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SAH 2025 Q4 财报电话会议

Operator: Good morning, and welcome to the Sonic Automotive Fourth Quarter 2025 Earnings Conference Call. This conference call is being recorded today, Wednesday, February 18, 2026. Presentation materials, which accompany management's discussion on the conference call can be accessed at the company's website at ir.sonicautomotive.com. At this time, I would like to refer to the safe harbor statement under the Private Securities and Litigation Reform Act of 1995. During this conference call, management may discuss financial projections, information or expectations about the company's products or market or otherwise make statements about the future. Such statements are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. These risks and uncertainties are detailed in the company's filings with the Securities and Exchange Commission. In addition, management may discuss certain non-GAAP financial measures as defined by the Securities and Exchange Commission. Please refer to the non-GAAP reconciliation tables in the company's current report on Form 8-K filed with the Securities and Exchange Commission earlier today. I would now like to introduce Mr. David Smith, Chairman and Chief Executive Officer of Sonic Automotive. Mr. Smith, you may begin your conference. David Smith: Thank you very much, and good morning, everyone. Welcome to the Sonic Automotive Fourth Quarter 2025 Earnings Call. Again, I'm David Smith, the company's Chairman and CEO. Joining me on today's call is our President, Jeff Dyke; our CFO, Heath Byrd; our EchoPark Chief Operating Officer, Tim Keen; and our VP of Investor Relations, Danny Wieland. I would like to open the call by thanking our amazing teammates for continuing to deliver a world-class guest experience for our customers. 2025 marked the third consecutive year of delivering all-time record customer satisfaction scores for our franchise dealership guests. And EchoPark once again retained the highest guest satisfaction rating among pre-owned vehicle retailers. We believe our strong relationships with our teammates, guests and manufacturer and lending partners are key to our future success. And as always, I would like to thank them all for their continued support and loyalty to the Sonic Automotive team. Turning now to our fourth quarter results. Reported GAAP EPS was $1.36 per share. Excluding the effect of certain items as detailed in our press release this morning, adjusted EPS for the fourth quarter was $1.52 per share, a 1% increase year-over-year. Consolidated total revenues were $3.9 billion, down 1% year-over-year. Fourth quarter record consolidated gross profit grew 4% and consolidated adjusted EBITDA was flat compared to the prior year fourth quarter. For the full year, reported GAAP EPS was $3.42 per share, and adjusted EPS was $6.60 per share, an 18% increase from 2024. Consolidated total revenues were an all-time annual record of $15.2 billion, up 7% year-over-year, and consolidated total gross profit was an all-time annual record of $2.4 billion, up 9% year-over-year. For 2025, consolidated adjusted EBITDA grew 10% to $615 million. Moving now to our fourth quarter franchise dealership segment results. We generated reported revenues of $3.4 billion, flat year-over-year and down 5% on a same-store basis, driven by an 11% decrease in same-store new vehicle retail volume, offset partially by a 5% increase in the same-store used vehicle retail volume year-over-year. Fourth quarter new vehicle volume faced headwinds from pull-forward consumer demand for electric vehicles ahead of the expiration of the federal tax credit in the third quarter, combined with strong luxury demand in the prior year fourth quarter. Reported franchise total gross profit was a fourth quarter record, up 4% and declined 2% on a same-store basis. Our fixed operations gross profit was a fourth quarter record, and F&I gross profit set an all-time quarterly record, up 8% and 6% year-over-year, respectively, on a reported basis. These two high-margin business lines continue to increase their share of our total gross profit pool, once again contributing over 75% of total gross profit for the fourth quarter, mitigating the tariff headwinds on new vehicle volume and margin to our overall profitability, while also leveraging our SG&A expenses more efficiently than incremental vehicle-related gross profit. Same-store new vehicle GPU was $3,033 per unit, down 7% year-over-year, but up 6% sequentially due to a higher luxury mix in the fourth quarter. On a reported basis, new vehicle GPU was $3,209 per unit, down 1% year-over-year and up $208 or 7% sequentially from the third quarter. On the used vehicle side of the franchise business, same-store used GPU decreased 2% year-over-year and decreased 10% sequentially from the third quarter to $1,379 per unit. Our F&I performance continues to be a strength with fourth quarter record franchised F&I GPU of $2,624 per unit, up 8% year-over-year and up 1% sequentially. Turning now to EchoPark. Adjusted segment income was a fourth quarter record $3.6 million, up 300% year-over-year, and adjusted EBITDA was a fourth quarter record $8.8 million, up 110% year-over-year. For the fourth quarter, we reported EchoPark revenues of $481 million, down 5% year-over-year and fourth quarter record gross profit of $54 million, up 9% year-over-year. EchoPark segment retail unit sales volume for the quarter decreased 6% year-over-year, and EchoPark segment total GPU was a fourth quarter record $3,420 per unit, up 15% per unit year-over-year and up 2% sequentially from the third quarter. For the full year, EchoPark segment adjusted EBITDA was an all-time record $49.2 million, up 78% year-over-year. Going forward, we remain focused on increasing our mix of non-auction sourced inventory to benefit consumer affordability and retail sales volume and GPU. When combined with the strategic adjustments we have made to our EchoPark business model, we believe we are well positioned to resume a disciplined store opening cadence for EchoPark beginning in late 2026, assuming used vehicle market conditions continue to improve. In the long term, we intend to expand our EchoPark platform to reach 90% of U.S. car buyers, selling over 1 million vehicles annually while continuing to provide a superior guest experience. We believe investment in brand marketing will be key to our long-term EchoPark growth plan, and we expect to begin to invest in this effort during 2026, potentially increasing advertising expense by $10 million to $20 million this year. Turning now to our Powersports segment. We generated fourth quarter record revenues of $36 million, up 19% year-over-year and fourth quarter record gross profit of $9 million, up 25% year-over-year. Fourth quarter combined new and used retail volume was up 18% year-over-year, and we are beginning to see the benefits of our investment in modernizing the Powersports business and the future growth opportunities it may provide. Finally, turning to our balance sheet. We ended the quarter with $702 million in available liquidity, including $306 million in combined cash and floor plan deposits on hand. Our focus on maintaining a strong balance sheet and liquidity position allows us to strategically deploy capital in a variety of ways to deliver value to our shareholders. During the fourth quarter, we repurchased approximately 600,000 shares of our common stock for approximately $38 million, bringing the full year share repurchase to 1.3 million shares for approximately $82 million. In addition, I'm pleased to report today that our Board of Directors approved a quarterly cash dividend of $0.38 per share payable on April 15, 2026, to all stockholders of record on March 13, 2026. We continue to work closely with our manufacturer partners to understand the potential impact of tariffs on vehicle production, pricing and volume forecast, vehicle affordability and consumer demand going forward. The full year 2026 outlook and guidance on Page 13 of our investor presentation considers these uncertainties and represents our current expectations for 2026 financial results. As always, our team remains focused on executing our strategy and adapting to ongoing changes in the automotive retail environment while making strategic decisions to maximize long-term returns. This concludes our opening remarks, and we look forward to answering any questions you may have. Thank you very much. Operator: [Operator Instructions] Our first question is from Jeff Lick with Stephens Inc. Jeffrey Lick: Congrats on a standout quarter. It's pretty impressive results relative to the others in Q4. I was wondering if you could talk a little bit about EchoPark. I was just curious, if you think about the -- the used car options that are out there right now, and there's obviously big players like Carvana, CarMax, [indiscernible]. I'm just wondering, as you're starting to understand the EchoPark business better, where do you guys see how you fit into the used car ecosystem in terms of when someone is looking to buy a new car, a used car, where do you guys view as like where you really kind of over-index and solve a problem for a customer. Where do you fit in the used car ecosystem? Frank Dyke: This is Jeff. We've always kind of looked at EchoPark as the Costco sort of the pre-owned world. There are 35 million to 40 million pre-owned cars sold every year in this country. And if you look at what Carvana is doing 500,000, 600,000, you look at CarMax in the 800,000, 900,000 range, there's a lot of room for us. And prior to COVID, we said we'd be at 90% coverage of the country and sell over 1 million vehicles. We feel very comfortable over the last 3 or 4 years. We worked very hard on the model. We can slowly and accurately build stores. Like we said, we're going to open 1 or 2 in the fourth quarter of this year. We'll open more in '27, and we will methodically grow the EchoPark business. But we're the low-cost provider in this arena. And when you look at how we price our vehicles and you compare to those two competitors, we're anywhere from $3,000 to $6,000 cheaper than those guys. And it gives us the ability to sell a lot of vehicles on a per rooftop basis versus our competitive set. And we're seeing that. We see it in the 17 stores that we have opened now. And we believe that being that low-cost provider and really taking care of our guests like we do with our great guest satisfaction scores, which are industry-leading, that combination is just going to be really hard to beat as we slowly begin to grow this brand. Heath R. Byrd: And Jeff, this is Heath. I'll add one point is exactly what Jeff was alluding to is that, that objectively, we are the lowest cost provider. You can look at the data and the facts are there. Objectively, we have the best customer experience. We've won for the last 16 quarters with reputation.com comparing to Carvana, CarMax and others. And now that we are starting the expansion again in a disciplined way where we still have profitability going forward. You combine that with our brand initiative, which we mentioned earlier in the press release and in the statements. Now people know. I mean, I think the biggest thing is that we get our name out there, and you've got the two main things that people are looking for, and that's just going to give additional tailwinds to EchoPark, especially as the inventory is returning, it's going to be a really nice situation for growth for EchoPark. Jeffrey Lick: Yes. Just a quick follow-up. You talked about non-auction sourcing. I'm just curious, you had a little bit of a hiccup with the commercial rental car fleet returns and that gumming up sourcing a little bit. Just any updates on where you're sourcing non-auction related and then how you see the sourcing unit availability for your business model in 2026? Frank Dyke: Yes. We are. We're incentivizing our team to buy vehicles all over the country. And we're finally beginning to leverage our new car franchised dealerships for inventory. We've always kind of kept that separate. And we have found a way, we believe, to leverage the heck out of that as lease returns begin to come back as we can trade for more cars out of those 111 franchise stores. And we'll begin to see. The beginnings of all this and the inventory sort of feeding into EchoPark will start in March and April time frame of this year. And so we're very excited about that and reducing our dependence on the auction lanes. And that's happening, but it's methodically happening with a very strategic plan around that. And buying more cars off the street certainly is happening and engaging our experience guides in that kind of model is going to make a big difference for EchoPark as we go forward. It's a very important part of our growth plan. Operator: Our next question is from John Babcock with Barclays. John Babcock: I guess just first question while we're on EchoPark. When do you plan to do the advertising spend? And then also, is that going to be more focused on building the brand or driving trade-ins? How are you thinking about that? And then also, if you could just talk regionally about whether you're going to target certain regions or if this is going to be more of a broad-based nationwide type advertising? Frank Dyke: Yes. That $10 million to $20 million is brand-based and focused on that -- strategically focused on that. We'll start spending that money, call it now, beginning of second quarter, somewhere in that time frame. And we've got to build commercials and do different things. We've got a lot of fun ideas that we'll present to the public. But I wouldn't expect any of that to be put into action for the public and you guys to see until the fourth quarter as we begin to launch stores again. So that will all kind of come together. Unfortunately, you guys start spending some money now, so the return doesn't come until fourth quarter or '27. And then that will be focused on our markets. But then as we move into '27, we'll even start marketing our brand in markets that we don't exist in. We've seen some of our competitors do that, and they've done a great job with that. So as Heath was saying earlier, we're going to bring the EchoPark brand to life, and we're going to start sharing with the world what our pricing model is and how great our guest experience is. And that's a one-two punch is going to be very difficult to deal with on top of an amazing selection of inventory. So put all that together, and we think we're sitting in the catbird seat, and we've got a lot of runway in front of us, and there's a lot of pre-owned cars being sold in this country. So we're very excited about it. David Smith: And this is David. And something to note is that, remember, the first EchoPark store opened in 2014. So this is something that factually we know that when people know us, like in markets like Denver, that we get a far higher market share. We get more for our cars. They know about us. They refer their friends and family to us. We've got a lot of people who bought from us over and over again. So it's not something that we're wondering, well, what if we advertise, will it work? It absolutely works. They just need to know about us. John Babcock: All right. That's very helpful. And then my last question, just on GPUs, fared pretty well in the fourth quarter. Just kind of curious how you're thinking about the cadence of that in '26. Frank Dyke: Yes. From -- this is Jeff. From a new car perspective, we put it out there in our franchise segment of $2,700 to $3,000 a copy, could be a little stronger than that in the first quarter of the year, maybe April, tax return season, all the good things. We're going to see what happens with tariffs. I mean, thank God for our manufacturer partners last year in '25, they made up -- you saw their balance sheets and what they all lost and what they've done for our industry. They are going to pass those expenses on. Our average retail selling price just got to $60,000 in the third quarter, over $62,000 in the fourth quarter. These are all-time record high prices. So the affordability issue, while maybe not being felt in '25, we believe as you get into May, June, July, August, you're going to start feeling it as new car prices have nowhere to go but up, and that's a difficult situation. It's a great situation for us with EchoPark because it's going to put us in the catbird seat with affordability from an EchoPark perspective and our used car business on the franchise side. That's exciting for us. But I think that everybody needs to keep a real close eye out on the inflationary effects and what's going to happen with new car pricing as we move into the early parts of the summer, late spring here and these -- our manufacturer partners start moving that cost on to the consumer in a more -- in a way that we did not see in 2025. John Babcock: Actually, as a quick follow-on to that, are you starting to see indications that the OEMs are planning to push on more costs? I don't know if you have any additional commentary there. Frank Dyke: Absolutely. They're lowering margin rebates that we get. The prices are going up. There's no question that you're going to see that. They're not going to sit back and lose billions and billions of dollars. They can't. It's just not going to happen. And so it's going to be really interesting to see the elasticity in new car pricing as we move forward over the next 6 months. And look, January was a hell of a month. Without the snowstorms, it would have been a magnificent month. So we'll see. I don't know if it's the tax stuff that's helping that. But definitely, prices are higher. And so maybe there's some great elasticity, but it does bring in the affordability discussion, and it really rings the bell from a used car perspective. We're going to have that gap that we've been missing between new car and pre-owned cars again. And that's just going to be fantastic for the industry and really, really good for EchoPark. Operator: Our next question is from Rajat Gupta with JPMorgan. Rajat Gupta: I just wanted to quickly follow up on the EchoPark commentary. Just given the store openings later this year, the increase in advertising, it looks like the year-over-year growth should accelerate in the back half. Are you setting up for 2027 to be an even stronger year from a growth rate perspective than the high single digits this year? Is that the right takeaway from these investments? Frank Dyke: Yes. 100%. Rajat Gupta: Got it. Okay. That's helpful. And maybe I want to pivot to like parts and services. Understandably, warranty comps were tough here in the fourth quarter. Could you give us an update on where you ended up with respect to same-store technician growth? And any targets for 2026 that you're going after there? I would be curious. Frank Dyke: I think since March of '24, where we started our technician focus, we're now plus 400 technicians from that original date that we started talking about this. And that's been a big part of our success since then from a fixed operations perspective. We're all in Houston right now at our annual meeting, and our whole annual meeting today is focused on fixed operations and our ability to grow this business significantly. We think we've got $100 million a month in fixed operations gross that we can do. That's $1.2 billion. We did a little over $1 billion in '25. So we're really excited about the opportunity here. There's just too many customers that -- and for the industry that don't come back to a new car store to have their vehicle serviced. And it's like 50-50. And we think we can attract a lot of customers. We've got the time to sell. We've got the base. We've got the technicians, and we're going to take advantage of that as we move forward here over the next year or 2. Rajat Gupta: Understood. And then just on your balance sheet leverage, just a question on capital allocation. It looks like the way you define it, it's 2.1 in terms of net debt to EBITDA based on the add-backs are allowed from rating agencies. I'm curious how much could you stretch? And would you plan to stretch that in '26 or in the medium term to maybe deploy more capital into either more M&A or buybacks? Heath R. Byrd: Yes. If you look at that rate, I think we are the first or #1 or #2 in leverage ratio, and we're comfortable with that. We want to have a very strong balance sheet. We would be comfortable going to a 3.5, but there's -- we can actually execute our plans for next year and still maintain that low leverage ratio. If a nice acquisition shows up that requires some debt funding, then we could do that as well. We have plenty of room. But we've got enough dry powder to implement our plan for '26. You can see we had a big acquisition in 2025. That was the majority of our capital spend. You can see that from a returning capital to shareholders, dividend, that's been increased by $200 plus over the last several years. And so that's always something we want to stay within 20% to 25% payout on the dividend. That's our target. And share repurchase, that's one of the things that when we see opportunity, when we have a price that pencils out and it's the best return, we're going to continue that as well. And then the last piece is returning -- basically investing back in the business. And as we start growing EchoPark, you'll see that bucket fill up a little bit more as we build new EchoPark stores. So very comfortable with our balance sheet, all of our covenants and got the dry powder we need to execute for '26 and forward into '27. David Smith: And Rajat, this is David. I think just on M&A, just to note that these opportunities in our industry come along and they can come along quickly and just -- and we're excited so far about our big acquisition of the JLR stores last year. It's been a great acquisition. And that one came along pretty darn quickly, and it was a great one. So hopefully, we'll see some more like that and some great opportunities to grow the business and grow earnings. Operator: Our next question is from Bret Jordan with Jefferies. Bret Jordan: Slide 13, I guess -- down in '26 roughly by the amount of your marketing advertising expense. Do you see that inflecting positively in '27? Or is there sort of ongoing rollout expense as you start rebuilding the business? Frank Dyke: You broke up right there at the beginning. Is that on EchoPark? Heath R. Byrd: Yes, Slide 13. Bret Jordan: Yes. I was wondering, do you see that in '27 accelerating as you're sort of passing this initial marketing expense? Frank Dyke: Yes. That's exactly how you should look at it. We're going to have some initial spend here while we get prepared for launch. That's really not going to happen until the fourth quarter as we begin to open a few stores. And then we'll have a cadence of stores that we can open next year and a different level of spend that we'll talk about as we begin to grow the brand across the country and focus on driving our $1 million-plus sales and our 90% coverage. And as we go through the quarters, we'll continue to update you guys on where we are in the progress that we're making. We gave you a $10 million to $20 million range, kind of we can narrow that gap a little bit as we get towards the fourth quarter for you, but that's exactly how you should look at it. Danny Wieland: And just to add to that, Bret, this is Danny. We guided to high single-digit volume growth for EchoPark in '26. But as Jeff said earlier, that really doesn't reflect any benefits from this brand investment. So you can look at that as accelerating in '27 and beyond as we get the benefits of the brand investment and increase our store base. So that will help drive both the volume-based growth that we're projecting as well as some EBITDA leverage in '27 and beyond. Bret Jordan: Okay. Great. And then a question on Q4, some of your peers talked about luxury consumers acting a little softer than normal for that seasonal period. And you guys didn't mention that. Do you see any behavioral change, whether it's people pushing back on these high ASPs in luxury or in the parts and service? Or is there any move to decline recommended services? Anything at the consumer we should read through? Frank Dyke: Yes. That's what I was saying earlier. I'm concerned about the tariffs and from a pricing perspective, what's going to happen as we get into the early summer. If you'd have sat been with us and you were looking at October and November and the cadence, you'd gone, holy, cow, you guys better have a big December. This is going to be a rough fourth quarter. And then December came along, and it was just -- it was one of those great Sonic Decembers that we always count on, and it was just amazing. We sold a lot of everything, in particular in our luxury segment. And surprisingly, 62-plus-thousand average selling price as that mix change to luxury, and we were prepared. We've been doing this for so long together as a team. We had the right inventory mix, our manufacturer partners stepped up. And so we had a great quarter, we think was a great quarter and an amazing December. And then we came in and had a really good January. When we report, we can talk about it on the first quarter, but the snowstorm slowed things down a little bit, but it was still a great January even with the damn snowstorm. David Smith: If we've not had that, right? Frank Dyke: No, had we not had that, wow. And so we'll see. I am cautioning and concerned about what is going to happen, how far, how much elasticity can we deal with or can the consumer deal with from a new car perspective. And something is going to have to give here. The prices are getting -- are just getting too high. And now didn't show up in January. It's really not showing up in February. We'll see. I think a lot of people are counting on big tax returns. We'll learn a lot this summer. Great news is the service business is great and has lots of upside. The F&I business is great. And then the used car business should just be fantastic as that gap widens. You really want your average retail selling price for a used car to be half that of a new car, and we're beginning to see that gap come back. And during COVID, it got all the way to 80%, 90%, sometimes 100% depending on the brand. So a lot of great opportunities as we move into the year, but a big caution on exactly what's going to happen from a pricing perspective on new. Bret Jordan: Do you have visibility as to what the OEs are going to pass through in higher price -- sort of on a same SKU basis? If the BMW X Series was 50, is it now 55 with the pass-through? Frank Dyke: I don't -- I mean I'm -- from based on what I've been seeing, we're seeing 3% to 5% increases and that can be a 1% to 2% increase on a normalized basis, right? So they're definitely passing on. But they're also doing a great job of cutting spending where they don't need to spend and cutting programs that were nice to have. And so -- and I've spent a lot of time on a bunch of different dealer boards, and that's a great topic of conversation with the manufacturer partners. So they are making some really good decisions on spend so that they don't have to impact pricing and they don't have to impact margin. But the tariffs are too high on some of these brands, and you're going to -- they're going to pass pricing on. It's already happening. They're going to cut margin. It's already happening. And they paid for it all in '25, and that's a big point here. They really paid for it, and you can see it in their reported numbers and the amount of money that some of these manufacturers were losing in the billions of dollars. That's just not going to -- that's unaffordable. That's not going to continue to happen and something is going to change as we move into this year, and we'll see. It's -- we've got to really pay close attention. I was calling this out, if you all remember, in the third and fourth quarter, watch these numbers. And I'm telling you, watch these numbers, watch new car pricing as we move forward, in particular, on luxury. Luxury buyer will push back at some point. Operator: Our next question is from Chris Pierce with Needham & Company. Christopher Pierce: Just kind of looking at fixed ops. I was just wondering if maybe you could speak to possibly like the subscription nature of this business? Or -- I mean, I know I guess you're trying to bring people back into the funnel. But when people buy cars, I know there's a prebuy option for 3 years of service, that type of thing. Is that something you're seeing and that gives you confidence in growing this business? Or is that so small right now that it's not really a factor? Frank Dyke: No. I mean I think that we have an opportunity to sell more products like that for sure to bring the customer back. But the industry as a whole is doing something wrong if 10 customers come in and buy cars and 5 of them don't come back to a dealership to have their vehicle service. And some manufacturers high as 70%. This is something as an industry we must address. Why would you not come back to a dealership where you have ASE-certified technicians, you've got the best equipment, the best parts, the best service you can get and they're going to mom-and-pop store, half of them are going to a mom-and-pop store down the street. That would indicate that there's a pricing opportunity from my perspective. And there's an opportunity. We fill the bucket up with technicians and the amount of hours that are available. Now we need to put that to work for us. And that's where we are at this point in time of our journey is really sharpening our pencils, making sure that we've got the right pricing out there and that we're bringing customers and the marketing, and we're bringing customers into our service drives. There's more out there to get, a lot more out there to get a lot of upside, and we're just scratching the surface from my perspective. David Smith: We've got to get the perception versus reality where the customer knows that our prices are actually competitive or better than the independent down the street. Heath R. Byrd: And I was going to say literally, the marketing is a new concept from the Sonic perspective. We have a focus to sales force. We have a focused campaign now, which we used to never have that on the service side. So that, coupled with having products, warranty products that drive the consumer back to the franchise dealer, those two things are going to help our market share. Danny Wieland: And one other point there. We guided to mid-single-digit percent growth in fixed ops on a same-store basis. Fourth quarter, our warranty was only up 2% year-over-year. That had been growing 20%, 30%, 40% year-over-year for the last several quarters. So we're finally seeing kind of a normalized level there. But we think that these opportunities on the customer pay side are what's going to drive sustained mid-single-digit growth above that long-term 2%, 3% average, but continued opportunity with the additional technicians, the marketing efforts, the efficiency of selling the hours and loading the base. There's some real upside there in that piece of the business. That just crested $1 billion in gross for the first time this year. So it's the larger numbers with a mid-single-digit percentage is significant opportunity from a gross profit growth perspective. Christopher Pierce: And just on that, is it something -- I know you guys have to take the ball and run with it, but it's something the OEMs can help with as well? I know the cars are getting smarter. You don't just see a check engine light, you can actually push a message what needs to happen, maybe the price. Like do the OEMs help on this front as well with the cars getting smarter? Or is it 100% you guys have to kind of take this and execute here? Frank Dyke: Yes, 100%. You sit down and talk with many of our OEM partners. They see the exact same issue, and it's at the top of discussion with all of them is how do we drive more customers that we're selling cars to now back into our service drive and what products do we need to use in order to make that happen. I had this exact conversation with the leadership of Toyota and Lexus not too long ago. It is a big, big focus point. And we need to drive more customers that we're selling cars to back into our service drive. And we can do it. The industry needs to do it, but we're certainly going to make that happen at Sonic Automotive. And it's awareness, as David was saying earlier, it's making sure that our door rates and our pricing are in the right areas in terms of being competitive with the mom-and-pops up and down the street. That data is readily available for us all now, and I think you'll see us make a big impact as we move forward. David Smith: And I think it sounds like you're also thinking of the technology side of it where the customers will have apps for their BMW and Mercedes, Porsche, et cetera. And the app will tell them, okay, come on in, and that's going to drive a lot of business for us. Christopher Pierce: Okay. So that's something that's not quite happening now, but can get better. Okay. Got it. 100%. Okay. And then just one on EchoPark. Do you feel like you need like a buy button on EchoPark given what digitally only like what Carvana is seeing as far as growth in units? Or is it just about convey the value to customers, convey the price and then versus peers. And from there, that should get the customers in the store, and that has consistently got the customers in the store in your older locations? Frank Dyke: Part of that $10 million to $20 million spend is you will see a launch of the EchoPark app, which we're incredibly excited about. And we're building and investing in a digital retail solution that we think will be industry-leading once complete. We've got a great team that's dedicated to that. And we're very, very excited about that exact opportunity for EchoPark. Yes, we need it. We need in an omnichannel environment, whether the customer wants to come in and test drive the car or sit at home in their underwear and buy a car. We need to be in a position where we can take care of that guest all the way through that buying journey. And it's great because at EchoPark, they can come, they can test drive a car. Many of our competitors, you can't even test drive a car, you just got to buy it. And we want to put ourselves in a position where they can do all of that, and that is part of that spend. So great, great question, much appreciated. Operator: Our next question is from Michael Ward with Citi. Michael Ward: What are -- you mentioned some variables that are giving you confidence. I don't know if they're internal or external to step up the growth again at EchoPark. Can you talk about some of those? Heath R. Byrd: This is Heath. One of them is obvious, the external triggering is the inventory returning. That's going to be a big part of it. And we've said that from the beginning that once that inventory starts returning, and I think we all believe it's going to take the [ 28 to 29 ] to get back to the 2019 number, but that's the external. And the other -- the internal is the fact that we've seen we can actually make really good EBITDA even at these lower units that are being sold. And so a lot of the efficiencies that we have seen and done internally gives us confidence that now we can grow and the branding that David was mentioning at our older locations, we can command a higher price and get a higher GPU because it's been there long enough that the word-of-mouth branding is working. So that, coupled with the inventory coming back, coupled with the things we've learned with this lower unit environment are the things that give us confidence that it's time to grow again. Michael Ward: To do that number -- go ahead, I'm sorry. Frank Dyke: Well, we've said for the last few years, as soon as inventory begins to return, you're going to see us methodically start and strategically growing. Inventory is returning, and we're going to start methodically and strategically growing. Heath R. Byrd: And one of the things that's most impressive because of the environment we were in, we got a lot better of finding alternate sources to buy, better buying off the street. And so all of that is going to help us as we grow as well. David Smith: This is David. Also, the economics of what a new EchoPark location and the money we're going to spend on those is going to be far less than some of the locations we've had, some of our current locations. So it's going to be a lot easier. We have to sell a lot fewer cars at those locations to actually break even. So you're going to see those locations are going to be highly profitable. Michael Ward: Did I hear the number right, your goal is to get to 1 million units? Frank Dyke: That is correct. David Smith: Over 1 million. Frank Dyke: Yes. It's 1 million-plus units. And so that's not a new number. If you go back and you look at our growth trajectory from '18, '19 before COVID hit, we were saying this exact same thing. We're on our way to making that happen. And we were well on our way and the whole world changed. Now methodically and strategically, we're on our way again, and we darn well believe that, that is something that we can do. And we know we've got the pricing methodology. We've got the inventory management, and we've got the guest experience. We're adding technology, our branding. We've been doing this for a long time, and we're very excited about this day. It's a long time in coming. Michael Ward: Yes. It's a big deal. Secondly, two of the headwinds that kind of hit in 3Q were BEVs and JLR. You didn't mention you had a JLR acquisition. What's the inventory situation like with JLR? And how did the -- what's the latest trend on the BEV side? Frank Dyke: Yes. So we saw a lot of BEVs because of the tax credit going away in the third quarter, that significantly dropped. And we'll see what happens in this upcoming calendar year, but maybe settle in, in the 5% to 7% range, who knows. JLR's inventory was impacted by a multitude of things, but coming back now. And we're right on plan with our acquisition there, which is great. We were real green with those guys, really understand that brand. And the acquisitions that we made in California, I mean, JLR, Beverly Hills, it all goes together. That's a great in Newport. That's a great fit for us. And so yes, we're very excited about that acquisition. Their inventory is returning. But there are another one that are going to be faced with the tariff issue, right? There's not a plant here and they're faced with this, as is Porsche, as is Audi. These are all things that they're going to pass on expense to the consumer, but fantastic product and our inventory is improving as every month goes on with them. David Smith: Yes. Unfortunately, the JLR customers, people love those cars. We've got multiple customers that have more than one in the garage. So it's a great brand. We're excited about that acquisition. Danny Wieland: And Mike, on the BEV mix, we saw north of 12% of our sales mix in the third quarter was EV with the pull forward demand from the federal tax credit expiration, but it was only about 4% of our mix in the fourth quarter. And you've seen our inventory mix of EV become more in line with that kind of 4%, 5%. So it's benefiting GPUs relatively speaking. BEVs are still $100 headwind in the fourth quarter to blended GPU, but that was down from $300 in the third quarter. And so as we go forward, if the OEMs can continue to produce the right BEVs for the right markets as importantly, I think that becomes less of a headwind for us going forward. Operator: [Operator Instructions] Our next question is from Glenn Chin with Seaport Research Partners. Glenn Chin: Just revisiting the pricing discussion. Jeff, you mentioned a few times OEMs cutting margins. Can you just clarify, is that a reference to dealer margin? Frank Dyke: Both. I mean you've got dealer margin in some manufacturers being cut. You've got price increases, 1%, 2%, 3%. You've got all kinds of different things going. And then you've got manufacturer partners doing a great job from my perspective on their part, cutting spend where the dealer and the manufacturer got together and said, we really didn't need this program. And so they're doing everything they can to fight this tariff battle. But again, if you go back to '25 and you look at some of the losses that some of our manufacturers took, it was a lot and they did an amazing job fighting this battle. They're not going to fight that battle by themselves forever. It's just not going to happen. They're going to have to pass on. And I just -- we'll see what happens from a pricing perspective, from a margin perspective. We're working incredibly close with all of them. And everybody's got the right mindset. Everybody wants to do the right thing, but there's only so much room before you have to start passing on price increases to the consumer. Glenn Chin: Yes. And on a related note, are you seeing any signs of them decontenting, taking out equipment? Frank Dyke: Absolutely. I mean everybody is looking at it is what can we do to pare down the price of a vehicle, whether it's wheels, you name it. That's something that is a topic of conversation across the board. Glenn Chin: Any items in particular, Jeff, that stand out to you? Frank Dyke: No. I mean I could probably go get you some detail, but not off the top of my head. I mean wheels definitely are part of that. The infotainment systems are certainly changing. And really, we're heading in one direction when BEV first launched because of the amazing technology in those vehicles. I think that's being tightened up and more to come. We're really sort of at a crossroads, an inflection point as manufacturers put their arms up and say, enough is enough. Dealers certainly can absorb those kinds of hits and pricing is going to have to change or something is going to have to change. Glenn Chin: Interesting times. Okay. And then just a question on the outlook. You're expecting a 10% increase in floor plan interest expense. Is this a function of higher store count? I know you guys acquired those JLR stores last year. Or is that a function of you expecting to carry higher inventory levels or both? Danny Wieland: It's really on store count and brand mix as well as the inflationary cost of vehicles. Our floor plan is based on the dollar value of the invoice cost. And if the OEMs are going to pass along with the model year '26 increases we've seen as well as what we expect in '27. And then compound that with -- we carried a higher floor plan offset balance for most of the last year, depending on what we do from a capital deployment perspective going forward, you could reduce the benefit that we see against floor plan somewhat. So it's a combination of factors. Glenn Chin: Okay. Yes, that makes sense. But just to confirm, your floor plan rates are variable. So any reduction in rate -- right, the rate environment should be a favorable offset to that. Is that accounted for in your outlook? Danny Wieland: Yes, and that's accurate. Operator: There are no further questions at this time. I'd like to hand the floor back over to David Smith for any closing comments. David Smith: Thank you very much, everyone. We'll speak to you next quarter. Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

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CODAF 2026 Q2 财报电话会议

Alfonso Ianniello: Good morning, and welcome to Codan's H1 FY '26 Results Presentation. I'm Alf Ianniello, Managing Director and CEO. And joining me today is our CFO and Company Secretary, Michael Barton. As announced this morning, after more than 22 years with Codan, Michael has informed us of his decision to retire at the end of August following our FY '26 full year results. Over that time, Michael has played a pivotal role in shaping Codan's financial discipline, capital allocation framework and acquisition strategy. On behalf of the Board and the broader team, I'd like to sincerely thank him for his contribution. I'm also pleased to confirm that Kayi Li, currently our Deputy CFO, will succeed Michael as our Chief Financial Officer. With nearly 19 years at the business, including senior finance roles at Codan since 2013, Kayi has played an integral role in our financial strategy and operational execution. We are confident her experience will support a smooth and seamless transition. In addition, Daniel Widera, our General Counsel and Joint Company Secretary, will become Codan's sole Company Secretary upon Michael's retirement. Michael will remain with the business for a structured 12-month transition period from August to ensure continuity and stability. Before we begin, please take a moment to review our standard notice and disclaimer. Today, we'll begin with our H1 FY '26 performance highlights, followed by a detailed review of each of our segments being Communications and Metal Detection. We also highlight 2 products that contributed meaningfully during the half, demonstrating how our engineering investment is translating into commercial outcomes. We'll then revisit our strategy and near-term priorities before closing with our outlook for the remainder of FY '26. Following our remarks, we'll move on to a live Q&A session, which will be hosted by Sam Wells from NWR. While Michael and I are working through the slides, you are welcome to submit written questions at any time [Operator Instructions] For those newer to Codan, we're a global group of technology businesses focused on critical communications and detection. Our technologies are designed for mission-critical environments, keeping people connected, informed and safe in demanding and often remote conditions. We operate across defense, public safety, gold detection and recreational markets, supported by a global footprint and strong engineering capability. At our core, we focus on reliability, performance and long-term customer relationships, particularly in environments where failure is not an option. Our strategy to build a stronger Codan remains consistent and disciplined. It is underpinned by sustainable organic growth, targeted and accretive acquisitions and continued engineering investment and strong operational execution. Diversification remains a key strength with Minelab delivering a strong cyclical performance and Communications positioned for structural long-term expansion driven by defense and public safety demands. Over time, this approach is building a more resilient and diversified earnings base with improved visibility and quality. At a high level, our H1 results reflect consistent delivery against our strategic plan, underpinned by disciplined execution and favorable market conditions in several key regions. Communications delivered another period of consistent and high-quality growth, supported by strong defense demand and the integration of Kagwerks. Metal Detection delivered exceptional performance, particularly in Africa, where elevated gold prices supported demand. Importantly, this performance was achieved while continuing to invest in engineering, systems and people, ensuring that our growth remains sustainable and repeatable over the longer term. Turning to the numbers. Group revenue increased by 29% to $394 million, reflecting strong organic growth and a full first half contribution from Kagwerks. EBIT increased by 52% and NPAT increased by 55% to $71 million, demonstrating strong operating leverage across the group. This reflects both revenue growth and improved product mix, particularly within Minelab. The Board declared a fully franked interim dividend of $0.195 per share, up 56% on the prior corresponding period, consistent with our disciplined capital management approach. I will now hand over to Michael to step through the financial detail. Michael Barton: Thanks, Alf, and thanks for the kind words at the start of your presentation. Also, I'd just like to thank you for your support of the succession plan to Kayi and Daniel, much appreciated. And thank you for making the time under your leadership so enjoyable and so successful. On to the numbers. So as highlighted, group revenue increased 29% during the half and pleasingly, the growth came from both our Communications and Metal Detection businesses. Our gross margins increased 58% and all profitability metrics were increased. Operating expenses increased primarily due to a targeted investment in shared services, higher performance-linked expenses, which are reflective of our strong results, product launch costs and the integration of Kagwerks for the full period. Tax expense was slightly higher at 25% with more of our increased Metal Detection profits taxed here in Australia. NPAT margin improved to over 18%, reflecting improved profitability and operating leverage. We continue to actively manage our foreign exchange exposure through our hedging program with contracts in place to mitigate approximately half of the expected USD exposure in the second half. Overall, the financial result reflects both strong performance and continued investment in capability. We closed the half with net debt of $88 million, an increase of $10 million compared to June, largely reflecting working capital investment to support growth and our increased activity levels. Leverage remains conservative at 0.4x EBITDA. With an undrawn debt facility of $140 million as well as an additional $150 million accordion capacity, we retain significant financial flexibility to pursue inorganic growth opportunities. This slide illustrates the key drivers of our net debt movement during the half, including the investment in operating cash flow into working capital to drive growth, our dividend payments and continued investment in our engineering programs. Engineering investment during the half was $36 million, representing approximately 9% of Group revenue. This level of investment is consistent with our long-term approach and supports product development pipelines across both Communications and Metal Detection. In Communications, investment is focused on advanced tactical platforms, next-generation waveforms and public safety applications. In Minelab, investment continues to support our product refresh cycles and our technology leadership. This sustained commitment to innovation underpins our organic growth trajectory. And back to you, Alf, to take a closer look at our business units. Alfonso Ianniello: Thanks, Michael. We'll now move on to the business units. Communications revenue increased by 19% to $222 million. Segment profit increased 17% to $58 million, with margins broadly stable at 26% as we integrate Kagwerks and manage the challenging trading period in Zetron Americas. The orderbook increased by 19% to $294 million at the 31st of December, providing strong revenue visibility into H2 and beyond. We remain focused on progressing Communications margins towards our 30% target by FY '27 as integration benefits and scale efficiencies materialize. DTC delivered strong growth, supported by defense demand and increased adoption of our unmanned system solutions. Revenue from unmanned systems increased 68% to $73 million. Approximately half of this unmanned revenue during the period related to operational defense application in conflict zones with the balance being driven by adoption of our technologies across non-conflict defense and security programs in Asia, the U.S. and Europe. Importantly, growth rates across both conflict and non-conflict markets were broadly consistent, reinforcing the structural expansion of the unmanned systems market. Kagwerks contributed in-line with expectations and continues to integrate effectively, enhancing our position within U.S. military programs and strengthening our ecosystem offering. Our presence across the U.K., U.S. and Australia positions us well to capture long-term defense program across allied markets. The BluSDR contributed meaningfully during the half and represents a strong example of our engineering capability translating into commercial success. It is an ultra-lightweight, high-performance software-defined radio platform designed for long-range, secure connectivity across unmanned and mobile applications and has proven particularly well suited for drone-based deployments. Its technical characteristics, including high output power, mesh networking capability and low size, weight and power reinforces DTC's competitive positioning in mission-critical communications. Trading conditions for Zetron Americas were temporarily impacted by slower procurement cycles across the state and local agencies that we serve, which extended sales cycles and deferred order timing during the half. Early indications in the second half of the year are encouraging with trading conditions showing signs of improvement as funding approvals progress. Outside the Americas, EMEA and APAC markets delivered stable performance. We continue to invest in next-generation 911 capability and the SALUS platform to enhance recurring revenue streams and strengthen long-term customer retention. Minelab's first half results were exceptional, with revenue up 46% versus prior corresponding period to $168 million. Segment margin expanded to 45%, reflecting a higher mix of gold detector sales and improved operating leverage. Africa delivered exceptional performance, supported by elevated gold prices and strong demand across West Africa. Rest of the world delivered high teens growth, which is an excellent result, reflecting continued strength across key recreational markets. Rest of world performance was supported by product innovation, retail expansion and the ongoing development of our direct-to-consumer platforms. This performance highlights both cyclical tailwinds and structural improvements in the business model. During H1, we launched the Gold Monster 2000. It delivers enhanced sensitivity to ultrafine gold and improved depth and accuracy in mineralized ground, critical attributes in many of our core gold markets. Early customer feedback has been positive, supporting continued momentum as distribution scales up. Now I'd like to move on to the strategy update section of today's presentation. Our strategy remains anchored in 3 core pillars: first, investing in ourselves, strengthening systems, process, people and product innovation; secondly, strengthening our core businesses, which means expanding addressable markets, improving revenue quality and increasing reoccurring revenue components; and thirdly, disciplined capital allocation, where we pursue strategically aligned and accretive acquisitions that enhance capability, scale and market penetration. Together, these pillars support sustainable, diversified earnings growth. In DTC, we are expanding towards a full system solution provider model, continuing investment in the next generation of waveforms and ecosystem integrations. In Zetron, we are focused on increasing reoccurring service revenue and expanding support contracts and also advancing next-generation command and control platforms. And in Minelab, we continue product innovation, retail footprint expansion and channel development with another new detector scheduled for release shortly. These initiatives support both near-term performance and long-term structural improvement. Now turning to our summary and outlook on Slide 23. Tying today's presentation together, market conditions remain positive in both Communications and Metal Detection, reflecting the diversified nature of the Group's portfolio and the quality of our business. Codan's strategy is to continue to invest in engineering programs to maintain product and technology leadership and to underpin long-term growth. In Communications, elevated defense spending and ongoing geopolitical tensions globally continue to generate strong demand for our unmanned systems products. Communications is on track to deliver FY '26 revenue growth within a 15% to 20% target range, supported by strong underlying demand and the full year contribution from Kagwerks. Minelab revenue in the second half of FY '26 to date is tracking in line with the strong first half performance. Based on Minelab's current trading conditions, we expect the second half performance to be at least in line with the first half, supported by favorable gold market conditions and a full 6-month contribution from recent product releases. With balance sheet capacity and a disciplined approach to capital allocation, Codan remains well-positioned to continue investment in the business and pursue future acquisitions that fit our product and technology road maps, which enhance the quality, resilience and the diversification of our earnings. The company will continue to keep shareholders updated as FY '26 progresses. Back to you, Sam. Sam Wells: As a reminder, the audience may ask questions to the management team. [Operator Instructions] There are a few pre-submitted questions, so I'll kick off with those before getting to the analysts. Firstly, just on Communications margins. You've talked about the moderating pace of margin expansion within Communications. Can you elaborate on the path from current margins to the 30% target by the end of FY '26? Michael Barton: Yes. Thanks, Sam. Yes, remain -- we've been very consistent that we remain focused on margin expansion. We did improve organically in the half, which was good. And we've been really consistent also on our revenue expectations for Communications, the 15% to 20% range remains the focus. As we deliver that and we see further revenue growth to be within that range in the second half, we would expect to see more improvement at the margin line as well. Sam Wells: And on Zetron, can you elaborate on the early encouraging signs in trading conditions in the Americas business? And are there any meaningful near-term opportunities specifically in the U.S.? Michael Barton: Yes. I think we posted a really pleasing increase in our order book at the half. So quite -- I think we're up 16% versus June, 19% versus last December. So we do go into the second half of this year with a stronger order book than what we entered the first half. So that's pleasing and sets us up to be within that 15% to 20% range that I mentioned. And I think we're also seeing -- while not yet in the order book, we are seeing some increased activity in the pipeline also in the U.S. market, public safety market for us. Sam Wells: And on Minelab Africa, an exceptional set of numbers within the Minelab business. How should we think about the sustainability of this performance, particularly in the context of 45% segment profit? Alfonso Ianniello: I think when you're looking at Minelab, I don't want to make it just an African discussion. We had a rest of the world high teens growth rate, really reflecting great execution from the Minelab team at a distribution, e-com level and direct-to-customer approach and new releases of great product. And then when you look at Africa, obviously, the gold price has been a tailwind for Minelab and then our great products have been a tailwind for Minelab. So the 45% is an exceptional number in its own right, and we believe it's maintainable in the future. Sam Wells: And just moving to unmanned. You printed some extraordinary numbers within the unmanned business. Can you help us understand how sustainable these opportunities are, particularly within the defense landscape? Alfonso Ianniello: Yes, it's really interesting. If you wind back 12 months, 18 months throughout these calls, we've referred to an unmanned market growing at 30% per annum globally. This is just increasing. The environment and the ecosystems in defense are very different today than they were previously. Our solutions back right into those unmanned platforms. And our ability to perform in conflicted environments well has really created a halo effect into other markets, hence, highlighting the success of the BluSDR-90, which was really born over the last 18 months through very high exposure to very conflicted environments. So we think the unmanned space over time will continue to be a significant tailwind for Codan. Sam Wells: Got you. And just shifting to some of those non-conflict opportunities you referenced in the presentation. Can you just elaborate on those? And where are the bulk of the revenues coming from in terms of specific applications? Alfonso Ianniello: Yes. So I won't talk about the specific applications. I'll talk more about the market -- the geographic markets that we are looking at. So if you look at, we did call out, we've started to see some positive work in the U.S., positive work in APAC, positive work in Europe. So if they're not in a conflicted environment at the moment, they're probably preparing for pre-conflict, I would say. So -- and again, let's take a step back and just reflect on the technology that we put in market, and that technology fundamentally is selling itself in these other markets at the moment. Sam Wells: Great. We'll move across to some of the analysts. First question comes from Josh Kannourakis at Barrenjoey. Josh Kannourakis: First, congrats, Michael, and wishing you all the best on the transition of your new steps and congrats to Kayi as well on the step-change in role. Good to see. Just jumping on to the first question just around regional exposure. So you did mention a bit of a step-up in terms of activity in the U.S. I know there's a lot of hoops to jump through in terms of getting into those programs and historically comms being dominated by a couple of those big local players. Is that a new incremental thing? Can you just give us some more detail on how recent that is? And maybe just specifically around the U.S., what you think the opportunity is across the broader comms space? And then obviously, specifically, unmanned as well? Alfonso Ianniello: Yes. I think when we look at comms in the U.S., we probably look at the dismounted soldier solution within the Kagwerks acquisitions and the unmanned solution giving us some good dialogue with potential U.S. customers. So there's a lot of -- as always, with these platforms, they're not plug-and-play. They are plug significant testing and evaluation and then you get an order. So we are comfortable that we're having the right dialogue with the right organizations, either at a defense department level or Tier 1s into the defense department. So that is positive. The other areas that we're actually having positive traction is APAC, and I won't go into the specific countries, but also there's been an uptick in European defense spend, and there's been some sort of shadowing of that application of that funding into unmanned systems and the DTC product category itself. Josh Kannourakis: Got it. That's really helpful, Alf. And just in terms of -- so just to understand it within the U.S. specifically because I guess my understanding was more that a lot of your volumes and things historically have been outside of that region. So you're sort of from a military perspective, within the sort of evaluation phase at the moment for that. So that's probably in terms of potential upside, that's significant if you can get through that. And -- but then on the other side, you're seeing traction in some of the nonmilitary sort of settings also. Is that the way to sort of read it through? Alfonso Ianniello: Yes, that's right. If you look at what we've seen over the last couple of months, we've been heavily involved in the border with our communications. So that's with government departments, not defense related. We are also heavily working with other sort of peripheral government departments in the U.S. that require our solution that in some ways, isn't defense related, it's more public safety related in theory, keeping the American public safe. So yes, and that's a great thing with the product categories. We can actually put it into dismounted soldier solutions, unmanned solutions, public safety solutions. Josh Kannourakis: Great. And just in terms -- I know you don't want to go into specific countries for obvious regions, but there's been some very large funding packages allocated to areas like Taiwan and in that sort of region. There's also a lot more flagged in terms of progressive step-up. How early in the journey do you think you are? Are you sort of -- do you have the right connectivity in place to capture what will obviously be a significant step-up in this broader region? Alfonso Ianniello: I would suggest, as we've said in the U.S., we are all part of the right conversations happening in APAC and EMEA being Europe. So yes, we're definitely having the right discussions with the right levels of people. Josh Kannourakis: Awesome. Final one from me. Just on M&A. I mean, obviously, it's been a pretty tumultuous environment across the software space. Defense on the other side has obviously has been a lot more favorable in terms of all the trends you've talked about. Can you maybe just talk about when you're thinking about it now the lens, how you're sort of seeing that in terms of the opportunities within both maybe comms and -- within comms within the tactical side, but also Zetron, especially with some of the potential in software, the AI-related disruption as well. Alfonso Ianniello: Yes. I think when you look at Codan and you look at our comms, the good thing we make products with software on it. So the -- any AI application is just an enhancements to the product and the end user, and that's how we actually see that. But we have pipelines of M&A targets. As you clearly mentioned, in the defense world, it's pretty hot at the moment. Multiples are far higher than we've seen in the past. People on the line would clearly know that we are very prudent when it comes to acquisitions about multiple and accretion levels. So we've been involved in processes. Some have worked. And then as in the past and the ones that we've been unfortunate on has been really the fact that we didn't believe we could extract the right value for it. But the process continues. We've invested heavily in structure at Codan. So we've got the right people working on it. We're looking heavily on how to enhance our technology road maps and our market positioning. So it's definitely a space where you just need to continue to be active in and ensure that you buy well and you can extract value for the future. So that's where we're at, Josh. Sam Wells: Next question comes from Mitch Sonogan at Macquarie. Mitchell Sonogan: And yes, congratulations to you, Michael and also Kayi as well. Just echoing Josh's comments. Just the first one, just on the outlook for Metal Detection or Minelab second half revenue to be at least in line with the strong first half. Just trying to get a little bit more color on that because obviously, you had pretty strong sequential growth. You've got, as you said, good gold conditions in that market and also still benefiting from new product releases. So just trying to understand what sort of visibility you have at the moment, how we should think about the second half potential upside risks. Alfonso Ianniello: Yes. Well, it's interesting if we talk about Minelab, that's probably the first time we've actually ever given a forward-looking number in Minelab. So yes, we've had a strong first half, right? We've got a lot of tailwinds either from a gold perspective -- gold price perspective, new product introduction, great performance in recreational. We sit here today, and we never comment on seasonality in Africa because we don't know. So we're not going to be a fact-based about that. But we do sit here today that we're saying there's the same tailwinds that existed in H1 exist in H2. And so I guess that's what our commentary was about, so okay? Mitchell Sonogan: Yes. And just in terms of -- obviously, you called out Africa being quite strong. But do you mind just giving a bit more color on other regions where you might have seen some big outperformance and other areas that you are more positive on the next 6 to 12 months as well? Alfonso Ianniello: Yes. I think I'll call out Australia. I think our work we've done in Australia has been exceptional on repositioning the way we go to market, big tick, some great work in APAC, big tick, LatAm, big tick. And then you've got Africa and Europe. We have been consistent in our approach either at a recreational level with e-comm, the marketplaces, the distribution point increases and new product introductions. So when I look at Minelab, it's very hard to fault anything they're doing in any market at the moment. And the most important thing is I'm as excited as with the gold detection and the gold sales as I am with the rest of the world sales because that high teens growth in a fairly flat consumer market is fantastic. So it just shows that where we're spending our money away from product development, it's working. Sam Wells: Next question comes from Evan Karatzas at UBS. Evan Karatzas: Just can we dive into Zetron a bit here. One of your larger competitors, Motorola, I mean they've been delivering some pretty consistent strong growth over recent quarters to their command center business. Can you maybe just speak to why you think there's such a discrepancy there to what you've seen in the U.S.? And anything you can, I guess, elaborate on around that order book for Zetron explicitly and how that's changed relative to 6 months ago, how you entered the year as well? Alfonso Ianniello: Yes. Good question. I think when you look at Motorola in the command and control space and you look at us, I don't think we're comparing apples-to-apples consistently on product offering. There's probably a bit more rolled up in that space of Motorola. And secondly, they're a Tier 1, Tier 2 player. We're a Tier 3, Tier 4 player. The way the funding and the grants work for Tier 3, Tier 4 are slightly different than they are in Tier 1, Tier 2. So -- and I think we also need to analyze Zetron over the last 4 years of Codan ownership, it's been well above market growth rate. So it's been an amazing acquisition for Codan. And so looking forward, what are we seeing in January, Feb when you -- just going further to what Michael said, yes, orders are being unlocked, so that they're pushing into the order book. There's far more activity in the pipeline. So the activity levels have come up from H1. It's a financial year. I think let's have a chat at the end of H2 and where these orders have rolled through. And let's not get away from the fact that we have entered H2 with an order book that is higher than most times. So that's the marketplace that public safety, it is. Also, let's not -- also let's understand the fact that we've been doing well in APAC and EMEA as well from a Zetron perspective, so. Evan Karatzas: Yes. Okay. No, all fair points. And just sort of coming back around to the DTC, the tactical comms, just around those investments you've been making, especially for contested environment, some of those new product releases, have they now been released into market? And then you can talk to about how early take-up or reception has been? And then also how that helps when you spoke about from a strategic sense with that expansion into your other growth regions like North America, Europe, Asia as well? Alfonso Ianniello: Yes. From a product perspective, I think the DTC product category is quite set. The feature content involves from market feedback. And that's the sort of the strength that we've had. We've been able to feed back those technical requirements from the field back into our product really quickly, either enhancing current product or creating new product like the SDR-90. So at the moment, we're heavily focused on feature content for the SDR range. And also we're heavily focused on feature content for the Kagwerks range as well. So probably less form factor changes, but more on feature content for the environment that these products work in. Sam Wells: We might just move on to the next question, please, from Tom Tweedie at Moelis. Tom Tweedie: Just the first one on Kagwerks. Are you able to give us a sense of the revenue contribution for the half for that business? And also just the color on the pipeline for program of record RFPs? Michael Barton: Yes. If I'd just give you the revenue range when we acquired that business, I think we were expecting high $40s million revenues into the low 50s. And I think we've commented, Tom, that it's been -- it's met our expectations. So it's been in that range over its first, what, 13 months of ownership. And Alf, do you want to talk about pipeline? Alfonso Ianniello: Yes. So when you look at, we've been heavily invested in supplying the Nett Warrior program, doing some international BD on other Army opportunities that we're looking at. I think what I've seen, which is very pleasing for us from a Kagwerks perspective is there's an evolution of movement from the standard DOCK Lite product, which is the base version to the DOCK Ultra product, which is the version with the radio and the AI technology and the edge computing technology. So that's what we're seeing happening in the Nett Warrior program itself. So that is significantly positive for us. And then like everything, we'll just keep doing the BD efforts with the other defense opportunities in the U.S. and internationally. Tom Tweedie: Very helpful. Just on Minelab and that side of the business, you called out detector launches. In the release, you've also mentioned one new detector to launch shortly. Just stepping back, can you remind us what the expectations are in the pipeline there over, say, the next 12-18 months for further models to come to market? Alfonso Ianniello: Yes. So we've released already an upgraded recreational detector, a new countermine detector and obviously, the Gold Monster 2000, great launches, great tech, keep moving forward. We've got a high, high-end gold detector coming out in the next couple of weeks, which is the GPZ, GPX range updates first time in almost a decade. So it will be -- it's probably anxiously being awaited by the users globally. Post that, the Minelab team has a road map on enhancing detection out 12 to 18-24 months. So -- and that's across recreational and gold and countermine, which is really the key areas. So there's no shortage of ideas from our Minelab. They are very good at creating products that exceptionally -- work exceptionally well in market. So like we always say, our ability to move that IP from an idea to a product is really the Codan superpower. Tom Tweedie: Awesome. And then one final one. You made a comment earlier around the distribution for Gold Monster 2000 still expanding. Are you able to give us a sense of -- is that in terms of key markets that you've still yet to properly launch the detector in? Or is there still more distribution to go in the second half? Can you give us a sense of what that comment related to? Alfonso Ianniello: Yes. I think that comment relates to launching a product. When you launch a product, we launched at the back probably in middle of Q2. So you're just ramping up supply chains, you're ramping up product to get into market. So at the moment, we're just in the ramp-up stage of Gold Monster 2000. So the scale up is to -- you just scale up production over time and you get into the supply chain into your customer base as more markets. And that's what that comment is about. So we are well on the way now, and that will continue over the next 12 to 18 months, I would suggest. Sam Wells: Next live question comes from Cam Bell at Canaccord. Cameron Bell: Just a couple of quick questions. So the Metal Detection comments you gave in the second half, flat revenue. Is it fair to say that with flat revenue, we can expect similar margins in the second half? Michael Barton: I think, Sam (sic) [ Cam ], we used the words at least rather than flat. So yes, in terms of the commentary on H2. At these revenue levels, we think 45% contribution margin out of Minelab is outstanding. We don't -- at these revenue levels, that would remain our expectation. I think it's fair to say at this level of revenue and that level of profitability, we are looking to reinvest in that business to continue the revenue growth that we've seen. So 45%, if that's what the contribution margin is in H2, that would be a fantastic result. Cameron Bell: Yes. Okay. I might stick with just 2 quick ones for you, Michael, to continue off on those. You might not miss these style of questions in a few months' time. Last half, you had a bunch of M&A costs unallocated. Is it fair to say there were some of those semi potentially nonrecurring M&A costs in this half? Michael Barton: Yes, probably not to the same extent. But yes, we did have M&A activity and ongoing integration costs across the business. We don't really call them out as one-off, Cam, because the business continues to evolve, and we continue to invest in different areas of the business to improve what we do. So the costs we've incurred in the first half is a fair representation of that cost base going forward. Cameron Bell: Okay. Sure. And then just last one for me. Is 25% tax rate the new norm? Michael Barton: Yes. I think with this mix of product, then yes, we're going to be in the mid-20s, whether it's 24%, 25%. But yes, I think we're in that range. Our Minelab business performing at this level, highly profitable. All that IP is generated here in Australia. We pay all of our -- majority of our Minelab taxes here in Australia at $0.30. So that caused that rate just to go up a percentage point or 2. Cameron Bell: Okay. Great. And congratulations, Michael, on everything you've achieved over the last 22 years. Michael Barton: 22 years, yes. Thanks, Cam. Sam Wells: And maybe just one last question here from James Lennon at Petra. Can we expect Codan's typical seasonal movement in working capital to repeat in FY '26, i.e., a wind down of working capital as the financial year progresses? Michael Barton: Yes. Historically, that has been the case, Sam. Look, we have had an increase in working capital over the first half. A lot of that was just activity related and the timing of that activity. So -- and we've had a really strong start to the year, the second half, a really strong start from a cash collection point of view. So some of that has unwound to start the second half. So yes. Sam Wells: And just one final question. What is DTC and Zetron revenue for the half? And would you consider disclosing DTC and Zetron revenue going forward? Alfonso Ianniello: I think we get asked that question a lot. And I think when we did the full year presentation for '25, we started talking about public safety ecosystems, defense ecosystems, unmanned, how it all comes together. If you see here today as Codan compared to 4 years ago, our Comms divisions are converging with the products that we have and how they work in market, right? So I guess a short answer to that is that we probably won't because a lot of our thinking is around public safety, which is heavily linked to Zetron, but there is creeping in on DTC products for that as that ecosystem evolves and not dissimilar to the defense ecosystem where you have unmanned systems, you have dismounted soldier solutions and you've got our standard core products in HF. So I guess the answer is that I see more converging rather than diverging today than I did probably 4 years ago. Sam Wells: Okay. Great. Thank you. We're just going through the hour. So I think that's all the time we have for live Q&A. If there are any follow-ups or unanswered questions, please feel free to reach out to us directly. And maybe with that, I'll just pass it back to you, Alf and Michael, for any closing comments. Alfonso Ianniello: Yes. Thanks, Sam. First, I'd just like to thank everyone for joining us today and the continued support you have for Codan as an organization. I think today, it just continually demonstrates our consistent approach in running Codan, our consistent strategy, our investment in product development, our investment in people and processes. We've actually steered into very good markets through M&A. So we sit here today, highly confident in our strategy, highly confident on our skills and execution and delivery and above all, that consistent approach. So I'd just like to thank everybody and we'll provide updates as we see fit for the rest of H2. Sam Wells: Great. Thank you very much for joining today's Codan's First Half FY '26 Results Call. Enjoy the rest of your day. Thank you, and good-bye.

44天前Insight Analytics约5分钟阅读

AUKNY 2026 Q2 财报电话会议

Operator: Good day, and thank you for standing by. Welcome to Auckland Airport Interim Results 2026. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Carrie Hurihanganui, CEO. Please go ahead. Carrie Hurihanganui: Thank you. [Foreign Language]. Welcome, and good morning to everyone on the line. I am joined today by Chief Financial Officer, Stewart Reynolds, and we are pleased to be able to share the interim financial results from the first half of FY '26 with you. Listen, overall, it's been a promising start to the financial year. We've seen strong momentum across the business as travel demand and seat capacity has continued to build along with increased cargo movements. The focused cost management and solid commercial performance. Customer journey times continued to improve with robust operational performance, all while making significant progress on our aeronautical investment program with key projects delivered in the period and our new integrated domestic jet terminal firmly on track. As we look ahead to the remaining 6 months of the financial year and beyond, we're feeling optimistic, and that's based on the recent trading momentum and continued growth in demand across aeronautical and commercial opportunities as well as a pipeline of additional new air connectivity and the continued substantial progress of our infrastructure program. Now of course, that is notwithstanding the complexity and challenges that naturally come with a program of the scale that it has in a live operating environment. Now plenty to run through today on the half year performance and outlook before we jump into Q&A as normal. So let's jump to Slide 4. We'll kick things off with an overview of the first half results. I'd summarize the half year really about reflecting a growing momentum. First half '26 revenue increased 4% to just under $520 million, reflecting the combination of an increase in aero charges, increased passenger numbers and higher commercial income. Operating EBITDAFI lifted from the prior comparable period by 6% to $371.3 million, and that resulted in a lift to the EBITDAFI margin. Net underlying profit after tax is also up 6% at $157.1 million and total reported profit after tax, which included revaluations down 5% to $177 million. An interim dividend of $0.065 per share will be paid on the 2nd of April with total dividends declared at $110.2 million. Capital expenditure was almost $431 million in the first half with assets commissioned in the period of more than $743 million. If we move to Slide 5 and look at some of the key highlights that underpin the half year results, you can see there that total passenger movements increased 2% to $9.64 million, and that was made up of domestic passengers at 4.37 million, up 2% and international, including transit, also up 2% to $5.27 million. We also saw almost 86,000 tonnes of international cargo movements worth $20.3 billion, and that was up a healthy 37%. The ongoing focus, collaboration and investment is making a tangible difference for our customers. We've been working together with our airport partners and border agencies, and we've seen the introduction of new technology and digital enhancements and an expanded arrivals area, resulting in improved customer satisfaction measures and importantly, shorter customer journey times. In the commercial space, we've continued to see growth across key business lines of car parking, retail, investment property and rental income, up 5% to just under $240 million. Of the $743.5 million of assets commissioned in the period that I mentioned a few minutes ago, $724 million of that was aeronautical projects across terminals, transport and airfield. Moving ahead to Slide 7. Fundamentally, we continue to build for the long haul, and it has certainly been a busy 6 months. And that 6 months has been focused on delivery and progress in creating capacity, increasing resilience and uplifting the customer experience and business performance. Moving to Slide 8. Auckland Airport, we've been incredibly proud to serve as a critical gateway and enabler of economic growth for both Auckland and New Zealand. International travel here at the airport is an essential driver of the economy, generating over $35.1 billion in economic output in trade tourism and employment per annum with Auckland Airport serving more than 90% of long-haul flights into and out of New Zealand. Or another way to look at it is $1.4 million of economic value for every international aircraft that lands into Auckland Airport. Now we've seen inbound tourists through Auckland up 2% in the 12 months to December at 2.4 million, and that makes up 67% of New Zealand's international visitor arrivals. Auckland also has 89% share of New Zealand's international airfreight by volume and 93% by value. In the period, that equated to $8.2 billion worth of goods exported by Auckland, which was up 75% and $12.1 billion imported, which was up 19%. Moving to Slide 9. Listen, we've been really pleased to see more seats and greater choice coming into the market for travelers. And the most significant of that, particularly in the international space, a highlight was the launch of China Eastern's Shanghai-Auckland-Buenos Aires service in the first half, and that was made possible through years of collaboration between China Eastern Auckland Airport and government partners. Now overall, the China market growth is positive with forecast around 50,000 additional seats during FY '26 versus FY '25, and that's primarily been driven by China Eastern, China Southern and Hainan Airlines. It was also positive to see Air New Zealand growing its network from Auckland with seat capacity to Australia up 8.4% and capacity to the Pacific Islands increasing by 7.3%, primarily driven by their incremental A321neos. Now that Tasman growth was also complemented by capacity increases from both Jetstar and Qantas, which lifted seat capacity from Auckland to Australia by 4% and 7.3%, respectively, during the period. It was great to see Qantas Group announce their new samoa and Gold Coast routes that will commence in the second half. And it's worth noting that [ CF's ] launch of Auckland samoa introduces competition to that existing route and the Gold Coast Auckland launch sees the Qantas full-service airline brand now come on to that route. Moving to Slide 10. A huge highlight for us. We were delighted to see the strengthening of Southeast Asia connectivity with Thai Airways announcement of their planned resumption of services in the back half of 2026, and that will restore a long-standing long-haul connection between New Zealand and Thailand. And really, for us, it's an important milestone as we think about the rebuild of long-haul connectivity to and from New Zealand. It adds real value for travelers between both countries while also strengthening our connections into Asia's wider aviation network. Moving to Slide 11. There's been a tremendous amount of work underway between business and government and working together to stimulate tourism recovery. And it's really positive to see outbound tourism by Kiwis fully recovered and inbound tourism seeing a 5 percentage point lift to 90% from the prior comparable period. As New Zealand's Gateway Airport, Auckland Airport actively promotes New Zealand abroad through strategic route development and working with airline partners to launch new international services to strengthen our country's connectivity to key global markets. And this connectivity matters. Each daily wide-body fleet to Auckland delivers annual tourism spend of more than $150 million and $0.5 billion in high-value airfreight. Now Auckland's international seat capacity was up 4% over the peak period, which was that November to March period. And this has been assisted by the gains made over the past year on tourism with business and government, both combining efforts to see things such as tangible progress on visitor visa turnaround times. What's been really interesting is the November introduction of that simplified visa requirement for Chinese travelers who already held an Australian visa, enabling them to come to New Zealand. That's driven a 44% year-on-year increase in Chinese traveling between Australia and Auckland for the months of November and December. And finally, the announcement of the $70 million events in tourism package as well as investments in the wider regions such as the opening of the convention center, excuse me, and the City Rail Link are all key in driving economic activity. Slide 12. If we dive in a little bit deeper, growth in the domestic jet and international capacity is providing greater competition and the resulting impact of that is, therefore, travelers with more choice. Overall, it's been a promising start for international travel at Auckland as both seat capacity and passenger volumes are growing. International seat capacity increased 1.8% during the first half compared to the prior year and reached 89.3% of 2019 levels. Non-transit pax movements reached 93.2% of 2019. In December, what we did see was the international load factors were 5 percentage points up on the FY '19 equivalent and clearly indicating that demand is not the problem as it continues to outpace supply. And it is something that we are very cognizant of. We are seeing the passenger demand trajectory as positive, but we do also see and expect the ongoing global fleet shortages to continue to weigh on the availability of new seat capacity supply and pace of growth in the near term but also have a clear line of sight that we see that washing through. Now if we turn our sights to the domestic market, first half '26 saw the largest boost to domestic jet seat capacity in a decade. So it was up 5%, albeit I acknowledge still not at 2019 levels. But the growth is positive. The additional 181,000 seats in the domestic jet market helped to make flying just a little more affordable on key routes with the average jet airfare costs falling by around 6% during the period. Moving to Slide 13. We are continuing to invest in driving efficiency and improvements across the customer journey. Now this extends to the ongoing close collaboration with airport and government border agency partners as we look to optimize the ecosystem alongside the infrastructure improvements. And that's things such as the expanded arrivals area, the new security screening technology and the new express pathway for eligible arriving travelers. Now delivering infrastructure improvements in a 24/7 airport is highly complex. And despite increased customer and passenger activity, we have continued to deliver tangible operational improvements, making traveler journeys more streamlined than ever. Over the summer peak period, which is that December to January time frame, median international departure processing times were 21% faster at 6.5 minutes compared to the same period last year, while international arrivals were 10% faster at 18 minutes. So from smoother passenger processing to reduce queue dwell times to providing enhanced customer experiences at airside, such as lounges and retail. These improvements are enabling the airport to both manage growing demand and do so efficiently while maintaining a reliable and positive experience for travelers. Moving to Slide 14. We are New Zealand's Gateway Airport, and it is critical that we continue to invest in greater capacity and resilience. The first half marked a significant milestone in the infrastructure plan with over $700 million of assets commissioning in the period. This includes the $465 million Northern Airfield expansion, assets at the eastern end of the international terminal that we refer to internally as the stitch into the new domestic jet terminal, a new direct cargo airside access point, a major upgrade of the stormwater network, the Western truck dock, critical airfield pavement renewals and works associated with the contingent runway. So in short, it was a very busy but productive first half. Moving to Slide 15. The integrated domestic jet terminal remains on track for completion in 2029. We've seen steady progress achieved across both the terminal and airfield works in the first half. And the new terminal structure is now clearly visible to all airport visitors. And in November last year, the project reached a key milestone with the physical connection to the existing international terminal building, which you can clearly see on this slide. Approximately 60,000 square meters of airfield has been temporarily closed and made available to support construction of the domestic jet terminal pier and aircraft stands with piling underway, fuel system installation progressing and airfield pavement works now commencing. The scope and scale of activity at the new domestic jet terminal will only increase further in the year ahead with more workers on site as the footprint availability in both the head house and the pier continues to increase and the structure becomes more enclosed, allowing some of the interior fit-out to get underway. Slide 16. Looking ahead, as travelers to the airport precinct, they are going to see in the international terminal building construction activity becoming even more visible as we transform the check-in area. Travelers will experience some changes with the opening of a new temporary check-in facility and change to passenger access routes heading into quarter 4 of this financial year. This next phase of the build is an essential step in delivering the future long-term capacity, resilience and improved customer experience travelers have been asking for. And while travelers can expect some temporary disruption as it gets underway, we are working very closely with airlines and government agency partners to minimize those impacts as much as we possibly can. Moving to Slide 17. In retail, the partnership we have with our new duty-free partner, French global travel retailer, Lagardere, ensured a smooth transition at the start of the half year and is focused on a competitive proposition that delivers both customer value and future growth. The new offering is already proving popular with travelers as Lagardere starts to significantly upgrade the store experience for customers, offering new brands and more choice. And while travelers will notice construction activity in the duty-free stores, the work is being undertaken in a very carefully staged manner throughout 2026 calendar year to minimize the disruption and travelers will continue to be able to access and buy their favorite brands. Our retail income in the period was $92.3 million with total PSR up 2%. It's actually 5% if you excluded FX, and that's versus the prior comparable period. Income per pax of $9.76 was down 4% with a change of sale mix noted as part of that. Lower concession rates are driving higher sales volume with duty-free basket sizes increasing and sales growth outpacing the pax growth. And in a sluggish retail environment, both on the high street here in New Zealand and in travel retail more broadly, to be able to grow basket size and PSR is a pleasing outcome with the duty-free business outperforming most regional peers. Moving to Slide 18. Investment in our parking product range with the opening of the transport hub and the Park and Ride South is delivering improved customer choice and revenue. Revenue was up 14% to $41.1 million, reflecting the full 6 months operation of the transport hub, an uplift in premium product, an increase in average duration of stay, growth of international passenger numbers and growth in total car park exits by 1%, with international up 3%. However, we did see domestic car park exits reduced by 7% due to weaker corporate demand, the ongoing domestic economic backdrop and the loss of circa 700 spaces due to the expansion of the regional airfield capacity program. This was partially offset, however, by the resilient performance of the Valet and Park and Ride products. Moving to Slide 19. Manawa Bay celebrated its first birthday in the period and is performing well. We've been seeing increased footfall of 6% and increased sales of 18% for the comparable November and December periods. And it's providing a valued shopping amenity for around 75,000 people who engage with the airport every day, including airport workers and the Auckland community. Taking it to Slide 20. Investment property rental growth continues with the existing commercial property portfolio seeing a 9% growth in investment property rental income in the first half and a 2% increase in the rent roll to $195.4 million, which all came from growth in the existing portfolio and further Manawa Bay leases. Now softer market conditions have contributed to a slower-than-expected investment property activity during the period. However, we are continuing to see strong interest from prospective commercial property tenants. Hotels are seeing an average occupancy of 83%, which is up from 78% in the prior period. And the ibis refurbishment program is on plan with the first of the 2 stages now complete in the period, and the second is going to kick off from April. Slide 21, a few key updates in the regulatory space. In December 2025, the High Court declined the appeals lodged by airports in relation to the Airport Services input methodologies, merits review and Auckland Airport has elected not to pursue the matter further. And related to this, the Commerce Commission has advised that in March, it will commence consultation on amendments to the airport cost of capital input methodologies in light of the coding errors that informed the 2023 input methodologies. Auckland Airport will be making submissions as part of this process, and the commission has indicated it is targeting a final decision in June 2026 on those amendments. Last month, the commission began its process to consult on the information disclosure requirements for major airport investment in line with the earlier recommendation by MBIE. The commission is targeting to complete this process by the third quarter of 2026. And finally, following consultation, the final master plan is expected to be published midyear 2026. So with that, I'll now hand over to Stewart to take us through the financial performance in more detail. Stewart? Stewart Reynolds: Thank you, Carrie, and good morning, everyone. It's a pleasure to be sitting here today and presenting Auckland Airport's interim results for the 6-month period to December 2025. Turning to Page 23, where we summarized our financial performance for the half. As Carrie mentioned, the first 6 months of 2026 financial year has indeed been a very busy one for the company with the continued recovery in aviation activity flowing into improved financial metrics and delivering what I would describe as a good start to the financial year. Higher tax movements, particularly international, combined with improved performance across the commercial lines of business drove a 6% lift in revenue for the 6 months, excluding interest income. With careful cost management in the period, the increase in revenue flowed through to a lift in EBITDAFI, up 6% to just over $370 million in the period. And with that, pleasingly, a lift in EBITDAFI margin on the prior period from just under 70% to 71.5%. Net profit for the year was down 5% to $177 million, largely as a result of a reduction in the investment property revaluations that we saw in the prior period, with underlying profit, that is profit excluding noncash movements associated with revaluations and derivatives in the period, rising 6% to $157 million, with the lower cost of debt and improved performance from our investment in Queenstown Airport and the hotel JVs, partially offsetting below-the-line impact of asset commissioning. Turning now to Page 24, where we've set out a breakdown in revenue across the different lines of business. In the half, it was pleasing to see aircraft movements at Auckland Airport return to a positive trajectory with an increase in both domestic and international movements on the prior period. During the 6 months, this increase was driven by higher value, larger aircraft with the [indiscernible] increasing ahead of both PAX and aircraft movements in the period. This increase in higher-value aircraft movements, combined with the lift in PAX movements and higher aeronautical charges associated with the significant investment in aeronautical infrastructure has resulted in total aeronautical revenue up 7% in the period to a combined almost $240 million. The increase in passenger activity was a key driver to the improved performance across most of our commercial lines of business with improved performance in car parking and the airport hotels, whilst also supporting our retail business in what has been a more challenging market for travel retail. Starting first with retail. Income declined 2% in the period to $92.3 million as the combined effects of lower concession rates to support customer value, promotional activity and a change in customer buying patterns to a larger proportion of lower-margin categories such as technology, resulted in higher sales and average transaction values, but resulted in a lower income per passenger in the period. On a category basis, duty-free traded well with sales up on the prior period. And as indicated at the full year results, the new contract has evolved with industry trends to support more flexibility to drive greater basket size and with it, customer value. In addition, food and beverage, destination, news and books categories also traded well in the half, reflecting the attractiveness of the retail proposition. However, also reflecting the difficult New Zealand retail environment, luxury and foreign exchange continued to underperform in the period with the latter remaining challenged as the industry continued its migration to new technologies. In car parking, income rose 14% on the prior period as the combined effects of a full period contribution from the transport hub, migration towards products closer to the terminal and pleasingly, an increase in over 20% in the duration of stays across all of the parking categories all contributed to a lift in revenue. You will recall previously, Carrie and I have spoken to the airport seeing a migration of parking to more remote, cost-effective options as the effects of the economic cycle were seen in our transport business. We are now seeing a reversal of this trend with migration from these more remote parks to those more proximate products. The reversal of this trend and the lift in demand has enabled Auckland Airport to also reduce promotional activity that occurred in the months following the opening of the transport hub. Property and other rental income rose by $8 million or 9% in the period, driven by new assets commissioned of close to $5 million and just over $2.5 million from the growth in the existing portfolio. And finally, Auckland Airport booked $3 million in the period of income associated with the insurance proceeds from the January '23 flooding event and lower interest income as the business cash reserves have been gradually utilized to fund infrastructure investment. In summary, the investment in commercial products in recent years has delivered an overall 5% lift in our commercial revenue in the half complementing the 7% growth in aeronautical, highlighting the continued strength and balance of our diversified revenue base. Turning to Page 25. Despite the increase in both aviation activity and also commercial and construction activity in the period, we are very pleased to report operating costs were down on the prior period as the continued focus by management on managing costs has resulted in operating expenses declining 1% in the 6 months to just over $148 million. In particular, our match-fit program of focusing on cost management whilst carefully investing in activities that improve the operation of the airport, reduce risk or improve the customer journey is working with over $20 million in costs saved and in some cases, redeployed to higher priority areas. Key to this has been improvements in procurement, a full 6-month benefits of organizational changes made in the prior period and focus on optimizing asset management throughout the life cycle that has enabled the business to reduce costs while still supporting ongoing investment in the customer experience and importantly, investment in new digital capability. As outlined on the page, marketing and promotional costs declined in the half, reflecting no repeat of the activities to support the launch of the new commercial activities in the prior period. And rates and insurance expenses have increased by $2.5 million or 12% in the period, reflecting a growth in the value of the asset base, a portion of which can be recovered from tenants and is reflected in our rates recoveries or other income. Turning to nonoperating costs outlined on the page. Depreciation costs rose substantially in the half, up over $19 million or 20%, reflecting the combined effects of the full period effect of assets commissioned in the second half of the prior financial year, which drove close to $14 million of this increase and commissioning, as Carrie mentioned, over $743 million of assets in the current half. In addition, for the first half of the financial year, we also included $2 million of accelerated depreciation for assets whose useful lives were shortened due to the decommissioning required as a result of the aeronautical investment program. Finally, gross interest expense declined in the period to $68.4 million, a decline of $6.2 million or 8% on the prior period, reflecting the full period benefit of cash from the equity raise undertaken in late 2024 and lower interest rates in the half, albeit the effect of the latter, moderated by our relatively high fixed debt component. Reflecting the significant number of assets commissioned in the half, capitalized interest dropped $3.7 million or 12% to $27 million as compared to just over $30 million in the prior period. As a result, the net interest expense that you see on the page for the 6 months dropped to $41.4 million or 6% on the prior period. Now turning to Page 26, where we outline a bridge in EBITDAF between the prior half and the first half of FY '26. Over the last couple of years, our EBITDAF has been impacted by one-off events that are not reflective of trading in the underlying business. In particular, the financial impact of the January '23 flood event and additional interest income earned from the 2024 equity raise have colored our EBITDAF. When you strip these out, you can see from the slide the improvement in trading within the core business and with it, a lift in normalized income of 6%, supported by the reduction in costs I talked about, resulting in an 8% lift in EBITDAF. Now turning to Page 27, where you can see our aeronautical investment program is gaining real momentum. CapEx in the period spanning both aeronautical and commercial investment totaled $430 million, with spend on terminal integration of over $219 million in the half, up 21% on 1H '25 or over 8% on the last 6 months of FY '25. For those of you who have been out to the airport recently, you'll see the scale of activity continues to increase with more workers and trades on site across the head house and connecting peer with work on the airfield recently underway. CapEx on the airfield works, as you'll see on the slide, has dropped in the period following the commissioning of the Northern Airfield in the stands and the team now is pivoting to more renewal work and upgrade of activities out on the airfield. With 229 projects on the go, 200 of which are in the construction phase of CapEx activity, we're expecting to see a step-up in activity in the second half due to several milestone payments relating to plant for the new systems as well as a full month -- sorry, full 6 months of activity on the airfield around the new domestic jet terminal after the project team took possession of the site in November. Reflecting the step-up in activity, we were pleased to see CapEx in January come in at $86 million despite it being a short month. Finally, closing WIP at December totaled $1.1 billion, down on the $1.4 billion you'll recall at 30 June 2025 as the 6-month period saw the significant commissioning of not only aeronautical but other assets across the period that Carrie touched on earlier. Now finally, before I hand back to Carrie, on Page 28, we outline our credit metrics. Despite the ongoing significant level of capital expenditure in the period, Auckland Airport continues to maintain a strong liquidity position and robust credit metrics. Total drawn debt at 31 December amounts to circa $2.6 billion with undrawn bank facilities of just over $1 billion. And this is in conjunction with or in addition to cash reserves, I should say, of $361 million. At 31 December, Auckland Airport's key credit metrics remain strong with its FFO to interest cover and FFO to net debt on a spot basis remaining well above their respective tests. With almost 87% of our borrowings fixed and a measured debt maturity profile, it gives us confidence and good visibility of the funding costs over the medium term. As Carrie mentioned, Auckland Airport has declared an interim dividend of $0.065 per share in the period, up from the $0.0625 in 1H '25, and we'll retain a dividend reinvestment plan for the interim dividend, offering those shareholders who elect to participate at a 2.5% discount. In the period, we were pleased to see ongoing strong shareholder support for the DRP with a participation rate in excess of 40% for the second straight period. In conclusion, the 1H '26 result represents a solid start to the year with the continued recovery in travel, improved performance across our commercial lines of business and continued success from the focus on cost control translating into strong underlying financial result. With that, I'll now hand back to Carrie, who will take you through the outlook for the remainder of the financial year. Carrie Hurihanganui: Excellent -- thank you, Stewart. And as we do look ahead to the remainder of the financial year, we can see demand is strong, and we can also see that challenges remain with the global issues impacting the supply of jets. However, we are optimistic based on the recent trading momentum, the continued growth in our aeronautical and commercial activity. The pipeline of additional new air connectivity that we have and the continued substantial progress of our aeronautical construction program. And as I mentioned earlier, we do acknowledge that there is complexity and challenges that come with the program at scale, but we have planned and anticipated those in our look ahead. So reflecting this and our growing confidence in the passenger forecast for F '26, Auckland Airport is narrowing its guidance to underlying profit after tax to between $295 million and $320 million with domestic and international passenger numbers of circa 8.6 million and circa 10.6 million, respectively. Capital expenditure guidance, we are narrowing that to between $1 billion and $1.2 billion in the year. And as always, the guidance is subject to any material adverse events and other criteria as highlighted on the slide. So at this stage, let's move to questions. Operator: [Operator Instructions]. First question comes from Andy Bowley from Forsyth Barr. Andy Bowley: A couple of questions from me. The first is on retail. So it was good to see the PSR going up, albeit average concession yields coming off modestly during the period. And the question is really around those concession yields. You both talked about sales mix being an issue that we've got to think about. But I'm kind of curious around the like-for-like concession yields that you've achieved in the new duty-free contract versus what you'd have had previously? And any discernible trends that you're seeing elsewhere in retail categories? I guess being blunt, are we seeing structural pressures on retail concession yields. Carrie Hurihanganui: Andy, I'll kick off, and then I'm sure Stewart will love to jump into that. I mean in terms of the like-for-like, the terms of the contracts are clearly commercially confidential. So we won't talk specifically on those. But I think there's an element we had over the last couple of years, even when that RFP was out. I know we talked several times about the fact that we were seeing trending changes. We were seeing elements around trends in both regional and global travel retail evolving. You were seeing it moving away from liquor in some instances towards fragrance, beauty and technology, et cetera. And that very much -- that trend continues. And so that's certainly in the sales mix and what you see there. But Stewart, do you want to talk more on the yield question in particular that Andy has asked? Stewart Reynolds: Yes. So Andy, in terms of your question, so in short, yes, we are seeing pressure on yields and -- but this is not unique to us. You see that across the region and more broadly and some of the well-publicized departure of retailers from New Zealand is a good example of that. So I think that's how I would just answer your question. Andy Bowley: And I guess following on from that, your desire strategically is to try and push that PSR further than what we've achieved in recent times, I mean, kind of the last 10 years or so where PSR has been relatively lackluster, but PSR to try and combat the concession yield issue? Stewart Reynolds: Yes, Andy, the way I would summarize it, and look, I'm not a retailer, but I'd say we like to push activity. We don't want the airside retail to be a shop window that people walk past. So we're keen that consumers step into the store and engage. And so to do that, we are taking a more active posture that we've talked about in terms of retailing, and that involves everything from promotional activity to bundling goods, et cetera. So trying to ensure that retail remains relevant to the consumer as they move through the airport. Andy Bowley: Great. And then second question on OpEx. The reduction in OpEx was pleasing. Now could you talk about the direction of travel here, please? And by that, firstly, the level of OpEx you anticipate through the second half? And then secondly, also the shape over the next few years as you commission additional assets leading up to the ITB in 2029? Stewart Reynolds: Yes. Look, I'll touch on that, Andy, and then I'll hand to Carrie to what talks about in terms of the challenges of trying to do that going forward because there's a number of sort of bigger considerations. So in short, we've managed to effectively optimize a lot of the spend in the business by ensuring we focused on what really mattered. And that meant that where we had greater discretion on the spend, and I highlighted some of the spend on promotional activity and consultants, et cetera, we took a very careful lens on that to ensure it made the boat go faster and redeployed that spend where it was required to higher priority areas. So that, in conjunction with some of the work we're doing on procurement, around asset life cycle management has resulted in a lot of those savings that we've talked about. So as we look into the second half of the year, then what we expect is that not only would we bank those savings, but we'll probably see a little bit of a lift in OpEx into the second half. But I would anticipate that would be in the low single digits, and that's just naturally reflecting the greater activity that's going on in the airport. And what I mean by that is the management of the disruption that Carrie alluded to around things like the check-in, et cetera, and we're trying to ensure that we manage the customer journey through that process. So it will be a little bit lumpy over the next 12 to 18 months. But notwithstanding that, as you then move forward into a longer period, we're trying to then normalize down and drive down that cost to serve, so to speak. Andy Bowley: You mean on a unit basis or in absolute terms? Stewart Reynolds: On a unit basis, first and foremost. Andy Bowley: Yes. Okay. And just to clarify, single-digit increase through the second half, you mean on top of the first half in dollars or percent or what's? Stewart Reynolds: Yes, in terms of dollars. Andy Bowley: On top of the first half. So a higher level of OpEx through the second half. Operator: Our next question comes from Wade Gardiner from Craigs Investment Partners. Wade Gardiner: A few questions from me. Can you -- given you've just given some guidance around the OpEx number, can you also sort of give a bit of guidance around what we should see around depreciation and interest given the assets being commissioned and the capitalized interest running off? Stewart Reynolds: Yes, I'll take that, Wade. So yes, it's -- I think at the full year results, I guided to the full year would be sort of around $300 million, and that would be essentially net of interest income for both depreciation and interest. And so when we're looking at the result for the first half, I'm still broadly comfortable with that number, but it might be somewhere between 2% and 5% sort of slightly higher. And that's really reflecting the slight change in the depreciation number that's flowed through the first half. Wade Gardiner: Okay. Just to clarify sort of following on from what Andy was saying on the duty-free concession, is there anything structural in that contract in regards to the period we're in now where there's fit-out construction. In other words, once they have done the fit-out, will we see any sort of structural step-up in that arrangement? Stewart Reynolds: Yes, Wade, I can't comment on the contract specifically. But I think if you go back previously, I think where your question is coming from is when we completed the expansion of the Phase 3 as we called it or the airside dwell and security processing area, there was a step-up as new space was deployed. And so we've tended to move away from those type of mechanisms. Wade Gardiner: Okay. While we're on retail, I mean, interesting to hear you talk about driving the PSR higher. How can you, as a management team actually do that versus just reliance on the retailers doing their thing? Stewart Reynolds: Yes. So you're right. It comes from, in short, a greater partnership with the retailer. And that was one of the reasons why we selected Lagardere. And it's -- so in working together and alignment around effectively ensuring that the retail environment is one where customers want to stop dwell and with that potentially spend ensures a greater outcome for all concerned. And so we work with them around promotional activity. We work with them around bundling as an example. And so you recall in the previous results, we talked about some promotional activity that we had in the liquor category as an example. And we also work with them around what [ Howard ] described as complementing some of the experiential elements that go on within the terminal and ensuring that travelers are aware of these sort of things before they turn up. So a big part of that is ensuring people get to airside relaxed and on time and are not rushing through that space. Carrie Hurihanganui: And if I could add to that, Wade, I think Stewart has covered it well. But one of the things that we also talked about back, you might recall when we were going from the 2 operators to the 1 and the way that we plan that, part of this refurbishment also moves away from, in effect, what -- even though we have one operator, it's still a duplicated or dual store layout. And so part of that also is we work together with them, and that was part of the agreement of how we move to a single integrated store, how we enhance layout, the brand visibility of the customer, all the things that Stewart was just referring to, but that's one of these key elements that goes alongside that as well. Wade Gardiner: Okay. And just finally for me, just -- I mean, $34 million on property in the first half. Can you give us an idea of what you're expecting in the second half? I mean I know you did say it will be down. And also what the sort of the medium-term outlook looks like for property CapEx? Stewart Reynolds: Wade, apologies, I can't quote that number for the second half, like Carrie and I have talked to what the long run rates of between $100 million and $150 million on commercial development, but that's very much on average over the longer term. And so you'll see from that number that we're expecting things to be a little bit more reflective of the subdued local market. We've obviously got some exciting developments underway at the moment, but I couldn't give you a CapEx number, I'm sorry. Operator: Next, we have Grant Lowe from Jarden. Grant Lowe: Can you hear me okay? Carrie Hurihanganui: We can. Grant Lowe: Perfect. Congratulations on a good result. It seems we all have very similar questions around retail and OpEx and the like. Just focusing on changing to the car parking side of things, quite a strong uplift and cycling some discounting and the like in the previous period. Do you see this as a new base for the car parking going forward and sort of inflationary and passenger growth from here? Carrie Hurihanganui: Yes, there isn't anything, Grant, that will make us think otherwise, particularly when it -- because we've had the full 6 months, obviously, versus the prior comparable period for the transport hub. We've got the change in mix in premium products pipeline. So some of those foundational elements are going to carry forward. I think probably the piece that interests us and we want to continue to build is probably the increased duration of stay. That's one that's getting under the skin of that and kind of understanding how do we continue to encourage that because that's been a key element for us. But the foundational elements have us seeing that as a carry forward. Grant Lowe: Yes. Okay. And then just looking at the route development and Thai Airways coming back at the end of the year, et cetera. I think they were sort of the key -- sort of the last of the missing pieces from pre-COVID times. Can you give us sort of any indication as to what sort of level of increase in capacity that return now gives on the international side? Carrie Hurihanganui: Well, the -- until a little bit in terms of its -- they have announced coming back daily. So -- but we -- they haven't landed on a specific date yet. So we're not in a position is until we know the start date for F '20 second half this year, but it will be around about 200,000 seats, which gives you an idea of the quantum. And then ultimately, they will confirm in the next while when exactly they will be starting in the second half of this year, and that will give them a better play-through of the impact to the forward impact for F '27 and beyond. Grant Lowe: That's great. And how does that compare to pre-COVID for [indiscernible] at least? Carrie Hurihanganui: At the time they were doing daily. So we were delighted that they didn't -- some airlines return, say, 3 or 4 and then build back into it. They've committed to coming back exactly in line with what they had exited during COVID. So we're really pleased with that. Grant Lowe: Okay. That's great. And then just going back to the retail side of things. So like I haven't been out to the international side of things for the last few months. But in terms of when exactly did that start? That was fairly late in the period, wasn't it? Stewart Reynolds: Yes. It started in -- some of the work was effectively in the fourth quarter of the calendar year, but there was work happening behind the scenes. So in the -- I think the store areas that the customers obviously don't walk through. So we've been progressively doing it behind the scenes as well. Grant Lowe: Yes. I guess where I'm going with that question is like there would have been fairly minimal disruption impact. And the second part of that question really is, are we expecting to see any sort of disruption impacts in the current half? Carrie Hurihanganui: Listen, on that, we would... Grant Lowe: In terms of spend and the like. Carrie Hurihanganui: We're doing everything to minimize that, which is part of the reason it's probably a little bit of a slower burn and throughout 2026 because we do want to minimize that impact, Grant. But will there be some? I think it would be very hard for us to say there would be 0, but we're certainly going to minimize that as much as we possibly can. Grant Lowe: Okay. So it hasn't had a big impact at this stage. Stewart Reynolds: Hard to measure, Grant, but I think your initial assumption, the initial works were behind the shelves, so to speak, and we've now stepped into that. But we're not seeing a measurable difference at this point. But like Carrie mentioned, it is a close focus of the team. Operator: Next, we have Rob Koh from Morgan Stanley. Robert Koh: Happy Lunar New Year. Just a question on Chinese passengers. I think you've called out that with the visa improvement, you started to see some better seat capacity. Should we be thinking that, that also flows through to the PSR results that you've seen? And then also, if you could maybe just give us any color on the timing of Chinese New Year impact this year so far? Carrie Hurihanganui: Yes, absolutely. As far as I take the first question in terms of do we expect that will flow through. Ultimately, we'd like to think it will. And I look at things that the change to the Australian visa holders that make them eligible travelers people who come to New Zealand. We've seen a 44% increase between Australia and Auckland in the month of November and December, sorry, and that was nearly 23,000 Chinese travelers using that route. So the indicators are all positive, but early days, right? We had kind of 1.5 months, but we'd like to think that, that will play through in that space. In terms of the capacity that's come through as part of Lunar New Year, we've had a significant uptick across multiple carriers adding in capacity through to, I think it's around, I want to say, the 2nd of March as far as their schedules. And again, because that's live now, we don't have any indication of how that's performing thus far. But we certainly, at the end of February, we'll be looking at our operating statistics as to what we kind of saw come through on that, but there was a significant uplift in that capacity over that period. Stewart Reynolds: And then, Rob, to your question on PSR, I think all things considered equal, yes, it should, but it's still too early to understand what we're seeing in that space. Robert Koh: Yes. Okay. All right. My next question, I just want to make sure I've got my kind of understanding of how to calibrate your revised guidance because you haven't changed your pax numbers that underlying that guidance, but it does seem you're a little bit more positive on seat capacity. So are you still thinking of those pax numbers as your central scenario? Stewart Reynolds: Yes, Rob, we are. When we put that guidance out, gosh, many moons ago now, there was essentially a bit of anticipation of capacity being deployed into that. And so that capacity, we have more confidence of it being deployed now, some of it, obviously, you see both domestically, but also internationally. So it's giving us greater confidence that, that target will be achieved. Operator: Next question comes from Marcus Curley from UBS. Marcus Curley: I just wondered if we could start with the CapEx, Carrie. It looks like -- well, it has been, let's call it, rounded down in terms of the year-end CapEx. My question is, should we -- or is there any associated further delays to endpoints on the major projects that we should read into that? Or is all of the major projects still on time to what you talked about 6 months ago? Carrie Hurihanganui: Yes. Thanks, Marcus, there's a few things, I think, in your question of trying to get an understand of that play forward, and I'm hearing beyond the next 6 months potentially as part of your question. I think if we do take this next half, the second half, a couple of things. Obviously, some of the revised guidance is that the higher levels of spend contemplated for commercial property that informed the top of that original guidance have not materialized. So that's one element that we certainly plays into the second half. And then as far as activity that we are expecting to pick up in the aeronautical space in the second half, we've got everything from kind of milestone payments relating to plant for the new baggage handling system. They fall in the second half as does a full 6 months of activity on the airfield around the new domestic jet terminal because they only took possession of that site in November. So only had kind of a month with Christmas close down. So we'll see the full 6 months play through that. And then we've got a number of other key projects moving from design to enabling to significant construction activity such as check-in expansion, payment renewals, et cetera. So those are things that give us the confidence for the next 6 months or so. Then I guess if your question is longer beyond that and some of the bigger projects that I'm hearing, consistent with our previous messaging, we do expect there have been some changes in that original forecast we had around PSE4 at the time of setting prices and PSE4, for example, assume that the Western stands on the new peer would be operational in the second half of FY '27, along with new regional stands. Now both of those are making great progress, but they are tracking slightly behind that period to land in that kind of first half of 2027. So -- but in terms of fundamentals of the programs, hitting the milestones and moving ahead, we have absolute confidence in those. Marcus Curley: And completion of the domestic terminal? Carrie Hurihanganui: Yes, that's on track for 2029. Marcus Curley: Yes. And then just secondly, you've obviously flagged again the downward trend in revenue from FX. I just wondered if you could provide any perspective in terms of the level of revenue exposure in that category? Or how should we be thinking about that over the next, call it, 3 to 5 years? Stewart Reynolds: Marcus, so I'd describe it as -- yes, I think it's just reaching that natural level now where there will always be some people who look to get foreign currency and take it to destinations around the Pacific or even into Asia. But over time, that number will reach a very de minimis number. So we described, I think, at the full year results is sort of that mid- to low single digits was the sort of revenue exposure there, and I can just see that continuing to trend in that direction. Operator: Our next question comes from Owen Birrell from RBC. Owen from RBC. Owen Birrell: Just wanted a question around, I guess, tourism outreach to international markets. Can you give us a sense on, I guess, what sort of activity is occurring at the moment broadly, I guess, at the government level to encourage tourism activity in New Zealand? Carrie Hurihanganui: Yes. I mean there's a number of facets moving across it, I guess, in terms of you've got what I would call the expected space, which is TNZ, and they've obviously been provided additional funding last year and into the year to promote that. There's -- that then carries forward. TNZ works in relevant markets like Australia and like North America and otherwise to build that out. Alongside that, we engage and often work if we think about kind of last year, we did work with RotoruaNZ and Tataki Auckland Unlimited to appeal to the Australian market, for example, what the North Island has to offer. We've also sponsored kind of 15 regional tourism organizations and came together with ourselves and Tataki Auckland Unlimited to create Kiwi North and again, how do we promote North Island to external markets and encourage them to. So there's a number of facets underway. And then you've got things like I mentioned earlier, that $70 million investment by government in terms of large events and bringing events to New Zealand, and you're seeing things like the state of origin and some of those other things starting to come through as well as the changes to Eden Park settings being proposed. And then obviously, with the convention center opening, they've got a really nice forward book in terms of large events coming. So it's a combination of pure leisure travel events and those things together that continues to gain momentum. Owen Birrell: I mean historically, we've seen some big pushes into Europe, India, a little bit of China. Is any of that sort of activity coming back at this point? Carrie Hurihanganui: Yes. Well, certainly, again, if you look at an organization like TNZ or [ Tosm ] New Zealand, sorry, they have offices and investment in all of the markets, so China, Europe, North America, all of those. So those are all part of that broader pace. And some of it also, I know in my discussions with TNZ things like Southeast Asia, we knew was, in particular, a bit of a missing piece of the puzzle. I said, hence, why we're so delighted with Thai Airways returning, but there's been a bit more of a targeted focus in Southeast Asia because we knew that was an area for New Zealand that needed to recover both the connections because you can stimulate travel, but you also need the connections to enable that to have kind of a multiplier effect, so to speak. So as we start to get recovery across some of those markets that have been missing like Southeast Asia, my anticipation would be that they'll look at those broader markets as well again. Operator: Our last question comes from Amit Kanwatia from Jefferies. Amit Kanwatia: Just a couple of questions. I mean you've given kind of guidance for operating expense, finance cost and D&A. I'm just wondering, I mean, if I look at the tax expense into first half '26, I think that tax rate was a bit lower as compared to the PCP fiscal '25. Maybe if you can give us a steer in terms of the tax rate that you expect for full year '26? Stewart Reynolds: Amit, what you should expect over time is we get trend back towards more the company tax rate. So I expect it will be closer to the 28% for the full year. There is obviously a number of moving parts within that, including the government's recent policy changes around the nondeductibility of depreciation on building structures. So there is a little bit of noise in that. But I think over the medium term, you should expect us to trend back to that overall rate. Amit Kanwatia: Okay. And then, I mean, if I think about the guidance range and you've increased the midpoint of the range, you've narrowed the range, $295 to $320. I mean you've kept the passenger expectations unchanged. Maybe if you can speak to kind of the swing factors to the -- from the midpoint towards the top of the guidance range? Stewart Reynolds: Yes. Certainly, Amit. So I think what I said at the full year was if we achieve those passenger forecasts and subject to any other unknowns that we could see ourselves getting into the top half of that guidance range. But the range really catered for the potential one-off costs that could come through in such a significant infrastructure investment program and managing the disruption with that and also some of the variability associated with as you commission assets and you disaggregate effectively what I would describe as the as built into specific assets, the variability in depreciation that comes. And the lack of, I think, one-offs that we saw in the first half has given us comfort around lifting the bottom of the range. And so I would come back to what I said at the sort of full year results that if we can achieve that passenger forecast as well as reduce the likelihood of any unknowns that appear, then we could be in the top half of that guidance range. Amit Kanwatia: Sure. That's very useful. And just back on -- I mean, if I still think back around the passenger guidance, I mean, international passenger growth, 3% for the full year. I mean the implied growth rate into second half is not too dissimilar to what we saw in the first half, slightly more. But if I think about the capacity outlook, I think that's improved over the last few months. Maybe can you talk to some of the thinking behind the expectation around the second half for passenger growth, particularly for international? Stewart Reynolds: Yes. So Amit, why don't I start with domestic and then move into international. And then I'll hand to Carrie to give her thoughts as well. So -- within the domestic system, we're obviously very cautious around the regional system. And as you've seen in our presentation and some of the commentary in the monthly traffic updates, we've been a little surprised to the downside in terms of the domestic capacity and travel numbers through there. But notwithstanding that, the addition of additional capacity on the jet side or trunk activity has been pleasing to see. And so we're confident overall of that domestic number, but it is essentially a 2-sided coin in many respects is where it's a watch on regional and positive on jet. On international, what you're seeing there is complementing some of that additional capacity that Carrie talked about in new services, you're getting additional frequency on existing routes as well. And so that's particularly the services that have been announced to date is what giving us confidence around that growth rate continuing into the second half as we get a full period effect of some of those services that turned up in the fourth quarter of the calendar year last year. Carrie Hurihanganui: And if I could add to that, it's this balance also of kind of the first half is what was actually phone, there's slots filed. So as we look forward, it's what we anticipate airlines to fly, but sometimes everything that's -- all the slots that are filed don't necessarily get operated. So there's a little bit of that. And then we're really positive. The optimism I talked about earlier was around things like I called out the Samoa and Gold Coast through Qantas Group. Those actually commenced in -- I think it's June. So actually, the pickup in this financial year is going to be minimal, but actually then carries forward. So we have a kind of a -- to Stewart's point, there's a mixture of things that are influenced, we have -- we're positive and optimistic about that, but there are those elements that we are just aware of in terms of those pulling through. Operator: Thank you. That concludes our Q&A. I will now pass back to Carrie. Carrie Hurihanganui: Well, thank you, everyone, for your time today. And as I said just before, we are optimistic is the word that I will use on the remainder of the year and beyond. We continue to be laser-focused on the successful delivery of the key enablers for growth across the business. And of course, that also includes our infrastructure investment program. It would be remiss of me not to take the opportunity to pass on my thanks to all the Auckland Airporters and our partners in terms of the positive performance in the first half has been a team effort, as they say. And so I want to pass an acknowledgment of the work that's gone into that. But we certainly look forward, Stewart and I to connecting with many of you over the coming weeks of investor meetings, both here in New Zealand and also Australia. So with that, have a fabulous afternoon. Thank you.

44天前Insight Analytics约5分钟阅读

EOHDF 2026 Q2 财报电话会议

Operator: Thank you for standing by, and welcome to the Emeco Holdings Limited Half Year Results. [Operator Instructions] I would now like to hand the conference over to Mr. Ian Testrow, CEO and Managing Director. Please go ahead. Ian Testrow: Good morning, everyone, and welcome to Emeco's Financial Year 2026 Half Year Results Presentation. Thank you all for joining us today. I'm delighted to have our Chief Financial Officer, Theresa Mlikota, here with me as well as Adam Buckler, our new Deputy CFO. Welcome, Adam. Today's session will follow our usual format. We'll take you through the presentation lodged on the ASX this morning, after which we'll be happy to take any questions. Before we begin, I'd like to direct your attention to disclaimer on Slide 2, which covers important information regarding forward-looking statements. I want to start with Slide 5 and some of the key takeaway messages before we get into the more detailed presentation. Emeco continues to deliver strong operational and financial performance. We've worked hard to strengthen the business and now delivered 6 consecutive halves of period-on-period growth in earnings and cash flow. Our balance sheet is in the best shape it's been in 10 years since I've been CEO, and we've recently completed a refinancing of our debt facilities on better terms and conditions, which provides us with great flexibility to consider growth options going forward. I just want to call out Theresa and her team and the finance and legal teams for absolutely cracking finance, a fantastic work. Well done, team. Our strategy has evolved to focus on disciplined organic and inorganic growth while continuing to target 20% returns for shareholders. We're focused on growing our portfolio of fully maintained rental projects, winning stand-alone maintenance projects and also for the pursuit of adjacent maintenance services businesses. We're also actively monitoring our rental competitors for consolidation opportunities. Additional to this, we will further develop our existing artificial intelligence and operational technology capabilities to expand our competitive advantage. We believe our capabilities in the areas of asset management, condition monitoring and reliability engineering are unique and set us apart from our competition. Moving to Slide 6 and the first half financial highlights. Emeco has an excellent start to FY '26 with a strong operational and financial performance in the first half. Our simplified business model and focus on disciplined capital and cost management has continued to deliver positive results. We have again seen good growth in all metrics, including revenue, operating earnings, free cash flow and return on capital. Group revenue was up 9% to $421 million, operating EBITDA increasing 7% to $155 million. Operating EBIT was up 13% to $77 million on the prior comparative period. Margins were driven by revenue mix with high levels of maintenance work in first half '26 compared to first half '25. While maintenance work is lower margin, it's also low capital and has been a key driver of the continued improvement in return on capital. The positive financial performance flowed through to the bottom line with operating net profit after tax increasing by 21% to $46 million. Operating free cash flow was up 37% to $67 million, with excellent cash conversion of 110% through improved working capital in the period. Return on capital was up 100 basis points on FY '25 and 230 basis points on the first half of '25 and has now reached 18%, which is good progress on our journey to our target of 20%. We've made strong gains in improving our balance sheet and improving returns. Preserving these gains and our capital will be important as we grow the business going forward. Our focus continues to be achieving a return on capital target of 20%. These gains are illustrated in Slide 7, which summarizes Emeco's half-on-half performance history. The slide shows steady and consistent half-on-half improvement over the past 2 to 3 years. The result has been a strong profit uplift in operating earnings from the prior comparative period and a solid repeat delivery of really strong performance we generated in the second half of FY '25. This is in line with the expectations we set out at our AGM. The real highlight here is the uplift in free cash flow generation, which has increased by nearly 70% during the 2-year period. In dollar terms, the business has generated around $230 million in free cash flow since first half '24. Much of this growth is being delivered organically without investment in growth capital, in particular, the growth in earnings from maintenance services, which will remain a key focus going forward. I'll cover this in more detail later. The strong cash generation has driven a significant improvement in Emeco's balance sheet. Net leverage has improved from 1.1x in first half '24 to 0.5x in first half '26. This is an outstanding result and puts the company in a strong position for future growth opportunities, which I'll cover more in the strategy and outlook discussion. Finally, the slide also clearly shows the strong progress we've made towards our return on capital target of 20%. The business generated a return on capital of 15% in the first half of '24, and we've grown this to 18% in the first half of '26. This has been a 230 basis points improvement, and I'm confident the Emeco team can continue to drive this towards our 20% target. Slide 9 shows the group's safety performance over the last 5 years. The safety of our people is paramount, and safety remains a key priority for Emeco and all of our employees. We remain committed to providing a healthy and safe workplace. The total recordable injury frequency rate reduced from 3.4 at 30th of June 2025 to 2.5 at 31st of December 2025. The lost time injury frequency rate remained at 0. We'll continue to focus on reducing TRIFR with ongoing investment in training, which is a key focus. Slide 10 outlines the key highlights for our Rental business in the first half of '26. Emeco is Australia's largest provider of surface and underground rental equipment with a fleet size of 840 primary machines and a workforce of 480 people and net assets approaching $900 million. Emeco's Rental business delivered a strong operational and financial performance in the first half of '26, with Rental revenue increasing 14% to $342 million, driven primarily by the delivery of increased maintenance services across key contracts. Operating EBITDA increased 6% in the first half of '26 to $168 million, while operating EBIT grew to $94 million from $86 million, up 9% for the half. Operational highlights include the successful ramp-up of a new large fully maintained operation in Queensland, where Emeco provides mining fleet and full maintenance services to both Emeco and the customers' fleets. We also continue to roll out infill digital tools to enhance our service offering, improving quality and productivity. Surface fleet utilization remained healthy at 85%, while underground utilization increased to 69% and is currently running at 75%. We have good operating leverage within the existing capacity of our current fleet, which limits the needs of growth CapEx to grow our earnings. The outlook for the Rental business remains positive. Our competitive positioning via our fully maintained rental model positions the business well to capitalize on new opportunities. While wet weather remains challenging in Queensland impacting utilization in early second half '26, the medium-term production outlook remains robust as customers recover operations. Slide 11 outlines the key highlights for Force in the first half of '26. Force is strategically important to the group with our workshops, field maintenance, asset management and condition monitoring service capabilities, the key driver of Emeco's competitive advantage. These deliver cost-effective maintenance and rebuild capabilities to both our customers and to our own Rental business. Force operates across 7 workshops as well as fully mobile Australia-wide field maintenance capability with approximately 350 employees. Force workshops completed 84 machine rebuilds in the first half of '26 and also provided support services to XCMG for their battery-powered fleet in preparation for delivery to Fortescue. Force delivered total gross revenue of $141 million in the half. External revenue was down year-on-year as workshop capacity was redeployed to support our internal rental fleet. Trade labor utilization remained high. The business maintained relatively stable gross operating EBITDA of $18.3 million and a gross operating EBIT of $15 million. Cost efficiencies realized during the half supported stable margins. The focus for Force will be on business development and increasing external work in both the Eastern and Western regions. The integration of underground capability has opened new maintenance services opportunities, while field-based services remain in strong demand. I'd like now to hand over to Theresa to run through the financials. Theresa Mlikota: Thanks, Ian, and good morning, everyone. As with our prior presentations, we refer to operating results in our presentation today, which are non-IFRS. You'll find a reconciliation to our statutory results in the appendices. Slide 13 summarizes the group profit and loss. Without rehashing too much of what Ian has covered already, the high-level message from the accounts is that the business continued to deliver period-on-period top line and bottom line growth with strong returns on capital. The business maintained a momentum created in FY '25, mirroring the strong performance generated in the second half of '25 into the first half of '26. Importantly, revenue growth was driven by growth in low capital maintenance services, which continues to drive stronger returns for our business. Whilst margins from services are lower, the return on capital is much higher. We expect to continue to grow this low capital side of our earnings to reach our 20% ROC target. Another point to make about our earnings for the half, our hours of rental fleet utilization were very similar to our last half, but our fleet mix was made up of smaller fleet. This reflected an average price per hour as well as depreciation cost per hour, which were both lower this half. Statutory profit after tax of $38.7 million increased 15% compared to the prior corresponding period, while our operating profit after tax of $46.5 million increased 21%. Lower finance costs contributed to this with lower drawn debt and lower base rates in the half. Whilst our intention is to grow the business, we will continue to maintain discipline around the investments we make, and we will continue to have a laser-like focus on our ROC target, which, as Ian already mentioned, has increased by a further 100 basis points to 18% in the last 6 months. Slide 14 shows the major cash movements half-on-half. The key number here is operating free cash flow, which was up a strong 37% on the prior corresponding period. This was driven by a strong EBITDA-to-cash conversion of 110%. Strong debtor collections in combination with timing benefits on creditor payments drove the stronger cash conversion, releasing $11.3 million in working capital. We expect the timing benefits on working capital to reverse by year-end. Finance payments of $13 million were largely consistent with the prior comparative period. Stay in business CapEx totaled $90.7 million in the half, representing a 17% increase from $77.6 million in the prior corresponding period. Proceeds from disposal of property, plant and equipment were $4 million, resulting in a net CapEx of $86.7 million. Second half CapEx will be lower and will align with the guidance we have provided to the market for the full year. Free cash flow was again applied primarily to debt reduction, including lease liabilities and other financing obligations, which reduced by $13.7 million. No shareholder distributions were made as the company focused on debt reduction ahead of the company's refinancing. The net result was an increase in cash of $45 million bringing total cash to $171 million at period end, up from $126 million since June. As with the prior year, no income tax is paid due to the group's carried forward tax loss position, which was $74 million at period end. Moving to the balance sheet and capital management on Slide 15. Emeco's balance sheet is in great shape and shows the delivery of our deleveraging strategy with net leverage now reduced to 0.5x EBITDA. This provides substantial financial flexibility to manage business growth or to make shareholder distributions in the future. Just highlighting some of the numbers on the balance sheet. The $52 million reduction in net debt since June was driven by strong earnings and cash conversion. The reduction in net working capital was driven by the reduction in debtors with strong cash collections for the half. Prepayments and accruals were both higher, recognizing the renewal of the company's insurance program. Contract assets were higher due to fleet mobilizations to surface and underground projects during the period. $12 million in noncore or end-of-life fixed assets were transferred into held for sale. Trade creditors were higher due largely to timing, and tax liabilities are higher due to the consumption of tax losses. Value created for shareholders and equity totaled $39 million with NTA per share increasing $0.08 per share to $1.44. CapEx outweighed depreciation during the half, mostly due to timing, with, as I just mentioned, $12 million of fixed assets being transferred into held for sale assets as part of the group's fleet optimization program. Turning to capital management. Importantly, the company's debt facilities were refinanced in November 2025 and were used to take out the company's maturing facilities in January '26. A 5-year $355 million syndicated bank debt facility was secured on better pricing and conditions than the preexisting debt facilities and will provide us with better flexibility around the use of excess capital. Emeco's credit ratings were reaffirmed during the half with Moody's maintaining Ba3 and Fitch at BB-. Ian will talk to this a little more in coming slides, but we are actively assessing low capital vertical opportunities to complement core business and will actively monitor competitors for consolidation opportunities. We expect to see opportunities emerge over the next 12 months, which will be assessed using strong capital discipline principles, including our key target of 20% ROC. On that note, the Board have elected to preserve capital at this time and to prioritize flexibility for growth. Consequently, no shareholder distributions have been recommended by the Board in relation to the half. Slide 16 shows the maturity profile and liquidity position in a bit more detail. The main things to highlight here are that we successfully completed the refinancing of our AMTN, which has extended the bulk of our debt maturity profile to be on the 5-year mark. As I mentioned on the previous slide, the new facility was applied towards refinancing the group's existing financial indebtedness, including the replacement of the existing RCF and the redemption of the $250 million AMTN, which occurred on the 19th of January 2026. The group's liquidity position has improved since FY '25, increasing by around $50 million to $271 million, taking account of the note redemption, which took place after period end. Slide 17 outlines our progress towards our ROC target. Our target of 20% has been key to driving improved efficiency and performance across all parts of our business. Over the last 2 years, we have consciously reduced our level of growth CapEx and focused on improving the cost performance of our business as well as organically growing earnings through the value-added services we provide to our rental customers. These low capital earnings have grown through the expansion of field services, on-site maintenance for our fleet as well as customer-owned fleet in combination with condition monitoring and reliability support. We delivered another 100 basis point improvement in ROC for the half, which now stands at 18%. This compares to 17% in FY '25, 16% in the first half of '25 and 15% in FY '24. Our drivers to achieve the 20% target lay in increasing our equipment utilization, optimizing the fleet and increasing our low capital maintenance services earnings. If you recall, in Slide 10 on Force, the segment delivered $15 million of EBIT in the half from $3 million in net assets. So you can see the opportunity from continuing to grow lower capital intensity earnings. Similarly, we have further potential to increase utilization with strong commodity prices in gold and copper. We see opportunities to grow here and our BD teams are focused on achieving this. ROC improvement has been a direct driver of cash generation. Emeco has delivered around $265 million of free cash flow since FY '24. As you can see on the right-hand side, when the company is delivering an 18% return on capital, the business is expected to deliver around $120 million in free cash, which is a good guide for this year. At 20%, this increases to around $140 million. This remains our key target. As always, I'm happy to talk more to the finances in the Q&A section. I'll now hand it back to Ian. Ian Testrow: Thanks, Theresa. I'll now move on to strategy. On Slide 19, you'll find the pillars that guide our strategy and its execution. Emeco's core strategic pillars guide consistent execution and long-term sustainable value creation for shareholders. I want to briefly recap these given their importance. We're Australia's lowest cost, highest quality, technology-driven mining equipment rental and maintenance service provider. We use our scale to invest in maintenance services, condition monitoring and asset management, technology and development of our skilled workforce to create a competitive market advantage. Secondly, we'll build on our diversified portfolio of businesses and services, balanced by service line, customer, project, commodity and region. This gives us flexibility to service a broad range of customers across a range of sectors utilizing our core strength while also exploring complementary or logical adjacencies. Finally, Pillar 3, exercise disciplined capital management. This pillar provides some of the guardrails to ensure disciplined capital allocation. Setting a ROC target of 20% in combination with a more conservative leverage target will provide more robust investment decision-making. It is worth noting the reset of our target leverage of 0.5 to 1x. This has been reset to support resilience through mining cycles but also providing the flexibility of dry powder to make opportunistic investments should they arise. Being prudent in the consideration of our capital investments will drive us closer to our 20% return on capital target and will assist to maintain strong free cash flow whilst protecting the balance sheet for all the cycles. These targets provide the flexibility to reinvest in the business, pursue inorganic growth or return capital to shareholders. Moving on to Slide 20 and our scale and competitive advantage. We've worked really hard over the years to create a competitive advantage for our scale. As you can see by the map, we have operations all around Australia. We're truly national. We have a very large rental fleet, 840 pieces of equipment. We have the ability to rebuild those equipment and rebuild mid-life equipment, which gives us a cost and quality advantage. And we're supported by the Force workshop, which has workshops all around Australia and a very talented workforce. On top of that, we have our asset management team, which is based in Brisbane. They provide reliability engineering, asset planning, condition monitoring and a bunch of analysts that really are key to our business. Moving on to strategic priorities on Slide 21. These are presented across 3 broad time horizons. Our near-term focus will be on strengthening and optimizing our core by growing our fully maintained rental projects, expanding low capital earnings and maintenance offering. This includes organically growing our earnings for the provision of maintenance services for customer-owned fleet. We'll actively monitor competitors for consolidation, and we'll scale our artificial intelligence and operational technology capability. These opportunities will likely be within or adjacent to the mining sector. Over the medium term, we will extend our capabilities for adjacent low capital opportunities. This includes assessing adjacent maintenance services and asset management acquisitions, commercializing our artificial intelligence-driven operational technologies into a repeatable operating model and partnerships to accelerate entry into adjacencies. Over the longer term, our strategic focus will be on portfolio resilience by divesting our earnings base by expanding existing capabilities into new industries or sectors, strategically scaling up digital services offerings, positioning the business for the energy transition. I want to emphasize this does not mean that we're going on a buying spree. Each investment decision will continue to be considered utilizing strong guardrails aligned with the disciplined capital management, including key financial hurdles, capability fit or strategic alignment and a driver for growth. Slide 22 shows the growth of our workshop and maintenance services and just how significant a part of this business this is. This generates 50% of gross revenues and about 35% of gross EBITDA of the business from a small capital base. Maintenance services have been an important contributor to Emeco's financial performance. Low capital and maintenance services earnings have doubled over the last 12 months. The scale of this contribution demonstrates a strategic shift towards a low capital, high-return service offerings. This expansion has been underpinned by significant growth across fully maintained projects, including projects where Emeco maintains both our and our customers' fleets. The maintenance service expansion directly strengthens Emeco's competitive positioning through the differentiated service capabilities that extend beyond traditional equipment rental. It has been a key factor in recent rental contract wins and renewals while achieving high returns. By leveraging Force's mid-life rebuild capability and on-site service expertise in combination with its asset management, condition monitoring and reliability technology, the company has created a defensible competitive advantage that supports sustained earnings growth and improved capital efficiency across the business cycle. It's important that we show how management have organically grown this low capital side of the business significantly. We believe this is a strong avenue to deliver future earnings growth. We have a good delivery track record, and we'll seek to expand and grow this part of our business. I want to use Slide 23 to judge just how serious we are about technology as a competitive advantage. Our asset management, reliability and field service teams are applying artificial intelligence and machine learning to drive better equipment reliability, lower cost and longer asset life for our customers. We actively apply AI and machine learning to the data that we source from our oil samples analysis and machine telemetry to provide better predictive maintenance across our fleet and an increasing number of cases, our customers' fleet, with active condition monitoring through our in-house telemetry across more than 200 of our machines. We're developing first-generation in-house agentic reliability solutions using patent analysis and root-cause investigations to drive improved decision-making and response times. We're rolling out the digitization of all paper-based field and workshops activities to improve maintenance decision-making, quality and cost control. We're investigating the application of artificial intelligence and machine learning across asset knowledge, field quality, service delivery and commercial processes. We have performed early proof-of-concept work to assess its commerciality feasibility and business value. Slide 24 outlines a brief update on ESG. We continue striving to be a sustainable business that delivers creative solutions for our customers, a family feel for our people, support of our local communities and value for our investors. Emeco is committed to integrating environmental, social and governance principles into our business strategy and operations. We published a climate change position statement available on Emeco's website and are developing a decarbonization transition plan to work towards lower Scope 1, Scope 2 and Scope 3 emissions. Scenario analysis has been undertaken to identify potential physical impacts of climate change in our people, equipment and operations. Preparations for reporting under AASB S2 climate-related disclosures are well advanced with oversight through the ESG Committee, and Audit and Risk Management Committee. I touched on safety metrics for the first half earlier on Slide 9. We continue to focus on strengthening workplace, health, safety, well-being and training through targeted initiatives and improved consistency of execution. FY '26 HSET focus areas include ongoing uplift in critical risk and control insurance, continued enhancement of workshop safety controls and expansion of role-based leadership and workforce training. Governance assurance is underway with ongoing assessments and compliance monitoring to validate policy effectiveness and drive continuous improvement. Slide 25 lists our priorities and outlook for the second half of FY '26. I'll start with our priorities for the core business. We continued disciplined capital expenditure and cost efficiencies to drive returns and cash flow while increasing utilization by building a portfolio of fully maintained projects for a pipeline of opportunities and expanding the Force service offering. With regards to capital management and the deployment of growth capital, investment in fleet will be limited until our existing fleet is more fully utilized with current capacity to grow earnings without the need to buy more fleet, a key driver to achieving our 20% return on capital. We'll also actively evaluate potential M&A opportunities, including low capital intensity businesses to complement our core business, and we're actively monitoring competitors for sensible consolidation opportunities. We intend to preserve our improved balance sheet and capital position to provide maximum flexibility should the right opportunity present. We'll continue to invest in technology to improve efficiency and to build our competitive advantage. The focus will be on delivering the build phase of our D365 ERP project and continuing the digitization of operational technology. I mentioned ESG earlier. Our focus will continue to be on improving safety and health, continuing the development of our plan to reduce emissions, and preparing for the new FY '26 sustainability reporting requirements. The mining sector outlook remains supportive for the business with the medium-term production outlook remaining robust. This provides a stable foundation for continued demand for our equipment rental and maintenance services across the sector. For FY '26, we expect stay in business capital of approximately $170 million to $175 million. Depreciation is expected to be in the order of $160 million to $165 million, while nonrecurring spend is anticipated to be approximately $15 million. We expect positive financial performance in the second half subject to wet weather events in Queensland, impacting client operations. Just to conclude, we're confident that continued execution of our strategy will enable us to deliver sustainable growth and increase shareholder returns in FY '26 and beyond. I'd like to take this opportunity to acknowledge the efforts of our entire Emeco team for delivering another great result and an excellent start to FY '26. I'd like to thank our customers, suppliers, financiers and the community partners who play a crucial role in our ongoing success. With that, I'll hand over for questions. Operator: [Operator Instructions] Your first question comes from the line of Gavin Allen from Euroz Hartleys. Gavin Allen: Good numbers. Just a couple for me quickly. Just firstly, thinking about the journey to 20% ROC, which has been a long-term target now and you're obviously making very good progress on that front. Do we think about that directionally now as a sort of a 12-month or an 18-month or 24-month journey? Do you think -- not to hold you to anything, but just in terms of direction. Ian Testrow: Thanks, mate. Appreciate your support. Yes, that one, we've obviously -- can you hear me? Gavin Allen: Can, mate, yes. Ian Testrow: Yes. Cool. Yes. Thanks, Gav. The question you made, we've made great progress on that. We launched this objective at your other conference a couple of years ago, and I'm really proud of the progress that we've made towards our target of 20%, remains our target as we put through the pack. It's all in utilization, really. This -- what we're doing around the maintenance services has really helped improve our return on capital. But if you look at that utilization at about 85%, it's kicking that up to 90%. That really gets us to 20% at some point, which shows that there is operating leverage in the business and capacity for increased earnings on this fleet. Gavin Allen: Yes. That makes sense. So you can do it. You can do it quickly if you get to 90%. And if it's more steady, it might include some sort of, I don't know, continued growth in the maintenance side. Is that sort of one way to look at? Ian Testrow: Yes, it is. The maintenance side of things that earnings come through, which is really what I'm really proud of, to be honest, the team has done a fantastic job, really leverages that return on capital because it's not capital-intensive earnings. But ultimately, getting that fleet working harder gives us that uptick in earnings as well, so it's a combination of those 2 things. Gavin Allen: Yes. Good one. Just one more for me. So medium term, you're talking about adjunct acquisitions in the maintenance side and asset management side. Just wondering if you got any flavor on how you're finding the competitive environment on the M&A front. Do vendors seem sensible to you in terms of price as a general rule? Or where are we thinking about that in an M&A curve or cycle? Ian Testrow: To be honest, we haven't been overly active in that space this year. We're working hard on our strategy and working with our Board. We've been in the gym for a couple of years getting fit. We're getting that return on capital from 13% to 18%, getting that leverage from 1.1x down to 0.5. So we've been at the right to consider those options. So I wouldn't say that we've done a hell of a lot of work. A fair bit of work in regard to how do we position this thing. There's 2 areas of focus. One is consolidation, looking at competitors where their fleet aligns with us when we can take our maintenance services to improve their business. That's attractive to us. And the other thing is, is to have a look at what are we doing really well in maintenance. What's facilitated that growth? There hasn't been so much in our typical Force workshops. It's been growth in maintenance services in the field. What are we doing there? What are we doing well? Where can we improve on it? And where does that add value to look at M&A to improve that and broaden that value proposition? So they're the sort of 2 things that we're looking at in parallel together. Operator: [Operator Instructions] There are no further phone questions at this time. I will now hand back to Mr. Testrow for closing remarks. Ian Testrow: Thanks, everyone. I appreciate all the hard work from the Emeco team. I touched on it in the preso, but great work to Theresa and her team and our legal team, Penny and just the hard work on that refi. I think that's a great thing for the business. So thanks for that, and thanks to everyone. I appreciate it. Operator: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.

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Fed officials signaled little appetite for reducing interest rates at their meeting last month, with most indicating they wanted to see further progress on inflation before considering any further cuts

Some officials favored more neutral language—pushing back against the prospect of future rate cuts.

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The Trump administration doesn't want states regulating prediction markets

Trump's CFTC has a message for states trying to regulate prediction markets: "We will see you in court." Disclosure: Yahoo Finance has a partnership with Polymarket prediction market.

44天前Insight Analytics约5分钟阅读