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Operator: Hello, and welcome to the Third Quarter 2025 Investor Call for Pershing Square. Today's call is being recorded. It is now my pleasure to turn the call over to your host, Bill Ackman, CEO and Portfolio Manager. William Ackman: Thank you, operator. So welcome to the third quarter conference call. We've had a strong year-to-date, certainly through Q3 and even up to the present, north of a 20% return and nicely in excess of the S&P for the year. But despite overall strong performance, we don't get them all perfectly right. So I thought we'd start the call just focusing on a couple of investments that have not performed well this year. And why don't I turn it over to Anthony to talk -- let's talk about Chipotle. Let's start there. Anthony Massaro: Thanks, Bill. So we actually sold our remaining shares in Chipotle this year following the company's third quarter earnings report. This concluded an investment in the company that was over 9 years old. So a very disappointing conclusion to what had long been a very successful investment for us. The stock IRR from our inception to exit was just under 16% versus just over 15% for the S&P 500. But fortunately, we have previously sold 85% of our initial 10% stake in the company at various times over our 9-plus year holding period. That resulted in a realized IRR on the position of just under 22% and $2.4 billion in cumulative profits. So the big question is, obviously, why did we decide to sell the rest of it this year after a stock decline of nearly 50%. So just to give you kind of some context for our thinking, from the first full quarter that Brian Niccol was CEO of Chipotle, that was the second quarter of 2018 through the end of 2024, quarterly same-store sales averaged 9% and no quarter outside of one quarter that was impacted by COVID was below 3%. And if you look under the prior management team, in the 10 years prior to the 2015 food safety scandal that predated our investment, same-store sales also averaged 9%. So as the company started to report weak quarterly same-store sales this year, we believed based on the various sales-driving initiatives they had in the pipeline and also the remarkable long-term historical performance since the company went public, that trends would eventually improve. And unfortunately, underlying trends progressively worsened throughout this year including another step down during the current fourth quarter that was disclosed on the Q3 call. We do believe that macroeconomic weakness amongst low- to middle-income consumers and younger consumers is the primary cause of this same-store sales slowdown as evidenced by similar trends that peers are experiencing. But we don't know how long this weakness is going to last. We don't know if it's going to worsen before it gets better. And it's pretty clear that Chipotle and competitor management teams don't know either. They're doing the right thing by reinvesting in the customer value proposition by not taking price despite mid-single-digit food cost inflation, and they're, therefore, accepting kind of lower near-term margins. But we don't know if this will be sufficient, and there might be more kind of to come there. Year-to-date, of the kind of nearly 50% stock decline, forward earnings are only down 8%. Now that's not good, right, because they're supposed to actually grow. But forward earnings are down 8%, but the PE multiple is down 44%. So the vast majority of the year-to-date stock decline is due to multiple compression. While the current valuation of about 25, 26x forward consensus earnings is cheap if the company can quickly get back to achieving its long-term growth goals, we just didn't have enough confidence to underwrite this at this time. So the business has a high degree of operating leverage. So it's possible that if sales weakness persists for however long it persists, that consensus margin levels will be below even current levels. And this investment now has a much wider range and dispersion of potential outcomes around the company's near- and medium-term earnings power. That's just much wider than we had foreseen at the beginning of the year and frankly, at any time since we own our investment in Chipotle. And this made it a lot more difficult to continue holding the investment despite the fact that the company is now trading at one of its lowest multiples ever. And there's a new CEO running the company since Brian left for Starbucks in August. He's a talented operator, but he's certainly off to a rocky start as a first-time CEO. And in light of this, a return to the company's historical premium valuation multiple is uncertain. We do have tremendous respect for Chipotle, and we wish the company all the best as it navigates what's proven to be quite a challenging environment for them and for the industry. William Ackman: Yes, we wish the company well. We think highly of Scott. We think he's a very good leader. He did a great job running COO of the company for a long period of time. So we wouldn't bet against Chipotle. And maybe someday, we have an opportunity to become a shareholder again. Anthony Massaro: Totally agree. William Ackman: So on the topic of less than successful investments this year, let's talk about Nike and maybe feel free to jump in as well, Manning, if you'd like. But Anthony, go ahead. Anthony Massaro: Sure. So we also exited our investment in Nike Options earlier this month. Unlike Chipotle, Nike was an unsuccessful investment for us. So much shorter holding period. We first invested in the company this time around in June -- or sorry, in the spring of 2024. The cumulative return on Nike since we first invested was negative 30% versus the S&P, which is up 33% and the cumulative P&L was over negative $600 million. So the big mistake here was the initial underwriting. So as we've previously communicated, we underestimated the degree of near-term revenue declines and operating deleverage, aka margin declines that would be necessary to effectuate a turnaround here. So the prior CEO had lost the organizational focus on sport. They overemphasized direct-to-consumer sales at the expense of wholesale relationships, and they failed to create innovative performance products while overproducing big lifestyle franchises, and this really damaged brand heat in the eyes of the consumer. The prior CEO had admitted to kind of these mistakes in early 2024 and outlined a series of corrective actions, which is why we thought that the ship had kind of been set in a better direction, but the magnitude of the corrective actions that were required were far greater than we anticipated. Fortunately, for Nike, the company's controlling shareholder, Phil Knight, and the Board of Directors made the ideal management change in September of 2024 by bringing back long-time Nike veteran, Elliott Hill. We believe Hill is a fantastic CEO. He has an excellent strategy to return to profitable growth by renewing Nike's obsession with sport, accelerating innovation, creating bold marketing and rebuilding wholesale distribution, which he led for a very long time. At the start of this year, we converted our Nike common stock position into a deep-in-the-money call option position. We did this to preserve the upside potential of owning the stock while unlocking capital to make new investments. Since the start of this year, the turnaround is progressing a bit below where we projected for revenues, but materially below for margins. And the reasons for that are twofold. About half of that margin decline versus what we projected at the beginning of the year is due to tariffs, which were new this year and the other half is due to more aggressive clearance activity of legacy inventory. So Nike is down about 17% year-to-date. Most of that is forward earnings, which are down 15% and the multiple is effectively unchanged, down 2%. While we have confidence that Nike has the right CEO and the right strategy, we grew more uncertain of what long-term margins would look like as this year progressed. Can the company really get back to pre-COVID margins in light of tariffs, which don't seem like they're going away anytime soon and in light of the more competitive nature of the industry. It is a more fragmented competitive landscape in athletic footwear and apparel now than it was kind of for most of Nike's history. And to meet our return thresholds for a turnaround at the time of our sale would have required us to assume stabilized margins of at least 13%, which is consistent with what they did pre-COVID. And we didn't have enough confidence to make this assumption kind of in light of these new margin headwinds. We do believe that Nike's turnaround will be successful, but we don't know what success will look like from a margin perspective. The company has articulated confidence in getting back to double-digit margins, very different outcome for shareholders if that's closer to 10% than 13%, 14%. So we have tremendous confidence in Elliott, a tremendous admiration and respect for what he's doing at bringing Nike back to greatness, and we wish him and the team at Nike the best of luck. William Ackman: Obvious question would be with respect to Nike. It's a company we've owned before and got right in the past in a meaningful way. Any sort of overarching lessons from either the Nike or the Chipotle experience that will help us avoid similar mistakes in the future, either a better exit from a Chipotle or a miss -- a better timing on our acquisition of shares of Nike. Anthony Massaro: Yes. Look, I think we're still reflecting on kind of lessons learned, but I think I would point 2 high-level ones, one for each. On Chipotle, I think high PE multiple stocks can be dangerous when things turn. I think that if everything is going right and you have a very proven leader running the company, you can afford to hold it for a while longer. But I think with a high multiple stock, if kind of the trends slow for any reason, it's better to exit faster than to give management the benefit of the doubt. For Nike, I think one lesson that I and we, I think, have learned there is return thresholds for turnaround situations, even if the turnaround doesn't look like initially that it's going to be that severe, should be higher. So I think had we gone in with kind of a higher required -- had we had a higher required IRR for that one, perhaps we would have avoided making the initial investment. William Ackman: Great. Why don't we focus on one other underperformer for the year, and then we'll get to why we're actually having a good year, but I think it's good. Let's focus on the negative first. Universal Music. Let's talk about that. Ryan, go ahead. Ryan Israel: Sure. So Universal Music, the business performance has continued to be strong. In their most recent quarter reported a few weeks ago, the company showed, for example, that revenues grew at about a 10% rate on a constant currency basis and their adjusted EBITDA profit metric actually grew a little bit in excess of that about 12% rate. Those levels of business performance are actually very consistent with what the company has done since we helped facilitate a public listing nearly 4 years ago. So the business performance remains quite strong operationally in our view. But as you mentioned, Bill, the stock has underperformed this year. And in particular, it's really underperformed since the summer. So the share price was in July, a little bit above EUR 28 per share. And as of earlier this week, it was as low as about EUR 21.50, which is about a mid-20s percent decline in the share price. And actually, at one point earlier this week, the company was down to a 20x PE multiple based on consensus analyst earnings for the next year, which is the lowest multiple that the company has ever traded at in our little over 4 years of ownership. And we think the primary reason for the decline in the share price over the summer to now really due to technical factors. So for example, the largest shareholder of the company, the Bollore Group, there was a ruling in July by a French court that they would need to buy out another publicly traded company. And so there was a fear or perception in the marketplace that Bollore, who is the largest owner of UMG would be a forced seller for a chunk of -- a very large chunk of their shareholdings in order to fund this buyout that a French court was requiring. And so that forced seller dynamic, in our view, made it difficult for other people to want to buy the stock ahead of what could be a forced seller in somewhat unknown time frame and potentially unknown quantity. As we transition from that happening in the summer to the fall, the U.S. government shut down. And so the SEC was unable to kind of fulfill any sort of request for a U.S. listing and UMG's example, which we think created potentially further technical headwinds. Stepping back a little bit, our view has been that the business performance remains very strong, as I mentioned on the quarterly basis, this quarter as well as really over the last 4 years. And we think that a share buyback really could address the technical concerns that would have happened. So for example, the market perception that there is a forced seller that could be around the corner, hard to get market participants to want to buy shares in advance of that. Yet if the company is buying their shares, that could provide somewhat of an offset for the technical demand. And in general, for a company that has very strong operational performance, we think a buyback at the lowest multiple that it has traded at for the last 4 years would be a good idea as well. But maybe I can turn it back to you, and you can talk a little bit more about the upcoming U.S. listing. William Ackman: So one of the package of rights we received when we became a shareholder of Universal Music was the ability to catalyze a listing in the U.S. And we felt strongly that it's a U.S. headquartered global business, but half -- even more dominant in the U.S. and a very significant percentage, effectively half of their business is a U.S. company. It is listed in Euronext that has limited the universe of people who can own the stock. Many U.S. investors by mandate are not permitted to own Euronext listed securities. And our view, materially more demand can come into the stock with the U.S. listing. We also think the kind of cadence of quarterly reporting and the kind of information that becomes available when a company is registered in the U.S. will provide -- enable better analyst coverage. The fact that the peers are U.S. listed companies will make, I think, easier, I would say, comparisons and I would say, better understanding of the company. And so we catalyze that listing by exercising our registration rights. Our registration rights require in order for the company to be obligated to register our shares in the U.S. and create a listing here for us to actually sell some stock. So we've agreed to sell $500 million of shares as part of the listing of the company. Now in light of the share price, we are not a -- we're a very reluctant seller, but we believe the value in terms of improved transparency as well as the improvement in the supply-demand dynamic overwhelms the cost to us of selling a portion of our position at the current share price. Now we've approached the company, and we've asked the company to simply seek a listing in the U.S. without the requirement for us to sell stock. At this point, the company has been unwilling to let us withhold the $500 million of stock in the offering. So we're going to go ahead with the offering, selling a portion of our stock at whatever the price is at the time the listing in order to catalyze what we think is a value-creating transaction for the company. Just further to Ryan's point, this is a company -- I've been on the Board -- I was on the Board for a number of years. I think it's an excellent management team that understands the music industry, where there seems to be a gap in understanding is in how the company approaches the capital markets and using -- taking advantage of the company's balance sheet, the free cash flow it generates and optimizing the company's use of capital. This is a business that's not going to require billions and billions of dollars of capital for acquisitions. The company has made that, I think, very clear. The nature of the company's dominant position in the marketplace also makes clear that it's very difficult for the company to do acquisitions of any kind of meaningful size in the industry. So we remain puzzled really as to why the company is not a more aggressive buyer -- or actually why it doesn't buy back stock at all and why in addition to pointing out that the stock is trading at the lowest multiple it traded at, it's also approaching the highest valuation for Spotify, a significant asset on the balance sheet. The company has intelligently held on to it at this point in time. But again, another opportunity for monetization and returning capital to shareholders. So that's our strong view on that topic. Okay. Let's focus to the positive. We are actually having a very good year. Let's talk about our largest investment at this point, Alphabet. And that's Bharath, who's going to take that on. Go ahead, Bharath. Bharath Alamanda: Sure. And maybe to rewind back to when we originally initiated our position in Alphabet more than 2.5 years ago, our investment thesis was that Google's leadership position in AI was being severely underappreciated. And our view then was the company had a unique full stack approach to AI that came with several structural advantages, namely frontier research capabilities, world-class technical infrastructure, scale distribution and the access to immense training data. And you could argue then that the main open question was around execution and whether the company would be able to harness all those inherent competitive strengths into their product road map. I think since we made our investment and one of the reasons the share price has appreciated meaningfully both this year and over the life for our investment, but we still continue to remain very optimistic shareholders, is they've really stepped up to that question and done an excellent job on the execution front and leveraging their strengths. And maybe to just provide a few recent examples of that. Earlier this week, Google released their latest and very widely anticipated Frontier AI model of Gemini 3.0. Not only did it immediately jumped to the top spot on all of the benchmark evaluation leader boards, more notably, they integrated Gemini 3.0 directly into search and the Google apps the same day that it was released, kind of highlighting the company's focus on improving the product velocity. Gemini 3.0 was also led by the DeepMind team, which was a start-up that the company had very presciently acquired all the way back in 2014, and that lab continues to be the leading kind of frontier research lab. On the hardware side, the company has spent the better part of a decade optimizing their technical infrastructure to specifically run machine learning and AI workloads. And as a result of that, they can now run those workloads at sort of industry-leading lowest cost per token. And they've developed their own proprietary TPU semiconductor chips, which has not only reduced their reliance on NVIDIA's GPUs for running internal workloads, but I think what we've seen more so over the last year is they're gaining increasing traction from third-party Google Cloud customers. On the scale distribution front, Google has incredibly valuable digital real estate and consumer mind share. And that's probably best seen through the rollout of AI overviews, which are the summary AI search responses that are directly embedded in search. AI overviews is now being served to more than 2 billion users. And if it were to be considered its own stand-alone app would be by far the most widely used AI app. And then lastly, kind of on the data front, we believe Google's ability to train kind of on a wide corpus of first-party data, including YouTube videos for image and video generation as this is a very valuable long-term differentiator. Tying all those advantages to the operating results, those advantages are now being clearly reflected in the company's ability to grow at scale. So for context, Google generated $100 billion of quarterly revenue in Q3, and those revenues grew at a 15% rate, right? Just their core search and YouTube franchises, despite their maturity, are continuing to grow at a low teens rate, and their cloud business, which is now a very scaled $50 billion run rate business, growing at an incredible 32% rate. So while the share price has appreciated meaningfully this year, we still think that the valuation is quite reasonable in light of the business quality, their leadership position in AI and their ability to continue to grow earnings from this point on at a high teens rate for a very long time. William Ackman: Great. Thank you so much. Why don't we go to Uber, Charles? Charles Korn: Sure. Thanks, Bill. So as a reminder for everyone, we invested in Uber early this year, what we believe was a very highly dislocated valuation with extremely strong fundamental and operational performance overshadowed by concerns regarding disintermediation risk. And big picture, we feel increasingly confident that the market structure is evolving consistent with our underwriting hypothesis. And over the course of 2025, basically, what Uber has done is they've advanced a number of partnerships with various autonomous vehicle and technology companies. And taken together, they're strategically advancing geographically focused commercial pilots with line of sights to thousands of autonomous vehicles covering major metro cities on their network within the coming years. And since our last update, one notable call out is a marquee partnership Uber announced with NVIDIA this past month. The partnership is interesting. It coalesces around NVIDIA's DRIVE AV platform as a reference compute and sensor architecture to make any vehicle an autonomous vehicle, i.e., L4 ready, which enables OEMs and developers to accelerate their AV technologies, respectively. And it offers an extremely credible counterpoint to Waymo and Tesla's respective architecture. So you essentially have what was looking like a potentially 2-player market developing to a credible third alternative, which can help some of these small long tail of AV players kind of accelerate their respective technology developments. And Uber's role here is they're going to be contributing valuable training data to an NVIDIA data factory, which will support a foundational model upon which others can draw. And the partnership overall, it's designed to lower cost of development and accelerate commercialization efforts for our industry participants. Now against this backdrop, Uber continues to operate commercial operations for Waymo in several markets, including exclusively in Austin and Atlanta with strong utilization data reinforcing Uber's unique value proposition. We expect the market structure will continue to evolve over time to maximize vehicle utilization and operating profits. And we believe basically Uber is positioning itself to become a technology and hardware-agnostic partner of choice for the AV ecosystem. Transitioning to discuss operating performance. In short, financial results continue to be excellent. Notwithstanding their market-leading scale, growth is actually accelerating with operational metrics achieving new all-time highs in users, engagement, frequency and trip growth. And so top line results also notably this growth is actually balanced across both the Mobility and Delivery business segments with 19% and 23% growth in the most recent quarter, respectively, which just gives you some scope of the scale and growth here. And that roughly 20% blended bookings growth translates to 33% adjusted EBITDA growth and more than 50% growth in earnings per share as the company is scaling margins off a relatively low base, which is very impressive. Notably, the company is achieving this level of operating -- attractive operating leverage and earnings growth while continuing to make investments to see the next generation of products and geographies, which we believe will sustain Uber's high rate of growth over the coming years. And to just kind of double-click on this concept of investment, so the stock has been relatively weak the last few weeks. And part of this, I think, was actually -- some people may have seen DoorDash, which is a primary competitor in the delivery space, announced an unexpected round of major investments, which caught investors off guard. The stock was down nearly 20% in response to that, and that's their primary competitor in delivery in the United States. So I think there was some concern, is Uber also going to need to make a similar round of investments? Or is the competitive intensity of the business increasing. And our perspective on this is basically DoorDash. They -- basically, the company has grown very rapidly. They're very strong operators, but they didn't have amazing kind of forward-looking vision on the product architecture. And so their technology stack kind of became slightly more outdated at a faster rate than one would anticipate for a newer, relatively speaking company. They've also done a number of acquisitions, and so they're using this as an opportunity to kind of integrate these acquisitions and rebuild their tech stack. But primarily, this seems like it was a miscommunication around the kind of IR and external communications from DoorDash, and we don't think this represents a fundamental shift in the competitive intensity or kind of a desire for DoorDash to lean in. And importantly, we don't think that Uber has to make these same kind of investments. They're making such investments while simultaneously achieving their multiyear financial targets. And so we think this is kind of a unique issue to one of their competitors. And so big picture, taking a step back, Uber is basically trading at a mid-20s multiple today, which we think is an extremely cheap valuation considering their high rate of earnings growth and attractive outlook. William Ackman: When does the Tesla overhang lift, if you will, the fear that Elon will -- there will be 10 million taxis driving around, charging people $5 to go unlimited distances. Charles Korn: What's interesting, what I'd say is a factual statement, right, is that Waymo is far more capable today from a technology standpoint than Tesla, right? Tesla has grand ambitions. But if you just look at the facts, the issue is it's hard to -- it's impossible to scale a business if you don't have unit economics that work, and it's a bit of a catch-22 where until you have a technology, until you have a cost structure that works, you can't scale. So it's hard to say. I think 2026 is likely to be another year of kind of experimentation and kind of evolution rather than revolution. I don't expect to see kind of a major breakthrough. I think the nature, too, of scaling in robotaxis is there's a requirement to kind of validate and evaluate the models you're creating to make sure they're performing in real-world scenarios consistent with your modeled expectations. And that, by its very nature is kind of a slow methodical approach because if you released 100,000 robotaxis without knowing how the models perform in real-world settings, there's real-world consequences and people can die. And I think actually, Elon has been pretty measured and thoughtful around making sure that they are cautious in terms of their rollout of the products to make sure that they're performing as expected. In this regard, we'd say Waymo is clearly -- has best-in-class data, best-in-class disclosure around safety, disengagement, et cetera. I think it will be positive if kind of Tesla demonstrated more of that. Ryan Israel: If I could add maybe one thing to that. I think the Tesla risk or the Tesla overhang is really centered on 2 variables. Number one, that Tesla itself will be the dominant market player in AVs and that if it is the dominant market player in AVs, it will not choose to partner with Uber. And so I think the way that this can resolve itself is that either one of those 2 premises shows to not be correct. So to Charles' point, if there are more AV companies such as Waymo and there's actually a handful of other potential AV companies that are showing very strong progress aside from Waymo, if those companies start to become more dominant in the space and/or they start partnering with Uber, I think the perception will be that this will not be owned by any one company for AVs, and therefore, it would be a much more balanced marketplace, which I think will help resolve some of that overhang. That may be knowable within the next, I would argue, 12 to 24 months, although the timing is a little uncertain. Secondly, to the extent that Tesla does become further along in actually deploying robotaxis at scale, which, to Charles' point, does remain to be seen. They're certainly behind a lot of the targets that they have suggested over the last several years. But once they start scaling up, to the extent they are more willing to talk about partnerships, that could be the other way that this overhang results. So I think there are multiple ways that will become clear over the next year or 2 in which this could resolve in the way that we think, which will ultimately be beneficial for Uber. William Ackman: In short, we basically think the Uber platform is enormously valuable to Tesla and to all the other sort of AV companies and it's becoming even more valuable over time, embedded in the mind share and the consumer experience, a bit like Google's presence in search. Okay. Let's talk Brookfield. Charles, go ahead. Charles Korn: Sure. So Brookfield, they've had a very active 2025 with strong operating performance, significant business building and corporate development activity, particularly in recent months, including the pending acquisition of Just Group, which is a U.K. pension insurer that they're going to be acquiring early next year and the recently announced buy-in of the 26% of Oaktree that they don't already own. To start, maybe I'll provide some perspectives on their financial performance, and I'll focus primarily for now on Brookfield Asset Management or BAM, which is, as a reminder, kind of comprises roughly 75% of the value of BN Corporation, i.e., the parent entity, which we own. BAM is generating very strong results. So they're seeing roughly 15% growth in fee revenues with particularly strong growth in their credit and renewables businesses. In renewables, they closed on their second transition fund earlier this year, which is driving some of that strength. That roughly mid-teens rate of fee revenues is translating into fee earnings growth at a slightly higher kind of 16% to 17% rate, which is basically strong operating leverage on the core BAM business, offset by lower margins at Oaktree, which we think is kind of a transitory development, which will reverse itself next year, setting the stage for even stronger kind of operating leverage. And so as we look to 2026 for BAM, we think they're poised for an excellent year with accelerating organic fundraising, further step-up in capital from BN Wealth Solutions. Again, part of this is that acquisition of Just Group and then efficiencies, which they'll garner from fully consolidating Oaktree within BAM. And so of note also, as you think about BAM for '26, they're going to be in market with multiple flagships next year, including their next-generation infrastructure and private equity funds and their recently launched artificial intelligence fund. And each of these flagships, these are large, chunky $10 billion, $15 billion, $20 billion, $25 billion funds, which drive step function increases in fee-bearing capital, fee revenues and, of course, operating profits. Now moving beyond BAM to the broader kind of Brookfield ecosystem and the cash flow streams that roll up to the parent BN, 2 kind of call outs. So one, carried interest is beginning to meaningfully accelerate at BN, growing roughly 150% the last few quarters off a relatively low base. Earlier this fall, the company provided a forecast for $6 billion of carried interest over the next 3 years, which should begin to meaningfully kind of show up in 2026. It may be somewhat back-end weighted, but it's basically setting the stage for very significant growth next year. And then second, I'd touch on Wealth Solutions, which is their annuities -- primarily the annuities business, that grew 15% this quarter, which was -- saw a strong earnings contribution from the relatively small P&C business they have within their wealth solutions portfolio, which is offset by lower growth in their annuities business. And here, what's happening is we believe they're repositioning the asset book for higher long-term yields, but it's driving some temporary dislocation, which we think will reverse itself in the near term. Taken together, so BN is tracking towards low to mid-teens distributable earnings growth this year, which we believe will meaningfully accelerate next year with step function changes, increasing both the earnings contributions from Wealth Solutions and a step-up in net carried interest realizations. Also of note, the company hosted their Annual Investor Day this past September, and they established a target for nearly $7 of earnings per share in 2030 or 25% compounded growth from here. And in that context, we note that -- we think Brookfield stock is extremely cheap. It's trading at roughly 15x our assessment of forward earnings, and we anticipate accelerated share price performance tracking with kind of the rate of earnings growth we anticipate to see from them over the next few years. William Ackman: Thank you, Charles. So Fannie, Freddie, was it yesterday? It seems like a long time ago that we gave a presentation on our thoughts for a path forward for Fannie and Freddie. The President and members of -- Treasury Secretary and others have talked and posted on Twitter about potential plans for an exit from conservatorship and/or an IPO for Fannie and Freddie. We think someday, a public offering of shares by the government may make sense, but we do think there's an important step that should be taken beforehand. That's a much lower risk alternative. So what we've proposed both privately to the administration, we had the opportunity to share these ideas with the President with Secretary Ludnick, Secretary Bessent as well as Director Pulte in the recent past, which we then shared in a public forum that the administration could get a sense of the market as well as the various commentaries view of this -- of our, let's say, trial balloon is really a very simple next step. If you think about the Trump administration's first term where the President started to put Fannie and Freddie on a path to removal from conservatorship, the most significant step was reversing the theft or stopping the theft, I guess, I would call it, where Secretary Mnuchin basically ended the net worth sweep and allowed these entities to start building capital. That was a very important step for actually reducing risk in our housing finance system, making -- putting Fannie and Freddie in a position where they could, on a stand-alone basis, support the guarantees that they had outstanding. I think that was a critically important step. But we think the next step should be an acknowledgment, really, it's an accounting for the payments that have been made to the government. So basically, U.S. government injected $191 billion into these companies after the financial crisis and extracted an appropriate pound of flesh, which is a 10% return on that capital as well as warrants on 79.9% of both companies. They basically took -- it was a distressed bail out with very onerous terms, the most onerous terms of any of the banking financially related companies, only, I think, tied maybe even -- actually, ultimately, the amended version of AIG, I think, was even less onerous than Fannie and Freddie. Now the administration -- the companies have paid back $301 billion of the original $191 million, which is more than the 10% return they're entitled to. But from an accounting perspective, the preferred remains outstanding on the balance sheet. That's really a function of the net worth sweep previously -- never-seen-before transaction. So what we're recommending is that the payments to the government have to be accounted for. The result would be eliminating the preferred line item from the liability section or the equity section of the company's balance sheet. And the next step, of course, will be exercising the warrants. The government will become now very large shareholders of both companies and then the businesses are in a position to be listed on the New York Stock Exchange. Importantly, we think they should stay in conservatorship. What that means is we're now -- there's literally 0 risk to mortgage rates. The government is still completely in control of both enterprises. And now the necessary next steps can take place over however long they take in a very measured, thoughtful manner. And we believe this accomplishes all of the administration's goals, at least the stated goals of showing how much value has been created for taxpayers. The President did the right thing in not selling these entities in his first term and they've increased in value probably fourfold or so from the $100 billion offer that was apparently made to take these businesses private, I guess. And we think there's still a lot more room to run. So we think it's not a good time to do a public offering of shares because it would be dilutive to the taxpayers' ownership of both entities, but the government will be able to show a mark-to-market value and demonstrate incremental important progress without taking a risk to mortgage rates, and we shall see. The good news is that transaction -- again, the President has got a lot on its plate, and we're approaching Thanksgiving, but it's actually theoretically possible. We've spoken to the exchange about a relisting. They're obviously prepared to do whatever is required to get that done. So it could be a nice Christmas present for the long-suffering shareholders of Fannie and Freddie, which include more recently some institutions. I mean, Pershing Square has been around here a while, but other institutions have bought stock over the course of the past year, and there are literally millions of small shareholders who are cheering for the President to save them, and this would be a very nice Christmas present for that group of owners. Why don't we go to Amazon? Bharath, why don't you update us? Bharath Alamanda: Sure. So earlier this year, we were able to opportunistically build a position in Amazon during the April market drawdown. It's a company we followed for a long time, and I always admired the fact that it operates... William Ackman: What price did we pay in the drawdown? Bharath Alamanda: Our average initial cost was around $175, which is a 25x entry multiple on forward earnings, the lowest multiple that the shares had ever traded at in their history. William Ackman: Thank you. Bharath Alamanda: So yes, it was a company we've been following for a long time, and we always admired the fact that they built and operate 2 of the world's great category-defining franchises between their cloud business, AWS and their e-commerce retail operations. Our view is that both of those businesses are supported by decades-long secular growth trends, occupy dominant positions in their markets and share the kind of core tenets of the Amazon ethos of focusing on the consumer value proposition and leveraging their scale to continue to reinvest and be the low-cost provider. Despite those compelling attributes, there were concerns around the growth trajectory of AWS and then coupled with the broader tariff-related market volatility, that kind of provided us the attractive entry point. And our view was that those concerns underestimated the resiliency of the business model as well as the duration of its growth runway. And while it's still early days, the company's operating results since then have kind of helped validate our thesis. So starting with the Cloud segment, AWS today is a $120 billion business that continues to grow at a high teens rate. And in fact, last quarter, the growth rate accelerated from 17% to 20%. Notably, that impressive growth rate was actually limited by capacity constraints as consumer demand for compute vastly exceeded the pace at which AWS is able to bring new supply online. William Ackman: Is that constraint driven by just the time to build the new facility or GPUs or... Bharath Alamanda: Yes, I think it's a combination of the above. So to that end, the company has been very focused on accelerating that build-out. So in the past 12 months, they brought online 4 gigawatts of power, which is more than any other cloud provider. And for context, Amazon has doubled their data center capacity since 2022 and are on track to double it again by 2027. So in light of the kind of supply-constrained nature of AWS' growth, we actually think those investments today to accelerate the build-out are very efficient and high return use of capital. And then kind of shifting to the retail business, they've seen very minimal, if any, impact from tariffs. And over a longer time frame, we're very encouraged by the potential for significant margin expansion in that segment. So if you were to look at peer margins and adjust for Amazon's business mix as well as taking into account their much higher margin and faster-growing advertising revenue stream, we estimate that Amazon's structural retail margins could be several hundred basis points above the 6.5% margins they're expected to realize in 2025. And in addition to that, they're also extracting a lot of productivity gains from their warehouse automation initiatives and their one-of-a-kind logistics network. And as just a proof point on that latter point, per unit shipping costs have been steadily declining for the last 8 quarters in a row. So stepping back, while it's still early days and while Amazon's share price has appreciated about 30% from our initial cost in April, it still trades at a very attractive multiple relative to peers like Microsoft and Walmart and especially in light of its ability to grow earnings at a nearly 20% rate for the next few years. William Ackman: Thank you. Let's go to Restaurant Brands. Feroz. Feroz Qayyum: Sure. Thanks, Bill. So Restaurant Brands actually continues to execute at a very high level, and its most recent results reinforce both the strength of its brands and the resiliency of its business model in what can only be described as a fairly tough economic backdrop for consumer businesses. During the quarter, the company-wide same-store sales grew at 4%, units grew by 3%, leading to 7% system-wide sales growth and operating income grew by 9%. So looking at their biggest businesses, Tim Hortons in Canada, they increased their same-store sales by about 4%, which outperformed the broader Canadian QSR industry by 3 whole percentage points. This now marks the 18th straight consecutive quarter of positive same-store sales. And that, by the way, has primarily been driven by underlying traffic growth. For several years now, Tim has been laying the groundwork in its Back to Basics plan with new innovation, both in cold beverage as well as afternoon foods while still maintaining their lead and providing good value for consumers in its core beverage, coffee and breakfast segments. Tim Hortons actually is also now growing its unit count in Canada for the first time in years, a market that many consider too mature. And these units are actually a lot more impactful to the company's bottom line than their units abroad because they're obviously higher unit volumes and Tims Canada has higher unit take rates as well. In the international business, same-store sales grew by 6.5%, also above the primary competitor, McDonald's, which has also been the case for actually several quarters now. The company also brought on a new partner to manage the Burger King China business, who will actually invest $350 million into the business shortly, and that will allow that BK China business to double unit counts over the next 5 years, and that will help restaurant brands, the total company achieve their 5% unit growth algorithm in the coming years. At Burger King in the U.S., same-store sales were up about 3%, again, also ahead of burger peers and one -- the results actually have also outperformed the broader U.S. burger category for multiple consecutive quarters. And that's really due to all the initiatives they've done under their Reclaim the Flame program. While investors were worried that competitors are pushing deeper into value, Burger King has actually done a really nice job striking a nice balance between innovation and premium offerings, doing nice tie-ins with movies and also providing everyday value with their Duos and Trios platforms. In what is -- can be best described as a very challenging economic backdrop, as Anthony alluded to, we think Restaurant Brands' results highlight the very nice defensive qualities of its business. So while low-income consumers have pulled back from spending many often skipping breakfast, Restaurant Brands has still continued to grow its sales as it's benefiting from the trade down for middle and higher-income consumers trading down. William Ackman: So are Chipotle customers becoming Burger King customers? Feroz Qayyum: Look, that's a question we've been discussing at length. I'm not sure it's specifically from Chipotle to Burger King, for example. But we do think what's happening, it's really a twin economy. So people that own stocks that are wealthy are doing incredibly well, and they're continuing to spend where they used to. At the same time, the low end of the economy is doing very poorly, and they're basically pulling back. So I think a brand like a Burger King or a Tim Hortons that caters to everyone is benefiting -- obviously losing those low-end customers, but it's benefiting from the mid-end trading down. But the fast casual space broadly, which obviously Chipotle is a member of, is missing that middle sort of demand vacuum where the high end isn't trading down, but the mid-end is trading down to the quick service category broadly. So that's certainly probably happening. What's also notable about restaurant brands is that it's obviously primarily franchise business model. And so it's also not as directly exposed to the labor and cost inflation to the same extent as others. And so thanks to its consistent growth and defensive business model, we expect that Restaurant Brands will actually still grow operating income at 8% this year, which is in line with its long-term algorithm. And the business still trades at a discount to its primary peers. So it's trading at about 17x earnings, whereas McDonald's and Yum! are trading at about 23x next year's earnings. We think a business of this quality with these characteristics should trade at a much higher valuation. So we're optimistic about the prospective returns from here. William Ackman: Okay. Great. So I'll just cover Howard Hughes. The short story here is the underlying real estate business of Howard Hughes is performing extremely well. The company reported an outstanding quarter really on every metric of net operating income, land sales, profits from their MPC business and the appreciation of their existing land portfolio. The management teams at Pershing Square and Howard Hughes are working very well together, which is great. And we are working, as we've publicly disclosed on a transaction to acquire an insurance company that would become really the beginnings of our diversified holding company strategy for the business. Our goal is to complete a transaction as early as the -- at least announce a transaction as early as year-end or perhaps in the early part of the new calendar year. We'll have a lot more to say about that if and when we are successful in completing a transaction that makes sense. But the short version of the story is that, we intend to by a good insurance platform with an excellent management team that can run a profitable insurance operation with Pershing Square managing the assets of that insurance company, I would say, akin to the way that Warren Buffett has managed his insurance company's assets and the way really he's managed the insurance company operations itself. Why don't we go to Hilton? Ryan, why don't you give us an update? I'll just point out, Hilton has been an excellent investment for us over many years now. We have enormous respect for the management team, and it's one of the best businesses that we've ever owned. It's become a smaller part of the portfolio, unfortunately, because -- or fortunately, because everyone else has recognized the qualities of the business. So we still think it's an attractive investment from here, but lower on the IRR thresholds than obviously when we originally acquired our position. But go ahead. Ryan Israel: Yes. So I just wanted to make a quick point that I think this quarter's results are really emblematic of why we think Hilton's business model is unique and incredibly resilient. So for example, the company same-store sales metric RevPAR actually declined about 1.5% this quarter as there were some macro softness, which clearly has impacted some of our restaurant businesses, but that actually impacted some of the travel businesses as well. And typically, what you would expect when a company has declining same-store sales, you would expect a decline in the profitability of the business. Hilton actually grew its adjusted EBITDA, its profit metric, 8% this quarter despite the decline in same-store sales, which is very unique and really reflects the 2 fundamental drivers of the business that are incredibly attractive to us, which are they have an enormous opportunity to grow their unit or hotel count around the world because the brands that they have are able to take advantage of the increased travel trends, and they are better than a lot of the alternative brands. And other people put up the capital for that because it's a good return for them and Hilton is able to earn a very high franchise fee. And that is really adding 6 to 7 points a year of growth to the business, and that's a trend, I think, will continue for a while. And the second factor is just incredibly strong cost control due to just overall great management. So the company is able to really limit the growth in its expenses despite having a very strong steady revenue growth base. So profits still grow even when same-store sales decline, which is a typical anomaly in business, but it's part of Hilton's core model. And then on top of that, this company has just superb capital allocation. So it continues to buy back about 5% of its shares on a year-over-year basis. So with a kind of consistent underlying tax rate, the company would have grown earnings at a low teens percent this quarter despite not growing same-store sales due to some macro softness. And so I think to your point, one of the reasons why we continue to hold Hilton is those unique characteristics where if the business performs in a normal macro environment well, we think there's a clear line of sight to 16%, 17% earnings per share growth annually for a very long time. If the macro is a little weaker and same-store sales don't even grow, we're still able to get pretty comfortably above a 10% rate of earnings per share growth, which is very unique. And so the market has recognized, as you pointed out, that this quality of the business and the growth characteristics should be deserving of a higher multiple, and the company trades at about 30x next year's consensus earnings, which is part of the reason why we've reduced our position is we think that the growth profile will offer us a reasonable return, but there's less opportunity for an accelerated annual return beyond the earnings per share growth when the multiples, I think are reasonable at 30x. But we still think it's very unique and a very strong management team, which is why we continue to hold the position even though it's somewhat smaller as you've been trimming as the share price and the multiple has increased over time. William Ackman: Let's do an interesting compare and contrast. Let's compare Universal Music to Hilton. They have some fairly analogous economic characteristics, and let's compare the trading multiple of one versus the other. And why is Hilton traded at 30x earnings and Universal traded 20 or 21x earnings? Ryan Israel: So I think you're entirely right, which is that while they obviously operate in different industries, the economic characteristics are very similar. They are both royalty-like companies that are very capital-light with very strong operating margins. In Hilton's case, we believe over time, the company is likely to grow at something along the lines of maybe 8% to 10% a year for revenue and that adjusted EBITDA is probably going to grow a little bit in excess of that. Those will sound very similar because that is exactly what UMG is growing at. Its revenue is about 10% right now. William Ackman: And management guidance -- let's stick with the management guidance on those numbers. Ryan Israel: Correct. And that is in line with the guidance over time. So it's interesting that they look incredibly similar on the operational performance, if you will. The key difference, as we pointed out earlier, is UMG has not bought back a single share, whereas Hilton pretty much like clockwork buys back about 5% of its shares. They allocate all of their free cash flow -- the substantial majority of free cash flow to share buybacks. And because of the high margins and the significant degree of predictable revenue growth, they have a nice amount of leverage, which the business can support. And obviously, UMG has an unlevered balance sheet when factoring in its stake in Spotify. I think the U.S. investor base, U.S. listing of Hilton, combined with the capital allocation has given investors a lot of confidence, which has allowed them to price in a multiple of something like 30x. And as we mentioned earlier this week, UMG was trading at 20x, which is a very large gap between the 2 despite very similar economic characteristics and growth characteristics currently. William Ackman: Let's go to Hertz on the other end of the balance sheet spectrum. Feroz Qayyum: Yes. We're not unlevered, in fact, very levered and also has some operational leverage. But look, the interesting thing about Hertz is that it's actually making a lot of progress on its turnaround efforts, and the results in the third quarter showed those. So it was the strongest quarter in years. It actually generated their first positive EPS for the first time in 2 years and they demonstrated meaningful traction on the operational levers that we've discussed previously as our investment thesis. Number one, the fleet refresh. When we invested, they basically had an upside down fleet. Now they've completely refreshed it. The average vehicle in the Hertz fleet is now less than 12 months old. As a result, depreciation per unit per month DPU, which is their metric, was $273 during the quarter, well below their long-term target of $300. And importantly, next year's vehicle purchase negotiations, which some investors are worried about given some of the tariffs and inflation, they're also nearly complete. And the management team is confident that, that will also support strong unit economics with depreciation of less than $300. Operationally, the company is also making big strides. So this quarter, utilization was 84%, the highest level the company has ever delivered since 2018. Revenue per day or RPDs were down low single digits, but they continue to improve and improved in October as the company has been implementing changes and modernizing its pricing systems. On the cost side, they also continuing to make progress through automating processes, lowering headcount and rationalizing some of their footprint. And we expect both SG&A and DOEs, which is their measure for expenses per day to decline from current levels. So the company is well on its way to delivering sort of a mid-single-digit EBITDA margin next year and has line of sight into delivering $1 billion of EBITDA in the coming years. What makes Hertz very interesting from these levels... William Ackman: $1 billion. It means $1 billion of annual? Feroz Qayyum: Exactly. $1 billion of annual EBITDA in the coming years. They have a target for 2027 actually. What makes Hertz really interesting from these levels is that it also has a number of upside levers or call options available to the company. So first, the company has been setting up infrastructure to sell more used cars through its own retail channels as well as its partnerships. The company actually has a partnership with both Amazon as well as Cox, and it's now live with their rent-to-buy program in over 100 cities where you can rent a car, try it out and if you like it, you can buy it. We believe the company can turn this into a meaningful profit center that can lead to structurally lower depreciation costs because obviously, you sell a car to the retail channel at a much higher profit than the wholesale channel. And then it also allows an opportunity for them to sell additional F&I revenues. Second, we believe Hertz also has the potential of being a significant partner to the various mobility companies that are rolling out autonomous vehicles. Hertz has an expertise in vehicle maintenance, servicing, and it has a very significant scale of -- with its parking facilities that make it an ideal partner to help manage as folks try to roll these out. Both these revenue streams have the potential of being large businesses for Hertz in the future and helping it further leverage its fixed cost base and brand. On liquidity, the company is also now in a much stronger position. Recall when we invested, some investors were speculating the company may need to declare bankruptcy again, and that is definitively not the case today. It has more than $2.2 billion of total liquidity. We actually helped facilitate a convertible bond issuance earlier this year and actually increased our exposure to the company. And the company also entered into a capped call transaction, which means that the convertible bonds are not dilutive unless the stock essentially triples from current prices. So with its current liquidity, as I mentioned, of over $2 billion, they have ample liquidity to address their near-term maturities and to help grow their fleet next year, which will again help them lever their fixed cost base. So stepping back, Hertz today is a much more leaner, more efficient company with, frankly, an enviable young fleet that its peers don't have. And on top of the core rental business, the company is also developing multiple new profit streams, as I mentioned, such as the retail used car sales, servicing AVs as well as serving the broader mobility segment. So we continue to believe that Hertz has asymmetric upside from current prices. But obviously, in light of the fact that it's going through an operational turnaround, we have sized this as a smaller investment than our typical holdings. William Ackman: Why is the stock so cheap in light of all of the above? Feroz Qayyum: So it's not immune to some of the consumer issues that we're seeing in the broader space. What's also notable is that the government shutdown has obviously had an impact on travel broadly. And so people are traveling a little bit less. Hertz does benefit to an extent as people have been taking out what are called one-way rentals. So instead of flying, you just take a car. But certainly, I think it's probably a net negative if the consumer environment is weaker and then people are traveling as much. And there's also -- there's been broader concern around RPDs. We think that's a little bit misguided. The way Hertz sort of reports RPDs, it's really burdened by the fact that they have mix towards smaller cars, which certainly have lower prices, but they're EBITDA accretive. And so next year, that should be a tailwind. And candidly, I think these car rental companies are generally misunderstood. There isn't a lot of market cap for long investors to dig into and to get excited. And so both Hertz and Avis have the potential to gather some of these long-only investors as they come out of the turnaround starting next year. And I think Hertz specifically has a very interesting opportunity to grow its EBITDA from basically nothing today to $1 billion in the coming years. William Ackman: Okay. Good. Thanks, Feroz. We've always received questions in advance of the call. We do our best to answer them during the pendency of the call. Just a couple that we didn't kind of get to. One is since both Howard Hughes and the Pershing Square funds are managed by Pershing Square, how should investors think about investing in Howard Hughes versus Pershing Square's core strategy? The answer is these are, I would say, different investments with some overlap. Howard Hughes, of course, the core business today is a master planned community business. It's a business we like. It's a business that we expect to generate a lot of cash over the next years and decades, and we think provides a very good base to build our version of a diversified holding company. With the acquisition of an insurance subsidiary or insurance company that becomes a subsidiary of the company, over time, as that business scales, that will become a more important part of the operation of the company. We intend to manage that insurance company portfolio, the float in U.S. treasuries, the equity and common stocks using the same kind of investment philosophy we have at Pershing Square. So there are clearly some similar elements. But it's an operating company. It's a C-corp. We intend to take the cash that the business generates over time and to deploy that capital in acquiring -- principally controlling interest in most likely private businesses. So the portfolio will look different. It's not a large cap or mega cap minority stake investment vehicle. It will be an operating company that will buy for the very long-term various businesses. Today, you're buying Howard Hughes at about a 15% discount to the price we paid for shares and an even bigger discount to kind of the, I would say, the NAV of the real estate portfolio. So that's a nice place to start an investment. But ultimately, the success of Howard Hughes will depend on how we do with our various initiatives there. I like Howard Hughes a lot, excited about what we're going to do there. An entity where you have -- that's a public company, we have access to the capital markets, may create some flexibility over time for us to do some things that we can't do in the Pershing Square funds. So over time, I would say they will be different entities, but the same investment principles will be applied and shareholder, I would say, orientation will be applied to both. And then I would -- the other thing I would say is that the Pershing Square management team has a very large investment in all of the above. So about approaching 30% of the AUM that we manage today is -- or I guess, 28% or so today is employee capital in the funds. And then on a look-through basis, therefore, the employees own an interest -- a meaningful interest in Howard Hughes. And then on top of that, the Pershing Square management company made a $900 million investment in the company. So we have, I would say, a very high degree of what you might call skin in the game in both the funds as well as Howard Hughes. I think Howard Hughes itself is at this point, still not well recognized. I think if and when we are successful in beginning to make this business look less like a real estate master planned community and more like a diversified holding company, we expect we deliver results and we expect the market to notice. With respect to hedging, our approach, as you likely know, is, one, we pay careful attention to what's going on in the world from a macro perspective, from a geopolitical perspective, from a political perspective, all these things can have an impact on markets. And we focus -- our first priority is what are the risks in the system that could cause a massive market decline. And to the extent we identify risks like that as we did pre-financial crisis or pre-COVID crisis or pre-Fed interest rate inflation, I wouldn't quite call it a crisis, but where the Fed was forced to raise rates very aggressively, we were able to hedge those risks because of the sort of surveillance of what's kind of going on in the world. Today, we really have no hedges in place. We don't try to hedge short-term kind of stock market declines or what some people might think of as a periodic -- the overall multiple, the market is above normal. There are lots of reasons why a market cap weighted index today appropriately should be trading at a higher multiple. If you think back to '09, we didn't warrant businesses, frankly, like NVIDIA, and we didn't have this massive growth driven by a major change in technology. We are seeing interesting places to put capital. We're doing due diligence. And our approach is to -- as we say, we sort of build a library of businesses that we get to know pretty well. Occasionally, new companies emerge, go public, get spun off. We track as many of them as we can in terms of ones that meet our criteria for business quality, and then every once in a while, they get really cheap. Amazon being kind of a recent example of a company we admired for years. It was always a little too expensive, but a business we want to own. And I think we started buying stock at something like $161 a share, which seem to be a really kind of unique opportunity. With that, I just want to thank you for joining the call, and we look forward to updating you. I think our next event will be our Annual Meeting that we will stream at some point in January or an Analyst Day. Thanks so much. Operator: Thank you, everyone. This concludes your conference call for today. You may now disconnect, and have a great day.
Operator: Good day, and welcome to the NetEase Third Quarter 2025 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Brandi Piacente. Please go ahead. Brandi Piacente: Thank you, operator. Please note that today's discussion will contain forward-looking statements relating to the future performance of the company and are intended to qualify for the safe harbor from liability as established by the U.S. Private Securities Litigation Reform Act. Such statements are not guarantees of future performance and are subject to certain risks and uncertainties, assumptions and other factors. Some of these risks are beyond the company's control and could cause actual results to differ materially from those mentioned in today's press release and this discussion. A general discussion of the risk factors that could affect NetEase's business and financial results is included in certain filings of the company with the Securities and Exchange Commission, including its annual report on Form 20-F and in announcements and filings on the Hong Kong Stock Exchange's website. The company does not undertake any obligation to update this forward-looking information, except as required by law. During today's call, management will also discuss certain non-GAAP financial measures for comparison purposes only. For a definition of non-GAAP financial measures and a reconciliation of GAAP to non-GAAP financial results, please see the third quarter 2025 earnings release issued earlier today. As a reminder, this conference is being recorded. In addition, an investor presentation and a webcast replay of this conference call will be available on the NetEase corporate website at ir.netease.com. Joining us today on the call from NetEase's senior management are Mr. William Ding, Chief Executive Officer; Mr. Zhipeng Hu, Executive Vice President; and Mr. Bill Pang, Vice President of Corporate Development. I will now turn the call over to Bill, who will read the prepared remarks on William's behalf. Bill Pang: Thank you, Brandi, and welcome, everyone, to today's call. Before we begin, I would like to remind everyone that all percentages are based on RMB. The third quarter marked continued momentum and strong execution across our NetEase family. By uniting creativity with exceptional operations, we created more meaningful connections with players, driven by our diverse portfolio of games that expanded our global reach and reignited our player enthusiasm for our key franchises. Total revenues increased 8% year-over-year, reaching RMB 28.4 billion in the third quarter, and revenues from our games and related VAS grew 12% in the third quarter compared with the same period last year. Innovative creativity and long-term operation remain the defining force behind NetEase's ongoing player engagement and global expansion, whether for new launches or established titles. Our teams are dedicated to delivering unexpected gaming experiences and responsive live services that are winning over players worldwide. This strategic creative approach continued to gain traction overseas, amplifying the influence and excitement of multiple games in the third quarter, including our new releases. Destiny: Rising, our new free-to-play mobile sci-fi RPG shooter quickly topped iOS download chart in the United States and other major Western markets following its global launch on August 28. The game has received widespread acclaim, securing leading positions on iOS download chart across nearly 100 markets worldwide, featuring Destiny's iconic powerful game gunplay across diverse mode setting new time line. The game has earned positive feedback from long-time fans, while gaining traction within the broader shooter game community. The excitement continued in China, where Destiny: Rising debuted on October 16 and immediately topped our downloading chart, drawing in players nationwide to experience the streaming shooting action at their fingertips. Marvel Rivals continues to captivate superhero shooter fan base around the world. Kicking off its fourth season on September 12, the game introduced a wealth of refreshing new content, features, special events and team-ups. Following the update, it reached #3 on Steam's global top seller chart. The new map, K'un-Lun: Heart of Heaven transport players to the Asian East, while the debut of Angela and eagerly anticipated Vanguard spurred excitement across the player community. Additionally, inspired by Marvel Animation's Marvel Zombies, a limited time PvE Zombie mode was released, featuring challenging bosses, Zombie Namor and Queen of the Dead just in time for Halloween. Beyond the game, Marvel Rivals Ignite celebrated its grand finals at DreamHack Atlanta, held in collaboration with ESL FACEIT Group. Elite players from around the world showcased their exceptional skills and strategies, drawing massive engagement both on-site and online and reflecting Marvel Rivals growing appeal. As we continue to enrich our global portfolio through diverse partnerships, our original titles are also gaining increasing momentum worldwide. Delivering a distinctive survival open world experience to players globally. Once Human launched engaging updates in the third quarter [ organizing ] its growing global community. On October 30, the game introduced a major new scenario centered on the capture and customization of deviations alongside a significant refresh of the PvP experience that provides more intense combat options. The highly anticipated collaboration event with the global hit game Palworld also went live on the same day, bringing popular pros to a dedicated in-game island, which further invigorated the player community. We recently shared some of our upcoming international expansion plans at worldwide gaming events like Gamescom and Tokyo Game Show 2025, generating even more excitement in the community with engaging player interactions. We exhibited Where Winds Meet at Gamescom 2025, showcasing our creative ambition in cultural storytelling and next-generation Wuxia World building. In China, Where Winds Meet continue to captivate Wuxia fans with its narrative-rich setting, authentic Chinese martial arts theme and innovative gameplay that combines single and multiplayer. Each newly unveiled district not only engages our existing fans, but also attract new players, driving continued growth in both revenue and monthly active users to new highs in the third quarter. On November 14, we brought Where Winds Meet [indiscernible] open-world featuring dynamic combat to the global market on both PC and PlayStation 5. Within just 2 days, we achieved a peak of 190,000 concurrent players, secured the #5 spot among the most played games and #4 position for top seller globally on them. Additionally, it became one of the top 10 bestsellers across the United States, Germany, France and several other regions on PlayStation. This underscores the widespread appeal of our captivating Wuxia universe to an even broader audience. To further enhance community engagement, the mobile version has commenced preregistration and is set to launch soon. Our highly anticipated title, Ananta, also garnered significant attention at the Tokyo Game Show. Players showed enthusiasm for in-depth game trailers and engaging hands-on playcasting. They will draw in by the game's imaginative action design, high-fidelity visuals and modern urban storytelling. Setting a dynamic and immersive city environment, Ananta blends high-energy action with open-world freedom, offering players an experience that goes well beyond conventional gameplay. We are pleased to see mounting excitement and anticipation among this title, including recognition from the Japan Game Award 2025 Future Division, where it was named as one of the most promising upcoming games. Our groundbreaking MMO, Sword of Justice went global across mobile and PC platform on November 7, topping the iOS download chart in multiple regions. The international release included AI-powered MPCs and intelligent face creation system. We showcased this at the Tokyo Game Show in September, highlighting how emerging technologies are reshaping gameplay experiences. Sword of Justice also continued to engage domestic players in the third quarter with its ever-evolving gameplay and rich content. With the global version now live, Swords of Justice is bringing its immersive world and cutting-edge AI enhancement to broader international audience. On top of the new releases we have brought to the international stage, our established games are also gaining steam in multiple regions worldwide. Our realistic car simulation game, Racing Master has continued to gain popularity overseas through localized content, making it highly resonate with players in Japan since it launched there last year. Player engagement spiked in August during its anniversary celebration with carefully designed in-game content, boosting the game's performance in Japan. Exciting e-sports events like the Racing Master 2025 Legendary Cup Finals held in Bangkok in August, brought passionate racers and fans from across Asia together, uniting Racing Master's distinctive global community. As firm believers in live operations, we stay closely attuned to players' evolving expectations across every title, and our domestic games continue to deliver strong performances. Each game update present new opportunities to entertain, engage and grow our communities. This approach continues to resonate with players, driving steady growth across our domestic portfolio for both new titles and games that has been around for decades. Fantasy Westward Journey Online, one of our longest running flagship titles at 22 years and counting, amplifies our dedication to sustain high-quality operations. The game is built around an inclusive ecosystem that allows players of all types to find enjoyment. We continue to inject fresh vitality through new features and mechanics. In July, we launched our innovative unlimited server, which offers classic gameplay under a popular modern model that eliminates the entry barrier of upfront time-based payments. This generated substantial enthusiasm from long-time fans and newcomers alike, significantly boosting player engagement. As a result, it has achieved 4 successive record peaking concurrent player counts since the third quarter, reaching a height of 3.58 million in early November. Fantasy Westward Journey Mobile also continues to evolve as we regularly introduce new features that players love. To meet players' demand, we launched our new casual server, which is designed for fun and streamlined play. It offers Fantasy Westward Journey Mobile's signature gameplay in a lighter format featuring simple progression, low threshold and intuitive controls. With a surge of new and returning players, monthly active users reached a 2-year high in September. Another long beloved MMO, Tianxia, continues to engage its community with deeply resonated updates. In October, we concluded closed beta testing for Tianxia II Classic. This version recreates the game's iconic art style and slower paced gameplay, allowing players to experience its distinctive Chinese cultural event. Meanwhile, the existing Tianxia client will undergo a complete upgrade with player progression seamlessly shared with Tianxia: Wanxiang the brand-new cross-platform client powered by Messiah, our flagship in-house engine. The upgrade will both enhance graphic quality and expand access for players across PC and mobile platforms, allowing them to experience the Messiah universe everywhere. Identity V fan base maintained a high engagement level in the third quarter, supported by our steady cadence of seasonal updates and partnerships. New characters released along with each season update, including Hunter of QS and the Survival of Lanternist in the third quarter, infused new energy into Identity V's distinctive role, reinforcing Identity V as a top destination for asymmetric gameplay fans. In addition, the game's collaboration with the Palace Museum Classic on September '25 added Majestic rooftops of Forbidden City to Identity V's manner, adding a new layer of cultural depth. Eggy Party also experienced robust growth with the third anniversary celebration in July, sparking renewed enthusiasm across the player community. Daily active users exceeded 30 million and average play time hit record high, driving historical engagement level. Two new gameplay modes quickly followed in September. [ Spooky Treasure ] Squad presents an intense extraction experience and Crazy Farm introduces a casual and social farming simulator. Both were highly praised and attractive way of returning users during the National Day holiday. Meanwhile, we continue to evolve Eggy Party's AI-powered AIGC tool, making its map design faster, easier and more enjoyable. We believe that together, these innovations are keeping Eggy Party fresh and its community inspired. Thanks to this ongoing effort, we saw Eggy Party's performance recover to historical peak level in both daily active user and average play time, which we expect will pave the way for smooth development in the coming years. Another example of our player-first philosophy and commitment to innovative high-quality content is Onmyoji, one of China's earliest and most iconic anime style games. On September 10, we launched its ninth anniversary celebration, featuring rich new content and gameplay updates shaped by player feedback. The highlight was a new character Yuki Gozen whose beautifully crafted CG trailer gained widespread attention on social media from both long-time fans and broader anime community. It was broadly inherited for its innovative use of stereoscopic screen and 2D animation tags to create a naked-eye 3D visual effect. With strong community support, Onmyoji quickly entered China's top 10 iOS download chart, demonstrating the vitality of this enduring IP and the strength of our long-term operations. Our commitment to engaging players and continuous innovation is also evident in Naraka: Bladepoint. In the third quarter, we rolled out new heroes and exciting collaborations such as Armor Hero in September and the time-limited return of Nier in October. Naraka: Bladepoint esports present is also growing. The 2025 Naraka: Bladepoint Pro League, NBPL, autumn season marked its first professional league since being selected for the 2026 Aichi-Nagoya Asian Games, culminating its rolling finals in October. Now in its fourth year, NBPL has become the cornerstone of Naraka's esports ecosystem and China's top professional league for the title, driving increasing social media engagement across major platforms. We continue to expand our domestic portfolio with new lighthearted experiences that appeal to a wider range of audience. [indiscernible] our MMO featuring magical heartwarming creatures inspired by Chinese fairy tales, has built a dedicated fan base since its launch in August, designed with a portrait interface for easy one-handed play. The game combines the joy of capturing and nurturing creators with strategic term-based combat and building a homeland for them to thrive in. Backed by our players and supported by world-class partners and global teams, we're building enduring collaborations that keep expanding what's possible in gaming. Blizzard titles continue to elevate the gaming experience for Chinese players. World of Warcraft rolled out updates across both classic and modern servers during the third quarter, sustaining strong engagement among long-time fans and newcomers alike. To further enhance localized experience, the game just launched a highly anticipated China-exclusive Titan Reforged server this week, blending the nostalgia of classic expansions with modern gameplay elements. The new server fulfills players long-awaited expectations and has reignited excitement across the World of Warcraft community. Overwatch 2 has also recently introduced a new Chinese hero, Wuyang, further deepening the game's diverse roster of characters. Meanwhile, Hearthstone celebrated its 11th anniversary, amassing over 100 million registered players in China. A series of special anniversary events drove enthusiastic participations from both loyal fans and newcomers to the game. The Diablo franchise also continued to capture attention. Diablo 2 resurrected, the legendary remaster of the installment that helped define the franchise returned to China on August 27. Newest season released in October pushed the game's daily active player base to record high. In parallel, Diablo IV, the latest blockbuster bringing the series signature dark aesthetics to a new height, were launched in China on December 12. Furthermore, the genre-defining real-time strategy game, Starcraft II, also returned on October 28, triggering excitement among fans. Minecraft China Edition, the localized version of the globally popular sandbox game, reached 1.25 million concurrent players on August 17, an impressive milestone in its eighth year of operation. Committed to nurturing its UGC ecosystem, the game continues to enhance creation tools and expand exposure for community creators, now supporting over 300,000 creators. By delivering enriched locally tailored experiences, Minecraft China Edition has fostered a highly engaged and loyal player community. Beyond above titles, other globally renowned franchises in our portfolio also continue to thrive in China, engaging vast creative community and expanding local ecosystems. Along with our expanding global presence and evolving development capabilities, our domestic community continue to thrive. Regardless of geographies or genre, we'll continue to put player first and work closely with our partners to deliver memorable high-quality experiences across our beloved franchises and existing new titles still yet to come. Turning to Youdao. Youdao continued to solidly execute its AI native strategy in the third quarter with healthy development of both its education and advertising businesses. For learning services, Youdao Lingshi grew gross billing by over 40% year-over-year in the third quarter. Notably, they partnered with the Yau Mathematical Science Center of the Tsinghua University, providing technical support to a platform, which is designed to identify and support mathematically gifted students. The platform is currently being piloted in top-tier schools with a national rollout plan following further refinement. Youdao's online marketing services achieved robust growth in the third quarter. As we advance the use of AI across multiple advertising processes, we further enhanced our expertise in programmatic advertising and influencer marketing campaigns, elevating the efficiency and effectiveness of advertising. For smart devices, we continue to enrich our offerings with technology upgrades. In the third quarter, we launched a new tutoring pen, Youdao Space X, which features a series of intelligent capabilities such as precise scanning for long-form and multi-graphic problems to help students learn more effectively. Turning to Yanxuan. The business continued to perform well across major e-commerce platforms, led by steady development in its core categories such as pet food, home sense and home goods. Propelling technology-driven innovations, Yanxuan's product launches have consistently stood out in the market. Its new pet food product is a refined production process, making it smoother and easier for pets to digest, earning a widespread praise for addressing common digestive issues. Across the NetEase family of businesses, we continue to build on our foundation of creativity, quality and disciplined execution. Looking ahead, we are focused on advancing our development capabilities and global reach, scaling our original IP into lasting franchises and elevating every experience we deliver. Guided by innovation and the trust of our communities, we're shaping a future defined by meaningful growth and enduring impact. That concludes William's comments. I will now provide a brief review of our 2025 third quarter financial results. Given the limited time on today's call, I'll be presenting abbreviated financial highlights. We encourage you to read through our press release issued earlier today for further details. As a reminder, all amounts are in RMB unless otherwise stated. Total net revenue for the third quarter were RMB 28.4 billion or USD 4 billion, representing an 8% increase year-over-year. Total net revenue from our games and related VAS were RMB 23.3 billion, up 12% year-over-year. Specifically, net revenues from online games were RMB 22.8 billion, up 3% quarter-over-quarter and 13% year-over-year. The quarter-over-quarter increase in online games net revenue was due to higher net revenues from self-developed games such as Fantasy Westward Journey Online and Sword of Justice as well as certain licensed games. The year-over-year increase was attributable to higher net revenue from self-developed games such as Fantasy Westward Journey Online, Eggy Party and newly launched Where Winds Meet and Marvel Rivals as well as certain licensed games. Youdao's net revenue reached RMB 1.6 billion, representing a 15% increase quarter-over-quarter, driven by growth in smart devices and online marketing services. Year-over-year revenue rose by 4%, attributed to a higher contribution from online marketing services. NetEase Cloud Music net revenue of RMB 2 billion, stable quarter-over-quarter, but down 2% year-over-year. Notably, revenue from membership subscriptions continued to show healthy growth both sequentially and year-over-year. Revenues from social entertainment services and others, though still lower compared with the same period last year, stabilized quarter-over-quarter. Net revenues for innovative business and others were RMB 1.4 billion, down 15% quarter-over-quarter and 19% year-over-year. The sequential decline was mainly driven by Yanxuan due to its high base during the 618 e-commerce festival. The year-over-year decrease reflected an increase in certain intersegment transaction elimination and to a lesser extent, decreased net revenue from Yanxuan and certain other businesses. Gross profit for the third quarter of 2025 was RMB 18.2 billion, up 10% year-over-year, primarily driven by increased net revenue from online games. This quarter, our total gross profit margin was 64.1%. Looking at our third quarter margin in more detail. Gross profit margin was 69.3% from games and related VAS compared with 68.8% in the same period of last year. The improvement was mainly driven by a higher mix of PC games in China, which typically have higher margins. Our gross profit margin for Youdao was 42.2% compared with 50.2% in the same period last year. The decrease was mainly due to the declined gross profit margin of online marketing services. Gross profit margin for NetEase Cloud Music was 35.4% in the third quarter versus 32.8% in the same period a year ago. The margin improvement was primarily driven by steady growth in our core online music business with lower contributions from social entertainment and other lower-margin services. For innovative business and others, gross profit margin was 43.0% compared with 37.8% in the third quarter of 2024. Despite the impact of intersegment elimination mentioned earlier, the improvement was mainly driven by better margins at Yanxuan and the higher revenue contribution from certain innovative business with relatively stronger margins. The total operating expenses for the third quarter was RMB 10 billion or 36% of our net revenue. Taking a closer look at our cost composition. Our sales and marketing -- our selling and marketing expenses as a percentage of total net revenue were 15.7% compared with 14.5% for the same period last year, primarily due to increased marketing expenditure related to online games. Our R&D expenses maintained stable at 16% of total net revenues in the third quarter compared with 16.9% for the same period last year, reflecting our consistent investment in content creation and product development. The effective tax rate was 13% for the third quarter. As a reminder, the effective tax rate is presented on an accrual basis in accordance with applicable policies and our operations. Our non-GAAP net income attributable to shareholders for the third quarter totaled RMB 9.5 billion or USD 1.3 billion, up 27% year-over-year. Non-GAAP basic earnings per ADS for the quarter was USD 2.09 or USD 0.42 per share. Additionally, our cash position remains robust with net cash of approximately RMB 153.2 billion as of September 30, 2025, compared with RMB 142.1 billion at the end of last quarter. In accordance with our dividend policy, we are pleased to report that our Board of Directors has approved a dividend of USD 0.11 per share or USD 0.57 per ADS. The company announced today that its previously approved share repurchase program of up to USD 5 billion for the company's ADS and other shares in open market or other transactions will be extended for an additional 36 months until January 9, 2029. As of September 30, 2025, approximately 22.1 million ADS has been repurchased under this program for a total cost of approximately USD 2 billion. Thank you for your attention. We would now like to open the call to your questions. Operator, please. Operator: [Operator Instructions] Your first question comes from Xueqing Zhang with CICC. Xueqing Zhang: [Foreign Language] [Interpreted] Congratulations on the third quarter. My question about Fantasy Westward Journey. Given that FWJ PC has consistently set new record for online player count since this summer, we would appreciate that the company is sharing its operational structure for this evergreen title. And we have several follow-up questions on it. Firstly, what's the core driving factors behind the unlimited player server. And secondly, what's the user profile? What's the ratio of retaining players to new players. And lastly, is this model replicable across other flagship titles? William Ding: [Foreign Language] Bill Pang: [Interpreted] Okay. I'll do the translation. The longevity of Fantasy Westward Journey online PC is based on highly stable economic system and unique enriched gaming experiences which are very rare in most other games. Our team has been dedicated to providing sustainable fun experience, stable ecosystem and innovative content. This commitment has been recognized and appreciated by the players as well as we can see from the market. In the unlimited server, we have removed the upfront time-based payment, streamlined the gameplay and systems, offered a lighter gameplay format, while preserving the core designs that has evolved in our classic server over time. Compared with the comprehensive and diverse game experience on the content, unlimited server offers enjoyable experiences in the simple -- more simple direct manner with a smooth learning curve, unlimited server has attracted both many former players back to the game as well as new players. This user demographic of unlimited server actually also benefited the classic server by introducing additional new and returning players. Fantasy Westward Journey online as a legacy game has been operated for 22 years. We remain committed to the innovation and diversified experience to meet -- continues to meet the demand from our community. Looking ahead, we will continue to focus on long-term development, providing our broad player community with various choices in one game. Operator: Your next question comes from Thomas Chong with Jefferies. Thomas Chong: [Interpreted] Can management comment about the gaming trend in China as well as overseas. On the other hand, can management also talk about the overseas expansion strategy? William Ding: [Foreign Language] Bill Pang: [Foreign Language] [Interpreted] Okay. I will do the translation. During our business operations process of doing business in overseas market, we have accumulated successful experiences, which is powered by the strong development capability we have in-house here. For example, in Japan, we have Knives Out as identified been very popular in national network games. And last December, we released Marvel Rivals globally, super successful. And just November 15 this month, we released Where Winds Meet in global markets. And all this product achieved a very good level of success overseas, and we hear a lot of positive feedback from the community as well. In the -- what we see is that in the overseas market, NetEase as one of the most prominent game developing powerhouses in our industry. And we are the only company that bring the purely truly Chinese authentic online games to global market. For example, Where Winds Meet, it's a very Chinese [Technical Difficulty] and we're the only big successful companies that bring this level of authentic experience to the online gamers globally and received very positive feedback. Looking ahead, we believe we have the capability to bring more and more success cases to overseas markets and provide gamers from the globe with more and more high-quality content and services. We have confidence in that. William Ding: [Foreign Language] Bill Pang: [Interpreted] Yes, there are some further comments from William. One is that actually also in this month, we also rolled out our Sword of Justice into the global market. And of course, 3 years ago, we rolled out Naraka: Bladepoint PC on global market. And as you heard, we showed our games to public for both ANANTA and Sea of Remnants. The market has very big expectations. We showed ANANTA game show this year, and it's been named one of the most promising upcoming games by the Japan Games Award 2025 Future division. NetEase, we are based in China, and we are also carving our territory in the global market. That is what we have been doing. We have some successes, and it's -- we're going to keep doing. Operator: Next question comes from Ritchie Sun with HSBC. Ritchie Sun: [Foreign Language] [Interpreted] Regarding Identity V, we have seen the volatility in grossing and DAU in recent months. Can management discuss the reasons behind it and the strategy to improve the performance? Secondly, World of Warcraft and Hearthstone have returned to China for 1 year already and about to face tough comps. Can management discuss the performance metrics now versus 1 year ago and plans to drive sustainable growth in the future? And the Diablo IV is also coming back soon. Can management discuss the monetization potential considering the more intense competition in the ARPG genre? William Ding: [Foreign Language] Bill Pang: [Interpreted] Okay. I will translate this part first. Indeed, it's true that there has been some influence from competing products during the summer holidays, particularly among general users in lower-tier cities. However, we also have noticed that the impact has eased since the start of back-to-school time. And in fact, talking about September, Identity V actually has reached historical high starting from the new semester compared to the same period in previous years. While Q4 historically has never been the peak season for Identity V, the team is focusing on preparing new content and marketing campaigns for the Chinese New Year cycle. During this period, we observed the demand -- the diversified demands on diversified gameplays from community. So we have been preparing more comprehensive and large-scale side game modes while on the other hand, we're also working on the next chapters of the game. William Ding: [Foreign Language] Bill Pang: [Interpreted] Thank you, Yes. As we approach the end of current expansion of World of Warcraft, it is indeed expected to see decline in performance compared to this launch period. Meanwhile, Hearthstone has steady maintained its cadence of expansion updates over the past years. With different operation strategy from the past, the performance of both games actually maintained higher than status than when the operation closed previously. Moving forward, we'll continue to deepen our collaboration to sustain our unique competitive offerings in the China market. And one specific example I want to give here is the Titan Reforged Server for Warcraft. That indeed was initiated by -- together by our Chinese team and the U.S. team. Together, we set the target and designed together and developed specific for this demand and the result is very good. So that is one example to see by working closer together, we can achieve better result compared to the past. Talking about Diablo, Diablo IV has its own unique quality, and we have brand-new business plans in place for it. We believe it will secure its deserved market share and commercial performance in the ARPG segment after launch. In addition, StarCraft II has achieved record high user engagement since its launch, infusing vitality into the RGS genre. Operator: Your next question comes from Alicia Yap with Citigroup. Alicis a Yap: [Foreign Language] [Interpreted] So just wanted to follow up. I think management earlier mentioned ANANTA was recently showcased at the Tokyo Game Show and has a pretty good feedback. So just wanted to know more details about the user feedback. And then how should we think about the market positioning and also the differentiation of this game? And then it also seems that the game included a pretty decent rich content and also the innovative gameplay. So any comments on that? And then are there any updates regarding the next testing timing and also the official launch timing in 2026 that you can share? William Ding: [Foreign Language] Bill Pang: [Interpreted] We showcased the latest update and playtesting of ANANTA at the Tokyo game show, which attracted significant attention on social media across the world, winning one of the most promising upcoming titles by the Japan Game Award 2025 Future Division. We believe with a blend of colorful quality content, innovative monetization strategy as well as our focus on long-term operations we anticipate the game will secure a new position within the industry ecosystem. We're currently planning to further enhance our development process, the development process is on track now, and we'll proceed with testing and launches as scheduled. And when time comes, we have further updates to share. Operator: Your next question comes from Jialong Shi with Nomura. Jialong Shi: [Foreign Language] [Interpreted] We noticed from media, it seems to us the number of new games in your pipeline every year is smaller than in the past few years. If our observation is correct, just wonder what is your current strategy towards launching new games into the market. And if NetEase does not launch as many new games each year, what will be the growth driver for your online gaming business? William Ding: [Foreign Language] Bill Pang: [Interpreted] Okay. I will do the translation. The whole company will be very focused on our success products. And among the already success product, we'll keep refining and keep focusing. We don't want to distract too much focus to charter many, many new products, which we don't have super confidence. For new projects, we will look at product more prudently and more focused, making sure that whatever new product we're building, it has confidence power in the content market. We actually don't see this to contradict with another. We believe being focused is one of the core competence a company needs to have. That's our view. Operator: Our next question comes from Felix Liu with UBS. Felix Liu: [Foreign Language] [Interpreted] My question is on the recent news of organizational changes in your game department. Will these changes impact the near-term operations of the related games? And how does management think about the current organizational structure under the context of your game strategy? And should we expect more changes to come? William Ding: [Foreign Language] Bill Pang: [Interpreted] Okay, I will do the translation. Regarding the recent adjustment and changes, it's part of the company's normal personnel turnover process and has been carried out without impacting daily operations of our game. That's rest assured. The adjustment is aiming to make the operation more focused and efficient, allowing us to concentrate -- keep concentrating on creating enduring high-quality product. For example, for existing evergreen titles, we asked our teams to stay focused continuously refining and optimizing the games. For new titles that show evergreen potentials, we'll allocate sufficient resources to develop them into Evergreen long-lasting successful games. However, for teams that are not keeping pace with the market trends or user demand, we also must trim decisively to make sure a healthy development of our core initiatives. NetEase has been especially for 28 years, and our commitment to creating high-quality products has remained unchanged. We'll allocate more resources to evergreen titles and provide more opportunities to teams who are creative and willing to innovate. Operator: Your next question comes from Lincoln Kong with Goldman Sachs. Lincoln Kong: [Foreign Language] [Interpreted] So my first question is about AI. So we have actually seen some of the games like Eggy Party or Justice Mobile has already integrated with AI applications. So going forward, for our existing portfolio and the new games, how should we think about AI can bring additional opportunities to our gamers? And the second question is in terms of the future new games. Given that the company now focus more on quality of those new games, so how should we think about the potential important game genre going forward? Specifically like for the shooting game genre globally, I think we have seen a rapid growth. So how would NetEase sort of differentiate ourselves in this shooting genre? William Ding: [Foreign Language] Bill Pang: [Interpreted] Okay. I'll do translation. First of all, regarding the question on AI, we have been using AI in development and AI is very important in game development and operation, and we have accumulated tons of hands-on in this area. And compared -- especially compared to many of our peer companies from overseas, we have more hands-on experience in this area. We have deployed massive resources in the research of AI and how to use AI in the process of game development, innovation and operation. Actually, the user experience is the best answer to guide us on how we should deploy technologies. But we don't think we have time here today for the detailed specific user experience explanations. Regarding your next question on the future direction of product, as we explained, we'll focus on the concentrating resources on building really high-quality flagship products, the product that we have conviction on the success. We won't do aggressively blindly open many projects. That's not our direction. We'll be focused on -- we'll do focused targeted approach to the new project. And in the future coming years, we believe NetEase compared to most -- many other companies in our industry globally, we are one of the companies that has clear vision on the future in future products, and we will make ground breakthroughs. Operator: Your next question comes from Yang Liu with Morgan Stanley. Yang Liu: [Foreign Language] [Interpreted] Let me translate my question. My question is about the Sea of Remnants this new game. Could the management share about the R&D development and expected launch timing? And what will be the commercial strategy for this title? And is there any direct peers or competitor for this game? And what NetEase can do to differentiate? William Ding: [Foreign Language] Bill Pang: [Interpreted] I will do the translation. First of all, the Sea of Remnants is a very important product to us. We focus on that very much. The team has very rich development and operational experience in the company. And the game is built on our self-developed game engine will support both PC, mobile and console as well. On the detailed gameplay and content, we believe we have a clear decisions on how to do that. We believe it's going to be a fresh experience in the market. It's going to be a multi-character cultivation kind of type, but not the traditional way. The sailing experience on the ocean as well as the rich combination between characters and classes, we believe it will bring a fresh unexperienced ocean experience to the gamers. Operator: And that concludes the question-and-answer session. I would like to turn the conference back over to Brandi Piacente for any additional or closing remarks. Brandi Piacente: Thank you once again for joining us today. If you have any further questions, please feel free to contact us directly. Have a great day. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Helen Gordon: So good morning, everyone, and welcome to Grainger's full-year results. Once again, we have delivered an excellent performance as we continue to deliver strong growth in our earnings, in our income and in our margin with high occupancy and a Grainger product, which continues to deliver for customers and shareholders. So the agenda this morning is that I will take you through the highlights, Rob will take you through the financial results, including our compelling growth to come and our conversion to REIT status. And then, I'll go through our investment case, the strength of our market and give you a quick insight into one of our new openings. And I will explain how we're well positioned for the changes to renting that are due to come in from next May and how we are driving shareholder value. We'll then have time for Q&A with members of the senior leadership team. So I'm pleased to tell you that Grainger is now the U.K.'s leading residential REIT. It feels quite good to say that. We are a build-to-rent investor operator with a sector-leading portfolio of high-quality homes in the best location. Our fully integrated operational platform, enhanced by technology, is capable of scaling. And this operational platform gives us a real competitive advantage in a sector with high customer interface and where operational excellence is a barrier to entry. Our investment case of a real estate asset class that delivers inflation linking returns is proven. As you can see here, consistently tracking wage growth and as is our proven strategy, we continue to deliver earnings growth to our shareholders and great homes to our customers. So looking at our earnings growth, we continue to target GBP 60 million of earnings in full year '26 and GBP 72 million by full year '29 and that's a 50% growth from full year '24. There are 2 simple reasons. We have sustainable rental growth outlook, and we have strong underlying fundamentals. And our strong earnings growth will be delivered after absorbing higher interest rates. We're expecting rental growth to continue at 3% to 3.5%. And we have a resilient customer base to support this. We have strong underlying market fundamentals with regulatory certainty and no rent controls and growing demand and constrained supply. We're reducing debt, which Rob will cover later, and we have topline growth, and we are improving margin. So turning now to the highlights of our results. We've delivered another outstanding performance. Our net rental income is up 12%. Our like-for-like rental growth is up 3.6%, and we've delivered 12% earnings growth and 10% dividend growth. And our NTA, our asset value, has remained resilient at 298p per share. We continue to deliver operational excellence. We've delivered high occupancy at 98.1%, and we've secured strong customer retention at 61%. And we have good customer affordability. On average, our customers are paying 28% of their income on rent, which is below the market average. And we are delivering a sector-leading gross to net at 25%. That's a 75% rental margin. So overall, an excellent set of financial and operational results. We continue to optimize our portfolio through sales of older or non-core assets and our investment in our new products. We have recycled GBP 1.9 billion of assets since the start of our strategy, and we've sold GBP 640 million since September '22. We've been selling in line with valuations and proving the accuracy of valuations. And importantly, we have over GBP 900 million in non-core assets to fund our future growth and our deleveraging. We are a highly cash-generative business with over GBP 200 million in operational cash flows each year. And as we recycle out of this low-yielding non-core assets, we secure attractive income accretion. We have a very clear capital allocation strategy. We are always focused on maximizing returns for shareholders. Our current priority is to fund our committed pipeline of GBP 343 million, and there's just GBP 130 million remaining to invest. And it is this committed pipeline, which will deliver our earnings growth to GBP 72 million by full year '29, a 35% increase from today. And as a reminder, a 50% increase from full year '24. Then, we are deleveraging in line with plan. Our debt is fixed at low rates to full year '29. So this deleveraging will support our earnings growth and ensure an optimal capital structure. And as we continue to recycle, we can look at stabilized acquisitions, and we have also our secured and highly attractive, forward-funded and direct development opportunities. So we have further opportunities in our planning and legals pipeline. We have all these opportunities for future growth. And of course, we will assess these against other opportunities to return capital to shareholders. We have a capital allocation strategy delivering for shareholders in the short, in the medium and in the long term. So turning to our portfolio and pipeline, GBP 3.5 billion, that's over 11,000 homes. And our portfolio of regulated tenancies is just over GBP 0.5 billion, and our future pipeline is GBP 1.3 billion. Our committed pipeline is immediate. Of the GBP 343 million, there was only GBP 130 million to invest. And indeed, last week, we completed on 374 homes in Bristol, one of our strongest cities and with more homes being delivered in our pipeline in London and Guildford. We have a highly attractive secured pipeline for further growth, including our strategic JVs, and we have a portfolio of sites going through the planning process. So we have optionality for the future. And we have clear visibility on our earnings growth and our EBITDA margin expansion. Our growth story is compelling. Yes, this is my favorite side. We've delivered extraordinary growth over the last 10 years. We've been consistent in our delivery, growing our net rental income on average 14% per annum. Our EPRA earnings have grown dramatically through the development of our platform and the efficiency it delivers. Our EBITDA margin has improved from 19% to 56%, with more to come. So this momentum is continuing with strong growth in our income, in our earnings and with further EBITDA margin expansion. So in summary, we've delivered a strong performance. Our operational highlights are our conversion to a REIT, 98.1% occupancy achieved, robust rental growth secured at 3.6%. And now, we have the Renters' Rights Bill passed. We have real clarity on our future regulatory environment and no rent controls. We've delivered a strong financial performance, a 12% growth in our net rental income, 12% earnings growth and a strong sales performance and a 10% dividend increase. We have a very clear focus on how to drive returns for our shareholders. We're focused on maintaining occupancy and rental growth. We're focused on delivering strong compounding earnings growth. We're focused on cost efficiency and reducing net debt, and of course, continuing to deliver high-quality homes and great customer service. And I'll now hand over to Rob to take you through the detail. Robert Hudson: Thank you, Helen, and good morning, everybody. Today, I'm going to run through the financial performance for the year and outline the very strong earnings growth that we have to come. FY '25 has been another period of excellent growth, demonstrating Grainger's resilience and our market-leading position. We've continued to deliver a strong operational performance with like-for-like rental growth of 3.6% and occupancy at 98%. Overall, total net rents continued their strong growth, up 12%. This resulted in strong earnings growth with EPRA earnings up 12%, and we're still targeting our GBP 60 million guidance for the coming year and a 35% increase to GBP 72 million by FY '29. Adjusted earnings were broadly flat at GBP 91 million, as the sales profits from our reducing regulated tenancy business are replaced with rental income from our pipeline. Our dividend per share increased by 10% to 8.3p, and EPRA NTA was resilient in the period at 298p. Now, looking at the income statements in more detail. Our overall like-for-like rental growth was strong at 3.6%. Stabilized gross to net was again flat at 25%, demonstrating our ongoing focus on cost efficiency. Overhead costs were up 4% in the year, in line with wage inflation. And looking forward, we're targeting GBP 2 million of cost savings with a GBP 1 million benefit in FY '26. So overall, this will mean that overheads will not grow for the next 2 years. Interest costs increased largely due to lower levels of capitalized interest and a slightly higher average interest rate during the year. EPRA earnings continued their strong growth trajectory, up 12%. And as a reminder, now, we're a REIT, this will be our key earnings metric going forward. As expected, sales profits were lower at GBP 37 million, in line with the reduction in the regulated portfolio size, and our sales are performing well and in line with book. Other adjustments include derivative valuation movements and a fire safety provision, which reflects a revision of cost estimates. Now, looking at the moving parts of our 12% increase in our net rent for the period. Strong occupancy and like-for-like rental growth of 3.6% contributed GBP 2 million. And this was driven by strong performances in both PRS at 3.4%, which is stabilizing back at long-run averages of 3% to 3.5% and our regulated portfolio of 6.6%. The strong lease-up performance of our recent pipeline deliveries has contributed an additional GBP 18 million of net rent. Our asset recycling program offset this growth by GBP 6 million. Looking forward, we'd expect rental growth to continue in line with the long-term average of 3% to 3.5% in FY '26. With the occupational markets back to normalized levels, we expect to see some seasonality in rental growth return with half 2 stronger than half 1 growth. This chart shows the key movements in NTA over the course of the year. Our EPRA NTA was maintained at 298p per share. Net rents and fees added 18p, with overheads and finance costs offsetting this by 11p. Overall, our portfolio valuation for the period was up 0.7%. And the PRS portfolio saw 1.1% valuation growth with ERV growth of 3.2% and a modest outward yield shift on some assets. Valuations on the regs portfolio were down 0.6%, demonstrating their resilience, and further details of the valuation can be seen on Page 45 in the appendices of this presentation. Now, turning to net debt. Net debt was broadly flat during the year at GBP 1.46 billion, in line with our plans. Operational cash flows remained strong with GBP 205 million generated and with disposals contributing GBP 169 million net of fees. The investments in our build-to-rent portfolio has now started to moderate, as we work our way through the committed pipeline, and there was GBP 133 million invested during the year, with a further GBP 130 million spent on the pipeline, and the majority of that being in FY '26. In line with our previously discussed capital allocation strategy, we'll continue to generate sales at current levels. These proceeds will be used to fund the committed pipeline and then go towards lowering leverage by GBP 300 million to GBP 350 million. Going forward, we, therefore, expect net debt to remain broadly flat for the coming year before starting to delever from FY '27. And our balance sheet remains in great shape. Both net debt at GBP 1.46 billion and LTV at 38% were broadly flat over the year, in line with our plans. We maintained strong liquidity and a robust hedging profile with rates fixed in the mid-3% range. As previously highlighted, we plan to reduce our net debt by GBP 300 million to GBP 350 million over the next 4 years, as we continue to sell through our lower-yielding non-core assets. We regard this as very deliverable given our continued strong performance on sales. This will see our net debt, it's around GBP 1.1 billion, and that will equate to around an 8x net debt-to-EBITDA and an LTV of 30%, which we see as the right capital structure in this current interest rate environment. As net debt is brought down over the medium term, this will help mitigate the impact of rising finance costs, as our low rate hedging rolls off, and that ensures continued strong earnings growth. REIT status has been a long-term ambition since the start of our strategy, and I'm pleased to say we successfully converted to a REIT back in September. The benefits to the business of being a REIT are substantial, as we no longer have to pay corporation tax on the profits of our build-to-rent business. And in the first year of FY '26 alone, this is expected to generate GBP 15 million of savings with this increasing as we deliver further growth. We see the resilient growth that our residential business delivers is arguably the perfect fit for the REIT structure with no impact on our business model or our strategy. And we're firmly committed to delivering a strong progressive dividend. Now, we're a REIT, our dividend policy will be to distribute at least 80% of EPRA earnings. In FY '26 and FY '27, we'll have a reg profits top up. Beyond that, we'd expect the dividend to be fully covered by our EPRA earnings. This will see a mid-single-digit growth over the next 4 years, as we absorb the full impact of interest rate increases. As a reminder, beyond the higher interest rate headwind, we're a business that will deliver strong organic earnings and dividend growth of around 5%, simply as a result of our 3% to 3.5% rental growth and operating leverage, and that's even without any further growth in scale. It's been a strong year of earnings growth in FY '25, but there is a lot more to come. The lease-up of our recent deliveries as well as the remaining committed pipeline will deliver an additional GBP 24 million of rent over the next 4 years. As a reminder, this pipeline only requires a further GBP 130 million of CapEx to deliver. This strong top line growth will ensure we continue to deliver very strong earnings growth, and we're targeting EPRA earnings guidance of GBP 60 million next year and a 50% increase in 5 years from FY '24 to GBP 72 million in FY '29. We see this growth as exceptionally strong, particularly as it's delivered through a period in which we'll absorb the full rebasing of our interest cost to market levels, which we currently assume to be 5.5%. The bridge on this slide breaks down the key drivers, including the benefits of like-for-like rental growth assumed at 3% to 3.5%. The yield pickup from recycling out of our lower-yielding reg's assets into our build-to-rent portfolio, scale efficiencies with EBITDA margins growing to over 60% and the mitigating impacts of reducing debt on higher interest rates. This growth is locked in with upside from delivery of further pipeline schemes or stabilized acquisitions. So to summarize, we've continued to deliver a very strong operational performance with rental income increasing by 12% and EPRA earnings also up by 12%. This growth is being delivered from a position of real financial strength. Our liquidity and our balance sheet are strong, giving us the flexibility through disposals to reduce our debt by GBP 300 million to GBP 350 million over the medium term, as we reinvest into our committed pipeline. We maintain our EPRA earnings guidance of GBP 60 million by FY '26 and GBP 72 million by FY '29 from the delivery of just our committed pipeline alone, whilst also fully absorbing the headwind of higher interest rates. This earnings growth is a major component of our medium-term total returns target of 8%, which we see as a low volatility return and which remains unchanged, assuming constant yields. And at the current share price, this would equate to a 12% return. With that, I'll now hand you back to Helen. Helen Gordon: Thank you, Rob. In this section, I'm going to go through the 5 fundamentals of our investment case, and then, look at the performance of one of our new openings and also the Renters' Rights Act and our shareholder value creation model. Our investment case is compelling. We invest in a low-risk, low-volatility asset class with resilient and proven growth. We're in a market with exceptional fundamentals of housing supply shortages and growing demand. Our customer base is strong with a positive outlook for rental growth. And we now have certainty around our regulation following Royal Assent of the Renters' Rights Act. We have a sector-leading operational platform supported by technology, and this gives us great data and insights, and I'll now look at each of these in a little more detail. So residential is a low-risk investment with sustainable growth. Yes, it's lower yielding than some asset classes, but that is because it's lower risk. It has consistent year-on-year rental growth, and it has delivered above inflation rental growth. And residential rents and capital values have outperformed commercial real estate. This is underpinned by a supply shortage of homes. Our market fundamentals are strong, a shortage of supply and a growing population. We have in this country an estimated shortage of 4.3 million homes. And of the 5.6 million private rental homes, still only 2.5% are owned by professional build-to-rent landlords. Private landlords continue to exit the market, reducing supply, and fewer homes are being built. Recent revisions of the household growth show a 10% increase in household in the 10 years to 2032 and rental demand is set to grow by 20% in the 10 years to 2031. The structural supply and demand imbalance that underpins our sector has never been more acute. Our customer base is strong. On average, a Grainger customer earns around GBP 38,000 per annum. And the average Grainger household income is GBP 62,000 per annum. Our core demographic is in the 20 to 48 range, which tends to see the fastest earnings growth. Our customer base is very diverse. And as a reminder, we cap our student numbers. This diverse customer base and healthy affordability gives us confidence on future rental growth and occupancy. Now, last month, the Renters' Rights Bill achieved Royal Assent. This means we now have certainty on the regulatory outlook, and importantly, it rules out rent control. We contributed our insights to government throughout the process. The act is designed to raise standards, and we at Grainger are already delivering high standards. The proposed standards are consistent with our business model and our operational platform. And our customer-centric approach is embedded in Grainger's business. So the 5 key changes here are the abolition of no fault evictions, annual market rent reviews, pet-friendly policies, open-ended tenancies and decent home standards. And these align with our business model or current practices. The changes in our processes to comply with the act are already well advanced. We know the main measures will be introduced from the 1st of May 2026, and we're ready. So importantly, we now have certainty that rent controls do not form part of this important act. The final piece of our compelling investment case is our operational platform and how we deliver operational excellence. We've grown our offer supported by technology, and this gives us great insights into what our customers want. In our operational excellence, we have moved from instinct to insight. We use AI-driven sentiment analysis to inform our operations. And the data tells us what's important to our customers and what they want from a home. Now, this strengthens both our leasing and our customer retention. Our intuitive customer app as well as our friendly on-site residence team drive our excellent engagement and performance scores, and we sit ahead of many big brands in customer satisfaction and Net Promoter Scores. Building trust is no small feat for a landlord. Now turning to a recent case study, our latest opening in London is Seraphina at Fortunes Dock and it's opposite Canning Town transport interchange. Now, our commitment to this scheme was some time ago. However, even with outward yield movement, rental growth has more than compensated. It's a high-quality scheme, and it was delivered into our best letting season, which is late summer. And we allowed 12 months to lease up in our underwriting. But the lease up here in the first couple of months takes it to 88% let. Rental growth is ahead of underwriting, and the scheme forms part of 3 buildings: Argo, which was launched in 2017; Nautilus, which was launched in 2023; and Seraphina. And whilst there is a slight rental difference, our cluster strategy delivers consistent service. What I'm so proud of is that the rent differential between Argo and Seraphina is only GBP 60 a month. And that is evidence of the low depreciation and resilience of our product. Unlike other real estate asset classes, residential has lower depreciation and greater resilience. As a reminder, Argo is 8 years old, all refresh costs have gone through the gross to net, showing its resilience and lack of depreciation. Residential investment run well offers a true net yield. Grainger's shareholder value creation model is simple and clear. We're investing in high-quality rental homes in great locations with strong demand, and this investment is low risk. We have inflation linking rental growth and the efficiency of a sector-leading operational platform. We are expanding our EBITDA margin, and we have strong growth opportunities secured for now and the future. Our growth is funded. We have demonstrated our track record of disposals. We have a strong balance sheet, and we are lowering leverage. So what this means is that this proven model is built to deliver shareholders' excellent risk-adjusted returns. Thank you. I now invite you to ask questions, and I'll be joined by Rob Hudson, our Chief Financial Officer; Mike Keaveney, our Director of Land and Development; and Eliza Pattinson, our Director of Operations and Asset Management; and other senior leaders in the room. So anyone listening in, you can submit questions through the webcast, but we're going to take questions in the room first. Helen Gordon: Chris, I've got my notepad because I know it will be a 3-parter. Christopher Millington: I've learned the lesson there. Chris Millington at Deutsche. First one I'd like to ask is about this deleveraging and kind of how the strategy is working. So if we don't -- let's say, we don't get such a ramp-up in finance costs going forward, would you still look to delever to that extent? Or should we think it more you're managing the finance cost within the mix of earnings? I'll stop there and go again in a minute. Robert Hudson: Yes, I think we'd always retain some level of flexibility, Chris. So if indeed, the outlook improves and interest rates start to fall a bit, we've modeled on current forward curves of 5.5%, then we'd obviously always aim to have a little bit of flexibility because we are thinking principally around preserving strong earnings growth in the business. Christopher Millington: Very clear. Assuming your assumptions on the 5.5% are correct in the GBP 300 million, can you just talk about what capacity you've got to invest? What -- how should we think about the secured pipeline coming through and beyond and maybe stabilized acquisitions which you mentioned? Helen Gordon: Yes. So you saw the slide, Chris, which actually had over GBP 900 million of capacity. And obviously, that sort of will grow over time. The main components of that are our regulated tenancy portfolio that we're working through strategic land portfolio and other older, non-core assets. So even with deleveraging, completing the pipeline because of our strong operational cash flow, we've got capacity to do our secured pipeline. Christopher Millington: And when do you think we should start seeing that get committed to? Helen Gordon: I think, as I mentioned, we'd look at that commitment in relation to all other options within the portfolios that deleveraging and also the investments in our existing pipeline. But obviously, as the Seraphina example shows, we make a commitment a couple of years out. Christopher Millington: And then I just wanted to explore the valuation backdrop. Perhaps just a little bit of detail as to kind of what assets, regions drove the slight outward yield shift? And just what you're hearing from the value as in what you feel about the outlook for yields? Helen Gordon: Yes. I mean, the interesting thing is how strong the investment market has been maintained for residential assets. We've seen some significant transactions. It was a few outward yield movements on some of our more regional portfolio, but it was literally 10 basis points outward yield movement there. And there were a couple of asset-specific movements. But overall, yields have been stable for the last couple of years, if you look at the valuers' charts. Eleanor Frew: Eleanor Frew from Barclays. So occupancy levels are high, rental growth slowing a little. Can you talk about how you're thinking about balancing the 2 moving forwards? You're likely to prioritize keeping occupancy. And then maybe any comment on incentives used over the year and any planned? Helen Gordon: Yes. Great question. I would -- that occupancy figure is exceptional at 98.1%. We model our business on a lower occupancy. What I always say is important is getting real estate income producing. It's probably one of the most important things you can do. That's sort of rather than keeping occupancy to drive topline rental growth. The new lets' figure that you saw in the numbers reflected the fact that in order -- because we got some late deliveries, if you like, into the year, we wanted to make sure that we went into the winter season with a really high level of occupancy. And so we did offer some incentives. So that blended rental growth just recognizes some small incentives that we made there, but occupancy and rental growth is something that the senior leadership team look at every single Monday morning in a lot of detail. So it's a really careful balance, and I think that anyone that's not looking at both might miss the picture. Eleanor Frew: Great. Then, we understand the market participants that students are increasingly turning to BTR instead of PBSA. Is that something you've seen? And have you seen any pressure on your cap? Helen Gordon: Students have obviously liked build-to-rent for a very long time. Our business model is to build long-term communities, which are most resilient, and therefore, have higher retention rate since students obviously churn more readily. So we've kept our buildings to make sure that students are only a small proportion and that means that we don't get that big summer churn when they finish their courses. But there's another reason for it as well, which is just that mix of young professionals and students doesn't always mix too many parties, I think. But we have -- there are certain cities where obviously, we've come under pressure to let more to students, and it's just really keeping very, very disciplined in order to ensure that we keep that balance of the community and prevent a high level of churn. Thomas Musson: It's Tom Musson at Berenberg. You just mentioned on rent growth for the year ahead, I think to expect some sort of normal seasonality and growth higher in the second half. Can you just remind me what sort of dispersion is in terms of rent growth first half versus the second half? Helen Gordon: I'm going to ask Rob to answer this in more detail in a moment. But one of the things I would say is that we've had quite an unusual market for the last few years. So -- this company is over 100 years old, and we always know that our best leasing season is the sort of late summer into the autumn. What happened during the pandemic and post pandemic is that, that changed with the way that the market went into fluctuation. And now, we're actually seeing it return to normal. But Rob, why don't you give some more detail on that? Robert Hudson: Yes, absolutely. So the first point is we continue to guide for our long run rate of 3% to 3.5% for the year ahead. And that's because we're sitting with very healthy levels of affordability at 28%, which has been constant at that level for quite some time. And, of course, the fundamentals of demand and supply with supply shrinking and demand remaining strong. So, as Helen said, the market obviously has been quite exceptional for the past few years coming out of COVID. But we could expect something in the order of anything up to 100 basis points spread between the first and the second half, but still very much guiding towards the long run rate for the year ahead. Thomas Musson: I just had a second one. You mentioned Bristol launched last week. Can you say -- I don't know if you have any early insight into how that's going? Any early demand there? Any chance that can be a successful lease-up as Seraphina? Helen Gordon: We haven't actually launched it yet, but we -- there's a good buildup, and it sits within a really good cluster. And so we've got good insight into it being a very, very strong rental city and good sort of indication of demand. Eliza, do you want to say anything on that? Eliza Pattinson: Yes. I guess, just going back to seasonality, we've done extremely well in all of our lease-ups in Bristol, but we are launching this building into the low seasonality of lettings. So we'll be doing prelaunches, pre-lets, and we have got good interest at the moment. Helen Gordon: Neil? Neil Green: Neil Green from JPMorgan. Just one, please. There were some initiatives announced in London, I think, last month around speeding up housebuilding activity, focus on the affordable element, but interested to get your take on whether you think this is the catalyst and also whether there's changed anything for Grainger when it comes to the future pipeline, please? Helen Gordon: Yes. I'm going to turn to Mike to talk about this because he's pulled all over the guidance on it. But -- I mean, I think it's a really strong signal of how difficult people are finding it to actually build in London. And just to give you an idea, I think the stat that was out was -- new homes delivered in May was 19. That's total new homes. So you can imagine they do need to stimulate housebuilding in London, but Mike, why don't you talk about the detail? Michael Keaveney: Sure. Thanks, Helen. So what was announced really were emergency measures around the fast track process for getting consents. And obviously, they dropped the amount of affordable housing that they expect from sites and also within that announced grant levels for the affordable housing. But it's really a signal that the GLA are listening to the fact that the housebuilding sector in London is under pressure from a viability perspective. And it's still going to be consulted through in the next 6 weeks or so. But I think it's a really welcome step that they realize, and it's not just build-to-rent, obviously, it's the house builders generally, that their viability models are struggling. And the right lever is affordable housing and grant. And so we welcome that. Helen Gordon: Alastair? Alastair Stewart: Alastair Stewart from Progressive. A couple of questions related to that. Recently, have you -- I know you -- your performance with the building safety regulator has been better than most. But what's your reading of the overall [Audio Gap]. Michael Keaveney: Definitely made a difference, and the big difference is engagement. So now developers in that process have someone they can speak to and talk about the process they're going through. And that's made a massive difference, I'd say. We recently achieved Gateway 2 approval with our partner in Guildford, and that was delivered in 22 weeks, which is much closer to the 12 weeks they originally started with. So we do see -- again, they are listening. They are trying to solve the problem and solve the problem without compromising safety. So yes, the direction of travel is good for that. In terms of the second question, the principle behind that is that there will be a dearth -- there's a backlog of residential development that needs to be -- that will get released through Gateway 2, and suddenly, it will all arrive at once. I think the emergency measures tell you something about that likelihood. The reality is you have Gateway 2 as a barrier, which is now being traversed. But after that, you have a viability issue on certain schemes around London, mainly with the house builders. So I -- and you'll see that the RPs are pulling back from development. So we don't see a massive increase in house building driving inflation. We see a steady progression of house building. Helen Gordon: James? James Carswell: James Carswell from Peel Hunt. Maybe a slight follow on from Chris's question. But just in terms of credit spreads and margins, it feels like they've probably come in looking at what some of the other REITs have done recently. I mean, where do you think -- if you were refinancing today, I appreciate you're not, where do you think your kind of marginal credit spread would be? Robert Hudson: Yes. So based on our internal forecast and current rates, the all-in rate would be around 5.5%. So I think it's obviously true to say as obviously gilt yields have moved, then we've seen a country movement on credit spreads, but the all-in remains around 5.5%. James Carswell: And then maybe just in terms of bigger picture, I mean, funding the kind of the next, I guess, phase of Grainger in terms of opportunities you're seeing, acquisitions, yes, how should we think about funding those? Because the non-core assets are kind of being used for the current pipeline and deleveraging. And is now a good time to maybe think about third-party capital? Is that under consideration? Helen Gordon: We do look at third party, and the Board discuss it, the pros and cons of doing that. But James, we've got a lot of capacity and a big pipeline to go at that we can actually fund ourselves. And so it's obviously -- but we talk to partners all the time. And if there is a right opportunity. And, of course, we do have a joint venture with TfL on our strategic joint venture. So we are known as being good partners. So I wouldn't rule it out. But -- I mean, the great thing is we have clear visibility on how we can fund that secured pipeline. Any other questions? Kurt, you are going to fire some from the webcast. Kurt Mueller: There are a few that have come in online. The first is from John Vuong, Van Lanschot Kempen. The #2 key positive drivers for NPS is the quality of the property. But at the same time, you mentioned that your assets have low depreciation and require minimal CapEx. How can you reconcile these 2 statements? Helen Gordon: It's because we're constantly on top of them, and meaning, that we're refreshing all the time, and we're doing that through the 25% gross to net. So it's very different from, say, our European counterparts that do put their refresh costs -- capitalize their refresh costs. And just as a reminder to John, the majority of our portfolio has been built since 2017. So it is actually a very, very new portfolio. And when we designed it in our specification, we looked very, very carefully at the long-term use of finishes, which is why we invest in high-quality finishes to make sure it doesn't deteriorate as quickly. Kurt Mueller: Next question is from Andres Toome of Green Street. What is the impact to yield on cost for schemes benefiting from lower affordability housing quota and the community infrastructure levy in London? We partly answered that, I think, before. And do you see any opportunities emerging from these changes? Helen Gordon: Yes. So -- I mean, most of our schemes have been through the planning process. But, Mike, why don't you answer this? Michael Keaveney: Yes. I think what lies behind the question is whether lower affordable housing and say, increased grant and that kind of combination would lead to greater returns, which is not quite the point of what the emergency measures are trying to do. The emergency measures are trying to bring back viability to housebuilders so that they make their returns. If you created a scenario where super normal returns were delivered through that, they would pull back. And so really, the benefit is that the housebuilders, the general housebuilders should be able to hit their viability returns, not make supernormal profits. Kurt Mueller: One final question from online. Dr. Francis Jardine, I believe, a private shareholder. "I have investments in over 20 REITs, who pay quarterly dividends, does the Board of Grainger intend to consider paying quarterly dividends going forward? Doing so is only a question of managing cash flow". Helen Gordon: We pay -- obviously, we pay half yearly dividends, as a reminder. I will make sure that the Board discussed it at the next meeting. Kurt Mueller: That's it from online. Helen Gordon: Any other questions in the room? Chris, another one? Christopher Millington: It's as I was getting through to the appendix on the presentation. But I notice now we've got London and Southeast net initial yields, quite tight versus the rest of the country, actually, a little bit below where you're holding in the Southwest. I think it's 4.3%, place 4.1%. What do you think of the relative attractiveness of London now you've seen that sort of convergence? Helen Gordon: Yes. I think it comes from the fundamentals of our sector, which is you've got a shortage of supply across the whole country. So you've got occupancy, and therefore, sort of they have converged the biggest -- I haven't put it in this year, but it is in the appendices. It is my chart where I show where is the best rental city. And the best rental city for obvious reasons is London. So I would argue -- I have to be careful, I think, we've got the values in the room, but I would argue that the London yields are too cautious. For most of my career, London yields have been significantly lower than where they sit today. No more questions. Thank you very much for getting up early and coming and joining us this morning. Any other questions, we will be around for a little while before I think another property company comes in here. So thank you.
Operator: Thank you for standing by, ladies and gentlemen, and welcome to Tsakos Energy Navigation Conference Call on the Third Quarter 2025 Financial Results. We have with us Mr. Takis Arapoglou, Chairman of the Board; Dr. Nikolas Tsakos, Founder and CEO; Mr. George Saroglou, President and Chief Operating Officer; and Mr. Harrys Kosmatos, Co-CFO of the company. [Operator Instructions] I must advise that this conference is being recorded today. And now I pass the floor to Mr. Nicolas Bornozis, President of Capital Link and Investor Relations Adviser to Tsakos Energy Navigation Limited. Please go ahead, sir. Nicolas Bornozis: Thank you very much, and good morning to all of our participants. As you mentioned, I'm Nicolas Bornozis, President of Capital Link and Investor Relations Adviser to Tsakos Energy Navigation. This morning, the company publicly released its financial results for the 9 months and third quarter ended September 30, 2025. In case you do not have a copy of today's earnings release, please call us at (212) 661-7566 or e-mail us at ten@capitalink.com, and we will have a copy for you e-mailed right away. Please note that prior to today's conference call, there is also a live audio and slide webcast which can be accessed on the company's website on the front page at www.tenn.gr. The conference call will follow the presentation slides, so please, we urge you to access the presentation slides on the company's website. Please note that the slides of the webcast presentation will be available and archived on the website of the company after the conference call. Also, please note that the slides of the webcast presentation are user controlled, and that means that by clicking on the proper button, you can move to the next or to the previous slides on your own. At this time, I would like to read the safe harbor statement. This conference call and slide presentation of the webcast contains certain forward-looking statements within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties, which may affect TEN's business prospects and results of operations. And before turning the call over to Mr. Arapoglou, let me take the opportunity to congratulate Dr. Tsakos for your recent recognition in New York by the Philoptochos Society of the Greek Orthodox Cathedral, paying tribute to your personnel and the group's contribution to the Global Maritime Industry to Philanthropy, Education and Community Welfare. Congratulations. And at this moment, I would like to pass the floor to Mr. Arapoglou, the Chairman of Tsakos Energy Navigation. Please go ahead, sir. Efstratios-Georgios Arapoglou: Thank you, Nicolas. Good morning, and good afternoon to all. Thank you for joining us today for the announcement of the 9 months and third quarter results of 2025. No surprises. Our business model continues producing sustainable profits, beating estimates, as you saw, while at the same time, building up a solid stream of $4 billion of accretive future contracted revenue. This provides stability and more predictability in our results going forward, as we explained many times in the past and mitigate volatility in our stock price while maintaining a very solid cash position of nearly $300 million. These results are a product of high fleet utilization, best-in-class operating efficiency by now a trademark for TEN. We're reminding the market of our record 20 Vessel Newbuilding Program with deliveries starting Q1 2026 until Q4 2028, 10 of which the shuttle tankers with long-term accretive employment. The program includes, of course, 3 VLCCs, materially growing our presence in the sector -- in this sector of the market. At the same time, and as mentioned earlier, in earlier communications, we are focusing on selling our older tonnage in order to continue maintaining a young and very modern fleet. Lastly, as mentioned in our press release, after the $0.60 per share interim dividend in July, we declared payment of an additional $1 per share dividend. This will be paid in 2 equal tranches of $0.50 each, one in December 19, 2025, and one in February 19, 2026, in order to, going forward, gradually align dividend date to the timing of audited results as Nikos Tsakos will explain later. At today's stock price, the total dividend of $1.60 per share for the year represents a very attractive yield of over 4%. So congratulations once again to Nikos Tsakos and his team. Their proven track record and business model in a market with stronger tanker fundamentals and turbulent geopolitics. This ensures continued success. Thank you very much, and over to you, Nikos. Nikolas Tsakos: Chairman, thank you, and welcome, everybody, to our 32nd year 9 month call. First of all, I would like to congratulate Clio Hatzimichalis for becoming a full -- she is our lawyer keep us out of trouble for all this year. So we're very happy for her to join the main Board of the company and looking to spend much more time, productive time. Well, in September, when we reported our 6-month results, I think we were all satisfied. They were good results. We did not expect the market to take -- to become even better, even stronger. And that's where we are today. I think we're perhaps more than 50% higher on the spot market than we were back in September, which we were very satisfied having gone through the typical seasonal period and being with a lot of profitability. We had a couple of months of lull waiting for the developments of the IMO saga, I would say. I think rightly so, the postponement has been achieved, and that allows the shipowners and the related parties to this industry to be able to put more input and find solutions going for the -- going forward. So I think we welcome this development. Since that development has put the world in -- at peace, the end of too much tariffing each other has also been achieved and the market has gone from strength to strength. We are seeing a market which has limited supply of tonnage. And all our vessels right now are in very high demand. I was glad that we, of course, were way ahead of -- or beat the estimates, and we're looking forward because I think the quarter we're going through now is also going to be a very strong quarter. We just concluded our fourth long-term profit sharing almost arrangement today on our VLCCs with a very accretive minimum rates, minimum rates that we would be happy to have as fixed rates many years before, and that would be a minimum rate and then with unlimited upside for the company. And with this part of good news, I will ask George Saroglou, our President, to give us a quick update of what has happened in the last 9 months. George Saroglou: Thank you, Nikos. We are pleased to report today on another profitable quarter. Tanker markets have remained healthy during the course of the year. And as Nikos mentioned, energy majors continue to approach our company for time charter business. Since the start of the year, we have 40 new time charter fixtures and extension of time charters. And today, we have a backlog of approximately $4 billion as minimum fleet contracted revenue. We have a 32-year history as a public company. From 4 vessels in 1993, we have turned every crisis the world and shipping has faced through the years into a growth opportunity. And we have faced many crisis since the start of the new decades, a lot of which we did not actually expect. We faced a global COVID crisis in 2020 with lockdowns and unprecedented collapse in global oil demand. Then as the world was exiting COVID and we were trying to go back to normal, we've had the war in Ukraine in 2022 and a major -- which resulted in major disruption in energy trading. Then in late 2023, we had the attack of Hamas in Israel and the ensuing war and the continuous attacks of merchant vessels in the Red Sea until most of the shipping people decided not to cross the Red Sea anymore. The turmoil in the whole of Middle East, the unwinding of globalization, the introduction of tariffs in 2025, trade wars between the United States and China and the rest of the world and the decarbonization efforts of many global industries, including shipping, which, as you know, has the lowest carbon footprint when we compare while at the same time, it's the most efficient way to transport different land-scale cargoes around the world. So a lot to do in such a short time. So far, we have managed to navigate the TEN ship safely through these challenges, thanks to the company's crisis-resistant model. Let's hope we go back to more peaceful and normal times for all very soon. Today, TEN is one of the largest energy transporters in the world with a young, diversified, versatile fleet of 82 vessels, a pro forma fleet of 82 vessels. So in Slide 4, we list this pro forma fleet, and we start with the conventional tankers, both crude and product tankers. The red color shows the vessels that trade in the spot market, and we have 7 as we speak, and our new buildings under construction. With light blue, we have the vessels that are on time charter with profit sharing, 16 vessels and with dark blue, the vessels that are on fixed rate time charters, 39 vessels. In the next slide, we list the pro forma diversified fleet, which consists of our 2 LNG vessels and our 16 vessel shuttle tanker fleet. We are one of the largest shuttle tanker operators in the world with very young and technologically advanced vessels following the tender we won earlier in the year in Brazil, building the Samsung shipyard in South Korea, 9 shuttle tankers for Transpetro. We have 6 shuttle tankers in full operation after recently taking delivery of both Athens 04 and Paris 24, which commenced long time charters to an energy major. If we combine the 2 slides and account only for the current operating fleet of 62 vessels, 23 vessels or 37% of the operating fleet has market exposure, spot and time charter with profit sharing, while 55 vessels or 89% of the fleet is in secured revenue contracts, that is time charters and time charters with profit sharing. Our clients with whom we do repeat business through the years are the blue chip list of our world. ExxonMobil is the largest revenue client, followed by Equinor, Shell, Chevron, Total and BP. We believe that over the years, we have become the carrier of choice to energy majors, thanks to the fleet that we built, the operational and safety record, the disciplined financial approach and the strong balance sheet and financial performance. The left side of Slide 7 presents the all-in breakeven cost for the various vessel types we operate in TEN. Our operating model is simple. We try to have our time charter vessels generate revenue to cover the company's cash expenses, paying for the vessel operating and finance expenses, for overheads, chartering costs and commissions and let the revenue from the spot and profit-sharing trading vessels contribute to the profitability of the company. And thanks to the profit-sharing element for every $1,000 per day increase in spot rates, we have a positive $0.09 impact on the annual EPS based on the number of TEN vessels that we currently operate in -- have exposure to spot rates, and that is 23 vessels. We have a solid balance sheet with strong cash reserves. The fair market value of the operating fleet is approximately $4 billion against $1.9 billion debt, and the net debt to cap is around 47%. Fleet renewal and investing in eco-friendly greener tankers has been key to our operating model. Since January 1, 2023, we have further upgraded the quality of the fleet by divesting from our first-generation conventional tanker, replacing them with more energy-efficient newbuildings and modern secondhand tankers, including dual fuel vessels. In summary, we have sold 17 vessels with an average age of 17.3 years and capacity of 1.4 million deadweight tons and replaced them with 33 contracted and modern acquired tankers with an average age of 0.6 years and 3.4x the deadweight capacity of the vessels we sold. We continue to transition our fleet to greener and dual fuel vessels. We are currently one of the largest owners of dual fuel LNG-powered Aframax tankers with 6 vessels in the water. Global oil demand continues to grow year after every year. OPEC+ accelerated their voluntary production cuts, wars, economic sanctions, sanctions listed tankers and geopolitical events positively affect the tanker market and tanker freight rates. While the tanker order book remains at very healthy levels as a big part of the global tanker fleet is over 20 years. As we speak, almost 50% of the fleet is over 15 years and needs to be replaced soon. And with that, I will pass the floor to Harrys Kosmatos, who will walk us through the financial performance for the third quarter. Harrys? Harrys Kosmatos: Thank you. Thank you, George, and welcome, everyone, to our call. So I'll start with the 9-month highlights. So as the tanker markets continued their upward trajectory propelled by the crude sector and VLCCs in particular, available term rates for crude vessels merited a shift towards fixed employment in order to provide earnings visibility and further safeguard the cash generating ability of the fleet. To this effect and in line with the company's tried and tested employment model, bar some occasional aberrations for opportunistically capturing short-term fix reverted to the norm and operated most of the fleet during the first 9 months of the year in secured revenue contracts. In particular, with a fleet of almost 62 vessels in the water, similar to the corresponding 2024 9-month period, days under secured employment, that is vessels on fixed time charters and time charters for 47 provisions increased by 12%, while days on pure spot experienced a 32% decline. Of interest, days on profit sharing contracts alone increased by 18%, signifying TEN's commitment to maintaining a meaningful presence in the still lucrative spot market. Today, 23 vessels in the fleet, 7 on spot and 16 on profit shares do provide TEN with such operational latitude. As a result of this employment recalibration for the 9 months of 2025, TEN generated $577 million in gross revenues and operating income of $171 million, which incorporated $4.5 million of capital gains from the sale of 4 older vessels. Capital gains during the equivalent 2024 period were at $49 million from the sale of 5 vessels, highlighting TEN's policy to continue the strategic recycling of the fleet with newer, more eco-friendly vessels, new builders in the majority. In line with the above employment pattern and fewer vessels on dry dock compared to the 2024 9 months, 9 now from 11 last year, fleet utilization increased from 92.2% to 96.2% during the 2025 9 months. The fleet's Time Charter Equivalent rate for the first 9 months of 2025 settled at a healthy $30,703. During the 9-month period and in line with the reduction of the fleet's spot exposure explained above, Voyage expenses declined from $118 million in the 2024 9 months to $95 million now, a $23 million betterment. Charter hire expenses also decreased by $4.6 million, whilst vessel operating expenses increased by just over $7 million from the 2024 same period to settle at $155 million. As a result, operating expenses per ship per day for the 2025 9 months averaged still competitive $9,797, just 1/3 of the Time Charter Equivalent rate mentioned above. Depreciation and amortization came in at $126 million for the 9 months of 2025 from $118 million in the 2024 9 months, reflecting the introduction of 3 newbuilding vessels and the new depreciation calculation on the 2 vessels repurchased from lease structures. General and administrative expenses were at $32 million, reflecting the amortization of stock compensation awarded in July 2024, and scheduled to fully vest by July 2026. On the other hand, significant improvements were made in our interest costs as a result of declining global interest rates and despite $126 million increase in the company's debt obligations from the 2024 9 months due to new loans for TEN's Newbuilding Program. $72.7 million of interest costs now compared to $87.4 million in the 2024 9 months, a near $50 million saving. At the end of the 2025 9-month period with 61.2 vessels on average in the quarter and the 20 Vessel Newbuilding Program, our total debt obligations were at $1.9 billion, while net debt to cap stood at a comfortable 47.3%. TEN's loan-to-value for the 2025 9-month period was at a conservative 50%. Interest income came in at $7.7 million, a meaningful contribution. As a result of the above, the company during the first 9 months of 2025 generated a healthy net income of $103 million, which translates to $2.75 in earnings per share. Adjusted EBITDA for the 2025 9 months was at about $290 million, while cash at hand as of the end of September 2025, stood at a healthy $264 million after having paid $135 million in scheduled principal payments, $178 million in yard predelivery installments and capitalized costs and $20.3 million in preferred share coupons. And now let's move to the quarter 3 highlights. The third quarter of 2025 experienced similar movement in fleet employment patterns, which led to fleet utilization increasing from 92.8% in last year's third quarter to 94.8% during this year's third quarter, despite 4 vessels undergoing scheduled dry dockings during the period compared to 3 vessels in the 2024 third quarter. With vessels in the water slightly under the level of the 2024 third quarter, the fleet generated $186 million of gross revenues and $60.5 million in operating income, which included $8.9 million, call it $9 million of capital gains from the sale of 3 older vessels and not the similar performance from last year's third quarter, which did not incorporate any gains or losses from vessel sales. The resulting Time Charter Equivalent per ship per day was at $30,601, in line with the focus of diminishing our presence in the spot markets. Naturally, voyage expenses during the year's third quarter were lower compared to last year's third quarter, experiencing a $7.7 million decline to settle at $27.4 million. Operating expenses, on the other hand, increased in line with the introduction of 3 larger vessels and settled at $52 million. The resulting operating expenses per ship per day for the third quarter of 2025 came in at $9,904, again, ahead of the fleet average TCE and still competitive, thanks to the efficient and proactive management performed by TEN's technical managers. Depreciation and amortization were a touch higher from the 2024 third quarter levels at $42.4 million, again, reflecting the new vessel introductions and the 2 suezmax repurchased from sale and leaseback agreements. General and administrative expenses were $5 million lower from last year's third quarter at $9.2 million. Interest costs, again, following the downward trend in interest rates came in at $23.7 million from $32.2 million during last year's third quarter. In other words, savings of $8.5 million. On top of that, another $2.1 million in cash gains was realized through the interest income generated during the 2025 third quarter. As a result of all the above, TEN during the third quarter of 2025 reported $38.3 million of net income or $1.05 in earnings per share. The adjusted EBITDA during the third quarter of 2025 settled at about $96 million, reflecting the shift towards longer-term secured revenue contracts to meet our clients' increasing long-term demand. And with this, I pass it back to Nikos. Thank you. Nikolas Tsakos: Good. Thank you, Harrys. Since the figures are good, we didn't talk about them a lot. But as I said, I think we had good results in the first 6 months. The market had a long period, really expecting the developments of the net zero discussions at the IMO. And after the extension of the discussions, the market has taken off again, and we are looking at the business coming very strong in the spot market and a lot of employment. As we said today on our VLCCs has been extended for another 2 years and there's a huge appetite for business out there. There's an increasing presence of the gray fleet, a lot of breakdowns on those ships. And of course, we are going through, again, more than expected geopolitical challenges with hijacking of vessels like the recent one from Iran and the Somalia piracy on both on Greek vessels outside -- quite outside 500 miles away from the Somalia growth. So there's a lot of interference. And in the meantime, this has created a nervousness in the market going forward, which we are able to take advantage with our chartering strategy I described with 40 new ships totaling $4 billion of extended business over the next 5 years. And with that, we would like to open the floor to any questions. Operator: [Operator Instructions] Our first question comes from the line of Climent Molins with Value Investor's Edge. Climent Molins: I wanted to start by asking about the 12 VLCCs coming open throughout this month. You mentioned in the press release that the employment on the DS1 has been extended for 2 years. Could you clarify at what terms? And secondly, based on your data kit, the Ulysses should also come open this month. How do you plan to employ this vessel? Is there any appetite to trade on spot? Nikolas Tsakos: Yes. Thank you for your questions. We are trying right now to protect our ships from being actually hijacked by the major oil companies. So it's -- but joking apart, I think we are seeing a significant increase, a 20% increase from our profit-sharing arrangements of the past from our minimum profit sharing arrangements. So there is a significant appetite for the vessels out there. I cannot -- perhaps if you -- next week when you see Harrys in the states, he can give you more details on that. But of course, it's quite a positive situation. Climent Molins: Makes sense. I'll reach out. I also wanted to ask about the Maria Energy. It is fixed until February of next year, but the long-term contract you signed a while ago doesn't start until May, if I remember correctly. Do you plan to trade the vessel on spot once it comes off its current contract and before it starts the next one? Nikolas Tsakos: The vessel is actually fixed back to back to a 15-year employment. So there won't be any downtime between that other than the survey that she will have the scheduled survey, which will have to go before the delivery of this in April. So the vessel has been chartered back to back until she goes to her new charter. So there won't be any downtime. Climent Molins: Perfect. And final question for me. You have a couple of MR newbuilds delivering in early '26. Should we expect those to be fixed on long-term contracts before delivery? And should that be the case, what kind of duration are you looking at? Nikolas Tsakos: We're contemplating. As I said, there's a big appetite. We're here with our chartering team. They have, I think, 5 or 6 major oil companies looking for those ships. As you know, we're a big participant in the Cargill-Maersk pool. We're very happy with that performance of that pool. And I've been saying that for us, the best method or the only method of consolidation in our industry is through commercial pooling because whoever has a fleet of our size or smaller or around or bigger does not really -- you do not gain any economies of scale of just ordering more and more and more ships and running more ships because the ships are always there. So we are supporting the pool, and we're -- the pool has performed quite well. And we might be considering also pooling. Pooling gives you the upside of -- gives you full utilization and the upside of a spot market. Operator: Our next question comes from the line of Poe Fratt with Alliance Global Partners. Charles Fratt: Some of the questions were covered already, but when I look at your newbuild program, close to 20 major commitment. What are you looking at as far as the fleet renewal side? You've been active selling assets. Asset values are fairly firm in my mind. So what should we anticipate over the next, call it, year or so as far as on the asset sales side? Nikolas Tsakos: Our -- I say we are close to negotiating 5 of our first-generation vessels. And so if you put it in a 12 month -- if you put it -- if you take a 12 months forward, I think it would be perhaps double that, 10 vessels. We're looking to the transactions we have in mind would release close to $250 million of net cash, which is more than enough of what we need for our newbuilding program. Operator: Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Dr. Tsakos for any final comments. Nikolas Tsakos: Thank you. Well, I hope, first of all, thank you for listening in. The market looks getting firmer and firmer. And from what I understand from my kids that are studying on the East Coast, the weather is [indiscernible] yet. So we're looking for further call. We're looking forward to continue with this positive market. Right now, we're taking advantage as much as possible with the team. And I would like to wish everybody a happy Thanksgiving next week. And don't forget that the TEN's share price is right now on Black Friday prices. So before next Black Friday, you buy some more of that. And I will ask our Chairman to have a final word. Thank you. Efstratios-Georgios Arapoglou: Happy Thanksgiving for me, too. I think that we're looking forward to beating all estimates next time around, touch wood. And again, congratulations to Nikos Tsakos team for excellent performance. Nikolas Tsakos: Thank you all. Happy Thanksgiving. Thank you. Efstratios-Georgios Arapoglou: Thank you. Bye. Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Nynne Jespersen Lee: Good morning, and welcome to Nilfisk conference call for the third quarter of 2025. My name is Nynne Jespersen Lee, I'm Head of Investor Relations and Group Communications. And with me today are Jon Sintorn, CEO and Carl Bandhold, CFO. Before passing the word over to Jon, I would like you to turn your attention to Slide 2 regarding forward-looking statements. Please note that this presentation, including remarks from management, may contain forward-looking statements that should not be relied upon as predictions of actual results. For more details, please read the content on this slide. And with that, I would like to pass the word over to Jon. Jon Sintorn: Thank you, Nynne, and good morning, everyone. So let's immediately turn to our third quarter key highlights. A key milestone this quarter was positive organic growth in all 3 regions. Elevated tariffs from China to the U.S. and softer demand impacted our gross margin through pricing adjustments, supply chain flexibility and operational efficiency measures, we mitigated much of the impact and maintained a solid margin foundation. We continue to execute structural cost reductions, lowering overhead and administrative costs while maintaining momentum in product development, R&D. These changes are already visible in our cost base. In October, we finalized the divestment of our U.S. high-pressure washer business. This step enables us to further concentrate it on our core activities and strategic priorities. We also completed a comprehensive review of our product portfolio to reduce complexity. This included phasing out, selected development projects and inventory items. As part of this transformation, we announced the consolidation of our production from Brooklyn Park into Querétaro. This moves improves efficiency, reduces inventory cost and strengthen the competitiveness of our big industrial machines line. These strategic actions have resulted in significant special items for the quarter, of which most were noncash items, reflecting the execution of decisions that improve our competitiveness and profitability. As we continue to sharpen our focus and strengthen the company for long-term profitable growth, we are making deliberate choices about where to invest and where to step back. Now let's move to some of the key numbers for the third quarter. In the third quarter, we reported revenue of EUR 238.7 million, corresponding to an organic growth of 2.1%. EBITDA before special items came to EUR 30.1 million, a decrease of EUR 0.8 million compared to last year, corresponding to an EBITDA margin before special items of 12.6%, which is slightly down from the 12.8% prior year. The professional business saw organic growth of 3.5%. The service business saw strong organic growth of 5%, driven by strong service performance in EMEA and Americas. The Specialty business saw negative growth of 7.7%, and the consumer business saw a negative organic growth of 13% as a result of continued decline in market demand for specifically high-pressure washers, but also some for vacuum cleaners across most European markets, if we compare it to last year, third quarter. By region, we continue to grow in EMEA and APAC and Americas returned to growth. Turning now to a market outlook per region. We continued to see growth in the EMEA region for the 7th consecutive quarter. Organic growth in the core professional business in EMEA, meaning excluding consumer and private label was 2.8%. This was driven by strong service business growth and solid performance in Professional. M2H is an important part of our EMEA go-to-market strategy to serve contract cleaners, and we are reclassifying its status as our now primary associated company. Americas saw organic growth of 4.3%. And if we take out the recently divested U.S. high-pressure washer business, organic growth was 9.1%. However, is with a fairly low, compare to the same quarter of last year since it was a bit weak due to the SAP Go-Live by the end of that quarter last year. In APAC, we continue to make good progress and delivered another quarter of organic growth and this time of 7.9%. This was driven by professional and specialty business with the large orders across various markets. China's economy continues to face some challenges. In contrast, the rest of Asia and particularly the Pacific region shows good momentum and steady demand. In the first quarter, we presented our strategic road map for 2025, where we highlighted 3 areas of focus for this year, and those were improving our competitive position in North America, enhancing our operating model through decentralization and executing on structural efficiency improvements. And in the third quarter, we have made material progress across all 3 strategic priorities. North America, delivered positive organic growth in the quarter and made significant progress on improving our competitive position. We restructured our operations footprint by initiating the last step of the consolidating of Brooklyn Park production into Querétaro. At the same time, we reinforced our strong commercial presence in the U.S. Looking ahead to the fourth quarter, we will continue to increase sales and commercial density, drive sales of new products and maintain a strong focus on product and parts delivery performance. As for our operating model, we are starting to see positive effects from the increased accountability that has been placed with the regions as part of enhancing the operating model. One example is that we are starting to see effects in terms of lower backlog and better inventory management. In the fourth quarter, we will tailor value propositions even more effectively across customer verticals, continue reshaping our cost structure and adapt financial performance management to ensure an even sharper focus and accountability. As part of executing structural efficiency improvements, we realized targeted cost savings from previously announced restructuring programs in the third quarter. We also addressed working capital and finalized the divestment of the U.S. high-pressure washer business in October, allowing us to concentrate on core activities and strategic priorities. Coming into the fourth quarter, our focus remains on delivering additional cost savings and continuing to improve working capital discipline. In the third quarter, we announced the last step in the consolidating of our manufacturing operations in Brooklyn Park into Querétaro. This will significantly improve our cost competitiveness and operational efficiency. Currently, we are only producing 4 products in our Brooklyn Park site. And those are big industrial machines. The CS7500, the SC8000 scrubber and the SW8000 sweeper will move to Querétaro and the 7765 sweeper-scrubber combi machine will be pruned. This consolidation will deliver approximately EUR 8 million in annual savings, creating a leaner cost base and freeing up resources for growth. So with that, overview, I will now hand over to Carl, who will give you a financial update. Carl Bandhold: Thank you, Jon. And I will look forward to taking us through the financials of this exciting quarter where we made a lot of good progress on reshaping the company and achieved some milestones and good financial performance. Not least, organic growth across the business, reduction in capacity costs, positive cash flow. And then we will also talk a little bit more about our quite significant special items resulting from these changes. So let's start with the P&L. EBITDA for the quarter, as Jon mentioned, came in at EUR 30.1 million for 12.6% EBITDA margin, very close to 12.8% where we were in Q3 last year. What we see here, of course, is that gross margins have come down a little bit, primarily driven by tariffs, but also under absorption in our factories due to slightly lower volumes. I am very glad though that we were able to offset most of this with a reduction in our operating costs. Also important to highlight is, as Jon mentioned, M2H is a partner of ours, serving the contract in the segment in France. It's a partnership we have for more than 2 decades, which has been extremely successful in serving this customer segment. We own 49% of the company. And when we are working now in our new decentralized structure and developing go-to-market strategies for the 3 regions separately, we see that this is a key component of the way we want to go to market in EMEA at least. And therefore, we are recognizing that this is a core part of our company, and we include M2H's profit contribution in our operating profits. And as you can see in the box here, the Profit contribution from M2H last year was close to [ EUR 5 million, ] revenue close to EUR 90 million and the profit of -- close to 18%. So a highly profitable business. And over the time, when we have worked together, M2H has also built a very strong balance sheet with over EUR 40 million in cash, which is not included in our balance sheet in our financials. So a little nugget in the Nilfisk portfolio. And talking about the EMEA go-to-market strategy, let's look a little bit on growth. So the third quarter of 2025 was another quarter of growth in the EMEA region. So across all our businesses in EMEA, we grew 0.1%, but as Jon also mentioned, when you look at the core professional business, i.e., excluding Consumer and Private label, we grew close to 3% again. So another solid quarter there. On the consumer business, this is a business where 2024 was a super strong year for the market as a whole and for Nilfisk. And compared to that, we are coming down, where we see the market coming down specifically in the high-pressure washers, but also slightly in Max. But we see that we maintain or even improve our market shares across markets in Europe. For instance, we can say that in September, in Denmark, we had a 45% market share in Max. I'm also very, very glad to see that Thomas and the team in APAC delivered a third consecutive quarter of organic growth. So we see really solid performance there despite some volatility in some of those markets. And as we have talked about before, a few really nice projects where we are installing autonomous machines in airports and other locations across the region. And then going to Americas, where we have been a little bit more challenged recently, a nice quarter with organic growth, again, realizing that the comps from last year was not so high as we have SAP Go-Live in September. But still a nice performance and fun to see that we grew in the market. That said, I think it's important to note that the market in Americas, particularly has been quite volatile throughout this year, with a lot of uncertainty for our customers as well as for us with tariffs as well as a 42-day government shutdown. So we can see quite a lot of volatility between months in how our customers have behaved. Looking ahead, we expect this to come down a little bit now that the government is open again and the tariffs have stabilized. Talking about tariffs, let's move on to gross margin. So we had a fair gross margin of 41.2% in the third quarter, where price increases and mix offset tariffs and under absorption in the factories. Looking ahead, now tariffs have stabilized. Of course, going forward, we expect them to be at a higher level than what they were before March of this year, but more in line with what they were now in Q3. Also to note, as Jon mentioned, we have taken quite significant steps during 2025 to improve our production footprint. So we concluded the consolidation of our 2 factories in Hungary in the end of Q2. And now we are executing the consolidation of our 2 production sites in North America, into Querétaro during Q4 and Q1 of next year. And as Jon highlighted, the second will contribute by about EUR 8 million in cost savings and the two together a little bit over EUR 10 million on an annual basis in reduced production overhead. Talking about overhead then, let's look at other parts of our overhead. We did manage to achieve quite a significant reduction in overhead in the quarter compared to the third quarter last year of about EUR 3.5 million. This was primarily driven by head count reductions in support functions or admin costs, somewhat offset by slightly higher total costs for product development and slightly lower capitalization ratio of our total R&D expenses, which is a result of product portfolio and project portfolio review that Jon mentioned earlier, which means that we are refocusing our R&D project portfolio. And in the changeover, we see that capitalization is a little bit lower, but we expect this to come back going forward. And elaborating a little bit here, the move in the U.S. also means that we are moving some of our R&D resources to locations where we have been more productive in R&D projects. And when we look at the R&D portfolio going forward, we will focus more on facelifts and cost downs rather than big moonshot projects. So we expect this to change going forward and to continue to improve our competitiveness. Yes. So we saw positive cost reductions in the quarter. If we look at the trend on overhead costs, we talked earlier in the year about reducing our overhead cost by 6% to 8% by the end of the year, and we are making very good progress on achieving this. So if you compare to Q3 last year, we are down a few percentage points if you compare it to Q1 of this year, the third quarter reported number was down by 12%. Some of this, about 3 percentage points is FX, but even adjusting for that quite a significant improvement on cost sequentially. So we feel confident that we will be able to reach our goal of reducing overhead by 6% to 8% before year-end. And at the same time, you can also see that we are making good progress on reshaping our resource allocation where we are using fewer of our resources on administrative tasks and more on sales and product development, which will improve our competitiveness and hopefully return us to consistent growth going forward. Another positive development in the third quarter is on cash flow, where we had close to EUR 17 million in positive operating cash flow, and slightly more than EUR 10 million in free cash flow in the quarter. So while I'm glad to note a positive development in the third quarter, of course, we still have not had strong cash flow year-to-date as we have built up quite high inventory levels, and we have invested significantly in our restructuring programs. But we do still see quite a significant opportunity to reduce inventory and strengthen cash flow in the coming quarters. But reducing inventory is an integral part of how we manage our supply chain and releasing that inventory will require us to change how we operate significantly, which we are making progress on, but it's a lot of hard work. So talking about changes in how we operate. We made a number of changes in the quarter that we have touched on. We also made a number of decisions. And all of this has resulted in some significant impact on our accounting, especially -- especially in so-called special items. So with looking at this from the perspective of what are the changes we have made, which I think is the important takeaway here, and how is that changing the business. So firstly, as Jon mentioned, we were able to close the deal on divesting our U.S. high-pressure washer at the end of October. As we have mentioned before, this is in a business that is not part really of the core of what Nilfisk offers our customers, it is not sold to the same customers, it is not using the same technology that we use in any of our other high-pressure washer businesses. Following the tornado that hit the facility last year, and this is also a business that have had a negative profit contribution by about EUR 1.5 million on a full year basis. Also, obviously, an impaired business, so we were not able to get that much value when we sold it, but at least it was cash flow positive, but it meant an impairment of about EUR 11 million that we took in the third quarter. Also, as touched on before, we are consolidating our North American footprint by moving the last production from Brooklyn Park to Querétaro Mexico. The objective here clearly is to reduce our production overhead, improve efficiency in the factory and improve our long-term competitiveness. This resulted in special items of EUR 6.4 million, out of which just EUR 1.4 million was cash. This is primarily related to write-downs on fixed assets in the factory, but also impairment or nonprofitable contracts, i.e., the lease on the facility in Brooklyn Park. On that same direction, we also have reviewed our product and project portfolio to make sure that we focus our efforts on the products that we see as core to our assortment going forward. This will enable us to focus our product development, on keep maintaining and updating the key products, which is something that we have under invested in, in the last few years. So consolidating the product portfolio will enable us to keep our portfolio current. And it will also enable us to work on component commonality across our product platforms to reduce our costs. This product portfolio pruning will result in some quite significant impairments, EUR 23.3 million, which is mostly intangible asset resulting from capitalized R&D expenses in the past relating to these products, but also some inventory of products that we don't expect to sell. Those were really the bigger items. We also have some other things and special items. We have used some consultants in conjunction with working through these restructuring programs and our updated business plan and strategy that we expect to elaborate on in our annual report, and we have some updates on a couple of legal cases that we have communicated before. So that was quite a lot, but a lot of special items, I think, were worth to discuss. If we then start to look ahead and our outlook for the rest of 2025. We are narrowing our guidance on growth. So we're going from expecting an organic growth of 1% to 3% to guiding that we expect growth to be around 1%. And as we get closer to the year, we can see that getting to 2% or 3% organic growth does not seem very likely, which is why we set it to around 1%. On EBITDA margin, before special items, we maintain our guidance of 13% to 14%, which is supported by the progress on reducing our costs and expected stability on tariffs and such things. Supporting this outlook are a number of important assumptions. Firstly, continued stable market conditions in EMEA, also that APAC region maintains moderate growth for another quarter. And as I touched on briefly before, that the uncertainty for our customers in the U.S. is reduced now that the government is open again and the tariffs have stabilized. So those are our expectations for the rest of the year and the assumptions behind that. Thanks, everyone, and I return the question or the mic to Jon. Jon Sintorn: Thank you, Carl. And with that, our presentations have been concluded, and we hand over to the operator for Q&A and questions. Operator: [Operator Instructions] The first question comes from the line of Kristian Tornøe from SEB. Kristian Tornøe Johansen: A couple of questions from my side. On your guidance assumptions. Just to clarify, the 1% organic growth you are guiding, is that including or excluding the high-pressure washer business? Jon Sintorn: It is excluding high-pressure washers in the U.S. Kristian Tornøe Johansen: It is excluding, okay. So what is the organic growth rate for the group in the first 9 months, excluding. So I think I assume these minus 0.2% you're reporting, that's including the U.S. high-pressure washer business, correct? Carl Bandhold: Yes, that is correct, Kristian. Kristian Tornøe Johansen: Okay. And do you have that number excluding? Carl Bandhold: Not on top of mind, I'm afraid. Kristian Tornøe Johansen: Obviously, the reason for asking is to try to calculate what you are sort of implicitly guiding for Q4 because if I just take the -- the minus 0.2%, I get to an implicit guidance of 4.4% -- sorry, 4.7%. But obviously, that's wrong. If the 1% is excluding because then the minus 0.2% is not the right number to use, so, yes. If you have that number afterwards, that would be useful. Then the other question I had was just on your margin guidance of 13% to 14%. Obviously, you get a tailwind of 0.5 percentage point from the M2H reallocation. But still 13.2% for the first 9 months and keeping the other end, the 14%. Just curious what scenario you see which could take the full year margin to 14%? Carl Bandhold: No. As you say, we are above 13% and generally, Q4 is a strong quarter for us. So I think there is an opportunity that we will have quite a high margin in Q4. So that is within the realm of possibility. We have also seen -- our gross margin improved sequentially over the last couple of months. So I think we still see that we will sort of be within that range. Operator: Your next question comes from the line of Casper Blom from Danske Bank. Casper Blom: A question on divisional level. Your professional business looks as it's a bit getting particularly hit by tariffs here in this quarter. Can you give any kind of guidance as to whether you expect that to recover in Q4? That's the first one, please. Jon Sintorn: We will see a gradual recovery in the course of fourth quarter and then moving into the first quarter, on the back of operational activities that we have done to mitigate, but also on the back of some price increasing that we have initiated early this quarter. Casper Blom: Okay. Will you see full benefit of that price increases here in the quarter if you've initiated in the quarter, I guess, not so expectedly some carry on into '26 also then? Jon Sintorn: That's correct. And obviously, we monitor this very closely with effects in the markets, obviously, the stickiness of the pricing but also how the volumes develop. But it was initiated early this quarter. So it will not have the full effect until early next year. Casper Blom: Understood. Then on the service business, the EBITDA margin here is -- looks as if it's up compared to Q2 and Q1. Has there been anything sort of unusual going on there? Carl Bandhold: No, I think there is some variability in the margin there, depending a little bit on the mix between service labor and parts sales, basically. So that, I think, explains that there is some fluctuation quarter-to-quarter in service profitability. Casper Blom: Okay. And then just a final question. Will you be providing adjusted divisional EBITDA numbers given the change of accounting on associates? Carl Bandhold: Excellent question. I haven't thought about that. Let's -- we need to think about how we do that. Operator: [Operator Instructions] The next question comes from the line of Claus Almer from Nordea. Claus Almer: Also a few questions from my side. So the first one is the special items and the cleanup you've done on the balance sheet. Should we expect more cleanup in the coming quarters? Or was that it? That would be the first one. Carl Bandhold: I don't expect anything like this in the coming quarters, no. We have done a good review of both our business plan and our balance sheet. And I think we have taken the big items now. Claus Almer: So we see big items. So if you -- if more adjustments were to be made, in what area would that be? . Carl Bandhold: I don't expect any more adjustments, but I expect that we will continue to have some special items related to severance payment for additional cost reductions. Claus Almer: Right. Then the M2H reclassification, what is the ownership of that asset? Carl Bandhold: So Nilfisk owns 49% of the company and the remaining 51% is owned by the founder. . Claus Almer: And how are you then able to include it in our EBITDA? Carl Bandhold: It's -- we classify it as an operating or as a primary subsidiary. Claus Almer: But isn't that -- I'm no accounting expert, but isn't that you need to have split control of the company to put into your operational performance? Carl Bandhold: Well, you need -- we need control of the company to be able to include the whole P&L in our P&L. But we're only including the operating profit as part of our operating profit and that we can do for associates. Claus Almer: Okay. All right. And then just coming back to the U.S., excluding the whole tariff things, but the shutdown of the government should maybe postpone some orders or revenue from Q3 to Q4. Have you seen any -- or do you expect any impact from that or it's more gradual going also into 2026? Jon Sintorn: Well, coming from a fairly strong October, we have seen that the order intake in November has been weak, weaker than anticipated. So on the back of uncertainty. So we anticipate that the reopening of the government and tariff stabilization, we anticipate that it will somewhat improve the market activity level. So yes, we have seen effects. . Claus Almer: Okay. And so you say strong October, weak in November. If you sum those up, is that then in line with expectations? Or is it above or below internal expectations? Jon Sintorn: I guess, so far, in average-ish, in line with expectations. But as we stated, we anticipate that market activity levels pick up somewhat on the back of the reopening of the government. Operator: Ladies and gentlemen, that will be the last question. I would now like to turn the conference back over to Jon Sintorn for any closing remarks. Jon Sintorn: So thank you all for participating in today's call and for your continued interest and caring about Nilfisk. We will return with our full year 2025 report in February and look forward to speaking to many of you over the coming weeks. Thank you very much, and goodbye for now.
Thomas Pevenage: Hello, and good afternoon, good morning. Welcome to our conference call for the Third Quarter Trading Update. We are pleased to welcome you and take this opportunity to have a dialogue with you. So we have prepared a short presentation considering it's just a third quarter update and the full update that we provide in the full year and half year results. So basically, we'll cover the presentation together with Catherine and Olivier. [Operator Instructions] So you'll see our usual disclaimer on this slide, today's speakers, so Catherine Vandenborre, Chief Financial Officer of IBA. Olivier Legrain, our Co-CEO in charge of IBA Technologies, he is also joining us and happy to take questions and myself, Tom Pevenage, taking care of Investor Relations. So we'll start with the highlights -- key highlights on the business side. And then that's a specific topic for this trading update, we'll cover the corporate refinancing that you could discover as part of our press release earlier today. So I will now leave the floor to Catherine for the first section. Catherine Vandenborre: Yes. Good afternoon or good morning, everyone, and thank you very much for attending this trading update call. Like Thomas mentioned, we hold this call today basically to provide you with qualitative trading update. We will again confirm the trends in our operational activities, ensure that they remain fully aligned with our guidance. We will briefly discuss the trends we see in the markets, and we will present our new financial structure before, of course, answering any questions you may have. So first element that I would like to stress is that IBA remains fully confident and highly confident to meet this year guidance, being EBIT at least EUR 25 million, and that's supported by well under control OpEx, which remain below our long-term target of maximum 30% of sales and an already positive EBIT contribution from Proton Therapy. This is for us a very important milestone resulting from the scale-up of Proton Therapy activities and favorable project mix. Of course, it underpins our commitments in the profitability improvement trajectory that we set ourselves at the beginning of the year. In terms of equipment order intake, this one amounts to EUR 195 million. It's an increase of EUR 11 million versus Q3 2024, thanks to a strong contribution from IBA Technologies, which increased by 22% and more specifically RadioPharma solutions. To give a little bit more flavor and details, FPS has an excellent commercial momentum in high energy Cyclone IKON and Cyclone KIUBE systems in both emerging and more mature markets and applications. And in this we have a quite active pipeline in China. In PT, we have sold 4 Proteus ONE at the end of Q2 -- Q3, sorry, 2025. If you remember last year, same period, we had sold 3 Proteus One. And the sales includes 2 Proteus One orders from our existing customer, Apollo in India, which is expanding beyond its already operational multi-room facility in Chennai. In dosi, we see decreasing level of activity versus last year. We faced some headwinds in the U.S. and the Chinese markets. So in conclusion on the order intake, I would say that it's a very encouraging one, confirming the added value of all solutions to all customers and the positioning of the IBA Group portfolio of activities. Of course, '25 is not ended yet, and we will keep you informed on the order intake progresses that we will realize in the next weeks. In terms of backlog of equipments and services, it is maintained at EUR 1.3 billion, a slight decrease of -- decrease of EUR 0.1 billion versus Q3 2024. Let's say, it's more or less stable after the strong accelerated backlog conversion that we have observed in the first half of 2025, and that is due to the higher order intake in Q3. Finally, our net financial position amounts to EUR 60 million as working capital has continued to be impacted by the customer delays in delivery of large Proton Therapy projects in Spain and China. That being said, we see this amount as a peak and our net financial position is expected to gradually improve as from December '25, while we have secured a solid refinancing package on which we will come back in a few minutes. To give you some view on the progress that we have made across the different business segments. First, on the clinical side, PT more specifically, we signed a memorandum of understanding with Varian at ASTRO and this memorandum aims to strengthen interoperability, enhance clinical workflow and we went also to co-develop some technologies together, including technologies in connection to our road map on DynamicARC and FLASH therapy. We see also a very good momentum for Proton Therapy supported by the growing clinical evidences. In particular, we have seen an exciting first ever Level 1 clinical evidence provided by MD Anderson that demonstrates Proton Therapy's benefit in head and neck cancer versus conventional radiation therapy, offering same tumor control with reduced side effects and most importantly, improved survival rates. We see also strong commercial traction in APAC, which is reflected in our order intake and the pipeline in the U.S. remains quite active as well. Regarding NHa, our partnership in carbon therapy, the installation works of the first system are progressing and the financing efforts are ongoing in parallel to cover related costs. Going to dosimetry, like I said, we face some regional-specific challenges in the U.S. due to local competition. We have also some headwinds in China. We have closed the acquisition of the Berlin-based PhantomX company at the end of October '25. As you may have seen in our press release, PhantomX is a commercial stage company recognized for its advanced anthropomorphic phantoms, which are used in quality assurance for AI solutions in medical imaging. Now going to IBA Technology side. In the industrial segment, we see a continuing regulatory pressure on ETO sterilization, supporting the long-term shift towards e-beams and X-ray technology. We see also sustained progress on new applications like polymers, like PFAS with IBAs increased presence at specialized conferences and workbooks. On Radiopharma solutions, there are strong commercials and good commercial traction, which is reflected in sales, both in emerging and mature markets. We see very exciting times in Theranostics with increasing industry interest in nuclear medicine and especially from major pharma companies with particular focus on alpha emitters such as Actinium-225 and Astatine-211. Now I propose to discuss the financing package that we concluded in its rationale. Maybe first, as a reminder, we had undertaken a review of our financial structure considering 3 elements: first, the past and expected evolution of the business. Second, the expected evolution of working capital; and 3, possible investment opportunities. This review resulted in the closing of a refinancing package, including a EUR 125 million bank club deal with different tranches and a EUR 10 million subordinated loan from Wallonie had performed. The refinancing addresses 3 objectives. First one is the consolidation of IBA's balance sheet, acknowledging that past investment in long-term assets like PanTera, like NHa, like mi2, that those investments had been funded by operating cash flows and not long-term financing. Second, we want to increase our resilience in a volatile context. And third, we want to build firepower to capture possible inorganic growth opportunities, of course, opportunities meeting our investment criteria and especially being related to IBA markets and being accretive. Out of the EUR 135 million financing package, EUR 60 million has been drawn so far. Thomas will now further detail the current and intended use of funds as well as the key terms and conditions of the facilities. Thomas Pevenage: Thank you, Catherine. So you will see on this slide our intended allocation of the use of these credit facilities. So on the right-hand side, you find the different tranches of funding. On the left-hand side, potential uses for this. First of all, starting at the top, you will see the EUR 10 million subordinated loan and basically EUR 30 million drawn under the EUR 50 million 5-year term loan immediately reinforcing the long-term funding components of the balance sheet, which is the first item highlighted by Catherine in our financing strategy. Then we have an unused portion under this 5-year term loan amounting to EUR 20 million, which is available to cover more structural working capital over the medium term, let's think, for instance, of our Spanish Proton Therapy projects as well as to fund investment opportunities, while the latter will also benefit from specifically dedicated M&A term loan, that's the EUR 15 million tranche you see on the right-hand side. But then at the bottom, we have EUR 60 million of revolving credit facilities aiming to address short-term working capital fluctuations. Note that they can also play a usual role considering that some geographies in which we operate do not allow straightforward cash management solutions, namely India and China, for instance. And this from time to time can create imbalances between group entities having excess cash, while IBA SA in Belgium, where manufacturing, R&D and SQ activities take place may have some needs. And so those revolving credit facilities can accommodate for those intragroup cash management opportunities or challenges as well. So you see on this slide, basically, again, an overview of the different tranches of funding and the amounts already drawn versus what remains available. So EUR 61 million drawn so far, leaving EUR 74 million available. Time-wise, we have 6 months to consider drawing additional tranches under the EUR 50 million term loan and still 24 months under the acquisition term loan facility. We will regularly review the use of these credit lines going forward in function of the evolution of working capital, temporary and structural and as well as business opportunities. Now a few words on the terms and conditions. Bank facilities are based on a floating rate, so typically EURIBOR plus the margin and that margin is in line with our previous credit lines. Financial covenants also follow our previous standards and consist in a maximum net leverage ratio and a minimum level of corrected equity, corrected because equity then in this case includes subordinated loans. The net leverage is calculated on the net debt, excluding subordinated debts and the last 12 months of EBITDA. The net leverage covenant provides for a maximum of 3x. Besides, as customary within the club deal documentation framework, IVS to comply with certain undertakings related amongst others to M&A disposal assets or others. Now moving to the conclusion. We have in place a financing structure that is secured with a 5 years commitment from the financing partners, optimized. As Catherine said, the idea was definitely to have a package addressing an adequate mix of long term versus short term on the liability side and funding versus the asset side. Flexible to be able to address working capital volatility and as well to be able to flexibly in an agile way to capture investment opportunities and as well robust given the support of strong financing partners that you see listed on the right-hand side of the slide, so a pool of 4 banks and as well Wallonie Entreprendre, our long-standing financing partner. So we see the opportunity really to thank all of them for their trust and long-term commitment to IBA success. We are now ready to take your questions. Thomas Pevenage: [Operator Instructions] So first question is from David. David Vagman: Maybe first, on the refinancing, I didn't hear it. So can you come back on the covenants and maybe give us details about the cost of the financing? And can you confirm that you're actually not planning to use -- so in your budget to use to draw the [ FCM ] as in Slide 7. That's my first question, and then I have 2 more. But maybe we can start with this one. Henri de Romrée: Okay. Thank you, David. So first part of the question is related to the covenants. So basically, and it is currently the case today, we have 2 covenants, 2 financial covenants. First one is the net leverage ratio. So comparing the net debt excluding subordinated debt and the last 12 months EBITDA, so it's calculated on a rolling basis. And we have to comply with a level of maximum 3x. The second covenant is a minimum level of corrected equity. And why is it corrected? It's because it's including the subordinated debt as banks consider its equity from -- for that purpose. So I assume it's clear. So on the cost, then of course, as you can imagine, it's the exact level of margin is a confidential element from a bank perspective as well. And so we can only comment that we stay with a similar level of interest rate and margin basically as the current credit lines. So if you look at the average use of those credit facilities over the last period of time versus the interest charges on our P&L, you will have an idea of what you can expect for the future. The last question relates to the use of the revolving credit facilities specifically. So currently, we have drawn EUR 20 million out of the available EUR 60 million. We've commented on the expected treasury trajectory with improvements indeed versus the current position starting from the end of this year and improving over the next year, most of is tied to the delivery of our large Proton Therapy projects, namely in China and Spain. So definitely, use should reduce over time. I also commented on intragroup cash allocation that may require from time to time use of this credit lines. So this should not come as a surprise, if you maintain some use. But the idea that these are used a shorter-term type of buffer. David Vagman: And my second question, you anticipated a bit. It's on the Ortega contract deliveries for the year and for next year. Maybe you can also comment on the Chinese contract. What is reasonable to expect maybe to give us a range, not necessarily precise, but a rough indication of how many project you expect basically for which you expect payment actually this year and then next year? Catherine Vandenborre: Yes. I think on this one, we remain quite aligned with what we already mentioned at the moment of the publication of Q2 results. So -- to summarize, we have guarantee manufacturers 3 machines out of the 10 that have been ordered, 1 has been shipped. That's something that we already mentioned in Q2 results that we intended to ship in October. It has been done by the end of October, beginning of November. And so we expect to receive the payment on this machine in December conform to the terms we have in the contract. The second and the third machines will be shipped next year in the course normally of Q2 for 1, end of Q2, beginning of Q3 for the third one. And in terms of payments related to all these 10 machines, you may remember that we mentioned that's the working capital impact linked to the delay was close to EUR 30 million. It is a [ 1/3, 1/3, 1/3 ] by machine, let's say. David Vagman: Do you mean that above the 7, the remain -- your talking about the remaining 7 or... Catherine Vandenborre: So that was on the first 3 that we already manufactured. On the remaining 7, we will change a little bit the way we manufacture them. And so instead of starting to manufacture as soon as we can to be ready to ship from the moment that the customer is ready with the building of the hospitals. We will wait before doing the manufacturing, we will wait to have strong signals that the building will be at the moment that we can ship the machine, so there must still be some kind of delay at certain point of the time, and we want to remain a little bit flexible in the interest, of course, of the patient, but the general principle is that we will not start building the machine as long as we don't have very strong signals that the hospital can accommodate the equipment to avoid this strong working capital impact that we had on the first 3 machines. David Vagman: And is it fair to say then that the remaining 7 will be for beyond 2026? Catherine Vandenborre: It's -- so it will be spread over the entire term of the contract. But indeed, it's fair to say that the shipment of the remaining 7 will be after 2026, yes. David Vagman: And last question from my side is on the PT, the Proton Therapy services. With a question of how you've been monitoring, I would say, more the credit risk aspect of your customer. My question is also a bit related to the recent controversy in the Netherlands that some centers would be underutilized and 1 was facing more acute financial difficulties. If you can comment on this, it's a bit too different topic, but I think they're related? Catherine Vandenborre: So maybe on the credit risk linked to the customers. That's, of course, something that we monitor at the moment that the contracts closed. Where we do a number of analytics on this sort of ability of the customers, the ability to pay for the equipment on the 1 hand and then later for the services that the hospital intends to consolidate. Of course, during the course of the year and depending on the evolution of the revenues of the hospital we might see some volatility compared to what the first rate assessment that we did then we managed together with the customer, relatively proactive way and we try always to find solutions that could benefit all the parties. So in the best interest of all the stakeholders. So that's on the credit, let's say, question. On the fact that some hospital not necessarily let's say, fully booked the availability of the rooms in which big equipments are installed. So it's true that sometimes it can take a little bit more time. So it's a little bit longer for a hospital to build a room, but of course, it's in the best interest of everyone to try to maximize the use of the room. And so that's something in which we can possibly advise hospitals, what they can do, how long it takes to take 1 patients or it can, let's say, or the installation can use a bit maximum capacity. But at the end, of course, it's something that the hospitals have to implement. I think in some cases, we're seeing these hospitals are having full use of the capacity. In other case, we see a hospital having a very high use. I think that the maximum, which has been reached until now is 64 patients being treated over 1 day. So you see it's very much depending on 1 hospital to another. David Vagman: Any comment on the lines on your performance? Catherine Vandenborre: And what is -- you mean on the study, which was published on the Proton Therapy. David Vagman: Not the study, but that one center was I'm just quoting the article. And so I don't know, if it's correct, but that one center was particularly in the difficult financial situation? Catherine Vandenborre: I must admit that I didn't see the article honestly. So I can't comment, because it's a specific question, but I would be happy if you can send to the team the link of the article, and I will come back to you maybe with any specific comments to be provided. Thomas Pevenage: So David, thank you for your questions. We have further questions from Laura. Laura Roba: I have 3. So first of all, could you comment on backlog conversion for H2. Because it was very strong in H1. So I was wondering how did it look like then in Q3? And what can we expect for the remainder of the year? Then you mentioned in dosimetry that you were facing some headwinds? I was wondering to what extent this would impact the full year performance of that division? And then the last one on CGN. Do you have any update from them? Do you expect any until the end of the year? That's it. Thomas Pevenage: Okay. Laura. So I will address the first question, and then Catherine and Olivier will answer the other 2. So the first question relates to backlog conversion over H2 and it was a very active H1, and we are increasing the pace in H2. Definitely, so far, it should be visible in the numbers. And this being said, it will be less imbalanced as last year in terms of H1 versus H2 weighting. So yes, we're definitely on the right trajectory to reach ultimately the targets that we have reconfirmed as part of our press release, today. Catherine Vandenborre: Okay. If you don't have any further question on the backlog, I will continue on dosi. So like I was indeed mentioning, we saw some kind of headwinds in this mainly due to, let's say, competition that we see coming with some product that we don't have yet. So in order to come back to the level that we internally anticipated, we might have to do limited acquisitions. That's the reason why we started with 1 PhantomX, but we might have to do a few and very limited others. On your question whether we expect an impact, I understood on the guidance that we have provided. The answer is clearly no. So it's, let's say, headwinds compared to internal targets that we had. But all in all, and having in mind all the segments in which we operate and all the activities we have we don't expect any impact on the guidance that we communicated to the market. Olivier Legrain: Could you specify your question on CGM? I'm not sure I see an immediate answer. So it would be great if you could spell it out again. Laura Roba: Yes. I was just wondering, if you has any update from them, any contracts, if you see any activity from their side? Olivier Legrain: Nothing outstanding, Laura. I think there are a few public tenders for the moment in the Chinese market, where we are active, but there is nothing meaningful to mention at this stage. So nothing really different compared to what we have said so far. Thomas Pevenage: I think, lastly, we confirm that they are as part of the partnership agreement. So they have basically executed the technology transfer part, and they have the facility, the factory for local manufacturing that is ready to go. Now the main area of focus is on the market developments and getting the sales convergence. At this stage we don't see any product open questions. So we have, I would say, last chance slots, if anyone willing to show the question. In the meantime, we can already tell you so the presentation will be available on our website in the same link shortly after this call. Catherine Vandenborre: So I think, if there are no more questions, I would like to thank you again for your attendance to this call. It was a pleasure for us to have the opportunity to answer your questions. And we wish you a good evening/good afternoon/end of morning. Have a good day. That might be -- thank you very much. Thomas Pevenage: Thank you.
Andrew Jones: Great. Good morning, ladies and gentlemen, and welcome to LondonMetric's half year results presentation. It's very rare that we're in such salubrious accommodation as this. I hope it's rent-free. It's an office building, it must be. Sorry, cheap shot. Okay, that's the tick-tick, dirt went off. Right. Go down the list in a minute. Right. So normal lineup this morning. I'm going to give you a quick overview. I'm going to hog all the good numbers, pass over to Martin. He'll do a deep dive for you. And then I'll come back to talk about our activity and the makeup of the portfolio and our outlook for the periods ahead. And then we'll open it up to Q&A. And we have our team in the front row, which actually now includes Carl, which is good. So any really difficult questions are going his way. And then hopefully, we'll be all wrapped up by about 11. So -- okay. So we retain our position, in our opinion, as the U.K.'s triple or leading triple net income REIT. Our objective is to continue to own mission-critical assets across the winning sectors of real estate. I come on to talk about this a little bit later because it is a theme throughout the presentation. We want to be -- we want to make the right macro calls. Logistics is our strongest exposure, partly because it gives us the best rental growth. So that's back up at 54%. And then we have our hospitality and entertainment, which is dominated by our hotels and our theme parks at just under 18% and then our convenience retail assets at 14%. So those are our 3 key areas with health care making up the fourth. As a result, our objective must be to grow our income. That's what we are. We are a triple net income compounding business. And our net rental income, as you can see in front of you, is up 15%. Again, we'll come on to talk about that in a little bit more detail, and that has obviously allowed us to progress our dividend. We announced this morning a Q2 dividend of 3.05p, which gives us 6.1p for the period, which is up 7% on where it was last year. And obviously, we expect that to continue. We are well on track for our 11th year of dividend growth. We also operate the lowest cost platform in the sector with a sector-leading EPRA cost ratio, down from, I think, 7.8% at the full year to 7.7%. And despite Martin's objections, we obviously think that, that should fall lower in the coming periods. The portfolio is focused on reliable, repetitive and growing income. It's a strap line that we've now used for many, many years. It doesn't need to change. And that is supported by, again, 5.2% like-for-like annualized rental growth, and that's largely driven by 2 things. Uplift on rent review. You can see there, 18% is our average uplift. Open market was at 24%. Our open market logistics was 27%. And then our leasing and regears delivered another 24% above previous passing. So that's what -- you put all those together, that's how we deliver that 5.2% annualized income growth. In the period, this translated into GBP 10 million of additional rental income. And again, we'll come on and talk about -- we've got a good slide on this later on in the presentation. We have a further GBP 28 million that we expect to collect over the next 18 months from rent reviews and lease renewals. We expect that and hope that will be higher because it doesn't include asset management initiatives, and it doesn't include the leasing up of vacant space that we currently have in the portfolio. The total property return, you see it there at 3.3%. We come on to talk about that in a little bit more detail later on in my second stint. So turning then to the financial highlights. EPRA earnings were up at GBP 148.6 million. That's driven by a 15% increase in our net rental income. You see there on the right-hand side. That has driven an increase in our earnings per share at 6.7p, up slightly on where it was this time last year. But equally important, it's 28% higher than where it was in September '23. So we've seen a 28% increase over the last 2 years in our EPRA earnings. And that has allowed us, as I touched on, on the earlier slide, to increase our half year dividend to 6.1p. Again, that's up 7% in the year. It's actually up 27% over the 2 years. Total accounting return for the period, 4.1% if I exclude the huge banking fees that we paid for the -- in our various M&A transactions. If you strip those out, it's at 3.3%. Portfolio value is up 22% to GBP 7.4 billion. Relatively flat EPRA NTA, up on where it was a year ago, flat on where it was in March at 199.5p. And our LTV is up marginally at 35%, and that reflects the GBP 200 million cash component of the Urban Logistics acquisition that we completed on earlier in the summer. And we feel pretty comfortable with that. It may go up, it may go down. That will be dependent upon opportunities that we see in the -- by and large, in the investment market. And then just again, to steal one of Martin's slides, the dividend, I should say, is -- you can see there, 111% covered with a full cash cover as well. So on that note, I'll pass over to Martin, and then I'll come back to take you through the portfolio. Martin McGann: Okay. So good morning. So there's nothing here he hasn't covered. So I'm going to do it anyway. So look, following an intense period of M&A activity and asset recycling, we've delivered very significant earnings growth and dividend progression. Pleased to report net rental income is GBP 221.2 million, an increase of 14.6% over last year. The acquisitions of Highcroft and Urban Logistics, which contributed only for 4 and 3 months, respectively, and other acquisitions during the period have added GBP 27.6 million of additional rent. We've also added GBP 6.6 million of additional rent from our existing properties and developments. We lost GBP 12.2 million of rent from asset disposals during the period. Our rent collection remains exceptionally strong. We've collected 99.5% of rents due. Our gross to net income leakage remains very low at 1.5%. Our administrative overhead for the period is GBP 14.6 million. And our EPRA cost ratio continues to be sector-leading at 7.7%, I think, reflecting operational synergies and the culture of cost control. The increase in overheads in the period is almost exclusively headcount and remuneration costs. Our headcount is now 54, up from 48 at the year-end. That's a combination of former Urban Logistics employees, but also new recruits that we've made to ensure that we have the right level of resource and the right skills for the enlarged business. Our net finance costs have increased to GBP 59.7 million compared to GBP 45.4 million last year. That's an increase of 31.5%. This was due to the additional GBP 484 million of debt from our corporate acquisitions that came in at an average cost of 4.26%, which compared to LMP's cost of debt at that time of 4%. We've also run a higher drawn debt balance during the period. So despite the increase in financing costs, that tight cost control on top of revenue growth, income growth has driven our EPRA earnings to GBP 148.6 million or 6.7p per share, an increase of 9.7% over last year and supports the increase to the dividend, which I think Andrew only mentioned actually 3x for the period to 6.1p per share, providing very strong 100% dividend cover and importantly, full cash cover. So our trading performance has been strong with the portfolio valuations increasing by GBP 29.1 million, allowing us to report IFRS profits of GBP 130.3 million. This actually reflects a reduction on IFRS profits compared to last year, but it does include the full impact of M&A acquisition costs and goodwill impairment in the period. So there's been further significant change to the balance sheet this period as it reflects our most recent M&A. The acquisition of Highcroft added GBP 81 million of investment properties to the balance sheet and the acquisition of Urban Logistics a further GBP 1.14 billion to bring the total value of the portfolio to GBP 7.4 billion. In addition to our M&A activity, our active asset recycling has delivered GBP 125 million of other acquisition, development and capital expenditure, partly offsetting the divestment of GBP 155 million of noncore assets. This, together with our revaluation uplift of GBP 29.1 million, has contributed to the increased portfolio value. Gross debt, which I'll come on to in a moment, is GBP 2.8 billion, and the cash balance is GBP 206 million. The other net liability position at the period is GBP 116 million, rent paid in advance accounting for GBP 78 million worth of that amount. In summary, therefore, our EPRA net tangible assets at the year-end were GBP 4.67 billion or 199.5p per share, providing -- producing a 4.1% total accounting return after adjusting for those M&A costs and goodwill impairment. So as I've said, our gross debt balance is now GBP 2.8 billion. The increase is partly a result of our M&A activity through which we acquired GBP 484 million of new secured debt facilities and also other new facilities entered into during the period, which I'll come on to on the next slide. Our debt maturity now stands at 4.2 years compared with 4.7 years at the year-end. We expect to maintain that level of debt maturity by the year-end despite the passing of a further 6 months, as we launch into our public bond program. Our average cost of debt is 4.1% compared to 4% at the year-end, and we do not expect our finance cost to increase materially, as we manage debt maturities over the next 3 years. Our net debt-to-EBITDA stands at 6.9x, which is trending downwards as our earnings increase and is comfortably within our upper limit of 8.5x. Our policy continues to be to limit our exposure to interest rate volatility by entering into hedging and fixed rate arrangements. We acquired GBP 140 million of interest rate swaps through the Urban Logistics acquisition at an average cost of 3.2%. We continue to be well protected against adverse movements in interest rates. And at the period end, our drawn debt was 94% hedged. As a result of the GBP 205 million cash component to the acquisition of Urban Logistics, our LTV is now at 35.1% compared to 32.7% at the year-end. Looking further forward, we'll continue to manage our debt arrangements to ensure that refinancing risk is mitigated and that we are able to take advantage of our increased scale and credit rating to diversify our funding sources. We strengthened our financial position in the period by completing 2 new unsecured revolving credit facilities totaling GBP 350 million with new lenders at margins below our existing comparable facilities. We completed a new 3-year unsecured term loan of GBP 180 million at an even tighter margin. And we entered into a new GBP 150 million U.S. private placement, as a credit spread ahead of any other private placement by any European REIT in the last 3 years. That amount was drawn post period end. And since that period end, we've entered into a further facility for GBP 50 million with a new lender at a margin of 125 basis points. Crucially, I think this new well-priced liquidity has allowed us to repay on maturity facilities post period end with AIG, L&G and Canada Life, which bought fixed rate pricing materially more expensive than our new debt facilities and was therefore, earnings enhancing. Additionally, we repaid the most expensive tranche of the Urban Logistics debt of GBP 57.3 million, which was costing us 6.17%. As I said in the summer, our successful credit rating now allows us to plan for possible future debt capital markets activity in the form of a public bond issue to cover debt maturities in financial years 2027, 2028 and 2029. We are preparing for such an issue and expect to be active imminently. Our contracted rent roll at the period end now stands at GBP 421.1 million with the inclusion of rent on the Highcroft and Urban Logistics acquisitions. Additional rent of GBP 9.8 million in the period was generated from active asset management, rent reviews and regears. Looking further forward, reversion within the LMP portfolio and the newly acquired Urban Logistics portfolio is expected to add GBP 28 million of contracted rent. The rent roll will increase as a result to GBP 450 million. This is, I think, a conservative view of growth post period end, as it takes no account of that active asset management initiatives and initiatives not yet executed and the letting of vacant properties. This generation of significant earnings growth supports our confidence that we will continue to be able to grow our earnings and our well-covered dividend. With this in mind, we've increased our quarterly dividend payment, as Andrew said, for HY '26 to 3.05p per quarter, an increase of 7% on HY '25. And then finally, just that look back at the last 11 years now, during which we've been able to increase earnings per share more than threefold. We're in our 11th year of dividend progression with excellent dividend cover and significantly ahead of the growth in CPI. Our total property return is strong, an 11-year CAGR of 10%, a very material outperformance against the MSCI or Properties Index. Our total shareholder return driven both by share price appreciation and dividend progression equates to a compound annual growth rate of 10%. On that note, I'll hand back to Andrew. Andrew Jones: Okay. Thanks, Martin. Right. So this is a look at how the portfolio sits today, GBP 7.4 billion split really against those 4 key sectors that I touched on in my opening remarks. Logistics now up from 46% to 54%. Our largest investment, as you can see there, about GBP 4 billion, and that is driving and delivering the strongest rental growth, and we see that continuing over the next few years through rent reviews and lease renewals. Hotels and Leisure remain a key beneficiary of the shift in discretionary spending. And in the period, we've continued to add new Premier Inn investments through a sale and leaseback transaction with Whitbread and hopefully, we have more to come. Our convenience investments is very much around the grocery sector. It is -- we're Aldi, we're Lidl, we're M&S, we're Waitrose, we're Home Bargains, a bit of B&M sort of thing. We're not the big supermarkets. And that we see it delivers great, great solid income with around about 3% rental growth to come. In health care, we're working with Ramsay to -- on initiatives that will improve the profitability and the desirability of our private hospitals and -- both from their perspective and for ours, and we're hopeful that we'll be able to talk about that shortly. But overall, as you can see from the numbers there on the right-hand side, it remains reversionary and on track, as Martin showed you on his last but one slide to deliver further increases in rent over the coming years. That 3.3% number that you see there at the bottom of the column is the -- effectively is the CAGR of the 18% on the rent reviews and the lease renewals that I touched on in our opening slide. We actually see that accelerating a little bit over the next couple of years. And that will be as much around reversions as around how many reviews are coming through and where they sit. So investment activity, the macro environment remains uncertain. We still believe that interest rates are the yardstick by which all investments need to be assessed. Current swap rates, they move around. I mean -- I think they peaked this year at 412. And I think about this time last week, they were down at 357, which is very exciting. And then all of a sudden, we're up about 15. I think we're 373 today. I mean, just it creates uncertainty and without a doubt, impacts on liquidity, particularly on the larger lot sizes. I mean we put in here -- GBP 20 million is a number. I mean we could bring it down a little bit. We could move it up a bit. But GBP 20 million is what we think above that, we think that it gets more difficult because it does require some debt buyers. However, we are enjoying much, much more success, greater liquidity in the smaller lot sizes. We've sold year-to-date GBP 212 million of assets, average lot size of GBP 6 million. So that's an awful lot of transactions. I think it's 36 transactions in the period. And we are dealing with a completely different array of buyers. It is -- there's a lot of owner-occupiers, family offices, small property companies, local authority pension funds. And we are transacting in a wide range of assets. Pubs, hotels, garden centers, children's nurseries, food stores, DIY stores, warehouses, waste disposal facilities, I mean, we've got them all. We have got them all. So we are seeing an unbelievably wide church of buyers and probably as wide a type of buyer that I've witnessed in a long time. I mean I made a comment the other day at the Board meeting. I think we've done and transacted on more sales to owner occupiers in the last 3 years than I've done in my previous 30, okay? So it's a different market. And the small lot sizes that we have is a massive strength for us. On the acquisition side, obviously, that GBP 1.4 billion that we've done year-to-date has been in the winning sectors that are going to deliver us the best income growth. It's obviously been dominated, as Martin has touched on earlier with the 2 M&A transactions. And not surprisingly, it is about reinforcing our logistics, our hotel, our convenience retail and roadside, which are continuing to offer up, we think, superior rental growth prospects. And then the opportunities are coming from really 4 or 5. We cut this -- we changed how we cut this really. It is sale and leasebacks. I referenced the Whitbread transaction that we did earlier in the year. Development fundings, we enjoy development fundings. A lot of developers are short of money, and we're only too happy to help them, providing it's in our winning sectors, and it's predominantly been logistics and grocery food, as we continue to strengthen our partnership with some of our key operators like Marks & Spencer. And then the pension fund industry is going through a dramatic shift, moving from DB to DC. That is throwing up portfolios. A lot of corporate pension funds are coming out of direct real estate, and that is throwing up an awful lot. And it's not hardly a week goes by that you might read something in one of the papers or -- sorry, one of the sites [indiscernible] or whoever, suggesting that so and so selling their properties and either in whole or in part. I mean, Santander recently has been in the news. St. James's Place has been in the news. And we're seeing opportunities from that. I mean we announced on Tuesday the acquisition of 2 assets from a Columbia Threadneedle portfolio. That was probably sparked either through expiry or redemptions. And so we hunt there pretty aggressively. And obviously -- the fourth one, which obviously I can't talk about is opportunities that we see, obviously, in the -- other opportunities that we might see in the listed sector through additional M&A. So our M&A activity. So we've done 4 public takeovers over the last 2 years that has added GBP 4.4 billion worth of assets. But more importantly, it's added GBP 267 million worth of new rental income, and it's been a source. It's obviously given us great scale, but it's also given us a great improvement to our earnings. We have, as we regularly update the market on is, successfully exited a lot of the noncore and some of the weaker assets. I mean, over those 2 years, we've sold GBP 372 million worth of these assets. That's 8% of the assets that we've actually acquired by value, largely in line with our acquisition prices. Some are up, some are down, but I think we're virtually bang on at the moment. And I'd like to say that, that was an incredible skill. I suspect there's a bit of luck in there as well. As you can see, out of the 465 assets that we've acquired, we've actually sold the smaller ones, which is we sold out of 89 of those. I mean I'm not going to go through the individual companies that we've acquired and the progress we made because it's there for you to read just as well. But the fact of the matter is the core assets that attracted us to these businesses in the first place are delivering for us. Rental uplift is GBP 12 million since acquisition. And again, this goes into that GBP 28 million I talked about over the next 18 months. GBP 17 million of it is arguably coming -- is going to come through from some of the acquisitions that we've made over the last 2 years. So that's the rub of why we like these companies, okay? We see them being pregnant with rental growth and maybe the property market or indeed the equity market hasn't valued that potential growth maybe as accurately as maybe we think we might have done. So we run an occupier-led business model. It helps frame our buy, hold and sell decisions. But as well as buying -- choosing the right sectors and buying the best assets in those sectors, we also actively manage our income granularity. Over the last 6 months, we -- our top 10 occupiers are down from 38% to 33%. Our top 3 occupiers are down from 27% to 22%. We obviously want to own the right space, and we want to let on the right terms in the right location. But one of our key things under this occupier-led business model is occupier contentment, okay? We're very close to our customers. We want to do more deals with them. We want them to be happy. Our test is that we -- and particularly at the operational side of the businesses, so things like the theme parks, the hospitals and the hotels, we are targeting a rent EBITDA ratio of 2x, okay? And that's a magic number because that then ensures not only contentment, but it also gives us much better asset liquidity. And we see -- I should say, pub market, the pubs as well, by the way, would fall into that as well. And that gives us the comfort of income durability. So we look at something like -- so that 2x test, and we expect all of our investments to hit that. And if they don't hit that, we will look -- we will have looked or have executed or are looking at exits. So if I look at there -- if I take Merlin as an example, that's a business that will hit our targets in the U.K. It's a business that has strong sponsor support. It was a take private for those of you old enough to remember it for about GBP 6 billion by the Lego family or KIRKBI which is its name, the Kristiansen family, Blackstone, CPPIB of Canada and the Wellcome Trust. It's also a business that has significant freehold properties. I think 50% of the earnings that Merlin report worldwide comes from freehold assets. And so therefore, it has -- it is what we consider to be an asset-backed -- it's an asset-backed business model. They recently sold 29 of their Lego Discovery centers back to the Kristiansen family for GBP 200 million. So they have these various levers when they need to raise money. U.K. profitability is running ahead of -- in '25 is running ahead of '24, and we have the added comfort in this business that we have the top operating company. And let's remember, we are talking here about a worldwide business that is the second largest entertainment firm in the world after Disney. I think there might be other people who claim to be that, but we think they're the second. So asset management, I think, I probably touched on most of these key numbers, like-for-like income growth, high occupancy. 67% of the income enjoys contractual rental growth, which gives us great comfort and -- to support the numbers that Martin had in his slide, the GBP 28 million that we've already touched on. And then interesting, I think in some ways, if you said to me, you've got one slide to take away, this is my favorite slide because this is -- it's what it's all about. This is what proves whether or not we've made the right investments in the right sectors and bought the right buildings. Rent reviews over the period gave us an uplift of 18%. Our urban reviews are up 22%. Urban open market was up 27%, which is what I referred to before. And then lettings and regears, again, this is the ultimate test of the desirability of your buildings. In fact, you're able -- tenant occupy content and people don't regear buildings, if they don't want to be in them and if they're not happy. And on average, those regears have been struck at 24% above previous passing rent. We have some vacancy. We inherited a little bit of vacancy under the Urban Logistics acquisition, and we're working through that either through leasing or through disposals. But that obviously -- we're at 98.1%. Personally, I think that's a little bit low. We need to be targeting 99% plus. Ideally, I'd have 100%, quite frankly, or maybe just under. So the asset management team have certainly contributed and helped drive that annualized like-for-like income growth of over 5%. So when I think about the outlook, I'm not actually sure, but I'm pretty comfortable -- confident that this slide actually might have been exactly the same 6 months ago. So it just shows that the world I'm really moved on, as it really. So macro events will continue to dominate investor sentiment. I've talked about the gilt and the swap rates always influencing the property investment markets. I say always, it wasn't always the case, but it certainly feels like it's been the case for the last few years. However, we do think the consumer is in good shape. Savings ratios are good, employment is good, wage growth is good. And interest rate cuts and a decelerating rate of inflation that we got yesterday -- was it, I think maybe the day before, I can't remember. We'll continue to improve confidence. We'd just be nice if we got a little bit more confidence coming out of 11, Downing Street. And I think -- but we are in quite good shape. There are times when I probably stood up here and I've taken questions on credit card debt or unemployment rates or low wage growth. I don't think those apply here today. And by the way, I think we're in a very different situation to America. And I'll expand on that later, if anybody is interested. But in the real estate sector, I think there are structural cracks between the winners and losers. I think for us, we're looking for organic rental growth, contractual rental growth without CapEx, okay? There are lots of sectors that are talking about high headline rents, but those have been bought through improved building qualities and facilities, tenant incentives. I'm talking about organic rental growth here. That's what you get in a rent review. That's what's great about a rent review. Lots of people talk about ERVs, but ERV doesn't pay the dividend, okay? Cash does. Rental growth does. And we're seeing why we want to be in logistics because we're still collecting that in-built reversions, okay? It's coming through. It's like a helicopter chucking cash at you. I mean it's just a wonderful, wonderful feeling. And we think that our scale, as Martin and I have already touched on, continues to improve our efficiencies and supports our triple net income strategy. We expect to see further consolidation in listed markets with or without us. We think it will take place. Without a doubt, the structural shift in the institutional pension fund market is throwing up opportunities, and we would be disappointed if we weren't a beneficiary of that over the coming period. And that we expect -- as a result of all of that, we expect further income growth, we expect further earnings growth, and we expect further dividend progression. We are well on our way to our objective for dividend aristocracy, only another 14 years, okay? And I expect to be here for it. So on that note, thank you very much for the last 33 minutes of listening to us. And obviously, questions either in the room or -- oh gosh, that was quick, or on the phones would be very welcome. Ladies first, Vanessa. Vanessa Maria Guy Vazquez: Vanessa Guy from JPMorgan. I'm having a look at your Slide 13, where you show your 4 main core subsectors in real estate. It's been a moving target in terms of your buy, hold and sell strategy. And my question is, over the next 6 to 12 months, is there anything that there that stands out that you want to streamline probably and grow in another subsector, anything that you have as an internal target? And are there any other sectors that are not there that you're interested in and possibly trying to build up? Andrew Jones: Okay. So the first thing is I never give the guys and girls targets because they have a habit of hitting them, and they hit them quickly. So our logistics has moved up to over 50%. If it went to 60%, that because we found some great opportunities. If it went to 50%, it's because we found some opportunities to sell at amazing prices to people who coveted our assets more than us. Entertainment and Leisure at 18%, that's down from 21% at the beginning of the year. I could see us buying some more -- we like the budget hotel market. We've been selling out of some of the smaller Travelodges. It's a market we actually understand pretty well. We have brilliant relationships with both Travelodge and Whitbread. We'd like to maybe add a little bit more into the -- into that bucket. Convenience retail is great, but our ambitions there are only hampered by the lack of opportunities. Most of the investments we make there are fundings or our own developments. I mean, I think we're on site at the moment with 4 or 5 M&S Simply Foods across the portfolio. And obviously, that will nibble up that -- push that percentage up a little bit. And health care, Martin has repaid the debt -- the secured debt on the hospital assets. We're working through some asset management, work with Ramsay, let's say, we have a fantastic relationship with them. That might improve liquidity and desirability. We'll have to see. It seems to be a hot topic at the moment in that sector. But we don't have any targets. And just in terms of new sectors that you touched on there, Vanessa, what these -- we try to keep -- I'm color-blind, so we can't do very -- many more colors. But within these sectors, there are subsectors. So in logistics, there's mega, regional and urban. Entertainment and leisure, there's the theme parks and there are the hotels. In convenience, there is the discounters, the drive-through restaurants. I mean we own 77 drive-through restaurants. The chances are one of you is shopping or buying goods in one of our drive-throughs all the time, okay? But that's in convenience as well as our Aldi, Lidls, M&Ss and Waitrose. Health care is essentially the hospitals. So there are nuances. And actually, some of those subsectors move at slightly different paces. We're getting good rental growth, for example. We get better rental growth arguably out of DIY at the moment than we might be getting out of GM. We're getting better rental growth maybe in urban than we might be getting out of regional. So even within those colors, the subsectors move at different speeds. Ana? Ana Taborga: Ana Escalante from Morgan Stanley. So my question is regarding logistics market rental growth. It's true that we're coming from very strong years and that market rental growth has decelerated a bit. Do you think that, that's just the normal digestion of those previous super strong years? Or do you think we are starting to see some affordability issues here and there? Or another way to ask the question is, at what point we can start seeing rents being too high or resulting affordable for some? Or shall we expect that Urban Logistics rental growth to reaccelerate next year? Andrew Jones: Great question. Again, it goes back to the answer I gave before around different parts of that logistics market moving at different speeds. We certainly see urban the strongest, and that is simply a demand-supply issue, except in London. Come on to talk about that because I think that was your second part of one of your first question. So urban feels good. And that's -- for us, obviously, urban is defined by geography, but we also define it by size. So we'd be 100,000 square feet down. We feel okay. Regional, we define as 100 and a bit -- up to about 350-ish, give or take. That market definitely has supply that's being delivered on a spec basis. I mean there are people out there that do spec developments, which I don't understand, but anyway, they do. And also maybe a pullback on demand of capital commitments and whatever with an uncertain economic environment going forward. Mega is fine as well because mega tends to be pre-let and build-to-suit. So there's not a lot of -- I mean there are some people who I admire enormously, who go off and build 1 million square feet spec. I mean you've got -- I mean, that is ballsy. But good luck to them, and I hope they do well. So I think it's okay, but there is a bit in the middle where I think net absorption needs to increase. What I would say, and this applies not just to logistics but it also applies to, we're seeing it very, very directly in our convenience retailers as well. We can't get the developments to stack up. It's really difficult to get developments to stack up. And that suggests rents have to push up, but that might take a little -- that might take a year or 2 to fall through, whilst the net absorption. I mean, I think we had the biggest take-up, didn't we guys, in the last -- a big take-up in the last 6 months. London is tougher for us. Even in urban, it's tougher. I think there's more of an affordability issue in London than there is anywhere else, but it's had dramatic rental growth. So it's not surprising. If you -- I take the view that most things revert to the mean over a period of time, and that's what I suspect London is doing. London will still enjoy a great supply side dynamic, but maybe the demand side at the current rents is a bit soft. I mean -- I think our flagship sale probably still when it was about a year -- 9 months ago, 10 months ago. We sold a warehouse that we bought in Parsons Green, which for those of you who know Fulham's -- not a lot of warehouses in Parsons Green. And we ended up -- we were going to let it originally to a dark kitchen. I thought getting planning for the dark kitchen was going to be a bit tricky as little mopeds going up and down the street, was not going to be overly popular with the finite residents of Fulham. And we ended up letting it to a leisure operator, who put in a fantastic facility for both adults and children alike and did an incredible fit out. And we ended up selling it, I think, for just over GBP 1,000 a foot -- I think it's about GBP 1,060 a foot, which is probably about what this building is worth. But that rent was GBP 50. So that would be trickier, yes. Sorry. Max. Max, behind you. Maxwell Nimmo: It's Max Nimmo from Deutsche Numis. Just a higher-level question kind of related, speaking to Martin before about kind of economies of scale versus opportunities of scale. And just in terms of cost efficiencies on one side, as you said, about the 7.7% EPRA cost ratio, but also the ability to kind of move the needle at the other end. And I guess my question is around if you're still doing deals around that sort of GBP 6 million lot size... Andrew Jones: We're buying GBP 6 million. Maxwell Nimmo: Okay. But if the lot size still remain relatively small, are you not effectively working the team harder and everyone having to run faster to kind of keep going at the same pace? Andrew Jones: Definitely. We're not a charity. No, look, our average lot size on acquisitions would be significantly higher than that. In fact, you would actually argue today a very strong case that the arbitrage available in the direct market is to sell the smaller assets at GBP 6 million for very good pricing and reinvest them at GBP 50 million where the price -- where the air is a bit thinner and the competition is less, and therefore, you get a slightly better deal. But don't forget, what we're buying is not high operational assets. I mean, Will bought a portfolio of Premier Inns a few months back, let on 30-year leases. I mean he'll probably be the only one who's seen them. I have no intention of -- I don't have to worry about them. I mean they're going to compound beautifully over the next 5, 10, 15 years. It's going to be wonderful. But that doesn't need a huge amount of skill. I mean the rent comes in from our key tenants pretty easily. Maxwell Nimmo: That makes sense. And maybe just kind of a follow-up. You talked about the sort of 4 to 5 opportunities that you have. In fact, there are 4 that are on the screen there. Maybe if we park M&A to one side, given there aren't as many businesses left for that now, but I guess, just the opportunity set, how would you kind of rank them? It sounds like there's a lot that could come out of these sort of pension funds, but there's perhaps a bit of a learning situation needed for them in terms of what their NAVs are and how that kind of unlocks. So maybe just if you could kind of rank them in terms of your -- how you're thinking about them. Andrew Jones: Well, 1 and 2 are amazing. So sale and leasebacks and development fundings are amazing because those are the -- those opportunities effectively, you've got brand-new leases. And those are very often scenarios or situations where you can influence the lease, not just the rent, but the rent review clauses and the term. So those are fantastic. We like those, but we're obviously not in control of how many of those opportunities will present themselves. I mean we're working on a big sale leaseback at the moment. We're working on a development funding at the moment with one of our key customers. And we are absolutely -- we want -- in development funding, we want to be the occupier's partner of choice or even -- we want the occupier to say to the developer, can you fund this through another metric? I mean that's really what we want them to say. And we had an example of that in the period. Fund expiries and pension liquidations, Darren deals with this, they're coming. There is a value issue to your point, but -- and there's also a timing issue, when are they coming. Managers are not -- they seem to be more willing to drip things out and keep the feet train running for a bit longer than literally come up against a hard deadline. But look, you've got to be in it. We're buying tickets. We're doing a lot of talking on it. We've executed those assets that we announced on Tuesday from Well, and we've got a few others that we're working through. But it is coming. I mean you've seen -- I think Lone Star did the St. James's Place portfolio, didn't they last week. And then -- so -- and it's either the -- and then also the strategies that these managers employ is different. Sometimes it's being -- most often, it's being led by the investors putting in redemption notices so -- if you might have a reluctant manager. And then it's whether or not they do the whole lot or whether or not they chop it up into sectors to try and get maybe a slightly better price. Again, you're not in -- I mean, the whole thing about real estate is you're never in control. We don't sit there go press a screen. We want to -- I know what we want to buy. It just -- it's not on the screen. It's got to -- it doesn't appear on the screen like it might do in the equity markets. And so I think -- look, I would -- I mean, I do love 1 and 2. I mean, I do love 1 and 2 and 3 is going to be pricing dependent and 4, we won't talk about. Matt? Matthew Saperia: It's Matt Saperia from Peel Hunt. Martin, you're looking like you need a question so... Martin McGann: Maybe don't. Matthew Saperia: Are you sure? I think you talked about -- or you showed earlier on the debt maturity profile. You've obviously got a current cost of debt that's below the market rate. Yes, I think you also mentioned that you don't expect your financing costs to go up. So can you just talk us through how you get to that conclusion, given the maturity profile and the cost? Martin McGann: Yes, absolutely. So we have a series of refinancings coming at us. And when you look at our debt stack, it's too weighted in favor of our relationship banks, and there's not enough bond debt on it. We did -- we've done various private placements. We've never done a public bond. When we got our credit rating earlier in the year, that was the precursor to a public bond. We will do a series of those coming up. When you then look at what happens to our financing costs, you stop paying commitment fees on undrawn RCFs and you stop paying the fair value amortization on the debt we've acquired through M&A, and that is a lot. So if your interest rate may nudge up or your amortization of your cost of putting debt in place may nudge up, but the compensating fact that you don't have those other 2 components of your finance charge means it is almost exactly flat going forward over the next 3 or 4 years. So our cost of debt could go from 4.1% to 4.3%, but the number you see in the income statement for finance costs won't change. Andrew Jones: You're just saying that the lending banks have just been robbing us. Steve, you up? Martin McGann: You weren't going to get away with it. Suraj Goyal: It's Suraj Goyal from Green Street. Just a quick question on sort of e-commerce. So just wanted to understand what your sort of base case forecast is for 2030 and beyond and how that sort of reconciles for -- reconciles with the recent normalization that we've seen, also with sort of return policy changes for a lot of e-commerce players, et cetera. And then what that would look like in terms of long-term rental growth. Andrew Jones: I stand up here just in case my mic is not working. Look, we form -- our strategy and sector investments is based of evolving consumer behavior. U.K. penetration into online shopping is excellent. I mean we're world-class, but it doesn't stop. I mean it's a bit like when retailers say to me or retail owners, you say, we've rebased the rents. It's as if it stops. But there is an ongoing generation that they actually enjoy the delivery of online shopping rather than the destinations that maybe my parents might have enjoyed more so. So we still think it will continue. We think that it will -- that it needs to get more efficient, and we're seeing operators increasingly putting more money into automation in order to make that work because it has to -- no point having it, it has to be profitable. I'm not convinced that, that influences our investments in Urban Logistics as much as it might in mega. But we still think it's a trend that as we move through generations and my children become the key shopper, the idea for them of wanting to go to St. David's or wherever it might be, whichever shopping center it is, it just doesn't exist. They want to buy online. So I think it's an attractive tail. You might argue that the bigger jumps are behind us, but we still think we still expect it to grow. I think food is different. I think food is different. And that is probably -- I mean, it obviously jumped from about 7 to 15 during COVID, and then it's come back. I think it settled about 11, depending on which grocery you talk to. And that's different. But we are absolutely seeing those operators investing in their facilities, particularly cold. So we're building a cold facility for M&S down in Avonmouth in Bristol. So we think it will continue to grow. We think it's supportive. But also what we also expect is that the occupiers will want more efficient facilities. Their network needs to get more efficient, if they're going to be able to drive -- use that to drive profitability. It wasn't that long ago when I could have stood up here and people talk about online shopping, but nobody makes any money doing it. Actually I haven't had that question for a while because I used to just redirect them to the next report and accounts actually to see how profitable it actually was. Eleanor Frew: Eleanor Frew from Barclays. The exposure to your largest tenants has been coming down, partly as a result of your acquisition activity elsewhere. Are you happy with the current top 3 concentration? I see it's below 2019 levels. Or if not, are you looking to accelerate reduction or happy to carry on diluting over time? Andrew Jones: Thanks, Eleanor. Look, I was asked actually on a call -- a press call earlier about what are your tests on tenant exposure. So the hard deck was always 10, although we did take that up to about 11 and a bit a few years back when we -- when Primark was our largest customer. And then we ended up selling one of the big facilities and bringing it back down again. So 10 is a hard deck. I think we would like to improve -- I would like us to improve our granularity so that nobody is more than 5, and we will look to do that over the coming years. But this is what happens, isn't it? When you buy portfolios or you buy companies, sometimes it's not all perfect because if it was, somebody else probably would have taken them out before you. But again -- so therefore, there will be a sell-down, and we're already making progress on that. So it's a combination of that. Obviously, as we've improved, it increased the size of the business, that has brought some of the concentrations down a bit as well. But income granularity, as I said on this, is an important part of our business model, but understand an occupier contentment overrides all of this. So yes, I'd definitely expect it to stretch a bit. When we announced the -- about what is it -- about 20 months ago now that we announced the deal with LXI, we were going to be the proud owners of 146 Travelodges and that really bothered me. And I now think we have 63 Travelodges. So there are levers that we will pull. Thomas Musson: It's Tom Musson on Berenberg. And actually just following up on Max's earlier point on the opportunity set. If we think about Europe, you might argue that you can access a lower cost of capital in some European countries. And now with your scale and with the triple net lease business model, that could be value accretive for the right opportunity. I just wonder how outwardly looking you now are when it comes to what's next? Andrew Jones: Good question. I think that -- look, we would look at Europe as not a country. We would look at Europe as a combination. And so if we are to look at investing outside of the United Kingdom -- I mean, we have a facility at the moment. We have Heide Park in Germany. We would probably identify 2 or 3 countries that -- where we could predict and have a clear view of consumer behavior. Also, we would want -- obviously, it would be -- we feel more comfortable, if we were to go into another country with an existing customer. I'm not going to name any names. So it would -- there would be a few tests first, Tom, but I wouldn't say that we're actively looking. We get European opportunities put through to us. I mean the big opportunity in some ways from an equity perspective is that there isn't really a triple net champion in the European markets. So that's the equity opportunity for us, which we're quite aware of. And we do get a lot of incoming from some investors, as to why don't you do it because then it would give us that European triple net exposure. But the lease structures, the REIT regimes in these countries has to be friendly to us as well. Like I said, we're obviously learning a little bit more about Germany now than we would have done 5 years ago, but I wouldn't expect an announcement that we're just about to make a big acquisition in Germany. Martin McGann: If you go back your 20 months when we acquired LXI, we would undoubtedly have said that we will sell Heide, the German theme park. But the truth is Heide throws off great income. We put some euro debt against it, there's a natural hedge and it's cheap and in your view could evolve. It's a terrific asset and perhaps the market is not right to sell it into today. So we don't. Andrew Jones: I did use to say that Europe was for holidays. Stop saying that. Any other questions? Unknown Executive: Okay. So we've got a question from the webcast today from Andrew Saunders from Shore Capital. Now you've been able to get under the hood of the ULR asset. What are your thoughts? And what are your plans for the Melton Mowbray? Andrew Jones: Thank you, Andrew. Look, I think Urban was a well-run REIT, okay? Let's say that. It was a well-run company. We're very pleased with what we've inherited. There are undoubtedly assets that we wouldn't have bought, but I've no doubt if the situations have been reversed, they might have thought that there are assets that we bought that they wouldn't, but they don't particularly like. So that happens. It's what we call beauty is in the eye of the beholder. Otherwise, we'd all be wearing gray [indiscernible] and light blue shirts. Look, Melton Mowbray is a difficult one at lots of levels. We're on it. We fortunately allocated a price on the way in that would allow us to get out without losing our shirt and trousers. But yes, I mean, the acquisition price was elevated. The tenant, obviously, longevity was not what was probably originally anticipated. But we'll deal with it and we'll move on and the money we reinvested. I mean, at the moment, it's not in any of our forecasts. So if we do either let it or sell it, that will be money or income that comes in that isn't in our GBP 28 million that we're hoping to collect over the next 18 months. So that would be on top of that. But listen, all portfolios have some problem children like families. Unknown Executive: Thank you for that. And that's all the time we've got for questions. So I'll hand back to you, Andrew, for closing remarks. Andrew Jones: Thanks. Well, okay, that's great. We are literally just the right side of an hour. So thank you ever so much for your questions, your time and your comments. So thanks. Have a great day.
Norman Choong: Okay. Good evening, ladies and gentlemen. Thanks for joining this call today of PT Bumi Resources 9 months 2025 Earnings Call. My name is Norman Choong, I'll be your operator today. So we're very honored to have this call being hosted by Pak Andrew Beckham, Chief Operating Officer of Bumi; and also Pak Christopher Fong, the Chief Corporate Affairs Officer of Bumi. So as usual, we will run through the operational stats of 3Q '25, then followed by question-and-answer session. Pak Andrew, I'll pass the floor to you. Andrew Beckham: Thank you, Norman. Good evening, good afternoon, good morning to everyone here. Let me go through the slides. Next slide, please. Okay, okay. Production for the 9 months 2025 was at 54.9 million tonnes, down slightly from 2024 of 57.3 million tonnes, mainly due to the heavy rain, especially in the third quarter at KPC. Prices, realized coal prices for 9 months decreased $60 -- to $60 versus $73 in 9 months 2024, in line with the global coal market. Production costs, overall production costs came down mainly due to lower unit costs at KPC, and I'll go on to more details in that, driven by the oil price and stripping ratio. Next slide, please. Our guidance remains at this 73 million tonnes, 75 million tonnes of sales. We're limited by production, which is under the RKAB, so we can't get more coal produced out of KPC, but we will be well set up for the first quarter because of that. Prices are between $59 and $61. It's possible that we beat that if the fourth quarter continues to move up a little as it is doing at the moment. Cost-wise, we're running around the lower end of our guidance at $42, and we've reduced our strip ratio slightly and fuel costs, as we've mentioned. Next slide, please. Global markets, international coal prices have been pretty flat, down towards the summer. And as usual, towards the winter in the Northern Hemisphere, you're seeing prices tick up a bit. There's a bit more demand now from October, November in China, and prices are just coming up. I think you'll see that continue up until halfway through December. And then it will go pretty flat as the Christmas holiday is coming. But we see a little bit of improvement in the prices at the moment. Next slide, please. The forward curve is running long term, still at $120, $122 in calendar '27. The GC NEWC referring to here. This is still up at $108, $109. And there's a lot of -- I think if the markets, global markets continue to perform, you'll see this $113 to $116 in calendar '26 a big possibility. Next slide, please. With regards to the operations overall, in our sales for 9 months with 54.5 million tonnes compared to 55.8 million tonnes, there's a slight drop of 2%. This is because we -- our strip ratio has come down. You can see at KPC, we're at 8.6 year-to-date versus 9.2 last year. That's because we have opened up mines. We have improved the -- now the mines will be in there in a more stable position. So you'll see that strip ratio being slightly down. It will continue slightly down next year, if all goes to plan. Coal mined is slightly -- is below because of the wet weather in the third quarter that we've had, and rain continues at both KPC and Arutmin at the moment. Prices wise, the FOB prices are down 20% at KPC, and down 8% at Arutmin. Arutmin's price has fallen less because it sells more domestic coal. And so therefore, there's a fixed price there of $70 benchmark, which takes it from that increase from that sort of global market fall plus the fact that we have a lot more of the 4,200 to 5,000 CV coal, which is -- has maintained its price better than the very high-grade coal. Next slide, please. Here, you can see the rainfall and KPC at the top has pretty much 5, 6 months, over on the red is the actual against the long-term averages. And for 5, 6 months, it's been -- there's been 5 months that have actually been above the long term, and over the last August, September and coming into October, we've been at higher levels, continues at the moment. Rainfall itself, Kalimantan and Arutmin has been less than the global trends and has stayed pretty stable all the way through. Next slide, please. As I said, overburden has come down because of the unfavorable weather, but also because of our strip ratio at KPC. You can see Arutmin is slightly down from last year. Coal mined is slightly down by about 3%, 4%, but that's because of the weather and KPC now restricting its production based on RKAB requirements. Next slide, please. Coal sales, almost the same, not far off. We've used up the inventory. We have quite a bit of inventory. We will see inventory levels come very low towards the end of the year as we maximize as much sales as possible. And we'll probably into the first quarter have a tight stockpile there. Arutmin has been here and is slightly up on last year in terms of sales. As I mentioned, stripping ratios are down at both KPC and Arutmin, and that's part of the mine plan, our long-term mine plans that we see into 2024, the prices -- the mines was open, and now we're seeing the benefit come through. Next slide, please. Production costs, we reduced our costs. As I said, because of the strip ratio and because of fuel oil prices coming down, I'll talk more about that later. Arutmin maintained its costs slightly down on last year. And FOB price, as we all know, has dropped about 18% overall, especially at KPC, has been a big drop. Next slide, please. Average selling prices, as I mentioned, you can see the big drop from the international prices of $82.8 down to $67.4. That's been a major trouble for us. And the fact that the HPB has been following slowly behind doesn't help when we try to do our royalty payments and tax payments are now covering -- are based on that HPB if it's higher than the realized price we got. So it makes it harder for us. In a rising market, we don't have that problem. Average selling prices overall were from $73.7 to $60.4. Next slide, please. This is the fuel. You see we're running at about 1.12, 1.13 in the last quarter at the moment. Remember, we're now using B40 solution, which is biofuels 40% and that's more expensive than pure diesel. And so therefore, we're paying probably about $0.05 to $0.10 a tonne -- $0.05 to $0.10 a liter more than any other normal operations or normal industry in Indonesia. So it's another penalty that we have to take into consideration. And if they go to B50, that will have an effect on our fuel costs. Next slide, please. Bumi's reporting, we were running -- if you look at the revenue, we're up on our revenues because of BRMS improvement, our gross profit has improved. However, our net profit has come down. The main reasons for that, if we look at the other income and expense, it's been the KPC earnings because of the drop in coal price and write-offs in BRMS, our subsidiary of one of its assets. And in the income tax and profit sharing when you compare to 2024, in 2024, there was a deferred tax adjustment, which gave it a benefit of about $60 million, $70 million, which benefited. So you saw an improvement in the profit last year. However, operational wise, we're in a very good position, just we need the prices to recover. Assets, liabilities are running, are pretty strong. We're still at current ratio of 1 and also equities higher at $2.8 billion. Next slide, please. This just gives you the consolidated numbers, as we've done before, just to highlight the size of the revenues of $3.5 million against $4.2 million. These are in the back of the financial statements, I think Note 41-- 42 or 43, if you ever need quarterly numbers. Carry on, please. And this just gives you the comparison between the 2, just so you understand, we're not -- the numbers are set, the bottom line is still the same, but it does have an effect on all our numbers. Next slide, please. So overall, when you look at consolidated revenues are down 17%, but we've managed to reduce costs as well. Thanks to fuel, but also thanks to the mining, bringing our strip ratios down. Our gross profit is down overall when you include KPC and our operating income is slightly down by 22%. Operating margins remain pretty -- not significant change. But we hope with coal prices ticking up over the next couple of months, we should see a good fourth quarter. Next slide, please. Bumi's financial highlight, as I said, the equity is slightly down overall year-to-date from December. And the last 12 months consolidated adjusted EBITDA is running at $277 million at the moment, slightly down on last -- on 2024 because of coal prices. Next slide. And this is just in quarter-by-quarter, how the start up. And you can see the EBITDA each quarter from this year, like Q1 '25 has gradually increased as formatting prices slightly rise. If prices continue to rise in Q4, we should see that slightly better as well. Next slide, please. Cash still remains strong at $314 million in total. Below are the breakdown of KPC. Note that we have the restricted fund, the CDA. Restricted fund is for payment of contractors at the end of the month or it gets paid the following month, the 1 or 2 days after the year closed. The mine closure deposits, you have there of $45,000 and $55 million -- over $100 million is for mine closure assuming we get our extensions, we' have to keep these in bonds in with the government, even though we have probably another 15 years of mine life to go. So it is quite frustrating, but that's the rules with the government. Next slide, please. ESG, would you like to? Christopher Fong: Yes. We're on track year by year, so to the 9 months compared to 2024. We have -- our CSR programs were at $3.5 million. We're on track to spend what has been targeted. Our environmental spend overall is on track, and we will end up spending somewhere in the vicinity of $76 million, and that covers reclamation, planting trees and protecting our environment. Also safety issues, gas emissions, et cetera. What we don't have in this document, which we're doing a lot of work on, we've talked about it previously, is the ESG work we're undertaking now in terms of setting standards and emission targets and reporting on them. Also related to issues such as the weather issues at KPC, we have implemented research in terms of predictive ESG to using our data from all our weather stations to determine better usage of working days and to increase production and also maintenance days. So that's a program that will be -- is ongoing. It started the last few months, and we'll be reporting on results from that as we move forward into the new year. But it is certainly positive in the work we're doing, undertaking on an ESG platform. Moving on. Yes. Andrew Beckham: Norman, that's about it. We won't go into the detail, but KPC details and Arutmin details are attached so that people have the breakdown of the key assets, the coal assets. But we're happy to open it up to questions and -- questions now. Norman Choong: Thank you, Pak Andrew. Thank you, Pak Chris. [Operator Instructions] Okay. I think audience needs some time to warm up. Let me kick it off first. But I wanted to check with you, what's your view on your 2026 coal production numbers because I understand that a lot of mining companies are in the process to submit RKAB for next year. That's my first question. Andrew Beckham: Yes. Yes, we all submitted. I think all our player base are in waiting for the government. I think they're having a big review on the total level of coal production they want. I know it was -- used to be about 800 million to 900 million, it came down to 750 million this year, but I understand they are looking at further reductions. To be honest, I don't know what the results of that are going to be. but we're waiting to hear from the government on our RKAB. Norman Choong: I see. The amount that you've submitted is the same as 2025, is it? Andrew Beckham: Slightly up. It will be slightly up because Arutmin will be probably raising its production. Norman Choong: Got it. You also had an EGM yesterday. Can you like run us through what was the key result from the EGM? Christopher Fong: Yes, I'm happy to do that. The EGM, the basis of the EGM was firstly, to address the resignations of the CIC directors. And so it was a formality in having the EGM recognizing their resignation. Also, there was a change in one other person. The CFO has been -- has moved to a new position outside the group. So those were the 2 main areas of -- and purpose of having the EGM. And also there was one appointment, which was myself as a Director. Norman Choong: Congratulations, Pak Chris. Do we have any questions from the floor? Let's see. Okay, otherwise, I'll follow up with my question. But from the news, it seems like Bumi Group is quite active in M&A recently. So we have this Wolfram acquisition and Laman Mining, right? So just wanted to understand, does it seems to be -- does it mean that there's a change of direction where Bumi now have more flexible in terms of doing asset acquisition? And how is the -- maybe in terms of the financial muscle side of things looks like? Christopher Fong: Well, look, there's no secret that this year has been -- is a year of transformation at Bumi. We announced to the market fairly early this year that we are going through a diversification strategy. I think the market has been fairly surprised in the speed that we've taken this on. And that was the first announcement of the asset in Australia, which is a copper and gold asset, Wolfram Limited. We now have 100% of that asset. It's in Northern Queensland in Australia. We visited that site recently, the President and Director and myself and a few other directors. It wasn't the first visit from Bumi, but it was certainly the first visit for myself. It's a fantastic asset. It's in care and maintenance. So it's a brownfield asset. It will be up and running very quickly. We initially targeted for June next year, although we're keeping to that, but we expect that this will be sped up, and we will announce that when we are ready to. It's, as I said, it's a very good asset. It has a lot of data, it has a lot of resources and it has processing on site. So we expect to have some very positive news as we move forward into the new year on that particular asset. Also on our website, we have announced another asset in Australia called Jubilee Metals. And that, there will be more information next month on that, but it is also a gold play. So that's the second asset in Australia that we have acquired. So as I said, there'll be further news on that in December. And also what you just mentioned, bauxite. So we've had some agreements on bauxite. They're going through a legal process. And as the market well knows that the bauxite industry is well established in Indonesia and there are some issues over export. So we -- as the market expects, there will be further announcements, what we do with bauxite and when we do it in the near future. So we can certainly move forward in a transition plan that I think has taken the market by surprise because we talked about it, but we actually are doing it. Norman Choong: Thank you, Pak Chris. Maybe to follow up on this one, right? So these 2 acquisitions, are they funded by internal cash or debt? And further related to in terms of debt funding, could you remind us, what is the current covenant in terms of debt and fund raising? Andrew Beckham: We've done the raising. We create some of the money through the bond program that we have, the rupiah bond program that we have. Rates are around 8.5% to 9%, depending on the tenure. Those have been the ones funded. We have no specific covenants other than the normal bond regulations in Indonesia. But we don't -- we're very confident with gold prices and copper prices where they are. We expect payback within 1 to 2 years on these projects. Norman Choong: Okay. We have questions from the box already. The first one is from [ Benjamin Michael. ] How big is the bauxite resources of Laman Mining? And how big is alumina smelter? Andrew Beckham: Laman Mining has, I think reserves of about 30 million tonnes, but potentially, that could increase with a little bit more. There's a discussion over one area and an agreement. If that agreement is found, that would probably increase it to 50 million tonnes. And what was the second question, sorry? Norman Choong: The alumina smelter, how big is the capacity? Andrew Beckham: That, we haven't gone into detail. We can't go into detail at the moment. We'll announce when that -- we get to that point. Norman Choong: Okay, sure. I hope that answered your questions, Benjamin. Christopher Fong: What we can say is that part of our diversification strategy is not just going into minerals away from thermal coal, but also into downstream processing. So as I mentioned before, we cannot export bauxite, and bauxite can't be exported from Indonesia. So naturally, there will be a downstream processing component to that, but we will announce that in due course. Norman Choong: Sure. Second question is coming from [ Alden Lam ]. Is Pak Ashok Mitra still in KBC as CEO? That's his first question. Andrew Beckham: No. No. He's not already in the group. He's outside that now. Norman Choong: Okay. His second question is, can you share your thoughts on the impact of B50 to the Bumi mining cost? Andrew Beckham: I can't give you a number at the moment. I haven't done the numbers, but I should expect another $0.05 to $0.10 per liter, it may well cost if the subsidy that used to be there by the government is still not there. Norman Choong: Got it. Andrew, I have a client who just texted me. Question is with regards to the 2 directors from CIC that has just resigned from the EGM, does it mean that CIC will totally exit from the business? What do you think about it? Andrew Beckham: We understand the China government has a policy of not being invested in thermal coal. Yes. And that's what we believe is the reason. And if you see in the public markets, they're selling down their shares in Bumi at the moment. So we assume that, that's the plan, that's why they resigned and their plan is to exit. I think this is their last thermal coal asset that CIC has. Norman Choong: Got it. Okay. A question from [ Yoga ]. Can you share production outlook for Wolfram and Jubilee Mining including annual production target and cash costs? Christopher Fong: For Wolfram Mining, on an annualized basis, commencing in June 2026, we're expecting 50,000 ounces at this stage. Although we won't be surprised if we commenced production prior to that date. Andrew Beckham: Yes. And I think Jubilee would do about 25,000 once it's in full production. Cost wise, we'll come back to you once the budgets are closed and finished. Norman Choong: Okay. Can I follow up on these two? What are the rough mine life that we should expect with this kind of production? Andrew Beckham: Well, with gold, it's always a case of you drill as you go over and place the years. There's long mine life in both of them based on the potential resources and reserves available. And we'll update as we go, but we have more than enough mine life to get our money back and a good return. Norman Choong: Got it. Benjamin has more questions. He's asking, who is replacing Pak Ashok following the end of his tenure? And any other potential M&A going forward? Andrew Beckham: Well, at the moment, I'm acting CFO as well. There's a discussion, a big discussion going on internally and once it's been resolved, then we'll make an announcement. Christopher Fong: And to the second question, which I'm happy to answer. It's also no secret of our expansion plans in terms of the transition model. And we're expecting in the next -- within 5 years to be an EBITDA basis, 50% in par with our coal. So therefore, naturally, we will be announcing further acquisitions as we move forward. And we expect that in the next 6 to 12 months. Andrew Beckham: Norman, we can see what you're writing. I don't know if that was... Norman Choong: So sorry. So sorry. I mean I have to write it down, right? So yes, so sorry. I forgot to off my screen. Christopher Fong: So what I'm saying is, yes, it's very clear that we're undertaking a very aggressive transformation and we have a very big unit who are focusing on assets, not just in Australia but also in Indonesia. So that has been reflected in some of the announcements that we've talked about today, and there certainly will be more coming. But we also don't discount that -- look, we're still in thermal coal. We are very focused on streamlining, sorry, excuse me, that production. And that -- and you would have seen those results today that was significant savings and cost savings we're seeing at the mine. And that will continue. So we're very much focused on thermal coal. But as we expand in this transition, you'll see more metals and you'll see more downstream processing assets come on board. Norman Choong: Okay. Anyone have more questions? Yes. It seems there's no more questions. Maybe let's wait for a little bit more. Yes, I think there's no more questions from everyone. Okay. So that concludes the earnings call today. Thank you, Pak Andrew. Thank you, Pak Chris, for doing this for us. As usual, if you have questions, you know you can reach out to them directly or you can reach out to me. Christopher Fong: Sorry, Norman. Can I just add that, look, apart from this transformation, there has been a significant restructuring at Bumi. We have a much larger, more -- larger Investor Relations department. And we're very transparent so we're very happy for engagement from anybody who has questions about the business. Andrew Beckham: And if you're not getting the updates from the company, please contact us here. Norman Choong: Sure thing. Thank you so much. Thanks, everyone. Andrew Beckham: Thanks, Norman. Christopher Fong: Thank you. Norman Choong: Thank you.
Mark Blair: Good morning, everybody. I'm Mark Blair, the CEO of the Mr Price Group, and thanks for joining us while we take you through our interim results to the 27th of September 2025. I'm going to be talking a little bit about the operating environment. Praneel Nundkumar, the CFO, will take us through the detailed group performance, and then I'm going to share the longer-term thinking with you and also the short-term outlook. So moving into the operating environment. And I think there's already been much said about this. There's been other retailer presentations. So I probably don't have to say too much except to say I think these graphs tell the full picture. Since COVID-19, there's been a prolonged period of negative real wage growth, rising debt service costs and obviously, inflation has been more elevated, but it seems to be improving now. But if you look at that graph on the left-hand side, there you'll see the negative wage growth in 2022 and 2023, started picking up a bit thereafter, but all negatively indexed to the base of 2019. And what happened during that process over that time frame is that there was an access to debt of those consumers who could. And therefore, on the right-hand side, you see the debt service ratio going up as well. It's great to have a little tick down towards the end there going into 2025. And we're hopeful that when we get to the outlook and the shorter-term future discussion that, that starts to trend in the right direction. But I think the picture here that it tells is looking at what's happened to general wages and wage increases over the period, just relative to the cost of living, many of the items that make up the cost of living have increased at a higher rate than people's wages. So there's some negativity in that. I think the good news is that when we start looking out towards the future, some of these things are starting to turn quite nicely. Looking at the consumer spend and behavior. And of course, the 2020, 2021 part of that term is not that relevant. It's a COVID year and it's a bounce back. But you can just see what happened to total household expenditure over the period and 2.6%, 0.2% and 1%, I think, also tells the picture. Certainly, what we've seen as retailers is that retail patterns have been very erratic. So I'm talking about monthly performances, very dependent on what's happened to timing of holidays, et cetera. And certainly, we've seen the impact of around pay days, very strong performance. And as it gets further away from pay days, then performance tends to come off. So very erratic in that front. And of course, what we're living with is a scenario that is spending is one thing. I suppose discretionary spending is another and discretionary retailers have also had to deal with the threat of the online Chinese retailers and online gambling, but just to add a little bit more insight into that. Certainly, the statistics that we've got show that the international online players have been losing market share for a few quarters now, and that was on the back of regulation change. So that's a positive for us. And then I think with online gambling, there's been quite a few reports that I've read. And I guess some of them have got divergent views as well. In the one report that I read, it did refer to that sometimes the statistics aren't that well understood. And it depends what's in the numbers because to some extent, there could have been where online gambling was illegally taking place offshore and has now been localized and included for the first time, that could be a factor. And the other factor is that although one of the figures quoted was total wagered value of ZAR 761 billion, there was a view that, that includes seed capital and winnings reinvested and that, that seed capital is probably around ZAR 115 billion versus the ZAR 761 billion. The net losses at the end of the day, I've seen figures of ZAR 36 billion, ZAR 29 billion coming from online, but it's the incremental change year-on-year that in 2025 is estimated to be about ZAR 15 billion. That's the worrying part is that jump. And of course, at this point, we also don't know how the accessing of two-pot retirement funding aided a short-term diversion into gambling. We'll have to see how that settles down. But I think the point that I also want to make is that as retailers over the years, we've had to face many, many disruptions. And whether you're looking at the 5-year history or in fact, going much earlier than that, the introduction of cell phones was a good example. These are all bumps that we've had to overcome in the past, and we'll certainly make a plan to make sure we manage these ones as best we can. Looking at Mr. Price's sales growth versus the market. Obviously, in this graph, Mr Price Group is in the red bar. And what you see where you're looking at 2024, 2025 and then H1 and H2 in 2025 and H1 in 2026, Mr. Price consistently above the gray bar, which is the rest of the market. So I think just sort of concentrating on the short term for a moment, although, of course, we'd like the 5.5% to be a lot higher, what is absolutely not negotiable for us is the quality of those sales, and we're not after growing market share at all cost. We have to grow profitable market share, and that's what we've done consistently, very, very important for us. Also want to just stress, and we'll talk a little bit later about it as well, is that as we -- in H2 now, we are up against a much stronger base. I've spoken about the two-pot hitting there and accessing that retirement funding really boosted spend last year, kicked in, in October. And just from a monthly trading perspective, we had a really strong run up until February. So the base is very high. And I think that's probably the timing going into 2026 that the two-pot effect should be out of the system, and we can see how we're trading relative to a much cleaner base and therefore, have a much better read on the health of the consumer. But very pleased that for all those reporting periods, comfortably above our peer set with -- and I just want to stress the point again, with profitable market share gains. And I guess at the end of the day, this is the kind of picture that we strive for. And it's not myself as the CEO or Praneel as the CFO, managing this from the top. I'll get into what makes up the Mr Price DNA a little bit later. This is a process that's alive in our business and there's great alignment on it in our business. So shout out to the teams that deliver these, but I must say it's not a fight to get the shape done. So very pleasing that there's been a translation of positive top line growth that we've kicked on in the GP percentage, managed overheads and actually come up with a HEPS growth of 6.5% and then maintained our dividend policy as well. Also cash nicely up at just over -- just around ZAR 3 billion. I did mention the word consistency a bit earlier. That is something that we do strive for as well. And normally on graphs, we like to be red, but in this case, quite happy to be black. And the fact that for the last 4 reporting periods, all our numbers are in the black, I think that's the objective that we set out for. So consistency through merchandise execution, through cost savings, there's a lot of discipline that happens in our business to manage that outcome. So although those figures for us are in the black, of course, we'd like them to be higher in scale. But hopefully, that's the last slide that I'm going to talk to when we're starting to see green shoots out there that could start shaping the trajectory of those black lines here to hopefully what could become a steeper curve. I think we all look forward to that. But I think just relative to what's happening out there, the market is extremely promotional. You've seen what's happening to gross margins across the sector and to come up with another consistent performance relative to that market, I've got to be pretty satisfied about that. I'm now going to hand over to Praneel, and he's going to take you through the detailed earnings. Praneel Nundkumar: Thanks, Mark. Good morning to everyone joining us online on the webcast this morning. I'm pleased to present to you the Mr Price Group results, the interim results for the 26 weeks ending the 27th of September 2025. As you would have gathered from some of the slides that Mark presented just now, the first half was quite a challenge in terms of the operating environment that we had to deliver results in. Consumer confidence remained negative in the first half, and you would have seen that household expenditure growth was subdued. At our last results presentation in June, we did say that in an environment like this, our focus was on ensuring that sales would continue to grow ahead of the market and that, that would come at higher GP margin gains. I'm pleased to report back today that that's exactly how the first half transpired. Taking a look at the income statement. Revenue for the first half grew 5.4% to ZAR 18.5 billion, driven by retail sales up 5.5% ahead of the market's growth of 5.3%. Retail sales was impacted by comp sales growing 2.1%, up from 0.4% last year, and weighted average space growth grew 3.5% due to the addition of 91 new stores in the first half. Gross profit grew 6.3% to ZAR 7.1 billion, creating a nice positive wedge to sales with GP margins growing 30 basis points on last year. Expenses were well controlled, growing 5.6% to ZAR 5.9 billion, and operating profit grew 5.7% to ZAR 2.1 billion. Net finance expenses decreased 4.9%, and that was due to the interest earned on the positive cash balance in the first half, offsetting interest expenses coming in at ZAR 297 million, down on ZAR 313 million last year. This assisted the profit before tax number growing at 7.7% to ZAR 1.8 billion and profit after tax grew 7.3% to ZAR 1.3 billion. Profit attributable to equity holders of the parents were up 6.7% to ZAR 1.3 billion. And as Mark mentioned earlier, HEPS was up 6.5% for the first half. In summary, even through the constrained trading environment and consumer challenges that we spoke about, our management team was satisfied with delivering operating leverage through GP gains and strict cost control. Moving on to the segmental performance. The Apparel segment, which contributed 78.5% of retail sales grew 5.3% in the first half. This outgrew comparative markets whose sales grew only 4.7%. The Mr Price Apparel division maintained market share in the first half and expanded GP margins despite the market being highly promotional, resulting in an operating profit growth for the sector of 12.3%. As you'll note from the pie chart on the left, the Mr Price Apparel business contributes 42.6% to total sales, and it's really pleasing that on a 12-month basis, the division gained over ZAR 200 million in market share. The Studio 88 business also delivered a solid margin-accretive sales performance, and I'm very pleased to report that the Power Fashion business reported its 14th consecutive quarter of market share gains. Comp sales were up 1.7% for the sector. Unit growth was up 2.4% and the sales density just under ZAR 38,000 per square meter for the apparel sector. Moving on to the Homeware sector, which contributes 17.7% to total retail sales. Sales in this sector were up 5.1% with healthy comp growth at 4.3%. It was pleasing that operating profit in the sector also grew 12%, driven by all divisions expanding GP margins and managing costs really well. Unit growth was also up 2.6% and inflation was up 2.4% with sales density just under ZAR 30,000 a square meter. I must make a mention of the Yuppiechef business, who reported double-digit sales growth in the first half and continued to gain market share for 18 consecutive months now. Having a look at the Telecom segment, which now contributes 3.8% to retail sales, up from 3.6% last year, and this came through from retail sales growing 12.4%, consistent double-digit earnings growth from this sector over the last few periods. This also was positively impacted from market share gains of 50 basis points per GfK in the first half. Operating profit grew 16.8% on last year, and comps were slightly down at minus 1.9%, but unit growth was up at 4.3%. The Mr Price Cellular stand-alone stores grew by 12 stores in the first half, taking the total stores to 73 and 481 combo stores across the business. Moving on to space growth now. The group ended the first half on 3,100 stores in the first half, a total of 91 new stores for the period. As you can see, a lot of this growth coming through from the apparel sector, where the Studio 88 chain grew 42 new stores across its 5 trading businesses with Power Fashion growing 11 stores and Mr Price Apparel and Kids growing altogether in 11 stores. The Homeware segment also delivered 8 new stores for the period. And as I mentioned just now, the cellular business grew 12 new stand-alone stores. Weighted average space growth at 3.5%. And really just wanted to show you the table on the left -- I'm sorry, the right at the bottom that over the last 4 years, we've averaged just under 200 new stores per year. And even for F '26, you will see on the red bar graph that we're on track to deliver 200 stores this year, another 109 in the second half. Our management team are also very satisfied with the return metrics on new stores. These continue to exceed the internal thresholds that we've set for new store CapEx. Moving on to the slide that you all have been waiting for, the gross profit analysis. Group GP grew 30 basis points to 40.0% in the first half, up from 39.7% last year. As you can see from the slide, these GP gains were noted across all trading segments despite the highly promotional environment by competitors. The margin gains ensured that we had a smooth transition out of winter into fresh inputs into summer and spring merchandise. The Apparel segment, which grew 30 basis points was driven by the 2 largest divisions, Mr Price Apparel and Studio 88 and further margin recovery in the Homeware sector by 20 basis points ensures that the Homeware sector is on track to deliver their medium-term target of 41% to 43%. And you'll note that we did increase this target in June, so a higher target, but we're comfortable that they are in the range. The Telecoms margin grew 60 basis points, both for cellular and the mobile business, aided a lot by the transition into the private label devices that we've introduced, which aids the margin growth. We're expecting to be within the medium-term target ranges in the second half despite a strong base. A big focus area for me in the first half and for many of our teams, as Mark mentioned, was managing overhead costs in the environment that we spoke about. I'm pleased to report that total expenses grew 5.6% to ZAR 5.6 billion due to stringent and active cost management by our teams, which has now become quite a cornerstone of our value retail model. Our teams are agile at being able to respond when the sales calls are different to expectations. Depreciation and amortization grew 5.5% to ZAR 1.5 billion and employment costs, while growing 11.1% was impacted due to some credits in the base, prior year base effects from LTI schemes that were forfeited due to performance criteria not being met in the previous year. Excluding these credits, employment costs were up 8.6%, which includes the annual increase that we did together with 91 new stores, adding weighted average space growth. Occupancy costs were up 4.2% to ZAR 566 million and other operating costs down 3.1%, impacted by foreign gains -- ForEx gains in the first half compared to ForEx losses last year from our African territories that we trade in. Excluding these ForEx gains and losses, operating expenses were still only up 1.9%, which talks to the effectively managed overhead costs in the business. Moving on to operating margin. Operating margin grew 10 basis points to 11.5% compared to 11.4% last year. And you will note that all trading segments expanded operating margin due to a combination of the GP margin gains that I spoke about earlier and together with efficient cost control. You will note on the slide that the group -- op margin grew at a lower rate than the trading segments, and I must make a comment that you must tie that back to the previous slide where I spoke about the LTI base effects credits in the base, together with the fact that the group growth is impacted by central costs that don't sit within the divisions. Also to note that the H1 margins are seasonally lower than H2, and we continue to track into our medium-term target ranges for op margin as we look forward into the second half. Moving on to the balance sheet now. Also pleased to note that the gross inventory balance grew only 4.5% on last year. We exited winter cleanly, and that really goes out to our management teams and our merchant teams who made sure that we managed stock efficiently and worked very hard in the first half to get this outcome. Together with improved port operations, reducing the unnecessary stock buffers that we had to place into the supply chain in the previous year. Trade and other receivables were up 3.9%, and this really is a factor of credit sales, but also the lower repo rate compared to last year, which we'll talk about a bit more when we get on to the credit slide. And trade and other payables growing 21.7%, just a very big testament to the teams in our sourcing space who really work hard to get our suppliers on to supply chain finance, the program that we've spoken to you about before. It was pleasing to note that in the first half, we've been able to transition a lot of our international suppliers onto the program, which is the non-comp piece to last year. All in all, net working capital resulted in an inflow of ZAR 372 million, assisted the cash and cash equivalents balance growing to ZAR 3 billion, up 38% on last year and a very healthy cash conversion ratio of 81.8% with 0 long-term debt at the end of the first half. Having a look at the cash flow movements now at the beginning of the period, we started with ZAR 4.1 billion in cash. Cash from operations from working capital changes came in at ZAR 3.5 billion. We just spoke about the working capital improvement of ZAR 372 million and net interest received, as I mentioned, on positive balances, ZAR 322 million. From an investing perspective, we spent ZAR 590 million in terms of PPE and intangibles and the large outflows in the financing space relating to dividend payments in the first half of ZAR 1.5 billion. We also spoke to you about the acquisition of the Studio 88 tranche of shares of 9% for ZAR 770 million and then the lease liabilities of just under ZAR 1.6 billion to end the first half on just under ZAR 3 billion in cash. Moving along to CapEx. Capital expenditure in the first half came in at ZAR 574 million, almost 50% up on last year. And for the full year, we're still anticipating to get to ZAR 1.5 billion in terms of CapEx. But as we've noted previously, this comes through due to the investment into the supply chain program, the Gosforth Park DC. That project is on track for delivery within budget by September 2026. This is due to the investment to support future sustainable growth for the business and further mitigating risks through the multisite strategy. You'll also note on the slide that store CapEx came in at 43.6% of the total CapEx spend. This talks to our investment into the store portfolio for new stores, revamps and relocations, expansions also. Moving on to the credit growth performance. Credit sales grew 4.3%, slightly behind the cash sale growth to ZAR 2.1 billion, now contributing 11.8% of total sales. Most of the credit sales that we saw came through from existing account holders. And you will note that we've been talking about the approval rate for the last few cycles, and I'm pleased to report that the approval rate came in at 22.6%, 360 basis points ahead of last year's 19%. This has been quite a big focus for us in the first half and will continue to be in the second half also. We've also just noted the TransUnion Consumer Credit Index, while you see improvements coming through from 2023 into 2025, you see the little dip at the end of the red line now trending downwards, really giving an indication or a data point around consumer credit health in SA. The debtors book grew 5.5% to ZAR 3 billion, and the net bad debt ratio came in at 8.9%, slightly up from the 7.8% in March, but due to the deteriorating consumer environment that we spoke about earlier. The net bad debt book ratio still remains low relative to the sector due to our strict affordability criteria. Impairment provisions at 13% was slightly up on March -- slightly down on March's 13.2%, but we're very satisfied with the coverage ratio on that provision. Thank you very much. I'll now hand you over back to Mark, who will take you through the strategy and the outlook section. Mark Blair: Great. Thanks very much, Praneel. I often get questions and in fact, one of the reasons that we've set out the results presentation in this manner as to what is it about Mr Price that you would think is different? What is our secret sauce? And what are the things that lead to good performance and consistent performance. And I think the short answer is there's no one single thing, but it's a combination of things, and it's suppose the magical way that these things all come together. I'll go through some of the individual slides, but in many respects, I'll let you just read and absorb it. But these are the items that I'll cover. The diverse portfolio of our brands, differentiated fashion value merchandise, and that's where it all starts and it's critical to hold on to that. The trusted brand on the 40 years that we've spoken about, our Red Cap culture, which really is a differentiator, tried and tested processes over the years that we've refined, but we rely on, supply chain agility, a business model that's fit for purpose and also a business that technology has a big part to play. So if I just start off on just looking at the South African business and exactly where the consumer profiles are made up. What you can see there is all the income levels for consumers and that red block sets out exactly where the majority of the population falls in South Africa. I'll let you read those stats on the right-hand side as well, but the first point that I want to make here is that we've got businesses that span this. So we're not all contained in the red block, but we're very well represented there. But of course, we've got some of those divisions that operate within that do access clients outside of that red block. And of course, we've got businesses that solely target or mainly target people outside of that red block on both sides, in fact. The way to show that a little bit better perhaps is then looking at those brands individually. And the 2 that I was saying a little bit earlier is outside of the red blocks would be Power Fashion on the left-hand side, that services the low-income consumer to Yuppiechef on the right-hand side, who on average services a consumer earning well over ZAR 1 million per annum. But if you see those businesses and the spread that they've got across income levels in South Africa and the amount of reach that they've got within those particular brands, I think that's certainly part of our success. And that you all know about the investment matrix that we devised many years ago that was designed to make sure that we are bringing better representation to the income levels that we previously thought we are underexposed to. Being leaders in differentiated fashion value, as I said, was an absolute key and the most important thing to us. It's what gets us our customers, what keeps us our customers and what does set us apart. And the way we always look at it is by plotting it on the fashion value matrix. So it's important to note that Mr. Price doesn't always be the -- try and be the cheapest because cheapest is based on price. We know that there's a lot more things that go into customers' purchasing decisions, and those things start going into the quality of the products, the level of fashionability, et cetera. So if you look at that fashion value quadrant that you can see Mr. Price's position there, that's what we protect at all cost. Yes. And you can see that on the right-hand side, Mr. Price Apparel leads the fashion value matrix ahead of some of the more recent competitors and existing competitors. Having been in business for 40 years now, I think it's important to note that the accolades that you can see here aren't recent. They're not 1-year wonders. Many of these have, in fact, been accolades that we've achieved year after year. Mr. Price Apparel, Mr Price Home and Mr. Price Sport holding the highest brand equity in their respective sectors. Mr. Price Apparel remains the most shopped apparel retailer in South Africa with 3.5 million shoppers. Mr. Price Apparel was voted the coolest clothing store in South Africa again, and Mr. Price Apparel holds a high share of wallet in the market, too. I said that Red Cap culture was something that I really believe is a differentiator. And I suppose that permeates our business. Started off with the founders and the foundations that they led -- that they made. And it's obviously got huge roots inside our business, but extends outside of our business, too. But I think really what it starts off with is a team that is passionate about what they're doing, a team and a young workforce that takes responsibility and ownership for things and a team that's aligned. So when I was saying a little bit earlier that when times are tight, we call code red for overhead management. We don't have to explain it. People know and they get on with it. But it's a team that's aligned in all the big objectives that we're doing and that makes management's team and the broader management team, their jobs a lot easier. There's certainly an extremely strong performance culture and the reward structures that we've got are also aligned to performance. We deal with each other in an environment of mutual respect. And if you ask anyone, are they part of a Red Cap family, the answer would be absolutely we are. So that's all great, and it's the way that we interact with each other internally. As I said, that also then externalizes itself. And one of the things that is really, really important to us is that we speak openly and honestly with the investment community and in fact, all our stakeholders and that we've developed trust just as we've developed trust internally with one another. So that Red Cap culture is something to preserve at all costs as well. We've spoken about our tried and tested processes over the years. This is something that works really well for us. It's what management teams rely on when they're back turned and they know that the rest of the business is focused on what they're doing because there's guidelines in place and performing very well. And that starts with the in-house trend departments. It's how we test merchandise, how we test concepts, how we've introduced tech into the business, talks to the agility of our supply chain and also how we allocate merchandise to stores. So just on that, just to give you a little bit of elaboration, there's an initial allocation of stock to stores. There's a degree of holdback in terms of performance, but the push of stock to stores is depending on what the demand is happening in those locations. So it's not just all a push. And by managing it the way we do, that's a very key way that we manage minimizing our markdowns and stock being in the wrong quantities in the wrong locations. Supply chain, we've spoken a lot over the last couple of years as well. It is a differentiator. We do have great agility without having to own factories. And you'll see by what Praneel just explained with our stock management and our inventory balances, climate like we've got, I think we did a very good job in managing that. And that talks to the -- not just the management teams and the merch teams, but it also talks to the supply base and our supply chain at large. So we've got the flexibility there. We've got, obviously, things that we do to gain access to fabrics. And so far, that supply chain works for us nicely, and that will continue to evolve, but there's a large degree of risk mitigation by relying on any one territory. And obviously, where we do source from depends on proximity to market, the technical attribute of the merchandise and the price of the merchandise as well. I said a little bit earlier that the operating model is one of a value retailer, and the reward systems are aligned to that, that if there's overperformance, then the reward really comes through. That also protects you on the downside when performance isn't there, then there's no performance pay. And when we are talking about the DNA of the business, one thing that is completely understood across our whole business is the saying that every decision every day must support our value routes. That's lived in the business. Highly cash generative, what we do internally with cash. Our investment decisions are always based on an ROI and a business case. And if you get the investment, then you're also responsible for telling us and proving to us that the business case has been achieved. Likewise, very focused on cash generation, and I'll explain some of our achievements on that, not just the recent cash flow, but when you just stand back and see what we've done over the last couple of years and expanded our business and still in the position with cash, I think that's been well thought through and well executed, I think. Praneel was talking about the way that we manage overheads. We've done that year after year. And as I said, there's a lot of discipline and there's a call to action that has proved itself it works. I think the next phase of unlocking efficiencies, however, isn't the more tactical nature of things, which we tended to do. But with all the retail chains and the size of the business and the complexity of the business now, there's a much deeper level of work to unlock efficiency and it's the reengineering, reconsidering the business. So I've just recently launched a program to do exactly that. It's going to be Exco led. There's very senior members of our Exco team that are going to be heading up the project. And the brief is really if the Mr Price Group didn't exist and we are starting it today, how would we be shaping that organization. So it's not something that results are going to be focused on getting into the short term, but it's taking a long-term view of the business. And if we can get efficiency that way with our cost management that we currently do, and an environment that has got this healthier consumer behavior or environment, then I think that's the thing that's going to tick us up going into the future. We've also spoken -- in fact, we spoke at the last results presentation about being a data-driven organization. I won't go into everything here. But then in that middle block, you can see some of the -- how that's translated into actual statistics. Number of information dashboards, we've got AI and ML models deployed into the business, man hours saved through automation. One of the things that we're going to be focusing on is not necessarily implementing a CRM system, but making sure that we've got access to a lot more customer data that will help inform decisions. So that's a project that's currently underway as well. Okay. I want to now go and just talk about -- maybe just start by taking a step back and explaining the strategic planning process over the last 5 years or so. Yes, it's something that I'm -- we're often asked what are we up to, what's shaping our thinking, and I think it's certainly the right time to do that because we've said to the market, well, I guess, for probably the best part of 2 years now, that we're doing research. There's a lot of effort going into it. And as we do that research, I suppose just the way that we landed the acquisitions as well, that there is a body of work to be done. But as we do it, we can't get it distract from running the business. And I think that we've proved that we've achieved that. When I was appointed in 2019 and obviously, early part of 2019, the latter part of 2019, COVID hit South Africa in 2020, and that was a great time for us to sit back and think about where we wanted to take this group. So we did some detailed research there, but it was -- I also had to evaluate the business that I inherited from my predecessor. And obviously, there were certain things that I wanted to change in that. But there are limits to what you can do. So my initial priority was given that COVID was on the go and given that we were doing a lot -- or my plan was to do a lot to strengthen the inherent core structure of the business, and that's where the immediate focus went. So you had all known about the DC that we brought in, the ERP replatforming, et cetera. And overlaying all that was quite a significant change to our management team. So I had to be quite careful in what I introduced into the business, given what I've just explained and had to make sure that even in the case of an ERP, which is very time consuming, I wasn't being too demanding on the business whilst they were coping with all that change. So we had been through a process we had identified many organic concepts. And when I say many, there were numerous. And we ended up implementing Kids and Mr. Price Cellular. Kids was an offer that was preexisting, but how we were actually shaping it in the business changed. So those 2 took priority and now they're a ZAR 4.3 billion business. Simultaneously, whilst we are focused on building our backbone, whilst we are focused on these organic concepts, we actually had been through thorough market research. To cut a long story short, we acquired 3 businesses. And today, those businesses contribute to ZAR 11.7 billion turnover, which is 29%. The operating profit is ZAR 1.2 billion. And there, you can see the store numbers to date with a very healthy future rollout potential as well. So between 2019 and 2025, we invested ZAR 10 billion in CapEx. Our revenue went up from ZAR 22 billion to ZAR 40 billion, dramatically increased the number of stores. Our HEPS went up to ZAR 14.24, and we maintained our dividend payout ratio. I think to reflect on that and the achievement of that in probably one of the most tumultuous trading periods that I've experienced in business, to have acquired 3 businesses contributing that to our turnover. And as Praneel said, we've got about ZAR 3 billion of cash actually tells you the extent to which we've deployed the cash that is available to us and how we've executed over that period. So if you look at the group right now, I think we've got very strong bands. I've spoke a little bit about that, and we've got a great corporate culture. We've got a talented and ambitious team, and we're consistently performing. I said we'd like the numbers to be higher, but it's consistent and it's top quartile and top quartile metrics as well. But we are continually evaluating organic growth opportunities locally and acquisition opportunities. However, the bigger we get, and I think it becomes more and more difficult to identify other businesses that meet our capital allocation criteria. So when we're looking at South Africa, there's no doubt that we can still benefit from scale, and that is online growth, store growth, as I've spoken about. And I'm feeling very comfortable about the growth prospects relating to those 2 things. I've spoken a bit about the focus on the customer as well, the customer obsession and getting more data that will help us inform decisions that will benefit the customer and drive sales is a focus area and supply chain excellence is something that we are very focused on, too. The reengineering program that is about to start to look for efficiency that will -- my guess is it's going to take probably 3 to 6 months to really get to grips of what's in play there and therefore, the execution period thereafter. And something that we've handled, I think, very sensibly is selective integration with these acquisitions. So we haven't forced anything. Of course, some things became -- we were more urgent than others. But a lot of the integration now is really around supply chain and related activities, logistics, et cetera. So one of the things that we're actually going through right now is with one of our -- the chains that we acquired is ran a test on bringing them into our distribution network in a test area that's delivered exceptional results and that will now be rolled out across the rest of that chain. So that's -- it's an excellent example of selective integration. And of course, we're going to continue with the technology evolution and I must stress that whilst we're trying to reengineer and look for cost savings, this is an area that we'll probably seek to redirect money into technology to leapfrog even further. So how am I feeling about SA? I think I'm feeling very comfortable about the performance. I'm feeling very comfortable about our discipline and what we're aligned to run the business. And I think we've got adequate opportunities there to carry on growing the business. And hopefully, the economy will start playing its part and should paint a very good picture, which takes us into Phase 2 of the strategy. So if you just consider that we've got our group investment matrix in place in South Africa, we've got a well-established Exco structure. And I think we've been executing well. The business is in sound shape, as I said, but we've got to recognize that South Africa is a low-performing economy. If you look at the GDP growth, you've seen the reduction over the years to the low point there of GDP growth that was almost flat. The projection out to around 2030 still shows GDP under 2%. The projections I've seen to 2050 see it coming below that number by a bit as well. So -- and of course, with these projections, there's always the chance and it's probably the tendency that projections are never quite achieved. Sometimes they're too bullish, doesn't mean that we're not hopeful that the green shoots that we're seeing will translate. But of course, at these kind of levels, it's hardly a robust and a nongrowing economy the way that we would like it. So you do know about the existence of our Apex strategy team. That's been a dedicated team that's been in place for more than 2 years now. Whilst we are looking and elevating SA businesses, we also elevated our research to look for new areas of growth. And it's really around the long-term execution of a vision. It's not quick growth that we need to stick on. It's all about the long term. We've really unpacked the pros and cons of organic growth versus acquisitive growth, and there is room for both. But of course, there's different things to consider in each. And very importantly, we've been considering local opportunities at the same time as we've considered offshore opportunities. But just to say, just like anything that we've done and anything I've explained up until this point, we're a group that thinks very deeply about things. And certainly, our thinking has been multilayered and includes the use of third parties, advisers, country visits, et cetera, et cetera. So it's -- these layers all help paint the picture. The key outcome is, and this has been, as I said, multiyears work, is that key territories outside of South Africa have been identified. And by identifying those, we also consider all the key risk mitigation considerations. It's fair to say over the years, it's not just the last 2 years, of course, it's way beyond that, that we've had a look at or assessed many, many opportunities. And I'm talking particularly offshore now and the fact that we haven't landed any means that we've been very selective on what we're looking for. So -- and once again, it comes back to the principles that we're setting and do those businesses meet those or not. And I suppose looking at my responsibility as a CEO, I suppose all CEOs have got this responsibility. It's to consider the markets that you operate in. It's to consider growth, consider the risks of achieving that growth and ultimately adding shareholder value over time. So when we're looking at new territories, we are only interested in identifying sustainable regions for long-term growth. The market size, the ease of doing business and the competitive landscape within that region are all critical and will be evaluated. And of course, it has to have a stable macroeconomic and political environment and tailwinds for sustainable growth. And then lastly, it really doesn't help if you've -- if you've ticked some of those things that I've just mentioned, but the currencies all over the place were even weaker than the rand. Credit -- the rand strengthened recently, but obviously, we want territories that don't weaken that position. Looking at actual guiding principles rather than just territory now for individual considerations is the size of the transaction will be appropriately considered. Very importantly, we want to acquire on the merits of the target. The in-country management team is absolutely critical. They're the ones that have got to run the business the way they've been running the business with limited interference from us and our input would be strategic. And therefore, getting the right management team is probably you can't get beyond that into the next block if you can't give that a tick. The asset itself has to have very clear growth prospects, and we don't have any appetite whatsoever for a turnaround. And certainly, what we're looking for is that in terms of the company itself is that we would like that company to be a platform for regional growth. So I'm not saying an online platform or anything like that. I'm saying a management team platform that can do justice to a region instead of perhaps just the country that they're located now. And then, of course, you can -- all those things, I think, are quite obvious why we'd look for them. And then as a final piece, you also want to consider synergies, I suppose, both ways. And then lastly, you'd also want to consider what about our brands in those locations. But we wouldn't plan to lead in with our brands. We want to, as I said, acquire for the merits of the target and let that management team who knows that particular territory very well, assess our brands for suitability into the country. So a lot of thinking, a lot of progress being made on that front. And yes, I think it's been a very thorough process that we've been through over the last couple of years, and we'll continue to focus on. The outlook, which I was referring to quite a few times in the presentation. And look, I think the great thing is that change has to start somewhere. And if you had to look at the outlook that we're seeing now to perhaps a year or 2 ago, I think we're in a completely different position. We've got stable electricity supply. We've got improving port infrastructure. So from the infrastructural point of view, things are a lot better. And then also from where -- what's affecting the economy and the consumer, things are looking a lot better there as well. Rand has improved. We're targeting low inflation of around 3%. Interest rates have been declining, and they are forecast to carry on declining. So I think what I said a little bit earlier is that once we get out of this two-pot base, I think we're going to get a really good read on the health of the consumer. But obviously delighted at this point that things are heading in the right direction. And even GDP growth, even if it's only circa 1%, maybe 1.2% this year, it's also headed in the right direction. So looking good there. It's premature to say that there's been a consumer revival. I think the update from all the retailers is sort of proving that, that's not the case. But I think it could well be the case as we head into the new year, but we just got to get over this lumpy base. And as you know, we performed very well this time last year. In fact, it was only March that was a disappointing month for us. So a strong base up until the end of April -- up until the end of February. And then just in terms of trading post the end of September, retail sales were up 3.1%. We pointed out what the base was. It was 12.3%, which was high. But if you look at the individual months, the RLC for October has just come out. We obviously weren't happy with October performance, but we did gain market share, believe it or not. And the momentum going into November is much better. So we're back into that sort of mid-single digits, slightly above, which I think we'll take relative to the October performance. So quite happy that momentum is improving. Quite happy that as you reach out into the future, the economy and the consumer environment seems to be on the cusp of an improvement. So I think overall, we've got a lot to look forward to. Thank you. Matthew Warriner: Good morning, everybody. Thank you for all of the questions that have come through. There have been a high volume of questions, so we're going to do our best to get through as many as we can in the time that we have remaining. I'm going to start off with some questions around operational performance. As Praneel -- maybe we start with you. With the sales environment softer due to the consumer challenges, do you have the same cost levers to pull in H2? Quite a few questions around H2 OpEx and the impact on the full year. Praneel Nundkumar: Yes. Thanks for that question. I think we have demonstrated that cost control is something that's always top of mind for us. Just in terms of how we're seeing it playing out and maybe how you should be thinking about it is the medium-term target range that we had set. So we had noted in June that, that range was between 27.5% and 28.5% in terms of expenses to RSOI. Our focus is to come in within that range. Obviously, we'll try and manage as much as we can in the second half. And as Mark mentioned, post period trade, also a bit subdued, but gaining some momentum. So we're watching the sales growth quite closely. And as I mentioned, also, our merchants are reacting quickly when they need to, to manage inventory at the same time. So all in all, Matt, I think that the range is where we will most likely want to land up in, and that's what we're aiming for. Mark Blair: I think just something to add there is that the base isn't a surprise to us. We always knew it was there. And therefore, anything that we also have to do on a cost basis, the thinking doesn't just start now. To some extent, we've preempted things. We've identified areas that we need to start pulling back, and that's all been set in motion. Matthew Warriner: How should we think about management preference should demand be soft in the festive season? Are markdowns preferred during the festive season or rather than Jan, Feb to clear stock. A couple of other questions just around the high promotional environment in H1. Is promotion a seasonal thing that could impact H2 as well? Mark Blair: Yes. Look, to some extent, we've got to concentrate on what we're really good at, and that's getting that fashion value equation right. But I must say, when the top line is not there in the market generally, the retail environment does become rather brutal. You've got heavy, heavy promotions. And of course, what that does do is bring higher-priced merchandise more closely still well above ours, but closer to our price. So that's not a great equation. But of course, we also know that competitors can't be living with this elevated stock position all the time. So when you go into December, the worst thing that I think that could happen is that you carry on your problem into the new year. So of course, seeing the trends for this year. We have updated our views on merchandise, on stock flow, on stock commitments. To the extent that, that doesn't play out, then, of course, you're going to be -- I guess, there's the threat of margins going against you. So we -- by track record, that's something that we got against at all costs. We try and manage as well we can. And I think there are very limited scenarios that you would be comfortable carrying stock into the period post December, but then it's got to be that you've actually acquired it with -- and there's no risk to the carry. So it can't be very seasonal, very fashionable stuff that's trending that might be out because you're just going to then have to deal with the problem even more severely in the new year. Matthew Warriner: Thanks, Mark. I think you've covered the one major driver to GP performance in the second half. Praneel, maybe just to cover the second half of that, and I'll read out one specific question, but there have been several on this. If you could give some color on annual GP margin expectations. You mentioned in June several factors that could be supportive of H2 GP. Quite a few questions around the rand and input prices being better a couple of months ago, the impact into second half GP. Praneel Nundkumar: Yes. Thanks, Matt. From a GP perspective, I guess you would understand that there are some supportive factors. So we called out kind of oil prices, cotton prices. We've seen where the rand has been kind of trending recently. The other big one also is shipping rates coming down. So the one piece that's also unclear, and it ties back to the comments Mark was just making now in terms of the second half and the promotional activity, what we have seen and you would have seen in the market is that when there's deep discounting in the market, it impacts and the reaction really then starts sitting in, in terms of where GP lands. So I think that there is some support for GP in the second half. I think what we need to watch quite closely is whether the market is as promotional as it was in the first half. But I think when I take the kind of high-level view, I think the important thing is those medium-term targets. So you'll remember in June, we said that for the group, the medium-term target range is between 40% and 42%, which is the same for the apparel sector and the Homeware sector is slightly higher between 41% and 43%. So we are aiming to land within those ranges more in -- aiming for the middle part of those ranges, but that's kind of what we're expecting or what we know at the moment. Mark Blair: Of course, in an improving currency situation, you do have 2 choices. The first choice is to take margin or the second choice is to pass the pricing through. So without sort of revealing our hand at this point, there's going to be a combination of that, but it's very critical for us to keep an eye on what pricing and what relative value there is in the market so that we do keep our value proposition. Matthew Warriner: And then just lastly, with regards to operating metrics, quite a few questions on central overheads and then a question specifically talking about op margin gains were healthy at a segment level. Can you give us some color on the dilution when looking at it from a group perspective? And yes, several questions just around the central overheads into the second half as well. Praneel Nundkumar: Yes. Thanks, Matt. I think on the slide that when I paused on the op margin slide, I spoke about the fact that there are central costs sitting in the group line, which is not the same from a trading division perspective. And then on the overhead slide, I spoke about the fact that there's base effects of the LTIs that were forfeited in the prior year. So that really was the non-comp base effect. Also, when you look at the performance of the trading segments, you would have seen as I've gone through the segmental slides, you would have seen that the operating profit from the trading segments were quite healthy, which also means that from a group central cost perspective, there is an STI component based on performance that's also non-comp in last year. So those are the 2 key things that are sitting in that group central costs that then impact the group ratio compared to the divisional ratios. But again, the medium-term target range for op margin between 13% and 15% is what we're aiming for as we look forward into the second half. Matthew Warriner: Okay. Just moving on to drivers of sales. The last 4 years has seen some aggressive space growth. Will you continue with this approach going forward? And just some questions as well as to what returns we would expect on space growth going forward? Mark Blair: Yes. as Praneel was saying a little bit earlier, we've set internal thresholds roughly 3x our WACC. And look, I think if we landed at sort of space growth between 3.5% and 4% this year, that is going some, but it's a space that is working for us, as we said earlier. So to the extent that our actual store performances remain, then I'm very comfortable with continuing with store expansion. The question does become, does it become harder to find the quality space with not a lot of new property builds happening, that is always something that we'd look at. I would say we'd probably -- we'll go into the budgeting process for the new year shortly. In fact, it's underway now. But I'd probably say that it would be safe to sort of bet around space growth around 3%, maybe slightly lower. But of course, if we presented with great opportunities and we model them correctly and they're generating -- and on paper they're generating the returns, we mustn't be shy to take the good space. And the other thing is that it's not one chain we're looking for in terms of that space. So it's multiple chains that are performing that all have got the desire for the space. Our job internally is then to say how much capital are we putting into store growth because we also want to spend on revamps. And therefore, that limit that we place, which chain is getting the space. And of course, that then gets down to a couple of other factors, which includes store performance. Matthew Warriner: It seems like Home is turning around with volume growth and profit growth. Would this be a fair assessment? Mark Blair: Yes. I think the trajectory of Home, we've continued to see market share losses. So that is the one negative. But I suppose it was like we're discussing a little bit earlier around margins. We've had GP gains in the Home sector, and that's what it's absolutely all about. So it does show you that without achieving the top line that you want, and I'm not unhappy with the top line, but it could have been higher if we went and chase sales a bit more that we can still generate a good profit. So the home sector, in fact, all 3 businesses, Sheet Street, Yuppiechef and Mr Price Home, I'm very happy with. Matthew Warriner: Praneel, just last one on sales drivers. The credit environment seems to have showed some steady improvements. Is there an opportunity to push the channel more into 2026, considering the lower net bad to book relative to the industry? Praneel Nundkumar: Yes. I think the credit growth is always topical, but as we always say, it's not a big part of our business. We also noted, and you would have seen from the consumer environment and some of the data points around this challenge in the consumer environment, we're obviously trying to manage risk as closely as possible. So we noted in the first half that the approval rate was higher than last year by 360 basis points, so probably mid-22%. We most likely will expect that to continue into the second half. I think if the environment becomes more supportive, and we see the data points in terms of customer affordability and customer behavior from a credit score perspective being in line with that, then yes, that will be an opportunity for us. But again, not an aggressive growth for credit is expected, but we're watching the market and the consumer health and affordability very closely. Mark Blair: Yes. Just to add to that, that consumer health is critical. We've got our own experience going back quite a few years now where we pushed credit into the market in the absence of improving credit health -- on the consumer credit health, and it actually counted against us. And the problem was that by pushing it too early, because you've got a situation where customers rehabilitate themselves, pay down some months, don't others, you've got this lump that moves through your system, and it doesn't just take 6 or 12 months because that's a credit term because of the rehabilitation, you're probably left with a mess in your portfolio for about 18 months. So really premature for us to think about pushing credit at this point. Matthew Warriner: Praneel, just a balance sheet question before we move on to some capital allocation questions. With the improved port operations, are there more working capital benefits that come in relation to inventory days from holding less buffer stock? Praneel Nundkumar: Yes. So we've been looking at this buffer stock quite closely in terms of port operations. We did note that there's been some improvement in the operations. And we did say even in June that we started to relax some of those buffers that we had in. So in terms of managing inventory to year-end, obviously, quite tight. It will continue to be quite tight. So yes, I think that from an inventory perspective, we're not foreseeing any additional buffers required in the second half, and we're quite comfortable with the stock levels as we see them play out. I mean the merchants -- other than just the first half, obviously, the merchants have been very busy as we go into the festive period now to manage the inputs and we're watching the sales also. So if those come off, then we can react quite quickly in terms of where the stock lands, but it's something that's in hand. Mark Blair: I might just add there, too, that we've, for some time now, have been communicating our focus on cash flow and therefore, stock turn is one of those critical parts of that. So when you're in quite a tumultuous situation that there's supply chain issues relating to shipping and containers and vessels and everything that we've been through, it's quite hard for merchants to deliver stock turn improvements when you're building buffers into your processes, absolutely necessary buffers. But as that then reverses, our real objective of improving stock turns should then be executed. Matthew Warriner: Okay. Moving on to some questions on capital allocation. I've been several questions relating to the current cash balance and share price and therefore, appetite for share buybacks. Praneel Nundkumar: Yes. I think we've discussed before that from a share buyback perspective, we obviously have a framework that we look at in terms of a target share price, target P/E ratio in terms of how we look at leading indicators in terms of that opportunity. What we always come back to from a capital allocation perspective, though is what are the returns from the other avenues that we can deploy capital to. So we quite -- as Mark mentioned, in terms of the store returns, we're very satisfied with those store returns in terms of where the portfolio is delivering. So we find that a really good avenue to allocate capital to. And the other piece that from a capital allocation is quite key -- quite a big number. We spoke about the ZAR 770 million for the 9% acquisition of Studio 88. Remember, there's still 15% left. So looking forward, that's another big piece that also drives our capital allocation thinking in terms of how we deploy capital. And the dividend ratio -- dividend policy is a big one. I think our shareholders have come to love the kind of dividend flows that come through the 63% payout ratio. That's also quite a big consideration. And also just to note that this year, we said we were going to invest into the infrastructure of the DC. So you'll see that CapEx coming through this year and also into next year because that DC only goes live in September '26. So more CapEx allocated to that project to support growth in the future. Mark Blair: Yes. I suppose the overall thing is use the cash or return it to shareholders either through share buybacks or through dividends. I think certainly what I was explaining around our strategy and our plans for the future, we've got more than enough plans to warrant keeping our cash flow now and to make sure that we deploy it in the best areas to generate future returns for shareholders. Matthew Warriner: Okay. With regards to the strategy update, do you mean outside or inside of Africa? And would you take the MRP brand to them? Just some other questions relating to which countries offer the best upside with lowest risk. And then several questions relating to multiples, deal size, et cetera. So maybe, Mark, just what you can share now with regards to the question on markets and other information. Mark Blair: Yes. I largely addressed, I think, most of those things in what I already said. I think the -- I'll go back a few years now. And I suppose at one point, there was always this hope of an expansion into Africa. That was the new frontier for a value retailer that seemed like it was an obvious place to go. But it is difficult to do business in some of those territories. And as a result, I said I think there's limited opportunities in SA. There's none that we've identified in the rest of Africa. So that's not really a focus area for us at all. I think it's premature at this point to start speculating on which other markets and territories and stuff like that. I think we've got to finish our work and then communicate at the right time. Matthew Warriner: Great. So thank you very much for everybody for joining today. I think we've covered the main themes. There are obviously many questions in between on other topics. So I do have them and will reply. Otherwise, please do send them directly to me. We can either cover them via e-mail or in catch-ups over the next few weeks. Thanks very much for joining today. Mark Blair: Thank you.
Operator: Good morning, everyone. My name is Danielle, and I will be your conference operator. Welcome to the Tiendas 3B Third Quarter 2025 Conference Call. [Operator Instructions] Also, please note that this call is for investors and analysts only. Questions from the media will not be taken nor should the call be reported on. Any forward-looking statements made during this conference call are based on information that is currently available to us. Today, we are joined by Tiendas 3B's Chairman and Chief Executive Officer, Anthony Hatoum; and Chief Financial Officer, Eduardo Pizzuto. I will now turn the call over to Anthony. Please go ahead. Kamal Hatoum: Good morning, everyone, and thank you for joining Tiendas 3B's third quarter earnings call. I will begin with a review of our operating results for the quarter and will be followed by our CFO, Eduardo Pizzuto, who will provide an overview of our financial performance. We will conclude with a Q&A session. We've delivered another quarter of exceptional growth, outperforming other listed players. We opened 131 net new stores in the quarter for a total of 3,162 stores. We opened 2 distribution centers in the quarter for now a total of 18. Our LTM store openings are 528 stores. Same-store sales grew by 17.9%. Total revenues increased by 36.7% to reach MXN 20.3 billion. EBITDA reported a loss of MXN 404 million. If we exclude our noncash share-based payments, then EBITDA increased by 43.6% and reached a positive MXN 1.2 billion. For the 9 months of 2025, cash flow generated by operating activities reached MXN 3 billion or a 30% increase year-on-year. We ended with a net cash position of approximately MXN 1.1 billion. In addition to this, we have $151 million in short-term deposits. Let's turn to operational performance. We are increasing the number of store openings. In the first 9 months of 2025, we opened 390 stores. This compares to 346 stores opened in the first 9 months of last year. Revenue growth remains rapid. We continue to be one of the fastest-growing retailers globally. Total revenues reached MXN 20.3 billion or an increase of 36.7% year-over-year, this, with a very strong same-store sales growth of 17.9%. Same-store sales is being driven by the continuous improvement of our value proposition to customers and more consumers realizing that. When comparing to ANTAD, our gap continues to increase. Our gap versus ANTAD is almost 17 percentage points today. I will now pass the microphone to Eduardo. Eduardo Pizzuto: Thank you, Anthony. Good morning, everyone. Sales expenses as a percentage of revenue increased from 10.1% to 10.2%. On one hand, we see real operational leverage as our store mature. On the other, we see this quarter an increase in D&A expenses as a percentage of revenue. I expect that next quarter, the comparison will be more favorable. Admin expenses, excluding share-based payments, increased by 16 basis points due to investments in new regions and hiring more talent. With respect to share-based payment expense, these are noncash and already reflected in our fully diluted share count. Please see the appendix of this earnings release. You can also see the projection of this noncash expense in the appendix. EBITDA increased 43.6% to reach 5.8%, driven by sales and margin growth and operational efficiency. I want to touch on operational leverage and margins. Close to half of our stores were opened in the last 3 years. When we look at our older vintages, their EBITDA margins are close to those you would see at other hard discounters. As you know, we don't drive to an EBITDA. It will naturally increase over time as a consequence of all the good things we are doing. Ours is a business model that generates significant negative working capital. And in turn, we generate significant cash flow from the changes in negative working capital. We can see, for example, that in September '25, we had MXN 7.8 billion compared to a negative working capital of MXN 5.4 billion in the third quarter of '24, excluding IPO proceeds. We are roughly at 10.8% of total revenue, excluding IPO proceeds. I will now turn the call back over to Anthony for some final remarks. Kamal Hatoum: We are hitting or exceeding our targets with same-store sales that stand out versus industry. Our business is robust, noncyclical and battle tested. In terms of store growth, we have significant runway with room for no less than 14,000 3B stores in Mexico. Today, we are opening more stores and faster. Our same-store sales growth is not only due to our newer stores, our older vintages continue to grow their same-store sales faster than inflation. This is driven by the continuous improvements in the products we sell both in terms of quality and price. Our brand equity continues to strengthen. This drives a faster sales ramp-up of our newer stores and draws new clients to our stores. Our older vintages are already showing EBITDA margins that are in line with those recorded by other listed hard discounters. We continue to invest in talent. We believe that this is a key success factor. The talent density within our team stands out in the market. Our share-based compensation approach has been a key driver to our success. It attracts entrepreneurial talent and aligns everyone with shareholders. Just as a note, our Board of Directors decided in its last meeting not to make additional reserves for our equity incentive plan for the year 2026. We continue to do the same, just better and faster. The future looks bright. We'll now start the Q&A session. So please go ahead, operator. Operator: [Operator Instructions] And our first question is coming in from Bob Ford at Bank of America. Robert Ford: Congratulations on the quarter. Anthony, I know your gross margin is a dependent variable, but can you comment a little bit on how you're thinking about your current value propositions and the volume response? And do you see any need to further sharpen value propositions? It looks like there's been some additional price reinvestment in the marketplace. And then I was wondering if you could also tell us how we should think about market share in the trade areas around your oldest cohorts and the implications for some of the younger units. And then as you scale, I was curious if you're beginning to see unsolicited interest from national suppliers, right? And as you scale, how should we think about your use of national suppliers, particularly as you go into new categories and segments just because those smaller vendors may not be able to supply you in terms of the quantities that you'll need as you continue to grow? Kamal Hatoum: Let's talk about margins. Because we're scaling, you'll naturally see an improvement in our commercial margin over time because on one side, you're lowering your purchasing costs and two, you're increasing your logistics efficiency. And the question, as we have seen many times is, okay, how does that translate into percentage margin versus an investment in price? And I've shared before that on the pricing side, it's dynamically set by doing elasticity testing. But the bottom line is that we are improving our value proposition to our customers. So we're increasing scale, and we are also opening new stores. So we're increasing scale, and therefore, we're getting better purchasing terms across the board. And naturally, over time, we will see a very natural increase in margins. However, I stress that quarter-to-quarter, we will see volatility in this number, and this is very normal. As you know, we don't set any specific targets for margin, but we're very comfortable that over time, this number increases. And if you look at other publicly listed hard discounters, you can sort of extrapolate where this naturally ends. Now in terms of market share related to our oldest vintages, cohorts. Well, we're very pleased to see that even our oldest vintage continues to grow its same-store sales well above inflation. And when we look at it, the main driver is, again, an improved value proposition and what we sell today is so much better than what we sold you 5 years ago. And that, as a consequence, does 2 things. One, it still draws new customers. And from the existing customer base, what we are seeing is purchases of more things within [ 3B ]. And if you look at it numerically, what you see is an increase in number of tickets and an increase in ticket size. And then internally, we ask ourselves the question, okay, how long can this last? When do we reach saturation in these oldest vintages cohorts? And we do extensive market research on these old cohorts, and we see that we have significant room still today to penetrate their wallet. And that is even before taking into account potential new categories that we might introduce. Your last question was about suppliers. There was 2 parts to that question, if I'm not mistaken. One, are we getting unsolicited requests from national suppliers? And my answer is yes. I mean we're becoming a significant player in the market. And therefore, it's only natural that suppliers will come and knock on our door and say, can we do business with you? And that's great. And second, our existing suppliers able to keep up with the pace? And the answer to that is yes. And the reason is simply because we've planned for it a long time ago. All our planning in terms of supply chain is done 3 years ahead of time. So that mitigates the risk -- any risks associated with ensuring that supply is there at the right time. And that's how we operate across 3B anyway. Long-term planning takes out a lot of the execution of operational risks that you would normally have in a business like ours. Operator: Our next question is coming in from Joseph Giordano at JPMorgan. Joseph Giordano: I want to explore one thing you mentioned on the release, the fact that new like store vintages are actually maturing faster than initially expected. So my question goes 2 ways here. So first, like, don't you think that like maybe the maturation level -- so the sales at regime is still a moving target. So as you flagged, you continue to see increasing number of tickets or so clients and larger baskets. So that's the first question. And the second question to you goes into like the return levels, right? So back in the day, I recall you guys mentioned a 60% cash-on-cash return on the new stores. So I'd like to understand how the new cohorts are actually behaving in terms of returns because it seems having higher returns. And in that aspect, how should we think about like further expansion acceleration going forward? Kamal Hatoum: So Joe, you're absolutely right in observing that new vintages mature faster. And therefore, they have improved return on invested capital versus the ones we've opened 10 years ago. And simply put, our brand is better recognized in the market today, and our value proposition is so much stronger than what it was. And therefore, it's natural that when you open a new store, clients come to it much faster and buy more immediately as opposed to taking the time it used to take to get to know us and know if our products are good or not. And that trend, I think, will continue. As long as we continue to improve our value proposition to customers, which is basically our job every day, you will see that phenomenon continue. In terms of -- again, I'm going back to older cohorts and what the returns have been versus today's cohorts. I think the returns are just as good, if not better. And that's due to the acceleration, as you pointed out so nicely. So we are not seeing anything but better numbers in everything that we're opening that's new. And even -- let's say, we take extreme cases of we open a store next to an old store, and therefore, it might cannibalize. And these things happen, but are, let's say, few and far in between. Then we simply look at the 2 stores together and see what their performance is. And together, their performance is better than what it used to be as a single store. So across the board, an improvement in returns and performance for the newer vintages. Eduardo Pizzuto: And Joe, it's Eduardo. Just to finalize on your questions, as we do on a yearly basis, we update our models, and we continue to update the models. And you're right on the moving target because we have not seen maturation yet. Even for our 2005 vintage, we continue to see very strong increases. So yes, we will do the same modeling this year, and it will be with improved numbers for the coming years. Kamal Hatoum: Now eventually, like I mentioned in the previous question, theoretically, you reach a point of saturation where there is no more real growth because you're selling everything you can to everybody that is within reach of your stores. But all our research points out that we're far from that point. And like I mentioned before, that's not even taking into account any new potential categories that might come to market via our stores. Operator: Our next question is from Álvaro García at BTG Pactual. Alvaro Garcia: Two questions. Eduardo, you mentioned in your prepared remarks that next quarter, we might see more favorable comps on sales expenses specifically. So if you could expand on that, that would be helpful. And my second question is a follow-up on the faster ramp-up of new stores. I was wondering if maybe you could provide a -- maybe some color on the regional basis, you are opening up new regions, new DCs and new regions. So in the context of that faster ramp, is that faster ramp in stores in sort of the central area of Mexico? Or are you seeing that ramp-up in new regions as well? Eduardo Pizzuto: Thanks, Alvaro. On the -- on selling expenses, it's really related to D&A. What I meant by that is that in -- and this is something that we touched on, on the call on the fourth quarter of last year. So there's a portion of D&A that was recognized in the fourth quarter of 2024 rather than on the third quarter of 2024. So that's why you'll see a more favorable number in fourth quarter of 2025. That's on the selling expenses side. Kamal Hatoum: In terms of faster ramp-ups, we're seeing them across the board. There is no notable differences geographically or by type of store or by their location. And fundamentally, when we ask ourselves, should there be, and the answer is not really because at the end of the day, we're selling basic goods, things that everybody consumes all the time. And we haven't seen a real change in behavior geographically as we're expanding into new regions. Also keep in mind that in terms of real estate strategy, we have been extremely balanced in where we open our stores on purpose in order to see maybe there is something different as we expand. And the answer is no. It's been very, very consistent. Operator: Our next question is coming from Alejandro Fuchs. Alejandro Fuchs: Congratulations on the results. I just have very 2 brief ones, maybe to dig a little bit deeper into Álvaro's question in terms of the expansion. Obviously, you're opening a lot of stores quarter by quarter. I wanted to see if maybe you could share if you see any difference in terms of competition depending on the region that you're entering in Mexico, maybe some of these new regions that you are penetrating or anything that has been interesting that you can share from the new regions? And then second, in terms of same-store sales, you mentioned, Anthony, that this is because of volume, right, number of tickets and mix as more SKUs in the ticket. If you have to pick those 2, how is the proportion? Who is maybe growing a little bit more or adding more to the same-store sales? Is it more volume? Or is it more mix? That will be all. Kamal Hatoum: Okay. With regards to competition as we are expanding, let me step back and say that Mexico has always been a very competitive market, very dynamic and healthily so. And so we have seen no increase or change in this competitive landscape. And if anything, we are becoming more competitive. So bottom line is no changes in terms of encountering new competition or a different kind of competition. Let me just say that it's strong and healthy competition across the board and has always been the case with a 3B that's becoming more competitive over time versus everything else. Eduardo Pizzuto: Alejandro, with respect to your second question on same-store sales, what we're seeing is very consistent to what we've seen in the past is that we're seeing more transactions in the stores. And in addition to that, we are also looking into more products in the basket. We don't disclose the percentage of those numbers, but it's mainly coming from having more people coming into the stores and just taking more products home. That's really -- it boils down to those 2. Kamal Hatoum: And that's versus price inflation, which is minimal in our case. Operator: Our next question comes from Héctor Maya at Scotiabank. Héctor Maya López: Congratulations on your results. Two key things on your very strong same-store sales growth, how confident are you on maintaining this space, I mean, particularly next year? And if you think we could continue to see this kind of levels as older stores continue to mature. That would be number one. And the second one is related to the higher commercial margin. I know this comes from your elasticity analysis, scale efficiencies and price negotiation with suppliers, but could you please guide us through your decision process here to define what to do with the savings that you achieved? Like how do you decide how much to take from that? And when do you decide to pass the full savings to consumers just to get a better sense of margins despite quarter-to-quarter volatility? Kamal Hatoum: Hector, let me start with the last part of your question. So we are generating real savings in purchasing given scale, given stronger relationships with suppliers, given efficiencies across the board that we particularly focus on. I mean we're very focused at seeing where can we save money, where can we improve the value proposition and therefore, where can we increase now volumes because people are buying more of this better product. And you can see the positive flywheel effect. And so comes your question about, okay, so how much of this goes into margin and how much of this goes into price. And we do it on a product-by-product basis, very much driven by elasticity testing in the market. At any point in time, in 3B, you'll have about 60 products that are being tested across the board for pricing elasticity. And we optimize them for volumes and dollar margin. And the result of doing this all the time across all our products is the margin that you see today in our numbers. So it's extremely hard for me to guide you and say, well, this is going to be this much next quarter. But what I can tell you from previous experience and if you look also at other hard discounters, you will see that naturally over time, a certain amount of these savings are going into percent margin and a certain amount are reflected in higher sales curves. So basically, that also drives same-store sales across the board. So again, apologies, but very hard to give you specific guidance, but I can give you the tendency, the trend as one where, over time, it does improve; quarter-to-quarter, it remains volatile. So this sort of leads into your first part of the question, what can I guide you in terms of same-store sales for next year? Would it be as robust? And I can say with a high degree of confidence based on all the work and research we've done that we see no reason why same-store sales would be any weaker than this year. So we expect them to continue to be strong, mainly driven by the fact that we know and we have in the pipeline, significant improvements in the products that we're going to be bringing to market over the next 12 months. If you ask me, does it remain strong 10 years from now, I can probably say, I don't know. But I can say that for the very immediate future for the next couple of years, it remains very strong. Operator: Our next question comes from Alexandre Namioka at Morgan Stanley. Alexandre Namioka: The majority of mine have been already answered. But perhaps touching on the -- on what Anthony mentioned about like innovating in the product categories here. If you can give us any update on how the perishables category sort of pilot test is evolving? And if we should see next year already some of these newer categories already in the stores here? Kamal Hatoum: We're constantly innovating, not only in perishables, but across the board in all product categories. I mean that's what we do. The latest example, the one I'm very excited about is our new ice cream bar, which is a banana with chocolate, and it is a blockbuster. So innovation and bringing in more value to our customers and new exciting products, we still have significant runway without breaking any of our principles of a hard discounter, which is limited assortment and an assortment that rotates very fast and therefore, generates significant amount of negative capital, which is, we think, a competitive advantage. To answer specifically on the matter of perishables, they have -- they're very high potential categories. But however, we have set ourselves very high standards in terms of quality, and other metrics, efficiency back, we want to make sure that the whole value chain is working perfectly before we launch it. But all our tests are extremely positive, and we remain very optimistic about that. Operator: Our next question comes from Irma Sgarz at HSBC sic [ Goldman Sachs. ] Eduardo Pizzuto: It's Goldman Sachs. Irma Sgarz: No worries. Yes. My questions are just a couple of sort of double-clicking on a couple of the other questions that the other analysts brought up on that product development and product mix. Anthony, it's super interesting what you were just saying sort of on the different products that you're bringing in. And I think the earlier comments on how the even mature cohorts of the customers still sort of migrating up in the -- and just increasing the basket size. So perhaps maybe if you could share some color on when you see sort of the typical customer journey, what typically brings them into the store? What is sort of -- is there a path that certain categories are being put in the basket first and then they migrate to new categories? What have you learned sort of in that journey of your customers, especially the oldest cohorts of the customers? And then linked to that, I know you're doing multiple year plannings when you think about both expansion and product pipeline. So I'd be curious if you also have something to share about when you think about demographics and shifts in the Mexican population, how to adapt -- how you have perhaps already adapted your product mix to that? And how -- I think I know some of those examples with some of the sort of health-related items. But more importantly, going forward, if there's any specific trends that you are keeping an eye on and that you're looking to get in front of? And then the final question, sorry to go on here, but hopefully, it's helpful for everyone. When we just think about operating expense leverage into next year, is it -- I know you've sort of -- you've had some heavy lifting around putting some structures in place this year. Is it fair to think that, that should be growing below your same-store sales next year? Kamal Hatoum: Thank you, Irma. Let's start with the customer journey. And I would say that in general, it's word of mouth. Your neighbor tells you what a great store they have been to. And suddenly, you decide to go visit it, and it happens to be walking distance and in your neighborhood. And you walk in and you do see a lot of brands that you're not familiar with. And our private labels are managed as brands, and we position them and communicate them as well as any FMCG company would do in the market, but you're not familiar with them. So what happens typically is you would start with basic goods. You'll buy eggs because they're at a great price and they're very fresh. You'll buy oil because it's at a great price. You'll buy rice. But slowly over time, as you've correctly pointed out, you will see, oh, well, they have canned goods, let me try that. And the detergent, I've not tried that. And by the way, anything you buy has 100% money back guarantee, no questions asked. I don't even need to see your receipt. And that's a very powerful trust builder. And over time, you start migrating to more sensitive products. And eventually, you end up trying our cosmetics and you realize that they're great and that they're at a great price, and you have no reason to go back to the other cosmetic that you were using that was much more expensive. And that's what we've observed in the customer journey, and that continues to be true today and more so when we introduce new products. In terms of what we could introduce in the future and what we're working on, some of you have pointed out that we have ongoing tests on perishables, but we also have ongoing tests on many other categories that you won't necessarily pick up as you walk in through the store. And that's true because even though we're focused on basic goods and high rotation goods, we are far from supplying everything you need. And there is a lot of potential to continue to increase our offering in what we currently offer as categories. And I think I've mentioned previously that our stores are designed to absorb much more SKUs without even -- without having to change anything either in store size or logistics or anything in the back office or transportation. And that's very important because that allows us and gives us significant cushion to expand our offering without incurring operational inefficiencies. On the contrary, it's all designed to become more efficient over time as we scale. I'll let Eduardo answer the question on operating leverage, especially as it looks like for next year. Eduardo Pizzuto: So Irma, without providing any type of guidance, truly, the answer becomes on how fast we expand. And as you know, we've been rapidly expanding, and we believe that will continue to be the case. What's been very helpful for us and the way we view things is what I mentioned in the release is that when we're looking at leverage for the older stores, we're seeing very strong leverage there. And if we divide the company in 2, the stores that have been open for more than, let's say, 2, 3 years, we've seen very strong leverage. You don't see that immediately because of the pace of growth. I mean we've opened close to 50% of our stores in the past 3 years. That's a massive amount of store openings in a very short period of time. So that drags the number down. And as I mentioned in our last call, it's a little bit perverse because the faster we grow, the less leverage you'll see in the very short term. However, that provides and that increases shareholder value drastically. So we will continue to operate in the same way. And we'll provide guidance for the next year in our next call. Kamal Hatoum: But mechanically, the operating leverage is real and very powerful. Any of you, if you model it, you see it. Operator: Our next question comes from Alex Wright at Jefferies. Alexander Wright: Yes. So you've given some indications of the long-term runway in terms of the number of stores that you're targeting. And you've consistently spoken about people constraints really being the main constraint on growth and the pace of expansion. So I wanted to ask, really, as you grow larger, you're obviously increasing the internal talent pool and the average experience of your teams quite rapidly. So is that something that you see alleviating some of those HR pressures that could allow you to expand more rapidly in terms of new store openings than you already are? And then the second question I have is on the CapEx for this year. I believe your budget was about MXN 3.65 billion. You've done about MXN 2.4 billion in the first 9 months whilst being well on track to meet your store openings. Obviously, still have a couple of DCs to open in the fourth quarter. Is it fair to say there's some headroom there to come in below CapEx budget? Or are there certain investments that you expect to make in Q4 that will lead to a pickup in CapEx in the fourth quarter? Kamal Hatoum: With regards to people, let me just start by saying we set a very high bar. And we're very proud that we invest in talent development and in human resources in general because we firmly believe that, that's one of our key success drivers, what's allowed us to grow now for more than 12 years at the growth rates of plus 30% that you've seen without any hiccups, and that's very unusual. And so we will continue to invest significantly in human resources and in developing talent. And I'm proud to say that I believe we have probably one of the best talent densities of anybody in the market. So going forward, is that an obstacle for expansion? It's always been, let's say, the gating item. But again, as we -- in everything, long-term plan, we work backwards. We say, if we want to open that many stores 3 years from now, how many people do we need? And then we ask ourselves, well, where are these people today? And what do we need to do today to make sure that 3 years from now, we have enough people of the caliber that we want with the profiles that we want in order to open that number of stores successfully and have them operate at the level of quality and efficiency that we'd like them to operate at. So yes, I would say that is always on our radar, but I think we have a very robust plan to tackle that and proof is in the pudding. We're opening more stores today, and they're all very successful. I'll let Eduardo handle the CapEx question. Eduardo Pizzuto: Sure. Alex, yes, so you're right. We still have a couple of more DCs to open for the [ back half ] of the year. So we opened one. So there's an additional one that will happen in early December and the balance of the year with more store openings. So I think we're going to be very close to the number that we projected late last year around the MXN 3.7 billion. Operator: Our next question comes from [ Santiago Alvarez. ] Unknown Analyst: This is [ Santiago Alvarez ] with Summit Management. Congrats on the quarter. We really appreciate the color on growth and EBITDA margins on the older cohorts. Can you provide any information regarding on how the product sales mix is behaving on those older cohorts? Is private label sales as a percentage of merchandise reaching the levels you were expecting? Eduardo Pizzuto: Santiago, in regards to EBITDA, we don't disclose this number, but conceptually, what I can tell you is we are -- those stores are reaching what other hard discounters in other geographies are reaching. So let's talk about around, let's say, 7% EBITDA margins. So what we're seeing in our older cohorts is that all these stores are starting to get to that number. In terms of the profile of these stores, what we're seeing is, of course, the sales penetration is higher than what you see on a consolidated basis. There's, as I mentioned in previous questions, a significant amount of leverage that gets us to the 7% EBITDA margin. In terms of private label penetration and the profile of these stores is -- I mean, at the end of the day, as Anthony mentioned, we are selling very basic goods that the average Mexican consumer consumes on an everyday basis. So there's really no significant differences between the profile of the stores. All of the stores are pretty much selling the same products. It's just a matter of time for the newer cohorts to get to that level of sales and therefore, profitability. But no major differences from one type of store -- one age of store versus the next. I think you had a second question on private label penetration overall. Is it as were we expecting? And the answer is yes. I mean, as you saw in the numbers that we have published is end of 2023, we were at mid-40s; end of 2024, we were at mid-50s. And this is a number that continues to evolve. If you visited the stores lately, you've seen that we've launched more products, and they're all doing fantastic. So that number continues to be -- we're very happy with the results of those numbers. Let me put it that way. Operator: Our following question comes from [ Gullie Arshad. ] Unknown Analyst: Yes. Anthony and Eduardo, congratulations on a great quarter. I have a kind of a sensitive topic I would like to ask you. Have there been any interest from larger national and/or international players about your business? And what are your thoughts of a potential bear hug from them? And I ask this question because I consider your shares very undervalued and your growth is incredible. So would you comment on that? Kamal Hatoum: The short answer, [ Gullie ], by the way, is not to my knowledge. We've talked with international players in terms of cooperating on certain matters, but the topic of a bearhug has not emerged today. In terms of the shares being undervalued or not, I'll let the market judge on that. This is a company that continues to show extremely high growth, healthy growth and improving returns across every single metric. So hopefully, the market recognizes that at some point. Operator: [Operator Instructions] We have not received any further questions. I would now like to hand the call back over to Anthony Hatoum for some closing remarks. Kamal Hatoum: Thank you to our investors who continue to be very supportive and very enthusiastic. Thank you for the analysts who are covering us who keep us challenged with interesting questions. And thank you overall for participating in this call. I'd like to leave you with the thought that our company continues to perform very strongly, and the future looks very bright for us. Thank you again. Operator: That concludes today's call. You may now disconnect.
Andrzej Matyczynski: Thank you for joining Reading International's earnings call to discuss our 2025 third quarter results. My name is Andrzej Matyczynski, and I'm Reading's Executive Vice President of Global Operations. With me are Ellen Cotter, our President and Chief Executive Officer; and Gilbert Avanes, our Executive Vice President, Chief Financial Officer and Treasurer. Before we begin the substance of the call, I will run through the usual caveats. In accordance with the safe harbor provision of the Private Securities Litigation Reform Act of 1995, certain matters that will be addressed in this earnings call may constitute forward-looking statements. Such statements are subject to risks, uncertainties and other factors that may cause our actual performance to be materially different from the performance indicated or implied by such statements. Such risk factors are clearly set out in our SEC filings. We undertake no obligation to publicly update or revise any forward-looking statements. In addition, we will discuss non-GAAP financial measures on this call. Reconciliations and definitions of non-GAAP financial measures, which are segment operating income, EBITDA and adjusted EBITDA are included in our recently issued 2025 third quarter earnings release released on November 14 on our company's website. We have adjusted where applicable the EBITDA items we believe to be external to our business and not reflective of our cost of doing business or results of operations. Such costs could include legal expenses relating to extraordinary litigation and any other items that we consider to be nonrecurring in accordance with the 2-year SEC requirement for determining whether an item is nonrecurring, infrequent or unusual in nature. We believe that adjusted EBITDA is an important supplemental measure of our performance. In today's call, we also use an industry accepted financial measure called theater-level cash flow, TLCF, which is theater-level revenue less direct theater-level expenses. Average ticket price, ATP, which is calculated by dividing cinema box office revenue by the number of cinema admissions is also used as an accepted industry acronym. We also use a measure referred to as food and beverage spend per patron, F&B SPP, which is a key performance indicator for our cinemas. The F&B SPP is calculated by dividing the cinema's revenues generated by food and beverage sales by the number of admissions at that cinema. Please note that our comments are necessarily summary in nature, and anything we say is qualified by the more detailed exposure set forth in our Form 10-Q and other filings with the U.S. Securities and Exchange Commission. So with that behind us, I'll turn it over to Ellen, who will review our 2025 third quarter results and discuss our business strategy going forward, followed by Gilbert, who will provide a more detailed financial review. Ellen? Ellen Cotter: Thank you, Andrzej, and welcome, everyone, to the call today. As we expected and following global cinema industry trends, despite the strong performance of certain titles through the third quarter of '25, the overall box office was behind last year's third quarter. At $52.2 million, our global total revenue decreased 13% versus Q3 2024, which was driven by a slate of 2025 movies that just didn't match up to the stronger titles in the same period last year. Last year's lineup included record-setting releases like Deadpool & Wolverine, Despicable Me 4, Beetlejuice Beetlejuice and It Ends with Us. Despite this past quarter's revenue performance, the company continued making progress on several strategic initiatives, which is evident in some of our key income metrics for Q3 2025. With respect to our global operations, both cinema and real estate, despite the decrease in our cinema revenues, we continue to effectively manage our expenses. At a loss of $329,000, our global operating loss improved by 4%. At $3.6 million, our positive EBITDA increased 26% from Q3 2024's EBITDA. With this past quarter's results, we've delivered 5 straight quarters of positive EBITDA. At a loss of $4.2 million, our net loss improved by 41%, representing the best third quarter result since Q3 2019. Through the quarter and the year in 2025, our operating teams continue to improve the company's overall profitability. In the U.S., by closing a 14-screen cinema in San Diego in Q2 '25, we eliminated a cash loss that resulted in a 7.3% reduction in our U.S. screen count. We have limited control over the quantity and grossing potential of the movies we play. However, in operational areas where we have more control like F&B and alternative content programming, we delivered record results that I'll touch on in a minute. Across the global cinema circuit, we're working with our landlords to reduce our overall occupancy costs to reflect the fact that attendance has not returned to pre-pandemic levels and our operating expenses for the most part have all increased. Our U.S. Real Estate division delivered the best third quarter operating income since Q3 2014 due in part or in large part to our improved performance of our live theater assets in New York City. Despite the elimination of the cash flow generated by the real estate assets sold in early 2025, Cannon Park in Townsville, Australia and our Wellington assets in New Zealand, our global property teams are driving productive changes in our 58 third-party tenant portfolio, which I'll touch on shortly. Those 2025 strategic asset sales have led to a significant debt reduction. From December 31, '24, we've reduced our global debt balance from $202.7 million to $172.6 million or about 15% as of September 30, 2025. Our interest expense for the 9 months ended September 30, 2025, has been reduced by $2.6 million or 17% compared to the same period last year. This follows an overall debt reduction of $112.3 million since December of 2020. Historically, about 50% of our revenues have been generated in Australia and New Zealand, and the third quarter 2025 was no different, with 49% of our revenues being generated internationally. In Q3 2025, our quarterly revenue was negatively impacted as the Australian and New Zealand dollar devalued against the U.S. dollar by 2.3% and 3.1% compared to the Q3 in '24. As you'll note from the exchange rate table included in our 10-Q, the average exchange rates for these 2 currencies are at a 20-year low. As I'll touch on in greater detail in a minute, despite the weak third quarter, we continue to have enthusiasm and confidence about the cinema business. Today, we're reporting global presales for Wicked: For Good of almost $850,000, which is one of the strongest global presale numbers we've experienced in years. Wicked: For Good is followed by Zootopia 2, Five Nights at Freddy's, Avatar: Fire and Ash, SpongeBob SquarePants movie and Anaconda. In addition to these movies that appeal to the family audience, we believe that Marty Supreme, Song Sung Blue and The Housemaid will give the older audience some compelling choices during the holidays. The 2025 holiday season will be followed by what looks to be a very robust lineup for 2026. We're thrilled about the upcoming 2026 film slate, which includes major franchise releases like Spider-Man: Brand New Day, Toy Story 5, The Devil Wears Prada 2, Minions 3, Mega Minions, Shrek 5, Supergirl, The Super Mario Bros. Movie 2, Moana, Ice Age 6 and Jumanji 3. Many industry insiders and analysts think that 2026 could be one of the biggest years ever at the box office. With 5 straight quarters of positive EBITDA, the most improved net loss delivered for any third quarter since Q3 2019, a balance sheet which continues to be anchored by a strong real estate portfolio and cinemas, which we believe to be poised for an exciting and robust 2026 movie release schedule. We believe the company is well positioned to deliver a much stronger '26 and beyond, having weathered a very challenging last 5 years. People ask whether following our monetization of various assets over recent years, whether we're still committed to our 2-business, 3-country strategy. And the answer to that is yes. It's obviously true that we've monetized a number of our real estate assets. This has been done strategically to meet our liquidity needs in the face of a pandemic that physically shut down all of our cinemas, then an unprecedented combination of writers and actor strikes that completely disrupted the supply of movies to our cinemas during a time when customers are just getting reacquainted with outside the home entertainment. We chose those assets, which typically were either negative cash flow or which after debt service did not materially contribute to our cash flow and which, in our view, have reached the best value reasonably achievable without significant further capital investment. We monetized our California headquarter building to cut administrative costs and have been able to work remotely now for 2 years. We've reduced our cinema count in the U.S. by 6 theaters, all of which have been negative cash flow since at least the pandemic. We believe that we continue to have a good core of cinemas and real estate assets. We've navigated these treacherous waters without one penny of U.S. government assistance without resorting to debtor rights, legal remedies and without diluting our stockholders. So now let's look at our specific businesses. I'll take a look at our Q3 2025 global cinema business and compared to the same period in '24. At $48.6 million, our Q3 '25 global cinema revenues decreased 14%. At $1.8 million, our Q3 '25 global cinema operating income decreased by 21%. As I mentioned, the overall weaker Q3 ' 25 performance was anticipated and followed along industry trends. This year's lineup just couldn't match the slate from last year when Deadpool versus Wolverine (sic) [ Deadpool & Wolverine ], Starring Ryan Reynolds and Hugh Jackman performed exceptionally well in all of our 3 countries. We believe our particular results were also impacted by unfavorable FX movements, the 7.3% reduction in our U.S. screen count due to the closure of an underperforming cinema in San Diego and the partial closure of a 16-screen U.S. cinema under renovation that I'll touch on in a minute. When you look at the year-to-date through September 30, 2025, our global cinema revenues increased slightly and operating income grew by 142%, reflecting stronger performance due to a Q2 2025 and our focus on our various strategic initiatives. Let me highlight a few of those key strategic initiatives that we focused on throughout '25 and have supported our results through the year. First, our food and beverage program. It remains a key area of focus. At AUD 8.05, our Q3 2025 Australian F&B SPP was the highest third quarter ever. At NZD 6.75, our Q3 2025 New Zealand F&B SPP was also our highest third quarter ever in our history. At $8.74, our Q3 '25 U.S. food and beverage SPP was the highest third quarter ever and the second highest quarter ever when our U.S. circuit has been fully operational. That excludes pandemic closure periods. And the U.S. F&B SPP appears to exceed the results of other major publicly traded exhibitors that disclosed their F&B SPPs. These strong F&B results were supported by improvement in our online and app food and beverage sales, the continued embrace of our movie themed menus in all 3 countries. For instance, in the U.S., our Spicy-Saurus Flatbread was a strong seller this quarter. And in Australia, the Jurassic Combo was one of our most popular movie theme menus. Also, the ever-increasing merchandise spend, where especially in the U.S., we're complementing our guest's movie experience with the opportunity to buy movie-themed merch. In the U.S., this past quarter, we generated just over $350,000 in revenue from movie themed merchandise. For instance, our Superman Totem popcorn container was one of the best-selling merch items we had during the period. We're also driving guests to our theaters through existing loyalty programs and are in the process of developing new and improved rewards and membership programs, which are set to launch over the next few months. In Australia and New Zealand, we recently revamped and relaunched our free-to-join Reading Rewards program to provide better perks and savings. Today, we have over 363,000 members, which is an 8% increase over last quarter. With respect to our paid memberships in Australia and New Zealand for both our Reading and Angelika brands, since our late Q4 2024 launch, we signed up over 17,400 paid memberships, which is a 16% increase over last quarter. In December '25, we're launching a new free-to-join rewards and premium membership program in Hawaii and in select U.S.-based Reading cinemas. In the U.S., our free-to-join Angelika membership program has 171,000 members today for our 8 Angelika branded theaters, and we plan to launch our premium Angelika monthly membership early next year. Another primary initiative for our global executive team has been the collaboration with our cinema landlords to reset occupancy costs to become more in line with the economic realities of recent years. During our negotiations for occupancy expense relief, our position is that although attendance has not returned to pre-pandemic levels, nearly all of our operating costs have increased. We also highlight there's really a limit on how much we can increase our ticket and food and beverage prices. Let's take a closer look at the third quarter 2025 results for our U.S. cinemas. Our revenue decreased by 10% to $25.1 million compared to the Q3 in '24, while our operating loss improved by 92% to a loss of $100,000 from a loss of $1 million in Q3 2024. In addition to what I mentioned earlier, a couple of other milestones to mention. Our average ticket price or ATP of $13.13 marks our second highest third quarter ever for our U.S. cinema circuit. This is impressive in light of the strength of our discount Tuesdays, which is branded Mahalo Holidays in Hawaii and Half-Price Tuesdays in the U.S. Mainland. With respect to our U.S. cinema circuit, our gross box office for alternative content and signature series programming, which is our nontraditional programming, delivered the highest third quarter box office ever. One of the reasons we performed so well in this regard had to do with the 2-day KPop Demon Hunters Sing-Along event distributed by Netflix, which provided another pivotal cultural moment for cinemagoers, especially in our markets. We received questions about the strength of specialty titles in 2026. But first, let me report that the box office of the Angelika New York year-to-date through mid-November 2025 has beaten the same period in 2024. For this period, the top grossing films included Wes Anderson's Phoenician Scheme, the third quarter's Sorry, Baby and most recently, Frankenstein from Director Guillermo Del Toro, which was released by Netflix and presented in 35-millimeter. Following the positive 2025 trends, we expect 2026 will deliver a similar result in the world of art house and specialty film. The Japanese movie, Kokuho from Director Lee Sang-il, which has been a runaway critical and commercial success in Japan will release in '26 at the Angelika. Its Oscar qualifying run at the Angelika this week has already demonstrated impressive presales. Director Park Chan-wook No Other Choice from Neon opens late in 2025 and will carry over into 2026. And later in '26, we anticipate that specialty film growers will enjoy movies like Sony Classics, A Private Life starring Jodie Foster, The Drama starring Zendaya and Robert Pattinson from A24, Focus Features Sense And Sensibility starring Daisy Ecker-Jones and Werwulf from Director Robert Eggers, the Director of Nosferatu. We also received questions about the status of our CapEx spend in '26. With respect to our U.S. circuit, we're in the process right now of renovating our Reading Cinemas in Bakersfield, California, which renovation should be completed by the end of January '26. We've now added recliners to our IMAX screen, which will make the only IMAX with recliners within a 100-mile radius of Bakersfield. We're creating a premium screen, TITAN LUXE with Dolby Atmos sound system that also features heated recliners, which will open for Wicked: For Good. And we're adding another 8 screens of recliners, 3 of which are open right now with another 5 screens to open in January. We'll be working on plans to add a TITAN LUXE and recliners to our Angelika in Mosaic, Fairfax, Virginia, which should be done by the end of '26 and through '26, we're also looking to refurbish many of our existing recliner seats that were damaged through the pandemic. And that project should also be completed by the end of next year. I'll note that by the end of '26, 68% of our existing screens in the U.S. will feature recliners and 44% of the theaters will have premium screens. Turning now to our cinemas in Australia and New Zealand. Following Q3 2025 box office industry trends and comparing to Q3 '24, our Australian cinema revenue decreased 17% to $20.5 million, and our operating income decreased 38% to $1.8 million. Our New Zealand cinema revenue decreased 23% to $2.9 million, and the operating income decreased 96% to $10,000. In addition to the milestones I've already mentioned, during the third quarter of '25, our Australian team also achieved the following, which are all in functional currency. Our Q3 2025 Australian ATP of $15.44 was the highest third quarter ever for Australian cinemas. We also secured a major ancillary revenue sponsorship from a major telco who signed up for our turn your cell phone off naming rights. With the agreement running through March of '27, the team achieved an exceptional sponsorship deal. With respect to our New Zealand cinemas, our Q3 2025 New Zealand ATP of $13.65 was the highest third quarter ever. And now turning to our CapEx spend in 2026 in Australia and New Zealand. I'll start with New Zealand. In New Zealand, through 2026, we'll be redesigning our Reading Cinemas at Courtenay Central in Wellington. The renovation will be a full top to bottom upgrade where we'll add recliners to all theaters, at least 2 premium screen concepts such as TITAN LUXE or others and upgrade our F&B offer and that whole renovation will follow our new landlord's seismic upgrade. We anticipate that the renovation will be completed sometime in '27. And in Australia, we'll be adding a TITAN LUXE with Dolby Atmos and 1 premium screen with recliners to another key Reading cinema sometime in '26. I'll note that by the end of '26, 36% of our existing screens will feature recliners and 59% of our international theaters will have premium screens. Now let's turn to our global real estate business, which on a segment reporting basis includes not only our third-party rental income, but also our live theater business in New York City and our intercompany rents. Starting with the third quarter of '25 global results and compared again to the same period in '24. At $4.6 million, our global real estate total revenues decreased by 7% and at $1.4 million, our total income was flat. The results were primarily driven by the elimination of property level cash flow from the third-party rents that we had received at our property assets in Townsville, Australia and in Wellington, New Zealand. Both of those assets were sold earlier in '25 to create liquidity to pay down debt. Breaking it down by division for the third quarter of '25 and again, compared to the same quarter in '24 with respect to Australia, our real estate revenue decreased by 22% to $2.4 million, and our income of $1 million decreased by 35%. At $221,000, our New Zealand real estate revenue decreased by 41% and our New Zealand real estate operating income of $90,000 increased by 169% from an operating loss of $130,000 in the third quarter of '24. With respect to our Australian and New Zealand portfolio, as of September 30, 2025, due to our asset sales in Wellington, New Zealand and Townsville, Australia at Cannon Park, the number of third-party tenants in our combined Australia and New Zealand real estate portfolio reduced to 58 and is now primarily made up of tenants at Newmarket Village in Brisbane and the Belmont Common in Perth. The quality of the remaining tenants is strong, and today, we have an occupancy rate of 98%. For the third quarter, our combined third-party tenant sales from our Australian real estate were AUD 25.9 million. During the quarter, 5 lease transactions were completed with existing tenants. These included 1 new lease, 3 renewals and 1 lease variation, reflecting continued tenant retention and portfolio stability. Also, as we recently reported in our 10-Q, we signed an agreement to sell our Napier property in New Zealand for NZD 2.5 million with a leaseback of the Reading cinema on the property. The contract is conditioned on the completions of various conditions, including due diligence. And right now, we can't provide any assurance that the deal will, in fact, close or when. Now turning to our U.S. real estate business, which includes our 2 live theaters in New York City. On a quarter-to-date basis, it delivered a 35% increase in revenue and operating income of $253,000, which represents a 433% increase. Our live theater segment delivered a standout performance this quarter, fueled by critically acclaimed productions and audience favorites. At the Minetta Lane Theatre for the third quarter of '25, our attendance increased over 450% and theater-level cash flow increased by over 140%, which is largely attributed to the successful shows produced by Audible and the Amazon Company and our licensee at Minetta Lane. The acclaimed musical Mexodus just concluded its successful run in the third quarter at the Minetta Lane. I'll also note that Audible recently exercised its option to extend their license another year at the Minetta Lane and will be there now through March of '27. Since the departure of STOMP, the Orpheum theater continues to be in high demand with theater producers. During Q3 and part of Q4, Ginger Twinsies, a parody inspired by the iconic film, The Parent Trap, received strong praise and played at the Orpheum. And it was just announced that the viral TikTok dance duo Cost N' Mayor, who have about 7.4 million followers on TikTok will debut their new show 11 to Midnight at the Orpheum, which opens in January of '26. We also received questions about the leasing at 44 Union Square. As previously reported, we signed a non-exclusive LOI and have exchanged lease drafts with 1 potential tenant who is a non-office user for all the remaining space in the building. We're continuing to work with this tenant to see if a deal can be completed within the company's long-term goals before the end of the year. However, we continue to explore other leasing opportunities. Based on industry reports from area brokers, we know there's been material improvement in the leasing environment in the Midtown South market, which has been further reinforced by the 2025 Union Square commercial report, which highlights positive momentum not only in the Union Square leasing statistics, but also the increased foot traffic in the area. Our Newberry Yard property in Williamsport, Pennsylvania remains classified as held for sale. While we've reviewed offers from both rail and non-rail users, we believe the property's highest and best use is tied to the rail industry as the tracks and infrastructure remain valuable. We're now exploring different marketing strategies to reach a greater pool of candidates. We've also received various questions about our Reading Viaduct in Pennsylvania. As we reported in our most recently filed 10-Q, the City of Philadelphia has expressed an interest in condemning all or portions of our Reading Viaduct for use as a public park, and they passed an ordinance to permit such an action to proceed. Since railroad properties are subject to the jurisdiction of the Federal Surface Transportation Board, or STB, and cannot be condemned without the consent of the STB, the city brought a petition before the STB for a declaration that all railroad use of our Viaduct have been abandoned and that as a consequence, our Viaduct was no longer subject to the jurisdiction of the STB. And by implication, that the city could proceed with the condemnation action without seeking approval of the STB. We've recently appealed the STB's recent decision. The city has also filed litigation against us claiming a failure on our part to address certain claimed building violations and seeking injunctive relief as well as certain fines and penalties. We're in the process right now of defending against that lawsuit. Regarding the potential for a condemnation, however, I can note that under applicable Pennsylvania law, the city would be required to pay us the fair market value of our property. We've not received any proposal from the city of Philadelphia before or after the adoption of the ordinance in December of '23. Though we do understand that funding has been received for the planning and design work tied to the development of a rail park on our property. We're not aware of any funding being secured or set aside for an actual acquisition in whole or part of our Viaduct. The company believes that the Reading Viaduct is a valuable asset of the company, and it will continue to vigorously defend itself in these cases. If the city does pursue condemnation, we'll work vigorously to obtain the maximum fair market value for any property taken. That wraps up my report on recent developments. So in summary, despite facing significant challenges over the last 5 years and having an underwhelming third quarter, the company has remained focused on safeguarding our global theaters and sustaining stockholder equity through strategic theater closures, cost reductions and the sale of select real estate assets to meet liquidity needs created by the pandemic and the unprecedented 2023 Hollywood strikes and to significantly reduce our overall debt. At the same time, our cinema teams have implemented strategic initiatives to increase revenue and enhance cost efficiency, while our global real estate teams have secured a strong, stable and dynamic base of third-party tenants, providing us with optimism regarding the future of Reading and the cinema industry as a whole. In addition, our global interest expense has decreased due to multiple paydowns a result of asset sales and overall lower government interest rates in all 3 countries. This reduction in interest expense, coupled with a steady and strong lineup of Hollywood releases for the remainder of '25 and '26, we believe Reading is well positioned for stronger growth and a return to profitability in the fourth quarter in 2026 and beyond. Before I turn it over to Gilbert, Margaret and I want to express our continued heartfelt appreciation to the entire management team and our Board and all of our employees. Your dedication, professionalism and tireless efforts have been instrumental in keeping the company moving forward and staying true to its long-term vision. Thank you. Now let me turn it over to Gilbert. Gilbert Avanes: Thank you, Ellen. Consolidated revenue for the quarter ended September 30, 2025, decreased by $7.9 million to $52.2 million when compared to the third quarter of 2024. This decrease was due to decreased cinema revenue from lower attendance in all 3 countries as a result of weaker overall movie slate released from the Hollywood studios in the third quarter of 2025 compared to the same period 2024 and the reduction in screen count due to closure of one of our cinema complexes in San Diego, California. These decreases in revenues were compounded by the decline in real estate rent revenue in Australia and New Zealand due to the sale of Cannon Park and Courtenay Central and the weakening of Australia and New Zealand foreign exchange rate against the U.S. dollar, partially offset by the improved live theater rental and ancillary income. Consolidated revenue for the 9 months ended September 30, 2025, increased slightly by $0.8 million to $152.7 million when compared to the same period of 2024. This increase is due to improved box office from better movie slates as Lilo & Stitch and Minecraft movies released during the second quarter of 2025 improved U.S. food and beverage revenue and better live theater rental and ancillary income, which was partially offset by a decrease in real estate rental revenue and decrease in food and beverage revenue in Australia and New Zealand. Net loss attributable to Reading International Inc. for the quarter ended September 30, 2025, decreased by $2.9 million to a loss of $4.2 million compared to a loss of $7 million in Q3 2024. Q3 2025 basic loss per share improved by $0.13 to a basic loss per share of $0.18 compared to a basic loss per share of $0.31 for Q3 2024. These improved results were partially due to a $1.1 million reduction in interest expense, a $1.2 million increase in other income and a $0.7 million reduction in depreciation and amortization expense compared to the same period in prior year. Net loss attributable to Reading International Inc. for the 9 months ended September 30, 2025, decreased by $21.1 million from a loss of $33.1 million to a loss of $11.6 million when compared to the same period in the prior year. Basic loss per share improved by $0.90 to a loss of $0.51 compared to a loss of $1.48 for the first 9 months of 2024. These results were primarily due to strengthened segment results, a $2.6 million reduction in interest expense and the $9.7 million increase in gain on sale of assets as a result of gain on selling our Courtenay Central and Cannon Park properties in 2025 compared to a loss on selling our previously owned Culver City office in 2024. Our total company depreciation, amortization impairment and general and administrative expenses for the quarter ended September 30, 2025, decreased by $1 million to $7.9 million compared to Q3 2024. For the 9 months ended September 30, 2025, it decreased by $2.6 million to $25.2 million compared to the same period in the prior year. Income tax expense for the 3 months ended September 30, 2025, decreased by $0.4 million compared to the equivalent prior year period. The change between 2025 and 2024 is primarily related to a decrease in reserve for valuation allowance in 2025. Income tax expense for the 9 months ended September 30, 2025, increased by $0.8 million compared to the equivalent prior year period. The change between 2025 and 2024 is primarily related to a decrease in consolidated loss in 2025. For the third quarter of 2025, our adjusted EBITDA increased by $0.7 million to an income of $3.6 million from an income of $2.8 million compared to Q3 2024. This increase was primarily due to an increase in other income. For the 9 months ended September 30, 2025, our adjusted EBITDA increased by $17.4 million to an income of $12.8 million compared to the same prior year period. This increase was due to improved operational performance through more efficient management of operating expenses and gains from asset monetization as mentioned previously. Shifting to cash flow for the 9 months ended September 30, 2025, net cash used in operating activities decreased by $6 million to $5.9 million compared to the cash used in 9 months ended September 30, 2024, of $11.8 million. This was primarily driven by a decrease in net operating loss, partially offset by a decrease in net payables. Cash provided by investing activities during the 9 months ended September 30, 2025, increased by $32.3 million to $37.3 million compared to the cash provided in the 9 months ended September 30, 2024, of $5 million. This was due to proceeds from sale of our Cannon Park property assets in May 2025 and the Wellington property assets in January 2025 compared to the proceeds from the sale of our Culver City office in February 2024. Cash used in financing activities for the 9 months ended September 30, 2025, increased by $38.3 million to $36.2 million compared to the cash provided in 9 months ended September 30, 2024, of $2.1 million. This was primarily due to the paydown of our Westpac debt, Bank of America debt and NAV facility in 2025 as discussed previously, compared to the NAV bridge facility drawn in the same period of 2024. Turning now to our financial position. Our total assets on September 30, 2025, were $435.2 million compared to $471 million on December 31, 2024. This decrease was driven by a $4.3 million decrease in cash and cash equivalents from which we funded our ongoing business operations, a $31.9 million decrease in land and property held for sale due to the sale of our Cannon Park and Courtenay Central assets. As of September 30, 2025, our total outstanding borrowings were $172.6 million compared to $202.7 million on December 31, 2024. The debt reduction was primarily funded by the net proceeds from the sale of our 2 major property assets, Cannon Park in Australia and Courtenay Central in New Zealand. Our cash and cash equivalents as of September 30, 2025, were $8.1 million. Further to address liquidity pressure on our business, we continue to work with our lenders to amend certain debt facilities, and we continue to have our Newbury Yard, Williamsport, Pennsylvania property classified as held for sale. During the third quarter and the beginning of the fourth quarter of 2025, we made progress with our lenders on the following financing arrangements. On July 3, 2025, we extended the maturity date of our Bank of America loan to May 18, 2026, and modified the principal repayment schedule. On July 18, 2025, we extended the maturity date of our Santander loan, which is the loan on our live theater assets in New York City to June 1, 2026. We also paid down $100,000 on the loan at signing. On November 12, 2025, we extended the maturity of our National Australia Bank loan to July 31, 2030, and modified the principal repayment schedule. On November 13, 2025, we extended the maturity of our Valley National Bank loan to October 1, 2026. With that, I will now turn it over to Andrzej. Andrzej Matyczynski: Thank you, Gilb. First, I'd like to thank our stockholders for forwarding questions to our Investor Relations e-mail. As usual, in addition to addressing many of your questions in the prepared remarks from Ellen and Gilbert, we've selected a few additional questions to offer additional insights from management. The first such question, which Ellen will address, there was a mention in the 10-Q about the Noosa Australian cinema development project still planned for 2027 or has it been deferred indefinitely? What is the current budget and expected ROI for this project? Ellen? Ellen Cotter: Yes. We're still expecting the Reading Cinema, which is being an 8-screen cinema with the TITAN LUXE to be built out in Noosa in Queensland. Our landlord and developer of the Stockwell Development Group is still in the town planning stage of its major multi-use project. Today, we believe the completion of the theater construction and the opening won't happen until around 2028. And we don't announce the terms and conditions of specific cinema deals. However, as we've reported in the past for third-party cinema lease deals, we usually target at least a high-teen double-digit return. And the current deal for the Noosa Cinema is consistent with those targets. Andrzej Matyczynski: The next question, we've been asked several questions about our plans for the refinancing of our Bank of America, Emerald and Valley National loans. Can you please elaborate? Gilbert? Gilbert Avanes: We plan to refinance this debt in 2026 and are considering a variety of alternatives and structures. We are encouraged by what we see as the improving environment from real estate financing, including anticipated reduction in interest rates, improving commercial rental market in Manhattan and the current industry box office projections for 2026. Obviously, a significant factor in any refinancing of our Emerald debt would be the lease status of our 44 Union Square. While no assurance can be given, we anticipate resolution of our current nonexclusive LOI by the end of the year. Andrzej Matyczynski: The next question, given Reading has no present New Zealand debt and the excess proceeds from the Wellington Courtenay sale were upstream to pay down costly U.S. debt, can you share what your likely use of the Napier sale proceeds will be? Ellen? Ellen Cotter: The Napier transaction closes, we'll likely use the proceeds to support the renovation of our Reading Cinema Courtenay Central in Wellington, New Zealand or -- and/or we may use the proceeds for general corporate use in New Zealand. Andrzej Matyczynski: And finally, one last question, which I will deal with. We also received a number of questions about the Sutton Hill Associates acquisition that involves RDI assuming $13.65 million in third-party notes at 4.75% interest maturing September 30, 2035, who will be the holder of these third-party notes? What assets will secure the guarantee and guarantee these notes? Sutton Hill Associates 25%, Sutton Hill Properties interest and Village East ground lease and Reading USA or Reading International, respectively. I appreciate the low interest rate on the debt. Can you explain why so favorable, especially with a 10-year maturity? Well, a very complex question. We believe that this will be a good transaction for Reading. It will, in essence, wind up and close out of our master lease transaction we entered into with Sutton Hill Capital, LLC in the year 2000. The third-party notes are, as previously disclosed, payable to a third party and the reasons for that third party's willingness to do the deal described in our 10-Q would only be a matter of speculation on our part. As part of the transaction, the third-party notes would be guaranteed by Reading International, Inc., but would otherwise be unsecured. And that marks the conclusion of our third quarter conference call for 2025. This year continues to see a gradual resurgence of the breadth and depth of the cinematic experience despite the slight downturn in the third quarter numbers. And we aspire to translate this into future enhanced value for our stockholders as the end of 2025 comes and the full 2026 year unfolds. We appreciate you listening to the call today. We thank you for your attention and support and wish everyone and safety. And as always, we look forward to seeing you at our movie venues.
Operator: Welcome to Evogene's Third Quarter 2025 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded in November 20, 2025. Before we begin, we'd like to caution that certain statements made during this earnings conference call by Evogene's management will constitute forward-looking statements that relate to future events. This presentation contains forward-looking statements relating to future events and Evogene Ltd, the company may from time to time make other statements regarding our outlook or expectation for future financial or operating results and/or other matters regarding or affecting us that are considered forward-looking statements as defined in the U.S. Private Securities Litigation Reform Act of 1995, the PSLRA, and other securities laws as demand. Statements that are not statements or historical fact may be deemed to be forward-looking statements. Such forward-looking statements may be identified by the use of such words as believe, expect, anticipate, should, plan, estimate, intend and potential or words of similar meaning. We are using forward-looking statements in this presentation when we discuss our value drivers, commercializations, efforts and timing, product development and launches, estimate market sizes and milestones pipeline as well as our capabilities and technology. Such statements are based on current expectations, estimates, projections and assumptions described opinions about future events, involve certain risks and uncertainties, which are difficult to predict and are not guarantees of future performance. Readers are cautioned that certain important factors may affect the company's actual results and could cause such results to differ materially from any forward-looking statement that may be made in this presentation. Therefore, actual future results, performance or achievements, and trends in the future may differ materially from what is expressed or implied by such forward-looking statements, due to a variety of factors, many of which are beyond our control, including without limitation, the current war between Israel and Hamas and any other adverse impact that it may have on economic activity in Israel, due to the calling up of a large number of reserve soldiers or the incurrence of debt to pay for the high cost of the war and any accompanying future uncertainties for the security of the company's operations in Southern Israel, as well as those additional factors described in greater detail in Evogene's annual report on Form 20-F and in other reports Evogene files with and furnishes to the Israel Securities Authorities and the U.S. Securities and Exchange Commission, including those factors under the heading, Risk Factors. Expect as required by applicable securities law, we disclaim any obligation or commitment to update any information contained in this presentation or to publicly release the results of any revisions to any statement that may be made to reflect future events and developments or changes in expectations, estimates, projections and assumptions. The information contained herein does not constitute a prospectus or other offering documents, nor does it constitute or form part of any invitation or offer to sell, or any solicitation of any invitation or offer to purchase or subscribe for, any securities of the company, nor shall the information or any part of it or the fact of its distribution from the basis of, or be relied on in connection with, any action, contract or commitment relating thereto or to securities of the company. The trademarks include herein are the property of the owners thereof and are used for reference purposes only. Such use should not be construed as an endorsement of our product or services. With us on the line will be Ofer Haviv, President and CEO of Evogene; and Yaron Eldad, CFO of Evogene. Now I will turn the call over to Ofer Haviv. Mr. Haviv, please go ahead. Ofer Haviv: Thank you for joining Evogene's Third Quarter 2025 Analyst Call. In today's call, I'd like to focus on the company's new strategy. which I partly shared at our previous quarterly calls and its current implementation. I will also provide an update on our expectation to start breaking the business benefits of the strategic shift over the coming year. Following my remarks, our CFO, Yaron Eldad will present the financial results, and we will then open the call for questions. But as usual, I will start with the financial highlights. During the first 9 months ending September 30, 2025, Evogene advanced its strategic transition towards establishing itself as a leader in computational chemistry, with a focus on the generative design of small molecules for the pharmaceutical and agriculture industries. As part of this new strategy, the company executed an organizational change and cost reduction plan, most of which was completed by the end of the second quarter. The impact of these measures is reflected in the third quarter results, with total operating expenses, net, of approximately $2.9 million compared to $6.6 million in the same period of 2024. This new expense level is expected to be maintained going forward. The financial results of Lavie Bio, Evogene's subsidiary, for the 9- and 3-month ending September 30, 2025, are presented as a single-line item in Evogene's consolidated P&L statement for 2025. Its results are including under the line titled: income or loss from discontinued operations net, this accounting presentation includes the sale of the majority of Lavie Bio's activities to ICL, which was completed in July 2025, and together with the sale of MicroBoost for Ag, generated income of approximately $7.9 million in the third quarter of 2025. In the 9 months ending September 30, 2025, revenues amounted to approximately $3.5 million, compared to $4 million in the same period last year. The decrease was primarily driven by lower revenue from AgPlenus' activity, which included a onetime payment from Bayer during the first quarter of 2024, partially offset by an increase in seed sales generated by Casterra. Total research and development expenses in the 9 months ending September 30, 2025, were approximately $5.9 million, compared to approximately $9.8 million in the same period of 2024. The decrease is primarily attributed to a reduction in Biomica's and Evogene R&D activities and the discontinuation of Canonic's operations. Sales and marketing expenses in the 9 months ending September 30, 2025, totaled approximately $1.1 million, compared to approximately $1.6 million in the same period of 2024. The decrease is mainly due to reduction in headcount across the subsidiaries. In the 9 months ending September 30, 2025, total operating loss was approximately $8.8 million, compared to approximately $15.3 million in the same period of 2024. This decrease is mainly due to the decrease in the subsidiaries' and Evogene's activity. As of the end of the third quarter of 2025, the company's cash and short-term bank deposit balance was approximately $16 million. This cash balance reflects the proceeds from the sale of Lavie Bio's assets and the MicroBoost AI for Ag tech-engine to ICL. The following are the business highlights of our subsidiary and related parties in the past quarter. Lavie Bio completed the transfer of its team and the majority of its activity to ICL. Its collaboration agreement with an existing partner continues with positive results. The distribution of funds to its shareholders with Evogene as the majority holder is advancing. No additional activities are expected. Biomica's clinical trial continues according to plan and is expected to be completed in early 2026. Currently, only one patient is in the trial and the efforts to secure partners to lead Biomica's current development program continue. No additional activity are expected. Last week, Casterra partnered with Fantini to advance agricultural mechanization for scalable commercial castor farming. The collaboration focus on integrating high-yield castor varieties with advanced mechanized solutions, including harvesting and threshing technologies. In addition, the company is investing efforts in strengthening its position in Brazil's castor farming ecosystem. AgPlenus underwent organizational restructuring, including the completion of workforce reductions. Evogene's related party, Finally Food, which drove the casein in protein in potatoes, announced raising $1.2 million led by CBC Group and signed a commercial agreement with it. Now I would like to continue with Evogene new strategy and its implementation, which includes AgPlenus' activity for the agriculture industry. The following slides reflect Evogene's new messaging and appearance supporting its new strategy. At Evogene, we are on an ongoing mission to redefine the future of science and business. By harnessing the power of our proprietary generative AI tech-engine, ChemPass AI, we designed novel groundbreaking small molecules, highly potent and precisely optimized across multiple parameters to transform the pharmaceutical and ag-chemical industries. Our goal is not just innovation, but meaningful beneficial impact for our world. Headlining this slide is the phrase real-world innovation. What do we mean by it? One of the greatest challenges in developing product in life sciences, from pharmaceuticals to ag-chemicals is the gap between real-word challenges and innovative scientific discovery. Anyone involved in life science product development knows this challenge well. It's reflected in the high failure rate of product that start full of innovative promise, but ultimately fall short of one or more critical criteria that often emerge only in later stages of development. We believe now is the time for change, for bridging the gap between innovation and real-world impact. The key lies in harnessing the possibilities of the computational revolution, transforming our word and above all, in unlocking the power of AI. Today's computational capabilities allows for simultaneous analysis of countless parameters, achieving a level of scientific depth that was once behind reach. They empower us to design solutions that integrate scientific innovation with commercial viabilities, pushing beyond the limits of traditional trial-and-error product development. Computational technology serve as the bridge connecting scientific discovery to commercial success. And this is exactly what we focus on. We call our approach real-world innovation. Evogene is structured on three interconnected pillars: our groundbreaking Gen AI best technology, ChemPass AI, which serve as the competitive advantage for our offering in the pharmaceutical and agriculture industries; second, our established activity in agriculture through our subsidiary, AgPlenus, where we have already achieved results in collaboration with leading global companies in the development of ag-chemical product; and our recent expansion into the pharma industry where ChemPass AI significantly increased the likelihood of the discovery of novel molecules with the highest potential to become breakthrough commercial drugs. I will begin with brief introduction to ChemPass AI, which is at the core of our operations. To understand the unique value of ChemPass AI, it is essential to consider the background of the product development process and its inherent challenges. Here is a simplified overview of how a small molecule product such as drug or pesticides is developed. It started with identifying the target protein we aim to inhibit, followed by searching for a chemical molecules capable of binding to it from an almost infinite number of possibilities. During the discovery and optimization phase, the objective is to design the most promising candidate for advancement into the next stage of development. These later stages are time consuming and costly, so choosing wisely early on is crucial. It's also worth noting that once these advanced stages are reached, the chemical structure of the molecules is basically set. This is the version that hopefully will eventually make it all the way to market. Therefore, very early in the process right after optimization, we commit to the molecule, we believe has the highest probability of becoming the final product. The outcome of this process is often frustrating. Statistically, only a small fraction of promising molecules that make it into advanced development actually reach the market. Success rates are usually somewhere between 3% and 10%, depending on the industry. This naturally raised the question what caused the success rate to be so low? And major reasons for low success rate is that a product must meet many often conflicting parameters to reach commercialization. Traditional methods for selecting molecules and addressing multiple parameters are very limited as a result early development usually optimize only a few parameters, one parameter at a time, creating a major bottleneck to commercial success. Overcoming this challenge present a significant strategic opportunity. Today, advancing computational technologies allowed for the simultaneous optimization of multiple parameters with the potential to greatly improve development efficiency and success rate. That brings us to ChemPass AI, the cutting-edge tech-engine developed here at Evogene, built to transform the way we design small molecules that are precisely tailored to specific target proteins. What makes our approach truly unique is not just the molecules we design, but the intelligence behind them, each molecule must overcome a complex web of scientific, regulatory and commercial challenges. To become real product, a molecule has to do more than just work, it must excel across multiple dimensions simultaneously. And that's exactly what ChemPass AI was built to achieve. Our engine designed molecules that meet three critical requirements: high potency, molecules that strongly and effectively modulate their target protein; novelty, expanding into novel chemical space, ensuring the creation of strong, defensible intellectual property; and multiparameter excellence, molecules that perform across the many requirements needed for the real-world commercial success. With ChemPass AI, we are not just designing molecules, we are designing the next generation of breakthrough products, closing the gap between innovation and market impact. That's the power and the promise of ChemPass AI. We are advancing a multiyear development program continuously adding new capabilities to our generative AI tech-engine. As a result, the number of parameters we can address keeps growing and the precision of the molecules designed to meet the required criteria continues to improve. The more the system is used, the smarter and more accurate it becomes. To accelerate ChemPass AI development process, we are collaborating with major technology companies such as Google Cloud as disclosed in May this year, and we intend to continue doing so. Additionally, we intend to explore the possibility of making certain parts of our technology accessible to researchers through such companies, which have a broad market reach. Of course, we will be happy to update you on these developments in the future. Our vision comes to life through the technology we have developed. Now I'd like to present the implementation of our technology through our agriculture and pharma activities. Starting with agriculture, a field we entered back in 2018 through the establishment of our subsidiary, AgPlenus. Since then, AgPlenus has achieved significant milestones, including strategic collaborations with leading industry players such as Bayer and Corteva. Agriculture is a huge global market valued in 2024 at $79 billion, including three main segments: herbicides, insecticides and fungicides. A single product in this space can generate anywhere from hundreds of millions to billions of dollars in sales annually. The industry is in great need of new products, yet developing them comes with significant challenges, an increase in pest resistance and regulatory requirements, an urgent need for new mode of action and the decreased rate in discovery of new pesticides due to lack of innovation. To address the challenges of developing new products in ag-chemistry, revolutionary technologies are needed. Computational chemistry can drive real-world impact in agriculture. And this is the mission of AgPlenus, Evogene's wholly owned subsidiary. AgPlenus discovered and optimized candidate for crop-protection products and has a robust product development pipeline through collaborations with leading global agriculture companies as well as internally founded programs. We are very proud of AgPlenus' achievements reflected in its strategic collaboration with two world-leading companies, Bayer and Corteva. Both collaborations focused on developing new herbicides, each targeting a different protein that represent a novel mode of action. This innovation is essential to addressing the growing resistance of pest to existing solutions. The plant images shown in this slide clearly demonstrates the effect of the small molecules being advanced through those collaborations. AgPlenus is also advancing independent projects within its internal pipeline. Its main focus today is on developing fungicide candidates against Septoria, a fungus causing major damage to field crops, especially wheat. AgPlenus already has several small molecules showing very promising results in lab test, which are now moving to greenhouse trials to test their performance on plants. Looking ahead, AgPlenus plans to further strengthen and expand its collaboration with existing partners, establish new partnerships, leveraging AgPlenus' pipeline innovations and broaden the scope of programs within its internal development portfolio. These initiatives are expected to generate cash inflows for the company through upfront payment, R&D reimbursement and as our products advance through development, milestone payment and potential royalties. We look forward to providing further update on both collaborative efforts and internal pipeline progress. Now I will continue with our efforts to capture the value of our tech engine, ChemPass AI, in the pharma industry, focusing on the market segment of drugs based on small molecules. While small molecules-based drugs such a lucrative opportunity, and why do we believe now is the right time to leverage our technology for it. Small molecule-based drugs represent nearly 60% of the global pharmaceutical market, valued at approximately $780 billion. Even more exciting is the current momentum of AI designed small molecules that are advancing through various companies' pipelines. More than 60 new candidates with an expected annual growth rate exceeding 150%. This rapid expansion is expected to drive the AI drug discovery market to nearly $190 billion by 2034. As I previously mentioned, the traditional process of developing drug based on a small molecule is expensive, lengthy and has a low success rate. This slide illustrates the high numbers of failure that occur during the transition from one stage of clinical trial to the next. We expect that the smart use of our tech engines, ChemPass AI, will lead to the initiation of clinical trials for a highly active, innovative small molecules, which most importantly, meet the maximum number of the defined drugs key parameters. As a result, we expect the probability of successfully progressing from one development stage to the next to improve, and the number of candidates that complete the development process and became successful commercial product will increase significantly. To capture the value of ChemPass AI offering in pharma, our business strategy is designed to maximize potential while minimizing risk. We hope to partner with leaders in pharma, biotech companies and academia that bring domain-specific knowledge, forming collaboration agreements. Through this strategic alliance, we aim to co-develop innovative products. The expected upside for Evogene stems from R&D fees, milestone payment and revenue sharing mechanism of the end product. In August, our Pharma division announced a collaboration with Professor Ehud Gazit of Tel Aviv University to develop new therapeutics for metabolic disease linked to the self-assembly of small metabolites such as tyrosinemia and gout. The partnership combines Evogene's ChemPass AI generative design platform with Professor Gazit expertise in molecular self-assembly to discover and optimize novel small molecules that can inhibit harmful metabolite aggregation. This collaboration aims to accelerate the development of first-in-class therapies that addresses the underlying molecular causes of accumulated metabolic disease offering new hope to patients worldwide. This collaboration exemplifies the type of strategic partnership we are pursuing, leveraging Evogene's advanced computational capabilities alongside existing scientific knowledge to create meaningful synergies that can drive breakthrough discoveries in drug development. Over the coming year, we expect to announce additional collaborations of this nature, further strengthening Evogene's position in this field and enhancing recognition of our unique technological edge. We believe such partnership will provide the validation and visibility needed to enable broader and more complex collaboration with leading biotech and pharmaceutical companies, opening new growth opportunities for Evogene. We look forward to providing future updates on our collaborative efforts. To summarize Evogene's strategy, we are using ChemPass AI, which is at the core of our offering and our main competitive advantage to drive real-world innovation for two strategic markets. Pharma for the development of small molecule-based drugs, agriculture for the development of crop protection chemicals. To realize this vision, we operate through Pharma division focused on pharmaceutical applications and through our wholly owned subsidiaries, AgPlenus, focused on ag-chemical solutions. Each develops its product either in collaboration with leading global companies or independently. In the near future, we expect the following: Continuing to strengthen and expand ChemPass AI and maintaining our technological edge, signing additional collaboration agreement with biotech and later on with pharma partners for small molecule drug development, and expanding collaboration with existing and new leading ag-chem companies while growing AgPlenus' internal crop protection pipeline. With this, I conclude my part, and I will now hand the call to our CFO, Yaron Eldad, to present the financial results. Yaron Eldad: Thank you, Ofer. The financial results for the first 9 months of 2025 and the capital gain of Lavie Bio, a subsidiary of Evogene, are presented as a single line item in Evogene's consolidated P&L statement for the first 9 months of 2025. Its results are included under the line titled: income or loss from discontinued operations. This accounting treatment reflects the classification of Lavie Bio's operations and its capital gain as discontinued following the sale of the majority of its activities to ICL which was completed in July 2025. During the first half of 2025, Evogene implemented a cost reduction plan, most of which was completed by the end of the second quarter. The impact of these reductions is reflected in the first 9 months results. As of September 30, 2025, Evogene held cash, cash equivalents and short-term bank deposits of approximately $16 million. The consolidated cash usage during the third quarter of 2025, excluding the cash generated from the sale of the majority of Lavie Bio's assets and the sale of MicroBoost AI for Ag to ICL was approximately $3.5 million. Excluding Lavie Bio and Biomica, Evogene and its other subsidiaries used approximately $2.3 million in cash during the third quarter of 2025. Revenues for the 9 months of 2025 were approximately $3.5 million, compared to approximately $4 million on the same period the previous year, reflecting a decrease of approximately $0.5 million. The decrease was primarily driven by lower revenue recognized from AgPlenus' activity, which included onetime payment from Bayer during the first quarter of 2024. And revenues recognized from the collaboration agreement with Corteva, partially offset by an increase in seed sales generated by Casterra during the first quarter of 2025. Revenues for the third quarter of 2025 were approximately $300,000, a decrease compared to approximately $1.7 million in the same period last year. The decrease was mainly due to reduced seed sales generated by Casterra during the third quarter of 2025. Research and development expenses, net of non-refundable grants, for the 9 months of 2025 were approximately $6.2 million, a decrease of approximately $3.6 million compared to $9.8 million in the 9 months of 2024. The decrease was primarily due to reduced R&D expenses in Biomica, and the cessation of Canonic's operation at the beginning of 2024. In the third quarter of 2025, R&D expenses were approximately $1.4 million, down from approximately $3.3 million in the same period of 2024. This decrease is mainly attributed to decreased expenses in Biomica. Sales and marketing expenses for the 9 months of 2025 were approximately $1.2 million, a decrease of approximately $400,000 compared to approximately $1.6 million in the same period last year. The decrease was mainly due to reduction in Evogene, AgPlenus and Biomica personnel costs. Sales and marketing expenses for the third quarter of 2025 were approximately $400,000, reflecting a slight decrease of approximately $100,000 compared to approximately $500,000 in the third quarter of 2024. General and administrative expenses for the 9 months of 2025, decreased to approximately $3.4 million from approximately $5.7 million in the same period last year. This decrease is mainly attributable to expenses recorded during the 9 months period of 2024, and related to a provision for doubtful debt for one of Casterra's seed suppliers as well as transaction costs associated with Evogene's fundraising in August 2024. General and administrative expenses for the third quarter of 2025 decreased to approximately $1.1 million compared to approximately $2.8 million in the same period of the previous year, primarily due to decreased expenses in Casterra and Evogene as mentioned above. Other income of approximately $200,000 was recorded in the first quarter of 2025 as part of the accounting treatment related to a sublease agreement. The decision to cease Canonic's operation in the first half of 2024 resulted in other expenses of approximately $500,000, primarily due to impairment of fixed assets recorded in the first quarter of 2024. The operating loss for the 9 months of 2025 was approximately $8.8 million, a significant decrease from approximately $15.3 million in the same period of the previous year, mainly due to the decreased operating expenses, partially offset by the decreased revenues as mentioned above. The operating loss for the third quarter of 2025 was approximately $2.7 million, a decrease from approximately $5.9 million in the same period of the previous year, primarily due to the decreased operating expenses, partially offset by decreased revenues as mentioned above. Financing income net for the 9 months of 2025 was approximately $744,000 compared to financing expenses net, of $448,000 in the same period of the previous year. The increase in financing income is mainly associated with accounting treatment of pre-funded warrants and warrants issued in August 2024 fundraising. As a result, during the 9 months of 2025, the company recorded financial income, net, related to pre-funded warrants and warrants of approximately $674,000, as compared to financing expenses, net, of approximately $881,000 in the same period of 2024. Financing income net, for the third quarter of 2025 was approximately $12,000, compared to financing expenses net of approximately $821,000 in the same period of the previous year. The increase in financing income is mainly associated with accounting treatment of pre-funded warrants and warrants issued in August '24, fundraising as mentioned above. Income from discontinued operations net, for the 9 months of 2025, was approximately $5.7 million, compared to a loss of approximately $2.2 million in the same period of 2024. For the third quarter of 2025, income from discontinued operations net, was approximately $7.9 million, compared to a loss of approximately $1.5 million in the quarter of the previous year. This amount primarily reflect the financial results of Lavie Bio and expenses related to the development and maintenance of MicroBoost AI for Ag, which are presented as a single-line item in the consolidated statement of profit and loss. Following the sale of the majority of Lavie Bio's assets as well as Evogene's MicroBoost AI for Ag to ICL, the company recognized a gain on sale of approximately $6.4 million which is also included in the income or loss from discontinued operations net, for the 9 months and 3 months period ended September 2025. All prior period amounts have been reclassified to conform to this presentation. The net loss for the 9 months of 2025 was approximately $2.5 million, compared to approximately $18 million in the same period last year. The $15.5 million decrease in net loss was primarily due to decreased operating expenses, income derived from discontinued operations due to the asset sale to ICL net, and increased financial income net, partially offset by reduced revenues. The net income for the third quarter of 2025 was approximately $5.2 million, compared to a net loss of approximately $8.2 million in the same period last year. This improvement was primarily due to income derived from discontinued operations net, due to the asset sale to ICL, decreased operating expenses and increased financing income net, partially offset by reduced revenues net, as mentioned above. Operator? Operator: [Operator Instructions] The first question, has the levels of interest in AI ChemPass increased post the recent NVIDIA and Eli Lilly AI drug discovery partnership. Also, could you please elaborate why Evogene's proprietary database should garner similar interest from others in pharma and technology industries? Ofer Haviv: Thank you for this question. This is Ofer. So I think that the announcement coming from NVIDIA and Eli Lilly definitely increase the interest and the traffic in shares in companies that are related to AI activity for the pharma industry. But I have to say that, I think that we didn't need even this announcement to generate interest. I think this is one of the hottest areas these days in the pharma world. And I think that this is really just the beginning of this new area of activity, and it's here to stay. With respect to Evogene, and I think that we are operating something very unique. I can share with you that we participate in a conference in Europe last month, and we see increased interest in what we are presenting to potential partners. It's -- I think we are already 1 year in this area of presenting our ChemPass technology for the pharma industry, and we see increasing interest in what we are doing. And we shouldn't forget that in the ag industry, we already have a significant collaboration agreement with Bio and Corteva, which you can imagine that they validate our technology before they engage in this collaboration agreement. What is unique about Evogene, from my perspective, this multiparameter approach, it's one. Then the second is that in Evogene, the people that are working in the computational -- ag part -- in computational division, they have a PhD degree in genomics. And this is the type of people that can design for scratch an AI tech-engine, and this is what is called foundation model. And we did it together with the Google team and we succeed to create a very unique dedicated AI engine that from the beginning, it was designed for a small molecule discovery and optimization. This is something that is not existing in other places. And in addition, the way that we are utilizing our technology, while we integrate every piece of information coming from our partners, it also puts us in a very different position compared to other companies because we don't believe in a one-size-fit-all approach, where you're developing the specific technology and you are using it for all the company, the same way. In our case, we modified the technology for each partner according to the specific need of the specific -in a program we are engaged. So yes, it might take a little bit longer, but the performance of what we deliver is expected to be much higher than the approach of one-size-fit-all. So I think that our technology is offering something different. And as time is going by, and we have more and more meetings with potential partners, our belief is getting stronger and stronger that we are coming with something which other company is not offering these days. Operator: The next question, how close are you to unlocking partners with AI ChemPass? Ofer Haviv: So as I mentioned, we see an increase of interest in what we are offering. If the meetings that we participate -- in the conference, we participate in the early years and the beginning of the year, we returned with a small number of potential candidates. Now it's much -- the list of potential candidates has increased significantly. And based on this, I believe that we hopefully will start to announce on more additional collaboration agreement with biotech companies at beginning of next year. And we'll start to hear more and more on new collaborations. And hopefully, with -- starting with small biotech companies, maybe even some -- or maybe academic institution, but later on, it will be midsized biotech companies. And in our target at the end of the day is also to engage with pharma company with a significant collaboration agreement. But this will take a little bit more time. But as I said, small biotech companies will start to -- hopefully to be able to announce such collaboration at the beginning of next year. Operator: The next question. Last quarter, you spoke to doing more IR to drive awareness to the company, but very little seems to be done. What's the IR strategy going forward? And can we rely on it being implemented in short order? Ofer Haviv: It's an interesting question because we just now discuss here this -- our approach in presenting the company strategy in this analyst call was the right one because it's taken a little bit longer than what we expected. But I think that -- but we all agree that the answer to this question is yes. And how is connected to the question that was just now raised. I think from this analyst call, now we present the first time, our -- the new presentation in an analyst call, where we are describing Evogene in the new structure, focusing on ChemPass AI, the utilization of this technology in the ag and in the pharma and the collaboration that we engaged. And from here on, this will be the main messaging the company would like to share with investors. Yes, we, of course, we will continue to talk about our subsidiary, Casterra, but the main focus will be on what I just now described. And we are now -- and we are planning to initiate roadshows and participate in conferences next year, not necessarily just IR meeting with investors, but also meeting with -- in professional event. And I think that starting from -- actually from -- even from December, we are planning that Evogene and the new story of Evogene will be out there. And hopefully, we'll start to see more and more events, IR events that we will be involved. Operator: The next question, could you highlight upcoming catalysts over the coming 6 to 12 months? Specifically, when could we expect the first partnership? Ofer Haviv: So I think, I partially addressed this question. From my perspective, we can envision three type of press releases related to the Evogene new strategy, new collaborations in the Pharma division, meaning that additional biotech companies will use our technology to discover and optimize small molecules for the specific targets. Then expansion of the existing collaboration or new collaboration in the Ag division. I'm talking here, of course, about AgPlenus. And third, and this is something that I think is quite important for us to mention, exactly as we engage with Google in building an important piece in our tech engine, I'm expecting and hoping that there will be additional announcements like this one with companies like Google, the same size of Google or also maybe with Google. And I think that our belief is that we definitely should accelerate the development of ChemPass AI through collaboration with company like Google, in order to keep our competitive advantage in the future as well. Operator: The next question. What type of revenue level can we expect for castor seeds in Q4 and for 2026? Ofer Haviv: We can't disclose this information. What I can say is that about Casterra, they are now talking with companies, strategic companies in the field of castor oil, companies that can really have a significant effect on the company revenue in the future. When this discussion will materialize, of course, we will share this information with our investors. But I think this is a good news that even in the past, we were talking about specifically one partner that we already disclosed its name, ENI. But I think that today, we believe that there is additional opportunity for companies that can have the same effect on Casterra that we are now talking with them. And there is more than one like this. So when this discussion will materialize into agreement, of course, we'll be more than happy to share this information with our investors. Operator: The next question. How excited are you about AI ChemPass compared to all your other times at Evogene? Ofer Haviv: I think that this is a very interesting question. I think that for many, many years, Evogene was focusing mainly on the ag sector. And I think that we succeed to go through some significant technology breakthrough. But from different reasons, and I don't want to get into it, the ag sector don't give you a financial trend to such an achievement from different reasons. I think the pharma, the situation is different, and I think that, first, the fact that we are focusing on the pharma industry, yes, we are still in the ag industry with respect to AgPlenus, but our main focus is going to be on the pharma industry. So I think this is the right decision for Evogene. In addition, the type of people that are working here in Evogene is people that hold a PhD degree. And this is very important, when you're talking about AI, because if you really want to be a player in AI, with all the respect to first degree or second degree, it's not enough. You need to have a much broader understanding in computational science in order to be -- to act as a player in AI industry. So I truly believe that we have the right people for the right challenge. And again, based on initial validation we conduct here in Evogene, based on the discussion we conduct now in the last bio conference. I would like to say the following, if we will succeed to mimic the same success Evogene demonstrate in the ag industry. If we succeed to do so in the pharma industry, our company will be something that everybody will be proud to participate in our journey. We have been there. We succeed to work with all the world -- all the big companies in the pharma industry -- in the Ag industry. I hope that we'll be able to do exactly the same, but this time, the financial rewards will come after the efforts that we are going to invest. Operator: There are no further questions at this time. Mr. Haviv, would you like to make a concluding statement? Ofer Haviv: Yes, I would like to thank everybody in participating in this analyst call. For me, it was a very unique presentation, where we present for the first time, the new Evogene story, with the new presentation. And I really hope that in the next analyst call, we will have much more to share with you, along the guidelines that I just now described. Operator: Thank you. This concludes Evogene's Second -- Third Quarter 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Bank Hapoalim Third Quarter of 2025 Results Conference Call. For your convenience, this call will be accompanied by a PowerPoint presentation. May we suggest if you have not yet done so, that you access the presentation on the bank's website, www.bankhapoalim.com by clicking on Financial Information on the homepage and then click on the Third Quarter 2025 Report Presentation. [Operator Instructions] As a reminder, this conference is being recorded, November 20, 2025. With us on the line today are Mr. Ram Gev, CFO; Mr. Victor Bahar, Chief Economist; and Ms. Tamar Koblenz, Head of Investor Relations. I would like to remind everyone that forward-looking statements for the respected company's business, financial condition and results of its operations are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated. Such forward-looking statements include, but are not limited to, product demand, pricing, market acceptance, changing economic conditions, risk and product and technology development and the effect of the company's accounting policies as well as certain other risk factors, which are detailed from time to time in the company's filings with the various securities authorities. Mr. Gev, would you like to begin? Ram Gev: Good afternoon to you all, and thank you for joining us today. I'm happy to review the bank's 2025 third quarter results with the highest in the sector quarterly and cumulative net profit. Let's start with Slide 3. This morning, we reported a 16.1% return on equity for the 9 months with net profit of ILS 7.3 billion, both excluding ILS 380 million income from the insurance reimbursement, 8.1% credit growth year-to-date and a profit distribution of 50% of third quarter net profit through cash dividends and share buybacks. These metrics demonstrate that we continue to be well on track to meet our 2025 financial targets. In fact, we are currently exceeding the targets, resulted from higher-than-expected growth and a more favorable macro environment than the market forecasted at the time of the target publication. Not less important is the fact that these results were achieved while we continue to strengthen our balance sheet, build buffers and maintain the high quality of the credit book. The CET1 capital ratio is 12.05%. The allowance ratio is 1.74%. LCR is comfortably above target at 124% and the NPL ratio has declined further to 0.49%. On Slide 4, we see the development of profitability over time. On a quarterly basis, net profit was ILS 2.8 billion and return on equity is 17.6%. Excluding the aforementioned income from insurance, net profit was ILS 2.4 billion and return on equity is 15.2%. EPS came in at ILS 2.1 or ILS 1.81 on an adjusted basis. Next, let's talk about our credit book. Our credit portfolio increased 11.4% in the last 12 months, of which 8.1% since the beginning of the year and 2.2% in the last quarter. Growth was recorded across all segments and in various economic sectors. This is a reflection of our ability as a leading bank to translate the strength of the Israeli economy into growth in the bank's activity. Slide 7 presents our financing income. Income from regular financing activity grew moderately this quarter compared to the previous quarter due to the growth in activity, which was mitigated by the slightly lower CPI. Non-regular financing activities saw a decrease due to, among other things, to customer benefits granted in line with the Bank of Israel voluntary program, which took effect on April 1. In the third quarter, the expense for benefits recorded in financing income was higher than in the previous quarter due to the bank's initiative to grant its customers 2 shares of the bank as part of the benefit program. Our margins stayed strong and grew year-on-year. The financial margin for the first 9 months of 2025 increased to 2.77% versus 2.71% last year. In fact, Bank Hapoalim has the highest financial margin in the sector and is the only one to present growth in margins in 2025. On fees, the positive trend continues across all types of fees as our business activity continues to expand. The slight reduction in fees versus last quarter is attributed to onetime income from international credit card organizations booked in the second quarter. The significant growth in fees is well demonstrated in the 11.4% increase during the 9 months period. Moving to present our disciplined cost management. Operating and other expenses are lower versus all comparable periods. The growth in income, coupled with the decline in costs as a result of cost restrained efforts brought the cost/income ratio to a very low level of 30.6% for the quarter and 32.7% excluding the onetime income. The cost/income ratio for the 9 months period is impressive as well, 32.7% as reported and 33.4% adjusted. Moving on to discuss provision for credit losses and the quality of our book on Slide 10 and 11. Provision for credit losses amounted to ILS 347 million or 0.29% of our credit book, driven completely by the collective allowance and net automatic charge-offs. The increase in the collective allowance reflects our prudent approach and is due to the growth of the credit portfolio and the continued uncertainty in the economic environment. On credit quality metrics, on the left-hand side, we see the NPLs continue to grow, now at 0.49%, while the NPL coverage ratio continues to rise, now more than triple the NPLs as we continue to increase the collective allowance. On the right-hand side, the allowance to loan ratio remained high at 1.74%. Over 95% of the total allowance is collective. Our deposit base continued to grow 3.6% in the last 12 months. Retail deposits decreased in the last year, but still represent 54% of total deposits. Liquidity ratios, LCR and NSFR continue to be well above the minimum requirement. Now let's move to present our capital position, which continues to benefit from strong organic generation capabilities, 11.5% in the last 12 months and the CET1 capital ratio rose to 12.05%. I'm moving to Slide 14. Total distribution in the quarter continues to be 50% of net profit, 40% as dividend and 10% in share buybacks. Total profit distributed and declared is ILS 1.38 billion in respect of the third quarter, of which ILS 1.1 billion of cash dividend or ILS 0.84 per share. After successfully completing our previous ILS 1 billion share buyback, the Board approved a new plan for a similar amount starting today. Moving to Slide 15 for a brief update on Bit, our unique innovative asset. The number of active customers continues to rise, now reaching 3.45 million users with an average monthly P2P transactions volume of ILS 2.4 billion. Recently, we introduced an exciting new offering, the ability to create savings pockets within the app, allowing customers to deposit up to ILS 20,000 and benefit from 4% interest. Before we review the macroeconomic slides and sum up the call, the important reminder on our financial targets for 2025 and 2026 is on Slide 16. The key assumptions for these targets are detailed in the 2024 financial report. I'm moving to Slide 17 on the macroeconomic environment. We have seen a substantial increase in economic activity in the third quarter with GDP growing at an annualized rate of 12.4%. Private consumption, exports and investments all grew at a rapid pace, more than compensating for the trough caused by the war with Iran in the second quarter. Looking ahead, we still believe that growth will remain high in the coming year, driven primarily by an increase in investments in housing, the rehabilitation of frontier villages and infrastructure. As the war ended, the risk premium declined to levels that prevailed in the first half of 2023 and the shekel appreciated sharply. Inflation has decreased to a year-on-year rate of 2.5% and markets are now pricing less than 2% inflation over the next 12 months. Under these circumstances, we believe that interest rate cuts are imminent, even though medium- and long-term inflation concerns persist as the labor market remains tight and wage inflation is high. I'm moving to Slide 18 to summarize. We delivered strong 9 months results, well on track to meeting our financial targets. ROE of 17.6% in the third quarter or 15.2% adjusted for the income from insurance, cost/income ratio of 30.6% and 32.7% adjusted. Financing income and margins continue to be strong, driven by the growth in activity and assets rollover. The strong growth in credit was broad-based across segments and economic sectors. Credit quality continues to be strong with NPL ratio of only 0.49% and allowance to NPL ratio of 313%. Our capital is organically and substantially growing. This quarter, we declared a 50% profit distribution, including the first tranche of a new share buyback plan. With that said, let's open the call for your questions. Back to you, operator. Operator: [Operator Instructions] The first question is from Chris Reimer. Chris Reimer: Can you hear me okay? Operator: Yes, we can hear you. Chris Reimer: One on regulatory risk. There has been some headlines about increasing tax rate on banks and separately by the Finance Minister to add a potential tax for mortgages subsidation. Does the bank have any take on these ideas? Ram Gev: Yes. Chris, thank you for the question. We see from time to time some regulatory initiatives. Some of them are continuing to further legislation, but a lot of them are not continuing. We look and when we analyze them, part of them are pretty populistic. You mentioned the one about subsidizing mortgages, et cetera. Those are initiatives in fairly early stages. We are reviewing and monitoring it. But I think what's most important is the position of the Bank of Israel that post these suggestions. So I think the track record that show that populistic initiative didn't go further to actual laws, that's the important element. And we think it will be reasonable to assume it will be the same with that. Obviously, there are some other legislation that may continue and be in the form of law, but that's the reason why we are reviewing every, let's say, initiative. Chris Reimer: Got it. Got it. That's helpful to know. Considering -- just looking at operating expenses, considering your upcoming move of the headquarters, how should we be looking at expenses going into next year? Ram Gev: Okay. You mentioned our project on centralizing our headquarters. The project continues well. And actually, we are about to finalize the project and start moving about a year from now. So it mainly affect operating costs from 2027 and on. Another major effect that it will have is the ability to sell our current buildings, some of them in major central location and create some material capital gains. But that will be in 2027 and on as well. Operator: The next question is from Priya Rathod. Priya Rathod: Just 2 from me. So the first is on capital. I saw that you increased your internal capital target to 11%. Could you just give a bit more color on the reasoning behind increasing this? And did this have any influence on your decision to stick with the 50% payout ratio? Because obviously, we've seen this quarter that a couple of your peers have raised the payout ratio to 75%. So any color on that would be really useful. Secondly is on your coverage ratio. You're like in excess of 300%. What would you need to see or what hurdles would you need to overcome to potentially release some of those provisions going forward? Ram Gev: Priya, thank you for the questions. As you have seen, the entire banking sector actually has updated its internal capital targets upon approval of the third quarter financial statements. This follows a periodic dialogue that the supervisor of banks conduct with each of the banks. And this year, in addition to the usual consideration and an element of the current economic and geopolitical environment, which in the view of the Bank of Israel still contains a degree of uncertainty, this element was also taken into account. And in light of these factors as well as the surplus capital within the system, the banks have revised their internal targets. Bank Hapoalim's Board of Directors has decided, like you mentioned, to set the minimum internal capital target at 11%. This is the outcome of the ongoing dialogue with each bank, taking into consideration the specific characteristics and what I mentioned about the geopolitical uncertainty. Obviously, the Board of Directors, while deciding about the distribution took into account the internal target. And the Board of Directors decided that given the current surpluses, the desired capital buffers and our significant growth targets, maintaining a 50% distribution rate is the right approach going forward. So that's about capital distribution. About collective allowance, and you mentioned right, we have very high-quality loan portfolio. And it's reflected in all aspects, very low NPLs, very low write-offs level and nearly 0 for the quarter, for example, individual provision. And indeed, we have conservative approach, and we accumulated buffers during the war. And actually, this quarter as well, we continued building the buffers. So we have the highest buffers in the industry. You mentioned allowance to credit ratio, we have 1.74% ratio. It's 20 basis points above the second one in the industry. And the reason is very simple behind our approach. We are indeed in a ceasefire situation, and we are optimistic, very optimistic about the Israeli economy, but uncertainty is still there. And we think that it's too early to release or reverse the buffers like other banks did. And having those buffers allowing us to be best prepared in the sector for 2026 in each scenario. If the pessimistic scenario will happen, we are best immunized for that. And if the optimistic scenario will happen, then we are prepared for 2026 better than others as well. I think that the entry to 2026, everyone will have more information and more certainty about the stability of the ceasefire, about the stability of the lower level of risk in other fronts and the growth of the Israel economy. So we think that we will benefit from our approach. Operator: The next question, can you please give us some color on your call decision approach to the Tier seconds callable next year and how you plan to approach the refinancing local versus international markets? Ram Gev: Yes. Thank you for the question. As for the Tier 2 CoCo bonds dollar, obviously, we can't say now what we will do. But I think we can learn -- you can learn from our track record. Usually, we use this call option, and we understand the investor expectations and that you need very unique circumstances in order not to use this call option. But the best evidence for how we look at that is our track record. Operator: [Operator Instructions] The next question is a follow-up a question from Priya Rathod. Priya Rathod: Just a quick on your deposits. I saw this quarter that the deposits from private individuals fell year-on-year and also on a quarterly basis. What are the drivers behind that fall this quarter, please? Ram Gev: Okay. Thank you, Priya. You're talking about money market funds and change in deposits. This reflects customer awareness to different alternative to investments and to deposits. We are happy with the awareness of the customers, and this reflects the -- what they choose how to manage their funds. From our perspective, we have very good levels of liquidity, and we are balancing growth in that area with profitability. So the very high flexibility we have, for example, you can look at the funding rate from capital markets is relatively low for Bank Hapoalim. So we rely on deposits, and that's enabled us to be flexible, keep disciplined pricing and manage the growth. Operator: There are no further questions at this time. This concludes the Bank Hapoalim Third Quarter 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.
Mark Blair: Good morning, everybody. I'm Mark Blair, the CEO of the Mr Price Group, and thanks for joining us while we take you through our interim results to the 27th of September 2025. I'm going to be talking a little bit about the operating environment. Praneel Nundkumar, the CFO, will take us through the detailed group performance, and then I'm going to share the longer-term thinking with you and also the short-term outlook. So moving into the operating environment. And I think there's already been much said about this. There's been other retailer presentations. So I probably don't have to say too much except to say I think these graphs tell the full picture. Since COVID-19, there's been a prolonged period of negative real wage growth, rising debt service costs and obviously, inflation has been more elevated, but it seems to be improving now. But if you look at that graph on the left-hand side, there you'll see the negative wage growth in 2022 and 2023, started picking up a bit thereafter, but all negatively indexed to the base of 2019. And what happened during that process over that time frame is that there was an access to debt of those consumers who could. And therefore, on the right-hand side, you see the debt service ratio going up as well. It's great to have a little tick down towards the end there going into 2025. And we're hopeful that when we get to the outlook and the shorter-term future discussion that, that starts to trend in the right direction. But I think the picture here that it tells is looking at what's happened to general wages and wage increases over the period, just relative to the cost of living, many of the items that make up the cost of living have increased at a higher rate than people's wages. So there's some negativity in that. I think the good news is that when we start looking out towards the future, some of these things are starting to turn quite nicely. Looking at the consumer spend and behavior. And of course, the 2020, 2021 part of that term is not that relevant. It's a COVID year and it's a bounce back. But you can just see what happened to total household expenditure over the period and 2.6%, 0.2% and 1%, I think, also tells the picture. Certainly, what we've seen as retailers is that retail patterns have been very erratic. So I'm talking about monthly performances, very dependent on what's happened to timing of holidays, et cetera. And certainly, we've seen the impact of around pay days, very strong performance. And as it gets further away from pay days, then performance tends to come off. So very erratic in that front. And of course, what we're living with is a scenario that is spending is one thing. I suppose discretionary spending is another and discretionary retailers have also had to deal with the threat of the online Chinese retailers and online gambling, but just to add a little bit more insight into that. Certainly, the statistics that we've got show that the international online players have been losing market share for a few quarters now, and that was on the back of regulation change. So that's a positive for us. And then I think with online gambling, there's been quite a few reports that I've read. And I guess some of them have got divergent views as well. In the one report that I read, it did refer to that sometimes the statistics aren't that well understood. And it depends what's in the numbers because to some extent, there could have been where online gambling was illegally taking place offshore and has now been localized and included for the first time, that could be a factor. And the other factor is that although one of the figures quoted was total wagered value of ZAR 761 billion, there was a view that, that includes seed capital and winnings reinvested and that, that seed capital is probably around ZAR 115 billion versus the ZAR 761 billion. The net losses at the end of the day, I've seen figures of ZAR 36 billion, ZAR 29 billion coming from online, but it's the incremental change year-on-year that in 2025 is estimated to be about ZAR 15 billion. That's the worrying part is that jump. And of course, at this point, we also don't know how the accessing of two-pot retirement funding aided a short-term diversion into gambling. We'll have to see how that settles down. But I think the point that I also want to make is that as retailers over the years, we've had to face many, many disruptions. And whether you're looking at the 5-year history or in fact, going much earlier than that, the introduction of cell phones was a good example. These are all bumps that we've had to overcome in the past, and we'll certainly make a plan to make sure we manage these ones as best we can. Looking at Mr. Price's sales growth versus the market. Obviously, in this graph, Mr Price Group is in the red bar. And what you see where you're looking at 2024, 2025 and then H1 and H2 in 2025 and H1 in 2026, Mr. Price consistently above the gray bar, which is the rest of the market. So I think just sort of concentrating on the short term for a moment, although, of course, we'd like the 5.5% to be a lot higher, what is absolutely not negotiable for us is the quality of those sales, and we're not after growing market share at all cost. We have to grow profitable market share, and that's what we've done consistently, very, very important for us. Also want to just stress, and we'll talk a little bit later about it as well, is that as we -- in H2 now, we are up against a much stronger base. I've spoken about the two-pot hitting there and accessing that retirement funding really boosted spend last year, kicked in, in October. And just from a monthly trading perspective, we had a really strong run up until February. So the base is very high. And I think that's probably the timing going into 2026 that the two-pot effect should be out of the system, and we can see how we're trading relative to a much cleaner base and therefore, have a much better read on the health of the consumer. But very pleased that for all those reporting periods, comfortably above our peer set with -- and I just want to stress the point again, with profitable market share gains. And I guess at the end of the day, this is the kind of picture that we strive for. And it's not myself as the CEO or Praneel as the CFO, managing this from the top. I'll get into what makes up the Mr Price DNA a little bit later. This is a process that's alive in our business and there's great alignment on it in our business. So shout out to the teams that deliver these, but I must say it's not a fight to get the shape done. So very pleasing that there's been a translation of positive top line growth that we've kicked on in the GP percentage, managed overheads and actually come up with a HEPS growth of 6.5% and then maintained our dividend policy as well. Also cash nicely up at just over -- just around ZAR 3 billion. I did mention the word consistency a bit earlier. That is something that we do strive for as well. And normally on graphs, we like to be red, but in this case, quite happy to be black. And the fact that for the last 4 reporting periods, all our numbers are in the black, I think that's the objective that we set out for. So consistency through merchandise execution, through cost savings, there's a lot of discipline that happens in our business to manage that outcome. So although those figures for us are in the black, of course, we'd like them to be higher in scale. But hopefully, that's the last slide that I'm going to talk to when we're starting to see green shoots out there that could start shaping the trajectory of those black lines here to hopefully what could become a steeper curve. I think we all look forward to that. But I think just relative to what's happening out there, the market is extremely promotional. You've seen what's happening to gross margins across the sector and to come up with another consistent performance relative to that market, I've got to be pretty satisfied about that. I'm now going to hand over to Praneel, and he's going to take you through the detailed earnings. Praneel Nundkumar: Thanks, Mark. Good morning to everyone joining us online on the webcast this morning. I'm pleased to present to you the Mr Price Group results, the interim results for the 26 weeks ending the 27th of September 2025. As you would have gathered from some of the slides that Mark presented just now, the first half was quite a challenge in terms of the operating environment that we had to deliver results in. Consumer confidence remained negative in the first half, and you would have seen that household expenditure growth was subdued. At our last results presentation in June, we did say that in an environment like this, our focus was on ensuring that sales would continue to grow ahead of the market and that, that would come at higher GP margin gains. I'm pleased to report back today that that's exactly how the first half transpired. Taking a look at the income statement. Revenue for the first half grew 5.4% to ZAR 18.5 billion, driven by retail sales up 5.5% ahead of the market's growth of 5.3%. Retail sales was impacted by comp sales growing 2.1%, up from 0.4% last year, and weighted average space growth grew 3.5% due to the addition of 91 new stores in the first half. Gross profit grew 6.3% to ZAR 7.1 billion, creating a nice positive wedge to sales with GP margins growing 30 basis points on last year. Expenses were well controlled, growing 5.6% to ZAR 5.9 billion, and operating profit grew 5.7% to ZAR 2.1 billion. Net finance expenses decreased 4.9%, and that was due to the interest earned on the positive cash balance in the first half, offsetting interest expenses coming in at ZAR 297 million, down on ZAR 313 million last year. This assisted the profit before tax number growing at 7.7% to ZAR 1.8 billion and profit after tax grew 7.3% to ZAR 1.3 billion. Profit attributable to equity holders of the parents were up 6.7% to ZAR 1.3 billion. And as Mark mentioned earlier, HEPS was up 6.5% for the first half. In summary, even through the constrained trading environment and consumer challenges that we spoke about, our management team was satisfied with delivering operating leverage through GP gains and strict cost control. Moving on to the segmental performance. The Apparel segment, which contributed 78.5% of retail sales grew 5.3% in the first half. This outgrew comparative markets whose sales grew only 4.7%. The Mr Price Apparel division maintained market share in the first half and expanded GP margins despite the market being highly promotional, resulting in an operating profit growth for the sector of 12.3%. As you'll note from the pie chart on the left, the Mr Price Apparel business contributes 42.6% to total sales, and it's really pleasing that on a 12-month basis, the division gained over ZAR 200 million in market share. The Studio 88 business also delivered a solid margin-accretive sales performance, and I'm very pleased to report that the Power Fashion business reported its 14th consecutive quarter of market share gains. Comp sales were up 1.7% for the sector. Unit growth was up 2.4% and the sales density just under ZAR 38,000 per square meter for the apparel sector. Moving on to the Homeware sector, which contributes 17.7% to total retail sales. Sales in this sector were up 5.1% with healthy comp growth at 4.3%. It was pleasing that operating profit in the sector also grew 12%, driven by all divisions expanding GP margins and managing costs really well. Unit growth was also up 2.6% and inflation was up 2.4% with sales density just under ZAR 30,000 a square meter. I must make a mention of the Yuppiechef business, who reported double-digit sales growth in the first half and continued to gain market share for 18 consecutive months now. Having a look at the Telecom segment, which now contributes 3.8% to retail sales, up from 3.6% last year, and this came through from retail sales growing 12.4%, consistent double-digit earnings growth from this sector over the last few periods. This also was positively impacted from market share gains of 50 basis points per GfK in the first half. Operating profit grew 16.8% on last year, and comps were slightly down at minus 1.9%, but unit growth was up at 4.3%. The Mr Price Cellular stand-alone stores grew by 12 stores in the first half, taking the total stores to 73 and 481 combo stores across the business. Moving on to space growth now. The group ended the first half on 3,100 stores in the first half, a total of 91 new stores for the period. As you can see, a lot of this growth coming through from the apparel sector, where the Studio 88 chain grew 42 new stores across its 5 trading businesses with Power Fashion growing 11 stores and Mr Price Apparel and Kids growing altogether in 11 stores. The Homeware segment also delivered 8 new stores for the period. And as I mentioned just now, the cellular business grew 12 new stand-alone stores. Weighted average space growth at 3.5%. And really just wanted to show you the table on the left -- I'm sorry, the right at the bottom that over the last 4 years, we've averaged just under 200 new stores per year. And even for F '26, you will see on the red bar graph that we're on track to deliver 200 stores this year, another 109 in the second half. Our management team are also very satisfied with the return metrics on new stores. These continue to exceed the internal thresholds that we've set for new store CapEx. Moving on to the slide that you all have been waiting for, the gross profit analysis. Group GP grew 30 basis points to 40.0% in the first half, up from 39.7% last year. As you can see from the slide, these GP gains were noted across all trading segments despite the highly promotional environment by competitors. The margin gains ensured that we had a smooth transition out of winter into fresh inputs into summer and spring merchandise. The Apparel segment, which grew 30 basis points was driven by the 2 largest divisions, Mr Price Apparel and Studio 88 and further margin recovery in the Homeware sector by 20 basis points ensures that the Homeware sector is on track to deliver their medium-term target of 41% to 43%. And you'll note that we did increase this target in June, so a higher target, but we're comfortable that they are in the range. The Telecoms margin grew 60 basis points, both for cellular and the mobile business, aided a lot by the transition into the private label devices that we've introduced, which aids the margin growth. We're expecting to be within the medium-term target ranges in the second half despite a strong base. A big focus area for me in the first half and for many of our teams, as Mark mentioned, was managing overhead costs in the environment that we spoke about. I'm pleased to report that total expenses grew 5.6% to ZAR 5.6 billion due to stringent and active cost management by our teams, which has now become quite a cornerstone of our value retail model. Our teams are agile at being able to respond when the sales calls are different to expectations. Depreciation and amortization grew 5.5% to ZAR 1.5 billion and employment costs, while growing 11.1% was impacted due to some credits in the base, prior year base effects from LTI schemes that were forfeited due to performance criteria not being met in the previous year. Excluding these credits, employment costs were up 8.6%, which includes the annual increase that we did together with 91 new stores, adding weighted average space growth. Occupancy costs were up 4.2% to ZAR 566 million and other operating costs down 3.1%, impacted by foreign gains -- ForEx gains in the first half compared to ForEx losses last year from our African territories that we trade in. Excluding these ForEx gains and losses, operating expenses were still only up 1.9%, which talks to the effectively managed overhead costs in the business. Moving on to operating margin. Operating margin grew 10 basis points to 11.5% compared to 11.4% last year. And you will note that all trading segments expanded operating margin due to a combination of the GP margin gains that I spoke about earlier and together with efficient cost control. You will note on the slide that the group -- op margin grew at a lower rate than the trading segments, and I must make a comment that you must tie that back to the previous slide where I spoke about the LTI base effects credits in the base, together with the fact that the group growth is impacted by central costs that don't sit within the divisions. Also to note that the H1 margins are seasonally lower than H2, and we continue to track into our medium-term target ranges for op margin as we look forward into the second half. Moving on to the balance sheet now. Also pleased to note that the gross inventory balance grew only 4.5% on last year. We exited winter cleanly, and that really goes out to our management teams and our merchant teams who made sure that we managed stock efficiently and worked very hard in the first half to get this outcome. Together with improved port operations, reducing the unnecessary stock buffers that we had to place into the supply chain in the previous year. Trade and other receivables were up 3.9%, and this really is a factor of credit sales, but also the lower repo rate compared to last year, which we'll talk about a bit more when we get on to the credit slide. And trade and other payables growing 21.7%, just a very big testament to the teams in our sourcing space who really work hard to get our suppliers on to supply chain finance, the program that we've spoken to you about before. It was pleasing to note that in the first half, we've been able to transition a lot of our international suppliers onto the program, which is the non-comp piece to last year. All in all, net working capital resulted in an inflow of ZAR 372 million, assisted the cash and cash equivalents balance growing to ZAR 3 billion, up 38% on last year and a very healthy cash conversion ratio of 81.8% with 0 long-term debt at the end of the first half. Having a look at the cash flow movements now at the beginning of the period, we started with ZAR 4.1 billion in cash. Cash from operations from working capital changes came in at ZAR 3.5 billion. We just spoke about the working capital improvement of ZAR 372 million and net interest received, as I mentioned, on positive balances, ZAR 322 million. From an investing perspective, we spent ZAR 590 million in terms of PPE and intangibles and the large outflows in the financing space relating to dividend payments in the first half of ZAR 1.5 billion. We also spoke to you about the acquisition of the Studio 88 tranche of shares of 9% for ZAR 770 million and then the lease liabilities of just under ZAR 1.6 billion to end the first half on just under ZAR 3 billion in cash. Moving along to CapEx. Capital expenditure in the first half came in at ZAR 574 million, almost 50% up on last year. And for the full year, we're still anticipating to get to ZAR 1.5 billion in terms of CapEx. But as we've noted previously, this comes through due to the investment into the supply chain program, the Gosforth Park DC. That project is on track for delivery within budget by September 2026. This is due to the investment to support future sustainable growth for the business and further mitigating risks through the multisite strategy. You'll also note on the slide that store CapEx came in at 43.6% of the total CapEx spend. This talks to our investment into the store portfolio for new stores, revamps and relocations, expansions also. Moving on to the credit growth performance. Credit sales grew 4.3%, slightly behind the cash sale growth to ZAR 2.1 billion, now contributing 11.8% of total sales. Most of the credit sales that we saw came through from existing account holders. And you will note that we've been talking about the approval rate for the last few cycles, and I'm pleased to report that the approval rate came in at 22.6%, 360 basis points ahead of last year's 19%. This has been quite a big focus for us in the first half and will continue to be in the second half also. We've also just noted the TransUnion Consumer Credit Index, while you see improvements coming through from 2023 into 2025, you see the little dip at the end of the red line now trending downwards, really giving an indication or a data point around consumer credit health in SA. The debtors book grew 5.5% to ZAR 3 billion, and the net bad debt ratio came in at 8.9%, slightly up from the 7.8% in March, but due to the deteriorating consumer environment that we spoke about earlier. The net bad debt book ratio still remains low relative to the sector due to our strict affordability criteria. Impairment provisions at 13% was slightly up on March -- slightly down on March's 13.2%, but we're very satisfied with the coverage ratio on that provision. Thank you very much. I'll now hand you over back to Mark, who will take you through the strategy and the outlook section. Mark Blair: Great. Thanks very much, Praneel. I often get questions and in fact, one of the reasons that we've set out the results presentation in this manner as to what is it about Mr Price that you would think is different? What is our secret sauce? And what are the things that lead to good performance and consistent performance. And I think the short answer is there's no one single thing, but it's a combination of things, and it's suppose the magical way that these things all come together. I'll go through some of the individual slides, but in many respects, I'll let you just read and absorb it. But these are the items that I'll cover. The diverse portfolio of our brands, differentiated fashion value merchandise, and that's where it all starts and it's critical to hold on to that. The trusted brand on the 40 years that we've spoken about, our Red Cap culture, which really is a differentiator, tried and tested processes over the years that we've refined, but we rely on, supply chain agility, a business model that's fit for purpose and also a business that technology has a big part to play. So if I just start off on just looking at the South African business and exactly where the consumer profiles are made up. What you can see there is all the income levels for consumers and that red block sets out exactly where the majority of the population falls in South Africa. I'll let you read those stats on the right-hand side as well, but the first point that I want to make here is that we've got businesses that span this. So we're not all contained in the red block, but we're very well represented there. But of course, we've got some of those divisions that operate within that do access clients outside of that red block. And of course, we've got businesses that solely target or mainly target people outside of that red block on both sides, in fact. The way to show that a little bit better perhaps is then looking at those brands individually. And the 2 that I was saying a little bit earlier is outside of the red blocks would be Power Fashion on the left-hand side, that services the low-income consumer to Yuppiechef on the right-hand side, who on average services a consumer earning well over ZAR 1 million per annum. But if you see those businesses and the spread that they've got across income levels in South Africa and the amount of reach that they've got within those particular brands, I think that's certainly part of our success. And that you all know about the investment matrix that we devised many years ago that was designed to make sure that we are bringing better representation to the income levels that we previously thought we are underexposed to. Being leaders in differentiated fashion value, as I said, was an absolute key and the most important thing to us. It's what gets us our customers, what keeps us our customers and what does set us apart. And the way we always look at it is by plotting it on the fashion value matrix. So it's important to note that Mr. Price doesn't always be the -- try and be the cheapest because cheapest is based on price. We know that there's a lot more things that go into customers' purchasing decisions, and those things start going into the quality of the products, the level of fashionability, et cetera. So if you look at that fashion value quadrant that you can see Mr. Price's position there, that's what we protect at all cost. Yes. And you can see that on the right-hand side, Mr. Price Apparel leads the fashion value matrix ahead of some of the more recent competitors and existing competitors. Having been in business for 40 years now, I think it's important to note that the accolades that you can see here aren't recent. They're not 1-year wonders. Many of these have, in fact, been accolades that we've achieved year after year. Mr. Price Apparel, Mr Price Home and Mr. Price Sport holding the highest brand equity in their respective sectors. Mr. Price Apparel remains the most shopped apparel retailer in South Africa with 3.5 million shoppers. Mr. Price Apparel was voted the coolest clothing store in South Africa again, and Mr. Price Apparel holds a high share of wallet in the market, too. I said that Red Cap culture was something that I really believe is a differentiator. And I suppose that permeates our business. Started off with the founders and the foundations that they led -- that they made. And it's obviously got huge roots inside our business, but extends outside of our business, too. But I think really what it starts off with is a team that is passionate about what they're doing, a team and a young workforce that takes responsibility and ownership for things and a team that's aligned. So when I was saying a little bit earlier that when times are tight, we call code red for overhead management. We don't have to explain it. People know and they get on with it. But it's a team that's aligned in all the big objectives that we're doing and that makes management's team and the broader management team, their jobs a lot easier. There's certainly an extremely strong performance culture and the reward structures that we've got are also aligned to performance. We deal with each other in an environment of mutual respect. And if you ask anyone, are they part of a Red Cap family, the answer would be absolutely we are. So that's all great, and it's the way that we interact with each other internally. As I said, that also then externalizes itself. And one of the things that is really, really important to us is that we speak openly and honestly with the investment community and in fact, all our stakeholders and that we've developed trust just as we've developed trust internally with one another. So that Red Cap culture is something to preserve at all costs as well. We've spoken about our tried and tested processes over the years. This is something that works really well for us. It's what management teams rely on when they're back turned and they know that the rest of the business is focused on what they're doing because there's guidelines in place and performing very well. And that starts with the in-house trend departments. It's how we test merchandise, how we test concepts, how we've introduced tech into the business, talks to the agility of our supply chain and also how we allocate merchandise to stores. So just on that, just to give you a little bit of elaboration, there's an initial allocation of stock to stores. There's a degree of holdback in terms of performance, but the push of stock to stores is depending on what the demand is happening in those locations. So it's not just all a push. And by managing it the way we do, that's a very key way that we manage minimizing our markdowns and stock being in the wrong quantities in the wrong locations. Supply chain, we've spoken a lot over the last couple of years as well. It is a differentiator. We do have great agility without having to own factories. And you'll see by what Praneel just explained with our stock management and our inventory balances, climate like we've got, I think we did a very good job in managing that. And that talks to the -- not just the management teams and the merch teams, but it also talks to the supply base and our supply chain at large. So we've got the flexibility there. We've got, obviously, things that we do to gain access to fabrics. And so far, that supply chain works for us nicely, and that will continue to evolve, but there's a large degree of risk mitigation by relying on any one territory. And obviously, where we do source from depends on proximity to market, the technical attribute of the merchandise and the price of the merchandise as well. I said a little bit earlier that the operating model is one of a value retailer, and the reward systems are aligned to that, that if there's overperformance, then the reward really comes through. That also protects you on the downside when performance isn't there, then there's no performance pay. And when we are talking about the DNA of the business, one thing that is completely understood across our whole business is the saying that every decision every day must support our value routes. That's lived in the business. Highly cash generative, what we do internally with cash. Our investment decisions are always based on an ROI and a business case. And if you get the investment, then you're also responsible for telling us and proving to us that the business case has been achieved. Likewise, very focused on cash generation, and I'll explain some of our achievements on that, not just the recent cash flow, but when you just stand back and see what we've done over the last couple of years and expanded our business and still in the position with cash, I think that's been well thought through and well executed, I think. Praneel was talking about the way that we manage overheads. We've done that year after year. And as I said, there's a lot of discipline and there's a call to action that has proved itself it works. I think the next phase of unlocking efficiencies, however, isn't the more tactical nature of things, which we tended to do. But with all the retail chains and the size of the business and the complexity of the business now, there's a much deeper level of work to unlock efficiency and it's the reengineering, reconsidering the business. So I've just recently launched a program to do exactly that. It's going to be Exco led. There's very senior members of our Exco team that are going to be heading up the project. And the brief is really if the Mr Price Group didn't exist and we are starting it today, how would we be shaping that organization. So it's not something that results are going to be focused on getting into the short term, but it's taking a long-term view of the business. And if we can get efficiency that way with our cost management that we currently do, and an environment that has got this healthier consumer behavior or environment, then I think that's the thing that's going to tick us up going into the future. We've also spoken -- in fact, we spoke at the last results presentation about being a data-driven organization. I won't go into everything here. But then in that middle block, you can see some of the -- how that's translated into actual statistics. Number of information dashboards, we've got AI and ML models deployed into the business, man hours saved through automation. One of the things that we're going to be focusing on is not necessarily implementing a CRM system, but making sure that we've got access to a lot more customer data that will help inform decisions. So that's a project that's currently underway as well. Okay. I want to now go and just talk about -- maybe just start by taking a step back and explaining the strategic planning process over the last 5 years or so. Yes, it's something that I'm -- we're often asked what are we up to, what's shaping our thinking, and I think it's certainly the right time to do that because we've said to the market, well, I guess, for probably the best part of 2 years now, that we're doing research. There's a lot of effort going into it. And as we do that research, I suppose just the way that we landed the acquisitions as well, that there is a body of work to be done. But as we do it, we can't get it distract from running the business. And I think that we've proved that we've achieved that. When I was appointed in 2019 and obviously, early part of 2019, the latter part of 2019, COVID hit South Africa in 2020, and that was a great time for us to sit back and think about where we wanted to take this group. So we did some detailed research there, but it was -- I also had to evaluate the business that I inherited from my predecessor. And obviously, there were certain things that I wanted to change in that. But there are limits to what you can do. So my initial priority was given that COVID was on the go and given that we were doing a lot -- or my plan was to do a lot to strengthen the inherent core structure of the business, and that's where the immediate focus went. So you had all known about the DC that we brought in, the ERP replatforming, et cetera. And overlaying all that was quite a significant change to our management team. So I had to be quite careful in what I introduced into the business, given what I've just explained and had to make sure that even in the case of an ERP, which is very time consuming, I wasn't being too demanding on the business whilst they were coping with all that change. So we had been through a process we had identified many organic concepts. And when I say many, there were numerous. And we ended up implementing Kids and Mr. Price Cellular. Kids was an offer that was preexisting, but how we were actually shaping it in the business changed. So those 2 took priority and now they're a ZAR 4.3 billion business. Simultaneously, whilst we are focused on building our backbone, whilst we are focused on these organic concepts, we actually had been through thorough market research. To cut a long story short, we acquired 3 businesses. And today, those businesses contribute to ZAR 11.7 billion turnover, which is 29%. The operating profit is ZAR 1.2 billion. And there, you can see the store numbers to date with a very healthy future rollout potential as well. So between 2019 and 2025, we invested ZAR 10 billion in CapEx. Our revenue went up from ZAR 22 billion to ZAR 40 billion, dramatically increased the number of stores. Our HEPS went up to ZAR 14.24, and we maintained our dividend payout ratio. I think to reflect on that and the achievement of that in probably one of the most tumultuous trading periods that I've experienced in business, to have acquired 3 businesses contributing that to our turnover. And as Praneel said, we've got about ZAR 3 billion of cash actually tells you the extent to which we've deployed the cash that is available to us and how we've executed over that period. So if you look at the group right now, I think we've got very strong bands. I've spoke a little bit about that, and we've got a great corporate culture. We've got a talented and ambitious team, and we're consistently performing. I said we'd like the numbers to be higher, but it's consistent and it's top quartile and top quartile metrics as well. But we are continually evaluating organic growth opportunities locally and acquisition opportunities. However, the bigger we get, and I think it becomes more and more difficult to identify other businesses that meet our capital allocation criteria. So when we're looking at South Africa, there's no doubt that we can still benefit from scale, and that is online growth, store growth, as I've spoken about. And I'm feeling very comfortable about the growth prospects relating to those 2 things. I've spoken a bit about the focus on the customer as well, the customer obsession and getting more data that will help us inform decisions that will benefit the customer and drive sales is a focus area and supply chain excellence is something that we are very focused on, too. The reengineering program that is about to start to look for efficiency that will -- my guess is it's going to take probably 3 to 6 months to really get to grips of what's in play there and therefore, the execution period thereafter. And something that we've handled, I think, very sensibly is selective integration with these acquisitions. So we haven't forced anything. Of course, some things became -- we were more urgent than others. But a lot of the integration now is really around supply chain and related activities, logistics, et cetera. So one of the things that we're actually going through right now is with one of our -- the chains that we acquired is ran a test on bringing them into our distribution network in a test area that's delivered exceptional results and that will now be rolled out across the rest of that chain. So that's -- it's an excellent example of selective integration. And of course, we're going to continue with the technology evolution and I must stress that whilst we're trying to reengineer and look for cost savings, this is an area that we'll probably seek to redirect money into technology to leapfrog even further. So how am I feeling about SA? I think I'm feeling very comfortable about the performance. I'm feeling very comfortable about our discipline and what we're aligned to run the business. And I think we've got adequate opportunities there to carry on growing the business. And hopefully, the economy will start playing its part and should paint a very good picture, which takes us into Phase 2 of the strategy. So if you just consider that we've got our group investment matrix in place in South Africa, we've got a well-established Exco structure. And I think we've been executing well. The business is in sound shape, as I said, but we've got to recognize that South Africa is a low-performing economy. If you look at the GDP growth, you've seen the reduction over the years to the low point there of GDP growth that was almost flat. The projection out to around 2030 still shows GDP under 2%. The projections I've seen to 2050 see it coming below that number by a bit as well. So -- and of course, with these projections, there's always the chance and it's probably the tendency that projections are never quite achieved. Sometimes they're too bullish, doesn't mean that we're not hopeful that the green shoots that we're seeing will translate. But of course, at these kind of levels, it's hardly a robust and a nongrowing economy the way that we would like it. So you do know about the existence of our Apex strategy team. That's been a dedicated team that's been in place for more than 2 years now. Whilst we are looking and elevating SA businesses, we also elevated our research to look for new areas of growth. And it's really around the long-term execution of a vision. It's not quick growth that we need to stick on. It's all about the long term. We've really unpacked the pros and cons of organic growth versus acquisitive growth, and there is room for both. But of course, there's different things to consider in each. And very importantly, we've been considering local opportunities at the same time as we've considered offshore opportunities. But just to say, just like anything that we've done and anything I've explained up until this point, we're a group that thinks very deeply about things. And certainly, our thinking has been multilayered and includes the use of third parties, advisers, country visits, et cetera, et cetera. So it's -- these layers all help paint the picture. The key outcome is, and this has been, as I said, multiyears work, is that key territories outside of South Africa have been identified. And by identifying those, we also consider all the key risk mitigation considerations. It's fair to say over the years, it's not just the last 2 years, of course, it's way beyond that, that we've had a look at or assessed many, many opportunities. And I'm talking particularly offshore now and the fact that we haven't landed any means that we've been very selective on what we're looking for. So -- and once again, it comes back to the principles that we're setting and do those businesses meet those or not. And I suppose looking at my responsibility as a CEO, I suppose all CEOs have got this responsibility. It's to consider the markets that you operate in. It's to consider growth, consider the risks of achieving that growth and ultimately adding shareholder value over time. So when we're looking at new territories, we are only interested in identifying sustainable regions for long-term growth. The market size, the ease of doing business and the competitive landscape within that region are all critical and will be evaluated. And of course, it has to have a stable macroeconomic and political environment and tailwinds for sustainable growth. And then lastly, it really doesn't help if you've -- if you've ticked some of those things that I've just mentioned, but the currencies all over the place were even weaker than the rand. Credit -- the rand strengthened recently, but obviously, we want territories that don't weaken that position. Looking at actual guiding principles rather than just territory now for individual considerations is the size of the transaction will be appropriately considered. Very importantly, we want to acquire on the merits of the target. The in-country management team is absolutely critical. They're the ones that have got to run the business the way they've been running the business with limited interference from us and our input would be strategic. And therefore, getting the right management team is probably you can't get beyond that into the next block if you can't give that a tick. The asset itself has to have very clear growth prospects, and we don't have any appetite whatsoever for a turnaround. And certainly, what we're looking for is that in terms of the company itself is that we would like that company to be a platform for regional growth. So I'm not saying an online platform or anything like that. I'm saying a management team platform that can do justice to a region instead of perhaps just the country that they're located now. And then, of course, you can -- all those things, I think, are quite obvious why we'd look for them. And then as a final piece, you also want to consider synergies, I suppose, both ways. And then lastly, you'd also want to consider what about our brands in those locations. But we wouldn't plan to lead in with our brands. We want to, as I said, acquire for the merits of the target and let that management team who knows that particular territory very well, assess our brands for suitability into the country. So a lot of thinking, a lot of progress being made on that front. And yes, I think it's been a very thorough process that we've been through over the last couple of years, and we'll continue to focus on. The outlook, which I was referring to quite a few times in the presentation. And look, I think the great thing is that change has to start somewhere. And if you had to look at the outlook that we're seeing now to perhaps a year or 2 ago, I think we're in a completely different position. We've got stable electricity supply. We've got improving port infrastructure. So from the infrastructural point of view, things are a lot better. And then also from where -- what's affecting the economy and the consumer, things are looking a lot better there as well. Rand has improved. We're targeting low inflation of around 3%. Interest rates have been declining, and they are forecast to carry on declining. So I think what I said a little bit earlier is that once we get out of this two-pot base, I think we're going to get a really good read on the health of the consumer. But obviously delighted at this point that things are heading in the right direction. And even GDP growth, even if it's only circa 1%, maybe 1.2% this year, it's also headed in the right direction. So looking good there. It's premature to say that there's been a consumer revival. I think the update from all the retailers is sort of proving that, that's not the case. But I think it could well be the case as we head into the new year, but we just got to get over this lumpy base. And as you know, we performed very well this time last year. In fact, it was only March that was a disappointing month for us. So a strong base up until the end of April -- up until the end of February. And then just in terms of trading post the end of September, retail sales were up 3.1%. We pointed out what the base was. It was 12.3%, which was high. But if you look at the individual months, the RLC for October has just come out. We obviously weren't happy with October performance, but we did gain market share, believe it or not. And the momentum going into November is much better. So we're back into that sort of mid-single digits, slightly above, which I think we'll take relative to the October performance. So quite happy that momentum is improving. Quite happy that as you reach out into the future, the economy and the consumer environment seems to be on the cusp of an improvement. So I think overall, we've got a lot to look forward to. Thank you. Matthew Warriner: Good morning, everybody. Thank you for all of the questions that have come through. There have been a high volume of questions, so we're going to do our best to get through as many as we can in the time that we have remaining. I'm going to start off with some questions around operational performance. As Praneel -- maybe we start with you. With the sales environment softer due to the consumer challenges, do you have the same cost levers to pull in H2? Quite a few questions around H2 OpEx and the impact on the full year. Praneel Nundkumar: Yes. Thanks for that question. I think we have demonstrated that cost control is something that's always top of mind for us. Just in terms of how we're seeing it playing out and maybe how you should be thinking about it is the medium-term target range that we had set. So we had noted in June that, that range was between 27.5% and 28.5% in terms of expenses to RSOI. Our focus is to come in within that range. Obviously, we'll try and manage as much as we can in the second half. And as Mark mentioned, post period trade, also a bit subdued, but gaining some momentum. So we're watching the sales growth quite closely. And as I mentioned, also, our merchants are reacting quickly when they need to, to manage inventory at the same time. So all in all, Matt, I think that the range is where we will most likely want to land up in, and that's what we're aiming for. Mark Blair: I think just something to add there is that the base isn't a surprise to us. We always knew it was there. And therefore, anything that we also have to do on a cost basis, the thinking doesn't just start now. To some extent, we've preempted things. We've identified areas that we need to start pulling back, and that's all been set in motion. Matthew Warriner: How should we think about management preference should demand be soft in the festive season? Are markdowns preferred during the festive season or rather than Jan, Feb to clear stock. A couple of other questions just around the high promotional environment in H1. Is promotion a seasonal thing that could impact H2 as well? Mark Blair: Yes. Look, to some extent, we've got to concentrate on what we're really good at, and that's getting that fashion value equation right. But I must say, when the top line is not there in the market generally, the retail environment does become rather brutal. You've got heavy, heavy promotions. And of course, what that does do is bring higher-priced merchandise more closely still well above ours, but closer to our price. So that's not a great equation. But of course, we also know that competitors can't be living with this elevated stock position all the time. So when you go into December, the worst thing that I think that could happen is that you carry on your problem into the new year. So of course, seeing the trends for this year. We have updated our views on merchandise, on stock flow, on stock commitments. To the extent that, that doesn't play out, then, of course, you're going to be -- I guess, there's the threat of margins going against you. So we -- by track record, that's something that we got against at all costs. We try and manage as well we can. And I think there are very limited scenarios that you would be comfortable carrying stock into the period post December, but then it's got to be that you've actually acquired it with -- and there's no risk to the carry. So it can't be very seasonal, very fashionable stuff that's trending that might be out because you're just going to then have to deal with the problem even more severely in the new year. Matthew Warriner: Thanks, Mark. I think you've covered the one major driver to GP performance in the second half. Praneel, maybe just to cover the second half of that, and I'll read out one specific question, but there have been several on this. If you could give some color on annual GP margin expectations. You mentioned in June several factors that could be supportive of H2 GP. Quite a few questions around the rand and input prices being better a couple of months ago, the impact into second half GP. Praneel Nundkumar: Yes. Thanks, Matt. From a GP perspective, I guess you would understand that there are some supportive factors. So we called out kind of oil prices, cotton prices. We've seen where the rand has been kind of trending recently. The other big one also is shipping rates coming down. So the one piece that's also unclear, and it ties back to the comments Mark was just making now in terms of the second half and the promotional activity, what we have seen and you would have seen in the market is that when there's deep discounting in the market, it impacts and the reaction really then starts sitting in, in terms of where GP lands. So I think that there is some support for GP in the second half. I think what we need to watch quite closely is whether the market is as promotional as it was in the first half. But I think when I take the kind of high-level view, I think the important thing is those medium-term targets. So you'll remember in June, we said that for the group, the medium-term target range is between 40% and 42%, which is the same for the apparel sector and the Homeware sector is slightly higher between 41% and 43%. So we are aiming to land within those ranges more in -- aiming for the middle part of those ranges, but that's kind of what we're expecting or what we know at the moment. Mark Blair: Of course, in an improving currency situation, you do have 2 choices. The first choice is to take margin or the second choice is to pass the pricing through. So without sort of revealing our hand at this point, there's going to be a combination of that, but it's very critical for us to keep an eye on what pricing and what relative value there is in the market so that we do keep our value proposition. Matthew Warriner: And then just lastly, with regards to operating metrics, quite a few questions on central overheads and then a question specifically talking about op margin gains were healthy at a segment level. Can you give us some color on the dilution when looking at it from a group perspective? And yes, several questions just around the central overheads into the second half as well. Praneel Nundkumar: Yes. Thanks, Matt. I think on the slide that when I paused on the op margin slide, I spoke about the fact that there are central costs sitting in the group line, which is not the same from a trading division perspective. And then on the overhead slide, I spoke about the fact that there's base effects of the LTIs that were forfeited in the prior year. So that really was the non-comp base effect. Also, when you look at the performance of the trading segments, you would have seen as I've gone through the segmental slides, you would have seen that the operating profit from the trading segments were quite healthy, which also means that from a group central cost perspective, there is an STI component based on performance that's also non-comp in last year. So those are the 2 key things that are sitting in that group central costs that then impact the group ratio compared to the divisional ratios. But again, the medium-term target range for op margin between 13% and 15% is what we're aiming for as we look forward into the second half. Matthew Warriner: Okay. Just moving on to drivers of sales. The last 4 years has seen some aggressive space growth. Will you continue with this approach going forward? And just some questions as well as to what returns we would expect on space growth going forward? Mark Blair: Yes. as Praneel was saying a little bit earlier, we've set internal thresholds roughly 3x our WACC. And look, I think if we landed at sort of space growth between 3.5% and 4% this year, that is going some, but it's a space that is working for us, as we said earlier. So to the extent that our actual store performances remain, then I'm very comfortable with continuing with store expansion. The question does become, does it become harder to find the quality space with not a lot of new property builds happening, that is always something that we'd look at. I would say we'd probably -- we'll go into the budgeting process for the new year shortly. In fact, it's underway now. But I'd probably say that it would be safe to sort of bet around space growth around 3%, maybe slightly lower. But of course, if we presented with great opportunities and we model them correctly and they're generating -- and on paper they're generating the returns, we mustn't be shy to take the good space. And the other thing is that it's not one chain we're looking for in terms of that space. So it's multiple chains that are performing that all have got the desire for the space. Our job internally is then to say how much capital are we putting into store growth because we also want to spend on revamps. And therefore, that limit that we place, which chain is getting the space. And of course, that then gets down to a couple of other factors, which includes store performance. Matthew Warriner: It seems like Home is turning around with volume growth and profit growth. Would this be a fair assessment? Mark Blair: Yes. I think the trajectory of Home, we've continued to see market share losses. So that is the one negative. But I suppose it was like we're discussing a little bit earlier around margins. We've had GP gains in the Home sector, and that's what it's absolutely all about. So it does show you that without achieving the top line that you want, and I'm not unhappy with the top line, but it could have been higher if we went and chase sales a bit more that we can still generate a good profit. So the home sector, in fact, all 3 businesses, Sheet Street, Yuppiechef and Mr Price Home, I'm very happy with. Matthew Warriner: Praneel, just last one on sales drivers. The credit environment seems to have showed some steady improvements. Is there an opportunity to push the channel more into 2026, considering the lower net bad to book relative to the industry? Praneel Nundkumar: Yes. I think the credit growth is always topical, but as we always say, it's not a big part of our business. We also noted, and you would have seen from the consumer environment and some of the data points around this challenge in the consumer environment, we're obviously trying to manage risk as closely as possible. So we noted in the first half that the approval rate was higher than last year by 360 basis points, so probably mid-22%. We most likely will expect that to continue into the second half. I think if the environment becomes more supportive, and we see the data points in terms of customer affordability and customer behavior from a credit score perspective being in line with that, then yes, that will be an opportunity for us. But again, not an aggressive growth for credit is expected, but we're watching the market and the consumer health and affordability very closely. Mark Blair: Yes. Just to add to that, that consumer health is critical. We've got our own experience going back quite a few years now where we pushed credit into the market in the absence of improving credit health -- on the consumer credit health, and it actually counted against us. And the problem was that by pushing it too early, because you've got a situation where customers rehabilitate themselves, pay down some months, don't others, you've got this lump that moves through your system, and it doesn't just take 6 or 12 months because that's a credit term because of the rehabilitation, you're probably left with a mess in your portfolio for about 18 months. So really premature for us to think about pushing credit at this point. Matthew Warriner: Praneel, just a balance sheet question before we move on to some capital allocation questions. With the improved port operations, are there more working capital benefits that come in relation to inventory days from holding less buffer stock? Praneel Nundkumar: Yes. So we've been looking at this buffer stock quite closely in terms of port operations. We did note that there's been some improvement in the operations. And we did say even in June that we started to relax some of those buffers that we had in. So in terms of managing inventory to year-end, obviously, quite tight. It will continue to be quite tight. So yes, I think that from an inventory perspective, we're not foreseeing any additional buffers required in the second half, and we're quite comfortable with the stock levels as we see them play out. I mean the merchants -- other than just the first half, obviously, the merchants have been very busy as we go into the festive period now to manage the inputs and we're watching the sales also. So if those come off, then we can react quite quickly in terms of where the stock lands, but it's something that's in hand. Mark Blair: I might just add there, too, that we've, for some time now, have been communicating our focus on cash flow and therefore, stock turn is one of those critical parts of that. So when you're in quite a tumultuous situation that there's supply chain issues relating to shipping and containers and vessels and everything that we've been through, it's quite hard for merchants to deliver stock turn improvements when you're building buffers into your processes, absolutely necessary buffers. But as that then reverses, our real objective of improving stock turns should then be executed. Matthew Warriner: Okay. Moving on to some questions on capital allocation. I've been several questions relating to the current cash balance and share price and therefore, appetite for share buybacks. Praneel Nundkumar: Yes. I think we've discussed before that from a share buyback perspective, we obviously have a framework that we look at in terms of a target share price, target P/E ratio in terms of how we look at leading indicators in terms of that opportunity. What we always come back to from a capital allocation perspective, though is what are the returns from the other avenues that we can deploy capital to. So we quite -- as Mark mentioned, in terms of the store returns, we're very satisfied with those store returns in terms of where the portfolio is delivering. So we find that a really good avenue to allocate capital to. And the other piece that from a capital allocation is quite key -- quite a big number. We spoke about the ZAR 770 million for the 9% acquisition of Studio 88. Remember, there's still 15% left. So looking forward, that's another big piece that also drives our capital allocation thinking in terms of how we deploy capital. And the dividend ratio -- dividend policy is a big one. I think our shareholders have come to love the kind of dividend flows that come through the 63% payout ratio. That's also quite a big consideration. And also just to note that this year, we said we were going to invest into the infrastructure of the DC. So you'll see that CapEx coming through this year and also into next year because that DC only goes live in September '26. So more CapEx allocated to that project to support growth in the future. Mark Blair: Yes. I suppose the overall thing is use the cash or return it to shareholders either through share buybacks or through dividends. I think certainly what I was explaining around our strategy and our plans for the future, we've got more than enough plans to warrant keeping our cash flow now and to make sure that we deploy it in the best areas to generate future returns for shareholders. Matthew Warriner: Okay. With regards to the strategy update, do you mean outside or inside of Africa? And would you take the MRP brand to them? Just some other questions relating to which countries offer the best upside with lowest risk. And then several questions relating to multiples, deal size, et cetera. So maybe, Mark, just what you can share now with regards to the question on markets and other information. Mark Blair: Yes. I largely addressed, I think, most of those things in what I already said. I think the -- I'll go back a few years now. And I suppose at one point, there was always this hope of an expansion into Africa. That was the new frontier for a value retailer that seemed like it was an obvious place to go. But it is difficult to do business in some of those territories. And as a result, I said I think there's limited opportunities in SA. There's none that we've identified in the rest of Africa. So that's not really a focus area for us at all. I think it's premature at this point to start speculating on which other markets and territories and stuff like that. I think we've got to finish our work and then communicate at the right time. Matthew Warriner: Great. So thank you very much for everybody for joining today. I think we've covered the main themes. There are obviously many questions in between on other topics. So I do have them and will reply. Otherwise, please do send them directly to me. We can either cover them via e-mail or in catch-ups over the next few weeks. Thanks very much for joining today. Mark Blair: Thank you.
Operator: Ladies and gentlemen, good day, and welcome to ZKH Group Limited Third Quarter 2025 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jin Li, Head of Investor Relations. Please go ahead. Jin Li: Good morning, and welcome to our third quarter earnings conference call. With me are Mr. Eric Chen, our Founder, Chairman and CEO; and Max Lai, our CFO. Today's discussion may include forward-looking statements. Related factors are described in our today's press release. And we will also discuss certain non-GAAP financial measures for comparison purpose only. Please refer to the earnings release for definitions of these measures and a reconciliation of GAAP to non-GAAP results. With that, I will turn the call over to Eric. Eric, please go ahead. Long Chen: [Interpreted] Hello, everyone. Thank you for joining the Third Quarter 2025 Earnings Conference Call for ZKH Group. In the third quarter, thanks to our team's concerted efforts, we are pleased to see signs of stabilization and recovery in our business following nearly four quarters of proactive business optimization and adjustment. In the third quarter, the number of transacting customers exceeded 70,000, reaching a new quarterly high and strengthening the foundation for future growth. Both GMV and the number of transacting customers among industry key accounts and regional SME customers continue to grow year-over-year. The company's gross margin continued its upward trend. As a result, our third quarter GMV, revenue and gross profit largely recovered to their prior year levels. From an order flow perspective, average weekday order value rose from approximately RMB 37 million in July to approximately RMB 52 million November to date, representing an improvement of over 40%. Compared to the previous year, this level has also grown to about -- grown by about 20%. We expect this positive momentum in average weekday order value to continue through the remainder of the year. Taken together, these advancements underscore that we are firmly back on a growth trajectory. In the third quarter, our total operating expenses were down by 14% year-over-year to approximately RMB 420 million. Overall, our profitability meaningfully improved during the quarter. Operating loss, net loss and adjusted net loss all narrowed significantly. Our adjusted net loss was down by approximately 78% year-over-year to just RMB 14 million. Our adjusted net loss margin also improved to 0.6%. Moreover, we once again achieved monthly breakeven in September, and we are on track to deliver quarterly profitability in the fourth quarter. In terms of cash flow, we generated net cash of approximately RMB 100 million from operating activities for the third quarter, primarily driven by the substantial narrowing of losses and continued optimization of working capital management, including accounts receivable and accounts payable. Our business development is underpinned by the ongoing advancement, refinement, and application of our product capabilities in AI technologies. In the third quarter, we continued to make strides in both areas, propelling business growth, while enhancing operational efficiency. As a professional one-stop MRO procurement service platform, the breadth and depth of our product offerings are fundamental to our growth. We strategically operate 32 product lines, each with a tailored approach. Some product lines are highly specialized with an emphasis on curation, while others prioritize expanding product variety and supplier base. In the third quarter, we added over 2.3 million sellable SKUs across categories such as chemical reagents, machining and transmission, bringing our total sellable SKUs to more than 19 million. We also onboarded over 1,200 new suppliers, primarily OEMs, further enriching our product offerings and solidifying our core advantage as a one-stop procurement platform. Our private label products are a key strategic initiative to provide our customers with high value-for-money offerings, enhancing our overall product competitiveness. In the third quarter, we launched over 600 new private label SKUs, spanning categories such as security-related products, personal protective equipment, tools, and material handling and storage products. The GMV of our private label products maintained double-digit growth, outpacing the company's overall growth rate. Looking ahead, we plan to steadily increase our private label products contribution to total GMV from around 8% today to approximately 30%. We will continue to focus on professional and industrial-grade MRO categories, that are -- that is spare parts, chemicals and manufacturing parts. These areas serve as key differentiators and value drivers that set us apart from our competitors. For product lines where we have distinct advantages, such as our chemical product line of industrial lubricants and adhesives, we have developed a robust and reliable supply chain comprised of 13 specialized chemical warehouses, three of which are dedicated to hazardous materials and an in-house fleet for distribution and delivery. We will continue to enhance our integrated capabilities from product selection to last-mile delivery and on-site service, further reinforcing our competitive moat. In the third quarter, our chemical product line achieved double-digit year-over-year GMV growth. In the AI realm, we are continuing to advance our AI infrastructure across both the data and application layers, focusing on intelligent business processes and data governance to systematically improve our sales and operational efficiency. We have already deeply integrated AI across various business scenarios including material cataloging and management, product recommendation, sales conversion, data standardization and workflow automation. AI has emerged as an increasingly important driver of cost reduction, efficiency improvement, business growth, R&D productivity and data asset enhancement. At the opening of the 8th China International Import Expo in November, we officially launched Expert Linglong, our proprietary AI large model and intelligent agent suite, specifically designed and developed for the MRO industry vertical. Expert Linglong marked a significant milestone for ZKH in empowering the entire MRO supply chain with AI. Our AI Smart Workbench, one of Expert Linglong's core applications enables automation across 45 business process scenarios, such as creating orders or issuing invoices with a single prompt. It has significantly reduced cross-system, manual operations and enhanced process efficiency, platform-wide synergy and workforce productivity. Measured by order volume processed per employee, in the third quarter, our customer service productivity increased by 42% year-over-year, while procurement productivity increased by 52%. Moreover, AI has become the key engine for capturing customer needs and improving supply-demand matching efficiency. Our ProductRecom Agent continues to improve product recommendation accuracy generating over RMB 100 million in new incremental sales revenue since its launch in the fourth quarter of 2024 through the end of the third quarter this year. Our AI tools also excel in complex business scenarios. For example, processing a 300-line customer inquiry traditionally takes 3 hours. By combining AI with expert experience, this task can now be completed in 30 seconds with 98% accuracy. Since the start of the year, we have utilized AI to optimize our product classification models and system rules boosting the platform's automated product classification rate from 11% to 31%. This not only reduces manual intervention, but also increases product onboarding efficiency and improves the accuracy of matching customer needs. Moving forward, we will continue to develop our self-service AI-driven procurement agent to speed up responses and further elevate customer experience. Our Expert Linglong large model is also empowering upgrades across our R&D system. Our R&D teams have widely adopted AI coding tools with over 15% of our code now being generated by AI, significantly improving development efficiency. Looking ahead, the Expert Linglong large model will remain at the core of our AI development, driving deeper technological empowerment across our product, supply chain and last-mile delivery capabilities. We believe that AI is more than the tool. It is a key force reshaping the MRO supply chain ecosystem. In summary, the third quarter was highly productive. We drove steady progress in all of our business segments, in line with our strategic road map, building stronger growth momentum across the board. Looking ahead, we remain committed to advancing our development goals of product excellence, AI-driven growth and profitability improvement, delivering long-term value to our customers and shareholders. Now I will turn the call over to our CFO, Max Lai, to present our financial results. Thank you, everyone. Chun Chiu Lai: Thank you, Eric, and thanks, everyone, for making time to join our earnings call today. I'm pleased to walk you through our robust financial performance, driven by revenue recovery, enhanced profitability metrics and possible operating cash flow. Let me begin with the top line. Both GMV and revenues returned to approximately last year's levels, with GMV down 2.3% year-over-year to RMB 2.62 billion and total revenues up 2.1% to RMB 2.33 billion. This performance indicates that the headwinds from our business optimization initiatives has largely cycled through, providing greater visibility for renewed top line growth in the quarters ahead. Notably, the number of transacting customers exceed 70,000 reaching a new quarterly high and private label GMV grew 16.7% year-over-year, outpacing the overall business and reaching 8.2% of total GMV. Turning to business quality. Our gross margin remained healthy at 16.8% compared with 17% a year ago. On a GMV basis, our gross margin continued to improve, expanding by 41.5 basis points year-over-year to 14.9%. Specifically, gross margin for our product sales 1P model increased by 11.2 basis points to 16.2 percentage on ZKH Platform and 223.8 basis points to 7.7% on the GBP Platform. Additionally, we take our take rate of Marketplace model rose by 47.5 basis points to 13.1% year-over-year. These gains were mainly driven by our optimized procurement costs and a high contribution from our private label products, which typically deliver high margins. On operational efficiency, our disciplined focus on streamlining the costs and enhancing productivity continue to yield tangible results. Total operating expenses decreased 14.4% year-over-year to RMB 493.8 million, representing 18.1% of net revenues, a significant improvement from 21.6% in the prior year period. Breaking this down, fulfillment expenses were RMB 90.4 million down 9.8% year-over-year, reflecting lower employee benefits and warehouse rental costs. Sales and marketing expenses declined 13.2% to RMB 145.9 million primarily driven by lower employee benefits and travel expenses. R&D expenses decreased 19% to RMB 40.3 million mainly attributable to lower employee benefits. And general and administration expenses were RMB 145.8 million, down 17% year-over-year, driven by lower employee benefits expenses and lower credit loss allowances. Efficiency gains underpinned margin improvements and a substantial reduction in losses. Operating loss narrowed 69.3% to RMB 32.3 million, with margin improving to negative 1.4% from negative 4.6%. Non-GAAP EBITDA improved to a loss of RMB 8.5 million from RMB 62.8 million, with margin improving to negative 0.4% from negative 2.8%. Adjusted net loss narrowed to RMB 14.1 million from RMB 66.2 million and margin improved to negative 0.6% from negative 2.9%. As of 30 September 2025, our cash position remained strong at RMB 1.9 billion. Net cash generated from operating activity was RMB 105.5 million compared with net cash used in operating activity of RMB 160.5 million in the same period of 2024. To conclude, our first quarter results demonstrate clear signs of stabilization and recovery, underpinned by a more balanced customer mix, a higher-margin product portfolio driven by private label growth and a structural efficiency gain from AI-enabled process optimization and strengthened supply chain capabilities. Looking ahead, we expect to capitalize on this momentum through disciplined investment in AI and data capabilities, continuous enhancement of our product and supply chain capabilities and focused execution while advancing our international expansion. We remain focused on top line growth, further margin expansion and loss reduction on our path towards sustainable profitability. Thank you. And I would like to now open the call for Q&A. Operator, please go ahead. Operator: [Operator Instructions] The first question comes from Xiaodan Zhang with CICC. Xiaodan Zhang: [Foreign Language] So, according to publicly available information, JD Industrial is preparing for an IPO in Hong Kong. So could management share your views on the competitive landscape of MRO market in China? Long Chen: [Interpreted] So I believe this JD MRO looking to get listed is a very good thing for ZKH and for the industry at large. Because it's very good in terms of spreading this idea of doing one stop purchasing on e-commerce platforms. And it's definitely an opportunity that our times have afforded us. China being the #1 manufacturer in the world is actually big enough for leading MRO companies to exist. And these MRO companies cannot only serve Chinese manufacturers, but also benefit global ones. And in the MRO space, we have seen different kinds of players, including those players traditionally engaged in supplying office supplies. As ZKH, we started out in serving and selling chemicals and industrial-grade MROs. So, we are really specialized -- we specialize in selling spare parts, chemicals and manufactured goods. And we have built an innovation center in Taichung. This goes to show how we are committed to be deeply involved and integrating our services. And so, in terms of R&D, testing, product selection and comparison, and we would like to use the specialty of ours to help our customers better. We have also built our own warehouses and last-mile delivery capabilities. So, this supply chain capability can not only serve the whole of China, but also the rest of the world. And in terms of the competitive landscape, I would say, over the years, things have really stabilized and as leaders in the space, our advantages are becoming increasingly marked. And the fact that we are able to have acquired lots and lots of SMEs goes to show that there has been a great improvement to our supply chain capabilities. So basically, at the end of the day, we are committed and focused on beefing up and enhancing our supply chain capabilities in the MRO space. That was my answer to your question. Thank you. Operator: Are you ready for your next question? The next question comes from Leo Chiang with Deutsche Bank. Leo Chiang: [Foreign Language] Let me translate myself. Management just mentioned in the prepared remarks that the company will commit to advancing development goals of profitability improvement. What are the reasons the company has not been profitable so far? And how does the company consider and balance between profitability and the mid- to long-term development investment? Long Chen: [Interpreted] So, we got lots of investment and funding along our journey. As a start-up -- start-ups have different phases, right? In early days, we were more focused on the health of our cash flow. So, more of the funds were used and spent on infrastructure build-out and the build-out of our core capabilities and the competencies. So, we were suffering losses primarily due to these investments that we made in order to beef up our core competencies. But I believe we are entering a new phase now. This is a phase marked by profitability, and we're going to use some of the profits and spend the profits to further build our core competencies. Now that we are profitable, one thing that is clear is we are having an increasingly strong operating leverage. Specifically, our expense ratio keeps dropping, while our fulfillment gross margin keeps rising. And our profitability is getting better. And this is very much in line with our original plan for our development. In terms of specific profit and losses, '21, we made a loss of RMB 910 million due to the loss and loss of investments that we made. 2022, we made a loss of RMB 630 million. '23 losses were RMB 290 million. '24, RMB 160 million. '25, we saw losses greatly narrowed and in Q4, we are very likely to turn a profit. So we are pretty certain that our GMV growth year-over-year could reach 15% to 20% per year going forward. In terms of how we're going to go about striking a balance between profitability and long-term growth, I think, it comes down a lot to control of expenses. So, we will continue to improve our efficiency and control our expenses as well as enhancing our capabilities of customer acquisition. We will also keep investing in our core competencies, while ensuring profitability. So these core competencies include R&D when it comes to AI, R&D when it comes to product capabilities and our overseas business expansion. So, we will not only make sure that our profitability is sustainable, but also we will enhance it while ensuring long-term growth. Operator: The next question comes from Ruchen Tang with CITIC. Ruchen Tang: [Foreign Language] So, let me quickly translate the question first. So, looking for -- looking out on your latest developments and the future plans for overseas expansion, could you talk us a little bit about how you think about developing your business in the States versus serving Chinese companies as they go abroad? Long Chen: [Interpreted] Overall, when it comes to going abroad, there's two parts. One is serving Chinese companies as they go abroad as there's lots and lots of Chinese companies that are currently taking their business globally. Also, we're going to develop business in the U.S. Mainland and Europe, we're actually already actively doing that. But after a period of testing things out, we have made some adjustments as well. So firstly, we still highly value Chinese companies going abroad. And because investments there on our part are pretty limited, and the certainty of this business is very high. So in Q3, for example, we have already finished the MRO purchasing and delivery for some of our customers for quite a few Chinese customers rather in Thailand, Malaysia, Indonesia and Mexico, for their local factories. And we have finished things like product certification, customers' clearance, et cetera. As for our business in the U.S., we believe that's going to be a mid- to long-term play. So because it's going to take longer time in terms of product prep getting to market, so we decided to control -- we have decided to control our investment pace and cadence in the U.S. And overall, we believe our overseas business will achieve breakeven in the whole of 2026. So that was actually all of my answer to this question. Operator: And that concludes the question-and-answer session. I would like to turn the conference back over to management for any additional or closing comments. Chun Chiu Lai: Thank you once again for joining us today. You can find the webcast of today's call on ir.zkh.com. If you have any further questions, please feel free to contact us. Our contact information can be found in today's press release. Thank you, and have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Friederike Thyssen: Good morning, and welcome to NFON's Third Quarter and 9 Months 2025 Earnings Call. Thank you for taking the time to join us today. My name is Friederike Thyssen, Vice President, Investor Relations and Sustainability at NFON, and I'll be your host for this session, which we are holding together with NuWays. Today's presentation will be led by our management team: Andreas Wesselmann, our CEO; and Alexander Beck, our CFO. They will take you through the key operationals, the strategic and financial development of the first 9 months 2025. As usual, we published our quarterly financial statement and our full investor presentation earlier this morning. You can find both, as well as the corporate news, on our NFON website under Investor Relations. The presentation will follow a clear structure. We'll start with the business highlights, then move on to the financial review, our outlook and guidance. And finally, we start the Q&A session. Please note that questions can only be asked live during the Q&A at the end of the presentation. [Operator Instructions] Thank you for understanding, and thank you in advance for your contribution. And now I will hand over to Andreas Wesselmann to start the presentation. Over to you, Andreas. Andreas Wesselmann: Yes. Thank you, Friederike. It's a pleasure to be here today for my first quarterly call as CEO of NFON. Many of you know me from my previous role as CTO, where I was already deeply involved in defining the NFON Next 2027 strategy. And as a consequence, stepping into the CEO role doesn't mean changing direction, but rather expanding the perspective, bringing strategy, product technology and market even closer together to turn the ideas into tangible results faster and more consistently. So my focus is clear. We want to accelerate NFON's transformation as an innovative growth company, driven by customer value and operational excellence and leveraging the latest AI technology. The course we have set with NFON Next 2027 is the right one. And our task now is to execute it with speed and discipline. And with that, I'm happy to introduce my colleague and our new CFO, Alexander Beck. Rather than me describing his background, I think he can do that best himself. Alexander? Alexander Beck: Yes. Thank you, Andreas. Also from my side, I'm very happy to join today's call for the first time as part of the NFON team. In the first 7 weeks since I have joined, I have had the chance to get to know people, products and the culture of the company. And what impressed me most is the energy and the commitment across the organization. This is really a genuine drive to move things forward together. A few words about myself. I bring around 20 years of international experience across several sectors like retail, like fast-moving consumer goods like software and also technology. In previous roles, I have led and developed finance organizations and supported businesses during phases of international expansion, growth, profitable growth and also transformational restructuring. From a financial perspective, I see NFON in a solid position. Profitability has been restored. Cash flow is positive and our financial base is stable. The strategy is clear, well communicated and is being consistently implemented across the company. What I particularly value is how strongly the teams identify with our strategic priorities and how focused the execution is. At the same time, we are aware of the challenges. Revenue growth has been slower than we would like and the commercialization of new products take time. But the direction is right and the fundamentals are strong. So overall, I'm very pleased to be here and I see a company that combines the right mindset, the right technology and the right talent to build sustainable value in the years ahead. With this, for the moment, back to you, Andreas. Andreas Wesselmann: Yes. Thank you, Alexander. Now let's take a closer look at the key highlights of the last month. So the last month showed tangible progress and growing momentum. We strengthened our market presence, we refined our brand positioning and further shaped NFON's perception as an innovative leader in intelligent communication. Let's start with Bits & Pretzels, one of Europe's leading founders' festival where NFON participated for the first time. We presented the company with a clear, technology-driven identity that reflects who we are today, an innovative growth company, combining communication expertise with AI-driven intelligence. More than 250 people joined our expert sessions and over 90 tech leaders took part in our CIO Summit talk, where we explored and explained how AI can make communication more human, efficient and secure. Another highlight was our executive dinner in Munich, held under the theme, From Europe with Intelligence. This event brought together decision-makers from business, technology and media to discuss how AI is reshaping communication and leadership. It also marked the live debut of Nia FrontDesk, our newest AI solution, which was received with strong interest and very positive feedback from customers, partners and analysts. It captured exactly what NFON stands for, turning innovation into real-world value. And finally, we received strong industry recognition. NFON was named Manufacturer of the Year and our EVP AI & Innovation, Jana Richter, was recognized as IT Woman of the Year. These awards underline our credibility as a European AI-driven technology company, one that combines innovation with responsibility, diversity and technical excellence. Altogether, these milestones show that we are executing our strategy with focus and consistency. Under NFON Next 2027, we are positioning NFON as an innovative growth company that drives AI-powered business communication from Europe for Europe, combining innovation, customer value and efficiency. And this brings us directly to one of the most exciting examples of this development. The NFON intelligent assistant, Nia FrontDesk. Nia FrontDesk is a practical intelligent assistant for reception and service areas that help organizations manage incoming calls, messages, visitor interactions, et cetera, more efficiently. The solution automates routine tasks such as call routing, scheduling and information requests, while always allowing a seamless handover to human colleagues with personal contact, if it's needed. What makes Nia FrontDesk stand out is its combination of NFON's communication platform with conversational AI. It's fully integrated, is GDPR-compliant and built on European infrastructure, which is an increasingly important differentiator for many of our customers who value digital sovereignty and data protection. The first reactions from partners and customers have been very positive. We see particular interest from sectors such as health care, education and public administration, areas with high service intensity and recurring communication needs. These organizations face increasing pressure to improve efficiency, while maintaining personal service quality, and Nia FrontDesk exactly addresses this. Its ease of use and measurable time savings help improve service availability and customer experience, delivering a clear return on investment. From a business perspective, Nia FrontDesk expands our portfolio beyond traditional voice services. It opens new cross and upselling opportunities within our installed base and helps us to enter new customer segments, particularly in sectors with high service intensity. Nia FrontDesk is about customer satisfaction and increased productivity. It's about making communication smarter, more human and more efficient. It shows how innovation, when done right, can improve customer experience, employee satisfaction and business performance. For us, Nia FrontDesk is more than a product launch. It's a proof point of our innovation strategy. And over the coming quarters, we will continue to expand the AI solution portfolio as we go, always focused on real customer benefit and profitable growth. To walk you through the details of our Q3 financial performance, I'll hand over to Alexander. Alexander Beck: Yes. Thank you, Andreas. So let's turn to the key financial figures for the first 9 months of 2025. In this period, we achieved a solid top line growth and stable profitability despite a continued cautious market environment and investment climate, particularly among small and medium-sized enterprises. Our total revenue increased by 2.7% to EUR 66 million, while adjusted EBITDA amounted to EUR 8.7 million, 3.5% below the prior year level. This performance shows that we are able to maintain profitability while continuing to invest in our strategic priorities, including AI and product innovation, including partner enablement and also sales effectiveness. At the same time, we remain realistic about the challenges. Revenue growth in the core SME business has been slower than anticipated, reflecting both uncertainty and extended decision cycles. The commercialization of new products also takes time, which is normal at this stage. Overall, the fundamentals are solid. Our cash position remains strong, and our strategy is clear. I'm confident that NFON has the right mindset, the right technology and the right team to translate these foundations into sustainable growth. Let's now take a closer look to the developments behind these figures in the following slides. In the first 9 months of 2025, NFON delivered moderate top line growth. The total revenue of EUR 66 million. This development was mainly supported by the continued strong performance of botario, which contributed positively through its project businesses. Our recurring revenues, the backbone of our business, rose by 1.9% to EUR 61.8 million, maintaining a high share of 93.6% of total revenues. Nonrecurring revenues developed even stronger, up by 15.3% to EUR 4.2 million, mainly driven by project implementation and again, service revenues from botario. At the same time, our seat base declined slightly by 2.6% to 648,000, reflecting a still cautious investment sentiment in our core markets. Despite this, our blended ARPU remained stable, increased slightly to EUR 9.92, supported by price adjustments and consistent customer usage levels. Overall, this combination underlines a resilient recurring revenue model and the stabilizing effect of portfolio diversification through botario. Turning to our profitability and cost structure. Material expenses declined by 6.3% to EUR 9.1 million, primarily due to lower hardware volumes and a more favorable cost mix. As a result of this, our gross profit increased by 4.3% to EUR 56.9 million. The material cost ratio improved to 13.8% versus 15.1% the year before, supported by a higher share of margin accretive project revenues. At the same time, our operating expenses rose moderately by 4.1% to EUR 22 million, mainly reflecting higher marketing activities, partner commissions and advisory costs are related to strategic initiatives. Overall, the adjusted OpEx ratio remained broadly stable at 33%, demonstrating our ongoing focus on cost discipline and operational efficiency, but also investing into strategic areas. Personnel expenses. Personnel expenses increased by 9.9% to EUR 28.2 million. This development primarily reflects the integration of botario and targeted staffing in product development, sales and AI-driven innovations. The average number of employees rose to 427 compared to 415 in the prior year. We made adjustments of EUR 0.9 million, mainly related to restructuring costs in management, sales and marketing. After these adjustments, personnel expenses were in line with expectations, consistent with our strategy to strengthen capabilities for innovation and customer value creation. In terms of profitability, EBITDA decreased slightly to EUR 7.7 million. After adjustments, EBITDA amounted to EUR 8.7 million, down 3.5% from EUR 9.1 million the year before. This decline was expected and reflects planned operating expense investments in personnel and infrastructure to support our AI-related initiatives and the ongoing execution of our strategy, NFON Next 2027. Adjustments totaled EUR 1.1 million, primarily related to restructuring measures and IT harmonization. As a result, the adjusted EBITDA margin came in at 3.2%, maintaining a solid profitability level while ensuring we continue to invest in our future growth. Looking at the cash flow and liquidity. Operating cash flow came in at EUR 4.9 million compared with EUR 5.1 million in the year before. This slight decline mainly reflects timing effects in receivables and provisions. Investing cash flow amounted to minus EUR 4.7 million, driven by higher capitalized development costs and earn-out payments of EUR 1.9 million related to the botario acquisition. Financing cash flow stood at minus EUR 1.7 million compared with plus EUR 4.8 million a year ago as the prior year period included loan inflows to finance the acquisition. At the end of September, this cash and cash equivalents totaled EUR 11.4 million, and this underlines our solid liquidity position and provide sufficient flexibility to fund both day-to-day operations and our ongoing strategic initiatives under NFON Next 2027. As already shown in the half year results, this slide summarizes the broader market environment and our key strategic priorities. It continues to provide the right framework for navigating the current conditions, steering NFON towards sustainable growth. But the macroeconomic environment remains challenging. Inflation, geopolitical uncertainty and budget caution, particularly among SMEs, continue to weigh on investment decisions and prolonged sales cycles, especially in communication infrastructure and digital transformation projects. At the same time, AI-driven innovation is reshaping the market. Many companies are still assessing how AI can be embedded into their operations. This extends decision-making, but also creates key opportunities. Across Europe, stricter compliance standards and the growing debate on data sovereignty continue to drive demand for secure GDPR-compliant solutions. NFON's position as an independent European provider with development, hosting and infrastructure entirely in Europe remains a key differentiator. Building on this foundation, we are executing the measures introduced earlier this year, which directly support our strategic priorities. And these are improving operational efficiency, strengthening the channel enablement, maintaining a market growth focus and driving profitability. We are seeing early signs that our initiatives are taking hold, also the momentum is developing more slowly than we would like. As we progress through the fourth quarter, our focus remains on disciplined execution, cost control and efficiency gains, while continuing also to invest selectively in growth areas such as agentic AI. So let's turn to the next slide for the details. As a part of our regular forecast update, we have reviewed our full year expectations based on the performance in the first 9 months. Given the continued investment restraint in part of the market and revenue trend that remained below expectations in Q3, we have slightly adjusted our guidance for the full year. We now expect total revenue to grow between 1% and 2.5% and adjusted EBITDA to range between EUR 11.5 million and EUR 12.5 million. This outlook already takes into account the ongoing macroeconomic caution, extended decision-making cycles among SMEs and the delayed recovery in investment activity in our core markets. At the same time, the measures implemented earlier this year, particularly pricing, cost control channel enablement, are delivering the expected effects and continue to support our profitability. Our midterm ambition for 2027 remains unchanged. Overall, we focus on innovation and efficiency, keeping our financial discipline strong so that growth remains healthy and sustainable. And with this, I will hand back to Friederike to open the Q&A session. Friederike Thyssen: Yes. Thank you very much, Alexander and also Andreas for the presentation and the detailed insight. We will now open the line for questions. [Operator Instructions] So we're now looking forward for your questions. First line in row is John Karidis. John Karidis: So it's John Karidis from Deutsche Bank. I know this has been a very tough quarter for NFON. And because of this, I wonder if you would be happy to tell us how many seats you ended the period with -- in Germany specifically? I know that in the first half, the seat loss was roughly split equally between Germany and the U.K. But I'd be sort of very interested in the number in Germany. And any other additional color you can give us, please, about the areas where you saw the most pressure? Alexander Beck: Thank you very much, John. Yes. So the seat growth, you're right. We lost seats in the first -- in Q3. Our total seat base declined slightly by 2.6%, around total 648,000 compared to 665,000 in the prior year period. So this was mainly the result of a lower order intake compared with last year, while our churn rate is also important, remains stable at 0.5% [ hard ] churn per month, the same level of quarter 3 2024. The stable churn aligns the high quality our products and services have and the resilience of our recurring revenue base in a challenging environment. However, growth in new seats came in below expectations, that's right and below last year's increase, reflecting both the more cautious investment climate and the expanding decision making cycles. The German numbers, I do not have exactly here, but I can tell you roughly, in Germany, we have around about 470,000 seats. And in U.K., we are about 73,000 seats. Friederike Thyssen: Okay. Next in line, Stéphane. Stéphane Beyazian: I've got 2, 3 questions, if that's possible. The first one would be, can you tell us a little more on how many more staff do you plan to hire and when you think you will start to see some stabilization on your staff costs? The second one is a follow-up on the number of clients. I was just wondering whether you are also seeing, let's say, do you think overall, it's a market, as you suggest, or also perhaps some competition that is more aggressive in cloud telephony? And I was just curious to know if there are any names of competitors you would highlight as being very pushy right now in the market? And finally, as a third question, if I may. Do you think now that it's quite likely that 2026, we should also see, let's say, the impact that we've seen in the third quarter carrying over into 2026 and therefore, potentially revenues and EBITDA could be down in 2026? Andreas Wesselmann: Thanks a lot, Stéphane, for your questions. Let me try to answer them in one shot and then after that, please let me know if some questions remain open. So the first question was about the hiring. There you can see along the numbers that we also adopted our growth in personnel expenses by the reduced top line so that we always stay in the same quote, and this is the same planning as we go forward. For the number of clients, maybe I'll just give the example of Nia FrontDesk that I outlined and why I think that's so important is -- the first time that we really combined the botario AI platform with our core voice platform in a very tight and integrated fashion. And just to share some numbers there with you, for the first 4 weeks after the launch, we see it as essentially our fastest-growing adoption of all products that we saw in the last years. So we already have a mid-double-digit number of sold licenses here, and we have very, very positive feedback. So that's, for us, the confirmation of our portfolio. And why is that important also looking forward? Because it shows that we have different revenue streams going forward that we are going to materialize. So one is that these capabilities integrated in our business, telephony, which we call AI Essentials or FrontDesk, help us to up and cross-sell existing customers and it makes our existing offering more attractive. That's one thing. On the other hand side, we see that these voicebots and the agentic AI capabilities, so to speak, get more from the botario side of the portfolio also help us in combined up and cross-sell in the contact center business, and that the botario portfolio offers us access to new customers and partners also in enterprise AI projects. So having that said, we are confident that in '26, we will get back to a growth strategy because in addition to the products, there are 2 other things I would like to mention. We also introduced in October a new way how we can sell easily with a new modular license model, we sometimes internally refer to as T-shirt sizes. This makes it easier to sell. Think of that as a kind of a self-service, and it's immediately available for deployment and getting it running. And the other important part is that we support our partners also in their transformation. So to enable them on the existing solutions, also expand to new partners and expand our solution portfolio with the existing and new partners. And therefore, also our partner program, Nexus, which we will unveil in more breadth and depth in January next year, will support us to have that. Overall, and your question was also about how we see the market. We see the market that the core cloud telephony market is essentially more or less stagnating. Why is that the case? If you take a look, for example, at some numbers in Germany, we had in August, the highest number of companies that needed to file insolvency in the last 10 years. If you take a look at the overall economic numbers, Germany and Austria, for example, unfortunately, they rank lowest within Europe, which is plus -- 85-plus percentage points of our business, as you know. And there is another thing that you should not underestimate. So this whole AI disruption, as I framed it, causes also some additional uncertainties, which causes a delay in decisions. We do not see that it's a question if you go with us in the solutions or not, it's a question of when do you do that, and you just need some more room to discuss with the partners and explain. So that's maybe -- overall, I hope that answered your question. Stéphane Beyazian: It does. If I may just to follow up a little bit and apologies for taking a bit of time here. I was just wondering if you think that adoption of AI could also, in a way, reduce a little bit demand from some of your clients as they may be replacing some of their staff? I'm thinking of call centers, for instance also, and reducing the number of seats potentially. Andreas Wesselmann: We see it the other way around. We see it as a strengthening. We see that from the tightly integrated AI capabilities. For example, in the cloud telephony, it makes the offering more attractive. So there, we have possibilities to increase the ARPU and to expand the number of seats that we have. That is one dimension. And we see great and interesting effects in cross-selling opportunities of the contact center solution and the agentic voicebots we have in the botario solution, which we can then sell to the same customer. So we see it more not as taking away from existing business, but accelerating and strengthening the different pillars of our solutions portfolio. Friederike Thyssen: Okay. Next line, [ Maximillian Pasco ]. We can't hear you. Now we can hear you. Unknown Analyst: Sorry for that. I have a 2-part question. Do you anticipate a normalization in customer investment patterns, potentially supported by your progress in AI? And as a result, could you -- could this provide greater visibility for 2026? Andreas Wesselmann: Yes. Maybe I'll start with that. So your first part of the question was about the investment normalization. This is certainly a trend that we see. We see a delay. And as I said before, we do not see that people decide against an investment. So in that sense, taking the first insights in the fourth quarter and looking forward, we see an investment normalization in the course of the year '26 despite the not so easy overall economic conditions. And exactly what '26 will mean, we will unveil at the beginning of the year when we then have the forecast for the year '26. Friederike Thyssen: Does that answer your question, [ Maximillian ]? Unknown Analyst: Yes. Friederike Thyssen: Next in line, Ross Jobber. Rosslyn Jobber: Can you hear me okay? Friederike Thyssen: Yes. Rosslyn Jobber: Perfect. I'm interested in the trends over the next year or 2 in some of the costs, which at the moment are high, but which hopefully are going to fall, things like consulting costs, IT harmonization costs and also capitalized development costs. Can you say a little bit more about where you would expect those to go over the next 1, 2, 3 years? Alexander Beck: Yes. Ross, thanks for your question. So in general, we are cautious when we talk about cost development. On the other side, we also want to invest into our strategic areas. You mentioned right now, a couple of them like consultancy costs, like other costs, we already tried now in Q3 and Q4 to bring these costs down. But on the other side, we are also going to -- as I said before, we are also going to invest into growth areas. So for next year, -- we are, in the moment, we are in the process to put our budget together and to finish the planning and we will communicate this at the beginning of next year. But overall, I think I can already say -- yes, we will continue our path. We try to eliminate costs, which are not necessary any longer. We try to gain efficiencies, especially in the things you mentioned. And on the other side, we try to invest as much as we need, as much as we can, as much as we want in order to grow in our strategic growing areas. So this is overall, the part for the next years. I hope this -- this is not very precise for the next 3 years, Ross, but I hope this gives you at least the color of where we want to go. Friederike Thyssen: Okay. I see Stéphane is still raising the hand? Stéphane Beyazian: Sorry, I'm all right. Friederike Thyssen: Yes, no probs. But Ross, you can unmute yourself. Rosslyn Jobber: Yes. Sorry, I got more questions. I just wanted to make way for others. Can you say whether or not the AI functionality is changing the procurement process amongst customers? I mean you've talked about uncertainty based on the macroeconomic environment and how maybe it's taking longer for customers to decide whether to buy. Does the fact that you're adding a lot of kind of enhanced customer experience change the sort of people who are getting involved in that procurement decision at your clients? Is that also a factor or not? Andreas Wesselmann: Yes. Thanks, Ross, for asking the question. Let me maybe start with -- we have one part of the solution that if you want to buy a click integrates with existing business telephony. And that's important because we want that the same people that currently administer and are responsible for the existing solutions with a very seamless path can activate them. So in the example of the Nia FrontDesk that I outlined, you can imagine that you go to the administration part you are used to. And then you just choose, I want this front desk capability, I want this as a language. And this is the content it should be based on and then you go. And this is really important because especially the SME customers can simply not afford to invest, take time in AI projects or consultancies or hire people themselves. So this, I think we are in a unique position by tightly integrating that for the existing market. If you go to the other segment of our offer, if I talk about enterprise AI projects and large customers and large partners, this is then a different approach, and you also meet different buying centers. And there, the telephony is not the leading capability, but the leading capability is on how you optimize your customer service, how you automate your processes, how do you integrate in the existing business processes and then offer a solution that can cover, if you want, the breadth from voicebots via contact centers to then the underlying cloud telephony. So that maybe gives you an overview about how we currently see the variety of the go-to-market activities. Rosslyn Jobber: Great. And can I just check one statistic? Did you -- am I right in thinking you said that churn for the 9 months is unchanged from a year ago at 0.5%? Did I hear that correctly? Unknown Executive: Yes, Ross. That's right. Friederike Thyssen: Okay. No further questions so far. Stéphane, go ahead. Stéphane Beyazian: There are no more questions. Let me ask just a follow-up. I was just wondering whether you're already seeing let's say, in the fourth quarter, a little bit better commercial momentum or if you think that those impacts will continue into Q4 on your customer base? Andreas Wesselmann: Yes. Thanks, Stéphane, for asking that question as well. Let me maybe get back to the Nia FrontDesk example which we launched at the mid of October. So there, as I outlined, we see already very fast-growing adoption in licenses, et cetera, which makes us very positive. But the reality is also that based on our recurring revenue model, this only has minor impact on the fourth quarter and then the total numbers. Why? Also we came to the conclusion as we outlined today. But that makes us confident looking forward to '26 and beyond that we start with a good foundation in those years and laid the foundation in this year for accelerated growth in the next year. Details to be shared in the first quarter next year. Friederike Thyssen: Good. So then no further questions. Let me ask a little -- last time. Are there any final questions from your side? So please raise your hand. If this is not the case, -- and it seems not to be the case. Thank you, again, for your time, for your interest and also from my side. And now I'll hand back to Andreas for a short closing statement. Andreas, back to you. Andreas Wesselmann: Yes. Thanks, Friederike. A big thank you from my side to all of you joining the first earnings call in that combination with Alexander and myself, thanks for asking questions -- and the very constructive and right questions and already looking forward to talking to you soon. Have a nice day. Thank you.
Operator: Good day, and thank you for standing by. Welcome to the Subsea 7 Q3 2025 Results 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, Katherine Tonks. Please go ahead. Katherine Tonks: Welcome, everyone. Thank you for joining us. With me on the call today are John Evans, our CEO; Mark Foley, our CFO; and Stuart Fitzgerald, CEO of Seaway 7. The results press release is available to download on our website, along with the slides that we'll be using during today's call. Please note that some of the information discussed on the call today will include forward-looking statements that reflect our current views. These statements involve risks and uncertainties that may cause actual results or trends to differ materially from our forecast. For more information, please refer to the risk factors discussed in our annual report or in today's quarterly press release. I'll now turn it over to John. John Evans: Thank you, Katherine, and good afternoon, everyone. I will start with a summary of the quarter before passing over to Mark for more details of the financial results. Turning to Slide 3. Subsea 7 delivered third quarter adjusted EBITDA of $407 million, representing 27% growth year-on-year, and a margin of 22%. The increase in our profitability reflects strong project execution as well as the continued high-grading of our backlog. As Mark will discuss, we now expect to exceed our prior guidance for 2025 and to deliver continued momentum into 2026. Order intake was high in the quarter, at $3.8 billion, resulting in a book-to-bill of 2.1x for the quarter and 1.4x for the first 9 months of the year. Our backlog reached a record high, close to $14 billion. Slide 4 shows the backlogs of both Subsea and Conventional and Renewables, which continue to increase in quality as we completed work won before 2022 and shift our focus to contracts with more favorable terms. We have a combined backlog for execution in 2026 of $6 billion, giving us over 80% visibility on next year's revenue. And now I'll pass over to Mark to run through the financial results. Mark Foley: Thank you, John, and good afternoon, everyone. I'll provide selective commentary on group, Subsea and Conventional and Renewables' financial performance in the third quarter before turning to the cash flow and financial guidance for 2025 and 2026. Slide 5 summarizes the group's revenue and adjusted EBITDA results for the third quarter, set in the context of recent quarterly performance. In the third quarter, revenue was $1.8 billion, in line with the high levels reported in the same quarter of the prior year. Adjusted EBITDA of $407 million, increased by 27% compared with the prior year period. And margin expanded by 460 basis points, to 22%. Net income was $109 million following depreciation and amortization of $175 million, net foreign exchange losses of $38 million, which were driven by noncash embedded derivatives. Net finance costs of $12 million. And taxation of $73 million. I'll cover the salient points concerning business unit performance in the next few slides. Slide 6 presents the key metrics for Subsea and Conventional. Revenue in the third quarter was $1.5 billion, representing growth of 6% year-on-year as high activity levels continued in Brazil, Türkiye and Norway. Adjusted EBITDA was $368 million, equating to a margin of 24%, an increase of 680 basis points from the same quarter last year. The margin improvement was underpinned by strong execution performance and high vessel utilization as well as the continued rebalancing of our portfolio towards projects with improved risk and reward characteristics. The results of Subsea and Conventional include an $11 million net income contribution from OneSubsea, in line with our expectations. Net operating income was $228 million, nearly 80% higher than the prior year period, equating to a net operating income margin of 15.1%. Selected Renewables performance metrics are shown on Slide 7. Revenue in the third quarter was $302 million, a reduction of 19% when compared with the high levels reported in the prior year period, which were driven by elevated activity in Taiwan, while in line with the second quarter of 2025. Activity progressed during the quarter at Dogger Bank C and East Anglia THREE in the U.K and at Revolution in the U.S. after a delayed start. Adjusted EBITDA was $52 million, equating to a margin of 17%, up 70 basis points from the same quarter last year. Net operating income was $21 million, representing a margin of 7%. Slide 8 shows the cash bridge for the third quarter. Net cash generated from operating activities was $283 million, which included an expected unfavorable movement in working capital of $82 million. Capital expenditure was $47 million, mainly associated with maintenance on vessels and equipment. Net cash used in financing activities was $123 million, which included lease payments of $79 million. At the end of the quarter, cash and cash equivalents increased by $132 million, to $546 million. Net debt was $505 million, including lease liabilities of $421 million, equating to a modest net debt to last 12 months adjusted EBITDA of 0.4x. The group had liquidity of $1.1 billion on the 30th of September. On the 6th of November, the company paid the second and last of its SEK 6.5 per share dividends to shareholders. Shareholders' returns this year represented solely by dividends amounted to approximately $376 million. To conclude the financials, we turn to Slide 7 -- sorry, Slide 9. We have refined certain guidance metrics for 2025. I will highlight the following favorable notable revisions. The upper and lower ends of revenue guidance have been narrowed by $100 million as we now expect revenue to be between $6.9 billion and $7.1 billion in the full year 2025. Given strong results in the first 9 months of the year, combined with high visibility and confidence in our execution performance, we have increased our guidance for adjusted EBITDA margin in 2025 to be between 20% and 21% from between 18% to 20%. We have also reduced our guidance for capital expenditure to a range from $300 million to $320 million. This reflects our continued focus on capital discipline as well as a rephasing of some cash capital expenditure from this year into 2026. Today, as is customary for Subsea 7 at the third quarter, we introduced initial guidance for next year. In 2026, we expect the group to continue to deliver growth in revenue and adjusted EBITDA. We anticipate revenue to be within a range from $7 billion to $7.4 billion with an adjusted EBITDA margin of approximately 22%. Capital expenditure is forecast to be between $350 million and $380 million, which includes rephasing of some capital expenditure from 2025, as mentioned some moments ago. Our confidence in this guidance is underpinned by the quality of our backlog which gives us over 80% visibility on revenue as well as the continued high tendering activity and the attractiveness of the prospects pipeline. I will now pass you back to John. John Evans: Thank you, Mark. On the next 2 slides, we have a couple of highlights from our portfolio of technology-led solutions. On Slide 10, we'll take a look at 4insights, developed by our 4Subsea business in Norway. 4insight is software that combines real-time data from vessels and weather feeds and uses advanced algorithms to automate operating decisions on board. The result is an extension of the windows of operability of our vessels and increased performance in project delivery through a reduction in the cost and schedule risks associated with waiting on weather. By automating the decision-making process, 4insight also enhances collaboration between marine and project crews and maximizes the efficiency of our operations. The software has been rolled out across part of our fleet and has received excellent feedback from our offshore and onshore teams. In 2025 to date, it has added 35 days of operation to Seven Vega, an uplift of over 10% compared to our standard planning assumptions. Our second highlight slide focuses on our unique bundle pipeline technology. Last quarter, we touched on this when we discussed our activity at Yggdrasil in Norway, which included the launch of a large bundle during the summer. By combining active heating, flow lines and the control systems into one towable bundle, we reduce the complexity of the Subsea architecture and offer a cost-effective alternative to traditional models. The solution requires the use of our proprietary lining as well as highly specialized welding from our team in Wick in Scotland. Subsea 7 is the only contractor with a proven track record of delivering production system bundles with over 90 installations to date. Repeat orders from clients, including Aker BP, BP, Chevron, Equinor and Shell, are a testament to the success of this unique solution and more broadly to the innovative solutions offered by Subsea 7's advanced engineering and fabrication capabilities. Now on to a review of our prospects on Slide 12 and 13. In Subsea, tendering activities remain high across our key regions with a combined prospect value of around $21 billion. Most of the projects on this map are long-cycle deepwater developments with favorable economics. Many carry strategic significance to both the operators and their host nations. They will be sanctioned based on a view of commodity prices beyond the next 5 years, sheltering them from the change in spot price of oil and gas. Overall, we are confident in the long-term outlook of our Subsea business with demand for our technology-led solutions expected to remain at high levels. On next slide, we have a summary of the fixed offshore wind projects that could bid in the U.K.'s Allocation Round 7, AR7. Whilst the maximum strike price of GBP 113 per megawatt hour was well received, the recently announced budget for AR7 was lower than hopeful by the industry. As I said last quarter, the U.K. is the largest single market in global offshore wind sector outside China. And with a number of other markets showing slower-than-anticipated growth, the ultimate outcome of the AR7 process will be a key driver for the medium-term momentum in the industry. Subsea 7 continues to support a number of key clients to optimize the AR7 developments whilst remaining selective in the contracts we pursue to safeguard our future profitability. To conclude, we'll turn to our final slide on Page 14. Subsea 7 finished the third quarter of 2025 with a record backlog of firm orders valued at nearly $14 billion. We've increased our guidance for 2025 and our guidance for continued growth in 2026 demonstrates our confidence in the outlook. Looking further ahead, we have a high conviction in the resilience of deepwater Subsea market and combined with a differentiated offering and a strong track record of delivery, this positions Subsea 7 for success. And with that, we'll be happy to take your questions. Operator: [Operator Instructions] We will take our first question, and the question comes from the line of Sebastian Erskine from Rothschild & Co Redburn. Sebastian Erskine: Congratulations on the results today and great to see the backlog at a record level. I'd like to just follow up on the Renewables business. So I guess we can expect a seasonal uplift in Renewables margins in 4Q, which is consistent with the new guide. But how should we think about the original kind of 14% to 16% EBITDA margin guidance into '26? And I guess linked to this, I mean, you mentioned it in the prepared remarks, but could you provide an update on the time lines associated with Allocation Round 7 as there appears to be some stalling progress? So yes, it would be great to get your thinking on that. John Evans: I'll ask Stuart to answer both those questions, please. Stuart Fitzgerald: Yes. So I can answer on the guidance first. So we're maintaining that guidance going forward into 2026. Also, worthwhile to comment about backlog position in terms of visibility through '26 and into '27 is particularly strong. Then on to the Allocation Round 7. So submissions from the developers in terms of the different projects that they put into the allocation round has been happening over the last week. So that milestone is essentially complete as we understand it, and the results of that to be announced around mid-January. So the next key milestone in the time line here is a mid-January announcement of outcomes. But the submissions to the best of our knowledge, are now made. Sebastian Erskine: Appreciate that, Stuart. And just if I can put another question, and I appreciate -- difficult one on the merger. We've seen the admission of kind of several interested third parties into the Brazilian antitrust process. Can you give us an update on that process and when we might expect to hear some ruling from CADE, if you're able to shed any light on that? And any other updates on the kind of geographies that you're submitting to, that would be helpful. John Evans: Yes, I'll take those. As we've said many times on these calls, we won't be giving a sort of blow-by-blow account here, but let's stand back. When we announced the merger, initially with the signing of the MoU at the end of February, we targeted the second half of 2026, full completion. The CADE process is following the steps that we had expected it to follow. We make our submissions. Interested parties then identify themselves as interested parties. There is also a wider market consultation, including suppliers, our peers and our clients, and that process is underway. We will then have an opportunity to discuss with CADE our responses to the different topics that are raised. And then CADE will go into their review process next year. So we continue to believe that the time line for the merger and the critical path is through CADE and Brazil, should allow us to complete by the second half of 2026. Operator: We will take our next question. The next question comes from the line of Victoria McCulloch from RBC. Victoria McCulloch: Starting as well on Renewables. Can you just talk about the contribution for 2026? I appreciate you don't give it specifically, but on the basis of Stuart's commentary, should we then see the driver for the growth coming from the Subsea and Conventional business? And then, John, maybe a bit sort of larger sort of picture -- views. Can you give us a bit of color about how you've seen the tendering pipeline and engagement with your customers over the last 3 months? It remains a fairly unpredictable macro environment, but it would be interesting to hear the conversations you're having with the engagement you have with customers. John Evans: Yes. Just to take the Renewables, Stuart was clear that we are comfortable with a guidance range of 14% to 16% EBITDA in Renewables in 2026. And as he says, he has a high coverage of work already on the books. So again, I don't think we will give any further information on that, Victoria, but we're comfortable that we have a good position in Renewables in '26, and as Stuart alluded to, also going into 2027. So for us, it's more about what it is in '28 and '29, and AR7 will be part of understanding that in the first quarter of next year. Coming to client interactions, I was down in Brazil at Rio OTC about 3 weeks ago. We've had a number of client discussions, which, as you'd expect, continue. We're seeing very little change in our clients' views. They are clear that they've got a number of large Subsea projects out there for bid or to be bid. The dialogue is all around timing of their bids, timing of their projects, what early commitments do they need to make, vessels availability. It's the traditional questions that we get in a busy market, Victoria. In Brazil, discussions with Petrobras. We expect to see the Petrobras' 5-year plan, announced in the next week or so, continued focus on Subsea projects being the main engine and the main driver for Petrobras. So their conversations are clear. A lot of other clients are about some big opportunities that they see. We're bidding work in Namibia. We're bidding work in Mozambique. And these were countries that weren't on our radar screen a couple of years ago. And down in Türkiye, in the first week in December. And again, that's about our ships are going in to do Phase 2. As you're aware, we picked up Phase 3, but there are other phases of Sakarya to come as well. And we continue to work with Equinor as planned on the developments of Wisting and Bay du Nord. The 2 big developments, one in the north of Norway, one in Canada. And they're quietly going on exactly as we had planned with Equinor that we'd be working with them, looking at multiple different scenarios. So long story short, we're not seeing a real change. And the other thing that we touched on in the last quarter was the pleasant surprise to see a number of new projects coming into Norway. The project with ConocoPhillips, which we expect to get sanctioned here at the end of the year. So there are very creative projects out there with a number of clients, and we remain confident. The only geography where that is not the case is the U.K., but I think everybody is clear that unless something changes in next month's budget, probably the U.K. is a bit out of sorts with the rest of the world. Victoria McCulloch: And maybe just a follow-up on that is, it was interesting to hear, obviously, you've shown us a lots about the pipeline bundles that you've done for Yggdrasil, for Aker BP and how that's optimizing the CapEx and OpEx for your customer. I guess, how much, I guess, new ideas in AI are customers looking for and sort of new wins from that? Because I guess, AI is such a massive theme globally, but how much of that is part of conversations in terms of they're trying to get economics better because of AI? John Evans: Yes. Our clients are always interested. Yggdrasil is an interesting example that we're using every single technology Subsea 7 has got, that huge greenfield development. We've got bundles in there. We've got traditional relay in there. We've got heated pipelines. We've got cool pipelines in the system. We've got everything in there. So that's why the customers come to us, is that we have a full toolkit, a full technology capability. If we come on to 4insight. 4insight is a form of AI technology that uses real-time data, analyzes huge volumes of data to give our offshore crews clarity as to what's going to happen in the next 24 hours and how they should think about whether we continue into the good weather, or do we stop, do we start and such like. Historically, that's all been done in a very static mode. Before we go offshore, we plan different scenarios. We take the scenarios out there. We have a book which tells us what we can and can't do. And if we're inside the parameters, we can work if we're outside the parameters. What 4insight has been is, say, let's take the actual parameters we got here and the actual parameters forecast and what you've had in the last 24 hours and exactly which way the weather is hitting the ship directionally and such like and can we continue pipeline. And again, as I said in my prepared remarks, we are finding some significant improvements. So it's a combination of the portfolio of technologies we've got, a real productivity to also just challenge the norms. We're also doing quite a bit of work with some of the regulators and some of the certifying authorities on how we run our DP vessels. dynamic position, rules were written in the 1980s when fuel was free. Nobody worried about emissions. And therefore, today, we are now finding different ways to run these ships, but we need the codes to change to do that. That allows us to improve our fuel efficiency, which our clients pay for, also reduces our emissions, but we need the codes to change to reflect that what was good in the '80s doesn't necessarily have to follow in the 2025 that we're in. So there's a lot of great things happening, Victoria, a lot of great engagement with our clients and with it, with every client on those type of technologies. So it's a good place that the industry is in. And as we know, deepwater subsea is one of the lowest cost per barrels lifted of any form of oil or gas out there. So I think we're in the right place at the right time. Operator: We will take our next question, and the question comes from the line of Kevin Roger from Kepler Cheuvreux. Kevin Roger: The first one is maybe in 2 way because when I look at the backlog execution for 2026, you are telling us that roughly your visibility is up by 13%, but the top line guidance imply only 3% growth in '26 versus '25. So can you give us a bit of color on that why the backlog for execution is up 13%, but the top line guidance is up by 3%? Is it related to the fleet utilization rate that is at the end already fully booked? Just to understand the rationale around the top line. And the second one, John, you roughly mentioned it, big project from Equinor for 2026. There has been some noise notably this morning saying that Equinor is currently hitting the market for fabrication tools. So just to understand on your side, would it be a kind of full scope, or then it will be phase by phase, meaning that for '26, it will be more than $1 billion as you have identified the projects in the pipeline or a smaller phase because that's going to be done in different phases? John Evans: Yes. The backlog in 2026, I guess, which just reflects the fact that we're in a very busy market, and clients have committed to us earlier. We have a finite capacity, which is why the revenue doesn't grow as much. We would expect, of course, next year to have 100% backlog by the end of the year. So it's more of a timing question, Kevin. A lot of our clients have engaged with us early, and that's been going for a number of years now, making commitments to make sure that they have capacity available as they go into '26 and '27. So it's just a timing disconnect more than anything, not a fundamental issue. This quarter, we're running at 87% utilization. We're getting towards the highest end of what we can do, and we've discussed that a number of times on this call. The key to us is post-merger is to reduce the amount of transits between projects and such like. That's one of the real attractions for a number of our clients, is that there are more days available if you don't move these assets around. But at the moment, we've got the fleet that we've got. We know very well where they're going to be placed next year. So I don't see it as a disconnect. The revenue will be the revenue in the range that we've given. And the backlog is just higher than we would normally expect. But equally, in my memory, when the market gets busy, people secure their assets earlier. Taking your second question, Bay du Nord is a project that for us is done seasonally over multiple seasons, and we won't be offshore until later on this decade, and that's always been the case. And because of the weather conditions out there, we can do about 100 days per year. So it's a multiyear project. And next year, we'll continue to be in this work mode that we're in, which is working with Equinor on the field layouts and allowing them to go through their different decision gates, DG2 and DG3 that they need to go through. So for us, Bay du Nord has continued working with them in the mode that we've been in for a couple of years. And so they will make their key decisions, I suspect, in '27 when they have all their information about their fabrication, their local content as well as the SURF packages. What I would say, I think there's been good work between the SIA and Equinor over a couple of years, and there's been some very interesting thinking about how to phase the project and how it comes together. So coming back to your initial question, Kevin, it was always a phased project because the weather conditions out there and the remoteness of that part of the Atlantic offshore, Canada means that you have to do 100-day slots per year out there. And it's just how you sequence it and how you develop the wells and the reservoir that goes with it is the key to probably unlocking the economics in that field. Operator: Your next question comes from the line of Guilherme Levy from Morgan Stanley. Guilherme Levy: First one, thinking about your guidance, how much would you say the lower figure this year is driven by activity that might have been -- might have slipped into 2026? And if you can perhaps share with us what sort of activity that is? And then thinking about 2026, is this a reasonable level for us to think about your capital needs over the long term? Or is there any nonrecurring factor in the 2026 figures that we have? And then second one, thinking about Brazil. Earlier this year, there was a headline saying that Petrobras was keen to do a long-term lease of a vessel to do the installation of rigid pipes in the [ Pre-Salt ] itself. Do you feel like this is a live discussion? Are they actively looking to do that? Or do you feel like that was just a headline that didn't really evolve over the course of the year? John Evans: I guess the question -- the first question asking about the sort of guidance between this year and next year on revenue and such like. You're very familiar with our projects. They work on a percentage of completeness at the end of -- completion at the end of each year. It varies big projects, a couple of percentage have quite a large influence on dollars. There's nothing to be concerned about. It's just how the different sequences of our projects are coming into play. In terms of 2026, as I answered Kevin previously, we're reasonably clear on how it will fit together. We've given you a range of revenues that we are comfortable with giving the market here, a high level of visibility as to how that fits and even the work that isn't in the backlog yet, we're pretty clear in our minds how that will sort of come together. And of course, as we've done consistently, if things change, we will give the market an update on each quarter as we see changes. Lastly, Petrobras are talking to the market about potentially the long-term lease of a rigid pipelay ship. Interesting enough, we had a contract many years ago, in 2012 to 2017, to do exactly the same, which was called hybrid steel, which was a contract that Subsea 7 had with Petrobras. So I'm old enough to know what those looks like, and we've done it before. Again, when Petrobras comes to the market, we will respond, and we'd be interested in that. But you just need to remember that the time scale is probably 4 or 5 major projects that need a pipelay each. So again, if they go down this path -- and I do understand. We've been speaking to them. This is about the timing of the arrivals of the FPSO, and the challenges of how you run different projects with different time scales with different arrivals of FPSOs. So maybe the hangoffs of the riser with a vessel more akin to a PLSV, which is more of a day rate contract where they can control it that way. So I understand fully the logic. It makes a lot of sense, and we will certainly be interested in the opportunity set should that come to the market next year. Guilherme Levy: The first one, sorry, I was actually just referring to your new CapEx guidance. So yes, just thinking about your 2026 CapEx guidance, is there any reason why 2027 should be materially different from that? Mark Foley: It really is a function of the vessels that have to go through their obligatory dry docking. So as you know, depending on where they are in the cycle, our CapEx increases and decreases. The majority of our CapEx is directed towards vessels and equipment. So I think we provided updated guidance for this year, slightly lower, driven by really strict capital discipline within the organization as well as a late phasing, a displacement of certain cash, capital expenditure into 2026 and then an amount that we've guided to for next year. So again, it will vary year-on-year depending upon the requirements of the vessels as well as the opportunities that we see in terms of growth, capital expenditure around minor modifications, around supplementary additions to equipment, et cetera. So hopefully, that provides some additional color. Operator: Your next question comes from the line of Alejandra Magana from JPMorgan. Alejandra Magana: On your SURF and Conventional margin strength, can you give us a sense of how much of the uplift reflects execution outperformance versus the roll-off of older, lower-margin projects? And how much reflects structurally better commercial terms or pricing power on more recent awards? And as the 2026 backlog converts, how do these contracts differ commercially from the ones you've executed this year? John Evans: Okay. I won't go into the margin mix. As I said in my prepared remarks, it's a bit of everything. We are taking less projects, taken before 2022 into the portfolio this year, and there are none of those as we get into next year. As we discussed very openly on this market, each project is bid individually and therefore, then there is a mixture of margins in each of the different projects. Sometimes some projects suit us because the availability of equipment, timing and clients' decision-making, potential delays in other projects. So again, there's quite a complex mix in that. And lastly, as we've discussed, we've had very good execution throughout this year, and I'm very pleased with the execution that we've got. So when all these things come together, we get a very good margin in the business. But we won't discuss the segregation of those items. As we go into 2026, again, it's about the stack of projects that we've got in there. There is nothing pre-'22 in the mix. So it's the packages of work that we brought in over the last 3 years at the various stages that give us the margin that we expect to see next year. And so we have given you clarity through the guidance as to what revenue range, and we expect to be at around 22% next year EBITDA on the portfolio that we've got. And just to close out on that, we're reasonably confident in that because we've got over 80% of that margin already in the books. And as I touched on earlier, I'm reasonably sure I know how the remaining 20% will fit. The remaining 20% part of that is elements such as call-off agreements we have with a number of clients where we're already under contract. We know what the margin is, but we haven't received the call offers yet. So confidence level is pretty high here. And we'll just get into '26 and let it run and see how it goes from there. Alejandra Magana: Very clear. And then on the new Brazil PLSV contracts, can you give us a sense of how the new rates compare with prior agreements? Do you expect a step-up in PLSV earnings over the next few years? John Evans: Yes. So they were bid a year ago. That is information where if you go through the press releases that we've released and our competitors have released, it's all public information. You can -- you know that each contract is roughly 1,000 days. So they were better than we had for certain, and all 4 PLSVs are now on the new contracts. Just last week, the fourth of our PLSVs went on their new agreements. So next year, part of the uplift in our margin is around the fact that the mix of work that we've got next year, as we discussed earlier, is a better mix. So the PLSVs are public domain information. So if you go back and dig through those, you can work the figures out from where we were and where we are now. Operator: [Operator Instructions]. Your next question comes from the line of Erik Aspen Fossa from SB1 Markets. Erik Aspen Fossa: I have 2 questions at least. First for you, John. I think the understanding so far has been that we should expect a slight increase in activity from '25 to '26. And I'm just wondering how we should think about this into 2027 on a stand-alone basis for Subsea 7? Is there still room for further increases, for example, through fleet optimization and other such things? Or are we kind of plateauing now in terms of how much you can do with the fleet that you have? John Evans: Okay, Eric, I think what's interesting for us is that we have a very strong backlog for '27. If you just look at the data we got $3.8 billion of backlog for 2027, which is a very good place for us to be looking this far ahead. There are some changes that we're doing next year. It's also about how we upgrade the margins in our projects. There has been some work that we've been doing, for example, on some Jones Act work that we won't continue next year. So we'll return those chartered vessels to the owners because we can't get the margins that we expect. We've returned the Champion in the Middle East. And so for us, it's also about just being very, very selective about which assets we deploy, how we deploy them and the returns that we get, and the risks that we take to earn those returns. So there is room for improvement. There's always room. But now it's about taking the asset base that we've got, as Mark said, being pretty brutal about what it's doing, where it's working, what it's returning for us. So you will see some changes in the fleet next year, some -- actually reductions in the size of our fleet next year whilst we're increasing the revenue. That's our task at the moment, is to maximize what we have in the cycles that we work in, Eric. Erik Aspen Fossa: I think you also sort of started to answer my second question, and that was on the lease costs that decreased, slightly now this quarter. And I'm just wondering how we should view that into 2026, should it come down because of what you actually just explained now, John? Mark Foley: Yes, Eric. We will see a directional downward movement in lease liability cash impact in 2026 as a result of releasing some of the lease vessels that we have in the portfolio today. As you know, out of the 41 vessels, we have 11 leased vessels, and some of those will be going back at the end of the charter period to the owners. Erik Aspen Fossa: Was that just the Jones Act vessels, or are there any other vessels? Mark Foley: All the vessels fleet, Eric. John Evans: Yes. So I discussed the Champion, it was leased, and that was in the Middle East. That has already come back. There will be a couple of Jones Act vessels going back, and there will be at least one -- further one going back, but we're not ready to include that at the moment. But that's the direction of travel, as Mark is saying, that we're working our way through, making sure that if we bring additional tonnage in, first of all, is it adding value in the portfolio and can we -- what we're trying to do here is to grow the revenue, but also make sure we maintain the margin. So that's what this fine-tuning that we're doing is about. But that also brings our lease obligation line down, which again, I know has a lot of high focus in the market as well. Erik Aspen Fossa: Just lastly, could you give some sort of indication on kind of the level that we could think about next year on the lease payments? Mark Foley: It will be notably lower than we have incurred so far this year, Eric. I think we've spoken about it every quarter. We'll probably just be under $300 million cash out this year, principal plus interest, and we've given a flavor of the vessels that, all other things being equal, we'll leave the fleet. I'll allow you to apply your assumptions in terms of what that means around impact -- favorable impact to cash. Operator: This concludes today's question-and-answer session. I'll now hand back to John Evans for closing remarks. John Evans: Well, thank you very much for joining us. We have an interesting story to tell, and we appreciate your continued support and the questions that you ask and the papers that you publish about Subsea 7. We have a very good year ahead of us, I believe, in 2026. We tried to frame that for you and try to give you information to allow you to model it and look ahead. And we continue to be in some very positive discussions. Stuart has also been very open about the opportunity sets in Renewables in '28 and '29, which will become clearer in Q1 next year. So hopefully, when we meet with our Q4 results at the end of February, early March time, we will be able to give you more updates on how we see AR7 and what that means for Seaway 7. So as ever, thank you very much for your support and your questions, and we shall see you again soon. Thank you. Goodbye. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Marc Ronchetti: Good morning, and welcome to our Half Year '26 Results Presentation. I'm pleased to be here to present a really strong set of results for the 6-month period, results which clearly demonstrate the enduring strength of our sustainable growth model and most importantly, the exceptional talent and commitment of our teams across the group. And I'd like to start by thanking everyone at Halma for their individual contributions that enable us to deliver consistent growth and positive impact. Carole will provide more insight into our financial performance shortly. But first, let me start with the highlights. As I said, it's great to report another set of record half year results, and I'm really pleased to see these results underpinned by strong organic growth. And fantastic to see the strong performance across all three sectors in addition to the premium growth of our Photonics business. We've also delivered a very strong margin performance and continued high returns on capital, and this supporting further substantial investment in the significant opportunities we see for future growth. And these results put us on track to deliver our 23rd consecutive year of record profit. Delivery of this financial performance demonstrates the power of our sustainable growth model, a model which has supported strong compounding growth and returns over decades, and a model which when combined with the opportunities we see in our markets, underpins my confidence in our continued long-term success. The strength of our model lies in the way that each of the elements are interlinked, aligned and complement each other. Together, they remain critical to the delivery of our performance, both in the short and long term, a topic which I'll come back to later in the presentation. But first, let me hand you over to Carole for more details on our financial performance. Carole Cran: Thank you, Marc. And a very warm welcome to everyone on the call. I'll be taking you through some of the detail behind this excellent set of results. First, let me give you the highlights. For me, these results are a great demonstration of what the Halma model can deliver. First, strong growth. We reported headline revenue growth of 15% and EBIT grew 27%. Excluding a one-off benefit in E&A that we've already flagged in our trading update, revenue grew 14% and EBIT 23%. And we delivered an exceptionally strong first half margin of 22.3%, up 160 basis points. I'll give you more detail of the drivers of this increase in the sector reviews. A fantastic performance, and as you will see, driven by organic growth broadly spread across our sectors. At the same time, we've continued to make substantial strategic investments to support our future growth. We've invested GBP 300 million in the first half, including nearly GBP 60 million in R&D, around GBP 130 million in acquisitions, and over GBP 100 million in CapEx and working capital to support growth in a number of our companies. While this investment resulted in cash conversion being below our KPI at 79%, we expect it to be more in line with our 90% KPI at the full year. All in all, a substantial level of investment, reflecting the significant growth opportunities our companies see in their markets and our confidence in continuing to deliver strong growth and returns. The strength of our financial model means that we've been able to make these investments while maintaining a strong balance sheet and delivering high returns. Net debt to EBITDA is essentially unchanged since the year-end at just over 1x, and returns have increased significantly, up 190 basis points to 16.2%, a very strong performance. All of this supporting a further increase in our dividend, putting us on track to deliver our 47th year of dividend increases of 5% or more. Now let's look at our revenue growth in more detail. This slide bridges the year-on-year revenue growth of 15.2%. Organic revenue growth was very strong at 16.7%. This reflected healthy growth broadly spread across all three sectors and a continued benefit from premium growth in Photonics, which accounted for around half of the organic growth. Most of the growth was volume driven with price increases averaging between 1% and 2%. There was a modest contribution from acquisitions of 1.6%, reflecting the number of deals completed in the last year. This acquisition contribution was partly offset by the disposal of AAI, which we sold in July. As a reminder, AAI's revenue last year was approximately GBP 42 million, so there will be a larger effect in the second half. There was also a translational currency headwind of 3.2%, primarily due to the weaker U.S. dollar. Based on latest currency rates, we expect a similar headwind for the year as a whole. Finally, the one-off benefit was equivalent to 0.9% growth. Excluding this, reported revenue growth was strong at 14.3%. Let's now move from revenue to profit and margins. EBIT was up 22.8%, excluding the one-off and a very healthy 22.7% on an organic basis. This was ahead of revenue growth and reflects margin expansion across all three sectors. Acquisitions contributed 3.1%, again, ahead of revenue, reflecting the quality of the businesses we have bought, while disposals were also accretive to margins. The currency headwind was similar to revenue at 3.4% and the one-off benefit of 3.9% completes the bridge. Moving on to the sector commentaries, starting with Safety. It was great to see further momentum in Safety following 2 years of double-digit growth. On an organic basis, revenue grew 6%, led by strength in the Public Safety and Worker Safety subsectors. This was partly offset by a mixed performance in the other two subsectors given some specific end market trends and customer project delays, notably in the U.S. Profit grew 16%, reflecting a 280 basis point margin increase to 27%. This is a historic high for the sector and was driven by four main factors: the sector's continued revenue growth; favorable portfolio and product mix; strong operational delivery and benefits from accretive acquisitions; and disposals. Our safety companies continue to invest at a good level to support their future growth, with R&D spend increasing by 11% to 6.1% of revenue. Turning next to Environmental & Analysis. This slide shows E&A's performance excluding the one-off. There's a slide in the appendix, which shows performance including it. The sector delivered an exceptionally strong organic revenue and profit growth of 36% and 38%, respectively. And it's really pleasing to see this driven by growth across all subsectors. Strength in Water Analysis & Treatment was driven by water infrastructure demand in both the U.S. and U.K. A strong performance in Environmental Monitoring reflected growth in U.S. gas detection and gas management in Asia Pacific. And in Optical Analysis, we saw continued premium growth in Photonics, reflecting increased demand from our long-standing hyperscaler customer. The profit increase of 38% on an organic basis included a 90 basis point increase in margin to 23.6%, driven by growth in all subsectors and continued cost discipline. At the same time, it was pleasing to see a good level of investment with R&D up 7%. Adjusting for Photonics, where development is part of the revenue we earn, R&D for the sector is at a healthy level at over 6% of revenue. And finally, it was good to see a strong 4.3% contribution from acquisitions, including Brownline and Minicam's bolt-on Hathorn. Now let's turn to Healthcare, which delivered a stronger performance compared to last year, reflecting good execution against a background of steady recovery in health care markets. This was supported by improving customer confidence and demand for solutions, which improve our customers' efficiency given increasing health burdens and rising patient backlogs. This resulted in good levels of organic growth in both Therapeutic Solutions and Healthcare Assessment, which together account for over 90% of the sector's revenue. Therapeutic Solutions saw strong performance in a number of surgical and respiratory device companies, although this was partly offset by continued softness in eye health therapeutics in Europe. Growth in Healthcare Assessment was broad-based with most companies in the subsector delivering solid organic growth. Sector profit was 10% higher and on a reported basis, up 8% organically. Margin increased 50 basis points to 21.3%, reflecting benefits from stronger revenue growth and improved pricing and mix. Our health care companies remain well invested with R&D at 5.4% of sales. Finally, there was a good contribution from acquisitions, reflecting the quality of businesses we recently acquired such as Lamidey Noury. I'll now talk about our cash flow and the balance sheet and how we've allocated capital during the first 6 months. The cash-generative nature of our companies means that we've been able to make a substantial investment to support our future growth while maintaining a strong financial position. Our first capital allocation priority is organic investment to support our long-term growth, represented here by investment through R&D and CapEx of GBP 93 million. Our financial strength means that we have also been able to support a number of our companies in making strategic investments in working capital. This resulted in a larger-than-usual outflow of GBP 75 million. Together with higher CapEx investment, this was the driver behind our lower cash conversion in the half, and we expect it to drive a stronger position at the full year. Our second priority is continued value-enhancing acquisitions, where we invested a net GBP 148 million. And our third is a progressive return to shareholders through the dividend, with GBP 53 million returned in this first half. In total, we've invested over GBP 300 million in the half to support future growth, both organically and through acquisitions. And our leverage has remained almost unchanged at just over 1x net debt to EBITDA. So before I look at our financial KPIs, let me briefly describe the M&A investments we've made this half year. First, Brownline, which is a fantastic purpose-aligned acquisition, which extends our strength in the trenchless technology market. Its location services deliver pinpoint accuracy underground for operators of horizontal directional drilling equipment. This is increasingly vital as utilities and data providers look to improve resilience and safety by burying their pipelines and cables. At the same time, they also want to reduce the surface disruption of digging trenches while safely navigating increasingly congested underground spaces. Brownline's best-in-class technology and deep technical know-how make a great addition to Halma. Next, Nu Perspectives, a small but strategic acquisition for our eye health assessment company, Keeler, enhancing its capability in cryogenic technology. This reflects a broader trend across Halma of our companies using bolt-ons to expand into adjacent markets and deepen their presence in existing nations. We also remain disciplined in managing our portfolio. The disposal of AAI reflects our commitment to continually assess our portfolio for strategic fit and to ensure each company contributes to our long-term ambitions for growth and returns. Looking forward, I'm confident we'll make further progress in 2026. We have a healthy pipeline of acquisitions and a good mix of deals by size and type, both bolt-ons and stand-alone acquisitions. Now let's turn to our performance against our financial KPIs. It's clear that this half year represents a strong performance by any measure, driven by broad-based growth and strong returns across all three sectors, combined with premium growth from our Photonics business. We are substantially ahead of our targets for organic revenue and profit growth, and delivered margins and returns well into the upper quartile of our target ranges. And while acquisition profit and cash conversion were below our KPIs, this principally reflects the dynamics in this specific half year. Over the longer term, our performance is ahead of our targets. So all in all, a very pleasing half year, but one that I'm aware comes from an unusual combination of broad positive momentum in both revenue and margins across all three sectors. Taking a longer-term perspective, this half year provides another proof point of what the Halma model can deliver. And these KPIs frame our ambition to deliver strong and compounding growth and returns over the longer term and further extend our strong track record against our targets. Moving on to my last slide on full year guidance. The strength of our first half performance across our portfolio, together with our current expectations for the remainder of the year means we have upgraded our full year guidance for the second time this year. While our companies continue to experience varied conditions in their end markets and the economic and geopolitical environment remains uncertain, we've made a good start to the second half of the year. For the year as a whole, we now expect to deliver mid-teens percentage organic constant currency revenue growth, including a continued benefit from premium growth in Photonics and an adjusted EBIT margin of around 22%. I'll now hand you back to Marc. Marc Ronchetti: Thanks, Carole. Fantastic to see the excellent performance against our financial KPIs and the further upgrade in our full year guidance. In this section, I wanted to take a step back from the results themselves and provide insight into the role of our sustainable growth model in driving our continued success. It's a model which has always been key to our past success, including in the first half of this year, and it underpins our ability to deliver compounding growth and high returns over the long term. You'll recognize the core elements of our sustainable growth model. In June at our full year results, I looked back over the last 50 years and shared how our model has been tested and proven to be resilient in a wide range of environments. And this enabling us to continue to scale through many different geopolitical events, economic cycles, technological advancements and changing market dynamics. And while our model continues to evolve, its fundamental elements remain at its core. Today, I want to highlight how our model enables one of Halma's most important characteristics, our ability to combine a long-term view with short-term agility. At Halma, we're guided by our clear and ambitious purpose and powered by long-term growth drivers that underpin our markets. And this enables us to think in decades and take a long-term view for determining the talent and capabilities we need or for the organizational model required to scale and when we're choosing the markets and opportunities in which to invest. If I take our markets as an example, we invest in markets with resilient, often regulatory-driven growth drivers that extend over decades. And our disciplined approach targets niches with high barriers to entry, strong societal benefit and sustainable demand, markets and niches where we enable our customers to tackle some of the biggest challenges we face today, better health care for everyone, clean air, clean water and how to keep us safe in our cities and in the places where we work. All of these fundamental challenges, which are intensifying, supporting our growth and returns for decades and giving us the confidence to invest ahead of the opportunity that's in front of us. And thinking in decades also enables us to continuously scan the horizon to identify long-term trends and reshape our portfolio to align with those evolving markets and technologies. And at the same time, our decentralized model and the quality of our leaders means that we're able to seize new opportunities. Agility is embedded in Halma's DNA. It enables us to respond quickly to fast-changing challenges and opportunities without losing sight of our long-term goals. Our model puts our companies close to their customers and their end market. And this gives our entrepreneurial leaders who are not dependent on other parts of the organization, the freedom to innovate and adapt rapidly to changing market conditions. This means that while maintaining their core long-term focus, they can also look for opportunities to apply their deep technical expertise to those faster-growing end markets for a period of time. Let me just bring that to life. Crowcon is applying its gas detection expertise into battery energy storage, detecting hazardous gases to protect these systems that provide critical backup power for sectors like health care. Sentric is applying its industrial interlock technology to keep assets and people safe in the fast-growing data center space. And Alicat's proven ability to apply its flow and pressure control expertise to many different fast-growing end markets. Just a few examples of how our companies are always looking to capture emerging additional growth opportunities. And this combination of long-term thinking and short-term agility is a powerful combination. Let's look a little bit closer at how we can maintain our agility as we continue to scale. And this is why we insist on talented entrepreneurial leaders with the ambition to act quickly and to innovate. Our structure enables fast decision-making. And by having our companies close to our customers, they can anticipate and adapt their changing needs. And this focus on the long term alongside the importance of agility means that we're constantly balancing seemingly contradictory requirements at the group sector and the company level. At Halma, we see these as complementary. It's not either/or, we call it yes/and. It's embedded in our DNA and our sustainable growth model. It's part of our culture and a source of our strength. Our leaders have the autonomy to grow their business in the way that's right for them, and they are held accountable for delivering that growth. Our leaders are focused on delivering this year's results, and they're focused on where the growth is going to come from 5 years from now. Our companies have the agility and speed of SMEs, and they get the benefits of being part of a global group. And it's this ability to combine the long-term and short-term agility that enables us to capture those fast-growing emerging opportunities with pace and invest ahead for future growth. And it's this same approach that we're adopting through this period of premium growth in Photonics, a great example of everything that I've just said. When we first acquired the company in 2011, our long-term view recognize Photonics as an enabler of technologies across many end markets. We could also see how the company was showing exceptional agility in capturing growth opportunities by accessing new faster-growing markets, a consequence of great leaders and deep technical expertise. And one of these opportunities has led to a period of over 10 years of working closely with their hyperscaler customer. They're using their substantial application knowledge to support their customer with the development of a relatively small but critical component of a wider solution in data centers. Our model allows us to maximize the opportunity with the customer while remaining focused on the continued delivery of our group strategy of sustainable compounding growth and returns. And this outstanding delivery in the short term through excellent local execution allows us also to reinvest for the long term to enable future organic and acquisition growth. Investments in innovative R&D at our companies in building out our teams for scalability, in our M&A capability and in the addition of great value-added acquisitions such as Brownline. As we heard from Carole, Brownline, another great example of a fantastic acquisition underpinned by long-term growth drivers. Urbanization, the need for resilient infrastructure, including water, electrification and the rollout of fiber and data networks. And this combination of a long-term view and short-term agility is critical in the continued delivery of our strategy. Being invested in niche markets underpinned by long-term growth drivers and having that org model and culture that gives us the ability to operate with agility is a fantastic start point. However, it's our talent that is the enabler and the multiplier. We structure for growth and agility, but it requires leaders and a culture that can realize it. It's our entrepreneurial and ambitious leaders that maximize our potential. And the criticality and therefore, the focus on talent isn't new. It's been there since the beginning, embedded into Halma by our founders, David Barber and Mike Arthur. In fact, it remains such a critical element of our model that we brought together all our MDs and presidents for our Accelerate event last month. And we spent 2 days solely focused on how we, as a leadership team, can all become even better at spotting and developing talent to help maximize Halma's potential. A truly inspiring event and a demonstration of how our great individual leaders benefit from the power of our network. But don't take it from me, let's hear from some of our leaders on why talent is so important to their businesses. [Presentation] Marc Ronchetti: Some fantastic comments from our leaders in the video, illustrating just how important talent is at every level of our business, both Alex and Alan capturing why talent is critical to seizing those faster-growing opportunities. Robert picking up on the importance of accountability driving that ownership mentality, and Natalya on why we've been able to attract and retain fantastic talent and the ability for them to make an outsized impact at Halma. As you heard from the video, we create a culture where leaders can thrive. This is what enables us to keep scaling and maintain our culture as we grow. And it's why we continue to invest in our people and our capabilities to support our future growth. For example, we've grown our M&A teams, and we've added two new Divisional Chief Executive roles over the last year. Our DCEs are critical to our growth. They're responsible for acquiring new companies and then they chair those companies once they join the group. So the strengthening of both of these teams gives us greater capabilities to find more companies and the ability to continue scaling. We also continue to invest in our development programs and our graduate scheme, the Catalyst Program, both critical in enabling us to grow and develop our own future leaders, ensuring that we maintain our culture as we continue to scale. And it's really pleasing to see those investments bearing fruit. For example, we heard from Alan in the video, who's one of three company MDs that have come through our Catalyst Program. Also the continued strength of our organic growth, a direct result of our continuous investment in R&D and the acquisition of Brownline, a result of the targeted investment in setting up a dedicated E&A sector M&A team when we transitioned to our three sector structure 4 years ago. So bringing it all together, Carole described the strength of our performance in the first half of 2026, another record result delivered in varied markets. You've heard how this continued success is enabled by our sustainable growth model, a model which enables us to take a long-term view, staying focused on and investing in capability needs and structural growth drivers, and a model which gives us that agility to capture emerging opportunities and mitigate risks. It's a model amplified by the exceptional talent at Halma, accountable to deliver long-term sustainable growth and empowered to act with agility to capture those short-term opportunities. A model that continues to deliver consistent, sustainable and compounding growth and returns. And a model that underpins my confidence in our ability to continue to deliver for decades to come. And that's the end of the presentation. And now we have time for some questions. Marc Ronchetti: As ever, there's two ways that you can ask your questions. You can either raise your hand using the tool at the bottom of your screen, and I'll invite you to ask your question verbally, or you can type the question which Carole and I will read out and then answer. So Bruno, let's come to you first. Unknown Analyst: The first question is just on the strong growth seen in E&A this half. And it relates to -- I guess, the growth in Photonics was good to see. But what was more surprising for us actually was the very strong implied growth in E&A outside of Photonics, which we calculate to be roughly around 17% to 18% on an estimated organic basis. Could you maybe just speak to the drivers of that a little bit more? So why was gas detection so strong in the U.S. and gas management solutions so strong in APAC and also the water infrastructure market? Marc Ronchetti: Yes. Great. Thanks, Bruno. As you say, really pleasing to see that broad spread growth, not only in the E&A sector, but across the whole group. I think that really is the story of these results in this 6-month period. Picking up on the specifics of your question, again, really pleased to see growth across all subsectors within Environmental & Analysis. As you say, Optical Analysis, very strong with that exceptional growth from Photonics. Beyond that, spectroscopy was mixed. We saw some recovery in certain end markets around semiconductors, personal electronics and other OEM customers, but slightly weaker in areas such as biopharma. But again, no real read across there. It's a really small part and pretty specialist in terms of what we're doing. Within Water Analysis & Treatment, yes, great to see the strength of the performance in Water Analysis. That was driven really by water infrastructure demand in the U.S. and the U.K. We also saw a recovery in water testing and disinfection. So again, there's still a bit of uncertainty certainly in the U.K. as we transition through the AMP cycles, but good to see the recovery come back and that underpin of the demand. And then finally, to your point in Environmental Monitoring, strong across both Environmental Monitoring and gas detection and analysis. We've seen that really, as you say, notably in the U.S.A. There is a little bit here just in terms of the specific companies have got a few more projects in them. So there's a bit of phasing in terms of the number of the projects, but growth across all regions in gas analysis. So net-net, a really strong performance. Always worth just remembering within that, it is a 6-month period and some of those are a little bit more project-based. But strong underlying growth and also actually pretty unique to have all of the subsectors moving forward in the same 6-month period. But net-net, really pleased with the wider performance. Unknown Analyst: That's very clear. And I guess just a follow-up on Photonics. And I know you're limited in terms of what -- but I was wondering if you could help us understand the driver of acceleration in the half a little bit more. So more specifically, are volumes for Photonics simply scaling up with CapEx or investment like your customer? Or is it more complex than that and you're perhaps taking share of CapEx wallet at the same time? And then finally, maybe a little bit on how you expect this relationship to evolve in the coming years. Is the base case that you just, again, simply scale with investment at your customer? Or is it more complex than that? Is there a replacement angle that we should factor in or again, share gains in terms of customer wallet? Just some thoughts around that would be super useful. Marc Ronchetti: Yes, I'll sort of pick up on the specifics. But I think before I do that, I mean, there's no doubt going to be a few questions on Photonics. As I said at the outset there, I think the big message from today is the wider performance of the group, really pleased in terms of what we've delivered. I guess for me, we're now here executing what we said we were going to do sort of 6, 9, 12 months ago, and that is we're maximizing the opportunity in front of us. So a phenomenal job by the team in the company in terms of execution and really scaling what is complex manufacturing. We're then continuing to deliver a strong performance in the rest of the portfolio and then using this period of premium growth to reinvest for future growth. So really good to see that coming through. To your point then more specifically, we're going to get some questions on Photonics. So it's probably worth me just giving a few reminders, setting a bit of background and then coming back to your specific questions. Firstly, as a reminder. As you say, we have got customer confidentiality to work through here. So I'll be a little bit guarded. I think we have been increasing our disclosures, but we've got to be careful and adherent to the confidentiality. Again, as a reminder, a business we acquired back in 2011, around GBP 4 million of revenue at that point. And as I said in the presentation, we've recognize that Photonics had many use cases. We've recognized the quality of the team and the technical expertise. And our org design means that they've had the autonomy to look for those opportunities. And then within the business, and we've talked about it before, the drivers of success and their core characteristics are largely the same as many other companies, if not all the companies in the group. So they've got that agile and entrepreneurial talent, still the founders, in fact, in this instance. They're very close to the customer. In fact, it's an embedded relationship. We work closely with all parts of the team with the customer, including the R&D team, and that's a relationship that's been embedded for over 10 years. And as I say, we've got significant technical skills. We're solving a really complex problem, and it's highly complex manufacturing of what is a small but critical component. So a bit of a reminder there in terms of the background. I've talked to how we're managing it in the group. I guess taking a view at the wider market, which will feed in a little bit to your point in terms of how do you scale is it linked to CapEx. There's no doubt there's lots of commentary and a wide range of views across a number of topics in and around AI, in particular, whether that's valuations, economics of investment, timing and scale of investment. And there's no doubt there's a lot of investment going in and around and a lot of interest in and around AI. I guess we look through the short term there. And if you think about the adoption of AI, in particular, whether that's in our daily lives at home or at work through productivity, automation, innovation, all of that continues to happen. I think it's been referred to as transformative technology in the last week or so. And there's no doubt that we're aligned to that point around compute demand accelerating. So if you've got an underlying demand for compute, then underneath that, that shift is going to require infrastructure and investment. And that's where data warehouses come through. So again, I'm sure lots of different views as there are out there around the absolute scale and timing of that build-out. But fundamentally, as I say, there needs to be a foundation in an infrastructure. And I guess if you take a more specific focus on data centers, there's that real focus at the minute on speed, on latency and more and more now on efficiency and energy consumption. So it's likely that Photonics can play a role in solving some of those problems. So net-net, and we can talk about kind of short-term forecast and all of those things, regardless of absolute scale, regardless of precise timing, we still see that medium-term demand in terms of the operations. All of that said, we mustn't forget that it is a very dynamic market. Whether that's the technology, whether that's the demand cycles. And specifically, again, as a reminder, for our business, we are operating on that 10-year relationship. It's PO-based. We've got sort of 6, 12 months of visibility, but fundamentally, not a contract in place because of that embedded nature, because of the strength of the relationship. So a lot of information there, but hopefully, it just means that everyone on the call is in the same place. Coming back then to your specific questions. As you know, we've been working with the customer for over 10 years. It's iterative in terms of the innovation. We continue to innovate with them. And we grow with them, to your point. So their CapEx investment, what they're investing, we're investing with the customer. In terms of the potential for replacement and upgrade, absolutely, that remains potential in fast-moving innovation, fast-moving technology. We haven't seen that as yet. But clearly, as you take a much longer-term view, there is that opportunity potentially. But again, I'd just come back to that thought around the dynamism in the market, the shifts in technology, et cetera. But certainly, as we sit here today, I think the team are doing a fantastic job locally of executing. And I think the rest of the group are doing an excellent job in terms of continuing to deliver that long-term growth and compounding returns. Unknown Analyst: Very much appreciate it. Maybe just a final one on Safety and the very strong margin that we saw in the first half. And I appreciate that a 6-month window is narrow when it comes to assessing profit margins. But I guess, could you just help us a little bit more with unpacking just why the margin was so strong? Were there any mix elements or anything else that we should be aware of? And just a little bit around how we should be thinking about the trajectory of the safety margin from here? Carole Cran: Bruno, Carole here. I hope you're well. Yes, I mean, as you say, I mean, first and foremost, across all three sectors, a brilliant job in the 6 months and great execution across the piece. As you rightly point out, it is a 6-month period. And so we would never be suggesting that you take 6 months as sort of inferring longer-term trends. And I think it's worth saying as well, it is actually quite unique that we have all three sectors growing with margin progression in a 6-month period. To your specific point on Safety, I mean, as ever in these explanations, there's a number of factors and variables. I mean, as you know, Safety has come off the back of 2 years of double-digit growth. So there's continued momentum through the top line. There is a bit, as you alluded to around, product and portfolio mix in there. And I suppose as we look forward, taking those points. While Safety is well invested, the reality is that you don't grow at that rate without having to then step up your investment further to make sure that you can sustain that growth. So as we look forward into the second half and beyond that, that's our thought process. And as we've said many times before, we're not in the business of chasing the margins higher. It's more that combination of keeping the margin strong whilst keeping the top line moving, too. So a couple of small examples for Safety. You heard Marc talk about two new DCEs in the group. One of those is Safety. You've heard Marc reference investment in M&A. Again, that's the sort of thing that Funmi and the team are thinking about. So as you look forward, think about the need for that additional investment. And I think also worth saying and not something that we major on because it's not a big spend for us, but CapEx-wise, one of the bigger CapEx investments this year is in one of our biggest safety companies where because they've been growing strongly, they're needing to expand their facilities. So that same thought process and logic applies to some of our other safety companies, too. Marc Ronchetti: Thanks, Bruno. So just looking at the list. Jonathan, we'll come to you, Jonathan Hurn. Jonathan Hurn: First question is just coming back to Photonics, Marc and some of the comment or one of the comments you made there just in terms of the visibility. Obviously, you have visibility on the revenue, I think you alluded to through the second half of this year. Can you just talk about the revenue visibility into your next fiscal year? How much of it or how much visibility do you have on '27? And then also just maybe sort of following up on Photonics. Just in terms of the customer exposure, obviously, you've got one key hyperscaler customer. Have you made or are there any efforts within the Photonics business to widen that exposure, maybe get some more customers on board? Essentially, that's the first question. I know it's got certainly two parts. Marc Ronchetti: Carole, do you want to pick up on the first point, and then I'll do the strategy on customers? Carole Cran: Yes, absolutely. Jonathan, I mean you've heard us reference, if we just take half 2 '26 first in terms of the visibility on Photonics. So we've spoken about the premium in the first half being about 8 percentage points of the group growth, and we're expecting similar for the second half. I mean beyond that, you heard Marc obviously articulate and remind everyone the whole position with this customer and how dynamic the market is. And whilst we do get a forward view from the customer for the next 12 months, I think it's fair to say that we would -- we consider that to be directional. And so I suppose coming back to Marc's description clearly, we'll guide for the whole group next June. But the way that I would sort of encourage you to think about the Photonics opportunity at the moment is that we would envisage it being a tailwind going into FY '27. Marc Ronchetti: Thanks, Carole. And Jonathan, just picking up on that point around the customer. As you say, we've got that strong long-term relationship. At this moment in time, strategically, we think it's the right thing to continue with that relationship from a commercial viability perspective. As I say, it's more than just that transactional relationship, that embedded nature and insight from the R&D side, we believe, is a good place to be. That said, both within the individual company, but also the sector in the group, clearly, we're looking at other opportunities to diversify. The reality is with the team and the scaling up, I mean, that is just a phenomenal job in the amount of time that takes -- that's proving difficult locally, but they have set up separate teams, and they'll continue to look. And then as you've heard today, we're doing a great job at the E&A sector of wider areas to look out. We saw Brownline coming in, and then the wider group continuing to grow. So as I say, strategically, today, it's maintained, that customer relationship, but options are always open as we go forward, and we're looking for other opportunities. Jonathan Hurn: Great. Very clear. If I could just ask a second question, just on Healthcare, please. First part of it was just on Life Science. Obviously, a smaller part, probably sort of 10% of the division, but it's the one area that's struggling. Just your views there, when do you start to think that will recover? Do you think that's potentially going to come through in H2? And the second part was just on the margin really. Obviously, we're a long way from the peak in that. Can you just give us a feel for how you think that sort of margin develops for Healthcare going forward, please? Marc Ronchetti: Yes, I'll pick up the first point around Life Sciences. As you say, it is a relatively -- well, it is a small part of the group, relatively small part of the Healthcare portfolio. And particularly, what we're doing there is mainly around specialist pumps, valves and manifolds. We've seen a mixed performance. We've actually seen pretty strong growth in the U.K. and Mainland Europe and then offset by a decline in wider Asia Pacific. But again, it's difficult to read anything into that fundamentally. I wouldn't do a read across anywhere in terms of other businesses in this arena. The reality is, again, we're starting to see a recovery. We're starting to see a bit of confidence in customers. I think we're through the destocking, but we're not at the stage that I'd want to say we were back to normal levels of demand just yet. Carole, if you pick up on that? Carole Cran: Yes, sure. And then on the margin point, actually just picking up what Marc said there, Jonathan. So we're characterizing it as a continued recovery. And there's still some uncertainty clearly in some of the markets. So Steve Brown, our sector CEO and the team are doing a great job and in particular, in the more challenging period sort of last sort of couple of years or so have been quite measured in terms of investment, although not underinvesting. So I suppose in the mix of making sure that we're investing into the recovery and the growth, we would expect to see the margins continue to move forward back towards historic levels. But I think you should think of it as progressively getting towards that point. Marc Ronchetti: Thanks, Jonathan. Just looking at the list. So, if we now go to Christian. Christian Hinderaker: I want to start on Photonics, perhaps unsurprisingly. And apologies if this is a naive question, but you've mapped the macro. As we think about the actual product set, how do we think about useful life of what you sell? And is it a fair assumption to assume that effectively any of your sales are really greenfield data expansion rather than, say, upgrades in existing facilities? Marc Ronchetti: Yes. I've got to be a little bit careful here, Christian, in terms of the confidentiality. I'll just come back to the point that I made to -- I think it was Jonathan's question. At this moment in time, we believe that a lot of that demand is CapEx and build-out. But we do believe that haven't seen it yet, but just by natural instance of the pace of change and the increase in innovation, there may be a replacement cycle. But as I say, we're not seeing that yet, and this is a dynamic market. So I certainly wouldn't want to pin any future definite guidance on that at all. Christian Hinderaker: And maybe pivoting to the Safety business. I was interested in your regional growth commentary there, marginal growth in the U.S., which compared to good growth in the U.K. and it seems strongest growth in Mainland Europe. Curious what's driving that distinction. It seems to be a bit at odds with maybe broader macro trends. Carole Cran: Christian, Carole here. Yes, I mean, I think as you probably heard us say before, we don't particularly sort of focus on the explanations around the geographies. And you have heard us reference the particular strength in public sector and worker safety. So that's really what you're seeing coming through the geographies. So nothing that we would consider to be structural, I suppose. And yes, I mean, really sort of one of our bigger business, bigger safety businesses is doing particularly well, which is benefiting the European numbers. And then in the U.S., for example, we talk about the other two subsectors being a little bit softer in Infrastructure Safety and Fire Safety. Some of that is in the comps where there was a couple of bigger projects last year. So I suppose in the round and I guess the genesis of your question about whether there's something more structural by geography, then no, we're not seeing any discernible trends that would indicate that. Marc Ronchetti: Christian, I'd see you've got a written question. So maybe we just pick that one up as well. And if I just read that out to the Brownline acquisition sits among the top 3 deals by size over the last 20 years. Does this reflect an appetite to do more medium-sized acquisitions? Secondly, when we think about those M&A ambitions, does the increased concentration of sales from Photonics affect your preferences across the segments? So I guess if I just pick up the second part of that first, not necessarily. We're open for business across all of our sectors, all geographies. So it isn't that we're looking to avoid certain areas or double down in certain areas. We're looking for those opportunities much through the lens as we always do with that disciplined approach that we have to M&A. From a deal size perspective, I guess the reality is as we continue to grow, we do get a higher level of confidence in our ability to bring value to larger companies. So those businesses at the top end of our portfolio around sort of that GBP 30 million, GBP 40 million, GBP 50 million of EBIT, they're still growing at the same rate as the rest of the group. So we've got confidence that we can bring value to those businesses. All of that said, with our aspiration at 7.5% each year on M&A, take that on GBP 0.5 billion, we're looking to acquire GBP 40 million next year, double that in 5 years, double again. It's a long, long time before you have to do anything transformative. So I think we've got the opportunity, we've got the appetite. I think we've -- as we've seen before, we've got the opportunity to do even more bolt-ons as our companies get bigger by size and they use bolt-ons to deliver their own growth strategies. But at the same time, we've got that confidence to do bigger deals than maybe we have done historically. But I don't see it as a significant shift in strategy, it's much more aligned to us being clear on the value we bring and having confidence in those future cash flows. No worries. Thanks, Christian. So is there anyone else just on the call? Dylan, I can see you've got your hand up. Dylan, on mute maybe. Dylan Jones: Apologies for that. Can you hear me now? Marc Ronchetti: Yes, perfect. Dylan Jones: Just another follow-up on Photonics and obviously, being appreciative of the fact that you're limited somewhat to what you can say. But I'm just wondering if there -- along with product sales, there's also opportunities for service and maintenance sort of post sale, particularly with this hyperscaler sort of customer in the aftermarket that could potentially sort of help smooth the growth trajectory over time. Obviously, I understand that the market dynamics are incredibly favorable and they look favorable for the foreseeable future and perhaps getting a little bit or perhaps a little bit early to be thinking about this. But just sort of wondering what levers are within that Photonics business' control to sort of deliver a sort of steady return or normalized sort of growth rate in the longer time, sort of avoiding that sort of sharp drop off, if you will? Marc Ronchetti: Yes. I think, unfortunately, what we're talking about here, Dylan, is kind of hypothetical in what is a very dynamic market. I guess I would just come back to three points there to think through. One is just the embedded nature in the long-term relationship. Two is the real -- and I just cannot undercommunicate the real expertise that we have in our company in terms of the use of photonics and the application in solving the problems. And then finally, I think coming back to that point I made earlier, if you think about kind of the need for increased speed, the need for increased energy efficiency, there's quite a bit of commentary out there that Photonics potentially has a role to play. So you put those things together, and I think you come back with hypothetically, but I certainly wouldn't want to be sitting here today making a call for something 10, 15, 20 years out. Dylan Jones: No, I appreciate that. And one last question. I think you sort of guided for, obviously, the step-up in CapEx. You kind of alluded to there's a bit sort of going on in Safety, but also the sort of corporate cost line, I think you've guided to be just a little bit higher. Should we sort of think about that as the sort of recent investment in the M&A capabilities? Or is there some other investment going on in the sort of corporate cost line? Carole Cran: Dylan, I'll take those. Yes, and I'll pick up actually on your CapEx point as well, which is well made. Yes. So we've moved our CapEx guidance up by about GBP 5 million. So the majority of that actually relates to Brownline, which is obviously a good news story because it means that the prospects are good, and it's something that we envisaged in completing the deal. So that addresses the CapEx increase. And then on the central costs, they tend to run around 2% of revenue and the slight increase is a bit of a mixture of things actually, a little bit more into the central costs that support M&A. So for example, we support centrally the integration activity of new acquisitions and also more specialist areas around tax advice and those sorts of costs. And then the broader sort of theme of technology, also make sure that we're well invested in the center around areas like AI that Marc has obviously been talking about and what that can mean for us as a group, and also the ever-present investment that is required in things like cybersecurity. So hopefully, that gives you a flavor of what's driving those. Marc Ronchetti: Thanks, Carole. That nicely answered a written question from Rory as well. But Rory, put your hand up if it didn't cover it, but I think it did. So I think we've got time certainly for one more question. Bruno, is your hand up for a new question? Or is that a legacy of having the first question? You're on mute as well, I think. Unknown Analyst: Just a follow-up question really around reinvestment in the group. I was wondering how you think about reinvestment during a period of premium growth in one area and allocation across the portfolio of the group. So do areas outside of Photonics essentially disproportionately benefit during this period? And so does your confidence of strong growth in, say, Safety and Healthcare actually start to increase as you look towards the following years? Or is it that your investment plans remain largely unchanged regardless of where the premium growth is occurring? Marc Ronchetti: Yes. It's a good question. I think the philosophy, certainly from an R&D expenditure is it's largely unchanged. That's very much bottom up. We've never restricted capital to the individual business. It's our #1 capital allocation priority in terms of R&D spend. So that doesn't necessarily change. We're not saying no to businesses. There's an opportunity there to invest. I do think to the point that Carole just alluded to, there's a bit of investment that we can do in the M&A teams. There's a bit of investment that we can do in the sector teams. And of course, the other opportunity, as we've talked to many times, is the opportunity to accelerate M&A, which, again, you make those investments, we cannot lose the discipline. So I think net-net, absolutely, that's part of our strategy, how do we reinvest through this period of premium growth to give us that future compounding growth. But I don't think it is specifically to the point in R&D per se. It will be more around M&A and anything that we can do at the sector level because, as I say, the R&D is very much bottom up and open for everybody. Unknown Analyst: Got it. That's very clear. And just a small, I guess, clarification. When we speak around orders growing year-over-year and positive book-to-bill, does that hold for, I guess, Photonics and also outside of Photonics? Carole Cran: Yes, it does, Bruno. Marc Ronchetti: Excellent. Thanks, Bruno. And thank you all. I don't see any other written questions, and I don't see any hands up. So many thanks, and have a great morning, and we will speak to you soon.
Norman Choong: Okay. Good evening, ladies and gentlemen. Thanks for joining this call today of PT Bumi Resources 9 months 2025 Earnings Call. My name is Norman Choong, I'll be your operator today. So we're very honored to have this call being hosted by Pak Andrew Beckham, Chief Operating Officer of Bumi; and also Pak Christopher Fong, the Chief Corporate Affairs Officer of Bumi. So as usual, we will run through the operational stats of 3Q '25, then followed by question-and-answer session. Pak Andrew, I'll pass the floor to you. Andrew Beckham: Thank you, Norman. Good evening, good afternoon, good morning to everyone here. Let me go through the slides. Next slide, please. Okay, okay. Production for the 9 months 2025 was at 54.9 million tonnes, down slightly from 2024 of 57.3 million tonnes, mainly due to the heavy rain, especially in the third quarter at KPC. Prices, realized coal prices for 9 months decreased $60 -- to $60 versus $73 in 9 months 2024, in line with the global coal market. Production costs, overall production costs came down mainly due to lower unit costs at KPC, and I'll go on to more details in that, driven by the oil price and stripping ratio. Next slide, please. Our guidance remains at this 73 million tonnes, 75 million tonnes of sales. We're limited by production, which is under the RKAB, so we can't get more coal produced out of KPC, but we will be well set up for the first quarter because of that. Prices are between $59 and $61. It's possible that we beat that if the fourth quarter continues to move up a little as it is doing at the moment. Cost-wise, we're running around the lower end of our guidance at $42, and we've reduced our strip ratio slightly and fuel costs, as we've mentioned. Next slide, please. Global markets, international coal prices have been pretty flat, down towards the summer. And as usual, towards the winter in the Northern Hemisphere, you're seeing prices tick up a bit. There's a bit more demand now from October, November in China, and prices are just coming up. I think you'll see that continue up until halfway through December. And then it will go pretty flat as the Christmas holiday is coming. But we see a little bit of improvement in the prices at the moment. Next slide, please. The forward curve is running long term, still at $120, $122 in calendar '27. The GC NEWC referring to here. This is still up at $108, $109. And there's a lot of -- I think if the markets, global markets continue to perform, you'll see this $113 to $116 in calendar '26 a big possibility. Next slide, please. With regards to the operations overall, in our sales for 9 months with 54.5 million tonnes compared to 55.8 million tonnes, there's a slight drop of 2%. This is because we -- our strip ratio has come down. You can see at KPC, we're at 8.6 year-to-date versus 9.2 last year. That's because we have opened up mines. We have improved the -- now the mines will be in there in a more stable position. So you'll see that strip ratio being slightly down. It will continue slightly down next year, if all goes to plan. Coal mined is slightly -- is below because of the wet weather in the third quarter that we've had, and rain continues at both KPC and Arutmin at the moment. Prices wise, the FOB prices are down 20% at KPC, and down 8% at Arutmin. Arutmin's price has fallen less because it sells more domestic coal. And so therefore, there's a fixed price there of $70 benchmark, which takes it from that increase from that sort of global market fall plus the fact that we have a lot more of the 4,200 to 5,000 CV coal, which is -- has maintained its price better than the very high-grade coal. Next slide, please. Here, you can see the rainfall and KPC at the top has pretty much 5, 6 months, over on the red is the actual against the long-term averages. And for 5, 6 months, it's been -- there's been 5 months that have actually been above the long term, and over the last August, September and coming into October, we've been at higher levels, continues at the moment. Rainfall itself, Kalimantan and Arutmin has been less than the global trends and has stayed pretty stable all the way through. Next slide, please. As I said, overburden has come down because of the unfavorable weather, but also because of our strip ratio at KPC. You can see Arutmin is slightly down from last year. Coal mined is slightly down by about 3%, 4%, but that's because of the weather and KPC now restricting its production based on RKAB requirements. Next slide, please. Coal sales, almost the same, not far off. We've used up the inventory. We have quite a bit of inventory. We will see inventory levels come very low towards the end of the year as we maximize as much sales as possible. And we'll probably into the first quarter have a tight stockpile there. Arutmin has been here and is slightly up on last year in terms of sales. As I mentioned, stripping ratios are down at both KPC and Arutmin, and that's part of the mine plan, our long-term mine plans that we see into 2024, the prices -- the mines was open, and now we're seeing the benefit come through. Next slide, please. Production costs, we reduced our costs. As I said, because of the strip ratio and because of fuel oil prices coming down, I'll talk more about that later. Arutmin maintained its costs slightly down on last year. And FOB price, as we all know, has dropped about 18% overall, especially at KPC, has been a big drop. Next slide, please. Average selling prices, as I mentioned, you can see the big drop from the international prices of $82.8 down to $67.4. That's been a major trouble for us. And the fact that the HPB has been following slowly behind doesn't help when we try to do our royalty payments and tax payments are now covering -- are based on that HPB if it's higher than the realized price we got. So it makes it harder for us. In a rising market, we don't have that problem. Average selling prices overall were from $73.7 to $60.4. Next slide, please. This is the fuel. You see we're running at about 1.12, 1.13 in the last quarter at the moment. Remember, we're now using B40 solution, which is biofuels 40% and that's more expensive than pure diesel. And so therefore, we're paying probably about $0.05 to $0.10 a tonne -- $0.05 to $0.10 a liter more than any other normal operations or normal industry in Indonesia. So it's another penalty that we have to take into consideration. And if they go to B50, that will have an effect on our fuel costs. Next slide, please. Bumi's reporting, we were running -- if you look at the revenue, we're up on our revenues because of BRMS improvement, our gross profit has improved. However, our net profit has come down. The main reasons for that, if we look at the other income and expense, it's been the KPC earnings because of the drop in coal price and write-offs in BRMS, our subsidiary of one of its assets. And in the income tax and profit sharing when you compare to 2024, in 2024, there was a deferred tax adjustment, which gave it a benefit of about $60 million, $70 million, which benefited. So you saw an improvement in the profit last year. However, operational wise, we're in a very good position, just we need the prices to recover. Assets, liabilities are running, are pretty strong. We're still at current ratio of 1 and also equities higher at $2.8 billion. Next slide, please. This just gives you the consolidated numbers, as we've done before, just to highlight the size of the revenues of $3.5 million against $4.2 million. These are in the back of the financial statements, I think Note 41-- 42 or 43, if you ever need quarterly numbers. Carry on, please. And this just gives you the comparison between the 2, just so you understand, we're not -- the numbers are set, the bottom line is still the same, but it does have an effect on all our numbers. Next slide, please. So overall, when you look at consolidated revenues are down 17%, but we've managed to reduce costs as well. Thanks to fuel, but also thanks to the mining, bringing our strip ratios down. Our gross profit is down overall when you include KPC and our operating income is slightly down by 22%. Operating margins remain pretty -- not significant change. But we hope with coal prices ticking up over the next couple of months, we should see a good fourth quarter. Next slide, please. Bumi's financial highlight, as I said, the equity is slightly down overall year-to-date from December. And the last 12 months consolidated adjusted EBITDA is running at $277 million at the moment, slightly down on last -- on 2024 because of coal prices. Next slide. And this is just in quarter-by-quarter, how the start up. And you can see the EBITDA each quarter from this year, like Q1 '25 has gradually increased as formatting prices slightly rise. If prices continue to rise in Q4, we should see that slightly better as well. Next slide, please. Cash still remains strong at $314 million in total. Below are the breakdown of KPC. Note that we have the restricted fund, the CDA. Restricted fund is for payment of contractors at the end of the month or it gets paid the following month, the 1 or 2 days after the year closed. The mine closure deposits, you have there of $45,000 and $55 million -- over $100 million is for mine closure assuming we get our extensions, we' have to keep these in bonds in with the government, even though we have probably another 15 years of mine life to go. So it is quite frustrating, but that's the rules with the government. Next slide, please. ESG, would you like to? Christopher Fong: Yes. We're on track year by year, so to the 9 months compared to 2024. We have -- our CSR programs were at $3.5 million. We're on track to spend what has been targeted. Our environmental spend overall is on track, and we will end up spending somewhere in the vicinity of $76 million, and that covers reclamation, planting trees and protecting our environment. Also safety issues, gas emissions, et cetera. What we don't have in this document, which we're doing a lot of work on, we've talked about it previously, is the ESG work we're undertaking now in terms of setting standards and emission targets and reporting on them. Also related to issues such as the weather issues at KPC, we have implemented research in terms of predictive ESG to using our data from all our weather stations to determine better usage of working days and to increase production and also maintenance days. So that's a program that will be -- is ongoing. It started the last few months, and we'll be reporting on results from that as we move forward into the new year. But it is certainly positive in the work we're doing, undertaking on an ESG platform. Moving on. Yes. Andrew Beckham: Norman, that's about it. We won't go into the detail, but KPC details and Arutmin details are attached so that people have the breakdown of the key assets, the coal assets. But we're happy to open it up to questions and -- questions now. Norman Choong: Thank you, Pak Andrew. Thank you, Pak Chris. [Operator Instructions] Okay. I think audience needs some time to warm up. Let me kick it off first. But I wanted to check with you, what's your view on your 2026 coal production numbers because I understand that a lot of mining companies are in the process to submit RKAB for next year. That's my first question. Andrew Beckham: Yes. Yes, we all submitted. I think all our player base are in waiting for the government. I think they're having a big review on the total level of coal production they want. I know it was -- used to be about 800 million to 900 million, it came down to 750 million this year, but I understand they are looking at further reductions. To be honest, I don't know what the results of that are going to be. but we're waiting to hear from the government on our RKAB. Norman Choong: I see. The amount that you've submitted is the same as 2025, is it? Andrew Beckham: Slightly up. It will be slightly up because Arutmin will be probably raising its production. Norman Choong: Got it. You also had an EGM yesterday. Can you like run us through what was the key result from the EGM? Christopher Fong: Yes, I'm happy to do that. The EGM, the basis of the EGM was firstly, to address the resignations of the CIC directors. And so it was a formality in having the EGM recognizing their resignation. Also, there was a change in one other person. The CFO has been -- has moved to a new position outside the group. So those were the 2 main areas of -- and purpose of having the EGM. And also there was one appointment, which was myself as a Director. Norman Choong: Congratulations, Pak Chris. Do we have any questions from the floor? Let's see. Okay, otherwise, I'll follow up with my question. But from the news, it seems like Bumi Group is quite active in M&A recently. So we have this Wolfram acquisition and Laman Mining, right? So just wanted to understand, does it seems to be -- does it mean that there's a change of direction where Bumi now have more flexible in terms of doing asset acquisition? And how is the -- maybe in terms of the financial muscle side of things looks like? Christopher Fong: Well, look, there's no secret that this year has been -- is a year of transformation at Bumi. We announced to the market fairly early this year that we are going through a diversification strategy. I think the market has been fairly surprised in the speed that we've taken this on. And that was the first announcement of the asset in Australia, which is a copper and gold asset, Wolfram Limited. We now have 100% of that asset. It's in Northern Queensland in Australia. We visited that site recently, the President and Director and myself and a few other directors. It wasn't the first visit from Bumi, but it was certainly the first visit for myself. It's a fantastic asset. It's in care and maintenance. So it's a brownfield asset. It will be up and running very quickly. We initially targeted for June next year, although we're keeping to that, but we expect that this will be sped up, and we will announce that when we are ready to. It's, as I said, it's a very good asset. It has a lot of data, it has a lot of resources and it has processing on site. So we expect to have some very positive news as we move forward into the new year on that particular asset. Also on our website, we have announced another asset in Australia called Jubilee Metals. And that, there will be more information next month on that, but it is also a gold play. So that's the second asset in Australia that we have acquired. So as I said, there'll be further news on that in December. And also what you just mentioned, bauxite. So we've had some agreements on bauxite. They're going through a legal process. And as the market well knows that the bauxite industry is well established in Indonesia and there are some issues over export. So we -- as the market expects, there will be further announcements, what we do with bauxite and when we do it in the near future. So we can certainly move forward in a transition plan that I think has taken the market by surprise because we talked about it, but we actually are doing it. Norman Choong: Thank you, Pak Chris. Maybe to follow up on this one, right? So these 2 acquisitions, are they funded by internal cash or debt? And further related to in terms of debt funding, could you remind us, what is the current covenant in terms of debt and fund raising? Andrew Beckham: We've done the raising. We create some of the money through the bond program that we have, the rupiah bond program that we have. Rates are around 8.5% to 9%, depending on the tenure. Those have been the ones funded. We have no specific covenants other than the normal bond regulations in Indonesia. But we don't -- we're very confident with gold prices and copper prices where they are. We expect payback within 1 to 2 years on these projects. Norman Choong: Okay. We have questions from the box already. The first one is from [ Benjamin Michael. ] How big is the bauxite resources of Laman Mining? And how big is alumina smelter? Andrew Beckham: Laman Mining has, I think reserves of about 30 million tonnes, but potentially, that could increase with a little bit more. There's a discussion over one area and an agreement. If that agreement is found, that would probably increase it to 50 million tonnes. And what was the second question, sorry? Norman Choong: The alumina smelter, how big is the capacity? Andrew Beckham: That, we haven't gone into detail. We can't go into detail at the moment. We'll announce when that -- we get to that point. Norman Choong: Okay, sure. I hope that answered your questions, Benjamin. Christopher Fong: What we can say is that part of our diversification strategy is not just going into minerals away from thermal coal, but also into downstream processing. So as I mentioned before, we cannot export bauxite, and bauxite can't be exported from Indonesia. So naturally, there will be a downstream processing component to that, but we will announce that in due course. Norman Choong: Sure. Second question is coming from [ Alden Lam ]. Is Pak Ashok Mitra still in KBC as CEO? That's his first question. Andrew Beckham: No. No. He's not already in the group. He's outside that now. Norman Choong: Okay. His second question is, can you share your thoughts on the impact of B50 to the Bumi mining cost? Andrew Beckham: I can't give you a number at the moment. I haven't done the numbers, but I should expect another $0.05 to $0.10 per liter, it may well cost if the subsidy that used to be there by the government is still not there. Norman Choong: Got it. Andrew, I have a client who just texted me. Question is with regards to the 2 directors from CIC that has just resigned from the EGM, does it mean that CIC will totally exit from the business? What do you think about it? Andrew Beckham: We understand the China government has a policy of not being invested in thermal coal. Yes. And that's what we believe is the reason. And if you see in the public markets, they're selling down their shares in Bumi at the moment. So we assume that, that's the plan, that's why they resigned and their plan is to exit. I think this is their last thermal coal asset that CIC has. Norman Choong: Got it. Okay. A question from [ Yoga ]. Can you share production outlook for Wolfram and Jubilee Mining including annual production target and cash costs? Christopher Fong: For Wolfram Mining, on an annualized basis, commencing in June 2026, we're expecting 50,000 ounces at this stage. Although we won't be surprised if we commenced production prior to that date. Andrew Beckham: Yes. And I think Jubilee would do about 25,000 once it's in full production. Cost wise, we'll come back to you once the budgets are closed and finished. Norman Choong: Okay. Can I follow up on these two? What are the rough mine life that we should expect with this kind of production? Andrew Beckham: Well, with gold, it's always a case of you drill as you go over and place the years. There's long mine life in both of them based on the potential resources and reserves available. And we'll update as we go, but we have more than enough mine life to get our money back and a good return. Norman Choong: Got it. Benjamin has more questions. He's asking, who is replacing Pak Ashok following the end of his tenure? And any other potential M&A going forward? Andrew Beckham: Well, at the moment, I'm acting CFO as well. There's a discussion, a big discussion going on internally and once it's been resolved, then we'll make an announcement. Christopher Fong: And to the second question, which I'm happy to answer. It's also no secret of our expansion plans in terms of the transition model. And we're expecting in the next -- within 5 years to be an EBITDA basis, 50% in par with our coal. So therefore, naturally, we will be announcing further acquisitions as we move forward. And we expect that in the next 6 to 12 months. Andrew Beckham: Norman, we can see what you're writing. I don't know if that was... Norman Choong: So sorry. So sorry. I mean I have to write it down, right? So yes, so sorry. I forgot to off my screen. Christopher Fong: So what I'm saying is, yes, it's very clear that we're undertaking a very aggressive transformation and we have a very big unit who are focusing on assets, not just in Australia but also in Indonesia. So that has been reflected in some of the announcements that we've talked about today, and there certainly will be more coming. But we also don't discount that -- look, we're still in thermal coal. We are very focused on streamlining, sorry, excuse me, that production. And that -- and you would have seen those results today that was significant savings and cost savings we're seeing at the mine. And that will continue. So we're very much focused on thermal coal. But as we expand in this transition, you'll see more metals and you'll see more downstream processing assets come on board. Norman Choong: Okay. Anyone have more questions? Yes. It seems there's no more questions. Maybe let's wait for a little bit more. Yes, I think there's no more questions from everyone. Okay. So that concludes the earnings call today. Thank you, Pak Andrew. Thank you, Pak Chris, for doing this for us. As usual, if you have questions, you know you can reach out to them directly or you can reach out to me. Christopher Fong: Sorry, Norman. Can I just add that, look, apart from this transformation, there has been a significant restructuring at Bumi. We have a much larger, more -- larger Investor Relations department. And we're very transparent so we're very happy for engagement from anybody who has questions about the business. Andrew Beckham: And if you're not getting the updates from the company, please contact us here. Norman Choong: Sure thing. Thank you so much. Thanks, everyone. Andrew Beckham: Thanks, Norman. Christopher Fong: Thank you. Norman Choong: Thank you.
Andrew Jones: Great. Good morning, ladies and gentlemen, and welcome to LondonMetric's half year results presentation. It's very rare that we're in such salubrious accommodation as this. I hope it's rent-free. It's an office building, it must be. Sorry, cheap shot. Okay, that's the tick-tick, dirt went off. Right. Go down the list in a minute. Right. So normal lineup this morning. I'm going to give you a quick overview. I'm going to hog all the good numbers, pass over to Martin. He'll do a deep dive for you. And then I'll come back to talk about our activity and the makeup of the portfolio and our outlook for the periods ahead. And then we'll open it up to Q&A. And we have our team in the front row, which actually now includes Carl, which is good. So any really difficult questions are going his way. And then hopefully, we'll be all wrapped up by about 11. So -- okay. So we retain our position, in our opinion, as the U.K.'s triple or leading triple net income REIT. Our objective is to continue to own mission-critical assets across the winning sectors of real estate. I come on to talk about this a little bit later because it is a theme throughout the presentation. We want to be -- we want to make the right macro calls. Logistics is our strongest exposure, partly because it gives us the best rental growth. So that's back up at 54%. And then we have our hospitality and entertainment, which is dominated by our hotels and our theme parks at just under 18% and then our convenience retail assets at 14%. So those are our 3 key areas with health care making up the fourth. As a result, our objective must be to grow our income. That's what we are. We are a triple net income compounding business. And our net rental income, as you can see in front of you, is up 15%. Again, we'll come on to talk about that in a little bit more detail, and that has obviously allowed us to progress our dividend. We announced this morning a Q2 dividend of 3.05p, which gives us 6.1p for the period, which is up 7% on where it was last year. And obviously, we expect that to continue. We are well on track for our 11th year of dividend growth. We also operate the lowest cost platform in the sector with a sector-leading EPRA cost ratio, down from, I think, 7.8% at the full year to 7.7%. And despite Martin's objections, we obviously think that, that should fall lower in the coming periods. The portfolio is focused on reliable, repetitive and growing income. It's a strap line that we've now used for many, many years. It doesn't need to change. And that is supported by, again, 5.2% like-for-like annualized rental growth, and that's largely driven by 2 things. Uplift on rent review. You can see there, 18% is our average uplift. Open market was at 24%. Our open market logistics was 27%. And then our leasing and regears delivered another 24% above previous passing. So that's what -- you put all those together, that's how we deliver that 5.2% annualized income growth. In the period, this translated into GBP 10 million of additional rental income. And again, we'll come on and talk about -- we've got a good slide on this later on in the presentation. We have a further GBP 28 million that we expect to collect over the next 18 months from rent reviews and lease renewals. We expect that and hope that will be higher because it doesn't include asset management initiatives, and it doesn't include the leasing up of vacant space that we currently have in the portfolio. The total property return, you see it there at 3.3%. We come on to talk about that in a little bit more detail later on in my second stint. So turning then to the financial highlights. EPRA earnings were up at GBP 148.6 million. That's driven by a 15% increase in our net rental income. You see there on the right-hand side. That has driven an increase in our earnings per share at 6.7p, up slightly on where it was this time last year. But equally important, it's 28% higher than where it was in September '23. So we've seen a 28% increase over the last 2 years in our EPRA earnings. And that has allowed us, as I touched on, on the earlier slide, to increase our half year dividend to 6.1p. Again, that's up 7% in the year. It's actually up 27% over the 2 years. Total accounting return for the period, 4.1% if I exclude the huge banking fees that we paid for the -- in our various M&A transactions. If you strip those out, it's at 3.3%. Portfolio value is up 22% to GBP 7.4 billion. Relatively flat EPRA NTA, up on where it was a year ago, flat on where it was in March at 199.5p. And our LTV is up marginally at 35%, and that reflects the GBP 200 million cash component of the Urban Logistics acquisition that we completed on earlier in the summer. And we feel pretty comfortable with that. It may go up, it may go down. That will be dependent upon opportunities that we see in the -- by and large, in the investment market. And then just again, to steal one of Martin's slides, the dividend, I should say, is -- you can see there, 111% covered with a full cash cover as well. So on that note, I'll pass over to Martin, and then I'll come back to take you through the portfolio. Martin McGann: Okay. So good morning. So there's nothing here he hasn't covered. So I'm going to do it anyway. So look, following an intense period of M&A activity and asset recycling, we've delivered very significant earnings growth and dividend progression. Pleased to report net rental income is GBP 221.2 million, an increase of 14.6% over last year. The acquisitions of Highcroft and Urban Logistics, which contributed only for 4 and 3 months, respectively, and other acquisitions during the period have added GBP 27.6 million of additional rent. We've also added GBP 6.6 million of additional rent from our existing properties and developments. We lost GBP 12.2 million of rent from asset disposals during the period. Our rent collection remains exceptionally strong. We've collected 99.5% of rents due. Our gross to net income leakage remains very low at 1.5%. Our administrative overhead for the period is GBP 14.6 million. And our EPRA cost ratio continues to be sector-leading at 7.7%, I think, reflecting operational synergies and the culture of cost control. The increase in overheads in the period is almost exclusively headcount and remuneration costs. Our headcount is now 54, up from 48 at the year-end. That's a combination of former Urban Logistics employees, but also new recruits that we've made to ensure that we have the right level of resource and the right skills for the enlarged business. Our net finance costs have increased to GBP 59.7 million compared to GBP 45.4 million last year. That's an increase of 31.5%. This was due to the additional GBP 484 million of debt from our corporate acquisitions that came in at an average cost of 4.26%, which compared to LMP's cost of debt at that time of 4%. We've also run a higher drawn debt balance during the period. So despite the increase in financing costs, that tight cost control on top of revenue growth, income growth has driven our EPRA earnings to GBP 148.6 million or 6.7p per share, an increase of 9.7% over last year and supports the increase to the dividend, which I think Andrew only mentioned actually 3x for the period to 6.1p per share, providing very strong 100% dividend cover and importantly, full cash cover. So our trading performance has been strong with the portfolio valuations increasing by GBP 29.1 million, allowing us to report IFRS profits of GBP 130.3 million. This actually reflects a reduction on IFRS profits compared to last year, but it does include the full impact of M&A acquisition costs and goodwill impairment in the period. So there's been further significant change to the balance sheet this period as it reflects our most recent M&A. The acquisition of Highcroft added GBP 81 million of investment properties to the balance sheet and the acquisition of Urban Logistics a further GBP 1.14 billion to bring the total value of the portfolio to GBP 7.4 billion. In addition to our M&A activity, our active asset recycling has delivered GBP 125 million of other acquisition, development and capital expenditure, partly offsetting the divestment of GBP 155 million of noncore assets. This, together with our revaluation uplift of GBP 29.1 million, has contributed to the increased portfolio value. Gross debt, which I'll come on to in a moment, is GBP 2.8 billion, and the cash balance is GBP 206 million. The other net liability position at the period is GBP 116 million, rent paid in advance accounting for GBP 78 million worth of that amount. In summary, therefore, our EPRA net tangible assets at the year-end were GBP 4.67 billion or 199.5p per share, providing -- producing a 4.1% total accounting return after adjusting for those M&A costs and goodwill impairment. So as I've said, our gross debt balance is now GBP 2.8 billion. The increase is partly a result of our M&A activity through which we acquired GBP 484 million of new secured debt facilities and also other new facilities entered into during the period, which I'll come on to on the next slide. Our debt maturity now stands at 4.2 years compared with 4.7 years at the year-end. We expect to maintain that level of debt maturity by the year-end despite the passing of a further 6 months, as we launch into our public bond program. Our average cost of debt is 4.1% compared to 4% at the year-end, and we do not expect our finance cost to increase materially, as we manage debt maturities over the next 3 years. Our net debt-to-EBITDA stands at 6.9x, which is trending downwards as our earnings increase and is comfortably within our upper limit of 8.5x. Our policy continues to be to limit our exposure to interest rate volatility by entering into hedging and fixed rate arrangements. We acquired GBP 140 million of interest rate swaps through the Urban Logistics acquisition at an average cost of 3.2%. We continue to be well protected against adverse movements in interest rates. And at the period end, our drawn debt was 94% hedged. As a result of the GBP 205 million cash component to the acquisition of Urban Logistics, our LTV is now at 35.1% compared to 32.7% at the year-end. Looking further forward, we'll continue to manage our debt arrangements to ensure that refinancing risk is mitigated and that we are able to take advantage of our increased scale and credit rating to diversify our funding sources. We strengthened our financial position in the period by completing 2 new unsecured revolving credit facilities totaling GBP 350 million with new lenders at margins below our existing comparable facilities. We completed a new 3-year unsecured term loan of GBP 180 million at an even tighter margin. And we entered into a new GBP 150 million U.S. private placement, as a credit spread ahead of any other private placement by any European REIT in the last 3 years. That amount was drawn post period end. And since that period end, we've entered into a further facility for GBP 50 million with a new lender at a margin of 125 basis points. Crucially, I think this new well-priced liquidity has allowed us to repay on maturity facilities post period end with AIG, L&G and Canada Life, which bought fixed rate pricing materially more expensive than our new debt facilities and was therefore, earnings enhancing. Additionally, we repaid the most expensive tranche of the Urban Logistics debt of GBP 57.3 million, which was costing us 6.17%. As I said in the summer, our successful credit rating now allows us to plan for possible future debt capital markets activity in the form of a public bond issue to cover debt maturities in financial years 2027, 2028 and 2029. We are preparing for such an issue and expect to be active imminently. Our contracted rent roll at the period end now stands at GBP 421.1 million with the inclusion of rent on the Highcroft and Urban Logistics acquisitions. Additional rent of GBP 9.8 million in the period was generated from active asset management, rent reviews and regears. Looking further forward, reversion within the LMP portfolio and the newly acquired Urban Logistics portfolio is expected to add GBP 28 million of contracted rent. The rent roll will increase as a result to GBP 450 million. This is, I think, a conservative view of growth post period end, as it takes no account of that active asset management initiatives and initiatives not yet executed and the letting of vacant properties. This generation of significant earnings growth supports our confidence that we will continue to be able to grow our earnings and our well-covered dividend. With this in mind, we've increased our quarterly dividend payment, as Andrew said, for HY '26 to 3.05p per quarter, an increase of 7% on HY '25. And then finally, just that look back at the last 11 years now, during which we've been able to increase earnings per share more than threefold. We're in our 11th year of dividend progression with excellent dividend cover and significantly ahead of the growth in CPI. Our total property return is strong, an 11-year CAGR of 10%, a very material outperformance against the MSCI or Properties Index. Our total shareholder return driven both by share price appreciation and dividend progression equates to a compound annual growth rate of 10%. On that note, I'll hand back to Andrew. Andrew Jones: Okay. Thanks, Martin. Right. So this is a look at how the portfolio sits today, GBP 7.4 billion split really against those 4 key sectors that I touched on in my opening remarks. Logistics now up from 46% to 54%. Our largest investment, as you can see there, about GBP 4 billion, and that is driving and delivering the strongest rental growth, and we see that continuing over the next few years through rent reviews and lease renewals. Hotels and Leisure remain a key beneficiary of the shift in discretionary spending. And in the period, we've continued to add new Premier Inn investments through a sale and leaseback transaction with Whitbread and hopefully, we have more to come. Our convenience investments is very much around the grocery sector. It is -- we're Aldi, we're Lidl, we're M&S, we're Waitrose, we're Home Bargains, a bit of B&M sort of thing. We're not the big supermarkets. And that we see it delivers great, great solid income with around about 3% rental growth to come. In health care, we're working with Ramsay to -- on initiatives that will improve the profitability and the desirability of our private hospitals and -- both from their perspective and for ours, and we're hopeful that we'll be able to talk about that shortly. But overall, as you can see from the numbers there on the right-hand side, it remains reversionary and on track, as Martin showed you on his last but one slide to deliver further increases in rent over the coming years. That 3.3% number that you see there at the bottom of the column is the -- effectively is the CAGR of the 18% on the rent reviews and the lease renewals that I touched on in our opening slide. We actually see that accelerating a little bit over the next couple of years. And that will be as much around reversions as around how many reviews are coming through and where they sit. So investment activity, the macro environment remains uncertain. We still believe that interest rates are the yardstick by which all investments need to be assessed. Current swap rates, they move around. I mean -- I think they peaked this year at 412. And I think about this time last week, they were down at 357, which is very exciting. And then all of a sudden, we're up about 15. I think we're 373 today. I mean, just it creates uncertainty and without a doubt, impacts on liquidity, particularly on the larger lot sizes. I mean we put in here -- GBP 20 million is a number. I mean we could bring it down a little bit. We could move it up a bit. But GBP 20 million is what we think above that, we think that it gets more difficult because it does require some debt buyers. However, we are enjoying much, much more success, greater liquidity in the smaller lot sizes. We've sold year-to-date GBP 212 million of assets, average lot size of GBP 6 million. So that's an awful lot of transactions. I think it's 36 transactions in the period. And we are dealing with a completely different array of buyers. It is -- there's a lot of owner-occupiers, family offices, small property companies, local authority pension funds. And we are transacting in a wide range of assets. Pubs, hotels, garden centers, children's nurseries, food stores, DIY stores, warehouses, waste disposal facilities, I mean, we've got them all. We have got them all. So we are seeing an unbelievably wide church of buyers and probably as wide a type of buyer that I've witnessed in a long time. I mean I made a comment the other day at the Board meeting. I think we've done and transacted on more sales to owner occupiers in the last 3 years than I've done in my previous 30, okay? So it's a different market. And the small lot sizes that we have is a massive strength for us. On the acquisition side, obviously, that GBP 1.4 billion that we've done year-to-date has been in the winning sectors that are going to deliver us the best income growth. It's obviously been dominated, as Martin has touched on earlier with the 2 M&A transactions. And not surprisingly, it is about reinforcing our logistics, our hotel, our convenience retail and roadside, which are continuing to offer up, we think, superior rental growth prospects. And then the opportunities are coming from really 4 or 5. We cut this -- we changed how we cut this really. It is sale and leasebacks. I referenced the Whitbread transaction that we did earlier in the year. Development fundings, we enjoy development fundings. A lot of developers are short of money, and we're only too happy to help them, providing it's in our winning sectors, and it's predominantly been logistics and grocery food, as we continue to strengthen our partnership with some of our key operators like Marks & Spencer. And then the pension fund industry is going through a dramatic shift, moving from DB to DC. That is throwing up portfolios. A lot of corporate pension funds are coming out of direct real estate, and that is throwing up an awful lot. And it's not hardly a week goes by that you might read something in one of the papers or -- sorry, one of the sites [indiscernible] or whoever, suggesting that so and so selling their properties and either in whole or in part. I mean, Santander recently has been in the news. St. James's Place has been in the news. And we're seeing opportunities from that. I mean we announced on Tuesday the acquisition of 2 assets from a Columbia Threadneedle portfolio. That was probably sparked either through expiry or redemptions. And so we hunt there pretty aggressively. And obviously -- the fourth one, which obviously I can't talk about is opportunities that we see, obviously, in the -- other opportunities that we might see in the listed sector through additional M&A. So our M&A activity. So we've done 4 public takeovers over the last 2 years that has added GBP 4.4 billion worth of assets. But more importantly, it's added GBP 267 million worth of new rental income, and it's been a source. It's obviously given us great scale, but it's also given us a great improvement to our earnings. We have, as we regularly update the market on is, successfully exited a lot of the noncore and some of the weaker assets. I mean, over those 2 years, we've sold GBP 372 million worth of these assets. That's 8% of the assets that we've actually acquired by value, largely in line with our acquisition prices. Some are up, some are down, but I think we're virtually bang on at the moment. And I'd like to say that, that was an incredible skill. I suspect there's a bit of luck in there as well. As you can see, out of the 465 assets that we've acquired, we've actually sold the smaller ones, which is we sold out of 89 of those. I mean I'm not going to go through the individual companies that we've acquired and the progress we made because it's there for you to read just as well. But the fact of the matter is the core assets that attracted us to these businesses in the first place are delivering for us. Rental uplift is GBP 12 million since acquisition. And again, this goes into that GBP 28 million I talked about over the next 18 months. GBP 17 million of it is arguably coming -- is going to come through from some of the acquisitions that we've made over the last 2 years. So that's the rub of why we like these companies, okay? We see them being pregnant with rental growth and maybe the property market or indeed the equity market hasn't valued that potential growth maybe as accurately as maybe we think we might have done. So we run an occupier-led business model. It helps frame our buy, hold and sell decisions. But as well as buying -- choosing the right sectors and buying the best assets in those sectors, we also actively manage our income granularity. Over the last 6 months, we -- our top 10 occupiers are down from 38% to 33%. Our top 3 occupiers are down from 27% to 22%. We obviously want to own the right space, and we want to let on the right terms in the right location. But one of our key things under this occupier-led business model is occupier contentment, okay? We're very close to our customers. We want to do more deals with them. We want them to be happy. Our test is that we -- and particularly at the operational side of the businesses, so things like the theme parks, the hospitals and the hotels, we are targeting a rent EBITDA ratio of 2x, okay? And that's a magic number because that then ensures not only contentment, but it also gives us much better asset liquidity. And we see -- I should say, pub market, the pubs as well, by the way, would fall into that as well. And that gives us the comfort of income durability. So we look at something like -- so that 2x test, and we expect all of our investments to hit that. And if they don't hit that, we will look -- we will have looked or have executed or are looking at exits. So if I look at there -- if I take Merlin as an example, that's a business that will hit our targets in the U.K. It's a business that has strong sponsor support. It was a take private for those of you old enough to remember it for about GBP 6 billion by the Lego family or KIRKBI which is its name, the Kristiansen family, Blackstone, CPPIB of Canada and the Wellcome Trust. It's also a business that has significant freehold properties. I think 50% of the earnings that Merlin report worldwide comes from freehold assets. And so therefore, it has -- it is what we consider to be an asset-backed -- it's an asset-backed business model. They recently sold 29 of their Lego Discovery centers back to the Kristiansen family for GBP 200 million. So they have these various levers when they need to raise money. U.K. profitability is running ahead of -- in '25 is running ahead of '24, and we have the added comfort in this business that we have the top operating company. And let's remember, we are talking here about a worldwide business that is the second largest entertainment firm in the world after Disney. I think there might be other people who claim to be that, but we think they're the second. So asset management, I think, I probably touched on most of these key numbers, like-for-like income growth, high occupancy. 67% of the income enjoys contractual rental growth, which gives us great comfort and -- to support the numbers that Martin had in his slide, the GBP 28 million that we've already touched on. And then interesting, I think in some ways, if you said to me, you've got one slide to take away, this is my favorite slide because this is -- it's what it's all about. This is what proves whether or not we've made the right investments in the right sectors and bought the right buildings. Rent reviews over the period gave us an uplift of 18%. Our urban reviews are up 22%. Urban open market was up 27%, which is what I referred to before. And then lettings and regears, again, this is the ultimate test of the desirability of your buildings. In fact, you're able -- tenant occupy content and people don't regear buildings, if they don't want to be in them and if they're not happy. And on average, those regears have been struck at 24% above previous passing rent. We have some vacancy. We inherited a little bit of vacancy under the Urban Logistics acquisition, and we're working through that either through leasing or through disposals. But that obviously -- we're at 98.1%. Personally, I think that's a little bit low. We need to be targeting 99% plus. Ideally, I'd have 100%, quite frankly, or maybe just under. So the asset management team have certainly contributed and helped drive that annualized like-for-like income growth of over 5%. So when I think about the outlook, I'm not actually sure, but I'm pretty comfortable -- confident that this slide actually might have been exactly the same 6 months ago. So it just shows that the world I'm really moved on, as it really. So macro events will continue to dominate investor sentiment. I've talked about the gilt and the swap rates always influencing the property investment markets. I say always, it wasn't always the case, but it certainly feels like it's been the case for the last few years. However, we do think the consumer is in good shape. Savings ratios are good, employment is good, wage growth is good. And interest rate cuts and a decelerating rate of inflation that we got yesterday -- was it, I think maybe the day before, I can't remember. We'll continue to improve confidence. We'd just be nice if we got a little bit more confidence coming out of 11, Downing Street. And I think -- but we are in quite good shape. There are times when I probably stood up here and I've taken questions on credit card debt or unemployment rates or low wage growth. I don't think those apply here today. And by the way, I think we're in a very different situation to America. And I'll expand on that later, if anybody is interested. But in the real estate sector, I think there are structural cracks between the winners and losers. I think for us, we're looking for organic rental growth, contractual rental growth without CapEx, okay? There are lots of sectors that are talking about high headline rents, but those have been bought through improved building qualities and facilities, tenant incentives. I'm talking about organic rental growth here. That's what you get in a rent review. That's what's great about a rent review. Lots of people talk about ERVs, but ERV doesn't pay the dividend, okay? Cash does. Rental growth does. And we're seeing why we want to be in logistics because we're still collecting that in-built reversions, okay? It's coming through. It's like a helicopter chucking cash at you. I mean it's just a wonderful, wonderful feeling. And we think that our scale, as Martin and I have already touched on, continues to improve our efficiencies and supports our triple net income strategy. We expect to see further consolidation in listed markets with or without us. We think it will take place. Without a doubt, the structural shift in the institutional pension fund market is throwing up opportunities, and we would be disappointed if we weren't a beneficiary of that over the coming period. And that we expect -- as a result of all of that, we expect further income growth, we expect further earnings growth, and we expect further dividend progression. We are well on our way to our objective for dividend aristocracy, only another 14 years, okay? And I expect to be here for it. So on that note, thank you very much for the last 33 minutes of listening to us. And obviously, questions either in the room or -- oh gosh, that was quick, or on the phones would be very welcome. Ladies first, Vanessa. Vanessa Maria Guy Vazquez: Vanessa Guy from JPMorgan. I'm having a look at your Slide 13, where you show your 4 main core subsectors in real estate. It's been a moving target in terms of your buy, hold and sell strategy. And my question is, over the next 6 to 12 months, is there anything that there that stands out that you want to streamline probably and grow in another subsector, anything that you have as an internal target? And are there any other sectors that are not there that you're interested in and possibly trying to build up? Andrew Jones: Okay. So the first thing is I never give the guys and girls targets because they have a habit of hitting them, and they hit them quickly. So our logistics has moved up to over 50%. If it went to 60%, that because we found some great opportunities. If it went to 50%, it's because we found some opportunities to sell at amazing prices to people who coveted our assets more than us. Entertainment and Leisure at 18%, that's down from 21% at the beginning of the year. I could see us buying some more -- we like the budget hotel market. We've been selling out of some of the smaller Travelodges. It's a market we actually understand pretty well. We have brilliant relationships with both Travelodge and Whitbread. We'd like to maybe add a little bit more into the -- into that bucket. Convenience retail is great, but our ambitions there are only hampered by the lack of opportunities. Most of the investments we make there are fundings or our own developments. I mean, I think we're on site at the moment with 4 or 5 M&S Simply Foods across the portfolio. And obviously, that will nibble up that -- push that percentage up a little bit. And health care, Martin has repaid the debt -- the secured debt on the hospital assets. We're working through some asset management, work with Ramsay, let's say, we have a fantastic relationship with them. That might improve liquidity and desirability. We'll have to see. It seems to be a hot topic at the moment in that sector. But we don't have any targets. And just in terms of new sectors that you touched on there, Vanessa, what these -- we try to keep -- I'm color-blind, so we can't do very -- many more colors. But within these sectors, there are subsectors. So in logistics, there's mega, regional and urban. Entertainment and leisure, there's the theme parks and there are the hotels. In convenience, there is the discounters, the drive-through restaurants. I mean we own 77 drive-through restaurants. The chances are one of you is shopping or buying goods in one of our drive-throughs all the time, okay? But that's in convenience as well as our Aldi, Lidls, M&Ss and Waitrose. Health care is essentially the hospitals. So there are nuances. And actually, some of those subsectors move at slightly different paces. We're getting good rental growth, for example. We get better rental growth arguably out of DIY at the moment than we might be getting out of GM. We're getting better rental growth maybe in urban than we might be getting out of regional. So even within those colors, the subsectors move at different speeds. Ana? Ana Taborga: Ana Escalante from Morgan Stanley. So my question is regarding logistics market rental growth. It's true that we're coming from very strong years and that market rental growth has decelerated a bit. Do you think that, that's just the normal digestion of those previous super strong years? Or do you think we are starting to see some affordability issues here and there? Or another way to ask the question is, at what point we can start seeing rents being too high or resulting affordable for some? Or shall we expect that Urban Logistics rental growth to reaccelerate next year? Andrew Jones: Great question. Again, it goes back to the answer I gave before around different parts of that logistics market moving at different speeds. We certainly see urban the strongest, and that is simply a demand-supply issue, except in London. Come on to talk about that because I think that was your second part of one of your first question. So urban feels good. And that's -- for us, obviously, urban is defined by geography, but we also define it by size. So we'd be 100,000 square feet down. We feel okay. Regional, we define as 100 and a bit -- up to about 350-ish, give or take. That market definitely has supply that's being delivered on a spec basis. I mean there are people out there that do spec developments, which I don't understand, but anyway, they do. And also maybe a pullback on demand of capital commitments and whatever with an uncertain economic environment going forward. Mega is fine as well because mega tends to be pre-let and build-to-suit. So there's not a lot of -- I mean there are some people who I admire enormously, who go off and build 1 million square feet spec. I mean you've got -- I mean, that is ballsy. But good luck to them, and I hope they do well. So I think it's okay, but there is a bit in the middle where I think net absorption needs to increase. What I would say, and this applies not just to logistics but it also applies to, we're seeing it very, very directly in our convenience retailers as well. We can't get the developments to stack up. It's really difficult to get developments to stack up. And that suggests rents have to push up, but that might take a little -- that might take a year or 2 to fall through, whilst the net absorption. I mean, I think we had the biggest take-up, didn't we guys, in the last -- a big take-up in the last 6 months. London is tougher for us. Even in urban, it's tougher. I think there's more of an affordability issue in London than there is anywhere else, but it's had dramatic rental growth. So it's not surprising. If you -- I take the view that most things revert to the mean over a period of time, and that's what I suspect London is doing. London will still enjoy a great supply side dynamic, but maybe the demand side at the current rents is a bit soft. I mean -- I think our flagship sale probably still when it was about a year -- 9 months ago, 10 months ago. We sold a warehouse that we bought in Parsons Green, which for those of you who know Fulham's -- not a lot of warehouses in Parsons Green. And we ended up -- we were going to let it originally to a dark kitchen. I thought getting planning for the dark kitchen was going to be a bit tricky as little mopeds going up and down the street, was not going to be overly popular with the finite residents of Fulham. And we ended up letting it to a leisure operator, who put in a fantastic facility for both adults and children alike and did an incredible fit out. And we ended up selling it, I think, for just over GBP 1,000 a foot -- I think it's about GBP 1,060 a foot, which is probably about what this building is worth. But that rent was GBP 50. So that would be trickier, yes. Sorry. Max. Max, behind you. Maxwell Nimmo: It's Max Nimmo from Deutsche Numis. Just a higher-level question kind of related, speaking to Martin before about kind of economies of scale versus opportunities of scale. And just in terms of cost efficiencies on one side, as you said, about the 7.7% EPRA cost ratio, but also the ability to kind of move the needle at the other end. And I guess my question is around if you're still doing deals around that sort of GBP 6 million lot size... Andrew Jones: We're buying GBP 6 million. Maxwell Nimmo: Okay. But if the lot size still remain relatively small, are you not effectively working the team harder and everyone having to run faster to kind of keep going at the same pace? Andrew Jones: Definitely. We're not a charity. No, look, our average lot size on acquisitions would be significantly higher than that. In fact, you would actually argue today a very strong case that the arbitrage available in the direct market is to sell the smaller assets at GBP 6 million for very good pricing and reinvest them at GBP 50 million where the price -- where the air is a bit thinner and the competition is less, and therefore, you get a slightly better deal. But don't forget, what we're buying is not high operational assets. I mean, Will bought a portfolio of Premier Inns a few months back, let on 30-year leases. I mean he'll probably be the only one who's seen them. I have no intention of -- I don't have to worry about them. I mean they're going to compound beautifully over the next 5, 10, 15 years. It's going to be wonderful. But that doesn't need a huge amount of skill. I mean the rent comes in from our key tenants pretty easily. Maxwell Nimmo: That makes sense. And maybe just kind of a follow-up. You talked about the sort of 4 to 5 opportunities that you have. In fact, there are 4 that are on the screen there. Maybe if we park M&A to one side, given there aren't as many businesses left for that now, but I guess, just the opportunity set, how would you kind of rank them? It sounds like there's a lot that could come out of these sort of pension funds, but there's perhaps a bit of a learning situation needed for them in terms of what their NAVs are and how that kind of unlocks. So maybe just if you could kind of rank them in terms of your -- how you're thinking about them. Andrew Jones: Well, 1 and 2 are amazing. So sale and leasebacks and development fundings are amazing because those are the -- those opportunities effectively, you've got brand-new leases. And those are very often scenarios or situations where you can influence the lease, not just the rent, but the rent review clauses and the term. So those are fantastic. We like those, but we're obviously not in control of how many of those opportunities will present themselves. I mean we're working on a big sale leaseback at the moment. We're working on a development funding at the moment with one of our key customers. And we are absolutely -- we want -- in development funding, we want to be the occupier's partner of choice or even -- we want the occupier to say to the developer, can you fund this through another metric? I mean that's really what we want them to say. And we had an example of that in the period. Fund expiries and pension liquidations, Darren deals with this, they're coming. There is a value issue to your point, but -- and there's also a timing issue, when are they coming. Managers are not -- they seem to be more willing to drip things out and keep the feet train running for a bit longer than literally come up against a hard deadline. But look, you've got to be in it. We're buying tickets. We're doing a lot of talking on it. We've executed those assets that we announced on Tuesday from Well, and we've got a few others that we're working through. But it is coming. I mean you've seen -- I think Lone Star did the St. James's Place portfolio, didn't they last week. And then -- so -- and it's either the -- and then also the strategies that these managers employ is different. Sometimes it's being -- most often, it's being led by the investors putting in redemption notices so -- if you might have a reluctant manager. And then it's whether or not they do the whole lot or whether or not they chop it up into sectors to try and get maybe a slightly better price. Again, you're not in -- I mean, the whole thing about real estate is you're never in control. We don't sit there go press a screen. We want to -- I know what we want to buy. It just -- it's not on the screen. It's got to -- it doesn't appear on the screen like it might do in the equity markets. And so I think -- look, I would -- I mean, I do love 1 and 2. I mean, I do love 1 and 2 and 3 is going to be pricing dependent and 4, we won't talk about. Matt? Matthew Saperia: It's Matt Saperia from Peel Hunt. Martin, you're looking like you need a question so... Martin McGann: Maybe don't. Matthew Saperia: Are you sure? I think you talked about -- or you showed earlier on the debt maturity profile. You've obviously got a current cost of debt that's below the market rate. Yes, I think you also mentioned that you don't expect your financing costs to go up. So can you just talk us through how you get to that conclusion, given the maturity profile and the cost? Martin McGann: Yes, absolutely. So we have a series of refinancings coming at us. And when you look at our debt stack, it's too weighted in favor of our relationship banks, and there's not enough bond debt on it. We did -- we've done various private placements. We've never done a public bond. When we got our credit rating earlier in the year, that was the precursor to a public bond. We will do a series of those coming up. When you then look at what happens to our financing costs, you stop paying commitment fees on undrawn RCFs and you stop paying the fair value amortization on the debt we've acquired through M&A, and that is a lot. So if your interest rate may nudge up or your amortization of your cost of putting debt in place may nudge up, but the compensating fact that you don't have those other 2 components of your finance charge means it is almost exactly flat going forward over the next 3 or 4 years. So our cost of debt could go from 4.1% to 4.3%, but the number you see in the income statement for finance costs won't change. Andrew Jones: You're just saying that the lending banks have just been robbing us. Steve, you up? Martin McGann: You weren't going to get away with it. Suraj Goyal: It's Suraj Goyal from Green Street. Just a quick question on sort of e-commerce. So just wanted to understand what your sort of base case forecast is for 2030 and beyond and how that sort of reconciles for -- reconciles with the recent normalization that we've seen, also with sort of return policy changes for a lot of e-commerce players, et cetera. And then what that would look like in terms of long-term rental growth. Andrew Jones: I stand up here just in case my mic is not working. Look, we form -- our strategy and sector investments is based of evolving consumer behavior. U.K. penetration into online shopping is excellent. I mean we're world-class, but it doesn't stop. I mean it's a bit like when retailers say to me or retail owners, you say, we've rebased the rents. It's as if it stops. But there is an ongoing generation that they actually enjoy the delivery of online shopping rather than the destinations that maybe my parents might have enjoyed more so. So we still think it will continue. We think that it will -- that it needs to get more efficient, and we're seeing operators increasingly putting more money into automation in order to make that work because it has to -- no point having it, it has to be profitable. I'm not convinced that, that influences our investments in Urban Logistics as much as it might in mega. But we still think it's a trend that as we move through generations and my children become the key shopper, the idea for them of wanting to go to St. David's or wherever it might be, whichever shopping center it is, it just doesn't exist. They want to buy online. So I think it's an attractive tail. You might argue that the bigger jumps are behind us, but we still think we still expect it to grow. I think food is different. I think food is different. And that is probably -- I mean, it obviously jumped from about 7 to 15 during COVID, and then it's come back. I think it settled about 11, depending on which grocery you talk to. And that's different. But we are absolutely seeing those operators investing in their facilities, particularly cold. So we're building a cold facility for M&S down in Avonmouth in Bristol. So we think it will continue to grow. We think it's supportive. But also what we also expect is that the occupiers will want more efficient facilities. Their network needs to get more efficient, if they're going to be able to drive -- use that to drive profitability. It wasn't that long ago when I could have stood up here and people talk about online shopping, but nobody makes any money doing it. Actually I haven't had that question for a while because I used to just redirect them to the next report and accounts actually to see how profitable it actually was. Eleanor Frew: Eleanor Frew from Barclays. The exposure to your largest tenants has been coming down, partly as a result of your acquisition activity elsewhere. Are you happy with the current top 3 concentration? I see it's below 2019 levels. Or if not, are you looking to accelerate reduction or happy to carry on diluting over time? Andrew Jones: Thanks, Eleanor. Look, I was asked actually on a call -- a press call earlier about what are your tests on tenant exposure. So the hard deck was always 10, although we did take that up to about 11 and a bit a few years back when we -- when Primark was our largest customer. And then we ended up selling one of the big facilities and bringing it back down again. So 10 is a hard deck. I think we would like to improve -- I would like us to improve our granularity so that nobody is more than 5, and we will look to do that over the coming years. But this is what happens, isn't it? When you buy portfolios or you buy companies, sometimes it's not all perfect because if it was, somebody else probably would have taken them out before you. But again -- so therefore, there will be a sell-down, and we're already making progress on that. So it's a combination of that. Obviously, as we've improved, it increased the size of the business, that has brought some of the concentrations down a bit as well. But income granularity, as I said on this, is an important part of our business model, but understand an occupier contentment overrides all of this. So yes, I'd definitely expect it to stretch a bit. When we announced the -- about what is it -- about 20 months ago now that we announced the deal with LXI, we were going to be the proud owners of 146 Travelodges and that really bothered me. And I now think we have 63 Travelodges. So there are levers that we will pull. Thomas Musson: It's Tom Musson on Berenberg. And actually just following up on Max's earlier point on the opportunity set. If we think about Europe, you might argue that you can access a lower cost of capital in some European countries. And now with your scale and with the triple net lease business model, that could be value accretive for the right opportunity. I just wonder how outwardly looking you now are when it comes to what's next? Andrew Jones: Good question. I think that -- look, we would look at Europe as not a country. We would look at Europe as a combination. And so if we are to look at investing outside of the United Kingdom -- I mean, we have a facility at the moment. We have Heide Park in Germany. We would probably identify 2 or 3 countries that -- where we could predict and have a clear view of consumer behavior. Also, we would want -- obviously, it would be -- we feel more comfortable, if we were to go into another country with an existing customer. I'm not going to name any names. So it would -- there would be a few tests first, Tom, but I wouldn't say that we're actively looking. We get European opportunities put through to us. I mean the big opportunity in some ways from an equity perspective is that there isn't really a triple net champion in the European markets. So that's the equity opportunity for us, which we're quite aware of. And we do get a lot of incoming from some investors, as to why don't you do it because then it would give us that European triple net exposure. But the lease structures, the REIT regimes in these countries has to be friendly to us as well. Like I said, we're obviously learning a little bit more about Germany now than we would have done 5 years ago, but I wouldn't expect an announcement that we're just about to make a big acquisition in Germany. Martin McGann: If you go back your 20 months when we acquired LXI, we would undoubtedly have said that we will sell Heide, the German theme park. But the truth is Heide throws off great income. We put some euro debt against it, there's a natural hedge and it's cheap and in your view could evolve. It's a terrific asset and perhaps the market is not right to sell it into today. So we don't. Andrew Jones: I did use to say that Europe was for holidays. Stop saying that. Any other questions? Unknown Executive: Okay. So we've got a question from the webcast today from Andrew Saunders from Shore Capital. Now you've been able to get under the hood of the ULR asset. What are your thoughts? And what are your plans for the Melton Mowbray? Andrew Jones: Thank you, Andrew. Look, I think Urban was a well-run REIT, okay? Let's say that. It was a well-run company. We're very pleased with what we've inherited. There are undoubtedly assets that we wouldn't have bought, but I've no doubt if the situations have been reversed, they might have thought that there are assets that we bought that they wouldn't, but they don't particularly like. So that happens. It's what we call beauty is in the eye of the beholder. Otherwise, we'd all be wearing gray [indiscernible] and light blue shirts. Look, Melton Mowbray is a difficult one at lots of levels. We're on it. We fortunately allocated a price on the way in that would allow us to get out without losing our shirt and trousers. But yes, I mean, the acquisition price was elevated. The tenant, obviously, longevity was not what was probably originally anticipated. But we'll deal with it and we'll move on and the money we reinvested. I mean, at the moment, it's not in any of our forecasts. So if we do either let it or sell it, that will be money or income that comes in that isn't in our GBP 28 million that we're hoping to collect over the next 18 months. So that would be on top of that. But listen, all portfolios have some problem children like families. Unknown Executive: Thank you for that. And that's all the time we've got for questions. So I'll hand back to you, Andrew, for closing remarks. Andrew Jones: Thanks. Well, okay, that's great. We are literally just the right side of an hour. So thank you ever so much for your questions, your time and your comments. So thanks. Have a great day.