cash burn on an average basis by a significant amount. But it's almost impossible to predict with the MLAs coming in. Patrick Yau: A question on the Bosch announcement earlier on in the year. So can you give an update on where we are with Bosch and what your latest thoughts are, please? Philip Caldwell: There's not a great deal more to say regarding Bosch, really. We've obviously more or less concluded the exit of Bosch. Obviously, they still have some shareholding, which they began to sell, but that's really up to Bosch to sell. Look, I think we've already been over the reasons behind that. Bosch, just this week announced a further 12,000 layoffs. So they're very clear. This was not about the technology. This is more to do with a Bosch restructuring of priorities, and we're just working with Bosch to conclude that. But the fact that we're not even really discussing Bosch, I think, shows you the progress that we're making with other partners. Patrick Yau: We've got a few questions on the data center power market. So firstly, can you talk a little bit more about our competitors in fuel cells within the market? Obviously, you talked to -- you mentioned Bloom. Are any of our partners, do you know thinking about solid oxide fuel cells plus carbon capture technologies to make the energy greener? And how does the cost of power for solid oxide compare to other costs of power for other solutions? Philip Caldwell: Sure. So when you look at the market for solid oxide for power generation, there is only really one player at the moment, which is Bloom Energy. And I think Ceres' licensees are probably the next wave of entrants into that market. And that's quite a difference when you look at the electrolysis market. You've got in China alone, 60 electrolyzer companies of PEM and alkaline and then you have solid oxide and then you've got four or five players on solid oxide in the electrolysis market. So in terms of competition, I think it's -- our competition is clear. It's Bloom Energy. And I think they've done a fantastic job in pioneering that market. What's interesting when you look at the economics is the cost of conventional power generation now has gone up quite dramatically. When you look at lead time of gas turbines, the time of lead ships, et cetera, the cost of those power generation equipment assets is secondary to the availability of power. So you're starting to see, I think, a very clear window and potentially a crossover where you can see solid oxide coming down the cost curve at the same time that conventional power generation is actually getting more expensive. Now that window maybe you can debate how long that is, but the order book for gas turbines, et cetera, now is full to 2030. So that window is clearly there. And I think that once you actually enter that market with solid oxide, you will get that scale effect. When you talk about then cost of power, that really depends on which part of the world you're operating in. It comes back to your spark spread, your difference between your gas price and your power price. But when you look at the key geographies that we operate in, the most attractive markets for this kind of technology are U.S. with cheap gas, U.K. because they have very high power prices. Germany, ironically, even though maybe Bosch didn't see that, I think that's unfortunate. I think they would see it. Taiwan, Japan, Korea, all of these nations that are somehow energy constrained, there is a clear advantage and you can generate power more efficiently than you can actually currently source grid power. So there the near-term geographic markets that we see for this. In terms of the ability to combine with carbon capture, I think it's an excellent question. When you take a conventional centralized power plant, your carbon that comes off the back end of it is about a 4%, 5% carbon concentration. Because we're not using combustion and the -- what comes off the air side of a solid oxide has a much higher concentration of carbon, 40%, 50% concentration. And therefore, it lends itself very well to a more efficient carbon capture. And definitely, it's -- you saw it in some of the thinking of people like Delta, it lends itself very well to power generation with natural gas, with biogas, with blends if you end up with putting hydrogen into the system, but with carbon capture. Patrick Yau: One for you, Stuart. Could you remind us of the mechanism for royalty payments? How does that work? And if you can just explain what goes behind that? Stuart Paynter: Sure. So our first royalty stream is going to come from Doosan. It's based on them making sales into marketplace. And there's a mechanism and actually, some of the mechanisms are different across many of our partners. But ultimately, it leads to either an exact percentage of their net sales or a proxy percentage to their net sales. So the more successful they are commercially, the more royalties we get. So supporting them to launch and kind of help generate demand for them is well worth it for Ceres. Patrick Yau: One more question for you, Stuart. In the slide deck, we talk about a GBP 0.9 million order intake at present compared to a larger number last year. So can you just elaborate a little bit on what's behind that difference? Stuart Paynter: Yes, sure. I mean, last year, in the first half, we concluded the Delta deal. And the Delta deal was what you see there, that number, GBP 40-something million worth of orders coming in, and that's what we're generating the revenues on now. So orders are super important for us because they build our backlog. And in those times where we're pursuing the MLAs, that's going to be the revenue stream and the cash flow for us. So we're -- even though we haven't been successful in signing an MLA in the first half, we -- one of the reasons we go through the transformation process now is so we can make sure we're optimally structured to pursue these opportunities and execute. Patrick Yau: We got time for one more question from the online audience. Phil, can you talk a little bit about India? Obviously, we have a relationship with Thermax there. So where are the main sources of hydrogen for that market? And how do you see that developing over time? Philip Caldwell: So the Indian market is obviously very interesting and it's, kind of, evolving quite rapidly. I was there just 2 weeks ago, and I was quite surprised how much progress had been made. I think we're often quite skeptical. So when you look at India today, it's a big importer of fossil-based energy. And its potential is to be one of the biggest generators of renewable energy. Under Modi, he has a plan to be able to export renewable energy, but you can't export electrons very easily. So you have to convert it into a green molecule. And those green molecules that they're looking at is green ammonia, green steel synthetic fuels. Now the problem you have in an economy like India is your renewable assets are often quite far away from your means of production, shall we say. So you can generate solar very cheaply, let's say, $15 a megawatt hour, something like that, but it's not where you want to site an ammonia plant or whatever. They've had a recent round of auctions on things like ammonia and they've achieved very low prices as in the 12 bids that went in, 6 of them were around, I think, I'm not an expert on ammonia, but $600 to $700 a tonne, which is pretty competitive. And one thing that's unlocking that is they've now made a more homogeneous power pricing policy, which means that if you're generating hydrogen and you're using renewable assets, you get a lower power price as a combination of renewable power that you're putting in and also conventional power and hydropower. So what it means is, India, actually, is progressively moving forward now in terms of cost of hydrogen. It's getting -- your cost of green hydrogen is coming down and cost of things like green ammonia is coming down as well. So there's a lot of progress being made. You asked about where hydrogen is coming from. I think it's being pushed a lot. And if you look at the auctions by companies that previously have been big renewable energy producers and are now moving into some of these areas. So it's a fascinating market. I think, the interesting thing for India is can they manufacture, can they have a made-in-India kind of strategy. But when we look at places like Taiwan, Korea, et cetera, China, it's obvious how they really get down cost curves and supply chains. And I think that's the challenge, I think, for the Indian opportunity. Patrick Yau: I think we're drawing to a close in terms of question time. If there are no more questions in the room, then I'll hand back to Phil just to conclude. Over to you, Phil. Philip Caldwell: Yes, sure. Look, I think we've covered a lot of ground today. I think there's a couple of takeaways. One is the company has made some very significant progress this year. We've hit some big milestones. We've talked about start of production. That's been key. We've talked about our partners investing and making progress. That's key for us. And I think also, some of the progress that we've made in the hydrogen side is continuing to give us confidence in that market. However, we see the near-term market now coming towards us quite rapidly as this power market, and we have to respond to that. We just follow the market, to be honest. We follow the demand that comes in our pipeline. We follow what our first product launches are with partners, and we're starting to see that. We continue to operate an asset-light model. We continue to operate high margins, and we're very confident in the future strategy of this business in terms of signing new partnerships and also bringing the partnerships that we have to market. So I think it's -- the company is very well positioned, particularly with what we see ahead of us with this near-term market and the hydrogen market following. And I think, what we're doing around a single product offering, a single platform that services both markets really gives us that opportunity to rationalize some of our activities and really focus now on the commercial launches. So thank you very much for your participation today, and we look forward to updating you again on progress in the future. Thank you.
Operator: Good afternoon, and welcome to the Directa Plus Plc half year results investor presentation. [Operator Instructions]. I would now like to hand you over to CEO, Giulio Cesareo. Giulio Cesareo: Good afternoon to you. Thank you, and good afternoon to everybody. My name is Giulio Cesareo. I'm the Founder and the CEO of the company. I have 40 years of experience in graphite and graphene arena, starting with 20 years in Union Carbide and 20 with Directa Plus. In front of me, that is our CFO, Giorgio please introduce yourself. Giorgio Bonfanti: Good afternoon, everybody. My name is Giorgio Bonfanti, I am the Group CFO of Directa Plus and I have been in this company more than 40 years, to go up to start many experience. Giulio Cesareo: [indiscernible] we will try to give you a concise view of what are the opportunities for the next class in the future. And I would like to start by telling that if you go on the website, you will see a similar content on an explosive expected growth of the graphene sector. All the different are talking of compound analytical rate between 20% and 40% for the next 10 years. With a significant focus following pre-vertical battery expense and environment. We consider Directa to be a leading company in this area. We have a process that has been during this year, redesign in engineered with the objective to generate new products, not just graphene but also graphite, and I will go deep on analysis of the process and of the product in the next few slides. Time to market is still very aggressive in the range of months. And we are signing significant partnership. One of these come forth and we will not have chart this close to mark that is very, very important for the future of the company and in the defense area. If we move to the process, I think that this is the slide covering the old cases but I will give you much more detail in a slide that has been prepared show the difference between the old and the new all-in-one comment. For your information, we have 116 granted patent set and 39 pending and one of those [indiscernible] of these patent as my name is inventor or co-investor. Giorgio Bonfanti: GiPave graphene. So our material is an enabling material. So it's a transfer a number of different properties across [indiscernible] and vertical [indiscernible] applications. So for example, from [indiscernible] to [indiscernible] properties, higher extra [indiscernible], improvement of chemical properties, I have absorb shrink capacity, plan [indiscernible] and the corrosion. So we had a number of different products across [indiscernible] group. Covered by stronger portfolio. We have a portfolio of 22 billion families, four of which are covering the production process and [indiscernible] covering process and applications. Let's jump [indiscernible] of the presentation, which will give you a few highlights on the maintenance of the first half of 2025. Having [indiscernible] operational performance. It is key for us and is a game changer. So we'll go more and deeper in the next month, but we are significant improvement on our production system that will allow us to have a reduction in operational costs and will be assets to new tariff process. So we will cover more in detail in that current part of the presentation. On the two main verticals, Environmental and Textile, just a couple of good comments that Environmental we keep working on the fracturing of Setcar after we acquired it for full ownership 1 year ago, and we have translated into solid results in the first half, and we signed also new important contracts using broad cover and the main material for acquiring the content media information on this front. And on this side, we keep working on more presence and a very important news as Giulio said is the fact that we secured for social contract [indiscernible] Environmental [indiscernible] departments. In terms of financials, in the first half of the year, we had revenue increase by 15%. This will have to the new focus, but more importantly we were able to reduce our EBITDA by 38%. This was the result of the continuous progress in terms of keep reviewing the production cost but also areas core control and optimization. Cash as of June 2025 was, of course, EUR 3 million, in line with mode station. And we keep working on carefully managing balancing investment growth with business opportunity. In the next slide, I will go more in detail on the main strategic actions we put in place. Giulio Cesareo: Put in place five strategic actions really to generate and capture the right momentum and the opportunity we see in the market. Let's start with the three levers underpinning the strategy. The first and most important nowadays is production we did a massive action on the production line reengineering and redesigning it. We have now full automation. We will have the chance to use new precursors we reach from 1 to 9 in the super expansion to reduce cost, but I will go with more detail in the next slide covering production it's important to stress the attention that we will give this system to reduce practically production costs and assess new market. With regard to sales that we are accelerating the market adoption in the existing vehicle the main for environment and excise, but especially with the new material in our end, we will be able to satisfy not the policy but the quality demand from certain applications was already performing totally by the price expectation of capital and also the too additional in the next slide. R&D is working very well in a very slow collaboration with production in sales and we were focused on real opportunities, real market and customary way. So we are not checking all the graphene opportunities without a real connection with the market. Now if we move to the slide covering production, as I told you, this is the most important move we made. And let me try to explain on the upper side of the slide, there is the old system on the bottom of the [indiscernible] one. What are the reasons to change from our system to the other? The reason are a very simple, inability to produce nano graphite. And the take on a more importance, we start to realize that some of our key competitors were capturing our market offering at nano graphite material. So we decided to move on all design that has six parameters so that was utilizing a kind of algorithm maximizing the input of energy to an significant amount of [indiscernible] placement. So I input local activity and a fixed number of morphology, moving to a new design where we prioritize what we can define the adaptive control logic. So we are able us to adapt the process during the production phase and to adapt the process also to defense [indiscernible]. This is key to get important -- very important reduction to get further increase. We have the full automation before the word -- minor automation in [indiscernible] department. We have a fast -- very fast setup change so we can move from one [indiscernible] to the other. And we have also a new training process that is able with very high pressure water to clean the entire production line and also to keep the material that normally was eliminated as a raw material for immense production. And we -- as I mentioned, we can work on the [indiscernible]. The last comment I want to make is that if you look at the third box in the bottom part of the slide, we are moving from the OpEx portion to what we call additional exfoliation and interlocking. What does it mean? We are able now to put together different materials. So we are able to cover a specific material with our graphene, adding binder and another product and satisfy mainly most is [indiscernible] in the battery arena. So the plant has been reconfigured as an integration platform fully automated. And doing this activity, we decided to certify [indiscernible] which is a very important step because nowadays, we can license the technology anywhere in the world and opportunities to license the technology right now. Giorgio Bonfanti: So as in said, we upgrade our production plans are a change for us because we'll have maybe two [indiscernible]. The first one is the fact that we review our direct production costs, as we said, did with our [indiscernible] revising [indiscernible] our price business to get either access to move to the market depending on the merits coming at location. And the second point is the fact that we will be able to produce new kind of products. So we'll have two different categories. The GiPave traditional products, we looking [indiscernible] for higher performance and higher price [indiscernible] somatic application in high potential. But at the same time, we will also ask as scenario [indiscernible] and branded materials margins. with higher volumes for industrial application. So we'll have a double offering. And in this slide, we try to summarize very briefly the main difference between the two categories. Giulio Cesareo: Yes. Let me tell you that the bond rate between graphene and nano graphite is many cases is very thin. And if you look at the upper part of this slide, below the layer, we have a nano [indiscernible]. So for us, different [indiscernible] is number of staff within [indiscernible] you can't pass a system that is designed to produce productivity at a proper level, we are able to really to practically reduce the number of debt and that creates a material that is top quality, but at low cost. The key markets are always between energy, advanced composite, textile, graphene [indiscernible]. But for example, in battery capitals, we are posed to produce a very interesting specific material our USA partner. And now we will move into the battery anode arena with the nano graphite. Position in the one side is tailor-made on the other is volume based and the compound annual growth for nano placement in graphene, between 35% and 40% and [indiscernible] between 10 and 15 all nano graphite. Giorgio Bonfanti: Okay. The next slide, we try to recap the most important opportunity in terms of sales and cost in our pipeline on this so many vertical. The first one is that on the [indiscernible] remediation. We had a couple of important opportunities. The first one is we find [indiscernible], which is the long-standing contract. We've been using [indiscernible] for a number of contract with them. Now there are people who [indiscernible], well they own in ground. It's a 20-year exposure. We actually commissioned 30,000 wells, and we are -- we have an open discussion with [indiscernible] value for sector, but this will be very [indiscernible] for us. The second one is with scenarios remain for a total with management contract. We submit an offer of EUR 2 million per year. So we are waiting for the outcome of the [indiscernible] will start from January 2026. On textile, we said, we keep working in the warframe applications because those are applications where we believe that our growth and technology can be appreciated the most. One key here is the fact that, as we said, that we won our first sole source contract with a leading governmental defense agencies. And not sure if you want to add. Giulio Cesareo: Yes, we are very proud because it's a very large agency. It's not an Italian agency. There is the previous -- we are not allowed to disclose any information because we committed ourselves personally to avoid any flow not of the informational side, but the leverage is on significant properties of our materials [indiscernible] by this agency to deploy [indiscernible] without intermediary products at Directa and start to work with us. Giorgio Bonfanti: The next one is on Setcar. Giulio Cesareo: Yes. Setcar [indiscernible] in progress [indiscernible] as objectives. The first one is the short term is almost completed. We have a new Board, a new governance. We report to a new general manager. We need financial sales, and we are looking for a couple of new executives to reinforce the organization. We continuously optimizing the workforce we projected to introduce new talent. Since June '24, we moved from 164, 465 people, down to June '25 to 144, and the objective by the end of this year is to be in the range of 130 or below. We are working on contract portfolio, removing the low-margin contract with a lot of focus on strategic agilities that are not anymore in the area of the Directa [indiscernible]. But the medium-term objective is to explore these opportunities keeping in the portfolio, customers and materials that either maximize Directa technological expertise or generating significant profit. Let me make an example, Setcar technology to decontaminated that transformer with PCB oil that is working very well in generating the profit we can move to a graphene technology, but this process is working well. The equipment is almost unique. So we don't want to lose this business opportunity. With regard to looking ahead, as I mentioned, refactoring still in progress. Timing, unfortunately, open exports to external factor. One example, we got a MIDIA order of EUR 1.5 million is -- has been structured on the part has the ability to decontaminate the drilling platform from hydrocarbons during all the activity, but the drilling platform was supposed to move from the Middle East to the Dead Sea and [indiscernible] of passing via Suez Channel. Nobody wants to insure them so they will have to make a longer freight, and this could generate a delay. The only other pending significant content for this year is the full contract that is in all the customer of Setcar. With regard to R&D, as I mentioned, we are focusing on real opportunities, existing market. We have six projects ongoing. One is covering the lens with global companies. We work to reinforce polymite composite in order to be using [indiscernible] transmission and we discovered that the lens adapt the [indiscernible] graphene is significantly improving the impact of the distance. So now we are targeting polycarbonate lenses that are a very significant market for the expense and safety. The other important area where we are moving quite fast is [indiscernible]. You probably know that [indiscernible] is [indiscernible] for every [indiscernible] very dangerous, and they are being utilized in different industries to leverage their properties to exist with water in oil. We are developing, and we finally design a filter to remove [indiscernible] from water. And we are already working in defense area. We are working in pharma area, facing and shaping the remove of contaminant in the pharma water, agriculture and semiconductors. And we have also develop with the support of the external farmer, a pilot the contamination units that can be offer to different industries and different customers. We are moving also back to the entire arena and starting with [indiscernible] tariff, but we are also testing and working with very large Taiwan factory and the test are still moving on. We have a big electronic conglomerate working with our glass polycarbonate enhanced for gaming devices. We have integration our new materials into batteries, working with our NAND [indiscernible] battery company and partner in [indiscernible] to U.S.A. next week to bring down some very close business opportunity with them. And last, we developed an HVAC system that will capture again of a normal conditioning system, not just the articles, but will have a make [indiscernible]. Giorgio Bonfanti: Just a couple of times mark on the market and outlook starting from the market, we would like to represent the chart on the left of this slide, which really shows that it was the market expect explore in terms of [indiscernible] graphene on the market. One key here to highlight is the patents, we believe that we are well positioned to manage from the market growth because we have on the market. They have a stronger portfolio and we have a strong know-how thanks to our work with me over the last few short. We are expert in producing the team. We need to rely on our departments in order to leverage on their team knowledge in the technical of a basis and the commercial network to accelerate the cooling [indiscernible] on the market. Giulio Cesareo: We got some closing in comments. The first one back to the upgraded production line. This is by far the most important move we made with the object to really consolidate the acquisition on basis. grow and there remains a core sector that we denied on batteries where as a mission we are having with some very interesting products and [indiscernible] opportunity. We consider the momentum very good. As I mentioned at the beginning, the index -- all the different index are showing an incredible attention to graphite and graphene, and some countries are also starting projects to be open graphite mine and to design a new graphene industry. And of course, we are open to offer our technology in license. And the Board really is convinced, I'm confident that we will deliver the year-on-year EBITDA improvement that the market is waiting for us. So let me say that without any doubt the future, it's no longer a different horizon, but it is unfolding now, and we are ready to chase it. I think that at this point, we can stop and wait for question. Operator: [Operator Instructions]. While the company take a few moments to read those questions it today, I would like to remind you the recording of this presentation, along with a copy of the slides [indiscernible] published Q&A can be accessed via your investor dashboard. Giulio and Giorgio as you have received a number of questions for today's presentation, Giorgio, you may now come back to you to share the Q&A, and I'll pick up at the end. Thank you. Giorgio Bonfanti: Okay. So I will read some questions. On the top of your H1 revenue is high, what capability do you have for 2025 and beyond? All we can say is that approximately EUR 6 million of our revenues on the related private current supply regarding the long-time variance that you've been working for more than 3 years now. So we believe that we have solid base of recurring customers. Of course, we should be not so comfortable for the next year in terms of revenue growth, as we said, we expect to keep growing with at least a double-digit growth as we eager to wait 2025 competition [indiscernible] for also next year. I feel there are a couple of questions about EBITDA. So the one that would say what are the robust to achieving breakeven [indiscernible] still make a full and another [indiscernible] similar questions. So I will have to suggest -- we [indiscernible] organization that we are inventory, maybe two different levels, different level response, that is [indiscernible] keep growth in the business, in the markets with the contract. I mean we believe that we have a good pipeline for the coming out year. In parallel to that, we are keep increasing our gross margin and reducing our production cost stocks and the intervention and upgrades to the line are fundamental, and we are achieving good results on that, but also come optimization with positive results. So we believe that we are eager to reach the EBITDA breakeven in the short term. Giulio Cesareo: And let me add that some of this new opportunity, especially the defense one, could really explode the turnover, if we will continue with this growing phase that is not just testing, but we are moving very close to significant number. Of course, we don't know exactly what is going to happen and when. But in any case, we see differently from the past that between starting an opportunity because we have the products because we have the material because when the patient we will have, in most of the cases, the price, the time is much, much closer -- on our side of [indiscernible] probably is doing the right thing on the other because the star global companies as dejected the concept and the largest behind the nano materials in graphene. Giorgio Bonfanti: Another question is our carbon is a sole technology across different countries, and we disclose key times to the market, we have acquired Setcar create a use case for the [indiscernible] of graphene on the market. So what couple and provide [indiscernible] services to the market, [indiscernible] and after that [indiscernible]. So the two ways, but it's probably more probable in July [indiscernible]. So we are putting place -- thanks to our [indiscernible] portfolio, we have put in place that we're working on potential market in the future of the results. Another question is how strong is your IP portfolio and how you would continue to [indiscernible] business? Giulio Cesareo: Yes, there are people [indiscernible] stronger. We are finding some ideas, but now, especially now with this [indiscernible] opportunities, we are investing a lot in rocks. So instead of filing that at the present point, we'll disclose some key information. We are keeping everything confidential. We are created the first business unit with a limited number of people. I mean we are very, very protected area covering the important information. Other places like [indiscernible] like some of the new materials, we will continue to file as we did in the past. Giorgio Bonfanti: The question is, what is your expected timeline for the rate revenues from the nano type product plan? Giulio Cesareo: We react to move almost or not immediately because I presented in one of the slide, the border between the two material is so thin that it's just a question to go back to some of the cash already tested our graphene material, offering them in nano graphite at an interesting new price, and we expect they will place the order. So we have a very clear on this. Giorgio Bonfanti: Okay. I think we answer all the questions. Operator: That's great. Giorgio and Giulio, if I may, just jump back in there and thank you for addressing all these questions from investors today. And of course, the company can review your questions submitted and will publish the responses on the investment company platform. With Giulio, before I redirect investors to provide you with their feedback, which is particularly importance to the company. Could you please just ask you foresee closing remarks to wrap up. Giulio Cesareo: Yes. Let me mention a statement quite the way up and the way down are one and the same. What we're [indiscernible] at are now the very steps of our [indiscernible]. This was mentioned by [indiscernible] 500 years before Christ. And I think it's really valid for ejecting company like Directa. And I would like to add a very short and various people comment on my side, come and ride with us. Operator: That's great Giulio, Giorgio. Thank you once again for updating the investors today. Could I please ask investors not to close this session as you have automatically redirected to provide your feedback and although that the Board cannot understand you and expectations, this will only take a few months complete and shortly at early by the company. On behalf of the management of Directa Plus Plc, we'd like to thank you for attending today's presentation, and good afternoon to you all.
Philip Caldwell: Good morning, everybody, and welcome to Ceres Power Interim Results for 2025. I'm Phil Caldwell, Chief Executive. And I'm joined by Stuart Paynter, CFO; and Patrick Yau, Head of Investor Relations. So without further ado, let's go through the first half year. First half of 2025 has been quite an exciting year for Ceres in a number of different ways. Probably biggest milestone for us is the start of production with Doosan in South Korea. And that's a milestone that we've anticipated for a long time. And it really is a pivotal point for the company, because it proves out R&D innovation all the way through to mass production and ultimately will lead to the payment of royalties and proves out the business model. So that's a big milestone for us achieved in this first half of the year. We're very pleased with progress with other partners as well. Delta Electronics has acquired land and factory facilities now to begin their scale up in Taiwan, committing around GBP 170 million investment into those large-scale manufacturing facilities for hydrogen energy solutions. We've had some landmarks with Shell as well on electrolysis, the largest solid oxide deployment in India, achieving record efficiencies. And our partnership with Thermax goes from strength to strength also in India, opening the HydroGenx Hub, which is going to actually test and validate systems and ultimately build systems in India as well. So a lot that we'll talk about this morning there. I think the markets are interesting as well. I'm sure you've seen the headlines, but the power markets are changing dramatically, probably in a way that we didn't anticipate 12 months ago. And it's really being catalyzed, if you like, by the near-term need for power, the time for power driven by things like AI data centers. So that market has shifted dramatically. And as a business, that's a big opportunity that we need to respond to as well. For Ceres, we're now very much in commercialization phase. As I mentioned, we've kind of crossed the Rubicon, if you like, from R&D into mass production. I mean, that's been coming for a long time. Our teams, our people have worked incredibly hard on that. And we're getting pretty good at this as well in terms of factory builds with our partners globally. And we really have this clear ambition to establish Ceres as the industry standard in solid oxide. We have a strong balance sheet and positive cash flow in the period, and Stuart will talk to the financials in a minute. And in response to what's going on in the markets and also the transition of where the company is moving from heavy investments in the R&D phase now through to commercialization and manufacturing, we are undertaking an alignment of resources and a business transformation initiative over the next few months leading to a year, which really will focus our partners more on initializing and executing on these commercial power market opportunities that we see and supporting partners as they go into mass production. I just want to remind you, you're probably pretty familiar with the technology. So the unique technology is the steel cell. This is the latest larger footprint, high-performing fundamental steel cell technology that we have at Ceres, that same cell now has a dual use. And we will be launching next year our latest stack platform. So that's a single product, single stack platform that will service both the power markets and the hydrogen markets. Now that's very important to us, because what that means is, we have a single platform, we have a very much focused R&D and product development pathway. And also the maturity, the scale, the supply chain build-out that we're doing for these first markets for power, ultimately will also directly result in the maturity, the cost down and everything that we need for the hydrogen market as well. So single cell, single stack platform. On the top here, you can start to see the first products coming through from our partnership with Doosan, our partnership with Weichai in China, our partnership with Delta in Taiwan. And also, we're making good progress on the hydrogen side of the business as well, particularly with Shell and Thermax in India and also our partnership with Denso in Japan as well. So just to give you an illustration, this is now becoming very real for Ceres. I think for some people, it's probably -- you understand the technology, you understand the potential of this, but seeing it in reality is what's now starting to happen. This is getting very real for Ceres. This is the first time probably that we're sharing with you the inside of that factory at Doosan. This is 300 meters long, highly automated state-of-the-art production facility in South Korea. It's a semi-clean room environment, all based upon the Ceres technology. It's an amazing facility, and we're very excited to hit that milestone. Doosan developing the power systems that will now go into things like commercial buildings, the data center markets and grid reinforcement in South Korea. We're making good progress with Weichai as well, developing larger power systems, again, on that commercial stationary power type applications. So very good progress in China. And then I mentioned Delta in Taiwan. This is a picture of the facility that they've recently purchased, which is -- just to give you a sense of scale, it's probably 4x the size of the Doosan factory as well. So you can start to see the potential of the scale-up of our partnerships. I want to say a few words about the two markets that we serve, the power market and the hydrogen market. If we start with the power market, AI-driven data centers, you've seen it in the news, it's driving what we believe is a killer application for solid oxide power. And you can't go anywhere without seeing headlines about investment in infrastructure, not just here in the U.K., but in the U.S. in places like on here, South Korea, Thailand. And one of the key themes of this is the need for power. We believe that this represents a very attractive market opportunity for solid oxide. In a near-term opportunity by 2030, we see the potential market for this being about 22 gigawatts. And it's a very underserved market today. Probably the only player that's addressing this market today is Bloom Energy in the U.S., which has a multibillion-dollar market cap. But we're starting to bring in to our partnerships, competitors that will actually enter this market. So we see that as very much the near-term focus. There's a clear market opportunity there. If you look at the 22 gigawatts, about 50% is projected to be data center, but also commercial buildings, industrial power shipping as well. And the split is 50% Asia Pacific, about 25% U.S., 25% rest of the world. Why do we believe the solid oxide is a killer app in this market? It's all about time-to-power. If you look at what's going on today, if you want to buy a gas turbine, you're waiting up to about 7 years now for gas turbine. There's been a lot of talk, particularly in the U.K. about small modular nuclear. You're not going to see small modular nuclear until about 2030, if you're looking, probably 2035. High-voltage grid connections, 5 to 15 years. So while there's a lot of talk about time-to-power, there's a gap. There's a near-term gap in the market. You could build a solid oxide fuel cell factory and develop products in under 3 years. That's what our partners are doing, far faster than you can address this time-to-power. In terms of resiliency, we have a very mature offering now that gives you 24/7 baseload and long stack life. We have low noise, very importantly, low emissions. So when you're talking about some of the things that you've seen in the data center market like deployment of gas turbines on a temporary basis, very quickly, they come up against emissions regulations. You can't deploy those kind of things for long. So it's low to zero emission technology. It lends itself very well to carbon capture as well. And it's highly fuel efficient. So it's over 60% electrical efficiency, so as efficient as any gas turbine. But also when you combine that with the heat or the cooling that you get off the back end of it, you get something which is 85%, 90% efficient. It's fuel flexible, natural gas today, hydrogen tomorrow, and it's modular, which means you can build out rapidly. And also, it's starting to benefit from policy decisions. We've seen this recently in the U.S. You've got the one big beautiful bill gives a 30% tax credit for solid oxide fuel cells. We see it in places like South Korea and many other places as well starting to have positive policy decisions to enable this time-to-power. This is just an illustration of how some of our partners are very much in this ecosystem. You may not be less familiar with Delta. Delta is now the third largest company in Taiwan. So when you think the biggest company is TSMC, Taiwan semiconductors, Delta is a very impressive company. This comes from their website. So you can see that they are already providers of things like power conditioning equipment, UPS equipment that feed into the data center market. And this schematic, I think, illustrates it very well. You have a fuel flexible input into solid oxide. You can combine it with carbon capture on the top, absorption chilling for cooling and also with the rest of the equipment, you have a ready-made solution that can service things like micro grids, AI data centers. Semiconductor manufacturing is really interesting as you go down to lower and lower nanometer kind of wafers, you need more and more power. So you're starting to see this whole electrification, industrial loading increasing this need for time-to-power. We have a lot of experience on this. This is with one of our partners that we did a hell of a lot of field work with. So we've got over 100,000 hours of real-world data center type application data for this and 28,000 load cycles. So, because of the nature of our technology, we can load cycle very well. So we have a very mature offering for this market. A few words about electrolysis. While we see the data center market and the power market as being the near-term market opportunity, we also are making good progress on electrolysis. I think, we've seen headwinds on hydrogen, and I think that will continue for the near term. However, it does open up a window of opportunity for solid oxide, which is a higher efficiency technology than what people are using today. Projections on hydrogen. Still, we believe that's a bigger market, but it's a longer-term market. This data is out to 2040. And again, we're very committed to the industrial applications, steel, ammonia, synthetic fuels. That's some of the work we've been doing with companies like Shell recently. The Shell milestone, we demonstrated 37 kilowatt hours per kilo. What does that mean in real terms? A typical low-temperature electrolyzer would need between 50, 55 kilowatt hours per kilo. So to generate the same amount of power, you need 50 wind turbines. In our case, you only need 37 or you get 30% more production from the same renewable assets. So, because you can integrate this into industrial processes as we've done with Shell, this lends itself very much to 50% of that electrolysis market, which is the industrial decarbonization. We are moving ahead with our partnership with Thermax in India. That's important to us because we have to compete with things like Chinese electrolyzers' longer term. So establishing low-cost manufacturing in hubs like India is very key to us. Also, it's a key market in terms of the ability to combine with renewable assets that they're putting in there and actually servicing things like the ammonia and the green steel markets in the future. This is an interesting piece of news that came out yesterday from one of our partnerships with DENSO. So we began our relationship with DENSO a year ago. We're very pleased that DENSO have announced the installation of their first SOEC hydrogen production with JERA, one of the biggest utilities in Japan. What this is doing is producing hydrogen for thermal power plants to reduce emissions there. So you can see quite a lot of progress, I think, in the first 6 months of the year. We're seeing this near-term market opportunity coming towards us on the power side, which we're very much focused on near term, and we continue to make very good progress on the electrolysis side. But I'm going to hand over to Stuart to talk you through the financials. Stuart Paynter: Thanks, Phil. Good morning, everyone. So let me just take you through the financials for the first half of the year and a little bit about our plans going forward. So financial review, revenue number, just over GBP 20 million, and we'll point to the gross margin percentage, which is industry-leading high gross margins given the fact we're pursuing our licensing model. These to remain high, gives us flexibility, which we'll take you through, generating a good gross profit number. And then, we're still a loss-making company, right? We're still investing in our stack platform, as Phil mentioned, and we'll take you through a little bit of the trend around that spend and how we're going to manage that going forward. Also, as Phil mentioned, we've been cash generative in the first half. This is a working capital internal financial efficiency play. And I think what we've done is we've managed to preserve more than GBP 100 million in cash at the half year through really tidying up the balance sheet. Of course, now we need to continue to deliver on the top line in order to drive future cash flows. The bottom right-hand number is an interesting one. This time last year, we came out and said that we were going to realign the business and do a little bit of a restructuring and generate about 15% of savings, both in OpEx and CapEx. And that measurement, as you can see is a slight increase on that 17% compared to the targets we set ourselves. That now forms the baseline of our costs. So anything you see from now on is based on this lower cost level. And just a bit on revenue and gross profit. You can see that we had a jump at the beginning of '24, and that represents the signing of Delta. We followed that up last year with the signing of Denso, and we're managing to maintain a relatively high revenue number given we're working our way through the backlog and the milestone generations for those two projects. This trend needs fuel and that fuel is signing of MLAs, and we are 100% focused on so doing, and we'll take you through a little bit of the plan about how we're going to optimize that going forward. Licensing model, of course, enables a sort of flexible cost base. And here, we're just talking about the OpEx in the last few halves and how it's come down. Like we said, we would deliver a 15% reduction in OpEx and CapEx. That translated to a 13% OpEx reduction, as you can see there. This now forms the baseline for which we go forward. We've done a few -- you'll notice if you're looking at the detailed interim report that we've started writing off some of the R&D that was previously being capitalized. So that's a slightly inflated number. So we've adjusted it there, and we'll continue to do that going forward. But this is a very important piece of the business model, the ability to keep a flexible cost base, and we'll go through a bit more of that in a moment. In terms of cash flows, I think this is a really interesting chart. This backs up what Phil was saying. We raised quite a lot of money in 2021. And you can see there, that the peak spend on the hydrogen investment we made was 2022. And that investment has been continuing but reducing. And we believe that with the cell, Phil showed you, and the next generation of technology, that's going to be available very soon, that we're going to commercially launch in 2026. We've come to -- we've crystallized a lot of the effort that's been made in '22, '23 and '24. So whilst I'm not going to sit here and promise we're going to be cash generative like we were in the first half, we're going to see a lesser amount of cash burn as we move forward, because even though we're going to continue to innovate, it's very important as a licensor, we're talking about lifetime and cost and very, very focused programs based on that one stack technology that we're going to launch in early 2026. Here's the licensing model. And the orange signpost is really where we are. So licensing fees are everything for us, and they'll continue to be very important for the next few years. But as Phil mentioned, that Doosan have now reached the start of mass production, and we expect royalties to flow there on. So we'll see that royalty base build, and that is sustainable profitability, the royalty base. The royalty stack is what we're after. In the meantime, we're going to continue to try and generate license fees as well, very important to make the maximum impact to our technology in the world as we're aiming for this technology to become the industry standard in solid oxide. So the orange signpost is where we are, and we believe that's a really important inflection point for us, because we're sort of through the R&D phase and into the commercialization phase now. And what does that mean? Well, in this morning's announcement, we did announce a business transformation program that we're going to launch within Ceres. That's going to take 12 months. And the aim is to utilize the fact that we've reached these various inflection points, the product that we've been talking about, Doosan's launch and royalty generation to realign the business resources around being more commercially focused and being able to maximize the impact of our product in terms of signing more MLAs. So we're going to support our existing partners. We're going to gain more partners and we're going to restructure ourselves. So we're in the right space to be able to achieve that goal. And we believe the output of that is going to be a reduction in operating expenses of around about 20%. And that will lead us on that clear path to profitability that we're looking for as royalties becomes a bigger part of the revenue streams. The first phase of this program will be done by the end of this calendar year. So there's a 3-month reorganization, which will go first. And then we'll work very hard on the ways of working and cultural alignment on the business for the next 9 months post that. But that kicks off today, and I think that's an important part of the position we are in the market at the moment. I think it's a real opportunity for us to maximize the position we currently find ourselves in. And with that, I'll hand back to a Phil on summary. Philip Caldwell: Thanks, Stuart. Yes. So just a few words in closing on the outlook for the year. So as Stuart said, this landmark start of production at Doosan means, we are transitioning from the very much 20-plus years of R&D through product development now into actually having products that are coming to market and a big milestone for us. We are seeing more and more incoming on power, with just respond to that market opportunity. That's being targeted by our partners as first product launches. If you look at Doosan, if you look at Delta, it's all about the power market to begin with, and then electrolysis will follow. We are making very good progress on electrolysis as well. As I mentioned, the relationship with Shell has been fantastic, great results there, great news coming out of Japan on progress there. So it really validates the capability of this technology to be a real step change in electrolysis in the future. Stuart has already talked about the business transformation plan. I think, we have that continued discipline on growing top line, but also managing our resources to really respond flexibly to the opportunities that we see. We maintain a strong balance sheet with the cash management and the cash inflows in the period, and that will continue. We did this morning adjust the revenue expectation for the year. I think, it's very hard to predict signing of new MLAs. So when you look at our revenues, they come from engineering services, signing technology transfers and then ongoing royalties. So for the year-to-date now, we are expecting a minimum of GBP 32 million. And anything that we sign now will be upside to that. The reason for the change here is, we honestly cannot predict exactly when we sign these deals, and also -- that also has an impact on revenue recognition, which, as you can imagine, is not trivial when you're actually dealing with these kind of contracts. But we are continuing to pursue several opportunities, and we'll keep you updated on progress as and when they arrive. So with that, I think Patrick, we may take some questions from. Patrick Yau: Yes, we have a couple of questions from the room. So if you have any questions, please wait for the roving microphone to arrive and ask your question, and then we'll have time, hopefully, for some questions online. Alex Smith: Alex from Berenberg. Just the focus on the power market, and you mentioned kind of the news flow in the U.S. and Bloom Energy. And are you seeing the pipeline of potential partners with that kind of U.S. tint that you kind of showed that pie chart of how big the Asian market is as well for the power data center AI market. Can you give a bit more color on where that pipeline is coming from? You mentioned a bit more incoming, that would be great. Philip Caldwell: Yes, sure. Look, I think what's happening with Bloom Energy is definitely attracted interest, and also the whole time-to-power thing has become pretty acute. I think when you look at the partnerships that we have, when you look at companies like Doosan, like Delta, you have to also remember they have U.S. operations. They're already servicing those markets for a lot of the products that we talked about in the data center market. So we have ways already into that market, but also we're looking for U.S. partners as well for that particular market. So that's -- I think, there's clearly a power gap there, and I think that does open the opportunity. I think -- what's interesting as well is on the electrolysis side, for example, the IRA bill has obviously had a lot of headwinds in the U.S. And we've really seen the U.S., I think, is now moving towards blue hydrogen rather than green hydrogen. But also what the Trump administration has done on the one big dutiful bill is definitely enable power generation for solid oxide, particularly with natural gas and carbon capture. So I think, that's a 10-year initiative that's just come in. So I think, some of the uncertainty around which way the U.S. is going, I think it's pretty clear now. We don't really see the U.S. as a market for green hydrogen. That's not where we're putting our commercial efforts, but we do see it as a potential market for power. Unknown Analyst: Just a couple of questions from me, if I may. You mentioned that it's quite hard to kind of predict when you might be able to recognize revenue when you do indeed sign an MLA. Can you just give us a bit more color around that in terms of the mechanics? I know that's probably hard to summarize, but just kind of a bit of an idea would be helpful. And the second one is just on the business transformation. I think, that makes a lot of sense and kind of preparing the business for its next kind of step. Can you just give us an idea of kind of what the cash costs might be around that to implement it? Philip Caldwell: Yes. So, when we talk about signing an MLA and an MLA is a manufacturing license, it's a very complex sale. And you are also not just selling a license in our case, GBP 40 million, GBP 50 million type deal. You're actually convincing a partner potentially to invest several hundred million in facilities in product development to enter a market. So it really is a corporate development type activity. And any of you that have worked in that kind of sphere realized that those decisions go all the way up to Board level and therefore, they take time. And they are subject to a calendar that you don't control. So the difficulty that we have as a business is, if we're trying to forecast revenue based on very discrete events, it gets somewhat difficult. Once we have those contracts, as you've seen with the likes of Delta and Denso, that gives us pretty predictable revenue flowing into the first half of this year, for example. So that's what's what makes it difficult. Now, we obviously have at any one time, several of these kind of conversations going on. And -- but it's very difficult to forecast exactly when they will come. I think the second complication, which is Stuart's world, which he knows and loves now is, once you actually get these kind of contracts, you have IFRS 15 and all kinds of moving standards, which seem to change quite dramatically. So when we have a contract, we have to also be very careful about how we recognize that. So it's not just the winning of a deal. You have to then to be able to specify or forecast how much of that deal you can recognize by when is quite a lot. So that's part of it as well. Stuart Paynter: I'll just follow-up by saying that single words in those contracts can make big differences in when revenue is recognized. So we go -- we diligently work through those contracts, but contracts are in negotiation, and there are gives and takes in those contracts. So when you come to the end, you then got to do a full review and see when your performance obligations are and try and decode that into revenue recognition. So it's not easy. As we do more and more deals, we become more experienced, we try and standardize the contracts where we can. But as Phil said, these are big corporate development deals, so it becomes tricky. The second part of your question on the costs of the first step of our transformation plan, which is the 3-month reorganization. This will be done by Christmas. And we're looking, as we said, we think on the back end of the reorganization to get an optimal structure, we can be about 20% less cost. To get there, there may be a one-off cost, but it's going to be relatively trivial compared to the saving, maybe it's GBP 1 million. Unknown Analyst: So a good payback in terms of an investment. Stuart Paynter: Yes. But we are not here searching for cost savings. What we're doing is making sure the company is optimally structured given the inflection we're going through. And we believe the output of that will be the cost reduction rather than chasing. We're not chasing a cost reduction. So it's definitely a transformation rather than rightsizing or anything like that. Patrick Yau: Are there any more questions from the floor before we move on to our online audience? No. Okay. Well, let me ask a couple of questions from the participants online. Phil, you mentioned that 2025 is a landmark year for the business. So what are the key milestones that investors should be looking out for to mark progress? Philip Caldwell: I think, it's continued milestones with existing partners. If you look at the partner progress this year with each of our partners, you're seeing evidence coming through Shell, Delta, Doosan. So I think that's continued. And then, I think it's also the potential to sign new partnerships as well. Patrick Yau: On Doosan, do we have any visibility into their sales pipeline at all? And can you elaborate on the types of markets that they're focusing on? Philip Caldwell: Doosan is a public company in Korea. So I think, obviously, I can't speak for them. But I think it's clear what their first markets. When you look at the Korean market, it's, again, a highly stimulated market as in SOFC is treated as quasi-renewable energy. And they have very clearly laid out targets in South Korea about, I think, it's 16 gigawatts of power by 2040. And every year, there's a process, there's auctions that are bid into, and Doosan has been in the past, very successful in those markets. So they tend to be grid reinforcement type activities, commercial power basically supporting electrification. Patrick Yau: Thank you, Phil. A question for you, Stuart. We're starting another cost savings program. So can you give an update on thoughts around cash burn, excluding licensing agreements in '25 and '26, how would cash burn look with one or two license wins, respectively? Stuart Paynter: Amid, so respectfully, I would correct the premise of the question. We're not going into a cost saving exercise. We're going to transform the business so we can commercially face into the power opportunities in front of us. That will lead to a reduction in operating costs. And for the -- to be most useful, given some of the uncertainty around revenue recognition and timing of deals, which Phil mentioned, I would just encourage the person who asked the question to go back and look at our operating cost base, which is here for the first half of the year and look at a roundabout a 20% reduction on that. That's going to be the cost base. What we can't do is sit here and predict accurately what revenue is going to be. So we believe that, that step, the optimization step leading to a 20% reduction will obviously reduce the cash burn on an average basis by a significant amount. But it's almost impossible to predict with the MLAs coming in. Patrick Yau: A question on the Bosch announcement earlier on in the year. So can you give an update on where we are with Bosch and what your latest thoughts are, please? Philip Caldwell: There's not a great deal more to say regarding Bosch, really. We've obviously more or less concluded the exit of Bosch. Obviously, they still have some shareholding, which they began to sell, but that's really up to Bosch to sell. Look, I think we've already been over the reasons behind that. Bosch, just this week announced a further 12,000 layoffs. So they're very clear. This was not about the technology. This is more to do with a Bosch restructuring of priorities, and we're just working with Bosch to conclude that. But the fact that we're not even really discussing Bosch, I think, shows you the progress that we're making with other partners. Patrick Yau: We've got a few questions on the data center power market. So firstly, can you talk a little bit more about our competitors in fuel cells within the market? Obviously, you talked to -- you mentioned Bloom. Are any of our partners, do you know thinking about solid oxide fuel cells plus carbon capture technologies to make the energy greener? And how does the cost of power for solid oxide compare to other costs of power for other solutions? Philip Caldwell: Sure. So when you look at the market for solid oxide for power generation, there is only really one player at the moment, which is Bloom Energy. And I think Ceres' licensees are probably the next wave of entrants into that market. And that's quite a difference when you look at the electrolysis market. You've got in China alone, 60 electrolyzer companies of PEM and alkaline and then you have solid oxide and then you've got four or five players on solid oxide in the electrolysis market. So in terms of competition, I think it's -- our competition is clear. It's Bloom Energy. And I think they've done a fantastic job in pioneering that market. What's interesting when you look at the economics is the cost of conventional power generation now has gone up quite dramatically. When you look at lead time of gas turbines, the time of lead ships, et cetera, the cost of those power generation equipment assets is secondary to the availability of power. So you're starting to see, I think, a very clear window and potentially a crossover where you can see solid oxide coming down the cost curve at the same time that conventional power generation is actually getting more expensive. Now that window maybe you can debate how long that is, but the order book for gas turbines, et cetera, now is full to 2030. So that window is clearly there. And I think that once you actually enter that market with solid oxide, you will get that scale effect. When you talk about then cost of power, that really depends on which part of the world you're operating in. It comes back to your spark spread, your difference between your gas price and your power price. But when you look at the key geographies that we operate in, the most attractive markets for this kind of technology are U.S. with cheap gas, U.K. because they have very high power prices. Germany, ironically, even though maybe Bosch didn't see that, I think that's unfortunate. I think they would see it. Taiwan, Japan, Korea, all of these nations that are somehow energy constrained, there is a clear advantage and you can generate power more efficiently than you can actually currently source grid power. So there the near-term geographic markets that we see for this. In terms of the ability to combine with carbon capture, I think it's an excellent question. When you take a conventional centralized power plant, your carbon that comes off the back end of it is about a 4%, 5% carbon concentration. Because we're not using combustion and the -- what comes off the air side of a solid oxide has a much higher concentration of carbon, 40%, 50% concentration. And therefore, it lends itself very well to a more efficient carbon capture. And definitely, it's -- you saw it in some of the thinking of people like Delta, it lends itself very well to power generation with natural gas, with biogas, with blends if you end up with putting hydrogen into the system, but with carbon capture. Patrick Yau: One for you, Stuart. Could you remind us of the mechanism for royalty payments? How does that work? And if you can just explain what goes behind that? Stuart Paynter: Sure. So our first royalty stream is going to come from Doosan. It's based on them making sales into marketplace. And there's a mechanism and actually, some of the mechanisms are different across many of our partners. But ultimately, it leads to either an exact percentage of their net sales or a proxy percentage to their net sales. So the more successful they are commercially, the more royalties we get. So supporting them to launch and kind of help generate demand for them is well worth it for Ceres. Patrick Yau: One more question for you, Stuart. In the slide deck, we talk about a GBP 0.9 million order intake at present compared to a larger number last year. So can you just elaborate a little bit on what's behind that difference? Stuart Paynter: Yes, sure. I mean, last year, in the first half, we concluded the Delta deal. And the Delta deal was what you see there, that number, GBP 40-something million worth of orders coming in, and that's what we're generating the revenues on now. So orders are super important for us because they build our backlog. And in those times where we're pursuing the MLAs, that's going to be the revenue stream and the cash flow for us. So we're -- even though we haven't been successful in signing an MLA in the first half, we -- one of the reasons we go through the transformation process now is so we can make sure we're optimally structured to pursue these opportunities and execute. Patrick Yau: We got time for one more question from the online audience. Phil, can you talk a little bit about India? Obviously, we have a relationship with Thermax there. So where are the main sources of hydrogen for that market? And how do you see that developing over time? Philip Caldwell: So the Indian market is obviously very interesting and it's, kind of, evolving quite rapidly. I was there just 2 weeks ago, and I was quite surprised how much progress had been made. I think we're often quite skeptical. So when you look at India today, it's a big importer of fossil-based energy. And its potential is to be one of the biggest generators of renewable energy. Under Modi, he has a plan to be able to export renewable energy, but you can't export electrons very easily. So you have to convert it into a green molecule. And those green molecules that they're looking at is green ammonia, green steel synthetic fuels. Now the problem you have in an economy like India is your renewable assets are often quite far away from your means of production, shall we say. So you can generate solar very cheaply, let's say, $15 a megawatt hour, something like that, but it's not where you want to site an ammonia plant or whatever. They've had a recent round of auctions on things like ammonia and they've achieved very low prices as in the 12 bids that went in, 6 of them were around, I think, I'm not an expert on ammonia, but $600 to $700 a tonne, which is pretty competitive. And one thing that's unlocking that is they've now made a more homogeneous power pricing policy, which means that if you're generating hydrogen and you're using renewable assets, you get a lower power price as a combination of renewable power that you're putting in and also conventional power and hydropower. So what it means is, India, actually, is progressively moving forward now in terms of cost of hydrogen. It's getting -- your cost of green hydrogen is coming down and cost of things like green ammonia is coming down as well. So there's a lot of progress being made. You asked about where hydrogen is coming from. I think it's being pushed a lot. And if you look at the auctions by companies that previously have been big renewable energy producers and are now moving into some of these areas. So it's a fascinating market. I think, the interesting thing for India is can they manufacture, can they have a made-in-India kind of strategy. But when we look at places like Taiwan, Korea, et cetera, China, it's obvious how they really get down cost curves and supply chains. And I think that's the challenge, I think, for the Indian opportunity. Patrick Yau: I think we're drawing to a close in terms of question time. If there are no more questions in the room, then I'll hand back to Phil just to conclude. Over to you, Phil. Philip Caldwell: Yes, sure. Look, I think we've covered a lot of ground today. I think there's a couple of takeaways. One is the company has made some very significant progress this year. We've hit some big milestones. We've talked about start of production. That's been key. We've talked about our partners investing and making progress. That's key for us. And I think also, some of the progress that we've made in the hydrogen side is continuing to give us confidence in that market. However, we see the near-term market now coming towards us quite rapidly as this power market, and we have to respond to that. We just follow the market, to be honest. We follow the demand that comes in our pipeline. We follow what our first product launches are with partners, and we're starting to see that. We continue to operate an asset-light model. We continue to operate high margins, and we're very confident in the future strategy of this business in terms of signing new partnerships and also bringing the partnerships that we have to market. So I think it's -- the company is very well positioned, particularly with what we see ahead of us with this near-term market and the hydrogen market following. And I think, what we're doing around a single product offering, a single platform that services both markets really gives us that opportunity to rationalize some of our activities and really focus now on the commercial launches. So thank you very much for your participation today, and we look forward to updating you again on progress in the future. Thank you.
Last week I wrote a market update speculating on whether the Russell 2000 (IWM) had put in a technical pattern called triple tops, or if IWM will clear the highs of 2021, 2024 and now 2025 and keep screaming higher.
Vice President Vance anticipates that a government shutdown is likely as US lawmakers scramble to try to come to a compromise on a spending bill ahead of the midnight deadline. A shutdown would suspend government agency operations, delay the release of key economic data this week, and impact certain government-funded benefits programs.
Small cap stocks—those from companies with market values between about $300 million and $2 billion—are famous for their ability to deliver big gains, but they often come with a wild ride. When times are uncertain, these stocks tend to lag behind the giants.