加载中...
共找到 24,912 条相关资讯
The S&P 500's recent 1.4% weekly decline highlights growing market complacency and signals a need for increased caution. My bear market probability model assigns a 25% chance of a bear market in the next 4–6 months, suggesting prudent cash-raising.
Inflation is easing, jobs are holding up, and growth is solid. But after years of high prices and with new risks emerging, declarations of victory feel premature.
The share of people ages 18 to 39 transferring funds to investment accounts every month has more than tripled over a decade.
Operator: Good morning, and welcome to NatWest Group's Full Year 2025 Results Management Presentation. Today's presentation will be presented by CEO, Paul Thwaite; and CFO, Katie Murray. After the presentation, we will take questions. Paul Thwaite: Good morning, and thank you for joining us today. As usual, I'm here with Katie, who will take you through the full year performance. After that, I'll talk about our strategy and our new 2028 targets. But first, let me start with an overview of 2025, a year in which we delivered another strong performance and made good progress on each of our strategic priorities. Highlights of the year include a return to private ownership in May, opening a new chapter for the bank with a focus on driving growth. Continued organic growth, together with successful completion of the Sainsbury's Bank transaction, improving operational leverage with a reduction in our cost income ratio of 4.8 percentage points, together with strong capital generation, enabling total distributions to shareholders of GBP 4.1 billion. You will also be aware that we announced the acquisition of the financial planning and investment firm, Evelyn Partners earlier this week, which I'll talk about later. So let's turn to the headlines. We added 1 million new customers during 2025, and delivered broad-based growth across all 3 businesses. Lending grew 5.6% to GBP 393 billion, deposits were up 2.4% to GBP 442 billion, and assets under management and administration increased 20% to GBP 58.5 billion. This activity resulted in strong income growth of 12% to GBP 16.4 billion. Costs grew 2% to GBP 8 billion, resulting in positive jaws of 10%. The cost income ratio reduced to 48.6%. This led to operating profit of GBP 7.7 billion and attributable profit of GBP 5.5 billion. Earnings per share grew 27% to 68p, dividends per share increased 51% to 32.5p, and tangible net asset value per share was up 17% to 384p. Our CET1 ratio was 14% and return on tangible equity was 19.2%. As you can see here, these results are even in line with or above our strengthened guidance. Our strong risk management is evidenced by a loan impairment rate of 16 basis points, and total distributions announced in 2025 of GBP 4.1 billion comprised buybacks of GBP 1.5 billion and dividends of GBP 2.6 billion, in line with our payout ratio of around 50%. This includes the buyback of GBP 750 million announced on Monday, along with our acquisition of Evelyn Partners. These results continue our track record of delivering value for shareholders. Over the past 4 years, earnings per share have more than doubled, growing at a rate of 26% a year, dividends per share have more than tripled, increasing at a rate of 33% a year and TNAV per share has grown 41% at a rate of 9% a year. At the same time, our share count has reduced from over 11 billion to just under 8 billion. Turning now to our 3 strategic priorities. I'll start with disciplined growth. We now serve over 20 million customers across our 3 businesses, and 2025 marks our 7th consecutive year of growing customer balances. In Retail Banking, our customer base increased by more than 5%, and customer assets and liabilities grew 4% to GBP 421 billion. This includes the addition of around 1 million new customer accounts from the Sainsbury's transaction, which contributed to our unsecured stock share growing from 6.4% to 7.2%, including an increase from 9.7% to 10.6% in credit cards. In Mortgages, we increased our flow share of first-time buyers from 10% to 12% and of the buy-to-let market from 3% to 6%. We are also extending our reach through NatWest Boxed, which provides embedded finance to companies such as The AA and Saga. In Private Banking and Wealth Management, over 50,000 customers invested with us for the first time in 2025. Net new flows to assets under management grew 41% and assets under management and administration increased 20% to GBP 58.5 billion. AUMA is now 49% of client assets and liabilities, up 4 percentage points on the prior year and customer assets and liabilities grew 10% to GBP 119 billion. In Commercial & Institutional, we extended our expertise in FX to a further 700 mid-market customers during the year. Many of them via online platform for FX, Agile Markets, where the number of users grew 13%. This contributed to FX revenue growth of around 20%. Lending balance growth was strong at 10% or GBP 14 billion. We lend GBP 4.6 billion to the U.K. social housing sector, where we reached our GBP 7.5 billion ambition ahead of schedule and have announced a new GBP 10 billion ambition to 2028. We are also the leading lender to U.K. infrastructure projects, and we delivered GBP 19 billion of climate and transition finance towards our 2030 target of GBP 200 billion, of which GBP 16 billion was in Commercial & Institutional. I'd like to turn now to our second strategic priority, bank-wide simplification. We continue to invest to improve customer experience and increase efficiency. During the year, we made gross cost savings of around GBP 600 million, which is over 7% of our 2024 cost base. And we created GBP 100 million of investment capacity in 2025 to reinvest and further accelerate our transformation. Taking a look at each business. In Retail Banking, our award-winning app has a Net Promoter Score of 51. And as we continue to invest to improve customer experience, we launched more than 100 new features during the year. We also launched generative AI enhancements in our digital assistant, Cora. As a result, the number of queries that can be resolved has increased by 20 percentage points. The cost/income ratio in Retail Banking decreased from 50% to 45%. In Private Banking and Wealth Management, we doubled the number of enhancements on the app, increasing our rating on the App Store to 4.4 and our Net Promoter Score to 54, up from 50 at our spotlight last June. In addition, we are leveraging group capabilities to simplify our operations. For example, we rehosted our core banking platform from Switzerland to the group data center in the U.K. and we are co-locating our people with other NatWest teams. So we are relocating our tech team from Switzerland to the U.K. and India. The cost income ratio in Private Banking and Wealth Management reduced 10 percentage points to 64%. In Commercial mid-market banking, we are investing in our digital platform, Bankline to give customers a single point of access to a wide range of products. We have now integrated our asset finance, invoice finance, payments, commercial cards, FX and trade platforms within Bankline, and customers access products via Bankline around 300,000 times last year. We also took steps to reduce our legal entities and branches in Europe. The cost income ratio in Commercial & Institutional reduced from 52% to 49%. Turning now to our third strategic priority, managing capital and risk. We generated 252 basis points of capital during the year, supported by reducing RWAs by GBP 10.9 billion through capital management. This includes 5 significant risk transfers in Commercial & Institutional and a GBP 2 billion mortgage securitization in Retail Banking. We have a high-quality lending book in all 3 businesses with a low level of impairment at 16 basis points of loans. And all this enables us to recycle capital into areas where we have chosen to grow. The successful implementation of our strategy gives us the ability to invest in the business, support customer growth and deliver attractive returns to shareholders. As I mentioned earlier, we have announced total distributions of GBP 4.1 billion for 2025, representing 75% of attributable profit. With that, I'd like to hand over to Katie to take you through our financial performance. Katie Murray: Thank you, Paul. I'll start with our performance for the full year, where, as Paul said, we have either met or exceeded our third quarter guidance. Income, excluding all notable items, was up 12% at GBP 16.4 billion. Total income included GBP 241 million of notable items. Total operating expenses were 1.4% higher at GBP 8.3 billion and the impairment charge was GBP 671 million or 16 basis points of loans. Taken together, this delivered operating profit before tax of GBP 7.7 billion and profit attributable to ordinary shareholders of GBP 5.5 billion. Our return on tangible equity was 19.2%. Turning now to the fourth quarter compared with the third. Income, excluding all notable items, was up 2.5% at GBP 4.3 billion. Operating expenses were GBP 2.2 billion, including the annual bank levy. The impairment charge was GBP 136 million or 13 basis points of loans, bringing operating profit before tax to GBP 1.9 billion. Profit attributable to ordinary shareholders was GBP 1.4 billion. Our return on tangible equity was 18.3%. Turning now to income. Full year income, excluding notable items of GBP 16.4 billion exceeded our guidance of around 16.3%. Across the 3 businesses, income grew by GBP 1.8 billion. This was largely driven by higher net interest income as balance sheet growth and the benefits of the structural hedge more than offset the impact of the Bank of England rate cuts. Net interest margin was up 21 basis points to 234 basis points, mainly due to deposit growth, coupled with margin expansion. Noninterest income grew 1.3%, reflecting solid customer activity as we supported their investment, FX and capital requirements. Turning to the fourth quarter. Income, excluding notable items, grew 2.5% to GBP 4.3 billion. Across our 3 businesses, income increased by 2.8% or GBP 116 million. Net interest income grew 4.5% or GBP 148 million, reflecting the trend over the year or volume growth alongside margin expansion. As a result, net interest margin was up 8 basis points to 245 basis points. Noninterest income across the 3 businesses was down 3.7%, mainly driven by Commercial & Institutional, reflecting typical seasonality after a strong third quarter. Turning to 2026 guidance, which excludes the impact of Evelyn Partners. We expect income, excluding notable items, to be within a range of GBP 17.2 billion to GBP 17.6 billion, and our current forecast is within this range. Turning to growth. As you heard from Paul, our 3 businesses have a strong track record of growth over the last 7 years. We have grown customer lending at 4.5% a year. This includes broad-based organic growth as well as acquisitions, which support scale and underweight areas such as mortgages and unsecured lending. Customer deposits have grown 3.9% a year supported by a boost during COVID as well as new propositions and an improved digital offering. AUMAs have grown at 12% a year and have more than doubled since 2018. These 3 elements together make up customer assets and liabilities, or CAL, which has grown at 4.6% a year. We focus on this metric as it reflects the breadth of balance sheet solutions we offer to meet customer needs. This track record gives us confidence that we can continue to grow CAL in the future, and Paul will talk more about our 2028 target shortly. Let me take you through the last year for each of these elements in turn. We delivered another year of strong lending growth. Gross loans to customers across our 3 businesses increased 5.6% or GBP 20.9 billion to GBP 392.7 billion. There was broad-based growth across Mortgages as we increase our flow share of the first-time buyer and buy-to-let markets with strong retention as well as new business flows. Unsecured lending growth was supported by the addition of Sainsbury's Bank balances and the first full year of our personal loans offering for the whole of market. In Commercial & Institutional, we grew in all 3 businesses with lending up GBP 14 billion or 10% excluding the repayment of government loan schemes. This reflects our leading position as the U.K.'s biggest bank for business with growth across social housing, residential commercial real estate, infrastructure, project finance and fund lending. I'll now turn to deposits. Customer deposits across our 3 businesses increased 2.4% to GBP 442 billion with a stable mix throughout the year. Retail Banking deposits increased GBP 7.8 billion or 4%, reflecting growth in savings and current account balances, supported by balances acquired from Sainsbury's Bank. This includes growth in the fourth quarter of GBP 6.8 billion, reflecting strong growth in savings of GBP 6.4 billion, supported by our limited edition Saver and term products and growth in our current accounts of GBP 0.4 billion. Private Banking and Wealth Management increased by GBP 300 million in 2025, also reflecting growth in current accounts and saving balances with progress driven by both deeper engagement with our existing customers and new customer acquisition. And C&I deposits increased GBP 2.3 billion, reflecting growth within large corporates and business banking. Moving now to assets under management. We are pleased to see the plans we talked about at the June spotlight delivering for our customers and shareholders. AUMAs increased almost 20% this year to GBP 58.5 billion and net flows of GBP 4.6 billion were up 44%. Fee income from higher AUMAs grew 11% to GBP 300 million. Moving now to the continued tailwind from our structural hedge. As you will be aware, in addition to our product structural hedge, we also have a longer duration equity structural hedge. Together, they are GBP 198 billion in size, GBP 4 billion higher than last year, and are an important driver of income growth. In 2025, product hedge income was GBP 4.2 billion, this is GBP 1.2 billion higher than the previous year and GBP 3.2 billion higher than 2021. Our equity hedge income was almost GBP 500 million which is around GBP 50 million higher than the previous year and around 25% more than 2021. The yield on both hedges has increased significantly over the last few years as interest rates rose. This slide shows our expectation for future yield progression based on our current macroeconomic assumptions and hedge durations together with associated income growth. We expect yield to increase from 2.4% in 2025 to around 3.1% in 2026, with further increases thereafter. Our illustration here assumes steadily increasing average notional balances for both the product and equity hedges, driven by growth in CAL and higher levels of capital held to support that growth. This expectation of increasing yield and notional balances drives higher annual income through to 2030. We are sharing our expectations for this year and next as more of the near-term income growth is locked in. We expect 2026 total hedge income to be around GBP 1.5 billion higher than 2025 and for 2027 to be around GBP 1 billion higher than 2026, reaching total income of around GBP 7.2 billion. Exactly how this develops will be subject to the prevailing reinvestment rates each year as well as the composition of growth in CAL. Turning now to costs. Other operating expenses were GBP 8.1 billion, including onetime integration costs of GBP 96 million, in line with our guidance. We are pleased with our delivery of around GBP 600 million of gross cost savings, which has allowed us to invest in business growth and accelerate our simplification program. Costs grew 1.8% if you exclude onetime integration costs. Our cost income ratio reduced to 4.8 percentage points to 48.6%. In 2026, we expect other operating expenses to be around GBP 8.2 billion. Staff costs will be a key driver of overall cost growth. We also made significant investment in the business each year with a range of initiatives to drive operating leverage. We expect further supplier contract inflation and increased business transformation costs this year. Delivery of around GBP 8.2 billion in 2026 will be supported by another year of significant gross cost savings. Turning now to our updated macro assumptions. Our base case outlook for the macro environment in 2026 assumes moderate growth, slightly lower than our previous year. The unemployment rate increased slightly above our expectation for 2025 and we now expect this to peak in 2026 at levels we are comfortable with in terms of lending risk appetite. We also expect inflation to come down at a slightly faster pace given the most recent print. And we expect lower rates reaching a terminal bank rate of 3.25% by the end of 2026. Our balance sheet remains well provisioned with expected credit loss of GBP 3.6 billion and ECL coverage of 83 basis points. We are comfortable with 1.1% of Stage 3 loans, which is down on the prior year, reflecting management actions in our personal portfolio, together with lower defaults in our nonpersonal portfolios. Our remaining post model adjustments for economic uncertainty are GBP 246 million, broadly stable in the third quarter. We will continue to assess these provisions each quarter and release as appropriate. Our latest scenarios also show that even if we were to give 100% weight to our moderate downside scenario, this would increase Stage 1 and 2 ECL by GBP 54 million. I'd like to turn now to the impairment charge for the year. Our prime loan book is well diversified and continues to perform well. We're reporting a net impairment charge of GBP 671 million, equivalent to 16 basis points of loans. There were no significant signs of stress across our 3 businesses and impairment levels across our products have performed broadly in line with our expectations. In 2026, we expect our loan impairment rate to be below 25 basis points. This guidance is not dependent upon post-model adjustment releases or any material shift in risk appetite. It's simply a reflection of normalization in impairments and lower one-off releases as well as growth in the book and ongoing changes in the mix. Turning now to capital. We ended the year with a Common Equity Tier 1 ratio of 14%, up 40 basis points on last year. In 2025, very strong capital generation of 252 basis points took our CET1 ratio before distributions to 16.1%. Distributions accounted for 213 basis points of capital, including accruals for our ordinary dividend payout of around 50% and our buyback of GBP 750 million that we announced on Monday. Risk-weighted assets increased by GBP 10.1 billion to GBP 193.3 billion, within our guided range. GBP 3.8 billion of higher operational risk-weighted assets includes GBP 1.6 billion in the fourth quarter as we brought forward our annual operational risk recalculation from the first quarter in 2026. You should now expect us to include this in the fourth quarter each year. GBP 11.1 billion of business movements broadly reflects our lending growth across the year. This was largely offset by a GBP 10.9 billion reduction from RWA management, including GBP 5.7 billion in the fourth quarter. So in essence, our actions this year have funded the growth in our lending book. Other movements include GBP 7.3 billion from CRD IV model inflation, of which GBP 4.8 billion was in the fourth quarter. We think we are now largely done, so we await PRA approval of our models. There was also GBP 1.2 billion of other risks and FX movements. Going forward, we expect a further impact on RWAs with the implementation of Basel 3.1 in January 2027. Based on our latest recalibration of a higher balance sheet, we currently expect this to increase RWAs by around GBP 10 billion. The majority of the RWA uplift from Basel 3.1 is due to operational risk and the removal of the SME and infrastructure support factors. We do expect an offset in our Pillar 2 requirements at the same time for these elements, but the net result will still require us to hold a higher nominal amount of CET1 given the offsets are at a total capital level. We also expect future growth to consume more capital in the form of RWAs. Despite this, we are confident in our ability to continue generating strong capital from earnings and to manage risk-weighted assets, and we are guiding to capital generation of around 200 basis points before distributions in 2026. Turning now to our CET1 ratio. Our CET1 target of 13% to 14% has been in place since 2019. As you know, we've been actively looking at this over the last year or so. Today, our minimum CET1 requirement stands at 11.6%. And as you know, there are no changes to the capital requirements in the latest FTC review. So our supervisory minimum remains 11.6%. And we expect this to reduce further with the implementation of Basel 3.1 next year with a reduction in our Pillar 2 requirement, as I just mentioned. Today, we are holding considerably more capital despite derisking. The successful restructuring of the bank is evident from the consistent and material improvement in our Bank of England Stress Test results. The performance of the business has materially improved, and we have demonstrated a track record of strong earnings, high capital generation and returns. So as a result of all of these considerations and taking into account the views of stakeholders, including investors, rating agencies and regulators, we are reducing our CET1 target to around 13%. This represents a healthy buffer over our MDA and supervisory minimum requirements and also reflects the expected reduction in Pillar 2 requirements on the 1st of January 2027. Turning now to our acquisition of Evelyn Partners. As we outlined on Monday, we see a strong strategic rationale for this acquisition. It brings GBP 69 billion of AUMA scaling our Private Banking and Wealth Management to 20% of group CAL, a third growth engine for the group. It increases fee income by almost 20% on Day 1. And ultimately, it makes us a faster-growing, higher-returning bank with higher distribution capacity for shareholders. Operationally, it is deliverable; culturally, we are aligned and financially, it delivers for shareholders. So let me show you how we expect to deliver a return on invested capital above that generated by our share buyback by year 3 after completion. We provided you with Evelyn Partners, 2025 income, costs and earnings before interest, tax depreciation and amortization, or EBITDA. Revenue synergies include bringing Evelyn Partners a broad range of financial planning and Wealth Management solutions to all our customers, enhancing our D2C investment offering via BestInvest, leveraging Evelyn Partners technology for portfolio management solutions and providing Evelyn Partners customers with our full range of banking solutions and combined wealth management offering. The business has grown AUMA at more than 7% a year for the last 2 years and bringing the combined capabilities to our customer base of more than GBP 20 million is a significant opportunity to create value. The benefit of being part of NatWest Group should deliver income greater than GBP 700 million. We expect to realize around GBP 100 million of cost synergies by removing duplication in shared services and technology applications. where there is high alignment between our platforms as well as efficiencies of scale. The cost to achieve of approximately GBP 150 million will be phased over 3 years. This means we expect costs to fall in absolute terms to less than GBP 300 million by year 3. Together, this drives EBITDA of around GBP 400 million. When assessing the transaction, we look at the returns accruing to capital. In other words, the return on invested capital. We do not include the amortization of purchased intangibles since amortization does not flow through to capital and does not impact our distribution capacity to shareholders. The cost of intangibles are taken in the day 1 impact of around 130 basis points on the CET1 ratio. Amortization is included in return on tangible equity. This is a capital-light business with very high returns on tangible equity, clearly accretive to the group in year 1 and beyond. Beyond year 3, we see further improvement in returns, driven by compounding net new money growth, driving higher assets under management and ultimately, stronger income growth. Turning now to returns. This shows the drivers of return on tangible equity in 2026. The notable items in 2025 income and tax credits, which together account for around 1.3 percentage points of RoTE. Clearly, the year-on-year change in some P&L lines will impact RoTE more than others with income growth being the biggest driver. Naturally, the level of return will also be impacted by growth in the denominator average tangible equity. This will be driven by earnings, balance sheet growth and further unwind of the cash flow hedge reserve. Overall, in 2026, we expect to deliver a return on tangible equity of greater than 17%. So to summarize our guidance. Excluding the impact of Evelyn Partners acquisition in 2026, we expect income, excluding notable items, to be in the range of GBP 17.2 million to GBP 17.6 billion, other operating expenses to be around GBP 8.2 billion, the loan impairment rate to be below 25 basis points, capital generation before distributions of around 200 basis points and a return on tangible equity greater than 17%. With that, I'll hand back to Paul. Thank you. Paul Thwaite: Thank you, Katie. So you've heard about our guidance for 2026. I'm now going to talk about our plans for the next 3 years and 2028 targets, which include the impact of the Evelyn Partners acquisition. You will be familiar with this slide, as you've heard about each 1 of our 3 businesses over the past year in our investor spotlights. We are building on strong foundations with a customer base of more than 20 million and leading positions in each of our businesses, all of which deliver attractive returns. Our Retail Bank has a track record of growing share profitably, with an opportunity to align areas such as mortgages, savings and unsecured lending more closely with our 16.5% share in current accounts. Private Banking and Wealth Management is a leading private bank with a strong brand and acts as a center for excellence within the group for investment products and solutions. With the acquisition of Evelyn Partners, a market-leading financial planning and investment management firm, we are creating the U.K.'s leading Private Bank and Wealth Manager. The combination increases assets under management and administration to GBP 127 billion and CAL to GBP 188 billion. It both transforms the scale of the business and the breadth of our financial planning and investment offering to meet more customers' needs across the group, further accelerating growth in assets under management. Commercial & Institutional is the U.K.'s biggest bank for business with a 25% share of deposits and 20% share of lending. We are a leading bank for start-ups in the U.K. with the largest presence in the mid-market sector where we see significant opportunity. The scale and strength of our customer franchise gives us a strong base to build on with plenty of capacity for further growth. We believe the macro economy in the U.K. provides a supportive environment, consumers in aggregate are managing well. You can see here that households are paying down debt and savings rates are high. Despite a challenging environment, particularly for sectors such as retail and hospitality, U.K. corporates are delevering and investments is steadily increasing. In addition, there are reasons to feel confident about the broader economy. In the housing market, interest rates are coming down, the government have set ambitious building targets and is committed to investing in social housing. There is a huge shift of generational wealth to younger generations underway. Whilst the FCA's advised guidance boundary review opens up an opportunity for thousands of people who currently receive no financial advice. And the U.K. is home to high-growth sectors and businesses with an innovation sector that is growing faster than the U.K. economy. It's against this backdrop that we have been thinking about our strategy and 2028 targets. Our strong performance in recent years demonstrates that our strategy is working. However, we review it on an ongoing basis and have refined our 3 priorities as we raise our ambition for the bank and target a 2028 return on tangible equity greater than 18%. So let me talk about each priority in turn. We remain committed to pursuing disciplined growth with an emphasis on returns. First, by focusing on key customer segments; second, by making it easier for customers to engage with us; and third, by broadening our propositions to ensure we serve more customers' needs. Our second priority has evolved to become leveraging simplification, reflecting the advances and progress we have made. We will continue to invest, in particular, in AI to drive growth, improve productivity and enhance the customer experience. And we will continue to manage our balance sheet and risk well by redeploying capital to drive returns and by putting a greater emphasis on dynamic pricing as we increase our speed and agility with more advanced data and analytics. The purpose of these priorities is to deliver growth at attractive returns for shareholders. Our increased ambition on returns is underpinned by 3 new targets growing customer assets and liabilities at an annual rate greater than 4% from 2025 to 2028, reducing our 2028 cost-income ratio to below 45% and generating more than 200 basis points of capital before distributions, whilst operating with a CET1 ratio of around 13%. These targets take into account the acquisition of Evelyn Partners. So let me talk more about how we aim to achieve this, starting with disciplined growth. In Retail Banking, our focus is on youth families and the affluent segment. In the youth market, we are building on the success of our RoosterMoney app, which has grown its customer base 15x to well over 0.5 million. We bank 1 in 3 families in the U.K. and want to build on connections within families and households through savings and mortgage relationships, for example. We also have a clear opportunity to grow in the affluent segments. We have around 1.2 million affluent customers in the Retail Bank, yet just 0.5 million use our premier proposition. So our aim is to grow our premier customer base to 1 million and travel the number of Retail customers who choose to invest with us. The Evelyn Partners acquisition will help accelerate the delivery of this ambition. It both enhances our direct-to-consumer investment platform with BestInvest and broadens our financial planning and investment offering. Private Banking and Wealth Management aims to increase the number of clients with more than 3 million of assets and liabilities by more than 20%. This will be supported by trebling the number of referrals from Commercial & Institutional. In Commercial & Institutional we want to remain the leading bank for U.K. startups and for the commercial mid-market. We serve over 1 in 4 businesses in the mid-market segment, businesses that are growing at a higher rate than the U.K. economy. We have an unparalleled presence across the U.K., enabling us to build deep relationships based on strong local and sector knowledge and we are building on our position as a leading lender to U.K. infrastructure and U.K. social housing as well as our strength in trade and climate and transition finance. Our second lever to deliver growth is making it easier for our customers to engage with us by combining our best technology with the support of our people. In Retail, most customers bank digitally but we also have over 1,000 personal bankers and relationship managers with a 24-hour call service for premier customers. Private Banking and Wealth Management has 250 advisers and specialists in Coutts, together with an award-winning app supported by Coutts 24, which answers calls 24 hours a day. Evelyn Partners adds 270 financial planners, 325 specialist investment managers and its own direct-to-consumer investment platform, BestInvest. Again, it combines expert, personal service with digital excellence. Commercial & Institutional has a digital platform bank line, an unparalleled network of around 1,000 relationship managers in commercial mid-market banking and a network of 12 accelerator hubs around the U.K. to help entrepreneurs grow and scale their businesses. We continue to invest in enhancing the digital experience for customers as technology advances and expectations evolve. For example, we are transforming our digital assistant, Cora by deploying generative AI so that it can resolve more complex customer needs. We are moving our data onto a single platform to deliver more personalized propositions. And in Commercial & Institutional we are investing GBP 100 million over several years to transform Bankline into a state-of-the-art digital platform giving business customers a single point of access to many of our products and services. Ultimately, we want a joined-up experience, which adds value for the customer however they choose to engage with us. We also want to meet more customers' needs by broadening our offering. For Retail Banking, this includes areas like home buying with more support for first-time buyers with family backed and shared ownership mortgages, offering more flexible savings accounts, developing tailored propositions for premier customers and entering point-of-sale lending. Private Banking and Wealth Management is primarily focused on investments. We are broadening our investment proposition to attract both high net worth clients and customers in the retail bank. We are preparing our response to the FCA's recommendation for targeted support following their advice guidance boundary review and we are broadening our deposit offering. In Commercial & Institutional we see the U.K. innovation economy as a key opportunity. Last year, we created a dedicated venture banking team to support innovative venture back scale-ups and we opened new business accelerators last year with 4 leading universities, which acts as incubator with a plan to expand this to 10 over the next 2 years. By continuing to deliver disciplined growth, our aim is to grow customer assets and liabilities across our 3 businesses at a rate greater than 4% a year, equivalent to more than GBP 120 billion of balance sheet growth by 2028. This will be a mix of broad-based lending growth, higher customer deposits and strong growth in assets under management and administration. We have already demonstrated our track record of growth. Retail Banking makes up 44% of our customer assets and liabilities, where we have grown more than 5% a year over the past 7 years. Private Banking and Wealth Management is currently 13% of CAL with a strong growth rate of 8.3%. This will grow to around 20% of CAL with the inclusion of Evelyn Partners and Commercial & Institutional represents 37% of CAL with a growth rate close to 3%. Moving on now to our second strategic priority, leveraging simplification where I'll start with architecture and data. We expect to drive a further GBP 100 million of investment capacity in 2026 by leveraging technology together with further streamlining our processes and governance. We have already made significant progress simplifying our systems and reducing duplication. For example, we decommissioned 200 business applications across the group last year, and we successfully migrated 1 million customers from Sainsbury's Bank covering multiple products. Last year, we announced the collaboration with Amazon Web Services to accelerate our data, analytic and AI capabilities. This collaboration will give us a single view of each customer's relationship with the bank as well as the tools to analyze data and enrich our customer understanding. Deployment of AI is not only helping us to automate routine work such as call summarization, it is also helping our coders to be more productive. Over 12,000 software engineers are now able to use AI assistance to generate code. This transformation has enabled us to improve the deployment frequency of updates across the group by more than 4x since 2021 and more than trebled the new features on our commercial banking digital platform Bankline. This investment is also increasing our operational resilience. We have reduced the number of critical incidents from 9 in 2021 to 1 last year. Our ambition is to become the leading bank delivering personalized customer propositions powered by the responsible deployment of agentic AI. So we are building out our capabilities across the bank. Last year, we set up an AI research office focused on improving customer experience and efficiency by accelerating the use of AI in fields such as multi biometrics, audio-visual conversational AI using proprietary small language models and ensuring algorithmic furnace as well as data safety. This shift to a agentic AI marks a transition from simple chatbots to autonomous systems that can execute complex banking workflows on behalf of our customers. By prioritizing these capabilities, we can move beyond basic automation towards a simpler, data-driven experience that meets rapidly evolving customer expectations. Many of the building blocks that will make this vision a reality will go live this year. This quarter, our customers will be able to ask questions about their recent spending in their own words on their app. And later this year, we will launch voice-to-voice conversations and more agentic fraud support. By delivering income growth ahead of cost growth, we expect to reduce our cost income ratio below 45% by 2028. Our track record of tight cost control gives us competitive advantage as it enables further growth. So our ambition is to strengthen our position as the most efficient large bank in the U.K. Turning now to our third strategic priority, active balance sheet and risk management. The strength of our capital funding and liquidity position provides significant opportunity to deliver continued balance sheet growth, together with attractive sustainable returns for shareholders, whilst operating with a CET1 ratio of around 13%. Our loan-to-deposit ratio of 88%, demonstrates the strength of our 3 businesses and our capacity to deliver material lending growth to support our customers and the U.K. economy. We continue to recycle in efficient lower returning capital into attractive growth areas to drive higher returns, and we have been active in significant risk transfers and credit risk insurance to increase capital efficiency. You can also expect to see a greater emphasis on the use of advanced data analytics to drive faster pricing, credit and asset enablement decisions. In addition, data analytics will help us manage risk dynamically, whilst optimizing risk-adjusted returns. We will continue to deliver our through-the-cycle cost of risk of 20 to 30 basis points aligned with our risk appetite. And we also want to maintain our market-leading position in customer fraud prevention with multi-biometric authentication. Our aim in pursuing disciplined growth, leveraging simplification and managing capital and risk is to drive strong growth and returns for shareholders. Given our strong track record of delivery, we are raising our future ambitions. So let me sum up with our 2028 targets. We aim to grow customer assets and liabilities at a rate greater than 4% a year as we continue to drive disciplined growth. We are targeting a cost income ratio below 45% as we drive positive operating leverage and we aim to generate more than 200 basis points of capital before distributions, whilst operating with a CET1 ratio of around 13%. Strong capital generation gives us the ability to support customer growth, invest in the business and deliver attractive returns to shareholders. We are targeting a return on tangible equity greater than 18% in 2028, and we expect to maintain our dividend payout ratio of 50% with scope for surplus capital to be returned via buybacks. Thank you very much. We'll open it up now for questions. Operator: [Operator Instructions] Our first question today comes from Sheel Shah from JPMorgan. Sheel Shah: I've got two, please. Firstly, on costs. The GBP 600 million of cost saves that you've seen in 2025, could you talk about where that's come from? And how we should think about the level of cost saves coming in 2026, particularly with regards to some of the technology developments that you've spoken about? And should we be thinking about a cost growth towards the out years of around sort of a 2% level going forward? And then secondly, in terms of the greater than 4% customer assets and liabilities target, I was wondering if you can disaggregate this across the divisions? And maybe more specifically, would you expect all of the business areas to be at this target level? And maybe sort of pointing up the corporate business here. Looking at that, it is slightly below target in recent years. So I'm just wondering whether you expect a pickup in this business. Paul Thwaite: Thanks, Sheel. I appreciate it. So, Katie, I'll talk generally about cost, you maybe want to come in around the outer years on cost and then I'll cover the CAL piece as well. So Sheel, on the -- first of all, I'd say we're very pleased with the momentum in the cost line. Obviously, nearly 5% reduction in the cost/income ratio this year. That's 20% plus over the last 4 years. So it feels like we've got a really good flywheel going in terms of driving out efficiencies and productivity in the business, reinvesting some of that capacity but making the bank more productive and more efficient going forward. In terms of your question around what levers are we pulling. It's a really broad range of levers, I would say. A key part of it is the kind of historic and current tech investment. That's driving a lot more digitization, automation. We continue to decommission a lot of applications. We've consolidated a lot of platforms. So that's really helping. We've also become a lot more efficient in how we do change. We talk about that in the presentation, GBP 100 million of benefits. In effect, we can do more change at lower cost, which is great for the customer, but also great for the cost outlook. And we're also continuing to simplify the business more generally, Sheel. So property consolidation would be one organizational simplification, legal entities, et cetera. So there's a whole range of costs -- a whole range of levers. And that's why for '28, we've said less than 45%, but we still -- and we see opportunity beyond that because we're very comfortable that this flywheel is heading in the right direction. Katie? Katie Murray: Sure. Thanks very much. So look, Sheel, as I look to it, obviously, operating costs GBP 8.2 billion for next year, it's very much as Paul says, it's the ongoing cost savings that we have, the higher investment spend on data and tech and the kind of -- as well as the higher business transformations and the benefits that we're seeing on that. We do expect -- you would be surprised to hear me say to continue our really cost tight management as we go out into 2028 and really ensure that we're getting the benefits of that investment spend and that they are realized. We do expect positive jaws in each year. We've brought in the cost/income ratio target of below 45% versus the very strong 48.6% we've already printed for 2025. That target does include the cost and, of course, income from Evelyn Partners, including our ongoing investment in that business. And I would say, if I had to look beyond 2028, I would expect to see further improvement in that ratio from here as well. So as ever, a very tight cost picture. Paul Thwaite: Great. Thanks, Katie. And then, Sheel, on your second broader question around CAL or customer assets and liabilities. We're not going to give you the exact -- and you probably don't expect it, the exact kind of split of growth. But what I'd encourage you to think about is we're very confident about growing across all aspects of CAL, lending, deposits, assets under management. Given it's a 3-year cycle, we're going to push hard to grow where the opportunities present themselves. Obviously, the environment will change. So different opportunities will be attractive at different times. I do think it's reasonable to expect that some areas will grow faster than others. If you look -- as you alluded to, if you look at our growth over the last couple of years, assets under management have typically grown at a higher CAGR. So 12% on average over the last 7 years. Evelyn will obviously accelerate that given the compound growth in that business of 7%. On lending, I'd say a broader picture, Sheel, very confident we captured -- I mean, historically, NatWest is a lending and credit franchise, and we can capture demand when it's there. So I'd expect lending growth across mortgages and retail, unsecured, but also, as you can see the growth in the Commercial & Institutional lending book in '25, GBP 14 billion, up 10% up. So we're not going to give you the breakdown, but I would plan across both lending, deposits and AUMA, and we're very confident that it will be greater than the 4% each year target for '28. Operator: Our next question comes from Benjamin Caven-Roberts of Goldman Sachs International. Benjamin Caven-Roberts: So I just wanted to ask a first one on profitability and a second 1 on the hedge. So if we look at the 19% return on tangible in 2025, I know there were a few factors which helped that result, including very low impairments, strong markets results, higher average bank base rate than likely in future years and a slightly lower effective tax rate than is modeled by consensus for the medium term. But aside from those, what would you call out as factors that you might see as being less favorable year-on-year in 2026? All elements of conservatism that effectively contributes to the sequential decline in RoTE on the lower end of your 2026 guidance. Put differently, is it fair to think of underlying RoTE as continuing to go up from here? And then secondly, on the hedge tailwinds through to 2030, has anything changed in the structure, duration or notional assumptions of the hedge to facilitate that very strong uplift in '26 and '27 and then the continued uplift through to 2030? Paul Thwaite: Thanks, Ben. Katie, do you want to take either order? Katie Murray: Yes. No, absolutely. So I'll start off with RoTE. So obviously, looking to our RoTE guidance of greater than 17% in 2026, you can see that we've got a record of high teens percent returns in there. So I wouldn't get too focused on the underlying versus this and that kind of coming in. We're very confident on delivering on this guidance. We did have a little bit of a boost in the year, but things come in at different points. I think the important thing to remember is that we will continue to build capital both through this year as we get to the end of 2026 with Basel 3.1 coming in on January 1. That's the next GBP 10 billion of regulatory capital along there. And then alongside our P&L guidance, you should expect that average growth coming through on the tangible equity as well, which kind of is what pulls your RoTE back a little bit. It's important not to forget that. We're obviously, also, guiding you on the strong capital generation that we can see coming through and there will be the movement during the year of 130 bps as we have CET1 coming in. But overall, I guess as I look at the number, there's not one thing I would say, look at that as a negative or a drag particularly, but I would encourage you to think of CAL growth and how it feeds through to the TNAV growth. If I then kind of take you on to the hedge in terms of where we are and then kind of how it's kind of structuring as we go forward from here. Look, when we look at the hedge, there's a number of different things that we kind of bring into that. One of the debates we've been having is around the hedge duration and what we've been looking at. We are very stable at 2.8 years. It's important to reflect -- to remember that, that reflects the product hedge at 2.5 years and the equity hedge at 5 years, which puts obviously 5 and 10 in kind of duration. We spend a lot of time looking at the behavioral life of different deposit types, different cohorts across the deposit franchise of our 3 businesses. We're very happy to see the deposit stability and the growth over this last year. We look obviously backwards, but we also look forward in terms of what we're expecting there. We give consideration of how things might evolve in the future as we go forward from here. So conversations, you'd expect us to be having around things like digital currencies, stablecoins, tokenized deposits as well, of course, the absolute competition that we see in this market. We continue to dynamically monitor that and assess that over time and how we reinvest the hedge at the different lifetimes. And I think the other thing that's important, that I'm not sure you all think about enough as well as also the relative size of both of those hedges in terms of how they sit and what that then does to your kind of this averaging out of the age of the hedge. I'd say one thing in addition, we do review our hedging instruments as gilts have repriced, we have actively been reinvesting our maturing 10-year swaps into 10-year gilts, which provides a pickup in yield that increased -- that contributed about GBP 50 million additional income from the equity hedge in 2025. Very comfortable with the approach we have which is kind of mechanistic and we talk about it is that a lot. It has a huge amount of thought that goes into the background to make sure we deliver the really quality returns that you see coming from this hedge year after year. Operator: Our next question comes from Robert Noble of Deutsche Bank. Robert Noble: On Evelyn, did you look at anything else in the space as a potential acquisition? There are a list of wealth managers that trade at lower multiples. So what makes this specific one worth of premium compared to others? If I could ask about AI as well, there's been a route in the market this week and wealth managers and then more generally across the last kind of few months. Could you talk specifically about the risks from AI in this space? And then if we could broaden it out to traditional banking, what risk do you see from AI on deposit spreads, particular or any other material risk you see in banking from AI as well? Paul Thwaite: Thanks, Rob. So we got Evelyn, AI and Wealth and then more broadly on I guess, AI impact on banking. Okay. To the first question, as you'd expect, Rob, we monitor a number of participants and actually have done for a number of years. As you alluded to, there's private entities, there's listed entities, there's different business models. In terms of Evelyn, we absolutely thought it was the right fit for NatWest, very strategic acquisition, creating one fell swoop, the #1 combined private bank and wealth manager in the U.K. It transforms our wealth business, increases the scale of 2x from an assets under management perspective. And most importantly, or as importantly, brings key capabilities that will complement our proposition a direct-to-consumer platform, BestInvest, the largest employed financial adviser network in the U.K. and a broad suite of investment products and propositions. So it was the combination of the scale, Rob, but also the capabilities that it brings. And it positions us, I think, excellently, for what is obviously going to be a growth area over both the short, medium and long term. We know that customer demand is increasing around financial planning, financial advice. As you see intergenerational wealth transfer that's only going to increase. I think it's an area that's going to be amplified by tech and AI, and I'll come back to that because I think it's going to make advice more accessible and more affordable. And it's obvious we have regular -- helpful regulatory tailwinds as well, whether that's the FDA's advice, guidance and boundary review, whether it's the targeted support developments, which will drive advice to more people that start in April. So for us, it felt like the right partner, the right capabilities, creating a really substantial private bank and wealth management to complement the #1 business bank we have. In terms of the broader picture on AI and Wealth Management, that's been on our minds for banking. It's been on our eyes -- it's obviously been on our minds in the context of Wealth as we thought about the Wealth space over the last couple of years. I actually think the winners in the Wealth space in respect of AI will be those who have scale and have data. When you think about 20 million customers that NatWest has, that's 200x the times of Evelyn. So the ability to use that scale and data, I think AI is a big accelerant and opportunity. Secondly, what all the customer research and customer insight tells us, both independent and our own is that the winning combination is going to be a combination of I guess, AI-driven digital wealth advice, but also expertise through humans and people for those big financial decisions, the complex aspects of financial planning. So to me, you bring both together, you see AI really helping us get closer to our existing customers in the wealth space, which is great, but also access new customers at relatively low marginal cost. But then combined from a hybrid perspective with excellent advisers for the more complex financial needs. So that's how we think about it. So we have -- net-net, we think AI will be an accelerant and a winner and will be a winner in terms of our wealth aspirations. And we think the customer need is really this hybrid need. And then more generally on AI, I mean, it's already affecting the sector. We've embraced it. That's from a colleague perspective and a customer perspective. I think it's going to change how customers engage with us or how they find us and discover us. I think what it plays to is, again, my point around scale. I think the winners here will be those who've got significant sized customer bases, 20 million for us, a long-standing relationships data. So you can bring products, propositions whether directly to your own channels or through other channels. I think that is going to be successful. And we're very thoughtful about that in terms of how we're building our capabilities. I hope that gives you a quite a big picture on all those big topics. Thanks, Rob. Operator: Our next question comes from Amit Goel of Mediobanca. Amit Goel: So the first question is just on the broader capital generation targets. So one is more -- well, part of it is just a clarification. When we talk about the circa 200 bps for 2026, I guess does that exclude the Basel 3.1 effect, which comes 1st of Jan '27, or is that in there? And more broadly, just looking at the 2028 capital generation target, greater than 200 bps, just curious, it seems to be on the low side, especially if I think about the kind of RoTE target, greater than 18%. So just if you can talk to your ability to meet or beat or how you reconcile to? And then just the second question, just a shorter follow-up. But, when we talk about the circa 13%, CET1 target going forward, is that a level where you'd be happy to operate one quarter or the other quarter with 12% kind of handle starting point? Or is it basically you'll look to be at 13% plus throughout your kind of operating period on a quarterly basis? Paul Thwaite: Thanks, Amit. So let me knock 2 of them off pretty quickly. So on the cap generation, yes, it excludes the 1st Jan '27 increases from Basel 3. So hopefully, that gives you the clarity there. We've also said that we believe that will be around circa GBP 10 billion. So x is the answer there. On the third question or the kind of sub question on CET1 and 13%, obviously, we've been thinking about that for a couple of years. It's around 13%. So the way I would think about it is it's not a hard floor. So that's the way to think about it. And then on the broader question of '28 and capital generation. A couple of things. One is, it's important to remember it's on a growing balance sheet, so it includes the growth that we've talked about. So please bear that in mind. And I guess just a bit of context. Obviously, you can see 19% RoTE this year. You can see the capital generation at above 250 basis points. That's our third year of greater than 17% RoTE. It's on a balance sheet that continues to grow to the compound rate, and you need to bear that in mind when you think about capital generation going forward. And that obviously flows through to EPS, DPS and higher TNAV per share. So that's how I would think about that. And as ever, we're very clear. Our target is you can see how we position our targets. The intention for '28 is to be greater than 200 basis points. Hopefully, it gives you a good picture. Operator: Our next question comes from Christopher Cant of Autonomous. Christopher Cant: If I could ask one on RWAs, please. So really pleasing to hear the detail around how you're expecting to grow. I think that's an important part of the story. But obviously, you're now talking about this CAL concept for growth, which makes it quite hard for us to think about the capital intensity of growth. Obviously, capital intensity of AUMA or deposits within that number quite different to lending growth given us this new guide on the Basel 4 RWA impact, which I think is probably a bit above where consensus was. So if I could just invite you to comment on the consensus RWA expectations. I think we're at GBP 223 billion in 2028. That would be appreciated just so we can sort of understand how you're thinking about the RWA piece of the puzzle? And then on rates assumptions, please. Your base rate assumption is 3.25% flat, Fair enough as a planning assumption. Could I just understand what reinvestment rates you're assuming on the hedge within those gross income increments you've given us, given the flat base rate assumption, I assume you're assuming a fairly lift swaps curve or a reasonably low reinvestment rate? Paul Thwaite: Very clear, Chris. Thanks, Katie. Katie Murray: Sure. Thanks very much. So if I deal first of all, you kind RWA outlook kind of point. I guess, as we look ahead, 2026 has obviously been underpinned by the disciplined balance sheet growth that we've got, the increasing regulatory clarity as well as the kind of further active kind of management, but the primary driver will be the lending growth. One of the slides we have included in the appendix pack is, I think, on Slide 57, a bit of a detail on risk density to show you that the risk density of lending is stable. However, the volume will increase. So therefore, your volume of RWAs will follow through in that. And so you need to kind of bear that in mind as you go through. There could still be a couple of small additional impacts from CRD IV in 2026, we think that's largely done. But obviously, our models are in that final stage of the PRA and there can be a little bit of movement as you get them kind of finalized. I would also expect to see some further RWA management. I would say we've had a really stellar year this year on RWA management, so I wouldn't necessarily put that number into your model at quite that kind of high level, but it's something you will continue to see as we move forward from here. And then if I go to the hedge and in terms of that kind of reinvestment yield that we see, look, as you know, we talk a lot about the tailwind that's coming through on the hedge. And if I look at our current economic assumptions, there's in the -- of the 5-year average of reinvestment rates, 3.5% in terms of the product hedge and the 10-year gilt reinvestment rate of 4.5% over the next 5 years. So we do expect that hedge to deliver on an annual year-on-year tailwind into 2030. The second thing you need to think about as well is not just those rates, but also the size of the hedge. We are assuming an increasing notional balance coming through. So we're GBP 190 billion in 2025. We expect that to grow to GBP 200 billion in 2026. And then I expect it to grow steadily as we move forward to 2030, supported by that CAL growth. Obviously, some of that will be going into the hedge eligible deposits and others will be into the increasing size of the equity hedge. Chris, if you were starting with me to probably say, those rates feel a little bit low. If I were to mark them today, they'd be a little bit higher, That's a fair statement, and I kind of accept that. However, I, kind of sitting where we are today, am comfortable with the rates for our base assumption. We'll see that as it comes through. But overall, we are really confident of this tailwind that we see coming through on the hedge in the next couple of years, but also all the way out to 2030. Thanks very much, Chris. Operator: Our next question comes from James Invine of Rothschild & Co Redburn. James Frederick Invine: I've got a couple, please. The first is on the guidance. I mean, if we -- sorry, the revenue guidance that is. So if we start with your GBP 16.4 billion revenue that you printed for last year, you guided to the hedge being an extra GBP 1.5 billion, so we're up to GBP 17.9 billion. There's decent balance sheet growth. So that's another tailwind for that. I know you've talked about Bank of England rate cuts. But I think from what I can see, the second one only comes right at the end of the year. So I was just wondering what are the headwinds you've got kind of factored into the 2026 revenue growth, please? And then the second one is just on costs. So Paul, I think on one of your slides, you talked about doubling the number of coders to 12,000, but also the AI is now writing about 1/3 of their code. So from here, what are you expecting for where that number of coders needs to go? I can see reasons for why it might go up a lot, but also why it might come down a lot. So I'm just wondering what your view is, please? Paul Thwaite: Great. Thank you, James. Do you want to take income '26? Katie Murray: Yes, sure, let me kick off. Thanks, James. So as we look at that kind of guidance, GBP 17.2 billion to GBP 17.6 billion, we're very confident on it. We will deliver in that range. And if you look at it, what we will be delivering as a kind of 5% to 7% top line growth. So very good. Let me help you a little bit with your math. And there's a couple of things in there. First of all, and the most important thing in reality is customer activity. And where we kind of land in that range is going to be very dependent upon that kind of activity, I would say. But we have a strong multiyear track record of growth. You can see the growth that we're talking about this morning, what we've delivered in 2025, we would expect that to continue as we move into 2026. So, obviously, the mix will ultimately contribute into the income contribution. You're aware, we may talk about it more this morning as well, a little bit of pressure that there is on mortgage margins at the moment. We talked about that in Q3. And there's also some continuing competitive pricing going on in the savings products. The second bit is on rates. 2 rate cuts, they're actually penciled in my forecast in April and October. So Q2 and Q4 as they come through. So they will have a little bit of an impact. However, I think you've also got to remember that we're not at the start of the rate cutting journey. We're quite some way through it. So if you think of our sensitivity, we give you, we give you year 1, we give a year 2 and year 3. The way I think about that number, it's a kind of negative GBP 500 million against that positive of the hedge coming through because you've just got the cumulative effect of those rates coming through. So I would bring that in. And the third thing I would think about -- you heard me talk already about the RWA management action. They do come at a cost. And as I look into 2026 numbers, I would say the cost -- additional cost of the RWA actions that we've done would be an extra kind of GBP 100 million as well. So I would take that off. And that will get you very nicely into the range that we're talking to you about the GBP 17.2 billion to GBP 17.6 billion and it's -- we're very confident that we're going to be able to deliver that. So thanks, James. Hopefully, that helps. Paul, so I hand back to you. Paul Thwaite: Thanks, Katie. Shifting gear to quite a different topic. I guess, engineering and productivity of software engineering, James, is something we spend a lot of time on as a management team. It's definitely a topic du jour. And it's pretty obvious the AI developments have been transformational for us. All our engineering and coding teams have got access to AI tools. As you alluded to, we have around 12,000 engineers and that's been increasing over a number of years. But now we're at a situation where circa 35% of the code is written by AI. So I think over time, there will be choices around how you use that capacity. I think it's still an evolving picture. We've got a couple of quite exciting pilots running in 2 of our businesses in our international business and also in our financial crime area, where we're, I guess, what we call doing fully agentic press play software, and that's actually delivering 10x productivity gains. So that's where you've got agentic workflows, autonomous agents, their planning, building code, testing code, but obviously then overseen in a responsible way by human. So this space is, I think, exploding pretty quickly. And I think it's inevitable there'll be a change both in the profile of, let's call it, engineers in terms of the activities that they do. And then I think there'll be some choices about how you capture that productivity benefit to capture some of it to go faster, deliver more products and services to your clients and enhance the customer proposition. Or do you also see opportunities for -- we also see opportunities for productivity and efficiency. And I think all of the things being equal, that's a reasonable expectation over the short to medium term, that there'll be some productivity and efficiency opportunities moving forward. Hopefully, that gives you a flavor for it. But very excited by the work that's going on there. But we are very mindful that we're a regulated industry, and we're doing it in a very responsible and thoughtful way. Thanks, James. Operator: Our next question comes from Aman Rakkar of Barclays. Aman Rakkar: I had a question actually back on Evelyn. So, yes, I guess the market reaction to Evelyn has been what it is and coming in the backdrop of broader cross currents. But the feedback I've been getting is around potential execution risk around the deal. So I was kind of interested in your take around your comfortability, your confidence in your ability to kind of integrate this business and also extract value from it. If you could bring a bit more to life around perhaps the revenue synergy that the degree of confidence that you have that in 2 years' time will give me looking back and think there's a good deal. And the kind of related question is a repeat of a question from earlier this week. But could you -- can you help us with your assumptions around attrition? I think that is essentially a key unknown variable here. How are you thinking about attrition risk in the investment practitioners? And what kind of strategic actions are you going to have to take to ensure that your staff, but also your customers kind of don't leave. If you could help us with that, I think it would really help. Paul Thwaite: Great. Thank you, Aman. So let's start with integration. And then I'll come on to revenue synergies, and then we'll talk a little bit around, I guess, the value creation and ensuring we retain both critical people, but also customers. On integration, very high confidence, Aman. We've known the business and tracked the business for a number of years. We know people -- obviously, we know people in the business. So we know Evelyn very well. We've undertook quite extensive due diligence around it, whether that's the tech platforms, whether that's the cultural alignment. There's been a lot of investment since the, I guess, original combination of the business in 2020 into the tech capabilities. We've seen that, to all intents and purposes, the tech end of integration is complete. The benefits of those investments are actually now coming through for Evelyn. There's a lot of congruence and alignment between the underlying platforms that our acute business uses and Evelyn uses, that gives us confidence about we know the platforms, we know the systems. We have experts on both sides of the transaction who know those platforms and systems. So we feel very confident about that. And what we also have on both sides of this transaction, we have experienced people who have done M&A transactions and integrations. We've got our very recent experience and the team still on the park around the Sainsbury's acquisition. We've complemented that over the course of the last 12 months with individuals who've been involved in some really significant FS M&A activity over the course of the last 12 months. Obviously, given Evelyn's history, they've built experience there as well, having to integrate different businesses. So we feel we feel pretty confident around that, what I call that alignment around integration and the ability net-net to create a lot of value out of that. So that's integration, high conviction, high confidence. On revenue synergies, I guess we could talk a long time about that. Big picture, though, I think the really critical thing to remember here is there's a really big opportunity in helping a lot more people to save and invest for the future. We've got these regulatory tailwinds, which you know about the financial advice gap. And we also know that in the wealth industry, despite the historic kind of cautious investment culture, we've seen mid- to high single-digit growth in AUM. If you look at our own business, we've seen 12% compound growth in assets under management. If you look at our 2025 performance, 20% growth in AUMA, net new money of 8.4%. So that's the big picture that gives us, I guess, a sense of confidence. If you look at the drivers of income growth, you look at Evelyn's track record, over 7% since 2023 in terms of AUMA growth. And then on top of that, we've got the revenue synergies. So where do they come from? Three big opportunities, BestInvest, it's a really significant upgrade to our NatWest Invest digital platform. We have the opportunity to bring that to life for our 1.2 million premier customers and our 19 million, 20 million customers in Retail. The breadth of the BestInvest offering versus our current offering is incomparable. At the moment, NatWest Invest has 5 funds. We've got 3,000 products with BestInvest, 19 funds versus 5 funds, access to U.S. equities, U.K. equities, ETFs, investment trusts plus we have a relationship with those 19 million customers and the ability to surface these opportunities through the app. So that's the first big kind of, I'd say, opportunity. Then you look at the excellence that Evelyn has in terms -- and the scale it has in terms of financial planning and the biggest adviser -- employed adviser network in the country. Again, we can bring that to our 1.2 million premier customers. We can bring that to our high net worth customers in Coutts. Again, the breadth of the proposition really adds to, I guess, the wealth water front that we have in our Coutts business, and 2x in terms of our Premier business. And then the third synergy is, obviously, if you look at what Coutts size, you look what NatWest has, we have a range of banking products, lending and banking that we can bring and support Evelyn clients with. So, you don't have to make very -- when you work it through, as I'm sure you have a month. You don't have to make very big assumptions to see where the opportunities are, both in the underlying growth rate of the business but also in the revenue synergies and opportunities that there are, and that's why we're very high conviction on this from a strategic perspective and very high conviction that the value creation in both the short term and long term will be significant. Thanks, Aman. Operator: Our next question comes from Jonathan Pierce of Jefferies. Jonathan Richard Pierce: Two questions, please. Apologies if I missed an answer on this already. I had a few issues this morning. The first is on tangible equity. Really looking at consensus out to 2028. There's lots of moving parts I guess, here versus what consensus might have been thinking before. So Evelyn sit down, lack of buybacks, push it back up, you're now talking about a bit more growth than people had in. The GBP 33.4 billion of average tangible equity consensus has in '28. How are you thinking about that? Is that an appropriate number to be applying the greater than 18% to? Or could that be a bit higher than that? That's the first question. The second question is on the hedge. Can I just confirm and I heard correctly on the equity hedge that you're now showing the income from the equity hedge as though it was invested in 10-year gilts rather than 10-year swaps. Is that obviously is going to give you a better yield and a better tailwind than if it was swaps. And you've obviously dropped the disclosure on the maturity yield on the product hedge. Just want to get a sense as to what that is in 2028, please, because obviously, the notional is growing, that all else equaled that the hedge income is going to grow, but I'm not sure that is a sort of underlying feature. What's the maturity yields, please, on the product hedge in 2028? Paul Thwaite: Thanks, Jonathan. Katie? Katie Murray: Sure. Thanks very much, Jonathan. So as we look, first of all, at the kind of the TNAV question, I think it's been -- it's important to look at the kind of T, the Evelyn versus share buyback and things of that, even with the capital allocation conversation as far as we're talking about in terms of TNAV. So it actually has no impact on your 2028 TNAV. And by that, I mean, if we haven't done Evelyn, we distributed the capital because our belief is to access your capital to you. So it was already out of that TNAV calculation. When you think of the TNAV, it's really CAL you've got to think about and within there, obviously specifically loan growth. There's a little bit of unwind of the cash flow hedge. But if you think of our loan growth that we've done over the last number of years, we're always -- we've been consistently above 4% within there. I could use that as a good proxy for TNAV if I were you. So therefore, I would say as I look at my number versus your number, I try not to compare myself to consensus, I would probably guide you to that 4% a little bit and kind of lift up a little bit as you go through. I know you're absolutely right as well if I move on to the hedge. We have over this last -- well, as we look as part of our kind of management of the hedge to sort of say where our opportunities. And so we have moved some of our equity hedge into gilts and because we felt we were getting a better return there and we can absolutely see that return coming through in terms of the extra GBP 50 million that we report within there. The equity hedge is GBP 25 billion in size. It's not by any means all in gilt, something we've just started to do relatively recently. And -- but we'll continue to -- we expect to continue that move as we see the kind of gilt return being a bit better than the swap return. We're not particularly constrained on the size of that. I would discourage you from saying, although start to do that on the credit hedge, the product hedge we won't just because it's a very different beast. We've got a lot of natural kind of product offset that we see within there, but it definitely is helpful to us in terms of that delivery. And Jonathan, I'm going to disappoint you a little bit and not give you the numbers, I've chosen not to disclose this morning. But you can sort of see that what we have given you is that combined yield. We've also given you the numbers as we go through. I know that one of the questions that has been going around is around actually that redemption yield and what it looks like specifically in 2028. So if I look at the kind of 2028 redemption yield for the structural hedge, it is slightly below 4%. Currently, we do see '28 as a kind of peak and it's always a favorite analyst term, the kind of peak redemption yield level, but we see that falling then into '29 and '30. I would say it's the only year that we do see the redemption yield being above our reinvestment yield. And the difference is probably 30 to 40 bps on that number. However, I think really importantly, there is a reason that we don't worry about this. It's more than offset by the compounding benefit of the hedge reinvestment over 2026 and 2027 and of course, the expected increase in our hedge nominal over the period, again, in line with our CAL guidance. And that's just why we are really comfortable about this annual income tailwind that we see through to 2030. I hope that helps you without giving you the exact numbers you're maybe searching for. Operator: Our next question comes from Guy Stebbings from BNP Paribas. Guy Stebbings: The first one was going back to the income guide for '26, but refocusing on net interest income. I mean, I appreciate you don't split out the guidance as such. But if we think about noninterest income perhaps broadly similar to '25, maybe a bit of growth as per consensus sort of ballpark 3.6%, then it looks like you're thinking about an NII around GBP 13.6 billion to GBP 13.9 billion. Q4, you're already sort of annualizing within that range. So I just want to check, is that the right way to think about it, and you're not really anticipating a lot of NII growth versus the Q4 annualized run rate and the rate cuts, I guess, lost NII from SRTs or mortgage return could almost be offset the hedge and volume growth, still a touch conservative. I just want to check my thinking there. And then on rate sensitivity. You're now talking to an increase to GBP 157 million on the managed margin sensitivity. I think that's 30% to 60% deposit pass-through. I appreciate the capacity reasons, you're not going to say exactly what you're assuming in the future, but maybe you can talk about how that's trended in particular in terms of the December rate cut. And I'm not sure, Katie, you mentioned something about a buildup of rate sensitivity as time progresses. I wasn't sure if that was sort of related to this point or something else. So perhaps you could elaborate. Katie Murray: If I miss any of them, Guy, do come back and forgive me. So I guess, as we look at the income guide, first -- my first guidance would be, and you've heard say before try to look at the 3 businesses. You remember that in the center, we've had a lot of sort of movement between noninterest income and NII. And that kind of -- if you just take the total NII that does kind of confused it a little bit. We talked a little bit about Q3 that we put in some hedge accounting to help resolve that. And what you will see as we go through the next few quarters as you won't see those big flips kind of going from NII to non-NII which is why I would say, really look at the 3 businesses. We are confident on the momentum that we see in the underlying customer activity and the underlying momentum we have in the business. But we would not -- we would expect to see noninterest income across the 3 businesses growing into 2026 from here as well. If I look then to the rate sensitivity, we've issued new ones today. The change in the amount is very much reflective of the sort of the size of the balance sheet as well. We work on a 60% pass-through. I would say broadly, when you look across a number of rate cuts, we're definitely -- we're in that sort of space as we come through from there. So that's not particularly changed. And I think that's a good proxy for you to continue to work on. And then I think your last point was very much around the income, and you've got this -- what's happening on the rate sensitivity. So if you look to 2026 income, what we've got is the impact of the rate cuts that we had in 2025, you will now have a full annual impact of those. And then I've also got 2 rate cuts in 2026. April, October, as I said earlier, when I look at those and kind of do my kind of math on them, I kind of see them as a drag of GBP 500 million, against the kind of income numbers that we've got through there. Obviously, going against the hedge, which is adding GBP 1.5 billion. So still strong growth, but that's why we're talking about in that part. It wasn't specifically on pass-through and things like that or our traditional rate sensitivity disclosure. Hope that helps. And I think I got all. Paul Thwaite: Hopefully we captured everything there, Guy. Operator: Our last question today comes from Ed Firth from KBW. Edward Hugo Firth: I had two questions. One was on detail. You mentioned that one of the reasons for the, I guess, reasonably cautious income expectations from '26 was the cost of capital actions. I'm just wondering if you could give us roughly some idea of what quantum you're assuming that, because obviously that was a big driver of risk-weighted assets from '25 would be helpful. And to get a guide for '26 if that would be helpful. And then I guess the second question was, you are interacting with a lot of banks, when we look at up in your AI slides and the tech slides and lot to talk about 10x productivity and massive production of that. And yet, when I look at the cost expectations for the sector as a whole, the actual efficiency improvements in terms of cost to loans, cost of risk weight now barely moved in the last 4 or 5 years. And expectations are to be barely moving going forward as well, a few basis points here and there. And so I mean, are we going to get this to a quantum shift in the cost of delivering banking that we're talking? And I mean not just like inflation above like in theory, the unit cost of delivery in banking products should go down massively with a digital delivery. And yes, we don't ever seem to be seeing -- and so I'm just wondering, you're thinking, is there a time like post '28 where we can suddenly see this transformation? Or do we have to accept -- but actually, you're just replacing cheap brand staff with expensive software engineers. Katie Murray: Can I take the first? Paul Thwaite: Do you want take -- Katie, quickly do income, and then I'll give my thesis on efficiency. Katie Murray: Yes, thanks, Paul. So you'd expect me to say this, I would say to you that our 2026 income guidance is certainly very reasonable and not cautious. I think I've given you the maths and all the building blocks as to how you can see that. In terms of the specific question on the cost of the capital actions, what I said earlier is you should think in your model of a negative GBP 100 million in 2026 in terms of that additional cost. They make great sense to do. You can see that we actually, in effect, paid for all of our lending with those capital actions, and that's taking off lower performing capital and replacing it with higher performing. So we're really pleased with the performance of the business on that piece. But think of it as an additional GBP 100 million. And Paul, would you like to... Edward Hugo Firth: Sorry. Katie, in terms of risk-weighted assets, what sort of reduction do you get to that GBP 100 million? Katie Murray: So in terms of that, so I think the numbers that it's GBP 10.9 billion was what we took off this year. I'm struggling to remember the number from the previous year, but, I think it was around GBP 7 billion. And that's the kind of level that we've seen. What you -- those are multiyear transactions. So some of that risk-weighted assets started to roll into 2026. Obviously, there's a little bit of unwind within the year, and then we'll do some further transactions in the year as well. Paul Thwaite: Thanks, Katie. And then, Ed, on your -- I guess, your question around, I guess, unit cost of our assets that as different to or versus cost income ratio. That's actually that's because of management team we spend time on because we do think that's a very valuable and useful ends. I think the -- you can see by the numbers we've shared today. The cost income ratio has come down -- part of that is income going up. But the reality is the absolute cost base has gone up a little bit, well below inflation, well below wage inflation. The targets we've set out imply less than 45%. That makes us the most efficient large U.K. bank. So by definition, our expectations are that costs will continue to be continue to be well managed. And I've signaled today. I think Katie said it as well, and we see opportunity beyond '28 to go beyond that. I do think that genuinely is a significant change going on, where you can see a business model and operating model that operates at a much lower cost base with a higher income base that drives obviously with greater returns on equity, but also, we'll start to see the unit cost over assets because you've got the growth coming through reduced as well. Time will tell where that plays out. But I think what we've laid out today. And I do believe we've got this flywheel of kind of cost efficiencies going well. Time will tell, but I do think we've got very good momentum in terms of improving the underlying kind of unit cost base of the bank. So as you say, I mean we'll get there, but that's how I think about it. We use both lenses. Thanks, Ed. Operator: Thank you for your questions today. I will now like to hand back to Paul for closing comments. Paul Thwaite: Yes, that seems to go quickly. So thank you, everybody, for joining us for the second time this week. As you've heard, we've delivered a very strong performance in 2025, continuing our track record of growth on both sides of the balance sheet and fees. Very attractive returns for shareholders. Our total distributions for the year were GBP 4.1 billion. That includes the GBP 750 million share buyback we announced on Monday alongside the acquisition of Evelyn Partners. That creates the U.K.'s leading private bank and wealth manager, we're very excited by that because it gives us another growth engine for the group. So hopefully, you've seen from today's numbers, we're ambitious for the business. We've set out new targets and we're determined to deliver returns greater than 18% in 2028. Thank you. Have a good weekend. Operator: That concludes today's presentation. Thank you for your participation. You may now disconnect.
Philippine de Schonen: Good morning, everyone, and thank you for joining us this morning. We are pleased to welcome you to our Kering 2025 Full Year Results. We are here with Luca de Meo, CEO of Kering; Jean-Marc Duplaix, COO of Kering; and Armelle Poulou, CFO. This presentation will be followed by a Q&A session. Luca, the floor is yours. Luca de Meo: Thank you, Philippine. Good morning, everyone. Very happy to be with you today. Of course, 2025 was not the year we wanted. I think it didn't reflect the full potential of Kering, and we all know it here. But what matters is our response, swift, disciplined and unwavering. Since the second half of the year, I can ensure you we have been taking action decisively to put the group back on the right trajectory. I think we're still far from where we want to be. We don't have everything in place yet, but we are building every day with focus. Our objective is clear, reignite desirability and prepare the next cycle of growth house by house, product by product, client by client. So 2025 was a turning point, not because of the numbers, but because of the decision we started to take. And I want to thank Francois-Henri and the Kering Board of Directors for their trust, their support. This trust allowed us to move fast and to start shaping the strategy, we will present during our Capital Markets Day in May (sic) [ April ]. Over the last month, we strengthened our financial flexibility. We reshaped parts of our portfolio. And we made bold strategic moves to give our houses the space and the time they need to regain momentum. A very important step, of course, was the partnership with L'Oreal. It allows us to accelerate the development of our beauty business with the #1 player in the world, unlocking power that we could not reach alone and also prepare our entry into the high-growth wellness and longevity segment, a space where we want to play and where we know value and growth will be created. In jewelry, the progressive acquisition of Raselli Franco, I think, reinforces our industrial capabilities in a category where we see tremendous potential. It gives us more control, more know-how and more capacity to scale. And this is only the beginning. Sharing the full ambition of our jewelry strategy is, of course, also on the agenda of the Capital Market Day. In parallel, we started to reinforce our operational discipline while protecting everything that makes our houses desirable. 75 fewer stores in 2025, net, a sharper, higher quality retail footprint, 8% reduction in inventories at the year-end, and we will go further in 2026. EUR 925 million in cost savings, down 9% compared to 2024, improving our agility and focus while preserving creativity and craftsmanship. On sustainability, I want to say that Kering remained at the forefront in 2025. It's a real competitive advantage, recognized again this year with our CDP Triple A rating for the third year in a row. But beyond recognition, we focused on delivery, closing our 10-year sustainability strategy and already shaping the next chapter, which we will present, of course, at the CMD. For us, at Kering, sustainability is not a separate agenda. It guides the way we create, source and operate the business. Producing less but producing better will remain a core principle to protect our brand equity, our clients and our environmental footprint. 2025 also marked the beginning of a creative renewal across houses, new creative leadership, new expression between heritage and innovation at Gucci, at Bottega Veneta, at Balenciaga. I think the feedback is encouraging. We are not celebrating anything yet, but I believe the momentum is building step by step. And one conviction has become even stronger week after week, day after day, creativity is our North Star. It is what sets luxury apart, but creativity only becomes value when execution follows at the same pace, in retail, in supply chain, in merchandising, in marketing. This is where we are putting our energy into. On the ground, the acceleration, I believe, is already visible. I spend time every weekend in our stores seeing the teams, talking to clients, feeling the product. And I can tell you, there is energy coming back. Our products are reconnecting with our clients. We saw progress in Q3 and Q4 with sales trends improving quarter after quarter. The momentum is real, early, fragile but real. And I can guarantee you that we will build on it. Before handing over to Armelle, let me highlight the key figures for the year. Excluding Kering Beaute, revenue for 2025 amounted to EUR 14.7 billion, down 10% on a comparable basis, with a clear sequential improvement throughout the year and Q4 at minus 3% on a comparable basis. This revenue level reflects the low point of the cycle and the starting point of our rebound. Recurring operating income reached EUR 1.6 billion, corresponding to a 11.1% EBIT margin, showing the impact, of course, of a difficult top line. Operating income will now start to benefit from the first effects of our work on top line and efficiency. Free cash flow amounted to EUR 4.4 billion, including real estate transactions. And finally, net financial debt decreased by EUR 2.5 billion to EUR 8 billion even before the impact of the L'Oreal transaction, which we will close in the first half of 2026. These results are not where we want to be, but they mark the bottom and the first steps of the turnaround we have initiated. Armelle will now take you through our operational and financial performance in more detail. Armelle, over to you. Armelle Poulou: Thank you, Luca, and good morning to all of you. As you have clearly stated, 2025 was a turning point we needed. The figures I will present confirm this low point. But let's be clear, these numbers establish a starting line from which we are now driving our turnaround, and they are the evidence of the financial discipline that underpins our strategy. Let's start with revenue on Slide 8. As a reminder, in accordance with IFRS 5, Kering Beaute has been deconsolidated from our fiscal year 2025 accounts and has been restated from 2024 figures to provide proper comparison. So all figures discussed in this presentation exclude Kering Beaute. Full year revenue reached EUR 14.7 billion, down 10% in comparable terms and 13% reported. ForEx was a 3-point headwind, mostly due to the strengthening of the euro against the dollar and the yen. The scope effect was immaterial, linked only to the turnover from The Mall for 1 month disposed of in January 2025. But the annual numbers don't tell the whole story. The critical point is the sequential improvement we delivered throughout the second half with Q4 showing a clear acceleration. This tells us our actions are starting to gain traction where it matters most, with our clients. Our geographic footprint remains well balanced across regions. We see the stable profile, we saw some mix adjustment during the year. Asia Pacific declined by 2 points to 29%, while North America and Western Europe each gained 1 point. Japan and the rest of the world maintained their respective shares. Slide 9 shows that throughout the year, we saw a gradual recovery with Q4 coming at minus 3%, representing a sequential improvement versus Q3 despite a more demanding comp base. The acceleration in trends was visible across all segments, returning to positive territory, except for Gucci. At group level, in Q4, AUR grew high single digit with only a minor impact from pure price increases, reflecting our actions to improve the mix within our brands. Conversion rate improved slightly, which is also encouraging. On the other hand, traffic remained soft. December, despite facing the toughest comparison base of the quarter, delivered a performance slightly better than we expected and remain consistent with the overall quarterly trend. On Slide 10, let's take a closer look at revenue by channel. Retail, including e-commerce, accounting for 76% of total revenue with the balance coming from wholesale, royalties and other. For the full year, retail declined 11% comparable with improved trends in the second half. After a 9-point sequential improvement in Q3, our retail channel, which is the heart of our business, saw its performance improved by 3 points in Q4 versus Q3, ending the quarter at minus 4% comparable despite a tougher comparison base. This progression was driven by a strong AUR but also by some improvement in volume trends. Included in retail, e-commerce was down 12% comparable in 2025 and represented 11% of retail sales in line with last year. Online performance also improved progressively throughout the year. Wholesale and other revenue declined 7% on a comparable basis in 2025. Consistent with our move towards greater exclusivity, together with a challenging market situation in some regions, wholesale was down 19% for our luxury houses. We have delivered on our plan to strengthen the control of our wholesale distribution, bringing down wholesale revenue for our luxury houses in line with the target we set in February 2024. In the fourth quarter, wholesale and other revenue were down 2% on a comparable basis. For our luxury houses, wholesale posted a sequential improvement with a decline contained to 9%. Kering Eyewear reported a solid and consistent wholesale performance, up 3% in 2025 and in the fourth quarter. Royalties and other revenue were up 6%, both for the full year and in Q4. Now turning to retail trends by geography on Slide 11. As you can see, we registered a sequential improvement in 3 of our 5 main regions in Q4 and a sequential improvement in all regions if we look on a 2-year stack. Western Europe was down 7% in Q4, in line with Q3 despite a tougher comparison basis. On a 2-year stack, however, retail sales in Europe have improved 4 points restated from Kering Beaute. Tourism remained weak, affected by the decline in Asian visitors. Local demand accounting for 51% of the total was still subdued, though not consistently across brands. Saint Laurent returned to growth in the region. For the full year, Western Europe was down 11% on a comparable basis. In North America, Q4 delivered a 2% comparable growth, maintaining solid momentum with only a 1 point deceleration versus Q3 despite a 5-point tougher comparison base. The higher-end segment performed better. And importantly, Gucci was flat in Q4 versus last year, marking the end of the decline in the region. For the full year, North America was down 5% in retail with the U.S. cluster broadly in line with the region. Japan improved in Q4 to minus 7%, supported by a more favorable comparison basis. Tourist purchases accounted for around 33% of sales in the country. Local trends were similar to Q3. The decline in tourist spending continued, but was less pronounced than in prior quarters. We can highlight that in Q4, Bottega Veneta turned positive in Japan. For the full year, Japan retail was down 16%. The appreciation of the yen, combined with the rebalancing of price gaps between geographical zones, significantly reduced the market's attractiveness for tourist customers. Asia Pacific showed a clear acceleration in Q4 at minus 6%, marking a 5-point improvement versus Q3, driven by Mainland China, Hong Kong, Taiwan and Korea. The Chinese cluster also improved slightly quarter-on-quarter, ending the period down mid-teens. For the full year, retail in Asia Pacific was down 16%. Finally, Rest of the World was up 3% in Q4, fueled by Middle East and to a lesser extent, Latin America. For the full year, retail in the Rest of the World was stable, slightly positive in the Middle East. Now let's move to results on Slide 12. At EUR 1.6 billion, recurring EBIT was down 33% year-on-year, representing a 340 basis point margin dilution and that was more contained in the second half with a 120 basis point decrease. While the 11.1% EBIT margin reflects the top line pressure, it more importantly demonstrates our efforts. To protect our profitability in such a challenging environment, it required rigorous cost management and deliberate choices. This discipline is precisely what provides a healthy financial foundation to fund our comeback. To support our brands, we continue to invest selectively in key areas while maintaining strict cost control in others. We delivered EUR 925 million in savings this year, reducing our OpEx base by 9%. This was not about blind cost cutting. It was a smart reallocation of our resources. We successfully protected creativity while boosting our efficiency, which is precisely how we are rebuilding our firepower to invest in our brands. At year-end, our store count was 1,719, a reduction of 75 units, fully in line with our plan and reflecting our strategy to upgrade the quality of our footprint, fewer stores, but in stronger and more strategic locations. In 2025, we opened 58 stores and closed 133, resulting in these net 75 closures. Our store network is being assessed constantly, and we have accelerated its rationalization by closing stores that no longer support our ambition to strengthen sales density. This is why in 2026, there will be another reduction of the retail footprint with 100 net closures already planned and more still under discussion. In the fourth quarter, we closed 18 stores, but we also continue to enhance the quality of our retail network with key openings, including the stunning Saint Laurent flagship on Avenue Montaigne in Paris, a new Bottega Veneta store in New York's Meatpacking District. We also expanded the Boucheron presence in the UAE with openings in Dubai and Abu Dhabi. At EUR 2.3 billion, free cash flow generation, excluding real estate transaction, was down 35% compared to 2024. Including real estate, it amounted to EUR 4.4 billion. CapEx, excluding real estate transaction at EUR 0.8 billion was down almost 30%. The CapEx to sales ratio was 5.4%, declining 1 point versus last year. We prioritized investments to upgrade the store network of our brands and selectively expand its footprint. Net debt stood at EUR 8 billion at year-end, down EUR 2.5 billion versus last year, confirming that our deleveraging strategy is firmly on track and that financial pressure continues to ease. In addition, the EUR 4 billion cash inflow from the Kering Beaute deal will further strengthen our balance sheet in the first half of 2026. I will now comment on our houses, starting with Gucci on Slide 15. Revenue for the full year came in at EUR 6 billion, down 22% reported and 19% comparable. Retail, down 18% comparable, accounted for 92% of sales. Wholesale decreased by 34%, and royalties declined 2%. In Q4, retail was down 10% on a comparable basis, showing a clear sequential acceleration driven by almost all regions, except Western Europe. The 3-point quarter-on-quarter sequential improvement was supported mainly by North America and APAC. The launch of La Famiglia collection, together with the surrounding activations has put Gucci back at the center of the attention. Newness trends, including revamped carryovers, continued to strengthen, reaching 60% of the mix in Q4. The AUR increased, thanks to the improvement in the performance of handbags. There was nearly no pure price increase. Wholesale was down 34% on a comparable basis for the year, reflecting the strategic rationalization of this channel and a reduction in the number of doors. In Q4, wholesale was down 14%. Gucci posted a full year recurring operating income of EUR 966 million, resulting in a 16.1% EBIT margin. There was a negative operational deleverage from lower sales, but it was partially offset by substantial efforts on the cost structure while reinvesting in product development. Over the year, the house continued to elevate its retail footprint, closing 32 stores, mainly in Asia Pacific and Japan. This is part of its strategy to reinforce its presence in the prime location and offer an increasingly exclusive experience to its clientele with exiting lower contribution sites. Some highlights on Saint Laurent, Slide 17. Saint Laurent delivered EUR 2.6 billion in full year revenue, down 8% reported and 6% on a comparable basis. Retail declined 6% comparable, and wholesale decreased by 14% as the house continued to streamline and elevate its wholesale network. Focusing on Q4, retail was flat year-on-year, marking the third consecutive quarter of sequential improvement, supported by better trends in Western Europe and Japan, while North America remained positive. In leather goods, new launches and reinterpretations of iconic bags were very well received, even if they did not fully offset for the softness in carryovers. Women's ready-to-wear and footwear collections delivered strong growth, fueled by the success of the latest collections and new introductions, particularly in footwear such as the loafer and the Babylon. Traffic remained under pressure in Q4, but this was offset by a higher average ticket and stronger conversion. Wholesale grew 5% comparable in Q4, reflecting a phasing effect. Full year recurring operating income reached EUR 529 million, delivering a robust 20% margin. The house maintained its profitability through efficiency measures that help reduce the cost base. The year was also marked by major investments in high-impact retail locations with several flagship openings. The relocation on Avenue Montaigne in Paris inaugurated in Q4 has been performing exceptionally well and the reopening of the Via Monte Napoleone 8, flagship in Milan, further strengthened the house's footprint in prime luxury destinations. Moving to Bottega Veneta on Slide 19, whose full year revenue was EUR 1.7 billion, up 3% comparable. Retail activity remained robust with revenue accounting for 86% of sales, up 4% on a comparable basis. Wholesale declined by 6%, in line with Bottega Veneta's strategic focus on selective distribution. Royalties delivered a strong 25% increase, benefiting from the initial launch of Bottega Veneta fragrances. In Q4, retail posted a solid plus 5% comparable despite a very demanding comparison base. North America was a key contributor, delivering mid-teens growth in the quarter. Performance continued to be driven by the strong appeal of the leather goods offering, while the brand expanding across other categories. In Q4, Bottega Veneta recorded double-digit growth in ready-to-wear and shoes. Revenue also benefited from a sustained increase in AUR and from the recruitment of new VIC clients. Wholesale declined 9% in Q4, consistent with the brand's disciplined approach to distribution. Full year recurring operating income reached EUR 267 million, up 5% year-on-year, resulting in a 15.6% margin. Gross margin improved, and the brand continued to invest in communication and store upgrades to support its strong momentum and reinforce its positioning. Comments on our Other Houses are found on Slide 21. At EUR 2.9 billion, 2025 revenue was down 6% on a comparable basis. Retail, which represented 77% of sales declined 4% comparable, while wholesale decreased 15% comparable as our soft luxury houses continue to strengthen their control over the distribution. In Q4, retail revenue rose 6% on a comparable basis, while wholesale was down 9%. Trends across our soft luxury brands remain contrasted. Balenciaga delivered a sequential improvement, with retail turning positive in Q4 in Asia Pacific, and maintaining solid momentum in North America. For Alexander McQueen, the year and Q4 remain challenging. We are taking firm and decisive actions to restore sustainable performance. The restructuring plan of the brand is well underway. It included the closure of 21 stores in 2025. Brioni delivered another strong year, with Q4 revenue up double digits, driven by excellent traction in Western Europe and Rest of the World. Our jewelry houses once again posted very robust trends in Q4, confirming the strong desirability and resilience of our houses. Boucheron achieved outstanding momentum, with revenues up in the mid-20s on a comparable basis and outstanding performance in Japan and Asia Pacific. Pomellato pursued its steady trajectory with solid resilience in Asia Pacific and line growth in both North America and Japan. Qeelin had another sound year, up in the mid-teens with a clear acceleration in the second half. The jewelry division continues to be one of the group's most dynamic growth engines, supported by strong brand equity, consistent investment in creativity and craftsmanship. At the same time, Boucheron expanded its geographic footprint by opening new stores, notably in Los Angeles, Rodeo Drive, Shanghai, Xintiandi, Abu Dhabi and 3 openings in Dubai. Recurring operating income for the Other Houses amounting to minus EUR 112 million in 2025 as soft revenue performance at Balenciaga and losses at Alexander McQueen weighed on profitability despite ongoing deep restructuring efforts. Conversely, Boucheron delivered higher results over the period, supported by strong brand momentum and disciplined execution. Now turning to Kering Eyewear and our Corporate segment, which no longer includes Kering Beaute. On Slide 24, revenue at Kering Eyewear came close to the EUR 1.6 billion mark this year. Comparable revenue was up 3%, both for the full year and in Q4. Performance was driven by sustained growth in Western Europe as well as in the optical category. Kering Eyewear operating income stood at EUR 252 million, reflecting a solid operating margin of 15.8%. The slight moderation comparative to last year mainly stems from higher custom duties and continued strategic investment in Maui Jim to support its development in new markets. As for Corporate costs, they were down EUR 10 million year-on-year, reflecting ongoing efficiency initiatives. The remaining lines of the P&L are summarized on Slide 24. Nonrecurring result was negative EUR 584 million. This reflects a combination of items, including capital losses on real estate deals in Paris and New York, offset by gains from the sale of the building in Japan and the disposal of the mall, impairment and restructuring charges related to the streamlining of our store network and organizational optimization initiatives, adjustments related to the building at Via Monte Napoleone 8 in Milan following its reclassification under assets held for sale and finally, the European Union Commission (sic) [ European Commission ] fine which we communicated on in October. Net financial charges amounted to EUR 594 million compared to EUR 614 million last year. The cost of net debt at EUR 328 million was broadly stable with the average coupon on our bonds remaining at 3%. Corporate tax amounted to EUR 354 million, down substantially from last year. The tax rate on recurring income was 36%, above our normative tax rate, mainly due to the losses generated in the United Kingdom by Alexander McQueen and by the one-off impact of the reclassification of Kering Beaute into discontinued operations. For 2026, our best estimate so far is a tax rate around 33%. We will be gradually back to our normative tax rate of 27% to 28% in 2 to 3 years. Net income group share amounted to EUR 72 million and to EUR 532 million, excluding discontinued operations and nonrecurring items. A few comments on free cash flow on Slide 25. Net cash flow from operating activities reached EUR 3.1 billion, down 34% versus last year, in line with the decline in recurring operating profit. It benefited from lower taxes paid, but the change in working capital was more limited than in the previous year. Excluding real estate transaction, free cash flow from operations was EUR 2.3 billion. Slide 26 illustrates our disciplined capital allocation in action. This year, we focused on strengthening our balance sheet. Through sound cash generation and real estate refinancing, we achieved a significant EUR 2.5 billion net debt reduction, bringing our year-end position to EUR 8 billion. This demonstrates our commitment to a strong financial profile with a resulting leverage ratio of 3.4x. So this net debt reduction will continue this year. A quick look at our balance sheet and financial structure on Slide 27. You will notice that we have reclassified EUR 5.2 billion in assets held for sale, corresponding to EUR 3.7 billion net for the Kering Beaute division to be sold to L'Oreal, closing expected in H1 and EUR 1.3 billion for our building Via Monte Napoleone as we expect to close the transaction in 2026. Our net debt-to-equity ratio stood at 51%, an improvement from 67% last year, reflecting the positive impact of the real estate refinancing operations. Inventories decreased by 8%, and our operating working capital ratio increased by 0.8% year-on-year. It stood at 17.7%, up from 16.9% last year. Reducing inventory remains a key priority for the year, and we expect to bring them down further in 2026. My final comment relates to the dividend on Slide 28. The Board of Directors has proposed a dividend of EUR 3 per share. In addition, an exceptional dividend of EUR 1 per share will be proposed related to the disposal of Kering Beaute to L'Oreal. Both dividends are subject to shareholder approval at our next AGM. Return to shareholders is a key priority in our capital allocation framework. Our ambition is to resume dividend increases as of 2026, in line with the expected improvement in our performance. This ends my remarks. I thank you for your attention, and I will turn the mic back to Luca. Luca de Meo: Thank you, Armelle. So as you can imagine, we still have a lot of work to do. Of course, not all the foundations are in place yet. But the good news is that we are moving forward with speed, with discipline and with a lot of determination. 2026 will be an important year for Kering, a year of construction, reconstruction and certainly transformation, a year in which we aim to return to growth and improve our margins, of course, step by step. We ended this year with a very clear view on the challenges ahead. We know that the environment remains uncertain, but we also enter with a lot of fighting spirit. We are convinced that our race is against ourselves. No matter what happens around, we have to raise our own bar, strengthening our fundamentals and executing better day after day. On April 16, at our Capital Markets Day, we will present the strategy of the group, the strategy of each of our houses and how they will rebuild desirability and regain momentum and the road map, milestones and operational drivers that will support this transformation. I think we're building a leaner, more agile organization powered by a strong group platform, bringing together industrial excellence, client expertise and tech and AI, sustainability and support functions, all aligned behind the same objective. And at the core of this platform, we will embed innovation in products, in client experience, in operation and in technology, innovation that enhances creativity, accelerates execution, strengthens our houses and brings value and new value to our clients. This group platform will give our houses the scale, the clarity and the capability that they need to focus on what creates really value, desirability, craftsmanship and top line momentum. And above all, we will drive this transformation as one team with aligned leadership, accountability, empowered people and the real culture of excellence in execution. On April 16, we will show ambition, but ambition we can deliver with humility, with intensity and with the determination that is typical of a real challenger. So thank you very much for your attention. I think we are now available to answer all your questions. Philippine de Schonen: Thank you, Luca. So we'll now open the Q&A session. [Operator Instructions] We have the first question from Luca Solca, Bernstein. Luca Solca: I hope you can hear me all right. Philippine de Schonen: Yes. Luca Solca: I wonder when you look at the brands in the portfolio and you look at criteria such as how prepared the vision is and how appropriate the vision is, what is the momentum that you are seeing in the market at the moment? What is the state of organization and leadership in place in these brands? What is the cost profile or the CapEx requirements? Whether you see that, as you said, Luca, you have a lot of work to do in a relatively uniform way? Or whether you see that some of these brands are further ahead, and some of these brands have more work to be done? I'm trying to focus on the current snapshot rather than sort of trying to steal the thunder from the Capital Markets Day when you will tell us the plans. But just an assessment of what you think the starting point is by brand if you were to force rank them in terms of which ones are already prepared and which ones are further behind. Maybe a similar assessment on the broader business. You sort of highlighted efficiency ambitions. Where do you stand on this efficiency program? At the moment, do you think that the bulk of it is yet to be realized? And for example, when it comes to the number of stores that you're planning to close, what would be the floor space reduction that you're aiming to achieve? And what are the other cost buckets that could potentially contribute to making the bottom line richer? Luca de Meo: Okay. It's a very broad question. Look, I'll try to be as sharp as possible. I would say Bottega and Saint Laurent are very sharp, very desirable brands when you look at the -- and attractive brands when you look at the numbers. I think the challenge or the opportunity, let's put it like this, with those 2 brands is actually to enlarge and to grow them. This is -- so I think we are pretty much in the place where we should be from a positioning point of view. And I believe that we have a lot of potential in terms of growth, both geographically, but also in the product offer. This is exactly what we're doing internally. Gucci is -- used to be in a different situation. You know that Gucci was a brand that had suffered in the last years in terms of desirability. I think we have -- you have probably noticed that we have -- apart from the nomination of Francesca, we have basically completely changed the executive committee. I think it's one of the best team in the industry right now, just look at their track record and their experience. We are working, of course, on the brand strategy for the Capital Markets Day. But in fact, they moved very, very quickly and making some clear decision, and we already see some signs on Gucci. You've seen also that into the numbers, that Gucci is kind of rebounding from the lowest point. But of course, there's much work to sharpen the position to get back to what Gucci is expected to be in the market. Conceptually, it's not very complicated. We have to execute it properly at all levels from product to distribution to marketing to creativity and innovation. You have Balenciaga, could be, let's say, that kind of movement from -- also the change on the Creative Director. Both are great people, but they have a different style, might, let's say, induce the idea that we have a question mark on Balenciaga. But what I could learn is Balenciaga is a very powerful brand and is, my opinion, a bridge to the next generation. This is one of the brands that brings young people, alternative people, people that really like avant-garde fashion into the group. So it has a very, very, let's say, important function into the portfolio. You have -- so these are the big brands. On the jewelry business, I think we are -- there, well, we should be with Boucheron. We have to grow it. I think that the acquisition of Raselli will give us that kind of industrial product development power that will enable us to really do bigger business with jewelry because I think it's underrepresented in our business mix. So we are, with that category, slightly above EUR 1 billion in terms of turnover. I think we can do much more. And then you have cases that are a little bit more complicated like McQueen, where the brand is making losses, important losses. And there, I think the solution is, it's very simple, is that we have to restructure. We have to get back McQueen in terms of cost structure, an investment where, in a coherent way, to the potential of the brand. That's the first step. And we will see then later what we will do with it. But we are already going that kind of process. I think we're closing stores, for example, because McQueen was with more than 130 stores, owned stores, and this was simply too big for the potential of the brand. So we have to resharpen the positioning and lower down the breakeven on the thing. It's a simple -- from a business point of view, a simple decision to -- conceptually to make, and now we are executing. This is a little bit quick the kind of analysis of the thing on the brand side. On the broader business, we already mentioned restructuring of the dealer network. Probably the perimeter in terms of numbers will go down progressively from the highest point, around 20% in point of sales. I'm not sure that this will reflect exactly the same numbers in square meter because sometimes, for example, we have to close a store and open something that is a little bit bigger for some brands where more surface is needed. Take, for example, Bottega. Bottega in China has a lot of small stores, probably we need to close some. But in the moment we go for a new one, we need to have something that represents the ambition of the brand and can fit all the products that we are developing. We are looking at everything, Luca, everything. So I can confirm you that, as I was saying into the introduction, we are very clear in our mind. The opportunity of this crisis for us that we have experienced in the last years is that we can question everything from scratch. This is what we're doing. So we are looking at investment. We are looking at how to improve, let's say, our performance on media investment, on marketing investment. We are reducing stores. But we do it -- we are looking at a lot of potential on the -- what I call the upstream. That means everything has to do with manufacturing, with logistics, et cetera. So I think this part has a lot of potential at Kering because, in fact, in the past, we tended to more look at the downstream. And I believe that we are putting a lot of attention -- this is also a little bit my special because I come from a sector where the industrial part is very, very important. So I've looked at and spending a lot of time on how to reorganize the upstream of Kering. I think one of the key is teamwork. So there is a lot of potential in kind of mutualizing and making sure that the brands can work together to find synergies, especially on the back office. And that's what we're doing. It's hard work, but it's very interesting. It's fun, and we can clearly see the potential. I hope I could answer in a reasonable time to your question. Philippine de Schonen: Thank you, Luca. We now have a question from Edouard Aubin, Morgan Stanley. Edouard Aubin: So I have one question on the short term and one on the more medium to long term. So on the short term, apologies to ask the question but I guess investors care, is there is some chatter in the market that maybe the group is off to a slightly soft start to the year. And I know things are really difficult to read given the timing of Chinese New Year. But if you could comment on that. And regarding Gucci specifically, I'd be curious to know how material has been kind of the traffic of the top line inflection since Demna's products have hit the shelves. It seems that things have certainly improved and accelerated, but I'd like to get an update for you, if possible. And I don't know if you're going to be willing to share with us, but related to that, I know you guys don't give guidance, but do you think Gucci could be up or down -- or is likely to be up or down in the first quarter? So that's the short-term question number one. And then on the more medium to long term is on management, Luca, how much of an opportunity for the group is for the group to kind of promote and hire talent over the next 12 months? How material changes will likely to be same time next year? So when we meet again in February '27, are we going to see significant changes or not? For example, I have been surprised a bit by the fact that you still not hired a high-caliber executive from the competition from the luxury goods sector yet. So are people not willing to join the group? Or are you taking your time because you just want to hire the best from the competition? So if you could comment on management changes -- future management changes, that would be great. Luca de Meo: Okay. So I understand that you are asking me how is it going on in the market right now, how we are -- we see the things happening. As I said before, I think we see a lot of positive signs, including at Gucci, okay? Because the first, let's say, move with La Famiglia was actually pretty successful almost everywhere, I would say, everywhere. Of course, it represents a relatively limited part of the offer. So I have to remind everybody that the first runway from Demna is actually happening on the 27th of February. So we haven't -- you haven't seen anything. What I know is that the Gucci team is working very, very hard, obviously, also the creative team. I can clearly see that they understand very well what Gucci is all about or should be all about. That's what you look and when you look at the product, et cetera. And they also know that they have to develop a collection that covers all the important categories for the consumer. So I'm pretty positive. I'm actually very optimistic about how the things are going. It's -- the environment is what it is. It's not the most dynamic environment in the luxury sector since years. But as I said during the introduction, I think we went so down that the first race is on ourselves. So I think we lost market share in the last years, and now we have to get the thing back by doing properly the things. So we will see growth in 2026. We will see increase of margin on all the brands. And that's basically the situation. For the management thing, I want to say that the quality of the people and the competence of the people in Kering is very, very high. In fact, a lot of people in the last round were promoted from internal. That shows that we had people, that they had potential, they know what they are talking about. Probably the opportunity that I see is to actually integrate people coming from different horizons to complement the vision of a group of people that have been growing in the luxury industry for decades. So I'm not looking at hiring executives from competition, also because practically speaking, sometimes you have gardening leaves of 1 year, et cetera. I don't have time to waste. I need the people immediately. And in the next weeks, you will be seeing announcements of new people coming into this house to cover positions that sometimes don't exist, because we need to structure the organization in a different way. I was mentioning to Luca before, the need to focus on the upstream part of the business. That means the manufacturing, the purchasing, the logistics, the product development, et cetera. So this is a typical area where you need someone on top with a different experience that can bring a new perspective to the sector or at least to our organization. So be patient on the management. It's also true that I'm taking my time to meet a lot of people, because those decisions are important for you, but also for us as a company. It's important to create teams that are very cohesive. Normally, it works when everybody -- each other recognizes the value and the contribution of every single member of the team. So I have to bring top people in, so that they can integrate, and it will happen. And most probably even before the CMD, you will see a few announcements that confirms what I'm hinting, what I'm spoiling to you right now. Jean-Marc Duplaix: Maybe Edouard, reacting to your comment, it's true that as long as we have not the full impact of the Chinese New Year, it's difficult to assess clearly what could be the landing point for Q1. Two, I think what has been said is super clear. We are projecting and we're working on recovering in terms of growth for '26, but it will be gradual along the year quarter after quarter. And there is something that you need to take into account is that there is a benefit to close, of course, some doors and some stores, because it has a positive impact on the EBIT margin, because we are working to close the dilutive stores, but it is also partly a drag in terms of sales. So it's something that has to be factored also in the way you look at Q1. Philippine de Schonen: Thank you, Jean-Marc. We now have a question from Erwan Rambourg, HSBC. Erwan Rambourg: Hope you can hear me okay. So first on stores. In reconquering share, there's obviously a case that you can shrink before you grow. I think, Luca, you said you would probably eventually close 20% of units. I suspect this is at the group level. Gucci seems to be a bit overstored relative to others, and you're at 497 units today. If we think about the medium-term retail footprint for Gucci, is it fair to assume that it would be more than a 20% reduction eventually? And you are in some markets tied into relatively long leases. Is there anything you can do to reduce these leases? So that's my first question. And then second question, coming back to management organization. I think you made a very original hire, which I don't think exists for some of your peers, which is a Chief Commercial Officer at the group level, Mr. Zito. So maybe going back to what you were mentioning about synergies, can you maybe explain that role within the group and how do you project that? Luca de Meo: So I leave the first answer to your first question to Jean-Marc, who is the absolute expert in the team in real estate. Jean-Marc Duplaix: No. Erwan, I think, first of all, the ambition that has been set is minus 20% in terms of store footprint from '25, and to midterm, so let's say, around '28. We mentioned already some closures, massive closures, net closures in '25, and of which, in the 75 closures, so based on what Armelle commented, it was already 40% of these closures made with the Gucci stores with a focus on outlet stores, but not only, because we have a systematic review of the quality of the network we have at Gucci and the densities that we have in the stores. And clearly, with the objective to close some doors, especially in Asia, I'm thinking about Korea, Japan and partly China, where your comment is totally relevant, where probably we have a sort of saturation of the market with too many Gucci stores. Going forward, in the minus 20% to come from '25 to '28, Gucci should represent something like 1/3 of this cohort of closures. But having in mind that there will be a concentration here again of the closures in the Asian market, I would say that if I consider particularly '26, I guess that 40% of the closures will happen in the Asian markets. An additional comment about the criteria regarding the closures and what is at stake. It's true that we have long-term lease, but it's part of the global negotiations that we have currently with the landlord. It's, a, to have a global discussion about not only the Gucci network, but the global network we have in terms of resizing, in terms of relocations, but also in terms of rent renegotiations. And that's part of the explanation for the nonrecurring items that we had in '25 and that we would surely have in '26. It's about the cost of the exit of some locations. And here, we are very pragmatic. It's a financial calculation. We look at what would be the accumulated losses or the cost of keeping open a store and the cost to close it. Sometimes we have an arbitration where we keep the store open until the end of the lease. And sometimes, we are closing stores. So that will be the rationale supporting this work of rationalization, but we are very determined. And as said by Armelle, 100 stores for net closures in '26 is the minimum we are targeting, and we are working to deliver more. In terms of square meters, it's around mid-single-digit decrease in terms of square meters with 100 net closures, and we are targeting, as I said before, even more. So probably we could reach ideally high single-digit decrease of the square footage for '26. Luca de Meo: Maybe building on what Jean-Marc was saying, I think that you have cases like the one I mentioned before, like McQueen, where you will go much deeper into the thing, probably more than 50% of the thing without mercy, because we have to get down. One of the things that we have been organizing, thanks to the support of Jean-Marc and his team, is also a form of coordination that was not necessarily working amongst the brand. So sometimes the locations that are closed are reallocated to other brands because they are interesting. So that kind of team play is one example of how the new Kering will actually work, bringing some opportunity of synergy and solution, because we play as a team. I think it's also, in a sense, the reason for the creation of the position that we've given to Daniele Zito, who was former President of Gucci Japan, a young guy, very talented, very knowledgeable about the retail. The whole idea there is to cut the horizontal -- to cut one of the many horizontals that I will have to cut within an organization that was siloed and structured by verticals on the brand. And this is the idea of basically, you have all the channels somehow in the hands of someone. So retail, wholesale, outlets, e-commerce, et cetera, et cetera, because I think we really need to see the channels altogether. We will understand much better what are the things we have option to decide, how to manage that kind of chain. And this was not the case, because the responsibility was split with different people. And the work of Daniele will be, of course, in coordination with the brand on how to orchestrate the functioning of all the channels in parallel. So it's going to give us a better view. Of course, the work of the group is not to intrude in the commercial policy of the brands. We are there to coordinate, we are there to develop tools, so that the brands can better decide. We are there to support them. The group is there to create a condition for efficiency, and the brands will have the responsibility of nurturing and fostering growth. That's the concept. And yes, so Daniele will be one of the guys cutting a horizontal, which we didn't have before. Philippine de Schonen: Thank you, Luca. We now have a question from Carole Madjo, Barclays. Carole Madjo: Carole from Barclays. I hope you can hear me well. Two questions on my side. The first one is about your outlook on 2026, in which you talk about returning to growth and improving margins. Can you share a bit more detail on that? So are you talking about all the brands, including Gucci? I think the market already has, for Gucci, for the full year '26, a top line growth of around 5% and EBIT margin improving by around, I think, to 18% more or less. Do you find these numbers achievable at this stage? That's the first question. And question number two was about the Gucci brand itself. Can you share your view on how you see the Gucci brand DNA going forward? I feel the key debate that maybe Gucci has been too fashion-driven, too exposed to newness. So how do you think about balancing creativity, innovation, fashion authority versus also maybe a bit more evergreen focus to carry over? Luca de Meo: So on the outlook, we already said what we could say and we wanted to say. So I can confirm you that 2026 should be a year of growth and increased margin, basically on all the brands, all the brands. What you have to understand, of course, I can't tell you exactly the detail. But the way we built the budget with the teams and with the brands was pretty much, you can confirm, Armelle, pretty bottom up. And this is not something that was imposed to the group. So we built it together. And all the people in each one of the brand, CEOs and the people here, are convinced that we have a plan for 2026 that is very reasonable. You can trust the numbers and pretty solid, okay? So that's the way we enter into the year. We know that we have to kick start a new phase and we know that 2026 will be important also to build somehow confidence with you and with the markets, okay? So this is what I can say. On the DNA of Gucci, I mean, I just want to remind everybody that Gucci is one of the top luxury brands on the planet. Don't forget that. And in my career, I've learned something, of course, it was a different sector, that great brands actually are immortal. They never die. If you do the right things, they can rebound. And Gucci in its history has proved many, many times an ability to rebound. And I have a feeling that this is what is starting right now with Francesca and with Daniele. It's not very complicated to understand what Gucci stands for, right? What Gucci has to do. So as soon as we do and we use codes, we execute excellently, both product and customer experience, the market reacts. Look at what happened, for example, with the small collection of La Famiglia. Immediately, the market was on us. I don't want to use information that we take, of course, as important. But a lot of signals are coming from different inquiries that Gucci is back on the radar. And this is only the beginning. And as I said before, just look at -- I had a question before on management. Look at the people that are running now Gucci. So nobody noticed that we made a lot of change in the management, bringing a lot of experienced people. We have a very strong CEO, one of the most talented designer on the planet. So trust that the thing will get better. Philippine de Schonen: Thank you, Luca. We now have a question from Antoine Belge, BNP. Antoine Belge: Antoine Belge at BNP. Two questions. So first of all, I think you've been mentioning that Demna will present its collection on the 27th of February. Will there be a bit of see me and buy me now happening? And so maybe in Q2 and then Q3, Q4. So how should we think about the share of the product offering influenced by Demna? And my second question is, in your return to profitability objectives, what will be the attitude to cost. I think in 2025, we already saw quite a significant decline in OpEx. So what more should we expect? And in terms of marketing, should we also expect some savings or a better use of the same dollars? What's the trajectory for marketing expenses in 2026? And actually, it's not a third question, but I think people are asking, so on the 16th of April, should we expect very precise numbers in terms of top line and margin for a certain period? Or is it going to be more an ambition without precise timing? Luca de Meo: Look, I mean, I will leave, of course, for Gucci, Francesca, the pleasure of unveiling the strategy for the collection. I think that everybody is very aware at Gucci that we need the rhythm, we need the quick execution. And so we have to very, very quickly show some signs of rebound, including on the product side. So expect the collection to be very, very quick in the distribution, okay? But it's a question you should be asking to Francesca and the Gucci team. Regarding OpEx, I think you can expect this year, we had a very important reduction in 2025. You should expect probably stability on the OpEx, but this is a mix of cuts that will continue on things where it makes sense and reinvestment on things to improve the desirability of the brand. So all in all, of course, we will try to reduce -- make the organization more and more efficient. So we'll look very, very detailed on the cost side. But when I look at the numbers, it's basically a combination of further reduction of the things that don't bring value and reinvestment of the things that potentially can bring value. And the same, I think, is for the marketing. What I could see as a problem, but also, therefore, as an opportunity is that we have been kind of protecting below the line into the marketing investment. And we have been cutting on above the line, which is the one that brings traffic to the stores. So this year, we not only are planning to renegotiate some of the contracts with the media agencies to gain efficiency, that is totally possible, I think, and we should do it, but also probably you will see a little bit more accent and investment on the above the line, which is the thing that speaks to consumers basically. Jean-Marc Duplaix: Maybe just to add on the OpEx side, if I may. I mentioned by Luca, there was a massive decrease of the OpEx in '25, but it started in '24. So over 2 years, we have more than EUR 1 billion of savings in terms of OpEx. And not only variable cost, it's also that we worked hard on the fixed cost. If you look at the headcount also, you see a double-digit decrease in 2 years, which is really an effort of restructuring starting with Gucci, but also with the corporate organization. And that's exactly what Luca said. We will continue in '26 to streamline the organization and to make it more efficient. So that will generate probably additional savings. But at the same time, hopefully, with the increase of the top line, we will have an increase of the variable cost. And we are reinvesting to sustain the growth, typically in terms of tech and things like that, where we will need to have some investments to support the recurring plan. Philippine de Schonen: Thank you, Jean-Marc. We now have a question from Thomas Chauvet, Citi. Thomas Chauvet: My first question on the portfolio after the sale of Beaute and your acquisition of the jewelry manufacturer, Raselli, at the end of last year, how are you thinking about brand portfolio management? Specifically, what are your key criteria to evaluate potential acquisitions or disposals? Secondly, on the financial leverage, net debt reduction to EUR 8 billion. That's, I think, 2.2x EBITDA ex lease liability, mainly due to the real estate transaction. That will be reduced by a further EUR 4 billion with the sale of Beaute. What leverage level are you targeting considering also that the Valentino acquisition is only 2 years away? And how do you prioritize capital allocation during the turnaround? And if I can squeeze just a follow-up to an earlier question on Gucci's '26 EBIT margin outlook. Taking into account the cost reduction you've started 18 months ago and the investments required, as you said, Luca, to enhance desirability, how sensitive is Gucci's EBIT margin to top line now? In other words, what is the growth level required this year to stabilize the EBIT margin at the 16% level that you recorded in '25? Luca de Meo: Look, maybe I'll leave to Armelle the question on the capital allocation, the lever, and the EBIT margin. I'd like to answer to the philosophy in terms of allocation and management of the portfolio. You've seen, let's say, those 2 big movements in 2025. One is the partnership with L'Oreal and the other one is the progressive acquisition of Raselli. It speaks a lot about how we see things. And I would say also the pragmatism that we try to bring and the common sense that we try to bring as a team into our approach to the market. I believe that people from the outside, they actually -- of course, the partnership with L'Oreal was seen very positively by, I would say, everybody. But I think that this, in fact, has been seen as a kind of Kering not really kind of abandoning the cosmetic and the perfumes business. In fact, the fact that we are with them reinforces our position. This is the way I see it. I think we will do much more business than what we could do alone. And the work that we will do together will, in fact, also have a huge benefit to our brand, particularly for the, let's say, investments and the strength of L'Oreal when it comes to marketing practices, okay? For me, the Raselli thing is, I can clearly see that the jewelry business is growing. I see that Kering is not doing so much. I think Boucheron is doing well. All the brands, Qeelin, et cetera, are doing well. But a very big hanging fruit is the business we could do with our fashion brands on that category from custom jewelry to high jewelry. Think, for example, Gucci. Gucci was, 10 years ago, doing 3x the business that they are doing right now in that category. So if you have an engine underneath that can help you develop the right product and right collection, this is a no-brainer, right? This is an hanging fruit that is there. So why we do the jewelry thing? Because it's totally legitimate for our brands, not only the specialist brand, but also because we understand that structurally, Kering is a little bit more dependent from the fashion cycle. And we want to create a form of balance and resilience embedded in the structure of the group. So both the L'Oreal partnership and the reinforcement of our action on the jewelry category are also there exactly for this to actually make Kering less dependent from the fashion cycle. It doesn't mean that we don't have to bring back Gucci what it deserves, we don't have to develop Saint Laurent, Balenciaga, Bottega Veneta, and all the brands. But you can expect in April that we will also talk about resilience and independence from the fashion cycles. That kind of work also has to happen within the brands in terms of the way you build the collection, of course. But our job as a group is also to design, to make the architecture of the group in that kind of fashion, in that kind of direction. I'll leave to you. Armelle Poulou: So regarding net debt, as you can imagine, with the L'Oreal deal closing in H1 2026, and the cash flow generation that we are going to generate this year, we, of course, expect net debt to decrease very substantially. And we see the leverage ratio, if I use the one pre-IFRS, which we ended the year at 3.4, we see this ratio ranging between 1 and 1.5. This is putting us back in a very good territory concerning also our leverage, and we are very comfortable in our strong investment-grade rating. You've seen that our outlook was confirmed positive stable in October after the Q3 results. Regarding margin, I wanted to remind something I said also last time in Q3 that with the work that we have done on our cost base, we could keep margin flat even without growth. But our ambition is to grow so it will yield an improvement in margin at the group level, but also at Gucci. Philippine de Schonen: Thank you, Armelle. We now have a question from Chiara Battistini, JPMorgan. Chiara Battistini: Yes, a couple of questions from me. The first one is, any initial thoughts on how you see the pricing architecture at the major brands evolving in 2026 between price and mix coming with the newness and the innovation that you're bringing to the market? And also how to think about the wholesale channel for the major brands considering especially for Gucci, the major cuts that we've seen over the recent years. But any outlook on that would be great. And then second question, sorry, more short term. But in terms of the gross margin dynamics of H2, I think there was an hedging gain that supported the gross margin. And therefore, I was wondering if you could give some color on the magnitude of that versus the underlying move of the gross margin and what we should be thinking in terms of drivers for 2026 at gross margin level? Luca de Meo: So we're going to do 1, 2, 3, okay? So Look, on the pricing, for sure, I think that, that kind of bonanza of inflationary power of the industry over the last few years probably should not be there. We know we all hear about luxury fatigue, people telling. And we take this thing into account very, very clearly. I think some of the products that just went off price. So we have been immediately looking at the structure of our collection. And you have seen already some signs of new product coming into the shops where we have -- including, for example, the Famiglia collection from Gucci, where we had been trying to bring to the market, let's say, products at, I would say, a very competitive price. And it works. And this is the customer recognizing this. So at least this is what the feedback I'm getting from all the store managers that I visit. So I think probably our efforts should be on trying to build an offer with the mix of things that are properly priced, but that structurally are creating value for us, okay? So I think that you will see more mix effect than sheer pricing. And this also depends on the way we are building the collection. I think for Gucci -- sorry, not for Gucci, for Kering in general, because we have 3 very important new creative directors, it's the opportunity for them to create desirability with newness. And on newness, you can actually ask for more, let's say, interesting prices. And that's the way we build the thing. So expect something that in terms of value is there that the people will be happy to pay for. But we will try to be competitive, because we recognize that maybe in some categories, we went too far and to the point that then volumes dropped dramatically on some categories and some products. As I said at the beginning, I think we are very clear in our heads on the challenge, and we try to address them one after the other without hesitation. Jean-Marc Duplaix: Okay. So just a remark about wholesale, just to take a step back if we want to think about 2026, that the evolution of wholesale in the past few years for the industry or for us was partly self-inflicted with some decisions to upgrade the distribution, which is still an objective that we have. And also something more structural with the sort of concentration of polarization of the wholesale distribution. It's important to remind this because, as you know, there is one player which gained some importance in this configuration, which is Saks Global. So when it comes to '26, part of the equation will depend also a little bit of what will be the evolution of the business of Saks Global, even if we think that with the procedure, which is ongoing, there will be a stabilization or improvement of the situation at Saks Global. That being said, if we look at the performance already in Q4, you see that for many brands, there was a sort of not a stabilization, but let's say, sort of normalization in terms of what are the trends. And if we project for next year, it's more or less that what we -- the situation is more or less what we had anticipated is that the size of wholesale business for brands like Gucci, like Saint Laurent, it's always in the range between EUR 200 million and EUR 300 million, considering the number of relevant accounts that we can afford to keep. So that being said, it means that for many of our brands, it will be flat, flat minus, flat plus depending on the brands with the exception of Gucci, where we should see some additional closures or improvement of the quality of the distribution. So I would say, I would anticipate something around mid-single-digit decrease of the wholesale at Gucci for '26. Armelle Poulou: Regarding the gross margin, as you know, there are many moving parts in the gross margin. The gross margin in H2 was flat to H1. There were, of course, some hedging gains. We will still have some hedging gains into 2026, more skewed to H1, considering the evolution of the currencies. We suffered in '25 from the geographical mix, as you've seen that APAC went down in the mix, and from the category mix, even if I must say that in Q4, because of the progress of the leather goods category, we regained in the mix. In terms of channel, channel was a positive because of the rationalization of the wholesale and the higher share of retail in our mix. And price of raw materials was a headwind, notably on the gold, even if it's not very important when you look at group level, but more significant in our jewelry houses. Looking into 2026, we expect channel to remain positive. Product mix will be positive because we are regaining in handbags. Geographical effect is very difficult to assess at the moment. And we expect the price of raw materials to probably still be a headwind in this year. Philippine de Schonen: Thank you, Armelle. We now have a question from Zuzanna Pusz, UBS. Zuzanna Pusz: I have 2 questions. One will be a bit more philosophical, the other one more financial. So maybe I'll start with the sort of more philosophical one. Luca, I'm just wondering, would you be able to tell us what sort of surprised you the most positively when you joined the group? Or maybe in other words, where do you see the biggest potential that hasn't been really properly exploited? And then my second question is a bit more financial. I think that may be for Jean-Marc, that's going to be a follow-up to the comments on space. So you mentioned that space may be, and please correct me if I'm wrong, mid-single-digit to high single-digit negative this year. You just mentioned that wholesale could be down mid-single digits for Gucci. So all in all, if I combine it together with the comments that sales should be up, that would imply probably double-digit like-for-like growth. Can you tell us if that's going to be mainly volume driven? Are you actually seeing that? Just so we can -- in terms of modeling, so we can understand if you already are seeing it, if that's meant to come later maybe in the year when the new collections come, just to understand that. Luca de Meo: Look, I'll try to answer to the philosophical question with a not philosophical answer. But I have to say that maybe 2 things for me where I would be surprised. One is, in fact, the -- and I remember having a conversation in the first weeks with Francois-Henri on that. The group was built by fostering independence of each one of the brands, which actually was great, so acting a little bit more as a holding and leaving to the entrepreneurial spirit of each one of the brand's team to do what was best for them, okay? And in fact, for a while, this thing worked pretty well here. And if you look at the upside that the Kering has created for some of the brands, I mean, I think from the beginning, I don't know, Saint Laurent was multiplied by 5, Balenciaga by 30. I mean there are not many organizations that were able to create that kind of upside. Now when the brand has become big and the company has become big, probably this is the time to actually build a platform for the group that, as I mentioned before, will enable brands to be stronger, will make the system more resilient, will allow us to share and create synergy between brands, and give to the brands access to things, to technology, to processes that they cannot do alone, okay? So the biggest potential I see is that kind of orchestration of a teamwork between the beautiful brands that we have. Because this is also, on the positive side, is that the brands are really great. I mean we actually own some of the best brands in the whole industry. And now that I'm getting into the thing and I hear feedback from media, from customer, et cetera, et cetera, there is absolutely no doubt that the portfolio of brands of Kering is pretty magic, okay? And by the way, we don't have too many, but we don't have too less. So I think it's a relative right number of brands that it's big enough that we can orchestrate that kind of teamwork. And there, I really see the potential, because it was not designed like this. So the mission that Francois-Henri and the Board gave me was to create that kind of platform, which, of course, as an ex-automotive guy, the name platform resonates to me very, very well. I know how to do it, okay? And probably the other thing that was kind of not surprising, but where I really see potential, but yes, a bit surprising, is that the accent that we would put on the upstream part of the business. So I think there are a lot of things that, also because of this approach, new approach, that we are bringing that where we can make big, big, let's say, step forward into the all industrial on the cost side, on the product development cycle, on the organization on the upstream. So don't let me spoil too many things that I wanted to say on the 16th of April. But for sure, one of the things which I found weird for a guy coming from a heavy industry sector was the level of emphasis on those topics, but now it's getting into the conversation, and we're spending a lot of time together to actually strengthen the upstream, you can call it verticalization, you can call it the way you want, but it's the way you actually engineer and control the back office things. Jean-Marc Duplaix: So Zuzanna, let's forget philosophy a few seconds, and let's move to figures. So send me your Excel file, and I will help you. No, I'm kidding. So more seriously, I think, first, in your reasoning, first, please consider that, as you know, wholesale now is not so huge in the contribution to the sales of Gucci. And when it comes to space, just to help you to figure out, we are closing, of course, doors, which are not the most productive. So you should not apply the average sales density to the square meters that we are closing. By the way, we are not closing the 1st of January. So of course, we are embarking the impact of the closing of '25. But when it comes to the closing of '26, it will be spread over the year. For sure, however, to come to your like-for-like growth, without disclosing, of course, our ambition, it's not double-digit growth, but it's a significant growth. That's the reason why we are starting the year with a lot of humility and knowing that there is a lot of work to do. The objective is, of course, not to redirect all the traffic from the stores we are closing to the other stores. It's an equation which is very difficult to solve. But it's, first of all, to increase the sales density of the stores we are keeping. And that's really the objective we have, and it's very correlated, of course, to the desirability of the brand, because the sales density, as you know as well as me, it's about traffic, conversion, units per ticket, average selling price. So we can work already on the average selling price with the structure or the architecture of the collections. Thanks to the energy and the commitment of our sales associates, as mentioned by Luca, about the excitement we have around the brand, we can work on the conversion, but we will need traffic at a point. And it will be the work we will do in terms of desirability along the year. That's the reason why we will invest some money in marketing. I'm not talking only about advertising and marketing in all the different directions to recreate the desirability and to drive the traffic. And it will go along the year. That's the reason why, of course, at the beginning of the year, and coming back to the first question about Q1, of course, you will have still the drag of the closures and not the full impact yet of the recovery in terms of desirability. Philippine de Schonen: Thank you, Jean-Marc. We'll take a very last question from Charles-Louis Scotti, Kepler Cheuvreux. Charles-Louis Scotti: I have 2. The first one on the profitability. When I look at Kering mid-cycle average margin, it's been around 20% since the group became a luxury pure player, and around 24% to 30% since Gucci reached a critical scale. I guess you will address this topic during the CMD, but do you believe you can bring the profitability back to those more normative historical levels? And if yes, is this achievable even without assuming a renewed super cycle at Gucci? And the second question on Beaute. It seems that Coty's new CEO sounded a bit more open on earlier termination of the Gucci Beaute license. Will you have any interest in taking the license back ahead of the current June 2028 maturity? And do you think it will be a strategic plus to relaunch Gucci Fashion and Beaute at the same time under a, let's say, fully coordinated approach? Luca de Meo: Look, because we are a bit short in time, I will answer to your first question with simply a yes, okay? On the second one, I mean, there is some kind of, let's say, court cases around Coty. So please allow me not to elaborate on the topic. We continue to do -- as a licensor of the thing, we continue to respect all our engagements and the contract. And this is a discussion we would preferably like to have, I would say, directly with Coty in a good spirit. And so we'll probably answer to your question in a few weeks. Philippine de Schonen: Thank you, Luca. Thank you to all of you. Thank you for your questions. And we are very sorry as we were not able to go through all your questions. But of course, the full IR team is available today and in the coming days to answer all your questions. We'll be very happy to be speaking with you again on April 14 for the Q1 revenue release. And then obviously, on April 16 with our Capital Markets Day. Have a good day. Thank you to all of you.
Operator: Thank you for participating in the Investor Meeting for 2025 Full Year Results at Japan Tobacco Inc. today, despite your busy schedules. Since it is a scheduled time, let us get started. Before we start the meeting, I'd like to ask you to make sure that your display name on the Zoom is accurate. Thank you for your cooperation. In today's meeting, first, our newly appointed JT Group CEO, Takehiko Tsutsui, who assumed the role in January 2026, will introduce the Business Plan 2026. And Eddy Pirard, CEO of JT International, will follow and explain the tobacco business focus on FY 2025 performance. Lastly, Hiromasa Furukawa, Chief Financial Officer of the JT Group will explain JT Group 2025 results and 2026 forecast. Then we move on to the Q&A session, and this meeting is scheduled to end at 8:00 p.m. Japan Standard Time. Now I would like to introduce the first presenter, Mr. Tsutsui, please begin. Takehiko Tsutsui: I am Takehiko Tsutsui, CEO of the JT Group. Thank you very much for attending our conference call today. And I would like to express my appreciation for your continued support and understanding of our commitment to growth. Please look at today's agenda. First, I will give an overview of our performance in fiscal year 2025. Then I will expand on the cornerstones of the JT Group before diving into the profit growth guidance and business strategies for the business plan 2026. Eddy Pirard, CEO of JTI will provide details of the Tobacco business performance in 2025. Later, and Hiromasa Furukawa, CFO of the JT Group will cover the fiscal year 2025 group financial results and fiscal year 2026 targets. Before starting the presentation, allow me to share some very early thoughts in my new role as CEO of the JT Group. The JT Group has a history of continuously looking ahead to the future and moving forward. And I myself have participated in many of its revolutions and growth along the way. I believe my mission is to build on the growth strategies and strengthened foundations, driven by my predecessor, Masamichi Terabatake, and to steer the company to even greater heights. We will continue to enhance our corporate value by practicing management based on the JT Group purpose, fulfilling moments enriching life, and our management principle, the 4S model, consistently exceeding customer expectations and achieving sustainable profit growth over the medium to long term. To achieve this, I will take the lead in strengthening our existing capabilities, further developing RRP into future core strengths and simultaneously envisioning our long-term future through D-LAB. Across the short-, medium- and long-term time horizons, we will continue to invest for future growth without hesitation, while also firmly committed to delivering short- and medium-term performance. In addition, in a rapidly changing business environment, I believe it is essential for us to proactively embrace change with a strong sense of urgency. To that end, I will devote my efforts to further strengthening the organizational foundation of the JT Group. Starting today, I would like to deepen our dialogue with capital markets and strive to meet our expectations. Now let me begin with an overview of fiscal year 2025. Please look at Slide 5. In 2025, despite an unstable global geopolitical and economic environment, including soaring prices, we delivered outstanding growth across all indicators from revenue to profit, each reaching record highs. I believe this achievement was supported by the outcomes of our continued strategic investments we have made to drive sustainable growth. I will also briefly review the performance of each business segment, in the tobacco business, our largest contributor. Solid organic momentum continued, as Eddy will detail in his presentation. The key drivers were pricing contribution, combined with ongoing market share gains in Combustibles. 2025 also marked the steady progress of the Vector Group integration, the U.S. Tobacco Company, we acquired in 2024, and its performance boosted the organic growth, I have just mentioned. In RRP, we launched our new heated products device, Ploom AURA, across a total of 17 markets in 2025, and it has recently expanded to 19 markets. Both Ploom AURA and its consumable EVO sticks have been very well received by customers, particularly the taste and design. These products are already contributing to share gains in multiple markets, notably in Japan, and these results further reinforce our confidence in the strategic investment we have made. Accordingly, we believe that 2025 was a year in which we made steady progress in strengthening the business foundation that will support the group's mid- to long-term growth in both Combustibles and RRP. The processed food business achieved profit growth through steady price revisions and improved productivity, as to our pharmaceutical business. And in line with our May 2025 announcement, we successfully completed its transfer to Shionogi in December. As we indicated at the third quarter earnings announcement, the annual dividend per share for 2025 is planned to be JPY 234 per share. Please look at Slide 6. The graph on this slide illustrates the trends in our performance and shareholder returns over the past 5 years. Guided by the JT Group purpose, and our management principle, the 4S model, we have consistently prioritized business investments that contribute to profit growth over the mid- to long term. We have delivered sustainable profit growth by strong top line expansion, which in turn has enabled us to enhance shareholder returns. We believe this demonstrates the growing resilience of our business and navigating a rapidly changing operating environment. As I take on the role of CEO, I will further strengthen and accelerate this growth cycle, and I am committed to formulating and executing our business strategies to ensure our sustainable growth in the years ahead. Allow me to briefly remind you of the philosophy behind the JT Group purpose and our 4S model. Please turn to Slide 7. The JT Group purpose plainly expresses our reason for existence and our aspiration. Importantly, in pursuing The JT Group purpose, we have defined specific purposes for each of our business segments to ensure full alignment. The 4S model. Our management principle is the customer at its center, guides us throughout the decision-making process. As we work to realize our purpose, I am committed to making high-quality decisions grounded in the 4S model and to continually exceed customer expectations. I am convinced that this is the best approach for achieving sustainable medium- to long-term profit growth and continuously enhance our corporate value, ultimately enabling us to share benefits with all stakeholders identifying the 4S model. As part of efforts to go beyond the boundaries of existing businesses for realizing our purpose, we will continue our initiatives within D-LAB of corporate R&D organization. Let me give you a brief overview of D-LAB. At D-LAB, under the concept of unknown fulfilling moments, we engage in advanced research by exploring and creating seeds for future businesses. We aim to foster the value of fulfillment moments and society over the long term, while also aiming to contribute to the JT Group's profit growth. As part of our efforts to create new businesses, several affiliated companies are conducting commercialization trials of products and services from scratch. And some of these initiatives have already progressed to the stage of delivering the value of fulfilling moments to consumers. In addition, in exploring businesses, we have also invested in more than 200 companies aligned with the concept of fulfilling moments, primarily through operating funds that invest in start-ups. And including our research activities, we are currently running over 100 projects at any given time. Although progress will be gradual, the outcomes of these activities are beginning to materialize. Turning to Slide 8, and our capital allocation and shareholder return policies. To further strengthen and accelerate the growth cycle I mentioned earlier, we will continue to prioritize business investments that will deliver sustainable profit growth over the mid to long term. Our main investment focus will remain the Tobacco business, particularly towards Combustibles and heated products. In strengthening our business foundation, we will also consider the acquisition of external resources, such as through M&A as one of our options. Through these business investments, we will drive growth in adjusted operating profit at constant currency, our primary performance indicator. This, in turn, will enable medium- to long-term growth in net profit and support competitive shareholder returns in the capital markets. Regarding the shareholder returns, we remain committed to maintaining a dividend payout ratio of around 75%. We'll continue to focus on delivering robust shareholders' returns with dividends at the forefront. On Slide 9, I'll highlight the overall framework of our sustainability strategy. We have identified the JT Group materiality. Our priority material issues based on our belief that people's lives and corporate activities can be sustainable if the natural environment and society are sustainable. Additionally, we have also established the JT Group sustainability targets as specific goals and initiatives, and we are steadily progressing toward achieving them. Detailed results are available in our integrated report and on our website. We remain strongly committed to ensuring the sustainable growth of our society, and our businesses and to driving forward our initiatives for a sustainable future. Turning to our business plan, 2026. Our profit growth outlook for the 3 years from fiscal year 2026 to fiscal year 2028 as well as business strategies that support it. Like all business plans shared so far, the current business plan is developed with our growth algorithm in mind. As you know, our aim is to pursue sustainable profit growth over the medium to long term, targeting mid- to high single-digit growth in consolidated AOP at constant currency. In fiscal year 2025, while we achieved record-high strong growth, the operating environment surrounding our group remains highly uncertain. We must continue to monitor the impact of geopolitical instabilities on the global economy, foreign exchange volatility, interest rate trends, hyperinflation in certain markets and broader macroeconomic developments across countries. Within this environment, our Tobacco business, our core driver of profit growth is expected to lead our performance. We aim to grow the consolidated AOP at constant currency at a high single-digit CAGR, which is the upper end of our medium- to long-term growth algorithm. Over the business plan period, we do not expect significant relief in the operating environment nor in terms of regulations. In Combustibles, industry volume contraction and down-trading are expected to continue. While in RRP, we forecast intensified competition, especially in heated products. Irrespective of these conditions, our strategic direction remains unchanged. In Combustibles, we will further improve profitability. And in RRP, we will concentrate our business resources toward heated products to establish it as the second engine for profit growth alongside Combustibles. As a result, we aim to grow AOP at high single-digit CAGR over the planned period. In the processed food business, we expect the operating environment to remain challenging, particularly in Japan, with continued increases in labor and logistic costs, as well as fluctuations in raw material prices. In addition, price increases driven by these factors are likely to affect demand. In this context, the processed food business will continue to play its role in complementing the JT Group's profit growth. To ensure top line-driven profit growth we will reliably implement price revisions, expand our business volume both domestically and internationally and further enhance productivity. In the next couple of slides, I'd like to detail some of the fundamental strategies in the Tobacco business. Starting with Combustibles, we'll continue to pursue quality top line growth by taking advantage of pricing opportunities across our footprint and by driving further market share expansion. While industry volume is expected to continue declining, we anticipate to outperform the industry trend through further gains in market share. In addition, we aim to continue improving profitability through focused investments aligned with our market archetypes and various initiatives to reduce costs across our supply chain. Through these efforts, we will generate incremental returns, which in turn will enable higher investments in RRP. In RRP, our view remains unchanged that the category of heated products is expected to grow the most and the fastest within RRP in the future. We will, therefore, continue to prioritize investments in heated products within RRP, accelerating our growth momentum through large-scale strategic investments. In other RRP categories, such as Modern Oral, E-Vapor and Infused, we will keep exploring business opportunities and we'll make selective investments based on the strategies tailored to each category. Specifically, we'll consider new market entries based on market size and growth potential while taking into account the different regulatory environments and consumer preferences across markets. In parallel, we will continue to advance initiatives to strengthen our pipeline of next-generation propositions that may not necessarily fall within the existing RRP category definitions, with the aim of creating products that have the potential to become future growth drivers for RRP. Turning to Slide 12 to explain more concretely our planned initiatives in RRP with a particular focus on heated products. We expect the global RRP market to continue expanding, and we will strengthen our business foundation, as we work towards the milestones laid out in our 2028 RRP ambitions. As the chart indicates, during the business plan period, we aim to accelerate growth in RRP-related revenue driven by top line expansion in heated products. As I mentioned earlier, we're increasingly confident that our investment in RRP has been steadily delivering results. While we will flexibly adjust our plans as circumstances evolve, we currently plan to invest a total of around JPY 800 billion from 2026 to 2028, an amount exceeding past levels, with annual investments expected to gradually increase towards the latter half of the period. The primary use of this investment will be to support commercial initiatives, prioritizing heated products. Through various promotional activities, we will further enhance the equity of Ploom and drive both new consumer acquisition and improved retention. To this effect, we will complete the transition of Ploom AURA in most key markets during 2026, as Ploom AURA is very well received by consumers. In addition, as we prioritize the rollout of Ploom AURA and had temporarily moderate the pace of geographic expansion, we will now gradually resume expanding our global coverage going forward. Furthermore, we will pursue innovation in both devices and sticks, aiming to continue improving our Ploom ecosystem through next-generation products with greater speed. Even as we step up investment, we expect volume growth as well as gross margin improvement in heated products, along with profit contribution from other RRP categories to drive overall profitability improvement in the RRP business. I'll now turn it over to Eddy Pirard, the CEO of JTI, for an overview of the 2025 performance of the Tobacco business. Eddy, the floor is yours. Eddy Pirard: Thank you to Tsutsui-san, and good afternoon to all participants on the call. It is my pleasure to present today the 2025 performance of JT Group's Tobacco business. A performance which you will see is nothing short of remarkable, thanks to incredible contribution and dedication of our 46,000-plus employees worldwide and that of our commercial partners. My presentation will focus on the main achievements of 2025 as well as the outlook for business plan 2026, while the key financial information will be covered by Furukawa-san in his presentation. 2025 marked another year of incredible performance for the JT Group's Tobacco business. All indicators were up year-on-year, demonstrating once again the significant value of our strategic framework. As a reminder, this strategic framework is anchored on 2 pillars of growth: a Combustibles pillar, where our focus is to improve return on investments through quality top line growth and efficient operations. And a RRP pillar in which we prioritize investments behind heated products, and our brand Ploom, while adopting a more selective approach in other segments like E-Vapor and Modern Oral. In terms of deliverables for the third consecutive year, we have grown total volume, clearly outperforming industry volume trends. GFBs were the main drivers of our 2025 Combustibles volume performance, as we will see later, further supported by the successful integration of the Vector Group, which we acquired in 2024. In RRP, the launch of Ploom AURA has accelerated our volume and share performance in heated products, resulting in JT delivering the fastest growth in this segment, a very promising start for our newest introduction to the Ploom family. This solid volume performance, combined with exceptional pricing in Combustibles, drove a double-digit increase in both core revenue, up almost 15% and adjusted operating profit growing over 23%. Let me elaborate on the key drivers of our 2025 performance, starting with reduced risk products. Growth in both RRP volume and revenue accelerated versus the prior year, increasing by 28% and 24%, respectively. Heated products were instrumental to the volume growth, expanding by 3.2 billion units and representing a 38.6% year-on-year increase, with gains mainly in Japan and across all clusters. On the revenue side, heated products grew by almost 50% at constant FX. The launch of Ploom AURA in May 2025 played a significant role in this expansion as well as the accelerated investment to establish Ploom as a global power brand. Beyond heated products, we continued to explore other RRP segments through a selective and flexible investment approach in line with our strategic framework. And in parallel, we pursued improving our knowledge on multi-category consumers and the capabilities required to win in this environment. Speaking to Modern Oral, as shown by Tsutsui-san, we have expanded Nordic Spirit's presence to 10 markets. Our approach to nicotine pouches remains cautious and targeted as similar to E-Vapor, the regulatory environment remains very fluid and the barriers to entry are lower compared to Heated Products. In E-Vapor, in addition to a logic presence, we profitably explore growth opportunities, including through strategic investments. In 2025, we took a majority stake in a leading and profitable independent U.K. E-Vapor company, Flavor Warehouse. The intent is to strengthen all learnings in this dynamic segment. Since the beginning of my presentation, I have mentioned Ploom extensively. Let me share some more details on its performance. In 2025, supported by innovation and successful consumer acquisition, Ploom was once again the fastest-growing brand in Heated Products. The introduction of Ploom AURA in certain markets and the expansion of our heated tobacco sticks portfolio, fueled share gains in all 28 markets were available. As of November 2025, Ploom had reached a share of segment of 9.7% across the 13 initial markets. Turning to Japan, the largest Heated Products market globally. Since the introduction of Ploom X, we have increased our share of the Heated Products segment almost fivefold, reaching 15.7% in the fourth quarter of 2025. AURA, which we launched mid-2025, clearly contributed to the acceleration of Ploom share gains, as you can see from the slide. And in December, Ploom reached 16.5%, making it the #2 Heated Products offering in Japan across 39 prefectures, including Tokyo. Moving on to other markets. Efforts to strengthen brand equity and drive consumer adoption through adjustments to our commercial execution delivered share gains across our footprint. As would be expected, the share of segment progression differs between markets as it is clearly related to consumer awareness of Heated Products, the diversity of products available and the competitive environment. Across the 9 markets presented on the slide, Ploom's share of segment grew by an average of 1.6x year-on-year with the most significant increases in Poland, in Serbia and Switzerland, all more than doubling their share. Lastly, we launched Ploom in Taiwan at the end of 2025. And although it's still very early, we are encouraged by the performance so far, which has exceeded our expectations. Before moving to a Combustible performance, I'm proud to share how Ploom AURA has improved the consumer experience since its introduction. Starting in Japan, where AURA has been available since the end of May 2025. While we are still early in the journey of AURA, as you can see from the data on the slide, this next-generation device has outperformed the previous X Advanced. It generated a higher Net Promoter Score or NPS compared to Ploom X Advanced, which itself outperformed Ploom X, if you remember, our slide from February last year. Importantly, the number of Ploom users has increased by 34% year-on-year and doubled since 2023. These positive results strengthen our confidence in the quality of our Ploom device, especially as consumers speak very highly of the improved design, functionalities and taste. Also worth mentioning that 58% of Ploom AURA users are new to the franchise. The superior taste satisfaction of Ploom is also owing to the next-generation heated tobacco sticks and the launch of a premium offering in Japan under the EVO brand, an offer, which was very well received by consumers, reaching a share of segment of 3% in December 2025, complementing the existing MEVIUS and Camel propositions with limited cannibalization. We now have a very compelling and competitive portfolio to drive further growth. Leveraging the early success in Japan we are progressively rolling out Ploom AURA across our footprint. As of today, AURA is already available in 19 markets and will be in almost all Ploom remarkets by the end of 2026. In addition, we are gradually migrating our sticks to EVO, our global brand for Heated Tobacco sticks. In summary, we are making good progress in line with our strategic drive to build Heated Products as a second pillar of profit growth in the future. In 2025, our performance in Combustibles was unrivaled. Our volume grew by 1.7% year-on-year, far outpacing industry volume contraction in the measured footprint. Our organic volume grew in over 50 markets year-on-year, further boosted by the successful integration of the Vector Group. While in certain markets like Russia and Turkey, the volume growth was compounded by an exceptionally resilient industry volume. Our volume growth was mainly driven by continued market share gains. Our Combustible share increased in approximately 60 markets, including 9 of our 10 key markets. GFBs were once again instrumental to the volume performance, growing by 2.8%, their 7th consecutive year of growth. At the end of 2025, GFBs represented 74% of our Combustibles volume. Winston, our largest brand and the world's second largest grew volume by 4.9%. Its volume increased in approximately 50 markets, including our key markets of Italy, Romania, Russia and Turkey. Winston also grew market share across many markets, including the 4 key just mentioned, plus Spain and Taiwan. In our measured footprint, Winston was the fastest-growing Combustible brand in 2025. Camel, the third largest global brand grew volume by 4.3%. Volume was up in almost 50 markets, including Italy, the Philippines, Russia, Taiwan and Turkey, fueled by market share gains including in 6 of our 10 key markets. Driven by these brands, our Combustibles market share grew by 1.3% across our measured footprint, making us the fastest-growing company in the category. Although volume contributed to a core revenue increase of 15% in 2025, the main driver remained Combustibles pricing demonstrating yet again its resilience. Last year, the price/mix contribution to core revenue reached an exceptional 10.8%, significantly above its past 3-year average due to several factors. The first accelerator is the positive volume performance, which enabled us to maximize pricing benefits across our footprint. The second and most important factor is the level of price increases across our footprint. All clusters delivered price/mix increases year-on-year. EMA was the strongest performance with all 4 key markets contributing positively. Western Europe, led by Italy and the U.K. also delivered strong growth, even within a down-trading environment. In the Asia cluster, the positive drive came mainly from Bangladesh, Japan and the Philippines. The last factor was related to the impact from down trading. Although the trend continued in 2025, its impact was more limited than we've seen in recent history. As a result of the solid pricing, the Combustibles profit margin grew by an outstanding 3.4 percentage points year-on-year. This increase demonstrated our strategic drive to improve return on investments in Combustibles. We have grown market share through equity-building initiatives towards our GFBs combined with an optimization of pricing opportunities when they arose. In addition, our focused approach using market archetypes, earnings only, share only or earnings and share continued to maximize the expected returns from investments and to ensure profitable top line growth. These top line drivers are enhanced through disciplined cost management initiatives without sacrificing product quality, growth opportunities, and a sustainable business base. These include, but are not limited to the deployment of an end-to-end integrated supply chain, the simplification of our products, both SKUs and brands, and of our IT infrastructure, as well as the further leverage of our global business services. We also continued to invest effectively and efficiently across all functions, including procurement, manufacturing, and in our route to market, while embracing the concept of Kaizen or continuous improvement to maximize the bottom line and drive stronger cash performance and delivery. Finally, the successful integration of the Vector Group further enhance our efforts to improve the Combustibles operating profit margin. Overall, the Tobacco business delivered an incredible performance in 2025, growing all indicators year-on-year, fueled by both Combustible and RRP. The goal for the business plan 2026 period is clear. Capitalizing on our strategy, we reconfirm our intention to grow adjusted operating profit at a high single-digit rate, despite continued down-trading, intensified competition across categories and macroeconomic factors. In RRP, we will further accelerate consumer acquisition by strengthening our commercial engine and leveraging consumer insights from the 28 markets where Ploom is available. As highlighted by Tsutsui-san in his remarks, we will continue to invest towards RRP during this business plan period. These investments will focus on increasing the top line contribution of Heated Products through the sale expansion of Ploom AURA and EVO sticks. We will also strengthen our understanding and profitable participation in other RRP categories. And we will take advantage of our innovation pipeline and improved capabilities to consistently exceed consumer expectations. In Combustibles, we remain committed to improving return on investments. This encompasses continued market share expansion, notably by our GFBs and optimized pricing opportunities to drive both revenue and margin improvements as well as initiatives to manage ongoing inflationary pressure. Thank you very much for your attention and interest in the tobacco business. I will now hand over to Furukawa-san, for the review of the JT Group financial results and forecast. Hiromasa Furukawa: Thank you, Eddy. I am Hiromasa Furukawa, CFO of the JT Group. I will detail the consolidated financial results for 2025, and our forecast for 2026, both at the group level and by business segment. First, let me take you through our consolidated financial results for 2025. As Tsutsui-san mentioned earlier, thanks to the strong performance of the tobacco business, revenue, AOP, operating profit and profit for the period all reached record highs in 2025. AOP on a constant currency basis, which is our primary performance indicator, increased by 24.9% year-on-year driven by organic growth in the Tobacco business, further boosted by the contribution of the Vector Group acquisition in the U.S.A. Regarding foreign exchange impacts on AOP. While there was a positive impact from the depreciation of the Russian ruble, this was more than offset by the depreciation of emerging market currencies against the Japanese yen, such as the Iranian rial and the Turkish lira, resulting in an overall negative impact. Operating profit increased year-on-year, mainly driven by the absence of the provision for loss on litigation related to the settlement in Canada, which was recorded in 2024. Profit from continuing operation increased year-on-year as the increase in operating profit more than offset higher financial expenses, mainly due to foreign exchange losses arising from a rapid deterioration in the exchange rate in Iran, as well as higher corporate income tax expenses. In addition, profit from continuing operations came in below JPY 555 billion forecast announced with third quarter results. This was due to the impact of a rapid deterioration in the exchange rate in Iran, as just mentioned. Free cash flow increased by JPY 102.2 billion year-on-year to JPY 272.7 billion, as the nonrecurrence of the Vector Group acquisition payment, recorded in 2024. And the increase in AOP more than offset the upfront payment related to the settlement of the litigation in Canada, which was recorded in 2025. Moving on to the financial performance of the Tobacco business. Eddy has already explained the details of the Tobacco business performance. So I will only focus on the financial performance. The volume contribution was positive, mainly fueled by the inclusion of the Vector Group. Regarding the Vector Group contribution to volume, I can confirm that it has been in line with our initial expectation. As shared by Eddy, the price mix contribution to AOP was above its historical average. Strong pricing contributions in many markets, including Japan, the Philippines, Russia, Turkey and the U.K. outweighed the lower product mix, mainly due to down trading in the Philippines and Taiwan. These positive factors far exceeded the incremental investment towards Ploom and the inflation-led cost increases, particularly across the supply chain regarding tobacco leaf and labor. As a result, AOP at constant FX increased by 23.5% year-on-year. As I mentioned earlier, the FX impact on AOP was unfavorable. Next, I will explain the results of the processed food business. Revenue increased by JPY 2.3 billion year-on-year, driven by the positive impact from price revisions of package cooked rice in the Frozen and Ambient Foods business. AOP increased by JPY 0.5 billion year-on-year, mainly driven by the revenue increase, which fully offset higher raw material costs such as rice. Let me move to our business forecast for fiscal year 2026. Before that, I would like to inform you that we have adjusted certain financial figures. One of these adjustments is related to Canada, which I would like to explain now. As you know, a settlement was reached in March last year regarding all the smoking and health litigations in Canada, in which our local subsidiary, JTI McDonald was included as a defendant. Consequently, we will make annual payments from 2026 onward. As a result of these payments, we expect this will create a gap between JT Group's recognized profit and loss as well as its cash flow. Therefore, in order to appropriately reflect the actual cash flow in our profit and loss, under certain assumptions, we have made adjustments to deduct from each indicator, the amounts of revenue and profit corresponding to each annual payment as well as to exclude the impact our noncash profit and loss. For details, please refer to the reference slide titled Canada Adjustment. This being cleared, allows me to explain the consolidated financials. Core revenue at constant FX is expected to increase by 3.6% year-on-year in 2026, driven by a solid pricing contribution in the tobacco business, higher RRP-related revenue and the top line growth in the processed food business. AOP at constant FX, our primary performance indicator is expected to increase by 8.9% year-on-year. The FX impact on AOP is forecast to be negative due to the depreciation of emerging market currencies and depreciation of cost-related currencies such as the U.S. dollar, both against the Japanese yen. Operating profit is expected to increase by 6.2% year-on-year, driven by the increase in AOP and lower amortization costs of trademark rights related to past acquisitions. These positive factors more than offset the absence of profit from the remeasurement related to the settlement liability for the Canada litigation recorded in 2025, as well as a decrease in profit from property sales. Profit is expected to increase by 14.2% year-on-year, driven by the increase in operating profit and lower financial costs due to the absence of the foreign exchange losses recorded in 2025. Free cash flow is expected to increase significantly, driven by the increase in AOP and the absence of the upfront payment related to the settlement of the litigation in Canada, which we recorded in 2025. In the following section, I will explain the forecast by business segment. First, let me explain the volume assumptions for the Tobacco business. The continued share growth of Combustibles across several markets and an increase in RRP volumes are expected to partially offset the global decline in Combustibles industry volume, notably in Japan, the Philippines and the U.K. As a result, total volume is expected to be between flat and down 1% year-on-year. Next, I will explain the financial forecast. Core revenue at constant FX is expected to increase by 3.4% year-on-year, driven by continued strong pricing contribution, mainly in key markets and higher RRP-related revenue. AOP at constant FX is expected to increase by 8.5% year-on-year, driven by top line growth that more than offsets continued RRP investments behind Ploom and inflation-led cost increases, including across our supply chain. As I mentioned earlier, the FX impact on AOP is expected to be unfavorable. Next, I will explain the forecast for the processed food business. Revenue is forecast to increase, mainly driven by price revisions in the Frozen and Ambient Foods business. AOP is expected to decrease, mainly due to higher raw material costs despite the expected increase in revenue. Finally, I would like to explain shareholder returns. As Tsutsui-san explained earlier, there is no change to our shareholder return policy. With respect to the dividend per share for fiscal year 2025, as indicated at the third quarter earnings announcement, is planned to be JPY 234 per share. Regarding the dividend forecast for fiscal year 2026, based on the Canada adjusted profit, we project a dividend of JPY 242 per share, which corresponds to a payout ratio of 75.2%. Profit for fiscal year 2025 came in below the level presented at the third quarter announcement due to the sharp deterioration in the exchange rate in Iran. On the other hand, our business momentum remains strong and adjusted operating profit at constant currency is growing. Under the current medium-term plan as well, we expect to achieve steady profit growth. For fiscal year 2025, the payout ratio will temporarily exceed the 75% plus or minus 5% range, defined in our shareholder return policy. However, given that the full year results are now finalized and we have gained visibility into our medium-term growth outlook, we have decided not to revise the dividend per share forecast that we presented at the third quarter announcement. Please look at the graph on the slide. We consider dividends to be the core of our shareholder return policy. To date, we have achieved sustainable profit growth. And through this profit growth, we have steadily enhanced shareholder returns. Over the past 5 years, our TSR has outperformed the topics. Going forward, we will continue to target a payout ratio of 75%, which we consider to be at a competitive level in the global capital markets and aim to enhance shareholder returns through the realization of sustainable profit growth over the mid to the long term. This concludes my presentation. Thank you for your attention. Takehiko Tsutsui: Thank you very much Furukawa-san. In closing, I'd like to reflect on the materials we have shared with you today. Throughout its history, the JT Group has consistently invested in its businesses with a long-term perspective, always looking to the future. As a result, our business foundations have strengthened steadily and we have delivered record-high results in 2025, with a further increase expected in 2026. To ensure that this growth remains sustainable, under the Business Plan 2026, which we presented today, we intend to pursue our current resource allocation and shareholder return policies based on the JT Group purpose and the 4S model. We will continue making large-scale strategic investments, particularly in Heated Products. We are convinced that our strong brand equity cultivated through consistent investment, our well-balanced portfolio, supporting our pricing strategy, market share growth as well as the profitability improvement in RRP driven by expected top line growth will deliver high single-digit growth in consolidated AOP at constant currency. We will also continue to enhance shareholder returns in line with growth in net profit, underpinned by our underlying business growth. This concludes our presentation today. Thank you for your attention. Operator: [Operator Instructions] Let me introduce the speakers who will answer your question as follows: Mr. Takehiko Tsutsui, CEO of the JT Group. Mr. Hiromasa Furukawa, CFO of the JT Group; Mr. Eddy Pirard, CEO of JTI, Mr. Vassilis Vovos, CFO of JTI and Mr. Stefan Fitz, CCO of JTI. [Operator Instructions] The first question comes from Mizuho Securities. Mr. Saji. Hiroshi Saji: Mr. Tsutsui, congratulations on being assigned as CEO. So I would hope for more enhanced market communication going forward. So my question is towards Mr. Tsutsui. I would like you to really share with us what are the strengths and also the weakness of JT Group, especially vis-a-vis the global competitors. So we have the portfolio within the convertibles. And of course, within RRP, the Heated Products and Modern Oral. So there are difference in the portfolio. So how -- what are your thoughts on your current portfolio? And also in terms of the R&D and the governance system. So what are the strengths and also the weaknesses? And where exactly do you expect to exert your leadership and make some improvements? So that is a question to you. Unknown Executive: So related to the strengths and weaknesses of JT Group, Mr. Tsutsui would answer your question. Takehiko Tsutsui: Thank you very much for that question. So let me first talk about the strengths of JT Group. As you have seen with the results and the actual was in Combustibles. We continue to make growth investment. And because of that, we continue to exert the growth capability, and we continue to cherish that going forward. In addition to that, strategically, we have been investing in a different strategy, and that is true for RRP as well. So steadily, we have been making progress. So the fact that we have a clear strategy, that is another strength that we have for JT Group. Now in terms of somewhat of a weakness as you posed, if you look at the RRP, it may be easier for you to understand. So whenever we would need to launch the new businesses. Of course, prior to my current position, 6 years, I was working within JTI, and I have been in the leadership position. So given my experience, I believe we are still at the starting point in launching these new businesses. However, as we have already shown with you with the actual results, little by little, steadily, we have been launching the business. So Ploom AURA, that we have launched back in May last year, if you look at the actual, we do have the innovation capability built in. So since I became the President, what is the kind of leadership I would like to exert? That was another question you posed. So of course, we'd like to cherish the strengths that we've always had. And we would look into RRP and D-LAB as well. So we'd like to continuously challenge for new businesses in the long run. And we'd like to make sure that, that is connected to the growth engine. So we need to make sure that actual really reflects the growth engine that we have. So that is exactly what we'd like to focus on going forward. So there will be an upfront investment. Therefore, it is essential that we engage in close communication with you. And we would like to continuously execute the initiatives. We ask for your continued support. We do ask for your implementation and execution. So thank you. Operator: The next person is from Nomura Securities. Mr. Morita, over to you. Makoto Morita: Can you hear me? Unknown Executive: Yes, we can. Makoto Morita: This is Morita from Nomura Securities. Regarding growth investments, and some numbers around RRP, up until 2028, you are investing JPY 800 billion as advanced investments. That was the outlook you set forth. Up until now, turning the business profitable by 2028, we're in the markets you enter, raising the market share for RRP to about mid-teens is what you've been communicating. So can you take this opportunity to talk about the profitability of RRP as well as the target share you may have in mind if you have any updates associated with this? Unknown Executive: Regarding the question about RRP and business strategies, Mr. Tsutsui will take that question. Takehiko Tsutsui: Thank you for your question. For our ambitions, what's important here is that, this will be a passing point. Therefore, we would like to ensure we build a strong foundation. And as we communicated in today's presentation, after Combustibles, we would like to turn it into the second growth engine. Regarding forecasting of the RRP business. There is uncertainty associated with innovation. Therefore, there may be times when the timing is different from what we expect, more or less. However, on the other hand, likely been setting forth from the past regarding our ambitions, I would say we are broadly in line. As for investments, last year, we set forth JPY 650 billion. When you look at this annually, the latter half of the year, the pace of investments are increased. That was the case for last year. And for this fiscal year, we have set forth the number of JPY 800 billion. We would like to step up the pace of investments going forward. On the other hand, when it comes to this fiscal year and the investments we made, it wasn't really that much off of our expectations from last year. And when it comes to the investments we make. First, for RRP. It's still a new market that was established 10 years ago. So in this type of new market, innovation is extremely effective that is focused on the customer. Therefore, as we continue to make investments, we would like to ensure that we develop good products, and effectively deliver the innovation to the customers by making investments into marketing. So that will be approximately 80% of the JPY 800 billion. So, the reason why it costs so much money for marketing investments is because Combustibles is a mature market. However, in order to effectively reach customers, the way we do things need to be different. So customer acquisition as well as retaining customers are the areas where we are making advanced investments. For Japan, when it comes to innovation, RRP relevant marketing are in sync with each other right now. That is leading to the good performance. So Japan is a good example. And for this momentum, we're not just talking about 2028 in our ambitions, but we would like to accelerate our efforts looking out beyond 2028. That is our intention. And once we are able to make this growth definitive, we would like to also ensure that investments become more efficient, but at this point in time, the plan is one where investments will come in advance. So as we make these advanced investments, as explained in the presentation, high single-digit AOP at constant currency is what we believe we can achieve. Makoto Morita: [Interpreted] May I confirm one thing? So for RRP and the midterm ambitions, you were saying you were probably in line, but it's not that off. But up until 2020, you were saying that you would like to turn the business profitable. Do you mean that, that target is still in place? Or do you think -- are you trying to say that it's going to be beyond 2028? Takehiko Tsutsui: [Interpreted] Regarding the communication of becoming profitable in 2028, its marketing spend is deducted from gross margins. That's how we have been communicating. At this point in time, what I would like to stress is, directionally, we are moving towards that direction. Makoto Morita: [Interpreted] But is that going to be 2028 or 2029 or even 2027? Takehiko Tsutsui: [Interpreted] Due to the nature of innovation, there may be a chance that the time line may move. However, we are broadly in line towards that direction is what I -- what we have been able to confirm. So it's more of a directional comment. Makoto Morita: [Interpreted] I see. I guess, the goal is to turn the RRP business into your next growth driver. So you don't really have to collect on your investments that early. But I look forward to your future business. Operator: [Interpreted] The next question comes from JPMorgan Securities -- excuse me, Morgan Stanley MUFG Securities. Mr. Miyake, please. Haruka Miyake: [Interpreted] So this is Miyake for Morgan Stanley MUFG. So Ploom has been launched in various markets. You have already made the presentation. So as you switch to Ploom AURA then in other markets, do you expect to see acceleration of the market share? So could we actually confirm that? So there are some markets that have good response, maybe not as much. You mentioned that it is related to the competitive climate. But if you can also highlight on some of the different features of the different markets. That is the first question. Also, the potential for EVO. So it's grown about 20% in Japan. And in terms of overseas market, it is also a premium product. So would it potentially drive the profitability in the overseas as well. So those are the 2 questions. Operator: [Interpreted] So the question relates to Ploom AURA and also EVO, the Ploom performance. Mr. Tsutsui would answer. Takehiko Tsutsui: [Interpreted] I would like to answer your question. JTI participants may add on some information later. So first of all, about Ploom AURA. So as we launch outside of Japan, I'd like to share with you the current state. Last year, inclusive of Japan. We have launched it in 17 markets. That is last year. As of today, the number has increased to 19 markets. Now the feedback from the customers, the direction wise, it is quite similar. When you compare the feedback in Japan and also outside of Japan, in terms of the taste and also for the device design, those have been highly evaluated by the customers and consumers. Another point in the overseas market, the timing of launching the Ploom AURA. So in the past, we had Camel and Winston, the brands that were used for combustibles. And we have been launching sticks according to these brands. But this -- we took this opportunity to switch to EVO. And the switch has been successful without reducing the number of customers and even after switching to EVO. The customers have been quite forward-looking. They have been quite positive about AURA and EVO. That was the feedback that we received. Of course, in the respective markets, the impact of AURA and EVO, we are bound to see difference in the different markets. But the general direction is quite similar. When you compare the feedback that we've received in Japan as opposed to the international market. So any additions from the JTI participants? Operator: [Interpreted] JTI, would like to respond to that question? Hiromasa Furukawa: Yes. Ploom AURA has been launched in several markets, starting in quarter 4, 2025. And depending on the launch timing, we have different time lines to see the success. But as you have seen in Eddy's presentation, we have, in some of our markets like Poland, tripled our market share of certain share of segment versus the year before. Ploom AURA has been very well received by the consumers in the markets outside of Japan. The consumers like the functionality, the consumers like the taste. But of course, it is also important to state that we need to continuously work on our commercial engine to drive awareness, acquisition and retention. And Ploom AURA, which is newly launched in these markets, will help us to do this in 2026. Haruka Miyake: [Interpreted] This is related to the first part of the question. So as you intend to improve the profitability of RRP, so the awareness and retention would actually drive the efficiency of the marketing. And of course, you would have more volume increase. At the same time, portfolio, the mix within the stick, you would have more premiumization. Those are some of the impacts you expect to see. So when you look the next 3 to 5 years, what do you see as the biggest driver? Operator: [Interpreted] So this is a driver of RRP profitability question. Mr. Tsutsui would continue with this response. Takehiko Tsutsui: [Interpreted] In terms of the driver for the profitability, first thing first, we need to expand the number of consumers, customers, so basically increase the volume of the sticks, the sales of the sticks. We do believe this is the biggest driver. Also in terms of making the operation more efficient, those consumers who tried the Ploom, we need to make sure we need -- we can convert them, and so increases the percentage of conversion so they would enjoy Ploom on a regular basis. Those would be the second -- that will be the second driver. And 2 drivers would really drive the profitability going forward. Operator: [Interpreted] The next person is from Goldman Sachs, Japan. Mr. Miyazaki. Takashi Miyazaki: [Interpreted] This is Miyazaki from Goldman Sachs. For the Tobacco business, I would like to learn about the factors that will drive profit increases in 2026. In 2025, on Page 24, you show the factors of adjusted operating profit, compared to this, for 2026, can you walk us through what you are anticipating? I am sure that you will continue to do pricing, but compared to 2025, is the potential going to go down. And for others, that includes supply chain cost, how much of a negative impact should we account for? And for volume, I think you're assuming a slight decline. But is that fair to say, are you actually assuming a decline? So please confirm. Operator: [Interpreted] Regarding fiscal '26 factors in the Tobacco business, Mr. Furukawa will explain. Hiromasa Furukawa: [Interpreted] This is Furukawa. I would like to take that question. As you said in your question, when you look back at 2025, it was an extraordinary year. Based off that, regarding what we are assuming for fiscal '26, which I think you're trying to get at. Well, 2025 was a good year, but we believe AOP growth should be about 8.5% on a company-wide basis. That's what we are assuming for '26. From 2025, we saw fair momentum around the world in various markets, and we are confident about that to be ongoing. However, we also had the impact from acquiring Vector, which is going to become absent in 2026. But year-over-year investments in RRP is going to increase and expand. Regarding our volume assumptions that you were asking about, it's true that in 2025, Turkey, Philippines as well as in Russia, we saw some temporary factors, and therefore, industry volume was relatively strong. But we have been taking pricing strategies and taxes have been up. So, we will continue to focus on demand from customers so that we could take action appropriately. Whatever the case may be for the driver of sustainable JT Group growth will be looking at short-term delivery, but we will ensure that we grow the business over the medium to long term and expand profits. That is the basis of which we have formulated our management plan for 2026. JTI will also comment. Vassilis Vovos: Thank you. Let me add a few color a little bit of color on already the key point of the answer of Furukawa-san. And you very correctly mentioned that for next year, we expect pricing to continue to be a driver of our revenue growth. And as mentioned already in the presentation, 60% of our plant pricing for 2026 is already done. We have already taken pricing in significant markets like the U.S.A., the U.K., the Philippines, Turkey and a number of other markets. So we see pricing continuing to be a big feeder of our profit revenue growth and eventually profit growth, certainly. In addition to that, we see that, by the way as a sustainable driver of revenues, not only for '26, but also as we move into the other years, we think our brands as mentioned in the presentation of Eddy are very strong, are the top-growing brands in combustibles. They have a lot of equity, loyalty pricing power. So we expect to be able to continue taking pricing in the other years as well. That is one driver, of course, of our revenue growth algorithm. You correctly mentioned, we have an anticipation of a slight volume decline next year. So we don't expect in our key markets to see the same behavior of the industry size in '25, we had very strong industry size performance in markets like Russia, Turkey and others. But of course, the decline of our volume, which overall is mentioned between 1% and flat, is much lower than the overall industry decline because we are gaining market share. We gained market share in more than 60 markets this year. We expect this to continue as we go in '26. So the momentum will mitigate our market volumes slight decline. And then the profit generation comes from efficiencies, continuous focus on improving the profit margin. You saw a very impressive increase of the combustible profit margin in 2025, which was up 3.4 points. We will continue in this direction as we move into the future. We are focusing around fewer brands. Our GFBs are now 75% of our volume. That means we reduce proliferation of SKUs, and we harmonize a lot of input materials, we are having a focus on our end-to-end services, both in manufacturing and our shared services. And we also give very clear guidance to our markets in terms of mission. So we have market classification that is clearly allowing for markets to know what's the focus. Markets could be focused on earnings or earnings in shared market. That drives efficiencies also into the investments we are doing. All these elements will help us improve our profit margin even further as we go. And together with the increase of revenue driven by the resilience of volumes and the quality of pricing, this is the driver of the growth. And to that, of course, the significant increase of the volumes of heated tobacco products, a significant increase of the revenues that will come in the coming years. And the reduction of costs because of scale will further fuel the algorithm of growth in the outer years. Eddy Pirard: Can I add something? I would like to add a little comment on Furukawa-san's and Vassilis' comment. A lot has been talked about in terms of responsiveness on things that we do control. There's also another element, which has been highlighted before, sometimes markets develop in a certain way, the unpredictable and the uncontrollable. And what I think is a feature of our organization, of our business is that we have an embedded increasingly agile organization that can respond to surprises in a very speedy and efficient manner. And that will help in relative terms ensure that we do keep the momentum and that we position ourselves competitively in the best possible way. I think this is something that we don't often talk about, but we've been doing a lot of work over the years on trying to bring that agility by removing obstacles for speedy decision-making and agility in everything that we do. And I thought it was worthy to mention that as well. Operator: [Interpreted] We would like to move on to the next question. SMBC Nikko Securities. Mr. Furuta, please. Tsukasa Furuta: [Interpreted] This is Furuta from SMBC Nikko Securities. So I have a question to Mr. Tsutsui, the new President. So we have been involved in large-scale M&A inclusive of Gallaher. And also, you have alluded to M&A during your presentation. So what would be your target going forward? So I'd like to hear your thoughts. Would it be similar to something like Vector or would it be any -- something that would accelerate the growth of RRP? Operator: [Interpreted] This is a question related to M&A. Mr. Tsutsui would respond. Takehiko Tsutsui: [Interpreted] Thank you very much for that question. As I have mentioned within the presentation, M&A is a very effective initiative. So as we consider M&A, some of the important elements, M&A is definitely a means to grow. So to what direction and what we are going to grow, so depending on that, the attractiveness of the different deals may differ. So according to our objective, if there are opportunities, we would like to consider and explore the opportunity. So what are the different types of M&A you may ask? So in terms of combustibles. As Eddy mentioned in his presentation, as we consider and focus on ROI. We would look whether it would be instrumental in improving the ROI. And back in 2024, Vector Group was exactly it and meeting that objective. It was a very high-quality deal as we recall. So if there are more opportunities, we would definitely like to explore the possibility. Now in terms of RRP, because it is quite new in terms of characteristic, perhaps it is not so much of a large-sized M&A, but we'll be looking into more of an intellectual property or perhaps a new business model. So for instance, Flavour Warehouse in the U.K. We have forged a partnership with them or acquire them rather. So this sort of a new business model that could be another objective as well. Also, if there are some capabilities that are not fully operational within the group, we may also opt to acquire those as well. So those are some of the directions in terms of M&A. So depending on the objective, we will look around the world. And if there are opportunities, we would definitely like to look into those and look into possibilities. So JTI would also like to respond to that as well. Eddy Pirard: Thank you very much for the question Furuta-san. I can only support what Tsutsui-san has said. We are hungry for growth, but that comes with discipline, and a more complex environment that we have experienced maybe 10, 15 years ago because of the changing consumer desires and expectations. So it is a twin approach in a way, the combustible area where we've got a lot of confidence in the capabilities that we have to run these businesses. We never forget that M&A is not easy. Integration is hard work. But we understand profoundly what it takes to succeed in the combustible area. And in RRP, it's still relatively new, all things being considered. And so looking at innovative propositions for consumers, looking at intellectual property that can give us a bit of an edge in certain parts of the business is always something that we will keenly look at with the financial discipline that, of course, you would expect from us. Tsukasa Furuta: [Interpreted] Also, interest of the shareholders' return, I would like to ask about that. So as you continuously make gross investment, Also, if you can also -- the 75% of a dividend payout ratio, maybe it is somewhat lagging behind vis-a-vis the global peers. So how do you intend to strike the balance between gross investment as opposed to shareholders' return? Operator: [Interpreted] So this is the balance between investment and return? Mr. Tsutsui would like to respond. Takehiko Tsutsui: [Interpreted] Thank you very much for that question. 75% dividend payout ratio related to this point. So we are fully aware, but there are various benchmarks available in the world. But as far as we're concerned, we believe this is globally competitive. That is our understanding. And as you highlighted, in terms of gross investment, we put the top priority in the gross investment. So within that balance, 75% dividend payout ratio, we believe this is the optimal in terms of the balance. Of course, there are companies out there who are making far larger shareholders' return. And also the global peers, they have been looking into various return level and also different methods of return as well. We are fully aware of those. So just to reiterate, what would you like to stress here, is indeed gross investment really brought our group to the current state. That was the biggest driver that brought us to this very day. So back in 1999, Reynolds acquisition, in 2007, Gallaher acquisition. So these business investment have continued, and that is exactly why we have the performance as of today. And also, we have strong brand equity. The reason it is there because we have made investment in the past. And also, we've been able to capture the pricing opportunity precisely because of the strong brand equity. So I'd like to seek your understanding this gross investment will continue to be proactive, and that would continue to be high in our priority. And that will be continued going forward. And within that, of course, we would also intend to explore the competitive level of shareholders' return. And definitely, we'd like to keep that balance. Operator: [Interpreted] We are running out of time. So the next question will be the last question. From Daiwa Securities, Mr. Igarashi, over to you. Shun Igarashi: [Interpreted] I am Igarashi from Daiwa Securities. I'd like to ask a question about innovation in the RRP business. For Ploom AURA, since the launch, the device and the new sticks, it is penetrating the market in a very good way. In the future, I'm sure that new products will appear in the market and innovative products will probably increase. So for your company, I'm sure that highly functional devices will probably be an area that you're going to invest into for more innovation. Is that the case or no? Operator: [Interpreted] That was a question about RRP innovation. Mr. Tsutsui will take that question. Takehiko Tsutsui: [Interpreted] Thank you for your question. Regarding RRP innovation, last year in May, we launched Ploom AURA. And it's been a product that was well received from the customer base. So I am very pleased to see that. When we are developing such products, from the moment we are developing the product, we already are talking about making it better. In order to respond to customer expectations, we are creating a wish list in the innovation cycle and are generating a variety of ideas. So -- and even better product, we believe can be delivered to the customer in the future, Therefore, we would like to -- we do have a pipeline in place. Unfortunately, I am not able to share with you today. However, from the pipeline, we would like to ensure that highly positive impactful products for the customer and services can be developed, and we hope you look forward to it. Operator: [Interpreted] This concludes the results meeting for fiscal '25. Thank you very much for participating today. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Ladies and gentlemen, thank you for standing by. I am Gailey, your Chorus Call operator. Welcome, and thank you for joining the Koc Holding conference call and live webcast to present and discuss the fourth quarter 2025 financial results. At this time, I would like to turn the conference over to Ms. Helin Sinem Celikbilek, IR Coordinator at Koc Holding. Ms. Celikbilek, you may now proceed. Helin Celikbilek: Thank you. Welcome, and thank you for joining us today for Koc Holdings' Fourth Quarter and Full Year 2025 Earnings Call. This is Helin, IR Coordinator of Koc Holding. And today, I'm joined by our CFO, Polat Sen; our Finance Coordinator, Ozge; our IR Manager, [indiscernible] Ismail, to take you through our presentation and answer questions during the Q&A session. Our presentation covers the company's audited financial results for the year 2025 prepared in accordance with Turkish Accounting and Financial Reporting Standards, including the application of IAS 29 inflation accounting. Please note that our presentation and Q&A session may include forward-looking statements and assumptions based on the current business environment, which are subject to change. As a reminder, a replay of this webcast will be available on our website following the call, and there will be a Q&A session at the end of the call. With that, I'd like to hand the call to Polat-Bey to begin the presentation. Polat Sen: Welcome, everyone. I'd like to begin with a brief overview of the macroeconomic backdrop that we defined in our group's operating environment in '25. The year was marked by heightened uncertainty and volatility shaped by ongoing geopolitical conflicts and shifts in global trade policies. Despite these headwinds, global economic activity remained broadly resilient. In Turkey, this inflation process continued with an annual inflation falling from 44.4% in 2024 to 30.9% in '25, while delivering a 3.7% economic growth in the first 9 months. Throughout 2025, market interest rates were higher than what was anticipated at the beginning of the year. Industrial production remained subdued throughout the year, yet the drag of high interest rates on the domestic demand proved more limited than anticipated. In this challenging environment, our strong operational discipline and balanced approach supported healthy financial performance. As we show on Slide 5, our combined operating profit was up by approximately 9%, reaching TRY 155.5 billion in 2025. On a consolidated basis, we generated TRY 22 billion net income in '25, significantly higher compared to last year's TRY 1.7 billion. Automotive segment remained the largest contributor with TRY 17.7 billion, followed by the Energy segment with TRY 13.4 billion. Financial Services segment delivered a notable year-on-year improvement, while the Consumer Durables segment continued to face pressure amid soft demand and tight liquidity conditions. Zooming into the fourth quarter of 2025, we recorded a consolidated net income of TRY 7 billion compared to TRY 8 billion loss in the same period of last year. On Slide 6, the chart on the left shows the sectoral breakdown of the net asset value of our diversified business portfolio at the year-end. Our portfolio diversification is not limited to -- limited only to sectors, but also includes international positioning. On a combined basis, we generated 31% of revenues from international sales in 2025. Including Tupras, which operates as an FX-linked commodity business, roughly 46% of our revenues can be considered hard currency based. Moving on to Slide 7. You can see that we had a net cash position of $815 million at the holding level at the end of the year. In 2025, our dividend income in nominal terms amounted to approximately TRY 33.4 billion, having distributed TRY 17.5 billion in dividends in the second quarter and other net cash outflows of TRY 13.1 billion. We end the year at TRY 34.9 billion net cash level. On Slide 8, you can see the main pillars of our balance sheet. Around 69% of $815 million net cash position is in hard currency. As we already disclosed in mid-October 2025, we secured a 5-year club loan of $600 million to further strengthen our liquidity. The funding remains available. And as of today, we plan to draw down this facility before the April deadline. We strictly apply and regularly monitor our prudent risk management policies at each underlying company on a combined basis. In terms of liquidity, leverage and foreign exchange position, we preserved our conservative levels. On a combined basis, our current ratio is 1.2x, and our net financial debt to EBITDA, excluding the finance segment, is 1.2x. In terms of FX position, we remain well within our risk management rules. With that, I'll hand over to Helin to walk you through the key sectoral developments of 2025. Helin Celikbilek: Thank you. Let's begin with the energy sector on Slide 10. The Energy segment's contribution to our consolidated net income was at around TRY 13 billion in 2025, up from TRY 9.2 billion a year ago. In 2025, global energy markets were pressured by political tensions, expanded sanctions and refinery outages, creating supply volatility. Crack margins trended higher overall on strong demand, while crude differentials narrowed even as OPEC+ increased production due to ongoing geopolitical constraints. Turkey's fuel demand was robust. Based on 11 months of data, gasoline demand rose 16% and jet fuel demand 15%, while diesel demand increased 3% over the same period. In this environment, Tupras operated resiliently, maintaining high utilization and capturing margin opportunities while advancing its strategic transformation. With approximately 94% capacity utilization rate, Tupras total sales volume was 29.4 million tonnes. In this supportive demand environment, Tupras delivered robust operational and financial results, beating its net refinery margin guidance. On the LPG side, domestic demand remained soft in January, November 2025 period with total consumption declining by 5% year-on-year. Despite the weak market backdrop, Aygaz delivered stable domestic retail sales volume year-on-year. And including wholesale and the sales in Bangladesh, total sales volume grew by 1% in 2025. During this period, Aygaz preserved its market-leading position in Turkey with a 26.2% overall market share. Let's move to Slide 11 and discuss the developments in the auto segment. The auto segment remains the highest contributor to consolidated net income. Despite solid volume growth, profitability in this segment is slightly lower compared to last year, mainly due to an intense competitive pricing environment, composition of sales and higher cost of goods sold amid inflationary pressures. In 2025, the domestic automotive market grew by 11% to reach a new record of 1.4 million units contrary to initial expectations. And this strong volume growth was mainly driven by an intense competitive environment, shifting macro conditions, wild effect through surge in gold prices and strong interest income as well as improved vehicle availability. Ford Otosan produced 32% of Turkey total vehicles and 83% of its commercial vehicles, while Tofas produced around 9%. Our group total share of the domestic market was at around 30%. On the export side, the European passenger car market grew modestly by 2%, whereas the commercial vehicle market declined by 8%, reflecting ongoing economic pressures and last year's high base. Our group market share in the exports increased around 6 percentage points to 43%. In 2025, looking at Ford Otosan, its export volume increased by 10% year-on-year, representing 38% of Turkey's total vehicle exports. With Ford Otosan nearing the end of its intensive investment cycle, its CapEx is set to normalize, supporting a more balanced and resilient cash profile, while financial and operational performance is anticipated to remain broadly consistent with last year. Tofas exports volume also increased by 41%, mainly with the ramp-up of K0 model. Tofas expects an acceleration in volumes in 2026 under the amended K0 production contract. 2025 was a pivotal year for Tofas with several milestones. The successful acquisition of Stellantis Turkey marked a major strategic step, firmly solidifying Tofas position in the Turkish automotive market. The company also advanced meaningfully towards full utilization of its production capacity. New investments are underway and supporting upcoming model launches. Strengthening of the product portfolio sets the stage for solid volume growth ahead for Tofas. TurkTraktor revenues declined 39% year-over-year, mainly driven by a 41% contraction in tractor sales volume, reflecting a weak demand in both domestic and international markets. The domestic tractor market contracted 36% in 2025, mainly due to favorable -- unfavorable climate conditions and tight liquidity. In 2026, TurkTraktor aims to strengthen its market share in what is expected to be a flat volume market, supported by a more balanced competitive landscape following the phaseout of Stage 3 models across the industry. Otokar, our leading bus and defense company, registered 18% revenue growth year-on-year. Defense vehicle revenue share rose to 27%, up by 11 percentage points. 66% of revenue was from international sales. Otokar continued armed vehicle deliveries under its existing contract in Romania and advanced preparations for local manufacturing. To strengthen its position, Otokar recently initiated the acquisition of its local partner in Romania. And in 2026, Otokar will also focus on the planned production of Mercedes-Benz Conecto city bus, part of its previously announced 3-year agreement with Daimler, and this will support Otokar's efficiency and global reach. On Slide 12, let's look at the Consumer Durables segment. The Consumer Durables segment faced headwinds in 2025 with performance pressured by subdued demand, a challenging market environment and intensifying competitive dynamics. In Turkey, white goods unit sales contracted by 3% year-on-year, reflecting tight financing conditions, while exports declined by 10% over the same period with a weak external demand and a more competitive European market. Looking at Arcelik performance, Turkey revenues declined by 6.6% year-on-year in an unfavorable price and product mix despite the moderate demand in the second half. International revenues, consisting 68% of the total, also declined at the same level of 6.6%. With disciplined execution, Arcelik delivered notable improvements in gross margin, EBITDA margin in the full year and EUR 5.7 billion free cash flow generation that reversed last year's significant free cash flow negative. Despite the transition year marked by a post-merger integration in Europe, Arcelik maintained its leadership while strengthening the balance sheet and remaining within covenant limits. Lastly, a few words on the finance segment with a particular focus on Yapi Kredi on Slide 13. The finance segment's contribution to our net consolidated income was negative around TRY 0.6 billion in 2025, which significantly improved compared to negative TRY 20.5 billion in 2024. As we always highlight, we consolidated Yapi Kredi's inflation-adjusted financials, which means its bottom line includes monetary losses from its monetary position, although the impact this year is much lower compared to last year. In this presentation, however, references to Yapi Kredi's KPIs are based on BRSA financials, consistent with the bank's disclosures where banks remain exempt from inflation accounting. Yapi Kredi maintained solid operational momentum supported by disciplined asset liability management, prudent deposit pricing strategies, a broad customer base and extensive franchise network. The bank's total performing cash loan growth was around 45% and total customer deposit growth was at 44% on a year-on-year basis. The bank maintained its leadership position in Turkish lira demand deposits among private banks with a 17.2% market share. Swap adjusted net interest margin expanded by 151 basis points in 2025 supported by ongoing policy rate cuts and effective asset liability management, ending the year at 2.24%. Net fee and commission income growth was robust at 50% year-on-year, driven by a pretty strong customer franchise and diversification initiatives. Fee generation remained a strong natural hedge, covering 94% of operating costs. On asset quality, total coverage remained solid at 3.9% in 2025, reflecting continued prudent provisioning. Net cumulative cost of risk, including currency hedge, stood at 167 basis points within guidance range. Yapi Kredi preserved its strength in capital and liquidity ratios. The consolidated capital adequacy ratio stood at 14.8% and the Tier 1 ratio stood at 11.8%, both comfortably above the regulatory thresholds. In 2025, the bank delivered tangible return on equity of 21.4% and return on assets at 1.5% on a reported basis. With that, I'd like to hand the floor back to Polat-Bey. Polat Sen: On Slide 14, you'll see the snapshot of our group's financial performance on a segment basis. To recap of what I outlined at the start of the call, on a combined basis, Koc Group registered TRY 4.6 trillion revenues, TRY 155.5 billion in operating profit and TRY 124.5 billion in profit before tax. Our consolidated net income of TRY 22 billion was substantially higher than -- higher compared to last year on the back of improvement at the operating profit level and a significant decline in the net monetary gain/loss position. On Slide 16, I'd like to briefly talk about some of our unlisted companies. Otokoc is the largest contribution to our NAV among our unlisted assets. It is Turkey's leading automotive retailing and car leasing company, ranking #1 in secondhand sales among corporate brands. With operations in 9 countries abroad, Otokoc's Avis Budget Group's largest licensee and key international investment partner. OPEC is a major player in Turkey's fuel distribution sector, operating 1,965 stations nationwide, Opet holds 19.3% market share in white products. Aligned with Tupras' strategic transformation plan, Entek is pursuing growth in renewable energy, both in Turkey and abroad. Today, 77% of Entek's 492 megawatts total installed capacity is carbon zero electricity. Construction of 178.5 megawatts solar power plant in Romania commenced in Q4 2025. Koc Finansman is another unlisted company operating as a leading player in the finance sector with total assets of TRY 55.5 billion. The company's loan portfolio increased by 79% to TRY 49 billion in 2025, while its net profit grew by 52% to TRY 1.5 billion. Considering our Marina operations in 2025, we expanded our portfolio with the inclusion of Gocek Village Port Marina and Gocek Exclusive Port Marina. This acquisition must further strengthen our position in Turkey's maritime tourism sector. With a total of 12 marinas, we hold a 24% market share in Turkey based on total capacity. We also have operations in commercial and naval vessel building and ongoing investments in super yacht building. On Slide 18, you will see the evolution of net asset value discount. At Koc Holding, we leverage our long-standing status as a market proxy, which makes our valuation, a meaningful barometer of broader market sentiment. Consistent with this dynamic, our NAV discount has historically narrowed during periods of improved risk appetite from the foreign investors. In 2025, we -- the weekly average NAV discount stood at 34%, noticeably wider than our long-term average of approximately 14%. We believe that the current level of discount is not aligned with the fundamentals of our portfolio and does not adequately reflect the resilience and strength of our underlying operating businesses. In summary, we have left behind a volatile year with solid standing demonstrating the strength of our financial discipline and operational resilience. As we prepare to celebrate our 100th year of establishment, we remain committed to sustaining strong profitability, reinforcing our balance sheet and leveraging the resilience provided by our diversified portfolio. Thank you for listening, and now we can open the floor for questions. Operator: The first question is from the line of Kilickiran Hanzade with JPMorgan. Hanzade Kilickiran: I just want to make a follow-up on your solo net cash position. In the third quarter, you have shown around $890 million solo net cash position plus around $290 million projected dividend inflows that are secured from Ford and Tofas [Foreign Language]. So you were supposed to end the year roughly $1.2 billion cash position. And you made some payment for Arcelik. But there is some extra cash spent during this period. Did you do any other acquisitions that maybe I may miss it? I'm trying to understand because around $360 million cash seems to be burned in the fourth quarter. And I try to understand why you spend this money other than Arcelik acquisition. Polat Sen: Yes. For -- if you can look at the other years as well, you can see that most of the cash outflow that we have is the Q4, mainly because of the OpEx that we have in terms of cash because of the year-end bonuses mainly. So that's one reason. But the remainder, we have had some capital increases in some smaller assets that we have. Maybe you remember, we have Mares, Talya Hotel in Antalya. We have increased some capital for that. And I can't remember exactly which ones right now, but some smaller ticket sizes also have contributed to this decrease of the cash that we have. And also, we have paid for Gocek Marinas. I think that was in Q4 as well. So that should make the difference clear for you. Hanzade Kilickiran: And I mean, how are you going to spend this new $600 million that? I mean, do you have any plans to invest it into somewhere else? Or you just want to keep it for a liquidity perspective? Polat Sen: It's not earmarked for anything right now. That was the plan from the beginning. And we are mainly keeping it for any possible acquisitions that may come up because when the time comes, you need the money. So our appetite for acquisition on M&A market is still there. We are looking for targets that would really fit to our expectations. So -- and this amount, the EUR 600 million is needed for that. And also, we are always keeping a war chest, as you know, as positive net cash on our balance sheet for a long time, because going through turbulent times, this cash is keeping us safe from any ups and downs, let me say. So most probably, there will be waiting on our balance sheet until we find the right target to spend it for. Hanzade Kilickiran: Okay. And final stuff, sorry for asking too many questions. But you can't get any further Arcelik shares, right? You reached the level, the limit now on Arcelik. Is it true? Because Arcelik still has some shares on their balance sheet. So if they want it, can they sell it to you? Polat Sen: Yes, of course, if they want, they can sell it to us. Hanzade Kilickiran: Yes, you can still buy it if... Polat Sen: They can sell it to the market as well. We just decided to go with 7%. So there's always the opportunity to do that. But we don't have any intentions right now to buy further shares from Arcelik. Operator: Ladies and gentlemen, there are no further audio questions at this time. We will now move on to written questions from our webcast participants. And it is from with [indiscernible]. And I quote, "Thank you for the presentation. Given the structural global and local changes anticipated over the next 10 years, how resilient and well positioned is your current portfolio? In terms of potential portfolio diversification, which sectors and business lines should be our primary focus?" Polat Sen: We do not have specific sectors. We are more interested in the dynamics of the dividend distribution, cash conversion, EBITDA level kind of metrics. And of course, we always have this DNA of manufacturing. So we are looking at manufacturing assets more than service assets, but that doesn't mean that if we find the right target with the right metrics that we are looking for, we would be interested in that one as well. So some of the sectors are standing out as high cash conversion, high EBITDA, et cetera. So we are looking at those. But I don't want to give any names specifically right now because it can really change because there are numerous amount of different sectors that we may be interested in. Operator: Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you. Polat Sen: Thank you very much for all who is attending. If you have any more further questions, you can always contact our IR team. Thank you. Good evening.
Operator: Ladies and gentlemen, thank you for standing by. I am Gailey, your Chorus Call operator. Welcome, and thank you for joining the Koc Holding conference call and live webcast to present and discuss the fourth quarter 2025 financial results. At this time, I would like to turn the conference over to Ms. Helin Sinem Celikbilek, IR Coordinator at Koc Holding. Ms. Celikbilek, you may now proceed. Helin Celikbilek: Thank you. Welcome, and thank you for joining us today for Koc Holdings' Fourth Quarter and Full Year 2025 Earnings Call. This is Helin, IR Coordinator of Koc Holding. And today, I'm joined by our CFO, Polat Sen; our Finance Coordinator, Ozge; our IR Manager, [indiscernible] Ismail, to take you through our presentation and answer questions during the Q&A session. Our presentation covers the company's audited financial results for the year 2025 prepared in accordance with Turkish Accounting and Financial Reporting Standards, including the application of IAS 29 inflation accounting. Please note that our presentation and Q&A session may include forward-looking statements and assumptions based on the current business environment, which are subject to change. As a reminder, a replay of this webcast will be available on our website following the call, and there will be a Q&A session at the end of the call. With that, I'd like to hand the call to Polat-Bey to begin the presentation. Polat Sen: Welcome, everyone. I'd like to begin with a brief overview of the macroeconomic backdrop that we defined in our group's operating environment in '25. The year was marked by heightened uncertainty and volatility shaped by ongoing geopolitical conflicts and shifts in global trade policies. Despite these headwinds, global economic activity remained broadly resilient. In Turkey, this inflation process continued with an annual inflation falling from 44.4% in 2024 to 30.9% in '25, while delivering a 3.7% economic growth in the first 9 months. Throughout 2025, market interest rates were higher than what was anticipated at the beginning of the year. Industrial production remained subdued throughout the year, yet the drag of high interest rates on the domestic demand proved more limited than anticipated. In this challenging environment, our strong operational discipline and balanced approach supported healthy financial performance. As we show on Slide 5, our combined operating profit was up by approximately 9%, reaching TRY 155.5 billion in 2025. On a consolidated basis, we generated TRY 22 billion net income in '25, significantly higher compared to last year's TRY 1.7 billion. Automotive segment remained the largest contributor with TRY 17.7 billion, followed by the Energy segment with TRY 13.4 billion. Financial Services segment delivered a notable year-on-year improvement, while the Consumer Durables segment continued to face pressure amid soft demand and tight liquidity conditions. Zooming into the fourth quarter of 2025, we recorded a consolidated net income of TRY 7 billion compared to TRY 8 billion loss in the same period of last year. On Slide 6, the chart on the left shows the sectoral breakdown of the net asset value of our diversified business portfolio at the year-end. Our portfolio diversification is not limited to -- limited only to sectors, but also includes international positioning. On a combined basis, we generated 31% of revenues from international sales in 2025. Including Tupras, which operates as an FX-linked commodity business, roughly 46% of our revenues can be considered hard currency based. Moving on to Slide 7. You can see that we had a net cash position of $815 million at the holding level at the end of the year. In 2025, our dividend income in nominal terms amounted to approximately TRY 33.4 billion, having distributed TRY 17.5 billion in dividends in the second quarter and other net cash outflows of TRY 13.1 billion. We end the year at TRY 34.9 billion net cash level. On Slide 8, you can see the main pillars of our balance sheet. Around 69% of $815 million net cash position is in hard currency. As we already disclosed in mid-October 2025, we secured a 5-year club loan of $600 million to further strengthen our liquidity. The funding remains available. And as of today, we plan to draw down this facility before the April deadline. We strictly apply and regularly monitor our prudent risk management policies at each underlying company on a combined basis. In terms of liquidity, leverage and foreign exchange position, we preserved our conservative levels. On a combined basis, our current ratio is 1.2x, and our net financial debt to EBITDA, excluding the finance segment, is 1.2x. In terms of FX position, we remain well within our risk management rules. With that, I'll hand over to Helin to walk you through the key sectoral developments of 2025. Helin Celikbilek: Thank you. Let's begin with the energy sector on Slide 10. The Energy segment's contribution to our consolidated net income was at around TRY 13 billion in 2025, up from TRY 9.2 billion a year ago. In 2025, global energy markets were pressured by political tensions, expanded sanctions and refinery outages, creating supply volatility. Crack margins trended higher overall on strong demand, while crude differentials narrowed even as OPEC+ increased production due to ongoing geopolitical constraints. Turkey's fuel demand was robust. Based on 11 months of data, gasoline demand rose 16% and jet fuel demand 15%, while diesel demand increased 3% over the same period. In this environment, Tupras operated resiliently, maintaining high utilization and capturing margin opportunities while advancing its strategic transformation. With approximately 94% capacity utilization rate, Tupras total sales volume was 29.4 million tonnes. In this supportive demand environment, Tupras delivered robust operational and financial results, beating its net refinery margin guidance. On the LPG side, domestic demand remained soft in January, November 2025 period with total consumption declining by 5% year-on-year. Despite the weak market backdrop, Aygaz delivered stable domestic retail sales volume year-on-year. And including wholesale and the sales in Bangladesh, total sales volume grew by 1% in 2025. During this period, Aygaz preserved its market-leading position in Turkey with a 26.2% overall market share. Let's move to Slide 11 and discuss the developments in the auto segment. The auto segment remains the highest contributor to consolidated net income. Despite solid volume growth, profitability in this segment is slightly lower compared to last year, mainly due to an intense competitive pricing environment, composition of sales and higher cost of goods sold amid inflationary pressures. In 2025, the domestic automotive market grew by 11% to reach a new record of 1.4 million units contrary to initial expectations. And this strong volume growth was mainly driven by an intense competitive environment, shifting macro conditions, wild effect through surge in gold prices and strong interest income as well as improved vehicle availability. Ford Otosan produced 32% of Turkey total vehicles and 83% of its commercial vehicles, while Tofas produced around 9%. Our group total share of the domestic market was at around 30%. On the export side, the European passenger car market grew modestly by 2%, whereas the commercial vehicle market declined by 8%, reflecting ongoing economic pressures and last year's high base. Our group market share in the exports increased around 6 percentage points to 43%. In 2025, looking at Ford Otosan, its export volume increased by 10% year-on-year, representing 38% of Turkey's total vehicle exports. With Ford Otosan nearing the end of its intensive investment cycle, its CapEx is set to normalize, supporting a more balanced and resilient cash profile, while financial and operational performance is anticipated to remain broadly consistent with last year. Tofas exports volume also increased by 41%, mainly with the ramp-up of K0 model. Tofas expects an acceleration in volumes in 2026 under the amended K0 production contract. 2025 was a pivotal year for Tofas with several milestones. The successful acquisition of Stellantis Turkey marked a major strategic step, firmly solidifying Tofas position in the Turkish automotive market. The company also advanced meaningfully towards full utilization of its production capacity. New investments are underway and supporting upcoming model launches. Strengthening of the product portfolio sets the stage for solid volume growth ahead for Tofas. TurkTraktor revenues declined 39% year-over-year, mainly driven by a 41% contraction in tractor sales volume, reflecting a weak demand in both domestic and international markets. The domestic tractor market contracted 36% in 2025, mainly due to favorable -- unfavorable climate conditions and tight liquidity. In 2026, TurkTraktor aims to strengthen its market share in what is expected to be a flat volume market, supported by a more balanced competitive landscape following the phaseout of Stage 3 models across the industry. Otokar, our leading bus and defense company, registered 18% revenue growth year-on-year. Defense vehicle revenue share rose to 27%, up by 11 percentage points. 66% of revenue was from international sales. Otokar continued armed vehicle deliveries under its existing contract in Romania and advanced preparations for local manufacturing. To strengthen its position, Otokar recently initiated the acquisition of its local partner in Romania. And in 2026, Otokar will also focus on the planned production of Mercedes-Benz Conecto city bus, part of its previously announced 3-year agreement with Daimler, and this will support Otokar's efficiency and global reach. On Slide 12, let's look at the Consumer Durables segment. The Consumer Durables segment faced headwinds in 2025 with performance pressured by subdued demand, a challenging market environment and intensifying competitive dynamics. In Turkey, white goods unit sales contracted by 3% year-on-year, reflecting tight financing conditions, while exports declined by 10% over the same period with a weak external demand and a more competitive European market. Looking at Arcelik performance, Turkey revenues declined by 6.6% year-on-year in an unfavorable price and product mix despite the moderate demand in the second half. International revenues, consisting 68% of the total, also declined at the same level of 6.6%. With disciplined execution, Arcelik delivered notable improvements in gross margin, EBITDA margin in the full year and EUR 5.7 billion free cash flow generation that reversed last year's significant free cash flow negative. Despite the transition year marked by a post-merger integration in Europe, Arcelik maintained its leadership while strengthening the balance sheet and remaining within covenant limits. Lastly, a few words on the finance segment with a particular focus on Yapi Kredi on Slide 13. The finance segment's contribution to our net consolidated income was negative around TRY 0.6 billion in 2025, which significantly improved compared to negative TRY 20.5 billion in 2024. As we always highlight, we consolidated Yapi Kredi's inflation-adjusted financials, which means its bottom line includes monetary losses from its monetary position, although the impact this year is much lower compared to last year. In this presentation, however, references to Yapi Kredi's KPIs are based on BRSA financials, consistent with the bank's disclosures where banks remain exempt from inflation accounting. Yapi Kredi maintained solid operational momentum supported by disciplined asset liability management, prudent deposit pricing strategies, a broad customer base and extensive franchise network. The bank's total performing cash loan growth was around 45% and total customer deposit growth was at 44% on a year-on-year basis. The bank maintained its leadership position in Turkish lira demand deposits among private banks with a 17.2% market share. Swap adjusted net interest margin expanded by 151 basis points in 2025 supported by ongoing policy rate cuts and effective asset liability management, ending the year at 2.24%. Net fee and commission income growth was robust at 50% year-on-year, driven by a pretty strong customer franchise and diversification initiatives. Fee generation remained a strong natural hedge, covering 94% of operating costs. On asset quality, total coverage remained solid at 3.9% in 2025, reflecting continued prudent provisioning. Net cumulative cost of risk, including currency hedge, stood at 167 basis points within guidance range. Yapi Kredi preserved its strength in capital and liquidity ratios. The consolidated capital adequacy ratio stood at 14.8% and the Tier 1 ratio stood at 11.8%, both comfortably above the regulatory thresholds. In 2025, the bank delivered tangible return on equity of 21.4% and return on assets at 1.5% on a reported basis. With that, I'd like to hand the floor back to Polat-Bey. Polat Sen: On Slide 14, you'll see the snapshot of our group's financial performance on a segment basis. To recap of what I outlined at the start of the call, on a combined basis, Koc Group registered TRY 4.6 trillion revenues, TRY 155.5 billion in operating profit and TRY 124.5 billion in profit before tax. Our consolidated net income of TRY 22 billion was substantially higher than -- higher compared to last year on the back of improvement at the operating profit level and a significant decline in the net monetary gain/loss position. On Slide 16, I'd like to briefly talk about some of our unlisted companies. Otokoc is the largest contribution to our NAV among our unlisted assets. It is Turkey's leading automotive retailing and car leasing company, ranking #1 in secondhand sales among corporate brands. With operations in 9 countries abroad, Otokoc's Avis Budget Group's largest licensee and key international investment partner. OPEC is a major player in Turkey's fuel distribution sector, operating 1,965 stations nationwide, Opet holds 19.3% market share in white products. Aligned with Tupras' strategic transformation plan, Entek is pursuing growth in renewable energy, both in Turkey and abroad. Today, 77% of Entek's 492 megawatts total installed capacity is carbon zero electricity. Construction of 178.5 megawatts solar power plant in Romania commenced in Q4 2025. Koc Finansman is another unlisted company operating as a leading player in the finance sector with total assets of TRY 55.5 billion. The company's loan portfolio increased by 79% to TRY 49 billion in 2025, while its net profit grew by 52% to TRY 1.5 billion. Considering our Marina operations in 2025, we expanded our portfolio with the inclusion of Gocek Village Port Marina and Gocek Exclusive Port Marina. This acquisition must further strengthen our position in Turkey's maritime tourism sector. With a total of 12 marinas, we hold a 24% market share in Turkey based on total capacity. We also have operations in commercial and naval vessel building and ongoing investments in super yacht building. On Slide 18, you will see the evolution of net asset value discount. At Koc Holding, we leverage our long-standing status as a market proxy, which makes our valuation, a meaningful barometer of broader market sentiment. Consistent with this dynamic, our NAV discount has historically narrowed during periods of improved risk appetite from the foreign investors. In 2025, we -- the weekly average NAV discount stood at 34%, noticeably wider than our long-term average of approximately 14%. We believe that the current level of discount is not aligned with the fundamentals of our portfolio and does not adequately reflect the resilience and strength of our underlying operating businesses. In summary, we have left behind a volatile year with solid standing demonstrating the strength of our financial discipline and operational resilience. As we prepare to celebrate our 100th year of establishment, we remain committed to sustaining strong profitability, reinforcing our balance sheet and leveraging the resilience provided by our diversified portfolio. Thank you for listening, and now we can open the floor for questions. Operator: The first question is from the line of Kilickiran Hanzade with JPMorgan. Hanzade Kilickiran: I just want to make a follow-up on your solo net cash position. In the third quarter, you have shown around $890 million solo net cash position plus around $290 million projected dividend inflows that are secured from Ford and Tofas [Foreign Language]. So you were supposed to end the year roughly $1.2 billion cash position. And you made some payment for Arcelik. But there is some extra cash spent during this period. Did you do any other acquisitions that maybe I may miss it? I'm trying to understand because around $360 million cash seems to be burned in the fourth quarter. And I try to understand why you spend this money other than Arcelik acquisition. Polat Sen: Yes. For -- if you can look at the other years as well, you can see that most of the cash outflow that we have is the Q4, mainly because of the OpEx that we have in terms of cash because of the year-end bonuses mainly. So that's one reason. But the remainder, we have had some capital increases in some smaller assets that we have. Maybe you remember, we have Mares, Talya Hotel in Antalya. We have increased some capital for that. And I can't remember exactly which ones right now, but some smaller ticket sizes also have contributed to this decrease of the cash that we have. And also, we have paid for Gocek Marinas. I think that was in Q4 as well. So that should make the difference clear for you. Hanzade Kilickiran: And I mean, how are you going to spend this new $600 million that? I mean, do you have any plans to invest it into somewhere else? Or you just want to keep it for a liquidity perspective? Polat Sen: It's not earmarked for anything right now. That was the plan from the beginning. And we are mainly keeping it for any possible acquisitions that may come up because when the time comes, you need the money. So our appetite for acquisition on M&A market is still there. We are looking for targets that would really fit to our expectations. So -- and this amount, the EUR 600 million is needed for that. And also, we are always keeping a war chest, as you know, as positive net cash on our balance sheet for a long time, because going through turbulent times, this cash is keeping us safe from any ups and downs, let me say. So most probably, there will be waiting on our balance sheet until we find the right target to spend it for. Hanzade Kilickiran: Okay. And final stuff, sorry for asking too many questions. But you can't get any further Arcelik shares, right? You reached the level, the limit now on Arcelik. Is it true? Because Arcelik still has some shares on their balance sheet. So if they want it, can they sell it to you? Polat Sen: Yes, of course, if they want, they can sell it to us. Hanzade Kilickiran: Yes, you can still buy it if... Polat Sen: They can sell it to the market as well. We just decided to go with 7%. So there's always the opportunity to do that. But we don't have any intentions right now to buy further shares from Arcelik. Operator: Ladies and gentlemen, there are no further audio questions at this time. We will now move on to written questions from our webcast participants. And it is from with [indiscernible]. And I quote, "Thank you for the presentation. Given the structural global and local changes anticipated over the next 10 years, how resilient and well positioned is your current portfolio? In terms of potential portfolio diversification, which sectors and business lines should be our primary focus?" Polat Sen: We do not have specific sectors. We are more interested in the dynamics of the dividend distribution, cash conversion, EBITDA level kind of metrics. And of course, we always have this DNA of manufacturing. So we are looking at manufacturing assets more than service assets, but that doesn't mean that if we find the right target with the right metrics that we are looking for, we would be interested in that one as well. So some of the sectors are standing out as high cash conversion, high EBITDA, et cetera. So we are looking at those. But I don't want to give any names specifically right now because it can really change because there are numerous amount of different sectors that we may be interested in. Operator: Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you. Polat Sen: Thank you very much for all who is attending. If you have any more further questions, you can always contact our IR team. Thank you. Good evening.
Operator: Good morning, and welcome to Primaris REIT's Fourth Quarter 2025 Results Conference Call. [Operator Instructions] I'd now like to turn the call over to Claire Mahaney, VP, Investor Relations and Sustainability to begin. Please go ahead, Claire. Claire Lyon: Thank you, operator. During this call, management of Primaris REIT may make statements containing forward-looking information within the meaning of applicable securities legislation. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond Primaris REIT's control that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. Additional information about these assumptions, risks and uncertainties are contained in Primaris REIT's filings with securities regulators. These filings are also available on our website at primarisreit.com. I'll now turn the call over to Alex Avery, Primaris' Chief Executive Officer. Alexander Avery: Thank you, Claire, and good morning. Thanks for joining Primaris REIT's Fourth Quarter 2025 Conference Call. Joining me today are Patrick Sullivan, President and Chief Operating Officer; Rags Davloor, CFO; Leslie Buist, SVP Finance; Mordy Bobrowsky, SVP, General Counsel; Graham Procter, SVP, Asset Management; and Claire Mahaney VP, IR and Sustainability. As we look back on 2025 and our first four years as a stand-alone public REIT, it is clear that this has been a period of exceptional growth and transformation for Primaris. When we launched Primaris in early 2022, we laid out an ambitious plan to grow our best-in-class enclosed shopping center platform to be the first call for retailers in Canada. I am pleased to say that over the past four years and in 2025, in particular, we have truly transformed our business. In 2025 alone, we completed $1.6 billion of acquisitions, bringing our total since the spinout to $3.3 billion and executed on $400 million of noncore dispositions and nearly $500 million since 2021. That means almost 65% of our portfolio is new since 2021, the level of growth that is remarkable for a REIT of our scale. These transactions have significantly elevated the quality and performance of our portfolio. The 7 malls we have acquired since 2023 have average aggregate CRU sales exceeding $250 million, well above our portfolio, $80 million per mall in 2021 and our portfolio average of $140 million per mall today. Tenant productivity has also grown meaningfully. Sales in our portfolio has increased from $523 per square foot in 2021 to $800 per square foot per day, while the centers acquired since 2023 averaged more than $1,000 per square foot. These results underscore the strength of consumer demand and the quality of tenants operating within our centers. All of this advances our strategic ambition of becoming the first call. Critical to this growth has been our differentiated financial model of low leverage and the low payout ratio. Despite tremendous growth, we have maintained strict capital discipline, keeping our debt-to-EBITDA below 6x. While it may seem counterintuitive at first, our very low leverage and low payout ratio are critical to our ability to access growth capital. Our discipline around capital allocation can be seen in our use of our normal course issuer bid. Since early 2022, we have consistently used our excess retained free cash flow to repurchase units. In 2025 alone, we bought back 5.2 million units at an average price of $15.13, a roughly 29% discount to IFRS NAV which delivered an immediate 43% return on the $79 million invested. Since we launched our NCIB in 2022, we have repurchased a total of 15.1 million units for $216 million at an average price of $14.31, a roughly 33% discount to NAV, which delivered an almost 50% immediate return. Looking ahead, the environment remains highly favorable for Primaris. As mall space per capita continues to shrink and demand from market-leading retailers strengthens, we expect market rents and NOI to continue rising. We also expect mall valuations to recover from the deep cyclical lows earlier this decade. Together with our disciplined capital allocation strategy, these trends position us for significant growth in FFO per unit, distributions per unit and NAV per unit. With that, I will now turn the call over to Patrick to take you through our operational results for the quarter. Pat? Patrick Sullivan: Thank you, Alex, and good morning, everyone. We have been hard at work reshaping the portfolio to achieve structurally higher internal growth by acquiring some of the best malls in the country and recycling capital from our noncore property portfolio. Underlying fundamentals for shopping centers continue to be supported by low retail supply, strong tenant sales and continued tenant demand for quality space. The closure of HBC provides Primaris a tremendous growth opportunity. As a result of HBC's departure, we regained control of space that has gone many years without investment, giving us the opportunity to revitalize and dramatically improve the productivity of some of the best located but least productive space in our portfolio. HBC occupied prominent space within our shopping centers. Their long-term leases had, on average, low single-digit rents and contain onerous development restrictions. Recognizing that time would be required to sign long-term leases with strong retailers and to obtain city permits and approvals for redevelopment, we signed 5 short-term leases for HBC locations with tenants on variable rent terms and limited capital contribution from Primaris. Following the court ruling terminating the proposed HBC lease assignment in November 2025, leasing efforts have accelerated and demand from retailers is exceeding expectations due to low supply of available retail space and a high quality of the HBC real estate. Property specific plans include replacement with single tenants, subdividing for multiple tenants and some include partial demolition. We anticipate retaining approximately 90% of the former HBC GLA. And to date, we are at various stages of advanced negotiation with tenants representing approximately 70% of the expected GLA. Expectations are that we will be able to announce completed transactions in Q2 of this year when leases are finalized. With robust demand from retailers for space, better clarity around development plans, which include retaining more of the HBC GLA than originally contemplated, and the addition of St. Bruno Shopping Center in Q4 2025, our capital investment expectations have increased and is projected to be $175 million to $225 million. Anticipated rental commencement from the redeveloped HBC locations will begin in some properties as early as mid-2027, with overall yields improving from prior guidance and now expected to be approximately 8% to 10%. A highly coveted benefit of HBC closing is the elimination of their onerous development restrictions from approximately 71 acres of land across our portfolio. Primaris has established strategic plans for our properties that include the potential to develop excess land for outparcel buildings, including restaurants, grocery stores and financial institutions as well as the sale of land to residential developers. We are currently engaged in discussions with retailers and financial institutions for outparcels previously restricted by HBC, which will generate returns more than 10%. In addition, we are close to finalizing a land disposition strategy and expect to begin marketing excess land in the next few quarters. While it will take time to service value from land sales, we estimate that dispositions of land previously encumbered by HBC to generate over $100 million. Although we will forgo $5 million of lost NOI from HBC in 2026, which is partially offset by short-term leases with tenants occupying some of the former HBC premises, we anticipate generating more than $17 million from their former premises over the next three years from a diversified tenant mix with significantly lower risk profile. We believe the full impact to NOI could be higher as this analysis does not account for the benefit to adjoining retail premises, some of which are currently vacant that will benefit from being next to new tenants generating higher traffic. On to our operating results. Same property cash NOI for the quarter increased 6.8% or 2.6%, excluding prior year tax adjustments, net of the impact of the disciplined HBC leases and increased 5.6% for the year. This growth reflects broad-based strength across the portfolio driven by rental rate increases, renewal spread gains and improved operating recoveries. Combined recovery ratios improved to 78.9% compared to 78% in 2024, driven by strong leasing activity but partially offset by the recently acquired properties, which have lower recovery rates and the impact of the disclaimed HBC leases. The increase in operating cost recovery ratio continues to trend towards a return to historical norms in the metric, which is around 92% to 93% for property tax and 96% to 97% for operating costs as compared to our current figures of 75.9% and 81.8%, respectively. As a reminder, each 1% improvement in the combined recovery ratio adds approximately $2.5 million to NOI annually. Turning to occupancy. We ended the year at 90.6% committed occupancy and 87.2% in-place occupancy. We were progressing well toward our occupancy target of 96%, having hit 94.5% at the end of 2024. HBC had a significant impact on our overall occupancy figure negatively impacting occupancies by 6.7%, with new acquisitions also creating a negative drag of 3.4%. As noted earlier, HBC occupied large premises but paid very low rent, creating significant income upside over the next several years. A key metric for us is CRU occupancy, which refers to space under 15,000 square feet. CRU occupancy improved to 93.6% as compared to 93.4% in 2024 and 91.7% in 2023. The CRU occupancy in newly acquired centers is lower than our portfolio average, which provides for significant income growth at these high-performing centers. At a property recently purchased, we have improved occupancy by approximately 2.5% less than a year with more than 40,000 square feet of new transactions being finalized, including 25,000 square feet of new CRU leasing transactions. Leasing activity was very strong during the quarter with 73 leases renewed at spreads of 11.3%. For 2025, our average increase in renewal rents was 7.4%, significantly higher than the 4.8% posted in 2024. We completed 40 new deals encompassing 370,000 square feet during the quarter and for the year, we have completed 137 new deals for 600,000 square feet, with 125 of those deals being CRU tenants equating to 232,000 square feet at rents above our weighted CRU average rent. Our 2025 CRU new lease transaction count was 25% higher than 2024, which demonstrates the continuing demand for retail space in our shopping centers. Our weighted average net rent per square foot for the year increased to $31.78 versus $25.28 at the end of 2024. This 26% increase is a result of higher renewal rates, new lease transactions that completed rents higher than previous in-place rents, acquisition of properties with higher rents, disposition of properties with lower rents and the 11 disclaimed HBC leases with rents significantly lower than our portfolio average. To better understand our average rents without the distortion of the HBC impact, our CRU average rent increased almost 15% to $49.68 per square foot compared to $43.26 per square foot in 2024. Tenant sales performance continues to be a major strength across our enclosed malls. Total same-store sales productivity, including newly acquired assets, reached $800 per square foot, up significantly from $718 per square foot last year and $672 per square foot in 2023 supported by strong consumer traffic, healthy retailer performance and the addition of high-performing regional malls. On a same-property basis, Sales increased to $727 per square foot in 2025 compared to $718 per square foot in 2024 and $624 per square foot in 2023. While productivity is an important metric, our focus remains on total CRU sales volume, which best reflects the strength of the portfolio. Our focus is to provide retailers with a size format that enables them to generate the highest possible sales volume. With some of our top productivity tenants posting increasingly higher sales, many are looking to expand their footprint in our malls, which will negatively impact productivity but increased total mall sales volume. For the year ended 2025, total CRU sales volume rose to $3.55 billion compared with the $2.4 billion in the prior year and $2.2 billion in 2023 due to the acquisition of large market-dominant shopping centers, rising sales and higher occupancy. Across the board, our leasing and operation teams are executing at a very high level and producing outstanding results. 2025 was a transformative year for our portfolio. We entered 2026 with significant leasing momentum and clear visibility into our drivers of continued growth. With that, I'll turn the call over to Rags. Raghunath Davloor: Thank you, Pat, and good morning, everyone. We continue to deliver very strong operating and financial results this quarter. NOI growth remained impressive, especially from the acquisition properties and many of our operating metrics continued to trend positively. Our financing strategy is another critical piece of our structure. Our investment-grade rating made possible by our sector low financial leverage and low payout ratio allows us to access the unsecured debenture market. This greatly simplifies our ability to arrange debt financing for our acquisitions as a mortgage financing alternative for these large properties can stress the limits of the secured mortgage market in Canada. The unsecured structure also allows us to buy and sell properties as well as renovate and redevelop properties without the constraints that come with secured mortgages. This gives us a significant advantage over potential new entrants to the mall market and over smaller private groups. In October, concurrent with the St. Bruno acquisition, Primaris issued a 5-year $250 million senior unsecured green debentures at a spread of 110 basis points resulting in a coupon of 3.845%. In accordance to the Green Finance Framework, Primaris published its Green Bond Allocation Report in December where we outlined the allocation of proceeds and highlight the eligible green projects. The allocation report was reviewed by Moody's ratings which issued a second-party opinion confirming the allocation report's alignment to the International Capital Markets Association Green Bond Principles. We published our third annual sustainability report where we outlined our sustainability plan, progress against targets, governance practices, accomplishments and metrics that impact our business. Consistent with all disclosure that Primaris publishers, we aim to provide clear and transparent disclosure and communication about the REIT's business and sustainability practices. And finally, we closed out the year with a strategic sale of Northland and Northland Professional Center in Calgary for $154 million, rounding out the $400 million in noncore dispositions completed in 2025. Northland Village is a recently redeveloped high-quality open-air center anchored by Walmart winners, Best Buy and other lifestyle retailers. The marketed process attracted very strong interest from the broad pool of buyers. Our disposition strategy aligns to our strategy to own a growing high-quality portfolio of leading enclosed shopping centers in Canada. Turning to earnings. FFO per unit for the quarter was $0.51, an increase of 11.6% compared to the same quarter last year and [indiscernible] FFO per unit was $1.85, representing a 9.2% year-over-year growth. Our FFO payout ratio for the year was 46.7% and remains within our target of approximately 45% to 50%. We achieved these impressive per-unit results despite increased unit count, sale of noncore assets and the impact of the disclaimed HBC leases. Internal growth and accretive high-quality acquisitions completed over the last 18 months were the drivers of our outperformance. At Primaris, we talk constantly about our differentiated financial model. We are highly committed to maintaining very low leverage of below 6x debt to EBITDA and maintaining an FFO payout ratio of below 50%. This model gives a structurally higher FFO and AFFO per unit growth as we retain and compound capital faster. As our public company track record continues to grow, we expect this to result in an improved cost of capital with higher FFO and AFFO multiples from current levels. Our debt-to-EBITDA ratio was 5.8x. As a reminder, this range forms part of our executive compensation structure with the top end of the range of 6x. Our balance sheet continues to be a significant advantage. We ended the year with $644.3 million of liquidity and $4.8 billion of unencumbered assets, representing more than 90% of the investment property values. Importantly, we have no debt maturing until 2027, which effectively eliminates refinancing risk in the medium term. We ended the quarter with a weighted average interest rate of 5.07% and extended our weighted average term to maturity on our debt to 4.1 years. Looking ahead to 2026, we have increased our guidance for both cash NOI and FFO per unit and now expect cash NOI to land in the range of $390 million to $400 million, and FFO per unit diluted to be in the range of $1.85 to $1.90. This increase reflects the full year contribution from the significant acquisitions completed in 2025 as well as continued leasing momentum and rental rate growth. Our 2026 guidance does not contemplate additional acquisitions or dispositions. We expect same-property cash NOI growth of 1% to 3%, moderated by the HBC and Toys "R" Us vacancies. We have a lot of positive leasing momentum in our same properties that is offsetting the hurdles of HBC and Toys "R" Us vacancies and the high volume of prior tax recoveries in 2025. If you're trying to reconcile same-property NOI growth to FFO growth, it is important to note that over 1/3 of our 2026 cash NOI guidance is attributable to 2025 acquisitions, which are not included through same-property NOI. We expect same-property NOI growth to pick up again in 2027 and 2028 as we see vacant anchor space come back online at higher rents. Redevelopment spending in 2026 is expected to total $60 million to $64 million, including approximately $35 million allocated to re-leasing and repositioning former HBC anchor boxes. This is an important multiyear opportunity to drive incremental value creation across the portfolio through higher rents. With a larger, higher-quality shopping center portfolio, strong liquidity, no debt maturities until 2027, and increasing embedded growth, we enter 2026 with excellent momentum and confidence in our outlook. Overall, we are very happy with our fourth quarter and full year results, prospecting the strength of our operating platform and discipline of our financial model and the value we are creating for our capital allocation decisions. We are well positioned for continued performance in 2026 and beyond. And with that, I'll turn the call back to Alex. Alexander Avery: Thank you, Rags. 2025 was a remarkable year for Primaris. $1.6 billion of strategic acquisitions completed and over 9% FFO per unit growth. This FFO growth has driven down our payout ratio to 46.7% at year-end 2025, the low end of our 45% to 50% target range. We are able to drive this growth from our strong operating results enabled by our low leverage differentiated financial model. This is a perfect demonstration of compounding capital for our unitholders. We are also continuing to produce strong leasing and operating results. We announced our fifth consecutive annual distribution increase. Our weighting in the TSX Capped REIT Index has risen significantly to approximately 4%, and our trading volume has more than doubled as measured in dollars of units traded per day as compared to a year ago. We also completed our 3-year sustainability plan and established a new plan for the next 3 years. And lastly, our trustees met with investors in the fall as part of our annual Board engagement program. With the HBC legal process now in the rearview mirror and a flurry of discussions and negotiations well underway on the remaining HBC space, we are confident 2026 will be another remarkable year for Primaris. We'd now be pleased to answer any questions from the call participants. Operator, please open the line for questions. Operator: [Operator Instructions] Our first question comes from Mike Markidis from BMO. Michael Markidis: Guys, I was just hoping you could give us or give me, I guess, or all of us listening, a kind of a reconciliation of the 2027 year-end occupancy target of 94% to 96%. Like how much of that is short-term leasing at HBC versus how much of that is actually fully implementing your long-term re-leasing and the development plan? I guess that's question one. I'm allowed to do a follow-up, so I'll listen for the answer first and then go from there. Patrick Sullivan: Yes. Mike, yes, I mean, HBC accounted for a significant drop in our occupancy rate. It's almost -- it's over 6%. And clearly, that's going to be a big driver of getting that macro number up to where it needs to be. From a CRU point of view, we're at a very -- we're right in line with where we thought we'd be at this moment in time. Having said that, we -- some of the properties we bought did have lower occupancy rate on the CRU side, and we're making really good progress leasing it. But the expectation is once we get a lot of momentum going in that -- in the HBC boxes, it will -- we'll claw back a lot of that 6% that we gave up with HBC closing. The short-term leases really don't amount to a lot in terms of occupancy. And they are really short term, and our plan is to replace the majority of them in the next 6 to 12 months. Michael Markidis: Okay. That's great. And then just my follow-up before I turn it back. You mentioned that you are now planning to retain 90% of the former HBC GLA. I'm just curious what that percentage would have been previously versus your expectations? Patrick Sullivan: Yes. There was a lot of -- it was really unclear exactly what we're going to be able to get done until the assignment case resolved itself in November. A lot of retailers were sitting on the sideline. So we had anticipated probably more than the 75% range in terms of demolition. But subsequent to the assignment case being dismissed, we had a lot of retailers step up and say they wanted space and more than we had actually anticipated. So we really did revisit some of our plans, we were planning on knocking down more space, and that was in some of our better malls. The lessons we learned from Target and Sears was built to demand and don't hope that we can fill space. And -- but in this case, we have a substantial amount of demand, and that's really tied to the fact that HBC real estate on our sites is some of the best space in the entire property. Operator: Our next question comes from Lorne Kalmar from Desjardins. Lorne Kalmar: Pat, just on your -- the talk around rents starting in mid-'27 for, I guess, the longer-term tenant at HBC or in the former HBC spaces. Would that be straight line or cash? Patrick Sullivan: That's cash. Yes. We'll have straight line effectively probably this year from a lot of tenants because we'll get leases signed this year. And then really, the process comes down to construction and permits. So in the case of one property, we're probably going to have it all with the construction completed this year. It's in a municipality where we've already advanced plans with the city, and we know we can get permits fairly quickly and the leases are basically right at the finish line for the entire box. Other boxes, the pieces will get -- come together probably Q1 -- sorry, Q2 this year, and we'll get construction underway and turn over to the tenants probably in some point in '27 with rent commencement later in '27 or maybe even early '28. But so we will have -- but we will have some cash rent coming in next year. Lorne Kalmar: Okay. Perfect. And then as my follow-up, I was wondering like how much -- assuming you backfill all the anchor space or the 90%, where do you expect recoveries to -- the recovery ratios to be, all else equal? Patrick Sullivan: So the CAM recovery ratio was not necessarily impacted by HBC because we were able to allocate that to the CRU tenants. The tax recovery ratio was the one that was impacted the most. So that should bounce back once the tenancies are in place. The replacement of HBC will pay a materially higher amount of TAM than HBC paid in the past and that will go in the CAM pool. That directly affects and benefits the CRU tenants to an extent because we'll be able to keep the CAM at or reduce it from where it is today. But really, the recovery ratio, the main driver of that is continuing to lease the CRU space. And we've made good progress in that. And I see a kind of a sequential increase in that as it has been in the last few years. Just -- we leased 2,000 feet at a time in CRU, and we did 235,000 feet last year. And I think we anticipate doing that again this year. So HBC is not actually going to drive that number. It's really CRU leasing. Operator: Our next question comes from Brad Sturges from Raymond James. Bradley Sturges: Just on the comments that you're working through on, I guess, the potential to add some new outparcels on the unrestricted HBC land. Just -- I wonder if -- I know you're going through the analysis still today, but where -- what do you think that opportunity could look like as you move forward in that plan and start to commence some projects? Patrick Sullivan: I think we're already well underway in talking to tenants about taking outparcels. I mean, this is stuff we couldn't deal with while HBC was in place. We wouldn't talk about it out loud because they always saw value anytime we talked about potentially doing anything, they would hold their hand out and ask us for money. So we kept fairly quiet about it. So we've always had discussions with tenants about taking outparcels. We have -- right now, we have discussions with grocery stores and banks and restaurants, and we are starting to progress those discussions, especially at some of our new properties where there was a lot of demand for outparcels. So I think by later this year, we'll probably be able to announce some deals in place for restaurants and financials and even grocery stores. Bradley Sturges: Okay. Is that something that could ramp up to be a little bit more of an annual program given there's a lot of opportunities? And do you need to kind of pick and choose what could make sense from a capital allocation point of view? Or how should we think about that? Patrick Sullivan: We have laid out -- we're laying out master plans for all of our properties and kind of our strategic plan for the next, say, 5 years in terms of development. And I think this is going to -- there's a runway of building outparcel development that's going to extend for at least 5 years. Operator: Our next question comes from Pammi Bir from RBC. Pammi Bir: Maybe just continuing along the lines of the last question there. Can you talk about some of the larger types of tenants that have expressed interest? It sounds like it's been going quite well beyond the tenants that you've already flagged in your update in December? Patrick Sullivan: I think you can look at our top 5 tenants in our top 5 tenants, and it's going to be those tenants that are taking a lot of this space. It's going to be TJX, it's going to be Canadian Tire, it's going to be Walmart's grocery stores. So very high-quality covenant tenants and that they're taking the majority of the space right now. Pammi Bir: Okay. And just maybe one follow-up. Can you maybe just talk about from an acquisition standpoint, maybe what's in the pipeline? How many properties are in maybe in advanced stages or maybe what range of value could be under discussion at this stage? Alexander Avery: Yes. Thanks, Pammi. We don't have anything advanced at this point. We've got lots of discussions going on, but we're not really engaged in great detail. And one of the dynamics that has been happening as we've been growing the business is that the bigger we've gotten, the bigger the assets that we can acquire have become. And -- so it's tough to put a number on what activity could look like this year. I think last year was a remarkable year at $1.6 billion across 4 malls. We would be pretty pleased if we could pick up one or two or three malls this year, that would be great. And if we were to hit the high end of that range, we can possibly exceed last year's target. But at this point, we don't have visibility to even one that we have confidence that we'll be able to bring down. Operator: Our next question comes from Sam Damiani from TD Cowen. Sam Damiani: Maybe just first off, a point of clarification, talking about retaining 90% of the HBC space, but I look at the table, you've got by property, you've got two properties tagged for redevelopment. So I just want to be clear, that adds up to about 20% of the GLA. So what is the, I guess, the 10% that's not being retained, which properties? Patrick Sullivan: It's not substantial demolition at any of the properties. So I'll give you an example like at Conestoga, it's a 120,000-foot bay box and we're going to knock down about 20,000 of that. And the purpose being is that the flow around the box isn't that great. So by demolishing a portion of it, it gets better access to the parking field for the space itself. And then like Orchard Park, we're going to shave a little bit off the building as well. So it's not substantial demolition at the buildings, but it's relatively minor and it's primarily being done just for better access through the property or through the space to the property. Sam Damiani: Okay. That's helpful. And just on Toys "R" Us, I wonder if you could just provide some progress, either updates or expectations in the near term for each of the spaces that you have. If it's in the MD&A, I didn't see it, but if you wouldn't mind just running through that quickly. Patrick Sullivan: Yes. No, I'm happy to. So we had 6 Toys "R" Us boxes. We have been working with them prior to their filing back into late last year in terms of getting control, we actually terminated all the leases. And we -- primarily because we had tenants in our back pocket wanting to take the space. So we're well advanced in discussions to replace all the boxes. I think kind of in line with HBC, we'll be in a [ position to have replacement ] tenants in the next 3 to 6 months as we're well progressed on all of them. They're all good spaces. Sam Damiani: Sorry, just to be clear, is that vacancy that will be incremental in Q1? To what degree? And how long do you expect that to be not paying rent? Patrick Sullivan: We terminated some of them in Q4, to be honest with you, so that would have showed up last year. Some of them we terminated in Q1 of this year. So the full impact of the vacancy will show up next quarter. Raghunath Davloor: Yes. I believe it was only two boxes that were not terminated until early this year. So that's a small incremental. Operator: Our next question comes from Matt Kornack from National Bank Financial. Matt Kornack: Alex, maybe just going back to Pammi's line of questioning around the acquisition front. Are you seeing a change in vendor expectations or even maybe their willingness to take back more of your stock in a disposition just given how malls are performing relatively and maybe the desire to have more exposure than they thought originally? Alexander Avery: Yes, I would say a couple of different points. One is that each of our vendors is unique, and they have unique objectives. They're working towards different priorities. And so it's hard to generalize about any of them. I would say, certainly, our stock price performing well is constructive towards our ability to get deals done. I have to remind people that we still trade 30% below NAV, even though our stock price is up, it's still trading at a pretty hefty discount. And yet, it certainly is helpful in those discussions. Our largest shareholder would have less than 19% on an as if converted basis, which is down from 27%. That's certainly something that we pay attention to. And I do think there's perhaps more appetite to take our stock. Matt Kornack: Okay. Fair. And then maybe switching to the op side. First [ Gap ] yesterday said that coming out of ICSC, there is no indication from tenants that they're pulling back or reducing plans based on kind of the nature of where we are macro-wise or population growth wise? Is that -- I mean, it seems like from what you're seeing on Toys and the Bay that that's the same for malls. But if you could give us a sense if there's any bifurcation between those two types of retail -- retailers? Patrick Sullivan: Matt. No, it's -- we're aligned with that comment. There's a lot of activity on the leasing side. A lot of new deals happening and a lot of tenants actually looking for larger footprints as well, sort of expansions. Sales are really, really strong. And space is very limited. So it's a really good place for retail right now. Operator: Our next question comes from Tal Woolley from CIBC Capital Markets. Tal Woolley: Just given how much capital you've deployed on acquisitions, I'm just wondering if there's been enough time elapsed for you guys to sort of do a broader post-deal review? And are you finding like anything consistent in these deals that you kind of have to work on or any surprises to the upside or downside that you're finding? Alexander Avery: Thanks, Tal. I would say we do have a pretty detailed disclosure in our financial reports. And we provide both same-property and non-same property NOIs separated out from acquisitions and dispositions. So you can see the NOI from the properties and you can go through an exercise to reconstruct how the NOI has been trending. And what I would say as a general statement is that in 2021, when we were structuring the spinout, we knew that we were coming off of a cyclical low in fundamentals, occupancy, rental rate, sales. And so we've seen tremendous growth in our portfolio. And I think as a general statement, the mall industry in Canada has seen tremendous growth. And when we've taken over management of the properties that we've acquired, we manage them in a slightly different way than pension funds do. And I think some of that can come down to we're a public company. We pay a distribution, and we are very focused on maximizing cash flow, which other investors sometimes focus more on long-term total returns and cap rates and things like that. But we've seen pretty strong performance out of our acquisitions. And we're very pleased with every one of our acquisitions. On a look-back basis, they've all been materially accretive to our business. Tal Woolley: Okay. And then with the vendors right now, just maybe following up, I think it was on Pammi's or Matt's question. The market keeps changing. And so I'm just wondering in your opinion, like does it feel like the vendors that are out there are just as motivated to sell product as they have in the last couple of years? Or do you get a sense that, that's changing somewhat? Alexander Avery: It's interesting. We were having this conversation in our investment committee meeting on Tuesday or Wednesday perhaps. I think it's easy in real estate to lose track of the long time lines over which trends take place. And for most of the period since the year 2000, you've seen capital flowing into real estate, large institutions, pension funds and others adding to the real estate portfolios as interest rates were declining. And I think we've moved into a different phase where institutional appetite for real estate has changed. Certainly, the menu has increased in terms of industrial being attractive, apartments being attractive, cell towers, data centers, all sorts of stuff. But the general appetite for real estate seems to have softened. And so I think this period of limited competition will likely continue for some period of time. And I can't say that I've observed any real change in tone from the vendors. They're really focused on portfolio construction priorities. And as I said to Pammi, there are -- each of them is unique and they have different priorities. But as a general trend, I think there's continued appetite to be recycling capital. Tal Woolley: Okay. And then just on -- as you start to move into redeveloping the HBC spaces, the last 5 years, there's sort of a lot of talk about just the escalation in pricing for redevelopment or construction, and that kind of stuff. Can you give -- given that there's a lot of mall operators out there probably working on these kind of projects. Are you finding pricing still reasonable? Or are you still seeing a fair bit of inflation in that? Patrick Sullivan: Yes. Construction costs certainly have gone up. But fortunately, we're able to move rents up as well just because of the lack of space. So we're -- I think as I mentioned in my speech, we're moving our return thresholds up because I think we're going to be able to generate more than enough rent to offset the rising construction costs. I don't see any issue with keeping our estimated costs in line because there's a lot of other construction going on. I think we're a fairly large landlord and the contractors really love doing work for us. And I think we get fairly good pricing from the contractors just because of the volume of work we do with them across Canada. Tal Woolley: Got it. And then just lastly, any other tenants of material size that you're concerned about coming out of like having financial difficulty coming out of the Christmas season? Patrick Sullivan: No, not necessarily. I think as I've said many times in the past, I think we -- because we get our sales reported to us, we have good visibility into tenants and where they're trending and where certain categories or specific tenants are softening. And we work -- we try to work ahead and mitigate our exposure to tenants that we see as waning in terms of consumer interest in their brand. But there's nobody on our radar in terms of bankruptcies. Toys "R" us was well telegraphed, I think, over more than a year ago but we could all see where they were headed, but there's nobody else really that fits in our bucket right now. Operator: Our next question is a follow-up from Mike Markidis. Michael Markidis: Last quick one here for me. I just -- I've previously been under the expectation that most of your redevelopment CapEx would be HBC attributed and it looks like you've given us more specific information that maybe is about just a little over half of the expected amount. So curious if you could just give us a little bit more color of the other projects that are planned or ongoing just with Northland being finished and Devonshire being completed? Patrick Sullivan: Yes. Sure, Mike. We have a project at Kildonan in Winnipeg, it's a food court redevelopment. It's going to go on over the next, 8 to 12 months. There's other small projects outparcel developments across the portfolio. They're all yielding -- generally, the outparcel developments all yield north of 10. So they're all very good projects. But those were projects well in advance. I think the majority of our focus is certainly going to be on HBC for the next 12 to 24 months. Operator: [Operator Instructions] Our next question is another follow-up from Sam Damiani. Sam Damiani: Just wanted to sort of reconcile the very robust leasing demand with trend in sales, sales per square foot and overall CRU sales seem to have flattened out in the latest quarter. I'm just wondering what you read into that and what your expectations are in the coming year. Patrick Sullivan: I don't read much into sales that fluctuate from one month to the next. I generally look at it over a much longer time horizon, and I really spend a lot of time focusing on total sales volume as opposed to productivity just because we do have a lot of tenants that are expanding. And when they expand, their productivity tends to go down, but their total sales volume goes up. They take more space. We're constantly trying to give them the right footprint so they can generate the highest sales volume. When their sales volume goes up, they can afford a higher GROC and we can charge some more rent. So we really don't cater to productivity. So I wouldn't put any kind of thought into a short-term fluctuation in productivity. Operator: There are no further questions at this time. Ms. Claire, I'd like to turn the call back to you. Claire Lyon: Thank you, Sami. With no further questions, we'll close today's call. On behalf of the Primaris team, we thank you all for participating. Thank you, and goodbye. Operator: This concludes today's call. We thank everyone for joining. You may now disconnect your lines.
Operator: Good morning, ladies and gentlemen, and welcome to the Core Natural Resources, Inc. Fourth Quarter 2025 Earnings Call. [Operator Instructions] This call is being recorded on Thursday, February 12, 2026. I would now like to turn the call over to Deck Slone, please go ahead. Deck Slone: Good morning from Canonsburg, Pennsylvania, everyone, and thanks for joining us today. Before we begin, let me remind you that certain statements made during this call, including statements relating to our expected future business and financial performance may be considered forward-looking statements according to the Private Securities Litigation Reform Act. Forward-looking statements, by their nature, address matters that are to different degrees, uncertain. These uncertainties, which are described in more detail in the annual and quarterly reports that we file with the SEC, may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. I'd also like to remind you that you can find a reconciliation of the non-GAAP financial measures that we plan to discuss this morning at the end of our press release, a copy of which we have posted in the Investors section of our website at corenaturalresources.com. Also participating on this morning's call will be Jimmy Brock, our Chairman and CEO; Mitesh Thakkar, our President and CFO; and Bob Braithwaite, our Senior Vice President of Marketing and Sales. After some formal remarks from Jimmy and Mitesh, we will be happy to take questions. With that, I'll now turn the call over to Jimmy. Jimmy? James Brock: Thank you, Deck, and good morning, everyone. 2025 was a momentous year at Core Natural Resources. On January 14, we completed the transformational merger that formed Core and immediately turned our full focus on establishing a strong and fully integrated platform for long-term growth and success. Above all, we directed our attention to three priorities: capturing the tremendous value driving synergies created by the combination; laying the foundation for operational excellence across our three major operating segments; and establishing a unified safety-driven culture. I'm pleased to report that we have made significant progress on all fronts. The integration process is nearly complete. We are operating as a single cohesive unit, and we have set the stage for a step change in our operational execution. In short, here at the outset of our second year as a combined company, I am confident that we are now ready to deliver on Core's potential. Now let me spend a few minutes on two key developments that are pivotal to our dramatically improved 2026 operational outlook. The first of these developments is the resumption of longwall mining at Leer South. As you know, Leer South experienced a combustion event early in 2025, an event that prevented the longwall from operating for nearly the entire year and resulted in approximately $100 million in fire suppression and idling costs. I'm pleased to report that since restarting the wall in mid-December, Leer South has returned to normal operations. During the first month of the year, the mine achieved its production target, and we are now focused on achieving even stronger execution going forward. As anticipated, mining conditions in the current district are highly favorable, and I fully expect Leer South to begin to showcase its status as a premier world-class longwall mine. The second development of note is the completion of the transition to the B seam at West Elk. If you recall, in recent years, West Elk had been mining in the last remaining panels of the E seam, where mining conditions were suboptimal. In 2025, we began transitioning to the B seam where conditions are significantly more advantageous and experienced a slower-than-expected startup in that new seam as we addressed elevated methane levels and an influx of water. As of December, these issues are behind us, and West Elk has begun running at very high productivity levels. The conditions in the B seam are exactly as advertised, and we are expecting a very strong operational performance in 2026. Our focus now is expanding the customer base for this high-quality coal given the step-up in the mine's production capabilities. Despite the just discussed operational challenges and soft market environment, Core still displayed some of the value-driving attributes that makes the company's outlook so compelling. As you will recall, in February, the Core Board deployed a capital return framework, targeting the return of approximately 75% of free cash flow with a significant majority of that return directed to share repurchases, complemented by a sustained quarterly dividend of $0.10 per share. During 2025, Core returned a total of $245 million to stockholders via this program, which constituted nearly 100% of free cash flow generation. Roughly $224 million of that total was directed to share repurchases, an effort that resulted in the buyback of around 6% of the company's shares outstanding. Again, given the headwinds we have already discussed, that's an impressive achievement and underscores Core's great cash-generating potential even in less than ideal circumstances. Needless to say, we believe there is great upside for even more substantial returns now that the operating platform is at full strength and given the recent signs of strengthening market environment. Now I'd like to discuss some of the many highlights on the public policy front, where the Trump administration continues to champion coal as a baseload fuel and critical mineral. The One Big Beautiful Bill Act which was signed in July, contained numerous provisions supporting coal's critical role in the U.S. energy equation and seeking to ensure the long-term health of the coal industry. Among those provisions, the new law established a production tax credit for coal that is suitable for use in the production of steel, markedly reduced the royalty rates for federally-leased coal and eliminated some of the financial support for intermittent resources that have done little to fortify America's need for 24/7 baseload power. In addition to the One Big Beautiful Bill, the Trump administration has employed Section 202C of the Federal Power Act to delay, perhaps indefinitely, the planned retirements of coal-fired generation units in a growing number of states, including Michigan, Colorado, Indiana and Washington. Given the upsurge in power demand precipitated by the AI data center build-out, we view the administration's effort on this front as farsighted and prudent. The Trump administration also launched a comprehensive effort to address the slew of regulations put in place by the previous administration in an effort to force the closure of coal-fired plants. In addition, the U.S. Department of Energy is making funding available to facilitate the modernization of the U.S. coal fleet to ensure that coal plays a central stabilizing role in the U.S. power markets for a long time into the future. We're hopeful that the current tranche of funding is the first of many. Additionally, we're also enthusiastic about the administration's effort to support the development of a domestic rare earth elements industry with some federal funding directed toward opportunities in the coal fields. We continue to monitor how such programs can apply to Core. Finally, the administration recently reinstated the National Coal Council, which provides another channel for ongoing in-depth dialogue between coal producers, including Core and policymakers. I am serving as Vice Chair of the Council and plan to devote significant time and attention to this important role going forward. Now let me turn the call over to Mitesh to provide the marketing and financial updates. Mitesh Thakkar: Thank you, Jimmy, and good morning, everyone. Let me start by providing an update on our financial performance. This morning, we reported our 4Q '25 and full year 2025 financial results. For 4Q '25, we reported a net loss of $79 million or $1.54 per dilutive share and adjusted EBITDA of $103 million. The reported 4Q '25 adjusted EBITDA includes $25 million of Leer South fire and idle costs and $11 million of West Elk idle costs, partially offset by $24 million of insurance recovery related to the FSK bridge collapse. In the quarter, we spent $81 million on capital expenditures and generated $27 million in free cash flow. For 2025, we reported a net loss of $153 million or $2.98 per diluted share and adjusted EBITDA of $512 million. Our reported adjusted EBITDA includes the impact of $101 million related to Leer South fire and idle costs and $11 million related to West Elk idle cost partially offset by insurance recovery of $43 million. 2025 was a milestone year for Core, being the first operating year as a combined company. As Jimmy mentioned earlier, we managed through this challenging year, both on the operational and pricing front, while still being able to return capital to our shareholders. We also had several accomplishments that were masked amongst those challenges. For instance, we had tremendous success in integrating the two companies, streamlining the management teams and exceeding the synergy targets. We also leveraged a strong partnership with our financing partners to create a sustainable and robust capital structure that allows for strong capital returns and growth optionality. Now let me update you on the marketing front. In the domestic market, the current administration has supported several Core-focused initiatives, as Jimmy mentioned. These policy shifts have laid the groundwork for a stable regulatory and demand landscape, allowing ongoing investments in coal-fired power plants and delayed retirements. In 2025, there were approximately 16 gigawatts of coal capacity announced for retirement. However, we estimate only about 4 gigawatts were actually retired. On the usage side for 2025, we estimate that total U.S. utility coal consumption was up 12% compared to 2024. In the PJM and MISO area specifically, we estimate coal-fired generation to have risen over 19% and 15%, respectively, when compared to 2024. According to the PJM Resource Adequacy Planning Department over the next 10 years, the net energy load is projected to grow at an average rate of 5.3% per year compared to expectations of less than 1% in 2022. This forecast as well as favorable support from the administration provides an attractive backdrop for domestic coal demand for years to come. One of the areas of growth that we have mentioned over several years is the upsurge in power demand stemming from the build-out of new data centers. By 2030, it is expected that global data centers will see a 14% compound annual growth rate, resulting in approximately 100 gigawatts of new data centers. Of this global demand, the Americas are expected to account for approximately 50% of data center capacity and to experience an expected compound annual growth rate of 17% to 2030. This data center boom is stemming in large part from AI, which is estimated to represent over half of the data center's workload. On the international coking front, heavy rainfall disrupted the Australian metallurgical coal supply. Starting in early January and continuing into February, both production and shipments were negatively impacted by flooding, which has caused a decrease in metallurgical supply in the export market. As such, we have seen an increase in PLV benchmark prices since the beginning of December with PLV prices up by approximately 25% to around $250 per metric ton. Globally, according to the IEA, estimated global coal demand rose again in 2025 by approximately 0.5% to 8.9 billion metric tons. The uptick in global coal demand last year is now part of a multiyear pattern. This market landscape lays the backdrop for our contracting progress. Since 3Q '25, our marketing team has further expanded our contract book for 2026. We added approximately 7 million tons each to our sold positions in the high CV thermal and PRB segments, bringing our contracted positions to 24 million tons and 47 million tons, respectively. Our metallurgical segment has nearly 7 million coking tons contracted for 2026 with approximately 2.4 million tons priced. Of our priced coking coal tons approximately 2 million tons are in the domestic market, the vast majority of which were high wall. Now let me provide our outlook for 2026. Starting with the high CV thermal segment, we are expecting 30 million to 32 million sales tons, of which 76% are contracted at the midpoint. Of those committed and called tons, we project coal revenue to be over $57 per ton. We expect the average cash cost of coal sold for 2026 to be $38 to $39.50 per ton, an improvement versus 2025 levels. For the metallurgical segment, we are expecting coking sales between 8.6 million and 9.4 million tons. On the committed tons that are priced we are expecting average Core revenue of approximately $120 per ton. As the metallurgical market strengthens due to the reduced Australian supply, we are encouraged by our ability to take advantage of this uptick in pricing for our committed and open tons. We expect an average cash cost of coal sold of $88 to $94 per ton, reflecting normalized performance at Leer South versus 2025 levels. Within this guidance, we layered in our expected benefits from the One Big Beautiful Bill that Jimmy discussed earlier, our cash cost guidance range for our high CV thermal and metallurgical segment includes the benefit of the 45X tax credit. It should be noted that this credit is applied in the year that the product is sold, but the cash benefit is received during the year in which the tax return is filed. As such, we anticipate recognizing the benefits of the credits in 2026 cash costs, but we will not receive the cash effect until 2027. For the PRB segment, we are expecting sales of between 47 million and 50 million tons, with 47.4 million tons contracted at an average coal revenue of approximately $14.15 per ton. We expect an average cash cost range of $13 to $13.50 per ton. On the capital expenditure front, for 2026, we expect a range of $325 million to $375 million. This capital expenditure range includes approximately $300 million to $350 million tied to maintenance-related spending while the balance is earmarked for various growth initiatives, including investments in critical minerals, battery technology aerospace and defense and other innovative coal-related's products. Lastly, we expect cash-based SG&A to be between $85 million to $100 million. As stated at the time of the merger announcement, we anticipate a longer-term cash-based SG&A to be approximately $90 million, which aligns with the current midpoint of our guidance. In summary, when comparing 2026 versus 2025, there are several positives to look forward to from a financial perspective. First, we do not expect to incur any idling cost across the high CV thermal and metallurgical segments, after incurring $112 million of such costs in aggregate in 2025. Second, we anticipate receiving additional insurance proceeds for Leer South during 2026, which is expected to outpace 2025 levels. Third, we expect to only incur approximately $10 million in merger-related expenses in 2026 compared to $66 million in 2025. Finally, and most importantly, we anticipate strong operational performance at Leer South and West Elk mines, which was not the case in 2025. With that, let me provide a quick update on rare earth elements and critical materials. Since our last earnings call, our innovations group has continued to advance our efforts on the rare earth elements and critical materials front. In the PRB, we have drilled additional Core holes at strategically selected locations. Initial lab results are consistent with our previous findings showing enriched ash basis rare earth elements, concentrations near the coal seam margins. In Northern App, we have been working with Virginia Tech and L3 Process Technologies to develop a concentration of creating an extraction strategy for the PMC and we recently entered into an exclusive option to license Virginia Tech's technology. We expect to have additional updates on our efforts in the Eastern and Western United States in the coming months. We continue to make further progress on the coal-based battery materials front as well as on our aerospace and defense tooling and parts initiatives. Our innovations team is rapidly building a platform focused on disruptive solutions for our nation's most pressing national security needs. Now let me pass it back to Jimmy for some quick closing remarks before we open the call for Q&A. James Brock: Thank you, Mitesh. In closing, for 2026, we will be focused on a few key areas. The first and most important priority for us in 2026 is regaining and strengthening our operating excellence and performance. We will continue to focus on running every operation safely and efficiently while reducing costs across the board as implied by our guidance. As we put the Leer South incident and the West Elk delay behind us, we will migrate our focus to finding additional areas to optimize and drive efficiency improvements across the operations. Second, as Mitesh laid out, we expect to see strong positive momentum from an earnings perspective related to 2025, underpinned by strong operating performance as well as significant reduction in margin-related expenses and an increase in insurance recovery compared to 2025. Third, we will continue to support the Trump administration and its efforts to preserve and upgrade the U.S. coal fleet, expand U.S. coal exports and ensure the long-term health and viability of the U.S. coal industry. Fourth, we will continue to advance our efforts in the growth areas of rare earth and critical materials with a prudent capital allocation strategy. Last but not least, our employees. Throughout the organization in 2025, we effectively work together to mitigate the effect of the Leer South incident as much as possible. The team successfully managed cost and ensured each operation did its part and running as efficiently and safely as possible. I am grateful for our team members' dedication and pleased with how this challenging year was managed. I want to thank all our employees for their dedication and hard work, which carried us through a very turbulent 2025. I specifically want to thank all our corporate employees who worked hard and spent countless hours streamlining policies, procedures and systems even as they grappled with the loss of their departing colleagues. With that, I will hand the call back over to the operator to begin the Q&A portion of our call. Operator, can you please provide the instructions to our callers? Operator: [Operator Instructions] We now have the first question. This comes from Nick Giles from B. Riley Securities. Nick Giles: My first question, just on the high CV committed and priced, $57 there, a few parts, but could you break this out just for the PAMC portion, maybe for comparison to legacy results? And then where are you seeing domestic netbacks today for PAMC coal? And how do you think about upside on the back of these positive developments? Robert Braithwaite: Sure, Nick, it's Bob. Right now, we have roughly about 20.5 million of the 23.5 million tons that are committed or contracted for high CV, 2.5 million for PAMC. Right now, about 12 million of those, I'll say, are domestic ,8.5 million export. About 4 million of those are linked to API2. And again, the reason why we gave a fixed price versus a range is we have less variable contracts in 2026. But of the 4 million tons that are linked to API2, we used about a $97 API2 price when we put in that guidance. So January was over $99. We're over $100 today. So there's certainly some upside there. Our sensitivity, give or take, is roughly about $0.10 a ton both on the up and down. That leaves us, call it, 5.5 million, 6 million tons left to sell PAMC. Very excited about what we're seeing now. It's not only domestic. We are seeing some opportunities domestically as well on a spot basis due to the recent cold weather we experienced in January plus as Mitesh and Jimmy both mentioned the growth in power demand due to data centers. But I'm also encouraged by what we're seeing on the export front, specifically in India. A month ago, CFR India prices were in that $115, $120 range today, they're $125 to $130. So we have been seeing some improvement there and been able to capture some of that upside on some of these open tons. James Brock: So Nick, I would add that in addition to all those comments, look, last year, that 45 million tons increase in coal consumption really did pretty much chew up the latent capacity that was out there. So your question of where things might go. Look, it could start to get tight. If we see another year, another significant uptick in demand and coal consumption, you could start to see some upward momentum on those prices. Haven't seen it fully yet, but expect that to come. Nick Giles: Guys, I appreciate all that color. Maybe just as a follow-up on that. You've spoken about it before, but where are you seeing things in the outer years for the order book? I mean, has it really been a duration benefit? Are you seeing any upside potential in pricing in some of those outer years? Robert Braithwaite: We are. If you look at our release this morning, we contracted over 38 million tons last quarter forward. And some of those contracts when it's far out is 2030. So our book is very well positioned. And I'll just tell you, in general terms, our pricing is in contango as we move out to the forward years. Nick Giles: Great. Great. My second question was more turning to -- Mitesh, you outlined some of the moving pieces in the financials, whether it's insurance recoveries or now the 5x credit. So I was just hoping you could touch on what this all means for shareholder returns. I mean should we think about shareholder returns as being a little bit more lumpy in nature. And then I had one more on the CapEx side. There was a bit of a step-up there year-on-year. So curious what was driving that? Mitesh Thakkar: Yes. So let me address the CapEx front first. On the CapEx front, remember, we have Leer South fully up and running now, right? So there's maintenance CapEx tied to Leer South that's going to show up as well. And as we laid out in our press release, we are spending a little bit more, and I covered it in my prepared remarks, too, we're going to spend a little bit more on some of the rare earth and innovation-type project as well that is included in that guidance. I think about $25 million out of our total guidance on the CapEx spending front is tied to rare earth efficiency improvement and some of the critical minerals efforts, including cold products included in that number. On the cash flow side, obviously, insurance is -- we expect insurance proceeds to be higher next year versus this year. Just providing some perspective. We have two insurance claim events, the Baltimore Bridge-related claim and Leer South related claim. We settled the Baltimore Bridge claim for a net of $40 million of which $10 million was received in the first quarter of '25 and $24 million was booked in fourth quarter of '25. We still have about $6 million that is going to be booked in 1Q, '26 for the Baltimore side. And on the Leer South side, we have so far booked about $19 million in 2025, and we expect another $10 million to be booked in 1Q '26 associated with the firefighting expenses. We also believe there's going to be a lost income claim of around more than $100 million. So I think that's going to play out as well. So we feel good about how cash flow is going to look like on a year-over-year basis including the fact that we are not going to have almost $112 million of idling costs that we had in 2025. And as we have said in the past, I think we'll continue to make sure that from a capital allocation standpoint, we continue to prioritize share buybacks. James Brock: And Nick, for the shareholder return, as you well know, we had the formula whereas we returned 75% of our free cash flow to shareholders. If you look at 2025, not the best of years for us, we still return probably 100% of our free cash flow or really close it to shareholders. So we should have an opportunity here in 2026 as we hit our targets and going forward to even provide more. And we certainly will stick with the form that we have in place today, which is 75% of our free cash flow or better. Operator: The next question comes from Chris LaFemina from Jefferies. Christopher LaFemina: I'm just trying to understand the progression on the unit cost. So if we look at your unit cost guidance for 2026, is kind of in line with where you were in the first half of 2025. I mean obviously, Leer South was down in the second quarter, but does that really evidence of cost being significantly lower in 2026 than they were right when the merger first was completed. And you've guided to $150 million or more synergies. And in addition to that, you have 45X tax credit. I understand you're not -- that being offset by lower prices in those contracts. But I would have thought that the trend on costs would have been more downward than we're seeing. So my first question is where are those synergies kind of showing up in the P&L here? And are they in -- is there a significant portion of synergies in 2026 guidance? Or is it that costs as the year progresses will go down, synergies will be a bigger factor each subsequent quarter. And then the second question I have is -- well, actually, let me ask that one first, just in terms of synergies and where is that showing up in the P&L? And why are we now seeing bigger cost reductions for next year? Mitesh Thakkar: So Chris, I'll take the synergy side and Jimmy is going to address the cost side as well. So on the synergy side, I think if you look at what we have said in the past from a synergy perspective, what the key buckets are. So one of the key buckets on the synergy side has been headcount related, which a lot of that shows up on the SG&A front. And based on our guidance for cash basis, SG&A that we have provided and what you have seen us do, you can come up with a reasonable conclusion of almost a 40% improvement on that front. I think the other part of the synergies was on the marketing and logistics side. So that shows up in some of the byproduct credits, byproduct sales price that we have disclosed in our earnings release as well. I think it's the last page of the earnings release, you will see a number that's $47 on byproduct credit that is related to blending. If you look at -- think about legacy Arch when they didn't have other products to blend, I think that they were selling it in the high 20s and low 30s. So there is a significant $10 plus uplift on that. So that flows into the realization bucket. Now part of the reason you might not be seeing the full power of that marketing and blending synergies is because the overall market has been down since the merger, whether it comes to metallurgical coal or whether it comes to thermal coal pricing as well. So when they come down, the blending related synergies kind of decline a little bit. And then the third bucket is financing and insurance related synergies that we have talked about in the past, realigning the balance sheet, improving liquidity, all sorts of things, right? Finally, on the operations side, supply chain is one part of the synergy. The cross-current to that was some of the impact related to tariffs that was not envisioned at the time of the announcement of the merger, right? So that's a little bit of a wash there. Christopher LaFemina: [indiscernible] about whether part of those synergies are being offset by inflation, which I assume would have been at, right? Mitesh Thakkar: Correct. Christopher LaFemina: Okay. But if we're thinking about cost into 2027, I know you haven't given guidance yet, but would you expect, all else equal, unit cost to be low in the first half of 2027 than they will be in the first half of 2026. In other words, is the impact of all these benefits going to increase over time? Or should we see most of it through the first half of 2026 and kind of flat lines in there. Mitesh Thakkar: I think overall, just in synergy in general, I think we still have a lot of -- some of the IT systems that are not fully integrated. So I think first half versus second half, I would expect second half to be better than the first half. So there's going to be a ramp up as those systems roll off. And so I think there is that part of it, too. And always remember in the first half, particularly in the first quarter, you always have weather impacts logistics, whether it's railroads, whether it's the terminal operations, all of those. So there is a little bit of that as well. So it could be a little bit more of a ramp-up from the first quarter. James Brock: And Chris, when you look at the cost, the unit cost, particularly with our guidance that we put out here in 2026, we've guided it certainly implies that we believe we'll have cost improvement in 2026 versus 2025. One of the things that I personally am going to do along with our Chief Operating Officer, and all of our operating folks get laser-focused on unit cost. Now that we have all of our assets up and running at full speed, we're excited about where we can get to. Now with that being said, there were some maintenance costs associated with the longwall moves pulling forward. There were some fixed costs associated with just the assortment of less tons. But as we move into 2026, I think within the guidance that we give here, we will be focused to get those numbers and even beat those. So as we move forward, I would expect a more steady cost -- unit cost, and those should improve quarter-by-quarter as long as we stay and seen where we're mining. Now we do have -- and as you know, it's been advertised that Leer mine was in the best yield that thickest seam they had. We're moving into a new district. We don't know exactly what that yield is going to be yet, but it's still going to be a great producing wall. We expect it to produce a much lower unit cost than we have. So pretty excited about 2026. I know 2025 had a lot of noise, a lot of calculations for cost. But I'm really excited about where these units can get to PAMC as well as the PRB and the Leer complex as well on the met side. Christopher LaFemina: That's really helpful. And just one more quick one on the markets, maybe a question for Deck, actually. What are you seeing in the high-vol market now with Leer South ramping back up? I mean that market is obviously really dislocated from the premium low-vol market and what's your expectation as to how those spreads will change over time? And what are you seeing right now in the market? Deck Slone: Actually, Chris, maybe Bobby will start with how -- where we are at the moment, and then maybe I'll give a few thoughts on the macro. Robert Braithwaite: Yes. I mean, as far -- we announced this morning, 6.7 million tons, we already have contracted. The exciting part about that is we do have some linkage to PLV, which I think you're indicating there are some wide spreads between where PLV indexes in the U.S. East Coast indexes are. We are seeing additional appetite in the Asian markets. They typically contract on a fiscal year basis, so April through March. We are in active negotiations today for some significant volumes. So I do feel good about our ability to contract those especially against PLV prices. So when you look at -- we have left to sell at a midpoint, call it, 2.3 million tons. Majority of that is high vol, call it, 1.8 million, about 500,000 tons of that's low-vol. I would anticipate most of that high vol being contracted into the Asian market. And also to say if we see these U.S. utilization rates continue to climb, they've been hovering at 75% to 79%, but we have seen some recent upticks that could open up some opportunity for us domestically as well. So I do feel good about where our book is. The spreads, I think, we'll continue to shrink as we move forward, although right now, we're certainly doing what we can to take advantage of the spread and link more toward PLV. Deck Slone: Chris, maybe a point on that, on the spreads. Look, if you look historically, 2017 through mid-2024, the average spread between PLV and HVA was about $10. So it's obviously blown out in a very significant way in a way that you can't say value and use doesn't explain a $90 spread between PLV and HVA. So as Bobby said, look, we'll try to take full advantage of that by committing as many tons against PLV as we can. But there is an opportunity here. We expect that spread to shrink significantly. Look, I think there's been some concern about additional high-vol A coming into the market or coming back into the market, which is valid, you do have some mines that are returning. And right now, everything else is running well. Always the caveat, there will be mines that go out. Typically, you have 5% to 10% of the global mining fleet that is experiencing some sort of operational difficulties. So it's not like those -- that capacity comes back and everything else runs like a Swiss watch. We don't expect that. But it's also true that if you look in 2025, you had production down 6 million tons in Australia, down 6 million tons or exports rather down 6 million tons in Australia, 6 million tons in the U.S. So that's a real counterbalance against some capacity coming back online. So look, we feel like there is balance returning -- Indian imports of coking coal were up nearly 10 million tons in 2025. So look, lots of positive signs here. So we expect this market to normalize here in the not-too-distant future. But clearly, we've been under some pressure through 2025 and are only now getting sort of back towards some positive signs. Operator: The next question comes from Nathan Martin from The Benchmark Company. Nathan Martin: Bob, a question for you. You mentioned earlier sensitivity to API2 price for the high CV thermal segment. Any sensitivity you could provide for PJM West power prices or even pet coke that you could share? Robert Braithwaite: Yes. So for PJM, it's fairly irrelevant right now. Our new contract with that specific customer, we negotiated a fixed price. We've certainly seen a much higher, I'll call it, base than what we received on the netback. We did have some volume carry into Q1. So sensitivity there, Nate, is I don't want to say it's irrelevant, but it doesn't become very relevant as we move forward in 2026 and 2027. In terms of what we're seeing on the pet coke side just as an example, recently, pet coke prices have improved to closer to -- CFR pet coke prices improved around $125, $130. That's netting back roughly a 6 handle back to the mine, where previously we were contracting in December when pet coke prices were closer to that $115, $120, we were low 50s. So we've seen at least a 10% to 15% improvement and our overall netback with the improvement in pet coke prices. Nathan Martin: Okay. I appreciate that, Bob. Maybe one other one for you. Thinking about West Elk, can you talk a little bit about the marketing efforts for that coal, given the potential for additional production out you guys are in the B seam? Robert Braithwaite: Yes. So a couple of things. We've really -- once we enter the B seam, the quality has significantly improved, especially from a heating standpoint. So the team has been doing a really good job and developing that coal into utilities mainly into the east. The coal traditionally has gone into the industrial markets out in the West and also into the export markets. We still have that business. But now that we're focusing on getting to 5-plus million tons out of West Elk, the incremental volume we're certainly looking to develop into the East. We've already been successful in securing four utility customers in the East, two that we currently have under contract, two, I would say, we're in the process of doing trials. So again, look forward to our ability to secure meaningful volumes into the utility business into the east. Mitesh Thakkar: And just for reference, this is a business that is being developed 6 to 12 months ago, we didn't have any utility business in the east for West Elk coal. I think with the demand growth that we are seeing everywhere in terms of data center and AI, I think there's a lot of potential to benefit from that growth in the east, and we are very optimistic that we will be able to capture some of that growth out of West Elk. Operator: The next question comes from George Eadie from UBS. George Eadie: Sorry, my line dropped out, but maybe just a quick one, sorry, if this has been asked. But the 45X tax credit, confirming all PAMC is eligible and also West Elk and maybe the timing of the $100 million insurance to come still. Is that weighted to late in the year, would you expect? Mitesh Thakkar: Yes. So on the 45X credit, George, I think both the metallurgical segment and high CV thermal segment are going to benefit from it. And we have modeled it in our guidance. And then on the insurance proceeds, I think what the way we'll file all our claims here in the first half. Now there is going to be a cadence we are going to start receiving, as I mentioned early on, we've started receiving some stuff in Q1, which I already mentioned. From a modeling perspective, I would assume that it's more second to fourth quarter loaded rather than first quarter, but we are getting some stuff. It's just timing and they go through the claim process and there's some back and forth. So again, we're trying to push as hard as we can, but sometimes, as you know, the insurance company also go through their own due diligence process. George Eadie: Yes. Okay. And then probably for Jimmy more so. But I mean 2025 wasn't the best year operationally with Leer South and West Elk in the more challenging sing. Like what tangible things have you guys done to give us more incremental confidence in the operational delivery for 2026? I mean volumes this year look good. There are some tailwinds helping on the cash cost front. But how do we gain conviction in delivery this year? And maybe a reminder as well, any operations in any challenging parts of the mine plan besides Leer? James Brock: No, I think that's what gives us so much excitement about 2026. As I said earlier, we have all of our assets up and running now. We've done some things that we think is going to really help our costs going forward, such as schedule change, such as looking at how we're producing on certain walls, that's what we did in prior years. And quite frankly, we're in great conditions at West Elk. We're really excited about that there. I think we can -- it's going to depend on the market in transportation for West Elk, but we're certainly in a position at the mine to produce at high productivity levels. We have Leer South back up and running now. I think they're going to do great things there. Of course, mining and mining, you always have incidents come up here and there. But as a whole, I feel really, really good about Core in 2026 and beyond. I think we're going to continue to work on cost structures and things will help us. Leer moving over into the North district there, we'd probably have a little better geology and maybe a little less yield coming out of that. But the team is laser-focused on doing that and getting our longwall moves and the right cadence to whereas we can move and produce to our guidance or above that, I think, is going to be what you see in 2026. George Eadie: Yes, that's clear. And then the U.S. coal fleet capacity factor like this is getting a lot of attention and interest, but we haven't really seen it annualized much higher than 50%. We've had patches in the 70s with the weather and gas prices, bad things. But how do you guys think about this on a sustainable 6-month view? Like would we see 60% U.S. coal plate capacity. Is that a fair assumption for potential second half? Or is that still too aggressive? Deck Slone: So George, as we said, look, it's running and we're running about 49% at this point. It's Deck. And look, actually, you only have to go back to the odds to the early part of the century to see when they were running at 70% to 72% capacity factors. And even then, that was with cycling down, right? So they definitely can run at much higher levels than the 49%. Quite frankly, we saw them running at 61% in January and February of 2025. So that demonstrates that they sort of proved it in winter, early -- earlier this -- earlier in 2025, they demonstrated that. And again, still with a lot of cycling down. So look, we're highly supportive of the Trump administration's efforts to induce additional investments and to try to make these plants young again in that way. But even now, we think they can operate at much higher capacity factors than they are now. We've seen that. And look, the math is pretty simple. I mean, if you go from a 49% capacity factor to a 65% capacity factor. If you increase the -- if you increase that capacity factor by 50%, the consumption can increase by 50%. That suggests another 200 million tons of coal consumption without really doing anything much to the fleet at all. So again, we're enthused about where that's leading. Robert Braithwaite: Yes. And George, one last thing I'll just add. I would say it's very encouraging is talking to a lot of our utility customers investments are happening. And I think Deck mentioned that at the last point of his comments there is that these utilities are investing in their coal fleet, so they can continue to run at these higher capacity factors as this additional load comes online. So that's very encouraging. Deck Slone: And I'd add one final point, George. The Trump administration also really focused on not allowing additional coal-fired plants to close. They've used their 202C authority under the Federal Power Act to ensure that plants that maybe a year ago, 2 years ago, 3 years ago were viewed as an essential, non-essential are now being preserved. And I think it's going to become very clear very quickly that those plants are, in fact, needed with the power demand growth we're seeing. We talked about the overall growth. But in fact, we're going to see 3.5%, 4% power demand growth, you're going to need all that baseload capacity and more. George Eadie: Just on [indiscernible], you think if I put in my U.S. thermal coal model, like 60% for second half '26 or first half 2027, does that sound too aggressive to you for a half? Deck Slone: Probably not that fast. That's probably too fast to jump up to that level. But I think we get there. I think that's just over the next several years. James Brock: I think it's going to depend. There are several factor for that, the price of gas, what the demand is, all of those things. So I would say it will take a little longer than the second half of the year to get to 60%. George Eadie: Right. Okay. Yes. But like if gas prices and energy prices sort of in the high 3s even like is U.S. power demand sort of high 400s in '27, say, a reasonable thought? Or is that again still a bit too optimistic in your view at least guys? Mitesh Thakkar: George, another thing I think we have to consider too is like coal production, right? Like as you probably saw from the earnings releases that have come out so far, there hasn't been a significant push to increase production. And one of the variable here is going to be how fast can the industry ramp up if the industry decides to ramp up, right? And to see that happen, you need to see strong pricing signals as well. So I think from a cycle perspective, I think the price need to go much higher than where it is today to be able to backfill into some of that demand growth, you could run into a situation where the utilities do want to run more, but there's not enough coal, so they will have to pay up for it, so to speak, right? And that's going to happen. It's just a matter of timing. And then you come back to that question is, is the pricing signals strong enough for the coal producers to invest for capacity expansion or debottlenecking or whatever. George Eadie: Okay. I'm guessing West Elk going to sort of 6 million tons, maybe slightly higher really the only labor you guys could pull in terms of that volume front? James Brock: Well, I think West Elk, as I said, it ran at a really high productivity level in January. It's going to depend on what the market is. I've always said, we will run to the market, but I think the capability of West Elk is certainly there. It's going to depend on customers and rails. But it's a great mine. It's ready to go. We have a good team there that's ready to produce, and they certainly could produce that 6 million tons if the market is there for it. Operator: Thank you. There are no further questions that came through. And this concludes our conference call for today. Thank you all for participating. You may now disconnect.
Philippine de Schonen: Good morning, everyone, and thank you for joining us this morning. We are pleased to welcome you to our Kering 2025 Full Year Results. We are here with Luca de Meo, CEO of Kering; Jean-Marc Duplaix, COO of Kering; and Armelle Poulou, CFO. This presentation will be followed by a Q&A session. Luca, the floor is yours. Luca de Meo: Thank you, Philippine. Good morning, everyone. Very happy to be with you today. Of course, 2025 was not the year we wanted. I think it didn't reflect the full potential of Kering, and we all know it here. But what matters is our response, swift, disciplined and unwavering. Since the second half of the year, I can ensure you we have been taking action decisively to put the group back on the right trajectory. I think we're still far from where we want to be. We don't have everything in place yet, but we are building every day with focus. Our objective is clear, reignite desirability and prepare the next cycle of growth house by house, product by product, client by client. So 2025 was a turning point, not because of the numbers, but because of the decision we started to take. And I want to thank Francois-Henri and the Kering Board of Directors for their trust, their support. This trust allowed us to move fast and to start shaping the strategy, we will present during our Capital Markets Day in May (sic) [ April ]. Over the last month, we strengthened our financial flexibility. We reshaped parts of our portfolio. And we made bold strategic moves to give our houses the space and the time they need to regain momentum. A very important step, of course, was the partnership with L'Oreal. It allows us to accelerate the development of our beauty business with the #1 player in the world, unlocking power that we could not reach alone and also prepare our entry into the high-growth wellness and longevity segment, a space where we want to play and where we know value and growth will be created. In jewelry, the progressive acquisition of Raselli Franco, I think, reinforces our industrial capabilities in a category where we see tremendous potential. It gives us more control, more know-how and more capacity to scale. And this is only the beginning. Sharing the full ambition of our jewelry strategy is, of course, also on the agenda of the Capital Market Day. In parallel, we started to reinforce our operational discipline while protecting everything that makes our houses desirable. 75 fewer stores in 2025, net, a sharper, higher quality retail footprint, 8% reduction in inventories at the year-end, and we will go further in 2026. EUR 925 million in cost savings, down 9% compared to 2024, improving our agility and focus while preserving creativity and craftsmanship. On sustainability, I want to say that Kering remained at the forefront in 2025. It's a real competitive advantage, recognized again this year with our CDP Triple A rating for the third year in a row. But beyond recognition, we focused on delivery, closing our 10-year sustainability strategy and already shaping the next chapter, which we will present, of course, at the CMD. For us, at Kering, sustainability is not a separate agenda. It guides the way we create, source and operate the business. Producing less but producing better will remain a core principle to protect our brand equity, our clients and our environmental footprint. 2025 also marked the beginning of a creative renewal across houses, new creative leadership, new expression between heritage and innovation at Gucci, at Bottega Veneta, at Balenciaga. I think the feedback is encouraging. We are not celebrating anything yet, but I believe the momentum is building step by step. And one conviction has become even stronger week after week, day after day, creativity is our North Star. It is what sets luxury apart, but creativity only becomes value when execution follows at the same pace, in retail, in supply chain, in merchandising, in marketing. This is where we are putting our energy into. On the ground, the acceleration, I believe, is already visible. I spend time every weekend in our stores seeing the teams, talking to clients, feeling the product. And I can tell you, there is energy coming back. Our products are reconnecting with our clients. We saw progress in Q3 and Q4 with sales trends improving quarter after quarter. The momentum is real, early, fragile but real. And I can guarantee you that we will build on it. Before handing over to Armelle, let me highlight the key figures for the year. Excluding Kering Beaute, revenue for 2025 amounted to EUR 14.7 billion, down 10% on a comparable basis, with a clear sequential improvement throughout the year and Q4 at minus 3% on a comparable basis. This revenue level reflects the low point of the cycle and the starting point of our rebound. Recurring operating income reached EUR 1.6 billion, corresponding to a 11.1% EBIT margin, showing the impact, of course, of a difficult top line. Operating income will now start to benefit from the first effects of our work on top line and efficiency. Free cash flow amounted to EUR 4.4 billion, including real estate transactions. And finally, net financial debt decreased by EUR 2.5 billion to EUR 8 billion even before the impact of the L'Oreal transaction, which we will close in the first half of 2026. These results are not where we want to be, but they mark the bottom and the first steps of the turnaround we have initiated. Armelle will now take you through our operational and financial performance in more detail. Armelle, over to you. Armelle Poulou: Thank you, Luca, and good morning to all of you. As you have clearly stated, 2025 was a turning point we needed. The figures I will present confirm this low point. But let's be clear, these numbers establish a starting line from which we are now driving our turnaround, and they are the evidence of the financial discipline that underpins our strategy. Let's start with revenue on Slide 8. As a reminder, in accordance with IFRS 5, Kering Beaute has been deconsolidated from our fiscal year 2025 accounts and has been restated from 2024 figures to provide proper comparison. So all figures discussed in this presentation exclude Kering Beaute. Full year revenue reached EUR 14.7 billion, down 10% in comparable terms and 13% reported. ForEx was a 3-point headwind, mostly due to the strengthening of the euro against the dollar and the yen. The scope effect was immaterial, linked only to the turnover from The Mall for 1 month disposed of in January 2025. But the annual numbers don't tell the whole story. The critical point is the sequential improvement we delivered throughout the second half with Q4 showing a clear acceleration. This tells us our actions are starting to gain traction where it matters most, with our clients. Our geographic footprint remains well balanced across regions. We see the stable profile, we saw some mix adjustment during the year. Asia Pacific declined by 2 points to 29%, while North America and Western Europe each gained 1 point. Japan and the rest of the world maintained their respective shares. Slide 9 shows that throughout the year, we saw a gradual recovery with Q4 coming at minus 3%, representing a sequential improvement versus Q3 despite a more demanding comp base. The acceleration in trends was visible across all segments, returning to positive territory, except for Gucci. At group level, in Q4, AUR grew high single digit with only a minor impact from pure price increases, reflecting our actions to improve the mix within our brands. Conversion rate improved slightly, which is also encouraging. On the other hand, traffic remained soft. December, despite facing the toughest comparison base of the quarter, delivered a performance slightly better than we expected and remain consistent with the overall quarterly trend. On Slide 10, let's take a closer look at revenue by channel. Retail, including e-commerce, accounting for 76% of total revenue with the balance coming from wholesale, royalties and other. For the full year, retail declined 11% comparable with improved trends in the second half. After a 9-point sequential improvement in Q3, our retail channel, which is the heart of our business, saw its performance improved by 3 points in Q4 versus Q3, ending the quarter at minus 4% comparable despite a tougher comparison base. This progression was driven by a strong AUR but also by some improvement in volume trends. Included in retail, e-commerce was down 12% comparable in 2025 and represented 11% of retail sales in line with last year. Online performance also improved progressively throughout the year. Wholesale and other revenue declined 7% on a comparable basis in 2025. Consistent with our move towards greater exclusivity, together with a challenging market situation in some regions, wholesale was down 19% for our luxury houses. We have delivered on our plan to strengthen the control of our wholesale distribution, bringing down wholesale revenue for our luxury houses in line with the target we set in February 2024. In the fourth quarter, wholesale and other revenue were down 2% on a comparable basis. For our luxury houses, wholesale posted a sequential improvement with a decline contained to 9%. Kering Eyewear reported a solid and consistent wholesale performance, up 3% in 2025 and in the fourth quarter. Royalties and other revenue were up 6%, both for the full year and in Q4. Now turning to retail trends by geography on Slide 11. As you can see, we registered a sequential improvement in 3 of our 5 main regions in Q4 and a sequential improvement in all regions if we look on a 2-year stack. Western Europe was down 7% in Q4, in line with Q3 despite a tougher comparison basis. On a 2-year stack, however, retail sales in Europe have improved 4 points restated from Kering Beaute. Tourism remained weak, affected by the decline in Asian visitors. Local demand accounting for 51% of the total was still subdued, though not consistently across brands. Saint Laurent returned to growth in the region. For the full year, Western Europe was down 11% on a comparable basis. In North America, Q4 delivered a 2% comparable growth, maintaining solid momentum with only a 1 point deceleration versus Q3 despite a 5-point tougher comparison base. The higher-end segment performed better. And importantly, Gucci was flat in Q4 versus last year, marking the end of the decline in the region. For the full year, North America was down 5% in retail with the U.S. cluster broadly in line with the region. Japan improved in Q4 to minus 7%, supported by a more favorable comparison basis. Tourist purchases accounted for around 33% of sales in the country. Local trends were similar to Q3. The decline in tourist spending continued, but was less pronounced than in prior quarters. We can highlight that in Q4, Bottega Veneta turned positive in Japan. For the full year, Japan retail was down 16%. The appreciation of the yen, combined with the rebalancing of price gaps between geographical zones, significantly reduced the market's attractiveness for tourist customers. Asia Pacific showed a clear acceleration in Q4 at minus 6%, marking a 5-point improvement versus Q3, driven by Mainland China, Hong Kong, Taiwan and Korea. The Chinese cluster also improved slightly quarter-on-quarter, ending the period down mid-teens. For the full year, retail in Asia Pacific was down 16%. Finally, Rest of the World was up 3% in Q4, fueled by Middle East and to a lesser extent, Latin America. For the full year, retail in the Rest of the World was stable, slightly positive in the Middle East. Now let's move to results on Slide 12. At EUR 1.6 billion, recurring EBIT was down 33% year-on-year, representing a 340 basis point margin dilution and that was more contained in the second half with a 120 basis point decrease. While the 11.1% EBIT margin reflects the top line pressure, it more importantly demonstrates our efforts. To protect our profitability in such a challenging environment, it required rigorous cost management and deliberate choices. This discipline is precisely what provides a healthy financial foundation to fund our comeback. To support our brands, we continue to invest selectively in key areas while maintaining strict cost control in others. We delivered EUR 925 million in savings this year, reducing our OpEx base by 9%. This was not about blind cost cutting. It was a smart reallocation of our resources. We successfully protected creativity while boosting our efficiency, which is precisely how we are rebuilding our firepower to invest in our brands. At year-end, our store count was 1,719, a reduction of 75 units, fully in line with our plan and reflecting our strategy to upgrade the quality of our footprint, fewer stores, but in stronger and more strategic locations. In 2025, we opened 58 stores and closed 133, resulting in these net 75 closures. Our store network is being assessed constantly, and we have accelerated its rationalization by closing stores that no longer support our ambition to strengthen sales density. This is why in 2026, there will be another reduction of the retail footprint with 100 net closures already planned and more still under discussion. In the fourth quarter, we closed 18 stores, but we also continue to enhance the quality of our retail network with key openings, including the stunning Saint Laurent flagship on Avenue Montaigne in Paris, a new Bottega Veneta store in New York's Meatpacking District. We also expanded the Boucheron presence in the UAE with openings in Dubai and Abu Dhabi. At EUR 2.3 billion, free cash flow generation, excluding real estate transaction, was down 35% compared to 2024. Including real estate, it amounted to EUR 4.4 billion. CapEx, excluding real estate transaction at EUR 0.8 billion was down almost 30%. The CapEx to sales ratio was 5.4%, declining 1 point versus last year. We prioritized investments to upgrade the store network of our brands and selectively expand its footprint. Net debt stood at EUR 8 billion at year-end, down EUR 2.5 billion versus last year, confirming that our deleveraging strategy is firmly on track and that financial pressure continues to ease. In addition, the EUR 4 billion cash inflow from the Kering Beaute deal will further strengthen our balance sheet in the first half of 2026. I will now comment on our houses, starting with Gucci on Slide 15. Revenue for the full year came in at EUR 6 billion, down 22% reported and 19% comparable. Retail, down 18% comparable, accounted for 92% of sales. Wholesale decreased by 34%, and royalties declined 2%. In Q4, retail was down 10% on a comparable basis, showing a clear sequential acceleration driven by almost all regions, except Western Europe. The 3-point quarter-on-quarter sequential improvement was supported mainly by North America and APAC. The launch of La Famiglia collection, together with the surrounding activations has put Gucci back at the center of the attention. Newness trends, including revamped carryovers, continued to strengthen, reaching 60% of the mix in Q4. The AUR increased, thanks to the improvement in the performance of handbags. There was nearly no pure price increase. Wholesale was down 34% on a comparable basis for the year, reflecting the strategic rationalization of this channel and a reduction in the number of doors. In Q4, wholesale was down 14%. Gucci posted a full year recurring operating income of EUR 966 million, resulting in a 16.1% EBIT margin. There was a negative operational deleverage from lower sales, but it was partially offset by substantial efforts on the cost structure while reinvesting in product development. Over the year, the house continued to elevate its retail footprint, closing 32 stores, mainly in Asia Pacific and Japan. This is part of its strategy to reinforce its presence in the prime location and offer an increasingly exclusive experience to its clientele with exiting lower contribution sites. Some highlights on Saint Laurent, Slide 17. Saint Laurent delivered EUR 2.6 billion in full year revenue, down 8% reported and 6% on a comparable basis. Retail declined 6% comparable, and wholesale decreased by 14% as the house continued to streamline and elevate its wholesale network. Focusing on Q4, retail was flat year-on-year, marking the third consecutive quarter of sequential improvement, supported by better trends in Western Europe and Japan, while North America remained positive. In leather goods, new launches and reinterpretations of iconic bags were very well received, even if they did not fully offset for the softness in carryovers. Women's ready-to-wear and footwear collections delivered strong growth, fueled by the success of the latest collections and new introductions, particularly in footwear such as the loafer and the Babylon. Traffic remained under pressure in Q4, but this was offset by a higher average ticket and stronger conversion. Wholesale grew 5% comparable in Q4, reflecting a phasing effect. Full year recurring operating income reached EUR 529 million, delivering a robust 20% margin. The house maintained its profitability through efficiency measures that help reduce the cost base. The year was also marked by major investments in high-impact retail locations with several flagship openings. The relocation on Avenue Montaigne in Paris inaugurated in Q4 has been performing exceptionally well and the reopening of the Via Monte Napoleone 8, flagship in Milan, further strengthened the house's footprint in prime luxury destinations. Moving to Bottega Veneta on Slide 19, whose full year revenue was EUR 1.7 billion, up 3% comparable. Retail activity remained robust with revenue accounting for 86% of sales, up 4% on a comparable basis. Wholesale declined by 6%, in line with Bottega Veneta's strategic focus on selective distribution. Royalties delivered a strong 25% increase, benefiting from the initial launch of Bottega Veneta fragrances. In Q4, retail posted a solid plus 5% comparable despite a very demanding comparison base. North America was a key contributor, delivering mid-teens growth in the quarter. Performance continued to be driven by the strong appeal of the leather goods offering, while the brand expanding across other categories. In Q4, Bottega Veneta recorded double-digit growth in ready-to-wear and shoes. Revenue also benefited from a sustained increase in AUR and from the recruitment of new VIC clients. Wholesale declined 9% in Q4, consistent with the brand's disciplined approach to distribution. Full year recurring operating income reached EUR 267 million, up 5% year-on-year, resulting in a 15.6% margin. Gross margin improved, and the brand continued to invest in communication and store upgrades to support its strong momentum and reinforce its positioning. Comments on our Other Houses are found on Slide 21. At EUR 2.9 billion, 2025 revenue was down 6% on a comparable basis. Retail, which represented 77% of sales declined 4% comparable, while wholesale decreased 15% comparable as our soft luxury houses continue to strengthen their control over the distribution. In Q4, retail revenue rose 6% on a comparable basis, while wholesale was down 9%. Trends across our soft luxury brands remain contrasted. Balenciaga delivered a sequential improvement, with retail turning positive in Q4 in Asia Pacific, and maintaining solid momentum in North America. For Alexander McQueen, the year and Q4 remain challenging. We are taking firm and decisive actions to restore sustainable performance. The restructuring plan of the brand is well underway. It included the closure of 21 stores in 2025. Brioni delivered another strong year, with Q4 revenue up double digits, driven by excellent traction in Western Europe and Rest of the World. Our jewelry houses once again posted very robust trends in Q4, confirming the strong desirability and resilience of our houses. Boucheron achieved outstanding momentum, with revenues up in the mid-20s on a comparable basis and outstanding performance in Japan and Asia Pacific. Pomellato pursued its steady trajectory with solid resilience in Asia Pacific and line growth in both North America and Japan. Qeelin had another sound year, up in the mid-teens with a clear acceleration in the second half. The jewelry division continues to be one of the group's most dynamic growth engines, supported by strong brand equity, consistent investment in creativity and craftsmanship. At the same time, Boucheron expanded its geographic footprint by opening new stores, notably in Los Angeles, Rodeo Drive, Shanghai, Xintiandi, Abu Dhabi and 3 openings in Dubai. Recurring operating income for the Other Houses amounting to minus EUR 112 million in 2025 as soft revenue performance at Balenciaga and losses at Alexander McQueen weighed on profitability despite ongoing deep restructuring efforts. Conversely, Boucheron delivered higher results over the period, supported by strong brand momentum and disciplined execution. Now turning to Kering Eyewear and our Corporate segment, which no longer includes Kering Beaute. On Slide 24, revenue at Kering Eyewear came close to the EUR 1.6 billion mark this year. Comparable revenue was up 3%, both for the full year and in Q4. Performance was driven by sustained growth in Western Europe as well as in the optical category. Kering Eyewear operating income stood at EUR 252 million, reflecting a solid operating margin of 15.8%. The slight moderation comparative to last year mainly stems from higher custom duties and continued strategic investment in Maui Jim to support its development in new markets. As for Corporate costs, they were down EUR 10 million year-on-year, reflecting ongoing efficiency initiatives. The remaining lines of the P&L are summarized on Slide 24. Nonrecurring result was negative EUR 584 million. This reflects a combination of items, including capital losses on real estate deals in Paris and New York, offset by gains from the sale of the building in Japan and the disposal of the mall, impairment and restructuring charges related to the streamlining of our store network and organizational optimization initiatives, adjustments related to the building at Via Monte Napoleone 8 in Milan following its reclassification under assets held for sale and finally, the European Union Commission (sic) [ European Commission ] fine which we communicated on in October. Net financial charges amounted to EUR 594 million compared to EUR 614 million last year. The cost of net debt at EUR 328 million was broadly stable with the average coupon on our bonds remaining at 3%. Corporate tax amounted to EUR 354 million, down substantially from last year. The tax rate on recurring income was 36%, above our normative tax rate, mainly due to the losses generated in the United Kingdom by Alexander McQueen and by the one-off impact of the reclassification of Kering Beaute into discontinued operations. For 2026, our best estimate so far is a tax rate around 33%. We will be gradually back to our normative tax rate of 27% to 28% in 2 to 3 years. Net income group share amounted to EUR 72 million and to EUR 532 million, excluding discontinued operations and nonrecurring items. A few comments on free cash flow on Slide 25. Net cash flow from operating activities reached EUR 3.1 billion, down 34% versus last year, in line with the decline in recurring operating profit. It benefited from lower taxes paid, but the change in working capital was more limited than in the previous year. Excluding real estate transaction, free cash flow from operations was EUR 2.3 billion. Slide 26 illustrates our disciplined capital allocation in action. This year, we focused on strengthening our balance sheet. Through sound cash generation and real estate refinancing, we achieved a significant EUR 2.5 billion net debt reduction, bringing our year-end position to EUR 8 billion. This demonstrates our commitment to a strong financial profile with a resulting leverage ratio of 3.4x. So this net debt reduction will continue this year. A quick look at our balance sheet and financial structure on Slide 27. You will notice that we have reclassified EUR 5.2 billion in assets held for sale, corresponding to EUR 3.7 billion net for the Kering Beaute division to be sold to L'Oreal, closing expected in H1 and EUR 1.3 billion for our building Via Monte Napoleone as we expect to close the transaction in 2026. Our net debt-to-equity ratio stood at 51%, an improvement from 67% last year, reflecting the positive impact of the real estate refinancing operations. Inventories decreased by 8%, and our operating working capital ratio increased by 0.8% year-on-year. It stood at 17.7%, up from 16.9% last year. Reducing inventory remains a key priority for the year, and we expect to bring them down further in 2026. My final comment relates to the dividend on Slide 28. The Board of Directors has proposed a dividend of EUR 3 per share. In addition, an exceptional dividend of EUR 1 per share will be proposed related to the disposal of Kering Beaute to L'Oreal. Both dividends are subject to shareholder approval at our next AGM. Return to shareholders is a key priority in our capital allocation framework. Our ambition is to resume dividend increases as of 2026, in line with the expected improvement in our performance. This ends my remarks. I thank you for your attention, and I will turn the mic back to Luca. Luca de Meo: Thank you, Armelle. So as you can imagine, we still have a lot of work to do. Of course, not all the foundations are in place yet. But the good news is that we are moving forward with speed, with discipline and with a lot of determination. 2026 will be an important year for Kering, a year of construction, reconstruction and certainly transformation, a year in which we aim to return to growth and improve our margins, of course, step by step. We ended this year with a very clear view on the challenges ahead. We know that the environment remains uncertain, but we also enter with a lot of fighting spirit. We are convinced that our race is against ourselves. No matter what happens around, we have to raise our own bar, strengthening our fundamentals and executing better day after day. On April 16, at our Capital Markets Day, we will present the strategy of the group, the strategy of each of our houses and how they will rebuild desirability and regain momentum and the road map, milestones and operational drivers that will support this transformation. I think we're building a leaner, more agile organization powered by a strong group platform, bringing together industrial excellence, client expertise and tech and AI, sustainability and support functions, all aligned behind the same objective. And at the core of this platform, we will embed innovation in products, in client experience, in operation and in technology, innovation that enhances creativity, accelerates execution, strengthens our houses and brings value and new value to our clients. This group platform will give our houses the scale, the clarity and the capability that they need to focus on what creates really value, desirability, craftsmanship and top line momentum. And above all, we will drive this transformation as one team with aligned leadership, accountability, empowered people and the real culture of excellence in execution. On April 16, we will show ambition, but ambition we can deliver with humility, with intensity and with the determination that is typical of a real challenger. So thank you very much for your attention. I think we are now available to answer all your questions. Philippine de Schonen: Thank you, Luca. So we'll now open the Q&A session. [Operator Instructions] We have the first question from Luca Solca, Bernstein. Luca Solca: I hope you can hear me all right. Philippine de Schonen: Yes. Luca Solca: I wonder when you look at the brands in the portfolio and you look at criteria such as how prepared the vision is and how appropriate the vision is, what is the momentum that you are seeing in the market at the moment? What is the state of organization and leadership in place in these brands? What is the cost profile or the CapEx requirements? Whether you see that, as you said, Luca, you have a lot of work to do in a relatively uniform way? Or whether you see that some of these brands are further ahead, and some of these brands have more work to be done? I'm trying to focus on the current snapshot rather than sort of trying to steal the thunder from the Capital Markets Day when you will tell us the plans. But just an assessment of what you think the starting point is by brand if you were to force rank them in terms of which ones are already prepared and which ones are further behind. Maybe a similar assessment on the broader business. You sort of highlighted efficiency ambitions. Where do you stand on this efficiency program? At the moment, do you think that the bulk of it is yet to be realized? And for example, when it comes to the number of stores that you're planning to close, what would be the floor space reduction that you're aiming to achieve? And what are the other cost buckets that could potentially contribute to making the bottom line richer? Luca de Meo: Okay. It's a very broad question. Look, I'll try to be as sharp as possible. I would say Bottega and Saint Laurent are very sharp, very desirable brands when you look at the -- and attractive brands when you look at the numbers. I think the challenge or the opportunity, let's put it like this, with those 2 brands is actually to enlarge and to grow them. This is -- so I think we are pretty much in the place where we should be from a positioning point of view. And I believe that we have a lot of potential in terms of growth, both geographically, but also in the product offer. This is exactly what we're doing internally. Gucci is -- used to be in a different situation. You know that Gucci was a brand that had suffered in the last years in terms of desirability. I think we have -- you have probably noticed that we have -- apart from the nomination of Francesca, we have basically completely changed the executive committee. I think it's one of the best team in the industry right now, just look at their track record and their experience. We are working, of course, on the brand strategy for the Capital Markets Day. But in fact, they moved very, very quickly and making some clear decision, and we already see some signs on Gucci. You've seen also that into the numbers, that Gucci is kind of rebounding from the lowest point. But of course, there's much work to sharpen the position to get back to what Gucci is expected to be in the market. Conceptually, it's not very complicated. We have to execute it properly at all levels from product to distribution to marketing to creativity and innovation. You have Balenciaga, could be, let's say, that kind of movement from -- also the change on the Creative Director. Both are great people, but they have a different style, might, let's say, induce the idea that we have a question mark on Balenciaga. But what I could learn is Balenciaga is a very powerful brand and is, my opinion, a bridge to the next generation. This is one of the brands that brings young people, alternative people, people that really like avant-garde fashion into the group. So it has a very, very, let's say, important function into the portfolio. You have -- so these are the big brands. On the jewelry business, I think we are -- there, well, we should be with Boucheron. We have to grow it. I think that the acquisition of Raselli will give us that kind of industrial product development power that will enable us to really do bigger business with jewelry because I think it's underrepresented in our business mix. So we are, with that category, slightly above EUR 1 billion in terms of turnover. I think we can do much more. And then you have cases that are a little bit more complicated like McQueen, where the brand is making losses, important losses. And there, I think the solution is, it's very simple, is that we have to restructure. We have to get back McQueen in terms of cost structure, an investment where, in a coherent way, to the potential of the brand. That's the first step. And we will see then later what we will do with it. But we are already going that kind of process. I think we're closing stores, for example, because McQueen was with more than 130 stores, owned stores, and this was simply too big for the potential of the brand. So we have to resharpen the positioning and lower down the breakeven on the thing. It's a simple -- from a business point of view, a simple decision to -- conceptually to make, and now we are executing. This is a little bit quick the kind of analysis of the thing on the brand side. On the broader business, we already mentioned restructuring of the dealer network. Probably the perimeter in terms of numbers will go down progressively from the highest point, around 20% in point of sales. I'm not sure that this will reflect exactly the same numbers in square meter because sometimes, for example, we have to close a store and open something that is a little bit bigger for some brands where more surface is needed. Take, for example, Bottega. Bottega in China has a lot of small stores, probably we need to close some. But in the moment we go for a new one, we need to have something that represents the ambition of the brand and can fit all the products that we are developing. We are looking at everything, Luca, everything. So I can confirm you that, as I was saying into the introduction, we are very clear in our mind. The opportunity of this crisis for us that we have experienced in the last years is that we can question everything from scratch. This is what we're doing. So we are looking at investment. We are looking at how to improve, let's say, our performance on media investment, on marketing investment. We are reducing stores. But we do it -- we are looking at a lot of potential on the -- what I call the upstream. That means everything has to do with manufacturing, with logistics, et cetera. So I think this part has a lot of potential at Kering because, in fact, in the past, we tended to more look at the downstream. And I believe that we are putting a lot of attention -- this is also a little bit my special because I come from a sector where the industrial part is very, very important. So I've looked at and spending a lot of time on how to reorganize the upstream of Kering. I think one of the key is teamwork. So there is a lot of potential in kind of mutualizing and making sure that the brands can work together to find synergies, especially on the back office. And that's what we're doing. It's hard work, but it's very interesting. It's fun, and we can clearly see the potential. I hope I could answer in a reasonable time to your question. Philippine de Schonen: Thank you, Luca. We now have a question from Edouard Aubin, Morgan Stanley. Edouard Aubin: So I have one question on the short term and one on the more medium to long term. So on the short term, apologies to ask the question but I guess investors care, is there is some chatter in the market that maybe the group is off to a slightly soft start to the year. And I know things are really difficult to read given the timing of Chinese New Year. But if you could comment on that. And regarding Gucci specifically, I'd be curious to know how material has been kind of the traffic of the top line inflection since Demna's products have hit the shelves. It seems that things have certainly improved and accelerated, but I'd like to get an update for you, if possible. And I don't know if you're going to be willing to share with us, but related to that, I know you guys don't give guidance, but do you think Gucci could be up or down -- or is likely to be up or down in the first quarter? So that's the short-term question number one. And then on the more medium to long term is on management, Luca, how much of an opportunity for the group is for the group to kind of promote and hire talent over the next 12 months? How material changes will likely to be same time next year? So when we meet again in February '27, are we going to see significant changes or not? For example, I have been surprised a bit by the fact that you still not hired a high-caliber executive from the competition from the luxury goods sector yet. So are people not willing to join the group? Or are you taking your time because you just want to hire the best from the competition? So if you could comment on management changes -- future management changes, that would be great. Luca de Meo: Okay. So I understand that you are asking me how is it going on in the market right now, how we are -- we see the things happening. As I said before, I think we see a lot of positive signs, including at Gucci, okay? Because the first, let's say, move with La Famiglia was actually pretty successful almost everywhere, I would say, everywhere. Of course, it represents a relatively limited part of the offer. So I have to remind everybody that the first runway from Demna is actually happening on the 27th of February. So we haven't -- you haven't seen anything. What I know is that the Gucci team is working very, very hard, obviously, also the creative team. I can clearly see that they understand very well what Gucci is all about or should be all about. That's what you look and when you look at the product, et cetera. And they also know that they have to develop a collection that covers all the important categories for the consumer. So I'm pretty positive. I'm actually very optimistic about how the things are going. It's -- the environment is what it is. It's not the most dynamic environment in the luxury sector since years. But as I said during the introduction, I think we went so down that the first race is on ourselves. So I think we lost market share in the last years, and now we have to get the thing back by doing properly the things. So we will see growth in 2026. We will see increase of margin on all the brands. And that's basically the situation. For the management thing, I want to say that the quality of the people and the competence of the people in Kering is very, very high. In fact, a lot of people in the last round were promoted from internal. That shows that we had people, that they had potential, they know what they are talking about. Probably the opportunity that I see is to actually integrate people coming from different horizons to complement the vision of a group of people that have been growing in the luxury industry for decades. So I'm not looking at hiring executives from competition, also because practically speaking, sometimes you have gardening leaves of 1 year, et cetera. I don't have time to waste. I need the people immediately. And in the next weeks, you will be seeing announcements of new people coming into this house to cover positions that sometimes don't exist, because we need to structure the organization in a different way. I was mentioning to Luca before, the need to focus on the upstream part of the business. That means the manufacturing, the purchasing, the logistics, the product development, et cetera. So this is a typical area where you need someone on top with a different experience that can bring a new perspective to the sector or at least to our organization. So be patient on the management. It's also true that I'm taking my time to meet a lot of people, because those decisions are important for you, but also for us as a company. It's important to create teams that are very cohesive. Normally, it works when everybody -- each other recognizes the value and the contribution of every single member of the team. So I have to bring top people in, so that they can integrate, and it will happen. And most probably even before the CMD, you will see a few announcements that confirms what I'm hinting, what I'm spoiling to you right now. Jean-Marc Duplaix: Maybe Edouard, reacting to your comment, it's true that as long as we have not the full impact of the Chinese New Year, it's difficult to assess clearly what could be the landing point for Q1. Two, I think what has been said is super clear. We are projecting and we're working on recovering in terms of growth for '26, but it will be gradual along the year quarter after quarter. And there is something that you need to take into account is that there is a benefit to close, of course, some doors and some stores, because it has a positive impact on the EBIT margin, because we are working to close the dilutive stores, but it is also partly a drag in terms of sales. So it's something that has to be factored also in the way you look at Q1. Philippine de Schonen: Thank you, Jean-Marc. We now have a question from Erwan Rambourg, HSBC. Erwan Rambourg: Hope you can hear me okay. So first on stores. In reconquering share, there's obviously a case that you can shrink before you grow. I think, Luca, you said you would probably eventually close 20% of units. I suspect this is at the group level. Gucci seems to be a bit overstored relative to others, and you're at 497 units today. If we think about the medium-term retail footprint for Gucci, is it fair to assume that it would be more than a 20% reduction eventually? And you are in some markets tied into relatively long leases. Is there anything you can do to reduce these leases? So that's my first question. And then second question, coming back to management organization. I think you made a very original hire, which I don't think exists for some of your peers, which is a Chief Commercial Officer at the group level, Mr. Zito. So maybe going back to what you were mentioning about synergies, can you maybe explain that role within the group and how do you project that? Luca de Meo: So I leave the first answer to your first question to Jean-Marc, who is the absolute expert in the team in real estate. Jean-Marc Duplaix: No. Erwan, I think, first of all, the ambition that has been set is minus 20% in terms of store footprint from '25, and to midterm, so let's say, around '28. We mentioned already some closures, massive closures, net closures in '25, and of which, in the 75 closures, so based on what Armelle commented, it was already 40% of these closures made with the Gucci stores with a focus on outlet stores, but not only, because we have a systematic review of the quality of the network we have at Gucci and the densities that we have in the stores. And clearly, with the objective to close some doors, especially in Asia, I'm thinking about Korea, Japan and partly China, where your comment is totally relevant, where probably we have a sort of saturation of the market with too many Gucci stores. Going forward, in the minus 20% to come from '25 to '28, Gucci should represent something like 1/3 of this cohort of closures. But having in mind that there will be a concentration here again of the closures in the Asian market, I would say that if I consider particularly '26, I guess that 40% of the closures will happen in the Asian markets. An additional comment about the criteria regarding the closures and what is at stake. It's true that we have long-term lease, but it's part of the global negotiations that we have currently with the landlord. It's, a, to have a global discussion about not only the Gucci network, but the global network we have in terms of resizing, in terms of relocations, but also in terms of rent renegotiations. And that's part of the explanation for the nonrecurring items that we had in '25 and that we would surely have in '26. It's about the cost of the exit of some locations. And here, we are very pragmatic. It's a financial calculation. We look at what would be the accumulated losses or the cost of keeping open a store and the cost to close it. Sometimes we have an arbitration where we keep the store open until the end of the lease. And sometimes, we are closing stores. So that will be the rationale supporting this work of rationalization, but we are very determined. And as said by Armelle, 100 stores for net closures in '26 is the minimum we are targeting, and we are working to deliver more. In terms of square meters, it's around mid-single-digit decrease in terms of square meters with 100 net closures, and we are targeting, as I said before, even more. So probably we could reach ideally high single-digit decrease of the square footage for '26. Luca de Meo: Maybe building on what Jean-Marc was saying, I think that you have cases like the one I mentioned before, like McQueen, where you will go much deeper into the thing, probably more than 50% of the thing without mercy, because we have to get down. One of the things that we have been organizing, thanks to the support of Jean-Marc and his team, is also a form of coordination that was not necessarily working amongst the brand. So sometimes the locations that are closed are reallocated to other brands because they are interesting. So that kind of team play is one example of how the new Kering will actually work, bringing some opportunity of synergy and solution, because we play as a team. I think it's also, in a sense, the reason for the creation of the position that we've given to Daniele Zito, who was former President of Gucci Japan, a young guy, very talented, very knowledgeable about the retail. The whole idea there is to cut the horizontal -- to cut one of the many horizontals that I will have to cut within an organization that was siloed and structured by verticals on the brand. And this is the idea of basically, you have all the channels somehow in the hands of someone. So retail, wholesale, outlets, e-commerce, et cetera, et cetera, because I think we really need to see the channels altogether. We will understand much better what are the things we have option to decide, how to manage that kind of chain. And this was not the case, because the responsibility was split with different people. And the work of Daniele will be, of course, in coordination with the brand on how to orchestrate the functioning of all the channels in parallel. So it's going to give us a better view. Of course, the work of the group is not to intrude in the commercial policy of the brands. We are there to coordinate, we are there to develop tools, so that the brands can better decide. We are there to support them. The group is there to create a condition for efficiency, and the brands will have the responsibility of nurturing and fostering growth. That's the concept. And yes, so Daniele will be one of the guys cutting a horizontal, which we didn't have before. Philippine de Schonen: Thank you, Luca. We now have a question from Carole Madjo, Barclays. Carole Madjo: Carole from Barclays. I hope you can hear me well. Two questions on my side. The first one is about your outlook on 2026, in which you talk about returning to growth and improving margins. Can you share a bit more detail on that? So are you talking about all the brands, including Gucci? I think the market already has, for Gucci, for the full year '26, a top line growth of around 5% and EBIT margin improving by around, I think, to 18% more or less. Do you find these numbers achievable at this stage? That's the first question. And question number two was about the Gucci brand itself. Can you share your view on how you see the Gucci brand DNA going forward? I feel the key debate that maybe Gucci has been too fashion-driven, too exposed to newness. So how do you think about balancing creativity, innovation, fashion authority versus also maybe a bit more evergreen focus to carry over? Luca de Meo: So on the outlook, we already said what we could say and we wanted to say. So I can confirm you that 2026 should be a year of growth and increased margin, basically on all the brands, all the brands. What you have to understand, of course, I can't tell you exactly the detail. But the way we built the budget with the teams and with the brands was pretty much, you can confirm, Armelle, pretty bottom up. And this is not something that was imposed to the group. So we built it together. And all the people in each one of the brand, CEOs and the people here, are convinced that we have a plan for 2026 that is very reasonable. You can trust the numbers and pretty solid, okay? So that's the way we enter into the year. We know that we have to kick start a new phase and we know that 2026 will be important also to build somehow confidence with you and with the markets, okay? So this is what I can say. On the DNA of Gucci, I mean, I just want to remind everybody that Gucci is one of the top luxury brands on the planet. Don't forget that. And in my career, I've learned something, of course, it was a different sector, that great brands actually are immortal. They never die. If you do the right things, they can rebound. And Gucci in its history has proved many, many times an ability to rebound. And I have a feeling that this is what is starting right now with Francesca and with Daniele. It's not very complicated to understand what Gucci stands for, right? What Gucci has to do. So as soon as we do and we use codes, we execute excellently, both product and customer experience, the market reacts. Look at what happened, for example, with the small collection of La Famiglia. Immediately, the market was on us. I don't want to use information that we take, of course, as important. But a lot of signals are coming from different inquiries that Gucci is back on the radar. And this is only the beginning. And as I said before, just look at -- I had a question before on management. Look at the people that are running now Gucci. So nobody noticed that we made a lot of change in the management, bringing a lot of experienced people. We have a very strong CEO, one of the most talented designer on the planet. So trust that the thing will get better. Philippine de Schonen: Thank you, Luca. We now have a question from Antoine Belge, BNP. Antoine Belge: Antoine Belge at BNP. Two questions. So first of all, I think you've been mentioning that Demna will present its collection on the 27th of February. Will there be a bit of see me and buy me now happening? And so maybe in Q2 and then Q3, Q4. So how should we think about the share of the product offering influenced by Demna? And my second question is, in your return to profitability objectives, what will be the attitude to cost. I think in 2025, we already saw quite a significant decline in OpEx. So what more should we expect? And in terms of marketing, should we also expect some savings or a better use of the same dollars? What's the trajectory for marketing expenses in 2026? And actually, it's not a third question, but I think people are asking, so on the 16th of April, should we expect very precise numbers in terms of top line and margin for a certain period? Or is it going to be more an ambition without precise timing? Luca de Meo: Look, I mean, I will leave, of course, for Gucci, Francesca, the pleasure of unveiling the strategy for the collection. I think that everybody is very aware at Gucci that we need the rhythm, we need the quick execution. And so we have to very, very quickly show some signs of rebound, including on the product side. So expect the collection to be very, very quick in the distribution, okay? But it's a question you should be asking to Francesca and the Gucci team. Regarding OpEx, I think you can expect this year, we had a very important reduction in 2025. You should expect probably stability on the OpEx, but this is a mix of cuts that will continue on things where it makes sense and reinvestment on things to improve the desirability of the brand. So all in all, of course, we will try to reduce -- make the organization more and more efficient. So we'll look very, very detailed on the cost side. But when I look at the numbers, it's basically a combination of further reduction of the things that don't bring value and reinvestment of the things that potentially can bring value. And the same, I think, is for the marketing. What I could see as a problem, but also, therefore, as an opportunity is that we have been kind of protecting below the line into the marketing investment. And we have been cutting on above the line, which is the one that brings traffic to the stores. So this year, we not only are planning to renegotiate some of the contracts with the media agencies to gain efficiency, that is totally possible, I think, and we should do it, but also probably you will see a little bit more accent and investment on the above the line, which is the thing that speaks to consumers basically. Jean-Marc Duplaix: Maybe just to add on the OpEx side, if I may. I mentioned by Luca, there was a massive decrease of the OpEx in '25, but it started in '24. So over 2 years, we have more than EUR 1 billion of savings in terms of OpEx. And not only variable cost, it's also that we worked hard on the fixed cost. If you look at the headcount also, you see a double-digit decrease in 2 years, which is really an effort of restructuring starting with Gucci, but also with the corporate organization. And that's exactly what Luca said. We will continue in '26 to streamline the organization and to make it more efficient. So that will generate probably additional savings. But at the same time, hopefully, with the increase of the top line, we will have an increase of the variable cost. And we are reinvesting to sustain the growth, typically in terms of tech and things like that, where we will need to have some investments to support the recurring plan. Philippine de Schonen: Thank you, Jean-Marc. We now have a question from Thomas Chauvet, Citi. Thomas Chauvet: My first question on the portfolio after the sale of Beaute and your acquisition of the jewelry manufacturer, Raselli, at the end of last year, how are you thinking about brand portfolio management? Specifically, what are your key criteria to evaluate potential acquisitions or disposals? Secondly, on the financial leverage, net debt reduction to EUR 8 billion. That's, I think, 2.2x EBITDA ex lease liability, mainly due to the real estate transaction. That will be reduced by a further EUR 4 billion with the sale of Beaute. What leverage level are you targeting considering also that the Valentino acquisition is only 2 years away? And how do you prioritize capital allocation during the turnaround? And if I can squeeze just a follow-up to an earlier question on Gucci's '26 EBIT margin outlook. Taking into account the cost reduction you've started 18 months ago and the investments required, as you said, Luca, to enhance desirability, how sensitive is Gucci's EBIT margin to top line now? In other words, what is the growth level required this year to stabilize the EBIT margin at the 16% level that you recorded in '25? Luca de Meo: Look, maybe I'll leave to Armelle the question on the capital allocation, the lever, and the EBIT margin. I'd like to answer to the philosophy in terms of allocation and management of the portfolio. You've seen, let's say, those 2 big movements in 2025. One is the partnership with L'Oreal and the other one is the progressive acquisition of Raselli. It speaks a lot about how we see things. And I would say also the pragmatism that we try to bring and the common sense that we try to bring as a team into our approach to the market. I believe that people from the outside, they actually -- of course, the partnership with L'Oreal was seen very positively by, I would say, everybody. But I think that this, in fact, has been seen as a kind of Kering not really kind of abandoning the cosmetic and the perfumes business. In fact, the fact that we are with them reinforces our position. This is the way I see it. I think we will do much more business than what we could do alone. And the work that we will do together will, in fact, also have a huge benefit to our brand, particularly for the, let's say, investments and the strength of L'Oreal when it comes to marketing practices, okay? For me, the Raselli thing is, I can clearly see that the jewelry business is growing. I see that Kering is not doing so much. I think Boucheron is doing well. All the brands, Qeelin, et cetera, are doing well. But a very big hanging fruit is the business we could do with our fashion brands on that category from custom jewelry to high jewelry. Think, for example, Gucci. Gucci was, 10 years ago, doing 3x the business that they are doing right now in that category. So if you have an engine underneath that can help you develop the right product and right collection, this is a no-brainer, right? This is an hanging fruit that is there. So why we do the jewelry thing? Because it's totally legitimate for our brands, not only the specialist brand, but also because we understand that structurally, Kering is a little bit more dependent from the fashion cycle. And we want to create a form of balance and resilience embedded in the structure of the group. So both the L'Oreal partnership and the reinforcement of our action on the jewelry category are also there exactly for this to actually make Kering less dependent from the fashion cycle. It doesn't mean that we don't have to bring back Gucci what it deserves, we don't have to develop Saint Laurent, Balenciaga, Bottega Veneta, and all the brands. But you can expect in April that we will also talk about resilience and independence from the fashion cycles. That kind of work also has to happen within the brands in terms of the way you build the collection, of course. But our job as a group is also to design, to make the architecture of the group in that kind of fashion, in that kind of direction. I'll leave to you. Armelle Poulou: So regarding net debt, as you can imagine, with the L'Oreal deal closing in H1 2026, and the cash flow generation that we are going to generate this year, we, of course, expect net debt to decrease very substantially. And we see the leverage ratio, if I use the one pre-IFRS, which we ended the year at 3.4, we see this ratio ranging between 1 and 1.5. This is putting us back in a very good territory concerning also our leverage, and we are very comfortable in our strong investment-grade rating. You've seen that our outlook was confirmed positive stable in October after the Q3 results. Regarding margin, I wanted to remind something I said also last time in Q3 that with the work that we have done on our cost base, we could keep margin flat even without growth. But our ambition is to grow so it will yield an improvement in margin at the group level, but also at Gucci. Philippine de Schonen: Thank you, Armelle. We now have a question from Chiara Battistini, JPMorgan. Chiara Battistini: Yes, a couple of questions from me. The first one is, any initial thoughts on how you see the pricing architecture at the major brands evolving in 2026 between price and mix coming with the newness and the innovation that you're bringing to the market? And also how to think about the wholesale channel for the major brands considering especially for Gucci, the major cuts that we've seen over the recent years. But any outlook on that would be great. And then second question, sorry, more short term. But in terms of the gross margin dynamics of H2, I think there was an hedging gain that supported the gross margin. And therefore, I was wondering if you could give some color on the magnitude of that versus the underlying move of the gross margin and what we should be thinking in terms of drivers for 2026 at gross margin level? Luca de Meo: So we're going to do 1, 2, 3, okay? So Look, on the pricing, for sure, I think that, that kind of bonanza of inflationary power of the industry over the last few years probably should not be there. We know we all hear about luxury fatigue, people telling. And we take this thing into account very, very clearly. I think some of the products that just went off price. So we have been immediately looking at the structure of our collection. And you have seen already some signs of new product coming into the shops where we have -- including, for example, the Famiglia collection from Gucci, where we had been trying to bring to the market, let's say, products at, I would say, a very competitive price. And it works. And this is the customer recognizing this. So at least this is what the feedback I'm getting from all the store managers that I visit. So I think probably our efforts should be on trying to build an offer with the mix of things that are properly priced, but that structurally are creating value for us, okay? So I think that you will see more mix effect than sheer pricing. And this also depends on the way we are building the collection. I think for Gucci -- sorry, not for Gucci, for Kering in general, because we have 3 very important new creative directors, it's the opportunity for them to create desirability with newness. And on newness, you can actually ask for more, let's say, interesting prices. And that's the way we build the thing. So expect something that in terms of value is there that the people will be happy to pay for. But we will try to be competitive, because we recognize that maybe in some categories, we went too far and to the point that then volumes dropped dramatically on some categories and some products. As I said at the beginning, I think we are very clear in our heads on the challenge, and we try to address them one after the other without hesitation. Jean-Marc Duplaix: Okay. So just a remark about wholesale, just to take a step back if we want to think about 2026, that the evolution of wholesale in the past few years for the industry or for us was partly self-inflicted with some decisions to upgrade the distribution, which is still an objective that we have. And also something more structural with the sort of concentration of polarization of the wholesale distribution. It's important to remind this because, as you know, there is one player which gained some importance in this configuration, which is Saks Global. So when it comes to '26, part of the equation will depend also a little bit of what will be the evolution of the business of Saks Global, even if we think that with the procedure, which is ongoing, there will be a stabilization or improvement of the situation at Saks Global. That being said, if we look at the performance already in Q4, you see that for many brands, there was a sort of not a stabilization, but let's say, sort of normalization in terms of what are the trends. And if we project for next year, it's more or less that what we -- the situation is more or less what we had anticipated is that the size of wholesale business for brands like Gucci, like Saint Laurent, it's always in the range between EUR 200 million and EUR 300 million, considering the number of relevant accounts that we can afford to keep. So that being said, it means that for many of our brands, it will be flat, flat minus, flat plus depending on the brands with the exception of Gucci, where we should see some additional closures or improvement of the quality of the distribution. So I would say, I would anticipate something around mid-single-digit decrease of the wholesale at Gucci for '26. Armelle Poulou: Regarding the gross margin, as you know, there are many moving parts in the gross margin. The gross margin in H2 was flat to H1. There were, of course, some hedging gains. We will still have some hedging gains into 2026, more skewed to H1, considering the evolution of the currencies. We suffered in '25 from the geographical mix, as you've seen that APAC went down in the mix, and from the category mix, even if I must say that in Q4, because of the progress of the leather goods category, we regained in the mix. In terms of channel, channel was a positive because of the rationalization of the wholesale and the higher share of retail in our mix. And price of raw materials was a headwind, notably on the gold, even if it's not very important when you look at group level, but more significant in our jewelry houses. Looking into 2026, we expect channel to remain positive. Product mix will be positive because we are regaining in handbags. Geographical effect is very difficult to assess at the moment. And we expect the price of raw materials to probably still be a headwind in this year. Philippine de Schonen: Thank you, Armelle. We now have a question from Zuzanna Pusz, UBS. Zuzanna Pusz: I have 2 questions. One will be a bit more philosophical, the other one more financial. So maybe I'll start with the sort of more philosophical one. Luca, I'm just wondering, would you be able to tell us what sort of surprised you the most positively when you joined the group? Or maybe in other words, where do you see the biggest potential that hasn't been really properly exploited? And then my second question is a bit more financial. I think that may be for Jean-Marc, that's going to be a follow-up to the comments on space. So you mentioned that space may be, and please correct me if I'm wrong, mid-single-digit to high single-digit negative this year. You just mentioned that wholesale could be down mid-single digits for Gucci. So all in all, if I combine it together with the comments that sales should be up, that would imply probably double-digit like-for-like growth. Can you tell us if that's going to be mainly volume driven? Are you actually seeing that? Just so we can -- in terms of modeling, so we can understand if you already are seeing it, if that's meant to come later maybe in the year when the new collections come, just to understand that. Luca de Meo: Look, I'll try to answer to the philosophical question with a not philosophical answer. But I have to say that maybe 2 things for me where I would be surprised. One is, in fact, the -- and I remember having a conversation in the first weeks with Francois-Henri on that. The group was built by fostering independence of each one of the brands, which actually was great, so acting a little bit more as a holding and leaving to the entrepreneurial spirit of each one of the brand's team to do what was best for them, okay? And in fact, for a while, this thing worked pretty well here. And if you look at the upside that the Kering has created for some of the brands, I mean, I think from the beginning, I don't know, Saint Laurent was multiplied by 5, Balenciaga by 30. I mean there are not many organizations that were able to create that kind of upside. Now when the brand has become big and the company has become big, probably this is the time to actually build a platform for the group that, as I mentioned before, will enable brands to be stronger, will make the system more resilient, will allow us to share and create synergy between brands, and give to the brands access to things, to technology, to processes that they cannot do alone, okay? So the biggest potential I see is that kind of orchestration of a teamwork between the beautiful brands that we have. Because this is also, on the positive side, is that the brands are really great. I mean we actually own some of the best brands in the whole industry. And now that I'm getting into the thing and I hear feedback from media, from customer, et cetera, et cetera, there is absolutely no doubt that the portfolio of brands of Kering is pretty magic, okay? And by the way, we don't have too many, but we don't have too less. So I think it's a relative right number of brands that it's big enough that we can orchestrate that kind of teamwork. And there, I really see the potential, because it was not designed like this. So the mission that Francois-Henri and the Board gave me was to create that kind of platform, which, of course, as an ex-automotive guy, the name platform resonates to me very, very well. I know how to do it, okay? And probably the other thing that was kind of not surprising, but where I really see potential, but yes, a bit surprising, is that the accent that we would put on the upstream part of the business. So I think there are a lot of things that, also because of this approach, new approach, that we are bringing that where we can make big, big, let's say, step forward into the all industrial on the cost side, on the product development cycle, on the organization on the upstream. So don't let me spoil too many things that I wanted to say on the 16th of April. But for sure, one of the things which I found weird for a guy coming from a heavy industry sector was the level of emphasis on those topics, but now it's getting into the conversation, and we're spending a lot of time together to actually strengthen the upstream, you can call it verticalization, you can call it the way you want, but it's the way you actually engineer and control the back office things. Jean-Marc Duplaix: So Zuzanna, let's forget philosophy a few seconds, and let's move to figures. So send me your Excel file, and I will help you. No, I'm kidding. So more seriously, I think, first, in your reasoning, first, please consider that, as you know, wholesale now is not so huge in the contribution to the sales of Gucci. And when it comes to space, just to help you to figure out, we are closing, of course, doors, which are not the most productive. So you should not apply the average sales density to the square meters that we are closing. By the way, we are not closing the 1st of January. So of course, we are embarking the impact of the closing of '25. But when it comes to the closing of '26, it will be spread over the year. For sure, however, to come to your like-for-like growth, without disclosing, of course, our ambition, it's not double-digit growth, but it's a significant growth. That's the reason why we are starting the year with a lot of humility and knowing that there is a lot of work to do. The objective is, of course, not to redirect all the traffic from the stores we are closing to the other stores. It's an equation which is very difficult to solve. But it's, first of all, to increase the sales density of the stores we are keeping. And that's really the objective we have, and it's very correlated, of course, to the desirability of the brand, because the sales density, as you know as well as me, it's about traffic, conversion, units per ticket, average selling price. So we can work already on the average selling price with the structure or the architecture of the collections. Thanks to the energy and the commitment of our sales associates, as mentioned by Luca, about the excitement we have around the brand, we can work on the conversion, but we will need traffic at a point. And it will be the work we will do in terms of desirability along the year. That's the reason why we will invest some money in marketing. I'm not talking only about advertising and marketing in all the different directions to recreate the desirability and to drive the traffic. And it will go along the year. That's the reason why, of course, at the beginning of the year, and coming back to the first question about Q1, of course, you will have still the drag of the closures and not the full impact yet of the recovery in terms of desirability. Philippine de Schonen: Thank you, Jean-Marc. We'll take a very last question from Charles-Louis Scotti, Kepler Cheuvreux. Charles-Louis Scotti: I have 2. The first one on the profitability. When I look at Kering mid-cycle average margin, it's been around 20% since the group became a luxury pure player, and around 24% to 30% since Gucci reached a critical scale. I guess you will address this topic during the CMD, but do you believe you can bring the profitability back to those more normative historical levels? And if yes, is this achievable even without assuming a renewed super cycle at Gucci? And the second question on Beaute. It seems that Coty's new CEO sounded a bit more open on earlier termination of the Gucci Beaute license. Will you have any interest in taking the license back ahead of the current June 2028 maturity? And do you think it will be a strategic plus to relaunch Gucci Fashion and Beaute at the same time under a, let's say, fully coordinated approach? Luca de Meo: Look, because we are a bit short in time, I will answer to your first question with simply a yes, okay? On the second one, I mean, there is some kind of, let's say, court cases around Coty. So please allow me not to elaborate on the topic. We continue to do -- as a licensor of the thing, we continue to respect all our engagements and the contract. And this is a discussion we would preferably like to have, I would say, directly with Coty in a good spirit. And so we'll probably answer to your question in a few weeks. Philippine de Schonen: Thank you, Luca. Thank you to all of you. Thank you for your questions. And we are very sorry as we were not able to go through all your questions. But of course, the full IR team is available today and in the coming days to answer all your questions. We'll be very happy to be speaking with you again on April 14 for the Q1 revenue release. And then obviously, on April 16 with our Capital Markets Day. Have a good day. Thank you to all of you.
Operator: Thank you for participating in the Investor Meeting for 2025 Full Year Results at Japan Tobacco Inc. today, despite your busy schedules. Since it is a scheduled time, let us get started. Before we start the meeting, I'd like to ask you to make sure that your display name on the Zoom is accurate. Thank you for your cooperation. In today's meeting, first, our newly appointed JT Group CEO, Takehiko Tsutsui, who assumed the role in January 2026, will introduce the Business Plan 2026. And Eddy Pirard, CEO of JT International, will follow and explain the tobacco business focus on FY 2025 performance. Lastly, Hiromasa Furukawa, Chief Financial Officer of the JT Group will explain JT Group 2025 results and 2026 forecast. Then we move on to the Q&A session, and this meeting is scheduled to end at 8:00 p.m. Japan Standard Time. Now I would like to introduce the first presenter, Mr. Tsutsui, please begin. Takehiko Tsutsui: I am Takehiko Tsutsui, CEO of the JT Group. Thank you very much for attending our conference call today. And I would like to express my appreciation for your continued support and understanding of our commitment to growth. Please look at today's agenda. First, I will give an overview of our performance in fiscal year 2025. Then I will expand on the cornerstones of the JT Group before diving into the profit growth guidance and business strategies for the business plan 2026. Eddy Pirard, CEO of JTI will provide details of the Tobacco business performance in 2025. Later, and Hiromasa Furukawa, CFO of the JT Group will cover the fiscal year 2025 group financial results and fiscal year 2026 targets. Before starting the presentation, allow me to share some very early thoughts in my new role as CEO of the JT Group. The JT Group has a history of continuously looking ahead to the future and moving forward. And I myself have participated in many of its revolutions and growth along the way. I believe my mission is to build on the growth strategies and strengthened foundations, driven by my predecessor, Masamichi Terabatake, and to steer the company to even greater heights. We will continue to enhance our corporate value by practicing management based on the JT Group purpose, fulfilling moments enriching life, and our management principle, the 4S model, consistently exceeding customer expectations and achieving sustainable profit growth over the medium to long term. To achieve this, I will take the lead in strengthening our existing capabilities, further developing RRP into future core strengths and simultaneously envisioning our long-term future through D-LAB. Across the short-, medium- and long-term time horizons, we will continue to invest for future growth without hesitation, while also firmly committed to delivering short- and medium-term performance. In addition, in a rapidly changing business environment, I believe it is essential for us to proactively embrace change with a strong sense of urgency. To that end, I will devote my efforts to further strengthening the organizational foundation of the JT Group. Starting today, I would like to deepen our dialogue with capital markets and strive to meet our expectations. Now let me begin with an overview of fiscal year 2025. Please look at Slide 5. In 2025, despite an unstable global geopolitical and economic environment, including soaring prices, we delivered outstanding growth across all indicators from revenue to profit, each reaching record highs. I believe this achievement was supported by the outcomes of our continued strategic investments we have made to drive sustainable growth. I will also briefly review the performance of each business segment, in the tobacco business, our largest contributor. Solid organic momentum continued, as Eddy will detail in his presentation. The key drivers were pricing contribution, combined with ongoing market share gains in Combustibles. 2025 also marked the steady progress of the Vector Group integration, the U.S. Tobacco Company, we acquired in 2024, and its performance boosted the organic growth, I have just mentioned. In RRP, we launched our new heated products device, Ploom AURA, across a total of 17 markets in 2025, and it has recently expanded to 19 markets. Both Ploom AURA and its consumable EVO sticks have been very well received by customers, particularly the taste and design. These products are already contributing to share gains in multiple markets, notably in Japan, and these results further reinforce our confidence in the strategic investment we have made. Accordingly, we believe that 2025 was a year in which we made steady progress in strengthening the business foundation that will support the group's mid- to long-term growth in both Combustibles and RRP. The processed food business achieved profit growth through steady price revisions and improved productivity, as to our pharmaceutical business. And in line with our May 2025 announcement, we successfully completed its transfer to Shionogi in December. As we indicated at the third quarter earnings announcement, the annual dividend per share for 2025 is planned to be JPY 234 per share. Please look at Slide 6. The graph on this slide illustrates the trends in our performance and shareholder returns over the past 5 years. Guided by the JT Group purpose, and our management principle, the 4S model, we have consistently prioritized business investments that contribute to profit growth over the mid- to long term. We have delivered sustainable profit growth by strong top line expansion, which in turn has enabled us to enhance shareholder returns. We believe this demonstrates the growing resilience of our business and navigating a rapidly changing operating environment. As I take on the role of CEO, I will further strengthen and accelerate this growth cycle, and I am committed to formulating and executing our business strategies to ensure our sustainable growth in the years ahead. Allow me to briefly remind you of the philosophy behind the JT Group purpose and our 4S model. Please turn to Slide 7. The JT Group purpose plainly expresses our reason for existence and our aspiration. Importantly, in pursuing The JT Group purpose, we have defined specific purposes for each of our business segments to ensure full alignment. The 4S model. Our management principle is the customer at its center, guides us throughout the decision-making process. As we work to realize our purpose, I am committed to making high-quality decisions grounded in the 4S model and to continually exceed customer expectations. I am convinced that this is the best approach for achieving sustainable medium- to long-term profit growth and continuously enhance our corporate value, ultimately enabling us to share benefits with all stakeholders identifying the 4S model. As part of efforts to go beyond the boundaries of existing businesses for realizing our purpose, we will continue our initiatives within D-LAB of corporate R&D organization. Let me give you a brief overview of D-LAB. At D-LAB, under the concept of unknown fulfilling moments, we engage in advanced research by exploring and creating seeds for future businesses. We aim to foster the value of fulfillment moments and society over the long term, while also aiming to contribute to the JT Group's profit growth. As part of our efforts to create new businesses, several affiliated companies are conducting commercialization trials of products and services from scratch. And some of these initiatives have already progressed to the stage of delivering the value of fulfilling moments to consumers. In addition, in exploring businesses, we have also invested in more than 200 companies aligned with the concept of fulfilling moments, primarily through operating funds that invest in start-ups. And including our research activities, we are currently running over 100 projects at any given time. Although progress will be gradual, the outcomes of these activities are beginning to materialize. Turning to Slide 8, and our capital allocation and shareholder return policies. To further strengthen and accelerate the growth cycle I mentioned earlier, we will continue to prioritize business investments that will deliver sustainable profit growth over the mid to long term. Our main investment focus will remain the Tobacco business, particularly towards Combustibles and heated products. In strengthening our business foundation, we will also consider the acquisition of external resources, such as through M&A as one of our options. Through these business investments, we will drive growth in adjusted operating profit at constant currency, our primary performance indicator. This, in turn, will enable medium- to long-term growth in net profit and support competitive shareholder returns in the capital markets. Regarding the shareholder returns, we remain committed to maintaining a dividend payout ratio of around 75%. We'll continue to focus on delivering robust shareholders' returns with dividends at the forefront. On Slide 9, I'll highlight the overall framework of our sustainability strategy. We have identified the JT Group materiality. Our priority material issues based on our belief that people's lives and corporate activities can be sustainable if the natural environment and society are sustainable. Additionally, we have also established the JT Group sustainability targets as specific goals and initiatives, and we are steadily progressing toward achieving them. Detailed results are available in our integrated report and on our website. We remain strongly committed to ensuring the sustainable growth of our society, and our businesses and to driving forward our initiatives for a sustainable future. Turning to our business plan, 2026. Our profit growth outlook for the 3 years from fiscal year 2026 to fiscal year 2028 as well as business strategies that support it. Like all business plans shared so far, the current business plan is developed with our growth algorithm in mind. As you know, our aim is to pursue sustainable profit growth over the medium to long term, targeting mid- to high single-digit growth in consolidated AOP at constant currency. In fiscal year 2025, while we achieved record-high strong growth, the operating environment surrounding our group remains highly uncertain. We must continue to monitor the impact of geopolitical instabilities on the global economy, foreign exchange volatility, interest rate trends, hyperinflation in certain markets and broader macroeconomic developments across countries. Within this environment, our Tobacco business, our core driver of profit growth is expected to lead our performance. We aim to grow the consolidated AOP at constant currency at a high single-digit CAGR, which is the upper end of our medium- to long-term growth algorithm. Over the business plan period, we do not expect significant relief in the operating environment nor in terms of regulations. In Combustibles, industry volume contraction and down-trading are expected to continue. While in RRP, we forecast intensified competition, especially in heated products. Irrespective of these conditions, our strategic direction remains unchanged. In Combustibles, we will further improve profitability. And in RRP, we will concentrate our business resources toward heated products to establish it as the second engine for profit growth alongside Combustibles. As a result, we aim to grow AOP at high single-digit CAGR over the planned period. In the processed food business, we expect the operating environment to remain challenging, particularly in Japan, with continued increases in labor and logistic costs, as well as fluctuations in raw material prices. In addition, price increases driven by these factors are likely to affect demand. In this context, the processed food business will continue to play its role in complementing the JT Group's profit growth. To ensure top line-driven profit growth we will reliably implement price revisions, expand our business volume both domestically and internationally and further enhance productivity. In the next couple of slides, I'd like to detail some of the fundamental strategies in the Tobacco business. Starting with Combustibles, we'll continue to pursue quality top line growth by taking advantage of pricing opportunities across our footprint and by driving further market share expansion. While industry volume is expected to continue declining, we anticipate to outperform the industry trend through further gains in market share. In addition, we aim to continue improving profitability through focused investments aligned with our market archetypes and various initiatives to reduce costs across our supply chain. Through these efforts, we will generate incremental returns, which in turn will enable higher investments in RRP. In RRP, our view remains unchanged that the category of heated products is expected to grow the most and the fastest within RRP in the future. We will, therefore, continue to prioritize investments in heated products within RRP, accelerating our growth momentum through large-scale strategic investments. In other RRP categories, such as Modern Oral, E-Vapor and Infused, we will keep exploring business opportunities and we'll make selective investments based on the strategies tailored to each category. Specifically, we'll consider new market entries based on market size and growth potential while taking into account the different regulatory environments and consumer preferences across markets. In parallel, we will continue to advance initiatives to strengthen our pipeline of next-generation propositions that may not necessarily fall within the existing RRP category definitions, with the aim of creating products that have the potential to become future growth drivers for RRP. Turning to Slide 12 to explain more concretely our planned initiatives in RRP with a particular focus on heated products. We expect the global RRP market to continue expanding, and we will strengthen our business foundation, as we work towards the milestones laid out in our 2028 RRP ambitions. As the chart indicates, during the business plan period, we aim to accelerate growth in RRP-related revenue driven by top line expansion in heated products. As I mentioned earlier, we're increasingly confident that our investment in RRP has been steadily delivering results. While we will flexibly adjust our plans as circumstances evolve, we currently plan to invest a total of around JPY 800 billion from 2026 to 2028, an amount exceeding past levels, with annual investments expected to gradually increase towards the latter half of the period. The primary use of this investment will be to support commercial initiatives, prioritizing heated products. Through various promotional activities, we will further enhance the equity of Ploom and drive both new consumer acquisition and improved retention. To this effect, we will complete the transition of Ploom AURA in most key markets during 2026, as Ploom AURA is very well received by consumers. In addition, as we prioritize the rollout of Ploom AURA and had temporarily moderate the pace of geographic expansion, we will now gradually resume expanding our global coverage going forward. Furthermore, we will pursue innovation in both devices and sticks, aiming to continue improving our Ploom ecosystem through next-generation products with greater speed. Even as we step up investment, we expect volume growth as well as gross margin improvement in heated products, along with profit contribution from other RRP categories to drive overall profitability improvement in the RRP business. I'll now turn it over to Eddy Pirard, the CEO of JTI, for an overview of the 2025 performance of the Tobacco business. Eddy, the floor is yours. Eddy Pirard: Thank you to Tsutsui-san, and good afternoon to all participants on the call. It is my pleasure to present today the 2025 performance of JT Group's Tobacco business. A performance which you will see is nothing short of remarkable, thanks to incredible contribution and dedication of our 46,000-plus employees worldwide and that of our commercial partners. My presentation will focus on the main achievements of 2025 as well as the outlook for business plan 2026, while the key financial information will be covered by Furukawa-san in his presentation. 2025 marked another year of incredible performance for the JT Group's Tobacco business. All indicators were up year-on-year, demonstrating once again the significant value of our strategic framework. As a reminder, this strategic framework is anchored on 2 pillars of growth: a Combustibles pillar, where our focus is to improve return on investments through quality top line growth and efficient operations. And a RRP pillar in which we prioritize investments behind heated products, and our brand Ploom, while adopting a more selective approach in other segments like E-Vapor and Modern Oral. In terms of deliverables for the third consecutive year, we have grown total volume, clearly outperforming industry volume trends. GFBs were the main drivers of our 2025 Combustibles volume performance, as we will see later, further supported by the successful integration of the Vector Group, which we acquired in 2024. In RRP, the launch of Ploom AURA has accelerated our volume and share performance in heated products, resulting in JT delivering the fastest growth in this segment, a very promising start for our newest introduction to the Ploom family. This solid volume performance, combined with exceptional pricing in Combustibles, drove a double-digit increase in both core revenue, up almost 15% and adjusted operating profit growing over 23%. Let me elaborate on the key drivers of our 2025 performance, starting with reduced risk products. Growth in both RRP volume and revenue accelerated versus the prior year, increasing by 28% and 24%, respectively. Heated products were instrumental to the volume growth, expanding by 3.2 billion units and representing a 38.6% year-on-year increase, with gains mainly in Japan and across all clusters. On the revenue side, heated products grew by almost 50% at constant FX. The launch of Ploom AURA in May 2025 played a significant role in this expansion as well as the accelerated investment to establish Ploom as a global power brand. Beyond heated products, we continued to explore other RRP segments through a selective and flexible investment approach in line with our strategic framework. And in parallel, we pursued improving our knowledge on multi-category consumers and the capabilities required to win in this environment. Speaking to Modern Oral, as shown by Tsutsui-san, we have expanded Nordic Spirit's presence to 10 markets. Our approach to nicotine pouches remains cautious and targeted as similar to E-Vapor, the regulatory environment remains very fluid and the barriers to entry are lower compared to Heated Products. In E-Vapor, in addition to a logic presence, we profitably explore growth opportunities, including through strategic investments. In 2025, we took a majority stake in a leading and profitable independent U.K. E-Vapor company, Flavor Warehouse. The intent is to strengthen all learnings in this dynamic segment. Since the beginning of my presentation, I have mentioned Ploom extensively. Let me share some more details on its performance. In 2025, supported by innovation and successful consumer acquisition, Ploom was once again the fastest-growing brand in Heated Products. The introduction of Ploom AURA in certain markets and the expansion of our heated tobacco sticks portfolio, fueled share gains in all 28 markets were available. As of November 2025, Ploom had reached a share of segment of 9.7% across the 13 initial markets. Turning to Japan, the largest Heated Products market globally. Since the introduction of Ploom X, we have increased our share of the Heated Products segment almost fivefold, reaching 15.7% in the fourth quarter of 2025. AURA, which we launched mid-2025, clearly contributed to the acceleration of Ploom share gains, as you can see from the slide. And in December, Ploom reached 16.5%, making it the #2 Heated Products offering in Japan across 39 prefectures, including Tokyo. Moving on to other markets. Efforts to strengthen brand equity and drive consumer adoption through adjustments to our commercial execution delivered share gains across our footprint. As would be expected, the share of segment progression differs between markets as it is clearly related to consumer awareness of Heated Products, the diversity of products available and the competitive environment. Across the 9 markets presented on the slide, Ploom's share of segment grew by an average of 1.6x year-on-year with the most significant increases in Poland, in Serbia and Switzerland, all more than doubling their share. Lastly, we launched Ploom in Taiwan at the end of 2025. And although it's still very early, we are encouraged by the performance so far, which has exceeded our expectations. Before moving to a Combustible performance, I'm proud to share how Ploom AURA has improved the consumer experience since its introduction. Starting in Japan, where AURA has been available since the end of May 2025. While we are still early in the journey of AURA, as you can see from the data on the slide, this next-generation device has outperformed the previous X Advanced. It generated a higher Net Promoter Score or NPS compared to Ploom X Advanced, which itself outperformed Ploom X, if you remember, our slide from February last year. Importantly, the number of Ploom users has increased by 34% year-on-year and doubled since 2023. These positive results strengthen our confidence in the quality of our Ploom device, especially as consumers speak very highly of the improved design, functionalities and taste. Also worth mentioning that 58% of Ploom AURA users are new to the franchise. The superior taste satisfaction of Ploom is also owing to the next-generation heated tobacco sticks and the launch of a premium offering in Japan under the EVO brand, an offer, which was very well received by consumers, reaching a share of segment of 3% in December 2025, complementing the existing MEVIUS and Camel propositions with limited cannibalization. We now have a very compelling and competitive portfolio to drive further growth. Leveraging the early success in Japan we are progressively rolling out Ploom AURA across our footprint. As of today, AURA is already available in 19 markets and will be in almost all Ploom remarkets by the end of 2026. In addition, we are gradually migrating our sticks to EVO, our global brand for Heated Tobacco sticks. In summary, we are making good progress in line with our strategic drive to build Heated Products as a second pillar of profit growth in the future. In 2025, our performance in Combustibles was unrivaled. Our volume grew by 1.7% year-on-year, far outpacing industry volume contraction in the measured footprint. Our organic volume grew in over 50 markets year-on-year, further boosted by the successful integration of the Vector Group. While in certain markets like Russia and Turkey, the volume growth was compounded by an exceptionally resilient industry volume. Our volume growth was mainly driven by continued market share gains. Our Combustible share increased in approximately 60 markets, including 9 of our 10 key markets. GFBs were once again instrumental to the volume performance, growing by 2.8%, their 7th consecutive year of growth. At the end of 2025, GFBs represented 74% of our Combustibles volume. Winston, our largest brand and the world's second largest grew volume by 4.9%. Its volume increased in approximately 50 markets, including our key markets of Italy, Romania, Russia and Turkey. Winston also grew market share across many markets, including the 4 key just mentioned, plus Spain and Taiwan. In our measured footprint, Winston was the fastest-growing Combustible brand in 2025. Camel, the third largest global brand grew volume by 4.3%. Volume was up in almost 50 markets, including Italy, the Philippines, Russia, Taiwan and Turkey, fueled by market share gains including in 6 of our 10 key markets. Driven by these brands, our Combustibles market share grew by 1.3% across our measured footprint, making us the fastest-growing company in the category. Although volume contributed to a core revenue increase of 15% in 2025, the main driver remained Combustibles pricing demonstrating yet again its resilience. Last year, the price/mix contribution to core revenue reached an exceptional 10.8%, significantly above its past 3-year average due to several factors. The first accelerator is the positive volume performance, which enabled us to maximize pricing benefits across our footprint. The second and most important factor is the level of price increases across our footprint. All clusters delivered price/mix increases year-on-year. EMA was the strongest performance with all 4 key markets contributing positively. Western Europe, led by Italy and the U.K. also delivered strong growth, even within a down-trading environment. In the Asia cluster, the positive drive came mainly from Bangladesh, Japan and the Philippines. The last factor was related to the impact from down trading. Although the trend continued in 2025, its impact was more limited than we've seen in recent history. As a result of the solid pricing, the Combustibles profit margin grew by an outstanding 3.4 percentage points year-on-year. This increase demonstrated our strategic drive to improve return on investments in Combustibles. We have grown market share through equity-building initiatives towards our GFBs combined with an optimization of pricing opportunities when they arose. In addition, our focused approach using market archetypes, earnings only, share only or earnings and share continued to maximize the expected returns from investments and to ensure profitable top line growth. These top line drivers are enhanced through disciplined cost management initiatives without sacrificing product quality, growth opportunities, and a sustainable business base. These include, but are not limited to the deployment of an end-to-end integrated supply chain, the simplification of our products, both SKUs and brands, and of our IT infrastructure, as well as the further leverage of our global business services. We also continued to invest effectively and efficiently across all functions, including procurement, manufacturing, and in our route to market, while embracing the concept of Kaizen or continuous improvement to maximize the bottom line and drive stronger cash performance and delivery. Finally, the successful integration of the Vector Group further enhance our efforts to improve the Combustibles operating profit margin. Overall, the Tobacco business delivered an incredible performance in 2025, growing all indicators year-on-year, fueled by both Combustible and RRP. The goal for the business plan 2026 period is clear. Capitalizing on our strategy, we reconfirm our intention to grow adjusted operating profit at a high single-digit rate, despite continued down-trading, intensified competition across categories and macroeconomic factors. In RRP, we will further accelerate consumer acquisition by strengthening our commercial engine and leveraging consumer insights from the 28 markets where Ploom is available. As highlighted by Tsutsui-san in his remarks, we will continue to invest towards RRP during this business plan period. These investments will focus on increasing the top line contribution of Heated Products through the sale expansion of Ploom AURA and EVO sticks. We will also strengthen our understanding and profitable participation in other RRP categories. And we will take advantage of our innovation pipeline and improved capabilities to consistently exceed consumer expectations. In Combustibles, we remain committed to improving return on investments. This encompasses continued market share expansion, notably by our GFBs and optimized pricing opportunities to drive both revenue and margin improvements as well as initiatives to manage ongoing inflationary pressure. Thank you very much for your attention and interest in the tobacco business. I will now hand over to Furukawa-san, for the review of the JT Group financial results and forecast. Hiromasa Furukawa: Thank you, Eddy. I am Hiromasa Furukawa, CFO of the JT Group. I will detail the consolidated financial results for 2025, and our forecast for 2026, both at the group level and by business segment. First, let me take you through our consolidated financial results for 2025. As Tsutsui-san mentioned earlier, thanks to the strong performance of the tobacco business, revenue, AOP, operating profit and profit for the period all reached record highs in 2025. AOP on a constant currency basis, which is our primary performance indicator, increased by 24.9% year-on-year driven by organic growth in the Tobacco business, further boosted by the contribution of the Vector Group acquisition in the U.S.A. Regarding foreign exchange impacts on AOP. While there was a positive impact from the depreciation of the Russian ruble, this was more than offset by the depreciation of emerging market currencies against the Japanese yen, such as the Iranian rial and the Turkish lira, resulting in an overall negative impact. Operating profit increased year-on-year, mainly driven by the absence of the provision for loss on litigation related to the settlement in Canada, which was recorded in 2024. Profit from continuing operation increased year-on-year as the increase in operating profit more than offset higher financial expenses, mainly due to foreign exchange losses arising from a rapid deterioration in the exchange rate in Iran, as well as higher corporate income tax expenses. In addition, profit from continuing operations came in below JPY 555 billion forecast announced with third quarter results. This was due to the impact of a rapid deterioration in the exchange rate in Iran, as just mentioned. Free cash flow increased by JPY 102.2 billion year-on-year to JPY 272.7 billion, as the nonrecurrence of the Vector Group acquisition payment, recorded in 2024. And the increase in AOP more than offset the upfront payment related to the settlement of the litigation in Canada, which was recorded in 2025. Moving on to the financial performance of the Tobacco business. Eddy has already explained the details of the Tobacco business performance. So I will only focus on the financial performance. The volume contribution was positive, mainly fueled by the inclusion of the Vector Group. Regarding the Vector Group contribution to volume, I can confirm that it has been in line with our initial expectation. As shared by Eddy, the price mix contribution to AOP was above its historical average. Strong pricing contributions in many markets, including Japan, the Philippines, Russia, Turkey and the U.K. outweighed the lower product mix, mainly due to down trading in the Philippines and Taiwan. These positive factors far exceeded the incremental investment towards Ploom and the inflation-led cost increases, particularly across the supply chain regarding tobacco leaf and labor. As a result, AOP at constant FX increased by 23.5% year-on-year. As I mentioned earlier, the FX impact on AOP was unfavorable. Next, I will explain the results of the processed food business. Revenue increased by JPY 2.3 billion year-on-year, driven by the positive impact from price revisions of package cooked rice in the Frozen and Ambient Foods business. AOP increased by JPY 0.5 billion year-on-year, mainly driven by the revenue increase, which fully offset higher raw material costs such as rice. Let me move to our business forecast for fiscal year 2026. Before that, I would like to inform you that we have adjusted certain financial figures. One of these adjustments is related to Canada, which I would like to explain now. As you know, a settlement was reached in March last year regarding all the smoking and health litigations in Canada, in which our local subsidiary, JTI McDonald was included as a defendant. Consequently, we will make annual payments from 2026 onward. As a result of these payments, we expect this will create a gap between JT Group's recognized profit and loss as well as its cash flow. Therefore, in order to appropriately reflect the actual cash flow in our profit and loss, under certain assumptions, we have made adjustments to deduct from each indicator, the amounts of revenue and profit corresponding to each annual payment as well as to exclude the impact our noncash profit and loss. For details, please refer to the reference slide titled Canada Adjustment. This being cleared, allows me to explain the consolidated financials. Core revenue at constant FX is expected to increase by 3.6% year-on-year in 2026, driven by a solid pricing contribution in the tobacco business, higher RRP-related revenue and the top line growth in the processed food business. AOP at constant FX, our primary performance indicator is expected to increase by 8.9% year-on-year. The FX impact on AOP is forecast to be negative due to the depreciation of emerging market currencies and depreciation of cost-related currencies such as the U.S. dollar, both against the Japanese yen. Operating profit is expected to increase by 6.2% year-on-year, driven by the increase in AOP and lower amortization costs of trademark rights related to past acquisitions. These positive factors more than offset the absence of profit from the remeasurement related to the settlement liability for the Canada litigation recorded in 2025, as well as a decrease in profit from property sales. Profit is expected to increase by 14.2% year-on-year, driven by the increase in operating profit and lower financial costs due to the absence of the foreign exchange losses recorded in 2025. Free cash flow is expected to increase significantly, driven by the increase in AOP and the absence of the upfront payment related to the settlement of the litigation in Canada, which we recorded in 2025. In the following section, I will explain the forecast by business segment. First, let me explain the volume assumptions for the Tobacco business. The continued share growth of Combustibles across several markets and an increase in RRP volumes are expected to partially offset the global decline in Combustibles industry volume, notably in Japan, the Philippines and the U.K. As a result, total volume is expected to be between flat and down 1% year-on-year. Next, I will explain the financial forecast. Core revenue at constant FX is expected to increase by 3.4% year-on-year, driven by continued strong pricing contribution, mainly in key markets and higher RRP-related revenue. AOP at constant FX is expected to increase by 8.5% year-on-year, driven by top line growth that more than offsets continued RRP investments behind Ploom and inflation-led cost increases, including across our supply chain. As I mentioned earlier, the FX impact on AOP is expected to be unfavorable. Next, I will explain the forecast for the processed food business. Revenue is forecast to increase, mainly driven by price revisions in the Frozen and Ambient Foods business. AOP is expected to decrease, mainly due to higher raw material costs despite the expected increase in revenue. Finally, I would like to explain shareholder returns. As Tsutsui-san explained earlier, there is no change to our shareholder return policy. With respect to the dividend per share for fiscal year 2025, as indicated at the third quarter earnings announcement, is planned to be JPY 234 per share. Regarding the dividend forecast for fiscal year 2026, based on the Canada adjusted profit, we project a dividend of JPY 242 per share, which corresponds to a payout ratio of 75.2%. Profit for fiscal year 2025 came in below the level presented at the third quarter announcement due to the sharp deterioration in the exchange rate in Iran. On the other hand, our business momentum remains strong and adjusted operating profit at constant currency is growing. Under the current medium-term plan as well, we expect to achieve steady profit growth. For fiscal year 2025, the payout ratio will temporarily exceed the 75% plus or minus 5% range, defined in our shareholder return policy. However, given that the full year results are now finalized and we have gained visibility into our medium-term growth outlook, we have decided not to revise the dividend per share forecast that we presented at the third quarter announcement. Please look at the graph on the slide. We consider dividends to be the core of our shareholder return policy. To date, we have achieved sustainable profit growth. And through this profit growth, we have steadily enhanced shareholder returns. Over the past 5 years, our TSR has outperformed the topics. Going forward, we will continue to target a payout ratio of 75%, which we consider to be at a competitive level in the global capital markets and aim to enhance shareholder returns through the realization of sustainable profit growth over the mid to the long term. This concludes my presentation. Thank you for your attention. Takehiko Tsutsui: Thank you very much Furukawa-san. In closing, I'd like to reflect on the materials we have shared with you today. Throughout its history, the JT Group has consistently invested in its businesses with a long-term perspective, always looking to the future. As a result, our business foundations have strengthened steadily and we have delivered record-high results in 2025, with a further increase expected in 2026. To ensure that this growth remains sustainable, under the Business Plan 2026, which we presented today, we intend to pursue our current resource allocation and shareholder return policies based on the JT Group purpose and the 4S model. We will continue making large-scale strategic investments, particularly in Heated Products. We are convinced that our strong brand equity cultivated through consistent investment, our well-balanced portfolio, supporting our pricing strategy, market share growth as well as the profitability improvement in RRP driven by expected top line growth will deliver high single-digit growth in consolidated AOP at constant currency. We will also continue to enhance shareholder returns in line with growth in net profit, underpinned by our underlying business growth. This concludes our presentation today. Thank you for your attention. Operator: [Operator Instructions] Let me introduce the speakers who will answer your question as follows: Mr. Takehiko Tsutsui, CEO of the JT Group. Mr. Hiromasa Furukawa, CFO of the JT Group; Mr. Eddy Pirard, CEO of JTI, Mr. Vassilis Vovos, CFO of JTI and Mr. Stefan Fitz, CCO of JTI. [Operator Instructions] The first question comes from Mizuho Securities. Mr. Saji. Hiroshi Saji: Mr. Tsutsui, congratulations on being assigned as CEO. So I would hope for more enhanced market communication going forward. So my question is towards Mr. Tsutsui. I would like you to really share with us what are the strengths and also the weakness of JT Group, especially vis-a-vis the global competitors. So we have the portfolio within the convertibles. And of course, within RRP, the Heated Products and Modern Oral. So there are difference in the portfolio. So how -- what are your thoughts on your current portfolio? And also in terms of the R&D and the governance system. So what are the strengths and also the weaknesses? And where exactly do you expect to exert your leadership and make some improvements? So that is a question to you. Unknown Executive: So related to the strengths and weaknesses of JT Group, Mr. Tsutsui would answer your question. Takehiko Tsutsui: Thank you very much for that question. So let me first talk about the strengths of JT Group. As you have seen with the results and the actual was in Combustibles. We continue to make growth investment. And because of that, we continue to exert the growth capability, and we continue to cherish that going forward. In addition to that, strategically, we have been investing in a different strategy, and that is true for RRP as well. So steadily, we have been making progress. So the fact that we have a clear strategy, that is another strength that we have for JT Group. Now in terms of somewhat of a weakness as you posed, if you look at the RRP, it may be easier for you to understand. So whenever we would need to launch the new businesses. Of course, prior to my current position, 6 years, I was working within JTI, and I have been in the leadership position. So given my experience, I believe we are still at the starting point in launching these new businesses. However, as we have already shown with you with the actual results, little by little, steadily, we have been launching the business. So Ploom AURA, that we have launched back in May last year, if you look at the actual, we do have the innovation capability built in. So since I became the President, what is the kind of leadership I would like to exert? That was another question you posed. So of course, we'd like to cherish the strengths that we've always had. And we would look into RRP and D-LAB as well. So we'd like to continuously challenge for new businesses in the long run. And we'd like to make sure that, that is connected to the growth engine. So we need to make sure that actual really reflects the growth engine that we have. So that is exactly what we'd like to focus on going forward. So there will be an upfront investment. Therefore, it is essential that we engage in close communication with you. And we would like to continuously execute the initiatives. We ask for your continued support. We do ask for your implementation and execution. So thank you. Operator: The next person is from Nomura Securities. Mr. Morita, over to you. Makoto Morita: Can you hear me? Unknown Executive: Yes, we can. Makoto Morita: This is Morita from Nomura Securities. Regarding growth investments, and some numbers around RRP, up until 2028, you are investing JPY 800 billion as advanced investments. That was the outlook you set forth. Up until now, turning the business profitable by 2028, we're in the markets you enter, raising the market share for RRP to about mid-teens is what you've been communicating. So can you take this opportunity to talk about the profitability of RRP as well as the target share you may have in mind if you have any updates associated with this? Unknown Executive: Regarding the question about RRP and business strategies, Mr. Tsutsui will take that question. Takehiko Tsutsui: Thank you for your question. For our ambitions, what's important here is that, this will be a passing point. Therefore, we would like to ensure we build a strong foundation. And as we communicated in today's presentation, after Combustibles, we would like to turn it into the second growth engine. Regarding forecasting of the RRP business. There is uncertainty associated with innovation. Therefore, there may be times when the timing is different from what we expect, more or less. However, on the other hand, likely been setting forth from the past regarding our ambitions, I would say we are broadly in line. As for investments, last year, we set forth JPY 650 billion. When you look at this annually, the latter half of the year, the pace of investments are increased. That was the case for last year. And for this fiscal year, we have set forth the number of JPY 800 billion. We would like to step up the pace of investments going forward. On the other hand, when it comes to this fiscal year and the investments we made, it wasn't really that much off of our expectations from last year. And when it comes to the investments we make. First, for RRP. It's still a new market that was established 10 years ago. So in this type of new market, innovation is extremely effective that is focused on the customer. Therefore, as we continue to make investments, we would like to ensure that we develop good products, and effectively deliver the innovation to the customers by making investments into marketing. So that will be approximately 80% of the JPY 800 billion. So, the reason why it costs so much money for marketing investments is because Combustibles is a mature market. However, in order to effectively reach customers, the way we do things need to be different. So customer acquisition as well as retaining customers are the areas where we are making advanced investments. For Japan, when it comes to innovation, RRP relevant marketing are in sync with each other right now. That is leading to the good performance. So Japan is a good example. And for this momentum, we're not just talking about 2028 in our ambitions, but we would like to accelerate our efforts looking out beyond 2028. That is our intention. And once we are able to make this growth definitive, we would like to also ensure that investments become more efficient, but at this point in time, the plan is one where investments will come in advance. So as we make these advanced investments, as explained in the presentation, high single-digit AOP at constant currency is what we believe we can achieve. Makoto Morita: [Interpreted] May I confirm one thing? So for RRP and the midterm ambitions, you were saying you were probably in line, but it's not that off. But up until 2020, you were saying that you would like to turn the business profitable. Do you mean that, that target is still in place? Or do you think -- are you trying to say that it's going to be beyond 2028? Takehiko Tsutsui: [Interpreted] Regarding the communication of becoming profitable in 2028, its marketing spend is deducted from gross margins. That's how we have been communicating. At this point in time, what I would like to stress is, directionally, we are moving towards that direction. Makoto Morita: [Interpreted] But is that going to be 2028 or 2029 or even 2027? Takehiko Tsutsui: [Interpreted] Due to the nature of innovation, there may be a chance that the time line may move. However, we are broadly in line towards that direction is what I -- what we have been able to confirm. So it's more of a directional comment. Makoto Morita: [Interpreted] I see. I guess, the goal is to turn the RRP business into your next growth driver. So you don't really have to collect on your investments that early. But I look forward to your future business. Operator: [Interpreted] The next question comes from JPMorgan Securities -- excuse me, Morgan Stanley MUFG Securities. Mr. Miyake, please. Haruka Miyake: [Interpreted] So this is Miyake for Morgan Stanley MUFG. So Ploom has been launched in various markets. You have already made the presentation. So as you switch to Ploom AURA then in other markets, do you expect to see acceleration of the market share? So could we actually confirm that? So there are some markets that have good response, maybe not as much. You mentioned that it is related to the competitive climate. But if you can also highlight on some of the different features of the different markets. That is the first question. Also, the potential for EVO. So it's grown about 20% in Japan. And in terms of overseas market, it is also a premium product. So would it potentially drive the profitability in the overseas as well. So those are the 2 questions. Operator: [Interpreted] So the question relates to Ploom AURA and also EVO, the Ploom performance. Mr. Tsutsui would answer. Takehiko Tsutsui: [Interpreted] I would like to answer your question. JTI participants may add on some information later. So first of all, about Ploom AURA. So as we launch outside of Japan, I'd like to share with you the current state. Last year, inclusive of Japan. We have launched it in 17 markets. That is last year. As of today, the number has increased to 19 markets. Now the feedback from the customers, the direction wise, it is quite similar. When you compare the feedback in Japan and also outside of Japan, in terms of the taste and also for the device design, those have been highly evaluated by the customers and consumers. Another point in the overseas market, the timing of launching the Ploom AURA. So in the past, we had Camel and Winston, the brands that were used for combustibles. And we have been launching sticks according to these brands. But this -- we took this opportunity to switch to EVO. And the switch has been successful without reducing the number of customers and even after switching to EVO. The customers have been quite forward-looking. They have been quite positive about AURA and EVO. That was the feedback that we received. Of course, in the respective markets, the impact of AURA and EVO, we are bound to see difference in the different markets. But the general direction is quite similar. When you compare the feedback that we've received in Japan as opposed to the international market. So any additions from the JTI participants? Operator: [Interpreted] JTI, would like to respond to that question? Hiromasa Furukawa: Yes. Ploom AURA has been launched in several markets, starting in quarter 4, 2025. And depending on the launch timing, we have different time lines to see the success. But as you have seen in Eddy's presentation, we have, in some of our markets like Poland, tripled our market share of certain share of segment versus the year before. Ploom AURA has been very well received by the consumers in the markets outside of Japan. The consumers like the functionality, the consumers like the taste. But of course, it is also important to state that we need to continuously work on our commercial engine to drive awareness, acquisition and retention. And Ploom AURA, which is newly launched in these markets, will help us to do this in 2026. Haruka Miyake: [Interpreted] This is related to the first part of the question. So as you intend to improve the profitability of RRP, so the awareness and retention would actually drive the efficiency of the marketing. And of course, you would have more volume increase. At the same time, portfolio, the mix within the stick, you would have more premiumization. Those are some of the impacts you expect to see. So when you look the next 3 to 5 years, what do you see as the biggest driver? Operator: [Interpreted] So this is a driver of RRP profitability question. Mr. Tsutsui would continue with this response. Takehiko Tsutsui: [Interpreted] In terms of the driver for the profitability, first thing first, we need to expand the number of consumers, customers, so basically increase the volume of the sticks, the sales of the sticks. We do believe this is the biggest driver. Also in terms of making the operation more efficient, those consumers who tried the Ploom, we need to make sure we need -- we can convert them, and so increases the percentage of conversion so they would enjoy Ploom on a regular basis. Those would be the second -- that will be the second driver. And 2 drivers would really drive the profitability going forward. Operator: [Interpreted] The next person is from Goldman Sachs, Japan. Mr. Miyazaki. Takashi Miyazaki: [Interpreted] This is Miyazaki from Goldman Sachs. For the Tobacco business, I would like to learn about the factors that will drive profit increases in 2026. In 2025, on Page 24, you show the factors of adjusted operating profit, compared to this, for 2026, can you walk us through what you are anticipating? I am sure that you will continue to do pricing, but compared to 2025, is the potential going to go down. And for others, that includes supply chain cost, how much of a negative impact should we account for? And for volume, I think you're assuming a slight decline. But is that fair to say, are you actually assuming a decline? So please confirm. Operator: [Interpreted] Regarding fiscal '26 factors in the Tobacco business, Mr. Furukawa will explain. Hiromasa Furukawa: [Interpreted] This is Furukawa. I would like to take that question. As you said in your question, when you look back at 2025, it was an extraordinary year. Based off that, regarding what we are assuming for fiscal '26, which I think you're trying to get at. Well, 2025 was a good year, but we believe AOP growth should be about 8.5% on a company-wide basis. That's what we are assuming for '26. From 2025, we saw fair momentum around the world in various markets, and we are confident about that to be ongoing. However, we also had the impact from acquiring Vector, which is going to become absent in 2026. But year-over-year investments in RRP is going to increase and expand. Regarding our volume assumptions that you were asking about, it's true that in 2025, Turkey, Philippines as well as in Russia, we saw some temporary factors, and therefore, industry volume was relatively strong. But we have been taking pricing strategies and taxes have been up. So, we will continue to focus on demand from customers so that we could take action appropriately. Whatever the case may be for the driver of sustainable JT Group growth will be looking at short-term delivery, but we will ensure that we grow the business over the medium to long term and expand profits. That is the basis of which we have formulated our management plan for 2026. JTI will also comment. Vassilis Vovos: Thank you. Let me add a few color a little bit of color on already the key point of the answer of Furukawa-san. And you very correctly mentioned that for next year, we expect pricing to continue to be a driver of our revenue growth. And as mentioned already in the presentation, 60% of our plant pricing for 2026 is already done. We have already taken pricing in significant markets like the U.S.A., the U.K., the Philippines, Turkey and a number of other markets. So we see pricing continuing to be a big feeder of our profit revenue growth and eventually profit growth, certainly. In addition to that, we see that, by the way as a sustainable driver of revenues, not only for '26, but also as we move into the other years, we think our brands as mentioned in the presentation of Eddy are very strong, are the top-growing brands in combustibles. They have a lot of equity, loyalty pricing power. So we expect to be able to continue taking pricing in the other years as well. That is one driver, of course, of our revenue growth algorithm. You correctly mentioned, we have an anticipation of a slight volume decline next year. So we don't expect in our key markets to see the same behavior of the industry size in '25, we had very strong industry size performance in markets like Russia, Turkey and others. But of course, the decline of our volume, which overall is mentioned between 1% and flat, is much lower than the overall industry decline because we are gaining market share. We gained market share in more than 60 markets this year. We expect this to continue as we go in '26. So the momentum will mitigate our market volumes slight decline. And then the profit generation comes from efficiencies, continuous focus on improving the profit margin. You saw a very impressive increase of the combustible profit margin in 2025, which was up 3.4 points. We will continue in this direction as we move into the future. We are focusing around fewer brands. Our GFBs are now 75% of our volume. That means we reduce proliferation of SKUs, and we harmonize a lot of input materials, we are having a focus on our end-to-end services, both in manufacturing and our shared services. And we also give very clear guidance to our markets in terms of mission. So we have market classification that is clearly allowing for markets to know what's the focus. Markets could be focused on earnings or earnings in shared market. That drives efficiencies also into the investments we are doing. All these elements will help us improve our profit margin even further as we go. And together with the increase of revenue driven by the resilience of volumes and the quality of pricing, this is the driver of the growth. And to that, of course, the significant increase of the volumes of heated tobacco products, a significant increase of the revenues that will come in the coming years. And the reduction of costs because of scale will further fuel the algorithm of growth in the outer years. Eddy Pirard: Can I add something? I would like to add a little comment on Furukawa-san's and Vassilis' comment. A lot has been talked about in terms of responsiveness on things that we do control. There's also another element, which has been highlighted before, sometimes markets develop in a certain way, the unpredictable and the uncontrollable. And what I think is a feature of our organization, of our business is that we have an embedded increasingly agile organization that can respond to surprises in a very speedy and efficient manner. And that will help in relative terms ensure that we do keep the momentum and that we position ourselves competitively in the best possible way. I think this is something that we don't often talk about, but we've been doing a lot of work over the years on trying to bring that agility by removing obstacles for speedy decision-making and agility in everything that we do. And I thought it was worthy to mention that as well. Operator: [Interpreted] We would like to move on to the next question. SMBC Nikko Securities. Mr. Furuta, please. Tsukasa Furuta: [Interpreted] This is Furuta from SMBC Nikko Securities. So I have a question to Mr. Tsutsui, the new President. So we have been involved in large-scale M&A inclusive of Gallaher. And also, you have alluded to M&A during your presentation. So what would be your target going forward? So I'd like to hear your thoughts. Would it be similar to something like Vector or would it be any -- something that would accelerate the growth of RRP? Operator: [Interpreted] This is a question related to M&A. Mr. Tsutsui would respond. Takehiko Tsutsui: [Interpreted] Thank you very much for that question. As I have mentioned within the presentation, M&A is a very effective initiative. So as we consider M&A, some of the important elements, M&A is definitely a means to grow. So to what direction and what we are going to grow, so depending on that, the attractiveness of the different deals may differ. So according to our objective, if there are opportunities, we would like to consider and explore the opportunity. So what are the different types of M&A you may ask? So in terms of combustibles. As Eddy mentioned in his presentation, as we consider and focus on ROI. We would look whether it would be instrumental in improving the ROI. And back in 2024, Vector Group was exactly it and meeting that objective. It was a very high-quality deal as we recall. So if there are more opportunities, we would definitely like to explore the possibility. Now in terms of RRP, because it is quite new in terms of characteristic, perhaps it is not so much of a large-sized M&A, but we'll be looking into more of an intellectual property or perhaps a new business model. So for instance, Flavour Warehouse in the U.K. We have forged a partnership with them or acquire them rather. So this sort of a new business model that could be another objective as well. Also, if there are some capabilities that are not fully operational within the group, we may also opt to acquire those as well. So those are some of the directions in terms of M&A. So depending on the objective, we will look around the world. And if there are opportunities, we would definitely like to look into those and look into possibilities. So JTI would also like to respond to that as well. Eddy Pirard: Thank you very much for the question Furuta-san. I can only support what Tsutsui-san has said. We are hungry for growth, but that comes with discipline, and a more complex environment that we have experienced maybe 10, 15 years ago because of the changing consumer desires and expectations. So it is a twin approach in a way, the combustible area where we've got a lot of confidence in the capabilities that we have to run these businesses. We never forget that M&A is not easy. Integration is hard work. But we understand profoundly what it takes to succeed in the combustible area. And in RRP, it's still relatively new, all things being considered. And so looking at innovative propositions for consumers, looking at intellectual property that can give us a bit of an edge in certain parts of the business is always something that we will keenly look at with the financial discipline that, of course, you would expect from us. Tsukasa Furuta: [Interpreted] Also, interest of the shareholders' return, I would like to ask about that. So as you continuously make gross investment, Also, if you can also -- the 75% of a dividend payout ratio, maybe it is somewhat lagging behind vis-a-vis the global peers. So how do you intend to strike the balance between gross investment as opposed to shareholders' return? Operator: [Interpreted] So this is the balance between investment and return? Mr. Tsutsui would like to respond. Takehiko Tsutsui: [Interpreted] Thank you very much for that question. 75% dividend payout ratio related to this point. So we are fully aware, but there are various benchmarks available in the world. But as far as we're concerned, we believe this is globally competitive. That is our understanding. And as you highlighted, in terms of gross investment, we put the top priority in the gross investment. So within that balance, 75% dividend payout ratio, we believe this is the optimal in terms of the balance. Of course, there are companies out there who are making far larger shareholders' return. And also the global peers, they have been looking into various return level and also different methods of return as well. We are fully aware of those. So just to reiterate, what would you like to stress here, is indeed gross investment really brought our group to the current state. That was the biggest driver that brought us to this very day. So back in 1999, Reynolds acquisition, in 2007, Gallaher acquisition. So these business investment have continued, and that is exactly why we have the performance as of today. And also, we have strong brand equity. The reason it is there because we have made investment in the past. And also, we've been able to capture the pricing opportunity precisely because of the strong brand equity. So I'd like to seek your understanding this gross investment will continue to be proactive, and that would continue to be high in our priority. And that will be continued going forward. And within that, of course, we would also intend to explore the competitive level of shareholders' return. And definitely, we'd like to keep that balance. Operator: [Interpreted] We are running out of time. So the next question will be the last question. From Daiwa Securities, Mr. Igarashi, over to you. Shun Igarashi: [Interpreted] I am Igarashi from Daiwa Securities. I'd like to ask a question about innovation in the RRP business. For Ploom AURA, since the launch, the device and the new sticks, it is penetrating the market in a very good way. In the future, I'm sure that new products will appear in the market and innovative products will probably increase. So for your company, I'm sure that highly functional devices will probably be an area that you're going to invest into for more innovation. Is that the case or no? Operator: [Interpreted] That was a question about RRP innovation. Mr. Tsutsui will take that question. Takehiko Tsutsui: [Interpreted] Thank you for your question. Regarding RRP innovation, last year in May, we launched Ploom AURA. And it's been a product that was well received from the customer base. So I am very pleased to see that. When we are developing such products, from the moment we are developing the product, we already are talking about making it better. In order to respond to customer expectations, we are creating a wish list in the innovation cycle and are generating a variety of ideas. So -- and even better product, we believe can be delivered to the customer in the future, Therefore, we would like to -- we do have a pipeline in place. Unfortunately, I am not able to share with you today. However, from the pipeline, we would like to ensure that highly positive impactful products for the customer and services can be developed, and we hope you look forward to it. Operator: [Interpreted] This concludes the results meeting for fiscal '25. Thank you very much for participating today. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Good morning, and welcome to NatWest Group's Full Year 2025 Results Management Presentation. Today's presentation will be presented by CEO, Paul Thwaite; and CFO, Katie Murray. After the presentation, we will take questions. Paul Thwaite: Good morning, and thank you for joining us today. As usual, I'm here with Katie, who will take you through the full year performance. After that, I'll talk about our strategy and our new 2028 targets. But first, let me start with an overview of 2025, a year in which we delivered another strong performance and made good progress on each of our strategic priorities. Highlights of the year include a return to private ownership in May, opening a new chapter for the bank with a focus on driving growth. Continued organic growth, together with successful completion of the Sainsbury's Bank transaction, improving operational leverage with a reduction in our cost income ratio of 4.8 percentage points, together with strong capital generation, enabling total distributions to shareholders of GBP 4.1 billion. You will also be aware that we announced the acquisition of the financial planning and investment firm, Evelyn Partners earlier this week, which I'll talk about later. So let's turn to the headlines. We added 1 million new customers during 2025, and delivered broad-based growth across all 3 businesses. Lending grew 5.6% to GBP 393 billion, deposits were up 2.4% to GBP 442 billion, and assets under management and administration increased 20% to GBP 58.5 billion. This activity resulted in strong income growth of 12% to GBP 16.4 billion. Costs grew 2% to GBP 8 billion, resulting in positive jaws of 10%. The cost income ratio reduced to 48.6%. This led to operating profit of GBP 7.7 billion and attributable profit of GBP 5.5 billion. Earnings per share grew 27% to 68p, dividends per share increased 51% to 32.5p, and tangible net asset value per share was up 17% to 384p. Our CET1 ratio was 14% and return on tangible equity was 19.2%. As you can see here, these results are even in line with or above our strengthened guidance. Our strong risk management is evidenced by a loan impairment rate of 16 basis points, and total distributions announced in 2025 of GBP 4.1 billion comprised buybacks of GBP 1.5 billion and dividends of GBP 2.6 billion, in line with our payout ratio of around 50%. This includes the buyback of GBP 750 million announced on Monday, along with our acquisition of Evelyn Partners. These results continue our track record of delivering value for shareholders. Over the past 4 years, earnings per share have more than doubled, growing at a rate of 26% a year, dividends per share have more than tripled, increasing at a rate of 33% a year and TNAV per share has grown 41% at a rate of 9% a year. At the same time, our share count has reduced from over 11 billion to just under 8 billion. Turning now to our 3 strategic priorities. I'll start with disciplined growth. We now serve over 20 million customers across our 3 businesses, and 2025 marks our 7th consecutive year of growing customer balances. In Retail Banking, our customer base increased by more than 5%, and customer assets and liabilities grew 4% to GBP 421 billion. This includes the addition of around 1 million new customer accounts from the Sainsbury's transaction, which contributed to our unsecured stock share growing from 6.4% to 7.2%, including an increase from 9.7% to 10.6% in credit cards. In Mortgages, we increased our flow share of first-time buyers from 10% to 12% and of the buy-to-let market from 3% to 6%. We are also extending our reach through NatWest Boxed, which provides embedded finance to companies such as The AA and Saga. In Private Banking and Wealth Management, over 50,000 customers invested with us for the first time in 2025. Net new flows to assets under management grew 41% and assets under management and administration increased 20% to GBP 58.5 billion. AUMA is now 49% of client assets and liabilities, up 4 percentage points on the prior year and customer assets and liabilities grew 10% to GBP 119 billion. In Commercial & Institutional, we extended our expertise in FX to a further 700 mid-market customers during the year. Many of them via online platform for FX, Agile Markets, where the number of users grew 13%. This contributed to FX revenue growth of around 20%. Lending balance growth was strong at 10% or GBP 14 billion. We lend GBP 4.6 billion to the U.K. social housing sector, where we reached our GBP 7.5 billion ambition ahead of schedule and have announced a new GBP 10 billion ambition to 2028. We are also the leading lender to U.K. infrastructure projects, and we delivered GBP 19 billion of climate and transition finance towards our 2030 target of GBP 200 billion, of which GBP 16 billion was in Commercial & Institutional. I'd like to turn now to our second strategic priority, bank-wide simplification. We continue to invest to improve customer experience and increase efficiency. During the year, we made gross cost savings of around GBP 600 million, which is over 7% of our 2024 cost base. And we created GBP 100 million of investment capacity in 2025 to reinvest and further accelerate our transformation. Taking a look at each business. In Retail Banking, our award-winning app has a Net Promoter Score of 51. And as we continue to invest to improve customer experience, we launched more than 100 new features during the year. We also launched generative AI enhancements in our digital assistant, Cora. As a result, the number of queries that can be resolved has increased by 20 percentage points. The cost/income ratio in Retail Banking decreased from 50% to 45%. In Private Banking and Wealth Management, we doubled the number of enhancements on the app, increasing our rating on the App Store to 4.4 and our Net Promoter Score to 54, up from 50 at our spotlight last June. In addition, we are leveraging group capabilities to simplify our operations. For example, we rehosted our core banking platform from Switzerland to the group data center in the U.K. and we are co-locating our people with other NatWest teams. So we are relocating our tech team from Switzerland to the U.K. and India. The cost income ratio in Private Banking and Wealth Management reduced 10 percentage points to 64%. In Commercial mid-market banking, we are investing in our digital platform, Bankline to give customers a single point of access to a wide range of products. We have now integrated our asset finance, invoice finance, payments, commercial cards, FX and trade platforms within Bankline, and customers access products via Bankline around 300,000 times last year. We also took steps to reduce our legal entities and branches in Europe. The cost income ratio in Commercial & Institutional reduced from 52% to 49%. Turning now to our third strategic priority, managing capital and risk. We generated 252 basis points of capital during the year, supported by reducing RWAs by GBP 10.9 billion through capital management. This includes 5 significant risk transfers in Commercial & Institutional and a GBP 2 billion mortgage securitization in Retail Banking. We have a high-quality lending book in all 3 businesses with a low level of impairment at 16 basis points of loans. And all this enables us to recycle capital into areas where we have chosen to grow. The successful implementation of our strategy gives us the ability to invest in the business, support customer growth and deliver attractive returns to shareholders. As I mentioned earlier, we have announced total distributions of GBP 4.1 billion for 2025, representing 75% of attributable profit. With that, I'd like to hand over to Katie to take you through our financial performance. Katie Murray: Thank you, Paul. I'll start with our performance for the full year, where, as Paul said, we have either met or exceeded our third quarter guidance. Income, excluding all notable items, was up 12% at GBP 16.4 billion. Total income included GBP 241 million of notable items. Total operating expenses were 1.4% higher at GBP 8.3 billion and the impairment charge was GBP 671 million or 16 basis points of loans. Taken together, this delivered operating profit before tax of GBP 7.7 billion and profit attributable to ordinary shareholders of GBP 5.5 billion. Our return on tangible equity was 19.2%. Turning now to the fourth quarter compared with the third. Income, excluding all notable items, was up 2.5% at GBP 4.3 billion. Operating expenses were GBP 2.2 billion, including the annual bank levy. The impairment charge was GBP 136 million or 13 basis points of loans, bringing operating profit before tax to GBP 1.9 billion. Profit attributable to ordinary shareholders was GBP 1.4 billion. Our return on tangible equity was 18.3%. Turning now to income. Full year income, excluding notable items of GBP 16.4 billion exceeded our guidance of around 16.3%. Across the 3 businesses, income grew by GBP 1.8 billion. This was largely driven by higher net interest income as balance sheet growth and the benefits of the structural hedge more than offset the impact of the Bank of England rate cuts. Net interest margin was up 21 basis points to 234 basis points, mainly due to deposit growth, coupled with margin expansion. Noninterest income grew 1.3%, reflecting solid customer activity as we supported their investment, FX and capital requirements. Turning to the fourth quarter. Income, excluding notable items, grew 2.5% to GBP 4.3 billion. Across our 3 businesses, income increased by 2.8% or GBP 116 million. Net interest income grew 4.5% or GBP 148 million, reflecting the trend over the year or volume growth alongside margin expansion. As a result, net interest margin was up 8 basis points to 245 basis points. Noninterest income across the 3 businesses was down 3.7%, mainly driven by Commercial & Institutional, reflecting typical seasonality after a strong third quarter. Turning to 2026 guidance, which excludes the impact of Evelyn Partners. We expect income, excluding notable items, to be within a range of GBP 17.2 billion to GBP 17.6 billion, and our current forecast is within this range. Turning to growth. As you heard from Paul, our 3 businesses have a strong track record of growth over the last 7 years. We have grown customer lending at 4.5% a year. This includes broad-based organic growth as well as acquisitions, which support scale and underweight areas such as mortgages and unsecured lending. Customer deposits have grown 3.9% a year supported by a boost during COVID as well as new propositions and an improved digital offering. AUMAs have grown at 12% a year and have more than doubled since 2018. These 3 elements together make up customer assets and liabilities, or CAL, which has grown at 4.6% a year. We focus on this metric as it reflects the breadth of balance sheet solutions we offer to meet customer needs. This track record gives us confidence that we can continue to grow CAL in the future, and Paul will talk more about our 2028 target shortly. Let me take you through the last year for each of these elements in turn. We delivered another year of strong lending growth. Gross loans to customers across our 3 businesses increased 5.6% or GBP 20.9 billion to GBP 392.7 billion. There was broad-based growth across Mortgages as we increase our flow share of the first-time buyer and buy-to-let markets with strong retention as well as new business flows. Unsecured lending growth was supported by the addition of Sainsbury's Bank balances and the first full year of our personal loans offering for the whole of market. In Commercial & Institutional, we grew in all 3 businesses with lending up GBP 14 billion or 10% excluding the repayment of government loan schemes. This reflects our leading position as the U.K.'s biggest bank for business with growth across social housing, residential commercial real estate, infrastructure, project finance and fund lending. I'll now turn to deposits. Customer deposits across our 3 businesses increased 2.4% to GBP 442 billion with a stable mix throughout the year. Retail Banking deposits increased GBP 7.8 billion or 4%, reflecting growth in savings and current account balances, supported by balances acquired from Sainsbury's Bank. This includes growth in the fourth quarter of GBP 6.8 billion, reflecting strong growth in savings of GBP 6.4 billion, supported by our limited edition Saver and term products and growth in our current accounts of GBP 0.4 billion. Private Banking and Wealth Management increased by GBP 300 million in 2025, also reflecting growth in current accounts and saving balances with progress driven by both deeper engagement with our existing customers and new customer acquisition. And C&I deposits increased GBP 2.3 billion, reflecting growth within large corporates and business banking. Moving now to assets under management. We are pleased to see the plans we talked about at the June spotlight delivering for our customers and shareholders. AUMAs increased almost 20% this year to GBP 58.5 billion and net flows of GBP 4.6 billion were up 44%. Fee income from higher AUMAs grew 11% to GBP 300 million. Moving now to the continued tailwind from our structural hedge. As you will be aware, in addition to our product structural hedge, we also have a longer duration equity structural hedge. Together, they are GBP 198 billion in size, GBP 4 billion higher than last year, and are an important driver of income growth. In 2025, product hedge income was GBP 4.2 billion, this is GBP 1.2 billion higher than the previous year and GBP 3.2 billion higher than 2021. Our equity hedge income was almost GBP 500 million which is around GBP 50 million higher than the previous year and around 25% more than 2021. The yield on both hedges has increased significantly over the last few years as interest rates rose. This slide shows our expectation for future yield progression based on our current macroeconomic assumptions and hedge durations together with associated income growth. We expect yield to increase from 2.4% in 2025 to around 3.1% in 2026, with further increases thereafter. Our illustration here assumes steadily increasing average notional balances for both the product and equity hedges, driven by growth in CAL and higher levels of capital held to support that growth. This expectation of increasing yield and notional balances drives higher annual income through to 2030. We are sharing our expectations for this year and next as more of the near-term income growth is locked in. We expect 2026 total hedge income to be around GBP 1.5 billion higher than 2025 and for 2027 to be around GBP 1 billion higher than 2026, reaching total income of around GBP 7.2 billion. Exactly how this develops will be subject to the prevailing reinvestment rates each year as well as the composition of growth in CAL. Turning now to costs. Other operating expenses were GBP 8.1 billion, including onetime integration costs of GBP 96 million, in line with our guidance. We are pleased with our delivery of around GBP 600 million of gross cost savings, which has allowed us to invest in business growth and accelerate our simplification program. Costs grew 1.8% if you exclude onetime integration costs. Our cost income ratio reduced to 4.8 percentage points to 48.6%. In 2026, we expect other operating expenses to be around GBP 8.2 billion. Staff costs will be a key driver of overall cost growth. We also made significant investment in the business each year with a range of initiatives to drive operating leverage. We expect further supplier contract inflation and increased business transformation costs this year. Delivery of around GBP 8.2 billion in 2026 will be supported by another year of significant gross cost savings. Turning now to our updated macro assumptions. Our base case outlook for the macro environment in 2026 assumes moderate growth, slightly lower than our previous year. The unemployment rate increased slightly above our expectation for 2025 and we now expect this to peak in 2026 at levels we are comfortable with in terms of lending risk appetite. We also expect inflation to come down at a slightly faster pace given the most recent print. And we expect lower rates reaching a terminal bank rate of 3.25% by the end of 2026. Our balance sheet remains well provisioned with expected credit loss of GBP 3.6 billion and ECL coverage of 83 basis points. We are comfortable with 1.1% of Stage 3 loans, which is down on the prior year, reflecting management actions in our personal portfolio, together with lower defaults in our nonpersonal portfolios. Our remaining post model adjustments for economic uncertainty are GBP 246 million, broadly stable in the third quarter. We will continue to assess these provisions each quarter and release as appropriate. Our latest scenarios also show that even if we were to give 100% weight to our moderate downside scenario, this would increase Stage 1 and 2 ECL by GBP 54 million. I'd like to turn now to the impairment charge for the year. Our prime loan book is well diversified and continues to perform well. We're reporting a net impairment charge of GBP 671 million, equivalent to 16 basis points of loans. There were no significant signs of stress across our 3 businesses and impairment levels across our products have performed broadly in line with our expectations. In 2026, we expect our loan impairment rate to be below 25 basis points. This guidance is not dependent upon post-model adjustment releases or any material shift in risk appetite. It's simply a reflection of normalization in impairments and lower one-off releases as well as growth in the book and ongoing changes in the mix. Turning now to capital. We ended the year with a Common Equity Tier 1 ratio of 14%, up 40 basis points on last year. In 2025, very strong capital generation of 252 basis points took our CET1 ratio before distributions to 16.1%. Distributions accounted for 213 basis points of capital, including accruals for our ordinary dividend payout of around 50% and our buyback of GBP 750 million that we announced on Monday. Risk-weighted assets increased by GBP 10.1 billion to GBP 193.3 billion, within our guided range. GBP 3.8 billion of higher operational risk-weighted assets includes GBP 1.6 billion in the fourth quarter as we brought forward our annual operational risk recalculation from the first quarter in 2026. You should now expect us to include this in the fourth quarter each year. GBP 11.1 billion of business movements broadly reflects our lending growth across the year. This was largely offset by a GBP 10.9 billion reduction from RWA management, including GBP 5.7 billion in the fourth quarter. So in essence, our actions this year have funded the growth in our lending book. Other movements include GBP 7.3 billion from CRD IV model inflation, of which GBP 4.8 billion was in the fourth quarter. We think we are now largely done, so we await PRA approval of our models. There was also GBP 1.2 billion of other risks and FX movements. Going forward, we expect a further impact on RWAs with the implementation of Basel 3.1 in January 2027. Based on our latest recalibration of a higher balance sheet, we currently expect this to increase RWAs by around GBP 10 billion. The majority of the RWA uplift from Basel 3.1 is due to operational risk and the removal of the SME and infrastructure support factors. We do expect an offset in our Pillar 2 requirements at the same time for these elements, but the net result will still require us to hold a higher nominal amount of CET1 given the offsets are at a total capital level. We also expect future growth to consume more capital in the form of RWAs. Despite this, we are confident in our ability to continue generating strong capital from earnings and to manage risk-weighted assets, and we are guiding to capital generation of around 200 basis points before distributions in 2026. Turning now to our CET1 ratio. Our CET1 target of 13% to 14% has been in place since 2019. As you know, we've been actively looking at this over the last year or so. Today, our minimum CET1 requirement stands at 11.6%. And as you know, there are no changes to the capital requirements in the latest FTC review. So our supervisory minimum remains 11.6%. And we expect this to reduce further with the implementation of Basel 3.1 next year with a reduction in our Pillar 2 requirement, as I just mentioned. Today, we are holding considerably more capital despite derisking. The successful restructuring of the bank is evident from the consistent and material improvement in our Bank of England Stress Test results. The performance of the business has materially improved, and we have demonstrated a track record of strong earnings, high capital generation and returns. So as a result of all of these considerations and taking into account the views of stakeholders, including investors, rating agencies and regulators, we are reducing our CET1 target to around 13%. This represents a healthy buffer over our MDA and supervisory minimum requirements and also reflects the expected reduction in Pillar 2 requirements on the 1st of January 2027. Turning now to our acquisition of Evelyn Partners. As we outlined on Monday, we see a strong strategic rationale for this acquisition. It brings GBP 69 billion of AUMA scaling our Private Banking and Wealth Management to 20% of group CAL, a third growth engine for the group. It increases fee income by almost 20% on Day 1. And ultimately, it makes us a faster-growing, higher-returning bank with higher distribution capacity for shareholders. Operationally, it is deliverable; culturally, we are aligned and financially, it delivers for shareholders. So let me show you how we expect to deliver a return on invested capital above that generated by our share buyback by year 3 after completion. We provided you with Evelyn Partners, 2025 income, costs and earnings before interest, tax depreciation and amortization, or EBITDA. Revenue synergies include bringing Evelyn Partners a broad range of financial planning and Wealth Management solutions to all our customers, enhancing our D2C investment offering via BestInvest, leveraging Evelyn Partners technology for portfolio management solutions and providing Evelyn Partners customers with our full range of banking solutions and combined wealth management offering. The business has grown AUMA at more than 7% a year for the last 2 years and bringing the combined capabilities to our customer base of more than GBP 20 million is a significant opportunity to create value. The benefit of being part of NatWest Group should deliver income greater than GBP 700 million. We expect to realize around GBP 100 million of cost synergies by removing duplication in shared services and technology applications. where there is high alignment between our platforms as well as efficiencies of scale. The cost to achieve of approximately GBP 150 million will be phased over 3 years. This means we expect costs to fall in absolute terms to less than GBP 300 million by year 3. Together, this drives EBITDA of around GBP 400 million. When assessing the transaction, we look at the returns accruing to capital. In other words, the return on invested capital. We do not include the amortization of purchased intangibles since amortization does not flow through to capital and does not impact our distribution capacity to shareholders. The cost of intangibles are taken in the day 1 impact of around 130 basis points on the CET1 ratio. Amortization is included in return on tangible equity. This is a capital-light business with very high returns on tangible equity, clearly accretive to the group in year 1 and beyond. Beyond year 3, we see further improvement in returns, driven by compounding net new money growth, driving higher assets under management and ultimately, stronger income growth. Turning now to returns. This shows the drivers of return on tangible equity in 2026. The notable items in 2025 income and tax credits, which together account for around 1.3 percentage points of RoTE. Clearly, the year-on-year change in some P&L lines will impact RoTE more than others with income growth being the biggest driver. Naturally, the level of return will also be impacted by growth in the denominator average tangible equity. This will be driven by earnings, balance sheet growth and further unwind of the cash flow hedge reserve. Overall, in 2026, we expect to deliver a return on tangible equity of greater than 17%. So to summarize our guidance. Excluding the impact of Evelyn Partners acquisition in 2026, we expect income, excluding notable items, to be in the range of GBP 17.2 million to GBP 17.6 billion, other operating expenses to be around GBP 8.2 billion, the loan impairment rate to be below 25 basis points, capital generation before distributions of around 200 basis points and a return on tangible equity greater than 17%. With that, I'll hand back to Paul. Thank you. Paul Thwaite: Thank you, Katie. So you've heard about our guidance for 2026. I'm now going to talk about our plans for the next 3 years and 2028 targets, which include the impact of the Evelyn Partners acquisition. You will be familiar with this slide, as you've heard about each 1 of our 3 businesses over the past year in our investor spotlights. We are building on strong foundations with a customer base of more than 20 million and leading positions in each of our businesses, all of which deliver attractive returns. Our Retail Bank has a track record of growing share profitably, with an opportunity to align areas such as mortgages, savings and unsecured lending more closely with our 16.5% share in current accounts. Private Banking and Wealth Management is a leading private bank with a strong brand and acts as a center for excellence within the group for investment products and solutions. With the acquisition of Evelyn Partners, a market-leading financial planning and investment management firm, we are creating the U.K.'s leading Private Bank and Wealth Manager. The combination increases assets under management and administration to GBP 127 billion and CAL to GBP 188 billion. It both transforms the scale of the business and the breadth of our financial planning and investment offering to meet more customers' needs across the group, further accelerating growth in assets under management. Commercial & Institutional is the U.K.'s biggest bank for business with a 25% share of deposits and 20% share of lending. We are a leading bank for start-ups in the U.K. with the largest presence in the mid-market sector where we see significant opportunity. The scale and strength of our customer franchise gives us a strong base to build on with plenty of capacity for further growth. We believe the macro economy in the U.K. provides a supportive environment, consumers in aggregate are managing well. You can see here that households are paying down debt and savings rates are high. Despite a challenging environment, particularly for sectors such as retail and hospitality, U.K. corporates are delevering and investments is steadily increasing. In addition, there are reasons to feel confident about the broader economy. In the housing market, interest rates are coming down, the government have set ambitious building targets and is committed to investing in social housing. There is a huge shift of generational wealth to younger generations underway. Whilst the FCA's advised guidance boundary review opens up an opportunity for thousands of people who currently receive no financial advice. And the U.K. is home to high-growth sectors and businesses with an innovation sector that is growing faster than the U.K. economy. It's against this backdrop that we have been thinking about our strategy and 2028 targets. Our strong performance in recent years demonstrates that our strategy is working. However, we review it on an ongoing basis and have refined our 3 priorities as we raise our ambition for the bank and target a 2028 return on tangible equity greater than 18%. So let me talk about each priority in turn. We remain committed to pursuing disciplined growth with an emphasis on returns. First, by focusing on key customer segments; second, by making it easier for customers to engage with us; and third, by broadening our propositions to ensure we serve more customers' needs. Our second priority has evolved to become leveraging simplification, reflecting the advances and progress we have made. We will continue to invest, in particular, in AI to drive growth, improve productivity and enhance the customer experience. And we will continue to manage our balance sheet and risk well by redeploying capital to drive returns and by putting a greater emphasis on dynamic pricing as we increase our speed and agility with more advanced data and analytics. The purpose of these priorities is to deliver growth at attractive returns for shareholders. Our increased ambition on returns is underpinned by 3 new targets growing customer assets and liabilities at an annual rate greater than 4% from 2025 to 2028, reducing our 2028 cost-income ratio to below 45% and generating more than 200 basis points of capital before distributions, whilst operating with a CET1 ratio of around 13%. These targets take into account the acquisition of Evelyn Partners. So let me talk more about how we aim to achieve this, starting with disciplined growth. In Retail Banking, our focus is on youth families and the affluent segment. In the youth market, we are building on the success of our RoosterMoney app, which has grown its customer base 15x to well over 0.5 million. We bank 1 in 3 families in the U.K. and want to build on connections within families and households through savings and mortgage relationships, for example. We also have a clear opportunity to grow in the affluent segments. We have around 1.2 million affluent customers in the Retail Bank, yet just 0.5 million use our premier proposition. So our aim is to grow our premier customer base to 1 million and travel the number of Retail customers who choose to invest with us. The Evelyn Partners acquisition will help accelerate the delivery of this ambition. It both enhances our direct-to-consumer investment platform with BestInvest and broadens our financial planning and investment offering. Private Banking and Wealth Management aims to increase the number of clients with more than 3 million of assets and liabilities by more than 20%. This will be supported by trebling the number of referrals from Commercial & Institutional. In Commercial & Institutional we want to remain the leading bank for U.K. startups and for the commercial mid-market. We serve over 1 in 4 businesses in the mid-market segment, businesses that are growing at a higher rate than the U.K. economy. We have an unparalleled presence across the U.K., enabling us to build deep relationships based on strong local and sector knowledge and we are building on our position as a leading lender to U.K. infrastructure and U.K. social housing as well as our strength in trade and climate and transition finance. Our second lever to deliver growth is making it easier for our customers to engage with us by combining our best technology with the support of our people. In Retail, most customers bank digitally but we also have over 1,000 personal bankers and relationship managers with a 24-hour call service for premier customers. Private Banking and Wealth Management has 250 advisers and specialists in Coutts, together with an award-winning app supported by Coutts 24, which answers calls 24 hours a day. Evelyn Partners adds 270 financial planners, 325 specialist investment managers and its own direct-to-consumer investment platform, BestInvest. Again, it combines expert, personal service with digital excellence. Commercial & Institutional has a digital platform bank line, an unparalleled network of around 1,000 relationship managers in commercial mid-market banking and a network of 12 accelerator hubs around the U.K. to help entrepreneurs grow and scale their businesses. We continue to invest in enhancing the digital experience for customers as technology advances and expectations evolve. For example, we are transforming our digital assistant, Cora by deploying generative AI so that it can resolve more complex customer needs. We are moving our data onto a single platform to deliver more personalized propositions. And in Commercial & Institutional we are investing GBP 100 million over several years to transform Bankline into a state-of-the-art digital platform giving business customers a single point of access to many of our products and services. Ultimately, we want a joined-up experience, which adds value for the customer however they choose to engage with us. We also want to meet more customers' needs by broadening our offering. For Retail Banking, this includes areas like home buying with more support for first-time buyers with family backed and shared ownership mortgages, offering more flexible savings accounts, developing tailored propositions for premier customers and entering point-of-sale lending. Private Banking and Wealth Management is primarily focused on investments. We are broadening our investment proposition to attract both high net worth clients and customers in the retail bank. We are preparing our response to the FCA's recommendation for targeted support following their advice guidance boundary review and we are broadening our deposit offering. In Commercial & Institutional we see the U.K. innovation economy as a key opportunity. Last year, we created a dedicated venture banking team to support innovative venture back scale-ups and we opened new business accelerators last year with 4 leading universities, which acts as incubator with a plan to expand this to 10 over the next 2 years. By continuing to deliver disciplined growth, our aim is to grow customer assets and liabilities across our 3 businesses at a rate greater than 4% a year, equivalent to more than GBP 120 billion of balance sheet growth by 2028. This will be a mix of broad-based lending growth, higher customer deposits and strong growth in assets under management and administration. We have already demonstrated our track record of growth. Retail Banking makes up 44% of our customer assets and liabilities, where we have grown more than 5% a year over the past 7 years. Private Banking and Wealth Management is currently 13% of CAL with a strong growth rate of 8.3%. This will grow to around 20% of CAL with the inclusion of Evelyn Partners and Commercial & Institutional represents 37% of CAL with a growth rate close to 3%. Moving on now to our second strategic priority, leveraging simplification where I'll start with architecture and data. We expect to drive a further GBP 100 million of investment capacity in 2026 by leveraging technology together with further streamlining our processes and governance. We have already made significant progress simplifying our systems and reducing duplication. For example, we decommissioned 200 business applications across the group last year, and we successfully migrated 1 million customers from Sainsbury's Bank covering multiple products. Last year, we announced the collaboration with Amazon Web Services to accelerate our data, analytic and AI capabilities. This collaboration will give us a single view of each customer's relationship with the bank as well as the tools to analyze data and enrich our customer understanding. Deployment of AI is not only helping us to automate routine work such as call summarization, it is also helping our coders to be more productive. Over 12,000 software engineers are now able to use AI assistance to generate code. This transformation has enabled us to improve the deployment frequency of updates across the group by more than 4x since 2021 and more than trebled the new features on our commercial banking digital platform Bankline. This investment is also increasing our operational resilience. We have reduced the number of critical incidents from 9 in 2021 to 1 last year. Our ambition is to become the leading bank delivering personalized customer propositions powered by the responsible deployment of agentic AI. So we are building out our capabilities across the bank. Last year, we set up an AI research office focused on improving customer experience and efficiency by accelerating the use of AI in fields such as multi biometrics, audio-visual conversational AI using proprietary small language models and ensuring algorithmic furnace as well as data safety. This shift to a agentic AI marks a transition from simple chatbots to autonomous systems that can execute complex banking workflows on behalf of our customers. By prioritizing these capabilities, we can move beyond basic automation towards a simpler, data-driven experience that meets rapidly evolving customer expectations. Many of the building blocks that will make this vision a reality will go live this year. This quarter, our customers will be able to ask questions about their recent spending in their own words on their app. And later this year, we will launch voice-to-voice conversations and more agentic fraud support. By delivering income growth ahead of cost growth, we expect to reduce our cost income ratio below 45% by 2028. Our track record of tight cost control gives us competitive advantage as it enables further growth. So our ambition is to strengthen our position as the most efficient large bank in the U.K. Turning now to our third strategic priority, active balance sheet and risk management. The strength of our capital funding and liquidity position provides significant opportunity to deliver continued balance sheet growth, together with attractive sustainable returns for shareholders, whilst operating with a CET1 ratio of around 13%. Our loan-to-deposit ratio of 88%, demonstrates the strength of our 3 businesses and our capacity to deliver material lending growth to support our customers and the U.K. economy. We continue to recycle in efficient lower returning capital into attractive growth areas to drive higher returns, and we have been active in significant risk transfers and credit risk insurance to increase capital efficiency. You can also expect to see a greater emphasis on the use of advanced data analytics to drive faster pricing, credit and asset enablement decisions. In addition, data analytics will help us manage risk dynamically, whilst optimizing risk-adjusted returns. We will continue to deliver our through-the-cycle cost of risk of 20 to 30 basis points aligned with our risk appetite. And we also want to maintain our market-leading position in customer fraud prevention with multi-biometric authentication. Our aim in pursuing disciplined growth, leveraging simplification and managing capital and risk is to drive strong growth and returns for shareholders. Given our strong track record of delivery, we are raising our future ambitions. So let me sum up with our 2028 targets. We aim to grow customer assets and liabilities at a rate greater than 4% a year as we continue to drive disciplined growth. We are targeting a cost income ratio below 45% as we drive positive operating leverage and we aim to generate more than 200 basis points of capital before distributions, whilst operating with a CET1 ratio of around 13%. Strong capital generation gives us the ability to support customer growth, invest in the business and deliver attractive returns to shareholders. We are targeting a return on tangible equity greater than 18% in 2028, and we expect to maintain our dividend payout ratio of 50% with scope for surplus capital to be returned via buybacks. Thank you very much. We'll open it up now for questions. Operator: [Operator Instructions] Our first question today comes from Sheel Shah from JPMorgan. Sheel Shah: I've got two, please. Firstly, on costs. The GBP 600 million of cost saves that you've seen in 2025, could you talk about where that's come from? And how we should think about the level of cost saves coming in 2026, particularly with regards to some of the technology developments that you've spoken about? And should we be thinking about a cost growth towards the out years of around sort of a 2% level going forward? And then secondly, in terms of the greater than 4% customer assets and liabilities target, I was wondering if you can disaggregate this across the divisions? And maybe more specifically, would you expect all of the business areas to be at this target level? And maybe sort of pointing up the corporate business here. Looking at that, it is slightly below target in recent years. So I'm just wondering whether you expect a pickup in this business. Paul Thwaite: Thanks, Sheel. I appreciate it. So, Katie, I'll talk generally about cost, you maybe want to come in around the outer years on cost and then I'll cover the CAL piece as well. So Sheel, on the -- first of all, I'd say we're very pleased with the momentum in the cost line. Obviously, nearly 5% reduction in the cost/income ratio this year. That's 20% plus over the last 4 years. So it feels like we've got a really good flywheel going in terms of driving out efficiencies and productivity in the business, reinvesting some of that capacity but making the bank more productive and more efficient going forward. In terms of your question around what levers are we pulling. It's a really broad range of levers, I would say. A key part of it is the kind of historic and current tech investment. That's driving a lot more digitization, automation. We continue to decommission a lot of applications. We've consolidated a lot of platforms. So that's really helping. We've also become a lot more efficient in how we do change. We talk about that in the presentation, GBP 100 million of benefits. In effect, we can do more change at lower cost, which is great for the customer, but also great for the cost outlook. And we're also continuing to simplify the business more generally, Sheel. So property consolidation would be one organizational simplification, legal entities, et cetera. So there's a whole range of costs -- a whole range of levers. And that's why for '28, we've said less than 45%, but we still -- and we see opportunity beyond that because we're very comfortable that this flywheel is heading in the right direction. Katie? Katie Murray: Sure. Thanks very much. So look, Sheel, as I look to it, obviously, operating costs GBP 8.2 billion for next year, it's very much as Paul says, it's the ongoing cost savings that we have, the higher investment spend on data and tech and the kind of -- as well as the higher business transformations and the benefits that we're seeing on that. We do expect -- you would be surprised to hear me say to continue our really cost tight management as we go out into 2028 and really ensure that we're getting the benefits of that investment spend and that they are realized. We do expect positive jaws in each year. We've brought in the cost/income ratio target of below 45% versus the very strong 48.6% we've already printed for 2025. That target does include the cost and, of course, income from Evelyn Partners, including our ongoing investment in that business. And I would say, if I had to look beyond 2028, I would expect to see further improvement in that ratio from here as well. So as ever, a very tight cost picture. Paul Thwaite: Great. Thanks, Katie. And then, Sheel, on your second broader question around CAL or customer assets and liabilities. We're not going to give you the exact -- and you probably don't expect it, the exact kind of split of growth. But what I'd encourage you to think about is we're very confident about growing across all aspects of CAL, lending, deposits, assets under management. Given it's a 3-year cycle, we're going to push hard to grow where the opportunities present themselves. Obviously, the environment will change. So different opportunities will be attractive at different times. I do think it's reasonable to expect that some areas will grow faster than others. If you look -- as you alluded to, if you look at our growth over the last couple of years, assets under management have typically grown at a higher CAGR. So 12% on average over the last 7 years. Evelyn will obviously accelerate that given the compound growth in that business of 7%. On lending, I'd say a broader picture, Sheel, very confident we captured -- I mean, historically, NatWest is a lending and credit franchise, and we can capture demand when it's there. So I'd expect lending growth across mortgages and retail, unsecured, but also, as you can see the growth in the Commercial & Institutional lending book in '25, GBP 14 billion, up 10% up. So we're not going to give you the breakdown, but I would plan across both lending, deposits and AUMA, and we're very confident that it will be greater than the 4% each year target for '28. Operator: Our next question comes from Benjamin Caven-Roberts of Goldman Sachs International. Benjamin Caven-Roberts: So I just wanted to ask a first one on profitability and a second 1 on the hedge. So if we look at the 19% return on tangible in 2025, I know there were a few factors which helped that result, including very low impairments, strong markets results, higher average bank base rate than likely in future years and a slightly lower effective tax rate than is modeled by consensus for the medium term. But aside from those, what would you call out as factors that you might see as being less favorable year-on-year in 2026? All elements of conservatism that effectively contributes to the sequential decline in RoTE on the lower end of your 2026 guidance. Put differently, is it fair to think of underlying RoTE as continuing to go up from here? And then secondly, on the hedge tailwinds through to 2030, has anything changed in the structure, duration or notional assumptions of the hedge to facilitate that very strong uplift in '26 and '27 and then the continued uplift through to 2030? Paul Thwaite: Thanks, Ben. Katie, do you want to take either order? Katie Murray: Yes. No, absolutely. So I'll start off with RoTE. So obviously, looking to our RoTE guidance of greater than 17% in 2026, you can see that we've got a record of high teens percent returns in there. So I wouldn't get too focused on the underlying versus this and that kind of coming in. We're very confident on delivering on this guidance. We did have a little bit of a boost in the year, but things come in at different points. I think the important thing to remember is that we will continue to build capital both through this year as we get to the end of 2026 with Basel 3.1 coming in on January 1. That's the next GBP 10 billion of regulatory capital along there. And then alongside our P&L guidance, you should expect that average growth coming through on the tangible equity as well, which kind of is what pulls your RoTE back a little bit. It's important not to forget that. We're obviously, also, guiding you on the strong capital generation that we can see coming through and there will be the movement during the year of 130 bps as we have CET1 coming in. But overall, I guess as I look at the number, there's not one thing I would say, look at that as a negative or a drag particularly, but I would encourage you to think of CAL growth and how it feeds through to the TNAV growth. If I then kind of take you on to the hedge in terms of where we are and then kind of how it's kind of structuring as we go forward from here. Look, when we look at the hedge, there's a number of different things that we kind of bring into that. One of the debates we've been having is around the hedge duration and what we've been looking at. We are very stable at 2.8 years. It's important to reflect -- to remember that, that reflects the product hedge at 2.5 years and the equity hedge at 5 years, which puts obviously 5 and 10 in kind of duration. We spend a lot of time looking at the behavioral life of different deposit types, different cohorts across the deposit franchise of our 3 businesses. We're very happy to see the deposit stability and the growth over this last year. We look obviously backwards, but we also look forward in terms of what we're expecting there. We give consideration of how things might evolve in the future as we go forward from here. So conversations, you'd expect us to be having around things like digital currencies, stablecoins, tokenized deposits as well, of course, the absolute competition that we see in this market. We continue to dynamically monitor that and assess that over time and how we reinvest the hedge at the different lifetimes. And I think the other thing that's important, that I'm not sure you all think about enough as well as also the relative size of both of those hedges in terms of how they sit and what that then does to your kind of this averaging out of the age of the hedge. I'd say one thing in addition, we do review our hedging instruments as gilts have repriced, we have actively been reinvesting our maturing 10-year swaps into 10-year gilts, which provides a pickup in yield that increased -- that contributed about GBP 50 million additional income from the equity hedge in 2025. Very comfortable with the approach we have which is kind of mechanistic and we talk about it is that a lot. It has a huge amount of thought that goes into the background to make sure we deliver the really quality returns that you see coming from this hedge year after year. Operator: Our next question comes from Robert Noble of Deutsche Bank. Robert Noble: On Evelyn, did you look at anything else in the space as a potential acquisition? There are a list of wealth managers that trade at lower multiples. So what makes this specific one worth of premium compared to others? If I could ask about AI as well, there's been a route in the market this week and wealth managers and then more generally across the last kind of few months. Could you talk specifically about the risks from AI in this space? And then if we could broaden it out to traditional banking, what risk do you see from AI on deposit spreads, particular or any other material risk you see in banking from AI as well? Paul Thwaite: Thanks, Rob. So we got Evelyn, AI and Wealth and then more broadly on I guess, AI impact on banking. Okay. To the first question, as you'd expect, Rob, we monitor a number of participants and actually have done for a number of years. As you alluded to, there's private entities, there's listed entities, there's different business models. In terms of Evelyn, we absolutely thought it was the right fit for NatWest, very strategic acquisition, creating one fell swoop, the #1 combined private bank and wealth manager in the U.K. It transforms our wealth business, increases the scale of 2x from an assets under management perspective. And most importantly, or as importantly, brings key capabilities that will complement our proposition a direct-to-consumer platform, BestInvest, the largest employed financial adviser network in the U.K. and a broad suite of investment products and propositions. So it was the combination of the scale, Rob, but also the capabilities that it brings. And it positions us, I think, excellently, for what is obviously going to be a growth area over both the short, medium and long term. We know that customer demand is increasing around financial planning, financial advice. As you see intergenerational wealth transfer that's only going to increase. I think it's an area that's going to be amplified by tech and AI, and I'll come back to that because I think it's going to make advice more accessible and more affordable. And it's obvious we have regular -- helpful regulatory tailwinds as well, whether that's the FDA's advice, guidance and boundary review, whether it's the targeted support developments, which will drive advice to more people that start in April. So for us, it felt like the right partner, the right capabilities, creating a really substantial private bank and wealth management to complement the #1 business bank we have. In terms of the broader picture on AI and Wealth Management, that's been on our minds for banking. It's been on our eyes -- it's obviously been on our minds in the context of Wealth as we thought about the Wealth space over the last couple of years. I actually think the winners in the Wealth space in respect of AI will be those who have scale and have data. When you think about 20 million customers that NatWest has, that's 200x the times of Evelyn. So the ability to use that scale and data, I think AI is a big accelerant and opportunity. Secondly, what all the customer research and customer insight tells us, both independent and our own is that the winning combination is going to be a combination of I guess, AI-driven digital wealth advice, but also expertise through humans and people for those big financial decisions, the complex aspects of financial planning. So to me, you bring both together, you see AI really helping us get closer to our existing customers in the wealth space, which is great, but also access new customers at relatively low marginal cost. But then combined from a hybrid perspective with excellent advisers for the more complex financial needs. So that's how we think about it. So we have -- net-net, we think AI will be an accelerant and a winner and will be a winner in terms of our wealth aspirations. And we think the customer need is really this hybrid need. And then more generally on AI, I mean, it's already affecting the sector. We've embraced it. That's from a colleague perspective and a customer perspective. I think it's going to change how customers engage with us or how they find us and discover us. I think what it plays to is, again, my point around scale. I think the winners here will be those who've got significant sized customer bases, 20 million for us, a long-standing relationships data. So you can bring products, propositions whether directly to your own channels or through other channels. I think that is going to be successful. And we're very thoughtful about that in terms of how we're building our capabilities. I hope that gives you a quite a big picture on all those big topics. Thanks, Rob. Operator: Our next question comes from Amit Goel of Mediobanca. Amit Goel: So the first question is just on the broader capital generation targets. So one is more -- well, part of it is just a clarification. When we talk about the circa 200 bps for 2026, I guess does that exclude the Basel 3.1 effect, which comes 1st of Jan '27, or is that in there? And more broadly, just looking at the 2028 capital generation target, greater than 200 bps, just curious, it seems to be on the low side, especially if I think about the kind of RoTE target, greater than 18%. So just if you can talk to your ability to meet or beat or how you reconcile to? And then just the second question, just a shorter follow-up. But, when we talk about the circa 13%, CET1 target going forward, is that a level where you'd be happy to operate one quarter or the other quarter with 12% kind of handle starting point? Or is it basically you'll look to be at 13% plus throughout your kind of operating period on a quarterly basis? Paul Thwaite: Thanks, Amit. So let me knock 2 of them off pretty quickly. So on the cap generation, yes, it excludes the 1st Jan '27 increases from Basel 3. So hopefully, that gives you the clarity there. We've also said that we believe that will be around circa GBP 10 billion. So x is the answer there. On the third question or the kind of sub question on CET1 and 13%, obviously, we've been thinking about that for a couple of years. It's around 13%. So the way I would think about it is it's not a hard floor. So that's the way to think about it. And then on the broader question of '28 and capital generation. A couple of things. One is, it's important to remember it's on a growing balance sheet, so it includes the growth that we've talked about. So please bear that in mind. And I guess just a bit of context. Obviously, you can see 19% RoTE this year. You can see the capital generation at above 250 basis points. That's our third year of greater than 17% RoTE. It's on a balance sheet that continues to grow to the compound rate, and you need to bear that in mind when you think about capital generation going forward. And that obviously flows through to EPS, DPS and higher TNAV per share. So that's how I would think about that. And as ever, we're very clear. Our target is you can see how we position our targets. The intention for '28 is to be greater than 200 basis points. Hopefully, it gives you a good picture. Operator: Our next question comes from Christopher Cant of Autonomous. Christopher Cant: If I could ask one on RWAs, please. So really pleasing to hear the detail around how you're expecting to grow. I think that's an important part of the story. But obviously, you're now talking about this CAL concept for growth, which makes it quite hard for us to think about the capital intensity of growth. Obviously, capital intensity of AUMA or deposits within that number quite different to lending growth given us this new guide on the Basel 4 RWA impact, which I think is probably a bit above where consensus was. So if I could just invite you to comment on the consensus RWA expectations. I think we're at GBP 223 billion in 2028. That would be appreciated just so we can sort of understand how you're thinking about the RWA piece of the puzzle? And then on rates assumptions, please. Your base rate assumption is 3.25% flat, Fair enough as a planning assumption. Could I just understand what reinvestment rates you're assuming on the hedge within those gross income increments you've given us, given the flat base rate assumption, I assume you're assuming a fairly lift swaps curve or a reasonably low reinvestment rate? Paul Thwaite: Very clear, Chris. Thanks, Katie. Katie Murray: Sure. Thanks very much. So if I deal first of all, you kind RWA outlook kind of point. I guess, as we look ahead, 2026 has obviously been underpinned by the disciplined balance sheet growth that we've got, the increasing regulatory clarity as well as the kind of further active kind of management, but the primary driver will be the lending growth. One of the slides we have included in the appendix pack is, I think, on Slide 57, a bit of a detail on risk density to show you that the risk density of lending is stable. However, the volume will increase. So therefore, your volume of RWAs will follow through in that. And so you need to kind of bear that in mind as you go through. There could still be a couple of small additional impacts from CRD IV in 2026, we think that's largely done. But obviously, our models are in that final stage of the PRA and there can be a little bit of movement as you get them kind of finalized. I would also expect to see some further RWA management. I would say we've had a really stellar year this year on RWA management, so I wouldn't necessarily put that number into your model at quite that kind of high level, but it's something you will continue to see as we move forward from here. And then if I go to the hedge and in terms of that kind of reinvestment yield that we see, look, as you know, we talk a lot about the tailwind that's coming through on the hedge. And if I look at our current economic assumptions, there's in the -- of the 5-year average of reinvestment rates, 3.5% in terms of the product hedge and the 10-year gilt reinvestment rate of 4.5% over the next 5 years. So we do expect that hedge to deliver on an annual year-on-year tailwind into 2030. The second thing you need to think about as well is not just those rates, but also the size of the hedge. We are assuming an increasing notional balance coming through. So we're GBP 190 billion in 2025. We expect that to grow to GBP 200 billion in 2026. And then I expect it to grow steadily as we move forward to 2030, supported by that CAL growth. Obviously, some of that will be going into the hedge eligible deposits and others will be into the increasing size of the equity hedge. Chris, if you were starting with me to probably say, those rates feel a little bit low. If I were to mark them today, they'd be a little bit higher, That's a fair statement, and I kind of accept that. However, I, kind of sitting where we are today, am comfortable with the rates for our base assumption. We'll see that as it comes through. But overall, we are really confident of this tailwind that we see coming through on the hedge in the next couple of years, but also all the way out to 2030. Thanks very much, Chris. Operator: Our next question comes from James Invine of Rothschild & Co Redburn. James Frederick Invine: I've got a couple, please. The first is on the guidance. I mean, if we -- sorry, the revenue guidance that is. So if we start with your GBP 16.4 billion revenue that you printed for last year, you guided to the hedge being an extra GBP 1.5 billion, so we're up to GBP 17.9 billion. There's decent balance sheet growth. So that's another tailwind for that. I know you've talked about Bank of England rate cuts. But I think from what I can see, the second one only comes right at the end of the year. So I was just wondering what are the headwinds you've got kind of factored into the 2026 revenue growth, please? And then the second one is just on costs. So Paul, I think on one of your slides, you talked about doubling the number of coders to 12,000, but also the AI is now writing about 1/3 of their code. So from here, what are you expecting for where that number of coders needs to go? I can see reasons for why it might go up a lot, but also why it might come down a lot. So I'm just wondering what your view is, please? Paul Thwaite: Great. Thank you, James. Do you want to take income '26? Katie Murray: Yes, sure, let me kick off. Thanks, James. So as we look at that kind of guidance, GBP 17.2 billion to GBP 17.6 billion, we're very confident on it. We will deliver in that range. And if you look at it, what we will be delivering as a kind of 5% to 7% top line growth. So very good. Let me help you a little bit with your math. And there's a couple of things in there. First of all, and the most important thing in reality is customer activity. And where we kind of land in that range is going to be very dependent upon that kind of activity, I would say. But we have a strong multiyear track record of growth. You can see the growth that we're talking about this morning, what we've delivered in 2025, we would expect that to continue as we move into 2026. So, obviously, the mix will ultimately contribute into the income contribution. You're aware, we may talk about it more this morning as well, a little bit of pressure that there is on mortgage margins at the moment. We talked about that in Q3. And there's also some continuing competitive pricing going on in the savings products. The second bit is on rates. 2 rate cuts, they're actually penciled in my forecast in April and October. So Q2 and Q4 as they come through. So they will have a little bit of an impact. However, I think you've also got to remember that we're not at the start of the rate cutting journey. We're quite some way through it. So if you think of our sensitivity, we give you, we give you year 1, we give a year 2 and year 3. The way I think about that number, it's a kind of negative GBP 500 million against that positive of the hedge coming through because you've just got the cumulative effect of those rates coming through. So I would bring that in. And the third thing I would think about -- you heard me talk already about the RWA management action. They do come at a cost. And as I look into 2026 numbers, I would say the cost -- additional cost of the RWA actions that we've done would be an extra kind of GBP 100 million as well. So I would take that off. And that will get you very nicely into the range that we're talking to you about the GBP 17.2 billion to GBP 17.6 billion and it's -- we're very confident that we're going to be able to deliver that. So thanks, James. Hopefully, that helps. Paul, so I hand back to you. Paul Thwaite: Thanks, Katie. Shifting gear to quite a different topic. I guess, engineering and productivity of software engineering, James, is something we spend a lot of time on as a management team. It's definitely a topic du jour. And it's pretty obvious the AI developments have been transformational for us. All our engineering and coding teams have got access to AI tools. As you alluded to, we have around 12,000 engineers and that's been increasing over a number of years. But now we're at a situation where circa 35% of the code is written by AI. So I think over time, there will be choices around how you use that capacity. I think it's still an evolving picture. We've got a couple of quite exciting pilots running in 2 of our businesses in our international business and also in our financial crime area, where we're, I guess, what we call doing fully agentic press play software, and that's actually delivering 10x productivity gains. So that's where you've got agentic workflows, autonomous agents, their planning, building code, testing code, but obviously then overseen in a responsible way by human. So this space is, I think, exploding pretty quickly. And I think it's inevitable there'll be a change both in the profile of, let's call it, engineers in terms of the activities that they do. And then I think there'll be some choices about how you capture that productivity benefit to capture some of it to go faster, deliver more products and services to your clients and enhance the customer proposition. Or do you also see opportunities for -- we also see opportunities for productivity and efficiency. And I think all of the things being equal, that's a reasonable expectation over the short to medium term, that there'll be some productivity and efficiency opportunities moving forward. Hopefully, that gives you a flavor for it. But very excited by the work that's going on there. But we are very mindful that we're a regulated industry, and we're doing it in a very responsible and thoughtful way. Thanks, James. Operator: Our next question comes from Aman Rakkar of Barclays. Aman Rakkar: I had a question actually back on Evelyn. So, yes, I guess the market reaction to Evelyn has been what it is and coming in the backdrop of broader cross currents. But the feedback I've been getting is around potential execution risk around the deal. So I was kind of interested in your take around your comfortability, your confidence in your ability to kind of integrate this business and also extract value from it. If you could bring a bit more to life around perhaps the revenue synergy that the degree of confidence that you have that in 2 years' time will give me looking back and think there's a good deal. And the kind of related question is a repeat of a question from earlier this week. But could you -- can you help us with your assumptions around attrition? I think that is essentially a key unknown variable here. How are you thinking about attrition risk in the investment practitioners? And what kind of strategic actions are you going to have to take to ensure that your staff, but also your customers kind of don't leave. If you could help us with that, I think it would really help. Paul Thwaite: Great. Thank you, Aman. So let's start with integration. And then I'll come on to revenue synergies, and then we'll talk a little bit around, I guess, the value creation and ensuring we retain both critical people, but also customers. On integration, very high confidence, Aman. We've known the business and tracked the business for a number of years. We know people -- obviously, we know people in the business. So we know Evelyn very well. We've undertook quite extensive due diligence around it, whether that's the tech platforms, whether that's the cultural alignment. There's been a lot of investment since the, I guess, original combination of the business in 2020 into the tech capabilities. We've seen that, to all intents and purposes, the tech end of integration is complete. The benefits of those investments are actually now coming through for Evelyn. There's a lot of congruence and alignment between the underlying platforms that our acute business uses and Evelyn uses, that gives us confidence about we know the platforms, we know the systems. We have experts on both sides of the transaction who know those platforms and systems. So we feel very confident about that. And what we also have on both sides of this transaction, we have experienced people who have done M&A transactions and integrations. We've got our very recent experience and the team still on the park around the Sainsbury's acquisition. We've complemented that over the course of the last 12 months with individuals who've been involved in some really significant FS M&A activity over the course of the last 12 months. Obviously, given Evelyn's history, they've built experience there as well, having to integrate different businesses. So we feel we feel pretty confident around that, what I call that alignment around integration and the ability net-net to create a lot of value out of that. So that's integration, high conviction, high confidence. On revenue synergies, I guess we could talk a long time about that. Big picture, though, I think the really critical thing to remember here is there's a really big opportunity in helping a lot more people to save and invest for the future. We've got these regulatory tailwinds, which you know about the financial advice gap. And we also know that in the wealth industry, despite the historic kind of cautious investment culture, we've seen mid- to high single-digit growth in AUM. If you look at our own business, we've seen 12% compound growth in assets under management. If you look at our 2025 performance, 20% growth in AUMA, net new money of 8.4%. So that's the big picture that gives us, I guess, a sense of confidence. If you look at the drivers of income growth, you look at Evelyn's track record, over 7% since 2023 in terms of AUMA growth. And then on top of that, we've got the revenue synergies. So where do they come from? Three big opportunities, BestInvest, it's a really significant upgrade to our NatWest Invest digital platform. We have the opportunity to bring that to life for our 1.2 million premier customers and our 19 million, 20 million customers in Retail. The breadth of the BestInvest offering versus our current offering is incomparable. At the moment, NatWest Invest has 5 funds. We've got 3,000 products with BestInvest, 19 funds versus 5 funds, access to U.S. equities, U.K. equities, ETFs, investment trusts plus we have a relationship with those 19 million customers and the ability to surface these opportunities through the app. So that's the first big kind of, I'd say, opportunity. Then you look at the excellence that Evelyn has in terms -- and the scale it has in terms of financial planning and the biggest adviser -- employed adviser network in the country. Again, we can bring that to our 1.2 million premier customers. We can bring that to our high net worth customers in Coutts. Again, the breadth of the proposition really adds to, I guess, the wealth water front that we have in our Coutts business, and 2x in terms of our Premier business. And then the third synergy is, obviously, if you look at what Coutts size, you look what NatWest has, we have a range of banking products, lending and banking that we can bring and support Evelyn clients with. So, you don't have to make very -- when you work it through, as I'm sure you have a month. You don't have to make very big assumptions to see where the opportunities are, both in the underlying growth rate of the business but also in the revenue synergies and opportunities that there are, and that's why we're very high conviction on this from a strategic perspective and very high conviction that the value creation in both the short term and long term will be significant. Thanks, Aman. Operator: Our next question comes from Jonathan Pierce of Jefferies. Jonathan Richard Pierce: Two questions, please. Apologies if I missed an answer on this already. I had a few issues this morning. The first is on tangible equity. Really looking at consensus out to 2028. There's lots of moving parts I guess, here versus what consensus might have been thinking before. So Evelyn sit down, lack of buybacks, push it back up, you're now talking about a bit more growth than people had in. The GBP 33.4 billion of average tangible equity consensus has in '28. How are you thinking about that? Is that an appropriate number to be applying the greater than 18% to? Or could that be a bit higher than that? That's the first question. The second question is on the hedge. Can I just confirm and I heard correctly on the equity hedge that you're now showing the income from the equity hedge as though it was invested in 10-year gilts rather than 10-year swaps. Is that obviously is going to give you a better yield and a better tailwind than if it was swaps. And you've obviously dropped the disclosure on the maturity yield on the product hedge. Just want to get a sense as to what that is in 2028, please, because obviously, the notional is growing, that all else equaled that the hedge income is going to grow, but I'm not sure that is a sort of underlying feature. What's the maturity yields, please, on the product hedge in 2028? Paul Thwaite: Thanks, Jonathan. Katie? Katie Murray: Sure. Thanks very much, Jonathan. So as we look, first of all, at the kind of the TNAV question, I think it's been -- it's important to look at the kind of T, the Evelyn versus share buyback and things of that, even with the capital allocation conversation as far as we're talking about in terms of TNAV. So it actually has no impact on your 2028 TNAV. And by that, I mean, if we haven't done Evelyn, we distributed the capital because our belief is to access your capital to you. So it was already out of that TNAV calculation. When you think of the TNAV, it's really CAL you've got to think about and within there, obviously specifically loan growth. There's a little bit of unwind of the cash flow hedge. But if you think of our loan growth that we've done over the last number of years, we're always -- we've been consistently above 4% within there. I could use that as a good proxy for TNAV if I were you. So therefore, I would say as I look at my number versus your number, I try not to compare myself to consensus, I would probably guide you to that 4% a little bit and kind of lift up a little bit as you go through. I know you're absolutely right as well if I move on to the hedge. We have over this last -- well, as we look as part of our kind of management of the hedge to sort of say where our opportunities. And so we have moved some of our equity hedge into gilts and because we felt we were getting a better return there and we can absolutely see that return coming through in terms of the extra GBP 50 million that we report within there. The equity hedge is GBP 25 billion in size. It's not by any means all in gilt, something we've just started to do relatively recently. And -- but we'll continue to -- we expect to continue that move as we see the kind of gilt return being a bit better than the swap return. We're not particularly constrained on the size of that. I would discourage you from saying, although start to do that on the credit hedge, the product hedge we won't just because it's a very different beast. We've got a lot of natural kind of product offset that we see within there, but it definitely is helpful to us in terms of that delivery. And Jonathan, I'm going to disappoint you a little bit and not give you the numbers, I've chosen not to disclose this morning. But you can sort of see that what we have given you is that combined yield. We've also given you the numbers as we go through. I know that one of the questions that has been going around is around actually that redemption yield and what it looks like specifically in 2028. So if I look at the kind of 2028 redemption yield for the structural hedge, it is slightly below 4%. Currently, we do see '28 as a kind of peak and it's always a favorite analyst term, the kind of peak redemption yield level, but we see that falling then into '29 and '30. I would say it's the only year that we do see the redemption yield being above our reinvestment yield. And the difference is probably 30 to 40 bps on that number. However, I think really importantly, there is a reason that we don't worry about this. It's more than offset by the compounding benefit of the hedge reinvestment over 2026 and 2027 and of course, the expected increase in our hedge nominal over the period, again, in line with our CAL guidance. And that's just why we are really comfortable about this annual income tailwind that we see through to 2030. I hope that helps you without giving you the exact numbers you're maybe searching for. Operator: Our next question comes from Guy Stebbings from BNP Paribas. Guy Stebbings: The first one was going back to the income guide for '26, but refocusing on net interest income. I mean, I appreciate you don't split out the guidance as such. But if we think about noninterest income perhaps broadly similar to '25, maybe a bit of growth as per consensus sort of ballpark 3.6%, then it looks like you're thinking about an NII around GBP 13.6 billion to GBP 13.9 billion. Q4, you're already sort of annualizing within that range. So I just want to check, is that the right way to think about it, and you're not really anticipating a lot of NII growth versus the Q4 annualized run rate and the rate cuts, I guess, lost NII from SRTs or mortgage return could almost be offset the hedge and volume growth, still a touch conservative. I just want to check my thinking there. And then on rate sensitivity. You're now talking to an increase to GBP 157 million on the managed margin sensitivity. I think that's 30% to 60% deposit pass-through. I appreciate the capacity reasons, you're not going to say exactly what you're assuming in the future, but maybe you can talk about how that's trended in particular in terms of the December rate cut. And I'm not sure, Katie, you mentioned something about a buildup of rate sensitivity as time progresses. I wasn't sure if that was sort of related to this point or something else. So perhaps you could elaborate. Katie Murray: If I miss any of them, Guy, do come back and forgive me. So I guess, as we look at the income guide, first -- my first guidance would be, and you've heard say before try to look at the 3 businesses. You remember that in the center, we've had a lot of sort of movement between noninterest income and NII. And that kind of -- if you just take the total NII that does kind of confused it a little bit. We talked a little bit about Q3 that we put in some hedge accounting to help resolve that. And what you will see as we go through the next few quarters as you won't see those big flips kind of going from NII to non-NII which is why I would say, really look at the 3 businesses. We are confident on the momentum that we see in the underlying customer activity and the underlying momentum we have in the business. But we would not -- we would expect to see noninterest income across the 3 businesses growing into 2026 from here as well. If I look then to the rate sensitivity, we've issued new ones today. The change in the amount is very much reflective of the sort of the size of the balance sheet as well. We work on a 60% pass-through. I would say broadly, when you look across a number of rate cuts, we're definitely -- we're in that sort of space as we come through from there. So that's not particularly changed. And I think that's a good proxy for you to continue to work on. And then I think your last point was very much around the income, and you've got this -- what's happening on the rate sensitivity. So if you look to 2026 income, what we've got is the impact of the rate cuts that we had in 2025, you will now have a full annual impact of those. And then I've also got 2 rate cuts in 2026. April, October, as I said earlier, when I look at those and kind of do my kind of math on them, I kind of see them as a drag of GBP 500 million, against the kind of income numbers that we've got through there. Obviously, going against the hedge, which is adding GBP 1.5 billion. So still strong growth, but that's why we're talking about in that part. It wasn't specifically on pass-through and things like that or our traditional rate sensitivity disclosure. Hope that helps. And I think I got all. Paul Thwaite: Hopefully we captured everything there, Guy. Operator: Our last question today comes from Ed Firth from KBW. Edward Hugo Firth: I had two questions. One was on detail. You mentioned that one of the reasons for the, I guess, reasonably cautious income expectations from '26 was the cost of capital actions. I'm just wondering if you could give us roughly some idea of what quantum you're assuming that, because obviously that was a big driver of risk-weighted assets from '25 would be helpful. And to get a guide for '26 if that would be helpful. And then I guess the second question was, you are interacting with a lot of banks, when we look at up in your AI slides and the tech slides and lot to talk about 10x productivity and massive production of that. And yet, when I look at the cost expectations for the sector as a whole, the actual efficiency improvements in terms of cost to loans, cost of risk weight now barely moved in the last 4 or 5 years. And expectations are to be barely moving going forward as well, a few basis points here and there. And so I mean, are we going to get this to a quantum shift in the cost of delivering banking that we're talking? And I mean not just like inflation above like in theory, the unit cost of delivery in banking products should go down massively with a digital delivery. And yes, we don't ever seem to be seeing -- and so I'm just wondering, you're thinking, is there a time like post '28 where we can suddenly see this transformation? Or do we have to accept -- but actually, you're just replacing cheap brand staff with expensive software engineers. Katie Murray: Can I take the first? Paul Thwaite: Do you want take -- Katie, quickly do income, and then I'll give my thesis on efficiency. Katie Murray: Yes, thanks, Paul. So you'd expect me to say this, I would say to you that our 2026 income guidance is certainly very reasonable and not cautious. I think I've given you the maths and all the building blocks as to how you can see that. In terms of the specific question on the cost of the capital actions, what I said earlier is you should think in your model of a negative GBP 100 million in 2026 in terms of that additional cost. They make great sense to do. You can see that we actually, in effect, paid for all of our lending with those capital actions, and that's taking off lower performing capital and replacing it with higher performing. So we're really pleased with the performance of the business on that piece. But think of it as an additional GBP 100 million. And Paul, would you like to... Edward Hugo Firth: Sorry. Katie, in terms of risk-weighted assets, what sort of reduction do you get to that GBP 100 million? Katie Murray: So in terms of that, so I think the numbers that it's GBP 10.9 billion was what we took off this year. I'm struggling to remember the number from the previous year, but, I think it was around GBP 7 billion. And that's the kind of level that we've seen. What you -- those are multiyear transactions. So some of that risk-weighted assets started to roll into 2026. Obviously, there's a little bit of unwind within the year, and then we'll do some further transactions in the year as well. Paul Thwaite: Thanks, Katie. And then, Ed, on your -- I guess, your question around, I guess, unit cost of our assets that as different to or versus cost income ratio. That's actually that's because of management team we spend time on because we do think that's a very valuable and useful ends. I think the -- you can see by the numbers we've shared today. The cost income ratio has come down -- part of that is income going up. But the reality is the absolute cost base has gone up a little bit, well below inflation, well below wage inflation. The targets we've set out imply less than 45%. That makes us the most efficient large U.K. bank. So by definition, our expectations are that costs will continue to be continue to be well managed. And I've signaled today. I think Katie said it as well, and we see opportunity beyond '28 to go beyond that. I do think that genuinely is a significant change going on, where you can see a business model and operating model that operates at a much lower cost base with a higher income base that drives obviously with greater returns on equity, but also, we'll start to see the unit cost over assets because you've got the growth coming through reduced as well. Time will tell where that plays out. But I think what we've laid out today. And I do believe we've got this flywheel of kind of cost efficiencies going well. Time will tell, but I do think we've got very good momentum in terms of improving the underlying kind of unit cost base of the bank. So as you say, I mean we'll get there, but that's how I think about it. We use both lenses. Thanks, Ed. Operator: Thank you for your questions today. I will now like to hand back to Paul for closing comments. Paul Thwaite: Yes, that seems to go quickly. So thank you, everybody, for joining us for the second time this week. As you've heard, we've delivered a very strong performance in 2025, continuing our track record of growth on both sides of the balance sheet and fees. Very attractive returns for shareholders. Our total distributions for the year were GBP 4.1 billion. That includes the GBP 750 million share buyback we announced on Monday alongside the acquisition of Evelyn Partners. That creates the U.K.'s leading private bank and wealth manager, we're very excited by that because it gives us another growth engine for the group. So hopefully, you've seen from today's numbers, we're ambitious for the business. We've set out new targets and we're determined to deliver returns greater than 18% in 2028. Thank you. Have a good weekend. Operator: That concludes today's presentation. Thank you for your participation. You may now disconnect.
After a positive jobs report for 2026, the CPI inflation report further confirms that this year is indeed on to a good start. Both the headline and core inflation levels indicate that PCE inflation is set to undershoot the Fed's projections, giving more room for a rate cut going forward.
Investors will get a better read on the health of consumers as Walmart reports its first quarterly results under its new CEO on Thursday.
Valuations have risen for many semiconductor-equipment producers — but some are still relatively cheap.
The core PCE inflation is expected to spike by 0.4% MoM in December, which would challenge the CPI disinflationary theme. The 2025 Q4 GDP is expected to slow to 3%, with a more significant slowdown in December, which could extend to Q1 2026.
Despite strong gains this year, Samsung Electronics and SK Hynix shares are even less expensive than their U.S. counterparts.
New Fed governor Stephen Miran signals shift from data-dependent monetary policy as Kevin Warsh's nomination stalls amid political turmoil at the central bank.
By Kevin Flanagan Key Takeaways Kevin Warsh's nomination for Fed Chairman initially reassured bond markets by offering a known, crisis-tested Fed veteran with a reputation as an inflation hawk, reducing uncertainty at a critical juncture for monetary policy.