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Operator: Good afternoon, and welcome to the Tracsis Plc Final Results Investor Presentation. Today, we are joined by David Frost, CEO; and Andy Kelly, CFO. [Operator Instructions] I'll now hand over to David to begin the presentation. Thank you. David Frost: Yes. Thank you, Harry, and welcome, everybody. We appreciate you joining us today. It's a real pleasure to be here and presenting to most of you for the first time. Next slide. So on to the agenda. Andy and I will start by walking you through a review of performance in FY '25, and we'll then talk about the strategic direction, the growth opportunities and the outlook for Tracsis in FY '26 and beyond before we move on to take questions from you. Next slide. So just to set the scene from myself, a few key messages for FY '25. Firstly, performance improved in the second half, which meant we were able to deliver full year results that were in line with the revised guidance that we gave back in April. As part of that, we resolved the profitability issues in Traffic Data & Events, and we entered the new financial year in a much stronger position as a result of that. Secondly, we made good progress in the areas that matter most for the long-term success of the business. Recurring revenues are an important focus area for us, and they continue to grow at a healthy rate. We won new strategic multiyear contracts, both in pay-as-you-go and also in GeoIntelligence, which will support future revenue growth. And we also completed the transformation of our operating model, bringing the Rail Technology & Services division under a single global leadership while investing into next-generation product platforms, which we'll come on to later in the presentation. Market-wise, we continue to see uncertainty in U.K. rail, which looks very likely to persist through FY '26. Control Period 7 funding remains constrained, and the proposed renationalization of the train operating companies alongside the creation of Great British Railways is having a negative impact on procurement timelines. While the recently announced railways bill is a step forward, there is still a long way to go before GBR is fully up and running. So we cannot control the timetable, but Tracsis continues to be well positioned to help deliver the government's long-term strategic vision for the future of the U.K. railway. In our planning for FY '26, we had anticipated that these headwinds in the U.K. would continue. And so our expectations for the full year are unchanged and consistent with market expectations. In the immediate future, we are focused on building on our H2 performance with a major emphasis on execution. In parallel, we have a clear and focused strategy for driving longer-term growth and margin accretion. We will share more later in the presentation, there's no real change in direction, it's more about building on foundations and tightening up on how we put the strategy into action. Next slide. Before we go into the detail of the presentation, I thought it was appropriate to share and reflect on my first 100 days with the business. My first observation is that the fundamentals of the group remain really strong. Tracsis has a combination of market-leading technologies and deep domain expertise that differentiate us in the attractive transport end markets that we serve. We're continuing to win new strategic contracts and embed long-term customer relationships, which in turn support growing levels of annual recurring revenue. And the progress we've made in organizational transformation means we're now ideally placed to deliver our near-term priorities while positioning the business for future growth. Those near-term priorities are really clear for us. The leadership transition has been completed smoothly with a structured handover from my predecessor, Chris Barnes. There have been no other changes to the senior leadership team, and we are now focused on continuing to build organizational capability to support both FY '26 operational delivery and our longer-term growth ambitions. It's all about progressing the drivers of organic growth transformation, building the pipeline of future opportunity, investing in SaaS-native products and increasing penetration in international markets in a very disciplined way. We continue to believe that North America offers a significant long-term opportunity for the group. I have actually been there twice during my first few months and have met with customers, industry leaders and railroad CEOs while spending time with the Tracsis team in the region. It's pretty clear to me that we have a high-quality, well-differentiated profit -- product offering in North America with our PTC-enabled train dispatch software. The deployment with Northern Indiana that was completed in September of 2024 is operating well. And from my recent conversation with other railroad leaders, it's clear there's a healthy pipeline of opportunities across passenger, freight and industrial operators with the industry actively looking for credible new technology providers. It's no secret that our progress in winning new opportunities has been slower than we anticipated, but procurement timelines can be lengthy. Behind the scenes, the team have been working hard to build and progress our pipeline. We do need to remain patient, but I firmly believe North America is a key growth opportunity for us. And finally, we're continuing to review our portfolio alignment, something I know many investors are interested in. And to be clear, M&A remains very much a key component of our growth strategy and something that we're focused on. So with that, let me hand off to Andy, and he will talk you through the financial highlights for the year. Andrew Kelly: Thank you, David, and good afternoon, everyone. So as David mentioned, our performance for the year was in line with the guidance we gave back with the interims in April. And that includes a much improved second half trading performance following a softer first half of the year. The second half improvement included the recovery in our Traffic Data & Events businesses, where actions that we took early in the year helped to improve profitability as well as the benefit from delivering the first phase of development work on a Tap Converter contract that we announced in February 2025. The group is typically more profitable in the second half of the year. That reflects the seasonality of our revenue streams. And in H2 of FY '25, we achieved an adjusted EBITDA margin of 19.2%, which was 331 basis points higher than in H2 of the prior year. And overall, we delivered modest revenue growth year-on-year despite the market headwinds that we referenced earlier. Importantly, within this, we've continued to deliver stronger growth in recurring and transactional revenues, which are key long-term value drivers. And in combination, these increased by 8% over the prior year. The group's balance sheet remains strong. We saw a healthy improvement in free cash flow generation. And we ended the year with GBP 23.4 million of cash on the balance sheet, having fully completed the GBP 3 million share buyback that we announced in April. We put in place a new GBP 35 million RCM in the second half of the year, and this remains undrawn. And on the dividend, we've maintained our progressive policy. We're recommending a final dividend of 1.4p per share, which would result in an 8% increase in the total dividend to 26p. So looking at the financial performance in more detail. As usual, I'll start with the group consolidated performance and then break out the divisional results in more detail. So total group revenue of GBP 81.9 million was 1% higher than prior year on a reported basis. It was 3% higher on a like-for-like basis after adjusting to revenue from the lower margin, non-software-related consultancy activities that we exited at the end of FY '24. Adjusted EBITDA of GBP 12.6 million was slightly lower than last year. And this really reflects 3 main drivers. Firstly, the Control Period 7 funding headwinds impacted volumes of our Remote Condition Monitoring hardware in the U.K. Revenues here were 42% lower than in the prior year, and this had an adverse effect to profit of approximately GBP 1.5 million. As you'll probably recall from the interim results, we have seen a significantly lower level of profitability in our Traffic Data & Events businesses in the first half. Second half performance here was much improved, I'll talk more about that when we get to the divisional review. However, the total profit contribution from this part of the business was lower than we achieved in FY '24. And offsetting these headwinds, the rest of the group delivered an EBITDA performance that was approximately GBP 2 million higher than last year. That includes the benefit from exiting those lower-margin consultancy activities as well as healthy underlying growth across the rest of the U.K. rail portfolio, excluding Remote Condition Monitoring. Over the last 2 years, we have completed a program of actions to transform the group's operating model. That's focused, in particular, on integrating and enhancing our technology, development and delivery capabilities. And alongside this, we've been working hard to upgrade operational systems, streamline our operating footprint, exit from lower-margin activities and, in some cases, contracts and address other legacy issues that have restricted our ability to deliver revenue and margin growth. Our FY '25 results include the final tranche of costs associated with these actions, with GBP 2.4 million of exceptional costs charged to the income statement, of which GBP 2 million were cash costs. Our statutory profit metrics were improved versus prior year. In addition to a lower level of exceptional costs, this also includes over GBP 0.5 million of additional interest income on our cash balances, and that includes the benefit from having centralized our cash management actions, which is one of the work streams that we completed as part of those transformation activities. So turning now to divisional performance, and I'll start with the Rail Technology & Services division. Total revenue in this division was 1% higher than the prior year. As I previously referenced, that did include a lower level of Remote Condition Monitoring hardware revenue in the U.K. from CP7 headwinds. And excluding this, the rest of the portfolio delivered revenue growth of approximately 7%. And as you can see from the charts on the right-hand side of this slide, the quality of revenue in this division is improving. And in FY '25, we delivered further growth in recurring and transactional revenues, which are the drivers of long-term value. Recurring software license revenue increased by 6% to GBP 23.2 million. And transactional revenues from our smart ticketing and delay repay products grew by 17% to GBP 4.1 million. The balance of the revenue in this division includes that Remote Condition Monitoring hardware revenue as well as milestone-driven project and bespoke development work. This was overall 14% lower than in FY '24, principally driven by the lower level of Remote Condition Monitoring hardware in the U.K. There was a lower level of project revenue in North America that followed the go-live of our Train Dispatch product with Northern Indiana in September 2024. And from a divisional perspective, that was offset by the first phase of development work on the Tap Converter that started in the second half of FY '25 and will continue throughout FY '26. EBITDA of GBP 9.6 million was 2% lower than the prior year that includes the approximately GBP 1.5 million adverse impact from Remote Condition Monitoring, offset by growth across the rest of the U.K. portfolio. Turning next to our Data, Analytics, Consultancy & Events division. Revenue here was 5% higher than the prior year on a like-for-like basis after excluding the exited consultancy activities. This was principally driven by high activity levels in events, where we achieved a record year with revenue in excess of GBP 20 million. That more than offset an overall lower level of revenue from Traffic Data. You may recall from the interims, we had approximately GBP 0.5 million revenue headwinds as one of our largest customers suffered a cyber attack in our first half of our financial year. That has been fully resolved. Activity levels in Traffic Data and with that customer return to normal in the second half of the year. However, we weren't fully able to recover that lost revenue from H1. We also saw a slightly lower revenue contribution from our GeoIntelligence business based in Ireland. And after a very soft first half, full year profitability in this division was overall consistent with FY '24. That includes a much improved performance in Traffic Data & Events. And whilst the absolute EBITDA contribution from those businesses was still lower than the prior year, together, they achieved an H2 EBITDA margin performance that was approximately 400 basis points higher than in H2 of FY '24, and we expect to see a full year benefit from that in FY '26. The lower EBITDA contribution on the Traffic Data & Events side was offset by professional services. Our GeoIntelligence business post year-end has won a multiyear contract with the U.K. government, and that underpins our growth expectations for FY '26. And then turning lastly to cash. The group continues to deliver a healthy level of cash generation. Despite the slightly lower level of EBITDA, free cash flow generation in the year of GBP 7.7 million was GBP 2.3 million higher than in the prior year. That was driven largely by favorable working capital movements including an unwind of the large trade receivables position that we had at the end of FY '24. There was a lower level of cash outflows relating to transformational activities and higher net cash interest received. Of the GBP 1.4 million cash outflows for exceptional items in FY '25, GBP 0.4 million of that relates to costs booked in FY '24. And there's approximately GBP 1 million of cash outflows that we anticipate in FY '26 in relation to costs that have been booked in FY '25. We've continued to invest in product development through the year, including future enhancements for our train dispatch product in North America. We also invested to acquire and develop the AI platform that's used by our Traffic Data business. Overall, our total cash balance increased by GBP 3.6 million to GBP 23.4 million. That includes completing the full GBP 3 million share buyback in the second half of the year. So this leaves us well positioned to continue to invest in a disciplined way, consistent with our capital allocation framework. And the new RCF provides us with additional headroom, flexibility and strategic optionality to invest for growth while continuing to maintain a robust balance sheet. So with that, I'll now hand you back to David to update you on the group's strategy and growth transformation opportunity. David Frost: Yes. Thanks, Andy. As mentioned previously, we've refreshed our strategic thinking as we move into the next phase of growth. And look, our purpose is simple. We make transport work, but we do so while driving safety, efficiency and sustainability in our customers' operations. We want to lead the future of sustainable, intelligent transport, and this is a really dynamic and fast-moving space. Our world is becoming ever more digitized and more connected, and the importance of transport networks to support the way we live and work in safe, efficient communities is only going to increase. Our ambition is to be at the center of that, creating technology and solutions that revolutionize how the world moves and make a lasting difference. Next slide, please. At the highest level, we have a very substantial global transport market, which is growing at an attractive rate, fueled by the demand for safer, more sustainable and seamless journeys. There are endless opportunities for Tracsis within this, but we are choosing to play in rail and road segments of the transport market, where we have a presence today, deep domain expertise and cost leading technology. The tailwinds in these sectors increasingly align with the solutions that we provide from urbanization, population growth and aging infrastructure through to multimodal frictionless travel and the growing demand for digital transformation, automation and the deployment of AI, this is what we do. We are talking about long-term structural trends that play directly into our strengths, and we are well positioned to benefit from them. Next slide. So moving forward, we think of growth in the form of 4 transformation factors. Firstly, and importantly, our priority is to focus on our core markets continuing to expand into white space through cross-sell and upsell opportunities. Secondly, we will invest in our roadmaps, producing a pipeline of SaaS-native products that we can sell in our core and international markets. Thirdly, we will target international growth through the deployment of our go-to-market model, augmented by the new products and the services that we will develop. And then lastly, M&A will continue to play an important strategic role in supplementing and supporting our organic growth. We have a disciplined approach to investing in target opportunities, and all acquisitions will be fully integrated into the one Tracsis business structure. These 4 vectors give us a very clear, practical and deliverable pathway for long-term growth. Next slide. So our journey continues. We have a great business at Tracsis, one built on technology and deep domain expertise. We have completed the operational transformation phase, opening the door for the next logical chapter in our story, the growth transformation phase. There is an opportunity here for us to scale our business internationally, expand into attractive transport adjacencies and invest in SaaS-native products that address global market requirements while accelerating recurring revenue and margin accretion. Look, it's not going to happen overnight, but we feel we have the strategy, the capability and the ambition to deliver steadily and sustainably. We know what the building blocks are for us to make this long-term vision a reality, and we really look forward to sharing our progress with you all as we move forward. Next slide, please. Finally, we'd just like to recap on the key takeaways from today. We have delivered a much improved financial performance in the second half of FY '25, and our expectations for FY '26 remain unchanged, with ongoing U.K. rail uncertainty already factored in. Our short-term priorities are clear. Our underlying fundamentals remain strong, and we continue to win new multiyear contracts that grow our recurring revenue. In summary, we are prioritizing near-term delivery while we build for an exciting future, one defined by greater scale, improved margins and enhanced long-term value for our shareholders and other stakeholders alike. Next slide. So at this point, we're happy to take any questions. Operator: [Operator Instructions] We've had some pre-submitted questions and questions submitted live. The first one being, Tracsis is trading at its cheapest multiple since it was listed in 2007. You have over 20% of your market cap in net cash. Stock buybacks would create a lot of value for long-term shareholders at these depressed levels. How high are these on your capital allocation priorities and why? Andrew Kelly: Yes. Thanks for that, Harry. So in our announcement, we have laid out our capital allocation framework. So we've got clear priorities in 3 areas. So firstly, that's around organic growth, and that includes investment in new product development. Secondly, as David said, we see M&A as a core component of our growth strategy, applying very disciplined criteria to that with an intention to integrate acquisitions into our operating model. And then thirdly, from returns to shareholders perspective, we're committed to the progressive dividend. Right now, we haven't got any firm plans to do a further buyback, but as you can imagine. And as the question hints at the current levels, that will be something that we continue to review as we go forward. Operator: The next question is, what is the acquisition pipeline of good businesses like? David Frost: Yes. So look, coming into the business, I was really pleased to see that there is an active M&A pipeline. I think Andy and I would like to see more strength in that with higher-quality assets available to us, but having said that, we are actively pursuing opportunities today through this disciplined lens of making sure that it aligns fully with the strategic direction we're looking to take the business. So it must enhance the technology capability, it must help us to address the attractive adjacencies within the transport market and hopefully help us to progress on our internationalization plans that we have shared with you. So we expect M&A to be more of a bolt-on type approach, certainly for the near and midterm as we -- it's been 3.5 years since we've done an acquisition in this business. We believe we've got good foundation to get back onto the M&A trail, but do that in a very disciplined way. We're not considering anything transformational at this time because we do genuinely believe that there are good quality assets out there that fit the criteria that we are outlining here. And importantly, we now have the financial capital and financial firepower to be able to go and execute in this area of our strategy. Operator: The next question is, there is cash in the bank, and you recently agreed a new RCM. Does this mean you're weighing up something more transformational from an M&A perspective? David Frost: Well, I mean, I guess I've just covered that off in my previous answer to how we're thinking about disciplined approach on M&A. So nothing transformational on the agenda at this point in time, but certainly looking at bolt-on opportunity. Operator: This comes from an investor. If I hold for the long term, i.e., 3 to 5 years, what's the main reason Tracsis' share price should go up? Andrew Kelly: Well, we believe that there's an awful lot of growth opportunity available to the business. We have -- our top line has been flat for the last 3 years in this business while we've been delivering that transformation, while we've been putting those foundations in for future growth. So as David summarized at the start of the presentation, we've got extremely strong fundamentals here. We've got a rich IP in the business. We've got deep domain expertise. We've got a strong balance sheet, healthy cash generation, and a healthy capital position today. And we're embedded in a transport ecosystem and transport markets where we believe the digital journey has only just begun. So we see an awful lot of upside and future opportunity for the business. And that's really our focus as a management team is to deliver and execute on that and hopefully create a lot of sustainable value for all of our stakeholders going forward. Operator: Another question on cash. H1 revenue was flat, but cash increased. How did you manage to generate so much cash despite lower EBITDA? Andrew Kelly: So we have a fairly seasonal revenue pattern in this business, driven largely by the activity levels, particularly on our base side of the business in H2, but also in our Rail Technology business. So we typically end the year with a high trade receivables balance that unwound in the first few months of FY '25 as it typically does. So that helps to support the healthy cash generation in the first half of the year despite the lower EBITDA performance. Operator: You say Tracsis is the go-to U.K. Rail Technology provider. If this is the case, how much white space can there be in your core markets? David Frost: Yes. We think about core markets as geographically, U.K. and Ireland. And then from a transport market point of view, obviously, rail and road, but also some, what we call, land application areas for things like agricultural technology. So they are our core markets. And within that, there is a well-defined customer group that we serve today and have done since the birth of the business back in 2004. Having said that, we are well positioned across that customer group, but there is always opportunity for us to cross-sell and upsell the broader Tracsis portfolio. And I'll give you a good example of this because we think of this as land and expand. So when we sell to any customer, we do not sell the entire Tracsis portfolio on day 1, in fact, quite the opposite. We penetrate a customer by selling 1 part of our capability, and then we're really good at then landing and expanding. So once you are in, it gives you an opportunity to present the broader capability. Probably a good example case study to share with you is Transport for Wales, where we are now delivering both Rail and Road Technologies into that single customer, but that took time, took sort of patience and time for us to develop, but good example of our ability to do that. And that's what we mean by white space within our core markets. We are not selling the entire portfolio to every customer that we have today, and therefore, that continues to present opportunity for us as we go forward. Operator: Why would international growth create value for shareholders? Isn't the market saturated with solutions already? David Frost: I think the short answer is no to that. And hopefully, we've shared some of the color behind how we think about international markets today. We are -- Andy and I are very focused on firing up an organic growth engine in this business, something that we've not particularly had in the past. Tracsis has been borne out of a buy and build through acquisition principally. And we're now sort of turning attention to how do we really get organic growth to a level that we would like to see. And the investment in the product developments that we've talked to and then the disciplined internationalization of our business will be 2 growth factors that support the organic growth side of our strategy. Operator: The U.K. Rail Funding headwinds, especially the CP7 hardware revenue decline of 42% in 1 category, what contingency plans does management have if those headwinds persist? Andrew Kelly: Yes. Look, we see the headwinds in the U.K. Rail market at the moment persisting through FY '26 -- for our financial year FY '26, but we do see them as temporary in nature. The government has published the railways bill in the last few weeks, which is a key step on the path to creating Great British Railways. And we think when you look at the strategic objectives that are outlined in that bill around efficiency, around asset availability and network reliability and around rolling out pay-as-you-go ticketing, we think Tracsis is really well placed to support with that and to continue to be a key technology provider that enables that future. So I think it's less about having contingency plans. We have fully factored the current market conditions into our forward guidance and into our market forecasts. So we are not reliant on the market improving in order to achieve our FY '26 ambitions. And as David outlined when talking about those growth factors, we're laser-focused on being well positioned, maintaining that position in our core markets, ready to respond where those opportunities come, whilst also increasingly diversifying the business so that we're not fully reliant on factors that are fully within our control. Operator: Do the internationalization efforts imply incremental technology investment? How much incremental investment should we expect over the next couple of years? David Frost: Yes. We're going to start with rail in the international markets because that's where we think we are; a, the most mature and importantly, have the right products to position and sell into the international geographies. So that's kind of our start point how we're thinking about it. Undoubtedly, we will continue to invest in SaaS-native application software products. That is a commitment that we are making. And as we understand the requirements of international markets, we believe that will present further opportunity for us to consider the investment. But the important part of moving to SaaS-native products is that you are developing an offering that meets market requirements, not just the requirements of one specific customer. So that's one aspect of it. But we do genuinely believe that today, with some of the technology we have around digital ticketing, our capability around Remote Condition Monitoring and also some of the software around safe working practices are products that are right and ready to go into international markets today, and that's how we will be starting to move down that pathway. Operator: Due to time, this will be the final question today. What should we expect in terms of PAYG revenue contribution over the next 3 years? With the National PAYG rollout, should we expect revenues to grow substantially from this year's levels? Andrew Kelly: So if -- just as a reminder for everybody, it's all on the same page. So Tracsis secured the Tap converter contract in February 2025, which is to provide the back office technology solution that will underpin rolling out pay-as-you-go ticketing across the rest of the U.K. Rail Network. So we've got a contract to do the development work for that, which is giving us a full order book in that part of the business for FY '26. The rollout in terms of making that technology available to the customer will be delivered through the Rail Delivery Group and the transport operators. So we're not in full control of that. And therefore, we don't have full visibility right now in terms of exactly when that's going to happen and how that's going to happen. So when you step back from that, absolutely, we expect that as that technology gets rolled out and customer usage increases, our revenues there will increase, but we're not able at this point in time to be precise about the timing or even the quantum of that because it depends on a number of factors, including pace of rollout, speed of customer adoption, customer usage patterns, et cetera, et cetera. So in our forward guidance, we don't have any incremental pay-as-you-go transactional revenue in those numbers. As that comes into more focus, we will guide the market and guide investors. So we certainly see it as a significant opportunity for the business. We're just not able to fully size that ourselves at the moment. Operator: I'll now hand back to the management team for any closing remarks. David Frost: Yes. Thanks, Harry. So look, just in closing, again, much improved financial performance in second half '25. We feel good about our expectations in FY '26. They're unchanged despite some of the challenges ongoing in U.K. Rail. Short-term priorities for us are really clear, fundamentals underlying really strong. We're prioritizing near-term delivery, but we're also building for an exciting future. And hopefully, you've been able to see through sharing how we think about the growth factors going forward, there's an exciting future ahead for our business. And we really look forward to continuing to share progress with you as we go forward on this journey. So thanks for listening today. Thanks for your questions. Look forward to speaking with you all again in the future. Operator: Thank you to David and Andy for joining us today. That concludes the Tracsis final results investor presentation. Please take a moment to complete a short survey following this event. The recording of this presentation will be made available on Engage Investor, and I hope you enjoyed today's webinar. Thank you.
Operator: Hello, and welcome to BJ's Wholesale Holdings, Inc. Third Quarter Fiscal 2024-'25 Earnings Conference Call. [Operator Instructions]. I now pass the call over to our host, Anj Singh, VP of FP&A. Please go ahead. Anjaneya Singh: Good morning, and welcome to BJ's Third Quarter Fiscal 2025 Earnings Call. Joining me today are Bob Eddy, Chairman and Chief Executive Officer; Laura Felice, Chief Financial Officer; and Bill Werner, Executive Vice President, Strategy and Development. Please remember that we may make forward-looking statements on this call that are based on our current expectations. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from what we say on this call. Please see the Risk Factors sections of our most recent SEC filings for a description of these risks and uncertainties. Please also refer to today's press release and latest investor presentation posted in our Investor Relations website for a cautionary statement regarding forward-looking statements and non-GAAP reconciliations. And now I'll turn the call over to Bob. Robert Eddy: Good morning. Thank you for joining us to discuss our third quarter results. Our business delivered strong results in Q3 and performed well in an incredibly dynamic environment. Once again, we gained share and grew traffic, marking the 12th consecutive quarter of market share growth and the 15th consecutive quarter of traffic growth. These consistent results are a testament to the value that we provide to our members each day as we are guided by our purpose of taking care of the families who depend on us. This purpose has never been more relevant as many of our members are dealing with a considerable level of unpredictability in their everyday lives. This has impacted consumer confidence, which has been at low levels for much of this year. And we are taking these conditions as a call to action to lean even further into value for our members' everyday needs. Some of our actions include incremental offers to those members that may need a little bit more help in the current environment. In addition, we're rolling out reduced delivery fees to make our most convenient shopping channel even more accessible. The combination of value and convenience is a powerful unlock for us, and this will help our members realize even more value from their BJ's membership. We've also launched a 10% discount for our team members as a way of thanking those who are on the frontlines living our purpose every day. For the quarter, we delivered merchandise comparable comp sales growth of 1.8% and adjusted earnings per share of $1.16. It's helpful to evaluate the performance on a 2-year stack basis to normalize for the impact of last year's port strike and hurricane activity. Our 2-year stack comp was 5.5%, an acceleration of nearly 1 point versus the first half. Our Q3 comp performance was evenly balanced across our 2 reportable divisions. Our perishables, grocery and sundries division grew comp sales by 1.8% with a 2-year stack that accelerated sequentially of 6%. The investments we've made in both Fresh 2.0 and our category management process have driven continued share gains across our consumables franchise. We saw the most strength in perishable categories such as fresh meat, dairy and produce, aided by our Fresh 2.0 investments. We also saw strength in nonalcoholic beverages and candy and snacking, driven by enhanced assortment and more prominent placement in our clubs. Our general merchandise and services business also grew by 1.8% on a comp basis in the quarter. Consumer electronics comped in the high single digits on success in computer equipment and tablets. Apparel, which we've highlighted on several recent calls, continues to grow, comping in the low single digits. The offsets we saw this quarter were in home and seasonal, which continued to be impacted by lower discretionary demand and consumer confidence, as well as some of the decisions we made earlier this year to tighten our inventories in light of the anticipated impact of tariffs. Our services business also contributed to the improved performance in this division during the quarter. Looking at the behavior of our membership base this quarter, we continue to see members across all income levels remain cautious, which tracks with what we broadly see in the consumer confidence data. We saw members exhibiting value-seeking behavior, including higher sensitivity to promotions, increasing purchasing of private label items and some trade down. For example, given the high price of beef, we saw higher purchasing of ground beef versus more expensive cuts. Despite this type of behavior, member trends exhibited stability quarter-over-quarter across all cohorts when adjusting for the noise from the port strike. While value-sensitive members remain more exposed to the macro backdrop, we did not see any incremental pullback from them. That resilience reinforces BJ's position as a trusted destination for strong value and convenience when it matters most. The environment continues to move quickly, but our teams haven't lost sight of the fundamentals. By zeroing in on our controllables, they're advancing our strategic agenda, increasing member stickiness, making our clubs better places to shop, expanding convenience and growing our physical footprint. These elements are central to creating value over time, and we built further momentum in each this quarter. I'll now provide an update on how those pieces are evolving. Our membership results continue to be robust, and we grew membership fee income by nearly 10% this quarter, driven by strong member counts, mix benefits and the effects of our recent fee increase. We expect the growth rate to show further improvement into the fourth quarter and to once again deliver a 90% tenured renewal rate for the full year. The core of our membership health is driven by growing the number of members as well as improving the mix of those members. In the third quarter, our higher tier membership penetration reached another new record, improving by 50 basis points sequentially. And we continue to see more opportunity to push here. We would not be able to deliver sustainable membership growth without parallel improvements in our merchandise. We are launching many new owned brands products, which are aimed at improving the member experience by offering excellent quality at an unbeatable price. Some of the products we are excited about include Wellsley Farms branded tortilla and potato chips, protein shakes, frozen poultry and coffee pods. This is just a small list of many new high-quality products that we plan to launch at amazing price points. Owned brands products have a multitude of benefits as they are typically priced at about 30% below national brands while offering comparable quality of national branded items. This gives our members even more compelling value for their hard-earned dollars, which in turn drives loyalty and higher lifetime value. Owned brands products also deliver higher penny profit for us, which we can use to invest back into the member experience, further propelling the flywheel that drives our business. We're excited to see how our customers respond to our improved offerings. Our efforts to continue to improve the convenience of shopping our clubs can be seen in the digital growth of 30% this quarter and 61% on a 2-year stack basis, driven by strength in BOPIC, same-day delivery and ExpressPay. We're looking to further drive innovation by utilizing AI to deliver enhanced content highlights and attributes, making shopping even easier for our members. We also recently beta launched an AI shopping assistant and personalized member shopping lists, and we're looking forward to taking these live to our members soon. Last but not least, our new club footprint expansion. We opened our club in Warner Robins, Georgia during Q3. And just last week, we opened our fifth Tennessee club in Sevierville. I'm pleased to report that both clubs are off to a great start, joining the class of 2025 clubs that have outperformed expectations, with membership counts 25% ahead of plan. The community reaction at all of our recent openings has been nothing short of phenomenal, and we are proud to serve these communities. Our expansion strategy has been a sustained and accelerating success, with clubs opened over the last 5 years delivering comp performance about 3x the chain average. On deck for new club openings, our Springfield, Massachusetts; Sumter, South Carolina; Casselberry, Florida; Chattanooga, Tennessee; Soma, North Carolina and Delray, Florida. That will make 14 new clubs for the year, the most we've had in many years. We remain on track to add 25 to 30 new clubs in 2 years, and our pipeline of new clubs is as large as it has ever been. Speaking of our pipeline, we are excited to announce 2 more 2026 openings in Foley, Alabama and Mesquite, Texas as well as a relocation of our club in Rotterdam, New York. Mesquite will be our fifth Dallas-Fort Worth Club opening in 2026. We've been impressed with the warm welcome we've received as we've introduced the BJ's brand to the market over the past few months, including our Friday night life sponsorships, which was capped off with South Grand Prairie taking home the trophy and the [ Prairie Bowl ] sponsored by BJ's Wholesale Club. The enthusiasm we've seen in these new markets has been awesome, and we can't wait to bring the value of BJ's Wholesale Club to Texas families early next year. As I look at our business, I see improving momentum. Our membership is growing in size and quality. We are making improvements in merchandising and continue to capitalize on the convenience of our digital offerings. And as I just said, our footprint expansion is accelerating and successful. While the short term may be somewhat unpredictable, I'm confident that our company is in an excellent position to deliver value to our members and make good on our commitments to shareholders. We will continue to act with purpose in building our structurally advantaged business for the long term, and you should continue to expect that we will run the business with lifetime value at the core of our actions. Before I turn it over to Laura, I want to thank our team members. Your dedication to serving the families who depend on us and your commitment to supporting one another make BJ's a great place to shop and a truly special place to work. I'm proud of all that we are accomplishing together. Laura Felice: Thank you, Bob. I'd like to start by recognizing the outstanding efforts of our team members in our clubs, at our club support center and throughout our distribution network. Your hard work and commitment to serving our members and communities are instrumental in delivering a solid quarter and advancing our long-term growth agenda. Let's look at our third quarter results. Net sales for the quarter were approximately $5.2 billion, growing 4.8% over the prior year. Total comparable club sales in the third quarter, including gas sales, increased 1.1% year-over-year as the average price of gas declined mid-single digits year-over-year. Merchandise comp sales, which exclude gas sales, increased by 1.8% year-over-year and by 5.5% on a 2-year stack. We are pleased to grow traffic and units in the quarter. This quarter, we lapped the surge of business brought by last year's port strike. At this time last year, we estimated it to have contributed about 1 point of comp in September. Moving to this year, September was by far the weakest month as we comped the strike, with August and October generally performing in line with our expectations. We believe it may be helpful to evaluate trends on a 2-year stack basis to assess the business, and I'll reference this metric in my overview. Our third quarter comp in our grocery, perishables and sundries division grew 1.8% year-over-year with a 2-year stack of 6%, showing slight acceleration versus the first half. Our general merchandise and services division comp also increased by 1.8% in the third quarter with a 2-year stack of about 2%, an improvement versus the declines seen in the first half. As Bob noted earlier, traffic and market share grew again in this quarter, and we experienced approximately 1 point of inflation. Digitally enabled comp sales for the third quarter grew 30% year-over-year and 61% on a 2-year stack. Our digital businesses performance is an affirmation of the values our members find in the improved and dramatically more convenient shopping experience. We find that the members that engage with us the most digitally and utilize all of our offerings, end up being the most valuable members with the highest lifetime value. We will continue to invest in our digital capabilities to gain even more wallet share of our members. Membership fee income, or MFI, grew 9.8% to approximately $126.3 million in the third quarter on strong membership acquisition and retention across the chain. We also continued to benefit from the fee increase that went into effect at the beginning of the year. Our underlying member growth remains healthy, and we continue to improve the member mix. Moving on to gross margins, excluding the gasoline business, our merchandise gross margin rate was flat on a year-over-year basis as we continue to invest in our business and in our members, along with execution towards our longer-term objectives. We expect to continue to invest in Q4 and beyond as we lean into our purpose and do the right thing for our members, which will be the right thing for us in the long term. SG&A expenses for the quarter were approximately $788.2 million and deleveraged slightly as a percentage of net sales year-over-year. Adjusting for the legal settlement benefit that we realized last year, SG&A as a percentage of net sales was about flat year-over-year. We continue to grow comp gallons and gain share in our gas business. Our comp gallons in the quarter grew 2% year-over-year, a nice improvement versus Q2's flat performance and again significantly outpaced the industry, which declined low single digits on a comp basis over the same time frame. We have been in a much less volatile gas margin environment this year with profitability just modestly ahead of our expectations in Q3. Our third quarter adjusted EBITDA was down about 2% year-over-year to $301.4 million, owing largely to lapping the benefit of a legal sentiment last year. Adjusting for the settlement, adjusted EBITDA grew approximately 5% year-over-year on higher top line and strong cost discipline. Our third quarter effective tax rate was 26.9%, slightly lower than our statutory rate of approximately 28%. All in, our third quarter adjusted earnings per share of $1.16 decreased approximately 2% year-over-year due to the legal settlement. Adjusted earnings per share grew approximately 8% year-over-year, normalizing for the settlement benefit last year. Moving to our balance sheet, we ended the third quarter with total and per club inventory levels down 1.5% and 5% year-over-year, respectively, while our in-stock levels increased by 90 basis points. Note that we are operating 9 more clubs in our chain compared to a year ago. The favorability in our inventory investment continues to be related to reduced inventory buys. I am proud of our team's hard work to stock even more of our merchandise our members want while improving the operating efficiency of our business. This is yet another driver of the flywheel, with which we can pass along even more savings to our loyal members. Our capital allocation strategy remains consistent. We believe profitably growing the business is our best use of cash and investments to support membership, merchandising, digital and real estate initiatives will continue to be funded by our cash flows. We ended the third quarter with net leverage of 0.5x. Share buybacks are a key component of our capital allocation framework. And in Q3, we took advantage of the lower share price and repurchased approximately 905,000 shares for $87.3 million. As of quarter end, we have approximately $866 million remaining under our recently renewed repurchase authorization. We will continue to take a disciplined and balanced approach to deploying our capital to maximize shareholder value. Looking ahead to the remainder of the year, we are confident in the momentum of our business and our ability to deliver sustained growth, especially in an uncertain economic backdrop. Our teams are focused on controlling the controllables while executing towards our long-term objectives. With regards to guidance and as we have been speaking to on this call, the macro environment is challenging. We have made decisions to be prudent with inventories in the face of this environment, challenging our ability to grow general merchandise sales. We made that choice in order to allow continued investment in member value in the rest of the business. While it will hamper sales in the short term, we remain confident that this was the right decision. With that in mind, we are narrowing our guidance for the full year merchandise comp sales to a range of 2% to 3% for the full year. We are also increasing our range of expected adjusted earnings per share to be $4.30 to $4.40. The actions we've taken to support stronger, more sustainable growth are working, and our long-term roadmap is solid. With a resilient business model and clear strategic direction, we're well equipped to keep building on our success and deliver substantial value to our shareholders in the years ahead. Bob, back over to you. Robert Eddy: Thanks, Laura. As I noted earlier, we are making progress in building momentum. We're elevating the quality of our membership base while it grows. We're curating a stronger, more relevant assortment at prices that reinforce our value promise. Our digital tools are improving member experience, and our expansion strategy is bringing the BJ's model to new high-potential markets. Looking forward, our commitment doesn't change. We will keep living our purpose and focusing on the people and communities who rely on us every day while executing on the long-term priorities that drive our growth. Thanks again for joining us today and for your support of BJ's Wholesale Club. We will now take your questions. Operator: [Operator Instructions] Our first question comes from Peter Benedict of Baird. Peter Benedict: I wanted to ask about some of the income demographics and the behavior. It sounded like it was relatively stable. And I think we're hearing a lot this week about kind of that lower and facing some struggles. Can you remind us maybe your exposure to maybe the SNAP program, talk about the renewal rates you're seeing maybe across these income demographics, just anything further below the surface in terms of behavior across income demographics, both in the third quarter and then as you're kind of entering here into the holiday season? Robert Eddy: Pete, maybe I'll kick this one off, and Laura can add to it if she sees fit. Our prepared remarks tried to tackle this question because we knew it would be out there. Certainly, everybody is concerned about the low-income consumer. The continued inflation provides clear pressure on that segment of all consumers and certainly that segment of our members. With that said, removing the noise from the port strike and the hurricanes and stuff last year, we saw their performance in Q3 as being pretty resilient. The purchasing habits were very stable, and we're pleased to see that. There certainly was a lot of noise at the end of the quarter and the beginning of the fourth quarter around the SNAP program and the government shutdown. I guess, I would say there was a slight disruption in the end of Q3, a more meaningful disruption in the opening days of Q4. But now that, that program is back on track, we're recovering. Those participants as they get access to their benefits are choosing to come to see us and -- as they have more opportunity to spend. So we're encouraged by that showing from those members and from the members in the medium- and high-income cohorts that we saw during the quarter as well. And maybe one final point. We're also encouraged, going forward, by the administration's help recently on the tariff front and reducing the cost of things that are not made or grown in the United States. And so that should be helpful to all consumers, but most pressingly, the low-end consumers that you referenced. Laura Felice: Yes, I think I'd just add on top of it from a membership perspective, we're really proud of our member -- our continued membership results throughout the year. We are acquiring members in our existing clubs, so comp clubs in our new markets and our new clubs that we've opened at the beginning of this year. And there isn't anything, when we look at the details of membership to your question about kind of cohorts, that looks different. We're acquiring members across all the cohorts. And so we're really happy with our continued strength from a membership perspective. Operator: Next question comes from Kate McShane from Goldman Sachs. Katharine McShane: We wanted to ask if you believe that the right long-term same-store sales growth for this business is in the 3% to 4% range. If so, why? And what do you think is holding you back from achieving this comp over the last several quarters? Robert Eddy: Kate, as you know, we've been transforming our business over the last several years with the idea of really four things: one, growing and maintaining a stickier membership; two, improving our merchandising; three, improving our convenience through digital; and then finally, increasing our footprint through real estate expansion. And as we talked about in the prepared remarks, all those things are heading in the right direction. Certainly, the things that we're doing sometimes conflict with what happens in the outside world. We certainly have the luxury of competing against great competition, and it's certainly been a choppy economic backdrop out there. So we have tremendous confidence in our long-term ability to grow this business from a top line perspective. We're showing signs of that in all four of those pillars. And we'll continue to work on each of those to get to that point. The thing that we try hardest to do, obviously, is put the right products on the shelf at the right value. And we made tremendous strides, I think, during Q3 to do that. Our merchandising team has put a lot of effort this year into that idea of greater products, greater values. And we made considerable investments in Q3 with that in mind. We'll continue to do that because that's what we believe wins. Value and convenience are really what we're after for our members. And we'll keep plugging. We're very optimistic in our long-term aspirations. Katharine McShane: And if I could just follow up with one question, you just mentioned the competitive environment. We were curious about what the competitive response has been when you open in some of these new markets, particularly Dallas, which has a really strong grocery offering and other club offering already. It sounds like things are going well there, but I wondered if you had any more details with the fifth store opening? Robert Eddy: Sure. The real estate growth story, and I'll let Bill talk about it since he is the architect of it, is a great one. It's certainly a continuing, sustained success and getting even faster with 14 clubs this year in lots of great markets. Those clubs are doing really well. And so we're very enthusiastic about this ability to grow our company. And we've been received well in the markets that we've entered. So why don't I let Bill talk a little bit more about it? William Werner: Kate, I think as Bob mentioned, we're really proud and excited about the success of the new clubs this year thus far and what's left to come for this year. And then as we look forward into Dallas next year, the prospect of going in and winning in that market is really important to the team. We've talked about it a couple of times on these calls that the culture that we've built around new clubs is really important. And the team is actually at a high level. As we look back at this year so far, I think 2025 will go down as the best class of new clubs. As far back as I can remember, with the success we've had with our 8 openings to date now and 6 more to go for the rest of the year, what we're seeing so far in those new clubs that haven't opened yet with preopening membership and the engagement of the community, we know that they're going to be outperformers as well. And so as we take that momentum from this best class of openings into next year into Dallas, combined with the work that we've done in the market of raising awareness for our brand and engaging with the community, we have a ton of confidence that not only will we compete, but we'll be in a position to have great success there. Operator: Our next question comes from Robby Ohmes from Bank of America. Robert Ohmes: I wanted to follow up on the inventory positioning that Laura talked about. I just wanted to understand how you're thinking about that for the fourth quarter. Is it the positioning that sort of limits sales upside, but supports margins? Just how -- what's the pluses and minuses of the tight inventory and semi-related Fresh 2.0 was like a great tailwind in comp driver, the benefit, the tailwind has slowed here. Is there anything that can reaccelerate? Is there a Fresh 3.0 or something like that, that's in the work here to kind of get that to reaccelerate? Robert Eddy: Robby, maybe I'll take a shot at starting off, and Laura can fill in. I think what you're referencing is Laura's comments around proactively managing our general merchandise inventory. When we were in the beginning part of the year, I'm trying to understand where prices would go and costs would go as a result of tariffs, we made some proactive decisions to manage potential markdowns to allow us to fund greater investment in overall value for our members. And I think that was the right decision. I think you want us to do that every day. That is really why we're here. We've taken those dollars and in fact, invested them across the rest of the business. In Q3, significantly reduced pricing on own brands water, on several other beverages, on some paper products across our produce assortment. So we are really trying to balance those two things. And so we do have a more conservative inventory position from a general merchandise perspective, that was true in Q3. It remains true for the fourth quarter. And I do think it will limit the upside of the general merchandise business, but again, allow us to continue investing for the overall value for our members. I think the other story within inventory is really an absolutely terrific performance in managing the overall inventory levels of the company. The team has done a really masterful job in the whole business to have our in-stock rates go up 90 basis points into inventories that are down. We are doing a much better job allocating inventory throughout our chain, making sure that things are where they need to be, when they need to be there and to be in stock for our members every day. We need to keep turning that handle and get better and better every day, but I couldn't be more proud of the team to make a performance like that happen. Anything else, Laura, on inventory? No? Fresh 2.0, I think it was another terrific program, continues to yield benefits. You know that started out in our produce business. We had terrific produce results during the quarter again. And what you're seeing from the perishables business overall is some of the reduced benefits from egg inflation and things that are offsetting some of that great performance. So with that said, we've talked about the next iteration of Fresh 2.0 and call it what you want, 2.1 or 3.0. We have made another set of considerable improvements in meat and seafood. And we're looking to doing the same in bakery and other categories as we go forward. The mission there is the same, right? Our best members interact with us in these categories. If we can show them the greatest product, the freshest product at compelling value, is displayed in a way that is compelling, freeing our team members so that they are experts in all these disciplines; we can provide a better experience for our members, get more people into those categories and grow the overall traffic of the business. That is certainly the result that we saw from Fresh 2.0 in the produce segment. The early returns on meat and seafood are good as well. And so we're very optimistic about that program and its ability to drive sales within those categories, but also to get to that further bigger goal of driving traffic in the whole business, which obviously drives lifetime value. So some of these investments are expensive, but they're very much worth it in terms of driving the top line and the overall value of membership to BJ's. Operator: [Operator Instructions] Our next question comes from Steven Zaccone from Citi. Steven Zaccone: I wanted to ask about the implied fourth quarter same-store sales because you referenced in the release that you've also seen some holiday momentum -- or excuse me, momentum to start the holiday season. Can you just talk through your category assumptions in the fourth quarter? And then, how you think about low end versus high end of the range? Robert Eddy: Sure. Again, maybe I'll start, and Laura can fill in, Steve. We certainly, I think, had a good performance in the third quarter. I keep using that word resilient. But into the face of the port strike and the hurricane activity and all that stuff, our sales were a bit higher than we thought they might be in the range of outcomes. And the team's preparation for the holiday season, I think, has been fantastic. We've been investing in value, we've got incremental promotions out there, we're continuing our really successful Free Turkey promotion, where if you spend $150 in 1 basket, you can get a free turkey for your family for Christmas. We're doing a lot of these things to really build on the momentum we saw in Q3 and get our members in our clubs and make them happy. With that said, it's a choppy economic backdrop out there, right? We talked about the low-end consumer at this point. And we certainly have a little bit of a harder hill to climb from a comparative perspective, we had a good Q4 last year. But net-net, while it's a wide range of outcomes that can happen in any quarter, most notably the fourth quarter, we are cautiously optimistic about our ability to put up some good numbers in the fourth quarter. Laura Felice: Steve, the only thing I might add to all the commentary Bob just said is I'd remind you about our inventory positioning that would be already talked about for general merchandise. So we've factored that into the range of outcomes. That doesn't mean that we will be out of stock in general merchandise. It just means that we've tightened up the buys and we've picked the best of the best assortment. So we're ready for Thanksgiving, like Bob talked about. And we're ready for our members for holiday kind of as we roll into December. Steven Zaccone: Okay. The follow-up I have then is on that general merchandise. So when we think about the inventory planning assumptions and maybe just talk about the buying environment, how does that look for the first half of next year, right? Because you made changes to the second half, presumably based on tariff uncertainty. But how does that apply to general merchandise plan as we kind of glance into 2026? Robert Eddy: Yes. Look, it's -- I don't want to get too far over skis and talk about next year. But obviously, the fourth quarter seasonal merchandise was bought in the spring when there was considerably more uncertainty around what the tariff exposures might be and what the consumer's response might be to any increase in prices. Every quarter we go through, we get more and more clarity and we get more information from our members as well. And so we obviously alter our buys accordingly. I guess the other thing I would say is Q4 typically is a higher general merchandise penetration and obviously lower in the first quarter. And so this question becomes a little bit less important as we get into the beginning of the year. Operator: Our next question comes from Mike Baker from D.A. Davidson. Michael Baker: I hate to focus on the short term so myopically. But the guidance, your fourth quarter implied guidance, to me, I'm calculating around 2, 2.5 or something in that range. Correct me if I'm wrong on that, at least at the midpoint of the outlook. But if you are in that range, that's a pretty big pickup on a 2-year basis against the 4.6% last year. So given all the caution you're talking about, can you square that? Or is it more reasonable to think about maybe the low end of the implied fourth quarter guidance, in other words, consistent on a 2-year basis? Robert Eddy: Mike. Look, let's just focus on the fact that we're cautiously optimistic, as I said earlier. We've done a lot of planning, a lot of action around providing our members the right products at the right value. We talked about incremental promotion and building into that. We're certainly where we need to be from a digital perspective. People are loving interacting with our digital properties to get what they need from a convenience perspective. And we just -- we are trying to act within our purpose and take care of the families that depend on us. And that is all those things, right, getting those -- getting the products on the shelf. We're doing a fantastic job doing that in an improved way, putting sharper prices on things, which we, again, had considerable improvements in during the quarter. And really trying to take care of all the different communities within our membership. And we talked a little bit in our prepared remarks about our team members, maybe I'd take one minute to thank those team members out there every day, taking care of our members. They have the hardest job in our company. And guys, I'd really like to thank you for all your efforts. We initiated for the first time in our company's history, a 10% discount for our team members to really say thank you, to acknowledge that it's tough out there for everybody and to help our team members through their holiday season purchasing as well. So I think we have a lot to be proud of. I think we have some momentum coming out of the quarter. The early days of Q4 have been reflective of that momentum. But we understand that there's a lot of road to go throughout the quarter. We're only a couple of weeks in. Next week -- this weekend and next week are huge for the quarter as are the remaining weeks in December. So we feel like we're in a good spot, but it's very, very early. And so that thought process really is what drove us to have the guidance that we put out there. Operator: Our next question comes from Ed Kelly from Wells Fargo. John Park: This is John Park on for Ed. It sounds like the messaging is that you've been investing in price, but I guess merchant margins were flat. So I guess, what are some of the offsets in gross margin that helps you get there? And then anything on Q4 merch margins and how we should think about that? Robert Eddy: John, we certainly have invested -- we widened our price gaps in Q3 considerably with those investments versus competition. So I'd like to say thanks to our merchandising team for making those moves. It's important to our company, important to our members, for sure. And we have many different levers to offset that throughout the business, not just within the margin construct. We will try and be as efficient as possible throughout the business to fund investments in member value. Certainly, some of the offsets that you might think about within the merchandising world would be being more efficient in the distribution centers, trying to be more efficient from a trends perspective, growing our retail media program, which has been growing very, very nicely, the team is doing a great job there. There are many different things that we've tried to do so we can pass more value back to our members, and we'll continue to do that. Operator: [Operator Instructions] Our next question comes from Simeon Gutman from Morgan Stanley. Pedro Gil: This is Pedro Gil on for Simeon. Nice job continuing to grow your digital business, really impressive. Could you comment on the work you're doing in retail media there? And also more broadly, we've heard some of your peers recently announcing partnerships in agentic commerce. Could you give us an update how you're thinking about the AI opportunity in e-commerce? Robert Eddy: Sure. As we've talked about, our digital business is an important part of our strategy. It has been growing by leaps and bounds for years now. So 30% during the quarter, over 60% on a 2-year stack. It is approaching 17% of our sales at this point. We are at a point that, frankly, a few of us didn't think we'd ever get to. And so we have a lot to be proud of there. It all comes on the back of convenience. We have an incredibly talented digital team that builds these capabilities for our members to help them get access to tremendous value in a more convenient way than they otherwise might. Most of our business, as you know, is in what we call BOPIC, Buy Online, Pickup In Club; as well as same-day delivery, as well as ExpressPay, where you check out in the club using your phone. Well over 90% of our total digital sales are fulfilled by our clubs. So we are efficiently building this business. It is certainly a moneymaking opportunity for us. We are really pleased with the way that it's growing. Included in there is our retail media program that you referenced, and I talked a bit about it a few seconds ago. While still small, our team has been growing that quite nicely as well as we improve our website, as we improve the way that we partner out there with our advertisers, the way that we really coordinate between our different properties, whether it's our website or our app. We are coming up with more ways to engage our members and allow our advertising partners to reach our members with compelling values that first and foremost, to help our members but also help us and our advertising partners. So we will continue to invest in that business in the future. Again, it's still small, but is growing quite nicely and allows us to make other investments in member value as we go forward. Everyone talks about AI, we are no different. AI is a big part of our future. It is most notably used in our digital group at this point. And the use cases would not surprise you. They were on the vanguard of using it to make coding more efficient, making testing code more efficient. And they will continue to use AI in consumer-facing avenues as well. And so I'll give you a couple of examples. As we talked about in the prepared remarks, we've got beta-launched AI shopping assistants and are using AI to do predictive shopping lists for folks. Probably the thing that's most well along, however, is partnering AI with the robotics that we have in our stores. We have a robot that roams our stores named Tally. And initially, Tally was just helping us with inventory accuracy and price line accuracy. And now we have taken that much farther where Tally's imagery creates a digital twin of each of our buildings, something that we've never had before because our buildings don't have warehouse management systems. And that has enabled really cool things from an operational perspective where not only are we getting better inventories and better pricing accuracy, but we are efficiently spotting problems for our team members to take care of, we are efficiently generating to-do list for our team members in the clubs find inventory and what needs more inventory, what should they be doing first within the building. We are using it to make help us spot quality issues in our Fresh businesses as well, so we can make sure that our standards there are tiptop every day. We're finding new ways to use Tally and the data that provides every day. I think the thing that's been most effective so far has been using those digital twins to predict the most efficient pick path for our team members to pick orders for BOPIC or curbside or same day, where they are about 40% more efficient today than they were before. So we'll continue to build on the use of AI. We'll continue to focus on long-term investments that really will allow us to continue our mission, which is to offer our folks the best products at the best prices. Probably the next thing up from a robotics and AI perspective will be our automated distribution center in Ohio that will go live next year. That will be when it gets going far more efficient than a traditional distribution center and will operate almost entirely in a robotic fashion. So it will be fun to see that. I've been out there to see it recently, and I can't wait to see it with all the machinery going in there to see how it works. But it's all in the same spirit of providing even greater value for our members. Laura Felice: Pedro, I'd just add all that commentary that Bob just said about Tally and the robotics we have in our club, there is a closed tie to that with the work that our planning and allocation teams are doing that we already spoke about in our prepared remarks. And that is producing our in-stock levels that have improved kind of year-over-year. So there is a tie beyond some of the digital efforts into how we're putting product on our shelves and how our teams internally are using the data from Tally as well. Pedro Gil: Awesome. Fantastic. And as a follow-up, if I could ask you, if you could comment on the competitive environment. You had a nice improvement in merch margin in the first half, a little more even this quarter. To the extent that you can comment, and I totally get it, it's still early; how should we think about the level of investments next year? Are there any particular areas within grocery or gen merch that you're looking to prioritize? Robert Eddy: Look, I don't want to talk too much about next year, but I would just echo the comments that I've already made around the fact that our job is to provide our members great value every day. We've made considerable investments all year in doing so and have been pretty creative to find ways to fund it, having the merch margin results that we had in Q3, while making the investments that we made was a good result. I would anticipate further investment going forward. As the competitive environment out there is, I think, consistent, but it's consistently competitive, and we need to continue to do our jobs to reward our members for their faith in us and the membership fees that they pay. So we will continue to try and ride that balance between margin and value, but we will always err on the side of value to try and operate the business for the long term. Operator: [Operator Instructions] Our next question comes from Chuck Grom from Gordon Haskett. Charles Grom: On the margin front, just to move down the P&L a little bit, your SG&A per square foot levels have been really tight, which is good. But your peers are up a lot, suggesting maybe some investment in technology and other areas. So I guess my question is, how sustainable do you think maintaining that SG&A per square foot at that level over the next couple of years, particularly as you move into Texas? Robert Eddy: Yes, it's a good question, Chuck. Our teams have done a good job over time being very efficient with our buildings, making sure that, that they're in good shape. They're in far better shape today than they were 5 years ago. With that said, we need to continue to do that and maybe even accelerate it. I think one of the things that we're seeing out there is our competitors getting sharper with their boxes. And so we will have to continue to do that, not just because of the competitive environment, but we want to show our members the best box we can every day. And so I would imagine we'll spend some capital going forward, remodeling our boxes. We will obviously continue to spend into our new club pipeline as well. And we'll do that as efficiently as we can, but obviously, with an eye for the long term. William Werner: Chuck, it's Bill. I'll just tack on to that as well. In addition to our existing clubs for the first time ever, we've really started to build a relocation program for some of our older clubs as well. So we had great success with our recent relocation in Mechanicsburg, PA. We announced this morning that we're going to relocate Rotterdam next year. And so it's not just an eye to our existing clubs, but also to the long-term future of these strong markets where we may have buildings out a little bit on the older side. We're taking the opportunity to invest into the future there as well. Charles Grom: Got you. Great. And then on general merchandise, right, like up 1.8% on the stacks much better than front half of the year, even with limiting inventory. You talked a little bit about the category improvement. I guess what do you think it's going to take to get home and seasonal to catch up to CE and apparel and other areas? And then I guess anything that you guys are excited about as we walk stores over the next couple of months into the holidays? Robert Eddy: Yes, sure. Maybe I'll start, and you guys can pick up. Look, I think we've -- we've done some great things from a general merchandise perspective. As we talked about, we had a strong showing in Q3 from a consumer electronics perspective and from an apparel perspective. Consumer electronics has been a hallmark of GM for a while. It's always been a pretty good business for us, and it gets better. We have very talented merchants in that group. Our apparel team has done a great job over the past few years really making sure that we simplify our assortment and bring in better brands, put great value out in front of our members every day. We need to continue to do those things, right? We might need to simplify our assortment a bit more. We need to continue to put great brands out there and put fantastic values on there as well. We need to apply those same lessons to the rest of the business. And we are actively at work on those things. We've seen some green shoots in previous quarters, we've talked about those with you like toys and some of our gifting in previous quarters. I like our toy assortment this year as well. And I'm excited about the way our gifting looks in the front of our clubs as well. But we need to have more sustained transformation in home and then seasonal going forward. These are probably the toughest categories, particularly the seasonal categories, maybe in the building. But certainly, among the GM categories, these are really tough categories. You need to be right on trend, you need to be right on style and color, on price point, all sorts of different things. And while we've made strides, we're not done. We're not satisfied with where we are. We need to continue to turn the crank and get better going forward. So we were under no illusions that renovating general merchandise would be easy or short in tenure. We've had nice success in the past, and we need to keep investing in that business because it is such an important part of the wholesale club model, where provides that treasure hunt, that emotional connection, those cool wow items that are so important to driving incremental trips. And quite honestly, that question around membership renewal is not only tightly linked with the grocery business, but it's really tightly linked with our general merchandise business when you can have more opportunity to save your entire membership fee in one purchase rather than stacking up just good values on smaller ring items. You can save a couple of hundred bucks on a television or a mattress or a great seasonal item. That becomes a really important part of our overall long-term growth of our company. So let me see if the guys want to file on, no? All right? So we're happy with our GM so far. We've got to get better and we'll continue to work at it. Operator: Our next question comes from Rupesh Parikh from Oppenheimer. Rupesh Parikh: Just going back to your commentary about 2025 clubs, the membership count is 25% ahead of plan. What do you think is contributing to that significant outperformance? William Werner: Rupesh, it's Bill. I always come back to the success with the new club program comes back to the culture that the team has built. I think I've mentioned this a couple of times on previous calls that everyone that has evolved within new club program internally is fully engaged and fully bought in and want to see us be successful. So we started this program way back in 2016 and the reps that we've built along the way. We talked about the goal of making the next opening, the best opening in the history of the company. Opening a new club where you have to build up, especially in the new market, membership base entirely from scratch is not easy to do, and it takes a lot of practice and a lot of learnings to do it right. And we're executing at a higher level than we've ever executed. And as we think about going into the Dallas-Fort Worth market next year as well as all the other markets, a market like Foley, Alabama that we announced this morning is a really cool, unique market, and we're going to be really excited to be there. And we wouldn't be able to do that, we wouldn't have the confidence to do that without all the success that we've built up to this point. So like I said, we're really pleased with what we've done here in 2025. It really has been probably the best class that we've ever opened in at least as far as I've been here. And it gives us a lot of confidence going forward. So more to come, but excited about what we've accomplished. Operator: Thank you very much. This marks the end of the Q&A session. I'd like to hand back to Bob Eddy for any closing remarks. Robert Eddy: Thanks, Carl. Thanks, everybody, for your attention this morning, for your thoughtful questions, for your interaction, your support of our company. I wish you all a happy Thanksgiving, and we'll talk to you at the end of the fourth quarter. Thanks so much. Operator: As we conclude today's call, we'd like to thank everyone for joining. You may now disconnect your lines.
Jonathan Oatley: Good morning, ladies and gentlemen. I'll just start with a few introductions for those of you who don't know us. My name is Joe Oatley. I'm the Chairman. To my immediate left, Frank Doorenbosch, CEO; and to his left, Ian Tichias, CFO. The bit of introduction is, I believe you should be able to submit questions at any time during the presentation, and then we'll come back to them and answer them at the end. I think the key takeaway for me from this set of half year results is, it's really steady progress, a really robust performance, and we've delivered what we said we're going to deliver. In a moment, Frank and Ian will take you through the details, and I don't want to steal their thunder, but there is one thing I wanted to just pick out and highlight. Some 3 years ago, we set off on a journey of transformation under Frank's leadership, and he set some quite stretching and ambitious financial goals for the business on return on sales and return on capital employed. And I'm really proud and delighted that the business is now at a level of performance and achievement where we are meeting those goals. You'll see some more detail on that as we go through. As we're now moving into the next phase of our strategy where we're seeking growth on top of that stable platform that we've now delivered, it's important to remember that we will continue our focus on cost discipline. We'll continue our focus on capital discipline and we'll continue our laser focus on operational effectiveness and operational performance. And those are the underpins for our future success. I think with that, I'll hand over to Frank to take us through the presentation. Frank Doorenbosch: Thank you, Joe. So yes, good morning, and thank you all for joining us. As Joe said, I'm Frank Doorenbosch. I'm the CEO of Carclo. And today, we are presenting our half year results. And besides Joe, I'm also very pleased to say that we have delivered on our projection. So through the agenda, this morning presentation will have 3 parts. First, I will take you through the journey, the transformation we've executed over the past 3 years. Ian Tichias, our CFO, will then walk you through the status, the financial results and what they mean for our balance sheet. And I will close with the future, how we scale this platform further. So let's begin. When I took over the helm at Carclo in 2022, we set out to transform this business from volume to value. Three years on, the transformation is complete. We've rebuilt the portfolio. We strengthened the margins. We improved capital efficiency, and we fortified the balance sheet. This was disciplined, structured and deliberate. So let me show you what we delivered. Before we discuss financials, let me start with something more important, safety. We maintained our incident frequency ratio at 0.6 in the first half, sustaining the significant improvement we achieved in full year '25. There is a saying we use internally. Safety is operational excellence in disguise. When you perfect the art of preventing accidents, you accidentally perfect everything else. This is not just good ethics, it is good business. This culture of operational excellence flows through everything we do in quality, efficiency, margin discipline. You will see that in the numbers. So we delivered on our projections, 4 numbers will tell the complete story. 10.1% return on sales as we transitioned from volume to value; 28.8% return on capital employed to optimize capital deployment; 1.4x leverage, strengthening our balance sheet; and GBP 57.2 million in revenue via disciplined portfolio repositioning. Four metrics, one story from volume to value. So let me put those numbers in context. In '23, we have set medium-term targets that were ambitious, but we knew they were realizable in the business we are, 10% return on sales and 25% return on capital employed. We have now exceeded both 10.1% return on sales and 28.8% return on capital employed. This wasn't luck. It was portfolio discipline and operational focus. And we've done it while reducing leverage from 2.5x in FY '22 to currently 1.4x. Control before growth, that was the plan, and we delivered it. This chart shows the portfolio transformation from FY '22 to today. We stopped the Manufacturing contract, which would deliver insufficient margin when we would have started that into with manufacturing. We've also exited low-margin, capital-intensive business. GBP 13 million of revenue we have choose to walk away from. The overhaul of asset revitalization project is now behind us, and we are now moving to focus ourselves on scalable growth and innovation programs. And in the past 3.5 years, we have grown the chosen CTP Manufacturing Solutions by 4% cumulative growth rate and Specialty by 14%, both on a constant currency basis. The results versus FY '22 when we started. Our portfolio margin has expanded from 4.1% to 10.1% return on sales. Our capital productivity has quadrupled and our balance sheet leverage has improved from 2.5x to 1.4x. The portfolio reset is complete. We now focus our talent, capital and engineering capabilities on highly critical opportunities in regulated markets. So here's what it looked like across our divisions. Our CTP Manufacturing Solutions demonstrate the disciplined portfolio management and strategic resilience. In FY '23, we generated GBP 92 million from our core focused portfolio. The COVID-19 PCR testing boom temporarily inflated FY '23 results. As the market normalized, we've experienced the expected decline through FY '24 to GBP 85 million. However, this masks the real story, our deliberate pivot towards high-value life science and safety and security solutions. Since FY '24, we have delivered consistent growth, reaching GBP 19 million in the trailing 12 months half year '26. This steady upward trajectory reflects the strength of our repositioned portfolio and validates our strategic focus on sustainable, high-value market segments. The business we've built today is more resilient. It's more focused, it's more valuable and positioned for continued growth in markets with strong structural demand. And Specialty, GBP 10 million was delivered with 14% cumulative growth rate in the last 3.5 years, mainly driven by our aerospace manufacturing. The CTP Design & Engineering operates on a project basis, driving natural volatility. FY '24's peak reflected our asset revitalization program, addressing years of underinvestment across our partnerships. With operational excellence restored and margins expanded, we are pivoting to growth and innovation programs, recurring revenue streams built on sustained asset quality. We're staying on top of our maintenance to ensure we will never slip back. The portfolio is optimized for sustainable growth in high reliability precision solutions in restricted regulated markets of life sciences, aerospace and safety and security. Strategic exits are complete, low-margin. Capital-intensive business is eliminated. The result, Carclo has stronger margins, enhanced ROCE and a scalable platform for growth. That's the journey. And now Ian will take over and get you through the numbers in detail. Ian Tichias: Thanks, Frank. It is a pleasure to announce our half year results for the financial year 2026, which we believe demonstrate continued performance in line with our expectations. Starting with the overall group financial performance. On a reported headline basis, revenue has dropped, and that's something I will explain in more detail on the next slide as it has been impacted by some FX headwinds as well as comparing to HY '25, which included revenue from sites impacted by our exit from the non-core activities completed a year ago. Despite this drop in reported revenue, we have grown underlying operating profit from GBP 3.4 million in HY '25 to GBP 5.5 million this year. And alongside that, EBITDA has grown to GBP 8.6 million, which is now 15% of revenue when compared to 11% a year ago and 13% at the last year-end in March. This excellent EBITDA delivery has driven positive cash generation, which after accounting for the expected working capital outflow in the period is still strongly positive at GBP 3.9 million. Net debt now stands at GBP 24.5 million. Now I will cover the detailed movement in net debt later, but key to point out that this is now 3% lower than the same time last year. So moving to look at the revenue profile. The profile demonstrates the benefit of the hard work of previous years as we have tightened the product portfolio and focused on key value drivers across the business. We have absorbed negative FX impact of GBP 1.5 million on revenue, primarily coming from the translation of our U.S. business and the impact in the last 6 or 7 months of the GBP-U.S. dollar rate as well as other currencies from the various markets in which we operate. Within CTP, our focus has been on portfolio refinement and completing strategic customer projects. Accordingly, D&E project revenue has dropped GBP 2.9 million. As we have previously discussed, we have exited non-core primarily short-run business. The final site exit related to this was in the comparative reporting period last year. Accordingly, there is GBP 2.2 million revenue included in last year's numbers. So pleasingly, allowing for this, on a like-for-like basis, our CTP Manufacturing Solutions revenue has grown by 4.5% in constant currency. The Specialty division also continues to thrive and grow, and we report 14% growth in the business, driven primarily by the aerospace sector. As Frank has previously told you, we are delighted to deliver improved margins. This is demonstrated by exceeding the medium-term target we set ourselves a couple of years ago by hitting a return on sales of 10.1%. This has come about through consistent delivery of improved margins over time. For this reporting period, we have continued to improve efficiencies through reduced wastage, materials usage and more efficient power usage. And this focus on a more streamlined value-added portfolio has enabled us to absorb increases in labor costs and some non-repeatable costs. So moving now to look at the divisional breakdown and firstly, with CTP. So as previously described, revenue is down on a reported basis. CTP Manufacturing Solution has increased 4.5% on a like-for-like basis, allowing for the GBP 2.2 million from site closures last year. D&E revenue reduced by 44% to GBP 4 million. And as a result of the portfolio reset, we have had lower customer activity, primarily in the U.S., which has been the key driver. Performance in EMEA. Project activity is strong in EMEA with revenue up 21% compared to the previous year. We have grown operating profit due to the self-help increased efficiencies that I just mentioned. And through enhanced machine utilization, rigorous cost control initiatives, we have steadily improved margins for several reporting periods now, and this trend has continued throughout HY '26. This sees our operating margin in CTP increased from 8.1% -- 8.2%, sorry, to 13.8% and is also up from the 12% in FY '25. So turning now to Specialty. The robust demand in aerospace, coupled with a return to growth for light and motion in this business unit have driven growth of GBP 1 million, which is over 14%. The operational focus and discipline in the business has also increased operating profit margin to over 21%. So now moving to look at our cash generation. Strong EBITDA growth has driven operating cash generation of GBP 3.9 million. This has been partially offset by an anticipated normalization of working capital. At the year-end, we previously talked about working capital being particularly low due to higher-than-normal provisions and accruals, and this has largely been unwound as we anticipated. And accordingly, working capital is now at 7.5% of revenue. This is at the higher end of the range we have previously talked about and should now be at a normalized level. Looking at net debt. This has dropped to GBP 24.5 million on the next slide, please. So this has now dropped to GBP 24.5 million when compared to a year ago. In comparing to the year-end balance of GBP 19.2 million, it has increased, and this is primarily due to the one-off pension deficit recovery payment made in April '25 of GBP 5.1 million. This payment was made as part of the refinancing arrangements we completed in April. Our new facilities with our lending partner, BZ is working very well, and we are very pleased with this arrangement. Moving now to the topic of the pension scheme deficit. At the last results presentation, we discussed how we are being proactive in managing the deficit and acknowledging that the subject of the deficit has previously been somewhat ignored. I think it's important to acknowledge the significance and also the actions we are taking with a proactive approach to reducing the deficit. We are aligned and work collaboratively with the trustees, which is vital to managing the position and reducing the technical provisions deficit. Since March '21, the deficit has reduced from GBP 83 million to GBP 61 million at the end of March '25 and further reduced to around GBP 53 million at the end of September. This has been achieved through a combination of higher investment returns and company contributions. Having a clear and agreed deficit recovery plan is important in derisking cash flow for the company. This chart shows that as we have continued to deliver performance, growing EBITDA, we have also been able to manage the risk more closely, seeing pension administration costs come down and accordingly, the cash cost and risk to the business has reduced. We will continue in our approach to further derisk the company cash flows. So finally from me, in summary, the business is more financially resilient. We have a stronger balance sheet with well-managed working capital and net debt. Delivering higher margins is now a solid trend, supporting good quality of earnings, and we continue to make sure our assets deliver more for the business. Thank you very much. I'll hand back to Frank. Frank Doorenbosch: Thank you, Ian. So you've seen the journey. You've seen the status. Let me now show you how we scale from here. Next slide, please. This pyramid shows our strategic road map. The foundation is complete. You saw the proof in Ian's numbers, financial resilience, operating excellence. And that foundation gives us the platform to move into Phase II, disciplined expansion and Phase III, innovation. From control to growth, that's where we are now. Let me show you the markets we are targeting. We're positioned in 3 high-growth, highly regulated markets. The IVD solutions, so our diagnostic consumables, we partner with 6 of the top 10 IVD OEMs and the market is growing with 5.6% cumulative growth rate between now and 2030. Drug delivery, auto-injectors and inhalers, custom solutions with regulatory excellence, the market is growing at 10.8%, which is the fastest of the 3 and delivering good opportunities for us. In aerospace, for our extreme performance parts, we are the leader in the [ MRO ] cables and wires, and we're adding machining to our portfolio. The market itself grows at 5.6%, with our additional machining portfolio addition will bring us to the high double-digit growth. We've got 3 restricted regulated markets. We've got strong positions and we've got structural tailwinds. And we're focused on where we have competitive advantage. So why do we win in these markets? Three reasons: technology, trust and transformation. Technology. We've got 40-plus years of precision engineering experience. We've got ISO 13485, FDA and AS9100 registered sites and our manufacturing platform now delivers 85% plus overall equipment efficiency. Trust. We partner with key players in all these respective markets. Our average relationship tenure is 15 years plus. And with 98% plus on-time delivery performance, we also there deliver on our commitments. Transformation. We've delivered it. 10.1% RoS, nearly 2.5x FY '22; 28.8% ROCE, 4x '22. And we've approximately invested GBP 14 million in the period FY '22-FY '25 to uplift our organization. So technology validates us. Trust creates stickiness and transformation proves execution. That's our competitive advantage. So we are now investing to widen our competitive moat through proprietary innovation with 3 priorities. The technology platform, for example, the C-Mould, our new modular tooling system, which accelerates time to market for our partners by 40%. We build it once, we deploy it globally. It's scalable capitation and replicatable region to region. In product innovation, working on an inhaler platform, which integrates counter and reusable holder. And on material development, we're managing wettability tuning for fluids. It's platform-led solutions for regulated markets. And digital intelligence. Our platform [ Syncura ], will be a digital layer for packaging and devices, real-time orders ready and traceability. So innovation isn't an idea. It is a system and our begins long before the product. We're building defensible IP that compounds our competitive advantage. So let me bring this together and why we are confident in delivering sustainable profitable growth and ensuring value for all stakeholders. Again, we've achieved the milestones set in 2023. 10% return on sales, target met; 28.8% ROCE, target exceeded. Recent highlights reinforce confidence. Safety culture is embedded with an IRR of 0.6. We've got a 5-year contract renewal from our major customer secured in July. We've got GBP 36 million in financing funding arranged in April. Now we're focused on 3 growth priorities: Life Sciences expansion, advancing our presence where high-precision solutions remain in robust demand. Specialty growth, sustaining the momentum in Aerospace with our Specialty division and further margin enhancement, continuing the journey from volume provider to value solution partner. So yes, we are confident in delivering sustainable profitable growth and ensuring value for all stakeholders. So thank you, and we're happy to take your questions. Jonathan Oatley: Thank you, Frank. I'm slightly disturbed that I don't have any questions showing on my system. Can I just check? Hold on. Let me refresh and see if it comes through. We do have one question coming from Chris. And the question is for the full year -- looks like this one is for you, Ian. Will the full year accounts include distributable reserves? Ian Tichias: Well, I'm not going to be in a position to forecast our numbers for the full year. So it's quite difficult to actually answer that directly. But we are confident in terms of how we are performing at the moment and confident in delivering our full year numbers. Jonathan Oatley: Okay. Another one just coming from Andrew. In previous presentations, you reported on the improving trend in environmental sustainability for the group. Seeing that nothing is included this time, I wonder if you could provide an update? Still with you, Ian. Ian Tichias: Yes, happy to take that. So we do tend to focus on that in our full year results. But I can kind of talk to the fact that we measure our energy intensity ratio, which is a measure of our carbon emissions per GBP 1 million of revenue. That's consistently dropped in the last 3 years. And actually, the reporting period now for HY '26 shows a continuation of that. So we're at 76.4 now, which is actually a 25% reduction from the number of 3 years ago. Jonathan Oatley: I'll just allow another minute or 2 to see if anybody has any further questions. There's nothing else showing on my screen. Ian Tichias: I can probably just add to that, actually. We are also in the process of establishing a governance structure for our ESG and our sustainability targets. And as I said, we'll report more on that full year. Jonathan Oatley: Okay. I think if we have no further questions, Frank, do you want to say a couple of words to wrap up, just to summarize? Frank Doorenbosch: Yes. I'm extremely proud to be -- being part and coaching the journey of this team. We've got a very, very motivated team to change in this organization. We've been able to keep ourselves focused and disciplined. And at the end, people are now focused on the growth. We now restructured in the right way, got the right platform. We've done it in 2.5, 3 years. That was within the plan. We always said medium term to get somewhere. I know people were very skeptical in the beginning, but we said the returns were there now. I think we are return-wise roughly where the market asks us to be. And now it's for us delivering the growth in the future. Jonathan Oatley: Thank you very much. Thank you, everybody, for joining. We hope to see you all in just over 6 months' time when we're doing the full year results. Ian Tichias: Thank you very much. Frank Doorenbosch: Thank you.
Masahiro Hamada: I am Hamada, Group CFO of Sompo Holdings. Thank you for joining our earnings call despite your busy schedule. I will go through the first half results and the full year earnings forecast for FY '25 as well as the shareholder return, all of which we disclosed today. Please turn to Page 3 of the presentation. This is the executive summary. First, the overview of the FY '25 first half results. Driven primarily by a decrease in nat cat in Japan and globally, profitability improvement in domestic P&C business and strong net investment income overseas, adjusted consolidated profit increased by JPY 78.1 billion year-on-year to JPY 247.4 billion. Next, the full year FY '25 earnings forecast. Based on the first half results, adjusted consolidated profit for the full year is revised up by JPY 77 billion from the initial forecast to JPY 440 billion. Although direct comparisons are not possible due to our transition to IFRS accounting this fiscal year, we expect to significantly surpass our previous record high profit. Last but not least, shareholder returns. The total shareholder return for the first half of FY '25 is JPY 145.5 billion, including JPY 77 billion of share buybacks. For the full year, in addition to the upward revision of adjusted consolidated profit, the plan for the sale of strategic shareholdings has also been revised up from JPY 200 billion to JPY 250 billion. Therefore, the total shareholder return comprised of the basic return and gains on strategic share divestitures is expected to be approximately JPY 250 billion, JPY 26 billion higher compared to the initial forecast. I will elaborate on these 3 key points on the following pages. Please turn to Page 4. The JPY 78.1 billion year-on-year profit growth was driven by profit increase of JPY 54.7 billion in the domestic P&C business. Compared to last fiscal year with significant hail damage, we had fewer major nat cat in the first half of this year. Improvement in the base profitability of fire insurance, thanks to the rate revision implemented in October 2024 as well as strengthened underwriting also contributed to the profit growth. The profit also grew for the overseas business by JPY 20.7 billion. Similar to the domestic environment, fewer natural disasters and increased investment income driven by growth in assets under management contributed to this profit growth. On Page 5, let me explain the upward revision of FY '25 full year forecast. Full year adjusted consolidated profit for FY '25 has been revised up by JPY 77 billion to JPY 440 billion from the initial forecast. On a year-on-year basis, it is to be a significant profit increase by JPY 116.3 billion, renewing record high both on a consolidated basis and for all business segments. Based on first half results, second half forecast has been revisited with a certain level of conservatism. On Page 6, I'll explain shareholders' return. As to interim shareholder return for FY '25, dividend per share is JPY 75 as initially forecasted, totaling JPY 68.5 billion. Share buyback with basic return and sales gains on strategically held shares combined amounts to JPY 77 billion. Full year shareholder return forecast for FY '25 is expected to be JPY 250 billion, up JPY 26 billion against the initial forecast, driven by increase in adjusted profit and increased reduction of strategic shareholdings. Lastly, some supplementary explanation on domestic P&C and overseas insurance. Please look at Page 7. First, let me explain domestic fire insurance. Fire insurance, even without favorable nat cat experience, it's showing strong improvement driven by rate increases and enhanced underwriting. Loss ratio of fire insurance for FY '25 full year without nat cat impact is expected to improve to 32% by 4.3 points year-on-year and by 2.4 points against initial forecast. Impact from last year's rate revision and underwriting enhancement is expected to continue and the positive profit is becoming well established. Meanwhile, motor insurance excluding nat cat impact remains in a different situation. Given the first half results, the assumption for the second half had been revisited and reflected in forecast. As traffic volume increased, rate of accident frequency in the first half FY '25 was up 0.6% year-on-year against the initial forecast of down 1%. Accordingly, full year forecast has been revised up to the level of the first half results. Unit repair cost in first half FY '25 was up 7% year-on-year, mainly driven by price hike of auto and its parts due to higher performance as well as inflation. Accordingly, full year forecast has been revised up to the level of first results. In January, auto insurance rates will be revised up by 7.5% on average. This revision has factored in higher-than-expected rate of accident frequency and unit cost, meaning midterm, our outlook for profitability improvement remains intact. Lastly, supplementary comment on overseas business. Currently, rate environment is becoming softer, but insurance revenue increased in all segments, namely commercial reinsurance and consumer, driven by geographic expansion and other growth strategies. Combined ratio is expected to be on a favorable level with certain level of prudence included. With that, I end my presentation. Long-term management strategies, including progress on MTMP will be explained at the IR meeting scheduled on November 25. Thank you for listening. Operator: So the first question is from Mr. Muraki of SMBC Nikko. Masao Muraki: This is Muraki from SMBC Nikko. My first question is on Page 5. So you show the breakdown of the upward revision that you made. And on the right-hand side, you see the factors. Of these, what are not one-off? And what will still prevail as you plan for next fiscal year? Unknown Executive: Thank you for the question, Mr. Muraki. So regarding your question around the factors driving the upward revision for this fiscal year, which will remain for next fiscal year? So first, with the domestic P&C business, compared to the initial plan, the upward revision was JPY 59 billion. As you can see on Page 5, lower natural catastrophe and larger loss experiences are going to be absent next fiscal year. So it will be adjusted to the normal year level. And for the higher investment gains at the outset of the year, we normally make conservative projections for the net investment income. So in that sense, most of this factor would also be taken out for next fiscal year. On the other hand, for the improved profitability for fire and casualty lines, as Mr. Hamada explained earlier, the improvement was driven by rate revisions and also stronger underwriting capabilities. So these positive factors would remain next fiscal year. And also, it is not indicated on the slide, but for the auto loss ratio, recently, it has been deteriorating. And compared to the initial plan, we expect the downward pressure to be JPY 3 billion on an after-tax basis. But as Mr. Hamada explained earlier, in January of 2026, we plan to execute rate revisions. And also with the following rate revisions, we aim to offset this negative impact. So the deteriorating loss on the auto policies will be absent next fiscal year. And moving on to the overseas insurance business. This fiscal year, we revised up the forecast by JPY 20 billion from the initial plan due to multiple factors. But most of this will not be remaining for next fiscal year. Specifically, this fiscal year, we are also benefiting from lower natural catastrophe overseas, and this will normalize for next fiscal year in our projection. On the other hand, the upside on the net investment income is stemming from the growth of the asset under management. So the positive impact on the investment side will remain. And for the insurance business, other than the nat cat risk, the change in the portfolio mix is impacting the profitability. And assuming that this portfolio mix will be similar to that of this year, this impact would also remain. So as a result, for the overseas business, the upside for this fiscal year will mostly be absent, and we expect to see growth without the one-off upside we saw this year. Masao Muraki: My second question is in a follow-up to my first one. So regarding achieving the ROE target for next fiscal year, can you update me on the necessity of adjusting the capital? Looking at Page 16, you have 10 points impact by the sales of the stocks sold by Sompo Holdings. And I assume that you have sold a lot of the Palantir shares. ESR is going up, but the base profitability is improving, and you would also get profit contribution from Aspen. So should you be able to still achieve that 13% ROE target without the capital adjustment? Or do you need to make that adjustment? Masahiro Hamada: Yes. Thank you for the question. So this is Hamada, and I will be responding to that question. On Page 19, we show the full year ROE target for FY '25, which is a first line on the table. Initially, we were expecting 10% ROE for the end of this fiscal year, but it has been revised up to 11.5%. But as we explained, there are many one-offs, primarily the nat cat impact. So when normalizing this, this 11.5% will be pushed down by a little over 1 percentage point. Also on a normalized level, the ROE for this fiscal year will be a little over 10%. And then we will have the Aspen impact and also improvement of the profitability. And with that, we can expect the ROE to be boosted by roughly 2%, but we will still be short of the 13% target. So beyond what I have explained, we are still considering this. So these are not fixed. But we have a few options. We can keep the current 13% target. And if it seems not doable, we may decide to adjust the denominator. Or as you said, this year, we have been actively selling our Palantir shares. And this is because the Palantir market cap increased significantly. And by selling our ownership, we saw some inflation of the denominator, which we were not expecting at the beginning of the year. So that has a negative impact of 1% on the ROE. So we can set the target for ROE, excluding this factor. So that will be a feasible option to consider. So leading up to the end of the fiscal year, we will discuss this matter in the management meeting. But having said all that, we cannot say that we do not need capital adjustment. We may need that or we may not need it. We cannot be too optimistic about the outlook. So we will continue to strive to build up both the denominator and the numerator. Operator: Next question is from Tsujino-san of Bank of America Securities. Natsumu Tsujino: So this time, you have revised the domestic business. As to fire insurance, profitability has been improved, while auto insurance is worsening. But fire has been performing well. So as Page 7 shows, well, this is the comparison with the previous year. On a full year basis, I don't expect that the comparison between first half basis, any case, the fire is getting better, auto is worsening. So I think that the similar trend that might be in the first half as well. My question is, to what extent auto has been worsened, maybe JPY 3.5 billion, as you mentioned earlier, and the improved profitability of fire insurance, that would have some impact in the next fiscal year. And in addition, auto insurance is going to be better -- should be better next year. Could you please give some color on that? Unknown Executive: Tsujino-san, thank you for the questions. First, about auto insurance, as you have pointed out correctly, increases in unit repair cost or in rate of accident frequency, some elements are behind the initial forecast. For the first half of the year compared to the previous year actuals, auto insurance losses have been aggravated by about JPY 2 billion after-tax basis. Given such situation on a full year basis, the worsening of about JPY 3 billion against initial forecast is expected. Meanwhile, as to auto insurance, in January next year, we are going to revise the rates and the rate increases will have full year impact for FY 2026. So while factoring in the shortfall against the initial forecast, we would like to make good catch-up so that we are going to achieve the earnings level expected for auto insurance in FY '26. With respect to fire insurance, its base profitability has been improving at every maturity. As a result of rate increases and other underwriting enhancement measures, we have been accumulating those efforts, and we are seeing good results this year. As you know, fire policy periods range from 1 year to 5 years. At every maturity, we will continue to improve our profitability. And we would like to make it sure that we are going to see good impact next year and beyond. Natsumu Tsujino: So my next question is, you have revised down the large losses. But without it, to what extent the business -- fire business has been improved. Large losses this time for this fiscal year, on a pretax basis, we assumed JPY 30 billion at the beginning of the year. Given the results of the first half, we changed it to JPY 26 billion. So after-tax basis, it's about JPY 3 billion add-on on the results. But as to this add-on, for example, as Page 5 shows, it will be included in the very first one, nat cat and large losses experience. And other than that, we have other elements such as the fire insurance, casualty, improved profitability and that impact will be felt next fiscal year. Operator: So next is Mr. Watanabe from Daiwa Securities. Kazuki Watanabe: Yes. This is Watanabe from Daiwa Securities. I have 2 questions. My first question is your thoughts about the sales of the Palantir stocks. Hamada-san, you have always said that you would like to use the proceeds of the Palantir share sales for M&A. So have you sold the Palantir shares this time to fund for the Aspen M&A? Or is it because the share price has gone up and the risk has also gone up? So that's why you decided to sell your stake in Palantir? Masahiro Hamada: Yes. Thank you for that question. My answer will be both. The share price has been rising significantly. And we are managing the exposure by setting an upper limit vis-a-vis our net asset value, and we have the opportunity. So we thought this was a golden opportunity. And we sold roughly 50% of what we owned. Kazuki Watanabe: I see. My second question is regarding dividend policy. In the Aspen M&A conference, you mentioned that the level of DPS may go up. But this time, you have not changed the dividend outlook. So if we were to raise the DPS, is it going to be happening from next fiscal year? Masahiro Hamada: Yes, like you said, we have not yet closed the Aspen deal, and we don't know the timing for that exactly. And we expect the profit contribution to be happening mainly from FY '26. So that's when we would like to raise the EPS. But other than that, we did revise up our outlook. So we discussed about the dividend. And basically, as we have been explaining, we basically do not want to lower the dividend and would like to raise it, reflecting our fundamental earnings capability. But this time, the upside mainly came from more moderate nat cat. So we decided not to change the dividend, and we would like to consider hiking the dividend next fiscal year. Operator: Next question is from Sato-san of JPMorgan Securities. Kazuki Watanabe: My first question is about Palantir and its size. So according to earnings report and looking at consolidated statement of changes in equity, I understand that you have transferred JPY 250 billion from investment in equity instruments to retained earnings. And you have about after-tax sales gains of JPY 90 billion from the selling of strategically held shares. That means about JPY 150 billion, the post-tax capital gains by selling Palantir shares. And earlier, you talked about the possibility of reusing those gains for Aspen. And as you explained at the time of the Aspen acquisition, there was some -- the investment profit loss in the funding, and you assumed about JPY 15 billion. Is there any expectation that this -- the loss can be alleviated or be less? Unknown Executive: Thank you for the question. And I cannot talk about details about any individual shares, but it seems that you have read correctly. And you're right about the first -- second half of your comments. When we were considering to acquire Aspen, of course, we did not think about how much we should use the capital gains from Palantir shares for the acquisition and so on. So we just set the rough percentage of the acquisition amount. And so based on that, I would say that the investment profit loss actually will be less than expected. Kazuki Watanabe: My second question is about domestic fire insurance and its improved profitability, especially when you look at expense ratio, in your plan, you originally assumed about 30% for fire insurance, if I remember correctly. But now I think it has been reduced, looking at Page 28. So original 30% expense ratio is now at 28.3%. And on an absolute amount basis, it has come down to some extent. So what kind of initiatives are involved there? Unknown Executive: Sato-san, thank you for the question. The expense ratio of fire insurance, well, initially, at the beginning of the year, we assumed about agent commission, and we were rather on the conservative side in assuming the commission level. But given the actuals, given the current status, what things are in a very favorable status and we have made revision. Kazuki Watanabe: I think it was part of your strategy to revisit the relationship with your agents. It's not that it is behind this revision. It's not emerging yet in this fiscal year. Am I right? Well, in that sense, I would say that the agent commission included, we are now working on the overall relationship with agents. And part of it is included in here as well. Operator: Next, Mr. Takemura from Morgan Stanley MUFG. Atsuro Takemura: Yes. This is Takemura from Morgan Stanley MUFG. I have one question, which is about how you think about ESR. So I am looking at Page 16 on the presentation. And you have indicated the impact of the Aspen deal, which is pushing down the ESR by roughly 30 percentage points, and you stand at 250.6%. So without the Aspen deal, it would have stood at 280% approximately. And moving on to the next slide on Page 17, you show that you have JPY 5 trillion of adjusted capital and risk amount of JPY 1.7 trillion. So the simple math keeps me 294%. And there's a difference of roughly 14 percentage points. So other than the Aspen deal, are there any factors that will be impacting the ESR? Unknown Executive: Yes. Thank you, Mr. Takemura. So regarding how we think about ESR, as we indicate on Page 17, and as you pointed out, we showed the adjusted capital and the risk amount. But this is a rough calculation, and we round down the numbers. So there is some gap between the simple calculation and the actual ESR, and that is the primary reason for that deviation. Atsuro Takemura: Also, you have sold some of the shares in Palantir. And even with that, the ESR will be in excess of 250%. In managing ESR, I'm sure that you are looking inorganic opportunities, including the one for the domestic well-being business. So a certain level of excess over 250% is going to be something that you will tolerate. So should we expect the ESR to be in excess of 250% to a certain extent? Masahiro Hamada: Yes, this is Hamada speaking. As we set the upper limit, we recognize that our ESR is in excess of that upper limit. And the reason we set the upper limit is because we want to achieve and manage the ROE. So we look at how is the ROE level and also how we strike balance between investment and shareholder return. So with that in mind, we deal with the capital that is in excess of the upper limit. Operator: Next question is from Sakamaki-san of Mizuho Securities. Naruhiko Sakamaki: Here is Sakamaki, Mizuho Securities. I have 2 questions, one for domestic business, another for overseas business. Starting with domestic business. I'd like to ask about combined ratio of auto insurance. Like fire insurance, expenses are lower than your initial forecast. Initially, you also assumed increase in systems investment expenses. So rate revision, agent commission and systems investment, all included. Could you please talk about profitability of auto insurance business? And if there's any time lag of booking for systems investment, could you please talk about that, too? That's my first question. Unknown Executive: Sakamaki-san, thank you for the question. As to expense ratio of auto insurance, here, the factors involved are more or less the same as factors for fire, namely the agent commission ratio, the contribution is significant there. And as to systems investment and other nonpersonnel costs and any potential time lag, well, things are moving on in line with the plan and the size or the amount involved remains unchanged from the initial forecast. Naruhiko Sakamaki: My second question is about overseas business. I would like to know more about the actual real performance. As to combined ratio assumption without discount, initially, it stood at 95%. It is now 94.9%. So the difference is only 0.1%. But the nat cat, the impact was revised down by $200 million. So maybe there are other factors which were actually worse than initial factors? Unknown Executive: So combined ratio without the discount, as we touched upon earlier, this fiscal year, the rate level and the contract terms, we are looking at those elements, and we are making a shift in our portfolio mix to casualty line. As to casualty line, for example, compared to property line, volatility is very low, while the expected loss ratio is a bit high. As a result, when combined ratio without the discount impact is in line with the initial forecast. The major reason there is the changes in the portfolio mix. So going forward, base loss ratio might go up, but the volatility will be less going forward. So compared to initial forecast, more changes in the portfolio mix. Operator: Sakamaki. So next, Mr. Sasaki from Nomura Securities. Futoshi Sasaki: Yes. This is Sasaki from Nomura Securities. I would like to ask 2 questions. First, on the improvement of the profitability for the domestic fire business. Is the magnitude of the profitability improvement going to get larger next year? My second question is regarding Page 56 of the presentation deck. You mentioned that for the overseas insurance business, the combined ratio compared to what you presented from the FY '24 results, the combined ratio projection seems to have been raised. Is it because the business is deteriorating from the original plan? Or is it because of the change of the portfolio mix that you explained earlier? Or is it both? And also, generally speaking, listening to the global insurance companies, they talk about the impact of the softening market. So looking at the Q3 and beyond and also for next fiscal year, what is your outlook for the overseas underwriting profit? Unknown Executive: Yes. Mr. Sasaki, thank you for those questions. First, regarding the improvement on the profitability of the domestic fire business, and is it going to be sustainable? As we explained earlier, as the policies are rolled over, we will see improvement in the profitability. So basically, this benefit will continue to be observed next fiscal year. But of course, the policies needing such improvement within our total portfolio will get smaller in terms of the proportion. So in that sense, if we look at the improvement year-over-year, the magnitude would be more moderate. And regarding your second question on the overseas combined ratio, like you mentioned, this is mainly because of -- due to the change in the portfolio mix and the impact is bigger than initially expected. Futoshi Sasaki: I have a follow-up question. So now looking at the same risk base or risk amount, do you see any lines of business where you see a big downward pressure on the rate? Or do you not have much visibility? Unknown Executive: Your question is around the overseas premium rate. Is that correct? Futoshi Sasaki: Yes, that is correct. Unknown Executive: Yes, I will take that question. It varies quite significantly depending on the line of businesses. As you know, for the property policies, we see softening of the market. On the other hand, for the casualty products, especially for the excess layer products, we continue to see relatively high rate. Also, we still see some hardening of the market. Also, we will underwrite in a selective manner to build a profitable portfolio. So that is what we have been explaining as a change in the product mix. Operator: Next question is from Majima-san, Tokai Tokyo Intelligence Lab. Tatsuo Majima: I also want to ask about fire insurance. So-called 2025 problem has arrived. It used to be like 30-year maturity, now more and more policies renew every 10 years or so. So from September '25 through September '26, during that 1 year, I think there will be more renewals than normal level. But that impact has not been factored in yet? That's my first question. The second question is about fire insurance premium. It seems that the premium is increasing faster from the first quarter to the second quarter this year. Is it because of some large policies? Or is it the phenomenon observed every year from first quarter to second quarter pace up in increase in premium? Unknown Executive: Majima-san, thank you for the question. As to your first question, fire insurance loss ratio and the impact of massive renewals coming up, if it is factored in or not. As to fire insurance loss ratio, as you know, denominator is insurance revenue or earned premium. And so -- as to massive renewals, basically, on a written basis, the renewals are expected to increase during this 1 year that you mentioned, but it would not give big impact on base loss ratio. As to your second question, fire insurance and its premium, you said that maybe there's some acceleration of the pace in the second quarter. Well, that is actually a phenomenon, which is unique for IFRS. In the first quarter, the insurance, the revenue was booked on the smaller side than the larger side. And in July to September period, usually partly because of nat cat, the fire insurance losses tend to be larger. So in the second quarter at IFRS because of this seasonality, insurance revenue tends to be booked larger. So it's not that there's some special factor or some unexpected against the plan happened. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Peter Podesser: Good morning, ladies and gentlemen, and thank you for joining us in this call presenting our Q3 and 9-month figures as well as an overview of the business right now. Together with Daniel, we will lead you through all the key figures, but also key facts relevant to the 9-month period right now, but also naturally on to the outlook. And thereafter, we will be happy to answer all your questions. No question, we are looking back to a soft quarter. We're looking back also to a challenging period here in the business. We have to say, as also anticipated as this was one of the key reasons why we saw ourselves obliged to bring down the guidance back in Q3 at the end of July. But naturally, starting with this point, I think we want to give you, let's say, a solid and concrete analysis on this. If we look at the development here in the first 9 months, we see a slower growth than originally planned in core parts of the business. And if we look into the main reasons of deviations, I think we have to start off with the biggest impact on the defense business. In India, we saw a postponement of the follow-on programs here for our EMILY and JENNY deployments -- EMILY and JENNY fuel cell deployments to the Indian Army based on a decision that was basically a repurposing of funds during this current fiscal year. We have spent quite some time in various meetings on site in India. And I think within the last 3 months, we see -- I think we see solid signs and we see, let's say, basis also for a rebound within, let's say, the next fiscal year here for the business in India, maybe not back to immediately the levels of the 2024 business, but at definitely higher levels than we see it in '25. Two additional elements here. We have signed service and repair contracts, comprehensive maintenance contracts now for all the deployments with the Indian Army, which going forward as of Q4, and we have signed them last Friday. So going forward, this is basically also covering more or less local cost and also yield a proper capacity loading here for our operation in India. And we have also started last weekend local methanol filling here as we do it in other parts of the world, North America and Asia as well. So we are also able now to provide local methanol, address also cost concerns from customers there and also see this as a basis also for the rebound. So India, the first element here of deviation this year, definitely, I'd say, volume-wise, the biggest impact. If we look at our organic growth, we also see a growing -- we still see a growing business in the U.S. Overall, in the first 9 months, we see about 28% growth, but we have to say, especially with new customers, we were expecting also based on historical growth rates, a significantly higher growth. The overall economic uncertainties have an impact on decision-making of our customers there. And therefore, we have missed out on the original plan to see growth above 40%. As said, 28% organic in the first 9 months and a corridor that we also expect until the end of the year is per se, a solid growth number, but definitely not what we had planned for and what we expected. The third element, and Daniel will dive into this, yes, we have seen 3 functional currencies, I'd say, devaluating significantly against the euro, U.S. dollar, Canadian dollar as well as the Indian rupee with an impact on sales and earnings, getting into this in a bit. If we look now into, let's say, the reaction on these developments, I think we are seeing first fruits out of, let's say, cost alignment and cost measures that we have implemented right immediately in third quarter. We are seeing, let's say, a normalization, especially on IT and ERP spending and I think also functional cost, you will hear from Daniel is, I think, an alignment on what we implemented. As also mentioned before, we are not talking about here now a significant headcount reduction at all. I think we are in a selective hiring mode here in those areas where we see growth, and we are reallocating also resources to those areas where we see growth, and we are taking capacity out in those areas where we don't see growth. If we now look into the third quarter, we have to -- we are seeing a significant increase especially on the order intake side, which also is the basis for us expecting a strong fourth quarter. We are overall seeing an increase to a book-to-bill ratio of 1.2 compared to about 0.76 in the first half of the year. And combined with, let's say, a product mix also impacted and positively impacted by a higher defense sales ratio in the fourth quarter, we see a positive impact also in the fourth quarter. If we now look also into, let's say, the next steps of implementing our strategy, I think the acquisition of a 15% stake in Oneberry Technologies in Singapore is a key element, on the one hand, for the regional expansion of the business, we are seeing Singapore as the regional hub for the expansion in Southeast Asia. The closing process is in a final phase. And besides the regional expansion, I think we have a unique opportunity here to learn and to step into a business model that is highly attractive and profitable where Oneberry is operating under a security as a service business model for their AI-based unmanned security solutions from border protection to drone defense applications and critical infrastructure protection. Overall, we have an option also to take majority ownership, and we are working actively on this as also a platform for further growth in Asia as of 2026. Furthermore, important to inform you about the U.S. operation. We are on track for the ability to do the local production to ramp up the local production in our facility in Salt Lake City. Strengthening our local-for-local program here at the end helps us to reduce exposure to import tariffs. But over time, naturally also makes us less vulnerable and depending on exchange rate and currency risks by establishing a local supply chain. Our team from the U.S. right now is here in Europe for training. And therefore, we will be ready to have a first pilot series produced still this quarter and ready for production early 2026. So overall, looking at the sales performance, we see a decline of 2.4% as said, not happy with this performance, the reasons for the deviation, the reasons for the decline, the main reasons mentioned here. If we look into, let's say, the order intake, I mentioned this, seeing EUR 34.6 million in the third quarter, we see a significant increase to the previous quarters. So the book-to-bill ratio now is up 1.2% in this quarter, and this also naturally gives us a solid basis here now for the final weeks of the year. If we look at the overall backlog here being around EUR 79 million, that is definitely significantly lower than at the beginning of the year with EUR 104 million, reflecting the weak order intake we had, especially in the first 6 months of the year. Here, I would like to also draw your attention to the fact that we naturally have a part of the business being highly transactional, which means it's kind of a rolling order book that is turned around within the quarter. And we are looking here at a ratio between, let's say, slightly below 40%, up to 50% of the revenue also turned around within a quarter. So we are looking at, let's say, this year, EUR 14 million to EUR 15 million turnaround in the quarter. So -- having this in mind also, you put in perspective the order backlog. If we look at the segments, the big impact here on the revenue and the significant impact here was mainly on the clean energy segment. The biggest segment, clean energy still is accounting for about 69.7%, so almost stable to the year before, but still here, we see a drop in revenue of about, I'd say, 2.5%. I mentioned this, the U.S. and the Indian defense business being the biggest impacting factors. Looking at the end markets there, we still have to see that the Industrial part of the fuel cell business is growing above 10%, 10.8% and the security part in this, that is basically CCTV application, civil security business is running above 15% growth. So there is an intact growth curve, I think, visible. Looking at the Clean Power Management, around 30% of the business, a decline of 2%, strictly leading back to a single project missed in the Canadian oil and gas business of, I'd say, a EUR 2.8 million business here for power products, VFDs with one customer in Canada that was basically in our forecast, but lost to competition. Looking at the clean energy business in Canada, we see also this part on a solid growth curve. With this, I will hand over to Daniel leading you through the financial results here of Q3 as well as the first 9 months. Daniel Saxena: Good morning. Thank you for dialing in. Let me go into the margins a little bit as well as the cost basis. I think as a summary, what we could say is that those negative impacts that we have seen in the first half year have continued. To some extent, they have lowered, but there was still a negative impact. I believe from the cost base, you've seen we are running rather stable in the underlying because costs are rather optimized. But let me go into that quick and highlight certain developments. So when it comes to the overall gross margin in the first 9 months, we've seen the negative effects that we also have seen in the first half year, especially with regards to the segment's clean energy, which is the less favorable product mix with a lower share of the defense revenue. We mentioned that before, that really play an essential role in the unfavorable gross margin development that we've seen since the beginning of the year. But what we also have seen now is that the customs duty that have been introduced slowly negatively impact our gross margin. Like I said, it will be unlikely that we'll be able to avoid the entire customs impact. So we -- it is not that we'll see a huge impact, obviously a slight impact from those custom duties. And then what we also see in the segment clean energy is the less favorable exchange rate with regards to the U.S. dollar and the Canada dollar. So if we compare the average exchange rates of those 2 major currencies, the U.S. dollar in average depreciated by 1%. The -- Canadian dollar in average depreciated by 4%, which has an impact on the gross margin. So the overall group's gross margin 40% in the first 9 months, which is slightly below what we've seen in the 9 months of 2024, while we had a gross margin of 41.7% and it's also moderately below the level of the previous full year margin, which was 41%. Nevertheless, we consider the group's gross margin to be on a level with which we're not entirely satisfied for a good reason. At the beginning of the year, we had higher goals and higher targets. We may not have anticipated entirely the economic turmoil ahead of us at the beginning of the year. We may not have seen entirely the development of the exchange rate, but also the development in India, all of it has an impact on the gross margin, especially with regards to the segment clean energy. It is a heterogeneous development in the gross margin, we've seen that, we have a gross margin expansion in the segment Clean Power Management, where we see the gross margin going up to 29.7% from 26.9%. So that is something that we are happy and content with. The main reason for that, the increase is basically that in both main product line in that segment. So the power management solution, we were able to implement a higher pricing also because I mentioned that in the first half year report call already, also due to our own products that we've been operating, but we've also been able to implement higher prices in the drive motor control products. So if we then look at the EBITDA margin and the key impact on those operating expenses, R&D and G&A, I think there's -- again, there's 3 major topics that we've seen in the first half year, which is the extraordinary cost for exchange rate losses. That is the IT spending for the implementation of SAP as well as making our IT overall landscape more robust. We've seen those costs, or those expenses having come down in the third quarter, but there was still an extraordinary expense in there. And what we've also seen in the third quarter is a lower rate of capitalization of R&D, which is something we've had in the first 6 months and which is also something that will unlikely change because that is pure accounting and that has also impacted EBITDA negatively compared to the first 9 months in the last year. So if we add up those 3 facts and look at the last year, make a like-for-like comparison, those 3 effects together have impacted EBITDA negatively with approximately EUR 5.5 million, which really shows that our cost basis is solid. The earning power is still there. We believe we take those 3 effects away. We know that they're there, but you'll see that we didn't do that bad. Let me dig into the exchange rate losses. First of all, so you've seen we had an income from exchange rate gains of EUR 1.8 million in the first 9 months, which were entirely offset by the exchange rate losses of EUR 5.1 million in the first 9 months. So that comes to a net effect of EUR 3.3 million, which negatively impacted the EBITDA or 3.2% of revenues. So out of these exchange rate losses that we've seen, EUR 4.4 million or 85% is unrealized losses and out of which approximately EUR 4 million are related to intercompany positions, i.e., shareholder loans and intercompany receivables. I mentioned that already in the first half year. So that's why you would not see that in the cash flow statement. Yes, we'll book it, but this unrealized losses for the exchange rate. But still it does impact our EBITDA negatively with 3.2% rather highly. The next position is the extraordinary cost for IT in the G&A expenses. These are costs relating to the SAP implementation. So in the first 9 months, the total cost has been EUR 1.9 million. They have come down notably in -- the spending has come down notably in the third quarter, but it's still over the first 9 months translates into 1.8% negative impact of the revenues on the EBITDA. We also had costs for improving our IT system that amounted to approximately EUR 1.4 million in the first 9 months, which again would then mean a 1.4% negative impact on the EBITDA. Together, if you see the amount that we really spend on IT, and yes, it's necessary, we need to make our system more robust. We need to make a step forward in higher efficiency and automation in our system. So this is not something that we're just doing for doing it. It really means making the major steps in getting our system safer, more secure, more robust, increased efficiency, also increase effectiveness of our operations. While it's a huge investment that we've seen, we'll see further investment in the fourth quarter. We also will see some of those investments still in the next year until we got the system entirely implemented. And then the third impact is the lower rate of capitalized R&D expenses. So the total R&D spending amounted to EUR 8.7 million in the first 9 months of 2025 compared to EUR 7.5 million in the previous year's 9 months. So you see a decent hike in our R&D spending. But what you will also see is that in the previous years, approximately 23% of these costs were capitalized, in the current year, we are capitalizing 30% of the cost. So on a like-for-like basis, this would also translate into a negative impact on the EBITDA on EUR [indiscernible]. To go into this really briefly, so capitalizing R&D expenses is not a choice or not an option, which we do. It is, as I mentioned at the beginning of the call, it is an accounting principle. So projects can be capitalized, certain projects cannot be capitalized. And that's a little bit depending on your R&D focus, but also what you have in the pipeline. Remember, any capitalization going forward means also depreciation, additional cost. So it's not that you're optimizing your cost, you're just pushing those expenses into the future. In any event, it is what it is, but you'll see that our R&D spending as though it has increased, it has not a huge jump that you see in the P&L and the earning power, that's why I said at the beginning, is still at a decent level. So what does it mean for the adjusted EBITDA, for the adjusted EBITDA, it means that we reached EUR 10.81 million, which, of course, is significantly with 56% below what we've seen in the previous year's 9 months. It is, of course, a factor of revenue growth of gross margin and those negative effects in the other operating costs that I just mentioned. Depreciation and amortization, you don't see a big change in there. Depreciation, EUR 5.8 million versus EUR 4.5 million, 40% of the depreciation is IFRS 16 related. So you will not see a huge change in that position going forward either. That brings us to the adjusted EBIT, which is -- came up to EUR 5 million. That represents an adjusted EBIT margin of 4.9%. That's significantly lower from what we've seen in the first 9 years (sic) [ 9 months ] in 2024. Again, we're not entirely happy with that, as you can imagine. Let me finalize with the cash flow and our cash position. Cash freely available at the end of the first 9 months were EUR 40.8 million compared to EUR 60.5 million, which we had at the end of 2024. So it's EUR 20 million lower from what we have seen. The financial debt on the other side also decreased by approximately EUR 1 million to EUR 3.1 million, which gives us a net debt -- sorry, net cash position of EUR 37.6 million, pretty much EUR 20 million below what we've seen at the year-end. Our equity decreased by EUR 1.5 million. That is due to the negative earnings. But remember, the negative earning also those nonrecurring effects with regards to the IFRS 2 and the stock option programs that are reflected. Cash flow, the operating cash flow before the change in net working capital was EUR 10.5 million. That compares to EUR 18 million in the first 9 months of the previous years. So what we see is it is significantly lower, but it's still at a good level with EUR 10.5, so it is 40% -- sorry, what we see then is the net working capital development. The net working capital increased by EUR 21.5 million. That compares to EUR 2.5 million in the last 9 months. So the working capital ratio to last 12 months net sales went up to 40% as of September compared to 25%, what we see at the year-end. So we're really trying hard to manage that working capital. It is really the inventory that we need to look at. It's really looking at the accounts receivable. The largest impact is really the increase in the inventory, which has gone up by EUR 10.3 million. That has changed the days of inventory to 237 compared to 131 at the end of the year. That is an extreme high value, and we are fully aware of that. That is something that we need to manage more actively and bring it down. We are fully aware of that. We have a lot of material sitting in there. It is mostly fuel cell components and material, which we intend to bring down in the next 6 months. So it's nothing that is going to go bad or will become obsolete. It is really material that have been acquired as bought this program. You also see a large impact on the increase of the accounts receivables. They increased by EUR 8.1 million compared to year-end. That translates into a 12-month trailing days of sales outstanding of 114 compared to 90, which we had at the end of the last year. So we see an increase in the sales outstanding. We don't see any bad receivables out there. But this is something also that we are managing actively and intend to bring that number down again towards the 90 days. Then what you also see is that the accounts payables have gone down EUR 2.8 million. That brings the payables outstanding down 52 days from 66 days So then with the tax payments of EUR 1.4 million, you'll see that the operating cash flow after net working capital and tax is becoming very negative with very negative, it means minus EUR 12.4 million, all driven by the net working capital development. Cash flow from investing activities is much, much lower from what we've seen in the last year. We are looking at EUR 2.6 million compared to EUR 6.4 million in the last year. So all those large investments that we have made last year are done and completed. So EUR 2.6 million is at a decent level. It includes, of course, the capitalized R&D. Then you see the cash flow from financing activities of EUR 2.8 million, a large portion of that is related to leases. And if you add those numbers up, you'll see a change in the cash position of EUR 17.9 million, and then we'll still have to add the exchange rate impact on our cash in foreign currency. So overall, cash has reduced, like I said, in summary, mostly net working capital. We've seen the margin decline. Still, I think we are at a good level, but not a level which we are happy or satisfied with, and we are fully aware that we need to keep on working on further implementing measures and structures to optimize especially our cash consumption. With that, I'll return it to Peter. Peter Podesser: Thank you very much, Daniel. So summarizing where we are, I think on the basis of the performance to date, also, we talked about the order backlog and also, let's say, still some, I'd say, challenging macro conditions here. We've done, I think, a concise assessment here on the year-end forecast, and we are expecting the revenue at the lower end of the target corridor that we had out there -- that we have out there as a revised guidance. We see EBITDA adjusted as well as EBIT adjusted in the lower half of the corridor that is out there for EBITDA, the corridor is EUR 13 million to EUR 19 million and for the EBIT, respectively, it is the corridor of EUR 5 million to EUR 11 million. As said, we are expecting to end up in the lower half for both ratios. So looking at this, I think after years of continuous and significant growth and increasing profitability, while you see ourselves here clearly and honestly disappointed with those results here after 9 months. We also have to be self-critical here in terms of some maybe too aggressive and optimistic plannings in some areas, especially of the top line against the macroeconomic also environment that we are operating under. But at the same time, I think we have done a thorough analysis of the situation, we also see the reasons of deviations and we have implemented clear and targeted measures. We've talked about the cost part. I think on the inventory part, yes, the defense part of the business has downsides with, let's say, longer procurement cycles. But the good thing is those products are not turning anywhere that, as Daniel mentioned. So this is naturally the basis here for the improvement also on the cash flow side to get let's say, this out of the door as fast as possible. And that's why you see ourselves here, let's say, this clearly, let's say, a realistic moat, but with all the dedication to get this back to a growth curve. And again, I think for all of us here, we have an organic growth in the business, be it, let's say, our civilian security business, be it the industrial business, we are talking here about double-digit growth here between 11% and 15% and also our U.S. business, significantly above 20%. So the expectation there is to continue on this growth path to return to a growth path in India, as I said, service contracts in place, local methanol filling, all basis also for further, I'd say, satisfying the customers' needs there. And we've been intensively working on OEM programs on the defense part of the business in Germany as well as in NATO states. And naturally, we are expecting an impact of this in the year to come. We are doing, again, our regional expansion with the investment in Singapore. We expect a growth impact out of this. We are seeing our products performing properly well also for new applications like drone charging, and I also mentioned the drone defense activity here in Singapore. So all over, yes, the situation, especially the last 2 quarters are very, let's say, disappointing. We've taken the measures now, and we are looking at a strong year-end and again, a return to growth and improved profitability here based on all the measures that we mentioned together. With this, we close our presentation and would like to open the floor for questions. Thank you very much. Operator: [Operator Instructions] The first question comes from Karsten Von Blumenthal from First Berlin Equity Research. Karsten Von Blumenthal: My first question is regarding Oneberry. You have now a 15% stake. And perhaps you could shed some light on your future activities. You have a 50% option. When and how will you try to get this option? Daniel Saxena: So we have that option to be exercised in the short term. Short term within this year, potentially beginning of next year. That option apparently, as we said, is to increase our holding in Oneberry to a majority for a fixed valuation. So this is something that we intend to do, and we put this option in there in order to exercise it. And of course, we'll have to review certain things with the business. We'll have to complete a bit more on the due diligence side, everything that is such a process and then we will likely exercise that option. Peter Podesser: If I can add here, Karsten, just to, let's say, shed a little more light on, let's say, the business model. At the end, they are engaged in long-term multiyear contracts with the Singaporean government, the pipeline they have and the backlog they have is more than 90% government business there. And this is something that we want to continue to drive, but then also replicate this model to other parts of the region and if possible, also in other parts of the world, a rental business, so security, unmanned security automated based on, let's say, significant also, let's say, AI content to, let's say, recognition parameters here. At the end, with a higher profitability than we see it in our own business. And well, having been partners for quite some years, I think we also have a good trust base there to roll this out to other areas in the region as well as in other parts of the world. Karsten Von Blumenthal: So there's a high likelihood that you will be able to consolidate Oneberry next year when you exercise the option. Could you shed some light on sales and EBIT Oneberry reached, for example, last year in 2024 that we can have an idea what will be the impact on your P&L next year? Peter Podesser: I think we would -- at this point also of the negotiations there, I think it's good to have a ballpark figure here in terms of revenue, we're looking at about EUR 20 million revenue. And as that profitability, I'd say, above our own EBIT and EBITDA level. Daniel Saxena: Consolidation -- well, let's assume that we exercise that option, let's assume that we'll get the control as defined for consolidation, then currently, let's assume that we will close that transaction, then yes, we would consolidate Oneberry from next year on. The numbers we are saying are not in IFRS to be also to make that sure, right? We're talking about Singapore GAAP [indiscernible]. Karsten Von Blumenthal: All right. That is very helpful. Next question, you mentioned the postponement in India, and you said that you expect a rebound in 2026, but not as high as in 2024. Could you roughly tell us how high revenue was in India in 2024? Peter Podesser: Well, the defense revenue in India was around EUR 12 million. And being, let's say -- now, let's say, 60% below last year's revenue, as said, is one of the major impacting factors this year. The fiscal year there ends at the 31st of March, and that's why we are, as we speak now in the assessment of, I think, the right level of -- or the right budgeting level together with our partner on site and will naturally be based on the experience, a cautious assessment for next year, but still we expect a rebound and growth based on what we have learned over the last 3 months out there. Karsten Von Blumenthal: All right. One follow-up question regarding the U.S. You mentioned that you are on track for local production in your facility in Salt Lake City. Could you shed some light on the next milestones you want to reach? So when will production start? How quick do you want to scale it up? Peter Podesser: Pilots, we have our team of the U.S. right now in Europe for training for, I'd say, still the next weeks here. And then we do the first pilot trial still in December so that everything is geared up for 2026 series production. The plan here is to have especially, let's say, our high runners, the EFOY 2800 all produced locally next year. And that's why we are looking, let's say, at a shift here from production from Germany as well as Romania to the U.S., whereas the core elements as the specs still will be mounted here in Brunnthal. So it's pretty the same exercise we did here with India, and we did with Romania in the last, let's say, 12, respectively, 24 months. So we are not reinventing the wheel here. So it's basically copying the process. Karsten Von Blumenthal: Yes, that was certainly facilitated. Could you roughly give us an idea about the value of this shift in terms of revenue for 2026? Peter Podesser: You mean end customer revenue or simply the transacted systems? Karsten Von Blumenthal: No. What -- how much revenue will you generate with the U.S., or you plan to generate with the U.S. production next year roughly, very roughly. Peter Podesser: Well, this will be somewhat above EUR 10 million because still part of the products will be shipped from here as we are not transferring the whole product line over there. We also do refurb of old EFOYs here in the market where we will not shift the entire production of this and therefore, in the first, I would say, 2 years, we will still see a mix dominated by also the old version here that is in the market. And then step by step, I think we will fade this one out and then the entire production for the U.S. consumption of EFOYs is planned to be there. And in addition, naturally, we will also have to see how the defense part of the business evolves. I think -- we were particularly pleased to be invited by the U.S. Army on the occasion of the AUSA, this defense show here a couple of weeks ago to again reengage into a fuel cell development program, and they were particularly happy about the fact that we already had prepared local manufacturing capacity there, which I think is also a big argument for us being a partner for them doing the local production also on defense over time on site in the country. Operator: The next question comes from Michael Kuhn from Deutsche Bank. Michael Kuhn: Three essentially. First of all, you mentioned OEM programs in the defense space into 2026. Is there any possibility to roughly quantify that scope already? Or would that be too early? Second question would be on the contract loss you mentioned in North America, I think, where you lost versus a competitor. Was that a fuel cell competitor? Or was a customer there going for, let's say, a different technical solution? And last question would be on working capital. I think you talked about a 6-month time frame to reduce that. So just to confirm that and maybe get a confirmation on, let's say, that working capital won't dramatically change over the course of the fourth quarter. Peter Podesser: First, OEM programs in defense. I think with, let's say, all the experience we just are undergoing, yes, we are a little hesitant now to come out, let's say, with numbers on those programs that are still work in progress. What we see today is that, I'd say, with a very, let's say, favorable financing environment based on all the political decisions, we also see that still capacity, the capacity on the administrative part of the purchasing or procurement part, but also the capacity in, let's say, some of the OEMs manufacturing capacity is a limiting factor. And we, let's say, therefore, expect all this to happen, let's say, in 2026. Part of it, I would say, on the earlier part of '26. But I'd say the visibility at this point in time is not at the point where I would feel comfortable to, let's say, put numbers out. We are looking at programs in Germany, but we are also looking, as you recall, we have, let's say, this also partnership here with Polaris on where, let's say, our products are under a NATO procurement contract. So we know that this program, the tender has been awarded here to Polaris, but we have not been, let's say, informed about individual numbers here out of the different countries participating. And I think the same thing here now with our German program. We are working on it as soon as we have more clarity, even if this is still before Christmas, we would be, let's say, able to share this. On the contract loss in Canada, we are talking here -- we are not talking about the fuel cell business. So it is, let's say, on the power management side, where we are integrating VFDs where we are integrating equipment also from ABB, and this was a loss based on, let's say, tough pricing here with an oil and gas OEM. At the same time, I think we also see, let's say, that's a competitive market. So it's -- but it's the single reason for, let's say, seeing a deviation from the original plan here. Otherwise, in the, let's say, Canadian oil and gas business, also especially on the EFOY side, we are still on our growth plan. And the third question, I would hand over to Daniel for answer. Daniel Saxena: So with regards to the working capital, yes, there are 2 positions that we're really working on, as you rightly said, the first one will be inventory, bringing inventory down. That, of course, is a function apparently of selling and manufacturing those fuel cells because the largest part of the inventory increase, as I mentioned, is in the German entity and happening in Germany. So that is really our intent to get back to a normalized level, which would be looking at what we had at year-end. One impact that is -- one factor that is negatively impacting our inventory is the platinum pricing. Remember that a large part of our membrane is platinum that has been -- the price has increased significantly in the last 9 months to all-time high, I think the highest thing I've seen for a couple of years. The amount of platinum that we have in our inventory is over EUR 1 million. So of course that and we tend to buy platinum when it's at a low price or relatively low price. And then we intend to buy an amount of platinum that covers us for at least 2 to 3, sometimes 4 quarters. That is really making sure that we can lock in the cost. That will have an impact on our inventory, like I said, right now, we only have EUR 1 million. On the accounts receivable, yes, we intend to bring them down significantly. We expect collections. We don't see any receivable [indiscernible] write-off there. So that is something we expect to improve towards the year-end. I know you made the math with regards to revenue. So what we expect in terms of revenue in the fourth quarter. And currently, the higher revenues at the end of the quarter, the higher the accounts receivable, but everything that we have right now to turn around quickly. Operator: The next question comes from Malte Schaumann from Warburg Research. Malte Schaumann: First one is on the customer behavior. I mean, during the second quarter call, one of the reasons for the weak order intake in the first half of the year, you mentioned that especially new customers kind of hesitated to adopt new technologies, place orders, et cetera. Do you actually have in the recent weeks registered a change in the customer behavior or more or less the same U.S. tariff discussions, et cetera, and still lead to existing uncertainties? Peter Podesser: I think at the end, we see, let's say, with new customers still, let's say, hesitation out there. And I mentioned before also that the U.S. pattern of the business still, yes, seeing, let's say, a growth of significantly above 20% organically is a solid growth, but it's not at what we have seen here, let's say, historically over the last 3 years. And that's why I think we -- with the environment, let's say, not being more stable and continuing as it is in the macro part for the new customer business, we have also factored this into our year-end planning. Existing customers, I think, being -- we published a significant order a couple of weeks ago with one of our largest civilian fuel cell customers here in Europe. We see a consistent repeat business. As mentioned before, the overall CCTV part, civilian security part of the business is also above 15% growth. But the change or the decision-making to, let's say, embark on a new technology here and complementing the existing whatever battery and solar devices with fuel cells definitely is delayed with, let's say, the environment as it is. So therefore, I think we can differentiate this pretty clearly and see this also in, let's say, the customer behavior. Malte Schaumann: Okay. And then maybe kind of an early view next year or your level of confidence that order levels will -- would you expect kind of subdued order levels going into early next year and then hope for a recovery later next year? What's your visibility or your level of confidence then going into 2026, where do you see maybe increasing customer activity and where uncertainties still prevailing kind of reducing the visibility? I mean you have alluded to in some areas, still unstable situation, low visibility. But then on the other hand, you might have kind of gained some confidence in the meantime that, for instance, India will return as a major customer in defense. So maybe you can shed some light on what are your thoughts on maybe how 2026 can [indiscernible]. Peter Podesser: As you can imagine, now we are doing, let's say, a constant analysis on this and let's say, also assess, let's say, the regional part of -- or the different regions of the business and also the different end markets. And looking at where we are right now, I think we see, I'd say, this repeat part of the business on a constant, let's say, growth curve that we also would, let's say, assume as a basis, and we are also doing this in our planning right now because it's budgeting time. We are finalizing our planning rounds right now. So we are expecting, let's say, an organic growth out of this. We are seeing, let's say, signs of, again, improvement again in India, where we have this deviation this year. With this coming back to, let's say, a modest growth part, I think we are in a corridor here of mere organic part that is somewhere around, let's say, low double-digit growth. And we also do, I'd say, this analysis here on our, let's say, what we call this rolling part of the order book that is intra-quarter business transactional, where we have a pretty good view on it. As I said, this is between, let's say, 40% to 50% here that comes in and out within a quarter. So adding this all up, I think -- and then also looking at what we have, let's say, done on the cost side. We're also looking at our product pricing here based on raw materials, platinum being a big factor here. We will have to adjust this, and we are preparing for this. And therefore, I think a growth corridor just organically, as mentioned here of a good 10% is, I think, a solid ratio across everything. This does not include, let's say, a big impact also of when we look at, let's say, a larger defense program. And at the same time, we have just discussed with Karsten also the impact here of a potential majority acquisition of the Singapore business here adding up to, let's say, the planning then in 2026. Also, with the caveat, we have not exercised this option yet. But naturally, we have done this to go through this process and hopefully get to a positive end also here with our partner in Singapore. Malte Schaumann: Okay. Then Oneberry, in the press release, I think you laid out the scenario for potential significant growth in the years ahead. So maybe you can shed some more light on where do you see growth? I think you mentioned EUR 100 million potential revenue contribution. So maybe you can shed some more light on that number? And where does the growth primarily come from? And what should happen that this will materialize in maybe, I don't know what the time frame is 5 years, 5 years plus. So what are your thoughts on that? Peter Podesser: Yes. Oneberry has been very focused and fully entrenched in the Singaporean security architecture also by, let's say, family roots here of the owner of Oneberry. And also, let's say, looking where, let's say, such a family business then stays also in terms of, let's say, further investment into regional expansion, the planning of the owner here, the family owners was not to expand this and roll this out, let's say, into the region. With us being on board, this is a key element, really copying what we have -- what they have built up, integrating also our products into those security services and roll this out. And naturally, it is logical. We have done some business development in Indonesia. We have done in Malaysia and Thailand and in the Philippines. And this is, at the end, the overall business plan that we have already sketched out with them. But naturally, first of all, we need to take the next step and close the transaction and talk about, let's say, the option. And then it is initially a regional play, but we are also seeing large customers in our civilian security business looking for potential rental solutions, and we might also have to -- and be able to, let's say, copy this part or this business model here in other regions. And if we look at the, let's say, potential in, let's say, Asia, this is, let's say, what we have developed together as a scenario with the owner family of Oneberry that is also at the end, a reflection of what we see in terms of demand here in Asia, which at the end, again, is the most populous region. Time frame, yes, as you said, we are talking definitely midterm, and we are talking about a 5-year scenario. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Dr. Peter Podesser for any closing remarks. Peter Podesser: Well, with this, we thank you all for your time and interest. As always, we are at your disposal also for bilateral discussions here with Daniel, myself and also Susan. We are heading through some rough waters here. Stay with us. I think we have a solid plan ahead of us. And we have shown that we are able to, let's say, implement plans apart from naturally, not neglecting the fact that we have seen 2 very tough quarters behind us. Thank you very much.
Alan Dickson: Good morning, ladies and gentlemen, and welcome to Reunert's results presentation for the year that ended 30 September 2025. I'm Alan Dickson, the Group Chief Executive; and together with Mark Kathan, our Group Chief Financial Officer, will be presenting our results today. This is a prerecorded webcast with a live Q&A session immediately after the webcast. 2025 was a challenging year for the group as tough macroeconomic conditions and global volatility were evident throughout the year. This was specifically true in the South African environment, where as we guided in our half year prospect statement, the macroeconomic conditions remain challenging. Pleasingly, Reunert's strategy of increasing our non-South African revenues provided good results and largely offset the challenging South African environment that we faced. In South Africa, despite there being solid progress made towards improving several of the country's key structural impediments to accelerate economic growth, the real impact on the ground is yet to be felt. The key drivers of Reunert's growth, which are reflected in the macroeconomic indicators of GDP and business confidence for our ICT segment, and gross domestic fixed investment, or GDFI, for the Electrical Engineering segment, all tracked negatively through this year. South Africa's infrastructure investment specifically decreased year-on-year and fell well below both government commitments and expectations. We do, however, believe that this decrease will be temporary, but in this financial year, it fell to the extent that it negatively impacted both the Electrical Engineering segment and the overall group's financial results. Conversely, our non-South African markets have much better macroeconomic dynamics and their general growth rates remain positive. Within this operating environment, the group's businesses performed well, specifically in the second half of the year, where we delivered on the commitments that we made to shareholders at the half year results period and produced good growth in profit and built positive momentum for 2026. Although the full year headline earnings per share were down by 5%, the second half delivered a strong performance with HEPS increasing by a pleasing 6% over what was already a good second half performance in the prior year. Importantly, despite the challenging conditions, the cash flow generation of the group was strong. The group converted profit for the year to free cash flow at 128%, which was 8% better than last year and generated cash of nearly ZAR 1.2 billion, which resulted in our net cash position increasing by ZAR 207 million to ZAR 743 million by the end of the year. In addition to the financial performance, good strategic progress was made across the group, as we improved access to our key international markets and took decisive action to optimize the group's portfolio. Internationally, in total, the group secured just under ZAR 5 billion or 35% of its revenue from non-South African sales this year. The defense cluster made significant progress in entrenching their long-term market participation in the key growth markets of Europe and the Middle East. While in the Electrical Engineering segment, over 40% of the segment's revenue now comes from outside of South Africa. The group's portfolio was strengthened through the efficient sale of Blue Nova Energy, and the mergers of Etion Create and Nanoteq in the secure communications cluster in our defense business and Skywire and ECN in the business communications cluster in ICT, which were all successfully completed with the latter coming into effect from the 1st of October 2025. These mergers bolster the financial capacity of these businesses. They create quantifiable synergistic benefits and they position the merged businesses for increased resilience and accelerated growth. Shareholder value was created in the year as a strong second half performance and the good cash flow generation enabled the final dividend to be increased by 6% to ZAR 2.93 per share, resulting in a total dividend for the year increasing by 5% to ZAR 3.83 per share. Although the group's return on capital employed decreased to just over 17% on the back of the slightly lower earnings this year, it pleasingly remains well in line with the steady increasing trend that we've been delivering over the past 4 years. And finally, the 3-year CAGR in total shareholder return remained at a healthy 14% per annum despite the challenging environment. So in summary, the good strategic progress, the group's positive performance in the second half, the strong cash flows have generated meaningful momentum, and we believe this establishes the base for the group's growth trajectory into the new financial year. I'll now hand over to Mark, who will take us through the details of the financial year's performance. K. Kathan: Thanks, Alan. Good morning to everyone, and thank you for joining us on the webcast today. I truly appreciate the opportunity to present our financial performance for the year ended 30 September 2025. Before I dive into the numbers, let me highlight some of the key drivers of the macroeconomic environment that impacted the group and its operations through the past financial year. On a positive note, we have experienced an improvement in the ports and consistent electricity supply. These factors contributed to a 1% growth in GDP, albeit sluggish. The consumer price index is into a lower range between 2.7% and 3.8%. The repo rate dropped by 1% over the past 12 months. Both the rand and the Zambian Kwacha strengthened against the U.S. dollar in the last quarter of the year. On the commodity front, copper and aluminum prices remained high throughout the period. Against this backdrop of low growth, low inflation, lower interest rates and a currency strengthening, I would like to take you through the group set of results that hold testimony to our resilience. The results presented in these slides are summarized extracts from the 2025 group audited annual financial statements, which are available in full from Reunert's website under the Investor Center tab. The group's auditors, KPMG, have issued an unmodified audit opinion on these financial statements. Consolidated statement of profit and loss. This slide represents total operations. The slides thereafter will only focus on continuing operations. And the comparatives for 2024 have been represented to accommodate the discontinued operation. The performance from total operations shows a decline in the headline earnings per share of 5%, which is similar to continuing operations. The difference between continuing and total operations relates to the disposal of the discontinued operation, Blue Nova Energy, which we highlighted in the first half of the year. Management and the corporate finance team efficiently concluded the disposal on the 15th of September of 2025. The total loss incurred, including the trading loss, impairments and the loss of disposal, was ZAR 142 million. The impact of the discontinued operation was ZAR 0.64 per share on basic earnings and ZAR 0.19 per share on headline earnings. We have excluded the impact of this disposal from the continuing operations performance. Revenue from continuing operations has declined for the reporting year by 2%. The decline in revenue can largely be attributed to weak transmission infrastructure spend by state-owned entities that impacted the Electrical Engineering segment's revenue of ZAR 7.5 billion, which is 3% lower than the 2024 year. On the positive side, circuit breaker revenue benefited from exports into the U.S.A. The ICT segment's revenue of ZAR 3.9 billion was resilient given the low growth environment, and this was flat year-on-year, with operating profit down by 9% to ZAR 644 million. The 7% lower Applied Electronics revenue of ZAR 2.8 billion was primarily due to a stronger rand and lower activity in the South African market. This translated into a 21% increase in operating profit to ZAR 500 million, up from ZAR 414 million in 2024. Approximately 35% of the group's revenue now originates from outside South Africa and is spread across 5 continents. The contribution of international revenues to the group's revenue has grown since 2021. The 8% decline in profit is attributable to the drop in financial performance in the Electrical Engineering and ICT segments. This was partially offset by a strong performance in Applied Electronics' defense cluster. As highlighted in the interim results, the nonrecurring COVID-19 business interruption insurance claim receipt positively impacted the prior year's results. Operating expenses were well managed. As a result, the operating margin that was delivered was 11%. Basic and headline earnings per share for the year declined by 5%. However, when we reflect on the first half's HEPS performance, which declined by 20%, then the second half's financial performance demonstrated a clear momentum by delivering a 6% growth on 2024's second half. When you adjust HEPS by the nonrecurring COVID-19 insurance claim receipt in the year-on-year headline earnings per share performance would be more or less flat. The group continues to maintain a strong balance sheet and remains in a net cash position, which has improved from ZAR 536 million last year to ZAR 743 million. The decline in long-term borrowings arose from the net settlement of external loans of almost ZAR 300 million. The headroom of unutilized debt facilities amounts to ZAR 1.8 billion. The put option liability relates to the issuance of a put in favor of a noncontrolling interest resulting from the merger of +OneX and the IQbusiness. Furthermore, the balance sheet is strengthened when reflecting on the net asset value per share, which has improved by 1% to almost ZAR 45. The group generated more than ZAR 1.7 billion in cash from operations. Working capital remains well controlled. However, the ZAR 103 million outflow relates to the high level of revenue in the last 2 months of the financial year. Included in the reduced tax paid of ZAR 284 million is a size refund of ZAR 62 million relating to the Quince fraud transactions identified in 2020. The excellent free cash flow of almost ZAR 1.2 billion allows the company to pay a healthy final dividend of ZAR 293 per share. The total dividend for the year represents a cover of 1.6x and a total yield of about 6.6% based on a ZAR 48 share price. The group has been extremely disciplined in respect of capital spend and allocation. During the year, the group spent ZAR 225 million on capital expenditure. Of this, ZAR 130 million was for expansion projects, while ZAR 95 million related to sustenance capital. The capital spend for the year was lower than the depreciation charge. The expansionary spend was directed towards growth projects for international markets, expansion of the last mile broadband network and technological advancements. With our strong balance sheet, our significant unutilized banking facilities, our continued positive cash generation, the group remains well positioned to continue executing its strategy and generating positive cash returns for our shareholders. In conclusion, I would like to thank my finance team throughout the Reunert Group for concluding these results quite efficiently throughout this period. With that, I will hand back to Alan to take us through the segmental review, the group strategy and the group's prospects for 2026. Alan Dickson: Thanks, Mark. I'll now take you through the segmental review, which will give you an understanding of what's taken place in this year so far as well as looking forward. The Electrical Engineering segment had a challenging year as a result of 3 discrete factors: Firstly, there was negative growth in South Africa's GDFI. Despite government's commitment to drive local infrastructure investment and credible progress being made on investment into the transmission grid, rail liberalization and port infrastructure, the extent of the actual investment on the ground fell this year and negatively impacted both the South African circuit breaker and power cables volumes. Secondly, there were ForEx losses and a product mix change in Zambia. In June of this year, Zambia's currency reversed the long-term weakening trend against the U.S. dollar and rapidly strengthened, which resulted in margin degradation and foreign exchange losses at the business. In addition, the drought in Zambia last year resulted in reduced energy generation for the Zambian power utilities ZESCO. This negatively impacted ZESCO's cash flow and reduced the volumes our Zambian power cable business sold to them. Pleasingly, these volumes were replaced by exported copper rod and cable, but this change in product mix negatively impacted margins. And then finally, the third impact was the U.S.A. import tariffs on South Africa. The implementation of a 10% import tariff on South African product imported into the U.S.A. in April, which was further escalated to 30% in August resulted in an unplanned increase in cost for the circuit breaker business. The business engaged with its customer base and successfully retained the market. However, some costs could not be fully recovered by the circuit breaker business and some margin degradation occurred during this period. These 3 key challenges were somewhat offset by a solid non-South African performance. Power cable volumes remained stable, and the circuit breaker business had a strong export performance. Although there was some margin degradation, as I discussed before, into the U.S.A. market, significant steps were taken by the business and were implemented to offset the additional tariff costs and to retain the market. And these 2 actions resulted in volumes increasing year-on-year by 25%. Going forward, the U.S.A. remains a significant market for our circuit breaker business. The actions taken have ensured that the business' market share has been retained and product volumes into the U.S.A. are expected to increase. The extent of the tariff costs that we faced in 2025 are unlikely to be experienced in future financial years. Looking forward for this segment, the segment's non-South African business remains positioned for continued growth. The circuit breaker volumes are expected to retain the positive growth trajectory they've had over the last number of years and new product releases into the U.S. market will support this continued growth. The non-South African power cable volumes should increase as ZESCO now has improved cash flow and the investment into mining infrastructure in Central and Southern Africa remains healthy. In South Africa, however, the market conditions are likely to remain somewhat constrained until overall, our infrastructure spending improves. Whilst orders for the transmission development plan, or TDP, have already been received, the volumes remain quite a bit lower than desired. Pleasingly, the Eskom framework agreements for the TDP have been awarded, which will secure volumes for the power cable business as these projects accelerate. In the ICT segment, the South African market for the group's businesses remained challenging as low GDP and weak business confidence, extended sales cycles and reduced market activity. Pleasingly, the segment's performance was achieved as collectively 3 of the 4 clusters delivered a year-on-year growth in operating profit, which demonstrated good resilience and strategic execution. The business communications cluster performed well with a pleasing growth in operating profit. Fixed line minutes remained stable throughout the year and the clusters last-mile broadband connectivity solutions grew healthily. The rental-based finance cluster performed well. The clusters revenue was negatively impacted by a lower average rental book than the prior year and reduced revenues due to the lower interest rates in the country. These were, however, more than overcome by additional efficiencies delivered through the implementation of improved control systems and processes. The collections remained of a high-quality and resulted in actual bad debts being well within the normal limits at less than 0.5% of the book value. The closing rental book remained nominally flat at just over ZAR 2.35 billion. In the total workspace provider cluster, Nashua delivered a stable revenue and operating profit result despite some of the complementary revenues coming under pressure as renewable energy sales fell due to reduced load shedding in the country. The business continued its strategy of enhancing the entrepreneurial strength of the franchise channel and 2 further franchises were sold this year, resulting in Nashua now only owning equity in a large metro franchises. The decrease in segment operating profit all occurred in the Solutions and Systems Integration Cluster, specifically due to reduced spending in the enterprise market vertical. Importantly, the business restructured its cost base to align to the expected future market demand, the restructure process and all of the associated costs were concluded in the 2025 financial year. Looking forward, although the local conditions remain tight, the broad market trends remain positive and position the ICT segment for growth and an improved performance in 2026. The Business Communications cluster's merger of ECN and Skywire is already delivering synergies and the market growth on their broadband connectivity continues at double-digit levels, specifically in Skywire's underserved target markets. Nashua is likely to deliver steady growth as complementary revenues increase and stable print volumes are expected to continue. These Nashua revenues also support both the Quince's rental book and its earnings, although we do expect Quince's revenue to remain relatively stable in this low-interest environment. The new leaner solutions and systems integration cluster provides agility specifically for the consulting leg of IQbusiness and the ongoing demand for digital transformation, cloud and AI supports an improved performance for 2026 for the segment. In the Applied Electronics segment, the reduction in segment revenue was caused by the impact of a stronger rand on the cluster's large foreign-denominated export sales and reduced demand in the local maintenance and support services market. The quality of the revenues, however, improved significantly as segment operating profit increased strongly. This was driven by efficient production, improved margins and some foreign exchange gains that were made on some of the long-term export contracts. Within the defense cluster, they had an excellent year, increasing operating profit on the prior year by more than 20%. There were record financial performances that were delivered by the radar and the fuze businesses, as they executed their strong order books and delivered improved operating profit and margins. The investment into the fuse factory in prior years produced a positive outcome as increased product volume we delivered to our major customers. In the half year results, we reported that a key fuze order had been delayed. Importantly, this order was successfully delivered in the second half and contributed to the record performance. At the radar business, they secured record defense and mining sales, and the business continues to expand both its product offering and its geographic footprint. There were also good performances from the Dynamic Control business, Etion Create and the communications business, which all contributed to the strong result for the cluster. There were some foreign exchange gains that were made in the year due to the well-hedged, long-term foreign exchange positions that we've taken. The clusters revenue for the first half of 2026 is already hedged, which limits any potential foreign exchange risk. But post this period, the cluster's revenue and income will be more exposed to the strength of the rand against the euro and the U.S. dollar. Importantly, the arrangements with the South African regulatory authorities that control the export of our defense products, the ports efficiency and the availability of electronic subcomponents are operating well and are expected to continue for the foreseeable future. Strategically, the defense cluster also progressed well in 2025. We developed new fuses and these were launched successfully into the Middle East, while the completion of the radar strategic IP co-development program, that we've been sharing with you over the last number of results, will be achieved by the end of this calendar year. This achievement positions the Radar business to participate in the future large volume production orders. And in addition to that, more fuse orders are imminent. Equally importantly, the cluster also entered a number of new markets for existing products at the radar company in Southeast Asia, North America and Europe, while the communications business made its first sales into South America. Looking forward, all 3 of the defense clusters key markets of Europe, Southeast Asia and the Middle East retain their strong growth trajectories. The graph at the bottom of the slide illustrates the clusters order book as it currently stands, which is well balanced across both local and export markets. This provides a cluster with a diversified product and geography exposure and largely eliminates any product, geography or customer concentration risk. Importantly, the strong execution performance of the cluster over the past 4 years has enabled it to now bid for larger and higher-margin defense export contracts as our customers seek to secure the long-term supply of critical products and services. The pipeline for the cluster remains robust and is complemented by good mining demand and increased spending on the South African rail infrastructure. And finally, after many slow years, there is improved activity in the South African defense space, which will further boost the cluster. We retain our view that the defense clusters growth trajectory is medium- to long-term in nature. Within renewable energy, the growth continued at the group's Solar Energy business as the key metric of EBITDA exceeded the prior years, although as expected and as we've guided, the growth rate has diminished of the double-digit levels that we have delivered in prior years. The business delivered good project margins and increased the quantity of owned assets under management during the year. By year-end, owned in construction and near financial close build-own-operate or BOO plants increased by 22% to 95 megawatts. Normalized EBITDA from these plants grew positively and exceeded the prior year by an impressive 71%. The group's wheeling business, Apollo had a solid year. Shortly after NERSA awarded Apollo its trading license in October 2024, Eskom indicated that it would take the award of the trading license and the other three companies that were awarded licenses at the same time on legal review. Apollo has continued normal business operations throughout the year and Eskom's actions have not impeded the business development achievements that they have made. Importantly, Apollo is concluding its first customer power purchase agreement and this agreement secures the business' revenue-generating capability, which will commence when the independent power producer finalizes its construction. Looking forward, the renewable energy cluster will continue to grow into 2026. The Solar Energy business has a good pipeline of BOOs and its track record on project execution and cost management, protect the returns on these projects. The commercial and industrial market or C&I market, which is the Solar Energy business' target market, remains robust as high energy inflation, unreliable municipal grids and battery storage, all present longer-term support for this market. Pleasingly, Apollo is likely to commence trading in 2026 with only the successful conclusion of the IPP project and Eskom's legal challenges being the inhibitor. In 2025, the strategic initiatives of the group had 2 key focus areas: firstly, strengthening of our international market positioning, to continue the recent good growth in non-South African revenues and secondly, to optimize the group's portfolio to strengthen the financial returns and growth prospects of our assets, specifically for our South African focus businesses with a current low interest, low growth environment may continue for some time. Internationally, despite the stronger rand and the reduced revenue into Africa, the group's non-South African revenues grew again this year. The group secured nearly ZAR 5 billion in non-South African revenues, delivering a 17% CAGR over the past 4 years. This focus on increasing these revenues and entering international markets remains a key strategic focus across the group. Both the electrical engineering and defense markets remain robust, and we believe defense specifically retains its high expectations for continued strong growth. Importantly, the circuit breaker access to the U.S.A. market and an improving Zambian economy after the devastating drought of last year create increased opportunities for the Electrical Engineering segment. The second key strategic focus area was to enhance the resilience and agility in some of our key operations. This was achieved through 2 mergers of existing assets and the disposal of one. The group concluded the sale of Blue Nova Energy this year. The rapid change in the South African battery market precipitated this sale, which has been concluded efficiently with no job losses and with a result that was significantly better than we projected in our half year announcements. In the secure communications cluster in our defense area, Etion creates a nanotech merged and in the ICT segment, ECN and Skywire emerged in the business communications cluster. These 2 mergers have delivered rapid synergies, have created larger business units, which have increased financial resilience and have simplified the Reunert portfolio. But perhaps most importantly, these mergers position these businesses for stronger growth. Nanoteq's encryption technology will provide new revenue streams to Etion Create export markets and will accelerate profitability of that entity, while in the business communications, Skywire's successful direct B2B go-to-market strategy will leverage ECN's channel partners and accelerate the growth rate of their last-mile broadband connectivity solutions. So ladies and gentlemen, in conclusion, and if we offer a view to next year, the momentum created through the group's positive second half performance and strategy execution positions Reunert well for growth in the 2026 financial year. It is anticipated that the South African economy will steadily improve as the impact of the energy and rail liberalization and port infrastructure investments continues, private participation in infrastructure projects increases and the benefits of the structural improvements flow into the economy. Whilst we believe this will be a steady increase, Reunert's track record reflects that steady economic improvement results in positive operating leverage and improved financial performance. Pressure is, however, expected to continue on the South African Electrical Engineering product volumes until the infrastructure investment increases, which is not anticipated to materially improve in the first half of the financial year, although they are at least expected to perform in line with 2025's results. When it will continue executing on its strategy and will deliver growth into next financial year through, firstly, solid growth in our offshore markets in the defense and circuit breaker business. Secondly, a refocused and restructured ICT segment is set to deliver sustainable growth. And finally, our renewable energy investments are expected to grow in both asset ownership and an enhanced trading footprint. Ladies and gentlemen, thank you for your interest and attention this morning. We'll now move into the live Q&A session. Thank you. Good morning, ladies and gentlemen, and thank you for your interest in Reunert and for joining us today for this 2025 results presentation. Prior to us just kicking off of the Q&A, I'd like to just spend a minute on my transition, which was also covered in a sense that was issued yesterday. We weren't able to include it in the webcast because the webcast was prerecorded. And for confidentiality purposes, it was left out of the webcast itself. But ladies and gents, just on behalf of the Board, I just wanted to share the following key messages, and there's 4 of them, that I think should be seen in conjunction with the SENS that we issued to the market yesterday. Firstly, this is a well-planned and structured process, and it carries the full support of both the Board and myself and is a culmination of an extensive and thorough process to identify and appoint the best person for the role. Secondly, the Board has confirmed that the group's strategy, operational and financial trajectory remains consistent with that, that we've been following for the past 5 years. Thirdly, I'm deeply invested personally in the success of Reunert and the success of this transition and my arrangements with the company and with the Board mean that I will remain involved with Reunert for the next 12 months to assist in ensuring its success. And I believe in Anthonie de Beer, we've got a candidate who's got the requisite skills, track record and leadership credentials to deliver sustainable growth for Reunert and long-term value for shareholders. And I think particularly important, his value system and culture are well aligned with Reunert, and we have full confidence in him. Ladies and gentlemen, on behalf of the Chair of the Board, any shareholder who would like to meet to discuss anything in the respect of this transition, if you could please let Karen Smith know, and we'll make the necessary arrangements to engage you directly with either the Chairman himself or the Chairman and myself should you so request. So ladies and gents, the Q&A will be managed by Mark Kathan, our Chief Financial Officer; and myself. I'll sort of try and chair the questions and move them in a direction whoever is most suitable between the 2 of us to answer those questions. Alan Dickson: The first question comes from Charles Boles at Titanium Capital. His question relates to the circuit breaker business. And the question is, over the long -- medium to long term, will Reunert remain competitive in exporting these products? Do these products not become commodity items over time where Reunert struggles to compete in the export market? So Charles, where we play, particularly in the U.S. market is we actually sell into the OEM market. We don't sell into the mass market as we typically do in South Africa. We design our circuit breakers together with the OEMs for the specific application that they are looking at. So there is a long run-up while we design, develop and approve those products. Those products go into their systems. And typically, they remain in those systems for the life of those systems. So when we talk about being involved in telecommunications or 5G rollout, once we approved, we tend to remain in that system for the life of that rollout. So they are long term in nature, and they are designed into those products where we work very closely with those OEMs in that regard. And those 2 elements give us quite a significant capability or competitive advantage to remain in those areas for a long time. More generally, if you look at our circuit breaker business today, we export 66% of all the product that we manufacture. So 2/3 of our products are exported globally. The fastest growing of those markets is the U.S.A., but we export globally. And that's not a new number. We've been exporting in that nature for at least 10 years, if not more than that. And I think that gives also an indication of the sustainability of our ability to export our circuit breakers and the likelihood that we will continue to do that, both from a strategic point of view, but also from the tactical way in which we get ourselves into those markets and remain in those markets. The second question is from Rowan, actually, the second and third from Rowan Goeller from Chronux Research. The first question relates to whether we expect an acceleration in transmission projects in the coming years given the 14,000 kilometers that need to be put in place or built by 2033. The short answer to that, Rowan, is yes. But if I give a little bit of color to it, we referred in our presentation that we have received and delivered some cables into those transmission projects that were executed by Eskom this year. But these are small projects. And we would argue that these volumes in the 2025 financial year are less than 10% of what Eskom will consume when these projects get up to full scale. So we anticipate a growth from where we are now, let's call it, less than 10% of what we expect, somewhere up to about 100% for those Eskom projects over the next 2 or 3 years as they ramp up those projects and the construction phases of those continue to accelerate. The other part of that question is that Eskom will do a portion of these transmission lines and private that PPP projects will do another portion. And to date, there are no PPP projects in place. The bids for those have been delayed. They were meant to be submitted now in November. They've been delayed until the middle of next year, and then those will start to ramp up from there. So there's none of those volumes in these volumes that we see at the moment. So we see a significant ramp-up in cables to go into those transmission projects, first of all, into the Eskom-led projects and then following those into the PPP projects, which will come a little bit later on. Rowan's next question relates to the growth rates that we expect in the defense cluster over the next 3 years, given the increased global spend on the defense segment. So in terms of that, we do anticipate still steady growth in terms of that defense market. We shared with you in the presentation the distribution that we have globally of our order book at the moment, which roughly, roughly is about 25% for each of our major markets, which really gives us a broad market access. All of those markets are looking for our products and services, and we're able to sell into those consistently across the globe at the moment. So without putting too fine a number on it, 2 comments I want to make. First of all, we believe it's a medium- to long-term trend in growth in our defense business. We've got that type of sustainability in it. And we anticipate that we will be doing double-digit growth for the next 3 years at least. The next question comes from Timothy Olls from Laurium Capital. There's 3 questions he's put in. One is that segmental EBIT from other dropped from ZAR 196 million last year to ZAR 109 million this year, and he's asked for some clarity on that. We don't often give too much clarity on it, but I'm going to ask Mark if he's got something, I asked him when the question first came on. Perhaps he's got something to offer without giving too much away on it. But Mark, do you want to field that one first for us, please? K. Kathan: Yes. So Timothy, last year, the share price -- the closing share price was higher than this year's share price, which is at ZAR 53. So when we provided for the ESOP, that's the employee share plan on the BE scheme as well as on the conditional share plan, we provided at a higher share price. So this year, we had a lower share price and hence, we charged less to the income statement. Alan Dickson: Thanks, Mark. Perfect. The second question that Timothy has is what is the total EBIT loss for the renewable energy this year? And when do we expect it to break even? I'll need to do some homework. Again, we don't normally give the level of detail at a particular business unit as that. So Timothy, we'll revert back to you on that one, but not be able to share with you the exact levels of the numbers we've got. I don't have those at hand as we speak right now. And then the third question relates to the record fuze and radar performance. And the question is where will all the growth come from here? And are the higher EBIT margins of approximately 24% in defense sustainable? So there are a number of our markets where further growth comes from. So in the fuze market, there is definitely further growth, and that really comes from increased volume into more geographies. We did share with you that we have got new fuzes into the Middle East, and those haven't reached full capacity yet. And equally, we are underexposed to some markets in Europe that we are actively trying to penetrate. So those are the 2 areas in the fuze business that we still anticipate further growth. And in the radar business, a portion of the radar businesses and the radar's revenue and income in this year relates to, what we call, strategic IP co-development. And that's the development of IP and a product. And when that is approved, which will be done by the end of this year, that over time converts into a production run. And we will then benefit from that production run going forward, which actually brings run rate growth into that business. So that's the source of the growth both for fuze and radar. And then if we look more broadly across the rest of the cluster, we can anticipate greater and improved profitability still from our communications business and Etion Create on the back of improved export potential for them. So we have quite broad opportunities for growth across our defense businesses. And then with relating to the defense margins, we think our margins remain healthy. The supply and demand at the moment is such that we can price correctly. There is one element in that, that one should take cognizance of. And around about 90% of our sales this year were export in nature, and those are in hard currency, either euro or dollar based. So to the extent we have a strong rand, somewhere around about the 17 that we have now or even if it gets a little bit stronger than that, that would put a little bit of pressure on to those margins, not material pressure on to it. But just from a, call it, an analyst point of view or shareholder point of view, one should remain or be aware and take cognizance of the fact that our exports and defense are all hard currency based and the rand does play a little bit of a role on that. We tend to hedge those revenues to protect them. But obviously, when it gets very much stronger, there would be some negative impact on the margin in terms of that. We then have another question or the next question is from Myuran Rajaratnam from MIBFA. There's 2 questions. One is, is our circuit breaker business exposed to the data center market in the U.S.A.? Yes, it is. We have a couple of access points into those data centers, and it's part of the good growth that we're seeing into that market at the moment, and we expect that to continue for some time. And then also asked a question around for a group with diverse segments. If I was forced to choose, although both are important, is it more important for the group Chief Executive to be good as a technical engineering person or a good capital allocator? It's a question that we thought deeply about through the process. Reunert today has a very strong executive team. We -- and the executive team is structured with Mark as the Chief Financial Officer; Mohini Moodley, HR Director and Sustainability Director. And then we have 3 segment heads. Each one is responsible for their line of responsibility, one for Electrical Engineering, one for ICT and one for Applied Electronics. And those gentlemen carry the biggest responsibility of, let me call it, the technical expertise and the delivery of the numbers. And our view was that within such a strong executive committee that we have at Reunert at the moment that it was important to have somebody who was a good allocator who understood how to run a portfolio and was capable to provide some inorganic strength to the group going forward as well. The next question is from Siphelele Mdudu from Matrix Fund Managers. He's asked, how should we be thinking about our circuit breakeven margins into the U.S.A. Will volumes more than cover the rand that are lost? So we think there is some thinning in the margins. Roughly, we believe we are able to recover somewhere between 65% and 70% of the tariff costs that we've got. So that's the nature more or less of the margin degradation into those circuit breakers, but we think that's sustainable. We don't think it gets any worse. And we are working with our customers to try and make those recoverables better, but we don't think they're going to get any worse at the moment. So we think the margins that we see in this year are probably the lowest that we'll see into the circuit breaker business going forward. And at a percentage level, we don't necessarily think it gets much better in terms of how much of those tariffs we can recover. But certainly, in a rand volume point of view or the rand growth that will come through the volumes, we do think that will more than cover the cost that we had in this year. [indiscernible] from RMB. The question is continued cash generation in the business. May we understand if there are any key plans for this cash going forward? I'm going to ask Mark if he can turn to that one, please. K. Kathan: Yes. [indiscernible], we have a very defined cash allocation policy as to how we invest our cash. And we would look at -- number one, we would first look at business requirements, and that would take working capital into account and then around our fixed assets, around sustenance and expansion. And then at the same time, we would then look at how we would distribute cash to -- on investments, if there are potential acquisitions or at the end of the day, we look at dividends and share buyback. So there's a defined process that we go through. And -- but the intention is obviously always to look at -- to come back to shareholders and tell them what we're going to do with our cash. Alan Dickson: Thanks, Mark. And then I'll ask you to do the next one as well from Myuran from MIBFA. And he has asked, can you please give some color into the nature of the amortization of intangible assets that we have reported as well as our annual investment into intangible assets in rands. K. Kathan: Yes. So Myuran, there are 2 distinct differences in the intangible assets, how we account for them. The first would be on acquisition where we would allocate part of the purchase price into intangible assets. And that will be typically customer lists, et cetera, that we write off those intangibles typically between 3 and 5 years. That would be part -- that will be on acquisition. And then in our defense cluster, we would also create some level of intangible assets, whereby we will start creating technology. And that would be part of our annual CapEx budget, and that will also be written off over the contractual period that we have with customers there. Alan Dickson: Perfect. Thank you, Mark. Ladies and gents, that's all of the questions that we have at the moment. I'm maybe just going to wait 10 seconds or so just to see if there's any last-minute questions that pop in. Okay. We've got one from Kgosi Rahube who just beat the bell from Melville Douglas. Can you please provide more insight into the expected improvements in South African defense given that the key issue has been the defense forces constrained budget? Yes, I can, Kgosi. There's been a little bit more budget that has been allocated. And certainly, one of the programs that have been announced that have been awarded is the armored vehicle program, which is a large vehicle program to replace the legacy Ratel vehicles. And into that vehicle goes some of our products, particularly our communication products. There's one example whereby we are seeing the kickoff of some larger scale projects, and that first one, as I've described, has been allocated. So there is some more budget that has been allocated into the South African defense force. There is no shortage of need for projects and expenditure there. So as the funding becomes available and as I think South Africa's fiscal position becomes a little bit better, which we do anticipate over time, we do believe that there will be more funding flowing to the SANDF for some of these projects. And our exposure at Reunert across those requirements is actually very good. So invariably, when any large capital project gets announced, we will get the benefit from that. Now it will take a little bit of time before that comes into play in the communications, so probably not in 2026, but 2027 onwards. But those type of projects coming through a real boost to our export volumes that we've got at the moment, which are also long term. So yes, we do think sort of this increased allocation to the SANDF, we do believe is part of our view that South Africa gets steadily better. [indiscernible] thank you for your kind words as well. I appreciate it. Thank you very much for that note. And ladies and gentlemen, that brings us to the end of the presentation today and the Q&A session. Thank you very much for your attention. We appreciate you taking time out to listen to Reunert and Mark and myself today. We appreciate your interest and your -- and value your contribution. Thank you very much, ladies and gentlemen.
Unknown Executive: 3 quarters of 2025. And as you maybe already saw in the presentation, we have plus 6.7% in revenue to CHF 845 million. EBITDA is up 2.4% to EUR 377 million and group net profit up 4.2% to EUR 215 million. So overall, very, very encouraging results. The only problem we face since maybe the last 3 years, but especially '24 and '25 is an ongoing cost pressure, which burdens our EBITDA and is slightly reducing our productivity. As you see in the latest figures of passenger growth, our guidance for 2025 is well based, and we can confirm it right now with already a clear visibility for full year expectations. What we need now is an efficiency improvement and cost reduction program, which is under work right now because we are in the process of making our budget for 2026, which will be for approval in our Supervisory Board mid of December. And details for the program, we will release beginning of January with the traffic results of 2025. But what we hope for is and what we are working on is to at least partially mitigate the effects of the tariff reduction and maybe lower traffic results for the coming year. I mean, cost management is always a very important issue. And I'm very positive that we will reach a lot of effects throughout the whole company in all departments, in all our daughter companies. And last but not least, we will also reduce our personnel costs, which is the most challenging issue all the time. But with a step-by-step approach, I think we will be also successful there. If we look at the figures more in detail, you see that despite the fact that interest rates are going down, we maintained a positive development of our financial results, only slightly below the first 9 months of 2024 with now EUR 11.6 million compared to EUR 11.9 million. And from today's perspective, we will have a lower EBITDA margin. It was 46.5% in the first 9 months of 2024. It's now 44.6% for the first 9 months. So it's not too bad at this level, but definitely, it's less than it was the year before. And the reason for that is that cost increases all over the board and especially also with personnel costs negatively impacted overall profitability. If we move on to expenses, you see that consumables and services used could kept more or less stable. Personnel expenses went up by 9.2%. If we put into account the change in consolidation of our subsidiary GET2, which is responsible for the cleaning, the personnel cost increase would even be 13.4% year-on-year, including also a high degree of increase from Malta. That's even beyond the cost increase here in Vienna. Other operating expenses went up by 11.6%. That is the other side of the coin of the personnel expenses of GET2, which has been included for in the personnel expenses and is now in the other operating expenses. Depreciation is slightly below the figures of 2024 and as already mentioned, EBITDA margin at 44.6% compared to 46.5% and EBIT margin at 33% compared to 33.9% in the last year. If you look at our cash flow, you see that it is slightly down. Cash flow from operating activities from EUR 322 million to EUR 268 million. On the other hand, the free cash flow went up 26% from EUR 114 million to EUR 145 million. The increase in CapEx is as planned. So we went up from EUR 131 million to EUR 199.5 million. And we will see how much will be added until the end of the year. So we will end up below the expected EUR 300 million, but not too far from that. The net liquidity was slightly reduced also by the high dividend payout and is now at EUR 438 million compared to EUR 511 but it's still on a very satisfying level given the fact that we are now in a cycle of investments and still we plan that we will finance the major investments of the coming years out of cash flow and net liquidity. So we will not need credits for the foreseeable years now. Equity went up from EUR 167 million to EUR 1.731 billion, so a plus of 3.7% and an equity ratio of roughly 70%, which still is a very good figure. Our Southern expansion of Terminal 3 is on budget and on schedule and will open as planned in 2027. We now are going to work on the tenant fit-outs and interior construction work and all the technical systems and the energy supply and as well as the connection to the existing terminal areas, but everything so far is on plan and no major issues there. We are also expecting the new hotel to open operations already in December. And we will start in the next weeks the expansion of our Office Park 4 so that we can start the operation there at 2028. A lot of other projects are underway. And so far, everything is within the plan. So last but not least, to remember the financial guidance for 2025. We expect a revenue of EUR 1.80 million, EBITDA approximately EUR 440 million or even a little bit better. Group net profit approximately EUR 230 million, maybe a little bit better given the latest traffic results and CapEx somewhere below EUR 300 million, but more or less close to EUR 300 million, we should end up at the 31st of December. So that are the main information and figures from my side, and I hand over to Julian. Yes. Julian Jäger: Yes, I will continue with the traffic development. In the first 3 quarters, we saw growth in the group of 4%, 32.9 million passengers, mainly driven by Malta, plus 10.8%; Vienna, plus 1.9% [indiscernible] nearly 10% growth. Yes, we had a strong October. Vienna was better than in the rest of the year as well with 3.1 million passengers, plus 3.7% Malta, again, a stunning 16.7% and [Kosice] more than 15% growth. So overall, we are at 4.3% growth in the group in January to October and plus 11% Malta, plus 10%, [Kosice] plus 2% Vienna. If we continue on the next slide, the peak was very strong. So we had a solid passenger growth in summer. We had in August, the highest month passenger volume in history, 3.4 million passengers in Vienna. We had a new single day record with more than 120,000 passengers in August. So overall, a very positive development here in Vienna, ongoing robust cargo growth of 7.8% to 233,000 tonnes in Q1-Q3. So overall, I think we can be happy with the development as well. Although we know we will not reach these figures next year, but I'm coming to that later. I think growth factors are really strong. If you look at October, last year, we had a record year in terms of growth factors. This year, October was even better and January to October, slightly below the 2024 figures. So overall, I think we can be quite happy with the development. If we look at the regional distribution, I think the only thing which is probably outstanding on this slide is Asia Pacific, plus 25% market share, 4%. So we saw growth to Tokyo, Bangkok, Singapore, Beijing, Chengdu. Overall, as expected, Asia, East Asia is coming back with a certain delay after the pandemic. North America, essentially flat, Europe essentially flat with the exception of Eastern Europe, here, mainly Southeastern Europe, Tirana, Pristina, Chisinau, Burgas growing. Middle East, slight below growth, plus 2.2%; Africa, plus 2.9%. So overall, I would say, a satisfying development. Looking at the lines, Austrian, slight growth, plus 0.8%; Ryanair flat this year, Wizz Air already a slight reduction of minus 4.4%, Yes. And I think the rest is pretty solid. Pegasus growing, Etihad growing. Overall, I would say, yes, an okay development. Lufthansa Group pretty much flat, close to 50% market share. Low-cost carriers probably for the last time for a couple of years, above 30% market share, 30.4%. So we will see here quite some significant changes in the distribution of our passengers next year. But overall, yes, a good picture this year. What works really well in Vienna is operations, punctuality, again, amongst the top 3 above 25 million passenger airports, just also in Copenhagen in front of us with an average of 83.7%. Again, like most airports this year, we improved punctuality in 2025, but we are still, yes, in the top 3. So I think better than Munich, better than Frankfurt, better than Zurich. So especially within the Lufthansa Group, we kept our lead as the operationally best hub of Lufthansa Group. Yes, what do we have to expect in terms of low cost next year? Wizz Air will close their base operations in Vienna already went down to 3 aircraft in the winter schedule and will close the base completely mid-March. Essentially, I think this was the result of a strategy change of Wizz Air. I think they will concentrate again more on Eastern Europe. We had -- until, yes, mid this year, we had interesting discussions with the top management about a possible base of XLR here in Vienna and flights to India. As you know, they reduced the order of the XLR then very significantly from more than 40 to less than 10. So I think this strategy has changed from Wizz Air again. They are leaving the Middle East essentially. In Vienna, we always had a high proportion of flights to the Arabian Peninsula. So overall, yes, we would have had to reduce our charges so significantly that on the one hand, we didn't want to do that. On the other hand, I think even legally, this would not have been possible for us. So that's why we eventually decided to close their base here. Ryanair, in my perspective, will attack Wizz now in Bratislava, and we will see quite some growth here in Bratislava next year. My impression is that Ryanair wants to get rid of Wizz Air in the catchment area. So therefore, yes, my impression is that what we've seen here in 2019 that Ryanair is fighting their turf and showing with their limits will happen next summer in Bratislava. And yes, it's anybody's guess how this will end. Obviously, I would say, in terms of Ryanair reductions, we are a bit the victims of the circumstances in terms of tax environment in Vienna. We have a flat EUR 12 per passenger tax. As you know, Ryanair is fighting all the governments, which have taxes on aviation in place. So -- the same here in Vienna. They are taking the Austrian government quite fiercely. If this strategy works out or not, we'll see in the future. But obviously, if you take this EUR 12, this is roughly a 40% increase on our airport charges. And obviously, in a competitive environment where Hungary, Sweden reduced their charges to 0, where Slovakia is actively supporting airlines, especially for the intra-Slovakian flight from [indiscernible] to Košice. This is a competitive disadvantage. So therefore, we will, yes, do our utmost to get here at least a reduction in the future. But yes, which is difficult to achieve on the short term. We still don't exactly know the flight plans of Ryanair for next summer. I think we will see -- hopefully, we have some more clarity here in January. I mean those reductions are painful and will put pressure on revenues, costs and result next year. But I think we have to see it a bit in perspective as well. And you probably -- those who are covering us for a couple of years already know that we had extraordinary change in 2018, '19 following the Air Berlin bankruptcy. So to a certain extent, it was always clear that probably not all of the growth is really there for the long run and really sustainable. So we saw huge growth between '17 and '19. We went from 24 million to 32 -- or nearly 32 million passengers. We recovered very quickly after the pandemic. And now we will see next year a reduction of something around 2.5 million passengers from Ryanair and Wizz Air, probably a bit more. But overall, if you see our average growth, which was 5.3% between 2000 and 2019, so significant above the European average, I think we will sustain a year or 2 where we are below our record, which we will achieve this year. And I'm pretty optimistic that we will reach the 32 million passengers and probably surpass this mark in 2025. To talk about the positive developments, Austrian is, let's say, fighting back. They will base 2 additional aircraft next summer. They will launch a Dubai service. We will see increased frequencies to Bangkok, to Mauritius to Rome. So overall, I think a good summer flight schedule as far as we see it today for '26. Scoot will increase next year by frequency to Singapore, Air Corsica launches new flights to Ajaccio and Bastia, Air Baltic resumption of flights to Tallinn as of March. SES has come back to Vienna recently, 12 frequencies per week to Copenhagen. Condor just increased their frequencies to Frankfurt up to 3 daily. EasyJet is expanding their offering. Air India is going to 4 frequencies. Air Arabia with a daily frequency to Sharjah. What is not on this slide, but what news which reached us very recently, we expect Etihad to increase by 4 weekly frequencies by next summer. So overall, there are positive developments as well, and we will lose a bit of ultra-low cost, but we will get some other capacity as well. And I would say, overall, the passenger outlook for 2026 remains challenging at this point. Typically, airlines announce their capacity at the beginning of the year. So there's still a lot of movement. And you can see here that we still get news in the one or other direction. So therefore, as I said, the capacity reduction of Wizz and Ryanair from today's perspective should be roughly 2.5 million passengers, maybe a bit more, but we are confident to compensate around 1/4 of this reduction. And as usually, we will get in much more detail in this respect in January. Yes, I think I've said everything to this slide. We can confirm our passenger guidance. We will probably slightly head the 32 million in Vienna. We will get very close to the 10 million in Malta. We will have a record in Košice. So I'm optimistic that we will surpass the 42 million passengers in the group. Yes, record results wherever we look, but we all know that 2026 will be challenging for us. Still, I would say there are some -- we can see some light on the horizon as well. I think -- if the Middle East remains or will get more peaceful than in 2025, I think this would be a huge opportunity for Austria. I think these are extremely important passenger flows from Tel Aviv to the U.S., but as well from Tirana. So the whole region, Aman. So I think there's a lot of potential for Vienna in the Middle East. obviously, Ukraine was always a very important market for us and would be a strong market for us again. So midterm, we are optimistic that sooner or later, these geopolitical tensions will ease, and I see quite some growth potential from these areas. Coming to the segment results, starting with the Airport segment. Yes, I think we obviously capitalize on the passenger growth Q1 '23, plus 7.8% in EBIT, plus 4.1% EBITDA, plus 5.7% revenue. Overall, healthy results, I would say. Obviously, there as well. And in so far, we'll get a double whammy next year with reduction in passenger numbers, reduction in passenger charges. So the passenger service charge, minus 4.6%, landing fees, minus 2.1% to be expected. The formula kicks in again. But obviously, this will not make our life easier in 2026. Coming to handling, I think we had a strong third quarter overall, still below the 2024 figures. EBIT of EUR 8.4 million versus EUR 10.9 million in 2024. Obviously, this is the area where the personnel expense increase hits the most. We've got 1,500 people in ground handling. We have 1,000 people in security. So overall, this is where we feel the hit. Still, I think in terms of revenue, things are going in the right direction. Cargo, in particular, very strong. So overall, we -- I think the development is okay. We are significantly positive, but we see here the pressure in terms of staff costs, and this is an area where we will have to focus on a lot in the coming months and years. Just last week, we celebrated the establishment of AIRZETA, the newly established South Korean cargo airline, which officially launched their operations in Vienna and selected us as their primary European hub. So overall, we are still optimistic that cargo will continue to grow, and we are doing our utmost to keep here very close relations, in particular, with the big Korean airlines like Korean and the newly founded AIRZETA, which is joint venture of Asiana, which went bust and Incheon. Retail & Properties, yes, I think in reality, the result is better than the figures shown here actually because we have a flat EBIT development when the revenue increased by nearly EUR 8 million or even more than EUR 8 million. I think we had a number of negative one-offs, respectively, one positive one-off in the same period of last year. So we were impacted here by increasing personnel expenses, mainly provisions and costs related to the demolition of existing buildings for the purpose of space optimization. This is a negative one-off, those are the 2 negative one-offs in the third quarter this year, and we had a positive effect relating to the reversal of a bad debt allowance in the previous year. So overall, if we remove these one-offs, we would have the normalized margin here in the Retail & Properties segment. So overall, I think the negative one-offs were a bit more than EUR 4 million. The positive effect last year was a bit more than EUR 1 million. So overall, we are talking about more than EUR 5 million one-offs, which seem to burden this segment. What is still encouraging. So I think overall, sales in center management and hospitality and parking in Vienna are above the passenger development. So center management revenue plus 7%, parking plus 5%, rentals plus 2%. And we see a lot of interest in our tender for the space in the South extension of Terminal 3. We are in the very final stages of choosing the operators for our 10,000 square meter extension. And in particular, in terms of F&B space, we are at the very late stage, and it will be sincerely best of Vienna with very good commercial offers as well. So we will disclose this in the coming weeks, and we are quite happy with the outcome of this tender. Yes, let me come to my last slide, Malta, yes, uninterrupted rise in passenger volume, revenue, plus 10%, EBITDA plus 6.7%, EBIT plus 5.4%, EUR 62.7 million, strong growth to Poland, again, Ryanair growing, Wizz Air growing more frequencies, new destinations in the winter flight schedule. So as far as I can judge. I think the outlook for next year is not bad as well. Hotels being built or extended in Malta. So overall, Malta is still banking a lot of growing tourist numbers. And therefore, yes, we remain optimistic in Malta as well. Obviously, as you know, we have a very significant investment program in Malta. We need to urgently extend the terminal building, which just started now, I would say. We have already extended the Apron, which will now cover us for, yes, the coming decades, I would say, in terms of aircraft parking space. We are building a new Sky Park building. We are building a hotel. So overall, I think there's a lot going on here in the next 3 years, I would say. But due to the significant growth, this is urgently needed to cater for the growing passenger numbers. Yes, that's it from my end. Thanks a lot for your attention, and we are happy to discuss our report now. Unknown Executive: Yes, let's start the Q&A session. Happy to discuss any topics of interest. Hands are already raised. Let's go in order, Vladimira, please go ahead. Vladimira Urbankova: Congratulations to a very solid set of numbers and it seems to be that growth is maybe more dynamic now in October than one would originally anticipate. Yes. My questions would be focusing on upcoming challenges. That means 2026, you said that you plan to introduce cost reduction and efficiency improvement program. Could you a little bit more elaborate what are the key elements of the program? And if you can share maybe already some preliminary scope of savings you want to achieve? And next would be, yes, you pointed out to the lower passenger numbers because of the withdrawal or partial withdrawal of low-cost carriers. Do you have maybe some plan here how to improve position of Vienna, increase its attractiveness? Do you take some active measures to fill in this gap and get maybe more passenger traffic? Or you simply wait and see what are the plans of other carriers? So this would be my major questions. Julian Jäger: Yes. Starting maybe with your first question, that's our daily work now and work in progress because we are in the second half of our budget process. And what you can expect is that through the whole company in all departments, in all our daughter companies, we defined measures to improve productivity and to lower costs. So material costs, service costs, personnel costs. So in all parts of our operations, we are defining such measures. What is not possible right now is to give you an exact number what it will end up because this is part of the budget that will be approved by the Supervisory Board in 4 weeks from now. And what I can generally claim is that we try to offset as much as possible from the effects for 2026. Will we be able to offset all of the problems? No, that would overstretch, I think, the possibilities, but it will be a very substantial part of it. Günther Ofner: Yes. Let me continue with your second question. We obviously never just wait and see [indiscernible]. So I think we are always very actively engaging with our airlines regardless if these airlines are already operating in Vienna or they are not yet operating to Vienna. So we are obviously -- and our team is in touch with, I would say, all relevant European airlines. And obviously, it will not be easy to replace 8 or 9 aircraft here in Vienna on the short run. There is no airline I can see, which would just come and base 8, 9 aircraft here in Vienna. So I think we will have to work with many individual airlines to replace the capacity over the years in total, but not with one bang and one airline. I mean, obviously, easyJet comes to anybody's mind, but easyJet is a very slow mover. And therefore, as I said, I think -- and I think you saw the list. So there is a number of good news and airlines coming back to Vienna growing in Vienna, but it will take until we replace this intra-European capacity. And on long haul, me and my team, we are constantly in touch with airlines, mainly in Asia who could fly into Vienna. And there, I'm optimistic as well we will see in the next 1 or 2 years, like we saw in recent years with the comeback of ANA Air India. Now this year, we got school from Singapore. So I'm very optimistic that we will see here some long-haul growth as well. In terms of conditions, we reduce our charges or we have to reduce our charges next year anyway. So this should improve our competitive position a bit. We will definitely do our utmost, but probably in a completely different style than Ryanair to convince our government that overall, it would be a net contribution to the Austrian budget if there would be a reduction in the tax because this would be financed with more tourists coming to Austria. But I don't foresee next year any other changes in terms of charges. I think a reduction on average of 4% is anyway a significant improvement. And what we will stop next year is the winter incentive. So the winter incentive is still applicable now in January and December, but it will not be applicable anymore next year. Vladimira Urbankova: Yes. This was my sub question, if you have any incentives already in plan maybe to attract more airlines. Günther Ofner: I think honestly our. Vladimira Urbankova: Of existing players. Günther Ofner: For new airlines and new destinations, we have an attractive package anyway in place. For airlines which have a certain volume, I think we have good conditions. I think what really harms us is the ticket tax, and you can see the development in Germany, where the German government now is reducing the ticket tax. They are not abolishing it. But I think in terms of ultra-low cost, our biggest problem is the ticket tax. And I think it shows how strong our market is that in the years after COVID, they didn't care. But now more and more countries reduce aviation taxes, and this makes obviously the competitive environment for us more difficult. Unknown Executive: Henry, please continue. Henry Wendisch: Congrats on the strong results. I have, yes, one question regarding the latest topic we just talked about the air taxes. So we already mentioned Germany is reducing them, not abolishing them. But I've seen that in Austria, there's a parliamentary motion to abolish it completely. This is, I think, by the FPU, or the opposition party. So sort of what is your assessment on this that it might go through even? And then a direct follow-up question, would this maybe alter the decision of Ryanair and Wizz Air to reduce? Or is this more or less final? And maybe then speaking more long term, if this may be reduced, we will see this effect now, the Ryanair and Wizz Air reduction now, but then maybe 2027, 2028, they will come back now because the capacity planning is already done. So what sort of your idea here? What's your take on this? Julian Jäger: I think there's a 0% chance that this motion goes through. I think it does not help. And this is where I completely disagree with Michael O'Leary, although probably not in content, but in style. I think there would be a lot of discussions behind closed doors necessary to get a reduction or an abolishment of the ticket tax. It does not work with the sledge hammer, I would say. But let's see. So I don't think that -- I mean, we have a double budget. '25, '26 and nobody in the government will touch this budget now. So the earliest imaginable reduction would be in 2027. We will do our utmost, and I think we have a lot of good arguments, but there will be no change immediately. I think Wizz Air even -- I mean, in the end, they had a lot of troubles in recent years as well with the capacity, with engines and so on. So I don't see Wizz Air coming next soon. I think we will -- it will be interesting to see how the battle between Ryanair and Wizz Air will turn out next year in Bratislava. But obviously, yes, if there would be a significant reduction or even an abolishment, [indiscernible] year to date. So I think we will have to wait and see. We will try to convince our government to give here really a reduction in the financial burden on the airlines. And then I would be optimistic that we would see ultra-low-cost growth again in Vienna, probably more from Ryanair than from Wizz Air. Henry Wendisch: Thanks for the political sort of more color on this. That helps a lot. because we don't follow in Germany here, your Austrian news on a daily basis. So it's always good to have this picture. Then second question for me is maybe for Dr. Ofner, I've seen the operating cash flow was lower due to cash out for taxes, mainly in this I see if I look at the P&L, there's a discrepancy between P&L taxes and cash taxes. So what's sort of the difference here? And can we expect something like that to revert back in the coming quarters or years? Or what's sort of behind this? Günther Ofner: Yes. I mean, in the phase of Corona and immediately after that, all our prepayments have been reduced. And now we have to, let me say, refill what we didn't pay in advance. And we also have now higher advanced payments. And all that sums up to roughly EUR 120 million. And it includes also the tax payment in Malta for 2025, which amounts to roughly EUR 33 million. So it's a normal process. And in '26 and the following years, we will not see such extraordinary events because the prepayment now is adapted to the expected results. Henry Wendisch: Right. And then my last question, I think also for you, Dr. Ofner, on next year personnel expense. So now the inflation rate is still at 4%. The [indiscernible] expects 2% for 2026, if my understanding is correct. So that gives us sort of something between 2% and 4% for, I think, a demand for the collective labor wage increase for next year as well. So this is sort of against your cost efficiency program or one step against this. What sort of your take if you had a -- I mean, you don't have it, of course, but if you had a glass ball to look in the future, what would your estimate be on the wage inflation for 2026 for the one in May, actually? Günther Ofner: So it will definitely below inflation rate. I mean, finally, we will have to agree for the new collective agreement in May 2026. But we definitely will be below inflation. And we will reduce workforce throughout the year. So altogether, I hope that we can see an absolute reduction in personnel expenses compared to 2025. Unknown Executive: Philip, your questions are still on the table. Philip Hettich: Hope you can hear me. First question, I just would like to revert on the incentives on the winter incentives of Wizz Air again. So could you elaborate again why you don't want to repeat those incentives given the pressure on traffic is much higher this year. So what basically changed here on your thinking compared to last year? And then also regarding traffic, can you already judge how much of the planes of the ultra-low-cost carriers that have left the Vienna base will maybe be compensated by them still flying into Vienna from other bases? Is there any visibility that you have here? So this would be the first 2 questions that I would have. Julian Jäger: Yes. To start with your second one, no, we don't have visibility there. I don't expect that Wizz Air will fly a lot into Vienna, probably not at all. But Ryanair, we don't have yet full visibility. So we don't even have full visibility for February and March. So there are still some things in the air. And yes, overall, I just have to delay this discussion for January. We'll get every day some good news, some bad news, but the net effect of the reductions of the ultra-low cost in next year, we will just get a better idea in January. Regarding your first question, I think this is pretty easy to answer. When we introduced the winter incentive this year, we looked at a very significant increase in airport charges, plus 4.6% passenger service charge. And what our idea was back then to even it a bit out. So that's why we introduced the winter incentive. And I would not see that, again, the winter incentive would have any significant positive impact on capacity next year. And therefore, with a reduction of 4.6% on our passenger service charge and security charge, we -- that's why we discontinued this incentive for next year. Philip Hettich: Okay. Okay. Understood. And then maybe one more for the retail segment. Do you also see any weakness here as regards to the spending per passenger from any potential weaker macro? So is there a feeling that you see that passengers just take back on their spending at your shops at the airport? Julian Jäger: Actually, this is something we expect all the time, but it doesn't really happen that much. What we see is a reduction in banks. This is not a major part of our business. So the market share here is minute. But this is an area where we see constant decreases, which is not a big surprise given that we don't have a lot of Russians anymore that we -- so passengers from areas where you usually carry some cash and exchange it are significantly less than probably before the pandemic. But all the rest is at passenger development or even above. So this year, so far, we cannot complain. And in terms of F&Bs, it's good. or it's significantly above the passenger development. duty-free is slightly above the passenger development. So overall, we are satisfied, I would say, with the development. And yes, as I said, PRR center management and hospitality cumulated is 5.7%. Passenger development is below 3% in Vienna. So overall, it's okay, I would say. Philip Hettich: Okay. And then maybe one more, if I can, on Malta. So the EBITDA margin reduction in Malta that led to basically a flat Q3 EBITDA year-over-year. Is it mainly due to investments that you are now conducting? Or is there any other effect here weighing as well that you would see pressuring margins? Julian Jäger: I mean it's -- I would say it's not only investment. We see some cost uplift overall in motor as well. But CapEx is part of it and CapEx will expand in the coming years. So we will invest more than EUR 100 million probably next year, and we will invest more than EUR 300 million until 2030, so in the next 5 years. So overall, I think we -- I mean, if you see the passenger numbers going through this small terminal, which has insignificantly changed since I left in 2011 when we had 3.5 million passengers. I think everybody will understand that we will have to invest here very significantly. And therefore, yes, I would say probably not next year, but in the years to come, the margins in Malta will reduce here as well. But overall, I see still a very strong sentiment in Malta. I see a very ambitious government in terms of how to grow tourism figures. I see a very strong cooperation between the tourism industry, the airport and government. So overall, we are very optimistic for the future development here. But yes, obviously, to sustain these levels of passengers and cater for future growth, we will have to invest here very significantly. Unknown Executive: Any further questions? No hand is raised, then I would thank everybody in the call for discussing the topics of interest for showing the interest in Vienna Airport. And the next scheduled event is January 20 with the traffic figures for 2025 and the outlook -- financial outlook for 2026. Thank you. Julian Jäger: Thank you. Bye-bye. Vladimira Urbankova: Thank you. Bye-bye.
Gary Arnold: Good morning to you all. Welcome to all our investors, colleagues and then our Chairman, Theunis, and we have Willem and Bridgitte from our Board here today. And then as I walked in, Anthony Clark said to me, he thinks he must be in the wrong place because he saw the old bugger here. So welcome, Chris. Hello to you. Chris has joined us today. Anthony called you the old bugger, not me. But let's dive into the presentation. We'll try and stick to the time. As you know, we are always quite diligent on that, and we'll get into the business overview. Fortunately, all green arrows, and Chris used to have a comment for this, which I'll steer away from. But absolutely a good scoreboard, revenue up 10%. One always likes to see that growth in revenue. That ultimately is what drives the bottom line growth, especially in an inflationary cost environment, and we'll dig a little deeper into where we generated that additional revenue from a little later. Profits up 11% to just under ZAR 1.3 billion and then headline earnings up 14% to ZAR 21.93. We closed the year with a very healthy cash balance, just over ZAR 1 billion. And on that, we're able to declare a final dividend of ZAR 8.80 a share, taking the total dividend for the year to ZAR 11. So good cash generated from operations at ZAR 1.7 billion, up 20%, and we will spend a lot more time on those numbers later in the presentation. It's very pertinent to point out that this was a tale of two halves as we've phrased it. And I thought we should give just a bit of perspective on what changed or happened between the first and the second half. And at our interim results in May, you will recognize some of these outlook prospects that we put up on the slides at that time. And it did point to some of the key drivers in the business coming through, which at the time were supporting a better outlook for that half. And we said then that we expected good prospects for the current local maize crop. I think we were the only ones, if you look at that, the first crop estimate committee number was 13.9 million tonnes, and we ended up on 16.3 million. So Anthony, I think perhaps we were the only ones in the trade that saw this crop coming. And -- but anyway, be that as it may, we had some good procurement there, and that helped with softer feed prices that we spoke about at the time. We certainly had lower finished stock levels in poultry. And as you know, we increased volumes from the 9th of March, adding an additional 400,000 birds a week to our production. And then we spoke a lot during 2024 after the tumultuous years of '23 with load shedding and bird flu, where we set sail on this transition journey or this journey to turn around the results and Project 3R was launched, Re-set, Re-start and Re-focus. And this past year was a lot about Re-focus. It's just to focus on the basics in the business and those key drivers, particularly in the cost of producing chicken, which is critically important to achieving the results that we see today. So this is the -- you'll see the waterfall later as we've called it before for the year-on-year comparison, but that almost clouds out some of the tailwinds that we had in the second half. So I wanted to just point to the movement year-on-year, and we reported a ZAR 271 million profit for the first half. That was down significantly on the first half in 2024, about 60%, I think at the time it was down. But then you can see the impact of the selling price recoveries coming through. We had significant selling price deflation through 2024 and into the first quarter of 2025. We had to go out there and look for some support in selling prices. Broiler margins were reported at that time of minus 1.1% negative margins, certainly not sustainable in any business, never mind a poultry business. We increased sales volumes. One would expect in the slide that this bar would have had more of an effect, but we should remember that in the first half, we sold a lot of product out of stock. So if you look at the 2 halves together, more or less equal sales volumes, but the year saw an increase -- quite a good increase in sales volumes over 2024, supported by feed price. So feed prices in that half coming down nearly 8% in fact. But if you look at the year, feed prices went up marginally. So again, very distinct results in the second half to the full year picture. Full year picture, feed prices went up ZAR 19 a tonne. Here, they came down in that half quite significantly by 8%. That resulted in the full year profit for the year at ZAR 1,247. So the salient points, now looking at the year-end perspective, poultry feed costs increased marginally. I've just spoken about that. And there was a lot of volatility through 2025 in the local SAFEX market. We managed to procure well, and we'll look at a chart of where the prices were later on, but we managed to procure well through the cycle that when we priced our feed in the second half, the market had traded at very high levels through 2025. Anthony will tell you that maize touched ZAR 5,700 a tonne at a point. So when you have good positions and we are pricing the feed into the market at replacement cost because every day you use the feed, you've got to -- or the maize, you've got to buy more to replenish it. You have to manage that very well into the market so that you're not replacing your maize with much higher -- or you're replacing with higher price positions, but we try and just hold on to any procurement benefits that we might have. On-farm broiler performance has improved. So notwithstanding the slightly higher feed price, feed conversion efficiencies decreased. And that, as you will remember, is the amount of feed used for every kilo live weight gain. So we used less feed again this year for every kilo of live weight gain. And that basically nullified the impact -- sorry, of the higher feed price through the year. So on-farm broiler performance is looking good. We will look at those metrics later. As I've said, we increased our broiler placements, and we sold what we produced. So we didn't produce it and put it in a freezer. Even through winter in the second half, we were able to sell what we produced with very manageable stock levels at year-end. Poultry selling prices improved marginally. Year-on-year, the selling price movement was 2.4%. Again, stands in quite stark contrast to what happened in the second half where we managed to recover selling prices to move those broiler margins back into positive territory. And we also benefited, and I think you'll see that in the slide later from an improved product mix. Now that helped support the basket and better poultry selling prices through the year. Our Feed Division, as you'll see, reported very strong earnings. They, in this integration and something we will have to demonstrate to the Competition Commission when we talk about the poultry market inquiry is that an integration works for you. It works in that you are able to support that poultry value chain through the year. Now our Feed Division obviously benefited from higher broiler placement numbers. They had higher internal feed production. So feed internally went up nearly 8%. But they also managed to sell more feed in the external market, which you always want to try and do. You want to grow your external market and fill up that spare capacity that you have in your feed mills. Notwithstanding the impact of ongoing diesel and water supply costs, we still have an average ZAR 10 million a month bill for diesel and trucking water up and down. ZAR 120 million for this year on the dot. It's a significant cost, and that's all about municipal interruptions, supply disruptions. So when you hear about national load shedding, that's gone, that's great. You see that. You don't see your lights going off any longer, but the infrastructure and the municipalities needs a lot of work. We did benefit though from the higher volumes, and we can demonstrate that a bit later where the economies of scale have supported lower costs in the business, lower operational cost per unit. Stringent focus on working capital. I mean, we've kept our focus on that line throughout the year as we were in this rebuild phase of the balance sheet. Last year, we clawed all the debt back. This year, we set ourselves the task of building cash, healthy cash balance on the balance sheet that will stand us in good stead for any future headwinds that may come our way. And in the poultry industry, they do. Those of you that are very familiar with the volatility in earnings, you will see that -- we will see that somewhere, but at least we are well positioned to deal with it. And then you all know about the cybersecurity incident in March. The only thing I want to say here is that there was no impact on the integrity of the financial information. There was a very thorough investigation -- forensic investigation that went into this by 2 companies and then the auditors, Deloitte went through this thoroughly, and there was absolutely no impact, fortunately, on the integrity of the financial information or data in the business. So we can stand here and say that the results we present to you today are 100% untouched by some guy hiding in the shadows in Eastern Europe. Okay. For the year, this is the movement, and that's why I showed you the half-on-half earlier on because you don't see the impact of some of those key drivers in the second half if you look at just the year-on-year perspective. What you will see through this year, though, is the quality of earnings in 2025 improved. We had a ZAR 250 million insurance recovery in 2024, and that was on the back of a number of natural disasters in 2023, bird flu, floods in Meadow Feeds Paarl in the Western Cape at our feed mill and a hatchery in the Western Cape that burned down. So recoveries in insurance there, which did boost the results in 2024. So you can see through the year, we got that assistance from selling price over the year with that recovery primarily coming in the second half. Volumes increased year-on-year as we placed more broilers, sold out of stock and increased our sales. We got the assistance from feed in the selling price and the benefit from feed conversion efficiency with our on-farm performances and the cyber incident we've spoken about. So all in all, an 11% increase in PBIT year-on-year. This is a slide that really tells a good picture together with the next one. You can see that in our first half of 2025, those margins under severe pressure. When we stood here in May, we reported margins of minus 1.1%, certainly not sustainable, increasing to 3.9% for the second half. And I think if you reflect -- if we go back to 2022, that was a 3.5% margin and a 5% margin and returning profitability at that time of ZAR 1.5 billion. So certainly, if you have the margins and you have the selling price and you have your cost base intact, there are drivers in this business that can support future earnings. We just -- as you can see, and I've spoken of the volatility, I mean, you try -- we often get asked what's an average margin? What should we be penciling in? Well, if you -- my guess would sometimes be as good as yours, I think there's a lot of volatility in this, and we're obviously going to try and keep it as best as we can above this line, the black line, but it depends on numerous factors, some of which are under our control, some of which are outside of our control like this horrible year here. Broiler selling prices against food price inflation. So the poultry selling prices are in this basket, the food basket. You can see the price deflation that we recorded or reported on through from December 2023 all the way through until around April this year, where we were able to get a selling price adjustment into the market. And I just would like to point out that our selling prices now are on average the same -- at the same level as they were in December 2023. So with inflation and costs and everything in between, our selling prices now are not higher than they've been historically. So it's certainly not record highs for the selling price of chicken. And this, as you know, gets harder and harder to get into the market, always a tough discussion with the retailers. And then, of course, we're always very wary and mindful of the pressure on consumers. This graph, we've always said, tells the whole story. If you had one graph you wanted to put up to tell you all what happened to Astral through the year, this is it. Definitely a tale of two halves. So you can see that I've put a red block around that one, a disappointing result in the first half, but certainly a positive result in the second half, which returned the business to a good level of earnings and financial performance. Just to remind everyone, this is the month-on-month, year-on-year movement in the broiler selling price and then the feed price. So you can see the price deflation coming through quite strongly here in the first half. At the same time, off the back of a smaller maize crop in 2024, we had this -- we had higher feed prices. We had spike -- the spike on SAFEX yellow maize at this time, and we'll look at that graph a little later. But we were able to procure well enough that our feed prices were softer through the second half, but we certainly looked to get some improvement in selling prices to cover input costs. Otherwise, those negative margins would just reflect again on the scoreboard, which is not the business we're in. So on the raw materials, I'm not going to go through this whole balance sheet, except to say that, that's the small crop in 2024, relatively small crop, which led to higher prices for maize on SAFEX and higher feed prices that we had through the first half of 2025. We then had the market -- quite a lot of volatility in the market. The first crop estimate committee report came out with a 13.9 million tonne crop. The last report being the ninth report at 16.3 million tonnes. So through all of that uncertainty about delayed planting, the late rains, the grade issues, everything that followed, there was a lot of volatility in maize prices. And we eventually reported or harvested a crop of 16.3 million tonnes. Now the progress -- planting progress for the current crop is well above the 5-year average. Today, we're sitting at about 44% planted. So good progress has been made on the planting of the current crop, and we've had some good rains. So I expect and what we can see, we've moved into a La Niña weather pattern, which means -- usually means good rains for Southern Africa. And if these rains continue and it rains at the right time through the growing season, there's no reason why the prospects for the maize crop that will be harvested in 2026 will not be any worse than this year. That will support favorable maize prices into poultry feed. In fact, we believe that if we produce this crop, you'll see the carryout increase, we should move closer to export parity pricing. And there's probably about ZAR 200 a tonne downside in that on July 26 contracts, which are trading at the moment about ZAR 3,500 a tonne. So good levels for poultry feed. You can see the volatility through 2025 in the maize price. I mean you had to choose your moments here where you wanted to buy. But certainly, Astral positioned ourselves well through this volatility. We did not participate in this which is why you see those softer feed prices coming through in the second half. And then more recently, through the latter half of this financial year or calendar year, SAFEX has dropped quite dramatically on the back of the news of the big crop of 2025 and the prospects for '26. So all you can do in this market is just keep buying, hold a good position. As you know, we always have to have 3 months of maize in the pipeline. Here, you keep buying and every day you buy, you can reduce your average price. In a falling market, don't always look as good as you could be. But if you don't buy, you're going to be waiting for some bottom that someone must tell you where it's going to be and then you're really a speculator. You can see a little bit of an increase in SAFEX pricing just lately, and that was of some volatility in the Chicago Board of Trade with funds taking up longer positions on corn. Soy meal, this is a story to tell. I mean we really -- protein input prices are very good. We're well positioned here. If you look where the market came off about 2 years ago at record highs, ZAR 13,500 a tonne. You could flat price meal during the year now at ZAR 6,500 a tonne, good levels to feed chicken. And then, of course, the rand-dollar exchange rate, very stable, which takes those shocks out of any movement that you will see something coming through with shocks on Chicago Board of Trade. But with very good global coarse grain balance sheet, the world is not short of maize and soybeans right now. The U.S. has had a good crop, harvested a good crop now. South America has had a good crop come off. South Africa has had a good crop come off, and you can see that Chicago is trading those fundamentals. So good global outlook, good local outlook for maize and soybeans, and then you have some stability in the rand-dollar exchange rate, which brings that price relief or favorable pricing levels to SAFEX. Very quickly on the Feed Division, revenue up here 9%. That was driven by an increase in sales volumes of 6.5% and selling prices up 0.6%. So that selling price movement reflecting that increase in raw material costs across both years, not reflecting the softer feed prices in the second half. Operating profit up 31%. So you can see the momentum that comes through. You place more broilers on the end, they eat more feed, you get this big pull into the feed mills in Astral, and you have these volumes coming through. Then you add external volume growth to that, and this is -- you cover your fixed costs even better. You have better efficiencies in your feed mills coming through, longer runs of all the broiler feed we make, and then this is the result. So to the Feed Division and the Meadow Feeds, a really good result for the year. And I think this -- we only saw something like this in 2023 when we had all of those feed volumes going to the Feed Division on the back of load shedding and the big bird era, but the Poultry Division was suffering because of the cost. So this is really a true reflection of what the integration of the business can do. Margins up to 6.6%. And expenses on a rand per tonne basis very well controlled. You can imagine what these volumes do. We've seen the graphs for these 2, so I'm not going to cover that again. But the internal volumes up 8%, external volumes up 5.6%. And that growth was largely in the external poultry and pig feed sectors. So saw some nice growth there with some of that coming through in the Western Cape. Expenses well controlled. And again, we saw a net margin per tonne increase in the division. So a good return from them for the group. Sales mix here remained largely unchanged, still about 60%, more or less internal feed and the balance going into the external market with a very important component in the other being dairy, making up about 25% of the sales. The Poultry Division, we'll cover this in some detail. Revenue up 10%, driven by volumes and a little bit of selling price recovery at 2.4%. But if you look at the volume growth, nearly 8% in this division year-on-year, which has really supported a good performance and turnaround in this division. Breeder revenue up 4.6%. We'll unpack that a little later. Now when you look at this graph, you'd say, well, you've had -- it's been a good year, but operating profit in poultry was down. That's where we come back again to that quality of earnings number. If you take out the hatchery fire and the bird flu insurance claim, which amounts to ZAR 231 million in this division, the underlying improvement in their results is just under 53% year-on-year without that one-off item in the insurance recovery. So a good result in the Poultry Division and certainly one that we're pleased with through the year with all of that recovery coming through in the second half. You'll remember, in the first half, we had a negative PBIT here. We've already spoken about the margins. So the average broiler net margin over the year, 1.5%. It still remains thin and vulnerable to any headwinds, 1.5% margin, if you look at that graph that we showed you earlier on, is thin in the business. And if you just have any shocks, that comes under pressure again. So a lot of focus then on rebuilding cash reserves, which you'll see later. Dries will go through the balance sheet in detail, which sets us up in a stronger financial position than we were 2 years ago or that we were even in a year ago. Of course, with higher volumes, your variable expenses increased, but those volumes assisted your overhead production costs, your fixed costs and our per unit -- per kilogram production cost for every chicken produced came down slightly for the year. So that's the benefit of scale, the benefit of volumes in the business. And then our finished goods stock levels, we've used the word substantially lower than at the end of 2024 because they are -- in fact, they were substantially lower than they were then, with the higher production we have now filtering into the system. It's not sitting in a freezer, and we are selling current production. And by the end of this month, we will surpass 6 million birds a week. This is the sales mix. So we spoke earlier on about a bit of support from the product mix. I'd like to just point out the IQF singles on higher volumes increasing in the year. We still sold 6% into the QSR sector, but on higher volumes. We sold 13% of the mix in fresh, but on higher volumes. So we had growth in IQF. We had growth in fresh. We had growth in QSR. We had growth in value-added. And within the IQF component, we had growth in IQF single portions, which attracts a better NSV. So all in all, support from the product mix with that improvement in selling price. On the Farming Division, Farming Division again had a good year. If you look at Ross Poultry Breeders, our sales of parent stock decreased slightly year-on-year. That is because in 2024, we saw a recovery of parent breeding flocks around the country. So after bird flu in 2023, a number of our customers were restocking. There was quite a big pull on volumes from Ross Poultry Breeders in that year. And certainly, once those flocks have been settled again and stabilized, the volumes in the market this year saw a more normalized level of parent stock sales into the market for -- from Ross Poultry Breeders. Certainly, better demand for day-old chicks this year, and we were able to increase the sale of day-old chicks into the broiler market. Feed input costs increased marginally. We've spoken about how the feed conversion rate offset that increase. Broiler production efficiencies improved, once again demonstrating the good genetic potential in the Ross 308 bird. If you couple that to good feeding practices, feeding programs and good on-farm management, you can generate again what we see as an all-time high reflecting in these broiler performances. And bird flu, we'll speak a little bit about in the outlook. I won't cover it here. These are the broiler performances, all indexed of 2015. So weight and age, average daily gains were slightly up by 1 gram per bird per day over the life cycle of the broiler, but weight for age more or less the same as it was last year. You can see the live weight there, pretty flat and the age pretty flat. Where the benefit came through, though, and unfortunately, given the scale of the graph, it doesn't quite show as much as we'd like to, but feed conversion rates did improve in the year, and that's where we got the benefit in live cost from feeding these birds efficiently and producing every -- or more kilos of meat for every kilo of feed produced. PEF improving at an all-time high. Just very quickly, some industry matters, a couple of topical points. Imports fell off quite a lot during the year, and that just had to do with bird flu around the world and the Brazil closing its borders to exports or rather South African closing its borders to imports from Brazil with the bird flu risk that presented itself there during the year. As soon as they open though, the borders, we've seen an increase again in imports. And we do understand there's quite a bit of chicken on the water. I mean, one needs to -- tend to look into the numbers. I mean about 80% of that though is MDM and bone-in portions. And if you break that down further, about 65% of that will be MDM and 15% bone-in portions and the rest will be tertiary. So Year-on-year, actually a decrease in the import volumes, but really just as a result of Brazil's bird flu. The industry is still producing around 21.1 million birds a week. And if you add imports to that, they make up about 19% of local consumption. Bird flu, we'll talk about in the outlook. It's still a risk. There's still outbreaks in the industry, unfortunately. And as early as last week, a further outbreak was reported. One point that is concerning for SAPA is the AGOA poultry import quota. That's about 72,000 tonnes per annum that's free of the antidumping duty from the U.S. with the 30% tariff imposed by the U.S. and then the expiry of AGOA or notwithstanding the expiry of AGOA, this quota should have already been removed, but it hasn't been. So we are taking this on a legal review with the Department of Trade, Industry and Competition. We believe they're still holding on to it to try and get a deal over the table with the U.S. We seem very far away from that if you read what's going on in the newspapers lately. And we trust they're not using chicken as, no pun intended, a trump card. But all we've asked for is a seat at the table. We want to be part of that conversation if they give up anything on behalf of chicken in this country. And then you all know about the poultry market inquiry and the final terms of reference that were published around that. I'm going to hand over to Dries Ferreira now. He'll take you through the financials in a lot more detail. Thank you. Thank you, Dries. Johan Andries Ferreira: Something that I just need to quickly highlight here is the efficiency with which we record or convert that revenue line into an operating profit environment. It's really a very healthy operating environment with the trim in the business coming through in the quality of earnings. Operating profit margin, although it stayed flat at 5.5%, really had a much better quality of operating profit. As a result of the quality of the balance sheet improving, you will notice that the finance charges line has improved tremendously year-on-year from the ZAR 138 million cost to ZAR 55 million cost, which includes the right-of-use liabilities, the right-of-use assets with the liabilities attached to it. Overall, net finance cost has come down significantly year-on-year. We, therefore, recorded a profit before tax of ZAR 1.2 billion, up 18% year-on-year and a profit from continuing operations, up 16.4% at ZAR 876 million. Our headline earnings per share on a rand value, ZAR 844 million, and the main difference between the profit of ZAR 876 million and the headline earnings of ZAR 844 million being the disposal of some properties and PPE that generated a profit, which we add back for headline earnings. That leaves us with earnings per share of ZAR 22.76, up 16% and headline earnings per share of ZAR 21.93, 14%. The group annual revenue all the way from where Astral listed in 2001 really tells us the story of an ever-increasing revenue line. And we've got them split into the different divisions, the gold bars showing the Feed Division revenue growth over the history of Astral. The blue bar is the Poultry Division and then the red line showing the group consolidated revenue. And again, just outlining there that hardly ever does the revenue in the group backtrack. We've got an increasing profile in the revenue, which means we're always growing volumes and trying to recover price from the market as we've got the input costs coming into the business. It's a very important aspect to the business to recover the input costs, obviously, to protect our net margin. But over time, there's a significant evidence of that ability to recover input costs. If you look at the different divisions, we've got ZAR 10.8 billion revenue in the Feed Division for this year and ZAR 18.8 billion revenue for the Poultry Division. The group, therefore, coming in with a consolidated ZAR 22.6 billion. Here we go. Annual operating profit recorded per segment or per division, all the way again back to 2001 demonstrates the volatility of the group's profitability. But if you look closer, you'll see that the Feed Division really is the -- as we always referred to it, the banker in our operating performance. And those are demonstrated with the gold bars. You can see this year's operating profit from the Feed Division at ZAR 714 million. Going back in the history, you'll see that, that's a very good performance. Poultry Division demonstrated on the blue bars, you can see the volatility really coming to a fall in the Poultry Division. And that really comes as a result of the fact that we've got feed cost pushes up, and it always takes time to recover that from the market. And therefore, the Poultry Division becomes the ham in the sandwich, so to speak. Operating profit for the group demonstrated on the red line, and we've demonstrated here as an operating profit margin, coming in at 5.5%, again, just referring back to the quality of the 5.5% versus the prior year's 5.5%. And if you look back at the history of the group, again, as Gary also outlined earlier, the volatility trying to peg a number of average margin is not that easy. But as he says, your guess, it could be as good as mine. But definitely a healthy margin at 5.5%, and we have done better in the past, but also worse. I think the reality is that if you look at the quality improving year-on-year, it really bodes well for the foreseeable future. If we unpack it into half year performances, it really starts to outline the quality of the second half earnings for the group. And I'd like to point out that ZAR 976 million operating profit for the 6 months, the second 6 months of this financial year is the second best half year reported profit in 50 cycles since the listing of Astral in 2001. So it really was a significantly strong performance for the 6 months and evenly weighted or well balanced, I should say, between Feed Division performance and Poultry Division performance. If you look at the green line and the red line, we really want to point out there that the green line reflecting the feed price change year-on-year and the red line, the poultry selling price, the broiler selling prices into the market. As you can see, in the 6 months, we've had a reduction on the feed cost input and a recovery in the selling prices. And you can see how sensitive the Poultry Division is coming off a loss of ZAR 26 million in the first half to a profit of ZAR 559 million in the second half. I think one of the highlights of this year's results is the quality of our balance sheet. As Gary also outlined earlier, we were on a rebuild phase, a Re-set, Re-focus, Re-start for the last 2 years being birth out of 2023, the dire environment that we operated in with the load shedding and the bird flu, which wiped out ZAR 2.2 billion off our balance sheet. We concluded the rebuild this year. And if I can just quickly run through that, the equity line at the bottom of this table shows a 13% improvement in our NAV in the group from ZAR 4.752 billion to ZAR 5.375 billion. The main drivers behind that, if I can jump to the top of this table, I'll run it through line by line. Our noncurrent assets, our PPE improved by 3%, showing that we are starting to spend on capital investment in the group, which drives efficiencies and ultimately improves the returns in the group. Our noncurrent assets, our right-of-use assets, at least, has increased from ZAR 178 million to ZAR 286 million, and that is coupled with slightly down on this table, the lease liabilities, which increased from ZAR 184 million to ZAR 294 million. And that mainly relates to long-term leases, mainly relating also to the transport contracts that we run in the group. And there, we've renewed a contract a year ago. You'll recall that a year ago, we had a capital commitment of ZAR 125 million that we brought in from for County Fair, and that one has obviously been started in November last year. And that is the increase in the right-of-use assets. Net working capital decreased by 11%. And that really demonstrates the quality of the working capital management in the group, coupled with the strong pull in the Poultry Division, feed -- for the Poultry Division finished inventory positions, which I'll unpack in a slide later. You'll notice the current assets is the big driver for that improvement coming down from ZAR 4.872 billion to ZAR 4.61 billion with current liabilities flat year-on-year. Noncurrent liabilities, mainly our deferred tax balance and borrowings that's in there, up 27%, and that really demonstrates the deferred tax position that we have in the group where we have a lot of benefit from the tax regulations because we are classified as a farming environment. Therefore, the net assets down 8%. Those are the productive assets that we engage in the business of which we generate our operating profit. And you can see that it's really a good story if you take the balance, the reduction of net assets and the improvement in quality of earnings. It really positions the quality of the financial statements all the way around. And therefore, the big story for the balance sheet is the fact that we restored our net cash balance. We managed to generate a net position of ZAR 1 billion in the year after everything considered, and we moved from ZAR 13 million cash a year ago to ZAR 1.013 billion at the end of September 2025. Capital expenditure, depreciation and amortization for the group ZAR 331 million, a slight increase year-on-year. Two buckets driving that one, PPE, property, plant and equipment at ZAR 241 million and the right-of-use assets, which we touched on earlier at ZAR 90 million. The total CapEx, however, is up strongly year-on-year, and that number is expected to be even stronger for the period lying ahead as we start to reactivate our investment programs after the Re-set, Re-focus and Re-start cycle that we've been through. But also linking that ZAR 336 million total CapEx number to the total depreciation, you'll see that we are very much in line with our depreciation for the year. If you look at the breakdown of that into replacement and expansion, you can see that the replacement CapEx or the maintenance CapEx in the group has received a lot of attention, and that will improve over the period going -- lying ahead in the foreseeable future, and we expect a strong total capital expenditure number there that will drive efficiencies and productivity. Outstanding commitments at reporting date, ZAR 159 million. The main items in there, there's quite a lot of items in there that makes it up. We've got a lot of capital projects undergo at the moment. But the two ones that stand out is really the refrigeration upgrade at Goldi, which increases our capacity. As Gary said, we will, by the end of this month, be just north of 6 million broilers per week being slaughtered, and that is the one activating that profile. And then also we're increasing our hatchery capacity. On the working capital, really a good story to witness here is the current assets coming down by ZAR 262 million in total. The main drivers of that being the poultry inventory. You can see they're coming down from ZAR 1.169 billion to ZAR 682 million, an improvement of ZAR 487 million in cash coming into the balance sheet. The Feed Division inventory position has improved by ZAR 42 million. And the trade debtors, although an increase of ZAR 294 million, it's a healthy increase. We really run an exceptionally clean debtors book in the group, running at a very good profile. All the debtors there is collected. We're really sitting with just about no debtors outstanding beyond due dates. So really an exceptional performance by the credit control team. Current liabilities, as I said earlier, flat year-on-year and net working capital, therefore, improving by ZAR 262 million. On the cash flow, really clearly demonstrated with this waterfall graph. Coming into this financial year with ZAR 13 million cash on the balance sheet net generating ZAR 1.5 billion cash operating profit. Working capital changes of ZAR 276 million. You'll notice the difference from the previous slide. It's really the IFRS application in terms of what working capital changes needs to be rolled back into that cash operating profit profile. And then we've got proceeds from the sale of assets, which I touched on the income statement being the difference in the headline earnings per share versus EPS, earnings per share. So there's a cash proceeds of ZAR 69 million that generated a profit profile that needs to be added back. And then we've got tax paid, ZAR 127 million. Again, the difference between that and the tax charge really driving that deferred tax liability on the balance sheet. And then we've got capital expenditure paid in cash, ZAR 328 million. And then the resumption of dividends at the end of last year with our final dividend being declared of ZAR 5.20 and interim dividend in the first half of the year of ZAR 2.20, translating into a cash payment of ZAR 285 million to shareholders. Closing off with ZAR 1.013 billion on the balance sheet in cash. Headline earnings per share history. Again, you can see the full history here, some volatility in the number. We all know where that comes from. But I think the story to be identified here is the fact we're paying a ZAR 11 dividend this year, which is a 2x cover of our ZAR 21.93 headline earnings per share number that we generated for the year. In summary, we've managed to convert our revenue into profitability on a very clean basis and that generated a significant cash inflow of ZAR 1 billion net for the year, which we could use to redeploy into reinvestment in the business, our capital expenditure profile at ZAR 336 million and returning ZAR 8.80 in the final dividend to shareholders. Thank you. Gary Arnold: Good. Well, thank you, Dries, for unpacking the numbers a bit further for us. As usual, we'll give the investors a view of how we see the near-term future and balance that with some slightly negative aspects that we see out there. I don't think we can stand here and be completely negative about the future. Otherwise, Anthony is going to look at me and say, you're playing your poker face. But certainly, there are some aspects out there that still concern us. And the #1 risk in the group remains bird flu. I think we must be ever mindful of that. There was an outbreak in KwaZulu-Natal just a week ago. And we are starting to see more and more, and this is across the globe that this isn't just a winter disease. You're seeing it in summer, now on the weekend in the press, they were reporting an outbreak in African penguins. So just off the coast here, which is concerning. So certainly not a winter disease any longer. And there has been slow progress on vaccination. You remember, we reported that we had approval to vaccinate one farm. We received that earlier in the year, which is about 5% of our breeding stock. There was a word in here on Friday that said with very slow progress. And then at about 4:00 on Friday afternoon, Dr. Obed Lukhele, our Head Veterinarian, gave -- dropped us a call and said, guess what, we've just received another 2 permits for vaccination. So we took very out -- just to change it to slow progress because it has been rather slow, even though we now have approval, and we'll look at the timing of that, but we have the ability now with those approvals received to vaccinate up to 30% of our breeding stock. And in the absence of compensation, still an ongoing battle with the Department of Agriculture and in the absence of insurance, good biosecurity and vaccination as a tool in the toolkit is what we have to manage the disease. So under very controlled conditions, we've been allowed to vaccinate, certainly not supporting blanket wholesale vaccination across the industry because that comes with other risks. But under controlled conditions, we are applying a vaccination strategy to deal with bird flu. The economic growth outlook does remain subdued. I mean, notwithstanding some positive signs we've seen in the week, they're talking about a possible interest rate cut and the Monetary Policy Committee getting together soon to look at that. That will have -- does bring some relief to consumers. But I think on the larger front, we need to see growth and development in the country that will create jobs. Without jobs, unemployment remains persistently high, and that just places additional pressure on household disposable income. So we -- that hasn't gone away, and it might seem a bit laborious as reporting it here, but it is a fact, and we need jobs in the country so that people can buy a better food basket and which ultimately put protein in there in the form of chicken. The AGOA preferential trade access, we spoke about that earlier on. This quota is still in play. And we are not sure what will happen with that. Time will tell, although we keep on letting the minister know that we hear and we're available to chat to him. But certainly, the tariffs at 30% and AGOA falling away, will have negative consequences for the country. A small reprieve for the citrus sector on Friday was that President Trump signed an executive order exempting South African citrus from the tariffs. They're a bit short on oranges and apples all of a sudden. So he's now signed that so that our fruits at least can flow into the U.S., free of those tariffs that he's imposed. So that's a small positive sign for that sector in South Africa. And then the poultry market inquiry was launched. It's very wide in scope. It's stealing from every point in the poultry integrated value chain from genetics all the way through to the retail sector. It's very wide in scope, and it will take time to conclude, and we're not sure what the outcomes will be. I mean there's a number of these market inquiries that have been conducted over the years. There are recommendations that are made. Time will tell what that means for our industry. What they're looking at is barriers to entry. They want to try and establish why we have large integrated poultry producers, how does economies of scale benefit poultry production in the country. But we're not unlike any other poultry market across the world in terms of how we produce chicken. So anyway, we'll engage this process positively, and we will wait for those outcomes. We put it on the slide as a little bit of a negative because it is going to take up time and it remains something a little uncertain. I think this -- can we just move to the next slide manually, please. Thank you. On the positive side, as we've already covered, maize prices are favorable, and we expect them to remain favorable unless it just doesn't rain in January and February next year and completely dries up, which we don't expect with the outlook that we have on the weather patterns. We are in the La Niña phase right now. We've moved into that, and we expect that to continue through the South African grain season. So we've had a large harvest in 2025 and a large harvest is expected in 2026, but we've still got a long way to go. A lot of water under the bridge to go, as I say, and we'll keep a close eye on the weather and other metrics there in our procurement strategy. We have increased and are able, by the end of this month, to increase Astral's production volumes again. This does positively benefit economies of scale as long as we can sell it. And the market seems to be very well balanced in terms of supply and demand at the moment, and we are moving into a festive period. And we have this ability or we had this ability to bring these additional volumes to market through the large capital expenditure program we embarked on a few years ago to increase our capacity by 16%. So we were always well positioned with that, and that has supported growth in the retail and quick service restaurant sectors. You see quite aggressive growth there with store rollouts on a monthly basis. And fortunately, they're all looking for chicken. Investment in process and product innovation, some of this is happening as we speak. And there's a couple of nice projects in here or good projects in here, which will enhance our manufacturing capabilities, support efficiencies in the business and will also lead to a product mix -- well-balanced product mix and certainly not indicating there that we're moving away from any one part of that product mix, just balancing that market well. And there are products outside of that, that we use in the integrated value chain that are not necessarily just chicken in the bag at the end of the day, but also ingredients that we produce that support a better feeding cost. Astral stated strategy hasn't changed. Our Board reconfirmed this in February at our strategic planning workshop. We are the best cost producer or we will endeavor to remain the best cost producer. And we're just keeping that steadfast focus on efficiencies. And all my colleagues will know that we keep on having this conversation. And we do have a group-wide awareness campaign around this, which we will keep on talking about because it's critically important that we streamline all our objectives to support this without the best cost producer strategy, we cannot be a supplier of affordable protein to the country. And then we have a healthy balance sheet, which Dries has spoken a lot about. This does obviously then support to key strategic capital investments, which will bring cost benefits, improve efficiencies. And then we must always look at how we will drive volume growth into the future. So this some positives on the outlook and certainly lend themselves to supporting the earnings in the business. If we can just call, I think this is a start. Thank you. I'd like to thank you for your attention today. From my side, thank you to all my colleagues in Astral, and these are your results, and without all the hard work that all of you put in every day, certainly wouldn't be possible. So enjoy the moment. This is your report card and scorecard, and it looks good. And then as you know, Dries is moving on to the industrial sector. I think after 3 years, he didn't -- he thought he had enough of poultry. But Dries, best wishes, and thank you for your support. We've told you, sorry to see you go, but good luck, best wishes. Thank you. Marlize, any questions? Marlize Keyter: So we'll take questions from the floor first. Gary Arnold: Any? Unknown Analyst: In terms of your second half sales increase, is there a correlation as a result of one of the competitors closing down or going into business rescue? Or is it a function more that the consumer with interest rate environment started consuming more chicken? Gary Arnold: No, there's a correlation with the industry consolidation that we see. I think everyone picked up some volumes there. We were in the fortunate position that we had capacity to do it. And it's got more to do with the fact that the country still needs to produce the 21.1 million, 21.3 million birds a week. So we have participated in that. But there's also been growth in the retail, wholesale and quick service restaurant sectors. One thing I can say, and we believe it does support volume growth through that period as well is that foot and mouth disease took hold in this country quite severely through the year. And you'll see the rally in beef prices. If you go later into the slides, we've got all the additional information. Beef prices rocketed in the year on the back of foot and mouth disease and the quarantine of livestock there in the feedlots. So certainly, that may have played a role as well in supporting the volumes in chicken and poultry. People still buying protein, meat to eat. And those that couldn't afford to buy beef, the next best thing is in chicken. So we do believe that played a role as well in the pull that we've seen for chicken through winter, which was traditionally your slower season. We certainly didn't see that drop off on fresher bird, yes, but not on frozen. Unknown Analyst: Then my second question is then as a result of that volume increase because of that event, is the price increase the same? As we know that, that entity was selling chicken at a loss previously, which was bringing the whole market down. Gary Arnold: So -- I mean, I think that points to some of the recovery in selling price through the second half. I mean, as you rightly said, there was the market pricing, and the market was suppressed, particularly through the latter half of 2024, a very competitive environment for frozen chicken. And there were prices out there that just were not recovering input costs. And our responsibility is to recover input costs. And I think we've managed to achieve that through the second half, which reflects in the margins. Anything else online, Marlize? Marlize Keyter: No, there are no questions, Gary. Gary Arnold: Okay. Then we've done pretty good job of covering it all. I'd like to thank you all again for attending, especially all of those -- there's a last question, a last entry. Marlize Keyter: Charl Gous from Bateleur Capital. When we review the FNB agri data report, it seems Astral's broiler price realization lags the data published in the report. Can you comment on poultry pricing achieved and how we should review the data released by FNB? Similarly, CPI data point to more muted price increase in poultry selling. Is this the more correct number to monitor? Gary Arnold: With all honesty, I don't know a lot about the FNB data that you're referring to. I mean we use some of it in a later slide, but in other proteins. If I could just give you some advice, refer to the SAPA average selling prices that are published in their production reports. They take information from the whole sector, go through a third-party Chinese walls, that's assembled, put together, probably a very reliable source of information when it comes to selling price trends. I'm not saying the FNB data is not. I just don't know the source. It could be on-shelf pricing or not, but the producer pricing that we provide, I think, is a reliable source. And you'll see that, that is included in a slide later on in the show. Marlize Keyter: The second question, the balance sheet is strong with improved cash generation expected. How do we view the potential for special dividends in the short term? Gary Arnold: The Board has, as you know, taken a decision for -- to declare dividend, final dividend at 2x cover, and that was with cognizance of our CapEx program going forward. I think the first task for us as a team was to rebuild the balance sheet. We've just done that. So certainly not walking out of that immediately thinking about special dividends. But looking at a project pipeline where we have as you'll see the CapEx for 2024. And we had to pull the reins back a bit with the cash that we bled from the business in '23. And '24 was a rebuild phase. So certainly, we have good places to spend the money. We will apply those funds wisely. And again, there's a lot of projects in there that will benefit the business going forward and improve earnings over the longer term. So we should look at that first. And yes, then it depends on the cash. We'll make those decisions as and when necessary with the Board. But certainly, no shortage of projects right now that we don't need the cash. So not looking to dish it out too soon. Marlize Keyter: Thank you. His third question, can you provide a poultry volume target for full year 2026? And what percentage increase do you target? Gary Arnold: Look, I can't. I think -- I don't think we can say, Marlize will kill me if I give you a forecast like that. We're going to produce, as we've said, 6 million broilers a week. We must sell that. It's not good we produce it and put it in a freezer. So it's going to depend largely on market conditions through the year. We are only in the second month of our new financial year. We're in the -- we're going into festive period, so good demand at that time. But normally in January and February with all the obligations that families have towards school fees and everything else and spent all their money through Christmas, you do see a softening in the market. So we've always said we must balance our supply with demand. And we're not going to be reckless about that. And there's always a lead time to that. It's at least 8 weeks, 8-week window we have to look into to balance it. But certainly, we'll need to -- I can't just say we're going to keep on producing and keep on selling. There needs to be that pull from the market. Marlize Keyter: Rajay Ambekar from Excelsia Capital. Do you expect imports to drive pricing pressure going forward with cost dropping and the rand being strong? Gary Arnold: It depends on what's in those imports. MDM makes up a large portion of that clearly because the country doesn't produce mechanically deboned meat. We sell the whole carcass, stripped carcass. So we don't produce MDM here. And that continues to be the largest portion of those imports with bone-in portions making up some of it and then offal or tertiaries making up the rest. It depends what happens to the volumes around imports. I think we should remember that we now, as a country, have an antidumping duty in place against Brazil and 4 European countries. The AGOA quota should be removed. The U.S. are having a bad time of bird flu, so hardly any chicken coming out of the U.S. to South Africa. Europe countries are opening and closing as bird flu hits their borders. So it's quite a disrupted -- quite disrupted trade flows at the moment. And most of the imports are coming out of Brazil. And again, a lot of that is MDM. So difficult to say that there will be this flood of imports, and it's going to impact pricing in the country. We have an MFN duty, most favored nation duty plus antidumping duty against Brazil, which was implemented a couple of years ago already. And that's a better position to be in than we were a few years ago. Marlize Keyter: Charl Gous, would you like to extend your feed procurement beyond 3 months given favorable feed input costs? Gary Arnold: We've got a procurement committee that looks at all the inputs, the technical data, the weather, recommendations from the trade and our suppliers, and we take a view. So certainly, if we need to take a longer position, we do that. We will determine what that strategy will be. And then we've got a daily procurement execution team that will go and fill that book. Our minimum coverage there is 3 months in the pipeline. That's really just to get physical deliveries to the mills. But certainly, we do from time to time, hold a longer position than that. And in the maize market like we're currently pricing, I don't think it's unreasonable to expect to hold a longer position. Marlize Keyter: We've got an audio question from [ Tabang Kapindayi ]. Unknown Analyst: It's Tabang Kapindayi from the University of Johannesburg, doing my PhD research, specifically on feed efficiency and antimicrobial resistance, which focuses on multi-omics in poultry systems. My question is for the leadership. And also congratulations. I've also send my congratulations also to the team as well on the impressive turnaround and a strong cash position. My question is on research and development because I have noticed that it was also mentioned like throughout your impressive like presentation. Given that the feed cost represent like 66% of your production cost, your single largest, obviously, expense at the moment. Could you outline the specific research and development initiatives prioritizing to systematically reducing this cost burden and to protect your margins? I'm particularly interested in the role in advanced nutritional science. So if I can just understand the priorities in terms of research development in that regard. Gary Arnold: Thank you for the question and the well wishes. Certainly, I mean, we have an ongoing research and development program. We've got a broad team of nutritionists in the group. We've got veterinarians in the group that are constantly working on feeding programs and feeding specifications to exploit or maybe a better word is -- what's the word I'm looking for, Dries? Yes, is to get the best genetic potential that exists in the bird in performance out of that animal. So we do have in-house R&D. We do have in-house testing facilities, and we are constantly testing feeding programs and developments in nutritional science with new ingredients, feed ingredients out there and as such to improve our performance -- broiler performances and thereby support a better feed conversion efficiency. But certainly something that you welcome, we can always set up some engagement with our nutritionists to explore this a bit further. Unknown Analyst: This is a follow-up question. Yes. I was saying that like have you also looked into maybe collaborating with -- considering maybe like this, what you have already presented, as Astral maybe considered collaborating innovation models with like universities and institutions, particularly like with the feed industry, with the feed sector, AMR reduction as well as precision maybe nutrition trials, even though you have your in-house and also maybe collaborating with academia. Gary Arnold: Yes. We do collaborate with academic institutions, both locally and abroad. So we draw on technical know-how abroad and research just performed overseas as well as locally, and we do have relationships with a number of local tertiary institutions. Marlize Keyter: [ Harold Sigola ], given the financial results, what is your view on reinvesting profits versus cost containment for the coming financial year? Gary Arnold: Well, we always -- cost containment is a continuous focus point, and that starts with managing the business right. So we will always look at opportunities to reinvest profits. Obviously, we want to as long as possible. We'll keep on rewarding shareholders as long as there's profits there to do that. And then if there's profits there, we need to reinvest them back in the business. It's a large business, requires a lot of repairs and maintenance and capital expenditure in maintaining or upkeep of the assets. We are a custodian of these assets, so we need to look after them and then certainly exploiting opportunities to improve costs and efficiencies. Marlize Keyter: There are no further questions. Gary Arnold: Thank you, Marlize. Thank you, everyone. Appreciate your time today and your attendance, and go well. Best wishes. Thank you.
Mark Heine: Apologies for those who are joining us now. We'll just kick off, sorry, we're a bit late. And good afternoon, everyone, and thank you for joining us today for FY '26 annual half year results. I'm Mark Heine, CEO of EROAD. I'm delighted to be introducing Ciara McGuigan, EROAD's new CFO, who commenced at EROAD in September. I'll start by outlining our performance for the half, and Ciara will take you through the financials. We'll then finish with outlook and guidance before opening up for questions. Turning to the key numbers for the half. Free cash flow remains a real strength for EROAD coming at $6.2 million. We've delivered consistent cash generation over multiple periods, thanks to the operational discipline that's been built into the business. Reported revenue was just over $99 million, a 3.3% with steady performance across the installed base and contributions from ongoing rollouts. Annualized recurring revenue increased to over $178 million, up 6.9% or 3% in constant currency. Growth continues to come from higher-value subscriptions and enterprise expansion. Normalized EBIT was $2.5 million, lower than the prior period due to some higher costs and lower R&D capitalization. Ciara will step through these movements in more detail in the finance update. The results show our business remains strong and resilient across its core fundamentals. First, our cash generation continues to be a standout. Free cash flow was over $6 million or almost $17 million on a normalized basis once the one-off 4G upgrade costs are removed. With that program finishing this year, the underlying cash profile becomes much clearer and provides greater visibility in how we allocate our investments. Liquidity remains strong at over $62 million, giving us confidence in the pace and focus of our investment decisions. Second, we've maintained strategic focus on the eRUC passenger opportunity in New Zealand. As the country moves towards universal electronic road user charging, we're preparing the technical, commercial and operational components needed to support a nationwide rollout with clear relevance to emerging global models as well. Third, we are focused on regional market conditions. New growth investment is being directed to Australia and New Zealand, where the near-term return profile is strongest. North America remains important, but slower conditions mean we're managing spend carefully while preserving capability. The impairment of goodwill and other assets in North America of $135 million recorded in the half relates to the previously signaled softer economic conditions, the increased competition, the nonrenewal of a large U.S. customer and our focus on ANZ. And finally, our customer focus and operational capability have continued to improve. Partnerships have been strengthened and boosted by the ramp-up of our Manila office, providing our customers with enhanced responsiveness and support. These improvements are translating directly into outcomes, including the newly inked enterprise agreement with Cleanaway, valued at $5 million ARR once fully deployed. Turning to our sustainable growth across our core markets. Let's start with free cash flow. We delivered 4 halves of sustained reported cash generation. That consistency gives us the flexibility to invest selectively and accelerate where market conditions are most favorable, while also evidencing that management takes a prudent approach to investment. In Australia, our enterprise momentum is driving sustained double-digit annualized recurring revenue growth. Once the new Cleanaway Enterprise deal is fully implemented, ARR in Australia is expected to grow significantly. And finally, the eRUC opportunity presents a global opportunity for EROAD, which we will dig into this opportunity over the next few slides. I'm incredibly excited to be talking about New Zealand's move towards a universal electronic road user charging system and the direction of travel is very, very clear for EROAD. The New Zealand government has committed to transitioning all vehicles, including petrol and light vehicles to eRUC. A series of bills and consultation steps are already scheduled through 2025, with implementation targeted for 2027. EROAD is deeply embedded in the current system, having pioneered eRUC for heavy fleets, and we now facilitate around $946 million in annual RUC collection for the New Zealand government. That experience, combined with our established regulatory relationships and platform capability puts us in a strong position as the country moves to a fully electronic usage-based model. New Zealand is moving early on this transition and the work underway positions us well for what is coming next. What we see in New Zealand is part of a broader shift starting to emerge internationally. As fuel tax revenue declines and EV uptake grows, governments are looking for a more sustainable way to fund their road networks and usage-based charges come to focus in several larger markets. Our priority is to get it right in New Zealand first. As the market moving earliest, it gives us the chance to prove capability at a national scale, while policy conversations elsewhere continue to develop. At the same time, the longer-term opportunity extends beyond New Zealand. New Zealand has 4.7 million vehicles. Australia has around 4x that amount with approximately 20 million vehicles, while the U.S. is around 60x the size of New Zealand, with more than 280 million vehicles. Those markets are actively examining alternatives to fuel in size and the scale involved is significant. This includes the Eastern Transport Coalition mileage usage-based pilots in the United States, which EROAD has participated in, in the past. So while the immediate focus is on New Zealand, our line of sight is global. The preparation underway is intended to ensure we're well positioned to take part in those conversations as they progress. As the New Zealand government works towards design of the future system, we've been preparing so that we're in a position to move quickly once the requirements are confirmed. A key part of that preparation has been testing different ways the service could be delivered, depending on how the government chooses to structure the program. That includes early prototyping of consumer pathways and exploring how the existing EROAD platform might support the scale and simplicity required for light vehicle users. We've also been building a clear view of the commercial considerations, the economics, the potential pricing envelopes and what a high-volume operating model would require. This work ensures any approach we take is both viable and scalable when the program rolls out nationwide. And alongside the core charging model, we're looking at adjacent opportunities that may become relevant as policies develop, such as time of us in concept, tolling and other services that could logically sit next to distance-based charging over time. The intent of all this preparation is to make sure we're technically ready, commercially informed and operationally capable when governments finalize the shape and timing of the program. And New Zealand offers the opportunity to prove capability at a national scale. Doing that well keeps options open in other markets as usage-based models continue to evolve globally. Now on to the regions. New Zealand delivered a stable and disciplined half, with growth across revenue, annualized recurring revenue and ARPU. Annualized recurring revenue increased over 6% year-on-year to $93.2 million, supported by consistent demand from our installed base and continued uptake of higher-value services. Revenue grew almost 5% to over $52 million and EBITDA reached over $35 million, underpinned by strong asset retention at 92%. ARPU lifted at 4.4%, reflecting the mix shift towards higher-value opportunities and the final stage of churn associated with the 4G upgrade program. Importantly, most of the reduction in the period came from fleet resizing rather than actual customer losses. Around 88% of the annualized recurring revenue impact from unit reductions relates to customers adjusting fleet size due to broader economic conditions. These relationships remain in place. A expansion upsell activity across the portfolio more than offset the reduction to give us a net positive annualized recurring revenue position. A quick update on our 4G program. Australia switch is now complete. And across ANZ, as at the half year, 87% of all units out there were EROAD and were 4G compatible. And as of today, this has now reached approximately 90% being 4G compatible. The remaining work is in New Zealand, where one is the schedule to switch off 3G in December of this year. The final activity is planned for the second half and remains fully funded from operating cash flow with no change to total programming costs. With completion now firmly on site, we have been forced to retire this site going forward. North America had a soft half and our numbers show that. Annualized recurring revenue reduced to just under $70 million, down almost 6% on a constant currency basis year-on-year. This was driven by normal churn that wasn't offset by much new growth in the period. Customer decisions have slowed and many fleets that have taken on a more cautious stance on new investment given tariffs, higher operating costs and a broader uncertainty in the freight sector. Revenue was $39 million, down 1.5% and EBITDA was $9 million. ARPU increased 4.1% as the mix continued towards higher-value contracts with lower value units coming out of the base. As previously signaled, North America will be impacted in Q4 by the nonrenewal of a large customer around 10,000 connections. However, North America remains a vital region for EROAD. Our focus is on protecting the core by supporting our customer base, maintaining capability and aligning spend conditions to the region is ready to scale when momentum returns. And finally, Australia. Australia delivered a strong first half with sustained growth across revenue, ARR and EBITDA. Annualized recurring revenue increased by 30% year-on-year to over $15 million, driven by continued enterprise expansion and high adoption of safety and compliance products. Revenue rose 23%, while EBITDA increased to $3.7 million. Retention sits very high at 95.5% and ARPU grew 8.3%, supported by product mix improvements and pricing actions. The standout development of this period was the recently announced Cleanaway Enterprise partnership, covering a national fleet of more than 3,000 heavy vehicles. This Cleanaway partnership is a significant milestone for EROAD and the Australian market. It's a 5-year agreement covering the full safety and vehicle monitoring platform across Cleanaway's national heavy vehicle fleet. The solution includes AI cameras with dual connections, fatigue and rollover detection, critical events monitoring and satellite connectivity for remote options and operations. Deployment has already begun, with full rollout expected by November 2026. The agreement represents $5 million of annualized recurring revenue in Australian dollars with fixed annual escalators over the term. And during this tendering, Cleanaway conducted a comprehensive valuation process. The partnership strengthens our position in the Australian enterprise segment and reinforces the strategic relevance of the investment we've made in product and operational capability. Over the last 3 years, EROAD has secured renewals or wins with a number of marquee Australian businesses, including Boral, Woolworths, Programmed, Ventia, Downer and now Cleanaway. This underscores how significant the Australian market is becoming, and EROAD is committed to focusing on further growth here. I'll pause and hand over to Ciara to take you through the financials for the half. Ciara McGuigan: Great. Thank you, Mark, and good afternoon, everyone. From a financial perspective, we have continued to execute on the 4 pillars of our financial strategy. As a reminder, these are position the company to generate cash, maintain operating leverage in the cost base, invest in innovation to drive growth and maintain a strong financial position. As Mark mentioned, first half revenue of $99.1 million is growth year-on-year of 3.3%. This was driven by annual price increases and an enterprise rollout over the last 12 months, with a strong performance in our SaaS business, where annual recurring revenue also grew by over 5.3%. This underscores the resilience in a challenging environment and the meaningful value that we are offering to customers. Following the recent Cleanaway announcement, the rollout is underway. We began procuring inventory over the previous months and expect to have approximately $2 million in inventory and hardware built up by year-end. About 1/3 of the units are expected to be deployed by year-end, contributing $1.8 million in revenue for the period. The remaining units are scheduled for rollout by November 2026. You will see that we reported a loss in the financial statement of $133.9 million. This was entirely driven by an impairment of the North American asset of $134.7 million. If we remove this plus the 4G hardware upgrade program, our normalized EBIT becomes $2.5 million, and this compares to $4.7 million in the same -- in the half last year. EBIT was impacted by lower capitalization of R&D. This will normalize or is normalizing as we exit the year and the accelerated amortization of a large customer termination in North America. On to the next slide, operating costs. So the chart on the left illustrates that operating costs were 71% of revenue. These include costs as we ramp up our investment in the Philippines office. Last year also included a one-off benefit to transaction revenue due to a change in the GST treatment of transaction fee income. If we exclude these one-off items, operating margins would be broadly in line with last year. Remembering, of course, that by building our engineering and customer support teams in Manila, we are growing our capability at a lower price point to support operating leverage. As a technology business, where transition and change are to be expected, it goes without saying that we will continue to relentlessly focus on cost discipline. Operational efficiency. The chart on the left, our cost to acquire remains stable as a percentage of revenue. Capitalized cost to acquire were lower at the start of this year, which we expect to increase, which will reflect the commissions relating to the closing of the Cleanaway deal in Australia. The chart on the right, our cost to support our customers has increased as a percentage of revenue as we have increased our service and support costs slightly to build capacity to support large enterprise rollouts. I think we skipped a slide of research. Now turning to free cash flow. We are pleased to have generated the significant free cash flow to the firm of $6.2 million in the period, which illustrates the strength of our core business, as Mark referred to. This is the fourth consecutive reporting period that we've delivered positive free cash flow. Once we remove the temporary impact of the 4G upgrade program, the company generated $16.7 million in normalized free cash flow, which you can see illustrated on the chart. This normalization shows the true underlying performance of our business. As the 4G upgrade program is completed by the end of this calendar year, and we continue to deliver on our strategy, we expect to see free cash flow continue to accelerate. There was an inventory buildup in the first half of the year to support our 4G upgrade program, which we expect to normalize in the second half as the program comes to a close. Subsequent to balance date, inventory was purchased to support the rollout of the Cleanaway contract, which is now underway. We also saw the benefit of $2.8 million related to the rollout of our annual billing program in Australia and New Zealand and a large North American account. We continue to see the benefit of this shift in the second half of the year. So turning to our research and development spend. In the first half of FY '26, our R&D expenditure totaled $19 million, which represents 19% of revenue. This is broadly consistent with last year, as you can see on the chart. Our R&D efforts have been more heavily focused on platform scaling, which is not capitalizable. We expect our future R&D investment to be more balanced towards innovation and growth initiatives, which will be capitalizable with a specific call out to work completed to win the Cleanaway deal. We believe this type of customer-led innovation is low risk and generates long-term value as we deploy these features across our customer base. Liquidity. We have maintained our disciplined approach to debt, repaying $2.5 million of outstanding facilities with cash generated from operations, reinforcing our strong balance sheet. Our liquidity remains significant at $62.3 million, providing a high degree of optionality. In addition, we're progressing plans to extend our facilities to ensure we are optimally positioned to execute on forthcoming growth opportunities. And with that, Mark, I'll hand back to you. Mark Heine: Thank you, Ciara. I'll now turn to the outlook and guidance for the rest of the year. Our outlook for the second half of the year is consistent with the updated guidance provided to the market in October as part of the strategic refocus. New growth investments being directed towards Australia and New Zealand, where we see the strongest near-term return profile. North America remains an important market, but the U.S. environment continues to be slow with cautious customer investment. Our approach is retain the base, maintain capability and align spend to the pace of the market. For FY '26, we are reaffirming the guidance we set in October. Revenue of $197 million to $203 million, ARR of $175 million to $183 million and a free cash flow yield of between 5% and 8% of revenue, normalized for the temporary impact of the 4G upgrade program. And finally, we plan to hold Investor Day in March to take you through our product road map and our long-term strategic and financial targets. Further details will follow closer to the time. And with that, we'll now open to any questions. Jason Kepecs: Thanks. The queue is open for questions. The first question is noting the reduction in units in the U.S., how many of those remaining units are part of the core strategy? Mark Heine: So if you look at the U.S. unit base that we have, about 40% of them are cold chain customer units. So a good chunk of it is. The rest are in other verticals, including transport and also ones who are particularly focused on health and safety. EROAD has a really strong product suite in health and safety. And so we're really confident that we can focus on retaining those other customers as well. If you're looking forward, in the U.S., there's over 700,000 cold chain trailers in that market and of which only half of them have any technology in them to date, which means that it provides a great greenfield opportunity for EROAD to grow into that space as economic conditions rebound in that market. Jason Kepecs: Second part to that question is there was a slight reduction in the unit count in New Zealand. How much of that was due to economic factors? And how much of that was due to the 4G hardware upgrade? Mark Heine: We believe a big chunk of that. And in fact, I think we mentioned over 80% was linked to customers reducing the size of their fleet as opposed to leaving EROAD entirety. And that suggests it's largely driven by economic conditions. New Zealand has had a rather challenging economic period over the last 3 years, which impacts particularly the freight sector. And so we are seeing customers park vehicles up, but we expect as economic conditions improve, those customers who have largely stayed with us will add additional units into their fleets. Jason Kepecs: And a question about the free cash flow, strong result at $16.7 million of free cash flow normalized for the half. The guidance suggests a midpoint of $13 million. But wanting to understand what that might mean for the second half of the year and also how to think about the trend for FY '27 in terms of whether that will be a year to harvest the free cash flow or to reinvest in the eRUC opportunity? Ciara McGuigan: So yes, I would agree with all of those points that was a highlight. And the guidance, your point about guidance is correct where you see it sitting broadly. There's obviously timing shifts between the 2 halves. We've got some big inventory purchases and then cash goes out in the different halves. So there is an element of reset between the 2 halves. In regards to the point to FY '27, we'll be obviously talking about that more towards the end of the financial year. We're going through quite a bit of planning, but our intention is certainly to be investing to leverage the eRUC opportunity, and that's where we land at the moment. Jason Kepecs: There's a lot of questions in the queue about the eRUC opportunity. I'm going to list them out, and we'll address them all at once. On the eRUC opportunity, questions about the size of the opportunity, how much service revenue is up for grabs, what the operating margins might be versus fleet management margins, what the revenue model might be? Was it a fixed fee or a percentage of the RUC collected? How capital intensive the opportunity might be? Whether it's free cash flow positive from year 1 and what the potential opportunity is in Australia following this rollout or deployment in New Zealand? Mark Heine: Great. Thank you, Jason. So looking through sequentially. So first, the size of the opportunity. In New Zealand right now, EROAD can service about 1 million vehicles using eRUC. Of that, it's about 200,000 heavy vehicles, and we have a substantial number of them already. And there's about 800,000 EVs and diesel vehicles already need to pay RUC in some form. Some have EROAD technology in them, but a lot of them are passenger vehicles. So right now, we're looking at what sort of passenger consumer-focused applications we can launch for them to really target that part of the market. In addition to those 1 million vehicles, there's an additional 3.5 million to about 3.7 million vehicles, which are petrol. And the government has indicated they want to move all those petrol vehicles starting in 2027 over to eRUC. So we're absolutely focused on winning a substantial part of that share of the market when it comes online. In terms of operating margins and revenue model, those are the things we're working through right now. EROAD is looking at whether we go direct or we work with partners across a range of sectors, including telco, insurance, gen trailers and the like, there's a whole bunch of opportunities for us around how we service that segment. And as part of that, we'll work through what the financial model could look like. And as we indicated in the past, we are looking in March to provide an investor update to go into that in a bit more detail as we have a bit more certainty around what that model looks like. I'll probably reserve for March also the free cash flow impact and what it would mean from year 1. But as you've seen historically, over the last 4 quarters -- 4 halves, sorry, we've provided reported free cash flow positive half, and we're going to continue to be focused on making sure that whatever we invest here that's going to have a strong return for our shareholders in the short to medium term. And turning to the Australian opportunity. So the Treasurer in Australia has noted that this is an area that they clearly need to get into. There's lots of pressures from the states, in particular, New South Wales, who indicated they want some form of road charging in the market by 2027 to help sort of fund their infrastructure challenges. And Victoria likewise are key to do something, too. So we expect movement over the next year or 2 in the Australian market to really unlock the eRUC opportunity there. More broadly, we are aware of RUC being rolled out in Hawaii recently. There are other states in the U.S. looking at it too. And EROAD also participating in past, and we've been invited back around looking at some pilots on the Eastern corridor in the U.S. around how eRUC could be used to fund road up there. So there's no shortage of opportunities, but we're focused on doing New Zealand first really, really well. We'll come to the market, hopefully in March with a bit more detail around what they will look like from a cost and revenue perspective. But we are continuing to watch this space very carefully and explore the opportunities that presents. Jason Kepecs: There's a question about the current pipeline that's in place following the landing of the Cleanaway deal. Was that in your pipeline? And what remains? Mark Heine: Sure. So yes, Cleanaway was in the pipeline. You may recall investors that at the beginning of the year, we said there are 5 enterprise customers in the pipeline, 3 in North America and 2 in Australia. Cleanaway was one. There's another Australian customer that has rather been a big bang, they are more of a customer who's got a large subcontractor fleet that we're working our way through over time. In North America, the other 3 opportunities we've deferred into future years. Just with the economic conditions we're seeing there now, they're quite challenged and it's sort of deferring buying decisions. On top of that, though, we are still exploring other pipeline opportunities. In New Zealand, with the recent all-out government win EROAD's had, we see a number of government fleets really interested in the EROAD solution in this market. And also in Australia, given the opportunity in that market and the size of it, it also -- we don't particularly have very strong competitors, well-resourced competitors in the Australian market. We're seeing more and more customers or potential customers come to us more on that sort of enterprise level between $100,000 and $1 million as opposed to something in that large enterprise, which is Cleanaway, which is above obviously $1 million and a $5 million ARR opportunity. Jason Kepecs: And the customer that didn't renew in the U.S., wondering when that phases off. Mark Heine: So we're working with the customer at the moment around the transition planning. We don't have a definitive date yet, but we expect to happen before the end of the financial year. Jason Kepecs: And on the U.S. business, would you be looking to grow that going forward at what rate? Who is expected to lead that? And what will the cost allocation generally look like? Mark Heine: So start with the first question in terms of -- sorry, Jason, say the first part of the question again? Jason Kepecs: Is it -- what kind of growth are you expecting out of that business going forward and the cost allocation and who's going to be leading that business? Mark Heine: Sure. So in terms of growth expectations, we expect the rollout of this customer, revenue will be backwards both this year and probably into FY '27 as well. In the medium term, we're looking at growth around 3% and greater than that. We expect it to pick up over time as the economy rebounds back. We'll certainly be focusing though on the cold chain opportunity, which should have a strong growth opportunity and ideally pushing towards low double digits or high single-digit growth in '28 and '29. In terms of who will lead it, right now, we are kicking off an Executive General Manager search for the U.S. market around helping to drive sales and marketing with a particular focus, obviously, on the cold chain experience very key here, too. Jason Kepecs: A question on the cold chain market. How much of the opportunity exists in New Zealand? And how much has been captured and same in the Australian market? Mark Heine: So we believe there's about 1 million cold chain trailers in the 3 markets we operate in. So about 300,000 dispersed between Australia and New Zealand, of which between 40 -- 20,000 to 40,000 are based in New Zealand based on type of truck we're talking about. There's relatively low penetration in the cold chain trailer space in New Zealand. It's not one that's particularly been a strong adopter of technology. So we believe we can target existing customers. Indeed, we recently announced or internally at the very least, we won 2 cold chain trailer customers in New Zealand recently who were already existing customers with the front of care part of our business. In Australia, we see greater growth there. Woolworths is one of our cold chain customers in that market, and we're going to be looking to see who else we can leverage from around the cold chain opportunity given it's a very hot continent over there. Jason Kepecs: Great. And final question. What proportion of your customers are now on upfront billing? And what is your target in the future? Ciara McGuigan: So currently, we have about 5% of our customer base on annual bill, and that brings in just under 10% of our revenue. Our ambition is still to go for a strong penetration of annual bill. We won't hit the 40% in FY '26, but we are still very front and center for us. Jason Kepecs: Great. That's it for the questions. Mark Heine: Thank you, Jason. And I just want to close by saying, as you can see, we're disciplined in how we're allocating capital. We're focused [Audio Gap] market showing the strongest returns, and we're preparing well for the structural opportunities ahead in eRUC. Thank you, and have a great rest of your day.
Mark Heine: Apologies for those who are joining us now. We'll just kick off, sorry, we're a bit late. And good afternoon, everyone, and thank you for joining us today for FY '26 annual half year results. I'm Mark Heine, CEO of EROAD. I'm delighted to be introducing Ciara McGuigan, EROAD's new CFO, who commenced at EROAD in September. I'll start by outlining our performance for the half, and Ciara will take you through the financials. We'll then finish with outlook and guidance before opening up for questions. Turning to the key numbers for the half. Free cash flow remains a real strength for EROAD coming at $6.2 million. We've delivered consistent cash generation over multiple periods, thanks to the operational discipline that's been built into the business. Reported revenue was just over $99 million, a 3.3% with steady performance across the installed base and contributions from ongoing rollouts. Annualized recurring revenue increased to over $178 million, up 6.9% or 3% in constant currency. Growth continues to come from higher-value subscriptions and enterprise expansion. Normalized EBIT was $2.5 million, lower than the prior period due to some higher costs and lower R&D capitalization. Ciara will step through these movements in more detail in the finance update. The results show our business remains strong and resilient across its core fundamentals. First, our cash generation continues to be a standout. Free cash flow was over $6 million or almost $17 million on a normalized basis once the one-off 4G upgrade costs are removed. With that program finishing this year, the underlying cash profile becomes much clearer and provides greater visibility in how we allocate our investments. Liquidity remains strong at over $62 million, giving us confidence in the pace and focus of our investment decisions. Second, we've maintained strategic focus on the eRUC passenger opportunity in New Zealand. As the country moves towards universal electronic road user charging, we're preparing the technical, commercial and operational components needed to support a nationwide rollout with clear relevance to emerging global models as well. Third, we are focused on regional market conditions. New growth investment is being directed to Australia and New Zealand, where the near-term return profile is strongest. North America remains important, but slower conditions mean we're managing spend carefully while preserving capability. The impairment of goodwill and other assets in North America of $135 million recorded in the half relates to the previously signaled softer economic conditions, the increased competition, the nonrenewal of a large U.S. customer and our focus on ANZ. And finally, our customer focus and operational capability have continued to improve. Partnerships have been strengthened and boosted by the ramp-up of our Manila office, providing our customers with enhanced responsiveness and support. These improvements are translating directly into outcomes, including the newly inked enterprise agreement with Cleanaway, valued at $5 million ARR once fully deployed. Turning to our sustainable growth across our core markets. Let's start with free cash flow. We delivered 4 halves of sustained reported cash generation. That consistency gives us the flexibility to invest selectively and accelerate where market conditions are most favorable, while also evidencing that management takes a prudent approach to investment. In Australia, our enterprise momentum is driving sustained double-digit annualized recurring revenue growth. Once the new Cleanaway Enterprise deal is fully implemented, ARR in Australia is expected to grow significantly. And finally, the eRUC opportunity presents a global opportunity for EROAD, which we will dig into this opportunity over the next few slides. I'm incredibly excited to be talking about New Zealand's move towards a universal electronic road user charging system and the direction of travel is very, very clear for EROAD. The New Zealand government has committed to transitioning all vehicles, including petrol and light vehicles to eRUC. A series of bills and consultation steps are already scheduled through 2025, with implementation targeted for 2027. EROAD is deeply embedded in the current system, having pioneered eRUC for heavy fleets, and we now facilitate around $946 million in annual RUC collection for the New Zealand government. That experience, combined with our established regulatory relationships and platform capability puts us in a strong position as the country moves to a fully electronic usage-based model. New Zealand is moving early on this transition and the work underway positions us well for what is coming next. What we see in New Zealand is part of a broader shift starting to emerge internationally. As fuel tax revenue declines and EV uptake grows, governments are looking for a more sustainable way to fund their road networks and usage-based charges come to focus in several larger markets. Our priority is to get it right in New Zealand first. As the market moving earliest, it gives us the chance to prove capability at a national scale, while policy conversations elsewhere continue to develop. At the same time, the longer-term opportunity extends beyond New Zealand. New Zealand has 4.7 million vehicles. Australia has around 4x that amount with approximately 20 million vehicles, while the U.S. is around 60x the size of New Zealand, with more than 280 million vehicles. Those markets are actively examining alternatives to fuel in size and the scale involved is significant. This includes the Eastern Transport Coalition mileage usage-based pilots in the United States, which EROAD has participated in, in the past. So while the immediate focus is on New Zealand, our line of sight is global. The preparation underway is intended to ensure we're well positioned to take part in those conversations as they progress. As the New Zealand government works towards design of the future system, we've been preparing so that we're in a position to move quickly once the requirements are confirmed. A key part of that preparation has been testing different ways the service could be delivered, depending on how the government chooses to structure the program. That includes early prototyping of consumer pathways and exploring how the existing EROAD platform might support the scale and simplicity required for light vehicle users. We've also been building a clear view of the commercial considerations, the economics, the potential pricing envelopes and what a high-volume operating model would require. This work ensures any approach we take is both viable and scalable when the program rolls out nationwide. And alongside the core charging model, we're looking at adjacent opportunities that may become relevant as policies develop, such as time of us in concept, tolling and other services that could logically sit next to distance-based charging over time. The intent of all this preparation is to make sure we're technically ready, commercially informed and operationally capable when governments finalize the shape and timing of the program. And New Zealand offers the opportunity to prove capability at a national scale. Doing that well keeps options open in other markets as usage-based models continue to evolve globally. Now on to the regions. New Zealand delivered a stable and disciplined half, with growth across revenue, annualized recurring revenue and ARPU. Annualized recurring revenue increased over 6% year-on-year to $93.2 million, supported by consistent demand from our installed base and continued uptake of higher-value services. Revenue grew almost 5% to over $52 million and EBITDA reached over $35 million, underpinned by strong asset retention at 92%. ARPU lifted at 4.4%, reflecting the mix shift towards higher-value opportunities and the final stage of churn associated with the 4G upgrade program. Importantly, most of the reduction in the period came from fleet resizing rather than actual customer losses. Around 88% of the annualized recurring revenue impact from unit reductions relates to customers adjusting fleet size due to broader economic conditions. These relationships remain in place. A expansion upsell activity across the portfolio more than offset the reduction to give us a net positive annualized recurring revenue position. A quick update on our 4G program. Australia switch is now complete. And across ANZ, as at the half year, 87% of all units out there were EROAD and were 4G compatible. And as of today, this has now reached approximately 90% being 4G compatible. The remaining work is in New Zealand, where one is the schedule to switch off 3G in December of this year. The final activity is planned for the second half and remains fully funded from operating cash flow with no change to total programming costs. With completion now firmly on site, we have been forced to retire this site going forward. North America had a soft half and our numbers show that. Annualized recurring revenue reduced to just under $70 million, down almost 6% on a constant currency basis year-on-year. This was driven by normal churn that wasn't offset by much new growth in the period. Customer decisions have slowed and many fleets that have taken on a more cautious stance on new investment given tariffs, higher operating costs and a broader uncertainty in the freight sector. Revenue was $39 million, down 1.5% and EBITDA was $9 million. ARPU increased 4.1% as the mix continued towards higher-value contracts with lower value units coming out of the base. As previously signaled, North America will be impacted in Q4 by the nonrenewal of a large customer around 10,000 connections. However, North America remains a vital region for EROAD. Our focus is on protecting the core by supporting our customer base, maintaining capability and aligning spend conditions to the region is ready to scale when momentum returns. And finally, Australia. Australia delivered a strong first half with sustained growth across revenue, ARR and EBITDA. Annualized recurring revenue increased by 30% year-on-year to over $15 million, driven by continued enterprise expansion and high adoption of safety and compliance products. Revenue rose 23%, while EBITDA increased to $3.7 million. Retention sits very high at 95.5% and ARPU grew 8.3%, supported by product mix improvements and pricing actions. The standout development of this period was the recently announced Cleanaway Enterprise partnership, covering a national fleet of more than 3,000 heavy vehicles. This Cleanaway partnership is a significant milestone for EROAD and the Australian market. It's a 5-year agreement covering the full safety and vehicle monitoring platform across Cleanaway's national heavy vehicle fleet. The solution includes AI cameras with dual connections, fatigue and rollover detection, critical events monitoring and satellite connectivity for remote options and operations. Deployment has already begun, with full rollout expected by November 2026. The agreement represents $5 million of annualized recurring revenue in Australian dollars with fixed annual escalators over the term. And during this tendering, Cleanaway conducted a comprehensive valuation process. The partnership strengthens our position in the Australian enterprise segment and reinforces the strategic relevance of the investment we've made in product and operational capability. Over the last 3 years, EROAD has secured renewals or wins with a number of marquee Australian businesses, including Boral, Woolworths, Programmed, Ventia, Downer and now Cleanaway. This underscores how significant the Australian market is becoming, and EROAD is committed to focusing on further growth here. I'll pause and hand over to Ciara to take you through the financials for the half. Ciara McGuigan: Great. Thank you, Mark, and good afternoon, everyone. From a financial perspective, we have continued to execute on the 4 pillars of our financial strategy. As a reminder, these are position the company to generate cash, maintain operating leverage in the cost base, invest in innovation to drive growth and maintain a strong financial position. As Mark mentioned, first half revenue of $99.1 million is growth year-on-year of 3.3%. This was driven by annual price increases and an enterprise rollout over the last 12 months, with a strong performance in our SaaS business, where annual recurring revenue also grew by over 5.3%. This underscores the resilience in a challenging environment and the meaningful value that we are offering to customers. Following the recent Cleanaway announcement, the rollout is underway. We began procuring inventory over the previous months and expect to have approximately $2 million in inventory and hardware built up by year-end. About 1/3 of the units are expected to be deployed by year-end, contributing $1.8 million in revenue for the period. The remaining units are scheduled for rollout by November 2026. You will see that we reported a loss in the financial statement of $133.9 million. This was entirely driven by an impairment of the North American asset of $134.7 million. If we remove this plus the 4G hardware upgrade program, our normalized EBIT becomes $2.5 million, and this compares to $4.7 million in the same -- in the half last year. EBIT was impacted by lower capitalization of R&D. This will normalize or is normalizing as we exit the year and the accelerated amortization of a large customer termination in North America. On to the next slide, operating costs. So the chart on the left illustrates that operating costs were 71% of revenue. These include costs as we ramp up our investment in the Philippines office. Last year also included a one-off benefit to transaction revenue due to a change in the GST treatment of transaction fee income. If we exclude these one-off items, operating margins would be broadly in line with last year. Remembering, of course, that by building our engineering and customer support teams in Manila, we are growing our capability at a lower price point to support operating leverage. As a technology business, where transition and change are to be expected, it goes without saying that we will continue to relentlessly focus on cost discipline. Operational efficiency. The chart on the left, our cost to acquire remains stable as a percentage of revenue. Capitalized cost to acquire were lower at the start of this year, which we expect to increase, which will reflect the commissions relating to the closing of the Cleanaway deal in Australia. The chart on the right, our cost to support our customers has increased as a percentage of revenue as we have increased our service and support costs slightly to build capacity to support large enterprise rollouts. I think we skipped a slide of research. Now turning to free cash flow. We are pleased to have generated the significant free cash flow to the firm of $6.2 million in the period, which illustrates the strength of our core business, as Mark referred to. This is the fourth consecutive reporting period that we've delivered positive free cash flow. Once we remove the temporary impact of the 4G upgrade program, the company generated $16.7 million in normalized free cash flow, which you can see illustrated on the chart. This normalization shows the true underlying performance of our business. As the 4G upgrade program is completed by the end of this calendar year, and we continue to deliver on our strategy, we expect to see free cash flow continue to accelerate. There was an inventory buildup in the first half of the year to support our 4G upgrade program, which we expect to normalize in the second half as the program comes to a close. Subsequent to balance date, inventory was purchased to support the rollout of the Cleanaway contract, which is now underway. We also saw the benefit of $2.8 million related to the rollout of our annual billing program in Australia and New Zealand and a large North American account. We continue to see the benefit of this shift in the second half of the year. So turning to our research and development spend. In the first half of FY '26, our R&D expenditure totaled $19 million, which represents 19% of revenue. This is broadly consistent with last year, as you can see on the chart. Our R&D efforts have been more heavily focused on platform scaling, which is not capitalizable. We expect our future R&D investment to be more balanced towards innovation and growth initiatives, which will be capitalizable with a specific call out to work completed to win the Cleanaway deal. We believe this type of customer-led innovation is low risk and generates long-term value as we deploy these features across our customer base. Liquidity. We have maintained our disciplined approach to debt, repaying $2.5 million of outstanding facilities with cash generated from operations, reinforcing our strong balance sheet. Our liquidity remains significant at $62.3 million, providing a high degree of optionality. In addition, we're progressing plans to extend our facilities to ensure we are optimally positioned to execute on forthcoming growth opportunities. And with that, Mark, I'll hand back to you. Mark Heine: Thank you, Ciara. I'll now turn to the outlook and guidance for the rest of the year. Our outlook for the second half of the year is consistent with the updated guidance provided to the market in October as part of the strategic refocus. New growth investments being directed towards Australia and New Zealand, where we see the strongest near-term return profile. North America remains an important market, but the U.S. environment continues to be slow with cautious customer investment. Our approach is retain the base, maintain capability and align spend to the pace of the market. For FY '26, we are reaffirming the guidance we set in October. Revenue of $197 million to $203 million, ARR of $175 million to $183 million and a free cash flow yield of between 5% and 8% of revenue, normalized for the temporary impact of the 4G upgrade program. And finally, we plan to hold Investor Day in March to take you through our product road map and our long-term strategic and financial targets. Further details will follow closer to the time. And with that, we'll now open to any questions. Jason Kepecs: Thanks. The queue is open for questions. The first question is noting the reduction in units in the U.S., how many of those remaining units are part of the core strategy? Mark Heine: So if you look at the U.S. unit base that we have, about 40% of them are cold chain customer units. So a good chunk of it is. The rest are in other verticals, including transport and also ones who are particularly focused on health and safety. EROAD has a really strong product suite in health and safety. And so we're really confident that we can focus on retaining those other customers as well. If you're looking forward, in the U.S., there's over 700,000 cold chain trailers in that market and of which only half of them have any technology in them to date, which means that it provides a great greenfield opportunity for EROAD to grow into that space as economic conditions rebound in that market. Jason Kepecs: Second part to that question is there was a slight reduction in the unit count in New Zealand. How much of that was due to economic factors? And how much of that was due to the 4G hardware upgrade? Mark Heine: We believe a big chunk of that. And in fact, I think we mentioned over 80% was linked to customers reducing the size of their fleet as opposed to leaving EROAD entirety. And that suggests it's largely driven by economic conditions. New Zealand has had a rather challenging economic period over the last 3 years, which impacts particularly the freight sector. And so we are seeing customers park vehicles up, but we expect as economic conditions improve, those customers who have largely stayed with us will add additional units into their fleets. Jason Kepecs: And a question about the free cash flow, strong result at $16.7 million of free cash flow normalized for the half. The guidance suggests a midpoint of $13 million. But wanting to understand what that might mean for the second half of the year and also how to think about the trend for FY '27 in terms of whether that will be a year to harvest the free cash flow or to reinvest in the eRUC opportunity? Ciara McGuigan: So yes, I would agree with all of those points that was a highlight. And the guidance, your point about guidance is correct where you see it sitting broadly. There's obviously timing shifts between the 2 halves. We've got some big inventory purchases and then cash goes out in the different halves. So there is an element of reset between the 2 halves. In regards to the point to FY '27, we'll be obviously talking about that more towards the end of the financial year. We're going through quite a bit of planning, but our intention is certainly to be investing to leverage the eRUC opportunity, and that's where we land at the moment. Jason Kepecs: There's a lot of questions in the queue about the eRUC opportunity. I'm going to list them out, and we'll address them all at once. On the eRUC opportunity, questions about the size of the opportunity, how much service revenue is up for grabs, what the operating margins might be versus fleet management margins, what the revenue model might be? Was it a fixed fee or a percentage of the RUC collected? How capital intensive the opportunity might be? Whether it's free cash flow positive from year 1 and what the potential opportunity is in Australia following this rollout or deployment in New Zealand? Mark Heine: Great. Thank you, Jason. So looking through sequentially. So first, the size of the opportunity. In New Zealand right now, EROAD can service about 1 million vehicles using eRUC. Of that, it's about 200,000 heavy vehicles, and we have a substantial number of them already. And there's about 800,000 EVs and diesel vehicles already need to pay RUC in some form. Some have EROAD technology in them, but a lot of them are passenger vehicles. So right now, we're looking at what sort of passenger consumer-focused applications we can launch for them to really target that part of the market. In addition to those 1 million vehicles, there's an additional 3.5 million to about 3.7 million vehicles, which are petrol. And the government has indicated they want to move all those petrol vehicles starting in 2027 over to eRUC. So we're absolutely focused on winning a substantial part of that share of the market when it comes online. In terms of operating margins and revenue model, those are the things we're working through right now. EROAD is looking at whether we go direct or we work with partners across a range of sectors, including telco, insurance, gen trailers and the like, there's a whole bunch of opportunities for us around how we service that segment. And as part of that, we'll work through what the financial model could look like. And as we indicated in the past, we are looking in March to provide an investor update to go into that in a bit more detail as we have a bit more certainty around what that model looks like. I'll probably reserve for March also the free cash flow impact and what it would mean from year 1. But as you've seen historically, over the last 4 quarters -- 4 halves, sorry, we've provided reported free cash flow positive half, and we're going to continue to be focused on making sure that whatever we invest here that's going to have a strong return for our shareholders in the short to medium term. And turning to the Australian opportunity. So the Treasurer in Australia has noted that this is an area that they clearly need to get into. There's lots of pressures from the states, in particular, New South Wales, who indicated they want some form of road charging in the market by 2027 to help sort of fund their infrastructure challenges. And Victoria likewise are key to do something, too. So we expect movement over the next year or 2 in the Australian market to really unlock the eRUC opportunity there. More broadly, we are aware of RUC being rolled out in Hawaii recently. There are other states in the U.S. looking at it too. And EROAD also participating in past, and we've been invited back around looking at some pilots on the Eastern corridor in the U.S. around how eRUC could be used to fund road up there. So there's no shortage of opportunities, but we're focused on doing New Zealand first really, really well. We'll come to the market, hopefully in March with a bit more detail around what they will look like from a cost and revenue perspective. But we are continuing to watch this space very carefully and explore the opportunities that presents. Jason Kepecs: There's a question about the current pipeline that's in place following the landing of the Cleanaway deal. Was that in your pipeline? And what remains? Mark Heine: Sure. So yes, Cleanaway was in the pipeline. You may recall investors that at the beginning of the year, we said there are 5 enterprise customers in the pipeline, 3 in North America and 2 in Australia. Cleanaway was one. There's another Australian customer that has rather been a big bang, they are more of a customer who's got a large subcontractor fleet that we're working our way through over time. In North America, the other 3 opportunities we've deferred into future years. Just with the economic conditions we're seeing there now, they're quite challenged and it's sort of deferring buying decisions. On top of that, though, we are still exploring other pipeline opportunities. In New Zealand, with the recent all-out government win EROAD's had, we see a number of government fleets really interested in the EROAD solution in this market. And also in Australia, given the opportunity in that market and the size of it, it also -- we don't particularly have very strong competitors, well-resourced competitors in the Australian market. We're seeing more and more customers or potential customers come to us more on that sort of enterprise level between $100,000 and $1 million as opposed to something in that large enterprise, which is Cleanaway, which is above obviously $1 million and a $5 million ARR opportunity. Jason Kepecs: And the customer that didn't renew in the U.S., wondering when that phases off. Mark Heine: So we're working with the customer at the moment around the transition planning. We don't have a definitive date yet, but we expect to happen before the end of the financial year. Jason Kepecs: And on the U.S. business, would you be looking to grow that going forward at what rate? Who is expected to lead that? And what will the cost allocation generally look like? Mark Heine: So start with the first question in terms of -- sorry, Jason, say the first part of the question again? Jason Kepecs: Is it -- what kind of growth are you expecting out of that business going forward and the cost allocation and who's going to be leading that business? Mark Heine: Sure. So in terms of growth expectations, we expect the rollout of this customer, revenue will be backwards both this year and probably into FY '27 as well. In the medium term, we're looking at growth around 3% and greater than that. We expect it to pick up over time as the economy rebounds back. We'll certainly be focusing though on the cold chain opportunity, which should have a strong growth opportunity and ideally pushing towards low double digits or high single-digit growth in '28 and '29. In terms of who will lead it, right now, we are kicking off an Executive General Manager search for the U.S. market around helping to drive sales and marketing with a particular focus, obviously, on the cold chain experience very key here, too. Jason Kepecs: A question on the cold chain market. How much of the opportunity exists in New Zealand? And how much has been captured and same in the Australian market? Mark Heine: So we believe there's about 1 million cold chain trailers in the 3 markets we operate in. So about 300,000 dispersed between Australia and New Zealand, of which between 40 -- 20,000 to 40,000 are based in New Zealand based on type of truck we're talking about. There's relatively low penetration in the cold chain trailer space in New Zealand. It's not one that's particularly been a strong adopter of technology. So we believe we can target existing customers. Indeed, we recently announced or internally at the very least, we won 2 cold chain trailer customers in New Zealand recently who were already existing customers with the front of care part of our business. In Australia, we see greater growth there. Woolworths is one of our cold chain customers in that market, and we're going to be looking to see who else we can leverage from around the cold chain opportunity given it's a very hot continent over there. Jason Kepecs: Great. And final question. What proportion of your customers are now on upfront billing? And what is your target in the future? Ciara McGuigan: So currently, we have about 5% of our customer base on annual bill, and that brings in just under 10% of our revenue. Our ambition is still to go for a strong penetration of annual bill. We won't hit the 40% in FY '26, but we are still very front and center for us. Jason Kepecs: Great. That's it for the questions. Mark Heine: Thank you, Jason. And I just want to close by saying, as you can see, we're disciplined in how we're allocating capital. We're focused [Audio Gap] market showing the strongest returns, and we're preparing well for the structural opportunities ahead in eRUC. Thank you, and have a great rest of your day.
Operator: Good day, and thank you for standing by. Welcome to the Ubisoft H1 Fiscal Year 2026 Earnings Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Yves Guillemot, Ubisoft Co-Founder and Chief Executive Officer. Please go ahead, sir. Yves Guillemot: Welcome, everyone, and thank you for joining us today. Before we begin, I would like to start with the reason for the delay in publishing our results. First, we have appointed a new panel of auditors that was approved at the AGM last July. Their position as part of their review of the H1 financial accounts required a restatement of our financial year '25 annual accounts that had been previously approved by our former panel of statutory auditors in May. In this context, we required additional time to finalize our accounts for our Board of Directors to approve them. Frédérick will walk you through this point in more details later in the call. The closing of our strategic transaction with Tencent, which will see Tencent become a minority shareholder in our new subsidiary, Vantage Studios, is now imminent, as all conditions precedent have been satisfied. This will mark a pivotal milestone in Ubisoft transformation, significantly strengthening our financial position by bringing in EUR 1.16 billion of cash, enabling the group to deleverage as planned. It will also empower Vantage Studios to accelerate the growth of our 3 flagship IPs under a dedicated leadership team. In a highly competitive market, Ubisoft delivered net booking above guidance on the back of stronger-than-expected partnerships that underscore the appeal and reach of our brands. Our portfolio showed contrasting dynamics this quarter with softer trends for Rainbow Six Siege, reflecting a phase of evolution for the game in an intense competitive first-person shooter environment, offset by strong performances across the rest of the catalog. The Assassin's Creed franchise exceeded our expectations, confirming its positive momentum and ability to engage players over time. The Division 2 also continued to perform strongly, benefiting from the momentum of the Battle for Brooklyn expansion, with the game's first semester already exceeding last year's annual bookings. Additionally, the progress we've made in addressing our fixed cost base brings with it confidence that we can continue to drive structural efficiencies across the organization that together with top line growth, will contribute to ensure a return to strong cash generation in the coming years. Vantage Studios represents a key element of the transformation of the company toward a new operating model built around creative houses. We will have finalized the design of this new organization by the end of the year. These creative houses will be autonomously efficient, focused and accountable business units, each with its own leadership, creative vision and strategic road map. This group-wide transformation reflects our ambitions to renew how we create and operate in order to deliver great games for our players and lasting value for our partners and shareholders. The full details of this new operating model will be unveiled in January. On the innovation side now, we are making great strides in applying GenAI to high-value use cases that bring tangible benefits to our players and teams. It's a big -- it's as big as a revolution for our industry as the shift to 3D, and we have everything to lead on this front. On the player experience side, we are continuing to make progress on groundbreaking player-facing generative AI application, building on our NEO NPC announcement in 2024. We have already advanced from prototyping to player reality, and we are looking forward to sharing more before the end of the year. On the production side, we now have teams in all our studios and offices embracing this new technology and constantly exploring new use cases in programming, art and overall game quality. On the transmedia side, we also, after greenlighting the Assassin's Creed live-action TV series in July, I would like to highlight the recent success of the animated Netflix series, Splinter Cell: Deathwatch that premiered on October 14, obtaining an 86 score on Rotten Tomatoes and landing the daily top 10 across more than 12 countries, including 6 consecutive days in the U.S. This strengthens our brand's long-term value ahead of the Splinter Cell's remake currently in development at the Ubisoft Toronto Studios. Last but not least, I would like to celebrate the successful launch of Anno 117: Pax Romana that expands the city-builder genre. This level of quality, innovation and sales set the standard against which we want to measure our future releases performance in the coming years. So I will now let Frédérick give you details on half year performance. Frédérick Duguet: Thank you, Yves, and hello, everybody. H1 net bookings stood at EUR 772 million, up 20% year-on-year with 34 million MAUs and 88 million unique users across consoles and PC, slightly down year-on-year when excluding XDefiant from the base. Turning to our second quarter. Net bookings stood at EUR 491 million, above guidance and up 39% year-on-year. The outperformance was driven by stronger-than-expected partnerships, demonstrating the power and attractiveness of our portfolio as well as a meaningful contribution from live TV and animated series. Excluding partnerships, overall back-catalog performance this quarter was robust and in line with expectations, broadly stable year-on-year, but marked by contrasted dynamics. The Assassin's Creed franchise posted a strong performance in Q2, with both Assassin's Creed Shadows and the rest of the brand’s catalog overperforming. In the year to date Assassin's Creed has generated 211 million session days, around 35% higher than the last 2 years' average. Shadows benefited from the launch of the New Game+ mode, which was widely anticipated by the community and introduced greater difficulty and new challenges for players. The Claws of Awaji expansion released on September 16 and contributed to re-engaging players. It was praised as a solid addition to the base game, offering new unique boss fights in a beautiful and dark atmosphere. Looking ahead, Assassin's Creed Shadows will reach a broader audience with its launch on the Nintendo Switch 2 on December 2. Beyond Shadows, the rest of the AC back-catalog also performed strongly, highlighting the strength of the franchise. Turning to the current quarter, we launched Valley of Memory on November 18, a free major update for Assassin's Creed Mirage, which brought new content and a fresh chapter in Basim's story set in AlUla. First feedback from the community is very positive, with player activity on Assassin's Creed Mirage doubling following the launch of the update, enabling the game to reach the 10 million player mark. In a highly competitive first-person shooter market, Rainbow Six Siege continued to attract new players this quarter, with acquisition levels twice as high year-on-year, and sustain activity levels, with unique players stable quarter-on-quarter and up double-digit year-on-year. Session days and playtime also increased both sequentially and year-on-year. However, as part of the evolution of Siege and its move to free access, a temporary surge in cheating has impacted activity and player spending versus expectations. With additional resources now in place and further hires planned, the team has identified the main issues and is actively addressing them with a robust plan in place. Having focused most of this year on establishing a new foundation for the game, the team is exploring a new seasonal approach that introduces multiple updates throughout each season, focusing on the core gameplay experience and heavily engaged players. This shift is designed to offer a steadier stream of fresh experiences with more variety keeping players engaged and supporting long-term franchise growth. The Siege community remains highly engaged and passionate about the game’s success. The development team is equally committed to working closely with players to address recent feedback, with a strong focus on anti-cheat measures and gameplay balance. As announced at the Munich Major on November 16, starting in Season 4, the team will double the number of anti-cheat updates per week and introduce new prevention solutions. On the balancing front, the team is accelerating efforts in Season 4, with four balancing updates per season planned for Year 1, aligned with the new content cadence. To celebrate Siege’s 10-year anniversary in December, players can look forward to daily rewards and a special in-game event launching mid-December. Elsewhere in the catalog, I would like to highlight a few notable performances. The Division 2 continued to benefit from the momentum of the Battle for Brooklyn DLC release in May, as well as regular content updates, continuing to attract new players to the game. Along with rising player numbers, player engagement is up, with a record second quarter in terms of Session Days since financial year '21. The game’s performance this semester has already exceeded last year’s annual net bookings. Avatar: Frontiers of Pandora posted a strong performance this quarter on the back of the July third person update announcement, that was widely anticipated by the community. The game also regained momentum with the announcement of the From the Ashes expansion that will come along with the movie. Star Wars Outlaws launched on Nintendo Switch 2 in September to strong critical and player reception. The release expanded the game’s audience and was praised for its exceptional visuals, technical optimization, smooth performance and seamless transition to Nintendo’s new hardware. Total digital net bookings reached EUR 436 million, up 62% year-on-year and PRI stood at EUR 323 million, up 110% year-on-year. Both of these metrics benefited this quarter from tailwinds linked to partnerships. Within PRI, mobile amounted to EUR 26 million, slightly down year-on-year. First, you will find our non-IFRS P&L on Slide 7 of our presentation. Gross margin was strongly up year-on-year by more than 3.5 percentage points, which reflects the fact that this semester saw more high-margin partnership than the first semester last year. R&D was down year-on-year, and we come back -- I will come back to that point in the following slide. SG&A was down 16%, reflecting lower variable marketing expenses due to the absence of major releases this semester, while last year's first half saw the release of Star Wars Outlaws and XDefiant Overall non-IFRS EBIT came back to the positive zone at EUR 27 million this semester, which marks a strong improvement to last year's EUR 250 million loss. Please refer to our press release or presentation appendix for the full IFRS to non-IFRS reconciliation. Turning now to Slide 8. P&L R&D was down year-on-year and mainly reflects lower depreciation of in-house software-related productions coming from the absence of new AAA releases this semester compared with accelerated depreciation for Star Wars Outlaws and XDefiant last year. For its part, total cash R&D was down 11% or EUR 70 million and reflects our continued efforts addressing our fixed cost base. Looking at cash flow statement on Slide 9. Free cash flow stood at minus EUR 251 million compared with a negative EUR 126 million the previous year. This free cash flow consumption mostly reflects the following impacts. On the one hand, a negative EUR 139 million cash flow from operations, reflecting the fact that we had no new releases this semester, which was half the outflow of last year, again, illustrating a strong improvement versus the year before. And on the other hand, a negative EUR 102 million change in working capital requirements, notably driven by trade payables decrease comparing with a significant higher gain in receivables last year, which mainly reflects cash in from Q4 fiscal year '24 partnerships. Non-IFRS net debt stood at EUR 1.15 billion, slightly up versus last year, and cash and cash equivalents amounted to EUR 668 million, down EUR 265 million versus last year, mostly driven by the reimbursement of around EUR 245 million in debt. The -- sorry, the EUR 1.16 billion cash injection from the Tencent transaction will deleverage the group and strengthen its balance sheet. I would now like to provide an update on the continuous progress we have been making on the group's transformation. First, all conditions precedent of the transaction with Tencent have been satisfied, enabling the sale of a minority stake in our new subsidiary, Vantage Studios to Tencent to close in the coming days. This marks a major milestone in our transformation journey. The proceeds of this transaction will deleverage the group on a consolidated non-IFRS net debt basis while providing enhanced financial flexibility to support our strategic transformation. A new leadership team is being formed around Vantage Studios, including heads of franchises to drive creative excellence and operational agility across each brand on their path to building annual billion euro brand ecosystems. Second, we will have finalized by the end of the year, the design of our new operating model built around creative houses, independent business units with the objective of driving stronger creative vision, greater focus, efficiency, autonomy and accountability. We will unveil the full details of this model in January. Overall, we benefit from a strengthened balance sheet. Our non-IFRS net debt position stood at EUR 1.15 billion at end September with a cash and cash equivalent position of EUR 668 million. The EUR 1.16 billion proceeds from the Tencent transaction will enable us to deleverage the group and notably proceed with the early repayment of the term loan and Schuldschein loans, which have an outstanding principal amount of approximately EUR 286 million. Of note, EUR 210 million were due next month. Additionally, we will cancel the undrawn revolving credit facility and initiate discussions with our banking partners with the objective of putting in place a new facility designed to support our strategic ambitions, in line with the broader transformation currently underway. Overall, we plan to rely on a very comfortable cash and cash equivalent position at end of March 2026 of around EUR 1.5 billion. Third, we continue to make progress on our new cost reduction program, which targets at least EUR 100 million in fixed cost savings by fiscal year '27 versus fiscal year '24 -- versus fiscal year '25, sorry. Thanks to continued discipline in hiring and targeted restructuring efforts. The group's global head count stood at 1,797 at the end of September, representing a decrease of around 1,500 employees over the past 12 months and about 700 since the end of March. Since the end of the semester, a targeted voluntary leave program and a proposed restructuring were introduced at our Nordic studios. Overall, the H1 fiscal year '26 fixed cost base stood at around EUR 701 million, a decrease of EUR 69 million or 9% year-on-year, including a favorable EUR 19 million foreign exchange impact. Out of the EUR 69 million reduction, approximately EUR 55 million came from lower capitalized investments. Before I turn to the outlook, I would like to cover an IFRS update. As Yves mentioned, we had to delay publishing our results. Towards the end of the review process of our H1 financial accounts, our new panel of auditors reviewed the analysis that had led to the fiscal '25 accounts being validated by our former panel of auditors in May. This related specifically to the IFRS 15 revenue recognition of one meaningful partnership in fiscal '25. The new panel of statutory auditors considered that utilization-based payment schedules must now be recognized under IFRS 15 as revenues over utilization even if the commitments are firm. This ultimately led to the restatement of our fiscal '25 account as per IAS 8. We then had to assess the impact of this restatement as well as the implication of this new position on the second partnership booked in Q2 along the same initial principles. The combined effect of what I've just described results in the company not complying with its leverage covenant ratio under certain existing financing agreements at September 30, 2025. However, this is being addressed by the aforementioned actions relating to the concern debt instruments. The restatement of the prior year financial accounts are detailed in the appendix of our press release, and the IFRS accounting restatement has no impact on the group's non-IFRS indicators given the firm nature of these amounts and has no impact on the operating cash flow profile of the group. Beyond this technical restatement, I want to make one thing clear. Our approach to B2B partnerships as a critical complement to our B2C business has always been and will continue to be centered around maximizing the value of our catalog, which we measure in terms of cash flow generation over time. Turning to the full year outlook. The stronger-than-expected benefit from partnership increases our visibility for the fiscal year in a context where, on the one hand, there remains a number of new releases to come by the end of the fiscal year. And on the other hand, Rainbow Six Siege faces an increased competitive FPS environment. In this context, we reaffirm our full year objective with net bookings to be stable year-on-year, non-IFRS operating income to be around breakeven and negative free cash flow, reflecting the group's transformation. Following the closing of the Tencent transaction, we expect to maintain a consolidated non-IFRS net debt position of around 0. Looking at Q3, we expect net bookings of approximately EUR 305 million, which will represent a slight increase year-on-year. Q3 will notably see the releases of Anno 117: Pax Romana as well as the Avatar Frontiers of Pandora from the Ashes expansion. Anno 117: Pax Romana launched on November 13, and marked a bold new chapter for the Anno franchise, building on the series strong momentum and releasing simultaneously for the first time on PC and console, it showcases impressive scale, striking visual fidelity and a deep economic simulation. The title has already received strong industry recognition, including winning Best PC Game at Gamescom and has now launched to strong critical reception with an 85 Metacritic score, the best score ever in the franchise, which translates into solid consumer spending growth after 1 week compared to the successful Anno 1800. IGN awarded it 9 out of 10 calling it "a gorgeous antique city-builder that is worthy of a standing ovation". For the first time in the series, players can choose their starting province is defined by distinct cultural identities and unique gameplay mechanics that emphasize player choice. This innovation expands the game's depth and replayability, laying the foundation for sustained player engagement and rich post-launch experience. The Avatar: Frontiers of Pandora - From The Ashes expansion is set to launch on December 19. Timed to coincide with the theatrical release of Avatar: Fire and Ash. This bold expansion sees players embark on the journeys of So’lek, a battle-hardened Na’vi warrior who seeks revenge against the ruthless Ash clan. The expansion introduces new visceral gameplay set in a ravaged Kinglor Forest and unveils a new subregion known as The Ravines. Ahead of that, a highly anticipated free update introducing a third person mode will arrive on December 5 and will feature long requested by the community. Together, this content should further strengthen engagement and extend the game's momentum into the holiday season. And for its part, Q4 will see the release of the Prince of Persia: The Sands of Time remake, Rainbow Six Mobile, The Division Resurgence as well as an unannounced title. Beyond fiscal '26, we expect to return to positive non-IFRS operating income and free cash flow generation in fiscal '27 and to see significant content coming from our largest brands in fiscal '27 and fiscal year '28. Finally, as always, here are a few fiscal '26 housekeeping items for modeling purposes. The stock-based compensation is expected at around EUR 32 million, down versus prior guidance and reflecting the lower share price. The non-IFRS net financial charge, excluding foreign exchange, is expected at around EUR 45 million, unchanged versus prior guidance and reflecting a year-on-year increase, primarily attributable to a lower interest income. The non-IFRS tax rate is not relevant in the context of breakeven non-IFRS operating income and the number of diluted shares is expected at around EUR 132 million, reflecting the fact that with an expected negative net income, the dilutive nature of our instruments no longer kicks in. We are now ready to take your questions. Operator: [Operator Instructions] And your first question today comes from the line of Aleksander Peterc from Bernstein. Aleksander Peterc: The first one would be pertaining to the breach of covenants. So although this is quite temporary, I'd still like to know if there are any of your other debt instruments that don't have these covenants, but have a standard cross-default clause that could be enforced. Is that a risk over the coming days or not? It's just a hypothetical, but just to clear that for me. And the second question is, given your below expectations third quarter, it seems to me that the implied fourth quarter is extremely strong, down only 15% year-on-year. But last year, you had the Assassin's Creed Shadows release, which has delayed and that's propped up the fourth quarter quite substantially. So can you help us understand how are you going to achieve this super strong fourth quarter? Frédérick Duguet: Yes. Thank you, Aleks. Yes, so that's on your first question, so we are addressing the topic by settling the repayment of our covenant-based debt, Schuldschein and term loan, and we are canceling the RCF before building a new credit backup line facility by repaying EUR 286 million in principal amount, keeping in mind that we were anyway preparing to repay EUR 210 million that were due in December and EUR 50 million in September. So overall, the net acceleration is estimated to be around EUR 25 million if we look at the impact on the medium-term cash trajectory for the company. So that has nearly no impact. We don't expect any impact on the overall debt structure. And keeping in mind that we will benefit from a very comfortable EUR 1.5 billion cash and cash equivalent position at the end of March. In terms of Q4, yes, as you mentioned, it would be significantly lower than the Q4 that we posted over the last 2 years. Keeping in mind that Shadows only impacted Q4 last year for 10 days. So this quarter will benefit from slate of new releases, including the remakes of Prince of Persia: The Sands of Time, Rainbow Six Mobile, The Division Resurgence and unannounced title. We have a meaningful contribution of partnerships, B2B partnerships, but to a lower extent than last year. We expect a strong Rainbow Six Siege that will go through the Six Invitational and starting into the next year. We will have the follow-on sales impact from Anno 117 and the Avatar expansion. So all this will contribute to the key building blocks of Q4. Operator: [Operator Instructions] And your next question comes from the line of Nick Dempsey from Barclays. Nick Dempsey: So my first question is, have the auditors looked at all of the partnership deals that you have done going back several years, so we can be comfortable that what we are seeing here is the final restatement impact, we won't get more, for example, at the full year '26 results. Second question, if I look at the restatement for FY '25 and the restatement for the last 12 months period, it seems quite a big difference. I understood something, but can you perhaps explain the difference between those 2 restatements, given that I thought it related to particularly one partnership deal? And then the third question, in terms of any partnership deals landing in Q4, do you have good visibility on when they land and whether they will land? Frédérick Duguet: Yes. So on the first question, so there is no risk on the prior year financial accounts. It's, by the way, interesting to have in mind that when you look at the many partnerships that we've been signing over the last 7 years, if you look at all the partnerships between fiscal year '19 and fiscal year '25, all of them have converted into cash. So that traces back to the quality of the earnings and the very strong cash conversion coming from these various partnerships. In terms of -- so on your following questions, I understand that you're talking about the fiscal '25 restatement. So it refers to a meaningful partnership. And if you look at the first half fiscal '26, you see the difference between IFRS revenues and non-IFRS net bookings, and you'll see that also it's driven by the second partnership that I mentioned earlier. And in terms of Q4, so as we said, we've had an increased visibility on this B2B partnerships performance. And so yes, we have a meaningful contribution that is expected in Q4, but to a lower extent than last year. Nick Dempsey: But you have full visibility on that landing in that time frame or you don't? That was my question. Frédérick Duguet: Yes, we have a good pipeline of partnerships that we are working on. Operator: There are currently no further questions. I will hand the call back to you. Yves Guillemot: So thank you very much for your questions, and have a good day or a good evening. Thank you. Frédérick Duguet: Thank you. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Jakub Frejlich: Welcome again. We are sitting here in Orlen headquarters in a meeting room to discuss Q3 and 9 months of 2025 ending September 30 financial and operating results. We are here in the room with Slawomir Jedrzejczyk, Group CFO; Daniel Obajtek; and my name is Jakub Frejlich, I'm Head of Investor Relations. Please don't -- please mind that we're doing it old school without video. So this is normal [indiscernible] function or technical problem. We would like to keep it that way for the time being and maybe further. So we will kick off. We're still having some joiners coming in. But since this is 5 past already, we'll be kicking off. And now I'll hand over to Slawomir, please. Unknown Executive: Thank you, Jakub. So good morning, ladies and gentlemen. Let me start only by saying it's good to be back. Warm welcome to everyone. It's my pleasure and privilege to present Orlen quarterly results. I would like to start with the highlights. First of all, macro environment and mixed views on that. First of all, lower oil and gas prices. So as you know, that impacted our upstream business. However, very good refining environment, very high margins. In petrochemicals, still, we see market pressure, both in terms of margins and volumes. Electricity, stable prices. And in terms of retail, fuel retail, we observed lower fuel consumption, especially in diesel. And let's look at operations, and this is very positive news, I believe. We delivered very good results in operations, higher gas production, distribution and sales, higher throughput and wholesale fuel sales. However, lower sales in petrochemical, as I said, higher electricity production and higher nonfuel sales in retail. So as a result, if we look into the financials, we delivered very solid EBITDA, close to PLN 9 billion, very high cash flow from operations altogether for the first 9 months of 2025, PLN 34.4 billion. And we managed to continue our CapEx program. Altogether, we spent PLN 21.1 billion for the first 3 quarters, and we paid record high dividend of PLN 7 billion. So as a result, we managed to decrease our debt level by PLN 6 billion in 2025. So now let's move to Slide #4, which is highlights, financial results highlights. As you can see, revenue dropped to PLN 61 billion in the third quarter. However, that was due to the fact that oil and gas prices were lower. Then very solid EBITDA, close to PLN 9 billion altogether, close to PLN 30 billion in the first 3 quarters. Very good cash flow from operations, as I said, although in the third quarter, slightly lower than in past quarters due to the fact that we increased our working capital by PLN 2 billion in the third quarter due to the fact that the prices increased and the volume increased. CapEx, we continue our CapEx program. Our budget was PLN 35 billion. So currently, after 3 quarters, PLN 21.1 billion. I will come back to this in the slide dedicated to CapEx. And as a result, free cash flow close to PLN 1 billion and very, very safe net debt position and net debt-to-EBITDA of 0.14x. So now let's move to EBITDA delivered by segments. As you can see, we delivered good results in all the segments, Upstream and Supply, PLN 3.3 billion; downstream, PLN 2.4 billion; Energy, PLN 2.2 billion and customer and products, PLN 1.6 billion. So altogether, PLN 8.9 billion. And what's very interesting, I believe, is that the bottom is a change year-on-year. So in Upstream, it's minus PLN 3.2 billion, but I would like to pay your attention that basically the results of '24 were, let's say, inflated, PLN 1.8 billion out of this PLN 3.2 billion is basically higher gas prices we achieved in '24 due to the fact that we contracted '24 based on '23 prices, PLN 0.8 billion is basically purchase price allocation that inflated results in '24. So you may say that this drop is, of course, due to the fact that there were lower prices of oil and gas. However, please bear in mind that '24 is not comparable due to those 2 one-offs, let's say. In Downstream, PLN 1.9 billion higher results, which is, I believe, great due to fantastic macro environment in refining from the refining margin point of view. Very solid results in Energy and Consumer Products. Corporate functions increased by more than PLN 200 million. PLN 100 million is, you may say, phasing and PLN 100 million is due to the fact that we increased our labor and general expenses by a few percentage points year-on-year. Now let's move to Slide #6, where we present our operational results. And this is evidence what I said that from operations, it was a very good quarter. So we increased production and wholesale gas sale in upstream and supply. We slightly increased crude oil throughput and wholesale fuel sale by 1 percentage point. However, you can observe here minus 16% drop in petrochemical, and this is clear evidence that petrochemicals under huge pressure, both from petrochemical margin perspective as well as volumes. In energy, steady growth in almost all areas, gas distribution plus 3%; heat generation, plus 5%; electricity generation, plus 7%. And what's very important, renewables generation increased by 43%. So what I can say is that currently in the electricity generation, renewables constitute 17%. This is 4 percentage point increase as compared to last year. As regards Consumer and Products, very good results in the retail gas and electricity sales. However, we see some pressure on the consumption of fuel in Poland, especially diesel. That's why you can see that our retail fuel sales dropped by 2 percentage points. Now let's move to each segment where we elaborate more. So let's start with Page #7, Upstream and supply. We managed to produce up to 200,000 BOE per day. Majority of this -- more than half of this is, of course, Norway, but then we have Poland and the remaining amount is Canada and Pakistan. Majority of this is gas production. And if you can see, the result is lower by PLN 3.2 billion. But as I explained, upstream Poland and Upstream International, this negative -- huge negative impact of lower gas and oil prices was to some extent or even a big extent, offset by higher production, both in Poland and Norway. And this PLN 2.8 billion, as I explained before, basically, this is lower realized gas sale price. So you may treat it as a kind of one-off from '24 and negative impact of the settlement of PPA, this is PLN 0.8 billion again from 2024. So now let's move to Downstream. And definitely, high refining margins help us a lot. So in the third quarter, that was almost doubling USD 15.2 per barrel. However, petrochemical margin is under pressure, 16% drop to PLN 168 per ton, but was very good. I believe crude oil production improved by 1%. So utilization of our Polish operations was basically 100%, whereas Lithuania, 94%. And in Czech Republic, that was lower utilization, 75% due to plant and unplanned shutdowns. So there was a failure in Litvinov. So that's why we produced less petrochemical products. So as you can see on this slide, petrochemical is minus PLN 92 million contribution to EBITDA LIFO. However, if it hasn't been for Litvínov failure, I believe that would be a kind of slight plus in the petrochemical business as well. However, we all know that we are looking at downstream business from the whole value chain perspective. So of course, great refining is offset by weak petrochemical business. However, altogether, I believe Downstream delivered very solid results of PLN 2.4 billion. Now let's move to Energy. The biggest improvement, higher result by PLN 500 million basically and the biggest improvement is in distribution networks of PLN 318 million, and that was basically due to increase in gas distribution volumes and higher gas and electricity distribution tariffs. In all other areas, as you can see, heating, conventional energy, new energy and electricity trading, we delivered positive results as well. Now let's move to Consumer & Products. Very stable result in retail, fuel and shops. And we see some pressure on the consumption and on the volumes. That's why it was a slight -- slight drop in this -- in that area. However, we managed to regain that drop from the nonfuel sale. We continued our promotions during summer period. So that decreased the margins. However, we managed to regain that from the nonfuel sale. And this increase of PLN 300 million is basically retail electricity and gas. But please bear in mind that part of this increase was again a kind of one-off from '24 that was positive impact of the settlement of PPA, roughly PLN 100 million, so slightly inflated the results. Altogether, PLN 1.6 billion EBITDA, very good result in Consumer Products. Now let's move to CapEx. So you can see the split of CapEx, our budgeted CapEx for '25, PLN 35 billion, and that's almost evenly spread across upstream supply, downstream and energy. However, in the past quarters, we indicated that our CapEx program is roughly between PLN 33 billion and PLN 35 billion. So looking at utilization of CapEx -- realization of CapEx for the first 3 quarters, probably we may expect to be at the closer to the lower end of this range. However, we'll see how this develops in the fourth quarter. Of course, we continue our projects in upstream and supply to increase our production according to our strategic goals. In downstream, of course, we have 3 areas of projects. One is enlarging value chain, which is new chemical project. Then we improve our product slate, and this is the construction of, for example, hydrocracking unit in Mažeikiai or hydrocracking oil block in Gdansk. And of course, we are doing projects that create biocomponents, second-generation bioethanol like [indiscernible] bioethanol in Jedlicze. In energy, of course, we all know that energy transformation is not only renewable energy, but we need to absolutely enlarge and modernize distribution network. So that's why you can see expansion and modernization of power grid and gas distribution network. And our key projects in the renewables energy is, of course, Baltic Sea. So we continue this project, and we target in the second half of 2026 to have this farm fully operational. We continue as well our CCGT project and Ostroleka and Grudziadz second half of '26 should be operational. And of course, we started the new projects like CCGT, Gron, the second plant and in Gdansk. As regards Consumer and Products, we expand and modernize and rebrand our fuel network stations, and we build alternative fuel stations network. So this is ongoing tasks, and we allocate sufficient CapEx for that project. So now let's move to our liquidity position. On Slide #12, we present the waterfall. So we generated -- or we delivered PLN 34.4 million operational cash flow. That was, of course, inflated by a working capital decrease, PLN 4.8 billion altogether for the first 3 quarters. However, the first quarter itself was a kind of minus PLN 2 billion. So we observed this effect of increasing oil and gas prices and volumes increase. So we spent investment cash flow PLN 21.9 billion. That includes our leasing cash out and managed to pay a record high dividend of PLN 7 billion. So altogether, we decreased our debt by PLN 6 billion. So we are in a very good financial position for the next years to come. We all know that we have quite significant CapEx program for the next 3 years. So this safe debt position is very helpful. Maturity, this is very important as well. Average maturity. We have like 2022 and '23, so like 7 years -- 6, 7 years of average maturity. So to finalize outlook, which is probably the most interesting slide in my presentation because here, we present how we see the macro environment and our operations. So we believe that we see fourth quarter so far, at least '25 as compared to third quarter '25 positive in upstream -- positively in Upstream and Energy segments, more or less stable in downstream and lower due to seasonality in customer and products. If we deep dive a little bit in all the segments. So in Upstream and supply, higher production because we don't have any significant maintenance works. We expect higher gas prices due to seasonality and higher sales volumes as well. However, lower oil prices that can, of course, impact the upstream business as well. But altogether, we believe it can be, at least, as I said, so far, good quarter for us. From the energy point of view, again, seasonality, so higher production sales and distribution, higher heat production, higher electricity quotations and higher gas prices may affect slightly negatively, of course, in Energy segment, however, altogether, positive as well. And mixed views in downstream, of course, refining is absolutely great, as we know. So this continues to be great. However, we may expect a little bit lower throughput, lower fuel wholesale volumes due to seasonality and of course, challenging environment in petrochemical business. So that's why, all in all, probably a kind of stable situation is the most probable outcome in downstream. And Consumer & Products, due to seasonality, we expect lower fuel sale and energy and gas negative as well. Of course, higher gas sales volumes, but we expect a negative impact of electricity tariff reduction and maintained frozen prices for household. So that concludes my presentation. So we are ready now for Q&A. So Jakub? Jakub Frejlich: Yes. Thank you very much. As usual, I would like to take your questions by saying who raised their hand first. And surprisingly, but not so much to ourselves. It's Anna from UBS, who's going to be asking the first question. Please go ahead. Anna, we can't hear you. Anna Butko Kishmariya: Can you hear me now? First will be around the wholesale margin in the refining. Can you please provide more details around what is the dynamic there? Because it looks like given how strong the refining margins currently are, it should be a very good support for the downstream segment in fourth quarter? And my second question will be around Azoty Polymers, if you can provide any color around when can we expect any updates for the deal? Unknown Executive: Thank you for your questions. As regards to the first one, we have Slide #17, where we present the kind of the most current macro situation in the fourth quarter. As you can see, model refining margin is absolutely extraordinary. This is 18. per barrel. We all know the macro environment, I believe. So I'm not going to elaborate much on that. This is definitely due to shortage of supply and basically the situation in Russia or the war in Ukraine. So this continue to be like that. Of course, in our base case scenario for the next quarters to come, we don't assume such a high refining margin. This is definitely extraordinary from our perspective. As regards the polymers projects, I can only confirm what is officially published. That means that we put on our offer of 1 billion cash-free debt-free and our offer is valid officially till the end of this year. So we are waiting still for the response of Grupa Azoty. So no progress official progress at least from what we are hearing in that area. Hopefully, this will develop in a positive way, but it's too early to conclude. Anna Butko Kishmariya: But regarding the wholesale refining margins, which you mentioned are a bit on the lower side. What's driving that? Unknown Executive: You mean this model refining margin, as I explained. Anna Butko Kishmariya: No, no, no. Like in the comments for the downstream segment, for example, one of the reasons you mentioned like lower wholesale margin. So can you please clarify there, what does it mean? Unknown Executive: Yes. This is more or less like inland premium we generate, and this is due to seasonality and lower consumption. So that's why this is our indication that in the wholesale business, the margins can be slightly lower. So this is basically the explanation. Anna Butko Kishmariya: And do you see those getting worse in fourth quarter or it will be stable? Unknown Executive: Sorry? Please say it again? Anna Butko Kishmariya: Comparing in fourth quarter to third quarter, do you expect it to worsen further? Or will it be stable? Unknown Executive: You mean fourth quarter? Anna Butko Kishmariya: Third quarter versus third quarter. Unknown Executive: We expect to be slightly lower, of course, as we indicated here, lower wholesale margins in refining. But slightly lower due to seasonality, basically. So this is not going to be a significant impact, I guess, as positive impact of model refining margin, definitely. Jakub Frejlich: Tomasz Krukowski. Santander. Unknown Executive: We can't hear you. Tomasz Krukowski: I think you can hear me now. Tomasz Krukowski, Santander. Three questions. The first one is specifically to Mr. Andre. And actually, I would like to hear your view on the dividend policy of the company. The company has a dividend policy. We are aware of that. But I'm wondering whether do you fully support this policy or you would like to introduce some changes to it. So this is the first one. The second is on the Energa situation. If you could give us some color in direction the analysis which you are performing is going? And the third one is on the refining. You already mentioned that you do not expect the refining macro to be so strong going forward. But actually, what is your reading of the situation right now? I mean, do you see any kind of lack of the product on the market, which is driving the prices? How is the situation with the Russian imports? What's your take on this? Unknown Executive: Thank you so much. As regards dividend policy, of course, we have official dividend policy, which was approved by the Management Board and Supervisory Board. So definitely still valid. And I'm in a position individually to change it, of course. I can give you just my comment on dividend, and I express those comments all the time. I was CFO in Orlen a few years ago. basically, my view is that the best dividend policy is basically to prove to the market that we are a dividend-paying company and consistently each year to pay slightly higher dividend. So if there is no extraordinary situation, my personal view is that Orlen absolutely should be a dividend-paying company, and we try to pay slightly higher each year, which was included in the strategy of Orlen from '25. And the second point, Energa, my comment on Energa is as follows. We have 4 segments, as we know, and we are much bigger due to those acquisitions we did a few years ago. So now absolutely, we should focus on creating a very efficient 4 business lines. And we are working on this efficiency in all the segments, so not only Energy segment, but as well in upstream and supply and customer and product. So this is the task which is ahead of us. We should create as agile and as flexible organization as we can. Of course, we are very, very complicated business, but we should be, as I said, as agile and flexible because macro environment can be challenging, can be dynamic. So that's why we are focusing to create in energy as well a very solid business line. However, no formal final decisions have been made so far. So it's difficult for me to comment at this stage apart from all official information we put is going to happen with Energa. As regards to refining margin, so I believe I said that this is basically perception of the market and the shortage of fuels, which is due to the fact that some installations in Russia were attacked by Ukraine. So basically, there's a shortage of fuel, and this is basically the -- we don't expect the situation continue in a sense that it would be absolutely unwise to create base case scenario based on this margin. So that's why I said that in our base case scenario for the next year and for the next years, of course, we don't assume double-digit refining margins so that we are a little bit conservative, let's say, looking into the current situation. And it's better to be conservative, I believe, in this area than to create a business plan and then CapEx and cash out based on the huge refining margin. So that's my comment on that. Tomasz Krukowski: And actually, do you see the lack of the product on the market? Do you have the clients calling you and saying, giving more diesel or sending more diesel? Unknown Executive: As regards our markets, no, we don't see a shortage. So from our perspective, absolutely, we are fully full of products. Jakub Frejlich: [indiscernible]. Unknown Analyst: Okay. So the first question, again, about dividend policy. Will the payout still be based on operating cash flow rather than free cash flow? Unknown Executive: So as I said the policy. And of course, unless we change it, we are going to follow it. So as regards to dividend policy, this is, as you know, up to 25% operational free cash flow minus interest, but this is up to. So each time each time, as you can imagine, we look before we give the final recommendation as regards to dividend payout, we look into current financial situation, current financial sting. And of course, we will propose this dividend in the second quarter of next year, probably. So we have still 2 quarters to go. So we will see how the market develops, how our cash flow look like, how our CapEx programs continue, and then we'll make the final decision. But yes, this is our... Unknown Analyst: Okay. So you don't assume any changes in dividend policy? Unknown Executive: Unless we update our strategy and we change. Unknown Analyst: Okay. The second question from my side. isn't your approach too conservative when you look at downstream segment for the fourth quarter, assuming current $25 a barrel refining margin? Unknown Executive: Of course, this is our perception. Maybe that's my view. It's better to be slightly less conservative than more optimistic. However, this is our assumption based on 6 weeks of the fourth quarter. So still, we have 6 weeks to go, and anything can happen. So this is our impression so far. And if you look purely from the refining margin, model refining margin perspective, which is more than PLN 18 billion -- USD 18 per barrel. So this is absolutely great. However, we have some challenges, as you know, in petrochemical business. Petrochemical margin is lower than the third quarter. Of course, our volumes should be slightly higher. We still don't know from the operations point of view, how our assets will operate. So that's why we are more cautious on that. That's why we present more or less stable situation. So stable situation means small pluses, small minuses, and we'll see. We'll see how the fourth quarter. Jakub Frejlich: We don't have follow-ups, please, Ricardo [indiscernible]. Ricardo Nasser de Rezende Filho: Can you hear me? Jakub Frejlich: Yes. Ricardo Nasser de Rezende Filho: A couple of questions on my side, if I may. The first one is on the CapEx. You mentioned that you're probably going to be at the lower end of the guidance of PLN 33 billion for this year. Can we assume that those -- that the PLN 2 billion would be spent next year? Or do you expect some CapEx savings and you might not have to disburse those PLN 2 billion? And then the second one is on the Consumer Products segment. You're talking about some of the margin pressures because of promos during the summer, just how the market is in Poland now. Do you still see some pressures there and you're still doing -- having to do some promos? And when should we expect margins to stabilize or even see some inflection on the margin side? Unknown Executive: Thank you so much. So as regards CapEx, -- if you assume that we have the budget of PLN 35 million, and I said that the range was PLN 33 million, 35 million. So basically, there are 2 items -- 2 big items that affects lower CapEx utilization. First one is CapEx spend on gas ships. Probably we explained that, that in the base case CapEx, we assumed 4 ships to be delivered. However, this year, only 2 will be delivered and the next 2 will be delivered next year. So that's why out of PLN 2.4 billion CapEx, PLN 1.2 billion will be booked this year and PLN 1.2 billion will be booked next year. So this is a kind of movement to next year. And second billion, we explained probably as far as my colleague told me, it was first quarter upstream, upstream projects. So we decided to just not to continue with one of the projects. That's why we decreased the CapEx plan for upstream. So it's difficult for me to say whether this is postponed or not, but because in Upstream, of course, we have our plan to deliver more production in the next years to come. So definitely, in Upstream, we'll prepare the CapEx for '26, which is appropriate to the targets we initiated in our strategy. So this is as regards CapEx. As regards Consumer & Products, I would say the margins are stable, and this is a kind of market time to time, we create promotions. If we create promotions, basically, we create promotions and to decrease the margins or to decrease the sales prices. And as a result, the margin slightly decreases. However, our goal is to regain this in nonfuel sale. We have more customers enrolling to our VITAY program as a result, so loyalty program. So definitely, we are going to continue with that. Ricardo Nasser de Rezende Filho: And if I may follow up on the upstream. On the strategy update, you had mentioned that you were looking at potential M&As in North America and the North Sea as well to increase your upstream production. Is there any updates on that front? Unknown Executive: I can give you a little bit kind of my personal view and the corporate view as well. Basically, we have quite significant CapEx for the next years, 3 years to come. Our flexibility in this CapEx is not very significant as we know. And in our strategy, we indicated that we have CapEx, basic CapEx and options for M&A. And this M&A -- in M&A, definitely, we have flexibility. So that's why I'm very cautious as regards putting any meaningful targets in M&A. We need to look into our cash flow position. We need to look into the macro environment development, and then we'll decide how much money we have -- we can allocate for M&A projects. So at this stage, I can confirm there are no meaningful projects on the table as regards upstream in U.S. Jakub Frejlich: [indiscernible]. Unknown Analyst: I got a question on your Upstream and Supply segment. First of all, can you tell us what kind of production dynamics do you expect next year? I think you mentioned that you plan to upgrade production in the next years. And the second question, can you tell us anything on your gas wholesale margins going forward? When I look at your gas contracts signed for next year, I see very big spreads. And can you comment on it? Unknown Executive: So as regards to the gas production, we are in the process of budgeting for '26. So I will not give you at this stage a kind of precise number, of course. And I can confirm what's in the strategy we put as far as I remember, the number of PLN 6 billion production from Norway, like PLN 4 billion from Polish operations. So this is a kind of target for 2030. So step by step, we are going to increase this number. As regards TO the -- can you be more specific as regards to the wholesale margin? You mean wholesale in Poland or wholesale from the kind of U.S. contracts. And... Unknown Analyst: What I mean is the gas margins in Poland, the margins which you book in the upstream and supply segment. So what I mean is the contract signed on TGE, yes, compared to 1 month TTF? Unknown Executive: Of course, we should look into development of gas prices, of course. And you are perfectly right in a sense that I explained a little bit this positive impact in '24. So '23 gas prices were very high. We booked at the high level, then prices dropped. So as a result, we managed to deliver roughly PLN 1.8 billion extra money. As regards to development of gas prices, of course, this is a big question, what kind of development we will see in the 2026. So at this stage, we don't provide a kind of full visibility on our goals. But generally, is going to be more stable than it used to be in the previous year. So I would not assume a very significant differences year-on-year on that. Unknown Analyst: Okay. So if you look at the EBITDA of the upstream segment this year and a scenario for next year that it is stable. Is it like reasonable? Is it optimistic or pessimistic at this moment? Unknown Executive: At this moment, I would assume stable, definitely. So we had this big drop as compared -- 2025 as compared to '24. So if you look longer term, like '26, '25, so it should be more or less -- I would assume this is the most realistic scenario, maybe slightly lower, but generally, not such a significant difference as '24, '25. Unknown Analyst: Okay. Okay. Understood. And a follow-up on CapEx. You mentioned that this year's CapEx will be like in the lower range, like closer probably to PLN 33 billion. And can you say anything about next year's CapEx? Will it -- is the PLN 33 billion benchmark a good one? Or should we expect higher CapEx because where there were some -- a few delays and I don't know, investments kick in. Can you say anything about this? Unknown Executive: Okay. At this stage, I can refer only to our strategic plan. And if you look into the strategic goals, of course, the CapEx is higher than 33%. So I would not assume at this stage that 33% is our benchmark. So please refer to our strategic plan, which is still valid. And -- of course, in the strategic plan, we indicated this M&A as well, which is flexible. So we will be very cautious on that area. But definitely, the range in the strategic plan was higher, as you know. Jakub Frejlich: [indiscernible]. Unknown Analyst: I got 2 questions, if I may. The first question will be a follow-up on refining because you said that you expect lower throughput. Is this because of the -- strictly because of the seasonality? Or do you have like planned turnaround on your plants in fourth quarter? And if so, which installations are you going to turn around? Unknown Executive: Basically, this refers to the planned shutdowns. So for example, in Orlen Lietuva, we have vacuum Flesher and this braking shutdown, plant shutdown. So that's why utilization of Orlen Lietuv is going to be below 80%. As regards Czech Republic, we have planned shutdowns as well in the steam cracker. So utilization of Czech Republic, if you assume roughly 85% would be the good assumption. As regards quartz, we are, of course, trying to achieve as much. It should be close to 100%. However, we have some shutdowns as well. So all in all, probably will be slightly lower than 100%. So if you summarize everything and compared to the third quarter, you can assume slightly lower throughput. Unknown Analyst: Okay. And second question will be about your Orlen project because I think it was like that you plan to come up with some review of that project in September, maybe lower -- maybe changing something in a budget or in assumptions for that project. Is there anything we should know about this? Or you are going to come up with... Unknown Executive: We continue our project. Yes, yes. Thank you for this question. We continue this project. We have only one item still on the table, which is final agreement with general contractor, CHT. And our goal is at least to conclude this up to the end of this year. However, we'll see how the situation develops. And when we have this final agreement with synchronized all the timetables and created the budget, the final kind of budget allocation and budget update. And once we are ready, we'll go to the market and communicate the full picture of that investment. So we should expect that probably first quarter next year. Jakub Frejlich: It does seem that the last speech [indiscernible] because there are no further questions unless this is for the -- we have a follow-up from Tomasz, good timing. Tomasz Krukowski: Yes. Just one on the CapEx. There's quite a lot of investments, especially in the downstream and in energy, which will be completed next year in 2027. And could you give us an estimate what kind of contribution to EBITDA would you expect from those completed investments in 2026 and in 2027, given current macro conditions, not the one which you had when you started those projects, but those that are at this moment. Unknown Executive: One minute ago, I was happy that I answered all the questions. However, finally, there is a question I cannot answer. So sorry for that, but those are the numbers we basically don't specify in details. And first of all, let's wait let's wait for these projects to be concluded. Once they are concluded, we look at into the macro environment, and then we may discuss in more detail. So sorry for this. But at this stage, please allow me not to give you any specific numbers. Tomasz Krukowski: But in general, do you expect this contribution to be positive? Or you think that there are going to be some projects which will be burning at the beginning? Unknown Executive: We believe that all the projects will be positive. However, the question is about the returns. And that's why we book this kind of impairments. Maybe this is the topic we can elaborate. In the third quarter, we booked PLN 1.1 billion impairment of new chemical projects, PLN 0.3 billion on the bottom of the bar in Mažeikiai. So you can -- this is a clear evidence that those projects are not delivering the return higher than weighted average cost of capital. However, this is not negative projects from the EBITDA point of view because it hasn't been negative from the EBITDA, it's a kind of wise move to just basically close this down, as we know. So you can assume definitely positive and which projects are difficult from the return perspective, you can observe our impairments, which we post. Jakub Frejlich: Now it seems that we left you speeches. So we will be concluding before the market opens. Thanks very much for answering this wake-up call from Orlen today. We may consider doing that going forward to have it before the session kicks off, but we're open for your feedback. Thanks very much for joining us today. If you have a spare hour in half an hour, we're having a press conference, including the CEO, so you can access it online. But for joining us. Thanks very much for your insightful questions, and see you in a quarter unless we see on the road before. Unknown Executive: Thank you very much. Thank you Bye-bye. Jakub Frejlich: Thank you very much.
Operator: Hello. And welcome to BJ's Wholesale Club Holdings, Inc. Third Quarter Fiscal 2025 Earnings Conference Call. After the company's remarks, there will be a question and answer session. In fairness to all participants today, we ask you to limit yourself to one question and return to queue with any additional questions. I'm out. Pass the call over to our host, Ansh Singh, VP of FP and A. Please go ahead. Good morning, and welcome to BJ's Third Quarter Fiscal 2025 Earnings Call. Ansh Singh: Joining me today are Robert W. Eddy, Chairman and Chief Executive Officer, Laura L. Felice, Chief Financial Officer, and William C. Werner, Executive Vice President Strategy and Development. Please remember that we may make forward-looking statements on this call based on our current expectations. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from what we say on this call. Please see the risk factors sections of our most recent SEC filings for a description of these risks and uncertainties. Please also refer to today's press release and latest investor presentation posted on our Investor Relations website for a cautionary statement regarding forward-looking statements and non-GAAP reconciliations. And now I'll turn the call over to Robert W. Eddy. Good morning. Thank you for joining us to discuss our third quarter results. Our business delivered strong results in Q3 and performed well in an incredibly dynamic environment. Once again, we gained share and grew traffic marking the twelfth consecutive quarter of market share growth and the fifteenth consecutive quarter of traffic growth. These consistent results are a testament to the value that we provide to our members each day. As we are guided by our purpose of taking care of the families who depend on us. This purpose has never been more relevant as many of our members are dealing with a considerable level of unpredictability in their everyday lives. This has impacted consumer confidence, which has been at low levels for much of this year, and we are taking these conditions as a call to action to lean even further into value for our members' everyday needs. Some of our actions include incremental offers to those members that may need a little bit more help in the current environment. In addition, we're rolling out reduced delivery fees to make our most convenient shopping channel even more accessible. A combination of value and convenience is a powerful unlock for us, and this will help our members realize even more value from their BJ's membership. We've also launched a 10% discount for our team members as a way of thanking those who are on the front lines living our purpose every day. For the quarter, we delivered merchandise comparable comp sales growth of 1.8% and adjusted earnings per share of $1.16. It's helpful to evaluate the performance on a two-year stack basis to normalize for the impact of last year's port strike and hurricane activity. Our two-year stack comp was 5.5%, an acceleration of nearly a point versus the first half. Our Q3 comp performance was evenly balanced across our two reportable divisions. Our perishables grocery and sundries division grew comp sales by 1.8%, with a two-year stack that accelerated sequentially to 6%. The investments we've made in both Fresh 2.0 and our category management process have driven continued share gains across our consumables franchise. We saw the most strength in perishable categories such as fresh meat, dairy, and produce, aided by our Fresh 2.0 investment. We also saw strength in nonalcoholic beverages, and candy and snacking driven by enhanced assortment and more prominent placement in our clubs. Our general merchandise and services business also grew by 18% on a comp basis in the quarter. Consumer Electronics comped in the high single digits on success in computer equipment and tablets. Apparel, which we've highlighted on several recent calls, continues to grow, comping in the low single digits. The offsets we saw this quarter were in home and seasonal, which continued to be impacted by lower discretionary demand and consumer confidence, as well as some of the decisions we made earlier this year to tighten our inventories in light of the anticipated impact of tariffs. Our services business also contributed to the improved performance in this division during the quarter. Looking at the behavior of our membership base this quarter, we continued to see members across all income levels remain cautious, which tracks with what we broadly see in the consumer confidence data. We saw members exhibiting value-seeking behavior including higher sensitivity to promotions, increasing purchasing of private label items, and some trade down. For example, given the high price of beef, we saw higher purchasing of ground beef versus more expensive cuts. Despite this type of behavior, member trends exhibited stability quarter over quarter across all cohorts, when adjusting for the noise from the port strike. While value-sensitive members remain more exposed to the macro backdrop, we did not see any incremental pullback from them. That resilience reinforces BJ's position as a trusted destination for strong value and convenience when it matters most. The environment continues to move quickly, but our teams haven't lost sight of the fundamentals. By zeroing in on our controllables, they're advancing our strategic agenda increasing member stickiness, making our clubs better places to shop, expanding convenience, and growing our physical footprint. These elements are central to creating value over time, and we built further momentum in each this quarter. I'll now provide an update on how those pieces are evolving. Our membership results continue to be robust and we grew membership fee income by nearly 10% this quarter driven by strong member accounts, mixed benefits, and the effects of our recent fee increase. We expect the growth rate to show further improvement into the fourth quarter and to once again deliver a 90% tenured renewal rate for the full year. The core of our membership health is driven by growing the number of members as well as improving the mix of those members. In the third quarter, our higher tier membership penetration reached another new record, improving by 50 basis points sequentially. And we continue to see more opportunity to push here. We would not be able to deliver sustainable membership growth without parallel improvements in our merchandise. We are launching many new own brands products, which are aimed at improving the member experience, by offering excellent quality at an unbeatable price. Some of the products we are excited about include Wellesley Farms branded tortilla and potato chips, protein shakes, frozen poultry, and coffee pods. This is just a small list of many new high-quality products that we plan to launch at amazing price points. Own brand's products have a multitude of benefits as they are typically priced about 30% below national brands while offering comparable quality of national branded items. This gives our members even more compelling value for their hard-earned dollars which in turn drives loyalty, and higher lifetime value. Home Brands products also deliver higher penny profit for us, which we can use to invest back into the member experience. Further propelling the flywheel that drives our business. We're excited to see how our customers respond to our improved offerings. Our efforts to continue to improve the convenience of shopping our clubs can be seen in the digital growth of 30% this quarter and 61% on a two-year stack basis, driven by strength in BOPIC, same-day delivery, and Express Pay. We're looking to further drive innovation by utilizing AI to deliver enhanced content, highlights, and attributes, making shopping even easier for our members. We also recently beta launched an AI shopping assistant and personalized member shopping list and we're looking forward to taking these live to our members soon. Last but not least, our new club footprint expansion. We opened our club in Warner Robins, Georgia during Q3, and just last week, we opened our fifth Tennessee club in Survivorville. I'm pleased to report that both clubs are off to a great start, joining the class of 2025 clubs that have outperformed expectations, with membership counts 25% ahead of plan. The community reaction at all of our recent openings has been nothing short of phenomenal. And we are proud to serve these communities. Our expansion strategy has been a sustained and accelerating success with clubs opened over the last five years delivering performance about three times the chain average. On deck for new club openings, are Springfield, Massachusetts, Sumter, South Carolina, Castlebury, Florida, Chattanooga, Tennessee, Selma, North Carolina, and Delray, Florida. That will make 14 new clubs for the year. The most we've had in many years. We remain on track to add 25 to 30 new clubs in two years our pipeline of new clubs is as large as it's has ever been. Speaking of our pipeline, we are excited to announce two more 2026 openings in Foley, Alabama, and Mesquite, Texas, as well as a relocation of our club in Rotterdam, New York. Mesquite will be our fifth Dallas Fort Worth club opening in 2026. We've been impressed with the warm welcome we've received as we've introduced the BJ's brand to the market over the past few months, including our Friday night life sponsorship, which was capped off with South Grand Prairie taking home the trophy in the Prairie Bowl sponsored by BJ's Wholesale Club. The enthusiasm we've seen in these new markets has been awesome, and we can't wait to bring the value of BJ's Wholesale Club to Texas families early next year. As I look at our business, I see improving momentum. Our membership is growing in size and quality. We are making improvements in merchandising, and continue to capitalize on the convenience of our digital offerings. And as I just said, our footprint expansion is accelerating and successful. While the short term may be somewhat unpredictable, I'm confident that our company is in an excellent position to deliver value to our members and make good on our commitments to shareholders. We will continue to act with purpose in building our structurally advantaged business for the long term, and you should continue to expect that we will run the business with lifetime value at the core of our actions. Before I turn it over to Laura, I want to thank our team members. Your dedication to serving the families who depend on us and your commitment to supporting one another make BJ's a great place to shop and a truly special place to work. I'm proud of all that we are accomplishing together. Laura L. Felice: Thank you, Robert. I'd like to start by recognizing the outstanding efforts of our team members in our clubs, at our club support center, and throughout our distribution network. Your hard work and commitment to serving our members and communities are instrumental in delivering a solid quarter and advancing our long-term growth agenda. Let's look at our third quarter results. Net sales for the quarter were approximately $5.2 billion, growing 4.8% over the prior year. Total comparable club sales in the third quarter, including gas sales, increased 1.1% year over year as the average price of gas declined mid-single digits year over year. Merchandise comp sales which exclude gas sales, increased by 1.8% year over year, and by 5.5% on a two-year stack. We are pleased to grow traffic and units in the quarter. This quarter, we lapped the surge of business brought by last year's port strike. At this time, last year, we estimated it to have contributed about one point of comp in September. Moving to this year, September was by far the weakest month as we comped the strike with August and October generally performing in line with our expectations. We believe it may be helpful to evaluate trends on a two-year stack basis to assess the business and I'll reference this metric in my overview. Our third quarter comp in our Grocery, Perishables and Sundry division grew 1.8% year over year with a two-year stack of 6% showing slight acceleration versus the first half. Our general merchandise and services division comp also increased by 1.8% in the third quarter with a two-year stack of about 2% an improvement versus the declines seen in the first half. As Robert noted earlier, traffic and market share grew again in this quarter and we experienced approximately one point of inflation. Digitally enabled comp sales for the third quarter grew 30% year over year, and 61% on a two-year stack. Our digital businesses performance is an affirmation of the values our members find in the improved and dramatically more convenient shopping experience. We find that the members that engage with us the most digitally and utilize all of our offerings end up being the most valuable members with the highest lifetime value. We will continue to invest in our digital capabilities to gain even more wallet share of our members. Membership fee income or MFI grew 9.8% to approximately $120.3 million in the third quarter on strong membership acquisition and retention across the chain. We also continued to benefit from the fee increase that went into effect at the beginning of the year. Our underlying member growth remains healthy and we continue to improve the member mix. Moving on to gross margins. Excluding the gasoline business, our merchandise gross margin rate was flat on a year-over-year basis as we continued to invest in our business and in our members. Along with execution towards our longer-term objectives. We expect to continue to invest in and beyond as we lean into our purpose and do the right thing for our members which will be the right thing for us in the long term. SG and A expenses for the quarter were approximately $788.2 million and deleveraged slightly as a percentage of net sales year over year. Adjusting for the legal settlement, benefit that we realized last year, SG and A as a percentage of net sales was about flat year over year. We continue to grow comp gallons and gain share in our gas business. Our comp gallons in the quarter grew 2% year over year a nice improvement versus Q2's flat performance, and again, significantly outpaced the industry, which declined low single digits on a comp basis over the same time frame. We have been in a much less volatile gas margin environment this year profitability just modestly ahead of our expectations in Q3. Our third quarter adjusted EBITDA was down about 2% year over year to $301.4 million owing largely to lapping the benefit of a legal settlement last year. Adjusting for the settlement, adjusted EBITDA grew approximately 5% year over year, on higher top line and strong cost discipline. Our third quarter effective tax rate was 26.9%, slightly lower than our statutory rate of approximately 28%. All in, our third quarter adjusted earnings per share of $1.16 decreased approximately 2% year over year due to the legal settlement. Adjusted earnings per share grew approximately 8% year over year normalizing for the settlement benefit last year. Moving to our balance sheet. We ended the third quarter total and per club inventory levels down 1.5% year over year, respectively, while our in-stock levels increased by 90 basis points. Note that we are operating nine more clubs in our chain compared to a year ago. The favorability in our inventory investment continues to be related to reduced inventory buys. I'm proud of our team's hard work to stock even more of our merchandise our members want while improving the operating efficiency of our business. This is yet another driver of the flywheel with which we can pass along even more savings to our loyal members. Our capital allocation strategy remains consistent. We believe profitably growing the business is our best use of cash and investments to support membership, merchandising, digital, and real estate initiatives will continue to be funded by our cash flows. We ended the third quarter with net leverage of half a turn. Share buybacks are a key component of our capital allocation framework and in Q3, we took advantage of the lower share price and repurchased approximately 905,000 shares for $87.3 million. As of quarter end, we have approximately $866 million remaining under our recently renewed repurchase authorization. We will continue to take a disciplined and balanced approach to deploying our capital to maximize shareholder value. Looking ahead to the remainder of the year, we are confident in the momentum of our business and our ability to deliver sustained growth, especially in an uncertain economic backdrop. Our teams are focused on controlling the controllables while executing towards our long-term objectives. With regards to guidance, and as we have been speaking to on this call, the macro environment is challenging. We have made decisions to be prudent with inventories in the face of this environment. Challenging our ability to grow general merchandise sales. We made that choice in order to allow continued investment in member value in the rest of the business. While it will hamper sales in the short term, we remain confident that this was the right decision. With that in mind, we are narrowing our guidance for the full year merchandise comp sales to a range of 2% to 3% for the full year. We are also increasing our range of expected adjusted earnings per share to be $4.30 to $4.40. The actions we've taken to support stronger, more sustainable growth are working. And our long-term road map is solid. With a resilient business model and clear strategic direction, we're well equipped to keep building on our success and deliver substantial value to our shareholders in the years ahead. Robert W. Eddy: Thanks, Laura. As I noted earlier, we are making progress and building momentum. We're elevating the quality of our membership base while it grows. We're curating a stronger, more relevant assortment at prices that reinforce our value promise. Our digital tools are improving member experience and our expansion strategy is bringing the BJ's model to new high potential markets. Looking forward, our commitment doesn't change. We will keep living our purpose and focusing on the people and communities who rely on us every day. While executing on the long-term priorities that drive our growth. Thanks again for joining us today and for your support of BJ's Wholesale Club. We will now take your questions. Operator: Thank you very much. We'd now like to open the lines for the Q&A. Our first question comes from Peter Sloan Benedict of Baird. Peter, your line is now open. Peter Sloan Benedict: Hi, guys. Good morning. Thanks for taking the question. You know, I wanted to ask about some of the income demographics and the behavior. It sounded like it was relatively stable, and I think you know, we're hearing a lot this week about kind of that lower end you know, facing some struggles. Can you remind us maybe, you know, your exposure to maybe the SNAP program? Talk about the renewal rates, you're seeing maybe across these income demographics? Just anything further below the surface in terms of behavior across income demographics, both in the third quarter and then as you're kind of entering here into the holiday season. Thank you. Robert W. Eddy: Good morning, Pete. Maybe I'll kick this one off and Laura can add to it if she sees fit. You know, our prepared remarks tried to tackle this question because we knew it would be out there. Certainly, everybody is concerned about the low-income consumer, the continued inflation provides clear pressure on that segment of all consumers and certainly that segment of our members. With that said, you know, removing the noise from the port strike and the hurricanes and stuff last year, we saw their performance in Q3 as being pretty resilient. Their purchasing habits were very stable. And we're pleased to see that. You know, there certainly was a lot of noise at the end of the quarter and the beginning of the fourth quarter around the SNAP program and the government shutdown. I guess I would say there was a slight disruption in Q3, a more meaningful disruption in the opening days of Q4. But now that the program is back on track, we're recovering those participants as they get access to their benefits are choosing to come to see us. And, as they have more opportunity to spend. So you know, we're encouraged by that showing from those members. And from the members in the medium and high-income cohorts that we saw during the quarter as well. And maybe one final point, we're also encouraged going forward by the administration's help recently on the tariff front. In reducing the cost of things that are not made or grown in The United States. And so that should be helpful to all consumers, but most pressingly, the low-end consumers that you referenced. Laura L. Felice: Yes. Good morning, Pete. I think I just add on top of it from a membership perspective. We're really proud of our continued membership results throughout the year. We are acquiring members in our existing clubs, so comp clubs, in our new markets. And our new clubs that we've opened at the beginning of this year. And there isn't anything, you know, when we look at the details of membership, to your question about kind of cohorts that looks different. We're acquiring members across all the cohorts, and so we're really happy with our continued strength from a membership perspective. Peter Sloan Benedict: That's great. Thanks for the perspective. Good luck. Robert W. Eddy: Thanks, Pete. You very much. Operator: Our next question comes from Katharine Amanda McShane from Goldman Sachs. Kate, your line is now open. Katharine Amanda McShane: Good morning. Thanks for taking our question. We wanted to ask if you believe that the right long-term same-store sales growth for this business is in the 3% to 4% range. So, why? And what do you think is holding you back from achieving this comp? Over the last several quarters? Robert W. Eddy: Morning, Kate. As you know, we've been transforming our business over the last several years with the idea of really, you know, four things. One, growing and maintaining a stickier membership. Two, improving our merchandising. Three, improving our convenience through digital. And then finally, increasing our footprint through real estate expansion. And as we talked about in the prepared remarks, all those things are heading in the right direction. Certainly, the things that we're doing sometimes conflict with what happens in the outside world. We certainly have the luxury of competing against great competition and it's certainly been a choppy economic backdrop out there. So we have tremendous confidence in our long-term ability to grow this business from a top-line perspective. We're showing signs of that in all four of those pillars. And we'll continue to work on each of those to get to that point. The thing that we try hardest to do, obviously, is put the right products on the shelf at the right value. And you know, we made tremendous strides, I think, during Q3 to do that. Our merchandising team has put a lot of effort this year into that idea of greater products and greater values. And we make considerable investments in Q3 with that in mind. We'll continue to do that because that's what we believe wins. Value and convenience are really what we're after for our members. And we'll keep plugging. We're very optimistic in our long-term aspirations. Katharine Amanda McShane: Thank you. And if I could just follow-up with one question. You just mentioned the competitive environment. We were curious about what the competitive response has been when you opened some of these new markets, particularly Dallas, which has a really strong grocery offering and other club offering already. Sounds like things are going well there, but wondered if you had any more details with the fifth store opening. Robert W. Eddy: Sure. The real estate growth story, and I'll let Bill talk about it since he's the architect of it, is a great one. It's certainly a continuing sustained success and getting even faster with 14 clubs this year. In lots of great markets. Those clubs are doing really well, and so we're very enthusiastic about this ability to grow our company. And we've been received well in the markets that we've entered. So why don't I let Bill talk a little bit more about it? William C. Werner: Yeah. Hey, Kate. Good morning. I think, as Bob mentioned, we're really proud and excited about the success of the new clubs this year thus far and what's left to come for this year. And then as we look forward into Dallas next year, the prospect of going in and winning in that market is really important to the team. We've talked about it a couple of times on these calls that the culture that we've built around new clubs is really important, and the team's executing at a high level. As we look back at this year so far, I think 2025 will go down as the best class of new clubs. As far back as I can remember with the success we've had with our eight openings to date now and six more to go for the rest of the year. What we're seeing so far in those new clubs that haven't opened yet, preopening membership and the engagement in the community, yeah, we know that they're gonna be outperformers as well. And so, as we take that momentum from this best class openings into next year into Dallas, combined with the work that we've done in the market of raising awareness for our brand and engaging with the community, we have a ton of confidence that, you know, not only will we compete, but we'll be in position to have great success there. Operator: Thank you very much. Our next question comes from Robby Ohmes from Bank of America. Robby, your line is now open. Robby Ohmes: Oh, hi. Thanks for taking my question. I wanted to follow-up on the inventory positioning that Laura talked about. I just wanted to understand how you're thinking about that for the fourth quarter. Is it the positioning that sort of limits sales upside but supports margins? You know, just how what's the pluses and minuses of the tight inventory? And semi-related, Fresh 2.0 was a great tailwind in comp driver. You know, the benefit the tailwind has slowed here. Is there anything that can reaccelerate? You know, is there a Fresh 3.0 or something like that that's in the works here to kinda get that, to reaccelerate? Thanks. Robert W. Eddy: Yeah. Good morning, Robby. Maybe I'll take a shot at starting off and Laura can fill in. You know, I think what you're referencing is Laura's comments around proactively managing our general merchandise inventory. When we were in the beginning part of the year, trying to understand where prices would go and costs would go as a result of tariffs. We made some proactive decisions to manage potential markdowns to allow us to fund greater investment in overall value for our members. And I think that was the right decision. I think you want us to do that every day. That is really why we're here. We've taken those dollars and in fact, them across the rest of the business. You know, in Q3, significantly reduced pricing on own brands water, on several other beverages, on some paper products. Across our produce assortment. So, we are really trying to balance those two things. And so we do have a more conservative inventory position from a general merchandise perspective. That was true in Q3. It remains true for the fourth quarter. And I do think it will limit the upside of the general merchandise business but allow us to continue investing for the overall value of our members. I think the other story with inventory is really an absolutely terrific performance in managing the overall inventory levels of the company. The team has done a really masterful job in the whole business. To have our in-stock rates go up 90 basis points into inventories that are down. We are doing a much better job allocating inventory throughout our chain, making sure that things are where they need to be, when they need to be there. And to be in stock for our members every day. We need to keep turning that handle and get better and better every day, but I couldn't be more proud of the team to make a performance like that happen. Anything else, Laura, on inventory? Laura L. Felice: No. You know, Fresh 2.0, I think it was another terrific program. Continues to yield benefits. You know that started out in our produce business. We had terrific produce results during the quarter. Again, and you know, what you're seeing from the perishables business overall is some of the reduced benefits from egg inflation and things that are offsetting, some of that great performance. So with that said, you know, we've talked about the next iteration of Fresh 2.0 and call it what you want, 2.1 or 3.0. You know, we have made another set of considerable improvements in meat and seafood, and we're looking to doing the same in bakery and other categories as we go forward. The mission there is the same. Right? Our best members interact with us in these categories. If we can show them the greatest product the freshest product at compelling values, display it in a way that is compelling, train our team members so that they are experts in all these disciplines. We can provide a better experience for our members get more people into those categories, and grow the overall traffic of the business. That is certainly the result that we saw from Fresh 2.0 in the produce segment. The early returns on meat and seafood are good as well. And so we're very optimistic about that program and its ability to drive sales within those categories, but also to get to that further bigger goal of driving traffic, in the whole business, which obviously drives lifetime value. So some of these investments are expensive. But they're very much worth it in terms of driving the top line and the overall value of membership to BJ's. Robby Ohmes: Sounds great. Thanks, Bobby. Robert W. Eddy: Thanks, Robby. Operator: Thank you very much. As a reminder, if you would like to raise a question, please signal now by pressing Our next question comes from Steven Emanuel Zaccone from Citi. Steven, your line is now open. Steven Emanuel Zaccone: Great. Good morning. Thanks very much for taking my question. I wanted to ask about the implied fourth quarter same-store sales. As you referenced in the release that you've also seen some holiday momentum or, excuse me, start momentum to start the holiday season. Can you just talk through your category assumptions in the fourth quarter? And then how you think about low end versus high end of the range? Robert W. Eddy: Sure. Again, maybe I'll start and Laura can fill in Steve. You know, we certainly, I think, had a good performance in the third quarter. You know, I keep using that word resilient, but into the face of the port strike and the hurricane activity and all that stuff. You know, our sales were a bit higher than we thought they might be. In the range of outcomes. And the, you know, the team's preparation for the holiday season, I think, has been fantastic. We've been investing in value. We've got incremental promotions out there. We're continuing our really successful free turkey promotion where if you spend $150, in one basket, you can get a free turkey for your family for Christmas. We're doing a lot of these things, you know, to really build on the momentum we saw in Q3. And get our members in our clubs and make them happy. You know, with that said, it's a choppy economic backdrop out there. Right? We've talked about the low-income consumer at this point. And, you know, we certainly have a little bit of a harder hill to climb from a comparative perspective. We had a good Q4 last year, but net net, well, lots of a wide range of outcomes that can happen in any quarter. Most notably the fourth quarter, we are cautiously optimistic about our ability to put up some good numbers in the fourth quarter. Laura L. Felice: Yeah. Good morning, Steve. The only thing I might add to all the commentary Bob just said is, I'd remind you about our inventory positioning that we already talked about for general merchandise. So we factored that into the range of outcomes. That doesn't mean that we will be out of stock in general merchandise. It just means that we've tightened up the buys, and we've picked the best of the best assortment. So we're ready for Thanksgiving like Bob talked about, and we're ready for our members for holiday kinda as we roll into December. Steven Emanuel Zaccone: Okay. Thanks. The follow-up I have then is on that general merchandise. So when we think about the inventory planning assumptions and maybe just talk about the buying environment, how does that look for the first half of next year? Because you made changes to the second half presumably based on tariff uncertainty. But how does that apply to general merchandise plan as we glance into 2026? Robert W. Eddy: Yeah. Look. I don't wanna get too far over our skis and talk about next year, but obviously, the fourth quarter seasonal merchandise was bought in the spring when there was considerably more uncertainty around what the tariff exposures might be and what the consumer's response might be. To any increase in prices. Every quarter we go through, we get more and more clarity, and we get more information from our members as well. And so we obviously alter our buys accordingly. I guess the other thing I would say is Q4 typically is a higher general merchandise penetration and obviously lower in the first quarter. And so that this question becomes a little bit less important as we get into the beginning of the year. Operator: Okay. Thanks very much. Our next question comes from Michael Allen Baker from D. A. Davidson. Michael, your line is now open. Michael Allen Baker: Okay. Thanks. Hate to focus on the short term so myopically, but the guidance your fourth quarter implied guidance to me, I'm calculating around, you know, two, two and a half, something in that range. Correct me if that if I'm wrong on that. At least at the midpoint of the outlook. But if you are in that range, that's a pretty big pickup on a two-year basis against the 4.6 last year. So given all the caution you're talking about, you know, can you square that? Or is it more reasonable to think about maybe the low end of the implied fourth quarter guidance? In other words, consistent on a two-year basis? Robert W. Eddy: Morning, Mike. Look. I've let's just focus on the fact that we're cautiously optimistic. As I said earlier, we've done a lot of planning, a lot of action around providing our members the right products at the right value. Talked about, you know, incremental promotion and building into that. We're certainly where we need to be from a digital perspective. People are loving interacting with our digital properties to get what they need from a convenience perspective. And you know, we just we are trying to act within our purpose. And take care of the families that depend on us and that is all those things. Right? Getting the products on the shelf. We're doing a fantastic job doing that, in an improved way. Putting sharper prices on things, which we, again, had considerable improvements in during the quarter. And, you know, really trying to take care of all the different communities within our membership and you know, we talked a little bit in our prepared remarks about our team members. Maybe I'd take one minute to thank those team members out there every day taking care of our members. They have the hardest job in our company. And guys, I'd really like to thank you for all your efforts. We initiated for the first time in our company's 10% discount for our team members. To really say thank you, to acknowledge that it's tough out there for everybody. And to help our team members through their holiday season purchasing as well. So I think we have a lot to be proud of. I think we have some momentum coming out of the quarter. The early days of Q4 have been reflective of that momentum, but we understand that there's a lot of road to go throughout the quarter. We're only a couple of weeks in. Next week this weekend and next week are huge for the quarter as are the remaining weeks in December. So we feel like we're in a good spot. But it's very, very early. And so that thought process really is what drove us to have the guidance that we put out there. Michael Allen Baker: Okay. Great. Fair enough. I'll keep it to the one question. Thank you. Robert W. Eddy: Thanks, Mike. Operator: Thank you very much. Our next question comes from Edward Joseph Kelly from Wells Fargo. Edward, your line is now open. Cathy Park: Hey, good morning. This is Cathy Park on for Ed. Thanks for taking my question. It sounds like the messaging is that you've been investing in price I guess merch margins were flat. So I guess what are some of the offsets in gross margins that helps you get there? And then anything on Q4 merch margins and how we should think about that? Robert W. Eddy: Morning, Cathy. We certainly have invested. We widened our price gaps in Q3 considerably with those investments versus competition. So I'd like to say thanks to our merchandising team for making those moves. It's important to our company, important to our members for sure. And we have many different levers to offset that throughout the business, not just within the margin construct. We will try and be as efficient as possible throughout the business to fund investments in member value. Certainly, some of the offsets that you might think about within the merchandising world would be, being more efficient in the distribution centers, trying to be more efficient from a trans perspective, growing our retail media program, which has been growing very, very nicely. Teams doing a great job there. There are many different things that we've tried to do so we can pass more value back to our members, and we'll continue to do that. Cathy Park: Got it. Great. Thanks a lot. Best of luck. Robert W. Eddy: Thanks, Cathy. Operator: Thank you very much. As a reminder, if you would like to raise a question, please signal now by pressing Our next question comes from Simeon Gutman from Morgan Stanley. Simeon, your line is now open. Pedro Gill: Good morning. This is Pedro Gill on for Simeon. Thank you for taking our question. Nice job continuing to grow your digital business. Really impressive. Could you comment on the work you're doing in retail media there? And also more broadly, we've heard some of your peers recently announcing partnerships in AI and tech commerce. Could you give us an update on how you're thinking about the AI opportunity in e-commerce? Robert W. Eddy: Sure. Good morning. You know, as we've talked about our digital business is an important part of our strategy. It has been growing by leaps and bounds for years now. So it's, you know, 30% during the quarter, over 60% in a two-year stack. It is approaching 17% of our sales at this point. We are at a point that frankly, a few of us didn't think we'd ever get to. And we have a lot to be proud of there. It all comes on the back of convenience. We have an incredibly talented digital team that builds these capabilities for our members to help them get access to tremendous value in a more convenient way than they otherwise might. Most of our business, as you know, is in what we call BOPIC, buy online pickup in club, as well as same-day delivery. As well as express pay where you check out in the club using your phone. Well over 90% of our total digital sales are fulfilled by our clubs. So we are efficiently building this business. It is certainly a money-making opportunity for us. We are really pleased with the way that it's growing. Included in there is our retail media program that you referenced, and I talked a bit about it a few seconds ago. While still small, our team has been growing that quite nicely as well as we improve our website, as we improve the way that we partner out there with our advertisers. The way that we really coordinate between our different properties, whether it's our website or our app, you know, we are coming up with more ways to engage our members and allow our advertising partners to reach our members with compelling values that first and foremost, help our members, but also help us and our advertising partners. So we will continue to invest in that business in the future. Again, it's still small, but it is growing quite nicely and allows us to make other investments in member value as we go forward. Everyone talks about AI. We are no different. AI is a big part of our future. It is most notably used in our digital group at this point. And the use cases not surprise you. They were on the vanguard of using it to make coding more efficient, making testing code more efficient, and they will continue to use AI in consumer-facing avenues as well. And so I'll give you a couple of examples. We talked about in the prepared remarks. We've got, you know, beta launched, AI shopping assistant. And are using AI to do predictive shopping lists for folks. Probably the thing that's most well along, however, is partnering AI with the robotics that we have in our stores. We have a robot that roams our stores named Tally. And initially, Tally was just helping us with inventory accuracy and price sign accuracy. And now, we have taken that much farther where Tally's imagery creates a digital twin of each of our buildings something that we've never had before because our buildings don't have warehouse management systems. And that has enabled really cool things from an operational perspective where not only are we getting better inventories and better price signing and accuracy, but we are efficiently spotting problems for our team members to take care of. We are efficiently generating to-do lists for our team members in the clubs. Find them and try what needs more of return, what should they be doing first within the building. We're using it to really help us spot quality issues in our fresh businesses as well so we can make sure that our standards there are tip-top every day. We're finding new ways to use Tally and the data that it provides every day. I think the thing that's been most so far has been using those digital twins to predict the most efficient pick paths for our team members to pick orders for BOPIC or curbside or same day. Where they are about 40% more efficient today than they were before. So we'll continue to build on the use of AI. We'll continue to focus on long-term investments that really will allow us to continue our mission, which is to offer our folks the best products the best prices. Probably the next thing up from a robotics and AI perspective will be our automated distribution center in Ohio that will go live next year. That will be, when it gets going, far more efficient than a traditional distribution center. And will operate almost entirely in a robotic fashion. So it'll be fun to see that. I've been out there to see it recently. And I can't wait to see it with all the machinery going in there to see how it works. But it's all in the same spirit of providing even greater value for our members. Laura L. Felice: Pedro, I'd just add, all that commentary that Bob just said about Tally and the robotics we have in our club, there's a close tie to that with the work that our planning and allocation teams are doing that we already spoke about in our prepared remarks. And that is producing our in-stock levels that have improved kind of year over year. So there is a tie beyond some of the digital efforts into how we're putting product on our shelves and how our teams internally are using the data from Tally as well. Pedro Gill: Awesome. Fantastic. Thank you for that. And as a follow-up, if I could ask you, if you could comment on the competitive environment. You had nice improvement in merch margin in the first half, a little more even this quarter. To the extent that you can comment, and I totally get it, it's still early, how should we think about the level of investments next year? Are there any particular areas within grocery or gen merch that you're looking to prioritize? Robert W. Eddy: Look. I don't wanna talk too much about next year, but I would just echo the comments that I've already made around the fact that our job is to provide our members great value every day. We've made considerable investments all year in doing so, and I've been pretty creative to find ways to fund it. You know, having the merch margin results that we had in Q3 while making the investments that we made was a good result. I would anticipate further investment going forward. As the competitive environment out there is, I think, consistently competitive. And we need to continue to do our jobs to reward our members for their faith in us and the membership fees that they pay. So, we will continue to try and ride that balance between margin and value, but we will always err on the side of value to try and operate the business for the long term. Pedro Gill: Okay. Great. Operator: Thank you. Robert W. Eddy: You bet. Operator: Thank you very much. As a reminder, if you would like to raise a question, please signal now by pressing Our next question comes from Chuck Grom from Gordon Haskett. Chuck, your line is now open. Chuck Grom: Hey. Good morning, guys. On the margin front, to move down the P and L a little bit, your SG and A square foot levels have been really tight, which is good, but your peers are up a lot suggesting, maybe some investment in technology in other areas. So I guess my question is how sustainable do you think maintaining that SG and A per square foot at that level over the next couple of years, particularly as you move into Texas? Robert W. Eddy: Yeah. It's a good question, Chuck. Good morning. You know, our teams have done a good job over time being very efficient with our buildings, making sure that they're in good shape. They're in far better shape today than they were five years ago. With that said, we need to continue to do that and maybe even accelerate it. You know, I think one of the things that we're seeing out there is our competitors getting sharper with their boxes. And so we will have to continue to do that not just because of the competitive environment, but we wanna show our members the best box we can. Every day. And so I would imagine we'll spend some capital going forward, remodeling our boxes. We will obviously continue to spend into our new club pipeline as well. And we'll do that as efficiently as we can, but obviously with an eye for the long term. William C. Werner: Yeah. Hey, Chuck. It's Bill. I'll just tack on to that as well. You know, in addition to our existing clubs, you know, for the first time ever, we've really started to build a relocation program for some of our older clubs as well. So we had great success with our recent relocation in Mechanicsburg, PA. We announced this morning that we're gonna relocate Rotterdam next year. And so it's not just an eye to our existing clubs, but also to the long-term future of these strong markets where we may have buildings that are a little bit on the older side. We're taking the opportunity to invest into the future there as well. Chuck Grom: Gotcha. Great. Thanks. And then, on general merchandise, right, like, up 1.8% on the stacks, you know, much better than front half of the year even with limiting inventory. You talked a little bit about the category improvement. I guess, what do you think it's gonna take to get home and seasonal to catch up to CE and apparel and other areas? And then I guess anything that you guys are excited about as we walk stores over the next couple of months into the holidays. Thanks. Robert W. Eddy: Yeah. Sure. Maybe I'll start and you guys can pick up. Look. I think we've done some great things from a general merchandise perspective. As we talked about, we had a strong showing Q3 from a consumer electronics perspective and from an apparel perspective. You know, consumer electronics has been a hallmark of GM for a while. It's always been a pretty good business for us. And, you know, again, better. We have very talented merchants in that group. Our apparel team has done a great job over the past few years. You know, really making sure that we simplify our assortment, and bring in better brands, put great value out in front of our members every day. We need to continue to do those things. Right? We might need to simplify our assortment a bit more. We need to continue to put great brands out there and put fantastic values on there as well. Need to apply those same lessons to the rest of the business, and we are actively at work on those things. We've seen some green shoots in previous quarters. We've talked about those with you like toys and of our gifting in previous quarters. I like our toy assortment this year as well. And I'm excited about the way our gifting looks in the front of our clubs as well. But we need to have more sustained transformation in home and in seasonal going forward. These are probably the toughest categories, particularly the seasonal categories, maybe in the building. But certainly among the GM categories, these are really tough categories. You need to be right on trend. You need to be right on style and color on price point, all sorts of different things. And while we've made strides, we're not done. We're not satisfied with where we are. We need to continue to turn the crank and get better going forward. So we were under no illusions that renovating general merchandise would be easy or short in tenure. We've had nice success in the past, and we need to keep investing in that business because it is such an important part of the wholesale club model. Where it provides that treasure hunt, that emotional connection, those cool wow items. Are so important to driving incremental trips and, quite honestly, that question around membership renewal is not only tightly linked with the grocery business, but it's really tightly linked with our general merchandise business when you can have more opportunity to save your entire membership fee in one purchase. Rather than stacking up just good values on smaller ring items. You can save a couple $100 on a television or a mattress or a great seasonal item. That becomes a really important part of our overall long-term growth of our company. So let me see if the guys wanna pile on. No? Alright. So we're happy with our GM so far. We've gotta get better, we'll continue to work at it. Chuck Grom: Great. Thanks a lot. Have a nice weekend. Robert W. Eddy: You too. Thank you. Operator: Thank you very much. Our next question comes from Rupesh Dhinoj Parikh from Oppenheimer. Rupesh, your line is now open. Rupesh Dhinoj Parikh: Good morning. Thanks for fitting me in. So just going back to your commentary about 25 clubs, the membership counts 25% ahead of plan. What do you think is contributing to that significant outperformance? William C. Werner: Hey, Rupesh. It's Bill. Yeah. I always come back to the success with the new club program. Comes back to the culture that the team's built. I think I've mentioned this a couple of times on previous calls that everyone that is involved with the new club program internally is fully engaged and fully bought in. And wants to see us be successful. So you know, we started this program way back in 2016, and the rep that we've built along the way, you know, we talked about the goal of making the next opening the best opening in the history of the company. You know, opening a new club where you have to build up especially in a new market, membership a membership base entirely from scratch. Is not easy to do, and it takes a lot of practice and a lot of learnings to do it right. And, you know, we're executing at a higher level than we've ever executed. And as we think about going into the Dallas Fort Worth market next year as well as all the other markets. So market like Foley, Alabama that we announced this morning is a really cool unique market, and we're gonna be really excited to be there. And we wouldn't be able to do that. We wouldn't have the confidence to do that without all the success that we've built up to this point. So like I said, we're really pleased with what we've done here in 2025. It really has been, probably the best class that we've ever opened in at least those far as I've been here. And it gives us a lot of confidence going forward. So yeah, more to come, but excited about what we've accomplished. Rupesh Dhinoj Parikh: Great. Thank you. I'll pass it on. Operator: Thank you very much. This marks the end of the Q&A session. I'd like to hand back to Robert W. Eddy for any closing remarks. Robert W. Eddy: Great. Thanks, Carly. Thanks, everybody, for your attention this morning, for your thoughtful questions, for your interaction, your support of our company. Wish you all a happy Thanksgiving, and we'll talk to you at the end of the fourth quarter. Thanks so much. Operator: As we conclude today's call, we'd like to thank everyone for joining. You may now disconnect your lines.
Operator: Greetings and welcome to the Azenta, Inc. Q4 2025 Financial Results. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press star followed by the one on your telephone. As a reminder, this conference is being recorded Friday, 11/21/2025. I will now turn the conference over to Yvonne Perron, Vice President, F. And A and Investor Relations. Yvonne Perron: Thank you, operator, and good morning to everyone on the line today. We would like to welcome you to our earnings conference call for 2025. Our fourth quarter earnings press release was issued before the open of the market today and is available on our Investor Relations website located at investors.azenta.com in addition to the supplementary PowerPoint slides that will be used during the prepared remarks today. Please note that effective 2025, the results of B Medical Systems are treated as discontinued operations. I would like to remind everyone that during the course of the call, we will be making a number of forward-looking statements within the meaning of the Private Litigation Securities Act of 1995. There are many factors that may cause actual financial results or other events to differ from those identified in such forward-looking statements. I would refer you to the section of our earnings release titled Safe Harbor Statement, the Safe Harbor Slide on the aforementioned PowerPoint presentation on our website, and our various filings with the SEC, including our annual reports on Form 10-Ks, and our quarterly reports on Form 10-Q. We make no obligation to update these statements should future financial data or events occur that differ from the forward-looking statements presented today. We may refer to a number of non-GAAP financial measures, which are used in addition to, and in conjunction with results presented in accordance with GAAP. We believe the non-GAAP measures provide an additional way of viewing aspects of our operations and performance but when considered with GAAP financial results and the reconciliation of the GAAP measures, they provide an even more complete understanding of the Azenta business. Non-GAAP measures should not be relied upon to the exclusion of the GAAP measures themselves. On the call with me today is our President and Chief Executive Officer, John Marotta, and our Executive Vice President and Chief Financial Officer, Lauren Flynn. We will open the call with remarks from John, then Laurence will provide a detailed look into our financial results and our outlook for fiscal year 2026. We will then take your questions at the end of their prepared remarks. With that, I would like to turn the call over to our CEO, John Marotta. John Marotta: Thank you, Yvonne. Good morning, everyone, and thank you for joining us today. As we reflect on fiscal 2025, I want to begin by recognizing our Azenta employees around the world. Their dedication, resilience, and unwavering focus on our customers and our purpose—enabling breakthroughs faster—have been the driving force behind our successes to date. At the start of the year, we set out to refocus the organization, put the customer at the core of everything we do, to simplify how we operate, to improve execution, and to build a company positioned for durable, profitable growth and long-term value creation. We've made considerable progress, but we have more to do, which excites us about the road ahead. The opportunities in front of us are significant. We're energized by the potential to deepen our impact, sharpen our execution, and continue delivering for our customers, our employees, and our shareholders. We've created a simpler, more accountable organization through the implementation of the Azenta business system, ABS, which is the framework for how we operate. It brings together lean principles, daily management routines, and structured problem-solving. This year, we trained teams and conducted kaizens in manufacturing, commercial, and support functions, and delivered measurable improvements in quality, on-time delivery, and overall productivity. These results are just the start. What's most meaningful is the cultural shift and momentum. Operational excellence is no longer just a goal. It's embedded in how our teams work every day. Employees are identifying inefficiencies and driving change from the ground up. We have simplified our structure. We have moved from a complex centralized model to one that empowers our operating companies with clearer accountability and greater agility. Decision-making is now faster, closer to the ground, and grounded in data and outcomes. We reinvested savings in line with our growth priorities: innovation, sales, marketing, and product management. These changes are making Azenta a more growth-focused and efficient company. The strength of our balance sheet, with over $500 million in cash, cash equivalents, and marketable securities, gives us the financial flexibility to invest with discipline across four strategic levers: driving productivity, accelerating organic growth, returning capital to shareholders through share repurchases, and pursuing targeted tuck-in M&A. We will have clear accountability for outcomes, reinforcing our commitment to value creation and operational excellence. We remain well-positioned to invest for our future while delivering sustainable returns and creating long-term value. In fiscal 2025, we achieved 3% core growth and delivered meaningful margin expansion of 310 basis points. Beyond our financial results, we took decisive steps to reshape our commercial organization. With the right leadership in place, an expanded field presence, and a sharpened go-to-market targeting, we're well-positioned to serve our customers and accelerate our growth trajectory. It's important to recognize that all of this took place amid a volatile and uncertain macro backdrop, characterized by softer academic and NIH funding, shifting biopharma priorities, and ongoing geopolitical uncertainty. Yet, through these challenges, Azenta demonstrated its resilience. Our differentiated portfolio delivers critical solutions that uniquely support customers, ranging from sample management of irreplaceable assets to automated product workflows, warehouse and inventory optimization, and comprehensive testing of samples and data that underpin life research and production. We're confident not only in our ability to navigate volatility but to capitalize on it. This environment has also created opportunities. As customers look to do more with less, they are consolidating partners, outsourcing non-core operations, and investing in automation and digital workflows—all areas where Azenta is positioned to lead. We're seeing new partnership discussions emerge precisely because of our reputation for expertise, quality, reliability, and execution. Our customers are looking for partners they can trust, and Azenta is that partner. As we look ahead to fiscal 2026, we are entering the year from a position of strength. Although macroeconomic uncertainty continues to persist, we have reshaped the organization, instilled a culture of accountability and continuous improvement, and set a strong operational foundation. Our priorities are clear: continue to deliver core growth and margin expansion, embed the Azenta business system deeper across the organization to further improve our operational discipline and productivity, and deploy capital optimally in a disciplined approach. We anticipate core revenue growth between 3% to 5% and expected adjusted EBITDA margin expansion of 300 basis points, and higher free cash flow generation as we scale our operational improvements. With a leaner structure, growth initiatives, enhanced ABS discipline, and a strong balance sheet, we believe we're positioned to outperform the market. Next month, we will host our Investor Day, where we will outline the next phase of the Azenta journey, including our multiyear growth strategy, long-term financial framework, and capital deployment priorities. We look forward to sharing how our strategy positions us for profitable growth and value creation. We are a stronger company today operationally, culturally, and strategically, and we are confident in the path ahead. With that, I'll turn the call over to Laurence for a detailed review of our financial results. Laurence Flynn: Thank you, John, and good morning, everybody. I'll start by sharing with you our fourth quarter and full-year fiscal 2025 results, then discuss our segments, provide an update on our balance sheet, and then close with guidance for fiscal 2026. But first, I want to take a moment to echo John's comments. Fiscal 2025 was truly a pivotal year for Azenta. As we close the year, we're encouraged by the internal business momentum and excited to carry that progress forward into fiscal 2026. The results we are discussing today exclude B Medical Systems, which is reported in discontinued operations unless otherwise noted. In the fourth quarter, we recorded an additional non-cash loss on assets held for sale of $4 million on B Medical. We believe the transaction remains on track to be announced in calendar 2025. To supplement my remarks today, I will refer to the slide deck available on our website. We'll begin on slide four with a few highlights. Fourth-quarter revenue was $159 million, up 6% year over year on a reported basis and up 4% organically, with Multiomics delivering a record quarter. Fiscal year 2025 revenue was $594 million, which was up 4% on a reported basis and up 3% organic, despite a macro environment that became more challenging as the year progressed. Strong performance in next-generation sequencing, clinical biosource, sample repository solutions, and consumables and instruments contributed meaningfully to these results. Non-GAAP EPS for the fourth quarter was $0.21 and was $0.51 for the full year. I'm pleased to report an adjusted EBITDA margin of 13% in the fourth quarter and 11.2% for the full year, representing expansion of approximately 230 basis points in Q4 and 310 basis points for the full year. These results reflect the continued benefits of our operational turnaround and disciplined cost execution, delivered in the face of a challenging macro environment. We believe we have meaningfully more margin expansion potential and are confident we can achieve it while also accelerating our top-line growth. Free cash flow, including B Medical, was a usage of $6 million for the quarter, driven by the timing of revenue and project-related milestone billing. For the full year, free cash flow was $38 million, a notable improvement of $26 million year over year, driven by improvements in working capital. Excluding B Medical, we ended the year in a strong financial position with $546 million in cash, cash equivalents, and marketable securities, providing us with the flexibility to invest in growth initiatives and return value to shareholders over time. We closed fiscal 2025 with a healthier, more efficient business, sustained operational momentum, and the financial strength to invest in our growth priorities. Now let's turn to slide five to take a deeper look at our results in the quarter. Total revenue of $159 million represented a 6% growth on a reported basis and 4% on an organic basis. As I already mentioned, Multiomics delivered a record quarter. Solid contributions from next-generation sequencing, automated stores, and sample storage were the primary driver of growth that helped offset softness in other areas of the portfolio. In the fourth quarter, non-GAAP gross margin was 46.7%, down 20 basis points year over year. The modest decline was driven by performance in multiomics, partially offset by favorable product mix gains from operational efficiencies and improved cost execution, mainly in Sample Management Solutions. Overall, the net impact was limited, demonstrating the resilience of our business amid a challenging macro environment. Adjusted EBITDA was $21 million, representing a 13% margin, expanding both year over year and sequentially. This improvement reflects the leverage from our cost actions and our disciplined focus on operational performance. Again, non-GAAP EPS was $0.21 per share. Overall, these results underscore consistent progress towards our profitability objectives, driven by improved efficiency, disciplined cost management, and stronger execution. With that, let's turn to slide six for a review of our segment quarterly results, starting with Sample Management Solutions, or SMS. SMS revenue was $86 million for the quarter, up 2% reported and flat organically. The performance reflects softness in cryogenic stores, driven by slower bookings due to ongoing customer budget constraints and a tough compare to last year's record quarter. Consumables and instruments performed well both year over year and quarter to quarter. While both automated stores and sample storage grew, customers continued to delay CapEx decisions due to macroeconomic uncertainty. SMS fourth-quarter non-GAAP gross margin was 49.3%, up 180 basis points year over year, as a result of the favorable shift in product mix and improved operational execution and cost management. Turning next to the Multiomics segment. Multiomics delivered record revenue of $73 million in the quarter, the highest ever for the segment, representing 11% growth on a reported basis and 10% organic growth. Continued strength in next-generation sequencing was the primary driver, with sequence volume rising 50% year over year. We saw strong performance across all geographies, aided by large deals in Europe that contributed to the record quarterly revenue. Despite macro and geopolitical headwinds, our team continues to outperform in China, posting 17% organic growth for the quarter. Encouragingly, gene synthesis revenue grew low single digits year over year, achieving the highest quarterly revenue in 2025, driven by strong demand in China and continued wins in oligo production. We continue to actively monitor the macro environment where customers are reprioritizing projects and remapping pipelines. Sanger sequencing revenue declined low double-digit year over year, consistent with trends we've discussed in prior quarters, though the pace of decline moderated in the quarter. Revenue growth in PLASMID EZ, our Oxford nanopore-based solution, remains strong and continues to largely offset the decline in traditional Sanger revenue. Multiomics non-GAAP gross margin for the fourth quarter was 43.7%, down 260 basis points year over year. The decline was primarily driven by product mix and lower volume in Sanger sequencing and gene synthesis. Now let's turn to slide seven for a review of the balance sheet. We ended the year with $546 million in cash, cash equivalents, and marketable securities, excluding the medical. We had no debt outstanding. This strong liquidity position provides us with the strategic flexibility to invest in growth initiatives, support operational needs, and maintain a disciplined capital allocation framework. Capital expenditures for the quarter were approximately $8 million, reflecting continued investment in automation, capacity expansion, and technology to support scalable growth. Turning to guidance on Slide nine. For fiscal 2026, we anticipate organic revenue growth in the range of 3% to 5%. Multiomics is expected to deliver low single-digit growth, while Sample Management Solutions is expected to contribute mid-single-digit growth. Our guidance reflects continued uncertainty in the macro environment, particularly around capital spending, as well as moderated growth in next-generation sequencing as volumes normalize. Based on these factors, we expect a slower start in the first half of the year and anticipate first-quarter revenue to decline approximately 1% to 2% year over year. We expect the second half of the year to accelerate as our commercial investments and growth initiatives gain traction, giving us confidence in our full-year guide. On the profitability front, we are targeting approximately 300 basis points of year-over-year adjusted EBITDA margin expansion, driven by continued operational efficiencies, disciplined cost management, and scalable operating leverage. We expect to improve free cash flow generation by over 30% year over year. We look forward to sharing more information about our growth priorities and longer-term financial and capital allocation framework at our Investor Day in December. We will outline how these strategic initiatives position Azenta for sustainable, profitable growth, and most importantly, value creation. In closing, we are pleased with our performance in fiscal 2025. We reshaped the company structure, strengthened our operational foundation, and generated strong financial results despite a challenging macro environment. The progress we've made positions us well for fiscal 2026. This concludes our prepared remarks. And I will now turn the call over to the operator for questions. Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. Your first question comes from David Saxon with Needham. Your line is now open. David Saxon: Great. Good morning, John and Laurence. Congrats on the quarter. So maybe I'll start with guidance. So 3% to 5% growth, I guess, you know, what do you think the market's going at this point? And then the decline in fiscal first quarter down 1% to 2%, what's driving that across businesses or even, you know, product categories? And then I think you'll lap the NIH funding dynamics in the fiscal first half. So would love to hear what's baked into guidance in terms of that impact. And then I'll have a follow-up. John Marotta: Sure. You bet, David. Good to be with you, and thank you for the questions. Let's talk about the macro, and then I'll hand it over to Laurence to get into the numbers. But a lot of what we're seeing is this slowdown on capital expenditures. That's continued to impact our stores in cryo. And we're seeing some green shoots around that, particularly in the EU, and seeing less traction in the U.S. right now. There's some booking softness, of course, the government shutdown from last month is really weighing on some of the guidance. The way to think about it is that midpoint is four, and that contemplates some deterioration in the macro on the low end. On the upper side, it's just a slow gradual improvement over the year. Regarding what we think the market is doing, we think the market is 1% to 2%. We're still an outgrowth story. And that's kind of how our view of this is shaping up for 2026. One thing to note is we're not focused on the first quarter, the first half. We're focused on delivering the year like we were this year. And that's really what the teams are laser-focused on. Laurence Flynn: Yeah, David, this is Laurence. How are you doing? Let me give you a little color on 1Q, and really John's touched on it a little bit, but a couple of things inform our view. Right? So the macro slowdown, the CapEx really will continue to impact our automated storage business in cryo, right? As John mentioned, we are seeing some green shoots in Europe, but right now not seeing much traction in the U.S. currently. The second is really the government shutdown. Right? Overall, we were down about forty-five days. John and I have heard from our customers that new grant reviews and approvals were paused during that time. And so it's going to take a bit of time to work through that through the system. So we don't expect this to impact the full year, obviously. But some of these bookings will push out to future quarters. As far as the proportion of the impact on the negative growth, I would say macro slowdown on CapEx was about two-thirds and about one-third is related to government funding. David Saxon: Okay. That's super helpful. Thanks for that. And then the follow-up, I guess, is just on SMS growth for the year. So mid-single digits, you just talked about some weakness in stores and cryos. So I guess last quarter, talked about the C and I backlog was like 2.5x annual sales. So, you know, maybe if you could, can we get an update there? Like, how much of that is driving your confidence in the mid-single-digit growth? And then, you know, how are you thinking about SRS for the year? Thanks so much. Laurence Flynn: Yeah. Look, I think we've for C and I, we feel really good about where we are. Some of the things that you'll see that inform why our SMS is mid-single digit is, and John and I talked a bit about really reinvesting in commercial. In fiscal 2025, we did that in GENEWIZ. What you're seeing in fiscal 2026 is we've put in a commercial engine, new leadership, and right now, they're putting investments to work on feet on the street. That's one. So that's going to read through across all our SMS business lines. Now to talk a little bit about SRS, you know, we expect robust growth in SRS. Really through two things, right? You'll see that our commercial engine really starts to move. We just put a new leader in place. Additionally, there is, and we talked a bit about this, we have an initiative in SRS particularly to optimize our price, and that's going to read through starting at the end of fiscal, sorry, at the end of the first quarter. So those are two major components. And why we feel really good about SRS is really we've seen actually recently our commercial leaders close two meaningful big deals in the areas of manufactured and bulk compounds. David Saxon: Okay. Great. Thanks so much for that. Operator: You bet. Next question comes from Mackie Tok with Stephens. Your line is now open. John Marotta: Maybe having an issue with Mac right now. Let's go to the main Mac, are you there we go. Oh, there we go. Hey, Mac. Laurence Flynn: Apologies. Sorry about that. You think I'd be able to find the mute button by now. John Marotta: No problem. Laurence Flynn: That's alright. Mackie Tok: As you highlighted, the macroeconomic backdrop is still a little bit challenged, specifically around capital equipment. But I'd love to just get an update on what you're seeing across your various customer bases at this point. John Marotta: Sure. We're seeing pharma, of course, we're tapping into the profit pools of pharma and biotech right now. We're seeing strength in pharma. So there's spending going on there. There's some repositioning around projects in pharma right now. With some of the restructuring that was going on, some of the projects were put on hold. We're seeing some of that get unstuck at this point in time. So there's clarity around that. That means there's clarity with our Multiomics business in terms of what we're supporting from a testing perspective, from a synthesis perspective. We are seeing some investments and some clarity around optimization in biotech. Biotech is holding tight right now in terms of CapEx more so than pharma. And then we're seeing we were seeing a little bit more clarity in the academic and the government side, but that really started to slow down with this government shutdown. But all in all, it's more of a pharma story at this point in time. Mackie Tok: I appreciate the color there. And then in terms of multiomics, the low single-digit guide, I think that's roughly in line with what people were expecting. But can you just parse out the various aspects that are contributing to that expectation for the year? John Marotta: Sure. You bet. More around on the macro side, and I'll hand it over to Laurence on the numbers. But on the macro, it's really this normalization on NGS. So, you know, past the technology curve, price normalization, volume normalization, those sorts of things, that's really what we're looking from a multiomics perspective. Laurence, you want to give some color on the numbers? Laurence Flynn: Yes. Look, Mackie, first off, we are really pleased with our fourth-quarter results for Multiomics. The team did a great job. Let's talk specifically a bit about multiomics. A couple of things to note, and John alluded to this, what you're going to see around multiomics, particularly NGS, is a bit of this normalization. So we expect NGS through the year to be roughly mid-single digits. As you may recall, we've kind of lapsed this price challenge in the prior year. We saw a lot of volume pickup. So seeing that double-digit number in fiscal 2025, you'll see that really kind of normalize back to mid-single-digit growth. Again, we feel really good about what the team has been doing, particularly around the NGS space. Mackie Tok: I appreciate the color. I'll leave it there. John Marotta: Thank you. Operator: Your next question comes from Andrew Cooper with Raymond James. Your line is now open. Andrew Cooper: Hey, everybody. Thanks for the questions. Maybe a similar one to one that was just asked, but on the SMS side of the house, in terms of that three to 5% and maybe calling back or sorry, mid-single-digit growth and then maybe calling back to the comment on optimizing price for fiscal 2026. Can you give a little framework for how you think about each of the segments? And then how much is price contributing when we think about that mid-single-digit goal versus volume on an apples-to-apples basis? John Marotta: So just in terms of the portfolio durability with SRS specifically, I mean, you're looking at contracts of 7% to twenty-five years, extremely stable, reoccurring revenue. Is in the 90 range in that part of our portfolio. And so we do have contractual obligations around price in particular. So a lot of strength in that. We really have not taken advantage of that in the past, and we're starting to do that now going forward in terms of sharing the value with our customers in terms of what we deliver. Laurence, you want to talk about give you some of the color on this? Laurence Flynn: Yeah, absolutely. Let's start with SMS. Look, we've talked a bit about this slower start for the first quarter and first half on capital expenditures on STORES and cryo. We expect this to pick up in the second half of the year. When you look at C and I, the team continues to do well. As you probably know, with respect into the workflows, right? There's a bit of this speed bump around the government shutdown, but overall, we expect to see this continue to be a very good business for us. Around SRS, again, talked about a lot of the long-term contracts. We've got a new leader in place that's done a spectacular job. Like I mentioned earlier, we've won two pretty big deals in manufactured and compounds, and feel pretty good about what we're seeing early on in fiscal 'twenty-six. Now let's talk a little bit more on multiomics. We've touched on NGS. Gene synthesis, we've seen some favorability coming off the fourth quarter. We think this area is stabilizing nicely. And then on Sanger, look, this is still slow. We are seeing that plasmid DZ is offsetting that loss there. I think that's going to be a trend that continues. I think the other question was around price. You know, look. We've talked a bit a little bit about this kind of price optimization. Where we're seeing our ability to optimize our price is two areas: C and I, and then in SRS. And let me kind of double click into SRS. You know, one of the examples we're seeing historically in this business is we were constrained by our systems to deploy contracted, meaning it's built into our customers' contracts. We were not able to really deploy this effectively annually. Know, the team has already done a good job and through the business system streamlined that process. Really, those are really the key areas that I refer to around price optimization. Andrew Cooper: Okay. Helpful. And then maybe one, John. You mentioned some of these moves to enable some of the different components of the business to make decisions closer to the customer. I guess, maybe frame that relative to a history where I think there was some siloed aspects of operations that really needed to come together and get integrated a little bit more. So how do we balance those two sort of ideas and comments would love the framing of how they fit together in context of that 300 basis points of margin that I think is encouraging in a three to 5% top-line environment. John Marotta: Of course. Sure. Sure. Happy to. I think this is really important in terms of our go-to-market and how we're aligning the organization from a product line P and L perspective and really having general managers and product managers aligned around these specific segments. We optimize and get synergies where it makes sense. And so we're moving from this very functionally aligned centrally aligned organization to a decentralized model. And you have that specifically built around, as I stated, around these product lines and these product managers. And so we've got general managers specifically in place now in all of the businesses. So that's kind of the first step in this. And there's clarity around that in the organization. And more importantly, it's putting R and D back into the businesses, product management into the businesses, sales and marketing back into the businesses. And then you have this regional go-to-market model where SRS we've got a leader in SRS, but we also have specific leaders around better storage management. And we've got a clear expert that's leading that right now. We've got clarity around our go-to-market and who's leading that. All of those individuals are new in their roles. In C and I and in STORES and cryo, very similar where we have a regional go-to-market model. The team is doing a great job by our European leader who's there now, and we just hired a new U.S. or North American leader as well. Doing a great job. So out with customers all the time, the decision-making is at the point of impact regionally now. And so that's really it's really given the organization a lot of clarity. Similar to GENEWIZ and our Multiomics business, we moved to a regional go-to-market model. And it's working, and we're seeing a lot of green shoots around that specifically. So the point is there's more credibility the closer you are to the customer, and we've really structured the organization around that. Synergies are around the systems, reporting systems, management information systems. We've really streamlined that. That makes a lot of sense to do that. But from an operating structure, we always talk about people structure process. Our structure is extremely nimble right now because it's very aligned around these product categories where you've got clarity around your R and D roadmaps and those sorts of things, and then there's regional go-to-market. So I appreciate the question. Thank you for that. Andrew Cooper: Awesome. Thank you. John Marotta: You bet. Operator: Your next question comes from Vijay Kumar with Evercore ISI. Your line is now open. Vijay Kumar: Hi, guys. Thank you for taking my question and congrats on a nice pretty share. Maybe, John, on this macro comment that you're making on CapEx and the shutdown impact. We haven't heard that from some of your other life science tools peers. So curious on the trends that you're seeing, maybe just elaborate on that. And what are you assuming for the segments here in Q1 to get to the minus one to minus two? John Marotta: Sure. So we're seeing strength in the outsourcing trends, of course, because they want to outsource and partner with experts. And that's continuing. But where the pause and the softness was, specifically around some projects with NIH and those sorts of entities that we do business with. People were just hitting the pause button right now through the government shutdown. We're starting to see kind of that being lapped, but this was an impact in the forty-five days. So real impact to the organization. Mostly, you know, mostly weaker in multiomics. Laurence, you want to give some color on? Laurence Flynn: Yes. Look, I think on the first quarter, kind of the CapEx and around the government shutdown, you'll see on the CapEx, obviously, that's weaker from a negative growth perspective in SMS, right? And then around the government shutdown, it's leaned to John's point more on the multiomics segments. There's a little bit in our C and I. But again, really, we still see that the full year, we are super bullish about kind of where we're gonna land. Normally, Vijay, we really don't guide quarterly. Our teams, John and I, really focus on hitting the year. But and then we still kind of commit to that. John Marotta: Vijay, one other comment I would note. We went out recall when at the beginning of the year, there was a lot of headwinds around government funding, NIH in particular, some of the tariffs. We went out to over 100 customers and had a lot over 100 data points directly from them what they were seeing. That gave us a lot of confidence around guiding in terms of this 1% headwind we were seeing in our business. And a lot of our peers at the time were calling 20% issues around these headwinds. We were calling 1%. There was a little bit of disbelief in that, but we felt confident because we had the data. We have the data right now around this in particular around VOC. I mean, we are out with our customers. This regional go-to-market model allows us to get real-time data from our customers on what they're seeing in region, around specific programs in which we were supporting and or are supporting. So that gives us the clarity there regarding our point of view on it. Vijay Kumar: That's helpful, John. And maybe one follow-up related on, I guess, Laurence, on the phasing. Looks like back half needs to be six or six plus. I guess, that confidence in the back half acceleration. Laurence, how are you thinking about EPS for the year? I know you gave them an EBITDA margin expansion. How should we think about any below-the-line items? And, you know, what should EPS be? Thank you. Laurence Flynn: Yeah. Look. I think, you know, if you look at how we're less than 50% of our full-year revenue falls in the first half of the year. So generally, you're right. We feel really good about the second half of the year, Vijay. And why is that, right? As we mentioned, we've really invested in feet on the street, particularly in SMS, starting this year. Put in almost 20 commercial heads, and Gene was earlier in mid-fiscal 2025. On top of the price we talked about, that's all going to read through in the second half of the year. So we've got pretty good line of sight around that. In terms of EPS, look, our EPS is going to be better, right? And so it's roughly about $0.50 and $16 to $0.18 of other income similar to 2025. Vijay Kumar: Sorry. If I may one more, if margins are up 300 basis points, right, is there some below-the-line impact? Like, why is EPS flattish year on year? Laurence Flynn: Yeah. So EPS is going to be greater than 50¢. So the you know, we I guess maybe clarify that I'm really sure of your question, Vijay. John Marotta: Vijay, the way to think about the way to think about how we look at value here is if you pull back and take a look at the way we're looking at value right now, we're trading at, you know, 10 times EBITDA. And we think we're undervalued right now. Dollars 12 of our stock is cash. And so we're focused around driving that margin expansion on the EBITDA line right now, and that's pretty important to us in terms of how we look at economic value. We do not typically guide on the EPS line right now. And so Laurence Flynn: I mean, we expect it to be better than $0.50. Vijay Kumar: Thank you, guys. John Marotta: Sure. Operator: Your next question comes from Brendan Smith with TD Cowen. Your line is now open. Jacqueline (for Brendan Smith): Hi, this is Jacqueline on for Brendan. Congrats on the quarter. Maybe just doubling down on some of your expectations on timing for the potential M&A deals or tuck-ins over the year. What areas are you kind of looking to pursue in the near term, and how has the macro environment shifted your expectations on both when and where to? John Marotta: Sure. Our focus around M&A has been pretty consistent. And that is on in regards specifically to tuck-ins and how we look at. So just to reiterate on how we look at capital allocation, first is around growth opportunities and capital allocation. So what are we doing to support our growth initiatives from an R&D perspective? Sales and marketing perspective, gross margin and productivity improvements. Third is around tuck-ins. And M&A. And fourth is around specifically share buyback. So parking on the M&A side, it's really expanding our core business. So the criteria around that's going to be specifically around SRS, expanding our scale in that space. We're really bullish about our target there and what our M&A funnel looks like. Second is around our automated solutions and driving some M&A around C and I and stores specifically. And then third around synthesis and how we're investing around synthesis. So I would think about those three areas in which we're looking at M&A. I would think about 2026 as being our year of executing on that specifically. '25 was really this reset building a stable foundation to be able to absorb those types of acquisitions right now. So that's the focus in those areas specifically. Jacqueline (for Brendan Smith): That's very helpful. And then maybe just one more. Double-clicking on, you know, the automated stores, which seems to be on the upswing. How should we think about the near and long-term expectations for both the performance and customer spend of that line? And how contributed do you expect it to be in the future for rev growth in that SMS segment? John Marotta: Sure. Consistent with the past. I mean, you know, when the macro starts to come back, I think you're going to see more strength in that segment. But we're also investing a lot in R&D in that segment in particular. And so that we won't see that read through until 2027-2028. We'll talk more about this in our long-term in our long-range plan in Indianapolis in December. On our Investor Day. We'll get into the particulars of this and we'll give you some more detail on it. But listen, we're investing behind this. We are not in the freezer business. We're in the automated solutions business. And what that means is you have highly, highly complex electronics in a cold environment some applications. For our customers. That's cryogenic. There's a lot of tailwinds around cryogenic cold storage because of cell and gene and the moves being made there. I mean 50% of the therapeutics coming out that are coming through FDA right now need ultra-cold or cold. And so we feel like we're well-positioned, and we're going to continue to position our product portfolio to enjoy those tailwinds. We'll get into that, of course, in Indianapolis. Jacqueline (for Brendan Smith): Great. Thank you. John Marotta: You bet. Operator: Your next question comes from Paul Knight with KeyBanc. Your line is now open. Paul Knight: Yes. Congratulations on the quarter. And I'm kind of hopping on to that same topic of stores. What do you think that market growth rate is? And I guess you're saying too that that's your probably biggest area for, you know, rolling up that part of the marketplace. So, you know, what do you think market growth is, you know, and relative to, you know, what are 10% biologic sales? Is that any kind of a proxy? And then again, you know, is this the key M&A spot? Thanks. John Marotta: Always an insightful question. So you basically kind of link the two, which is what the way we like to think about it from an automated solutions perspective. So stores and cryo, we think are low single-digit right now. We're not in some of the veterinarian space as some of our peers are in cryogenic. We don't enjoy some of the vaccine tailwinds that are going on right now. What matters is, is when you've got an in-base that we have right now of hundreds of biological stores, plus the attachment rate of our consumables, which is increasing. I mean that business is really performing for us very nicely. And so you've got this attachment rate that's driving this data. The data output right now in the tools revolution is driving data. In our space, in our business, that is physical specimens. Okay? And so we see that read through with the attachment rate of our consumables and sample tubes. And that's pretty important here. Got 100% attachment rate on the service side, and we're driving more attachment rate on the C and I side. So to summarize, stores in cryo, low single in our segment of the market. And we're still an outgrowth story based on us capturing market share. And then you've got these attachment rates on C and I. I will tell you, I mean, I'm so proud of our team and what they were able to deliver last year in a really tough macro. And we saw that across all of the segments of our business. And in some of the areas that were challenged, the team needed to pull back and work on some things operationally, and we were able to do that. But we were also executing nicely on a lot of our attachment rates and installed base. C and I specifically we have tens of thousands of instruments out there. And so our attachment rates, we're working on that specifically, and you're seeing that read through as well. But it's a mixed story in terms of how we look at it. Hope that helps, Paul. Paul Knight: Very much. Thanks. John Marotta: You bet. Operator: There are no further questions at this time. I will now turn the call over to John for closing remarks. John Marotta: Excellent. Well, in summary, we entered '26 as a stronger company operationally, commercially, and culturally. I want to thank again, our employees, our customers, and our shareholders. We're excited about the road ahead, and we will certainly see you at Investor Day in December. Thank you again. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Phillip Bentley: Good morning, everyone, and welcome to Mitie's interim results presentation for the 6 months ended 30th of September 2025, H1 FY '26 as we call it, which as usual, we are broadcasting live here from The Shard We're also joined today by Chris Rogers, Mitie's new Chairman. Welcome, Chris. And I also welcome Sam White. Sam White is our long-awaited and much welcome Managing Director of Technical Services division, who joins us from Costain on the 1st of December. So thank you, Sam, for slipping off quietly here. Now it's just over 2 years ago since our Capital Markets event that we held here, where we launched the Mitieverse, if you remember, in our facilities transformation vision. And we've now reached the halfway mark in delivering our FY '25 to FY '27 3-year plan. As a reminder, our business model set out to leverage our scale, our technology and our capabilities to unlock the value of our customers' estates through facilities management, facilities transformation and with the recent acquisition of Marlowe Facilities Compliance. And as we say, to become the future of high-performing buildings and places. So -- and at this stage, I'm pleased to say that the business is on track and momentum is growing. Encouragingly, we have maintained double-digit revenue growth for the fifth successive 6-month period, significantly outpacing the market, and we've shown good margin resilience despite the headwinds from national insurance and wage inflation. We've delivered record contract wins again and renewals and have continued to grow the order book and pipeline again. Free cash flow generation was good and our leverage at 1x EBITDA is modest, hence, why we launched in October a new GBP 100 million buyback program over the next 12 months. We're confirming our FY '26 EBIT guidance of GBP 260 million with the integration of Marlowe going well. And AI, as I'll show, is having a wide impact in the business. And we're on track not only to deliver our ambitious FY '27 targets, but also to take us beyond '27 with our growing momentum. So I'll discuss all these points shortly after Simon takes you through the H1 '26 numbers. Simon Kirkpatrick: Thanks, Phil. Good morning, everybody. So as Phil said, we're now halfway through our 3-year plan. So before getting into the detail of the half 1 results, I'll give a little bit more color to the financial progress that we've made so far and the financial model that underpins our strategy. Our model is based on profitable growth and free cash flow generation, enabling us to compound earnings, drive value accretion and increase shareholder returns. At the Capital Markets event in 2023, when we launched the MITIEverse, we said revenue would grow in high single digits. At the halfway point of our plan, it's exceeded that target, growing at 12% a year, supported by the increasing pipeline and much larger order book that Phil just referenced. Operating profit is growing a little faster than revenue at 13% a year. And it's worth reminding ourselves that back in 2023, consensus profit for FY '26 was GBP 207 million. Today, we're forecasting GBP 260 million, having made 6 upgrades since then. Margins have been resilient despite the material external headwinds, and this good growth and increasing profitability has led to significant free cash flow generation, enabling us to return cash to shareholders and to pursue value-accretive M&A. As a result of these actions, our TSR since the capital market events is 68%, well above the FTSE 250 average of 30%, and we're compounding earnings with EPS growing faster than revenue at 18% a year. So with that as the backdrop, I'll move on to cover the half 1 results, starting with the headlines. Revenue is up 10.4% in the half to GBP 2.7 billion, driven by good organic growth of 6.4%. Operating profit has grown by 7.6% to GBP 108.8 million. And as Phil said, we've maintained margins at just over 4% despite significant profit headwinds. EPS is up 5.6% to 5.7p a share with profit growth and share buybacks offset by higher net finance costs. We've declared an interim dividend of 1.4p a share, up 7.7% on FY '25. And finally, we've had a free cash inflow of GBP 51.9 million with average daily net debt of GBP 332 million. Moving on then to cover the performance in more detail and turning firstly to revenue. This slide shows the key drivers of the revenue growth in the first half of the year with the good momentum from FY '25 continuing both organically and inorganically. The first block of the chart shows GBP 70 million of growth in core FM from wins and losses and incremental growth on existing contracts with wins significantly exceeding losses. Organic projects growth of GBP 48 million was driven by good growth in both divisions and includes a GBP 13 million reduction in revenue in Mitie Telecoms, where we've exited unprofitable contracts. Pricing accounts for GBP 77 million of additional revenue, and we've shown separately on this bridge, the GBP 41 million headwind from completion of the high-margin one-off surge security work last year. When we combine these 4 blocks, total organic growth for the half is 6.4%. Finally, acquisitions contributed 4% of growth in the half. This block includes the infill acquisitions we've made in the last 18 months, including Argus Fire and ESM as well as the Marlowe acquisition, which added GBP 51 million of revenue. Sticking with the group numbers. Next, I'll cover operating profit. And this slide shows the key financial themes for the half on a profit bridge, highlighting the resilience of our business model. Strategic profit growth of GBP 31.3 million more than outweighed GBP 23.6 million of profit headwinds. Our growth strategy is focused on core FM, projects and acquisitions, underpinned by margin enhancement initiatives. Core FM and projects grew by GBP 6.4 million in the half, driven by new wins, combined with a good projects performance across most sectors. These upsides significantly outweighed lost contracts as well as one specific contract provision, which reduced profit by GBP 5.4 million. I'll come back to this shortly when I cover Technical Services. Next, we added GBP 4.7 million of incremental profit from acquisitions, including GBP 3.1 million of profit from Marlowe. We've made good progress with margin enhancement initiatives, delivering GBP 10 million of profit, and we've turned the telecoms business around, making a small profit in half 1, which is a GBP 10.2 million year-on-year improvement. In terms of headwinds, the completed surge response work was a GBP 7.8 million profit headwind. We made GBP 6.2 million of investments to drive growth, including an extra GBP 2.8 million of contract mobilizations and the headwind from National Insurance and inflation was GBP 9.6 million, which I'll cover in a bit more detail now. Once again, we were successful in managing inflationary pressures in the period. Our contractual protections and strong customer relationships enabled us to pass on 95% of cost inflation to our customers, resulting in only a GBP 3.4 million reduction in profit. We expect cost inflation and pricing recovery in half 2 to be broadly consistent with half 1, resulting in a net P&L impact for the year of around GBP 8 million. We said in June that we expected our employers' NI bill to go up by around GBP 50 million in FY '26 and that we'd recover around GBP 35 million of that through contractual protections and commercial negotiations. Recovery in the first half of the year has been slightly better than we expected, leaving a residual cost of only GBP 6.2 million. As a result, we're forecasting a full year net impact of around GBP 13 million, all of which will be offset by MEI. Moving on then to cover the divisional performance. Over the past 2 years, we've been simplifying our divisional structure, consolidating 4 divisions into 2. First of all, we broke up Central Government and Defense, moving the more soft services-focused central government business into Business Services and the more engineering-focused defense business into Technical Services. We've also broken up Communities with the majority of it being amalgamated into Technical Services other than Immigration and Justice, which now sits comfortably in Business Services alongside the Security business. Turning then to Business Services in more detail. Revenue grew by 15.1% to GBP 1.4 billion, with particularly good performances in Security, Hygiene and in Spain. The Security business grew by 12.2% in the half despite the GBP 41 million headwind from completion of the surge work last year. Growth was driven by Fire Safety and security projects, both organically and inorganically as well as new wins and pricing. Growth of 13.3% in Hygiene was driven by some significant wins in FY '25 and pricing, and the business in Spain has grown by almost 1/3 as a result of the expansion into security and significant wins in the public sector. Underneath the total revenue line, we call out projects revenue, which has increased by 30.5% to GBP 167 million as a result of the growth in the fire safety and security projects that I just mentioned. Profitability in Business Services has been resilient, in line with the first half of last year at GBP 85.3 million, but margins have reduced by 90 basis points to 6%. Revenue growth, MEIs and the contribution from Marlowe have been positive drivers of profit in the half, but they've been offset by the headwinds from cost inflation, national insurance and the completion of the high-margin surge work. Moving on to Technical Services, which has grown by 5.4% to GBP 1.3 billion. Engineering, which includes our private sector maintenance contracts and larger engineering projects, grew by 4.8% in the half. New wins, project work and pricing more than offset the loss of one notable contract and the contracts that we've exited in the telecoms infrastructure business. The Defense growth of 5.2% and the HLG&E growth of 7.1% were largely driven by increases in project work. In Defense, this included projects for the DIO in Gibraltar and Cyprus. And in HLG&E, the projects growth was largely in the health care sector across a number of hospital contracts. These DIO and HLG&E projects, combined with good growth in data centers and power and grid, helped total TS projects to grow by 10.6% to GBP 469 million. This project's growth combined with MEIs and the turnaround in the telecoms business drove a 22.9% increase in profit, boosting margins by 60 basis points. However, although margins have improved, they continue to be impacted by the headwinds from inflation and national insurance as well as a provision for loss-making contract. As I said earlier, this contract was a GBP 5.4 million headwind to Technical Services profit in the half, but it will complete in May 2026. It sits in a structurally low-margin sector, which we're exiting. Without this contract provision, TS profits would have increased by 36% and margin would have been 40 basis points higher. We expect TS margins to improve significantly in half 2 as projects revenue and margin enhancement initiatives ramp up. My final P&L slide shows the consolidation of the group numbers with the business services and technical services profits that I've just talked through, combining with GBP 26.9 million of corporate costs to make up the GBP 108.8 million of group profit and the 4.1% margin. Corporate costs are a little higher in the period as a result of inflation and the national insurance increase. My last 2 slides cover cash flow and the balance sheet, and we generated a free cash inflow of GBP 51.9 million in the half, with the key driver being the operating profit of GBP 108.8 million. Other items was a GBP 25.6 million outflow of cash and was largely made up of acquisition-related costs as well as the costs of delivering our margin enhancement initiatives. Next, we have a cash outflow from working capital of GBP 24.4 million, driven by 3 key factors: our seasonal cash outflow in the first half, where we pay suppliers for the high volume of project work that's completed at the end of the previous year, the growth in the projects business, which consumes more working capital than FM and longer payment terms on a number of new wins, particularly in the retail sector. Offsetting these outflows, we've made further process improvements and rationalized our supply base. CapEx, leases, interest and tax was a GBP 61.1 million cash outflow, GBP 13.8 million higher than the first half of last year. The increase was driven by GBP 8.7 million of CapEx, largely for new contract mobilizations and GBP 3.7 million of additional interest as a result of our capital deployment actions. These capital deployment actions account for GBP 305.1 million of cash outflow, including GBP 41 million of dividends and GBP 228 million of cash consideration for Marlowe. Finally, at the bottom of the page, we see the overall increase in net debt of GBP 272.4 million. This increase results in a closing net debt of GBP 471 million and an average daily net debt of GBP 332 million, with the average leverage ratio of 1x remaining at the lower end of our targeted range. Debtor days are consistent with FY '25 and creditor days have improved as we rationalize our supply base and continue to improve our processes. ROIC reduced by -- ROIC reduced to 16.3% as a result of the Marlowe acquisition, where we've added GBP 380 million of invested capital, but only 2 months of operating profit. And finally, net assets increased to GBP 544 million after adding the net profit for the year and the shares issued for Marlowe, offset by dividends, share buybacks and market purchases for employee share schemes. So in summary, we've made a good start to FY '26. Revenue growth has been better than our high single-digit guidance, and we've maintained our margins despite the investments we've made and the headwinds from inflation, national insurance and the completion of the search work. We made a positive step forward in EPS despite higher interest costs. We generated good free cash flow and ROIC has fallen below 20%, but only temporarily. As we look ahead to the second half of the year, we expect revenue growth to continue in double digits. Margins will be higher than in half 1, and we remain confident of achieving our full year profit target of at least GBP 260 million. Finance costs will be higher as our leverage increases due to the acquisitions and the share buybacks and EPS will grow despite these higher finance costs and the shares issued to acquire Marlowe. Completing the FY '26 guidance, we expect free cash flow to be more than GBP 120 million this year and ROIC will increase back towards our targeted 20%. And on that note, I'll hand back to Phil. Phillip Bentley: Thank you, Simon. They seem a decent set of results to me. But I think more importantly now is to talk about where we are on our strategic journey since we pivoted our business model from service-led facilities management to project-led facilities transformation and then now to regulation-led facilities compliance. Just as a reminder, our strategic plan was focused on growth, growth over 3 pillars. And the foundation of our strategy pillar 1 was centered on growth from the core. Key account growth and scope increases, delivering condition-based maintenance, risk-based security, demand-led hygiene for our customers. And this is a heartland of facilities management. Pillar 2 of our growth strategy was centered on our projects capability and infill acquisitions, transforming the built environment, better workplaces, greater energy efficiency, higher security. This is a heartland of facilities transformation. And our third pillar of growth was M&A, bringing in new capabilities to meet our customers' evolving needs in sustainability, environmental compliance and fire and security. This was our move into facilities compliance with the acquisition of Marlowe. And taken together, our strategy set out to build an unrivaled set of integrated capabilities to deliver the future of high-performing places. Now any successful strategy needs to be underpinned by attractive macro trends and [ Mitie's ] from decarbonization, higher security, repurposing the grid, accelerating data center investments to increase public sector spending in defense, in justice, in health care and immigration. We're fishing where the fish are. And since we launched our new strategy, 2 further macro trends have emerged. Number 9 here, building compliance regulations are raising compliance requirements. Number 10, investments in water infrastructure will top GBP 100 billion over the next 5 years. These are themes that I will return to shortly. In terms of our performance, as Simon touched on, H1 revenue was good. New wins lapping a strong H1 FY '25 plus renewals grew to a record GBP 3.8 billion total contract value in the period. And more importantly, as a leading indicator of growing momentum, our order book grew 31% year-on-year to GBP 16.5 billion TCV. Now we split the order book by time buckets this time. And on the lower left, you can see that revenue expected to be produced from the order book over the next 3 years has grown by 32% to GBP 8.6 billion of TCF since this time last year. And on the right, you'll see how our pipeline has not only grown in size from GBP 17.6 billion TCV 2 years ago to GBP 33 billion TCV today, but it's also grown in quality. Let me explain that. The pipeline funnels opportunities from prospecting at the very early stages, such as identifying future bids on public sector frameworks through to a pre-qualification questionnaire as a bit of a mouthful, and becoming qualified to bid. And then on to a bid submission itself with the final stage of BAFO, best and final offer before a decision is finally made by the client. And as you can see, the quality of our pipeline has been growing. And at this time, at the moment, we've got over GBP 2 billion of TCV sitting in BAFO. This is another leading indicator of our growing momentum, particularly given our improving bid win rates. And it's this growing momentum anchored in the 4 strategic imperatives shown here, which gives us confidence that our business model will not only deliver our FY '25 to FY '27 ambitions, but will also sustain growth beyond this current 3-year plan. Sustaining growth, firstly, by capturing more of our clients' facilities management share of wallet by upgrading, cross-training our strategic client directors, SCDs, we've identified over GBP 1 billion of additional client spend that we could deliver. Secondly, sustaining growth by turbocharging projects, building a GBP 2 billion-plus division over the next few years and sustaining growth thirdly, in compliance and water. Following the Marlowe acquisition, we now have a GBP 550 million Fire & Security Environmental Services compliance business, and we aim to grow this to GBP 1 billion in the coming years. And finally, as our AI strategy drives efficiencies and costs out, we see margins expanding beyond FY '27. Now a little bit of detail on each of these imperatives, starting with SCD, strategic client directors and client share of wallet. By deepening our relationships within our strategic accounts, we know we can deliver more value to our clients. Integrated facilities management, IFM is only currently delivered to 40% of our top 50 contracts just 10 contracts where we've completed a share of wallet deep dive with Kevin, our Sales Director, we've identified a further GBP 500 million of work in security and hygiene, engineering and projects and in compliance currently delivered to our clients by third parties. Winning here requires more senior business builders with new propositions, a wider understanding of Mitie's capabilities and how AI and data can drive insights and upsells with stretch incentivization. And our best SCD of our largest strategic client is now leading this new team. And we know how to do it when done well. Take 2 examples here on the right. One is a retailer has gone from annual revenues of GBP 16 million at the start to an estimated GBP 55 million this year. We've added more facilities management services, increased projects. roof-mounted solar panels, for example, is a big push for this client. And that's before we talk to them about refrigeration services where we announced an infill acquisition today or about F-Gas compliance and water services for Marlowe. And second is a transport customer with annual revenues of GBP 25 million in FY '14. And today, that number is GBP 119 million, and we've added more sites and more services. And turning to the blue triangle in the upper right there, we always expected growth from the core of facilities management to be the biggest contributor of our 3-year plan. Growth from the core for me is probably the most important thing that we think about day-to-day. And we've outperformed our own expectations here and have already delivered over 90% of our GBP 600 million incremental growth target at the halfway stage of our strategy. Our Block 2 growth imperative is turbocharging projects in facilities transformation. And by any measure here, our performance has been outstanding with strong growth from the capabilities we've added in fire & security, power and grid and building engineering. An order book of GBP 2.9 billion today, up 53% year-on-year, a pipeline of GBP 6.9 billion, up 130% year-on-year and an average project size now at GBP 270,000 per job, up 80% year-on-year. And turning again to the Maroon triangle this time on the upper right. Again, we've outperformed our own expectations here and have just about delivered all of the GBP 200 million incremental growth that we set for FY '27 at the halfway stage in our strategy. Our final growth imperative is in the GBP 7.6 billion facilities compliance market, where the acquisition of Marlowe positions us as the leader -- market leader, providing us with a platform to accelerate growth. Adding Marlowe's capabilities to Mitie's existing Fire & Security business created a differentiated total fire offer with a full suite of active fire and passive fire solutions as well as creating the market-leading provider in security systems. But what really excites us about Marlowe on the right-hand side is their capabilities to build a total managed water solution. And as some of you will have already heard me say, water is the new energy. We buy it, we meter it, we recycle it and we report the usage of it. We've already signed up 2 existing Mitie clients to take these new water services literally in the last couple of months. But the really big prize for me is AMP8 Asset Management period 8, the latest set of regulations from Ofwat that will see GBP 104 billion invested in water efficiency, resilience and sustainability between 2025 and 2030. This is a material opportunity for Marlowe Environmental to deliver end-to-end solutions across the water services value chain from sourcing and metering through to transport, wastewater management and compliance and delivered at national scale. Simply put, our aim is to be the provider of choice for our clients as they navigate increasingly complex regulatory requirements and sustainability goals built around water. So take the public sector, for example, previously, Marlowe did not have pre-qual approval in public sector bids. But Mitie is a cabinet office approved strategic supplier, and we're already now precleared to participate in some material upcoming public sector bids. And on the right upper triangle, again, we set a target there of GBP 400 million of revenue from M&A step out. The step-out being facilities compliance. It's early days after less than 2 months of owning Marlowe business, but revenues will now grow rapidly as Marlowe scales up to approach the GBP 400 million target. Now whilst we are on the subject of Marlowe, it would be remiss of me not to take a moment to update you on our progress with the acquisition and the integration. The business is trading in line with our expectations and the synergy work streams are moving ahead. We're on track to deliver at least GBP 15 million of cost synergies in FY '27, and we'll exit FY '27 having fully integrated Marlowe and having captured the full GBP 30 million of synergies to be delivered in FY '28. We're removing duplicate corporate, administrative and other support functions through automation. We've reviewed procurement opportunities and moving the Marlowe supply chain to Mitie's preferred supply list and 3 sites in Marlowe's property portfolio have already been closed. We're exploring major efficiencies from automating field force scheduling and delivering route density savings. We've already migrated 1,500 of Marlowe's Environmental Services colleagues onto Mitie's HR platforms, putting in controls around pay rises and bonuses with the remaining fire and security colleagues to follow before the fiscal year-end. And we're migrating Marlowe's IT applications on to Mitie's Azure platform to raise cyber resiliency. So in short, we're making good progress. And of course, in FY '27 and beyond, Marlowe will be a positive to the group's total overall margin. A final contributor to our 5% margin target. And the last of our 4 imperatives is the execution of our AI strategy, reimagining and automating workforce and workflow management to drive better service efficiencies, reduce back-office costs across the business and drive margin accretion. And I've tried to capture our thinking in the next 2 slides, going back to the MITIEverse of the center there, the Mitie Command Center, which we introduced at our Capital Markets event in October '23. We haven't forgotten about it, creating the single pane of glass of the built environment. And our AI strategy has 4 components. Upper left, all our core systems, which are already cloud-based have been AI-enabled or in the case of Workplace+ and SAP will shortly be AI-enabled. Lower left, all of our major customer apps, Merlin for risk and for cleaning, ARIA, ESME and Net Zero are all interconnected via our HARK connected workplace to the IoT platform and they're producing real-time data. And the upper right, the output from our core systems and apps feeds our leading enterprise insight platform, Mozaic360, developed on Microsoft Fabric and integrating all the operational data across all our intelligent solutions. Mozaic360 provides comprehensive operational and strategic insights into the daily operations of the built environment of our clients. And finally, bottom right, as it were, our task mining from SkanAI has led to a growing number of AI bots or agents, enabling smarter, faster, more consistent ways of delivering tasks. But the real game changer since we launched our 3-year plan is the power of agentic AI and agentic mesh using the Microsoft Copilot Studio platform to connect and orchestrate our AI agents to deliver a single pane of glass in the MITIEverse Command Center. In Technical Services, we're orchestrating those AI agents which deal with our clients, those that execute work orders, those that interact with the supply chain, develop life cycle upgrades, close out jobs in the CAFM. When completed, this agentic mesh will provide that single pane of glass for workflow management. And in the MITIEverse Command Center and Business Services, a single pane of glass for workforce management will mesh all our recruiting, vetting, onboarding, training, deploying payroll AI agents with outputs from the supervisor layer highlighting productivity numbers, best-in-class performance. And the final output from the MITIEverse Command Center will be a large language model, answering questions such as how does my building running costs compare to others? Or what's the optimum way of reducing costs by 10%. These are the questions that today, although we have much of the data, we simply didn't have the processing power to answer. But with the MITIEverse digital twin of the built environment, we'll be able to provide better service, greater insights to our clients and also at a lower cost. So my expectation is that we'll have completed our agentic mesh by summer '26. So if you need a bit of a line down after that, let me wrap up. We've had a strong first half in FY '26 with double-digit revenue growth and good profit growth. Contract wins and renewals are at record levels as is our order book and bidding pipeline. Cash generation is good, and it shows we can undertake value-creating acquisitions and deliver shareholder value from buybacks. It's not either/or at Mitie. FY '26 profit will be at least GBP 260 million, and the Marlowe acquisition is progressing well. AI efficiencies will underpin our 5% margin aspiration. And with 18 months to go, we're on track to not only deliver our stretching FY '27 targets, but with our growing momentum, we're confident our strategy will carry us into FY '28. So with that, let me now turn over to Q&A. Thank you. We need some mics. We've got [ Demolo. We've got Marie ]. Alex Smith: Alex Smith from Berenberg. Just 2 quick questions for me. First one on the projects division, the turbocharging. I guess the sizes of the projects have grown. Can you highlight any key areas of focus? And are you happy with the risk profile of those projects? And then number two -- sorry, just on the growth in the pipeline. Immigration and Justice seems to keep growing there. I guess, kind of Prism renewals and your entrance into that division. If you could provide some color on that, that would be great. Phillip Bentley: So what I'll do is ask Mark Caskey, who runs our projects business. And I think -- I mean, this year, we should end close to GBP 1.5 billion. We've set a target of GBP 2 billion over the next couple of years. That's ahead of where we indicated before. And Mark, why don't you just give a bit of color. We had a Board meeting here earlier in the week, signing up some quite big projects in -- big opportunities in projects. So why don't you talk a little bit about that. Mark Caskey: Happy to, Phil. So thank you. Where do we see the biggest opportunities going? If you go back to the slide, Phil talked about -- sorry, a pipeline greater than GBP 7 billion, which is more than double up from where we were this time last year. And the growth is really coming from 3 areas. Firstly, being data centers. Secondly, being in the power and grid space, you think of everything around buildings need connections to the power systems, you've got battery storage and renewable projects that are underway. And then lastly, there's a significant amount of momentum in the marketplace at the moment around retrofitting the built environment. And if you think about our -- a lot of our project work sits on top of our FM clients and we dedicate project managers to those FM clients, that's where we're seeing the natural uptake. The risk profile, we're so -- I mean, very rigorous around from a contracting perspective, we've invested in our commercial function as well. So we're really sort of like on the ball when it comes to margin profiles. A lot of our projects are short cycles. So even if we are doing larger projects, they're often broken down into numerous phases so we can control the price risk, the delivery risk and the scheduling to manage against ultimately our client expectations. So... Simon Kirkpatrick: Just one -- thanks, Mark. Just one brief build on that, picking up on Mark's point about the short project life cycles. Phil picked it up on his slide, but you see on the turbocharging project side that the average size of our projects is GBP 270,000. So from a risk perspective, the majority of them are relatively small. They turn over relatively quickly. And importantly, 80% of them are with our existing customers. So we know the customers. We've got a good relationship. We can, therefore, negotiate decent commercial terms, and we know the estates that we're working on. Phillip Bentley: And on the prison immigration, I thought I might bring Jason in and stand up, Jason, if you look at the camera that way because Mark, you were sort of off -- you're off screen there. So next time, I ask you back again, come to the front here. But Jason runs our Business Services division, as you know, our largest. And as Simon said, we've moved the immigration and justice because there's a security element of immigration and justice, absolutely in our case. And we're already the largest provider of security services in the U.K., and we're building a strong position in both immigration and in justice. Jason Towse: Yes. Thanks, Phil. Look, the increased pipeline has been driven by, first of all, the announcements of the significant investments being made into the prison infrastructure, driven by the aging infrastructure currently in place and new prison places required. I think we have acquired leading capabilities in Mitie over the last 2, 3 years, and that's resulted in us being successful with Millsike, the U.K.'s first all-electric prison, where we successfully mobilized that prison and in the process of ramping up to full capacity. I was there yesterday and incredibly impressed by the standards that the Mitie people are delivering. But also that puts us in a good position, gives us a good foundation for future growth as more new prisons are getting built and more prison places coming available. And from an immigration point of view, we've all seen the increase in immigration centers. We have -- we are currently mobilizing our latest immigration center at Campsfield, and there's more new immigration centers being opened. And the third point is around the investments being made in the prison and probation estate, which is a significantly aging infrastructure and a current live contract in flight to upgrade all of those services. So 3 real key areas of interest for us with good capability and good opportunity for growth. Phillip Bentley: I mean just to take a little bit more on that, as you saw on the Slide 17, I mean, the pipeline, as you touched on, I've got a great question from Alex, GBP 8 billion. I think it's fair to say we've got a couple of quite big ones in the BAFO stage at the moment. We won't say any more at this point. We don't want to jinx it. But there are some big jobs coming down the track. Simon Kirkpatrick: And we should also say that whilst there is some concentration in immigration and Justice and Defense, actually, that growth in the pipeline that we've seen come through is spread across a number of sectors. So yes, immigration and defense, but also health care, transport and aviation, we've also seen some fairly chunky increases. Phillip Bentley: Sam? Samuel Dindol: Samuel from Stifel. Two questions from me, please. Firstly, on the strategic client directors, can you just remind us how they're incentivized and how you're sort of educating them about the Marlowe proposition? And then secondly, on facilities compliance, having covered Marlowe AMP8 and the water opportunity there is not something they particularly touched on. So I'd be interested to sort of get a sense of the opportunity you see now they're part of the bigger group and sort of what is going to be the typical AMP8 contracts you're sort of going to look to win? Phillip Bentley: Yes. Why don't -- I mean, Mark, I might get you back to the front here with a mic if you come to the front once I set you up on the SCDs, I'll answer the facilities compliance point first because the SCDs, we used to call them SAMs, strategic account managers, but we want them to be much more strategic in business building. And I think it's fair to say we've had people who are good operationally, but not necessarily people who are good client on the client really understanding the client's breadth of the share of wallet. And that's where Kevin Tyrrell, our Sales Director, has been working hard on growing that out. But in terms of incentives, I mean, we've -- talk about some of the people we've got and then we know how they're incentivized. It's going to be on the growth of the business of the client and specific to their account in terms of profit, revenue, Net Promoter Score and employee engagement. But I'll just say a little bit about that. Mark Caskey: In terms of our SCDs, we've identified our top 50 accounts. And part of their role and what we're supporting them with is bringing the best of everything of Mitie to the benefit of those clients, whether it's in hard services and engineering or soft services and/or projects. And what we've recognized as well is we're investing in our sales community or business development community to give them, let's say, the access to the resources to help them support our clients in terms of some of those conversations. Another area we're investing is our consulting capability. And again, whether it's workplace, facilities management, energy and sustainability consultants, we've got over 300 of them in the business, and we're allocating them to the SCDs to be able to have a different order of conversation with our clients to really bring the full value of Mitie to solving their business challenges and improving the value they get from their property portfolio. And as Phil said, on the incentives, we reward them for growth. We reward them for the full P&L stack that sits underneath their client responsibility. Phillip Bentley: And on the pipeline, I could show you that, Sam, but you might go to see it. This is our top 30 opportunities from the Marlowe opportunity. And the first one, I'm not going to say it is, is GBP 47 million, the largest. The point I would make as well is that we don't have not yet scrubbed the pipeline and the order book for Marlowe. So there is nothing in there at the moment in the numbers. We'd expect to have done so when we've got it all in the CRM system, Kevin, and we've actually qualified these opportunities. But -- and I deliberately said the point I made that Marlowe were not public sector bidders. They ended up doing some work in hospitals, but that's because CBRE gave them the job and it was public sector, but they hadn't contracted directly with public sector. We opened up that completely now. And there's some big bids already in play where we've made bids. We're waiting for answers, and we'd hope to announce those quite soon. But the opportunity is probably bigger than I expected. And once we've scrubbed it -- and actually, this is where we need to pivot Marlowe away from -- I've euphemistically used this phrase before, fire extinguishers in Scout huts and get into proper B2B. That's where the price -- that's why we bought the business. And we're quite excited about what it could look like. Tom, yes. Tom Callan: Tom Callan from Investec. I've also got 2. Just one on that GBP 2 billion pipeline that's BAFO. Can you just remind us in terms of the conversion -- the typical conversion of pipeline to order book and also typical contract length? Just trying to get a sense as what that might be... Phillip Bentley: Kev, I might bring you in on that as well, the back there. I know you like hiding in the back. But our win rate on -- there's 2 types of wins. There's wins around -- there's retention and we give you that number, and it's running at 80%. It's quite volatile in terms of if you lost a big contract in a short period of time. And then we've got wins on cold calls and wins on projects as well and the rates of those. But Kevin has been our Sales Director now for about 18 months, and we've got a lot more analysis now. Is it 18 months or 12 months' I can't remember? 18 months. Kevin Tyrrell: Yes. So conversion rate, we look at 2 different numbers. One of them is conversion rate of pipeline. The other one is conversion rate of tender win rate. So our tender win rate is things which come to market, we're actively bidding on. And our win rates have gone up into the low to mid-60s in the past 12 months. Our pipeline conversion rate is sitting about 27%. So it depends whether that pipeline converts into a tender, we bid on the tender, win rates are going up in that area. Phillip Bentley: And I think that's -- it's a double-edged sword for us because we try and take all our private sector clients away from a tender process in what we would call an off-market deal. But that's exactly what our clients do to us. I mean, we went for BT, but it stayed with the incumbent. And the number of -- in tech services, a number of clients that were in the pipeline never came to market. because they rolled it with the incumbent. And it's why -- but in public sector, you can't do that. You can't just do a quiet deal. So it's why there's more volatility in public sector because that is a straight shoot out on a tender process. So that's why not all of that pipeline ever comes to us. But that -- and that's why there's a predominance in the pipeline of government. We know that's definitely going to come out. We might hope NatWest comes out next year, which we do, but we don't know if it'll ever see the light of day. Okay. There's another one, James. Are you sleeping, James? Didn't your wife have another baby? James Beard: Still on the first one. Phillip Bentley: All right... James Beard: But not sleeping. James Beard at Deutsche Numis. I've got 3 questions, please. Firstly, going back to the projects business and the projected growth to GBP 2 billion revenues there. You've -- how much of that is driven by growth in -- expected growth in average ticket value versus just growth in the number of tickets that you're generating in that business going forward? Second question is on Marlowe. Can you just talk through what is happening with the existing customer base there, whether you are retaining or seeing the great of any sort of degree of retrenchment within that existing customer base? And then thirdly, on the telecoms business, noted the GBP 10 million profit swing in the first half. What is your expectation on the second half for that? Phillip Bentley: Okay. I'm just in the mid of speeding it up because otherwise, we'll be here for a while. But I mean, the projects, it's a bit of both. We sell more jobs, but there's some very big jobs out there. If you look at Longcross was a GBP 90 million job at the data center, and that was for only 1/3 of the full potential there. So you get some sense of the size of the scale. And Longcross in when fully built out is 90 megs what's Harlow, that's a lot bigger. Mark Caskey: It's 37 megs, but because they're densifying significantly, the amount of MEP you're putting into a data center now is increasing the average project size. Phillip Bentley: So there's some big stuff there. When you can think about the battery energy storage deal that we announced, Staythorpe, that's GBP 70 million. And there's a lot -- there's a big pipeline in battery energy storage as well. And what was the statistic? We -- our company that we bought ironically out of administration, G2E has done what, 25% of the U.K.'s battery. Mark Caskey: So the battery storage capability in the U.K. is about 4.5 gigawatts at the moment. And G2 Energy, which is the company that we acquired just over 2 years ago, have developed over 25% of that capacity in the U.K. And so they're a really powerful brand when it comes to investors and developers into energy storage and battery storage solutions. Phillip Bentley: Okay. Marlowe, look, we -- it happens every time. Every time we buy a business, if they do any work with a couple of our sworn enemies, they cancel it straight away and Marlowe had a bit of that, but it's not material. We've got it -- and for every bit of business that a competitor has taken away from us, we have work that we were doing with third parties that we can now give Marlowe. So you're going to -- you're not going to see a big change in that number for now. And then on Telco... Simon Kirkpatrick: Yes, just briefly on Telco. So you recall that we already initiated our turnaround plan on Telco, which was starting to have a positive effect in the second half of last year. And therefore, we won't see a big delta half-on-half this year versus last year in the second half. Phillip Bentley: It's growth that we need one of the reasons why we pulled back, we shared work that we were losing money on essentially. And then what we want to do is try and rebuild from a profitable level, but we've taken the revenue down by 50% -- 40%. Chris? Christopher Bamberry: Chris Bamberry, Peel Hunt. A couple of questions. You've also had a very successful period in terms of contract awards. How much would you put down that to what you've been doing over the past few years and perhaps what's been changing in terms of customer behavior? And secondly, on Slide 20, you identified GBP 0.5 billion of opportunities with 10 contracts. Just trying to get an idea of kind of a scale of uplift there, what was the revenues on those contracts? Phillip Bentley: Do you have Kevin, on the 10 -- I don't know if I have that we have to come back to you if you haven't got it. The 10 -- we don't have the revenue -- not on the top of my head, we'll come back to you on that. It's a fair question as a percentage of uplift. But just -- I mean, a quick way of doing it a different way is our top 25 clients generate 25% of our revenue and our top 50 generate 50%. Simon Kirkpatrick: It's a bit more than that actually, yes. So top 25 are closer to 40% actually. And the top 50 are just over 50%. So it's quite a concentration in that top 25. So given that we're taking the 10 largest there, we'll flesh it out. Phillip Bentley: Yes, we'll flesh that one out. I forgot the second question. What was it? What was the second question? So it's about -- the question was around winning contracts. It's quite volatile. I mean, it surprises me in some ways that it keeps going up because it is dependent on the size of some of the deals that are out there and it drives a weighted average. A big -- a government contract, I can think of 2 government contracts that are GBP 2 billion together, okay, that were at BAFO. So -- and that can be -- and because it's -- our public sector win rate, Kevin, will probably be a little bit lower than the number you gave. Kevin Tyrrell: So I guess there's a couple of things for me. I think building capability over the past few years, and we've seen all the capability we've built in our core FM service offering around hygiene, security and engineering, we continue to build. Continue to build capability around our project capability as well, strengthening of relationships on the back of really strong NPS. So strong NPS is the foundation for retention, which gives us the ability to continue to grow. So I think you apply good NPS, improving relationships with our clients, which we'll continue to do through the SCD program and building internal capability, the things which are enabling us to win. Phillip Bentley: That was a much better answer than mine, actually. But it actually reminds me because we've never had a group Head of Sales. Now you may say that's rather shameful in our fault. But we used to leave each business unit running its own stuff, doing its own stuff. And in the end, we decided that wasn't a good idea. So 18 months ago, we brought them all under Kevin. And you've replaced quite a few people now. And we do it through a standard way of bidding, standard reviews, all of the data is in this CRM system. And we've just become a lot more methodical than we used to be. And that hasn't -- the value of that hasn't finished playing out yet. We've still got people literally just having joined us less than 6 months ago who are with a top track record. And one thing I'd say, we've not had any difficulty attracting talent into Mitie. Any more? Excellent. Thank you for your support, as always, and we'll see you at the drinks and not -- what is it? The 20 -- 20 something. Next week. If you're not invited, go and see Kate. Thanks, everyone.
Alan Dickson: Good morning, ladies and gentlemen, and welcome to Reunert's results presentation for the year that ended 30 September 2025. I'm Alan Dickson, the Group Chief Executive; and together with Mark Kathan, our Group Chief Financial Officer, will be presenting our results today. This is a prerecorded webcast with a live Q&A session immediately after the webcast. 2025 was a challenging year for the group as tough macroeconomic conditions and global volatility were evident throughout the year. This was specifically true in the South African environment, where as we guided in our half year prospect statement, the macroeconomic conditions remain challenging. Pleasingly, Reunert's strategy of increasing our non-South African revenues provided good results and largely offset the challenging South African environment that we faced. In South Africa, despite there being solid progress made towards improving several of the country's key structural impediments to accelerate economic growth, the real impact on the ground is yet to be felt. The key drivers of Reunert's growth, which are reflected in the macroeconomic indicators of GDP and business confidence for our ICT segment, and gross domestic fixed investment, or GDFI, for the Electrical Engineering segment, all tracked negatively through this year. South Africa's infrastructure investment specifically decreased year-on-year and fell well below both government commitments and expectations. We do, however, believe that this decrease will be temporary, but in this financial year, it fell to the extent that it negatively impacted both the Electrical Engineering segment and the overall group's financial results. Conversely, our non-South African markets have much better macroeconomic dynamics and their general growth rates remain positive. Within this operating environment, the group's businesses performed well, specifically in the second half of the year, where we delivered on the commitments that we made to shareholders at the half year results period and produced good growth in profit and built positive momentum for 2026. Although the full year headline earnings per share were down by 5%, the second half delivered a strong performance with HEPS increasing by a pleasing 6% over what was already a good second half performance in the prior year. Importantly, despite the challenging conditions, the cash flow generation of the group was strong. The group converted profit for the year to free cash flow at 128%, which was 8% better than last year and generated cash of nearly ZAR 1.2 billion, which resulted in our net cash position increasing by ZAR 207 million to ZAR 743 million by the end of the year. In addition to the financial performance, good strategic progress was made across the group, as we improved access to our key international markets and took decisive action to optimize the group's portfolio. Internationally, in total, the group secured just under ZAR 5 billion or 35% of its revenue from non-South African sales this year. The defense cluster made significant progress in entrenching their long-term market participation in the key growth markets of Europe and the Middle East. While in the Electrical Engineering segment, over 40% of the segment's revenue now comes from outside of South Africa. The group's portfolio was strengthened through the efficient sale of Blue Nova Energy, and the mergers of Etion Create and Nanoteq in the secure communications cluster in our defense business and Skywire and ECN in the business communications cluster in ICT, which were all successfully completed with the latter coming into effect from the 1st of October 2025. These mergers bolster the financial capacity of these businesses. They create quantifiable synergistic benefits and they position the merged businesses for increased resilience and accelerated growth. Shareholder value was created in the year as a strong second half performance and the good cash flow generation enabled the final dividend to be increased by 6% to ZAR 2.93 per share, resulting in a total dividend for the year increasing by 5% to ZAR 3.83 per share. Although the group's return on capital employed decreased to just over 17% on the back of the slightly lower earnings this year, it pleasingly remains well in line with the steady increasing trend that we've been delivering over the past 4 years. And finally, the 3-year CAGR in total shareholder return remained at a healthy 14% per annum despite the challenging environment. So in summary, the good strategic progress, the group's positive performance in the second half, the strong cash flows have generated meaningful momentum, and we believe this establishes the base for the group's growth trajectory into the new financial year. I'll now hand over to Mark, who will take us through the details of the financial year's performance. K. Kathan: Thanks, Alan. Good morning to everyone, and thank you for joining us on the webcast today. I truly appreciate the opportunity to present our financial performance for the year ended 30 September 2025. Before I dive into the numbers, let me highlight some of the key drivers of the macroeconomic environment that impacted the group and its operations through the past financial year. On a positive note, we have experienced an improvement in the ports and consistent electricity supply. These factors contributed to a 1% growth in GDP, albeit sluggish. The consumer price index is into a lower range between 2.7% and 3.8%. The repo rate dropped by 1% over the past 12 months. Both the rand and the Zambian Kwacha strengthened against the U.S. dollar in the last quarter of the year. On the commodity front, copper and aluminum prices remained high throughout the period. Against this backdrop of low growth, low inflation, lower interest rates and a currency strengthening, I would like to take you through the group set of results that hold testimony to our resilience. The results presented in these slides are summarized extracts from the 2025 group audited annual financial statements, which are available in full from Reunert's website under the Investor Center tab. The group's auditors, KPMG, have issued an unmodified audit opinion on these financial statements. Consolidated statement of profit and loss. This slide represents total operations. The slides thereafter will only focus on continuing operations. And the comparatives for 2024 have been represented to accommodate the discontinued operation. The performance from total operations shows a decline in the headline earnings per share of 5%, which is similar to continuing operations. The difference between continuing and total operations relates to the disposal of the discontinued operation, Blue Nova Energy, which we highlighted in the first half of the year. Management and the corporate finance team efficiently concluded the disposal on the 15th of September of 2025. The total loss incurred, including the trading loss, impairments and the loss of disposal, was ZAR 142 million. The impact of the discontinued operation was ZAR 0.64 per share on basic earnings and ZAR 0.19 per share on headline earnings. We have excluded the impact of this disposal from the continuing operations performance. Revenue from continuing operations has declined for the reporting year by 2%. The decline in revenue can largely be attributed to weak transmission infrastructure spend by state-owned entities that impacted the Electrical Engineering segment's revenue of ZAR 7.5 billion, which is 3% lower than the 2024 year. On the positive side, circuit breaker revenue benefited from exports into the U.S.A. The ICT segment's revenue of ZAR 3.9 billion was resilient given the low growth environment, and this was flat year-on-year, with operating profit down by 9% to ZAR 644 million. The 7% lower Applied Electronics revenue of ZAR 2.8 billion was primarily due to a stronger rand and lower activity in the South African market. This translated into a 21% increase in operating profit to ZAR 500 million, up from ZAR 414 million in 2024. Approximately 35% of the group's revenue now originates from outside South Africa and is spread across 5 continents. The contribution of international revenues to the group's revenue has grown since 2021. The 8% decline in profit is attributable to the drop in financial performance in the Electrical Engineering and ICT segments. This was partially offset by a strong performance in Applied Electronics' defense cluster. As highlighted in the interim results, the nonrecurring COVID-19 business interruption insurance claim receipt positively impacted the prior year's results. Operating expenses were well managed. As a result, the operating margin that was delivered was 11%. Basic and headline earnings per share for the year declined by 5%. However, when we reflect on the first half's HEPS performance, which declined by 20%, then the second half's financial performance demonstrated a clear momentum by delivering a 6% growth on 2024's second half. When you adjust HEPS by the nonrecurring COVID-19 insurance claim receipt in the year-on-year headline earnings per share performance would be more or less flat. The group continues to maintain a strong balance sheet and remains in a net cash position, which has improved from ZAR 536 million last year to ZAR 743 million. The decline in long-term borrowings arose from the net settlement of external loans of almost ZAR 300 million. The headroom of unutilized debt facilities amounts to ZAR 1.8 billion. The put option liability relates to the issuance of a put in favor of a noncontrolling interest resulting from the merger of +OneX and the IQbusiness. Furthermore, the balance sheet is strengthened when reflecting on the net asset value per share, which has improved by 1% to almost ZAR 45. The group generated more than ZAR 1.7 billion in cash from operations. Working capital remains well controlled. However, the ZAR 103 million outflow relates to the high level of revenue in the last 2 months of the financial year. Included in the reduced tax paid of ZAR 284 million is a size refund of ZAR 62 million relating to the Quince fraud transactions identified in 2020. The excellent free cash flow of almost ZAR 1.2 billion allows the company to pay a healthy final dividend of ZAR 293 per share. The total dividend for the year represents a cover of 1.6x and a total yield of about 6.6% based on a ZAR 48 share price. The group has been extremely disciplined in respect of capital spend and allocation. During the year, the group spent ZAR 225 million on capital expenditure. Of this, ZAR 130 million was for expansion projects, while ZAR 95 million related to sustenance capital. The capital spend for the year was lower than the depreciation charge. The expansionary spend was directed towards growth projects for international markets, expansion of the last mile broadband network and technological advancements. With our strong balance sheet, our significant unutilized banking facilities, our continued positive cash generation, the group remains well positioned to continue executing its strategy and generating positive cash returns for our shareholders. In conclusion, I would like to thank my finance team throughout the Reunert Group for concluding these results quite efficiently throughout this period. With that, I will hand back to Alan to take us through the segmental review, the group strategy and the group's prospects for 2026. Alan Dickson: Thanks, Mark. I'll now take you through the segmental review, which will give you an understanding of what's taken place in this year so far as well as looking forward. The Electrical Engineering segment had a challenging year as a result of 3 discrete factors: Firstly, there was negative growth in South Africa's GDFI. Despite government's commitment to drive local infrastructure investment and credible progress being made on investment into the transmission grid, rail liberalization and port infrastructure, the extent of the actual investment on the ground fell this year and negatively impacted both the South African circuit breaker and power cables volumes. Secondly, there were ForEx losses and a product mix change in Zambia. In June of this year, Zambia's currency reversed the long-term weakening trend against the U.S. dollar and rapidly strengthened, which resulted in margin degradation and foreign exchange losses at the business. In addition, the drought in Zambia last year resulted in reduced energy generation for the Zambian power utilities ZESCO. This negatively impacted ZESCO's cash flow and reduced the volumes our Zambian power cable business sold to them. Pleasingly, these volumes were replaced by exported copper rod and cable, but this change in product mix negatively impacted margins. And then finally, the third impact was the U.S.A. import tariffs on South Africa. The implementation of a 10% import tariff on South African product imported into the U.S.A. in April, which was further escalated to 30% in August resulted in an unplanned increase in cost for the circuit breaker business. The business engaged with its customer base and successfully retained the market. However, some costs could not be fully recovered by the circuit breaker business and some margin degradation occurred during this period. These 3 key challenges were somewhat offset by a solid non-South African performance. Power cable volumes remained stable, and the circuit breaker business had a strong export performance. Although there was some margin degradation, as I discussed before, into the U.S.A. market, significant steps were taken by the business and were implemented to offset the additional tariff costs and to retain the market. And these 2 actions resulted in volumes increasing year-on-year by 25%. Going forward, the U.S.A. remains a significant market for our circuit breaker business. The actions taken have ensured that the business' market share has been retained and product volumes into the U.S.A. are expected to increase. The extent of the tariff costs that we faced in 2025 are unlikely to be experienced in future financial years. Looking forward for this segment, the segment's non-South African business remains positioned for continued growth. The circuit breaker volumes are expected to retain the positive growth trajectory they've had over the last number of years and new product releases into the U.S. market will support this continued growth. The non-South African power cable volumes should increase as ZESCO now has improved cash flow and the investment into mining infrastructure in Central and Southern Africa remains healthy. In South Africa, however, the market conditions are likely to remain somewhat constrained until overall, our infrastructure spending improves. Whilst orders for the transmission development plan, or TDP, have already been received, the volumes remain quite a bit lower than desired. Pleasingly, the Eskom framework agreements for the TDP have been awarded, which will secure volumes for the power cable business as these projects accelerate. In the ICT segment, the South African market for the group's businesses remained challenging as low GDP and weak business confidence, extended sales cycles and reduced market activity. Pleasingly, the segment's performance was achieved as collectively 3 of the 4 clusters delivered a year-on-year growth in operating profit, which demonstrated good resilience and strategic execution. The business communications cluster performed well with a pleasing growth in operating profit. Fixed line minutes remained stable throughout the year and the clusters last-mile broadband connectivity solutions grew healthily. The rental-based finance cluster performed well. The clusters revenue was negatively impacted by a lower average rental book than the prior year and reduced revenues due to the lower interest rates in the country. These were, however, more than overcome by additional efficiencies delivered through the implementation of improved control systems and processes. The collections remained of a high-quality and resulted in actual bad debts being well within the normal limits at less than 0.5% of the book value. The closing rental book remained nominally flat at just over ZAR 2.35 billion. In the total workspace provider cluster, Nashua delivered a stable revenue and operating profit result despite some of the complementary revenues coming under pressure as renewable energy sales fell due to reduced load shedding in the country. The business continued its strategy of enhancing the entrepreneurial strength of the franchise channel and 2 further franchises were sold this year, resulting in Nashua now only owning equity in a large metro franchises. The decrease in segment operating profit all occurred in the Solutions and Systems Integration Cluster, specifically due to reduced spending in the enterprise market vertical. Importantly, the business restructured its cost base to align to the expected future market demand, the restructure process and all of the associated costs were concluded in the 2025 financial year. Looking forward, although the local conditions remain tight, the broad market trends remain positive and position the ICT segment for growth and an improved performance in 2026. The Business Communications cluster's merger of ECN and Skywire is already delivering synergies and the market growth on their broadband connectivity continues at double-digit levels, specifically in Skywire's underserved target markets. Nashua is likely to deliver steady growth as complementary revenues increase and stable print volumes are expected to continue. These Nashua revenues also support both the Quince's rental book and its earnings, although we do expect Quince's revenue to remain relatively stable in this low-interest environment. The new leaner solutions and systems integration cluster provides agility specifically for the consulting leg of IQbusiness and the ongoing demand for digital transformation, cloud and AI supports an improved performance for 2026 for the segment. In the Applied Electronics segment, the reduction in segment revenue was caused by the impact of a stronger rand on the cluster's large foreign-denominated export sales and reduced demand in the local maintenance and support services market. The quality of the revenues, however, improved significantly as segment operating profit increased strongly. This was driven by efficient production, improved margins and some foreign exchange gains that were made on some of the long-term export contracts. Within the defense cluster, they had an excellent year, increasing operating profit on the prior year by more than 20%. There were record financial performances that were delivered by the radar and the fuze businesses, as they executed their strong order books and delivered improved operating profit and margins. The investment into the fuse factory in prior years produced a positive outcome as increased product volume we delivered to our major customers. In the half year results, we reported that a key fuze order had been delayed. Importantly, this order was successfully delivered in the second half and contributed to the record performance. At the radar business, they secured record defense and mining sales, and the business continues to expand both its product offering and its geographic footprint. There were also good performances from the Dynamic Control business, Etion Create and the communications business, which all contributed to the strong result for the cluster. There were some foreign exchange gains that were made in the year due to the well-hedged, long-term foreign exchange positions that we've taken. The clusters revenue for the first half of 2026 is already hedged, which limits any potential foreign exchange risk. But post this period, the cluster's revenue and income will be more exposed to the strength of the rand against the euro and the U.S. dollar. Importantly, the arrangements with the South African regulatory authorities that control the export of our defense products, the ports efficiency and the availability of electronic subcomponents are operating well and are expected to continue for the foreseeable future. Strategically, the defense cluster also progressed well in 2025. We developed new fuses and these were launched successfully into the Middle East, while the completion of the radar strategic IP co-development program, that we've been sharing with you over the last number of results, will be achieved by the end of this calendar year. This achievement positions the Radar business to participate in the future large volume production orders. And in addition to that, more fuse orders are imminent. Equally importantly, the cluster also entered a number of new markets for existing products at the radar company in Southeast Asia, North America and Europe, while the communications business made its first sales into South America. Looking forward, all 3 of the defense clusters key markets of Europe, Southeast Asia and the Middle East retain their strong growth trajectories. The graph at the bottom of the slide illustrates the clusters order book as it currently stands, which is well balanced across both local and export markets. This provides a cluster with a diversified product and geography exposure and largely eliminates any product, geography or customer concentration risk. Importantly, the strong execution performance of the cluster over the past 4 years has enabled it to now bid for larger and higher-margin defense export contracts as our customers seek to secure the long-term supply of critical products and services. The pipeline for the cluster remains robust and is complemented by good mining demand and increased spending on the South African rail infrastructure. And finally, after many slow years, there is improved activity in the South African defense space, which will further boost the cluster. We retain our view that the defense clusters growth trajectory is medium- to long-term in nature. Within renewable energy, the growth continued at the group's Solar Energy business as the key metric of EBITDA exceeded the prior years, although as expected and as we've guided, the growth rate has diminished of the double-digit levels that we have delivered in prior years. The business delivered good project margins and increased the quantity of owned assets under management during the year. By year-end, owned in construction and near financial close build-own-operate or BOO plants increased by 22% to 95 megawatts. Normalized EBITDA from these plants grew positively and exceeded the prior year by an impressive 71%. The group's wheeling business, Apollo had a solid year. Shortly after NERSA awarded Apollo its trading license in October 2024, Eskom indicated that it would take the award of the trading license and the other three companies that were awarded licenses at the same time on legal review. Apollo has continued normal business operations throughout the year and Eskom's actions have not impeded the business development achievements that they have made. Importantly, Apollo is concluding its first customer power purchase agreement and this agreement secures the business' revenue-generating capability, which will commence when the independent power producer finalizes its construction. Looking forward, the renewable energy cluster will continue to grow into 2026. The Solar Energy business has a good pipeline of BOOs and its track record on project execution and cost management, protect the returns on these projects. The commercial and industrial market or C&I market, which is the Solar Energy business' target market, remains robust as high energy inflation, unreliable municipal grids and battery storage, all present longer-term support for this market. Pleasingly, Apollo is likely to commence trading in 2026 with only the successful conclusion of the IPP project and Eskom's legal challenges being the inhibitor. In 2025, the strategic initiatives of the group had 2 key focus areas: firstly, strengthening of our international market positioning, to continue the recent good growth in non-South African revenues and secondly, to optimize the group's portfolio to strengthen the financial returns and growth prospects of our assets, specifically for our South African focus businesses with a current low interest, low growth environment may continue for some time. Internationally, despite the stronger rand and the reduced revenue into Africa, the group's non-South African revenues grew again this year. The group secured nearly ZAR 5 billion in non-South African revenues, delivering a 17% CAGR over the past 4 years. This focus on increasing these revenues and entering international markets remains a key strategic focus across the group. Both the electrical engineering and defense markets remain robust, and we believe defense specifically retains its high expectations for continued strong growth. Importantly, the circuit breaker access to the U.S.A. market and an improving Zambian economy after the devastating drought of last year create increased opportunities for the Electrical Engineering segment. The second key strategic focus area was to enhance the resilience and agility in some of our key operations. This was achieved through 2 mergers of existing assets and the disposal of one. The group concluded the sale of Blue Nova Energy this year. The rapid change in the South African battery market precipitated this sale, which has been concluded efficiently with no job losses and with a result that was significantly better than we projected in our half year announcements. In the secure communications cluster in our defense area, Etion creates a nanotech merged and in the ICT segment, ECN and Skywire emerged in the business communications cluster. These 2 mergers have delivered rapid synergies, have created larger business units, which have increased financial resilience and have simplified the Reunert portfolio. But perhaps most importantly, these mergers position these businesses for stronger growth. Nanoteq's encryption technology will provide new revenue streams to Etion Create export markets and will accelerate profitability of that entity, while in the business communications, Skywire's successful direct B2B go-to-market strategy will leverage ECN's channel partners and accelerate the growth rate of their last-mile broadband connectivity solutions. So ladies and gentlemen, in conclusion, and if we offer a view to next year, the momentum created through the group's positive second half performance and strategy execution positions Reunert well for growth in the 2026 financial year. It is anticipated that the South African economy will steadily improve as the impact of the energy and rail liberalization and port infrastructure investments continues, private participation in infrastructure projects increases and the benefits of the structural improvements flow into the economy. Whilst we believe this will be a steady increase, Reunert's track record reflects that steady economic improvement results in positive operating leverage and improved financial performance. Pressure is, however, expected to continue on the South African Electrical Engineering product volumes until the infrastructure investment increases, which is not anticipated to materially improve in the first half of the financial year, although they are at least expected to perform in line with 2025's results. When it will continue executing on its strategy and will deliver growth into next financial year through, firstly, solid growth in our offshore markets in the defense and circuit breaker business. Secondly, a refocused and restructured ICT segment is set to deliver sustainable growth. And finally, our renewable energy investments are expected to grow in both asset ownership and an enhanced trading footprint. Ladies and gentlemen, thank you for your interest and attention this morning. We'll now move into the live Q&A session. Thank you. Good morning, ladies and gentlemen, and thank you for your interest in Reunert and for joining us today for this 2025 results presentation. Prior to us just kicking off of the Q&A, I'd like to just spend a minute on my transition, which was also covered in a sense that was issued yesterday. We weren't able to include it in the webcast because the webcast was prerecorded. And for confidentiality purposes, it was left out of the webcast itself. But ladies and gents, just on behalf of the Board, I just wanted to share the following key messages, and there's 4 of them, that I think should be seen in conjunction with the SENS that we issued to the market yesterday. Firstly, this is a well-planned and structured process, and it carries the full support of both the Board and myself and is a culmination of an extensive and thorough process to identify and appoint the best person for the role. Secondly, the Board has confirmed that the group's strategy, operational and financial trajectory remains consistent with that, that we've been following for the past 5 years. Thirdly, I'm deeply invested personally in the success of Reunert and the success of this transition and my arrangements with the company and with the Board mean that I will remain involved with Reunert for the next 12 months to assist in ensuring its success. And I believe in Anthonie de Beer, we've got a candidate who's got the requisite skills, track record and leadership credentials to deliver sustainable growth for Reunert and long-term value for shareholders. And I think particularly important, his value system and culture are well aligned with Reunert, and we have full confidence in him. Ladies and gentlemen, on behalf of the Chair of the Board, any shareholder who would like to meet to discuss anything in the respect of this transition, if you could please let Karen Smith know, and we'll make the necessary arrangements to engage you directly with either the Chairman himself or the Chairman and myself should you so request. So ladies and gents, the Q&A will be managed by Mark Kathan, our Chief Financial Officer; and myself. I'll sort of try and chair the questions and move them in a direction whoever is most suitable between the 2 of us to answer those questions. Alan Dickson: The first question comes from Charles Boles at Titanium Capital. His question relates to the circuit breaker business. And the question is, over the long -- medium to long term, will Reunert remain competitive in exporting these products? Do these products not become commodity items over time where Reunert struggles to compete in the export market? So Charles, where we play, particularly in the U.S. market is we actually sell into the OEM market. We don't sell into the mass market as we typically do in South Africa. We design our circuit breakers together with the OEMs for the specific application that they are looking at. So there is a long run-up while we design, develop and approve those products. Those products go into their systems. And typically, they remain in those systems for the life of those systems. So when we talk about being involved in telecommunications or 5G rollout, once we approved, we tend to remain in that system for the life of that rollout. So they are long term in nature, and they are designed into those products where we work very closely with those OEMs in that regard. And those 2 elements give us quite a significant capability or competitive advantage to remain in those areas for a long time. More generally, if you look at our circuit breaker business today, we export 66% of all the product that we manufacture. So 2/3 of our products are exported globally. The fastest growing of those markets is the U.S.A., but we export globally. And that's not a new number. We've been exporting in that nature for at least 10 years, if not more than that. And I think that gives also an indication of the sustainability of our ability to export our circuit breakers and the likelihood that we will continue to do that, both from a strategic point of view, but also from the tactical way in which we get ourselves into those markets and remain in those markets. The second question is from Rowan, actually, the second and third from Rowan Goeller from Chronux Research. The first question relates to whether we expect an acceleration in transmission projects in the coming years given the 14,000 kilometers that need to be put in place or built by 2033. The short answer to that, Rowan, is yes. But if I give a little bit of color to it, we referred in our presentation that we have received and delivered some cables into those transmission projects that were executed by Eskom this year. But these are small projects. And we would argue that these volumes in the 2025 financial year are less than 10% of what Eskom will consume when these projects get up to full scale. So we anticipate a growth from where we are now, let's call it, less than 10% of what we expect, somewhere up to about 100% for those Eskom projects over the next 2 or 3 years as they ramp up those projects and the construction phases of those continue to accelerate. The other part of that question is that Eskom will do a portion of these transmission lines and private that PPP projects will do another portion. And to date, there are no PPP projects in place. The bids for those have been delayed. They were meant to be submitted now in November. They've been delayed until the middle of next year, and then those will start to ramp up from there. So there's none of those volumes in these volumes that we see at the moment. So we see a significant ramp-up in cables to go into those transmission projects, first of all, into the Eskom-led projects and then following those into the PPP projects, which will come a little bit later on. Rowan's next question relates to the growth rates that we expect in the defense cluster over the next 3 years, given the increased global spend on the defense segment. So in terms of that, we do anticipate still steady growth in terms of that defense market. We shared with you in the presentation the distribution that we have globally of our order book at the moment, which roughly, roughly is about 25% for each of our major markets, which really gives us a broad market access. All of those markets are looking for our products and services, and we're able to sell into those consistently across the globe at the moment. So without putting too fine a number on it, 2 comments I want to make. First of all, we believe it's a medium- to long-term trend in growth in our defense business. We've got that type of sustainability in it. And we anticipate that we will be doing double-digit growth for the next 3 years at least. The next question comes from Timothy Olls from Laurium Capital. There's 3 questions he's put in. One is that segmental EBIT from other dropped from ZAR 196 million last year to ZAR 109 million this year, and he's asked for some clarity on that. We don't often give too much clarity on it, but I'm going to ask Mark if he's got something, I asked him when the question first came on. Perhaps he's got something to offer without giving too much away on it. But Mark, do you want to field that one first for us, please? K. Kathan: Yes. So Timothy, last year, the share price -- the closing share price was higher than this year's share price, which is at ZAR 53. So when we provided for the ESOP, that's the employee share plan on the BE scheme as well as on the conditional share plan, we provided at a higher share price. So this year, we had a lower share price and hence, we charged less to the income statement. Alan Dickson: Thanks, Mark. Perfect. The second question that Timothy has is what is the total EBIT loss for the renewable energy this year? And when do we expect it to break even? I'll need to do some homework. Again, we don't normally give the level of detail at a particular business unit as that. So Timothy, we'll revert back to you on that one, but not be able to share with you the exact levels of the numbers we've got. I don't have those at hand as we speak right now. And then the third question relates to the record fuze and radar performance. And the question is where will all the growth come from here? And are the higher EBIT margins of approximately 24% in defense sustainable? So there are a number of our markets where further growth comes from. So in the fuze market, there is definitely further growth, and that really comes from increased volume into more geographies. We did share with you that we have got new fuzes into the Middle East, and those haven't reached full capacity yet. And equally, we are underexposed to some markets in Europe that we are actively trying to penetrate. So those are the 2 areas in the fuze business that we still anticipate further growth. And in the radar business, a portion of the radar businesses and the radar's revenue and income in this year relates to, what we call, strategic IP co-development. And that's the development of IP and a product. And when that is approved, which will be done by the end of this year, that over time converts into a production run. And we will then benefit from that production run going forward, which actually brings run rate growth into that business. So that's the source of the growth both for fuze and radar. And then if we look more broadly across the rest of the cluster, we can anticipate greater and improved profitability still from our communications business and Etion Create on the back of improved export potential for them. So we have quite broad opportunities for growth across our defense businesses. And then with relating to the defense margins, we think our margins remain healthy. The supply and demand at the moment is such that we can price correctly. There is one element in that, that one should take cognizance of. And around about 90% of our sales this year were export in nature, and those are in hard currency, either euro or dollar based. So to the extent we have a strong rand, somewhere around about the 17 that we have now or even if it gets a little bit stronger than that, that would put a little bit of pressure on to those margins, not material pressure on to it. But just from a, call it, an analyst point of view or shareholder point of view, one should remain or be aware and take cognizance of the fact that our exports and defense are all hard currency based and the rand does play a little bit of a role on that. We tend to hedge those revenues to protect them. But obviously, when it gets very much stronger, there would be some negative impact on the margin in terms of that. We then have another question or the next question is from Myuran Rajaratnam from MIBFA. There's 2 questions. One is, is our circuit breaker business exposed to the data center market in the U.S.A.? Yes, it is. We have a couple of access points into those data centers, and it's part of the good growth that we're seeing into that market at the moment, and we expect that to continue for some time. And then also asked a question around for a group with diverse segments. If I was forced to choose, although both are important, is it more important for the group Chief Executive to be good as a technical engineering person or a good capital allocator? It's a question that we thought deeply about through the process. Reunert today has a very strong executive team. We -- and the executive team is structured with Mark as the Chief Financial Officer; Mohini Moodley, HR Director and Sustainability Director. And then we have 3 segment heads. Each one is responsible for their line of responsibility, one for Electrical Engineering, one for ICT and one for Applied Electronics. And those gentlemen carry the biggest responsibility of, let me call it, the technical expertise and the delivery of the numbers. And our view was that within such a strong executive committee that we have at Reunert at the moment that it was important to have somebody who was a good allocator who understood how to run a portfolio and was capable to provide some inorganic strength to the group going forward as well. The next question is from Siphelele Mdudu from Matrix Fund Managers. He's asked, how should we be thinking about our circuit breakeven margins into the U.S.A. Will volumes more than cover the rand that are lost? So we think there is some thinning in the margins. Roughly, we believe we are able to recover somewhere between 65% and 70% of the tariff costs that we've got. So that's the nature more or less of the margin degradation into those circuit breakers, but we think that's sustainable. We don't think it gets any worse. And we are working with our customers to try and make those recoverables better, but we don't think they're going to get any worse at the moment. So we think the margins that we see in this year are probably the lowest that we'll see into the circuit breaker business going forward. And at a percentage level, we don't necessarily think it gets much better in terms of how much of those tariffs we can recover. But certainly, in a rand volume point of view or the rand growth that will come through the volumes, we do think that will more than cover the cost that we had in this year. [indiscernible] from RMB. The question is continued cash generation in the business. May we understand if there are any key plans for this cash going forward? I'm going to ask Mark if he can turn to that one, please. K. Kathan: Yes. [indiscernible], we have a very defined cash allocation policy as to how we invest our cash. And we would look at -- number one, we would first look at business requirements, and that would take working capital into account and then around our fixed assets, around sustenance and expansion. And then at the same time, we would then look at how we would distribute cash to -- on investments, if there are potential acquisitions or at the end of the day, we look at dividends and share buyback. So there's a defined process that we go through. And -- but the intention is obviously always to look at -- to come back to shareholders and tell them what we're going to do with our cash. Alan Dickson: Thanks, Mark. And then I'll ask you to do the next one as well from Myuran from MIBFA. And he has asked, can you please give some color into the nature of the amortization of intangible assets that we have reported as well as our annual investment into intangible assets in rands. K. Kathan: Yes. So Myuran, there are 2 distinct differences in the intangible assets, how we account for them. The first would be on acquisition where we would allocate part of the purchase price into intangible assets. And that will be typically customer lists, et cetera, that we write off those intangibles typically between 3 and 5 years. That would be part -- that will be on acquisition. And then in our defense cluster, we would also create some level of intangible assets, whereby we will start creating technology. And that would be part of our annual CapEx budget, and that will also be written off over the contractual period that we have with customers there. Alan Dickson: Perfect. Thank you, Mark. Ladies and gents, that's all of the questions that we have at the moment. I'm maybe just going to wait 10 seconds or so just to see if there's any last-minute questions that pop in. Okay. We've got one from Kgosi Rahube who just beat the bell from Melville Douglas. Can you please provide more insight into the expected improvements in South African defense given that the key issue has been the defense forces constrained budget? Yes, I can, Kgosi. There's been a little bit more budget that has been allocated. And certainly, one of the programs that have been announced that have been awarded is the armored vehicle program, which is a large vehicle program to replace the legacy Ratel vehicles. And into that vehicle goes some of our products, particularly our communication products. There's one example whereby we are seeing the kickoff of some larger scale projects, and that first one, as I've described, has been allocated. So there is some more budget that has been allocated into the South African defense force. There is no shortage of need for projects and expenditure there. So as the funding becomes available and as I think South Africa's fiscal position becomes a little bit better, which we do anticipate over time, we do believe that there will be more funding flowing to the SANDF for some of these projects. And our exposure at Reunert across those requirements is actually very good. So invariably, when any large capital project gets announced, we will get the benefit from that. Now it will take a little bit of time before that comes into play in the communications, so probably not in 2026, but 2027 onwards. But those type of projects coming through a real boost to our export volumes that we've got at the moment, which are also long term. So yes, we do think sort of this increased allocation to the SANDF, we do believe is part of our view that South Africa gets steadily better. [indiscernible] thank you for your kind words as well. I appreciate it. Thank you very much for that note. And ladies and gentlemen, that brings us to the end of the presentation today and the Q&A session. Thank you very much for your attention. We appreciate you taking time out to listen to Reunert and Mark and myself today. We appreciate your interest and your -- and value your contribution. Thank you very much, ladies and gentlemen.