加载中...
共找到 40,104 条相关资讯
Operator: Good morning, and welcome to Ranger Energy Services, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Joe Meath, Vice President, Finance. Please go ahead. Joe Meath: Good morning, and welcome to Ranger Energy Services, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. Appreciate you joining us today. Before we begin, Ranger Energy Services, Inc. has issued a press release outlining our operational and financial performance. The press release and accompanying presentation materials are available in the Investor Relations section of our website at www.rangerenergy.com. Today's discussion may contain forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to update our forward-looking statements. Further, please note that non-GAAP financial measures will be referenced during this call. A full reconciliation of GAAP to non-GAAP measurements is available in our latest quarterly earnings release and conference call presentation. Joining me today are Stuart Bodden, our Chief Executive Officer, and Melissa Cougle, our Chief Financial Officer. Stuart will begin with a strategic and operational overview outlining our accomplishments in 2025, and provide an outlook for Ranger Energy Services, Inc. for 2026. Melissa will then walk through a financial summary of the results for Ranger Energy Services, Inc.’s fourth quarter and fiscal year. Following their remarks, we will open the call for Q&A. With that, I will turn it over to Stuart. Stuart Bodden: Thanks, Joe, and good morning, everyone. I appreciate all of you joining us today to discuss our fourth quarter and full year 2025 results. I will spend some time walking through our operational performance during the quarter, highlight the strategic milestones we achieved in 2025, and then talk more broadly about the trajectory we see for the business as we move into 2026. Let me start with an overview of the year. We posted total company revenue of $547,000,000 with adjusted EBITDA of $73,200,000. I am pleased with how the organization executed throughout 2025, particularly against the backdrop of a market environment that required discipline, adaptability, and continued focus on operational performance. Across the board, our teams delivered consistent execution in the field, maintained strong alignment with customers, and supported the integration of new assets and capabilities that will position Ranger Energy Services, Inc. well for the long term. In the fourth quarter specifically, activity levels were generally consistent with our expectations. The market continued to reflect the same characteristics we have spoken about over the past several quarters: relatively stable demand, customers focused on high-quality service execution, and a continued emphasis on efficiency and cost management. Against that backdrop, Ranger Energy Services, Inc. continued to perform well. Our well service operations, wireline offerings, and ancillary services demonstrated solid utilization and maintained the margin profile we had built through disciplined pricing, cost control, and operational efficiency. Let me turn now to a few of the strategic initiatives that shaped the year. Starting with the American Well Services acquisition. We completed this transaction with a strategic intent to broaden our footprint, enhance scale, and strengthen our service offerings in the Permian Basin. I am pleased to report that the integration is progressing well. Our focus during the fourth quarter, and continuing into early 2026, has been on ensuring that the combined operations function cohesively, that our teams remain aligned with the expectations we established at the outset, and that our shared best practices are implemented efficiently. All of these areas have integration milestones that are on track and being achieved. The operational overlap continues to progress well, and we see nothing approximately 120 days into our combination that would derail our long-term synergy plans. We have maintained transparency with our teams and customers, and we have ensured continuity of service while beginning the process of capturing efficiencies that the combined platform enables. The AWS team has been collaborative, and their operational culture aligns well with Ranger Energy Services, Inc.’s emphasis on safety, efficiency, and reliability. The acquisition also strengthens our customer reach and enhances our competitive position. We are solidifying relationships with operators who value scale, responsiveness, and the ability to execute consistently. We continue to see opportunities to drive incremental value from this combination as we move through 2026, and we are encouraged by early results. The other strategic initiative that saw meaningful progress in 2025 was our ECO rig program, which has been one of the most exciting internal developments in our history. As many of you know, ECO represents a significant advancement in well technology—one that reduces emissions while also delivering greater overall control and safety on location. As we rolled out our first two ECO rigs in 2025, we continued to validate the platform's performance with customers, and the feedback has been very reassuring. As one example of the efficiencies of our ECO rigs, in the first 450 hours of deployment last year, one of our ECO rigs used less than 22 hours of generator power, with the balance coming from the onboard battery system being recharged through the regenerative capabilities of the rig. At the beginning of this year, we signed a contract for 15 ECO rigs to be built with a key operator in the Lower 48. This contract reflects a few important themes. First, customer interest remains strong. Operators are increasingly looking for ways to improve operational efficiency and safety on-site while also reducing emissions. ECO directly addresses those needs and provides a flexible platform that can work independently or leverage infield or coal power. Second, the platform is beginning to demonstrate real, measurable value. We have worked to quickly address any issues identified, and we are starting to quantify the operational efficiencies produced. The theme we continue to hear from operators is that the ECO platform is differentiated. We are still early in the broader adoption curve, but the pace is accelerating—faster than what we initially expected when we launched ECO. The pipeline of interest remains robust, and as customers gain more experience with this technology, we expect those conversations will continue to mature. ECO is one of the most meaningful strategic investments we have made as a company. We are excited about the momentum it continues to generate heading into 2026. Outside of the accomplishments on the growth side with AWS and ECO, our legacy core Ranger Energy Services, Inc. businesses have continued to perform well despite the headwinds that were present through most of 2025. Our high-spec rig fleet continued to benefit from operational consistency, steady workload, and disciplined labor management—areas that have long been strengths for Ranger Energy Services, Inc.—with holiday scheduling at year-end showing more resiliency than expected. Although our ancillary services segment performed well as a whole, the situation was more nuanced, with some service lines finding new growth avenues in the fourth quarter, while others contended with white space. Finally, our wireline services continued to navigate a challenged business environment in the fourth quarter. That said, we have seen recent signs of improvement and experienced a couple of key customer awards. We also maintained our commitment to capital discipline throughout the year and deployed capital in a balanced and deliberate manner, investing in opportunities that support our strategic goals while maintaining flexibility on the balance sheet. As Melissa will discuss in more detail later, our free cash flow generation allows us to both pursue growth opportunities and return meaningful capital to shareholders. In 2025, we used approximately $40,000,000 of our free cash flow towards the purchase of American Well Services, while also repurchasing nearly 1,000,000 of our own shares last year, which represents almost 5% of shares outstanding. This disciplined approach to capital deployment positions us well as we move into 2026, where we expect to continue generating healthy levels of cash while also supporting the rollout of our ECO fleet and completing the integration of AWS. Let me now touch briefly on the broader 2026 outlook. We expect the operating environment to remain generally stable and similar to 2025 from an activity level standpoint, making 2026 a year of execution and strategic evaluation. We will continue to integrate American Well Services, support our teams in the field, advance the rollout of the ECO platform, and explore opportunities to strengthen our service offerings where it aligns with our capabilities and our financial strategy. We will stay focused on the fundamentals: safety, efficiency, cost control, and customer service, and we will continue to make decisions that support long-term shareholder value. Despite expectations for a relatively flat 2026, there is reason to be excited about the future looking to 2027 and beyond. Our pro forma financial profile with the AWS acquisition gives us an annual EBITDA generation opportunity of more than $100,000,000 in 2026, with room far beyond in a supportive macro environment when commodity supply begins to tighten. By 2027, we expect to have 15 new ECO rigs operating in the Lower 48, and we believe more contracts for further rig deployments will be underway, providing for an ever more differentiated service offering with best-in-class assets. Over the next 18 to 24 months, we believe the U.S. onshore market will see activity improvement, and Ranger Energy Services, Inc. will be ready with high-quality assets to be deployed. Both oil and gas markets are seeing more incremental support than expected this year, even before geopolitical developments in the past seven days. Whether taking a near, medium, or long-term view, we will remain disciplined in our deployment of capital, ensuring long-term value creation. Before I hand things over to Melissa, I want to again thank the entire Ranger Energy Services, Inc. team for their hard work and commitment throughout 2025. The company delivered solid results through consistent execution, thoughtful decision-making, and strong discipline at every level of the organization. We have momentum entering 2026, and we are confident in our ability to continue building on that foundation. Our field personnel continue to be the heartbeat of this organization, and throughout 2025, our crews delivered safe, reliable, and efficient work for our customers in a variety of operating conditions. And our commitment is evident in the trust we continue to earn from operators across all service lines. As we have said before, Ranger Energy Services, Inc. differentiates itself through execution, and our teams continue to validate that every day. With that, I will turn the call over to Melissa to walk through our financial results. Melissa Cougle: Thanks, Stuart, and good morning, everyone. I will now take you through our financial results for the fourth quarter and full year 2025. Starting at the top line, revenue for the fourth quarter was $142,200,000, up from $128,900,000 in the third quarter and essentially flat with $143,100,000 reported in 2024. The sequential increase reflects higher activity in our High Specification Rigs and Processing Solutions and Ancillary Services segments brought about from a partial quarter of included AWS results. These increases were partially offset by continued softness in wireline. Breaking out the revenue by segment, High Spec Rigs generated $92,300,000 of revenue in the quarter, up meaningfully from $80,900,000 in the third quarter and up from $87,000,000 in 2024. Rig hours grew 16% sequentially to 128,500 hours in the quarter. Processing Solutions and Ancillary Services contributed $37,500,000 of revenue, representing a 22% sequential increase from Q3. This reflects both organic performance and the contribution of service lines acquired through the American Well Services transaction. Wireline Services revenue was $12,400,000, down from $17,200,000 in the third quarter and consistent with expectations given lower completed stage counts during the quarter. On the profitability side, net income for the fourth quarter was $3,200,000, or $0.14 per diluted share, compared to $1,200,000, or $0.05 per diluted share, in the prior quarter. Adjusted EBITDA for the quarter was $20,300,000, representing a 14.3% margin, compared to $16,800,000, or about 13%, in the third quarter and $21,900,000 in the fourth quarter of the prior year. The sequential improvement reflects stronger revenue and margins in our High Specification Rigs and Processing and Ancillary segments, partially offset by continued margin pressure in wireline. When looking to 2026, we did see heavy winter storm impact in January that will likely put our first quarter results largely in line with Q4, although early March activity levels give us confidence that our full year 2026 goals remain within reach. Turning to the full year, Ranger Energy Services, Inc. generated $546,900,000 of revenue compared to $571,100,000 in 2024. While modestly below last year, the result reflects consistent execution and a generally stable operating environment in our core business, with some softening in activity in specific service lines in wireline and ancillary segments. Full year adjusted EBITDA was $73,200,000, representing a 13.4% margin, compared to $78,900,000 and a 13.8% margin in 2024. From a segment perspective, full year financial results remain stable and aligned to the drivers we have outlined throughout the year. HSR continued to anchor our earnings profile with strong utilization and disciplined pricing. Processing and Ancillary delivered improved performance driven by the incremental contribution from the AWS acquisition. Wireline saw headwinds related to lower utilization and pricing and remains an opportunity set for Ranger Energy Services, Inc. in the future. Turning to CapEx, Ranger Energy Services, Inc. continues to invest capital in a disciplined and measured manner. Total capital expenditures for 2025 were $26,100,000, down from $34,100,000 in 2024. The year-over-year decrease reflects reduced growth spending, as 2024 included approximately $10,000,000 of growth-related CapEx. Growth capital in 2025 was deployed selectively and focused predominantly on the ECO rig deployments. We continue to employ the same rigorous return on capital screening for growth investments that have served us well for several years. Our full year 2026 pro forma financial profile of more than $100,000,000 of annual EBITDA remains supported with a highly disciplined approach to capital deployment. Maintenance CapEx is anticipated to be aligned with historical trends and run at approximately 4% to 5% of revenue. ECO CapEx will push that number higher this year, but recall that these contracts include provisions that include upfront CapEx in many cases that will result in deferred revenue and/or guaranteed hourly commitments in the future. We will call out specific ECO spend that is significant in future periods. Turning now to cash flow, which continues to be one of the most important elements of Ranger Energy Services, Inc.’s financial profile. For the full year 2025, cash provided by operating activities was $69,000,000 compared to $84,500,000 in 2024. The year-over-year decline reflects financial dynamics such as lower profitability in wireline, timing of working capital, and costs associated with integration activities. Free cash flow for the full year was $42,900,000, or $1.89 per share, compared to $50,400,000 in 2024. Our EBITDA-to-free-cash-flow conversion rate posted at nearly 60% for a third straight year in a row. This strong and consistent cash flow generation continues to be a hallmark of Ranger Energy Services, Inc.’s financial model and reflects disciplined operational execution and tight control over capital spending. In 2026, we expect that our free cash flow conversion rate will be closer to 50% as a consequence of the timing of ECO rig capital, and we will be transparent about those impacts and expectations as the year develops and as delivery and payment timing is more solidified. We also ended the year with $67,700,000 of total liquidity, consisting of $57,400,000 of availability on our revolving credit facility and $10,300,000 of cash on hand. We finished the year with $3,500,000 in outstanding borrowing. Ranger Energy Services, Inc. was able to optimize working capital through the end of the year and finish in an incredibly strong liquidity position. We do expect to see borrowings in the first quarter as we anticipate a working capital build as spring arrives and activity levels increase, coupled with typical labor costs unique to the first quarter. On the capital returns front, we take great pride in sharing that we returned over 40% of free cash flow to shareholders in 2025 through a combination of dividends and stock repurchases. During the year, we repurchased nearly 1,000,000 shares at an average price of $12.26, totaling $12,300,000. This capital return strategy continues to be an important part of our value creation framework and reflects our confidence in Ranger Energy Services, Inc.’s long-term cash generation capability. As we enter 2026, we remain focused on maintaining operational discipline, supporting the integration of AWS, pacing the deployment of our ECO fleet, and continuing our track record of consistent financial performance. With that, I will turn the call back over to Stuart. Stuart Bodden: Thanks, Melissa. As we close out the fourth quarter, I want to reflect on the progress we have made and the opportunities ahead. The acquisition of American Well Services is a clear example of our disciplined approach to growth. It is a transaction that enhances our scale, expands our service offerings, and strengthens our position. With AWS, we are not changing who we are. We are building on what we do best. Our integration plan is already in motion, and we are confident in our ability to execute. We have done this before, and we will do it again with measured urgency, precision, and a focus on creating value for our customers and shareholders. At the same time, our ECO Hybrid Electric Rig program continues to gain traction. These rigs represent the future of well servicing, and the AWS acquisition gives us a better platform upon which we can accelerate that future. We are committed to being the best well services provider in the Lower 48 on behalf of our customers, employees, and shareholders. Strong free cash flows and strong returns to investors remain our guiding principles, and we will continue to make our strategic decisions and allocate our capital with discipline and foresight. With our balance sheet in excellent shape, our integration playbook in action, and our technology roadmap expanding, I am more optimistic than ever about the next chapter for Ranger Energy Services, Inc. I want to thank our Ranger Energy Services, Inc. employees, customers, and shareholders for their partnership and commitment this past year. With that, operator, we will now open for questions. Operator: We will now begin the question-and-answer session. The first question comes from Don Crist with Johnson Rice. Please go ahead. Don Crist: Morning, guys. Hopefully, you all are doing well this morning. Stuart Bodden: Yeah. We are. Good morning, Don. How are you? Don Crist: I am doing well. My first question is surrounding the ECO buildout and the conversations you are having with customers there. Just an update on how those conversations with other operators are going and, as a second step to that, what is the capability of your partners? Do you have a lot of capability there to put a lot more orders on the books? Just any comments around that. Stuart Bodden: Yeah. Thanks for the question. Obviously, very excited about the contract that we signed earlier in the year. We are in a couple of pretty advanced conversations. I think what we found historically is sometimes it takes a while and then it happens really fast. But we are having really, you know, kind of very productive conversations. As far as manufacturing, we have been working with our vendor pretty closely and feel like we can expand manufacturing if needed. I would highlight these are refurbs, and so there are some things that we can do on our side to streamline the process and increase throughput. So we do not feel like manufacturing should be a bottleneck for us. There are some long lead time items that we are pretty mindful of, but other than that, again, we feel like we can respond to the market demand. Don Crist: That is reassuring. And I do not believe you mentioned it in your prepared remarks—I did want to touch on the plug and abandonment contract that you put in the press release. The comment about regulatory agencies, I do not know if you want to disclose who this contract is with, but if I remember correctly, this could probably expand your P&A fleet pretty significantly. Any comments around that? Stuart Bodden: Yeah. It is the Texas regulator, so it is public—you can look it up. What this is, Don, and I think one of the reasons we are excited about it and wanted to call it out in the script, is that these are for complex wells in particular. We really have been trying to position ourselves on some of the government P&A programs as a contractor of choice for some of the more complex P&As. And so that is really what this represents. And you are right. I think it is something that we think we have growth opportunity within this regulator and in other states as well. Don Crist: Okay. And how many rigs do you think that is going to occupy? I mean, if I remember correctly, it was low single digits that were kind of dedicated to P&A in the past. Any kind of metrics around that? Stuart Bodden: Yeah. It is still kind of three-ish, plus or minus depending on the program at the moment. But certainly, if we needed to ramp it up, we could. But it is kind of low single digits right now. That is right. Don Crist: Okay. And one for you, Melissa. As we kind of think about CapEx for the ECO rig program through the year, any kind of metrics around quarter-by-quarter dollar amounts that we could kind of put in the model? Melissa Cougle: So what I would say, Don—it is a very good question, that is part of my comments around it—we will let you know. A lot of it depends because there are progress milestone payments. You will see a little bit start to trickle in in the first half of the year, but the reality is most of that CapEx really starts to show up as we make milestones and we start to have deliveries month after month in the back half of the year. So I think we have got a long way to really organize how that flows. We have a model, but I also think we are too early in the build cycle to probably give hard guidance on that. That said, I think you will see light build in the first half of the year as just kind of some progress payments are made, but then it will really ramp up in the back half of the year. And just calling attention to the wording was pretty intentional when we said the conversion rate has deteriorated a bit this year on timing, because in some cases we have capital coming in from customers timed alongside this. So what you will see is—and I am just trying to get a sense of the complexity—you might see us lay out capital that ultimately ends up getting refunded to us further down the line too. But we will try to call that out each quarter to any degree it is material, which I suspect it will start to be material as well in 2026. Don Crist: But it is safe to say that you should still build cash through the quarters, even with this CapEx? Melissa Cougle: Yes. I think the one thing we were calling out, Don, is Q1. There are a few things going on in Q1—actually less so on the ECO side, more just to do with seasonality and working capital builds. So I think you will not see cash start to really come in until Q2, Q3, Q4. But our guide right now is closer to a 50% conversion rate for the year, and most of that will show up, as is typical, in the later quarters of the year and not in Q1. Don Crist: I appreciate the color. Thank you so much. I will turn it back. Melissa Cougle: Thanks for the question. Thanks, Don. Operator: The next question comes from Derek Podhaizer with Piper Sandler. Please go ahead. Derek Podhaizer: Good morning. Stuart Bodden: Good morning, Derek. Derek Podhaizer: Patrick is my cousin. Sticking on the ECO rig buildout, should we think about the 15 rigs plus the two rigs under operation as far as maybe like a percentage of your fleet? And then where could this go if you continue to execute on additional contracts? And then also, are these all incremental rigs to the fleet, or are you replacing some of your older legacy assets? Just maybe some color on that as well. Stuart Bodden: Yes. I will try to take it in pieces. Obviously, we have the two in the field and a contract for 15 to 17. Right now, once they are deployed, that would be a little less than 10% of the active fleet, which does include some rigs that are constantly in refurb, repaint, maintenance, etc. As far as the conversations, I think it is really hard to put a number on it, and the reason I say that is that based on the conversations we are having, there is a scenario where it could be the same number again, but I think probably it looks like the next contract would be for less than 10, most likely. So that gives you a sense. And then I think depending how the next 18 to 24 months go, we do think there is longer-term demand for this. Remind me of your second question, sorry, Derek. Derek Podhaizer: Just as far as incremental or replacement. Stuart Bodden: It is very customer dependent on that answer. I think for a lot of the ones that we are deploying right now, if there is not a change in the macro environment, they will do some replacement of existing rigs. I think what we had highlighted is that given who the customers are that are interested in ECO, the rigs that get displaced tend to be high-spec and very high-quality rigs, and so we are certainly thinking that they will find homes pretty quickly. That said, I think we want to be open and transparent that the first wave of ECO rigs will replace some of our existing rigs. Derek Podhaizer: Right. That makes sense. That is helpful. And then how should we think about the earnings power with the ECO rig buildout? Just looking at your margins right now in High Spec, you are in the low 20s to end the year. As we move over the next 18 to 24 months and these start to become a bigger part of your rig mix, where could those margins start going to when we also start thinking about integrating AWS, and now with the buildout of ECO, how should we think about the margin profile? Melissa Cougle: It is a good question, Derek, and I would tell you we are still working on how that can come together. Again, you have a little bit of timing. Each one of these contracts sort of looks and flavors itself out differently. So in some cases where you would have a contract that has more upfront capital, we will have deferred revenue, which actually turns into amortization. So you are not going to get—even though we are getting probably pulled-forward returns—it is not going to be as readily obvious in margins because it will be an amortization item as opposed to a current revenue item and collection item. On the inverse side, where we get more hardcore rate uplift over the like, you will see margin uplift. So it is going to be a little bit of a mix of both coming through the pipeline. On the AWS side, what we are seeing is the best of operating leverage and the worst of operating deleverage, because what we saw, for example, in December, where we had a lot of good activity in utilization, we saw real margin expansion in just one single month. That said, the winter storm in February hit us hard, and we had the opposite effect. So I think we are still trying to get a better cadence and flow. I think there is margin to be expected this year. I just think it is too early to tell you that it is 200 bps or 100 bps or 300 bps. It is probably not 5%, though, I would tell you that. Derek Podhaizer: Right. Right. Great. That is all helpful. Thank you. I will turn it back. Stuart Bodden: Thanks, Derek. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Stuart Bodden for any closing remarks. Stuart Bodden: Thank you, operator. Thank you, everyone, for joining. Thank you for your interest in Ranger Energy Services, Inc., and have a great day and a great rest of the week. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, and welcome to the Kinaxis Inc. Fiscal 2025 Fourth Quarter and Year-end Results Conference Call. [Operator Instructions] I'd like to remind everyone that this call is being recorded today, Thursday, March 5, 2026. I will now turn the call over to Rick Wadsworth, Vice President, Investor Relations at Kinaxis Inc. Please go ahead, Mr. Wadsworth. Rick Wadsworth: Thanks, operator. Good morning, and welcome to the Kinaxis earnings call. Today, we will be discussing our fourth quarter and year-end results, which we issued after close of markets yesterday. With me on the call are Razat Gaurav, our Chief Executive Officer; and Blaine Fitzgerald, Chief Financial Officer. Some of the information discussed on this call is based on information as of today, March 5, 2026, and contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those set out in such statements. For a discussion of these risks and uncertainties, you should review the forward-looking statements disclosure in the earnings press release as well as in our SEDAR filings. During this call, we will discuss IFRS results and non-IFRS financial measures including adjusted EBITDA. A reconciliation between adjusted EBITDA and the corresponding IFRS result is available in our earnings press release and MD&A, both of which can be found on the IR section of our website, kinaxis.com and on SEDAR+. The webcast is live and being recorded for playback purposes. An archive of the webcast will be made available on the Investor Relations section of our website. Neither this call nor the webcast may be rerecorded or otherwise reproduced or distributed without prior written permission from Kinaxis. We have a presentation to accompany today's call, which can be downloaded from the IR homepage of our website. We'll let you know when it change slides. Over to you, Razat. Razat Gaurav: Thanks, Rick. Turning to Slide 4. I'd like to start by saying how thrilled I am to be a part of the Kinaxis team. It's a company I've admired and competed against for several years. Here are my top 3 reasons for joining Kinaxis. One, getting back to my roots in supply chain software, where I've spent over 20 years in my career, particularly at this time when organizations are experiencing unprecedented levels of demand and supply volatility; two, to build and scale a company that is already a market leader in AI-powered supply chain planning and orchestration; and three, the tremendous talent and culture in the organization that is rooted in innovation and customer success. I am truly excited to build and scale the business while delivering unprecedented value to our customers. Turning to Slide 5. I couldn't have joined Kinaxis at a better time. The team performed really well, and we had a record-setting fourth quarter and year with ongoing momentum in 2 key growth metrics. Our SaaS revenue grew by a healthy 19% in Q4 and 17% for the year, significantly higher than our initial guidance range of 11% to 13%. Perhaps more importantly, our ARR balance grew by 20%, accelerating from 12% growth at the end of 2024. Incremental bookings hit record levels in the quarter and year. This momentum sets us up really well to target higher SaaS revenue growth in 2026, as Blaine will explain and speak soon. This growth momentum combined with operating efficiency also translated to significantly improved profitability. Full year adjusted EBITDA was at a record level and grew by 30%. The margin in Q4 was 26% and was 25% for the year, at the high end of our initial guidance range and a year early at our midterm target. We see room for ongoing improvements in coming years. Moving on to Slide 6. The new business we won in the quarter and year demonstrates excellent execution on important go-to-market strategies. Let me give you some color. In Q4 and in fiscal 2025, we won roughly 1/3 more new business than in any previous quarter and year in our history, measured by the total average annual contract value in the period or ACV. The number of contracts with $1-plus million in average ACV was at record levels in Q4 and the year. We won 21 deals over $1 million in the year versus 6 in 2024 and over 30% higher than the closest result. When looking at total contract value or TCV over the committed term, we won over 100 deals above $1 million. Our pipeline suggests that 2026 could be another strong year in this regard. Together, these metrics reflect the growing market need for companies to develop agility and adaptability as they navigate unprecedented levels of supply and demand volatility. We continue to be the market providers, the go-to-market providers for AI supply -- for AI-powered supply chain planning, decision-making and orchestration for the world's largest and most complex supply chains. Going to Slide 7. We won some world-class companies in Q4, which are distinguished not just by their size, but also by the role they play in the global AI transformation. As investments increase in the build-out of data centers and related AI infrastructure, Kinaxis Maestro is becoming the default choice for supply chain planning and orchestration across the value chain. During Q4, we won a top 5 global semiconductor foundry, which manufactures highly advanced GPUs for the world's AI infrastructure leaders, mobile device leaders, massive players in the digital economy and others. You'll recall that in the first quarter of 2025, we also won another global leader in the semiconductor ecosystem. In Q4, we also won a major player in the global storage business, serving the world's largest cloud providers, consumer electronics companies and other device makers. Last quarter, we talked about winning a material science company that is also a key part of the global data center infrastructure. We have continued our amazing run in the oil and gas sector by earning the business of Marathon Petroleum Corporation, a leading integrated downstream and midstream energy company headquartered in the U.S. and operating the nation's largest refining system. The AI economy is energy hungry, so our success in oil and gas continues to position us really well. We're also seeing increasing demand from energy utility companies that are expanding their operations to service the surge in data center needs. We're performing very well in other growing markets like aerospace and defense. Companies in the sector are seeing significant growth in demand while leading with complex bill of materials, engineer-to-order operating models and capacity constraints. In the fourth quarter, we won one of the world's largest aerospace engine makers, which powers defense, civil and business aircraft worldwide. We already support Honeywell, Lockheed Martin, Raytheon, L3Harris and several other leaders in the aerospace and defense space. In consumer goods, we won the Magnum Ice Cream Company with revenues of roughly EUR 8 billion in 2025, the Magnum Ice Cream Company is present in 80 markets around the world and is home to icons like Magnum, Ben & Jerry's, Cornetto and the Heartbrand. If that wasn't enough, we also won a top 5 global chocolate company in Q4. At the end of 2025, roughly 85% of our ARR is split between our top 4 vertical markets: life sciences, high-tech, consumer products and industrial manufacturing, including aerospace and defense. Maestro's ability to offer comprehensive AI-powered supply chain planning and orchestration for such a diverse set of major manufacturing markets, all without custom coding is unparalleled. There are still 14,000 prospects remaining in our markets, and we have never been in a better position to win them. Moving on to Slide 8. Despite outsized success winning major new accounts in Q4, 55% of gross additions to ARR came from expansion business with existing customers. For the year, that number was 53% compared to 45% in 2024. It was our biggest year ever for expansion business. We revamped the structure and goals of our installed account teams at the end of 2024. The impact has been meaningful, immediate and lasting. The contribution of expansion business from applications hit an all-time high with newer products like enterprise scheduling, machine learning-based forecasting and supply optimization making notable progress. We have over 400 customers and a growing set of capabilities to take to market to them. There is still massive room for growth within the installed base. Going on to Slide 9. I'm excited to tell you more about our ongoing journey with AI, the commercial launch of Maestro Agent Studio. This is a next-generation capability that gives supply chain teams a no-code way to compose AI agents grounded in their real operating context to reimagine the ways of working and delivering the next level of value outcomes. The agents are proprietary -- use proprietary data, workflows, resources and tools in our Maestro platform and can leverage the context of the most comprehensive digital representation of the complex and interconnected physical supply chain. Working within Maestro's trusted supply chain planning environment, the agents help teams concurrently evaluate trade-offs and coordinate decisions and actions as business conditions change, and the business conditions are changing at unprecedented levels as we speak. Maestro Agent Studio embeds leading large language models, including OpenAI, ChatGPT and Google Gemini with others like Anthropic's Claude in testing and keeps agent behavior anchored in Maestro's trusted data intelligence and governance. The agents call on and complement our existing decision automation capabilities that are anchored in decades of deep domain expertise and sophisticated mathematical models that LLMs aren't designed to replace. This includes advanced machine learning capabilities, deep optimization algorithms and heuristics algorithms. Together, these capabilities create a practical foundation for more autonomous supply chain operations that deliver faster, better decisions with confidence and trust. To date, early innovator customers are using Maestro Agent Studio for exciting use cases. For example, a major global electronics manufacturing services company is autonomously analyzing forecast quality and outside-in demand signals across business units to recommend improved forecast quality. A prominent consumer fashion company is analyzing demand changes to help planners understand the impacts on production and distribution and determine mitigation strategies. A global life sciences company is eliminating steps in inventory risk assessment to surface insights in seconds instead of hours. And several early adopter customers are streamlining reporting processes to reduce manual effort and tons of hours per month. Our progress is exciting, but the best is yet to come. So far, Maestro Agents are focused on working with data within our own platform. As we continue our AI journey going forward, we are expanding Maestro's reach to the broader ecosystem with an expanded data fabric and an abstracted semantic layer to enable composable agentic orchestration right across the supply chain. In 2026, our plans are the following: orchestrator agents that coordinate and sequence multiple agents across concurrent supply chain workflows, securing connections between Maestro Agents and external agents and systems through emerging protocols like MCP and A2A, expanded data context and semantics with an extensible ontology layer, enabling agents to reason consistently across larger data sets and analytical environments beyond Maestro. Through agentic connections to other systems that can provide relevant data and insights, we can leverage our context-sensitive real-time concurrent planning engine to help customers make better, more informed decisions and achieve unprecedented positive outcomes. Moving on to Slide 10. Maestro Agent Studio and our prebuilt Maestro Agents are fully available today. Monetization will happen through our next-generation pricing structure, an evolution that we've launched with customers and which introduces the Maestro activity units. Our new pricing structure remains subscription-based and still reflects a platform fee based on customer size and fees for individual functional modules like supply and demand planning, inventory optimization, production planning, enterprise scheduling and so on. However, now a subscription also includes bundles for Maestro activity units or MAUs, which expand the basis for usage-based pricing in our structure. Customers will commit for the full term of the contract to a quantity of MAUs bundles that reflect anticipated usage. The size of MAU commitment grows with a number of scenarios, AI tasks and automations and plan calculations and data exports a customer expects to engage through our MCP server. This more fulsome notion of usage achieves some very important goals. First, over time, we anticipate a bigger share of Maestro work to be conducted by AI agents. So our pricing needs to reflect that important value. If efficiencies result in fewer users, we are compensated by the growth in AI tasks and automations. Second, since we expect Maestro to interact more with a broader network of interoperable agents, we need to capture the value of the intelligence and analysis we share at. The data export aspects of MAU compensates us for that. Finally, embedding plan calculations in the MAU better reflects the value that customers receive and the costs we incur through normal plan iterations. Maestro now has the instrumentation to track MAU usage and persistent overages require additional MAU subscriptions. We will learn a lot more about MAU usage and our next-generation pricing model over the next few quarters and fully expect some tweaking along the way. I am confident that it better aligns pricing with the value we create for customers in an even more AI-forward world. The new pricing model is getting thoughtfully rolled out in a phased approach. I see AI as meaningfully expanding our TAM in the long run. As with all meaningful innovation, we encourage you to both avoid overestimating its impact in the short term and underestimating it in the long term. Our customers run the world's most important, complex and innovative supply chains. By necessity, they move carefully and thoughtfully, but they undeniably move forward. I'll pass the call to Blaine to discuss Q4 and 2025 results and our 2026 outlook. Blaine Fitzgerald: Thank you, Razat, and good morning. Q4 was a great record-breaking quarter for Kinaxis, and 2025 was also beyond expectations in key areas. We are positioned well for even more progress in 2026. I'll start with Slide 11. As we look at the numbers for the fourth quarter and compared to Q4 2024 results, total revenue was $144.2 million, up 16% or 14% in constant currency, driven largely by very strong SaaS revenue growth. SaaS revenue was $97.2 million, up 19% or 16% in constant currency, thanks to strong momentum winning new business throughout 2025, including record levels in Q4. Subscription term license revenue was $1.7 million, up 8% and consistent with expected renewal cycles for on-premise customers. Professional services revenue was $40 million, up 14% and stronger than expected due to higher realized rates as we work to ensure that pricing fully reflects our premium services. We continue to successfully ship work to system integrator partners, and we'll continue to focus on that in 2026. In 2025, partners participate in almost 70% of new customer implementations won by our direct sales team. Maintenance and support revenue was $5.4 million level with comparative period. Our gross profit was up by 26% to $94.3 million or a 65% gross margin, greatly improved from 61%. Our software margin was 78%, up substantially from 73%, largely due to more efficient delivery of our software. We see room for ongoing improvement as we complete our migration to the public cloud. Professional services gross margin was 32% compared to 29%, reflecting the higher realized rates in the quarter, as mentioned. Adjusted EBITDA was up 19% to $37.6 million, a record level. This reflects strong revenue growth, a higher gross margin and strong control over operating expenses. Adjusted EBITDA margin was 26%, up from 25%. Our profit in the quarter was a record $19.5 million compared to a loss of $16.3 million in the fourth quarter last year, which, as you remember, reflected some onetime items. Cash flow from operating activities was $29.9 million, up 24%. Cash, cash equivalents and short-term investments were $324.7 million, up $26.2 million from last year despite a very active share buyback program. Moving to Slide 12. Key aspects of full year results were beyond our expectations. SaaS revenue, our most critical GAAP measure, grew 17% compared to the initial guidance of 11% to 13% and came in at the top end of our most recent guidance range. Constant currency SaaS revenue grew 16% versus initial guidance of 12% to 14% and at the top end of our most recent guidance range. Total revenue was $548 million, up 13% and at the top end of our guidance range despite shifts from subscription term licenses to future SaaS revenue as well as lower professional services than expected as we shifted more work to partners and faced a challenging pricing environment earlier in the year. In constant currency, total revenue was $540 million, in line with recent guidance. Adjusted EBITDA grew an impressive 30% from 2024 to a record $138.4 million. The 25% margin is the highest since 2019 and a big step from 22% in 2024. Our adjusted EBITDA margin was at the top end of guidance and hit our midterm profitability goal of full year ahead of target. We're pleased with the progress. On Slide 13, our trailing 12-month free cash flow margin remains strong -- onetime payments we made in the first quarter relating to tax planning and litigation settlement reduced the results by 5.1 percentage points. So the normalized result is 25.6%, similar to our adjusted EBITDA margin for the year and trending positively. If you flip to Slide 14, annual recurring revenue growth in 2025 was impressive, growing by 20% year-over-year compared to 12% in 2024. In constant currency, ARR growth was 18% compared to 14% in 2024. We added $73 million to our ARR balance in 2025 with $26 million of that coming in the fourth quarter, both records. This dramatic progress reflects improvements in go-to-market strategies and personnel over the last year as well as the benefits of an increasingly differentiated and AI-centric product. As Razat already mentioned, some drivers of growth included many more deals above $1 million ACV, more large enterprise accounts wins and more focus and execution on expansion business. On Slide 15, SaaS and total RPO balances and growth remain very robust. Both measures show a healthy 3-year CAGR of 18%, and our total RPO is rapidly approaching $1 billion. This metric continues to highlight robust growth in our subscription business. Loyal customers driving gross revenue retention over 95% and is also influenced by normal renewal cycles. Looking at Slide 16, I am very pleased to introduce 2026 guidance. Given our strong momentum, we expect SaaS revenue growth of 17% to 19% in 2025, which at the midpoint is consistent with our constant currency ARR growth rate exiting 2025. We expect total revenue of $620 million to $635 million. Underlying this guidance, we assume that professional services revenue will grow in low single digits as we expect success enabling partners to handle more work, which is a key strategy to achieve scale in the business overall. Maintenance and support revenue should be flat to slightly down from 2024, given the recent conversions on-premise contracts to SaaS. The remainder of total revenue will be made up by subscription term license revenue, which should see growth in the 60% range versus 2025 and then decreasing to 2027 by roughly 25%. For 2026, approximately 60% of subscription term license revenue will be recognized in Q1, roughly 1/4 in Q4 and the remainder in Q2. Ongoing demand from on-premise customers who are moving to our hosting infrastructure could change the assumptions, and we will advise if that happens. We view 25% adjusted EBITDA margin as a new floor for the foreseeable future and are guiding to an adjusted EBITDA margin of 25% to 26% for 2026 as we make strategic investments in the year, primarily to drive exciting growth initiatives in AI and go-to-market activities that Razat will speak to shortly. Our business model and strategy allows for even higher margins in the coming years. I'll add some other color to help you with your models. We expect our total gross margin rate to continue its steady growth in 2026, driven by a more favorable revenue mix and a slightly improved professional services margin. We expect our subscription revenue margin in 2026 to be similar to 2025 as the benefits of moving North American customers to public cloud will be offset by onetime costs related to those transitions in the year. With respect to operating expenses, we expect sales and marketing to grow by high single digits relative to 2025. We expect research and development to grow in the high 20 percentage range versus 2025. And excluding stock-based compensation, we expect roughly 10% growth in general and administrative expenses compared to 2025. Including stock-based comp, we expect growth to be above 25%, reflecting some senior hires. Finally, we expect CapEx will be in the $8 million to $10 million range as we make office improvements to support growth in Japan and undergo internal IT refresh. I'll leave you with Slide 17. As we exit our quiet period, we will be maximizing the size of our normal course issuer bid by roughly doubling the repurchase limit to approximately 2.8 million shares or 10% of our float by October 31, 2025. We've already invested $54 million under the buyback and repurchased roughly 440,000 shares. At the average price paid for those shares, our new commitment put in an additional investment of up to approximately $284 million throughout the term of the buyback. We see tremendous value in maximizing our share buyback while public markets continue to misvalue complex AI-enabled software companies like ours. Kinaxis business has never been in better shape over my 6 years here. ARR growth has reaccelerated, and we are winning more industry leaders than ever, including in markets that have huge AI and other tailwinds. We have room to improve SaaS revenue growth and adjusted EBITDA margin in the coming years. We have a revitalized go-to-market team and the market's best product that continues to lead the AI transition in our space. All this made my personal decision to take a new opportunity extremely difficult. I'll be joining an exciting private company with a path to go public ahead, which is a really exciting place to be for a CFO. I'm sure my departure raises questions as senior management changes always do. Let me address them right now. First, I believe Kinaxis will be a huge AI winner, and we have a great new pricing model to monetize the inevitable evolution of how Maestro will be used. Second, Razat will be a fantastic leader for Kinaxis, and I truly wish I could have partnered with him a lot longer. There is no better time to have an industry veteran CEO with such impressive qualifications on the product side of the business as well as such strong go-to-market and overall leadership job. Finally, 2026 is set up to be a great year, and overall, the future looks exceptionally bright. So I'll be cheering from the sidelines. I want to thank the entire senior team for their support over my time here, including past leaders like John Sicard, Richard Monkman and Bob Courteau. They taught me a lot and created a truly special culture. And thanks to you, our shareholders and analysts for years of partnership as well. I've learned a great deal from you and enjoyed getting to know you all. We may meet again. For now, I'll let Razat make some concluding remarks. Razat Gaurav: Thanks, Blaine, for your countless contributions to Kinaxis. We've strengthened our business foundation, built a great finance team and successfully steered the company through great growth, opportunity and change to leave us in tremendous shape today. I wish we could work together longer, and I hope our paths cross again soon. I'm very pleased that Blaine will be with us through our Q1 earnings call in early May. In the meantime, we're actively searching for a new CFO to fill his big shoes. Going on to Slide 18. Kinaxis has a long history balancing rapid growth with strong profitability, and that will not change. A 25% adjusted EBITDA margin represents a solid floor and will also allow us to invest in exciting growth opportunities. We are focused on accelerating the transformation of Kinaxis from a supply chain planning solution provider to an AI-driven supply chain decision-making and orchestration platform. I'll highlight 4 key areas of investment in 2026. First, we're going to accelerate our road map for building out our core planning capabilities and turbocharging the leverage of agentic AI, including an extensible data fabric and semantic layer to enable our fulsome supply chain orchestration vision. Second, we're going to keep our foot on the gas for even greater go-to-market success. We will add quota-carrying capacity to expand account coverage and develop the go-to-market operating model for our new and exciting agentic capabilities. Third, we'll increase the leverage of key partners to both give us bigger edge in winning new business and to scale and help deliver the customers successfully with an increasing share of the implementation services. We are expanding our investments in training and enablement of our partner ecosystem and ensuring strong collaboration with solution assurance during implementation cycles. Finally, we are mobilizing a team of forward deployed engineers to accelerate the go-to-market usage, adoption and value realization from our agentic capabilities. This team will work across the life cycle of our relationship with customers with a mix of deep supply chain domain knowledge, data science and data engineering skill sets to compose agentic solutions architected to deliver valuable outcomes while still leveraging the core foundation of Maestro. We've already hired a leader for this group, a highly respected executive who rejoins Kinaxis after roles leading go-to-market and customer engagement teams for supply chain at Palantir and Celonis as well as senior roles at Cooper and Llamasoft. I couldn't have asked for a better person to spearhead our agentic solutions initiative. Internally, we have a company-wide program to identify use cases for AI to transform our ways of working in an effort to gain velocity and productivity as we scale up the business. In our product teams alone, roughly 90% of all requests, which is the way that new code goes into testing -- goes from testing into live environments, includes AI-assisted code, helping us gain speed and freeing up more time for innovation. Roughly 80% of engineers and growing are using AI in their work and half of those are power users. I hope these priorities give you a sense of how strongly Kinaxis continues to lean into the AI transformation opportunity. Evolving from a market-leading supply chain software solution to a composable agentic supply chain orchestration platform is a unique opportunity for Kinaxis and is why I am here. As you know too well, there is a lot of confusion in the public markets about who the winners will be in a more AI-forward world. We are working hard to prove that all the innovations in AI, data and agentic architectures are a significant tailwind for Kinaxis as we build the future of supply chain decision-making and orchestration. In the meantime, we are focused on delivering quarter after quarter as we did in Q4 and throughout 2025. Thank you for your ongoing support. I will now turn the line over to the operator to start the Q&A session. Operator: [Operator Instructions] Your first question comes from the line of Richard Tse with National Bank Capital Markets. Richard Tse: Great results, guys. Just before, Blaine, congratulations and all the best in your new job. It's a pleasure working with you over the years. Razat, like really great color on AI. And against that, I've got a really sort of basic question I'll ask here because we're getting a lot of inbounds on this. And so when you think about Kinaxis, why is it that a sort of high-powered sort of small team could not come in and build an AI native platform to compete directly with Kinaxis here. I know it's a basic question, but it's certainly one that we're getting a ton of inbounds on. Razat Gaurav: Yes, Richard, thanks for asking that question. And we think about this very deeply. And I think the underlying facts are what are the types of problems we are solving for our customers. The types of problems we're solving for our customers requires a very deep understanding of the supply chain domain. And the supply chains that our customers operate are highly complex, highly interconnected. And you need to understand the physics of the supply chain before you can use AI or agents to do anything with it, right? And that's what we've built in Maestro over decades long. And that platform is the single richest representation of that complex interconnected supply chain that our customers operate. And then on top of that, we, like everyone else in the enterprise software space, are leaning in, in leveraging generative AI to transform the user interface to a more conversational interface, which is democratizing the usage of our solution. But also we are leaning in on all the new data architectures and the semantic architectures to create a composable agentic platform, right? So when you think about the kinds of customers we have, these are customers like Ford Motor Company and Unilever and Schneider Electric and Merck, they rely on the trust and the robustness and the industrial strength and the understanding of the physics of the supply chain on our underlying platform. And then we are layering the intelligence and the automation and the prediction layer with agents and with AI. So we feel very confident in our ability. We're clearly seeing the demand for it in our customers, and we have every intention to continue performing to prove that out. Richard Tse: Okay. Great. I have just one follow-up question, and I'll pass the line after that. So with respect to the new pricing model, is sort of, I think, the bias here that it will be sort of incremental to the existing growth profile here of the company because obviously, it sounds like that's kind of what is happening here. And when it comes to profitability, can you maybe just provide us a bit of color because, obviously, it's sort of transaction based and there's a lot of sort of things with tokens, like I imagine the costs won't be fixed. There'll be obviously sort of variable. So how are you thinking about sort of those two things? And then I'll pass the line. Blaine Fitzgerald: Yes, Richard, I'll start. As we're going through this, it's somewhat exciting in terms of -- we think this is a potential to accelerate growth in revenue while keeping our costs actually at the same levels. As you know, there are some like AI modules that we have that are a little bit more costly than others. But overall, what we've done is we covered that with this actual almost variable cost that is actually committed. And that's the one thing that I think people need to realize for what we're doing here is that although it's consumption and usage based, we are obviously going forward with a committed revenue scheme. So at the end of the day, it won't look too much different from what we have today. However, there are areas of revenue opportunities and value that we're giving to our customers that we think that we should be monetizing on. And so we think this is going to be both beneficial to overall EBITDA, but also very much the revenue side. I will say that in any of our guidance that we've given today because it's early days, we have not put any of that upside in our guidance at this stage just because it's too early to tell how that's going to play out. Razat Gaurav: Yes. Let me just add a little bit to that as well. So the biggest driver for us to really evolve to a usage-based pricing structure is to better align our offering going forward and the substance of the value we're bringing to our customers going forward to the way we price our offering, right? And so a lot of the metrics that form the basis of the MAUs, the Maestro activity units are anchored on those usage patterns. I fully expect that the initial phase of adoption, and we're seeing this with early adopter customers right now is really around making the key personas that interface with our applications, whether it's a planner or it's an extended part of the supply chain organization or even senior executives within supply chain organizations. It makes them more productive. It makes them leverage our platform and gain insights from our platform and take actions on our platform in a far, far more efficient way in a far easier and simpler way as well. So that's the first phase of adoption. As we keep building out our platform and we get into a more expanded agentic orchestration layer, I fully expect we'll be getting into more and more use cases that are developing digital personas, right? And so we don't want to tie our pricing to just users because I think we're going to scale across our customers' organizations in a very nonlinear way from a user perspective. And so that's the whole emphasis and the thrust behind our MAU structure. Operator: Your next question comes from the line of Thanos Moschopoulos with BMO Capital Markets. Thanos Moschopoulos: I'll echo the congrats to Blaine on the opportunity. Maybe starting off with a question for Blaine. When I look at your SaaS backlog at year-end relative to your SaaS revenue guidance, it's a higher coverage ratio with respect to the backlog than we've seen in prior years. Is that conservatism? Or is there some other dynamic? Blaine Fitzgerald: Yes, it's a good observation. So we're -- our CRPO is about 80% of what our midpoint on our guidance is, which is a good thing to point out. I think we are having a healthy amount of confidence in what we're landing at 17% to 19%. I think there is always opportunities. I just mentioned one of them with NGP where we could start next on pricing, which could show that we could maybe potentially beat that. Obviously, if you look at our past and look at 2025, in particular, we did much better than that 88 percentage points. And I think that's something that we are continuing to evaluate. And I'm hoping we'll be putting some smiles on people's faces throughout the rest of the year and beating that 17% to 19%. But right now, I'd say 10 months, I guess, 9 months to go in the year, it's a long way to go. We'll see how things play out. Hopefully, you'll be hearing some increases in that guidance over the year. Thanos Moschopoulos: Great. And then for Razat, how would you characterize the near-term spending environment? Clearly, you had strong bookings in the quarter, but is that a function of better execution, better competitive performance on your part against the stable markets? Or has there been some improvement in the demand environment with supply chain being more topical with tariffs and the like? Razat Gaurav: Yes, I think it's a good question. Look, I think it's a few reasons. I'll put it in sort of three buckets there. First, I do think there is growing levels of supply and demand volatility, which creates a better need -- even a bigger need for our platform, right, for our customers because customers are trying to gain agility, gain adaptability and through sort of high degrees of uncertainties and volatility, they need a platform like Maestro that enables scenario planning, enables intelligent decision-making while incorporating all the physics of the supply chain. So I think the overall macro environment has been a tailwind for us. The second is definitely our execution has improved significantly. Our go-to-market execution in the last 12 to 18 months has significantly improved. We have revamped the makeup of our go-to-market engine. The way we are engaging with customers has been significantly improved. And then we're going to continue to add capacity and coverage in the field to make sure we can continue to scale up. So that's the second big reason. And then I think the third big reason is I think there's a deeper interest in organizations that have had legacy systems and processes and supply chain planning and decision-making to really look for the next wave of productivity improvements, right? And that's causing a significant replacement cycle of old legacy systems, right? And we are one of the preeminent providers that is replacing older legacy systems right now in an effort to really architect processes and operating models and applications that help companies get the next wave of improvement in working capital efficiencies, next wave of improvement in supply chain operating cost efficiency. So these are the three big reasons, I would say, that is driving the growth momentum we're seeing in the company. And by the way, as we come into this year, we continue to see our pipeline growing along the same dimensions. Operator: Your next question comes from the line of Kevin Krishnaratne with Scotiabank. Kevin Krishnaratne: Congrats, Blaine, great working with you and good luck on the future. Question on your R&D. Did I hear that you plan to grow that line 20%? And if so, can you just comment on the moving pieces there? I noticed in your slide deck, you talked about the addition of forward deployed engineers. I'm just wondering sort of what you're seeing? Is that driven by customers? Are some of the decisions taking a bit longer on their side requiring you to kind of step up your -- the FTEs and to help drive that adoption. Just wondering if you can unpack the growth in R&D. Blaine Fitzgerald: Yes. Great question. And so what I said is that we'll be in the high 20 percentage range for that growth year-over-year. And there's a great reason. I mean we're seeing unprecedented momentum in the business at this stage. We had -- in 2025, we had the biggest deal ever. We had the biggest day ever. Every quarter had the biggest amount that we've ever seen for the demand coming in and the wins that we had for every single region. We had adjusted EBITDA, net income, basic EPS, like everything was off the charts records for us. That demand makes us believe there's a bigger opportunity that we could actually go after at this stage. In R&D, with the innovations that we see in front of us with agentic AI, with what's happening on trying to get access to the machine learning that we have in place and the tool that we have that our product has built, we just see that there's so much more than this. What -- a lot of the discussions we're having right now between Razat and myself and the other leaders of this team is that we're not okay with just being a supply chain planning company. What you're probably going to see is a company that may not even have supply chain in it at some point in the future and be more focused on enterprise AI. I think that is the eventual vision of where Kinaxis will do extremely well. And I think we have now this leadership team that -- which is part of the reason why this decision is so tough is that we have a leadership team that's all coming together and creating a huge opportunity. So the R&D spend, yes, it's going up. It's going up because there's a huge, huge opportunity, and we're seeing that today from every single customer that's asking for more and more and more. Razat Gaurav: Yes. Maybe just add a little bit more color to that. So look, our R&D investments are growing in 2026, and that's a very deliberate approach to this, right? And I would say that it's in two big buckets. One, investing in our core Maestro platform. Given the new architectures, given the new performance and scale expectations of our customers, we need to continue to expand and build on the core platform that we have and build out further the broader planning footprint that we have with our customers. So that's an important area. There's a lot of investments happening there. In addition to that, as I talked about earlier, there's a new architecture evolving with agentic AI. And we want to be leaning in and shaping what that means to the world of supply chain decision-making and orchestration, right? And so we are leaning in and building out this data fabric, abstracting the semantic layer, building out the agentic infrastructure around it and working with early adopter customers in faster cycles. So these things are important investments to really future-proof a sustained growth path for us in the coming years. On your question about the forward deployed engineers, look, this is a really important operating model that we're putting in place because unlike taking our traditional planning footprint, where the customers had a strong understanding of the feature functions requirements, and then we would be evaluated by those customers based on the fit of our platform against those feature function requirements. In this new world of agentic AI, it takes a different shape and form where the customers are more anchored on their pain points and outcomes. And then we together formulate what is the solution set required and how to architect the feature set required with the combination of our Maestro platform and agentic architectures to create a tailored and composable solution. That requires a very different engagement model, and that's where the forward deployed engineering skill set becomes really, really important. We're going to be investing in that. We've hired the leadership for that. We've got some internal skill sets. We're going to be hiring additional resources in this mix to really scale this business in a discovery-led consultative model so that we can really harness the power of the platform we're building out and deliver the outcomes throughout the life cycle of our customers. Operator: Your next question comes from the line of Paul Treiber with RBC Dominion Securities. Paul Treiber: A question for Razat. You talked about one of the reasons that you joined Kinaxis is building and scaling the company that you see as a market leader. What do you -- as you look forward in the next couple of years, what do you see as the largest challenge to scaling that you're looking to address as you grow? Razat Gaurav: Yes, it's a good question. And what I'll say is it's a unique moment in time for Kinaxis and frankly, for me to come in and to really build and scale. And I'm very bullish on the market need on the market opportunity, the market size. I'm very bullish on the domain problems that we're solving and the hard complexity and the value generation potential of those problems. I think the biggest barrier for a company like us would be to continue to scale in terms of retaining and attracting the talent that is required for us to realize the potential we have and to realize the expectations our customers have. That continues to be the biggest sort of thing to focus on is the talent. What doesn't keep me up at night is the market potential. I'm not too worried about the competition because we really have some amazing customers, and we have a lot of momentum. It's really allows -- really about scaling the business in every dimension with the best talent because we solve hard problems. We're not solving easy problems for our customers. And so we need the top caliber talent. And so you're going to see us continue to expand the talent. We've got -- we're anchored with some amazing talent in Ottawa, Toronto, Dallas. We've got a rapidly growing team in India, in Chennai and Bangalore. You can fully expect us to create new hubs of talent as we continue to scale up the business. Paul Treiber: And an interesting point you made that you're not worried about competition. You mentioned earlier the new hire from Palantir. The -- and I think this is one of the first times I've heard Kinaxis mentioned Palantir. Can you speak to like the competitive environment, if you're seeing these new entrants get traction in the market? Or is it still -- do you just see the traditional competitors? Razat Gaurav: It's -- the net story there is it's a very fragmented market. You've got a mix of a lot of old legacy players, including some of the ERP players, where we're actually driving replacement cycles. You've got some players that have emerged more so in the last 10, 15 years that we see in different cycles in different industries or different verticals or different geographies. And then you've got some new entrants that are coming in, right? But through all of that, our win rates have been very high throughout 2025. And maybe Blaine can talk a little bit more about the win rates there. Blaine Fitzgerald: Yes, that's a great point. Obviously, the -- it's a common question is the competitive landscape changing? The short answer is yes, but only slightly. SAP, o9 and Blue Yonder are still the main competitors we see. We have extremely high win rates. I think we've talked about in the past over 60% against those 3, which we can say is the same. I would say one of those, they almost landed the goose egg in terms of trying to win dollars from us, which is a pretty incredible, I guess, achievement to be almost 100% against one of those big 3 competitors. But those are the big 3 that we continue to see over time. I think there's going to be more new entrants that are going to come in. But at this stage, it's a very, very small percentage of the competitors that we do see. Operator: [Operator Instructions] Your next question comes from the line of Lachlan Brown with Rothschild & Co. Redburn. Lachlan Brown: Congrats on the strong results. And Blaine, congrats on an excellent tenure as CFO. I would like to dive into the regions. Asia was pretty successful throughout 2025. Europe was a good driver of growth, while North America was a laggard. Could you run us through why we're seeing different outcomes in the different regions? The recent bookings over the last couple of quarters tell a different story? And just any initiatives you're doing to push growth into the North American market? Blaine Fitzgerald: Yes, sure. Well, number one, I'll just reiterate, we had records every quarter, every -- for the full year for every region. I would say though, the one that outperformed by a significant, significant amount was EMEA. It was well beyond our expectations. I won't say the percentage, but they were extremely much higher than their target they had. The APAC team also did extremely well. They had a Q1 and Q2 that was much higher than our expectations. And then North America, they set the all-time record right now. They are the ones that are the champion for us in terms of those records for the full year. So it's one of those situations where I don't -- people look for the bad news. We don't have the bad news in any region at this stage. We're very proud of those regional leaders and how they performed. If there's one that kind of stuck out as way over the targets that we had, that was EMEA. They did extremely, extremely well. Razat Gaurav: Yes. And look, North America is our largest region in terms of bookings and ARR and revenue, and we have tremendous momentum in North America right now. I think we're going to be off to a great start this year, and we ended obviously Q4 at a very, very strong level as well. So actually, I'm super excited about the momentum in our North America business. Operator: Your next question comes from the line of Stephanie Price with CIBC World Markets. Stephanie Price: Congratulations, Blaine and Razat, looking forward to working with you. My question is on the Maestro Agents. They've been available more broadly to your customer base. Just curious about early feedback on the consumption bundles for the agents and what customers are saying about the pricing strategy that you discussed? And maybe more generally, how customers are kind of thinking about the pace of AI uptake here? Razat Gaurav: Yes. Look, it's a good question. First, on the early adoption with customers, right? So we were very deliberate in curating a mix of customers from various industry verticals that we play in to make sure we could work with those early adopter customers in a very iterative agile way and continue to improve the underlying Agent Studio that we've developed now. And the results are exciting. Clearly, there's a lot of learning cycles on the customer side and our side as we go through that. And what we're finding is the use cases fall in sort of or 2 or 3 different buckets, right? There are use cases that are very straightforward and are easy to compose and deploy, and they add additional intelligence and insights and create a much simpler experience for the users that are already interfacing with Maestro today. That's sort of the low-hanging fruit, if you would, and provides a lot of quick hits. The second category are use cases that are really oriented around creating a different way of working in creating automation capabilities in being able to rethink how planning gets done in the enterprise, right? And those, while our platform is an important enabler to that, they also require changes in operating models, in governance structures, in underlying processes for our customers. And that's where we're working with our customers and our partners very closely in not just enabling it through a system, but also surrounding it with the operating model shifts and the process changes that are required to truly transform how business gets done, right? So that's the second category. And the third category, we are just about to sort of embark on, which is the broader orchestration scope, which goes well beyond just the Maestro platform and the data sets that reside in Maestro and go into the extended supply chain, the extended enterprise, right? So I'm very encouraged by the early results. We are working very closely on this. This is a big priority for us as a leadership team and for our customers. And what I'm finding is I've talked now in the last 8 weeks to roughly 25 customers, there's a big appetite for customers to really co-innovate. They're looking for the next wave of efficiencies. They're looking for use cases where AI can authentically create value as opposed to just following the hype. And we're very fortunate to work with many organizations that want to be leaning in and be on the front foot on that. So really encouraging on that. On the pricing side, it was a very thoughtfully curated pricing structure where we leverage third-party experts. We benchmarked ourselves on what other companies are doing. We got some feedback and input from various existing customers. And that's what has resulted in the MAU structure. As we roll this out, by the way, the rollout of this just started last month, right, in February, we're getting additional feedback and input from our field teams, from our customers. And I fully expect that we'll go through those iterative learning cycles in evolving that pricing structure and refining it -- so it's something that works for our customers and for ourselves going forward. Operator: Your next question comes from the line of John Shao with TD Cowen. John Shao: Razat, you mentioned semiconductor is a new win. So just curious if this industry is any different from a supply chain planning perspective. Any specific pain points you're helping them to address that's just unique to them? And how should we think about your expansion with this new vertical, as you mentioned, top 5 global foundry? Razat Gaurav: Yes. Look, the semiconductor industry has a very interesting supply chain. I've had the fortune of working with semiconductor companies for many years now. If you think about the high-tech value chain, the semiconductor companies are at sort of the top tail end of that in some ways, right? And so as shifts happen in demand in downstream demand for various products, right, whether it's chips required in powering data centers, which are on an upswing or in consumer electronics products like mobile phones and iPads and servers, et cetera, the shifts in demand downstream impact the semiconductor industry in very massive ways. That's the bull effect that how demand propagates upstream through that value chain. So -- and then semiconductor companies are always trying to grapple with big swings in demand by the time it gets to them with the capacity that they have. And capacity is not easy to mobilize. They require heavy capital investment. So it's a unique supply chain problem. We're very familiar with it. We're very excited and very fortunate to work with several semiconductor companies, and we're seeing a significant need and demand for really allowing semiconductor companies to develop a more agile paradigm because as demand is shifting downstream, they're having to figure out how to service that demand with supply and capacity in a profitable and sensible way. And that's what Maestro is helping them do. Operator: This will end the Q&A session. The Kinaxis team will reach out to those who did not have a chance to ask questions. I will now turn the call back to Rick Wadsworth, Vice President of Investor Relations at Kinaxis, Inc. for closing remarks. Please go ahead. Rick Wadsworth: Thanks, operator. Thank you, everyone, for participating on today's call. We appreciate your questions and your ongoing interest and support of Kinaxis. As the operator mentioned, we've run out of time here, but I will reach out to folks who didn't get a chance to ask their question here, and we look forward to speaking with you all again when we report first quarter results. Bye for now. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Thank you for standing by, and welcome to the Clean Capital Energy Carriers Corp. Fourth Quarter 2025 Financial Results Conference Call. We have with us Today, Mr. Jerry Kalogiratos, Chief Executive Officer; Mr. Brian Gallagher, Executive Vice President, Investor Relations; and Mr. Nikos Tripodakis, Chief Commercial Officer. [Operator Instructions] I must advise you that this conference is being recorded today, Thursday, March 5, 2026. Statements in today's conference call that are not historical facts including our expectations regarding the seller acquisition transactions their expected effects on this cash generation, equity returns and future debt levels, our ability to pursue growth opportunities, our expectations or objectives regarding future distribution amounts, or share buyback amounts dividend coverage, future earnings, future leverage, capital allocation as well as our expectations regarding market fundamentals and the employment of our vessels, including delivery dates, redelivery dates and charter rates may be forward-looking statements as such as defined in Section 21E of the Securities Exchange Act of 1934 as amended. These forward-looking statements involve risks and uncertainties that could close the stated or forecasted results to be materially different from those anticipated. Unless required by law, we expressly disclaim any obligation to update or revise any of these forward-looking statements whether because of future events, new information, a change in our views or expectations to conform to actual results or otherwise. We make no prediction or statement about the performance of our common shares. I would now like to hand the call over to our speaker today, Mr. Brian Gallagher. Please go ahead. Brian Gallagher: Thank you, operator. Good morning or afternoon to wherever you are, and thank you for listening to the Capital Clean Energy Carrier's Q4 2025 Earnings Call. As a reminder, we'll be referring to the supporting slides available on our website as we go through today's presentation. Let's start with the highlights on Slide 4. An exceptionally busy quarter has continued with subsequent events into the current quarter, but it's pleasing to report the companies continue to make progress on multiple fronts. The key highlights from Q4 was our contracting of 3 latest technology LNG carriers. This opportunistic transaction illustrated our capability to act with conviction and speed and capturing what we believe will be valuable and timely additions to our fleet. More details from Jerry on that later on. Elsewhere, early on in the quarter -- current quarter, we welcome the Active into our fleet, the world's first 22,000 cubic meter liquid CO2 multi-gas carrier, but we also said goodbye to another container vessel as we pressed on with our focus on gas transportation. In terms of our governance and ongoing focus on sustainability, the company was pleased to gain accreditation from CDP in our first submission to that particular platform. Finally, the LNG shipping spot market had a robust if short-lived upturned during Q4 with freight rates touching $100,000 per day. This is an encouraging feature for the future development and potential earnings power from the sector, and there are some key underlying trends, which will require consideration and they'll be covered later on in the presentation. We are acutely aware of the current and fast-moving dynamic in the Middle East, impacting LNG and gas shipping sectors, which are Head of Commercial, Nikos Tripodakis, will provide some thoughts on later on. And naturally, management will be available to take questions after the formal presentation. Moving back to Q4 and our reporting net income from continued operations for the quarter came in at $28.4 million from which we fulfilled our commitment to a fixed distribution of USD 0.15 dividend per share to our shareholders, retaining the company record of distributing a cash dividend for every single quarter since our listing in March 2007. With that, I'll hand it over to our Chief Executive, Jerry Kalogiratos to run through, firstly, the financial highlights. Gerasimos Kalogiratos: Thank you, Brian, and good morning or afternoon to everyone listening in today. It has almost become routine to report further container sales, and the fourth quarter of 25% is no different. As Brian pointed out, we have now classified Buenaventura Express under discontinued operations due to its sale, which nevertheless had a full quarter before being delivered to its new owners in January. The sale of the Buenaventura represents the 14th container carrier sale in 24 months, consistent with the company's strategy to pivot to gas transportation. The classification of the Buenaventura Express under discontinued operations affected our results compared, for example, to the previous quarter. This leaves the company with just 1 container vessel. It continues to generate positive cash flows for the company as it is on the long-term charter with a blue-chip partner to 2033 and options to extend to 2039. We have made significant progress in our pivot, but we have always remained focused on ensuring value creation for our shareholders. We will only look to sell the last container asset. If it is accretive this strategy has served us well with the 14 other vessels, and we will continue on the same path. The dividend payout remains a core component of the company's value proposition to shareholders. The $0.15 dividend was paid on February 12 to shareholders of record on February 3. This was the 75th consecutive quarter that the company has paid a cash dividend. Moving now to the balance sheet on Slide 7. We closed the year with a solid cash position of $296 million, including restricted cash and the net leverage ratio just short of 49%. As mentioned earlier, we also finalized the sale of 13,700 TEU container vessel in early '26, continuing our disciplined capital recycling strategy. Finally, just a week ago, we issued a 200 million-euro bond listed at the AtenStock Exchange, further enhancing our balance sheet flexibility. We continue to work closely with different sources of finance and the funding of the 9 LNG carriers still due for delivery, and we are very encouraged with the progress of these discussions. We hope to be able to report much more on this front in the next quarterly call. Moving to Slide 9. Our LNG fleet continues to provide long-term visibility and stability. We have 90 years of contracted backlog at an average of DCE of approximately 86,800 per day, representing $2.7 billion of contracted revenue. If all extension options are exercised, this increases to 123 years or approximately $3.9 billion in contracted revenues. I recently announced order for 3 new LNG care newbuilds shown at the bottom of this slide, positions us to benefit from increased LNG Cpi demand towards the end of the decade. We continue to be in constant alogue with counterparties regarding our LNG fleet in what has become increasingly a more active period market and looking for the right employment structure for our remaining 6 open new builds. In terms of fleet update, we will have 4 upcoming dry docks for our LNG fleet. In the first quarter of this year, we have the Adamas. And in the next quarter, we expect to have the dry docking of the Arista House, Tatas and [indiscernible]. In terms of cash cost, the guidance remains the same as in previous quarters at $5 million all-in cost per dry dock and around 20, 25 days of hire. Importantly, we will welcome 2 more vessels during the second quarter of 2026, our second liquid C2 carrier and LPG carrier, the Amadeus at the end of April and also our first dual fuel 45,000 cubic medium LPG carrier various genes in early June. Turning to the next slide. Funding of our newbuilding program is well supported. We have already paid a portion of the required CapEx supported by -- generated cash flows, asset monetization and attractive debt financing terms. As we progress through 2026 and '27, we expect CapEx to be mostly weighted towards the LNG carriers for which we assume on average approximately 70% debt financing. The picture that you see is before tapping into the proceeds of the EUR 250 million bond issue. This leads neatly to look briefly at the key events for the company during the quarter, namely the contracting of 3 new LNG carriers on Slide 11. As mentioned earlier, we secured 3 state-of-the-art LNG carriers with deliveries scheduled of 1 vessel in the fourth quarter of '28 and 2 in the first quarter of '29. These vessels include enhancements to fuel efficiency, boil of rates as well as liquefaction capacity, placing them among the highest-performing LNG carriers globally. We secured the spares at HD Hyundai Samho in South Korea on attractive terms. The delivery profile is optimized for a market period where the order book looks particularly undersupplied in view of the anticipated demand giving us significant commercial optionality. Now after quarter end, we delivered the world's first 22,000 cubic liquid CO2 multi-gas carrier, the Active. This vessel is capable of transporting liquid CO2, LPG and ammonia and other petrochemicals and remains fully competitive in the conventional semi ref gas market. The vessels already employed on a 6-month charter, transporting LPG, an optional extension, demonstrating immediate commercial demand. As mentioned earlier, we successfully raised last month EUR 250 million through a newly issued unsecured bond, take advantage of a favorable interest rate environment. After hedging the currency and interest rate exposure of the new bond, we expect the online cost to be approximately so 1 for $295 million in dollar terms. But to the process of the new bond will be used to refinance our outstanding bond of EUR 100 million -- EUR 150 million issued in 2021, maturing later this year. The rest of the proceeds will be used to finance our newbuilding program and for general corporate purposes. I would like now to turn to our Chief Commercial Officer, Nikos, who will run through our LNG market slides. I will then be available to answer your questions along with Nikos Brian at the end of the call. Nikos, over to you. Nikolaos Tripodakis: Thank you, Jerry, and good morning or afternoon, everybody. Currently, of course, the war in the Middle East and how it will affect the energy model. And in our case, the shipping market is in everyone's mind. I will come back to this at the end of my presentation. Please allow me to start with the main highlights of Q4, which has been the unexpectedly strong spot market. As Slide 14 shows, spot rates rose strongly to exceed $100,000 a day in mid-December, the highest level of the past 2 years. An unexpected surge in LNG production from the U.S. pockets of East West arbitrars and logistical constraints led to an absorption of available tonnage and the significant increase in spot rates. This served as a stark reminder of the fragility of the LNG shipping supply-demand balance during winter months when modest changes in -- economics, production volumes or port and canal logistics can collectively have a disproportionate impact on freight markets. However, as we will see on Slide 15, all vessel types benefit in a similar way from a surge in spot rates. Turning to Slide 15. As we can see on the left-hand side, we see the 5-year quarterly average freight rates up to 2024. What is interesting is that the charter rates for steam vessels during that period captured around 50% of the rate of a 2-stroke modern vessel. But in 2025, that percentage dropped to 20%, even though the market has been consistently lower compared to the 5-year average. What is also worth noting is that even though 2-stroke charter rates rose by approximately $32,000 a day on average through Q4, steam rates only rose about 7,000 a day and continue to trade below OpEx levels. This clearly indicates that 2 stroke vessels, like the 1 CCF owns and operate capture the lion's share of the benefits in a rising market, while older vessels remain unattractive as long as 2 stroke vessels are available even if the charter rate for 2 strokes is approximately 400% higher as it was during the Q4 of 2025. This widening rate gap underscores the increasing obsolescence of older technology and supports our strategy for investing exclusively in modern high-efficiency LNG carriers. Turning now to Slide 16. The challenging market conditions for older vessels described so far have led to 2025 becoming a record year in terms of scrapping with 61 vessels exiting the fleet. Looking at the age, the redelivery profile from current charters and the fact that these vessels would operate below their OpEx breakeven in the spot market, even when the spot market goes through its seasonal spikes, the commercial removal of those vessels either through laying up or scrapping becomes inevitable. Our attention now turns to the other end of the spectrum and specifically new buildings on Slide 17. As we look at Slide 17, a clear pattern emerge in Q4 with an increase in ordering, something we were part of with a 3-vessel order. In December alone, there were almost as many orders placed as for the rest of the year combined, indicating greater confidence amongst the ship owners regarding the dynamics of the LNG market. This has led to a slight uptick in newbuilding prices as we can see in the right of Slide 17. We expect this trend to continue as limited yard capacity for deliveries in 2028 and 2029, meets the surge in demand for LNG carriers stemming from the doubling of U.S. LNG production from the U.S. This limited capacity for 2028 and 2029 provides a very good opportunity to look at the order book availability and CCEC's market share of open newbuildings. Turning to Slide 18. It is demonstrated that out of the 30 new buildings in the order book, 6 of those or 20% are controlled by CCEC. This makes us the owner with the largest market share of the open order book and in prime position to capitalize from the increased demand expected in 2027 onwards as charter sick molded tonnage. Moving on to Slide 19. We would like to summarize our view on the long-term supply and demand picture of LNG freight. As with any shipping segment, there are always a lot of cross current and moving parts. We have tried to incorporate the recent supply and demand developments on this chart. Firstly, to explain the chart, the orange dash line represents the maximum potential growth in demand for LNG carriers and global energy projects extending to 2032. The blue dash line represents the number of LNG vessels required based solely on those projects that have reached an FID status, which is a relatively conservative approach as we expect more projects to reach FID in the months to follow. The gray bar represents the gross number of LNG carrier deliveries expected on a cumulative basis year-on-year with the orange bars being the estimate from CCEC on LNG vessel removals. The dark gray bars finally represent the net number between vessel deliveries and removals. In summary, we anticipate the LNG shipping market to reach an inflection point in late 2027 or early 2028 with new energy supply requiring a substantial number of additional vessels. Accounting for scrapping of older ships, demand is anticipated to outpace vessel supply, creating a constructive long-term outlook. Now as mentioned at the beginning of my presentation, we need to address the current situation in the Middle East. The U.S. Iran conflict following the coordinated U.S. Israel strikes on Iran on the 28th of February, has significantly increased geopolitical risk in the Persian Gulf and particularly around the strait of Hermosa a critical energy shipping checkpoint. Most commercial vessels are avoiding the area due to security concerns, missile and drone attacks, AIS interference and the withdrawal of more risk insurance. This has disrupted significantly any normal shipping patterns and the flow of energy commodities and has created a situation where Western affiliated vessels faced particularly high risks and costs when transiting in the region. The conflict has major implications for the global LNG market as roughly 20% of the global LNG exports originate from the Arabian Gulf, mainly from Qatar -- further. Israel has shut down at least 2 major gas due to security concerns, potentially forcing Egypt and Jordan to increase imports by up to 65 cargoes per year to replace lost pipeline gas supply. Combined with the Arabian Gulf export disruptions and the withdrawal of more risk insurance for vessels operating in the region, the situation could significantly tighten global energy markets as a prolonged closure of the strait of -- will lead to increased competition for the limited flexible supply, mainly from the U.S. and result in significant price increases in gas worldwide. Now the most important unknown right now is the duration of the conflict. We can place lost pipeline gas supply, combined with the Arabian Gulf export disruptions and the withdrawal of more risk insurance for vessels operating in the region, the situation could significantly tighten global energy markets as a prolonged closure of the strait of -- will lead to increased competition for the limited flexible supply, mainly from the U.S. and result in significant price increases in gas worldwide. Now the most important unknown right now is the duration of the conflict. We cannot speculate on how long the situation will last, but the effect in the gas and shipping markets in less than a week are very clear. Global gas prices for the pro months have more than doubled at some point during this week with Asian gas prices combining a significant premium over TTS. The increase in global prices in combination with the surge in ton mile demand due to an open arbitrars to the East has led to our nonprecedented rise in spot charter rates from circa $40,000 a day last week to around $300,000 per day on a -- basis for March and April loadings at even rates above $100,000 a day for 12 months on modern vessels. One thing is clear. the longer the situation continues, markets will price the risk accordingly and the rise in commodity prices will further support the rising freight rates. This concludes our presentation for today, and happy to open the floor to any questions. Operator: [Operator Instructions] Our first question is from Alexander Bidwell with Webber Research & Advisory. Alexander Bidwell: I just wanted to see if you guys could give a little bit more color on, I guess, the potential implications of this shutdown of Middle Eastern supplies on the carrier market. We've seen -- I guess, as you mentioned, we've seen spot rates climb pretty drastically over the last couple of days. But what is the -- I guess, the longer-term implications of having a significant amount of supply taken off-line. Gerasimos Kalogiratos: It's probably more than million-dollar question right now, but we'll try to answer it in the best way we can. As we mentioned, the supply for Middle East mainly supplies Asian markets. And unlike what happened in 2022 when Russian gas flows to Europe were cut and Europe into place tight gas with LNG from the U.S. There is no way to replace this Qatar volumes in Asia. So the only way that Asia could replace this, Olivan fuel switching would be to increase the price. That would lead to an increased open arbitrars to the east and the market already now is undersupplied for vessels if this situation were to continue, i.e., an open arbitrage with healthy gas prices to the East. What would mean for freight rates I mean, we already saw the spike in the front, if this were to continue, you could expect term rates to rise significantly. Now how much is something that remains to be seen. Alexander Bidwell: All right. And then just kind of switching gears. So I believe 1 container vessel left in the fleet. Can you give us a sense of how you're looking at disposal options and just a general idea of what that time line might be? Gerasimos Kalogiratos: Yes. So we have been always quite opportunistic in the way that we have approached the sale of our container vessels and especially these ones, the last 3 that -- these last [indiscernible], the 13,000 EU containers, we have already sold 2 were down to 1. They have a long-term charter and good cash flow visibility, good counterparty. There -- the financing also on this vessel is less flexible than others. So while it's not impossible to transfer or sell this asset, it's more difficult because it has tax equity in the structure. So I think we're going to be quite opportunistic if we see a similarly attractive deal, we will look at selling the vessel or we might simply stick with it until closer to the end of the charter. Again, we will be driven more by the opportunity and less by a specific time line to divest from this container. I mean we have sold already 14 out of the 15 we feel quite comfortable. Operator: Our next question is from Jon Chappell with Evercore ISI. Jonathan Chappell: The capital exposure to the conversation and what's happening today, it looks like the more meal becomes open later in '26, 1 newbuild delivers later this year. and 1 in early '27. So is it right to assume that this parabolic move in spot rates does not have any immediate term effect on you? And I guess the follow-on to that would be as some of these new builds become closer to the delivery date. And as mentioned, some of the time charter rates are moving up as well. Is it kind of a wait and see how this plays out? Or is there any increased inquiry and opportunity to maybe time charter some of the newbuilds even at shorter duration to take it then, I hate to say and take advantage, but to take advantage of the of the move in the charter rates. Gerasimos Kalogiratos: Let me comment on the first part, and then maybe Nikos can pick up the second part with regard to the long-term curve. But -- the -- you are right to point out that in terms of redeliveries, the first vessel that we have is the more in Q3, but we do have some of our newbuilds coming early in much earlier in Q3 and while some of them we have already have employment in place, we have flexibility in swapping this with other later sisters. So there is the potential for us if we see the market interest to be able to offer earlier positions very late Q2 or early Q3. . I think it will very much depend on how long this lasts Nikos said, which -- and we don't have immense visibility here. Nikos, would you like maybe to say a few words as to how you see the long-term curve being affected right now? Nikolaos Tripodakis: Yes. So as mentioned, this all depends on how long the situation will last. We will need to make something very clear now. There have been a lot of charters out there that were happy to play the spot market given the arbitrage pointing to Europe and a sensible oversupply of vessels in the Atlantic. But now what this situation has created and the longer it lasts, it will make companies that use this strategy more aware and more eager to take the position is that a prolonged arbitraries to the East has made this market very tight. So -- the longer the situation lasts, more and more companies will try to secure shipping even at higher rates, just to be able to lift those volumes. And we have already seen inquiries for terms for some of our new buildings, obviously, are not at the rates we mentioned for the spot market, but already at higher levels than what we saw let's say, 2 or 3 weeks ago. So it has certainly affected the market, but we need to see the situation last for a bit longer for dealers to be concluded in the 5, 7 years space. Jonathan Chappell: Okay. And then maybe the terms are a little bit commercially sensitive, but I think it's super important in the context of trying to understand the new market for the LCO2, is there any way to kind of help frame out the charter rate that the active has for the 6 months and then maybe the extension? And then I guess the other thing I'd ask on the LCO2 is, I don't see the delivery schedule in the presentation or the press release anywhere. Just want to make sure that the delivery schedule is last presented was still the same for the remainder of this year and those ships going forward. Gerasimos Kalogiratos: Yes, of course, Jon, yes, the table has not changed, deliveries have not changed. So as I said during my prepared remarks, we are expecting the next LCO2 hand the LPG carrier towards the end of April and the 45,000 cubic fuel [indiscernible] in early June. These are the next couple of deliveries and the delivery schedule for the rest remains as previously described. Now in terms of the Active, the Active really went directly into the trade as a semi-ref LPG ammonia carrier. It's -- and I think this is how we should be thinking about it until we see a more mature LCO2 market. So in terms of numbers, the -- if you want to think about TC after the ballast days and repositioning from the shipyard into the trade, that's probably for the first 6 months, you can assume close to $21,000 per day. The rate was $25,000, but as I said, the repositioning was in on the first 6 months. And then there is an option for the charter if it's exercised than the headline rate is $32,000 per day. So assuming that option is exercised, the blended average, including repositioning is around $25,000, $26,000 per day for the whole year. Operator: Our next question is from Liam Burke with B. Riley Securities. Liam Burke: Jerry, I know the timing is not great in light of the shortage of LNG carriers, but what is the general tenor of discussions on the future deliveries of the non-LNG carriers for longer-term charters? Gerasimos Kalogiratos: Yes, this market is a shorter term market. So typically, there, you will find a lot of liquidity anywhere between 6 to 12 months. And then -- there is some demand in the 2- to 3-year type of periods occasionally 5 years. but definitely shorter than the 7, 10, 12 years or more that you see in the LNG market. But I think you could safely say that the most liquid part, the most volume is on the 6 to 12 months TCs. Liam Burke: The liquid part, okay. if you look on the longer durations that they're kicked around, is there a sufficient return on those rates? Or do you prefer to keep them in on the shorter 6 months to the year. Gerasimos Kalogiratos: With the kind of rate that we see nowadays. I mean, since the delivery of the first vessel market has tightened both for handysize LPG carriers as well as for MGCs, I think the returns are quite decent. And if we see the opportunity, we will try to lock them in for longer. Market today for 45,000 cubic dual-fuel vessel it's probably somewhere around the $40,000 per day mark, give or take, which is quite decent returns. Operator: [Operator Instructions] Our next question is from Omar Nokta with Clean Securities. Unknown Analyst: Obviously, a lot of stuff I guess I just wanted to ask in terms of the developments in the Middle East, is there any of your vessels that are directly affected by this, specifically, say, the force majeure that was put in by Qatar Energy. I believe you might have 1 ship on contract with them. Does that at all affect the terms of the charter? Gerasimos Kalogiratos: No. So far, we haven't been affected at all. all charters continue with their ongoing charter commitments, and we don't have any vessels in -- within the Gulf. So it's relatively smooth if you can describe it that way given the turmoil in the background. Unknown Analyst: Okay. And then just completely separate, just an accounting question. Just in terms of the remaining newbuild CapEx that's roughly that $2.4 billion. How much of that do you have secured in bank lines? And then how much are you intending to put in place? Gerasimos Kalogiratos: So all the MDCs and LCO2s have been already financed -- and the -- we are in advanced discussions for the remaining LNG carriers as we typically do, you should expect that we will be financing the earlier deliveries and then wait out for later deliveries. I mean we're not going to finance everything this year, simply because we don't want to incur commitment fees. I expect next quarter, we will have a lot more news on the financing of the LNG carriers to be delivered this year and next. In terms of the breakdown, let me suit you an e-mail later on with the exact amounts. Operator: There are no further questions at this time. I would like to turn the conference back over to Mr. Kalogiratos for closing remarks. Gerasimos Kalogiratos: Thank you, operator, and thank you, everyone, for joining us today. Operator: Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.
Operator: Good morning, and thank you for standing by. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ardent Health Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Dave Styblo, Senior Vice President of Investor Relations. Please go ahead. David Styblo: Thank you, operator, and welcome to Ardent Health's Fourth Quarter 2025 Earnings Conference Call. Joining me today is Ardent President and Chief Executive Officer, Marty Bonick; and Chief Financial Officer, Alfred Lumsdaine. Marty and Alfred will provide prepared remarks, and then we will open the line to questions. Before I turn the call over to Marty, I want to remind everyone that today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to update our forward-looking statements. Further, this call will include the discussion of certain non-GAAP financial measures including adjusted EBITDA, adjusted EBITDAR and free cash flow. Reconciliation of these measures to the closest GAAP financial measure is included in our quarterly earnings press release and supplemental earnings presentation, which were both issued yesterday evening after the market closed and are available at ardenthealth.com. With that, I'll turn the call over to Marty. Martin Bonick: Thank you, Dave, and good morning. We appreciate everyone joining the call and webcast. During our third quarter call, we committed to taking swift and decisive action to address certain industry challenges that has intensified. The initiatives were designed to strengthen our operating model and better position the company for long-term earnings growth. I'm pleased to share that our fourth quarter results reflected a number of positive developments and encouraging signs of progress as a result of the actions we took since our last update. Key industry headwinds that we flagged as accelerating on the third quarter call, including professional fees and other rate pressures driven by payer denials showed stability in 4Q. Additionally, our team focus on disciplined execution and expense optimization is already starting to pay dividends and drove solid fourth quarter earnings performance. Furthermore, we generated robust cash flow that was above our expectations resulting in nearly a 50% increase in full year 2025 operating cash flow. In short, I'm pleased with our finish to 2025 and the momentum that we've built exiting the year. Importantly, we expect operating performance traction to further ramp throughout 2026. During today's conversation, I'm going to focus my comments on 3 key areas: First, I'll walk you through fourth quarter performance, which resulted in 2025, recording our highest ever revenue, EBITDA and operating cash flow. Second, I will provide color on our IMPACT program, our work to improve margins, performance, agility and care transformation and how those actions are strengthening our business, along with an update on industry challenges we highlighted last quarter. And third, I will share context around our 2026 financial guidance. Let's start with fourth quarter performance in 2025 results. We reported solid fourth quarter revenue supported by durable industry demand. This capped off a strong 2025, where we grew full year revenue by 6% at $6.3 billion, squarely in the middle of our 2025 guidance range. Underpinning this performance was strong 2025 admissions and adjusted admissions growth of 5.3% and 2.3%, respectively. Fourth quarter adjusted EBITDA benefited from the impact program initiatives to optimize revenue and streamline the business. For full year 2025, we grew adjusted EBITDA 9% and expanded margin 20 basis points. We also generated significant operating cash flow of $223 million in 4Q and $471 million during 2025, up 49% from 2024. Our improving earnings profile, along with diligent work to maximize collections contributed to the large increase. Finally, we strengthened our balance sheet during the year. We increased cash by approximately $150 million to over $700 million at the end of 2025, and we reduced our lease adjusted net leverage nearly 0.5 turn to 2.5x. That's a good segue into the second topic of today's discussion, our IMPACT program progress and an update on industry challenges. We are pleased with the traction of IMPACT-driven initiatives to further optimize costs and strengthen margins. During the third quarter call, we sized $40 million of annualized IMPACT program savings that we expected would ramp during the fourth quarter of 2025 and reached run rate entering 2026. We are on track to deliver on that target and are raising the expected contribution to approximately $55 million, which Alfred will discuss shortly. Importantly, IMPACT is a multiyear operating model transformation, improving not only margins, but our performance agility and care transformation. These efforts are reflected in the P&L. For example, we activated precision staffing initiatives that resulted in fourth quarter a salaried wages and benefit expenses declining 0.4% year-over-year. Similarly, we reduced SWB per adjusted admission by 2%, which is a significant inflection from the 4% growth during the first 3 quarters of 2025. Within SWB, we reduced contract labor expenses by 26% to $17 million in the fourth quarter. To put that into context, contract labor accounted for only 2.6% of SWB in 4Q, which is the lowest it's been since 2019 when we were running in the mid-2% range. These improvements are being driven by focused efforts to optimize precision staffing, drive operating room excellence and expand virtual care. In contract labor, we renegotiated a key contract to improve our rates and we reduced overall utilization by accelerating our speed to hire and leveraging real-time management tools. This enabled us to reduce agency labor FTEs by approximately 175 in the last 4 months of 2025. In the operating room, which is 1 of our highest impact areas for improving performance, we increased first case on time starts by over 10 percentage points in 4Q versus 3Q and expect to continue on that progress this year. Additionally, we continue to see significant value and care transformation through our virtual care activities, including virtual nursing, patient monitoring and provider coverage. As we have shared previously, these programs have improved workflows, ease staffing pressures and strength in clinical support across our hospitals. Building on this success, we announced a partnership with last week to launch an enterprise-wide AI-assisted virtual care expansion that will span more than 2,000 patient rooms by year-end. This will establish a connected, scalable virtual care network across all markets, improving safety, operational efficiency and enabling better utilization of clinical talent. Stepping back, I'm encouraged by the traction of our IMPACT program built throughout 4Q and the momentum it provides heading into 2026 as we manage well-known industry pressures. On that front, I wanted to provide a brief update on the 2 pressure points we experienced in the third quarter. Payer denials in 4Q held generally consistent with 3Q, and we are starting to see some improvements on the margin aided by our partnership with Ensemble. Specifically, we've been focused on denial integrity and more consistent application of our contractual tools yielding better predictability in the revenue cycle. Likewise, professional fees also moderated in Q4 with growth decelerating to 8% from 11% in Q3. Our strategic recontracting and vendor transitions are having a positive impact. While it's still early, the 4Q data points are directionally favorable on both industry challenges. Pivoting to our third discussion point, I want to address our 2026 outlook. We entered this year encouraged by tangible progress from our IMPACT program and expect to continue building momentum throughout the year. We remain highly focused on optimizing revenue, disciplined expense management and productivity, the levers most within our control, all while delivering excellent quality care to patients. In terms of industry demand, our positioning remains a strong cornerstone as our markets continue to grow 2x to 3x faster than the national average and are further bolstered by rising care complexity. These structural trends reinforce our long-term growth thesis, while we continue to overcome the impact of well-known industry headwinds. With that backdrop, we are issuing 2026 adjusted EBITDA guidance of $485 million to $535 million. As Alfred will detail, this reflects tailwinds of mid-single-digit core earnings growth and IMPACT program savings, we now estimate will contribute about $55 million in 2026 at the midpoint, up from our $40 million estimate. Those benefits will largely help offset headwinds that include a prudent estimate for potential exchange disruption. We believe this is an appropriate posture to start the year given the broader market uncertainties Importantly, we expect adjusted EBITDA to return to growth in 2027 after lapping this year's annualization of payer denial and professional fee headwinds and as IMPACT program savings build through 2026. Before turning the call over to Alfred, I want to underscore that the deployment of AI and other technology continues to be an important part of Ardent's transformation strategy. We've taken a progressive disciplined approach to building the infrastructure required to deploy these tools at scale and that foundation is enabling us to advance additional initiatives this year. The takeaway is simple. Our single instance of Epic and enterprise-wide technology foundation gives us a structural efficiency advantage that continues to widen over time. We are seeing tangible benefits in coding accuracy, labor efficiency clinical throughput and quality. As for Ardent, you heard earlier that we are expanding AI-assisted virtual care across the full enterprise in 2026, supporting a virtual first approach that improves access, streamlined care delivery and extends the operating efficiencies already demonstrated in several markets. Our AI-enhanced scribe technology reduces clinical documentation time by 35% for physicians, enhances documentation quality and supports appropriate revenue capture. Adoption continues to grow, with Ardent providers now using the AI scribe in approximately 85% of patient visits without double the industry average. Additionally, we continue to deploy medical wearables that enable continuous vital sign monitoring. In markets where we implemented, this technology has reduced mortality by up to 15% and shortened length of stay by approximately 1/3 of a day. Finally, we are leveraging technology to support both clinical staff and operating room scheduling. This provides frontline leaders with real-time insights into staffing patterns and surgeons access to pull forward cases to maximize our operating room utilization. And importantly, our single instance of Epic remains a core differentiator standardizing and optimizing workflows, enhancing provider scheduling and consistently delivering strong clinical outcomes, including top quartile performance. Collectively, these tools have and will continue to make Ardent more efficient and enable us to deliver best-in-class patient care and quality. With that, I'll turn it over to Alfred to provide more detail on our fourth quarter financial performance and outlook. Alfred Lumsdaine: Thanks, Marty, and good morning, everyone. Building on Marty's comments, we're pleased with our fourth quarter results and our momentum exiting the year. Fourth quarter revenue of $1.61 billion was essentially flat compared to the prior year and in line with our expectations. As a reminder, we recorded 2 quarters of financial benefit related to the New Mexico DPP program in the prior year period. Adjusting for this, year-over-year revenue growth would have been approximately 3%. In terms of volumes, fourth quarter admissions increased 1.5%, adjusted admissions grew 2% and surgeries were essentially flat. Fourth quarter adjusted EBITDA of $134 million was 2% above our implied guidance midpoint, driven by expense discipline, operating efficiencies and our IMPACT program initiatives. As Marty noted, these actions contributed to SW&B cost savings after increasing 6.7% for the first 9 months of 2025 compared with the prior year period, salaries, wages and benefits declined 0.4% in the fourth quarter year-over-year, reflecting our focus on precision staffing and reducing reliance on contract labor. For the full year 2025, revenue increased 6% to $6.3 billion and adjusted EBITDA grew 9% to $545 million with margins expanding 20 basis points to 8.6%. Similarly, pre-NCI adjusted EBITDA margin also expanded 20 basis points to 12.7%. We generated robust operating cash flow of $471 million in 2025, up nearly 50% over the prior year. And free cash flow, net of noncontrolling interest distributions was $170 million. This is an outstanding result and reflects the work we've done to improve collections and correspondingly reduce AR days. Of note, the timing of our last payroll cycle in 2026 will create about a $50 million cash flow headwind year-over-year. We also strengthened our balance sheet during 2025. At the end of the fourth quarter, our lease adjusted net leverage was 2.5x, which was an improvement from 2.9x at the end of 2024, and our total net leverage was 0.8x. Additionally, we increased total cash by over $150 million, finishing the year with $710 million. At December 31, 2025, our total debt outstanding was $1.1 billion and total available liquidity was $1 billion. We also repurchased $3 million of stock during the fourth quarter and had $47 million remaining under our repurchase authorization at December 31. Now turning to 2026 financial guidance. We expect revenue of $6.4 billion to $6.7 billion or 3.6% growth at the midpoint. We expect adjusted admissions growth of 1.5% to 2.5% which contemplates expected exchange disruption from the expiration of the enhanced subsidies. Our adjusted EBITDA guidance is $485 million to $535 million. And I'd like to add some context and key assumptions behind that. Adjusted EBITDA for the full year of 2025 was $545 million. From there, we estimate our jumping off base to be approximately $475 million. This reflects approximately $50 million from the annualization of headwinds we discussed on our 3Q earnings call. Those primarily related to elevated professional fees and rate pressures, including elevated payer denials. The remaining approximately $20 million impact reflects restoration of short-term incentive compensation, which was below the typical baseline target in 2025. From the $475 million 2025 jump-off base, our midpoint of guidance assumes 2026 core earnings growth of approximately 4%. Additionally, we expect our IMPACT program to generate approximately $55 million in adjusted EBITDA in 2026, up from the $40 million estimate that we shared at the end of Q3. This creates a year-over-year tailwind of approximately $50 million, given that we recognized about $5 million of IMPACT program savings in 2025. This higher target incorporates additional opportunities we've identified across revenue and expense optimization, primarily in controllable salaries, wages and benefits. Finally, we estimate the exchange headwind will be approximately $35 million. Collectively, this results in a 2026 adjusted EBITDA guidance midpoint of $510 million. Our outlook excludes any potential benefit from the Rural Health Fund. Additionally, while we're already executing on IMPACT program savings pull-through, our work is far from finished, and we plan to continue to identify and execute on additional opportunities. With regard to payer denials and professional fees, we're not factoring in any improvement in our outlook from the back half of 2025 despite some indication that pressures are at least beginning to moderate. Finally, we believe the exchange headwind we have assumed in our guidance contemplates an appropriately sober view of the associated disruption risk. In short, our goal is to establish prudent adjusted EBITDA guidance in light of the current industry headwinds and tailwinds. I'll conclude by noting that we feel confident in our ability to return to adjusted EBITDA growth in 2027. As we transition into the second half of 2026, we expect to begin lapping the annualization of the industry headwinds that accelerated in the back half of 2025. Additionally, we anticipate the IMPACT program savings will build through 2026 and thereby augment 2027 core earnings growth and position us to grow adjusted EBITDA even with the BBBs Medicaid redeterminations beginning next year. With that, I'd like to turn the call back over to Marty for concluding remarks. Martin Bonick: Thank you, Alfred. I want to leave you with 3 key takeaways from today's call. First, our fourth quarter results reflected solid earnings performance as we quickly addressed the industry headwinds outlined last quarter. These actions helped drive our strongest revenue, EBITDA and operating cash flow in our history. Second, our IMPACT program continues to accelerate under Chief Operating Officer, Dave Casper's leadership. The operational improvements underway are strengthening the business. We have raised our 2026 savings target and pressure points of payer denials and professional fees and stabilize with early indications of improvement. Third, we have established prudent 2026 guidance and expect to return to EBITDA growth in 2027. We remain financially strong and strategically positioned to create long-term shareholder value. In 2025, we generated $471 million in operating cash flow and strengthened our balance sheet, giving us the flexibility to invest through cycles and deploy capital to support long-term growth. Looking ahead, these fundamentals position us to expand margins and grow adjusted EBITDA over the next several years. Before I turn the call over for questions, I want to recognize our 25,000 team members and 2,000 affiliated providers across Ardent. This is a time of significant change in health care and their resilience, agility and unwavering commitment to our purpose have been critical to our progress. Every day, they continue to adapt, improve how we operate and deliver high-quality care to the people and communities we serve. Their dedication is the foundation that allows us to navigate change and positions Ardent for long-term success. With that, I will turn the call over to the operator for a question-and-answer session. Operator: [Operator Instructions] Our first question comes from the line of Ann Hynes, Mizuho Securities. Ann Hynes: Just on some guidance assumptions on maybe a little bit more details. So you said professional fees, can you remind us what the actual increase in professional fees was in 2025 and what you expect the year-over-year increase to be in 2026? And then also with the enhanced subsidies. I know bad debt can be an issue, especially in Q1 you have greater -- should we assume greater maybe lower net revenue growth in Q1, just given that we're not 100% sure how many people will be kicked off and we might not have visibility into that until later this spring. Like how should we assume bad debt through the year-on-year assumptions? Martin Bonick: Thanks, Ann. Appreciate the questions. Professional fee growth year-over-year 2025 was in the roughly high single-digit range. We are making similar assumptions into 2026, consistent with our comments with denials and pro fee growth, not expecting significant reduction from these elevated rates and it would be upside if we did see some improvement in those. On the second half of your question on the enhanced subsidies, and we see lower growth from a revenue standpoint in Q1? I mean I think some of it is just going to depend on the timing. I'm sure you're familiar with the 90-day grace period. We'll have to see how that plays through. It's too early for us to really speak to that dynamic. As you saw from our guide, we think we're being prudent in our overall assumptions as it relates to the HIX enrollment expectations. Operator: Our next question comes from the line of Matthew Gillmor with KeyBanc Capital Markets. Unknown Analyst: This is [ Zack ] on for Matt. Could you guys provide some detail on your underlying HIX assumptions as it pertains to expected volumes declines in 2026? And then what percent are you assuming shift to other coverage versus uninsured? Martin Bonick: Yes. This is Marty. The good news is, given the expectations in the market for enrollment declines. Our markets were actually up. New Mexico was up. Texas was up, and so we're seeing some good pull-through on the initial side. I think the uncertainty comes in terms of what happens after the grace period and how many of those people defect. We're planning for enrollment to decline about 20% as we play through the fluctuation of that impact. And we're assuming about 10% to 15% move to employer-sponsored coverage and the rest go to self-pay. So we assume that the utilization we got 30% lower in that cohort. Unknown Analyst: Great. And then just for the $15 million increase in the IMPACT program, can you provide some detail on how those were identified, maybe bucket those savings, whether it be revenue integrity, cost takeouts or other met that you guys are producing those savings? Alfred Lumsdaine: Yes. This is Alfred. I would say of that $15 million increment that we've identified, the vast majority currently is in the SW&B line. Operator: Our next question comes from the line of Raj Kumar with Stephens. Raj Kumar: Maybe just kind of it would be helpful to get a perspective on the kind of IMPACT initiatives that have a longer lead time until the benefits materialize. And just kind of when we think about the commentary in 2027 return to EBITDA growth and then kind of thinking about the sustainability of that earnings growth heading into '28 as you kind of incur some of the OBBVA-related headwinds. Just kind of curious on how much more tank there is or how much more fuel there is left on the kind of IMPACT initiatives front on those kind of longer lead time initiatives? Martin Bonick: Yes. This is Marty. As I stated before, the IMPACT initiatives are meant to be multiyear and durable and sustainable, as we look at the OBBB impacts coming down the line. We're very confident that with the technology improvements that I mentioned in the AI. These are going to be multiple tailwinds that we're going to be able to continue to capitalize on. As Alfred said, SWB is an early target because it's the most direct control, but we know that we still have opportunities in the supply chain that we're harvesting and continued opportunities in the revenue cycle as we continue to enhance our coding, our collections and management, returning those denials. And so there's multiple factors. And so the early wins, as Alfred talked about, we are harvesting, but we expect these to continue. an magnify over the continuing years to come out to offset those headwinds that we have. So we feel very confident in our ability to continue to harvest these and direct them for the future. Raj Kumar: Got it. And then maybe as my follow-up, just kind of thinking about some of the kind of moving pieces in 2026 guidance. I guess is there any kind of 1Q volume impact from the winter storms that's embedded and maybe any call out on that would be helpful? Martin Bonick: Yes. Obviously, for us, the primary impacts were in the Texas, East Texas and Oklahoma markets from Winter Storm Burn. Of course, we did -- went into bull mode to ensure that we're rescheduling cancer surgeries. Did see some of that lost volume at the tail end of January come back in February. We're not pointing to that for any sustainable impact. You could have maybe just a very, very immaterial impact to Q1 overall, but not looking for that from any kind of an enduring dynamic. Operator: Our next question comes from the line of Ben Hendrix with RBC Capital Markets. Unknown Analyst: This is [ Michael Murray ] on for Ben. Your guidance called for 3.6% revenue growth at the midpoint, and you project core earnings growth of 4%. So slight core margin expansion, but that obviously excludes the headwinds that you called out. So I wanted to see if there's anything to call out on your core operations cost structure. Whereas some of the margin expansion you would normally see rolled up in that IMPACT program? Alfred Lumsdaine: No, I don't think there's anything in particular that I would call out that core margin expansion is similar to what we saw in 2025 once you exclude the headwinds that we've talked about at length, and so very consistent. Again, obviously, we talked about the HICS dynamics as well. But no, there's really nothing to call out. We've seen, we believe, sustainable efforts to improve both the labor line and the supplies line. Unknown Analyst: Okay. And then my follow-up. On professional fees, I appreciate the commentary on high single-digit growth expectations for the year. Should we expect a bigger headwind in the first half versus the second half? And if so, what growth rate do you believe you'll end the year at? Alfred Lumsdaine: Yes, I would continue to stick with that high single digits growth. Again, as we mentioned in our commentary, we're not modeling in any substantial improvement. So I think a similar rate throughout the year would not be inappropriate. Operator: Our next question comes from the line of Kevin Fischbeck with Bank of America. Unknown Analyst: This is [ Joanna Gajuk ] filling in for Kevin. So first one, just a follow-up on the IMPACT program cost saves. And it sounds like you expect more in the future, but as we just think about that number for '26. Is there some sort of time line? And should we think about a run rate number you expect to be when you exit '26 in this cost savings? Alfred Lumsdaine: Yes, thanks, [ Joanna ]. Yes, from a ramping perspective, the 40 plus the 15 is, I would say, fully identified and being executed on and there will be a modest amount of ramp into '27 on that, but the larger opportunity would be anything else that we identified during the year and are able to actuate and that would create additional impact, no pun intended, into 2027. Unknown Analyst: Okay. So a modest ramp, but I guess the point you were making before is that there's additional progress, right? So like '26, you have on whatever you identified, there's a little bit of a ramp, but it's more about like incrementally any additional savings after you achieve that target for this year? Alfred Lumsdaine: Yes. Unknown Analyst: Okay. And a different topic. So I appreciate the comments about the core growth being 4%. And when we look at things, we exclude the benefit because we're assuming like there's not much of a growth, I guess, in that sort of bucket. So if we do that, we get to implied growth excluding the DTP, so everything else besides the DPTs will have to grow 12%. So that seems like a high growth. So can you walk us through like what's driving the fast growth? Alfred Lumsdaine: Well, I guess I would start with saying that the PPP are volume-based. States are growing. And we certainly, in addition, have strategies to capture share as well. So I would not say that PPPs would be flat. But then second, going back to the previous question as well, we generated a similar core growth to that 4% number in 2025, we need to adjust for those incremental headwinds of and payer denials. We've laid out what our volume growth expectations are of 1.5% to 2.5%. And then I would also add our rate of increase on our commercial contracts. We're roughly 90% contracted for the year and we're seeing rate increases of between 4% to 5%, all leads us to be very comfortable with that $20 million expectation from core growth. Unknown Analyst: All right. And then you said the DPP sorry, just a follow-up on that. So all your programs, the DPP programs are volume-based. But I guess if the enrollment in Medicaid enrollment is declining in these states, like what happens with that funding? Alfred Lumsdaine: That would be an exposure at Medicaid. And then again, depending on where those lives go. Martin Bonick: And this is Marty. As we saw in previous years, some of that Medicaid disenrollment actually attributed to positive commercial conversion. And so again, we feel very confident, as Alfred said, in terms of the core growth algorithm we've outlined it, consistent with prior performance. Operator: Our next question comes from the line of it Benjamin Whitman Mayo with Leerink Partners. Benjamin Mayo: Was hoping to get an update on the ambulatory or outpatient strategy. You guys acquired some urgent care assets, I think, in the last year-or-so, but maybe give us a look at the pipeline, what does it look like? And do you feel like you're in line or behind on your targets? Martin Bonick: Whit, this is Marty. Yes, we feel like our ASC and ambulatory strategy has been continuing to develop. We started with the urgent cares and had good success with those opening up access points. And I think that contributed to a lot of the positive growth that we saw when you look at across the peer group. This year, we're continuing to focus on growing that, opening up a new ED department in our market, opening up 5 new urgent cares hospital-based ASC and other HOPD ASC and a freestanding ED in Texas. And so we feel like, again, we're continuing to deploy capital in a disciplined way to continue to grow that outpatient market share and capture the shift of where a lot of these volumes are going. And so we feel we're very much on pace and continuing to deploy capital in very rational manner. Benjamin Mayo: Okay. And then maybe for Alfred. Cash flow this year, any reason that it wouldn't grow in line with your EBITDA? I think you mentioned there were some timing factors that influence the shape of cash flow this past year. Alfred Lumsdaine: Sure. Thanks, Whit. Yes, obviously, we were really pleased with the robust cash flow that we generated for the full year from a -- as I called out in my opening comments that we did have a dynamic of a -- our last payroll cycle being fully accrued at the end of the year and next year that effectively will be paid right before the end of the year. And that's about a $50 million headwind from a year-over-year perspective and then it starts to build every year again and that's simply from a timing perspective. Otherwise, we would expect cash flows to follow consistent with our 2026 guidance. Benjamin Mayo: Can I squeeze in 1 more just on the rural health fund. Do you believe that any of your hospitals qualify for that? And that's it. Martin Bonick: Yes, this is Marty. Yes, we do believe that given our footprint sort of midsized urban markets with regional spokes with primary and secondary level hospitals that we should qualify, we think that maybe upwards of 1/3 of our hospitals could qualify now. We're closely working with our state governments to understand how they're utilizing these funds and going to be deploying those. It does seem that they're going to be deploying these funds greater than just hospitals to support the entire rural care network. But with our clinic presence, we think that we've got a good story to tell and good rationale based upon some of the technologies that we've deployed and continue to deploy out the markets our virtual attending program being an example of how we're keeping patients close to home and supporting those local hospitals in local markets. And so we're working very closely with our vendors and with the states to make sure that we can capture as much of that as possible. At this point, it's too early to tell what's going to happen in terms of how those are going to be distributed or win. So we did not include any of that in our guide. So that would be potential upside. And there's a couple of good points. Our 2 largest states in terms of Texas and Oklahoma have also been to the Texas received at the largest allocation from the government in Oklahoma, I think, was the fifth highest in the country. So those are some good proof points and antidotes that will hopefully help and pay out based upon how we've been supporting the rural networks and supporting those rural hospitals. Operator: Our next question comes from the line of Scott Fidel with Goldman Sachs. Unknown Analyst: You've got [ Sarah ] on for Scott. Can you please describe how the 4Q volume trends compared to your expectations? And then with the exchange open enrollment and Medicare AEP complete, what further perspectives do you have on sustaining volume growth this year? Martin Bonick: This is Marty. I'll take the first part of that. I think the volume was very consistent with what we thought. In Q4 of '24, we're overlapping or lapping some of the midnight rule, and so that contributed to a little bit of a deceleration. But otherwise, volumes were very strong and adjusted admissions continue to grow. And if we look across all of our statistics, volume statistics for full year 2025, we are sort of best-in-class in the peer group, and so the demand for our services continues to remain strong in our markets, #1 or #2 in majority of the markets that we serve and our markets are growing 2 to 3x faster. So the slowdown in Q4 is consistent with lapping that 2 midnight rule and focusing on high acuity growth versus just growth for growth sake. Alfred Lumsdaine: On the second part of your question, this is Alfred, under the assumptions we laid out pertaining to the exchange dynamics, the headwind that we would expect associated with admissions from the HIX enrollment would be upwards of 50 basis points. Unknown Analyst: And then just with the progress in payer denial activity, can you provide any color here on the impact of 4Q performance and how we should think about that benefit on a go-forward basis? Martin Bonick: This is Marty. Yes. The fourth quarter, we did see some moderation or stabilization from the elevated Q3, and we're expecting that to continue. We've got the second half of the year from '24 -- '25, I should say, that we're expecting to continue into '25, but then moderating. So that's the view. Alfred Lumsdaine: Yes. This is Alfred. I would just say add that overall, we did see some slight improvements very modest and late in the year or take any month or weeks and project that out as a trend. However, we're both optimistic that the work we're doing with to curtail and combat the denial trends will yield some benefit. However, we want to be very sober and realistic and to Marty's point, in not projecting that to be sustained and just deal with the reality of what we experienced in the last half of 2025. Operator: Our next question comes from the line of Craig Hettenbach from Morgan Stanley. Craig Hettenbach: I appreciate all the color on the exchange implications this year. Outside of that, can you give us a sense in terms of other payer mix of Medicaid, Medicare, commercial exchange is kind of what you're expecting from a volume perspective this year? Alfred Lumsdaine: This is Alfred, Craig. Yes, I think we get the color as it pertains to the exchange dynamics. And just as a reminder, we we ended last year with 6% of our 7% of our revenues from an exchange perspective. So just a little bit lower than, I'd say, the industry average from an overall exposure standpoint. Otherwise, I wouldn't say we expect any significant material shifts in our planning other than what we lined out from an exchange perspective. And then, of course, where do those lives end up, one dynamic, I think it's a little too early to tell, but we've seen just a little bit as we've seen this inexorable march of traditional Medicare moving to MA, that seems to be slowing or maybe even reversing a bit in early data, but I would say that's not -- we didn't necessarily forecast that as a trend, but we would view that as a positive development if it continues. Craig Hettenbach: Got it. And then, Marty, just following up on all the technology initiatives, how do you think about that in terms of just time line of beginning to the needle from a margin perspective and things we should be watching for around that? Martin Bonick: Yes, Craig. We've got a number of things that I outlined that we're deploying. care virtual care is building off of a successful pilot that we already started in East Texas. We'll be rolling that out across the the entire system, an entire company by the end of this year. So we expect that benefit to continue to ramp. We're starting in a very focused way with our virtual nursing and sitting programs, which should have a direct financial benefit as well as a quality benefit to our patients. And as we continue on that, as I mentioned before, we saw a positive success with our virtual attending where we're actually bringing specialists from the metro areas into some of those rural areas and helping to keep those patients close to home, which allows us to keep some of those acuity transfers in our primary and secondary markets while making room for the higher acuity cases to come into tertiary centers. And so that's an example. But this will continue to ramp throughout the year as well as other initiatives that we have in flight across the board from both the back-end business side as well as on the frontline clinical side and staffing and scheduling in between, so these will continue to ramp, and this is part of our care transformation impact that we expect to continue to ramp over the next several years as AI becomes more and more prominent. We've had a very labor-dependent business across this industry. And I think AI is going to be a liberator. We're looking into new ways of helping to extend our primary care reach with AI and then helping patients to do that so we can expand panels. And so there's a lot of focus in this area to actually transform the way in which we deliver care to make it more accessible, make it more affordable and transform the cost structure for the business. So we're excited about the future possibilities. Operator: Our next question comes from the line of Benjamin Rossi with JPMorgan. Benjamin Rossi: Just an assessment the uptick in average length of data close the year. I appreciate that you've been making some efforts to try and bring this down through improved rounding and some of your new investments in the virtual care. What do you think have been some of the winning factors in bringing this figure down this year? And are you seeing any variation in length of stay across your payer classes between Medicaid, Medicare and commercial, particularly among your exchange volumes? Martin Bonick: This is Marty. Thanks. Length of stay is a factor of acuity and a factor of efficiency inside the hospital. As our acuity continues to grow, that raw length of stay will also likely have the corresponding impact. But as we look at sort of a geometric mean length of stay, we've actually seen very good performance and the technology investments that we're making are helping with that efficiency. So I think that the length of stay is a continued focus across all of our hospitals. It's a quality measure. It's a safety measure and it's an efficiency measure. But we think that we're managing that and still have some opportunity to improve. Benjamin Rossi: Understood. And I guess this is a follow-up from the policy side. With the CMS model and Medicare fee-for-service some of this program overlapping in a few of your states and your footprint, are you thinking about any potential impact in 2026 as CMS starts rolling out these AI-based tools for prior auths? And then do you factor this into your embedded assumptions for now raising in 2026, it sounds like you aren't assuming a meaningful shift in denial trends during the year. So just curious any color there? Martin Bonick: Yes. As Alfred outlined, we're taking a very prudent look at denials and not making any dramatic assumptions from it changing. That being said, to the question, it does overlap in a couple of our smaller markets. Our work with Epic and that is an advantage we have. Epic has been working collaboratively with both payers and providers. and we're part of that work group to advance ways in which we can streamline that. We just had a new electronic prior authorization module go live with one of the large payers in the country just recently. And so while CMS is focusing on this, I think it's an opportunity for us to work with our partners with both Ensemble and Epic to drive better performance in this area. So we think that these technological advances will help address the governmental intentions behind these laws that are coming out and they're experimenting with a lot of these different programs, but we feel like we're well positioned given the technology partner vendors we have to stay on top of that. Operator: [Operator Instructions]. Our next question comes from the line of Timothy Greaves with Loop Capital. Timothy Greaves: I guess, I want to ask around the existing market and the growth there. I believe you listed a bunch of initiatives that you guys are working on in answering with question. But I guess around that, I guess, I want to know from a broader sense, how -- what you're seeing in the current environment impacted your plan around these initiatives? Like are you guys like maybe leaning into more affecting physical versus digital opportunities or anything around that in the near term? Anything that you can point out that's notable? Martin Bonick: Apologize, it came across a little bit distorted the question, can you reframe this core question Timothy Greaves: Yes, I'll reframe it a bit. I guess what I'm trying to see is how you guys are interacting with the market in a broader sense of like growing in existing markets? So as far as versus physical expansion versus digital opportunities, you listed like the -- Hello Care, virtual care opportunities. But just in the current environment, how you guys are prioritizing this expansion of your footprint? Martin Bonick: That came across a little bit more clear. Yes, we are focused on growth in a number of different ways. We always said from the onset, we're going to prioritize growth in our core markets, both high acuity service lines in our inpatient environment as well as growing the outpatient, our focus the last couple of years of growing urgent cares as access points has paid off for us. We are expanding that funnel, so to speak. But our consumer team is really helping to drive that continued engagement. So last year, we saw about a 5.5% improvement in our total encounters and we grew our total unique number of individuals that we serve consumers in our markets and so our digital outreach strategies are very much focused on not only attracting those initial patients but retaining them in our system. And again, our technology vendors with Epic really help play into that because we can have a longitudinal relationship with our patients and make sure that we can be their one-stop shop for care when they need it, and they're not going out and searching in the market for point solutions. We've got a strong virtual care offering in all of our markets and all of our clinics. And so patients can get the care where and when they need it the most. It doesn't have to be inside of a hospital or a clinic setting, it can be virtual and in the home. So we're very much focused on using those lower cost of capital digital solutions to attract, retain and grow our patient base. Timothy Greaves: Okay. I think the one question is good for me. Operator: At this time, we have no further questions. I would like to turn the call back over to Marty Bonick for closing remarks. Martin Bonick: Thank you all for your participation in our Q4 call. We're entering 2026 with operational momentum, financial strength and strategic clarity, and we are confident in our ability to execute. We appreciate everybody's support, and thank you. Operator: This concludes today's conference call. You may now disconnect your lines. Have a pleasant day.
Operator: Good afternoon, and welcome to the MicroVision Fourth Quarter and Full Year 2025 Financial and Operating Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Drew Markham. Please go ahead. Drew Markham: Thank you, Paul. Good afternoon. I'm here today with our Chief Executive Officer, Glen DeVos; and our Interim Chief Financial Officer, Steve Hrynewich. Following their prepared remarks, we will open the call to questions. Please note that some of the information you will hear in today's discussion will include forward-looking statements, including, but not limited to, strategic plans, acquisition benefits and risks, expectations regarding customer engagement and product deliveries, go-to-market strategies, product performance and pricing, market landscape and opportunities, cash flow forecasts, liquidity and the impacts of recent financing activities, availability of funds and access to capital, expected revenue, operating expenses and cash balances, as well as statements containing words like believe, expect, plan and other similar expressions. These statements are not guarantees of future performance. Actual results could materially differ from the future results implied or expressed in the forward-looking statements. We encourage you to review our SEC filings, including our most recently filed annual report on Form 10-K and quarterly reports on Form 10-Q. These filings describe risk factors that could cause our actual results to differ materially from those implied or expressed in our forward-looking statements. All forward-looking statements are made as of the date of this call, and except as required by law, we undertake no obligation to update this information. In addition, we will present certain financial measures on this call that will be considered non-GAAP under the SEC's Regulation G. For reconciliations of each non-GAAP financial measure to the most directly comparable GAAP financial measure, as well as for all the financial data presented on this call, please refer to the information included in our press release and in our Form 8-K dated and submitted to the SEC today, both of which can be found on our corporate website at ir.microvision.com under the SEC Filings tab. This conference call will be available for audio replay on the Investor Relations section of our website at www.microvision.com. Now I would like to turn the call over to Glen DeVos, our Chief Executive Officer. Glen? Glen DeVos: Thanks, Drew. We have a lot to cover, and I want to start today's call by sharing our view of the significant changes we see happening in the broader LiDAR market, what we call LiDAR 2.0, and how we are building MicroVision to lead in this new era. When I reflect on the last 10 years or so in our industry, what we refer to as LiDAR 1.0, it was clearly a technology race. Companies operated with a Silicon Valley mindset putting hardware first chasing best-in-class specs. The prevailing thought was that the best technology would lead to wins and that the volume would drive down costs, which would in turn lead to mass adoption. The challenge with this start-up mentality is that it was at odds with the realities of how the industry operates. Long predevelopment and sourcing cycles followed by uncertain volumes, a recipe for fragile revenue, heavy burn rates and has led to consolidation in the space. What MicroVision defines as LiDAR 2.0 isn't driven by technology, but rather by providing value to our OEM customers. It's not about winning with the single most impressive sensor, but rather it's about achieving scalable deployments across real-world platforms that drive long-term growth and margins. The transition from LIDAR 1.0 to LiDAR 2.0 now is now underway. Looking across our industry, incumbents will face significant challenges in navigating this shift, for example, hardware-centric players have impressive technology but the wrong economics, embracing a mindset of volume will fix price, while also failing to leverage the value that software can deliver. Automotive-only players have deep focus, but their single-threaded revenue creates risk when faced with program delays, low option take rates or tightening budgets. Industrial players have revenue prospects in the short term, but the current electromechanical sensor architectures with their associated high cost structures are vulnerable to the emerging high-performance solid-state sensors with their significant lower cost basis. These challenges require a fundamentally different approach and success in LiDAR 2.0 will come to companies that can excel in 4 key areas. These include: first, having a scalable product portfolio that enables participation in diversified end markets, enabling robust revenue streams and achieving scale across the business, taking an open approach to software that both drives down hardware costs while also enabling our customers to more effectively manage their applications and systems. Hitting the right price point with a hyper-focused design-to-cost approach that enables our OEM customers to unlock value in their end markets and embracing automotive-grade execution coupled with fiscal discipline. The new MicroVision has been built to lead in this LiDAR 2.0 era. So why are we feeling so confident? Certainly because we have the following capabilities. First, we have the right portfolio through the acquisition of Luminar and Scantinel, MicroVision now has the most complete and robust LiDAR technology portfolio. MicroVision's MOVIA sensors offer compact, cost-effective short-range solid-state sensing with applications in all of our end markets. We are now seeing the anticipated interest in MOVIA S following its launch at IAA last September with multiple customer trials for industrial and automotive applications. Our IRIS AND HALO sensors acquired from Luminar offer long-range sensing for high-speed use, and it's a perfect fit for automotive and security and defense. Our 1550 nanometer FMCW sensor acquired from Scantinel provides ultra long-range sensing with initial applications in automotive and security and defense. The combined software products, MOSAIK and SENTINEL now provide a complete end-to-end capability from silicon to point cloud to perception with advanced AI-based features, which can easily be integrated and configured by our customers, leveraging our open software framework. With this product portfolio, MicroVision is now equipped with the solutions to serve the automotive, the industrial, and the security and defense markets with a scalable set of hardware and software solutions. I want to take a moment though to highlight the emerging needs in the security and defense sector that are of increasing importance to MicroVision. We completed our proof-of-concept phase for our drone and ground-based autonomy platforms in Q4 of last year, and we are now working closely with our defense advisory board members as part of our business development and customer engagement phase. With our drone-based MOVIA Air and our newly acquired IRIS and HALO products, we have the right products at the right time to enable real-time drone-based mapping and perception as well as ground-based autonomy. The ongoing shipments of MOVIA L to a European customer was an important start for us in this space and validates the need for these applications to use robust solid-state solutions. We will be publicly showcasing our capabilities over the course of the next months as we ramp up our efforts in this important market. Our production technology, our U.S. and German footprint, as well as our U.S. manufacturing capability position MicroVision to be a leader in the security and defense space. Now in addition to our portfolio, MicroVision's use of software is a clear differentiator. The new MicroVision shifts our center of gravity from hardware bragging rights to software that lowers cost and expands capability. Our focus on advanced software-centric signal processing through the full stack continues to enable MicroVision to drive down the cost of the sensor hardware. This strategy follows a very similar blueprint to what we did in vision and radar for the move to software-defined sensors was a key step in achieving cost levels that drove mass adoption and achieving scale for these technologies. LiDAR will follow the same path, but we are making it happen much faster. Additionally, our open software framework completely changes how our customers can utilize and leverage the capability of our sensors. It gives them full control of their system development and integration, opening up new value creation opportunities for them. And finally, we're accelerating revenue. The new MicroVision is converting existing commercial demand and customer relationships into shipped product and revenue. And this is happening now. Following the Luminar acquisition, our top priority has been to restart those commercial relationships and contracts where I'm meeting personally with our IRIS and HALO customers. In the first month since the acquisition, we've already shipped IRIS units as we transfer contracts and POs and reestablish commercial relationships and the production schedules. The customer feedback has been very positive, with strong interest in MicroVision's post-acquisition combined product road map where we can be a total solution provider to them. The Luminar acquisition also significantly expands our market access by bringing approximately 30 new customer relationships and many more incremental prospects to MicroVision. It also enables us to offer new sensor solutions to existing MicroVision customers. This cross-pollination is further accelerating our commercial traction. Additionally, we began shipments of MOVIA L in December to an EU security and defense OEM with repeat orders continuing in 2026. As I talked about earlier, we are very pleased with the momentum in this segment where we see opportunities to expand near-term revenue. And then finally, as I mentioned, MOVIA S continues to gain interest and traction with multiple customer engagements and we remain on track for our Q4 MOVIA S industrial launch. We could not be more excited about MOVIA S as it is truly the right product at the right price and at the right time. We are also confident that our operations can support this accelerated revenue, but we know that the proof is in the execution. The new MicroVision is guided by experienced leaders with proven reputations in the automotive industry. With automotive-grade DNA and a collaborative approach to partnering with customers, the company is poised to meet commitments, milestones and deliveries. Now to reiterate my remarks from last week's fireside chat, I want to be very clear about our thinking regarding our recent Luminar and Scantinel acquisitions, and the critical role they play in enabling MicroVision to lead the LiDAR 2.0 era. First, they round out our strategy of offering the right product at the right price. By integrating these assets with MicroVision's, we now offer the most comprehensive and robust LiDAR portfolio in the industry. We expanded our ability to serve different industries, use cases and price points. Not only will this open up immediate revenue streams in automotive, industrial and security and defense, that will also make our business more resilient and diversified. Second, the acquisitions accelerate revenue. In particular, the Luminar acquisition brought active commercial programs and established customer relationships that pull forward our timeline to scale. We've made significant projects in resetting these commercial relationships. And as I mentioned earlier, are now shifting products to multiple customers. This approach accelerates MicroVision's path to revenue compared to achieving this organically, which would have taken much longer. And third, these acquisitions have added depth to the talented MicroVision team with expertise in hardware, software and advanced perception, all with proven experience in navigating automotive requirements and manufacturing at scale. This has enabled us to make the recently announced decision to consolidate our Redmond engineering, manufacturing and supply chain management operations into our Orlando site. This marks a key step in realizing the synergies we identified as part of the acquisitions as well as improving our overall operating efficiency. Orlando will be our U.S.-based manufacturing site for our full line of products, which is serving the security and defense sector and will be critical for that sector. It will also complement our ongoing high-volume contract manufacturing strategy. In summary, we didn't acquire Luminar or Scantinel to simply grow bigger, we acquired them to move faster. We have also continued building out our executive leadership team with proven credibility across the markets we serve, including automotive. Executives like Fabio Laura, who's leading our operations, supply chain management and quality, as well as Greg Scharenbroch, who will join -- who joined us in November as our Vice President of Global Engineering. What I've shared with you today serves as the basis for the new MicroVision strategy and how we will lead in the area of LiDAR 2.0. It's a strong and clear blueprint to guide the company and these steps are already well underway. I would now like to invite Steve to review our GAAP fourth quarter and full year financial performance. Stephen Hrynewich: Thank you, Glen. For fourth quarter revenue, we reported $0.2 million primarily driven by hardware sales in the industrial sector. This compares to $1.7 million of revenue during the same period in 2024. On a full year basis, we reported $1.2 million of revenue in 2025 as compared to $4.7 million in 2024. The decline from both 2024 periods is a result of a last time buy on a contract with an agricultural equipment customer to deliver legacy Ibeo sensors. Total operating expenses for the fourth quarter of 2025 were $25.3 million. This includes noncash charges of $13.4 million related to asset impairment, and $1.5 million of depreciation and amortization and offset by a net credit of $1.5 million of share-based compensation, primarily due to the forfeiture of PSUs from an executive departure in December. Adjusting for these noncash items, our cash-based operating expenses totaled $11.9 million. Compared to the previous quarter, including a onetime $1.2 million cash severance payment in the third quarter, our operating expenses were $0.9 million higher than Q3, and in line with our expectations. The increase is primarily related to the addition of our Aerial Systems team to bolster our competitiveness in the security and defense sector as we announced in November. On a full year basis for 2025, our total operating expenses were $65.5 million, which includes noncash charges of $13.4 million related to asset impairment, $5.8 million of depreciation and amortization, and $0.7 million of share-based compensation. Adjusting for these noncash items, our cash-based operating expenses were $45.5 million. As compared to full year 2024, our operating expenses declined $14.4 million or 24%, primarily driven by reduced purchase services and actions taken in 2024 to reduce head count and rightsize our business. This year-over-year decline in operating expense is a demonstration of our accounts management focus and cash-conscious mindset. Cash used in operations for the fourth quarter was $15.4 million. This compared to $15.1 million in the fourth quarter of 2024. On a full year basis, cash used in operations for 2025 was $58.7 million as compared with 2024 at $68.5 million. The year-over-year decrease of $9.8 million or 14% was primarily driven by our intentional reduction of operating expenses. Capital expenditures for the fourth quarter were in line with expectations at $0.2 million. This compares to $0.1 million during the same period in 2024. On a full year basis, capital expenditures were $0.7 million in 2025 and $0.4 million in 2024. For both periods, the year-over-year increase is primarily attributed to purchases of tooling equipment needed for the production of MOVIA S sensors scheduled to start in early Q4 of this year. In the fourth quarter, we incurred $29.4 million of noncash asset impairment and adverse purchase commitment charges, of which $16 million is accounted for as cost of revenue because it relates to inventory and commitments of our short-range MOVIA L sensor. The remainder of $13.4 million is accounted for as operating expense, primarily attributed to perception software and equipment for our long-range MAVIN sensor. The write-down of MOVIA L, MAVIN and Perception software results from a multi-factored analysis, including the progress of our next-generation short-range solution and the market readiness of the long-range solution that we recently acquired. With the recent announcement of our consolidation of operations from Redmond into our new Orlando facility, we are currently evaluating the impact to the 2026 financial statements and anticipate asset impairment charges of $8 million to $12 million related to our Redmond office and operating lease as well as people-related restructuring charges of $1 million to $2 million. On our balance sheet, at the end of the fourth quarter, we finished with $74.8 million in cash, cash equivalents and investment securities. We also have $43 million available under the current ATM facility. Subsequent to the end of 2025, we issued 2 new senior secured convertible notes in the aggregate principal amount of $43 million. The new notes will be used to repay the current outstanding principal balance and interest of $19.5 million on a current note with the remaining available for general operations. The new notes are redeemable in cash, or shares of the company's common stock. With our strong leadership, depth and breadth of our product portfolio, financial discipline through operational cost management and capital raise activities, we are well situated to deliver our cost-efficient products that meet performance standards to our customers and capitalize on the significant revenue opportunities that the automotive, industrial and security and defense sectors have to offer. With our recent acquisitions, the LiDAR industry is consolidating into a handful of key players. MicroVision is well positioned to lead the LiDAR industry in these 3 verticals and offers a significant opportunity for shareholder value creation. I would now like to pass it back to Glen for closing remarks. Glen DeVos: Thanks, Steve. This is a transformational time for MicroVision. Today, we've talked about the vision for a new MicroVision, a company built to lead in the new era of LiDAR 2.0. We shared how our strategy allows us to create value for customers in new markets and the steps we're taking to deliver the right portfolio with the right performance at the right price. We've also begun to demonstrate concrete steps as a testament to our focus on execution, shipping products against existing orders and prudent financial management. Turning now to guidance for calendar year 2026. We expect revenue to be in the range of $10 million to $15 million. This is based on our analysis completed to date of both prior MicroVision outlook going into 2026 as well as the now continuing Luminar revenue streams. This is a positive reflection of our ability to retain and convert prior Luminar contracts to ongoing Microvision revenue. We expect cash use in operations plus CapEx to be in the range of $65 million to $70 million for the full year, which reflects a modest increase over 2025 due primarily to the acquisitions of Scantinel, Luminar as well as the addition of our Virginia-based aerial systems team. These additions have dramatically expanded our market access but with thoughtful and disciplined management of our cash burn. In summary, as we move into LiDAR 2.0, I'm very confident that MicroVision is positioned to lead this transition. We have the right portfolio and products to access multiple end markets. We are delivering the right performance at the right price. We have the management and engineering teams to deliver at automotive grade, and we have the financial discipline to ensure that we will continue to have access to capital and financing to achieve our growth plans. Our mission is clear. Our team is aligned, and we're focused on creating value for customers and shareholders. I'm excited about the path lies ahead for the new MicroVision and LiDAR 2.0. Thank you, and we will now open the call for questions. Operator: [Operator Instructions] And the first question is coming from Jason Kolbert from Boral Capital. Jason Kolbert: Thanks for the guidance, $10 million to $15 million, that's for this year. How does that break between the automotive and industrial segment? And what kind of margins are we talking about on that revenue? Glen DeVos: Steve, do you want to take that one? Stephen Hrynewich: So the breakdown of our revenue is mostly in the industrial space with the balance being in the automotive side. That's kind of where our key customers are that we brought over from the Luminar side, and that's the key customers that we're currently working with right now, developing those relationships, which is going to help us achieve our guidance in terms of our revenue situation. From a margin perspective, our margins definitely should be positive. We're still working on what that cost is going to be just based on the cost that we're going to be getting as we're getting that cost evaluated as we're doing the PPA right now, but we do definitely see our margins to be positive this year. Jason Kolbert: And going forward beyond 2026, so what I'm trying to understand is how these 2 segments grow and what's the market potential in automotive, what's the market potential in everything else, the industrial? Stephen Hrynewich: I think what we're seeing as we move forward into the future as we get towards the end of the decade, we definitely see our revenue growing in the automotive space, most likely that won't be till towards the end of the decade '28, '29, and that's where all of the automotive companies are developing their LiDAR strategies, their ADAS strategies, and they will implement LiDAR into their platforms. So we are in process of a number of RFQs as we speak right now to support those activities. So we see the automotive kind of towards the end of the decade and that's going to form a big portion of our business. Our bridge between now and then is primarily going to be in the industrial space, as Glen talked about in his prepared remarks. We have a number of customers that we're working with right now. Then the other piece is going to be on the defense and security side. So we've got some products that we're going to have readily available mid this year for salable units to those potential customers. As Glen mentioned, we do see some growth in that area. We see that kind of moving forward into the future. That's going to kind of again -- but the industrial and the defense side is going to be a bridge as we progress into the automotive side, which will begin towards the end of the decade. Glen DeVos: Yes. Just to add some content to that. For auto, as Steve said, that's going to be later in the decade, the RFIs and the RFQs that we're talking about now are targeted for the '29, '30 start of ramping. So if you think about auto, that's where you start seeing volumes and really more meaningfully in the '30, '31 time frame. Now that's at scale. So that's the big TAM where you have basically a multibillion dollar TAM and significant opportunities. Industrial for us, we'll see some sales this year, but really MOVIA S is our big industrial product. So as we launched in October, back half of the year or the back quarter of the year, we expect MOVIA S sales to start driving and then strong growth through 2027. So as those orders come in and preorders come in over the course of this year, we'll be able to give an accurate projection of what that growth looks like in '27. And then security and defense, this is an area that is still -- it's still very nascent, but we actually are very optimistic about it. There's a lot of focus now on drones and what can be done with drones in terms of autonomy, providing basically mapping, real-time mapping in conflicted areas and also extending perception for ground-based vehicles as we look at ground-based vehicle autonomy. And that's one where we'll be sizing those markets for us, but we're confident that's very interesting to us for 2 reasons. One, we think it has significant sustainable growth, but it's also -- it has higher ASPs and sale prices than, say, industrial and certainly auto. So it's a great opportunity for us to commercialize and monetize the IP we have there, whether it's IRIS and HALO or it's MOVIA S, monetize that in that market at very attractive ASPs. Jason Kolbert: And just my last question is on the sales and marketing line. It just seems like a big line, right? You're spending a lot of money there. What is that money actually being spent on? Stephen Hrynewich: So sales and marketing line -- sorry, go ahead. Glen DeVos: No. Well, why don't you complete your thoughts, Steve, and then I'll add my color. Stephen Hrynewich: Yes. I think most of our sales and marketing line, as of right now, we're kind of building our team up. We now have a team that's on a global basis. We're bringing over the Luminar team. So we've got a strong team that's going to help us drive forward this revenue opportunity. And we have an office in a couple of different locations that we're trying to continue with that team moving forward. And Glen, do you want to pass it on? Glen DeVos: Yes. Since joining MicroVision, this is -- it's almost been a year now. One of the things that I've been prioritizing and certainly since taking over as CEO is having just a very strong sales and marketing capability. We have great technology. But if you're going to compete in automotive, if you're going to compete in industrial, and then security and defense, you have to have the right people in the commercial organization that understand the sales motion, have the respect of the customers and can really deliver that. And so we've been growing that organically prior to the Luminar acquisition. And part of that was what we did with the Defense Advisory Board to help us understand and develop our strategy for security and defense. Part of it was bringing on some additional talent over the course of the year. And then hear more recently expanding that team with the -- with onboarding of the Luminar sales team, and it's really -- we're now -- we now have just a very capable sales and marketing team that can take the portfolio we have and really bring that to market. So I could not be happier with the team that we have. It's an investment that we needed to make if we were going to grow the business and accelerate the business growth. And -- but that's the reason why it is what it is. Operator: And the next question will be from Casey Ryan from WestPark Capital. Casey Ryan: Glen, Steve, great update. So my first question is, I guess, this is sort of related to the Scantinel acquisition and the FMCW technology. Is that technology getting a lot of interest from defense? It sounds like maybe that's kind of the key thing with its range. I know it's historically been targeted trucking, but is that helping you sort of think defense is a bigger opportunity for you in particular, using FMCW, versus some of the other product lines? Or is it all the product lines are being considered for multiple because I know there are so many applications in that defense space. Glen DeVos: Yes, great question. Scantinel, there is a significantly increased pull from the defense sector for the technology really for 2 reasons. One is 1550 nanometer, which is you don't -- it's basically not visible with night vision goggles or night vision capabilities. So it's essentially invisible. So from a scanning and perception standpoint for night ops, it seems very, very attractive. And then the FMCW, and that architecture gives it all for long-range capability. And where we're seeing interest is on drone detection, long range drone detection as well as other types of navigation and mapping. So when we acquired Scantinel, of course, the focus of the team really had been in the commercial vehicle market that has been the primary focus. What we're seeing now is a much -- an equally strong pull from the defense side. So still has interest in application in CV, mainly commercial vehicles, but much stronger interest from defense, no question about it. Kind of related to the second part of your question, we also have interest in the other products, and particularly -- for security and defense and particularly, if you think about short-range LiDAR like a MOVIA S, where you can or even now doing MOVIA L with our MOVIA Air products, those are 940 nanometer, and 905 nanometer, but they're very good for terrestrial mapping. So they're not as worried about being visible because it's a very low-cost drone that's flying around doing mapping away from personnel and providing real-time perception and extending that perception from those ground-based vehicles and personnel. And so we're seeing interest there relative to MOVIA L products and MOVIA S products for mapping. And then as well, IRIS and HALO for basically on vehicle perception. So if you think about vehicle autonomy where vehicles want to operate at night, you want to have a 1550 nanometer solution that you can offer. Again, so that vehicle isn't visible at night as it's scanning and its sensors are working. So really across all of those products, we're seeing significant interest there, both in ground-based autonomy, but also with regard to drone applications. Casey Ryan: Okay. Terrific. So then I was curious about sort of -- as you acquire all the Luminar assets, and I think Orlando was kind of their headquarters. And this is just asking about how much effort it is to sort of complete the acquisition? Are there additional locations that you inherited with your purchase that you're sort of responsible for closing down and consolidating? Or was the Orlando kind of the only thing that was on your plate around physical locations? Because I know Luminar had lots of offices and spots around the world. Glen DeVos: Yes. We really only acquired 2 locations. One is, as you said, the Orlando office, and they were -- really their headquarters and where their engineering tech center was. And then the other is in Colorado, which was the Black Forest Engineering team for their ASIC design. So those are the 2 offices and sites that we're maintaining. We did bring over people from some of the other offices. If you think about Japan, if you think about Sweden and Germany, but we did not assume responsibility for those facilities. So we're not having to deal with closing down legal entities or closing down offices around the world. And so Orlando, Colorado, those are offices that we have and we're going to keep. And then as we mentioned earlier, we'll consolidate operations in Orlando. Casey Ryan: Yes. Okay. Terrific. That's great color. And then last question, I think, for me. And maybe this is all -- too many new products and too many opportunities at one time. But I think we're seeing some I don't know if it's a desire or sort of a road map of combining centers, right, cameras with LiDAR and maybe radar, some of these new radar applications. But does that change the way you go to market at all? Do you want to partner with somebody? Or is that all kind of too far in the future to worry about today? How do you see sort of all those sensors coming together at some point in some applications? Glen DeVos: Yes. To your point, it really depends on the application. It's interesting in automotive. We went through a period where we thought, hey, combining sensor modalities would be really a great way to package sensors in the car, and then we immediately brought them all back apart because it gave us more flexibility in where you can mount the sensors and how you mount them and then actually sourcing those sensors. You combine sensors, you end up actually restricting that. So there are some applications where combined sensor like LiDAR and camera. For instance, that's what we do with our MOVIA Air products where we have LiDAR as well as a resolution camera that we then fuse that in the sensors. So when we provide the map data coming out of the drone, it has fused vision as well as LiDAR. But right now, that tends to be more of how the OEM wants to package those sensors on their platforms. And we can do it as a stand-alone sensor. We're happy to work with others in a combined sensor configuration. We just recently had some discussions around those lines this week as well. But as of right now, our feeling is we'll develop a great LiDAR sensor that can be flexible in terms of how it's integrated, how it's mounted, whether that's in a combined fashion or as a stand-alone LiDAR sensor. Casey Ryan: Terrific. That's actually a great perspective. It's a great update, and it looks like it's going to be an exciting 2026. Operator: I will now turn this call back over to Steve Hrynewich to read questions submitted through the webcast or in advance of the call. Steve? Stephen Hrynewich: Thank you, operator. Our first question is with regards to your revenue guidance of $10 million to $15 million, how confident are you in achieving this? Glen DeVos: Yes. Let me take that, Steve, and then I'd ask you to add any further comments from your end. So that revenue is a combination of sales of our long-range and our short-range products, and it's really across all 3 end markets. We've already been shipping into critical customers that came with that Luminar acquisition, and we really expect that to continue. In addition, the commercial uptake of the short-range MOVIA S is actually ahead of our expectations. We believe that was going to be a great product. The interest and the pull we're seeing on that validates that. And now it's up to us to launch that on time and at volume. We believe we have, however, a clear line of sight to other opportunities and that combination of what we know today, what we're seeing, that gives us a great deal of confidence with that guidance. Now as we continue to work through what were the Luminar customer engagements and those contracts and production schedules, we believe there are additional opportunities there that we can include. But we still have to work through that process. We were basically what about 5, 6 weeks into it. And so through a lot of it, but not through all of it yet. And we believe that there will be additional opportunities for us. Stephen Hrynewich: I think just to add to that, as Glen mentioned, we're looking at production of our MOVIA S short range sensor in quarter 4 of this year. We have lots of customer traction, lots of interest from our customers. So we are definitely expecting to see revenue with that product coming in the fourth quarter this year. Glen DeVos: Yes. Stephen Hrynewich: Okay. Second question. How many customers are you engaging with including your recent acquisitions? Glen DeVos: So with the addition of Luminar's customer base, that has been a significant increase to our opportunity pipeline and really across all 3 verticals. And they've basically brought in incremental about 30 new customers for us to be working with. And within that customer group, many more opportunities and prospects. And as I mentioned earlier, with the onboarding of the Luminar sales and their commercial team, that was just a tremendous benefit of the acquisition because not only do they bring those contracts, they bring relationships and they bring knowledge of those end markets, knowledge of those customers. So it isn't just a matter of the formality of acquiring a contractor, taking over a PO, we also now have the individuals with MicroVision who understand and have a history with those contracts, the history with those customers and a deep understanding of those customers' needs and how we can then basically bring our solutions to them. So that's why that's been such a benefit. Stephen Hrynewich: Along with same lines, another question. What is the state of the Luminar customer relationships of Volvo, Nissan, Caterpillar? Have you delivered to any of these brands yet? Are these critical to achieving your 2026 guidance? Glen DeVos: Yes, it's a great question, actually. And well, it's not appropriate to comment on individual customers, it is fair to say that every Luminar customer is engaged with us. And I mentioned, this is in part due to the fact that we have a sales team that knows them, that's maintained contact and now we're continuing those dialogues. By normalizing and restarting those past relationships, as you can imagine, when you go -- when a supplier goes into bankruptcy, that generally speaking, puts a pause on the relationship, it's disruptive. Well, we're now normalizing those relationships and having discussions, not just around the active POs or the near-term needs but also discussions regarding ongoing development. We're not going to comment on how individual customers drive guidance. Subsequent to closing, we have shipped to the largest customers in automotive and commercial vehicles. So that product and that associated revenue is flowing as we speak. Stephen Hrynewich: Next question is, how did Luminar impact MicroVision's path to revenue and commercialization? Glen DeVos: So to put a very concisely, Luminar accelerates our revenue. It brings with it. That acquisition brings with it active commercial programs and established customer relationships that really pull forward our path to scale significantly. So we are actively engaged with the Luminar customer base and normalizing and restarting those relationships. And as I mentioned earlier, converting those paused POs and contracts over to active shipments as well as the discussions regarding ongoing development. Now one of the other benefits, though, is we've been able to take -- with the Luminar customer base, we've been able to bring their products into -- the Luminar products into our existing MicroVision customer base as well as the MicroVision products into that existing Luminar customer base. So that cross-pollination we talked about in the -- earlier in the meeting, that really helps us accelerate that traction because it means that MicroVision can be a single one-stop shop provider for their LiDAR perception needs. We provide short-range, long-range, wide field of view, narrow field of view, we can provide the complete LiDAR solution set to them, which it's important from a purchasing standpoint. It's also important from a technology standpoint, because that means harmonizing and integrating all of those sensors becomes much simpler. They don't have to try to integrate short-range sensor from one supplier with a long-range sensor from another. They -- we can do all of that for them. So it's really an exciting development that we're able to cross-pollinate across the different customer bases. Stephen Hrynewich: And I think just to add to that, one of the key parts of the acquisition is, again, bringing that revenue ahead early. So the HALO product going out into the future is going to bring it as a quicker time for us from a long-range perspective. So that product now is getting very close to samples that we can be providing to customers. And the team is working on that as we speak. And this is going to, again, hurry our -- ready our revenue in terms of the long-range solution quicker. Glen DeVos: Yes, great point, Steve. Stephen Hrynewich: Next question is, what happened to the multiple RFQs that you previously announced? Glen DeVos: Yes, that's another great question. We continue to be actively engaged with those customers. And what's interesting is that, I mean, this has been ongoing for some period of time, and we now have a more diversified product portfolio to offer, especially with our recent acquisitions. So different product offerings for them. But we're seeing an interesting behavior with regard to those RFQs and those RFIs, I mean, normally, when you talk about the automotive passenger car market, an RFI is followed by an RFQ, the RFI is used to kind of understand the market, understand the supply base, selected technologies. The RFQ comes, kind of narrow that down with pricing and the specifics and then a production award typically would follow that. And that's usually management in a short period of time, not 2 plus or 3 years. So what we're seeing right now in that automotive, in particular, the North America and European passenger car market, the OEMs are clearly reformulating their Level 3 value prop and offerings. And this is doing no small part to the cost of these systems and really the limited initial value that the features offer to their end customers. At the end of the day, the end customer is simply not willing to pay $6,000 to $9,000 more for an L3 and certainly not the L3 that they're currently offering. So we've seen some program cancellations or those offerings being suspended. And I think what it highlights to me is why our focus on cost is so important because we need to be able to drive the cost of short-range and long-range LiDAR sensors down to the point where the OEMs can afford to put them on the cars, it can enable Level 2+ or Level 3 features that the OEMs can then offer at a price point that their consumers find attractive but they still have healthy margins. So it's -- we're still involved in those RFIs and RFQs. In some cases, the discussions now are in year 3. But I think, again, it just reflects and emphasizes the fact we have to be driving the cost of these sensors down to where the OEMs can really, really be able to put it on the vehicle and drive value both for them and the end consumer. Stephen Hrynewich: Okay. With the current technology you have plus with the acquired technology, what makes your overall portfolio, your technology different? Glen DeVos: Well, I think a couple of things to that. First, we have a, as I mentioned, a really broad portfolio. We have 905 nanometer, 1550 nanometer. We have short-range and long-range. Time of flight, FMCW, solid-state and scanning with polygons on MEMS. What that means and why that's important is that means, we can bring the right solution for any given application in any of the end markets that we're serving. And additionally, our approach combines that strong hardware performance with an open software framework. And so instead of offering a closed system, we enable the OEMs and the partners to integrate faster, customize functionality and basically identify new ways of monetizing advanced features on our sensors, and that openness and that open software framework reduces the integration complexity, shortening their development time lines and reducing their costs, helping customers move from concept to deployment faster. And then finally, as a U.S. and German-based company with U.S.-based manufacturing, we can bring that complete product portfolio to the security and defense market, which is a significant differentiator for us. Stephen Hrynewich: Okay. Good. How do you create value for customers and specifically to the automotive sector? Glen DeVos: Well, I can tell you, it's not to vendor with the most impressive demo that will create that value. It's the supplier that enables new use cases across the vertical -- across the verticals. And for industrial, that's the ability to enable autonomy at affordable prices as well as advanced safety systems and security and defense. We talked about it, it's applications, such as unmanned ground vehicle autonomy as well as drone-based real-time mapping and reconnaissance. Now for automotive, this includes enabling Level 3 features and like we talk, making them affordable for the OEM and end consumer. And ultimately, Level 3 systems have just simply been too expensive and especially when you consider Level 2+ systems now coming in well below $2,000 on cost to the vehicle. So for us, it's a matter of how do we enable the OEM to successfully offer these types of products and services to their customers, but most critically to be able to do it in a way where they make and they unlock value for themselves. And so our ability to enable our customers to unlock value is how we will create value for them. Stephen Hrynewich: Next question here is, what is the future for MAVIN in the MEMS technology? Glen DeVos: So when you think about MAVIN, really the key there is the MEMS scanning technology. That's the heart of MAVIN. And that technology is still a very important part of our total portfolio. So now with MEMS, it has some very good applications. It's great for scanning when you think about a fixed-wing drone doing terrestrial mapping, MEMS is a really, really excellent scanning mechanism for that laser. And so great for scanning on drones. It's also very good for narrower field of new scanning. So if you think about automotive, when you get down to about 60 degrees of horizontal view -- field of view scanning, MEMS is a great option for doing that. And as a result, as we think about Tri-LiDAR, that's where you can get the field of view for long-range LiDAR down to around 60 degrees when MEMS now comes into play. So for us, MEMS, it remains a really important part of our scanning technology portfolio, and we continue to look at applications for it. Stephen Hrynewich: Next question is, what's the status of the CFO hire? Glen DeVos: So the CFO hire, this is ongoing. If you think about that role, it's really critical that our CFO has that -- our new CFO would have the skill set and be able to really accelerate our success in the vision that we have laid out today. So we have to have the breadth and depth to the CFO skills along with the relevant industry experience. Now we're in a very, very favorable position in that our Executive Vice Chair, who is part of our leadership team, have been a CFO for 4 public technology companies, and that gives us tremendous capability along with what I would say is just an outstanding financial team that is -- just gives us a really solid basis from a financial and accounting foundation. And so when you combine those, that means we can take the time we need to take to find exactly the right person for that role. So we're continuing with that. We would expect that sometime here in the second quarter. But we're not in a situation where we have to rush that, which is a great place to be. Stephen Hrynewich: Okay. All right. Let's go for -- we've got 4 minutes left, maybe one more question here. Now with the recent -- again, the recent acquisitions, obviously, the company has changed. How are you different now? And what is your competitive advantage in the marketplace? Glen DeVos: Well, I mean, the first and foremost difference is the breadth of the portfolio. So we've significantly augmented the portfolio compared to where we were pre-acquisition, in particular if you add Scantinel and Luminar. So first question is portfolio. Second question is time to revenue. As we mentioned, in particular, the Luminar acquisition dramatically accelerated that timeline to revenue and -- versus doing that organically as we were pre-acquisition. So that time to revenue and the broadening of the customer base is that we now have access to with our portfolio, that's a huge difference. And then finally, just deepening on the whole, the entire team and the capabilities we have. So if you look at the depth of our knowledge, whether it's the Scantinel team in Ulm, it's the MicroVision team in Hamburg, it's the combined team now in Orlando with the Black Forest Engineering team now in Colorado. When you look at that depth of engineering talent, it's just amazing. We have the talent to support that portfolio, to develop those products and to deliver on that. So it truly is, as we said at the beginning of today's call, it's a transformative time for MicroVision. And that's what gives me confidence that we will be very well positioned to lead in what we call LiDAR 2.0. Stephen Hrynewich: Okay. Thank you, Glen. Okay. That brings us to the end of our call today. I just want to thank you, everybody, for participating on our call today and your continued support of MicroVision. We will now close the call. Operator: Thank you. This concludes today's conference. All parties may disconnect. Have a great day.
Dame Carolyn McCall: Good morning, everyone, and welcome to ITV's 2025 Full Year Results. As always, I'm here with Chris Kennedy, our CFO and COO. I'm going to start this morning with a brief summary of the 2025 highlights and then Chris will talk you through our financial and operating performance in a bit more detail. ITV delivered a good performance in 2025 outperforming market expectations despite the challenging market backdrop. We have transformed ITV and are demonstrably a much leaner and more agile business with a strong digital platform. We have capitalized on numerous growth opportunities as a result and are generating strong levels of cash. We've created 2 attractive and resilient businesses in ITV Studios and Media & Entertainment. We have successfully changed the shape of ITV and achieved a key strategic target. 2/3 of our total revenue now comes from Studios and M&E digital and that really demonstrates the scale of ITV's transformation. Before discussing our results, I wanted to mention the leak in November about potential transaction. As you know, we confirmed that we were in preliminary discussions with Sky regarding the possible sale of our M&E business. We are actively engaged with Sky and we will provide an update to you when we can. The effectiveness of our strategy to diversify ITV's revenue streams is clear in our results with the growth in ITV Studios and our digital M&E business combined with our disciplined cost management largely offsetting a difficult linear advertising segment. In line with our dividend policy, the Board has proposed a final dividend of 3.3p giving an unchanged full year dividend of 5p, a total payment of around GBP 190 million. I'll now hand over to Chris to go through the numbers in more detail. Chris Kennedy: Thank you, Carolyn. Good morning, everyone. ITV Studios continues to demonstrate strong momentum with total revenue climbing 5% to GBP 2.13 billion. This performance highlights our ability to consistently outperform the broader market. Notably, external revenue rose by 10% reflecting our successful move toward global streaming partners and the rapid scaling of our digital distribution via Zoo 55. The U.S. unscripted business had a good year with a strong slate of deliveries. Love Island U.S. was the most watched streaming TV original season of 2025 in America, greatly increasing the value of the format. Overall performance in the U.S. was down year-on-year due to the phasing of deliveries and some short-term market softness. We're already seeing good momentum in 2026 and are confident that this year will be much stronger. Our U.K. and international arms saw 14% revenue growth driven by high demand from both streamers and broadcasters. Adjusted EBITA for Studios was GBP 297 million and EBITA margin was 13.9%. The year-on-year change in the margin reflects a lower proportion of catalog sales in our revenue mix as we previously guided. We remain highly efficient. We delivered GBP 31 million in cost savings this year and continue to leverage our world-class talent and unique IP to drive recurring value. Turning to Media & Entertainment. The highlight is the continued evolution of our digital business. Digital advertising revenue grew 12% to GBP 540 million and total digital revenues were up 10% to GBP 614 million. This strong trajectory is a testament to the success of ITVX, Planet V and our data-driven ad products. Total advertising revenue fell 5%, better than guidance with our digital growth providing an important and profitable hedge against double-digit linear advertising decline. We've been incredibly disciplined on costs within M&E. Content costs were down 5% reflecting an ever more optimized investment strategy. Noncontent costs fell by 6% with permanent cost savings of GBP 32 million and temporary savings of GBP 15 million. This ensured that our M&E adjusted EBITA margin remained steady at 11.8% despite the decline in advertising revenue. The balance sheet remains robust. We ended the year with net debt of GBP 566 million and a leverage ratio of 1x. Our cash generation remains good with a profit to cash conversion of 65% as expected and over the 3 years from 2023 to 2025, cash conversion averaged around 80%, in line with our target. This provides us with the flexibility to reinvest in our growth drivers and provide meaningful cash returns to shareholders. Our capital allocation is clear. We reinvest for profitable growth, maintain an investment-grade balance sheet and return surplus cash to shareholders. We've maintained an ordinary dividend of 5p and continue to keep our capital structure under review. A core pillar of our strategy is reshaping our cost base to better reflect viewer dynamics and enhance productivity and profitability. In 2025, we accelerated our efficiency efforts delivering GBP 63 million in permanent noncontent savings across the business. This brings our cumulative permanent savings since 2019 to GBP 253 million. Looking forward to 2026 taking the year as a whole, Studios will show good revenue growth with margin at the lower end of our target range. As is usual, revenue, profit and margin will be weighted to the second half with momentum continuing into 2027. In M&E, digital revenue is predicted to continue its strong trajectory in 2026. We anticipate Q1 TAR to be down around 2%, which is better than we expected. And looking forward to the rest of the year, we have a strong schedule of sports being the only commercial broadcaster of the expanded FIFA Men's Football World Cup and the new Men's Rugby Nations Championship, both of which will boost ad revenue from Q2 onwards. Finally, you can find detailed planning assumptions in the appendices in the slide deck. Thank you. Carolyn, back to you. Dame Carolyn McCall: Thank you, Chris. As you know, our strategic vision is to be a leader in U.K. advertiser-funded streaming and a diversified and expanding global force in content. Our strategy is familiar to you. Just to summarize it in 3 key pillars: expanding Studios, supercharging streaming and optimizing broadcast. So let's turn first to expanding Studios. ITV Studios has built a unique and leading position in the global content market. It has 3 core competitive advantages and value drivers. Its world-class talent who are producing some of the most successful shows around the world; second, its global scale and diversification are creating a strong platform for further growth; and three, its unique and valuable IP library, which combined with Zoo 55, its digital studio, maximizes the monetization of our IP globally and this is underpinned by a culture of cost discipline. All of this ensures the business is well positioned to continue to grow ahead of the market and drive attractive margins. So let's take these value drivers in turn. First, ITV Studios culture. It's entrepreneurial and offers creative autonomy and it's backed by global distribution and resource and that attracts and retains industry-leading talent. This is a position we continue to enhance through strategic acquisitions, talent deals and partnerships and that delivers both creative scale and revenue synergies. Most recently in 2025, we acquired Moonage Pictures in the U.K. They're the producers of The Gentleman for Netflix and also Plano a Plano in Spain, the producers of Suspicious Minds for Disney+. So the success of this strategy is really clear I think from the creative output and other recently acquired labels also demonstrate the success of this strategy. So Rivals by Happy Prince for Disney+ is returning for a Season 2. Skyscraper Live for Netflix by Plimsoll, which saw Alex Honnold's free solo quite terrifying ascent of one of the world's largest tallest skyscrapers in Taipei. Our track record on retention is really, really strong. In the U.K. where we do the majority of talent deals, about 75% of our label MDs and creative leaders stay with the business post earn-out. ITV Studios also has a formidable portfolio of world-leading brands and formats through our established scripted and unscripted labels. Love Island is now in 28 markets. It continues to expand with successful spinoffs such as Love Island Games and Beyond the Villa. Squid Game: The Challenge was Netflix's biggest reality competition and has been recommissioned for a third series. ITV Studios is constantly refreshing its portfolio with new formats like Nobody s Fool and Celebrity Sabotage, both of which launched on ITV this year and have already started to sell really well internationally. They're original shows. ITV Studios also has a strong slate of high quality returnable scripted brands that demonstrate incredible longevity. Line of Duty is an example, Gomorrah is another example and there are newer brands like Ludwig and Vigil, which have all been recommissioned. So the global content market remains large and attractive. It's expected to grow about 1.5% to 2% this year. ITV's resilience though comes from having a diversified portfolio by geography with 59% of revenue generated internationally, by genre with 32% of revenue from the scripted and by customer with 28% of revenue from the growing streamers where we have a proven track record of success now. We have deep strategic relationships with every major global content buyer, which combined with a very strong pipeline of new and returning hits, ensures that we capture further share of the key growth areas, which are scripted and unscripted commissions for streamers and IP distribution. Now a significant driver of our long-term value is our unique IP library, which now exceeds 100,000 hours of content. ITV Studios adds thousands of hours of content every single year and licenses this to over 350 customers globally. That scale allows ITV Studios to maximize the monetization of its IP and we already generate GBP 400 million of high margin revenue through our global partnerships business. Most recently this is through Zoo 55, a key area of incremental growth. Zoo 55 distributes ITV Studios IP across 3 areas. Social video where we had over 24 billion views across 200-plus social channels globally last year; FAST enabled platforms where we have partnerships with multiple partners such as Samsung, Tubi, Xumo and viewing here has been up 28% year-on-year; and the third is games and gaming where we've got 40 games live at the moment across 19 of our brands and that is going to continue to expand. And some of the key brands we distribute include Hell's Kitchen, River Monsters, the Graham Norton Show, Come Dine With Me, Love Island and there are hundreds more. So as you'd expect, we are leveraging AI to deliver content more effectively and efficiently. For example using it for subtitling, content selection and curation. Overall in 2025, Zoo 55 generated over 47 billion global views, which was up over 30% year-on-year and that drives double-digit revenue growth. ITV Studios is on track to achieve GBP 120 million of high-margin digital revenue from Zoo 55 by the end of 2027. So the combination -- this particular combination of talent, scale and quality IP ensures that ITV Studios remains a very attractive and resilient business and it delivers high quality earnings. As a creator, owner, producer and distributor of IP; ITV Studios captures the full value of its world-class content from initial idea to global delivery. Around 60% of its revenues are recurring. This is coupled with Studios diversified revenue streams and low-risk production model, remember, where we only produce programs once they have actually been commissioned. Together, this ensures ITV Studios drives growth ahead of the market at attractive margins and delivers strong cash flow. I'm now going to turn to Media & Entertainment, which includes our pillars of Supercharge Streaming and Optimise Broadcast. We have completely transformed M&E into a strong and resilient streamer and broadcaster with a very disciplined cost base, well positioned to deliver profitable digital revenue growth and strong cash generation. It leverages its compelling position and value drivers, which include wide reach in the U.K., leading platforms in ITVX and Planet V, an extensive first-party data set and deep and established relationships with advertisers and commercial partners. We are really pleased with the success of ITVX and Planet V. Since its launch in 2022, ITVX has built incredible momentum delivering 25% CAGR in total streaming hours and 16% CAGR in digital advertising revenues. Planet V, our first-class addressable advertising platform, allows brands to target audiences by leveraging an extensive first-party data set of over 40 million registered users. Now that can be augmented of course with third-party data from our partners like Tesco and Mastercard for really granular targeting. It is a powerful engine for growth bringing in over 1,500 new advertisers to ITV since its launch. Digital advertising now represents 31% of our total advertising revenues. With this momentum, digital advertising revenue is outperforming our original plan when we launched ITVX, which is fantastic news. And given the strong performance of ad-funded streaming and our focus on profitable growth, we have, as you know, pivoted our digital strategy by doubling down on AVOD and deprioritizing subscription video on demand. Therefore, it's going to take slightly longer than initially anticipated to reach the overall GBP 750 million digital revenue target. Importantly, this has saved significant incremental content and marketing spend. As a result, as this slide shows, we reached breakeven 2 years earlier than planned recouping our entire investment in ITVX 4 years earlier than projected. In doing so, we've created a profitable ITVX platform with attractive growth prospects. So building on the foundations of our strategic investments in ITVX and Planet V, we are now competing effectively for a greater share of the GBP 9.5 billion online video advertising segment and attracting new ITV advertisers. We're expanding our digital reach through strategic partnerships, the SME strategy and through commercial innovations. Our YouTube partnership for example is successfully extending reach with over 40% of ITV's content viewed on the platform coming from under 35s. Our YouTube sales team continues to grow from partnering with 8 brands at launch to 800 today. We've recently agreed a major deal with Banijay to sell all their advertising around their YouTube content. We've also added new partnerships with TikTok and expanded our relationship with Disney+ to include their content on ITV1's peak schedule. With our SME strategy, we're removing barriers to entry for TV advertising, simplifying the buying process and leveraging AI to produce cost-effective advertising. We're making good progress towards the launch of our self-serve advertising platform in collaboration with Sky, Channel 4 and Comcast's Universal Ads, which we will be testing later this year. And in a first of its kind in the U.K., we launched picture-in-picture adds, which you might have seen in the 6 Nations. This drives incremental reach and value with sensitivity to the viewer experience. We're also increasing our inventory and can now do targeted advertising on our linear channels on the Sky and Freely platforms. And if that weren't enough, in addition, we're leveraging our brand, IP and first-party data to drive profitable non-advertising digital revenue. We've just launched the Birthday Draw. You might have heard the ads for that all across Global Radio and it's a partnership with Global for GBP 1 million cash price. We're also evolving ITV Win into a premium destination, bringing scaled competitions to audiences with new games. So it's early days for both of those, but we expect these 2 initiatives to drive double-digit growth in interactive revenues. Now finally, to our third pillar, which is Optimise Broadcast. We continue to demonstrate our strength and resilience in delivering mass audiences. In 2025, ITV delivered 91% of the Top 1,000 commercial audiences. To reinforce this value, we're collaborating with Channel 4 and Sky on Lantern, an outcomes program to clearly measure the effectiveness of TV advertising. We have a fantastic slate for the year focusing on drama, entertainment, reality and sport and we optimize our spend and deliver the most valuable audiences for advertisers. We're significantly increasing live sports. We are the only commercial broadcaster with the rights to the Men's Football World Cup, as Chris said, which includes 19 more matches on ITV, a 60% increase. In addition, we have the rights to all England Men's rugby games this year. In summary, we're really confident we will continue to create value for shareholders. With the profitable growth of ITV Studios and the M&E digital business underpinned by strong cash generation, we will continue to deliver attractive returns to shareholders. None of this of course would be possible without ITV's unique blend of creativity and commercialism, which is fueled by the talent and commitment of our people. And I just want to take a minute to say how proud we all are of what we do, the work that's done in ITV, but especially how proud we are of our colleagues and we're incredibly grateful to them for their hard work and achievements. Thank you. We're now ready to take your questions. Operator: [Operator Instructions] The first question today comes from Annick Maas of Bernstein. Annick Maas: The first one is on the advertising market. I mean your Q4 was better than anticipated. Your guide for Q1 is better. Can you tell us a bit more what the sentiment is in the ad market? Is this coming from across the board? Is it just certain campaigns or advertisers? That's the first one. The second one is on programming costs, which I guess also the guide is better than what was expected despite owning actually the World Cup rights. So is there something in there that is AI cost savings or what is really explaining the program cost savings? Just thinking also ahead how we should therefore think about program costs going forward? And same question for Studios. You're guiding to the bottom end of your margin guide because of the revenue mix. I thought production would probably be within your whole industry, the 1 segment where you can put through AI savings the quickest. So is that so or if not, why not? And then maybe just 1 last one, which is on studio growth more generally. If you look to the midterm, I guess some of your competitors have been saying that the sort of growth level that you've seen for the last 5 years or so in the production world are slightly coming down. Is this something you are seeing or is it that you are taking share of the others and therefore, you can consistently grow better? Dame Carolyn McCall: Okay. On the ad market, I think Q4 was largely down as a result of a pause by advertisers while they waited to see what the budget was going to be and so it was down year-on-year and we had expected it not to be like that. So that was the story behind Q4. Q1 is definitely trading better than we thought because the run rate from Q4 feeds into Q1 if that makes sense. Thus, February was really improved on January and March has improved further not just on February, but on March. So you're right, it's definitely better. I think that the fact that we have the World Cup in Q2 and Q3 means that we're having very, very active conversations with many, many advertisers. So I mean just to give you an example of that. We have more inventory because we've got 19 more matches, that's 60% more than we had at the World Cup in Qatar. We're talking to about 100 advertisers at the moment and that is spanning 20 different categories. So we're very actively engaged with a huge number really of advertisers. And where we would say the trend really was, the Q4 was down on virtually all categories except 1 or 2. Q1, you'd have seen supermarkets doing well. You'd have seen travel was actually doing very well, let's wait and see on that one. But there's no discernible trend on categories in Q4 and Q1 whereas I think now with Q2 and Q3, the range of advertisers we're talking to would kind of indicate that all categories should be quite active in those quarters. So that is very good news. And I think the other really interesting thing is we're getting a lot more interest in the World Cup from very big global brands and they're looking really to create high quality content and very bespoke creative advertising around kind of high-end content. So using players, using teams, et cetera. That's all brilliant for TV because it's the thing TV does best. You can't really do that in any other medium. So that's I think really good and we've agreed to sponsor and that will be announced. So I think the advertising market certainly, because the World Cup will lift it, should be a strong year for us. Your second question was costs I think. Chris Kennedy: I think specifically content costs. So you're right. Last year we didn't have one of the big mens events and we've obviously got the FIFA World Cup, as Carolyn said, and we've also got the new Rugby Nations Championship as well, which runs Q3 and then into Q4. So really a strong slate of sport all the way through from Q2 to Q4 and we have managed that within the overall envelope of content and that happens in several ways. There's some self-help in there. We did a reorganization of daytime soaps, which completed at the end of the year. The new schedule started 1st of January. That saved us some money on those shows while maintaining exactly the viewer experience as we had before. In fact with the power hour in the soaps, that was viewer led. People were saying we don't want to watch an hour of the same soap, we'd like 2 half hour episodes and that's worked really, really successfully. So we've saved some money there and that's enabled us to reinvest elsewhere in the schedule as well as affording the World Cup. And longer term, the team have just got -- they get better and better and better every year using the really granular viewer data that we've got through ITVX now to inform windowing decisions, acquisition decisions, commissions, we can see how a show grows and also making the marketing a lot more effective as well. So all of that means that -- I think you asked about where do we think that content cost will go longer term. We're really pleased that we've held it at plus or minus the same level ever since the launch of ITVX. Dame Carolyn McCall: Yes, because we've absorbed a lot of inflation in that. Chris Kennedy: Yes, exactly. And so that's what we're looking to do going forward whilst continuing to grow that viewing on ITVX. Dame Carolyn McCall: And then on your Studios question, I'm just going to -- we'll take it in 3 parts because you asked a margin question, you asked AI question, you asked a growth question. Let me kick off on the AI question because I think you're right. I think AI obviously lends itself very well to Studios. And I think the first thing to say is our fundamental belief is that we use AI on creativity only to enhance and augment it, but we then use it in a very, very strategic way where we integrate it in everything we do end-to-end. So it's a very integrated way of working in Studios. And we've had quite a lot of experience already now because we've been doing this probably for the last 18 months to 2 years where we started with having what we call the Skunk Works and now actually it's kind of embedded in all the labels. So whether that is tools for R&D, research and development or preproduction or postproduction or editing or production planning and indeed marketing, we're kind of using it for the whole end-to-end process in Studios. And what we try and do there is that of course there's efficiency gains, we use that to offset inflation and then try and bank some of that. And then we use productivity gains to get people to do more interesting things for instance in development to try and get more shows in. So the more resource we free up, we actually reuse that in a higher value kind of function if that makes sense. So that's what we're doing on AI. Chris Kennedy: And then Studios, you talked about the margin guidance and we've guided for bottom end. Our Studios business has industry-leading margins. We are the best in the business and the team have to work really hard at that. Last year they made GBP 31 million of cost savings. That came from some quite difficult decisions around label reorganizations in some geographies. At the same time, we're refilling the pipe. So we've made 4 bolt-on acquisitions and those take some time to integrate the back office. So the whole strategy is around maintaining the margin within that 13% to 15% range. It will go up and down depending on the mix of business we do in the year and where we are in the cycle, but very pleased with the level they're at. And the whole point about Studios is we want profitable growth and that means maintain the margins within that range. Dame Carolyn McCall: And in terms of growth, we see the market growing. So it's a very big market, it's GBP 230 billion market. It's growing at about 1.5% to 2.5% according to Ampere. And our goal really is to be ahead of market growth and to take share. So that continues. That continues to be part of our strategy. Chris Kennedy: And you'll have seen that we've done that consistently over the last 8 years, consistent growth. And from a compound average basis over the course of that period, we've outgrown the market and we'll continue to take share. Operator: Our last question today comes from Julien Roch of Barclays. Julien Roch: My first question is on the World Cup. Based on previous additions, can you give us an indication of the impact either millions of pounds or percentage? Second question is impact of AI on a cost basis, I know it's early days. But Stroer who reported this morning said that within 5 years they thought they could save EUR 50 million thanks to AI, which is about 3.5% of their operating cost. So any indication there? And then the last question is on your linear inventory, where are you in terms of that inventory being sold digitally or programmatically so it can be included in the kind of new AI platform that all the agencies are developing? Chris Kennedy: Okay. So on the World Cup, we don't guide for the uplift for individual tournaments. But you'll have seen performance on '25 versus '24 where we had the FIFA Men's World Cup. You can see the categories that outperformed when we have those. So as Carolyn said, we're really looking forward to the rest of the year with sport. It should give us an uplift and it should bring the whole advertising market in the U.K. up with it. But we don't give the exact tournament by tournament guide on that. Dame Carolyn McCall: No. I mean just as a little fact on sports. The reason we really focused on live sport is in '25 when there wasn't a Euros or a World Cup, our reach of sport on ITV1 was 46.2 million people, which is fantastic and we would expect to exceed that in terms of our reach obviously this year because of the rugby and the football. We've got all the racing. It's an unprecedented year for sport for us. Chris Kennedy: And then, Julien, on the AI question, could you repeat it? I didn't quite pick up what the question was there. Julien Roch: So everybody is saying that AI is going to transform our lives. Every company is going to generate more revenue and they're also going to save a lot of cost. And Stroer who reported this morning said that in their view, AI would allow them to save EUR 50 million within 5 years, which is 3.5% of their operating cost. So I was wondering whether you already have sized the potential efficiency gain from all those wonderful AI things we're all going to do all the time. Chris Kennedy: The way we look at AI is exactly how you described it, where can we use it to augment creativity? Where can we use it to increase revenue and create new revenue streams? And on the flip side, how can we use it to create efficiency so that same number of people can do more with the AI tools? On the efficiency side, it absolutely fits into our long-term cost saving program. We've demonstrated that we are relentless about the efficiency within the organization. We've taken out a huge amount of cost over the last 6 years. We'll continue to do that. It's a multiyear program and within that, AI will obviously help with the next leg of that program. Dame Carolyn McCall: Because we integrate it. We build it into the continuous cost improvement program. So it's something that we task ourselves with, but it's not always about -- there's a net cost saving, but then there's also an offset against inflation. There's an offset against other costs because cost of production is going up. So we just look at it in a much more integrated way than that. And I missed the company actually, Julien. Did you hear who the company was? No. Who was saying that they would do the EUR 50 million, it's just interesting for us. Julien Roch: Stroer, the German outdoor company. Dame Carolyn McCall: I mean there will be significant savings. But in Studios in particular, we're very focused on how we can release resource to do more stuff that will generate more hits. I mean that's the kind of philosophy in Studios, which is why we will gain efficiencies and we will net off inflation, but we also want to reinvest in, say, making sure development is stronger. Chris Kennedy: Yes. I mean I think it really is -- I hate to use the phrase, but it really is in the DNA of ITV, this everyday efficiency. If you look at M&E, noncontent costs were down 5% last year and that is a lot of hard work by a lot of people across a whole range of initiatives. There aren't big set piece efficiency programs. It's baked into people's every day. Dame Carolyn McCall: I think the third question was linear inventory. Chris Kennedy: Yes. So last year we finished the year, 30% of the linear inventory could be -- was capable of having a targeted ad within it. By the end of '26, we're looking to bring that up to 50%. Obviously we will not be using anywhere near 50% for the targeted industry -- targeted advertising because we can now make the choice both for advertisers and for ITV about what is the best use of that inventory? Is it better to use it for a targeted ad or is it better in a mass reach campaign. One of the reasons we've doubled down on sport is that those big live audiences are more valuable than ever. So we would not be doing a targeted ad in the World Cup because that is the only place an advertiser can get the huge audiences that we attract. So over the course of this coming year, you will see coming out of ITV commercial a few more ad products where they will be -- they've already developed them in conjunction with advertisers and they're releasing those to do that targeted advertising in the live streams. Julien Roch: My question was not about targeted advertising. It's more being able to buy linear advertising on a digital platform, right? Because all the agencies are developing those AI platforms that they're going to give to their clients where clients can buy across media at a click of a button. And so if TV is not on those platforms, some clients will be lazy and maybe deemphasize TV. So it's more on whether you can buy digitally the linear advertising. Chris Kennedy: Yes. Understood. And absolutely, the commercial teams are really engaged with the agencies both on the buy side in terms of buying linear inventory, but also doing the outcomes work, launching Lantern in conjunction with Sky and Channel 4 to give measurability. All of the work we're doing to demonstrate the value of TV because if those models are rational, TV should benefit because we have the highest ROI of any media. So absolutely, we're working with them. Dame Carolyn McCall: Is that what you meant, Julien? Julien Roch: Yes. But only working with agencies, you can have many reasons. You can do both at a click of a button on those platform alongside Hugo and Meta and not only ITVX or targeted, the whole inventory. Dame Carolyn McCall: So I suppose that goes to the distribution strategy and our distribution strategy is to be in as many places. I mean I think we've got something like 98% coverage now of all platforms with ITVX and then a bit lower than that for channels. But our strategy is to be in as many places as possible on the right commercial terms, which then allows us to benefit from their reach and our inventory. Operator: We have no further questions at this time. So I'd like to hand back to Carolyn for closing remarks. Dame Carolyn McCall: Just want to say thanks very much for joining us today. We know it's a very busy day out there so thanks for your time. Bye for now.
Amanda Blanc: Okay. Good morning, everyone, and thank you for joining us today for our full year results presentation. I'll start with a quick update on our 2025 performance and how Aviva will deliver today and for the future before Charlotte takes you through the results. Then we'll open for questions. So let me begin with the key messages. Aviva has delivered another outstanding set of results in 2025, extending our multiyear track record of delivery. We have achieved our 2026 targets of full year early and have now raised our ambitions. And we have enormous potential to go even further for the longer term. We are set up to make the most of the opportunities across the market, whether that's with artificial intelligence as technology changes the game, general insurance as the importance of scale and brand grows, wealth as the market expands with regulatory tailwinds or in retirement for the next wave of pensioners as the U.K. ages. And I'll cover some of these in more detail later. So let's get into the numbers, which include the 6-month contribution from Direct Line. As you can see, it's been a great year. Operating profit rose 25%. IFRS return on equity increased and cash and capital generation are growing. We now have over 25 million customers and an opportunity to serve even more of their needs with over 7 million of those customers being multiproduct holders. Operating EPS growth is well into the double digits. And today, we are announcing a final dividend of 26.2p per share, up 10% year-on-year. And we are resuming the share buyback now at a higher level of GBP 350 million. Every business contributed to these results. In General Insurance, premiums are up 18%. We are now approaching the sub 94% combined ratio ambition, and we are already achieving this in our U.K. business. In Wealth, we are extending our #1 position with over GBP 230 billion of assets. And we are growing with record net flows of almost GBP 11 billion. In Protection, we have improved margins and are nearing completion of the AIG Protection integration program. In Health, we have grown in-force premiums by double digits with a low 90s combined ratio. And in Retirement, we have written GBP 4.6 billion of bulk annuities at attractive returns, supported by real asset origination in Aviva Investors. Turning now to targets. As I've said, today's results mean that we have already delivered our 2026 targets. This is a fantastic achievement, and I'm really proud of Aviva's performance. So I want to thank the whole Aviva team for their hard work. In November, we set new 3-year targets across operating EPS, IFRS return on equity and cash remittances. These now include Direct Line and better reflect our trajectory as a diversified capital-light business. Charlotte will cover more details on the numbers shortly. But now I'd like to talk about Aviva's longer-term potential. This has been a journey where we have driven sustained growth, served more customers and stepped up for shareholders year in and year out. And we continue to create longer-term value with smart strategic M&A resulting in today where we are the U.K.'s only diversified insurer with a clear strategy that is delivering results. Our focus is now on hitting the new targets, further accelerating beyond 75% capital-light and realizing the full benefit of Direct Line. But this is just the next step in our journey. There is more long-term potential beyond this 3-year time horizon. Clearly, we are set up to capitalize on a range of opportunities across all our markets, but I'll prioritize three of these today. First, how we outperform right through the cycle in General Insurance; secondly, why we are uniquely positioned to lead in Wealth; and thirdly, how we are using artificial intelligence to shape the future of Aviva. And supporting all of this is one constant, our leading customer franchise and preeminent brand. So let's start with General Insurance. This is and always will be a cyclical market. And after more than 325 years in the industry, we know how to navigate cycles. And we have been through disruption time and time again. Direct Line changed the industry by selling directly over the phone. Price comparison websites then reshaped the market. And now we have generative AI with autonomous vehicles to come. And through all of these changes, Aviva continues to deliver, bringing in fantastic people, launching innovative products like Aviva Zero, expanding distribution onto PCWs and through Lloyd's and so much more. And we have tripled profits over the last 5 years. The U.K. is the most competitive insurance market in the world with high regulatory barriers to entry. And Aviva is the standout #1 insurer here and the only player operating at scale across Personal and Commercial Lines. We have always adapted and we will keep adapting. When we acquired Direct Line, we knew that market conditions would continue to evolve. And the same is true when we set our new group targets. But we also knew that Aviva has the scale, discipline, technical expertise, proprietary data, brand strength and diversified group model to grow profitably. And there's plenty of room to grow, unlocking value from Direct Line, expanding partnerships, scaling SME in Canada, building out our Lloyd's presence, not to mention the opportunity with our 25 million customers. The market will keep changing, and that's exactly why we invest in innovation. We are ahead on EVs, telematics, automation and AI, and we'll stay ahead. So our portfolio is built to deliver performance for years and decades to come. Looking first at Personal Lines in the U.K. Owen and the team have a track record of outperformance, delivering profitable growth through COVID, periods of high inflation and pricing practices where many others struggled. And though the market is challenging today, we are still writing at target margins. It is not by chance that we have been able to do this. Our scale is unrivaled with breadth across distribution and game-changing amounts of proprietary data. We have the only wholly owned repair network in the U.K., which saves us around GBP 500 per repair. And we have huge potential with Direct Line, not just with the cost synergies, but growth headroom with leading brands and new products such as Pet, Green Flag Rescue and Micro-SME. Turning now to Commercial Lines, where it's a similar story. We are successfully navigating tougher conditions. We have built up our pricing strength, and we are able to quote above the technical prices in our models. Putting margins first has always been our priority, and that's why we have delivered consistent profits year-after-year. We have unique strengths to win in this market. So let me just highlight a few. We are a leader in SME and mid-market, and these segments are more resilient. We have first-class underwriting with strength across motor fleet and liability. So we are very well positioned for any future shift with autonomous vehicles. And with access to Lloyd's through Probitas, we can tap into a wide range of attractive lines, having launched 8 since the acquisition. This now includes high net worth, which is complementary to our already leading proposition here. So across both Commercial Lines and Personal Lines, we are well set up for success today and in the future. Moving to Wealth, which is a huge opportunity for us. There are GBP 2.7 trillion worth of assets today, growing at double digits, and the market is set to surpass GBP 4 trillion by 2030. This strong growth is underpinned by clear structural trends and regulatory tailwinds. At Aviva, we have a leading Workplace and Adviser Platform businesses. And we are leveraging advice capabilities in Succession Wealth and scaling fast in Direct Wealth. We have built a competitive edge that no one else can match. We have a leading customer franchise with a significant affluent opportunity. Our holistic offering and trusted brand means that we can support customers throughout their lifetime. We have always invested in our platform, which is ranked by de facto as the #1 in the market. Our modern technology platform brings scale benefits. And of course, we have leading investment solutions with Aviva Investors. And the performance of our Wealth business is testament to all of this. Since 2022, we have grown assets faster than the market, and we have improved margins at the same time. In Workplace, our profit margin is up by almost 2 points over the last 2 years, which makes this business a key driver of growth and a major contributor to our profits. So we are on track for our GBP 280 million Wealth profit ambition in 2027. And the importance of Wealth within our portfolio is growing. It is fast approaching 10% of our group earnings, further increasing our share of attractive fee-based income. But the longer opportunity here is even more exciting. Take Workplace. It is a highly attractive market, which has grown four-fold over the past decade. And with a constant flow of employer and employee contributions, it is expected to triple over the next decade. This growth is not only strong, but it is also very resilient. Aviva has an incredible track record here, and we're accelerating. The business is a genuine growth engine with 1,500 scheme wins over the last 3 years and a near 100% retention. And we are very pleased to now be the sole administration partner for the Mercer Master Trust, expected to bring around GBP 8 billion worth of assets over the next 12 to 18 months. The strength of our proposition is powered by leading Aviva Investors default funds. And we recently launched our My Future Vision Fund, which gives customers access to private markets and reinforces our commitment to the Mansion House Compact. So when you bring together our Workplace, Direct Wealth, and Advice businesses, you get a truly unique Wealth offering. We are able to retain and serve customers from their very first job all the way through to their retirement. And we are tapping into 4.5 million affluent customers who hold more than GBP 1 trillion worth of assets. We're also leveraging technology and innovation to deliver advice and guidance at scale. Targeted Support is a huge opportunity for us. This is a new service that sits between guidance and full financial advice, and it will allow us to offer easy-to-access support to so many more people. Our first journeys here will focus on how people save for their pensions, launching around the middle of this year. And there's still so much more to share on the Wealth business. So we will do a deeper dive at the next in-focus session, which will be in Q4 this year. Finally, turning to Artificial Intelligence. So we know that this is going to be transformational. And here at Aviva, we have a greater opportunity than most. For any opportunity that you have seen in the media, and there's been quite a few recently, there are key enablers that you actually need to drive the value. It is not enough to just have the technology. You need access to millions of customers, the ability to deploy and reuse at scale, capacity to invest, and most importantly, proprietary customer and claims data. Aviva has all of these in spades, and our diversified model is more resilient for any disruption. This technology isn't new to us either. We have been using traditional AI capabilities for over a decade now. In fact, over 98% of retail business in U.K. Personal Lines is priced with machine learning. And we have been training over 150 machine learning models in claims with our own data for years. Generative AI and Agentic are just the next steps on this journey. And because of our targeted investments in technology and talent, we already have many of the AI-ready foundations in place, so we are well positioned for this shift. We have built an in-house platform to deliver use cases at speed, and we are already seeing tangible benefits. We have halved the time taken to review each case in medical underwriting. And we have also reduced call wrap times by 20% for customer service agents in Direct Wealth, which we are now rolling out more broadly in IW&R. All of our colleagues have access to AI tools, and we continue to enhance and streamline all of our data. We are proud of what we've achieved so far, but we are aiming much higher and always balancing ambition with pragmatism. Our focus now is on prioritizing progressively bigger end-to-end opportunities where AI can transform areas like customer engagement and distribution, underwriting and claims right through to back-office operations. This is the kind of change that will shape Aviva's future. And some of this is closer than you think. So let me give you an example in U.K. General Insurance claims. We have already saved nearly GBP 100 million through our claims transformation and Agentic has the potential to unlock much more. Over the next few months, we will be testing an AI-enabled claims agent built in-house and launching later this year. This will enable us to handle simple claims from start to finish without human support. And the best part is that this is voice-enabled. Most claims begin on the phone. So this will be transformative for customers, delivering faster, clearer and more consistent outcomes. And finally, I'm delighted to announce our partnership with OpenAI, which is a really important step for us. Combining OpenAI's cutting-edge capabilities with our expertise and data will help us to deliver powerful AI solutions for our customers and our colleagues. So there's a lot more to come, and we'll share more with you at our half year results in August. Now I'll finish with what brings all of this together. Aviva's powerful unique model. We have diversification and growth advantage with market-leading positions and a majority capital-light portfolio. We have a customer advantage with almost 22 million U.K. customers and a leading brand. We have a scale, technology and data advantage, including the opportunity that AI brings. All of this gives us real confidence for the future over the next 3 years and well beyond. And with that, I'm going to hand over to Charlotte, who's going to take you through the results in more detail. Charlotte Jones: Thanks, Amanda, and good morning, everyone. It's great to be here for another full year results presentation. 2025 was a strong year for Aviva once again, as we continued our growth momentum. Operating profit was up 25% to GBP 2.2 billion, which translated to an EPS of 56p and a return on equity of 17.5%. Cash remittances were up 4% to GBP 2.1 billion, and this excludes the funding for Direct Line, which is reported separately. Solvency of 180% is at the top end of our working range, supported by GBP 2.3 billion of own funds generation or OFG, the solvency measure of operating performance. In November, we said we were on track to meet our 2026 group targets a year early, and I'm pleased to confirm that we have achieved that. We exceeded our GBP 2 billion operating profit target before the contribution from Direct Line. The group total of GBP 2.2 billion is in line with November's guidance. And we comfortably achieved our OFG target a year early and are ahead of schedule on our cash remittance target. This demonstrates the grip we have on performance management to actively manage through the cycle and outperform peers. So given our excellent progress, we set new and ambitious 3-year targets in November, reflecting the shape of our group today and our plans for the next 3 years. These targets allow better comparability with peers, align with our capital management framework and support our plans to grow in capital-light businesses. These targets are ambitious and achievable. They take into account the outlook for each business, including good visibility of where we are in the cycle. So we're targeting an 11% operating EPS CAGR from 2025 through to 2028. This reflects the operating earnings growth and share count reduction from regular and sustainable capital returns. So our 2025 EPS of 56p is ahead of the 55p baseline that we set in November, as the last few weeks of the year saw more benign weather than expected. And we're not assuming this favorable weather repeats. So the 11% target is from the 55p baseline and builds to around 75p by 2028. We're really confident in our plans to drive progressive earnings across the group. And combined with share buybacks, we're well placed to achieve this and our other group targets. So I'll now unpack the group results in a bit more detail, starting with General Insurance, which was 56% of business unit operating profit. Top line growth has been an impressive 14% over recent years, and margin has improved too, with the combined ratio better by 1.6 points. The investment return has grown in line with the portfolio, all of which together means operating profit has grown to almost GBP 1.5 billion. In the U.K. and Ireland, premiums grew 27%. A large component of this was the addition of Direct Line reported as part of U.K. Personal Lines, where we saw 50% premium increase. Commercial Lines premiums grew 7% as we build GCS, integrate Probitas and leverage the strength of our SME and mid-market propositions. The combined ratio in the U.K. for both Commercial and Personal Lines is a strong 93.9%. This is a 1 point improvement, reflecting the earn-through of pricing and some favorable weather. In Commercial Lines, positive prior year development was more than offset by elevated large losses in the current year. And including Ireland, COR was 94.1%, reflecting the impact of storm Eowyn back in Q1. Overall, operating profit for U.K. and Ireland grew 52% to over GBP 1 billion. Now in 2026, growth will benefit from a full year of premiums for Direct Line. Now looking at the U.K. and Ireland business as a whole, we expect to deliver a 2026 combined ratio of better than 94%, subject, of course, to normal weather patterns. We come from a position of strength with good rate adequacy and relative to the softer market, we have held rate. We leverage the strength of our brand, scale, pricing sophistication, proprietary data and diversification. And we have extensive experience in managing pricing cycles and disruption. So we're really well placed to navigate the current conditions. Premiums in Canada, up 2% in constant currency. The Canadian market is at a different stage in the pricing cycle compared to the U.K. And so Personal Lines grew as we secured pricing increases across property and auto, maintaining strong retention. This was offset by some portfolio actions taken in Commercial Lines that I covered at the half year. And the undiscounted core was almost 3 points better, largely reflecting weather experience, which was broadly in line with our budget compared with the elevated cat activity in 2024. There was improved large loss experience compared to '24 as well as pricing actions earning through. Investment income was marginally down, but operating profit was up 49% to GBP 408 million. And for 2026, we expect to deliver a combined ratio approaching 94% for Canada. The Personal Lines rating environment remains supportive with further pricing increases expected. In Commercial Lines, though, the dynamics are similar to the U.K. with softer conditions that vary line-by-line. So across the portfolio, we will navigate the cycle with discipline. Now moving to Insurance, Wealth and Retirement and starting with the Insurance businesses, Health & Protection. Demand for Health has been affected by cost of living pressures for consumers and small businesses re-prioritizing spend to absorb the national insurance changes. Despite this, in-force premiums were up 12%, and we maintained a low 90s COR. Operating profit was up 9% as the business grows in line with our ambition. Now as expected and in line with the first 9 months, protection sales were lower following the consolidation of AIG and Aviva propositions back in August 2024. Margins have improved by 90 basis points as we reprice the business. And all of this is in line with our integration plans. Operating profit was up 97% as we had some adverse assumption changes back in 2024. And in '25, we recognized a onetime integration benefit following the legal transfer of business acquired from AIG. Now moving to Wealth. Workplace net flows were up 6% as member contributions grew and we onboarded new schemes. The resilience of this business is demonstrated by the impressive GBP 1 billion of regular monthly contributions. Our Adviser Platform performed strongly with flows up 11% despite elevated outflows around the time of the U.K. budget. And in our Direct business, the customer base grew by almost 1/3 to over 100,000, and we're continuing to invest in developing the proposition. Wealth operating profit was up 36% with operating margin improving by 1.1 basis points as the business grows and leverages the cost base. Operating profit as a portion of revenue is 23%, up 4 points. And as Amanda mentioned, we are on track to meet our near-term ambitions. And beyond that, the opportunity is even more exciting for the group's long-term growth. We have a strong brand proposition and scale from which to build. So we anticipate further improvements in operating margin and profit progression. In Retirement, we wrote a more typical GBP 4.6 billion of BPA following an elevated 2024. Importantly, Aviva Investors originated GBP 3.5 billion of real assets to support the business. Now this is an increasingly competitive market, and our team has continued to trade well and with discipline. We achieved a mid-teens IRR, well above our low teens guidance, and the business has been written a relatively low strain. Individual annuity sales were up 19% to GBP 1.6 billion, our highest level since 2015 pension reforms, supported by a new product launch. Operating profit was 5% lower as higher releases from the contractual service margin were offset by a lower investment result. And we expect to remain active this year in retirement, and we'll be disciplined in the competitive environment. Now turning to costs and efficiency. The ratios are broadly stable despite the temporary uplift effects from acquisitions and new partnerships. Across the group, we continue to invest in exciting growth and productivity initiatives, including the use of AI and in automation. And we expect this investment to drive efficiencies in each of our businesses. It will improve operating leverage and unlock significant long-term value from our extensive customer base and proprietary data. Now the application of our consistent capital allocation framework is a critical part of what we do to optimize our diversified group. And this slide summarizes how we think about performance and financial strength and what that means for uses of capital. We continue to build sustainable growth in earnings and cash and work to maintain our balance sheet strength. We grow the regular dividends. We invest in the business for growth and efficiency, and we return capital to shareholders. Nothing here is new, but it's important that you see we do this really well. And as an example of the framework in action, I'll pause for a moment on solvency. One of the advantages of the model we have built is proactive balance sheet management. A year ago, our cover ratio was 203% as we prepared to complete the Direct Line transaction. This used 31 points of capital ahead of the realization of the capital synergies. We've delivered elevated management actions of 11 points and accelerated 3 points of Direct Line synergies by temporarily moving the business to standard formula. This has supported building solvency back up to 180%. The underlying capital generation of 16 points includes a couple of points of favorable one-offs, including positive weather and reinsurance pricing impacts, which we can't assume will repeat, but we do expect to unlock the remainder of the Direct Line synergies. Specifically, we're on track to deliver at least GBP 350 million or 7 points of solvency around the end of this year. And looking forward, we expect a progressive build of operating capital generation of around 20 points in 2027. This assumes normal levels of management actions of around 200 points. And depending on whether these impact own funds or SCR or both, this translates to between 2 and 4 points of solvency. This level of capital generation will continue to grow and provides headroom in excess of the annual dividend and regular buyback. Now moving to a few words on Direct Line. The integration continues to progress well and at speed. We have successfully implemented our pricing models into Direct Line with an improvement in written calls in the fourth quarter. We've made excellent progress on the Direct Line branded PCW sales, doubling the number of policies in Q3 and almost doubling them again in Q4. We've transferred GBP 2.9 billion of assets to Aviva Investors with more to come. And we've made good progress rationalizing two office locations and three motor repair sites. We're progressing and removing duplicate roles and have an incredibly strong leadership team in place with a proven track record. All of this is enabling us to deliver material financial benefits. So in November, you'll remember, we uplifted our cost savings ambition to GBP 225 million and confirm Direct Line's own cost program of GBP 100 million had been achieved. We have delivered the first GBP 50 million of cost savings in the second half of 2025. This will fully earn through in '26 and contributed around GBP 10 million to operating profit in 2025. We expect to deliver the remaining GBP 175 million of savings fairly evenly over the next 3 years. And we're also investing around GBP 50 million to unlock claims cost benefits of at least GBP 50 million each year. And all the work on the acquisition balance sheet has now been completed. Now I'll briefly cover the delivery of our commitments on dividends. Today, we've announced the final dividend of 26.2p, giving a total dividend of 39.3p, a 10% increase on 2024. This includes the regular dividend growth plus the 5% uplift we promised following the acquisition of Direct Line. We've also resumed the buyback, launching a new GBP 350 million program increased to reflect the higher share count. And as we go forward, our consistent dividend policy of mid-single-digit increases in the cash cost of the dividends builds from this higher point. And combined with the resumption of the regular buyback, this will deliver a highly -- a higher progressive DPS development. So to summarize, 2025 was another great year for Aviva and the outlook for '26 and beyond is positive. Our diversified business model and the addition of Direct Line leaves us well placed to continue our track record of growth and earnings momentum. We will continue to invest in data, customer engagement and operating efficiency, ensuring we keep winning in an ever-changing world. And of course, we will maintain a firm grip on performance management across the group. All of this gives us great confidence in delivering the ambitious targets we have set and the future beyond that time frame. And with that, I'll hand back to Amanda. Amanda Blanc: Okay. Thanks, Charlotte. So before we move to Q&A, let me conclude with the key points. We have real momentum, and we are building on it every single year. 2025 extends our track record of strong profitable growth. We have already delivered another set of targets, and we are driving towards the raised ambitions that we have set for our next chapter. Aviva is in a stronger position than ever. And this isn't just a strong position for the next few years. Aviva is uniquely placed for longer-term success. Here is why. We are the U.K.'s national champion and the only diversified insurer. We are accelerating capital-light and unlocking higher returns. We have an outstanding customer franchise of more than 25 million customers globally. We are the U.K.'s most trusted insurance brand. We have proprietary data at scale, driving better pricing, better risk selection and better customer outcomes. And all of this fuels our superior returns for shareholders with strong and sustainable earnings growth and attractive dividend and regular share buyback. So these strengths and many more give me deep confidence that we will unlock the full potential of Aviva in the years ahead. So thank you for listening. Let's move to your questions. Unknown Executive: Thank you. And as usual, if you just raise a hand and give us a moment to get a microphone to you. We'll start at the front here with Andrew Baker. Andrew Baker: Andrew Baker, Goldman Sachs. First one, I guess, on your '26 combined ratio guidance. If I look at U.K. and Ireland, I think the underlying is about 96.7% in 2025. So it's quite a jump to get to less than 94%. So can you just help us with the bridge there? And then similarly on Canada, how do you get from sort of the 96.5% underlying to approaching the 94% that you've highlighted? And then secondly, I can see you added a slide in the appendix giving a bit more detail on autonomous vehicles. Are you able just to give us sort of your view on maybe the timing here, opportunities, threats and I guess, ultimately, how you think Aviva is positioned to win in this market? Amanda Blanc: Okay. Charlotte, do you want to take the first one? Charlotte Jones: Yes, I'll take the first one. Thanks, Andrew. So look, I'll start by saying we're very pleased with the COR of 94.6% for the group. And underlying COR has increased across the group from 1.4% to 96.7%. But I'm very comfortable with the position. So let me try and explain. So in Canada, we've seen about 0.7% of improvement in the underlying as we've seen price increases earn through, and we've seen auto theft trends improve. And we see having put around 10% through in Personal lines and those trends continuing, we can see the continued trend towards the sort of approaching 94%. We took those portfolio actions in the Commercial book. So again, some of that profitability will improve as a result of that, already coming through in the second half, but you'll get a full year effect of that. In the U.K., yes, the underlying COR I've got is 96.3%. But in there, you've got some elevated Commercial Lines, large loss experience, which was kind of in the second half. So just as I won't assume weather is better than long-term averages and I don't assume prior year development coming through. I also assume that large losses will be at a kind of regular loss loading. And when you look at the nature of the large losses, they were idiosyncratic in nature. So they were good underwriting decisions, just a bit of bad luck. So again, I wouldn't assume they repeat. Now they were about 1.7 points higher than the long-term averages or the loadings that we set. So if I take that off the 96.3%, you can see that's already quite a lot of an improvement. Then I've got Direct Line coming in, in the second half, it's still not at the performance level we would want it to be. So it's got a negative impact in the second half. But as we see that earning through and we see more of the cost synergies come through, then again, that will drive a lot of the improvement. So we have the plans, and we've got the good line of sight to the guidance we've given. Amanda Blanc: On autonomous vehicles, so yes, we did put the slides in the deck because we sort of thought that there might be one or two questions on it. There's obviously been a lot of media activity on this in the last couple of weeks. But you've also -- you've seen sort of two extremes of that really. This is going to -- everything is doomsday scenario to the sort of major manufacturers coming out only last week and saying that they've abandoned their Level 3 driving system plan. So I think that we've got to just manage some of the noise that sits around the topic. Now on saying that, we do recognize that this will bring a change in the market. And just the same as I think we've adapted to hybrid vehicles, to electric vehicles, pricing sophistication, now generative AI, I think we sort of feel very ready for this. Our view is we've looked at the WEF analysis and the BCG analysis. And we would concur that the widespread adoption is not expected until the 2040s. And even then, I think if you think about the upgrading of the car park globally is going to cost trillions of dollars. I mean, I don't think we should just underestimate even that an average car price today versus what it costs to have a fully autonomous vehicle, you're talking about tens of thousands of cost difference. So I think you sort of have to balance that. But when it comes to it, who's going to win in this autonomous vehicle world? Well, I think, first of all, this is the most competitive market in the world, as I said in the presentation. So I would bank on the U.K. being able to deal with this. We've got a deep -- as Aviva, we have deep understanding of vehicle technology. So we are the #1 insurer for EVs today. We have our own repair network. So the feedback loop in terms of that repair is going to be important. We've got -- we're one of three telematics players in the market. We've got about 3 billion miles of telematics data since that product was first offered. By the 2040s, as you can imagine, we're going to have a lot more data. So all of that data will matter. But I think ultimately, you're never going to have this as being a pure Commercial Lines product because at some point, the vehicle may get stolen, and I don't think that the vehicle manufacturer is going to take responsibility for that. There will be times when the vehicle is being driven in difficult driving conditions on country roads where it's not going to be fully autonomous. And so what you're going to need is this balance between Personal Lines and Commercial Lines. And I would put Aviva out there to be able to deal with that as probably the only player in the U.K. today that actually can. So I think we have to be circumspect about it. We have to recognize that the market will change. But I think genuinely, we are thinking it's a good way off. But we thought we'd put the slide in because we thought you may be interested. Unknown Executive: If we come to Farooq. Farooq Hanif: Just one numbers question and one non-numbers question. So on the numbers, I noticed your investment income in General Insurance was up quite a lot, certainly compared to what I expected. Is that a sustainable level? And will that get the margin with the unwind of the discount as well? I mean, can we expect that to sort of be a sustainable level that might grow from here? And then secondly, on -- going back to AI, I mean, there's also been a lot of kind of wild scenarios about how Wealth will be affected by AI and how distribution will be killed and margins will disappear and lots of doomsday stuff on that, too. So what are your thoughts on Wealth, particularly around Targeted Advice and how you could use Gen AI to your advantage? Charlotte Jones: Okay. Yes. So I think nothing particularly to call out on the investment income. It is obviously affected by having the Direct Line portfolio. But the rates that we were earning is pretty consistent. So LTR as a percentage of average assets aligned to the prior at 4.2%. So nothing untoward or nothing particularly to call out in the investment income. So, no. Amanda Blanc: Okay. So on AI in Wealth specifically, but I think more broadly. If we think about the investment that needs to go into AI and how you will reuse that across the business, I think if you think about Aviva, if you think just even on claims summarization, we've taken things for motor that we will apply to home, to travel, to health, to protection, to various other areas. So if you think about the investment spread across the business, we feel that we're in a good position to be able to sort of get more maximum use and maybe keep more of the benefit of that and not pass all of that on to -- in a competitive environment. On Wealth specifically, if we think about this new term of the moat, which is obviously new to all of us in the last -- the AI moat, like what is Aviva's AI moat? And I would say that one of the biggest moats that we have is our workplace pension business. Why is that the case? Because it is basically connected to employer, employee and provider. And effectively, with 4.5 million workplace pension customers, with the data that we have on those customers, we know what they are saving and the ability for us to be able to use AI and all the other data that we may have on them from things like motor, home and everything else to be able to provide a more personalized proposition via targeted support or simplified advice or going right through to sort of the full fat advice. I think that we're in a really good position to be able to capitalize on that. So I think we've seen disintermediation in many places before. Take price comparison website. I mean that massively transformed the motor market and disintermediated to almost a whole extent where today, 95% of quotes come that way. As a mass affluent player, we are in a perfect position to be able to manage that any potential disintermediation. But I still believe that advice will be there. I just think that the advisers will be given better information, more support, and they'll spend more of their time with the customers, where the customers want that face-to-face advice. But I think for those many people, 91% of the population today that don't take advice. AI will facilitate the ability to be able to do that and mean that they will get better guidance. And you've got 12.5 million people in the U.K. today that do not save enough for their retirement. I think it gives a real opportunity to be able to do that. So I would say we're bordering on the sort of excited end of the scale in terms of the opportunity that, that provides Aviva. Unknown Executive: Larissa? Larissa van Deventer: Larissa Van Deventer from Barclays. Three quick ones on my side. The first one, just on Canadian Commercial. Is the culling now done? Or should we expect some of that to linger into 2026? On the Life value of new business, if you could please give us a little bit more color on what drove the decline and how we should think about margin evolution going forward, basically was to separate the one-offs from any structural change that you may see? And the last one on Workplace. You've been very positive on this for some time. What needs to happen for you to meet your targets? And do you see -- and specifically on that, how do you see margin or potential margin compression in that space? Amanda Blanc: Okay. So I'll pick up one and three and then hand over to Charlotte to take the margins bit of three. So on the Canadian portfolio remediation, yes, that is largely done. And I think if we think about Canada, we really see a big opportunity there to improve the performance of the Canadian business. I think there's a number of areas, a push out in terms of SME, a move more from Ontario as well as into Quebec, where we're not largely represented in Quebec today. We've got big partnerships with Loblaw and RBC, which we will be capitalizing on. And so I think the Canadian business has made some really strong improvements that they will continue to build on over the coming period. And that's why Charlotte was able to give the guidance that she wanted to there. On the Life VNB, Charlotte, and then hand back on Workplace. Charlotte Jones: Yes. So I suppose there's a couple of things. In general, there's an element coming down because of the retirement levels of the BPA volumes being less. Then we've got a slightly strange effect coming through in Wealth in the fourth quarter, and that's allowing for some assumption changes, which kind of are relevant for the whole year, but they come through in the fourth quarter. There's a little bit -- so there's a little bit on Retirement margin and a little bit on Wealth. But I would encourage you on Wealth to always look at the flows and the operating margin and how we're improving the operating leverage there and therefore, the opportunities on the profitability. The VNB metric isn't that applicable, but we give it so that you can see the overall IWR level. Amanda Blanc: I mean on Workplace, so what gives me the confidence here? Well, I think the progress that has been made, you've only got to look at the sort of the progress towards the GBP 280 million ambition. And that is primarily driven by the contribution from the Adviser Platform and the Workplace business. So Workplace AUM is up 19% to GBP 153 billion. So strong new business and growing member contributions. Net flows of GBP 7 billion, so that's 6% of AUM. We're getting regular GBP 1 billion member contributions every month. We talked about the new scheme wins, the win rate of 75%, which I think is pretty impressive. And so we've got a very positive outlook on Workplace. And we announced the new deal this morning with the Mercer transfer, that's GBP 8 billion being transferred in over the next 12 to 18 months. So I think the team are in -- they're doing exceptionally well here. On the margin, Charlotte, do you just want to comment on Workplace margins? Charlotte Jones: Sorry, yes. On Workplace margins, we have shown the improvement in the operating margin. So if I look at it at the overall Wealth level, it's gone from about 7% to 8.1%. If I look at Workplace, which has not been so much diluted by some of the investment that we're spending, it's improved from about 10.7% to 11.5%. So all the pressure that you constantly always expect at the revenue margin level, which continues to be there, we're compensating by the scale that we have, the operating leverage that, that drives and that keeps going forward. And so, we also gave you a stat on sort of the expense margin as well, which is sort of like the inverse of a cost/income ratio. And again, that's showing an improvement to 25% now for the whole Wealth business. So I think we've got to keep on it. We've got to make sure that we're protecting as much of the revenue margin as we can. And we do that through being competitive. We have to be competitive, but then there's a lot of incremental contributions into Workplace that sometimes attract a slightly higher margin per item. So we have to keep mind on that, but the real driver is making sure that the operating leverage continues to build. Unknown Executive: Andrew? Andrew Crean: It's Andrew Crean, Autonomous. Could you talk a little bit about Direct Lines, premiums and your retentions there? Is that working out the way you planned as you renew business? Secondly, I noticed the CSM, the net flow -- value net flow is negative to the tune of about 2%. Is that something which you think will continue in the long term, i.e., that your releases will be more than your expected return on new business? And then can you talk about U.K. retail pricing? What's happening in the market in terms of rates? And how you see rates going over this year? Amanda Blanc: Okay. Shall I pick up? Charlotte Jones: Yes, do pricing first and I'll do the two. Amanda Blanc: Yes. So on the -- we're not going to break down the individual brands, Andrew, in terms of like policy count or retentions because we don't do that for Quotemehappy, for Aviva Zero, and everything else. But what I would say is that I think we are incredibly pleased with the Direct Line deal. Actually, one of the real strengths in the Direct Line portfolio is the retention and their ability to retain. And we were with some of the teams earlier this week where their marketing team, particularly were commenting on the strength of the talent within the team around retention. So we feel very good that the team is set up to do that. On the -- on the pricing of the portfolio, on motor, which I assume is the sort of where you're heading. So what do we think about this? So we always give you the numbers. So bear with me just a second. So if we think about our performance in 2025 on Personal Lines motor new business, we were up about 1% on rate. I think the Pearson Ham data was showing rate down minus 11%. On home, we were sort of broadly flat, I think, on new business, and we were up about 8% on rate for home. So I think that shows really good discipline. And I think what it shows is us using our different distribution channels effectively. Obviously, we've got the Nationwide deal, which has come in for travel and home, and that will build over the course of this year. In terms of what we see going forward, I think that obviously, we see inflation in the sort of mid-single digits. We've -- Charlotte talked about us guiding to overall 94%. So that will give you confidence, hopefully, that we will be disciplined. And we do see that the rates are starting to flatten out. And I think the competitors are saying the same thing. You saw the ABI data come through just a few weeks before. So we believe that it is time to start increasing the rates, and we will be very disciplined about how we do that in what is obviously still a competitive market. Charlotte Jones: Then on the CSM, if I look at it, excluding Heritage, it's pretty stable at just under GBP 6.5 billion. Obviously, with a lower volume of BPAs, you've got a smaller amount of that new business CSM going in. Then my interest accretion, that's a little bit higher because we had the higher opening CSM and because of the business written back in 2024, and that was written at higher rates than the portfolio average. So that's kind of driving that. Then experience variances were broadly neutral, whereas the previous year, they've been a bit positive. And assumption changes are relatively minimal across the both. So when I look at the release, it's a bit higher because my starting point is higher. Now if I put Heritage back in there, because that's got no new business and is only coming out, then there's a bit -- the reduction is down to 7.7% from 7.768%. So it's pretty marginal. When I look at the percentage, the release is 10.3%. Again, that's slightly higher than the previous year, which was 10.1%. But that sort of level is expected to repeat. But again, it will depend a little bit on mix and volumes of new business written. But I think it's always important to remember, this is the capital-intense part of the portfolio, and it's throwing off cash that we're investing in Wealth and Health. And obviously, protection is within the CSM. But it's stable to level and obviously will be impacted by how much annuity business we write in every year. But again, it's only part of the picture for IWR. Unknown Executive: Give it to Dom. Dominic O''mahony: Dom O'Mahony, BNP Paribas. Three questions, if that's all right. Just one clarification on the Mercer flow piece. If I've understood that correctly, is that just straight GBP 8 billion to the flows sort of over and above what you would get normally? Maybe if you could just expand on that, that sounds very helpful. Second question, just to come back on the investment income. I think opening yields presumably are lower than 12 months ago. Could you just speak to whether that -- well, firstly, whether that's actually right for your portfolio, but also whether that's a headwind to investment income across the different business lines and/or discounting and/or whether there's anything you could do to offset that? And then the third question, just on the capital generation. So OCG underlying, I mean, much stronger than I was expecting with -- in particular, the SCR growth is interesting, because I think it was ever so slightly negative in the second half as in a release. Is that the reinsurance change that you referred to, Charlotte? I wonder if you might just expand on why the SCR dynamic within the OCG is so benign? Amanda Blanc: So I'll answer the first one, which is a very straightforward one. And then I'll leave Charlotte to answer the two difficult ones. Charlotte Jones: So look, let me just repeat your OCG question again. It's obviously strong, strong underlying and strong management actions. Dominic O''mahony: The SCR, which underlying GBP 36 million headwind in the full year, I think it's about GBP 20 million better than it was in the half year, which implies an underlying release of SCR, a small one. I did this math on the gee, so I might have got it wrong. But I assume that the reinsurance piece that you just -- you spoke to earlier is an SCR release in the underlying? Charlotte Jones: That's correct. Dominic O''mahony: Just wondering how big that is, whether there's anything else explaining the very good print there. Charlotte Jones: So within the underlying -- so management actions tend to apply only to really the IWR world and then we have a little bit in international. So anything that's sort of not run of the mill in the GI businesses still sits in underlying. So yes, there's some approaching a point coming through from -- in the OCG from the reinsurance. There's a little bit of an additional benefit coming through from weather. Then we -- what else have we got? Yes, that's the main thing. Then obviously, we've got the 3 points coming through from Direct Line moving that to standard formula in the short term. We did -- we talk about -- in the IWR side, we talk about moving to the -- moving the credit model and getting an improvement on the way we model credit risk. That's predominantly a benefit in IWR, but there actually is a little bit of a benefit coming across the other areas as well. So that's also impacting the SCR as well. Dominic O''mahony: And sorry, just to clarify, the Direct Line model change, that's going through the underlying, not through the other? Charlotte Jones: Yes, that's right. Dominic O''mahony: Okay. Understood. That was very clear. Charlotte Jones: And then what was your -- your other question was on investment income again. I mean, there's really not a particular headwind. It's a very consistent portfolio. We've got the bigger size and scale because the book is bigger. Then we've added Direct Line. The mix of assets is similar. We've moved the assets across to Direct Line. That's a helpful thing from an investment income perspective as well as fees for Aviva Investors. And then again, nothing much. There's a bit of a mix point, I suppose. And overall, it's a little bit helpful for discounting, but nothing really major to call out. Unknown Executive: Mandeep? Mandeep Jagpal: Mandeep Jagpal, RBC Capital Markets. Two questions for me, please, both on Life. Firstly, given the fixed income market conditions, how have you invested your annuity premiums you received in 2025 versus your target allocation? And does the current allocation create an opportunity for more management actions or margin enhancement in the future? And then on the Retirement IFRS earnings, in the appendix on Slide 56, it looks like experience variances, the line there was quite negative for both operating profit and CSM. Could you provide some color on what drove that negative line? Is there anything to call out here in terms of changing trends in longevity or mortality in the U.K. post the COVID period? Charlotte Jones: Right. So the first question was on the mix of assets supporting the Retirement business. I mean, in general, we've continued to keep a low reliance on corporate bonds in the low spread environment. So that's meant that we've largely written at a relatively low capital spend. When I look at the mix between liquids and illiquids, it's still kind of around the target mix that we have, which is a little over 50% in the illiquids. So we've kind of achieved that. The GBP 3.5 billion of real assets gathered by AI have contributed to that. Obviously, that will be more than 50%. So some of that is then actually in a warehouse ready for deals that we do this year and a portion of that has been an element of back book activity as well. So that's roughly the mix there. And we constantly look at what rebalancing we can do for the back book where as part of the overall ALM. But -- and the spreads, as I say, in corporate bonds has meant that we haven't allocated as much there. So we've still got a higher allocation of gilts. On your second question, which was Retirement IFRS 17. Let me -- I might -- Yes. So look, I think what we've got in Retirement is historically, we've ended up with a little bit of new business, which is slightly unintuitive for the Retirement business because normally, when you write Retirement business, it all goes into the CSM. But in the last few years, we've ended up with a bit of benefit, and that's because the way it's allocated to the CSM is based on the target asset mix at the time and the pricing thereof. If by the time we actually transact, it's slightly different and then that will drive a new business line. So this year, we haven't got that repeating, which is more likely what you would expect from IFRS 17. But in the past, we've ended up with a little bit of new business coming through. In terms of assumption changes, I mean, they were honestly relatively benign. And then you've kind of got experience variance effects. We had more coming out of the CSM because we started with a bigger position. And then the investment return was a little bit lower, and that is because we use a 1-year rate to derive the expected return, and we saw a slightly bigger discount unwind from the higher opening CSM. So -- I mean, there's a few mixed pieces going up and down. But overall, that is a function of IFRS 17. Unknown Executive: Tom? Charlotte Jones: Longevity. What was your question on longevity? Amanda Blanc: Was there have been any changes, any trends? Charlotte Jones: So on longevity, what I would say there is, we have moved to the latest tables. We have reflected essentially the CMI '24, moving from CMI '23 to '24 hasn't led to a big release or anything. We continue to apply a 0 weighting to '22 and '23. And that's -- instead of that, we apply a sort of temporary uplift for the mortality rates in the post-pandemic drivers. So things like the COVID and the NHS pressures. As we kind of look forward, we retain -- so -- and we assume that will run off over a 10-year period, but we keep that under review. We then retain our long-term improvement rate, so we assume that, that continues to improve. So longevity still continues to improve, but the tapers sort of once people are in that 85-plus age bracket. We generally have greater mortality improvements than we see in the general population. That's a function of our portfolio. And so there is -- we are assuming greater mortality improvements than the population more generally. And that will include, but not exclusively factors such as weight loss drugs and other sort of improvements in medical experience. So we are still having an assumption that longevity is improving. Unknown Executive: Tom? Thomas Bateman: Thomas Bateman from Mediobanca. Just a question on Wealth. It's a bit of a fluffy question. But obviously, the GBP 280 million guidance for, I think it's, 2027 is really good in Wealth, quite a big jump from where we are. Could you just break us down? I think it's investment spend, but there's quite a big jump there. Is it just that? And more generally, when you talk about Wealth, it always seems so fantastic, the win rate is really good. So how are you tracking versus that longer-term GBP 500 million guidance? I think it was 2030 or something. And second question, again, on AI. I hear everything else you're saying on the group impact, but you haven't talked much about cost impact on AI. Is that something that we could expect to hear more from you in the long term in terms of cost savings? And third question, just very quickly on the new lines of business at Probitas, what's the contribution from them? Amanda Blanc: Okay. I can pick up one and three, and Charlotte will pick up two. So on Wealth, on the GBP 280 million, so I think if we sort of go back to the in-focus session that Doug did 2 years ago now, we talked then about the getting to the GBP 280 million would be primarily driven by the two big lines of business, which would be -- which is the Workplace business and the Adviser Platform and that we would be investing in the Direct Wealth over the course -- the biggest investment was in 2024. Then there was more investment in 2025. And then that sort of -- that will drop out or become more normalized. I wouldn't say drop out, because you're always going to be investing in the business as we move forward. So that's why we have -- so there is an investment drag, yes. And obviously, we've had some success in Direct Wealth. We've now got 100,000 customers. We've built the platform. We've put proposition onto that platform. And so we see some real traction in that business. So -- but I think we've always said that the benefit from Direct Wealth comes after this GBP 280 million ambition. So are we confident about the continued growth of Wealth post the GBP 280 million? Absolutely. Because we can see that the Workplace engine continues to grow. I mean, I feel like I'm sort of boring you to death on this, but it is quite important, like Workplace contributions are today, that market is GBP 760 billion. It will be GBP 1.3 trillion by 2030. And I'm going to make a number of like GBP 2 trillion by 2035 or something like that, and I'm looking to the team to not to say that, that is the right number. So as we have a close on 25% market share there, and we're retaining at a high level, and you've seen the benefits of the operating margin improvements, we've invested in the technology platform. Doug talked about that when he presented. So we're on modern technology. We're sort of built for this business to just keep growing and growing efficiently. And then you've got some of the tailwinds coming from the regulatory environment. So yes, I'm super positive because it's a growing market. We are really good at it. We've got the sort of AI opportunity and 4.5 million current members, and we've just -- and we're winning schemes like the Mercer scheme. So I feel very good about that. In terms of -- what was the second question? Charlotte Jones: Second question, AI and cost benefits, et cetera. I mean, I think it's very hard to put a specific cost benefit on this yet. Obviously, we -- when we are thinking about it, and what's already embedded in our numbers. So I think on one of my slides, I talked about as an annual BAU spending on growth, efficiency and customer change initiatives, we have about GBP 450 million. That's embedded in the business plans for the markets and the functions, and it's separate to the I&R spend that we have and regulatory-driven stuff. But it's a wide range of investment in our business. And that's a recurring amount that's been going on for a number of years. And as each -- as part of the planning cycle, we work through how we're going to spend that money and some of the projects are multiyear. But you've heard us talk about things like the development of the app, the single source of the customer data, the work on Direct Wealth. That is all -- some of it is automation, some of it is AI. You've heard us talk about claims summarization, which takes call hold time down by 50%. You've heard us talk about the large language models that we're developing that enables protection and underwriting to be done with automated reading of many doctors' notes. So all of that is driving productivity. And each time we spend money on those initiatives. There's a business case that's put forward that has benefits. And that's how we allocate all of the change money across the group. So this is no different. And so to the extent that we've got those activities in flight and they're driving benefits to the business, they are part of the improvements that will drive us to those EPS targets. That's real, and that's built into all our numbers. As we start talking about some of the more advanced things that are still an early stage, such as the Gen AI agent or the Agentic agents and where they will drive benefit, there are probably benefits beyond the planned time horizon. So they're not so incorporated in the targets that we have. But they are partly funded. And as the business cases build, we will start to think through how much of that annual budget is allocated in that direction. So I think it's very dynamic. But what I'm trying to say is, yes, where it's real and tangible and we can put our arms around it, it's both funded and it's included in the benefits that are in the numbers that you can see, where it's more early stage and it's likely to leave benefits longer term, then it's outside of the target range. But people have talked around 15% to 20% of savings. And you can sort of begin to imagine how that might come. Now some of that will be in the work we do with outsources, because a lot of the -- a lot of the work that we have with outsources is the real mechanical stuff that we would look to automate and drive savings there. So some of it will come in the way we deal with those third parties as well. So it's a multiple range of things. What I'm trying to do is give you assurance that it's normal course for us to be investing, have business cases, reflect those in the numbers and deliver. Amanda Blanc: On Probitas, so obviously, we are benefiting from the greater access to markets with the 8 lines of business. So illustratively, for 2025, we wrote about GBP 73 million worth of new business that neither Probitas on their own or Aviva's GCS would have written without previously. So I think we are showing progress. But here, I would say, again, it's about discipline in the current market environment. We've got those lines of business. We're not just going to write for the sake of top line. We will write profitable business. Unknown Executive: Give it to Nasib and then Fahad. Nasib Ahmed: Nasib Ahmed From UBS. So firstly, on capital management, I think pro forma, you're at 187% plus on the solvency. You're above the holding company cash of GBP 1 billion. And Charlotte, you were saying you're generating solvency above the dividend and the share buyback. And similarly on the cash remittances, if I roll that forward, you're generating more cash than you need. What is the binding constraint on distributable cash? Is it leverage where you're kind of around 30%? Secondly, on bulk annuities, it seems like the second half last year was very competitive and probably getting more competitive with the transactions that are probably going to close this year. Why are you still in this market given your focus on capital light? And then thirdly, on PYD first half versus second half, it seems like you've done some reserve strengthening in the second half, both in Canada and U.K. If you can talk a little bit about that. Amanda Blanc: Okay. I'll let Charlotte do one. I'll do two and she can do three. Charlotte Jones: Yes. So look, I think -- just trying to think how best to answer your question. I mean, look, we are talking around -- we're at 180%. Now I'm struggling with your number, 187%, what are you... Nasib Ahmed: With Direct Line coming through 7 points. Charlotte Jones: I see. Okay. So the way I think you need to think about it is, we gave guidance for '27 of 20 points. I am going to get to your question, but let me just set the scene how I see it. So for 2027, I'm giving guidance of 20 points. And that comes from the sort of 12 points that we've had in the past, which is kind of like the 1 point a month of regular underlying OCG plus about 3 points coming from Direct Line. So we had about 1.5 points. This is just the regular performance of Direct Line. We had about 1.5 points in the latter part of the second half of the year. So if I take the 12 points plus the 3 points that's coming from Direct Line, then I think of the business improvements, I'm getting to an underlying of about 17 points. And management actions on a recurring basis will be about 3 points. That gets me to the 20 points. So that's kind of '27. That's looking beyond when the Direct Line synergy benefits come through. So at that point, dividends will probably be about 14 points and buybacks is about 4 points. So 20 versus 18 kind of gives me the couple of points of headroom. '26 is a complicated year because you've kind of got a higher SCR going into the year. I would definitely expect that the underlying generation will continue to improve, but we will be focusing hugely on getting the 7 points of synergies coming out of Direct Line. And then kind of that will then drive the SCR down. But obviously, all the time, there's new business growth, which is driving the SCR up. So each year, the same number of points is leading to more pound notes in terms of capital generation. When I think of just the near term, we've got dividends and buybacks to come out. So my 180% will go down. I've also got a bit of solvency, a bit of a few debt instruments or previously grandfathered instruments that stopping. So I've got some drags on capital coming from that. So I'm not sure I would give the pro forma, and I really don't want to give guidance for '26 because it's quite a complicated year. But what the 20 points looking through that to '27 is, I think, important for modeling. And it is a step-up from '25 when you think of -- obviously, we had extremely high levels of management actions, but that aside, it is a step-up on that. Amanda Blanc: On bulks, so first of all, I think your question was why do we do it? Well, we're actually quite good at it. So we've been doing it for a very long time. We are delivering results that are sort of mid-teens IRRs. So I think that's a pretty good return. It is a significant contributor to the cash and the dividend payment of the group. And what we've always said is that the role of bulks is to sort of stay like this, whilst the capital-light businesses go like this. But we've never said that bulks don't play an important role. So we've got -- we're confident in the business. We've written GBP 4.6 billion of deals -- business across 86 deals. Yes, it's competitive, but our IRRs are attractive. We've got a really strong proposition called Clarity, which is the smaller deals, which we've sort of launched over the last couple of years. We've got a very experienced team. And yes, there are new competitors in the market. But what you have to do when that happens is you have to sit back, you have to make sure that you are disciplined and you allow them to do what they will do. And it's not easy in this market from a regulatory perspective, making sure that you are disciplined to do this well. So we will watch how that plays out. But we would still say that our GBP 15 billion to GBP 20 billion sort of guidance for 2025 to 2027 is there. The other thing I would say is that on individual annuities, which is part of this business, the sales are up 19%. And in our guided retirement proposition, which has got how do people draw down, how do they retire, that individual annuities plays a really important role as does equity release. So I think you have to look at the combination effect of bulks of individual annuities and equity release. And I think that, yes, it will be competitive. And we will maintain discipline. I've said that about every line of business. And I think that's going to be the way that we will play this. We've got a scale position today, and we will make sure that we manage this business for profit. And that's mine and Charlotte's role, and the team are all completely aligned with that. On Canada? Charlotte Jones: So PYD, first half, second half reserving, I mean, we definitely had a positive impact on core from PYD. That's in the disclosures. And it was kind of actually across all the markets. I'm not going to go into the detail of reserving, but we had some larger losses, as I talked about before. We will reserve adequately for those. As we've looked through, again, best estimate reserving across the place, but there are -- there have been some areas that we've strengthened reserves here and there, but nothing major to call out. Unknown Executive: I'm aware others are reporting this morning. So we'll take one last question from William Hawkins at the back, and then we'll take the other questions offline afterwards. William Hawkins: William from KBW. Hopefully, I'll be quick for the others. First of all, thank you for providing more financial information in Excel format. I know it's a really small point, but it is really helpful. Two questions. It feels like ancient history, but can you just go back to the Life Insurance Stress Test and just tell us, did you learn anything that you thought was commercially helpful for your business or your understanding of the market? And then secondly, a lot of talk today about the 94% combined ratio for 2026. What's your feeling about the long-term sustainability of underwriting margins? Is this a ratio that can keep improving because of the great stuff of AI and how you can keep growing the business because you've got amazing diversification? Or is this still a cyclical business? And so at some point, combined ratios have to be poorer. I'm not clear about sort of the long-term view on that. Charlotte Jones: Should I take Life Stress Test? So look, I think the Life Stress Test was, as you say, somewhat ancient history at this stage, but it was back in December -- or November, December when it was reported. I think it did provided some helpful reassurance that the sector is well capitalized and can deal with reasonably severe stresses. And -- but it was done entity level, so it wasn't kind of group level. But nonetheless, the individual and the collective disclosure and the confirmation from the PRA that the framework is working well and they see the sector is resilient. I think was a net positive and partly because -- more specific than that, partly because we do a lot of stress and scenario tests anyway, we work through that. And for us, it is important how the group behaves overall. So neutral to helpful, I suppose. Amanda Blanc: And on the 94% COR, so I think we have to congratulate the U.K. team for getting to 93.9% in a very sort of competitive and dynamic environment. You asked, is insurance going to be still cyclical? My bet on this having done 35 years is, I think it probably is going to continue to be cyclical. I think the winners that come out of that cyclicality, if that's the right word, are those that are constantly looking at the cost and looking at the innovation within the business, making sure that you have pricing discipline that you're able to sort of flex according to the market. The investment in AI and machine learning that we know that, that makes a massive difference to our ability to be able to price in a sophisticated way. But in a competitive environment, you're always going to be giving some of that back because your competitors, it's a bit like an arms race. You will invest in something, you will have a fraud tool or you're not getting rid of that fraudster. What you're doing is pushing that fraudster somewhere else. They'll keep trying, you have to keep going. So I would say in the U.K. market, particularly as I think the most competitive market, I would say that we will be aiming for that 94%, which we've said, I think, for the last 4, 5 years, weather aside, that's where we're aiming. Obviously, we will constantly be looking to improve all of the time, but you also have to recognize cyclicality and the competitive nature of the market. But I think we are set up to win because of our scale, because of our supply chain and because of all of the data that we have and the sophistication that we have within the business. And on that, I'm conscious that you have other places that you might need to get to. So I just want to thank you very much for your questions. Obviously, we're around. If there are any follow-up questions, apologies that we couldn't get to absolutely everybody. But -- we have the brunch next Friday with Charlotte, which I'm sure you will deeply enjoy and you'll be able to ask her all the very detailed questions on appendices and everything else. So thank you very much.
Operator: Ladies and gentlemen, welcome to the LEG Immobilien Full Year 2025 Conference Call and Live Webcast. I am Valentina, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Frank Kopfinger, Head of Investor Relations. Please go ahead. Frank Kopfinger: Thank you, Valentina, and good morning, everyone, from Dusseldorf. Welcome to our call for our full year 2025 results, and thank you for your participation. We have in the call our entire management team with our CEO, Lars von Lackum; our CFO, Kathrin Kohling; as well as our COO, Volker Wiegel. You'll find the presentation document as well as the annual report and documents within the IR section of our homepage. Please note that, there is also a disclaimer, which you'll find on Page 2 of our presentation. And without further ado, I hand it over to you, Lars. Lars Von Lackum: Thank you, Frank. Good morning, everyone, and thank you for joining our analyst and investor call today. I am very proud to share that 2025 has been an outstanding year for us. We have delivered AFFO of EUR 220.5 million, marking a 10% increase, the highest level in our company's history. This performance is a clear reflection of our disciplined execution, our strong portfolio and our willingness to capture opportunities, like we did with BCP. Building on this success, we are proposing a dividend increase of 8% to EUR 2.92 per share. This reflects the full 100% payout of our AFFO, a strong signal of both cash generation as well as our financial health. We have also made solid progress on the balance sheet. Our loan-to-value ratio has improved to 46.8%, and we remain on track to reach 45% in 2026. This improvement was supported by a 3% positive valuation effect, which is backed by our own disposals and markets building higher confidence, although admittedly, markets remain at lower transaction volumes. On the portfolio side, we have completed or agreed on the sale of 3,100 units in 2025. These disposals further optimize our balance sheet and the efficiency of our portfolio. We are well on track with further disposals in 2026. The planned sale of the Glasmacher development plot in Dusseldorf has made significant progress. Renowned real estate developer, Hines signed a purchase option for the site with LEG just yesterday. We confirm our 2026 guidance with AFFO expected between EUR 220 million and EUR 240 million. We will grow cash generation also this year, while weathering higher interest costs as well as lower subsidies. Looking further ahead, I am equally excited about our midterm growth outlook. From 2028 to 2030, we see strong potential driven by a substantial part of units running off subsidization in 2028 and by the creation of a new operating model based on comprehensive digitalization across our business. These initiatives will not only strengthen our competitive position, but at the same time, create long-term value for all stakeholders. In summary, 2025 has been a year of achievement, strategic progress and measurable results. We have delivered growth, improved resilience and positioned ourselves for an even stronger future. Thank you to our teams for their dedication and to our investors for their trust. The foundation we have built today ensures that the years ahead will be just as successful. Let's now turn to Slide 6 and the 2025 financial highlights, a year that truly embodies our theme of promised and delivered. We entered 2025 with a clear set of targets, and I am proud to say we did not just meet them, we partially exceeded them. Starting with the net cold rent. We closed the year at EUR 919.9 million, representing a 7% increase year-over-year. This growth was supported by a healthy 3.5% like-for-like rent increase, but equally by the successful integration of BCP, which added 9,000 high-quality units to our portfolio. This integration was executed seamlessly and has already begun contributing to earnings as planned. On operating profitability, our adjusted EBITDA margin came in at 78.1%, well above our planned level of 76% and even above our improved guided level of roughly 77%. Those 110 basis points of outperformance reflect both our tight cost discipline and our continued success in driving efficiencies across operations. Moving to our earnings metrics. FFO I reached EUR 481.5 million, a 5.2% increase, lending right above the midpoint of our guidance range of EUR 470 million to EUR 490 million. Even more impressively, AFFO grew by a strong 10% to EUR 220.5 million, lending smoothly within our improved guidance range of EUR 215 million to EUR 225 million. This marks a record high for the company. And speaking of returns, our dividend proposal of EUR 2.92 per share reflect a 100% payout ratio of AFFO. Year-on-year, this is an increase of 8% and ensures that our investors benefit directly from these strong results. Let me now turn to one specific growth driver going forward, our subsidized units coming off restriction from 2028 onwards. Today, we have around 30,000 subsidized units that are still subject to rent regulation under the so-called cost rent regime. These units are currently rented out for about EUR 5.40 per square meter, which is significantly below market levels. By comparison, the relevant market rent for a similar mix of units is roughly EUR 9 per square meter. This means there exists a rent gap of more than 60%. As these units get off restriction, we can start closing that gap in a controlled and sustainable way like we have done with smaller numbers of subsidized units over the past years. In general, we will apply the 15% or 20% rent increase on all units getting off restriction depending on whether they are based in tense or non-tense markets. However, the cost rent adjustments executed in 2026 as well as the new lettings in 2026 and 2027 absorb parts of that maximum rent increase potential. As of today, we assume that this limits the rent increase potential to around 12% in 2028. On the portfolio level, that alone translates into about 1 percentage point to our overall rental growth in 2028. And importantly, the effects do not stop there. We expect spillover effects into 2029 and beyond as further adjustments and relettings will deliver further rent growth. This will become a recurring and predictable growth driver for our residential portfolio as it will take quite some time until we can close the gap towards market rent level. In short, as soon as these restrictions expire, we are going to not only unlock immediate rental uplift, but also secure a long-term structural growth contributor. That will support our earnings trajectory well beyond 2028 until the gap towards market level is fully closed. Let me now turn to our second midterm growth driver that will become equally important to LEG's value creation going forward, our technology and digitalization agenda. Our industry environment has changed fundamentally. The regulatory framework in the German residential real estate sector is becoming even more restrictive, whether in terms of rent regulation, energy efficiency requirements or tenant protection. The traditional levers for operational optimization are reaching their limits. This makes it even more important to identify new sources of efficiency and value creation. And we are firmly convinced that technology and digitalization represent the most significant untapped lever available to us today. We have made a very deliberate strategic choice in how we approach this. We are dedicated to building a completely new operating model by making the best use of technology and digitalization, not just implementing software, but truly embracing it and redefining the way we serve our tenants. We manage our buildings, we steer our contractors. Rather than diverting resources to building proprietary software, we pursue a disciplined Buy & Partner strategy. And we have chosen 2 world-class partners to execute on this vision. The first one is ServiceNow. With ServiceNow, we are building an end-to-end system architecture that spans our entire operative value chain from customer service to technical operations to administrative processes. This gives us the flexibility to deploy AI at every touch point along that chain rather than in isolated pockets and thus enables us to drive automation to unprecedented levels. We are, to our knowledge, among the first residential real estate platforms globally to adopt ServiceNow as a core platform, and we see this as a genuine competitive advantage. The second is SAP. We have made a consequent commitment to building on the most modern ERP system available in the market. In fact, we have been operating on the latest version of SAP since the end of 2024. This positions us ahead of many peers who are still facing complex migration journeys. Together, SAP and ServiceNow form our central tech backbone, enabling not only system consolidation and process standardization, but critically the systematic scaling of AI across our operations and administration. Our technology investments are designed to drive AFFO and FFO I optimization along 3 core value drivers: efficiency, top line and investment management. The first focus will be on efficiency, streamlining our customer-facing technical and administrative processes with best-in-class AI-powered solutions. Beyond that, we see meaningful opportunities to leverage technology for revenue growth and smarter capital allocation across our portfolio. We are investing meaningfully in this transformation with the bulk of spending concentrated in the near-term implementation phase. This is a conscious front-loading of investment. From 2028, we expect these initiatives to turn cash flow positive, building to a contribution of more than EUR 10 million in AFFO from 2030. In short, in an environment where traditional optimization levers are increasingly constrained, we are building the technological foundation that will make LEG a more efficient, more scalable and ultimately more profitable platform for the years to come. And with this, I hand it over to Volker for some insights into the operations. Volker Wiegel: Thank you, Lars, and good morning to everyone from the shiny AI future back to 2025 and specifically to our rent development. As we mentioned earlier in the year, rent growth followed a different quarterly trajectory compared to last year. After 9 months, we were at 3.1%, but I'm very pleased to report that, as promised, we delivered fully on our guidance range of 3.4% to 3.6%. We closed the year right at the midpoint of 3.5% like-for-like in-place rent growth. At year-end, the average in-place rent of our residential portfolio stood at EUR 7.04 per square meter on a like-for-like basis. This compares to EUR 6.81 in the previous year. The drivers behind this growth were well balanced. 2% came from rent table increases and another 1.5% from modernization and reletting activities. Looking across our market segments, stable markets showed the highest momentum with 3.8% like-for-like rent growth, while higher-yielding markets grew by 3.1%. Our free financed units specifically saw rent increases of 4%, which reflects the underlying strong momentum in the market. Specifically, we saw rent table publications in Hilden with 11%, Wilhelmshaven with 7% and Leverkusen with 5%. However, the growth momentum seems to have reached its maximum level, while years with higher rent growth are reflected in the published rent tables, lower growth rates will limit this development going forward. As expected, there was no effect yet from the cost rent adjustment for the subsidized portfolio in 2025. Importantly, this growth came with an ultra-low vacancy. Our like-for-like EPRA vacancy rate remained at 2.3%, virtually unchanged versus last year, confirming the strong demand we continue to see across our markets. Looking ahead, for the current fiscal year, our goal is to deliver 3.8% to 4% like-for-like rent growth as already indicated with our Q3 numbers. The cost rent adjustment should contribute around 40 to 50 basis points to that result. Moving on to our investments in 2025 on Slide 10. Our guidance for the year was to invest more than EUR 35 per square meter, and I'm pleased to confirm that we exceeded that target coming in at EUR 36.11 per square meter. In absolute terms, we invested slightly more than EUR 400 million into our portfolio, an increase of 10% year-on-year. This increase to the prior year was largely driven by the integration of the BCP portfolio where we had to accelerate necessary investment measures. Looking at the composition of investments in more detail. CapEx accounted for EUR 228 million or EUR 0.46 per square meter, while maintenance represented EUR 175 million or EUR 15.65 per square meter. Altogether, this brought the per square meter figure up by 6.2% versus last year. Our capitalization ratio remained broadly unchanged at 57%. With substantially lower new construction activity, recurring CapEx still increased by a moderate 2%, reaching EUR 261 million. Overall, 2025 was another year of disciplined and targeted portfolio investment. We delivered above guidance, managed the BCP integration successfully and continued to invest responsibly in the quality and long-term value of our housing stock. For 2026, we are guiding for investments of more than EUR 35 per square meter, which remains similar to the investment level of 2025. Let me now touch on one of our operational growth drivers, our value-add businesses. These operations are a key pillar of LEG's strategy and a reliable growth driver for the company. They allow us to generate additional earnings beyond pure rent growth, while at the same time, those improve service quality and efficiency for our tenants. I'm very pleased to report that in 2025, we achieved strong FFO I growth of around 20% in this segment, increasing from EUR 50 million in 2024 to around EUR 60 million in 2025. While others in the market are still talking about the value-add additions, we are delivering real results. The foundation of this success lies in our technician and craftsmen services, our project management and electrical service units and of course, our energy and heating business as well as the multimedia business. In particular, we are very optimistic about the continuing growth of our energy services, which benefit from the ongoing focus on energy efficiency and shift towards heat pumps as well as our small repairs and in-house maintenance business. Beyond these established value-add services, we are also building momentum in our Green Ventures. These include new climate-focused services such as RENOWATE for serial refurbishment; termios, with smart thermostats for hydraulic optimization and dekarbo for the installation and maintenance of heat pumps. It is important to note that the Green Ventures are not yet included in the financial numbers shown on this chart, but they will become a meaningful growth contributor over the next few years. Between 2024 and 2028, we strive to generate a cumulative contribution of around EUR 20 million from our Green Ventures. To sum up, our value-add business combines stable cash flows, operational synergies and sustainability, while our Green Ventures offer the chance to participate in one of the fastest-growing segments in our market, decarbonization of real estate. They significantly enhance the resilience and profitability of LEG's business model and will continue to be a strong source of earnings growth forward. Let's now take a look at our disposals in 2025 on Slide 12. In total, we completed or agreed on sales for around 3,100 units and a total of more than EUR 250 million. During the year, we sold 2,252 residential units for total proceeds of around EUR 190 million. After deducting financing redemption fees and taxes, net proceeds amounted to roughly EUR 100 million. The transaction market remained subdued throughout the year. Overall, investment volumes in the German residential sector declined by about 4%. Even more telling, the share of large-scale transactions above EUR 100 million fell sharply from 63% in 2024, down to just 34% in 2025. You find additional information for the transaction activity in the German market on Slide 29 in the appendix. Against this challenging backdrop and while maintaining our strict disposal discipline, we are very satisfied with the year's outcome. All in all, disposals were executed at or above book values, fully in line with our policy of value-preserving capital recycling. The chart on the slide shows the units that have been transferred in 2025, but there's more to come. Year-to-date, we had already signed additional sales contracts for roughly 950 units, representing around EUR 70 million in proceeds. These transactions will transfer in the first half of 2026, and we already issued a press release about the majority of them in early January. Within these transactions, we also made strong progress on the Glasmacher district development plot in Dusseldorf. This would certainly contribute to our deleveraging strategy. As already described by Lars, we were able to agree with Hines on an option to buy the plot. The next step will be an agreement between Hines and the city of Dusseldorf. In case that works well, we expect to sign the deal by end of September, the latest. However, please be aware that the sales proceeds will follow the progress made in the building permission process. Moreover, we continue to advance our broader disposal program of up to 5,000 units, including around 1,400 units in Eastern Germany. Overall, our selective approach, i.e., focusing on sales of smaller portfolios or even single multifamily houses in the current market environment clearly demonstrates our ability to deliver on disposals. We remain focused on execution, disciplined pricing and support to our balance sheet as well as improvement of the overall quality of our portfolio. And with this, I hand it over to Kathrin. Kathrin Köhling: Thanks, Volker, and good morning also from my side. Let us now look at Slide #13, which covers our most recent portfolio revaluation. The results clearly confirm that market conditions are stabilizing. They also reflect the upward trend seen in leading market indicators such as the VDP Property Index and the German Real Estate Index GREIX. While the VDP Index recorded an increase of around 5.3%, the GREIX showed an increase of 4.8% for 2025. Against this backdrop, our portfolio valuation result in the second half of 2025 posted a 1.8% uplift, which was even stronger than the 1.2% increase we saw in the first half of the year. Altogether, for the full financial year 2025, we saw a valuation result of 3%, demonstrating clear upward momentum. Further details can be found in the appendix on Slide 30, where we show valuation changes by market segment. Our gross yield now stands at 4.8%, which continues to offer a comfortable spread versus bond yields, an important buffer in a still cautious investment environment. On a net initial yield basis, excluding incidental acquisition costs, we stand at 4.3%. The average gross asset value per square meter amounts currently to EUR 1,710, ranging from about EUR 2,320 in high-growth markets to EUR 1,190 in higher-yielding markets. Overall, the valuation result confirms that the correction phase of the past 2 years is behind us. We remain confident that this recovery path will continue into 2026, driven by renewed investor interest, more stable financing conditions and the intrinsic strength of the German residential sector. The trend has turned positive and the positive outlook is being supported by the view of major real estate experts such as CBRE, JLL as well as Moody's. Let's turn to Slide #14 and take a closer look at the development of our AFFO in 2025. We ended the year with an AFFO of EUR 220.5 million, representing a 10% increase year-on-year or about EUR 20 million higher compared to the prior year's EUR 200.4 million. The main driver behind this growth was, as expected, higher net cold rent. Altogether, this contributed roughly EUR 60 million. From that, about EUR 28 million comes from organic rent growth and another EUR 49 million from the acquisition of BCP. These positive effects more than offset the EUR 17 million negative impact from disposals. Net cash interest rose by EUR 12 million, driven by the increase in debt due to BCP and by higher refinancing costs. Still, I would like to highlight that we were able to keep our average interest cost at a very competitive 1.66%, which is an excellent outcome given the current interest rate environment. In addition, our Green Ventures still in their early investment phase, had a temporary negative impact of EUR 4.2 million on AFFO in the reporting period. Maintenance and CapEx spending amounted to about EUR 13 million more after subsidies, reflecting the enlarged asset base. To sum up, 2025 was another solid year of strong growth and recurring cash flows, underlining both the resilience of our operating platform and the profitability contribution from the BCP integration. Finally, let's turn to Slide #15, which highlights LEG's financing structure and key figures, starting with our loan-to-value ratio. We closed 2025 at 46.8%, coming down by 110 basis points year-on-year. That puts us well on track to reach our target of 45% during 2026. This continued deleveraging is driven by our solid cash generation, disposal proceeds as well as valuation effects. In addition to LTV, another key indicator, especially with regard to our bond covenants is the interest coverage ratio or ICR. Our ICR stands at a very strong 4.3x, and also all other bond covenants have ample headroom. For those interested in more detail, we've provided the full overview in the appendix. Our average interest cost increased modestly by just 17 basis points to 1.66%, still a very low level in today's market environment. At the same time, the average debt maturity remains comfortable at 5.5 years. Our liquidity position remains very strong, with more than EUR 800 million available as of year-end 2025 and undrawn revolving credit facilities of EUR 750 million. As already discussed in the last earnings call, all debt maturities for 2026 are covered. At the beginning of this year, we redeemed our EUR 500 million bond, and we are now evaluating refinancing options for the 2027 maturities, including the next bond, which comes due only in November 2027. We'll continue to take an opportunistic and disciplined approach here, depending on market conditions. All in all, our balance sheet is resilient. Our maturity profile is well structured, and we are in a very strong financing position with ample flexibility going forward. And with this, I'll hand it back to Lars. Lars Von Lackum: Thanks, Kathrin. Let me conclude today's presentation, with a brief summary of our guidance for 2026, as shown on Slide 16. These targets were already introduced with our Q3 2025 results, and I'm happy to reconfirm today that our guidance remains fully in place. For 2026, we expect a further improvement in our cash generation with AFFO between EUR 220 million and EUR 240 million. That represents continued growth on top of the strong performance we delivered in 2025. In line with that, our FFO I is expected to come in between EUR 475 million and EUR 495 million, supported by an adjusted EBITDA margin of around 78%. On the operational side, we target like-for-like rent growth between 3.8% and 4%, driven by our solid rent dynamics, targeted modernizations and the cost rent adjustment for subsidized units. Our investment volume will again exceed EUR 35 per square meter, ensuring that we maintain the quality, energy efficiency and long-term attractiveness of our housing stock. On the balance sheet, we remain fully committed to further deleveraging. With our LTV expected at around 45% by year-end 2026, we are well on track to achieve this. As announced, we plan to distribute 100% of AFFO to our shareholders, reflecting both our strong cash flow generation and our disciplined capital allocation approach. We will propose a dividend of EUR 2.92 either in cash or shares, the latter depending on the market environment. Beyond the financials, we also continue to make measurable progress in sustainability. In 2026, we target a CO2 reduction of about 7,600 tonnes. And by 2029, we aim to lower our relative CO2 emission saving costs per ton by 20%. To sum it up, LEG remains on a clear and consistent path, generating reliable cash flow, maintaining financial discipline and building long-term value for our shareholders and tenants alike. As we've said before, cash flow remains king and the best metric to steer our business. Our 2026 guidance once again underlines the strength and resilience of our business model. And with this, I come to the end of our presentation, and we are now looking forward to answer your questions. Operator: [Operator Instructions] The first question comes from Marios Pastou from Bernstein. Marios Pastou: I've got 2 questions from my side. So firstly, on the 5,000 unit disposal pool. Can you provide an update here on the progress you're having with current discussions? I think on the last update call, you mentioned you were in exclusivity in East Germany. So any comments on the progress there would be helpful. And then secondly, on the slide with the 16,000 units coming off restriction in 2028. Based on your prior experience when adjusting the rents, do you foresee any vacancy risk here, the uplift being 15% or 20% depending on the cap level seems like quite a step change in one go. So any comments there will be helpful. Lars Von Lackum: Marios, thanks a lot for your questions. So with regards to the 5,000 units disposal portfolio we have on the market, around 1,400 units are in Eastern Germany. So for parts of it, we are in exclusivity. And unfortunately, still the transaction times are much longer than initially expected. This is partially due to the financing and the more stricter view of banks with regards to real estate. Those processes still take much longer than we had forecasted. So therefore, yes, there are still portfolios in exclusivity. And certainly, we hope that we can close those over the course of Q1 and Q2. With regards to the remaining 5,000 units, we are selling those in smaller portfolios as well as single multifamily houses exactly as Volker has laid out during his presentation. So it is unfortunately not the case that we see bigger investors or transaction liquidity to have increased since the beginning of the year. So let's wait how the discussions at MIPIM next year -- next week will look like. It might certainly be that this brings additional liquidity to the market. With regards to the subsidized units, which run off, you might have seen that most of those which are getting off restriction are those in the high-growth markets. So the non-tense markets account for around 2/3 of those units getting off restriction. So therefore, I have full confidence in Volker and his team that they will relet those very quickly and easily because the undersupply in those markets is quite strong. Volker Wiegel: And even to add up, we don't see the risk of higher -- significantly higher fluctuation. Of course, there will be some fluctuation, but not in a way that we will not be able to cover it. And on Slide 27 in the appendix, you see the spread to the market rent, and you see that it's hard to find a substitute which is at the previous cost. Operator: The next question comes from Veronique Meertens from Van Lanschot Kempen. Veronique Meertens: A few from my side. So first, on the Dusseldorf land plot, could you please elaborate what you exactly meant with the time line you see for the sales proceeds of this disposal because I didn't fully understand it. Lars Von Lackum: Veronique, thanks a lot for the question. So unfortunately, first of all, let me say that certainly, we have a U.S. investor on the other side. So confidentiality requirements are quite strict. I try to give you as much of an insight as possible as of today's stage. So we have signed a purchase option with Hines yesterday, and they can make use of that call option until the end of September. If they are agreeing to that call option, we have a fully laid out contract with regards to the acquisition of the plots. So that contract will then be signed immediately and all those terms and conditions are pre-agreed, certainly including the price and the payment pattern. The payment pattern then foresees that a certain part of the sales proceeds will be paid by year-end, and the remaining payments will depend on the progress of the building permission process. And that is what I can disclose as of today. Veronique Meertens: Okay. That's clear. And then maybe that also rolls into my next question. So your LTV target is still 45%. It sounds that you're not probably get all the proceeds of this disposal in '26. So how strict is that target? How do you expect to get there as in what have you assumed in terms of disposals and value gains? And also, are you willing to sell at a discount if that means that that's what's necessary to meet that target? Lars Von Lackum: Yes. So Veronique, as you know, we have currently 5,000 units in the market. We will strictly stick to the levels which we were sticking to for all the previous years, which means we are not willing to sell below book value. So that is what we have executed over the last -- much more difficult years, and we will also stick to that guidance for this year. In order to arrive at those 45%, certainly a contribution comes from the sales proceeds, and we are also seeing a positive development in the market. Let's wait whether that is consistent over the year. Certainly, we now have a big war in the Middle East. If that tends to be longer than initially assumed, that certainly might have an impact. As of today, and looking into whatever we heard at least, it might be not that, that war is extending for weeks. So therefore, if that's not going to happen, we are quite confident that we can reach our 45% target. And this is, as of today, what we are now striving for, and we are quite confident to reach that within 2026. Operator: The next question comes from Andres Toome from Green Street. Andres Toome: You have a pretty clear focus on disposals for the next 12 months or so, it seems. But I was just wondering on the other side of it, if large disposals in the market today require "portfolio discounts", then is there a case where you can see actually accretive acquisition opportunities yourself to be a buyer, which would be financed through an equity raise? And I guess I'm particularly thinking about some of these news flows around open-ended funds for German residential that need to fulfill their redemption needs. Lars Von Lackum: Yes, Andres. And thanks for your question. So with regards to our own acquisition activity, I think we have just acquired a big portfolio, BCP, 9,000 units, integrated that fully. Certainly, we are being offered bigger portfolios on a regular basis. I can tell you that we have not seen any of those willing sellers to give in on price. So therefore, there was nothing comparable with regards to any acquisition opportunity with regards to the quality and also the pricing of the BCP portfolio. Looking at our share price, I think it would be very, very difficult to identify anything which in the current market would then really end up with an accretive value for our shareholders, making the next acquisition. So therefore, our focus currently is strictly on deleveraging, reaching that 45% target, getting sales executed. Andres Toome: That's clear. And then maybe related to this, maybe not in terms of pure straight equity raise, but are you perhaps seeing any options where the seller would accept LEG shares as a buying consideration? I think we've seen some of these examples in other geographies in Europe, but I wonder if there's any discussions around that in Germany. Lars Von Lackum: So currently, we haven't had that discussion with any of the willing sellers. Andres Toome: Understood. And then my final question was just on the points you made around AI. And I think one of the points you highlighted was gaining also some revenue upside. I just wanted to understand how does that work in a regulated residential market? What are the levers you can pull beyond the regulatory constraints you already have in putting through in place rent increases? Lars Von Lackum: Yes. As you know, Andres, the number of criteria with regards to the rent tables can be up to 100 for a single rent table. So the qualitative criteria, which you need to take into consideration is quite a long list. Certainly, being more precise on those different criteria can certainly give you additional upside to just mention one of the examples with -- which certainly gives you an additional rental potential to be realized if you are using more AI. Operator: The next question comes from Thomas Neuhold from Kepler Cheuvreux. Thomas Neuhold: I have 2. The first one is a follow-up on the Gerresheimer project. I understand you're bound by NDA. But I was wondering, would you be able to sell the land plot at or above book value? Can you comment on that? Lars Von Lackum: Yes, so the book value is at around EUR 71 million, and we've been able to realize a substantial uplift on that if we get the sales contract signed end of September. Thomas Neuhold: Good. The second question is on the regulatory environment. I was wondering, if there have been any recent important news on the planned change to the rent regulation. Did you hear anything important? Lars Von Lackum: Yes. So if you look at the current discussion in Berlin, I think on a federal level, you might be aware that there are still discussions on how the regulation for refurbished apartments will look like, how index rents will be limited and also how those pure payments are being regulated. So those are the 3 big issues the Social Democrats are currently forcing through. And from our perspective, that is already a given and that's going to be agreed. With regard to the city of Berlin, there's certainly a lot of discussion and let's wait of what's going to happen now. As you know, we do not own a single unit in Berlin. So we will be not affected by whatever is being decided or at least being discussed in the upcoming election in Berlin. Operator: The next question comes from Kai Klose from Berenberg. Kai Klose: I've got 3 quick questions, if I may. The first one is on the -- actually, the first 2 are on the AFFO statement. Could you indicate or give more details on the increase for the nonrecurring special items from EUR 16 million to EUR 33.9 million and if there will be a similar level or similar increase in '26? Second question is on the green investments, which -- investment income from Green Ventures, where you mentioned that this will leave the investment phase in '26. So can you read that there will be a positive contribution to the AFFO in 2026? And the third question would be on maintenance. You mentioned there was an increase in '26 -- '25 because of the BCP portfolio. Has this been -- this increase only in '25? Or can we expect slightly higher levels because of ongoing work for BCP -- ex BCP assets in '26? Kathrin Köhling: Thanks, Kai, for your questions. With regard to the first one on the nonrecurring special items, this was a special case this year because of BCP. Obviously, we had some integration costs that took place this year, and that's why this number was higher than in the previous year. As long as we don't buy another BCP this year, this should be lower next year. Volker Wiegel: On the second question on Green Ventures, yes, we expect a positive result will not be record high. And of course, there's more risk in these ventures as it's new, but we expect a positive result and yes, expect breakeven. Lars Von Lackum: And to conclude the round here, so with regards to the maintenance expenditures we had in 2025, we do not expect an additional expenditure on the BCP portfolio within 2026. Operator: The next question comes from Paul May from Barclays. Paul May: Three, if I may, probably doing one at a time might be easier. Just following on from the question earlier around acquisitions out of the open-ended funds. I appreciate you said they're not willing to move on price, but there comes a point where they don't have a choice. They do need to meet those redemptions. So I assume that opportunity may still come. You mentioned it wouldn't be accretive for investors if you fund it with equity. Just wondering how you're viewing that, whether you're viewing that on a cash flow basis or whether you're viewing that on a kind of balance sheet made up value basis. That would be great. And then we live it next to separately. Lars Von Lackum: Yes, Paul, thanks for your question. So with regards to the acquisition opportunities out in the market, I think you rightly assume that certainly some of those open-ended funds will sell portfolios. What we still see in those discussions is that liquidity there does not seem to be so stretched that they are under pressure to do really fire sales. So therefore, currently, no indication for them really giving in on price. Certainly, and you might have seen that, we had 2 funds which have also stopped accepting redemptions. You can close down on the fund for 3 years. So that once again also might be a prolonged period where you are not seeing those funds to really do for selling. So therefore, that is what we've currently seen in the market with regards to those funds currently offering portfolios in the market. Secondly, with regards to how we view those acquisition opportunities, we certainly look at it from a cash flow basis, but also from an NTA perspective. And currently, we were not willing to really offer our shareholders any exposure towards those acquisitions. From our perspective, we are well advised to be strict on sales and do our deleveraging path in 2026, in order to arrive at that 45% LTV target. Paul May: Just sort of following on that, I guess, you mentioned the trend in the market, I think it was in Kathrin's commentary has turned positive. I mean, to some extent, the only thing that's positive is valuation prints. Transaction market is lower. Swap rates and bonds have moved higher now versus the average through 2025. So one might argue that the activity levels are lower and worse versus the valuation prints that have got better. Just wondering how you're reconciling those 2 things, which seem to be moving in opposite directions. Kathrin Köhling: Yes. So happy to take your question. When you just look at what is happening in the market with the undersupply that we continue to see, we still expect that rent growth will be a key driver for property values also this year. And yes, it is -- it has been a low year in terms of transaction volumes last year. But when we look at what the big valuators are expecting for this year, they are expecting at least transaction volumes, which are a little bit higher than last year. So we've seen around EUR 9 billion last year. We'll probably see around EUR 10 billion this year. So there are some positive signs. I mean, given currently the Iranian conflict, things look quite different these days, but we have to see what will happen ultimately over the next weeks. If we were to come back to a rather normal environment, which we've had like a week ago, then I'm quite positive that we will see what I just said. Paul May: I think the brokers were quite positive on improving last year as well and ended up being slightly worse, but just be interested to see how that comes out. And then I think again for you, Kathrin, just another one. So over the next 6 years, I think it is roughly, you've got about EUR 1 billion of debt maturing. I think it's just over EUR 1 billion of debt per annum with an average cost of about 1.3% at the moment. Obviously, the cost of that will likely go up by somewhere around 220, 230 basis points, which I think implies a financial headwind to FFO of about 28% versus 2025 FFO and about 63% headwind to AFFO based on FY '25 AFFO. I appreciate that we offset to some extent by rental growth. But just wondering your thoughts there, how you're going to manage that? And obviously, you mentioned disposals, but those in theory come at a higher EBIT yield than your financing costs. Otherwise, you're better off refinancing and holding on to those assets. So I just wonder how you're going to manage that sort of headwind to FFO and AFFO moving forwards over the next 6 years. Lars Von Lackum: Yes. Thanks a lot for your question, Paul. With regards to our midterm planning, our assumption currently is that we can realize, on average, a 5% growth of our key KPI, AFFO over the coming years despite the headwind from interest rates, which you have just mentioned. Certainly, exactly as you mentioned, we are expecting the core business to deliver strongly due to the undersupply in the market and the additional element, which we have disclosed hopefully, in a bit more detail as of today, the substantial number of subsidized units running out of those subsidization schemes and then being treated as free financed units. Secondly, you've seen what happened to the value-added businesses. We are quite confident that we can grow those value-added businesses going forward. That was certainly a very strong year, EUR 50 million to EUR 60 million. So please do not extrapolate that going forward. But that's certainly a contribution we are going to see. Green Ventures, you heard that. That was the last investment year. Last year, they are supposed to contribute substantially. Cumulatively, we strive for a profit of around EUR 20 million until 2028. That's an ambitious target. Certainly, as always, it's under risk if you are talking about start-ups, but the market certainly on the decarbonization side is huge. And finally, we will strive for a new digital operating model, and that certainly will give rise for efficiency gains, lower investments and certainly and most importantly, also additional top line. So with those elements, we feel comfortable to say over the next years, despite the headwind from interest rates, we can increase AFFO per year at around 5%. Paul May: Cool. Perfect. And just to check, the marginal financing costs you're assuming in that 5%, just so you got a sense. Lars Von Lackum: The marginal financing cost for a 10-year financing in the -- in the... Paul May: In your planning, you mentioned 5% per annum AFFO growth. So I just wondered, what is the assumed marginal financing cost? Lars Von Lackum: Yes. So what we do is that we certainly use the interest rate curve as of the time where we are preparing and finally deciding the midterm planning, which was October last year. So certainly, if that is going to change, that will have an impact. But believe me, everyone here in the management team and the full team is fully dedicated to deliver those returns going forward. Paul May: Okay. So we're about sort of 15-ish basis points higher on that versus October last year. Operator: The next question comes from Thomas Rothaeusler from Deutsche Bank. Thomas Rothaeusler: A couple of questions, I think 2 or 3. The first one is on subsidized rents and the adjustment potential, more looking at the long-term upside. I mean, should we expect a structurally higher rental growth rate from '28 considering the higher reversion potential? I mean, you can almost double the rents over time, as you've shown. Maybe you could provide a rough idea about the long-term impact on rental growth. Volker Wiegel: You will have significant impact on the next 3 years starting 2028. Thomas Rothaeusler: But I mean from there, like more the very long term, I mean, you can basically adjust by 12%, as I understand, in '28. But then from there, actually, there is much more adjustment potential, I think, given the low level where subsidized rents come from. Volker Wiegel: Yes, it's -- well, you see the spread to the market rent, and it will take time to adjust it until it's there. And market rent also develops. So this will -- there will be a significant gap that we need to close. And of course, we have the German rent regulation where we can adjust all 3 years then the rents. And we haven't simulated for the next 20 years, but it will have a structural impact over the next decade, I would say. Thomas Rothaeusler: Okay. And then on value-add services, I mean, which contributed a record EUR 60 million in '25. Just wondering what to expect in the coming years? Lars Von Lackum: Yes. So please do not expect that value-added services are now increasing on a regular basis by 20%. That would be highly unrealistic. So that we had -- that lower growth over the last 3 years was certainly very much driven by the energy crisis and the Ukraine war. So that was a strong impact on the Energy Services business. So from our perspective, for this year, assumes something in the growth range for the AFFO. So that will be growing pretty in line with AFFO for this year. Thomas Rothaeusler: Okay. Last one, yes, on property values. I'm just wondering if you could -- if you already got any indication from your appraisers for the first half? Kathrin Köhling: Yes, we just finished our last valuation. So as always, we will start with our new valuation with our cutoff date end of March. And then we'll have more insights once we meet again in May, and then we will give you an indication on H1 as we've always done. Operator: The next question comes from Neeraj Kumar from Barclays. Neeraj Kumar: I've seen a couple of questions on equity raise, so I'll probably not ask that. But on the other side, I would say that it's assuring that you see your values are strong and you don't look to sell below book values. But given your current share price, which seems to be pricing more than 50% discount to your NTA, do you see a potential in saying disposal of EUR 500 million assets of your least profitable assets at 10% discount to your book value and then using those proceeds to buy back shares? If yes, why you're not considering it? And if not, then how do you think about your share price here? Do you think it's fairly representing your property values? I'm just trying to understand if we should be believing your reported property values or your share price implied property values here. Lars Von Lackum: Yes. Thanks a lot, Neeraj, for the question. So it's always difficult with hypothetical questions. So we have not thought about doing that, and we will not do that. So from our perspective and looking at the value increases, especially with those with the lowest yields, those have grown substantially in value over the last 2 years. So therefore, from our perspective, that's nothing which we would -- we would look at. Neeraj Kumar: Okay. So if I understand correctly, like selling assets at 10% discount to book value is not accretive, if you were to use that to buy your shares at more than 50% discount to book value? Lars Von Lackum: This is not what I said, Neeraj. I said that we are not thinking about doing so because from our perspective, the highest value creation on those assets is still to come due to the strong undersupply in the especially high-growth markets. Neeraj Kumar: Got it. And last question. You seem to have been able to refinance your debt with good success with Baa2 rating. I was just trying to understand how critical the LTV target of 45% or a potential rating of Baa1 for you is? Or you think that is better in terms of running with high leverage and doing more share accretive stuff here? Kathrin Köhling: Yes. So of course, as I've always said, the 45% LTV is definitely something that would help to get an upgrade from Moody's on our rating. Although, as you know, it's not the only thing -- the only KPI and the only qualitative factor they look at. So obviously, we would love to have a better rating, but is it essential? Like do we need it to refinance? No. We have refinanced also in the past years. We have refinanced at very attractive levels. So it is not an absolute need that we get this rating upgrade. But however, it's still something nice to have. Operator: [Operator Instructions] The next question comes from Manuel Martin from ODDO BHF. Manuel Martin: Two questions from my side, please. One follow-up question on the units getting off restriction in 2028. Having looked from a political perspective, have you heard anything from the political players in the locations where the units will come off restrictions, i.e., could there be some headwinds to be expected? Maybe you can elaborate a bit on that and thereafter, will be my second question. Lars Von Lackum: Yes, Manuel, thanks a lot for the question. So we have not heard from any political resistance. If you look at the prices of those subsidized units, EUR 5.40 versus the market level EUR 9, that is the difference you're currently seeing in the market. We paid back the subsidized loans already in 2018. So there was a waiting period for another 10 years. So therefore, from our perspective, nothing to be expected on the political side, no political pushback also with regards to those units, which were getting off restriction over the past years. So also no political pushback to be expected from that bigger portfolio. Volker Wiegel: And maybe to add, we are in close contact with almost every mayor and every bigger location, and they understand what's going on and accept it. Manuel Martin: Okay. Perfect. Second question about project development, you're not actively doing that. Do you think this could become an option again for LEG to restart project development? It might be a bit too early, but maybe you can say a word on that, please. Lars Von Lackum: Yes. So very happy to do so, Manuel. We are still struggling to come up with a return worthwhile taking the additional risk on our balance sheet. It is still something which certainly we have explored with that big plot in Dusseldorf of 19 hectares. Finally, we were not making or coming up with a business plan, which will have at least brought about the return worthwhile spending additional money on that plot. So therefore, from our perspective, no, the current regulation is still very strict. The Bau-Turbo, so that's speeding up of building permission processes, we have not seen that really kicking in. We still wait for that building type E, which is assumed to reduce some of the requirements with regards to the building type and the building qualities. Also, those reductions are still not being decided or not in a way currently being discussed politically, which would come then finally to lower construction costs. So therefore, from our perspective, no, we currently do not see any real benefit of that for us to reenter the development market. So that is the current status there. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Frank Kopfinger for any closing remarks. Frank Kopfinger: Yes. Thank you, Valentina, and thanks for all your questions. And as always, should you have further questions, then please do not hesitate and contact us. Otherwise, please note that our next scheduled reporting event is on the 13th of May when we report our Q1 results. And with this, we close the call, and we wish you all the best and hope to see you soon on one of our upcoming roadshows and conferences. Thank you, and goodbye, everybody. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Luc Van Ravenstein: All right. Good morning, everyone, and welcome to the Elementis 2025 Results Presentation, and thank you for joining us. Great to see you. In terms of agenda, I'll begin with our highlights for the year and Kath, our new CFO, will then run you through our financial performance. Then I'll take you through our strategic progress over the past year and finally, to our outlook for 2026. And we'll then open for questions. It has been quite the year. Looking back 10 months into the job, I'm really proud of everything we've achieved together. We delivered strong profit growth and margin expansion despite soft demand environment, and that's a clear proof of the quality and resilience of our business. From a strategic perspective, the sale of the Talc business and launching our Elevate Elementis strategy were more than milestones. They set the foundation for this company can achieve when we focus and move forward as one team. And we're making solid progress across all of our strategic priorities, such as innovation sales up to a record of 16.4% and 0 lost time accidents. So lots of positive momentum. You might remember a version of this slide from our last half year result presentations. Our portfolio has fundamentally transformed over the past years. We've reshaped Elementis into a pure-play specialty chemicals business, focused on our 2 segments, Personal Care and Coatings. Selling Talc was a major step in making this happen, and it was my first priority when I started as CEO. And with Chromium sold in 2023, we exited these commoditized capital-intensive businesses, and it was absolutely the right decision. It allows us to focus on our core strengths and capabilities. As you will have seen this morning, I'm pleased to share that we've agreed to sell our pharmaceutical business to ABF, and this sale is in line with our strategy as well, further sharpens our focus. More on this on the next slide. In November, we added Alchemy to the portfolio, a fantastic bolt-on right in our personal care sweet spot. It's a fast-growing, high-margin business that strengthens our position in skin care and cosmetics. So this is the new Elementis. We're a company with a unique position built on 3 real differentiators: hectorite, rheology and formulation solutions. And we're really pleased with the shape of the portfolio, and we're well positioned for growth. So we announced today that we reached an agreement to sell our noncore pharmaceutical manufacturing business to ABF. Last year, the business made $35 million in revenue. Our pharmaceutical business was originally acquired as a part of SummitReheis in 2017. It manufactures antacids and pharmaceutical excipients from our Ludwigshafen site in Germany. And while the business has performed well, it's clear that it no longer fits with our strategic focus. And because of that, the sale we announced today is the best outcome for both the Pharma business and for Elementis. It's a straightforward, clean transaction. It will reduce our capital intensity and on a pro forma basis, will deliver an uplift to 2025 group operating margins. We're working towards the completion in Q2. With the Talc business sold, we accelerated the delivery of all of our 2026 financial targets by 1 full year, which is a fantastic result. And with Elevate Elementis, we shared our new targets, mid-single-digit revenue growth, operating margins of more than 23% and 3-year operating cash conversion to be above 90%, ROCE, excluding goodwill, of more than 30%. And our proven track record gives us the confidence that we can meet these targets and be among the top of our peer group. Moving to sustainability. Next slide. Starting with safety, which is fundamental to how we operate. Last year, we achieved our first 0 lost time accidents since 2019. That's a big milestone. On the environment, we continue to make good progress. The divestments of Talc and Chromium have significantly reduced our carbon footprint, which is now nearly 80% lower than 2019. And we continue to transition to a more sustainable and responsible business. For example, at our hectorite mine, we moved to almost entirely renewable energy from a 0% base last year. Finally, on people, we've made a lot of changes in the organization with Fit for the Future, which was a big reorganization for us. And the engagement scores actually improved with voluntary attrition down by 40%. We're well below industry average now. But for me, even more importantly, I see it when I visit our sites, how proud the team is when I visit the Newberry, which is where we have our hectorite site or when I visit the new Porto team. And with that, I'm delighted to hand you over to Kath, our new CFO, to cover our financial performance. Katharina Helen Kearney-Croft: Thank you, Luca, and good morning, everybody. Before I begin, I'd just like to share some initial reflections of my first few months in Elementis. I've been here for 4 months now and 2 months as the CFO, and I've been genuinely impressed and frankly, relieved by what I've seen. I've had a really warm welcome with lots of people taking time out of their busy schedules to help me on-board. And it's clear, everyone is working with real commitment to unlock the full potential of Elementis. I've had the opportunity to visit locations in the U.K., Europe and U.S.A., and I really enjoyed learning about the business. There's nothing quite like the manufacturing environment, seeing products being made and looking to see what we're talking about in the meetings. And the real highlights for me have been hands-on in the Alchemy lab and visiting the hectorite mine. What has really stood out is the passion, dedication, commitment and pride of our people. They care deeply about the company and rightly so. And I'm confident that we can continue to build on these strong foundations, demonstrating that we have opportunities to grow revenue and profit and continue to generate strong cash and returns. When I look at the macro backdrop for 2025, we could be standing here looking at a very different set of results, and I'm definitely glad that I don't have to present that. Despite the challenging market, we have made good progress in 2025, and the team have done a fantastic job. And it's in this context, I'd like to cover the results for the prior year. Following the sale of Talc, the 2024 P&L and cash flow figures have been restated for continuing operations and used for comparison purposes. I wanted to show a brief overview of the metrics for 2025. Most of these will cover in the following slides, so we won't go into detail here other than highlighting. Despite a small decline in group revenues, we delivered strong growth in adjusted operating profit and a 150 basis point improvement in margins. In combination with lower net finance costs and a lower number of shares following the buyback, adjusted earnings per share was up 14.2% to $0.137, an outstanding performance considering the challenging operating environment that Luc referenced earlier. And as we turn to look at group revenue, you'll see that despite the backdrop, we delivered a resilient performance with overall revenue down 1% on a reported basis and 1.9% on a constant currency basis to $597.5 million. Bridging from 2024, we had a favorable FX tailwind of approximately $5.2 million. Volumes were down $5.6 million due to the weak demand environment in Coatings, resulting in a reduction of $14.1 million, and this was partially offset by volume growth in Personal Care of $8.5 million. On pricing, we delivered $7.8 million across both businesses, a testament to the specialty nature of our portfolio. Of note, a combination of proactive pricing, procurement agility and supply chain optimization actions helped us to fully offset the direct impact of tariffs in the year. And we believe the latest news on this topic, at least of Saturday, 21st of February, will continue to leave us in a neutral position. Turning lastly to mix. This was down $13.7 million, primarily due to a combination of one-off sales in Coatings of $3.4 million in 2024, not repeated in 2025, along with the continued softness in industrial coatings and decorative end markets. And AP actives saw strong growth in lower-priced but margin-accretive products as well as a consumer-driven shift from aerosol to roll-on formats in LatAm. As we turn our eyes to adjusted operating profit, we delivered strong growth, which increased 4.6% to $126.7 million. Within this, we benefited from favorable FX of $1.9 million. Lower volumes had an adverse impact of $1.9 million and the net price impact after offsetting inflation was $10.5 million. These headwinds were mitigated by the ongoing delivery of our self-help initiatives, which led to $18 million of total cost savings in the year and more to come on this shortly. As noted earlier, our strong profit performance helped drive higher margins, increasing 150 basis points to 21.2%, so let's take a look deeper into the reporting segments. Starting with Personal Care. Revenue was up 2.4% to $224.5 million with strong growth in skin care and cosmetics, offsetting a slight decline in AP actives. Looking at the regional performance, we saw higher revenues in EMEA and Americas with Asia flat compared to last year. Adjusted operating profit was up strongly at $72.8 million or 16.9% and importantly, brings the absolute profitability of the Personal Care segment in line with the Coatings segment. This improved profitability was driven by improved volumes and pricing alongside cost savings. The higher profits in turn helped to drive higher margin, which is up 410 basis points to 32.4%, including the benefit of one-off volume and cost savings in H1 previously noted at the half year. And lastly, on this slide, I wanted to highlight that our results in 2025 included the pro rata contribution from the recent acquisition of Alchemy, a small quantum for the year given the late acquisition timing, but meaningful strategically. And now moving on to the Coatings segment. We delivered a resilient performance with revenue of $373 million compared to $386.4 million last year, with a decline in Coatings partially offset by strong performance from our Energy business. The year-on-year decline was impacted by the benefit of high-margin one-off sales in Q4 2024. The drop-through from the lower revenue led to a lower adjusted operating profit of $70.4 million. However, the combination of higher pricing and our self-help actions supported the operating margins, finishing the year at 18.9% compared to 20.3% in the year before. You will recall at H1, we highlighted some operational challenges at St. Louis that were holding back our Coatings performance. Whilst there's still progress to be made, I wanted to share positive news that the debottlenecking program at St. Louis is progressing well and leading to improved performance, which Luc will cover more fully later. Last year, we successfully completed the balance of our 2-year $30 million cost savings program by delivering $12 million via our Fit for the Future restructuring and supply chain initiatives. In addition to this, we announced in July a further $10 million in savings that we were aiming to deliver over the remainder of 2025 and 2026. These are net of planned additional R&D spend, which will increase our total spend from 2% of revenue to 3% over the next 2 years. As we announced this morning, we have delivered $6 million of savings already, and we will deliver the balance of $4 million by the end of 2026. Our cost saving programs have reduced complexity and improved operational efficiency. We will continue to proactively identify opportunities to streamline our cost base and capture further efficiencies as we deliver on our growth agenda and become a simpler and leaner company. Now taking a look at free cash flow. A key feature of this business is its strong cash flow generation. And I'm pleased to report that we generated good free cash flow of $41 million in 2025 compared to $51 million in the prior year. Looking at the key components, higher adjusted EBITDA was more than offset by the working capital outflow in the year, driven by higher receivables due to lower debt factoring and strategic inventory build. We also had higher CapEx as we increased our investment to support adjacent market growth and capital investment in support of the St. Louis improvement program. As a result of these movements, our adjusted operating cash flow was $104.7 million compared to $123.2 million in the prior year. As we move down the cash flow statement, it's worth calling out 2 items. Firstly, our cash taxes were lower by $4.4 million, primarily due to an IRS refund received relating to a 2024 claim to utilize net operating losses for prior periods. And also adjusting items were $6.7 million lower as the Fit for the Future program finished during the year. Our balance sheet remains robust. And whilst leverage ticked up to 1.3x, this was after acquiring Alchemy and returning cash to shareholders. Looking at the key movements from left to right, we started the year with a net debt balance of $157.2 million, adding back the free cash flow of $41 million as well as the proceeds from the Talc sale of $52.5 million, we had an increase in cash available for distribution of $93.5 million. Of this amount, we returned $79.1 million through our first buyback program and the 2024 final dividend and the 2025 interim dividend. The share buyback program led to the purchase and cancellation of approximately 4% of our issued share capital. In October, we completed the disposal of the disused Eaglescliffe site for a negative cash consideration of $11.1 million. I would like to specifically note the strategic divestment of both Talc and the Eaglescliffe site have enabled us to significantly reduce our environmental liabilities and provisions. In November, we completed the acquisition of Alchemy for a total upfront consideration of $20.1 million. Taking off the FX of $11.4 million, we ended the year with a net debt balance of $185.4 million and a net debt-to-EBITDA ratio of 1.3x. Our aim is to maximize return on invested capital while maintaining a strong balance sheet and strategic optionality. In relation to investments, our CapEx program will be focusing on investing in growth and productivity. We will also invest in R&D and have plans to increase total spend here from 2% to 3% of revenue. To complement these organic growth investments and as we demonstrated with the acquisition of Alchemy, we will selectively pursue bolt-on acquisitions whilst maintaining a strong balance sheet. On dividends, our policy is for a payout ratio of around 30% of adjusted earnings. And as we announced this morning, the Board has recommended a final dividend of $0.03, taking the full year dividend for 2025 to $0.043, up 7.5% from last year and represents a 31% payout ratio. In considering future additional returns, we will assess several factors, including prevailing market conditions, our existing progressive dividend policy, the investment requirements of the business and our desire to maintain a leverage around 1x net debt to EBITDA over time, which we anticipate we will achieve on an organic basis in 2026. In light of the announcement of the pharmaceutical manufacturing business disposal, our expectation is to distribute the net proceeds to shareholders following completion. and we will provide a further update upon closing. And lastly, for your reference, we've included some technical guidance for 2026 on Slide 19. So with that, I'll now hand over to Luc, who will take you through our strategic progress over the last 12 months and the outlook for the year. Thank you. Luc Van Ravenstein: Thank you, Kath. For those less familiar with Elevate Elementis, this is our new strategy. We presented that in July. The plan is simple. We have 3 strategic priorities. First, top line growth, and this is about focusing on what we do best in the areas that make Elementis unique without the distractions of Talc and Chromium. Our objective is to grow revenue by mid-single digit over the medium term. And in the next slides, I'll share a view of our growth opportunities and our progress in 2025. The second priority is about service delivery. Our ambition is to be best-in-class and the first choice for our customers. We've made some great progress, and I will show that later. Third, simplification and agility. We're building a simpler and leaner Elementis that empowers colleagues, makes us more agile and allows us to execute at pace. Delivering against these 3 priorities is what will drive value creation and will help us to deliver the new medium-term targets. So looking at our first priority. For us to grow and unlock our full potential, it is important to focus on what makes Elementis unique and what will allow us to win. We call these our winning differentiators, and let me briefly touch upon them. Hectorite, this is a very special asset. It's a white mineral that comes from our mine with long-term reserves. It has really unique properties because of its chemical composition and its platelet structure. We don't just sell hectorite. We modify it, add value to it, for example, by making preformulated gels for cosmetics, and our customers love its efficiency. You only need a tiny amount to get a big effect. It's natural, and it delivers the kind of premium skin feel that consumers are looking for. Rheology, this is the science of flow. It's what's needed to stabilize ingredients in a paint can. It's also what makes sunscreen spread evenly on a skin. And here, Elementis is the global leader. Formulation Solutions, this is our expertise built up over the years of our customers' formulations. It's how our people work together with our customers to improve the performance of a paint or a skin care product day in, day out. And our colleagues in the labs have worked at AkzoNobel or Estee Lauder. They talk our customers' language, and that's a huge benefit. Now we operate in big attractive markets, as you can see here. Our focus, though, is to target these niche areas where our winning differentiators set us apart. And we work together with our customers to improve their products. For example, in skin care, we're replacing synthetic additives by hectorite, giving a more premium texture. And in industrial coatings, we help the transition from solvent-borne to high-performance water-based formulas. I'm not going to go into the detail of all of these here, but the point is we are using our expertise and our unique portfolio to help our customers make better and more sustainable products. So lots to go for in our current markets. And outside of our existing markets, there is a large new adjacent space for us that we're tapping into as well. We're using the same model, and we have entered areas that we're going to scale. One example is hectorite for geothermal energy. And here, because the wells are extremely deep, you're facing ultra-high temperatures at which hectorite is stable. We're using our formulation knowledge and existing customer relationships to grow with this market. We had our first sales in 2025 and have a number of field trials planned for this year in the U.S. and Germany. So lots of exciting opportunities and potential for growth. So we're focusing on the right areas, building on our winning differentiators, but what levers are we pulling to now bring in this growth? First, we're investing more in R&D, 50% more. For example, in application knowledge to support customers, and we're building a hectorite center of excellence. We're already seeing the benefits. Last year, innovation sales reached a record of 16.4%. That has doubled in the last 5 years. We launched 19 new products, of which we sent more than 1,500 samples to our customers. Some of the innovation highlights from last year on the right-hand box. We launched DEOLUXE, our patent-pending non-metal-based active, and this is looking quite promising. Several large customers are testing, and we expect the first sales in the second half of this year. We also launched a number of new hectorite products, BENTONE ULTIMATE, also patent pending. It's a highly active hectorite technology that delivers exceptional skin feel, mostly for lipstick and mascara. And in coatings, we launched THIXATROL 5050W for metallic pigment orientation and waterborne automotive coatings. So lots of excitement around innovation. And next, we're covering more customers directly, also local and regional accounts. We want to understand firsthand about their needs. And we've made good progress last year. We now service about 67% of our customers directly. We're also building a local-for-local footprint, and this reduces cost and increases reliability. More and more customers are demanding local supply, particularly in China. So this is how we're going to look at growing organically. To complement our organic growth, we're looking at bolt-on acquisitions, but in a very disciplined way and only when it fits our strategy, which does not depend on M&A. But the acquisition of Alchemy is a great example. In November last year, we announced the acquisition of Alchemy right in our Personal Care sweet spot. And Alchemy develops innovative rheology modifiers for personal care. They are fully natural and can fully replace synthetic raw materials in cosmetics. And the business has done really well in recent years, delivering double-digit revenue growth and operating margins in line with our Personal Care business. And we're bringing on a team with incredible expertise in this market. We're already working together on new products, including with hectorite, quite a nice synergy. The point is, with Elementis behind it, Alchemy can scale faster, leveraging our global sales network as well as our application capabilities. It's a great example of how bolt-ons can strengthen our core and accelerate growth. To make the most of this growth agenda, we need to be the best supplier to our customers. An important measure is On-Time-In-Full. And in July, we shared our target to deliver a 20% uplift over the medium term. And I'm pleased to share that we're now already halfway, and we'll stay focused on this. Second, we talked about St. Louis in July, one of our largest sites, and we have been dealing with some backlogs there. We had a big opportunity, 30% by unlocking capacity. I've made some leadership changes there, brought some experienced people back, and we're seeing the results, a 20% improvement since the first half of 2025. That puts us 2/3 the way there. At the end of the day, all of this comes down to customer focus and mindset, whether you work in sales, R&D or in the plant. And with some of the changes we've made, we have a new top-notch customer service center in Porto, we've seen a 50% reduction in customer response times. We've also received external recognition that you can see on the screen, which is a great acknowledgment for the team. We're building a simpler, leaner Elementis. And to us, this means driving agility, faster execution and responsiveness, so we can scale and deliver more value to our customers. And we've made good progress. We've streamlined our organization and leadership team. We've eliminated the stranded costs related to Talc. And some of these things were low-hanging fruit like reducing office spaces that we didn't really need. And some things took more coordinated effort like qualifying 50 new suppliers that led to quite significant procurement savings. Looking ahead of 2026, we're not done here. There'll be more procurement savings to come. We're making our supply chain more efficient, and we'll continue to move towards a local-for-local model. This is a continuous journey. All right. On to our last slide, outlook. While we remain mindful of the recent geopolitical uncertainty, we're confident in another year of progress. We're seeing great momentum and excitement building in the business. And I'm pleased that we've made a solid start to 2026 and our priorities for the year are clear: deliver organic growth through R&D and customer intimacy, achieve best-in-class customer service levels; and lastly, drive operational efficiency and continue to deliver cost savings. And the team and I are fully focused on delivering this plan. Thank you very much. And with that, let's move to Q&A, please. Everybody could please say their name, speak to the microphone, so that folks on the call know who you are. Thank you. Vanessa Jeffriess: Vanessa Jeffriess from Jefferies. Just wondering if you could speak first about how the first quarter has started given weather in the U.S. and improving beauty markets and how you think about seasonality for the year given coatings is normally stronger in the first half, but we're probably not going to see much improvement soon. Luc Van Ravenstein: Hi Vanessa Jeffriess from Jefferies, thank you for that question. We had a solid start of the year which is encouraging -- Q4 was relatively soft. So solid start in coatings as well, which particularly was softer in Q4. And the seasonality is -- we expect it to be quite typical, 52-48 balance. So yes, encouraging start. Vanessa Jeffriess: And then just on your new growth areas, great that you were able to execute on Alchemy. But how do you think about the mix between achieving that growth from bolt-on M&A and not diluting margins, given I can't imagine there's much out there making the margins you are. Luc Van Ravenstein: Yes. Absolutely. Look, this is an organic-led strategy. So we're really focusing on organic growth, which there are great opportunities in our existing segments, as we say, Personal Care and Coatings as well as these new areas that we talked about. It really is organic-led. Look, we work with many, many companies out there, such as Alchemy. We knew that for a long time, this company -- those could be nice new arrows to our bow. But again, it's really organic-led. You're right, our margins are in a nice spot. We're driving them up further. And it's difficult to find companies that are actually accretive to our margins. Alchemy was one of those, by the way. So we're very happy to use them to grow faster. Vanessa Jeffriess: And then just on pharma. I know that you didn't give profit, but based on past commentary, I would guess that, that's making probably 10% margins. So it seems like you sold at a multiple similar to your own group multiple, which is interesting. I think since your undervaluation, but what else is left in the group do you think that is making similar margins and could be sold? Luc Van Ravenstein: I think you're absolutely spot on in terms of your analysis around the margins and what we did there with pharma. So for us, this was a really good step from a margin and a CapEx perspective, but also from a strategic perspective, most importantly. Pharma was really an activity that it's a really great piece of business, but it doesn't fit with us. Looking at the rest of the portfolio now, we're really pleased with the portfolio we have. We don't have any other business in this kind of margin area. So yes, right now, it's about growth really. That's what we're focused on. We're pleased with the portfolio. Kevin Fogarty: Kevin Fogarty from Deutsche Numis. If I could kick off firstly on innovation. So you called out some several examples of progress, I guess, in new rheology markets. It feels like you're making sort of more progress there perhaps rather than the current ones. It's obviously sort of quite a different sale in terms of new markets rather than the current. I just wondered if you could sort of talk a little bit about that process. And sort of I guess, culturally, how is that different in terms of what you're trying to do there relative to what Elementis has done in the past? You're at 16% in terms of innovation sales. Just thoughts on the 20% target you've got out there? And just secondly, if we can think about Personal Care, just if you could frame the benefits from cost savings perhaps during the year. Any thoughts on Personal Care Asia and dynamics there during the year would be quite useful and just sort of confidence on retaining the margin, which is clearly at a significantly higher level than in the past? Luc Van Ravenstein: Yes. Thank you, Kevin, for those questions. Perhaps I can take the first couple and then Kath, you can help me on the third, if you don't mind. Thank you. So in terms of the new markets, so indeed, look, we have a large market in Personal Care and Coatings where we have great opportunities for growth. We talked in July, for example, about replacing some of the synthetic additives in sun care. That's our existing markets, huge opportunities. And if I look at our growth going forward, probably the largest piece of growth is actually going to come from those existing markets. We have exciting opportunities in new markets for sure as well, where, frankly, we've started to look into only relatively recently. Some of these opportunities, we will actually be able to address and bring in with our current sales force, application knowledge, et cetera. I gave a little example of geothermal. So geothermal drilling is actually -- is happening a lot with our existing customer base already, the Schlumberger of this world. So we have the access to customers. We have the knowledge of deepwater drilling through our oil and gas business. So that's an opportunity we'll bring in with our existing setup. Other opportunities, for example, we've identified a new opportunity for hectorite to remove PFAS out of wastewater. That's really interesting, but we're not going to build a whole sales force and application knowledge to -- for wastewater removal. So there, we might work with a partner, right? So I think for these new opportunities, very large, some of them will bring in with our existing knowledge. Some we will build, some knowledge we'll build, for example, in the construction market. And some we'll just have to partner up with other people. So that's the way I look at that, but a lot of innovation coming from our existing markets. Your second question was around innovation and about our path towards the 20%. Absolutely key indeed, because if you think about everything we do in innovation, innovation sales typically generate 5% to 10% higher margins than the rest of our sales. So it's really important. It also helps us to -- in our relationship with our customers and our relevance to our customers. So we've made great steps last year, 200 basis points up to 16.4%. We foresee to further progress that with all the activities that are ongoing towards indeed our medium-term target of 20%, but we're making some good progress and the investment in R&D, which sometimes is also simply about bringing that application knowledge in is going to help. Your third question was around Personal Care, particularly Personal Care Asia. For us, Personal Care in Asia is still a relatively smaller business compared to the European and the U.S. Personal Care business. We had some movements in Personal Care in the first half last year, Korea, color cosmetic market is a big one for us, and there was some order timing for which H1 was relatively softer. We had a better second half of the year. So we continue to see good momentum. What I would say is in the fourth quarter, we did see in antiperspirant some softness, particularly from some format changes in Latin America, as I think Kath referred to. So aerosols moving to roll-ons. That's for the antiperspirant business. But in general, we see good momentum. We're very happy with the margins. As said, Alchemy is accretive there or it is actually in line with our Personal Care markets margins. I don't know, Kath, if you want to add anything on the margin point that Kevin was asking about. Katharina Helen Kearney-Croft: So I think last year, we made good progress with the Fit for the Future finalization and the start of the new cost savings. Personal Care specifically also benefited from the closure of the Middletown site. So that is directly related to Personal Care. But from the other perspective, a lot of it ends up being in allocations because we've got joint plants and back office, which ends up being allocated. Angelina Glazova: Angelina Glazova from JPMorgan. I have 2 questions. First, I wanted to ask about the midterm targets on margins for 23%. You have already talked us through some drivers for growth that you see in the midterm. How should we think about Elementis bridging the gap in operating margins from current level to target of 23% plus? And do you see any particular drivers as more important relative to others? And then there is also clearly a difference in margin profiles between the 2 divisions. So how do you see that developing? And is there anything maybe for the Coatings business where you see those actions that could help lift the margins? And then secondly, looking at 2026, are there any particular items in terms of cash flow generation, net debt development that we should be mindful of? Luc Van Ravenstein: I'll kick-off with the first question and then if you don't mind, to complement and go on to the second question. So in terms of the margin development, look, we made a nice step in the right direction. Actually, selling the pharma business is going to help us, like Vanessa just said, a little bit more. Look, this is really about growth. And as we just discussed, we're growing in areas that are actually margin accretive. Hectorite, we're actually looking to selling more hectorite and growing that double digit. So that's going to help the mix. That's going to help our margin development. Obviously, we're taking some more cost out this year, but there is a limit to that at a certain point. We're really -- the big reorganizations are behind us. We have Fit for the Future behind us. So this is about high-margin growth. Obviously, we continue to look at how we can do things more efficiently. We'll always think about how we can do things at a lower cost and having Kath come in with a fresh pair of eyes a couple of months ago has also really helped in that respect. But it is about growth and about high-margin growth, and that's the way we're going to really get to that 23% plus level. Kath, anything to add? Or you want to go to the second part? Katharina Helen Kearney-Croft: Well, I think it's also related to the profiles in Personal Care. It has got higher margins and higher growth, and therefore, that would naturally generate some accretive margin. Luc Van Ravenstein: Yes, good point. Katharina Helen Kearney-Croft: With respect to cash flow and net debt, so Page 19 has some technical guidance. We're flagging CapEx will be between 4% to 5% in 2026. We will also expect a small working capital outflow in the year. I referenced in my script that we still had some factoring at the end of 2025, we will not be factoring in 2026. And so that will naturally unwind. And then with the sales increase that we're expecting, we will need to fund that. I think from a sort of just big picture, we are expecting to be circa 1x leverage on an organic basis by the end of 2026. And when I say organic, I'm ignoring the sale of the pharma business because as we said, we expect to give the net proceeds back. Unknown Analyst: This is Madhumanti Sanyal from CaixaBank. So I want to know if there is -- if you think there is a strong synergy between the Coatings and the Personal Care business, like if Coatings continues to show lower-than-expected performance, would you consider a sale of the Coatings business without affecting the performance of the Personal Care business? Luc Van Ravenstein: Thank you for the question. Look, Coatings and Personal Care are different markets, right? So our customers in Coatings are Sherwin-Williams and PPG and AkzoNobel and in Personal Care, you talk to L'Oreal and Estee Lauder. So the markets are different. But in terms of how we operate at Elementis, there's a lot of synergies. So most of our manufacturing plants are actually multipurpose and multi-market plants. So they service both markets, so both Coatings and Personal Care. Our plant in Livingston in Scotland and the U.K. is about half-half Personal Care, Coatings. So in that respect, there's a lot of synergies. Also, if you look at the products that we manufacture and the knowledge that we have in our laboratories, we talked about rheology, we talked about hectorite, all of that ends up in both Coatings and Personal Care. So the product knowledge, the manufacturing footprint synergy, these businesses are intertwined. So no. But I would add to that as well is that we're actually quite pleased with the performance of Coatings. If you look back at Coatings, where we were 7, 8 years ago, the margins of the Coatings business were in a bad year, 10 percentage points around that. In a good year, it was 14%, 15%. Right now, in a low demand environment, we're at 18.9%. So we're actually quite pleased with the Coatings performance, and we're excited about the opportunities ahead. Operator: I've got some questions from Sebastian Bray at Berenberg. Has there been any change in the energy business that led to the strong performance as you've highlighted, despite the oil price decline? One. Second question, what are management's thoughts on additional buyback after receiving proceeds from the sale of the pharma business? And thirdly, are there any signs of the recovery in hectorite sales in Personal Care? Did these grow in 2025? And if not, why this was the case? Luc Van Ravenstein: Shall I take 1 and 3 and you do 2? Katharina Helen Kearney-Croft: Sounds good. Luc Van Ravenstein: All right. Let's do it. So Energy business, we're actually very pleased with the performance of the Energy business. And it is a relatively small business, give or take, $40 million, but it did very, very well last year. One thing that Sebastian might remember, we closed our Charleston site in the U.S. back in 2019 or early 2020, and that was at the time a purely energy-focused business, or plant, I should say. We moved the manufacturing of those products to St. Louis. So that helped us in terms of margins. That's one thing that helped us. I would also say that by doing so, we really transformed the energy business, which if I look --when I joined Elementis 14 years ago, it was a much larger business. But now we really focus this business, one on manufacturing only from St. Louis, focus on hectorite. Why on hectorite? Because we really have a unique winning differentiator with hectorite because it works very well for deepwater drilling. So if you go very deep, you have to drill at temperatures of 250, 280 degrees Celsius and hectorite is stable at those temperatures. So we refocused the team. We have a smaller portfolio. And actually looking at last year, we've had a lot of success indeed in difficult conditions for drilling such as deepwater. We talked about the geothermal energy opportunity. So that's what we're doing here. Smaller business, relatively small team, close the plant down to do cost out and focus on the areas that make Elementis unique. And we'll continue to do that actually. The third question was around Personal Care and hectorite. Yes, we have grown. Obviously, last year, with the markets being a little bit soft, also the Personal Care growth was low single digits also in hectorite. But if I look at Personal Care, again, I'm turning the clock back 14, 15 years ago when I joined, this was a $30-or-so million business. We actually reported it at a certain point under oil and gas, you wouldn't believe that. But that was a purely hectorite business. And we understood where else we could sell hectorite in Personal Care in adjacent areas. So looking at the last 5, 10, 14 years, hectorite in Personal Care has grown really, really nicely. Last year was relatively lower growth, but still growth. But looking at the opportunities ahead in Personal Care as well, replacing synthetics, which continues to be very, very exciting opportunity, entering skin care, which is a $20 million or so business for us now, we're going to scale that, lots of exciting opportunities. Katharina Helen Kearney-Croft: So I think with respect to the question on share buybacks. So as we said this morning, following the sale of the pharma manufacturing business, upon closing, we expect to distribute those funds to shareholders. We also have the target of net debt to EBITDA of about 1x, we expect to be there by the end of 2026. So that will give you a signal of what we're expecting in this year. And then as we look forward, we'll continue to take into consideration where we are on leverage and expectations. Operator: Sorry, I've got to pretend to be Anil now. Anil Shenoy from Barclays has sent 2 questions as well. We didn't see any guidance on 2026. So are you happy with where the consensus is at for adjusted EBIT? And if so, could you help to bridge the gap between 2025 EBIT to 2026 consensus EBIT. What are you assuming in terms of growth? And what are you assuming in terms of savings? Luc Van Ravenstein: Shall I do the first part and you the second? Katharina Helen Kearney-Croft: Okay. Luc Van Ravenstein: All right. Thank you, Anil, for those questions. Look, we had a solid start of the year, like we just mentioned. So we're quite happy with that. And therefore, comfortable with the consensus. In terms of the bridge EBIT '25, '26, I mean, Kath, do you want to add on that? Katharina Helen Kearney-Croft: So as I mentioned, we expect the incremental $4 million in savings to come through. We do expect volume growth, so we'll get some natural leverage and some margin accretion continue to drop through, and that's how we're moving from 2025 to 2026. So sort of steady as she goes with the additional cost savings. Operator: And just some last questions from Chetan Udeshi from JPMorgan. Are you expecting Q1 sales to be up compared to last year? And secondly, we didn't see volume growth this year. What are your expectations for volume growth for '26? Luc Van Ravenstein: I think for Q1, as I said, we made a solid start. I think the most important is that if you look at where we -- the exit rate of Q4 last year was relatively softer. So we're happy to see good progression after that. For the full year, again, back to the previous questions from Anil, we're comfortable with where consensus is. We are looking at a typical balance between H1, H2, which I think also can help Chetan in terms of his modeling. Anything to add, Kath? Katharina Helen Kearney-Croft: [indiscernible] but I would just note the geopolitical situation has weakened. So we have an expectation, and we hope we will deliver that, but some things are out of our hands. But we will maintain our focus on our strategic targets. Luc Van Ravenstein: Yes, we're 2 months in. It's early days. Good point. Unknown Analyst: [Technical Difficulty] Luc Van Ravenstein: Not so much anymore, actually. When we own Talc, I had the Dutch gas price on my phone here. I was tracking it every half an hour, and I didn't get a lot of sleep. Luckily, we don't have that business anymore. And we are in specialty chemicals. So if you look at how we generate our margins, it's about adding value to our customers' formulations rather than trying to squeeze out a cent on our costs. So very much a different situation than where we were a year ago. Good question. Thank you. And we'll continue to monitor. I mean, I think perhaps one of the things to add, we continue to monitor the situation, the situation that Kath mentioned, obviously, that the recent occurrence in the Middle East. And if our input costs go up, we typically look to price to compensate for that input cost increase, definitely. Thank you. Good question. No more questions? Katharina Helen Kearney-Croft: Can we just get a mic to you? Vanessa Jeffriess: Sorry, just to clarify what you just said that you're happy with consensus sales and EBIT, but you've got the loss of Pharma business, which is $35 million sales and $3.5 million EBIT, right? Katharina Helen Kearney-Croft: So that's on a pre-adjustment for pharma, but I do suggest that people wait until it actually closes before adjusting numbers. Operator: I am seeing no questions on the conference line. So with that, thank you very much. Luc Van Ravenstein: Thank you, everybody. Katharina Helen Kearney-Croft: Thank you.
Nicholas Ashworth: So good morning, everybody, and thank you for joining us for Reckitt's full year 2025 results presentation. I'm Nick Ashworth, I head Investor Relations here at Reckitt. So before we start, can I draw your attention to the usual disclaimers in respect to forward-looking information. So presenting today, we have our CEO, Kris Licht; and our CFO, Shannon Eisenhardt. Following the presentation will be the usual Q&A session. We're going to take questions from the room first, as we always do, and then followed by the written questions via the webcast. For those of you who have joined online, please feel free to submit your questions via the questions tab, which I think is at the top of the screen, and I will read them out. And if you've got further questions after the event, please feel free to reach out to me or the team, and we'll be happy to help. So with that said, I'm going to hand over to our CEO, Kris Licht, to start the presentation. Kris Licht: Thank you, Nick, and good morning to everyone in the room and those who have dialed in. I'll start with an overview of our 2025 results and some of the key highlights from the year, and then Shannon will take you through our financial performance. I'll then come back and provide an update on our key priorities for 2026 and some of the elements of our winning playbook. After that, we'll both be happy to take your questions. 2025 was a year of strong financial delivery as we continue to deliver on our strategy. Core record net revenue grew 5.2%, ahead of our improved half year guidance of above 4%. Group net revenue increased 5%, including Mead Johnson growth at 3.8%. This was driven by Emerging Markets, with China and India growing double digits in the fourth quarter. In our developed markets, a weaker season held back growth and the consumer environment in Europe remains tough. However, this was more than offset by a strong nonseasonal performance in North America. Adjusted operating profit increased 5.3%, underpinned by the benefits of the Fuel for Growth program. Core Reckitt margins expanded 90 basis points to 26.7%, with Emerging Markets margins growing 210 basis points to 20.9%. We are delivering profitable growth at scale. EPS grew 1.1% and was supported by our ongoing share buyback program, offset by a higher year-on-year effective tax rate, in line with our guidance. And we delivered another year of strong cash returns with GBP 2.3 billion returned to shareholders through dividends and our share buyback program. Looking at our noncore businesses, we completed the divestment of Essential Home to Advent in December, and we returned a further GBP 1.6 billion to shareholders via a special dividend in February. Mead Johnson Nutrition grew net revenues by 3.8% as trading normalized. We continue to consider all strategic options for that business. So we made strong progress delivering against all our strategic priorities during the year. We simplified and sharpened the portfolio, supported by the divestment of Essential Home. And this has allowed us to focus exclusively on 11 high-growth power brands with increased investment, increased accountability, faster decision-making showing through in our results, in particular, in Emerging Markets. We delivered superior innovation with launches across all our categories. Some were new products with the power to disrupt such as our Durex Intensity condom, which we've rolled out to 18 countries in 2025. And many others are extensions and improvements helping us to grow loyalty and win new consumers. They included new fragrances for Lysol air sanitizer for Dettol antiseptic liquid as well as Nurofen mini liquid caps and dual-action cough and sore throat products from Strepsils. We've generated significant benefits from our Fuel for Growth program. This has supported increased investment in our brands to drive revenue, expand margins and deliver our ambition of sustained earnings growth. We feel good about the program, and we believe we can go further. Shannon will come to this later. And finally, improved execution has strengthened our competitive position. In China, strong e-commerce growth has enabled us to capture more digital-first consumers. And in North America, our omnichannel partnerships and quick commerce are accelerating and widening access to our portfolio, for example, by bringing Mucinex to consumers in 30 minutes with 68% of buyers new to the brand. Building on this final point, executional excellence can only happen with a strong supply chain. This has been a big focus of mine since becoming the CEO. It's critical to have a supply chain that reflects the quality of the brands and the products that we make. Historically, modest investment in our supply chain created risk and led to inconsistent performance. We have started to address that by investing in greater levels of localization, automation and digitization, building a supply chain that is more scalable and resilient as we continue to grow. You can see this in the actions we're taking. On the manufacturing side, there is a lot going on. For example, we're rationalizing and improving our China footprint, installing new Durex lines in our state-of-the-art Taicang factory with a new China Science and Innovation Center due to open this summer in Shanghai. We're increasing our North America footprint with our new factory in Wilson, North Carolina, which is on track to open next year. And we've also enhanced our Lysol toilet bowl cleaner capacity and capability at our Belle Mead plant. We're adding a new generation of lines at our Polish factory to support innovation behind Finish. And we're investing in new Gaviscon capacity in Thailand, initially to support growth in Europe and Australia and ASEAN in the longer term. And as part of Fuel for Growth, digital and AI and GBS will enable greater effectiveness and efficiency right across the supply chain. We've stepped up investment in CapEx to GBP 592 million in 2025. And this is starting to deliver results across the portfolio with a few examples shown here on the slide. Our service levels have increased across Europe and North America, and we're driving improved factory operational performance with good early results, in particular, in Emerging Markets. There's more to do, but we have made great progress on the supply chain over the past 18 months. So in summary, I'm proud of what our teams have achieved in 2025. Our actions have repositioned Reckitt as a world-class health and hygiene company. Our focused portfolio of power brands are in the right categories, driving premiumization and benefiting from geographic diversity. We have a proven playbook for how to grow and expand our brands, and we're executing more consistently against it. Our foundations are strong, and we're making them stronger. There is much more to do, and I will come back to you to talk about our priorities for the year ahead shortly. But let me stop now and hand over to Shannon for more detail on our financial performance. Shannon Eisenhardt: Thanks, Chris, and good morning, everyone. Let me start by running through the key financial highlights and the strong progress we made in 2025. Core Reckitt like-for-like net revenue grew 5.2% with volume growth of 1.5% and price/mix of 3.7%. Excluding seasonal OTC, Core Reckitt grew 7% year-on-year. Core Reckitt's growth was led by Emerging Markets, up 14.6%. Group like-for-like net revenue increased 5%. We held Core Reckitt gross margin flat at 62.2% with group gross margin above 60%, expanding 10 basis points year-on-year as productivity efficiencies more than offset the impact of tariffs. Adjusted operating profit margin for Core Reckitt increased 90 basis points, helped by our Fuel for Growth program, with group adjusted operating profit margin up 40 basis points to 24.9%. At constant currency, group adjusted operating profit grew 5.3% year-on-year with adjusted diluted EPS up 1.1%. Looking now at volumes for the year, where Core Reckitt volumes grew 1.5%. In Emerging Markets, we delivered broadly balanced growth with volumes up 6.7%, led by online launches and increased penetration in China as well as expanded distribution reach in India. In Europe, volumes declined 3.1%, reflecting category growth rates slowing throughout the year. This was compounded by a weaker cold and flu season in Q4. In North America, volumes were flat. Encouragingly, volumes improved sequentially in the second half, driven by the performance of our nonseasonal brands. Turning next to performance across each of our areas and starting with Emerging Markets. Growth was broad-based across all categories and all regions. China delivered its 10th sequential quarter and another year of double-digit growth, driven by strong performance in Dettol with innovations and extensions such as Activ Botany, ongoing strength in VMS and sustained market leadership in Intimate Wellness across both Durex and Intima. India delivered high single-digit growth for the year, driven by our offline execution as we continued to increase distribution points. We have also seen double-digit growth across a number of our smaller markets, including Indonesia, Colombia and Malaysia. We're pleased that we're driving this growth while expanding our adjusted operating profit margins 210 basis points on the prior year to 20.9%. This has been driven by continued gross margin expansion, which includes mix benefits from continued outperformance in Self Care and Intimate Wellness. Moving on to Europe, where net revenue declined 1.4% for the year. During the year, category growth rates slowed to being broadly flat. We saw increasing promotional activity across the area as well as a softer season in Q4. However, our premiumization strategy continued to deliver price/mix benefits. We continue to focus on our power brands and showing up competitively on shelf for our consumers every day, which enabled us to maintain market leadership positions. Finish declined low single digit, but remained the category leader in Europe, supported by continued premiumization. In Self Care, nonseasonal OTC grew low single digit, led by strong performance from Gaviscon, partially offset by a mid-single-digit decline in seasonal OTC brands. Durex delivered low single-digit growth, driven by the successful launch of Durex Intensity, our new nitrile condom, enhancing our category leadership. Adjusted operating profit margin was 31.4%, up 130 basis points on the prior year, with strong delivery from cost savings and efficiencies, offsetting stable gross margins and volume declines. Now in North America. Like-for-like net revenue growth was broadly flat at 0.2%. Our nonseasonal brands, which represent around 70% of our portfolio performed well with low single-digit growth against a soft category backdrop. Lysol grew low single digits, supported by strong core business execution, particularly in wipes and the continued momentum of recent innovations with laundry sanitizer and air sanitizer, both growing double digits year-on-year. And while our seasonal OTC business declined mid-single digit, reflecting the soft season, our nonseasonal Self Care business grew double digits in 2025, driven by successful innovation launches across Neuriva, Move Free and Biofreeze. Adjusted operating profit margin at 30.1% was down 30 basis points year-on-year with cost savings partially offsetting a decrease in gross margins driven by category mix. Now turning to our categories. Self Care net revenue increased 3% on a like-for-like basis. Seasonal OTC declined mid-single digits, more than offset by high single-digit growth in our nonseasonal Self Care business. Gaviscon grew high single digits, and we delivered double-digit VMS growth for the year. For Germ Protection, net revenue increased 8.4% on a like-for-like basis. This was led by double-digit growth in Dettol across emerging markets, including high single-digit growth in India and double-digit growth in ASEAN and China behind the launch of new innovations. Harpic grew mid-single digits with emerging markets offsetting a softer consumer environment in Europe. Moving on to Household Care. Like-for-like net revenue declined 0.4%. Finish was broadly flat year-on-year with double-digit growth in emerging markets, offset by softness in both Europe and North America. Vanish was flat with strength in China, offsetting softness in LatAm and mid-single-digit declines in Europe. Finally, Intimate Wellness was our fastest-growing category with net revenue up 12.5% on a like-for-like basis. Durex delivered double-digit growth, supported by ongoing product innovation, notably the successful launch of Intensity in Europe and additional Durex launches in China and India. Veet also delivered double-digit growth in 2025 and Intima's like-for-like net revenue almost doubled as brand adoption in China accelerated. Looking at our market share data. As expected, our seasonal business has some share weakness given the soft season. So 51% of Core Reckitt's top CMUs were in gain or hold territory for the year. Turning to our noncore business. Mead Johnson Nutrition delivered like-for-like net revenue growth of 3.8% in 2025, driven by our specialty brands, particularly Nutramigen in the North America business with favorable price/mix. The business also benefited from rebuilding retail inventories following the Mount Vernon Tornado in July of 2024. Mead Johnson Nutrition international grew low single digits. Adjusted operating profit margin increased by 150 basis points to 20.4%, reflecting favorable gross margin progression on higher-than-normal production volumes as well as insurance proceeds. Essential Home is excluded from like-for-like net revenue growth following the disposal completion before year-end. Operating profit is included until the disposal on December 31, 2025. Our Fuel for Growth program continues to drive meaningful simplification and improved effectiveness across our business. We've made strong progress against each of our focus areas, and our actions are enabling us to deliver savings faster and more efficiently than originally planned. Our investments in digital and AI are creating value, particularly in marketing with automation and shared services also progressing well. The larger impact from these areas will build progressively over time. In 2025, group fixed costs were 19.4% of net revenue, a 150 basis point improvement year-over-year. As expected, this ratio will rise in 2026 before declining again in 2027, driven by 2 factors: first, the mitigation of stranded costs following the sale of Essential Home; and second, a smaller net revenue denominator resulting from the transaction. Program delivery costs in 2025 were below our GBP 500 million guide due to pacing and phasing of costs and around GBP 200 million of restructuring and separation costs that were offset against Essential Home proceeds. With this progress and disciplined execution, we remain on track to deliver within the GBP 1 billion investment envelope and now expect to exit 2027 with a fixed cost base below 19%. Reviewing our progress shows the benefits this program is delivering. We delivered 90 basis points of savings in 2024. 30 basis points went back into increased BEI investment. In 2025, we've driven 150 basis points of savings, which enabled 120 basis point step-up in BEI investment. We're investing more behind our brands to fuel our top line growth while also growing our margins. And importantly, we're enhancing our functional capabilities to enable sustainable growth going forward. In 2025, consistent with our guidance, we grew group adjusted operating profits ahead of net revenues, up 5.3% at constant currency. Our Fuel for Growth savings enabled us to step up investment behind our brands and also drove group operating profit margins up 40 basis points to 24.9%. Turning now to earnings. EPS grew 1.1% over the year to 352.8p. This was driven by net revenue and profit growth and further supported by a lower share count resulting from our share buyback program. These benefits were partially offset by a higher effective tax rate and adverse foreign exchange impacts, both totaling a 7% headwind to EPS. In total, we returned GBP 2.3 billion to shareholders through dividends and share buybacks. This included GBP 900 million of share repurchases, and we will shortly commence the final tranche of our current buyback program, which was announced at the half year. We delivered free cash flow of GBP 1.7 billion with a conversion rate of 71%, including one-off cash costs associated with transformation and restructuring. Net debt to adjusted EBITDA closed the year at 1.6x, reflecting the proceeds received on December 31, 2025, from the Essential Home divestment. Adjusting for the GBP 1.6 billion that was returned to shareholders last month via a special dividend, our net debt-to-EBITDA ratio would have been roughly 2x at the end of 2025. As we move through 2026, we expect leverage to rise towards 2.5x by half year, given continued investment in the group and the lower EBITDA denominator post divestment before starting to trend back down through 2027. The Board is proposing an increase to our full year dividend of 5%, consistent with our aim of delivering sustainable dividend growth. Our disciplined capital allocation framework remains unchanged. Our priority continues to be investing in organic growth as we've done in 2025 with a step-up in investment behind our supply chain and R&D capabilities. We aim to continue to pay a progressive dividend, and we will manage the portfolio for value creation, continuing to return excess cash to shareholders through our share buyback program as well as any excess proceeds from future transactions as we look to continue to deliver attractive total shareholder returns. Now turning to guidance for 2026. First, Core Reckitt. In 2026, we expect to deliver 4% to 5% net revenue growth, in line with our medium-term guidance. This again will be led by emerging markets growth. We expect the challenging environment in Europe to remain where we're taking actions that are already having an impact. And similar to the fourth quarter, Q1 will be negatively impacted by the softer season. Given these factors, in Q1, we expect Core Reckitt net revenue growth to be below our full year guide. In our noncore Mead Johnson Nutrition business, we expect low single-digit like-for-like growth in 2026 with a mid-single-digit net revenue decline in Q1 as we lap retailer inventory build from Q1 2025 post the tornado. At the group adjusted operating profit level, we aim to largely offset stranded costs associated with the Essential Home divestment through our Fuel for Growth program. Finally, looking at EPS. We'll receive income from our participation in Vestacy, the Essential Home vehicle in 3 different ways: noncash interest income from our USD 300 million vendor loan note, which is part of our net interest guide; associate income from our 30% equity stake; and around GBP 25 million of pretax income from service and other agreements we're providing. The share consolidation and ongoing share buyback will reduce share count, and we'll provide updates on foreign exchange impacts as we progress through the year. Our ambition remains to deliver long-term sustainable EPS growth, acknowledging in 2026, the dilution headwind resulting from the divestment of Essential Home. I'll now hand back to Chris to talk about our strategic priorities for the year ahead. Kris Licht: Thank you, Shannon. I want to spend the last part of the presentation taking you through our key priorities for 2026 as we continue to strengthen Core Reckitt's foundations for long-term sustainable growth. Before I go through each of our areas, I want to revisit a chart that you may have seen me use recently. It's a great chart because it marks an important inflection point. For the first time, emerging markets have more households with $25,000 disposable incomes than developed markets. That's a big shift in terms of where global purchasing power lies and Reckitt is in a strong position to benefit. As our results show, we're capturing these consumers through category penetration and category creation. But it's not just about emerging markets. The opportunities across developed markets also remain exciting. Our power brands are at the premium end of the market where consumer loyalty is high. We're building that premium position with new launches and by expanding our categories. We have the portfolio to win in both developed and emerging markets. So turning to our areas and starting with Emerging Markets. As we said at our December event, we expect the strong trajectory to continue with high single-digit growth over many years. The number of consumers able to buy our products increases every day. And in many ways, we're only just touching the surface. Consumption patterns are changing fast, supported by the growth of households that own dishwashers and an increasing number of consumers paying much more attention to their health. We have 3 clear priorities for the year ahead. First, to increase penetration in mature categories, driving our distribution strength to reach more consumers through efficient and digitized execution in India and Sub-Saharan Africa and to continue our success of expanding into new categories in China. Second, to develop nascent categories. In December, our Emerging Markets President, Nitish Kapoor, spoke about growing levels of dishwasher penetration and our focus on rolling out our self-care portfolio across many parts of the area. This is working well with Finish and Gaviscon both growing double digits in 2025. Finally, to scale up the next tier of countries. We're already seeing very strong double-digit growth across a number of markets that are small today, but they have very high potential. We will continue to drive executional excellence by increasing OTC medical expertise in Latin America, making our sales teams in Africa more digitally enabled and modernizing our go-to-market capabilities in ASEAN. Next, turning to Europe. Our performance in 2025 was impacted by the challenging market backdrop, a slowdown in our categories throughout the region and weak seasons. We expect consumer sentiment to remain weak, and we've already taken actions to improve our competitive position with early positive share results. And while the season has continued to be soft in Q1, we have maintained our market share, and so we're well positioned looking forward. Our priorities in Europe are, therefore, to capture trade-up and premiumization, and we're doing this. Our highest tier dishwasher tab, Finish Ultimate Plus all-in-one grew double digits across Europe in 2025, driven by the formula upgrade. Competition will remain tough, but the mix opportunity for us remains. Next, we will drive category expansion through innovation. We will continue to successfully roll out Durex Intensity as well as launching Nurofen mini liquid caps into a number of new markets. And finally, we'll take steps to strengthen our competitive position. A big focus will be on the pharmacy channel, working with pharmacists on product education and by better equipping our sales force with improved technology. We will also strengthen e-commerce and tailor our North America omnichannel best practices for Europe. And then finally, North America. I believe this area has great opportunity for us. 2025 saw good progress, and we're encouraged by the momentum we saw through the second half. Our nonseasonal business is strong, outperforming low single-digit category growth, offset by the weaker seasonal OTC. The investments we're making in our supply chain and in our iconic brands are strengthening our platform for further growth in 2026. Our priorities will be to expand our premium categories. We built a strong track record of category expansion, moving into laundry and air sanitizer with Lysol into lozenges and pediatrics with Mucinex, and there is much more to come in 2026. We will work closely with our partners to deliver customer-centric growth. This means greater online and omnichannel focus and continued focus on winning in the club channel. Innovation and digital execution are helping us do this, whether it's through exclusive SKUs, pack sizes and variants for specific retailers or working together with quick commerce partners to accelerate and broaden access to our brands. And finally, we want to deliver consistent operational excellence. We've seen improved performance in Lysol wipes in 2025 as we invested in our largest U.S. factory in St. Peter's, and this will support greater consistency in 2026. We will also continue to invest in our supply chain in North America with our Wilson, North Carolina site moving towards operational readiness by 2027. And there's more work to do, but the future is an exciting one in North America. Moving to our seasonal business, which represents right around 12% of our core portfolio. The past few years, we've seen the natural volatility that we all associate with this category, but it doesn't change the attractiveness or strategic importance of the portfolio. Even after a couple of weak seasons, the upper respiratory category has still grown at a 5% CAGR from 2019 to 2025, supported by strong macro tailwinds from an increasingly health-conscious consumer base. When viewed through a longer-term lens rather than just a 1-year basis, the trajectory is good. Strepsils delivered a 7% CAGR between 2019 to 2025, while Mucinex grew 5% in the same period. These are 2 of the highest gross margin brands in the portfolio. The strength of these brands is underpinned by leading brand equity, superior claims and a consistent track record of innovation. Part of our excitement for 2026 in North America is around Mucinex. This is a brand with a great history of innovation, powering growth. This slide shows you that it has delivered a number of firsts over a number of years, and I'm proud to say that we're going to continue this strong track record in 2026. Mucinex 12-hour Cold and Fever will be launched later this year. It is the first and only 12-hour cold and fever multisymptom remedy in the market. This is a real breakthrough. It lasts 3x longer than other cold medicines from just a single dose. It took us 15 years to develop. It's the first FDA-approved new drug application in the upper respiratory category in over 15 years, and it's our first approved NDA. So when I talk about superior innovation, this really is an excellent example of our teams delivering, and we're doing this right across our portfolio and all around the world. This slide shows some of the other launches we've delivered in 2025. Innovation is integral to our ongoing success because it enables us to grow our categories, it strengthens further loyalty to our brands. It captures more consumers, and it drives pricing and ongoing premiumization. The investment that we've been making in R&D will ensure that our pipeline remains strong to underpin a steady stream of launches in 2026 and the years ahead. As many of you know, we started our series focus on educational events last spring. For 2026, I'm pleased to announce our next 2 events. On the 14th of May, we will showcase digital science with our first virtual event where our digital and R&D teams will come together to show how we're applying new digital and AI technology to innovate faster and better. And then on November 19, at our new office in New Jersey, we will host our first event in the U.S., showcasing our North America business. So there's a lot to look forward to in 2026. Shannon took you through our guidance for 2026, and I want to reiterate our confidence in delivering on our medium-term ambitions. Our strategy is focused on positioning Core Reckitt to consistently deliver 4% to 5% like-for-like net revenue growth alongside annual EPS growth. Last year, we saw a tough consumer backdrop, and 2026 doesn't show much sign of improvement, especially in Europe. However, I'm confident that our portfolio, geographic footprint, executional excellence, combined with continued investment and innovation puts us in a strong position to deliver our targets. So in summary, we achieved a lot in 2025. The transformation of Reckitt is well underway. We've simplified the portfolio. We've reduced costs. We've expanded margins, and we've invested behind our brands to accelerate growth. We have iconic brands in categories with decades of runway for growth. We have the innovation pipeline, the executional capabilities and the financial model to win. Core Reckitt is built to deliver sustainable profitable growth year in and year out, and that's what we're focused on doing in the year ahead. Thank you for listening. Shannon and I will now be happy to take your questions. Nicholas Ashworth: Thank you very much. And yes, so as we said at the beginning, we'll take questions in the room first and then we'll go online. And if you're watching through the webcast or listening through the webcast, then there's Ask a Question box. So please put the questions in there and they'll come through to me and I can read them out. To start in the room. James got the first. Wait for the mics as well, I should say, if you can introduce yourselves. James Jones: It's James Edwardes Jones from RBC. Two questions, if I may. Obviously, you're not giving explicit margin guidance for 2026. Can we interpret your comments as being that margins for Core Reckitt are likely to decline in 2026? And within that, can you give any indication on brand equity investment sales whether that will go up to support all those innovations you're talking about? Secondly, you said 51% of your top CMUs are gaining or holding share. I'm not sure if that was Q4 or full year. So clearly, 49% are losing share. Is that something we should be concerned about? Is there any intensification in the competitive environment? Kris Licht: Do you want to handle margins? I can do the share. Shannon Eisenhardt: Yes. I'll start. Okay. So from a margin standpoint, we exited the current year at 24.9%, which is what we shared in the release this morning. Obviously, when you think about it from the group level with the Essential Home divestiture, that will be a positive tailwind to our operating margins in 2026 just because it's a lower profit business that we're divesting. We will, however, be facing the stranded costs coming from Essential Home. And so what we outlined was that we expect to largely offset those stranded costs with the Fuel for Growth program in 2026. So the expectation would be that operating margins will increase. However, the amount of increase is obviously dependent on how much of those stranded costs we offset within 2026. We're confident as we then head into 2027 that will more than offset those costs, and that's why we also changed the guidance for the Fuel for Growth program to now get below 19% as we move forward. James Jones: Shannon, just to check, so operating margins for the group, you expect to increase, but not necessarily for Core Reckitt. Shannon Eisenhardt: For Core Reckitt, I think it will be the same dependence around exactly how much of those fixed costs we offset because we have to metabolize that within Core Reckitt, obviously, going forward without Essential Home. From a BEI standpoint, we remain very consistent in the fact that our intention is to be growing BEI as a percent of net revenue year-on-year. We believe it's important to be investing behind innovation. So we'll continue to focus on that in 2026 as with any other year. Kris Licht: On your question on market share. So 51% it's a full year number for the CMUs. One of the things that happens when we have a weaker season is some of our self-care brands that are highly efficacious and medicated and premium lose a bit of share. Conversely, when we have strong seasons, they gain a bit of share. So we did see Mucinex suffer some share loss during the year because of that weaker season. Mucinex is a really big CMU. If you consider that effect, how we're running is okay. Obviously, I'm not happy unless that number is 60% or higher. But with a weaker season, we know and expect that that's a headwind on share, and it's temporary. Jeremy Fialko: Jeremy Fialko, HSBC. So a couple from me. First one is, can you delve a little bit more into Europe and what's going on there? Because you talked about the markets being broadly flattish at the end of the year. Obviously, you were down somewhat more than that. So talk about why there's that difference in the market, what the sort of the seasonal bit there is and how you think you can get at least that back to, let's say, around flattish or into positive territory during '26, your confidence in that? And then secondly, maybe we have a bit of a follow-up on this margin question. If we think about some of the other components of margin. So for example, would you expect some -- any progress in gross margins over the course of the year? Would there be any leverage as other factors beside this sort of fixed cost versus this -- fixed cost versus stranded overheads point? Kris Licht: Let me tackle Europe first, and I'll hand it to you. Look, the first thing I'll say is we had a tough quarter in Q4 in Europe. A part of that was the season being weak, as we talked about. And so that's sort of quite understandable. And obviously, we hope that the next season will not mirror that. The other part of it is a very competitive environment, slowing category growth to broadly flat growth in our categories in Europe and a more competitive environment. So more promotional activity, deeper promotional activity. In that environment, we need to stay focused on being competitive, but we also have to strike the right balance. And some of the promotional activity in Europe at the moment, we feel is excessive. So we saw a return to what we would say was normal promotional activity last year after the period of time when there was almost no promotions when we were all passing on the COGS increases, the unprecedented COGS increases. But now the promo has gotten to a level that we think is probably not sustainable. However, we are very focused on being competitive. We're very focused on striking that balance, and we have taken some actions, and we're seeing some good early share results as a consequence of that. However, I would say that Europe will likely remain tough. Everything that we see in terms of consumer behavior, category dynamics and really the outlook for growth in Europe is not particularly strong. So that's why we were clear and even in -- when we discussed our guide. We're setting that guide knowing that Europe will be a tough marketplace to operate in and will be highly competitive. But we have a portfolio that can handle that. I think the point of really the 2025 results that we're showing is, yes, Europe was tough. Yes, we had a weaker season, but look at what we delivered in terms of top line growth. So I think that speaks to the strength of our company. Shannon Eisenhardt: Yes. Do you want me to answer the second? Look at that Nick was not going to answer your second question. So the other components from operating margin, I think I'd call out -- I mean, gross margins, we've been pretty consistent in discussing over the past 2 years that we have sector-leading gross margins. We're not looking to drive significant expansion there, particularly given the increased investments we want to be making in supply chain. You saw in the current year, we did end up expanding gross margins by 10 bps. But if I think looking forward, I wouldn't change the general theme that we're not looking to drive expansion in gross margins. I think the only other driver I would call out is obviously geography mix plays a role. You can see the various profitability levels across our geographies. And so we've talked a fair amount around the fact that we do expect to see developing markets deliver more in 2026. And so that would obviously roll through as well from an operating margin standpoint. Jean-Olivier Nicolai: Olivier Nicolai from Goldman Sachs. Two questions for you. First, a quick follow-up on Europe, perhaps on auto dish specifically, since you mentioned high promotional activity in end of '25. How much room do you see for premiumization in the category there? And do you think you've reached somehow the end of the journey in terms of how much you can premiumize that category auto dish? And then secondly, perhaps for Shannon, on free cash flow delivery, it was down year-on-year, reaching GBP 1.7 billion. You mentioned the higher cash costs associated with Fuel for Growth and the CapEx that led to about 70% free cash flow conversion. What are the building blocks for 2026? And how can we expect the free cash flow conversion to improve from there? Kris Licht: So just on Europe, I mean, I said a few things already, but auto dish is actually the category that's most promotionally intense to your point. Premiumization is entirely doable. In fact, we did really well with Finish and our ultimate all-in-one range, which is the most premium offering we have, and that grew really strongly in the year, and we will continue to fuel that. The tiering that we run and moving consumers up that ladder, that's absolutely critical in our playbook, and we'll continue to run it. And we're seeing no signs that, that can't work. I think the promotional intensity is really more on sort of base products, and that's where we're seeing that. And again, I hope that we can return to a more rational environment. I think right now, the consumer is under a lot of pressure. Retailers are wanting to provide great value, and some of our competitors are promoting in very deep rates, and we're just trying to strike that balance. The thing about Finish that's also important to remember is we have a good, strong business. We're market leaders in Europe, and obviously, we'll defend that position. But at the same time, the runway for growth for Finish in emerging markets is the exciting part for this franchise. So we'll continue to premiumize and innovate in Europe, and I think that will deliver good results in a tough environment, but I'm really very focused on making sure that we win in emerging markets because that is the future growth for the franchise. Shannon Eisenhardt: So for free cash flow, the impacts you referenced in 2026 around the one-off restructuring costs as well as the heightened CapEx spend, I would expect those to continue in '26 and '27. And so we'll exit that restructuring program at the end of 2027. From a CapEx standpoint, I'm sure you saw the guide for '26 was around 4%. And so a higher guide than last year, but consistent with how we ended up spending last year. I would expect the restructuring costs, as I said, roll off when we enter '28. The CapEx, I think we intend to continue to be investing for the foreseeable future at that higher level of CapEx. From a free cash flow conversion then, I think you'd see it around similar levels in '26, '27. And then we would expect once we're through the restructuring program that free cash flow conversion would get back to more normalized historical levels. Tom Sykes: Tom Sykes from Deutsche Bank. Just one question, firstly, on Russia. How much is Russia now of your sales and I guess the ecosystem that supports into Russia? And how much would that be of Intimate Wellness, please, which is obviously growing quite quickly? And then just sort of further on that CapEx point, could you give a feeling for what the geographic split between EMs and DMs on the CapEx is because your D&A to sales that you give in the release for the EM business is relatively low, it looks like. So I was wondering how hot are you actually running the EM businesses? And how quickly can the CapEx actually give you more capacity in EM to continue that growth, please? Kris Licht: Okay. Just on Russia. So what I can share with you, we've shared this before is Russia today is part of our MENARP business. It's about 15% of sales for Core Reckitt. It's -- for Emerging Markets and Core Reckitt. Russia is not a driver of growth. It's not a place where we're investing, and this is what we've shared before. And so the growth performance you're seeing is not -- there's no contribution to that from Russia. So it's not significant, including for Intimate Wellness. Shannon Eisenhardt: Yes. Then on CapEx. So expect to spend around 4% of net revenue on CapEx. Within that, when you think about it, the majority of that is supply chain CapEx, manufacturing CapEx. When we look at how that splits across our geographies, I'd say it splits I'm not going to say evenly, but it's across all of our geographies. So we've talked around the Taicang facility in China has been a place within developing markets where we've been investing CapEx. We've just overtaken or Harald, our Chief Supply Chain Officer, overtook an entire review of our manufacturing footprint around the globe, and we'll be spending across all 3 geographies to support growth. So we've talked about the Wilson facility in North America, which will be a significant source of CapEx spend, but it will be spread across both developed and developing markets. Edward Lewis: Edward Lewis from Rothschild & Co. Redburn. A couple of questions. I guess just on the first year that you've done the change in the organizational structure. And clearly, that benefited the emerging market business with the strong results there. Can you just talk about the impact that's had on the developed market business, Europe and North America, where obviously contrasting performance is relative to the emerging markets. And then, Kris, you mentioned about bringing omnichannel capabilities in North America into Europe. What sort of opportunity is that? Could you elaborate further, please? Kris Licht: Sure. So let me start with the organization. Look, I'm very pleased with the way the new organization is functioning, but it's also year 1. So I think it's important to know that there's more benefits that will come from the simpler organization that we have now. And obviously, we have more scale in our markets when we are not split into GBUs, and that's a benefit that will keep paying off for us. Emerging Markets was one of the main reasons why we changed the structure because they were -- they didn't receive the level of focus that I think is important for them to receive. And obviously, we can see what happens when we set them up for success like we've done in China and India, but we want to do that in many more markets. This organization facilitates that. So very pleased with that. Europe went through a lot of change last year. And obviously, going through a lot of organizational change takes up some time, some capacity of the organization, but that's behind us now. And so therefore, one of the reasons why we believe Europe will be able to demonstrate improving performances because they have that stability and they have greater scale in what they're doing in a number of markets. In North America, we're actually quite pleased with how the business is doing. So I mean, recognize that it's not quite the growth rate we're realizing in Emerging Markets, but it probably won't be, but actually, we're outpacing our categories. And as we shared, the nonseasonal business, 70% of the business is doing really well and I expect it to do really well this year. And then with the innovation behind Mucinex, I think we'll see a strong year from North America. That's my expectation. They are an energized organization at this moment. We were actually just with them and spent a lot of time with the team there, and they're fired up. And I'm very pleased with what I'm seeing there. And I think we're laying the foundation for very good performance. So North America will definitely also benefit and is benefiting. And as you said, now we have to see the benefits come through in Europe, too. Omnichannel. So omnichannel is really the name of the game in terms of how increasingly our business operates. Obviously, we have very sophisticated capabilities in China, and the business there has really moved quite heavily online. The vast majority of the business is now online. In North America, it's been a more measured evolution, I would say, and the majority of the business is certainly still offline in the U.S. But leading retailers are now operating in an omnichannel way, right? So you're seeing many of the retailers that are succeeding are really running multiple fulfillment models and relatively seamlessly moving across the screen in the store and combining these 2. So that means that we have to work with them in that way, too. So we can't do the traditional thing that we did where we had a separate team doing e-commerce and separate investments and separate P&Ls. And now we have to unite it and we have to run optimization and growth initiatives across these platforms seamlessly. So we have to activate online, offline in a very cohesive manner. And the U.S. is ahead of Europe on this dimension. So European retailers are certainly investing in this space, but they're not as advanced as the leading retailers in the U.S. And so that's why we can take what we do well in the U.S. because we really are quite successful with the leading retailers in the U.S. on this dimension. And so we want to move those best practices to Europe. And we'll do that gradually as the trade landscape in Europe evolves and gets more advanced. Unknown Analyst: It's [indiscernible] from RBC. It's a question for you, Shannon. So Reckitt's share is not very cheap anymore. And with the level of leverage at the moment and the planned spending on CapEx, what's your view on share buyback going forward? Shannon Eisenhardt: I won't address the not very cheap comment. But on the share buyback, look, we view the share buyback program as a really important lever in how we return value to shareholders. And we've talked pretty consistently since that started in October of '23 around the fact that we view it to be an ongoing component of how we think about capital allocation and of how we return value to our shareholders. And so we mentioned today the fact that the next tranche of our already announced program will be announced imminently to finish up that program. And then my expectation would be that it will be an ongoing program. Now we've also talked that the magnitude of the program can vary. And so that can be impacted in line with our capital allocation principles around our net debt ratio and other uses of cash, but we view it to be an important component. Nicholas Ashworth: Great. So we have a number coming online. [Operator Instructions]. I'm just going to work through an order. So starting with Feng at Jefferies. She's got 3 questions. The first one was around operating margins for Core Reckitt. I think you've already answered that one, Shannon. So I'm going to move on to, can you talk about the price/mix for Core and/or Emerging Markets, specifically, how much of EM price contribution reflects underlying pricing versus the VAT increase on contraceptives? And have you secured the California WIC contract? And if so, when should it start contributing to Mead volumes and revenue? Shannon Eisenhardt: All right. I'll do emerging markets price/mix. So we've talked around the fact that our ambition is that price/mix, we want to drive balanced growth. So we want our growth across all of our geographies to be balanced across volume and across price/mix. Specific to emerging markets, if you look at the first 3 quarters of the year, our results were very balanced across volume and price. When you look at the Q4 number, it's important to note a couple of things. One of them is the fact that we did have a realignment of some of our marketing investments where we moved that from an accounting standpoint out of trade spend and down into BEI. And so that was a onetime contributor of seeing more price/mix driving growth. We did also, and I think she mentioned it, we had condom pricing in China ahead of the new VAT policy. And so we took that pricing a little bit early. And so that influenced. And then we had some positive mix coming through India as we look at the Dettol products that have been driving growth for us in India. And then California WIC. Kris Licht: California WIC. So that's a contract we secured last year, and it is contributing. I think that's all we can say about that. Nicholas Ashworth: Okay. So the next, I've got a couple from Callum at Bernstein. The first one, I think we've already answered, it was around the free cash flow conversion, a step down to 71% this year. And what's the outlook? And I think you've already talked about that, Shannon. So then the second one, strong progress of Fuel for Growth in 2025. Can you help us understand the 19.4% fixed cost in 2025, what does it look like if you adjust for the Essential Home divestiture? Shannon Eisenhardt: I mean I think the answer is that we haven't been sharing a specific number around stranded costs for Essential Home. What we're really focused on is getting to the target we set out, I guess, 18 months ago around getting to 19%, which we're seeing strong progress. It's coming in faster than expected. It's coming in more efficiently than expected. And I think a reflection of our confidence came through today and the fact that we've now increased our ambition that as we exit 2027, we'll be below 19%, which obviously reflects more than offsetting any stranded costs from the Essential Home transaction. Nicholas Ashworth: Thank you. Next up from Guillaume, UBS. And Guillaume, I can see that you've sent me through a few. So thank you. I'm going to start with the -- I'll start with the first 2 and then come back to some of the other ones later. The first one then on Latin America. Region's like-for-like was down mid-single digits in Q4. Can you shed some light on the main drivers behind this decline? And what do you expect for the year? Is it going to be similar challenging trading conditions or some gradual improvement? And then second, on the tax rate, you're guiding to around 27% this year. This is the second year in a row where tax is increased. What's driving the uptick? And how should we think about it over the medium term? Kris Licht: So let me answer on Latin America. So obviously, we run a seasonal OTC business in Latin America, too. So some of that weakness is directly impacted by a weaker season. The other thing is it is a subdued trading environment, and it is highly competitive in some of our categories. We're also changing a couple of things about how we enhance our go-to-market system. And so I fully expect Latin America to get back to growth, but those are some of the drivers why we've seen the weakness. Shannon Eisenhardt: Then from a tax rate standpoint, so it's important to remember, we exited 2024 with what we had called out as an abnormally low tax rate. I think we were around 22%. So for 2025, we'd guided that we'd be 25% to 26%. We came in a bit under that with 24.7%. 2026, guiding the tax rate at around 27% is just reflecting that we're getting -- returning back to our more structural tax rate. And so there's no specific driver other than the fact that we're coming off of an abnormally low base in 2024. Nicholas Ashworth: Perfect. Thank you. Diana Gomes at Bloomberg. This is a question around the current geopolitical events and the impact on gas and oil prices. So have you talked about hedging levels for 2026? How should we think about gross margins as we move through the year? Kris Licht: So I think the first thing I'll just say on that, and maybe you want to talk about hedging. I think the most important thing for us to say on current events is we're watching it very closely, but our overwhelming focus right now is the safety and well-being of our team members in these markets and their families and anyone that's impacted by it in our organization. And obviously, we hope for a resolution soon. Shannon Eisenhardt: Yes. I mean I would just say we obviously have an active hedging program to try and mitigate risk and to provide some level of consistency or ability to forecast gross margins. As we head into 2026, we hedge out 12 months, and we have about 55% of exposures hedged at this point in time. And so we'll continue to run that program and to manage volatility as much as possible. Nicholas Ashworth: Thank you. So next up from Warren at Barclays. A couple of questions. So the first one, I actually think has 2 parts. On the modeling for 2026, what associate contribution would you expect from Essential Home? And on 2026 fixed costs, I assume they go up before they go down to below 19% in 2027. So can fixed costs be above 20% in 2026? And then how much more below 19% could they get to in 2027? So I actually apologize, I'm not sure that was 2 questions. I think there's a few more. Shannon Eisenhardt: Yes. I would say 5 questions from Warren. Okay. I'll do my best here. So on the associate contribution to EPS, we're not providing a specific figure. I think the variables that would be important to think through as you model that would be, we obviously shared last year the profitability of Essential Home. That level of profitability will change as that comes under new ownership. I think it's important to remember that it will be highly leveraged, and that will have an impact. And then that we're a 30% shareholder in that business. And so to reflect that as you think through the modeling. From a fixed cost standpoint, the question was fixed costs, will they go up before they go down. And so I think the answer is yes, consistent with the language around Fuel for Growth largely offsetting, which would imply it doesn't fully offset. From a number standpoint, I'm not going to provide a specific number of guidance on fixed costs for 2026. But I will say that we'll be below 19% as we exit 2027. Nicholas Ashworth: And then a second one from Warren sort of. It's on the volume price mix. And so some of our peers put mix into volume. Can you, therefore, try to give us a feel for what mix is versus pricing in Q4, given volume was a little bit weaker. But then, as I said, others put mix into volume. So is there an argument that we should be doing likewise? Shannon Eisenhardt: I saw Warren's request bolded and underlined in his note this morning. So it's on my list of things to talk to Nick about. I mean I don't think we have a specific mix number to share. We've talked around the fact that we want to drive balanced top line growth that we would expect that to look like a point or 2 a year from volume, a point or 2 a year from price and a positive impact from mix. Kris Licht: I think the only thing to add is in emerging markets, we are seeing really good mix benefits. And that's a function of the innovation. It's a function of the fact that we're driving growth in categories that have better structural economics than the base business. So there's sort of a benign trend there that we think will continue, and it's significant. Nicholas Ashworth: And coming back to Guillaume again, a couple more. Thank you, Guillaume. So on condoms in China, do you expect a material impact from the recent change in VAT on category growth? And so how could this affect Durex's momentum in 2026? And then on brand equity investments, it increased 120 bps as a percentage of sales last year. Which brands and geographies got the lion's share of this increase? And are you satisfied that you're getting the right returns on that incremental investment? Kris Licht: So on the VAT change and the sort of outlook for Durex, I fully expect Durex to have a good year in China. Durex has been growing really well in China for a very long time. I mean it's a very steady pattern. And so obviously, when you have changes flowing through like the change you're asking about, it can have short-term impacts and a little bit of upside and a little bit of downside in the next quarter, but it's not going to change the trajectory of Durex performance. And I think Durex will do well in China in '26. Shannon Eisenhardt: Yes. From a BEI standpoint, I mean, I think the best way to think about where are we putting incremental BEI is we always want to prioritize innovations and making sure that as we launch new innovations that those are fully funded and that we're really driving to make sure those launches are as successful as possible. Beyond that, we look across all 3 geographies and really go sort of think of it as going brand by brand, country by country to understand where are we investing in line with what we view as the minimum levels of BEI that we'd want to be spending and where are we below that and then deciding where it makes the most sense to put the incremental investment each quarter, if not more frequently. And again, our intention is that, that BEI as a percent of net revenue should be increasing year-on-year. Nicholas Ashworth: So just a couple left. [Operator Instructions]. So a couple from Celine at JPMorgan. Firstly, on China, I'm not sure whether we might have answered this already. Have you seen higher orders ahead of the VAT implementation in condoms? And what has been the impact on pricing that you mentioned? And then on Mead, you mentioned you were looking at all strategic options for Mead. Can you help us understand what those are and any time expectations around litigation? Kris Licht: So China, I mean, yes, we saw a little bit. But again, like I just said, we're not expecting this to be a significant headwind for Durex in 2026. For Mead, I would say that we've been very clear. We're looking at all strategic options, and we've been consistent about not setting a time line for that so as to give ourselves the flexibility to do what's best for shareholders. And of course, as you know, we're working to resolve the litigation. So the -- today, we don't have a lot of new news on that. I think the thing to maybe just focus on is that Mead Johnson is trading well. And Mead Johnson had a good year, and we expect them to have another good year this year, and that's a positive. Nicholas Ashworth: And this is the -- for now, the final one I have online. So it's from Juan Rios at Santander. Again, a couple of questions. Firstly, on Mead. There's been some turbulence in infant nutrition market recently. Could you comment on whether this has any knock-on implications for the Mead Johnson brands operationally and from brand perception? And secondly, regarding issues in the Middle East, can you provide some color on how you're thinking about the potential impact on your business? Kris Licht: So I think it's easy to answer the first one because it had no impact on us. So we were not involved in it, and we haven't seen any commercial impact because we don't operate in the markets in question in any significant way. The geopolitical events, look, it's too early for us to really assess where this is going. The range of possible outcomes, as you know, the uncertainty is extremely high. It's developing live, and we're just paying a lot of attention to what's going on, obviously, mostly focusing right now, as I said before, on the safety and well-being of our employees and of course, protecting our assets, our business. But it's too early for us to quantify any impacts. Nicholas Ashworth: That was everything online. Anymore in the room? We've got through a lot. Perfect. So look, with that, we will call it the end. Thank you very much for all the questions and interest. And I will just highlight the next slide, which is going to come up on the screen as if by magic. The next focus on events. The next one will be May 14. And hopefully, we will see many of you then. Thank you very much.
David Paja: Okay. Good morning, everybody. I'm delighted to welcome you to today's presentation covering our financial year 2025. Let's move to the first slide. This is today's agenda. First, I'm going to take you through the highlights of the year. Hannah will then present our financial performance. And after that, I will give a strategic update, including our new divisional structure, our growth drivers and our updated medium-term targets. After the summary and outlook, we'll take your questions. So let's start with the highlights of the year. 2025 has been my first full year as Chief Executive of the group, and it has been a year of significant evolution for the business with 2 significant M&A transactions, resilient trading in a challenging market and great progress in our growth initiatives. As a result, today, we announced renewed and more ambitious medium-term targets. In 2025, we have acquired OrthoLite and divested our U.S. Yarns business. We have demonstrated once more our ability to gain market share, reflecting the benefits of differentiators that our competitors cannot match. And our new target, organic adjacencies have added 1 percentage point to growth at group level. Finally, we have delivered a record level of free cash flow of $160 million. For reference, this is more than the free cash flow that we have delivered in the past 10 years combined, and it reflects the new and improved cash generation profile of the group following the end of U.K. pension contributions and the end of large restructuring activities. With that, I will hand over to Hannah to take you through our financial performance. Hannah Nichols: Thank you, David, and good morning, everyone. Now before I start, it's worth noting that the Americas Yarns business has been treated as a discontinued operation and is therefore excluded from the numbers presented here. I'm pleased to report that the group has delivered a resilient performance in 2025 set against a backdrop of macroeconomic and tariff uncertainty from the second quarter onwards. Revenue was $1.46 billion, flat on an organic constant exchange rate basis, comfortably outperforming our core apparel and footwear end markets, which we estimate were down low to mid-single digit for the full year. EBIT was $290 million, in line with expectations, and up 3% on an organic CER basis. Pleasingly, group operating margin increased by 80 basis points to 19.8%. And in the second half, we matched our strong first half performance organically despite challenging markets, showcasing the resilience of the group. Earnings per share was in line with expectations at $0.093 with higher EBIT offset by higher pension-related interest charges and the timing of the share placing in July 2025. The group generated $160 million of free cash flow pre-dividends, reflecting the powerful dynamics of high margins and low capital intensity and timing benefits from the OrthoLite acquisition. In line with our guidance, year-end leverage increased to 2.2x following the OrthoLite acquisition, and we expect leverage to fall below 2x by the end of 2026, underpinned by the cash-generative characteristics of the enlarged group. So turning to our margin performance. The group delivered strong margin expansion in 2025 with EBIT margin increasing by 80 basis points to 19.8%. As you can see from the chart on this slide, the margin improvement reflects pricing discipline as we successfully managed pricing pressures during the year and mix benefits with a focus on premium and sustainable product lines. In addition, our teams continue to focus on driving productivity, including procurement savings and operational improvement actions. Margins also benefited from strategic project savings, including the footwear division manufacturing site consolidation and the move of operations to Indonesia. In line with expectations, OrthoLite contributed to $11 million of operating profit in the last 2 months of the year. If we now turn to the divisional performance, starting with the Apparel division. At $769 million, revenue was up 1% on a CER basis. This was a strong performance in a year that started with market growth momentum but softened following the U.S. tariff changes in April with market conditions remaining challenging through the rest of the year. The division continued to gain market share, outperforming the core apparel threads markets, which we estimate were down around 3% in the year. This was achieved through a focus on delivery and service and supported by our flexible global manufacturing capabilities. The division benefited from favorable mix with year-on-year growth in premium thread sales and recycled thread products. In addition, there was good growth in the China domestic market, which requires high levels of operational agility to meet demanding customer lead times. EBIT increased by 4% on a CER basis to $156 million and EBIT margin increased by 60 basis points to 20.2%. The margin expansion reflects the benefits of the favorable product mix and pricing discipline alongside prudent cost control and an ongoing focus on productivity gains. If we turn to Footwear, at $440 million, revenue was 2% lower than 2025 on an organic CER basis. This reflected a period of growth until the end of April, followed by customers taking a cautious approach to ordering. And in the last few months of the year, we saw brands managing down inventory further in response to the uncertain 2026 outlook. As such, we estimate our core footwear end markets were down around 4% to 5% for the full year. Despite this challenging backdrop, the division outperformed with estimated organic market share growing to around 30%. The division also successfully maintained pricing despite downward pressures. EBIT was $105 million, flat on an organic CER basis compared to the prior year. The division delivered a strong EBIT margin of 23.9%, an increase of 40 basis points, reflecting pricing strategy and prudent cost control measures alongside operational actions taken in the past year, including footprint consolidation in Europe and the rebalancing of the division's manufacturing towards Indonesia. The acquisition of OrthoLite was completed at the end of October 2025, and 2 months trading are included in the 2025 divisional results. The 2025 full year profit performance for OrthoLite was in line with our expectations with above-market revenue growth and high levels of cash generation. Turning to Performance Materials. Now this is the last time that we will talk about Performance Materials in this format given the move to the 2 divisional structure. However, we are pleased with the improvements made in 2025. Revenue in the year was $256 million, flat on an organic CER basis, reflecting a return to growth in the second half of the year of 2%. Industrial revenue was 1% lower than prior year, with share gains in automotive thread, partly offsetting softness in other industrial end markets. The division also saw strong demand in 2 organic adjacency target areas: Safety Fabrics, which delivered 40% revenue growth in the year; and composite tapes for the energy market, which grew 21% in the full year after a particularly strong performance in the second half. As expected, EBIT was $29 million, an increase of 10% on an organic basis, with margin increasing to 11.3%. The organic margin improvement reflects the benefits of operational actions and the stronger second half trading with Q4 exit rate margins at 11.8%, approaching the bottom end of the medium-term targets set out in March 2025. In the second quarter, we exited from the noncore U.S. Yarns business, improving the quality of the portfolio with the divisional margin increasing 390 basis points, including Americas Yarns results in the 2024 comparator. In addition, the small acquisition of VizLite was completed in October 2025, accelerating our Safety Fabrics growth strategy. If we turn to the income statement, there are certain areas worth highlighting. At $2 million, exceptional items significantly reduced from 2024 with previous strategic projects now complete. Acquisition-related items included $27 million for the amortization of acquisition intangibles and $20 million for acquisition transaction costs, mainly relating to the OrthoLite acquisition. Finance costs were $41 million, higher year-on-year due to the impact of the 2024 U.K. pension buy-in payment and including $3 million of exceptional charges associated with acquisition loan financing. At 29%, the full year effective tax rate remains well controlled and in line with expectations. As a result, 2025 adjusted earnings per share was $0.093. The higher EBIT was offset by higher finance costs given the 2024 pension buy-in and the increased number of shares in issuance following the successful capital raise that took place in July 2025 to part fund the OrthoLite acquisition. And finally, given the full year performance and our confidence in the group outlook, we're pleased to propose a final dividend of $0.0228, resulting in a full year dividend of $0.0328, up 5% year-on-year. If we now turn to look at cash flow and leverage. The group delivered strong cash performance in 2025, generating $160 million of free cash flow. This reflects the low capital intensity of the group, a lower level of exceptional cash flows and the positive contribution from OrthoLite. As you can see from the chart, the working capital inflow in the year was $13 million, reflecting disciplined working capital management and a timing benefit from OrthoLite. Working capital as a percentage of sales was 11% in 2025. In 2026, we expect this ratio to return to a more typical level of around 12%. Capital expenditure was $32 million as we maintained a disciplined approach to investing in growth opportunities. We expect capital expenditure to increase to the $40 million to $45 million range, including the OrthoLite business, as we continue to allocate cash in support of our organic growth strategy. The exceptionals cash flow of $24 million included cash outflows related to strategic projects, which are now complete, and was significantly lower than 2024, which included $128 million of cash outflow associated with the U.K. pension scheme. Acquisition-related cash flows of $793 million, mainly relate to the completion of OrthoLite transaction at the end of October 2025. And as a result, net debt, excluding lease liabilities, was $815 million at the end of the year, representing a pro forma leverage of 2.2x, in line with our previous guidance. And given the cash generative characteristics of the enlarged group, we continue to expect leverage to fall below 2x by the end of 2026. And finally, moving on to modeling guidance for 2026 and beyond. Now I won't run through all the details on this slide. However, the main focus is to provide you with more color around the building blocks for the group cash flow in 2026 and the medium term. I've already touched on some of the guidance areas, including working capital and capital expenditure. In terms of the other areas to draw your attention to, it's worth calling out that we expect the effective tax rate to reduce slightly over the medium term given the benefits of the OrthoLite acquisition. In terms of OrthoLite cost synergies and integration costs, we're maintaining the guidance we provided at the time of the acquisition announcement, and we will provide you with progress updates as the integration progresses. In addition, in the appendices to this deck, we set out some indicative 2025 numbers under the new 2 divisional structure to assist you with your modeling going forward. So in summary, we've delivered a resilient performance in 2025 with strong cash generation, which sets us up well for 2026. I will now pass back to David to provide a strategic update. Thank you. David Paja: Thank you, Hannah. As I said earlier, I cannot understate the strategic progress that we've made during the year with substantial improvements and positive momentum. The reshaping of our portfolio has included the divestment of our U.S. Yarns business in June 2025, following the closure of the Toluca, Mexico facility in December 2024. These actions have removed slower growth and lower margin business from the portfolio. Notably, this action has enhanced group margins by 100 basis points, and it has enabled us to focus our investment on other businesses in the portfolio. In October, we completed the acquisition of OrthoLite for an enterprise value of $770 million, which has accelerated our strategy to create a leading Tier 2 supplier in footwear components by adding an exciting, high-growth and high-margin business to our portfolio. OrthoLite brings with it compelling revenue and cost synergy opportunities. I will share more on OrthoLite later. These significant changes have facilitated the streamlining of the group into 2 divisions, Apparel and Footwear, enabling us to reduce internal complexity and better align our underlying technologies. We have continued to take share. We delivered flat organic revenue during 2025, a year in which we estimate our markets declined by a low to mid-single-digit percentage. This proves again the resilience of our business model and our ability to grow faster than the market in all conditions. Our target adjacencies have delivered quickly, contributing 1 percentage point to group revenue growth overall, in line with our guidance. Especially pleasing this year was the growth from our Safety Fabrics, which I will come back to later, and energy tapes. We expect our revenue in these target adjacencies to continue to scale up over time as we expand the customer base and introduce new products. We have consolidated our divisional structure into 2 divisions. The former Performance Materials businesses of Personal Protection and Industrials, which accounted for 80% of PM sales, have been incorporated under Apparel. And the Telecom & Energy business, 20% of PM sales, under Footwear. We now have 2 divisions with technology cohesion, scale and strong operating margins. The Apparel division is predominantly focused on textile engineering with thread as the main product category and 2 exciting growth opportunities in Safety Fabrics and Coats Digital. The Footwear division is predominantly focused on polymer science with a more diverse product portfolio and OrthoLite as its largest business. This change provides increased focus and operational simplicity. Coats has a number of levers to generate organic growth in excess of 5% per annum on average through the cycle. We estimate that our underlying markets can grow on average 3% through the cycle. We will continue to outpace our markets by 100 to 200 basis points as the industry consolidates around fewer, stronger players. We have consistently gained share over the past few years. And in 2025, we have done it again in a difficult market context. Last year, we launched the initiative to grow in target organic adjacencies, and this strategy has already delivered 1% of group growth in 2025, which will continue as we scale up. Set together, this is how we will deliver more than 5% growth, 200 basis points ahead of the underlying market on average through the cycle over the medium term. Additionally, our strong cash generation provides us as we deliver with optionality to enter attractive inorganic adjacent markets as we did with OrthoLite. We continue to monitor companies with differentiated positions, a sustainability focus, cross-selling and cost synergy opportunities. This slide summarizes our key differentiators on one page. These differentiators are the drivers of our share gains. The Apparel and Footwear supply chains are very fragmented, but they are consolidating to cope with increase in product complexity, the increase in sustainability requirements and the changes in sourcing countries. Coats is in an enviable position to gain market share because we have the scale and capabilities to support our customers where it matters to them. At the bottom of this chart, you will see that the strength of our customer relationships is underpinned by our people and our culture of customer centricity. We have built deep trust with our customers through a track record of delivery over the years in any market conditions. Service is king for our customers, and this translates into the operational and commercial excellence focus at Coats. Customers value our high product quality and our ability to deliver it consistently from all our manufacturing sites, including accurate color matching, which is a key differentiator. And our investments in operational agility are paying off as orders are becoming more fragmented. Our service is also reflected in the way that our commercial and technical teams support our brand customers and manufacturers every day around the world to make the right product choices and improve their manufacturing productivity. At the top of the house, you can see our 3 key growth enablers. Our scale and financial strength allow us to invest more than other companies in sustainability in both products and operations, innovative new solutions and digital systems that make customer interactions more efficient and enhance supply chain transparency. This is how we win in the marketplace. Sustainability is at the heart of both Coats' and OrthoLite's strategies. Our sustainable thread portfolio grew 43% in 2025 and contributed to our share gains in the year. But we also drive sustainability in how we run our operations. In 2022, we set ambitious 2026 targets, and we are well advanced in many areas. Since 2022, we have achieved a 30% reduction in our Scope 1 and 2 emissions, ahead of our 2026 target of 22%. We have also achieved zero waste to landfill a year early. And women now occupy 33% of our top 150 leadership roles, ahead of our 30% target for 2026, a significant improvement as we continue to ensure equality for all employees. OrthoLite shares the same sustainability DNA with a similar focus on increasing recycled material content, developing breakthrough innovations like Cirql or making operations more sustainable. Our target organic adjacencies represent an addressable market of approximately $2 billion, growing at more than 5% per annum. We have increased the size of this addressable market from $1.3 billion to $2 billion since last year because we have added a new product category, high-visibility trims within Safety Fabrics. All these initiatives represent opportunities to offer new differentiated product categories to our existing customers, building on our expertise in textile, engineering and polymer science. In Safety Fabrics, we are bringing innovative protective materials to workers in hazardous jobs, combining premium protection with comfort and lightweight. In energy, we're expanding our range of highly engineered tape products that protects critical on and offshore pipeline applications. In Coats Digital, we provide to our apparel customers software products that optimize their production planning and costs. In Footwear, our woven upper technology, ProWeave, delivers increased performance and more design freedom with lighter weight. In lifestyle, we are extending our structural components offering from luxury to premium handbag customers. These 5 adjacencies, combined accounted for $45 million sales in 2025 with great momentum going into 2026. Let me give you more color on our Safety Fabrics initiative, which grew strongly in 2025. Safety regulation continues to tighten globally, and customers are demanding products that are not only protective, but also comfortable to wear. We already sell thread for safety applications, and we are now using those existing customer relationships to offer highly engineered fabrics and high visibility trims, leveraging our core know-how in textile engineering and polymer science and our cost-competitive supply chain in Asia. In the second half of 2025, we brought to market our latest innovation in protective clothing, FlamePro ARC, which offers superior protection against electric arc hazards. What sets this technology apart is that protection comes together with extreme lightweight and comfort, allowing workers the enhanced mobility and comfort needed to perform their roles. We also have a portfolio of high visibility trims, which can be paired with our safety fabrics, bringing life-saving identification characteristics in all types of ambient light, including no light. In the second half of 2025, we acquired VizLite, a small company with a lot of potential, whose glow-in-the-dark technology is already enhancing our portfolio. We combine it with our existing retro-reflective, fluorescent trims to create 3 layers of visibility in environments with reduced or no light. This technology has been specified for U.K. firefighters and has significant potential for growth in other parts of the world and other applications. The acquisition of OrthoLite is an excellent example of our strategy of making inorganic investments into adjacent markets. This high-quality business improves the quality of the group in terms of growth and profitability potential. OrthoLite is highly complementary to our existing Footwear business, creating a leading Tier 2 supplier of footwear components. In 2025, OrthoLite delivered full year profit in line with our expectations. So a good start. The complementary nature of these footwear businesses gives us the opportunity to create additional value from the acquisition in 2 significant ways. Firstly, we have identified $20 million of joint cost synergies, which we expect to deliver by 2028 through savings in joint footprint optimization with significant overlap in operational footprint and from strategic procurement initiatives, operational excellence and systems implementation. In 2026, we expect to deliver $5 million of these savings. In addition, there is significant overlap in our respective customer portfolios, route to market and leadership in sustainability. These commonalities present opportunities to accelerate growth through cross-selling as well as the development of joint innovation initiatives. This builds on our recent track record from the multiyear integration of the Texon and Rhenoflex footwear acquisitions in 2022. Innovation is at the core of OrthoLite. The adoption of open-cell foam technology will continue to increase in the core footwear market as well as positive mix given the shift towards molded insoles. But new OrthoLite products will also create additional opportunities in 3 adjacencies not served by OrthoLite until now, expanding our addressable market in insoles. In 2026, we plan to launch the first insoles made of open-cell foam technology with electrostatic discharge protection targeted at safety shoes. OrthoLite's technology will provide both comfort and protection in one insole. A leading European brand is currently testing the product with positive results. Within the core premium footwear market, we are also entering 2 new product categories. Using the Cirql technology, we have developed our first supercritical foam insoles, a solution that addresses requests from brands for a lower density, high rebound insole. These are aimed at the trail and road running markets and are also currently being tested by 2 leading brands. In parallel, we continue to assess the commercial potential and go-to-market strategy for the Cirql technology in midsoles, which we expect to complete in the first half. The third adjacency is very exciting as it perfectly shows how we can leverage the combined technology capabilities of Coats and OrthoLite to make technological breakthroughs. We have integrated in one product the comfort of OrthoLite's insoles with the performance of Coats' carbon plates, and we are aiming to launch this product starting in the aftermarket. This is just the beginning of the collaboration between our innovation teams, and we are excited at the many opportunities this may create. With the significant changes to the portfolio in 2025, we have looked again at our medium-term targets to ensure they remain appropriate. Based on this exercise, we have upgraded and simplified parts of our medium-term framework. We have maintained our above 5% revenue CAGR target through the cycle, expecting that the portfolio quality we have now will support a more consistent delivery ahead of the market. Our growth will be a combination of market growth of 3%, and our ability to continue to deliver growth ahead of the market through market share gains and target organic adjacencies. With the acquisition of the margin-accretive OrthoLite business and the associated synergies and with increased confidence in our business potential following the 2025 margin performance of 19.8%, we have increased our group margin target range by 200 basis points to 21% to 23%. Reflecting the contribution of OrthoLite, we have also increased our cumulative free cash flow target over the next 5 years from $750 million to $1 billion. This major step-up reflects the highly cash-generative nature of the group, including OrthoLite. We have also improved the quality of our measure of free cash flow, which is now defined as after exceptionals. This underlines how determined we are as a management team to drive cash generation for the benefit of shareholders. Finally, we have maintained our target of a strong double-digit EPS CAGR post M&A or share buybacks over a medium-term time frame. Our capital allocation strategy remains consistent. Our target debt leverage range is 1 to 2x EBITDA. We intend to allocate capital to support our organic growth, continue to deliver a progressive dividend and pursue disciplined M&A or share buybacks. With circa $1 billion of free cash flow generation over the next 5 years, we're excited about our future prospects, and committed to delivering EPS growth in excess of 10%. So to conclude, 2025 was a year of strong strategic progress with a resilient operating performance and where we outgrew our markets. While we expect our Apparel and Footwear markets to remain uncertain in 2026, we anticipate delivering organic revenue growth with easier comparatives as we move through the year. Our growth will be underpinned by our ability to outgrow the market. That said, we are mindful of the potential impact on demand and supply chains as a result of the conflict in the Middle East, which we are assessing. However, it is too early to provide an update. If conditions do prove more challenging, then the example of the past few years highlights our ability to adapt and the resilience of the group's trading. Importantly, we also expect OrthoLite to significantly outperform the underlying footwear market as its technology differentiation enables it to win new customers and share. We expect to deliver further adjusted EBIT margin expansion in the year from a full year OrthoLite contribution as well as from the modest organic margin improvement. Consistent with our enhanced ability to generate cash, we will have another year of strong free cash flow generation. We go into 2026 with upgraded medium-term targets, reflecting our enhanced portfolio of businesses and optimism about the future of the business. Thank you very much for listening. We're happy to take your questions now. Charles Hall: Charles Hall from Peel Hunt. David, could you just talk a little bit more about the adjacencies, that $2 billion total addressable market. What do you see as a realistic share of that, say, on a 5-year view? How much of that would be organic? How much of that would be M&A? And how do you see the margin profile of sales in that area? David Paja: Thank you, Charles, for the question. So we're pretty excited about the opportunity of growing into that $2 billion market. Obviously, our starting revenue last year was $45 million, with a good growth from the year before. But we see this driving at least 1% of organic growth at the group level going forward. This is based on just organic moves. I mean most of those efforts are organic. They are obviously built into our framework. And we believe that those adjacencies can deliver margin rates in line with our group medium-term targets. So obviously, there's going to be a scaling-up effect over maybe the first few years, but we see the margin potential there to reach that group level ambition. So look, overall, probably we always look at -- also check M&A opportunities. And obviously, we're exploring these spaces, but most of our focus is on organic work right now. Charles Hall: Got it. And then on the tariff situation. Obviously, we're in a year in now to tariffs. Has everything settled down in terms of supply chains? And do you see any changes as a result of the sort of recent tariff changes? David Paja: I think the direction of travel is quite clear. It was already kind of clear at the mid of last year. And it's fairly settled right now. So we don't think there's going to be a huge change in terms of where things are going relative to where they stand now. Obviously, we are monitoring the situation in the Middle East, but that's going to create probably more disruption in the near term. That disruption will require operational agility, which is one of our strengths. So we're ready to handle that as we've done in the past few years. And there might be a little bit of, again, shift of volumes temporarily maybe away from the Middle East as well, going back maybe into other locations. But strategically, in terms of overall market direction, we think it's quite settled and the near term, it will just require agility, which we are ready for. Mark Fielding: Mark Fielding from RBC. I've got 3 questions, but I'm going to ask the first 2 together and then I'll come to the other one because they're sort of linked. Firstly, can we talk a little bit more about OrthoLite's performance so far? I mean, obviously, you said it was performing ahead of the market. But I mean, the implication of your sort of 5% decline in Footwear in the second half as the market is down high single digits. So I'm just -- a bit more clarity on whether OrthoLite is stable, growing or still actually down a bit with the market, just better than that market and how we think about that evolving this year? And the reason that ties to my second one was, I mean, quite sensibly, your medium-term targets, you've sort of dropped the divisional part. But historically, you were targeting 3% to 4% growth in Apparel and 7% to 8% in Footwear. So do we still think about that as the sort of medium-term split? Or is there any changes because you've slightly rejigged the divisions, et cetera? David Paja: Yes. So I'll start with OrthoLite. OrthoLite substantially outperformed the market, the underlying footwear market and also outperformed our own Footwear business last year. And if you recall, that's because they have a couple of growth levers that we don't have in the rest of our business. One is technology penetration. Open-cell foam insoles are increasing in adoption within the footwear market. And the other driver is their shift from flat insoles to molded insoles, which raises their average selling price. So these 2 drivers are helping them deliver substantial growth ahead of the underlying market. Having said this, they also saw a sequential impact from the market decline that happened in the back end of the year. As Hannah mentioned, we saw some destocking in the footwear market in the last couple of months of the year. OrthoLite felt the same trend. But we see, as we are now obviously in Q1, we start to see kind of a sequential -- some level of sequential recovery from what happened at the end of Q4. And we expect OrthoLite to deliver strong growth ahead of market this year as well. Maybe to your second question, over the medium term, we still expect Footwear to be a higher growth division than Apparel. We think the fundamentals in there support a higher underlying market plus with the addition of OrthoLite, we think that, that's going to act as another incremental, I would say, accelerator to our performance within that market. So we see that medium term still the trend. Mark Fielding: Okay. And then just my third question, the high visibility trims business, just so I understand that a little bit. I'm assuming the market structure is relatively similar to others as in that you sell to a garment manufacturer who then includes it in the garments. And then I suppose I'm just checking, what does it mean that you are specified for U.K. firefighters? Does that mean they all have to have it? Or it's just something that could be used? David Paja: Yes. So the high visibility trims is a product that makes a lot of sense for us. And actually, for those who haven't noticed, [ Chris ] is wearing one of our products. So typically, you have -- in that particular product, that's our fabric. So it's a protective fabric. It has our thread and it has the high visibility trims. So that shows how you can go for that particular application with very complementary offerings. And by the way, as I said in my remarks, it just builds on our capabilities in textile engineering and polymer science. So it's at the core of what we know how to do. With regards to the question on VizLite, in particular, it's now specified on all U.K. firefighter applications. So that's a technology, a fluorescent technology that glows in the dark. So in a pitch dark room or when there's heavy smoke and you can see anything, this technology will glow by itself without the need for any light input. So it's a very interesting IP. That's what attracted -- what made it very attractive to us. There's about -- even though we specified it as a technology, there's only about 30% of U.K. firefighters that have already started tendering it because the other specification for the other 70% is more recent. But we expect that other 70% to start tendering this technology relatively soon and then kind of ramp up progressively over the next 5 years. So we're excited about that. We're also excited about the opportunity of this glow-in-the-dark technology to expand into other firefighter applications globally outside of the U.K. And as well as we see that as a technology that can be applied to other end markets even in the core Footwear and Apparel businesses. So we look at it as an IP acquisition. It's a relatively small company now, but we think very complementary and differentiated and it helps us scale up in a direction that makes a lot of sense to us. David Richard Farrell: David Farrell from Jefferies. I've got a couple of questions. I'll take them one at a time. 2026 is a World Cup year in North America. If I remember back to the 2022 Capital Markets Day, there was some excitement about kind of ProWeave. Is there anything in your forecast for higher sales as a relation to the Soccer World Cup? And if so, would that come in '26 or at the back end of '25? David Paja: So I think there's a couple of questions there. I'll take it as one in general on the Olympics and then the other one is more about ProWeave in particular. So on the Olympics, look, we have not planned for a bump or a significant one-off benefit of -- in our sales from the Olympics. So it's not something that we are accounting for. And there's a lot of discussion out there on how much of a bump these type of events generate in reality. Yes, with regards to ProWeave, it's one of the adjacencies obviously, that we're doing. It's a relatively niche technology that basically applies only to kind of relatively high-end applications. We already deployed it across almost 10 different shoes. So it's already being sold on 10 different shoe models for different brands. But we continue to drive with the help of OrthoLite, actually, that's one of the cross-selling areas we're working together to increase penetration in some of the major brands. But it will always be -- I mean, we know that is a little bit limited for its kind of high-end characteristics. I think I mentioned last year, the interest of ProWeave goes a little bit beyond in terms of longer term, how we see the upper space as an interesting space. And we see this as kind of the entry point with a very kind of high-end type of technology. David Richard Farrell: One for Hannah. If I look at the capital allocation slide, there's nothing in there for net debt reduction. Obviously, you're coming at that from going into '26 for the next 5 years at 2.2x leverage. Should actually some of that capital allocation be thought about? Or is the reduction in the leverage coming just from the EBITDA? Hannah Nichols: No, absolutely. Our focus is, on '26 is on reducing the net debt. We see it in terms of capital allocation actually as an output of allocating capital to support organic growth. It's sort of a natural outcome, which is why it's not explicitly referenced on the slide. But absolutely, our priority is on deleveraging. And we've talked about the cash generation of the group. You've seen that evidence in 2025. And with OrthoLite as well, that sort of clearly enhances the cash generation. So short answer is yes. David Richard Farrell: And final question, kind of EcoVerde. I guess over the last few years, the kind of higher selling point of that has been a real benefit of driving Apparel organic revenue growth above the market. How much is left to go from that as a tailwind as you look out over the next kind of 5 years? And can you just talk about kind of new customer bases versus kind of a replacement of existing customers? David Paja: Yes. So our 100% recycled thread product, EcoVerde, the EcoVerde brand is I think has been a phenomenal success for the group. I mean, literally 5 years ago, there was no sales. And last year, it was $550 million, which is about half of all the thread that we make. So it's been an impressive ramp-up that has required a substantial effort to develop a new supply chain, adapt our manufacturing processes, requalify all our color recipes. So we see that as something that is very difficult to replicate. Now from here, where do we go? We are at about 52% now with -- in terms of penetration. We think it can go -- it can keep going still. But obviously, as you increase towards 60% or beyond 60%, you're going to the very, very price sensitive pieces of the market. So we see that as a substantial differentiator, difficult to replicate with some room to grow. But in terms of sustainability, what we're doing now is we are continuing to drive recycled penetration, so kind of continue to push that, but it will moderate in terms of growth rate. You won't see the 50% kind of ranges that we've seen this year. And at the same time, we've launched a big initiative on supplier decarbonization, which will complement our efforts to get to our Scope 3 targets. So now when we go to brands, we have both the big push we have on recycled. And on top of that, supplier decarbonization as another big kind of driver for their sustainability -- to achieve their sustainability goals. James Bayliss: James Bayliss from Berenberg. Two, if I may. On Footwear customers, you noted they were managing down their inventory levels in the last few months of 2025. Can you just give us a sense of where that trend is for the first few months of 2026? Do you feel that levels are steady and in the right place now, absent any further shocks or Middle Eastern ramifications? And then my second question on market share. Your ambition seems to be to continue to grow for 1% to 2% per year over the medium term, but you're coming from quite a high base already. Are there any regulatory considerations in local markets or any territories where growth will be naturally more limited than others that we should be aware of? David Paja: Yes. So I'll start with the latter question. So on market share, yes, we're at close to 30%, right, on both divisions. We still see this as a number that continues to increase and going to continue to increase. The reason is, I mean, it may look like a big number, but when you look at manufacturer by manufacturer, in general, they like to concentrate thereby on fewer, stronger players, and it's not unusual to have manufacturers, so Tier 1s that buy 60%, 70% from us. So at a manufacturer level, they don't have an issue. They actually typically want to have kind of a core supplier that is at that high level, and brands also are trying to consolidate the number of Tier 1s. So we think those 2 trends, the fact that the Tier 1s are not necessarily trying to kind of limit the share they give to their largest supplier, and the fact that brands are trying to reduce the number of Tier 1s, I think, continue to play in our favor going forward. And sorry, remind me the first question was on -- yes, the sequential for Footwear. So I mentioned a little bit earlier, we saw the last 2 months were a little bit tough. We're obviously focused on delivering our profit and cash commitments, which we did. But we saw a substantial slowdown in the last 2 months of the year in Footwear in particular. But we've seen a sequential improvement in Q1. So it's not back to where it should be, but we've seen a sequential improvement that makes us think that, that kind of destocking that was done towards the back end of the year was already completed. Andrew Ford: Quick question. Andrew from Peel Hunt. I wondered if within that sort of market data information that you provided, whether there was anything, more detail you could bring out of that because I could see that -- sorry, I've lost the train of thought. I'll move on to the next one. So the other one is around competition on sustainability. Obviously, 5 years ago, EcoVerde, it was quite sort of a greenfield area for you. Just wondering where -- what the competition is currently within that area? I'll come back to the other one as I remember it. David Paja: So on sustainable threads, we see ourselves as by far the leading provider. As I mentioned before, it's actually not easy to transition to recycled polyester. It's a completely different supply chain. You need to develop suppliers that basically recycled PET bottles, so plastic bottles. And the quality requirements are very sensitive to our manufacturing process. So you need to kind of make sure that you define very clear requirements. Otherwise, your productivity goes down quite substantially. And on top of that, you need to redo all your color recipes for all the -- I mean, on average, on a given year, we delivered 200,000 different sets of color. And doing that is a gigantic piece of work. We have systems that allow us to do that very, very efficiently. But we find it like a very substantial differentiator when you combine all those things for people to replicate to the scale that we've done. And obviously, with scale comes also negotiation ability in terms of pricing and everything. So overall, we think we've built something that is very substantial in terms of scale and difficulty to replicate, and we don't see any competitor anywhere near that. Andrew Ford: Great. I'll try again with the other one. So I was just wondering about whether that was a broad-based sort of market decline? Or was it sort of within more sort of specific niches that either hindered you more than the market or was actually helpful sort of your relative -- I guess, the granular detail of that market movement, if you like? David Paja: Yes. The bigger -- so at the back end of the year, the bigger drop was in Footwear. Footwear is always more volatile. If you go over time just because of the average price of one of these athletic shoes is typically higher than a typical apparel garment. And for the second reason, there's fewer larger brands. So it's more concentrated around a few big brands like Nike, adidas, et cetera. So typically, you see a little bit of more kind of volatility when they decide to either destock or restock. So that's something we've seen in the past. We don't -- we haven't seen it in a particular OEM or a particular part of the market is being quite broad-based, but that's also because we are -- in Footwear, in particular, we have a higher percentage of exposure to those brands relative to Apparel. Hannah Nichols: I was just going to say, I think if you look at Apparel and the markets decline there, we really play to our strengths in Apparel in terms of our global footprint, our agility. And actually, when we look at our sort of the trends within the market share gains, a lot of those came after the tariff announcements because of our ability to react to the shifts and the agility. So it's really played to our strength, I think, is what I'd say about the Apparel piece. Mark Fielding: Sorry, Mark Fielding again. Just a couple of follow-ups on those questions. I mean, firstly, in terms of the recycled thread, I mean, there was conversation in the past about future sort of natural biodegradable threads, et cetera. I'm just curious how you think about the next generation in that? And then also possibly linked but more immediate. In terms of in Hannah's presentation, you talked about the price mix benefit. And then in Apparel, you talked specifically about mix, whereas it was price strategy in Footwear. Maybe a bit more elaboration on that. And just a reminder, I mean, is my impression that EcoVerde is slightly higher revenues, not higher margins? So it's not a mix benefit, but I'm just double checking that. David Paja: So I'll let Hannah comment on the second one. With regards to the next step in terms of recycled product, the big focus is going from PET bottle recycling to textile recycling, what is called textile to textile. So instead of just taking plastic bottles and recycling them into polyester, you would recycle garments. And starting with waste from manufacturing processes, there's a lot of waste generated by the Tier 1s in the manufacturing process. So we're very actively working in that space. This year, we've launched our first textile to textile recycled products. Today, it's a more expensive technology than the PET bottle recycling. But like we did a few years ago, as we led in the industry PET bottle recycling, we are now leading as well in textile to textile, it's now in the market. So we're selling -- it's still small volumes because it's higher priced. But we're doing a lot of work through our sustainability innovation center in India with all the supply chain that is developing the capabilities and the scale to make this happen. So we also have innovation in that same hub around all the type of products like you're saying, biodegradable or natural origin, not oil-based at all. But those, we see them as more at this stage probably those would be a further step away. So I would say the next step will be going more to textile to textile. And there's quite a lot of, I would say, interest from the brands. The leading brands in sustainability, they are already starting to at least look at that textile to textile as the next step. Hannah Nichols: And I think your question was about Apparel mix and what's driving that. So it's actually a combination of both premium products, but with premium products, they are more likely demand recycled product offerings. So it's a combination of the 2, which is where Apparel have benefited. So the correlation with the margins of recycled thread because they're going into premium products that they are typically higher margin, if that makes sense. David Paja: Okay. So if there's no other question, well, you see, basically, we delivered strong 2025, and we entered '26 with good momentum. Thank you very much for joining us today. We wrap up the call here. Hannah Nichols: Thank you.
Operator: Hello, and welcome to the Spire Healthcare Full Year Results for 2025. [Operator Instructions] I will now hand over to your host for today, Justin Ash of Spire Healthcare. Justin, over to you. Justin Ash: Thank you, and welcome, everybody, in the room and welcome, everybody, online. Very good to be here today. If you are joining for the first time, I'm Justin Ash, and I'm the Group Chief Executive of Spire Healthcare, and this is Harbant Samra, our CFO. So we're going to talk you through the results, and then we're going to leave lots of time for questions. So let me start with a review of our strategic progress in 2025, the market context, how we're thinking about 2026 and how we're prioritizing in response. So the results we're sharing with you today demonstrate a resilient performance in the face of significant cost challenges and changes in the NHS commissioning environment towards the end of last year. In response, we focused on consistent delivery of our strategic priorities. Our private focused multi-payor strategy, our transformation program that's delivering efficiencies through standardizing, centralizing and embedding digital and automation, our plan to grow in primary care, an area of accelerating demand and our continuous focus on care quality and innovation to drive an even better patient experience. Together, these priorities allowed us to respond with flexibility in 2025 while strengthening our foundations for the long term. So looking first at the market, we saw 4 key trends last year. The private market, as previously reported, saw low single-digit percentage volume decline for much of '25. However, I'm encouraged that we saw improving momentum in demand, especially self-pay during the second half of H2 as well as continued growth in primary care. However, we experienced significant labor inflation during 2025, driven by the increase in Employer National Insurance contributions. And of course, in the later parts of H2, there was a sector-wide slowdown in NHS volumes as we began to see the start of activity management plans as integrated care boards faced budget-free restrictions. We responded to these trends with focus in line with our strategic plans. Looking first at private patient growth. We ended the year with a return to positive volume growth in self-pay. As I said, I'm encouraged to see that is continuing now. There is no doubt some market effect here as the impact of NHS budget constraints both influence local waiting times and patient sentiment more generally. However, we've also spent 18 months building our efficiency and effectiveness in private patient acquisition and response, including actions to strengthen our brand, our speed of access and our mix. Next, transformation. 2025 was the biggest year of change yet for our business. We drove efficiency, and we delivered our plan of GBP 30 million savings, offsetting rising employment costs. The largest program was transitioning administration for incoming inquiries, bookings, preoperative assessments and self-pay sales into 3 patient support centers. This is already providing a platform to improve patient experience and deliver growth with further benefits to come. We've also been investing in our sites over a number of years, creating an estate which is attractive to patients and those who work there, and this enabled us to lower our CapEx spend in 2025 without compromising on quality. We made progress in primary care. Our clinic strategy is to open sites in new geographies to attract private patients we could not otherwise access, and in 2025, we opened 5, including in Kingston, Wimbledon and Kings Lynn. The larger hospital outpatient clinics generated downstream referrals to our hospitals worth GBP 3 million of EBITDA. We also made 2 small acquisitions of a physiotherapy business and an occupational health business, both of which are performing in line with plan. Lastly, we continued to deliver on our quality strategy, including a focus on reducing average length of stay across several procedures, saving just over GBP 1 million whilst improving patient access and recovery. We are now at 29 surgical robots across the estate, and we added 7 in 2025. These have increased our capacity to provide high-value private care, and they deliver improved outcomes and also contribute to faster recovery times. And our actions underpinned by focus on efficiency and CapEx discipline have resulted in strong adjusted free cash flow growth. I just want to take a moment to unpack some of the actions we've taken to leverage the self-pay opportunity, in particular, over the last 18 months. So I mentioned improving brand scores and marketing effectiveness on the previous slide. Our private focus targeted local marketing strategy is successfully driving demand and conversion in a competitive and predominantly online marketing environment. So if you look at the chart on the right, our latest data shows our brand scores now lead the market. More people are moving from simple brand awareness at the top to the next level direct service consideration. Our unprompted and prompted awareness are now at their highest levels ever of 35% and 80%, respectively. And consideration, which is key, has driven by 6% to 61%, which in turn drove record levels of inquiries to Spire during the year. We've continued to apply AI to optimize our pricing locally to ensure we are as competitive as possible versus our competitors whilst also protecting margin. And since moving self-pay sales and bookings to patient support centers, they are consistently delivering call answer rates of around 95% compared to 60% before we move to patient support centers and therefore, converting more inquiries to bookings and bookings on the same day. And finally, to meet rising demand for diagnostic MRIs, we applied again AI to increase image quality, throughput and capacity in scanners at 21 hospitals, halving the scan times to contribute over GBP 2.5 million EBITDA in 2025 through growth in activity. So all these activities are setting us up well with strong foundations from which to capitalize on the improving self-pay environment. As we look ahead to the rest of this financial year, I just want to take a moment to frame what is happening with NHS commissioning and the related effect in the private market. The NHS is going through a fairly fundamental restructure as it seeks to ensure financial discipline. You're all aware of the system-wide and well-documented NHS commissioning slowdown of both independent sector and NHS elective work, which is impacting hospitals in our first quarter of 2026. Patient demand remains high, but the budget is not there to fund the demand. And as a result, multiple integrated care boards have imposed activity management plans. I should mention that our primary care business is relatively insulated from this given the long-term nature of the contracting there. The net effect is we expect NHS revenue to be down about 25% in Q1. At the same time, as I've mentioned, self-pay is responding, partly a consumer reaction to the NHS slowdown as well as our own actions. And in Q1, we expect around 4% growth in private revenue with self-pay up around 6%. Looking ahead, the NHS financial year resets in April, and activity will undoubtedly bounce back from the lower levels of Q1. We are yet to have firm visibility on what activity plans for the period covering our Q2 to Q4 will look like or how they will be managed. So clearly, that is a material uncertainty for the year. And this should become clearer as commissioning discussions progress in the coming months. But with this in mind, we've developed some scenarios on which to base our 2026 plans for Q2 to Q4. Broadly speaking, these assume significant improvement in NHS activity relative to Q1 as budgets are reset. We've taken a balanced view of continuing NHS budgetary pressures alongside the need to reduce waiting lists. And we also expect faster private patient growth in response. So we also think this is a transitionary period for the NHS as it resets, whilst local relationships between Spire and commissioners remains strong. Therefore, as we look to the rest of 2026, our strategic priorities set us up well to control the controllables, respond flexibly to the market environment, and we will make delivering sustainable cash flow a priority. We will continue to intensify our focus on private payor growth, capturing the momentum we're seeing in self-pay through targeted local investment in marketing and price optimization. The next phase of our development in our patient support centers will further support self-pay inquiries through to conversion, which together with a new website and CRM system will deliver an even better experience for patients and consultants. And we'll continue to streamline hospital operations to make quick access and treatment for private patients a priority. In transformation, we'll continue to deliver more efficiency improvements. Our track record in delivering such programs has led us to accelerate our 2026 savings program, which will at least mitigate the Q1 NHS commissioning impact. In primary care, we've built a strong foundation across multiple services, spanning private GP, occupational health, mental health and physiotherapy. This year, we aim to accelerate integrating these services with our hospitals and leverage our existing base to drive organic growth. We anticipate limited M&A. We're also working on unlocking the opportunity for growth with employers, where the growing impetus behind employee health and productivity gives us a platform to provide a wider range of treatment solutions in addition to traditional occupational health. And we'll continue to open a small number of CapEx-light clinics in new geographies. Finally, of course, we will maintain our focus on care quality that underpins our growth. We aim to maintain or improve our already high ratings from regulators and patient and consultant satisfaction scores. So the Board announced in September 2025 that the company is actively evaluating actions to drive long-term sustainable shareholder value. That review is ongoing. So as part of this review, we're considering a range of potential options, which may include, but is not limited to, a potential sale of the company, value generation from the hospital property estate and adjustments to our operational and strategic plans. There can be no certainty that any offer will be made for the company nor as to the terms of any offer if made. Many of you will already understand that being in this process and therefore, subject to takeover panel rules means there are limitations to the statements we can make today about the strategic review, our forecasts and the assumptions that underpin them. The Board will make a further announcement on this matter in due course as appropriate. In the meantime, as you can see, we continue to focus on executing our existing strategy to grow our healthcare business. The management team and I are relentlessly focused on delivering our 2026 priorities. Finally, I'd like to take a moment to talk about the high standard of care that we provide. This is the foundation for our resilient performance, and I'm pleased to say that in 2025, 98% of our sites were rated good or outstanding or the equivalent by regulators. 97% of hospital patients rated as good or very good with a rise in very good ratings. 84% of consultants rated our care very good or excellent on par with last year and with a small increase in excellent ratings. So this is only possible through the hard work and commitment of our more than 17,000 employees and over 8,000 consultant partners. They have adapted to change as we have significantly transitioned the way we run our business to be more agile and responsive. It required their patience, their input, their professionalism. And I'd like to take this opportunity to thank them profoundly for their collaboration, partnership and professionalism. I've been really delighted to see this professionalism and dedication in action as I and fellow directors have visited sites throughout the year, meeting our DAISY and IRIS award winners for outstanding care and marquee moments such as the opening of our new clinics and the delivery of new surgical robots. Thank you very much, and I'll now hand over to Harbant. Harbant Samra: Thank you, Justin. Good morning, everybody. So I'll start by giving a high-level summary of the financial year. Total revenue for the group has grown 4.5% with hospitals up 4.3%. Underlying this, we saw a strengthening and improving private market, but the NHS business experienced slowing volumes in the second half due to their budgetary pressures. We also saw strong growth in revenue for our Primary Care business. Adjusted EBITDA was up 3.2% to GBP 268.6 million. This was supported by the successful delivery of our transformation savings target as well as price and mix management. These savings helped to mitigate increased cost pressures, a larger element of which related to the rises in National Insurance and National Minimum Wage from Q2 onwards. After deducting depreciation and finance charges, both of which were in line with guidance, the group reported an adjusted profit before tax of GBP 46.5 million, 7.4% down on the prior year. We have delivered our CapEx plan, investing in growth projects and transformation and have done so whilst reducing the overall spend by 30% year-on-year to GBP 78.5 million. As a result, I'm pleased to report that our adjusted free cash flow was up 64.9% to GBP 64.3 million. Finally, ROCE was 8% compared to 8.2% for 2024. On a comparable basis, excluding National Insurance and National Minimum Wage uplift during the year, ROCE increased by 30 basis points to 8.5%. Now turning to our Hospital Business. Total revenue grew 4.3% to GBP 1.5 billion and is reflective of our strategy where we have targeted growth across both private and the NHS. Overall, total volume across all payors was up 1.4%. Adjusted EBITDA for our Hospital Business rose by 3.9% to GBP 258.8 million, representing a margin of 17.9%, broadly flat to last year's 18%. EBITDA would have grown by more than 7%, excluding National Insurance and National Minimum Wage rises. And the GBP 30 million of new cost savings alongside tight management of price and acuity helped to mitigate the cost headwinds. Moving on to performance by payor. I will start with self-pay. Overall, revenue saw a minor decline, but notably year-on-year volume growth returned to positive by the end of 2025. This is reflective of our strategy to target this segment. We have invested in the start of the sales funnel with targeted marketing, and we have made big and important changes to our booking processes, centralizing teams into patient support centers. Bearing in mind the scale of these changes, it was not surprising that we saw some operational disruption early on during the summer. But the centers have now bedded down and are making a positive contribution to our self-pay and wider business. We've also continued to optimize price based on local market dynamics at an individual procedure level, resulting in ARPC growth -- growing by 3.9% during the year. Turning to PMI. The market has remained stable. As we flagged at the half year, insurers continue to manage claims access and issue tenders. Despite this context, we have grown PMI revenue by 3.1%. This is largely driven by our price and mix management towards higher acuity procedures, contributing to above-inflation ARPC growth of 5.3%. Overall, the signs for our private business for both self-pay and PMI are encouraging. Turning now to the NHS. In the second half of 2025, we saw the initial signs of sector-wide action from the NHS, where it slowed commissioning due to budgetary pressures. This was followed by further tightening in late 2025, where certain integrated care boards requested a stop in activity. The result of this was revenue growth for H1 reaching 16.2% before slowing to 6.8% in H2, taking us to revenue growth for the full year of 11.4%. We also continue to target high acuity procedures and thereby achieved a 3.2% uplift in average revenue per case, slightly ahead of the NHS tariff uplift of 3.1%. Orthopedics continue to account for over 60% of all NHS admissions. Moving on to our Primary Care business. Revenue increased 7.4% to GBP 133.7 million, driven by organic and new contract growth across talking therapies and occupational health. After including our recent acquisitions of Acorn and Physiolistic, revenue growth was 10.5%, and their revenue and profit contribution were in line with plan. Adjusted EBITDA for our Primary Care business as a whole was GBP 9.8 million, which whilst at a headline level is a reduction, the core business has grown by more than 5% year-on-year. Two of the 3 larger new clinics are already profitable. More importantly, these clinics have also generated GBP 3 million in EBITDA through referrals to our hospitals, which is encouraging given the relatively short period of time that they have been open. Looking at overall group EBITDA delivery, we can demonstrate the important role that the transformation savings played in our full year outturn with the business delivering on those things in our control. In addition to one-off cost headwinds, which includes National Insurance and Minimum Wage increases, there was also underlying cost inflation, half of which related to salary uplifts. Our transformation savings have mitigated around 2/3 of this cost inflation, which together with price and mix management has underpinned EBITDA growth. Turning to profitability. We incurred GBP 27.9 million of adjusting items with statutory profit after tax declining to GBP 17.2 million, stated after the impact of National Insurance and National Minimum Wage rises, partially mitigated by a reduction in taxation. This benefit arose from a review we initiated over qualifying capital investments for tax deductions and covers a number of years. 2025 was a significant year for our transformation program. As a result, the adjusting items included around GBP 13 million in one-off costs associated with delivery, covering, for example, redundancy costs and setting up the PSCs. Adjusting items also included certain fees linked to the ongoing strategic review of around GBP 7 million. Moving on to cash flow. We have grown adjusted free cash flow by around 65%. This outcome evidences our disciplined approach towards CapEx investment. We continue to focus on growth and returns with CapEx increasingly directed towards expanding the private patient business. Alongside this, our transformation program delivered GBP 30 million in savings, helping to support the overall strong cash flow outcome. Now a deeper dive into CapEx. Total CapEx was GBP 78.5 million, which is 30% lower than last year. We have made significant but targeted investment in our estate over the last few years. As a consequence of this, we have dealt with a backlog and importantly, have become a much more modern and attractive offering for private patients, which is clear from their feedback. This strategy has meant that in 2025, CapEx as a percentage of revenue decreased to 5% compared to 6% to 7% in prior years. Of our total CapEx outlay, GBP 50 million was directed towards our hospitals for maintenance and growth. We also invested GBP 20 million supporting our transformation program and GBP 8 million in primary care, which included new clinic openings. For 2026, we expect the underlying split across these categories will follow a similar pattern to that for 2025. Moving on to the balance sheet and returns. We have maintained our leverage at 2x, and this is stated after acquiring the Acorn and Physiolistic businesses during the year. We have also extended the maturity of our bank facilities by 18 months to August 2028. The underlying terms are unchanged. The strength of our balance sheet is further underpinned by the quality of our freehold base, where we have a valuable portfolio of 19 hospital properties. We know that this -- we note that the market appetite for healthcare assets remains strong. Having this asset base gives us a wide range of options in terms of strategy and generating future shareholder returns. Our ROCE was 8%. However, I will highlight that after adjusting for the impact of National Insurance and National Minimum Wage rises, our ROCE would have been 8.5%. Moving on to the outlook. As Justin has mentioned, private patient momentum has continued to improve in the first months of 2026. For the full year, we're expecting percentage growth of mid- to high single digit year-on-year. NHS volumes remain a material uncertainty across the sector and activity from April or the start of the commissioning year has yet to be agreed. As a result, there are a range of scenarios we are planning for, which means we are targeting an adjusted EBITDA outcome for 2026, which is broadly in line with 2025. Our base planning assumption is for Q2 to Q4 NHS revenue to be down between 5% and 10% year-on-year, a significant improvement versus the Q1 outturn, which will be down around 25% year-on-year. We think this planning assumption is plausible in the context of a new budget and commissioning year. And as a reminder, the provisional NHS tariff for 2026 is close to an annual uplift of 0%. On savings, we have an existing GBP 30 million target. Over half of this is already underpinned by rollover from programs deployed last year alongside head office restructuring that took place in January. We are planning to deliver ahead of this target to at least offset the impact of the Q1 NHS shortfall. Primary Care is expected to deliver strong organic growth. Finally, across all scenarios, we will continue to be disciplined around the deployment of CapEx, leading to lower CapEx as a percentage of revenue and maintain our focus on generating free cash flow. Thank you. With that, I'll now hand back to Justin. Justin Ash: Thank you, Harbant. Okay. So I'm just going to give a short summary, and then we will go to Q&A. So today's results demonstrate a resilient performance against the backdrop of increased employment costs, combined with the changes in the NHS commissioning environment. We've used the levers at our disposal to respond effectively. We focused on growing private and particularly self-pay. We delivered our biggest ever year of transformation, including our planned GBP 30 million in savings. And we improved cash generation while maintaining care quality, optimizing our pricing and exercising discipline across our activity mix and investments. In doing this, we have created a strong platform for improving patient experience and growth. So looking to the rest of 2026, we'll remain focused on using the levers of our strategy to deliver sustainable cash flow. We will respond to NHS uncertainty by growing private patient revenue, building on encouraging early momentum in self-pay, and this will be enabled by targeted investment and further improvements in our patient support centers. Actions are already underway to accelerate transformation cost savings this year, which will at least offset the Q1 NHS commissioning impact and more. Our transformation program will continue to create greater consistency and ensure that we maintain and improve our high-quality ratings. In Primary Care, we intend to focus on organic growth and integration in the year ahead. We'll leverage our multiservice platform, step up our engagement with the employer market and build on the momentum from our clinics to continue to drive new referral pathways into our hospitals. In all that we do, we will remain disciplined in deploying CapEx towards higher returning investment and benefit from our already well-invested estate. So we have a solid foundation to deliver sustainable returns as we continue our evolution to meet the U.K.'s growing healthcare needs. We remain excited by the private market opportunities ahead and confident in the medium-term outlook for Spire Healthcare. Thank you very much for listening. I'm now going to go and join Harbant and take Q&A, and we'll start with questions in the room. Thank you. Justin Ash: Question here. Can you please state your name and your organization? Sebastien Jantet: It's Seb Jante from Panmure Liberum. So 3 questions, if I may. I'll just start off with one on PMI. Obviously, kind of all of the operators are under pressure from NHS kind of volumes. And I'm guessing that, that kind of is flowing into the PMI kind of discussions on pricing. And I'm just wondering how those are kind of panning out? Are you finding it harder to get decent price increases through? And also in terms of the PMI, are they starting to ask you for broader offerings that go around physiotherapy and some of the more primary care stuff as part of that? Or are they still seeking that from other vendors? Justin Ash: Okay. So I'll take that. Thank you, Seb. So PMI, so I think we're pleased with our relations with PMIs. I think things have moved forward from the last time we talked. I think we think we'll see some of the impact in the NHS as well beginning to filter through in PMI as well. And yes, we have very broad -- Peter may add, but we have very broad strategic discussions. It depends a bit by insurer, but the broader offering is clearly where insurance is going. I mean patients generally by way of backdrop, one of the reasons for our primary care strategy is younger patients, in particular, are accessing both self-pay and PMI and they're accessing it typically through Primary Care. You can see insurers are interested in that, and we have very strong engagements with them on that. So I think overall, a pretty constructive environment. Peter, would you be happy with that? Peter Corfield: Yes. Justin Ash: Yes, it's a pretty constructive environment at the moment. Sebastien Jantet: Second question is on I guess, more the shape of the NHS volumes as the year kind of progresses. So we're kind of sitting here in March. You're still not really clear on NHS volumes and what they might be. Is there a risk that the NHS volumes don't end up being equally spread through the year, which would obviously cause you guys a headache in terms of costs and kind of -- and capacity? Justin Ash: Yes is the answer. I mean, first of all, we can't see the future here. And by the way, at this time of the year, we never quite know what it will be. It's just there's a bit more uncertainty than there was. So what are the scenarios around NHS? So I think we've picked a plausible scenario because they've got 2 pressures. If you read the press, let's do NHS generally, you can read a lot about the imposition of enforcement around deficits. So the NHS has clearly decided that it wants financial discipline. And that's the backdrop to this. I mean, just to be clear, we've not had a single message about relationship with the independent sector. This has been about financial discipline and therefore, looking for places to impose restrictions where they can to hit the fact they're under budgetary pressure. And we work with commissioners on that, and that's clearly important for the NHS. On the other hand, there's clearly pressure on commissioning boards where their waiting list get too high. So what we've seen in the first quarter is whilst we are down 25%, we're also seeing and a little bit more of what our spot contracts where a commissioning board of particularly a trust calls up and says, we've got to wait in this problem. Can you help us with this cohort of patients, okay? So I suspect the year is going to look a bit like that, which is overall, we think the effect will be what we've described, which is down mid-5% to 10%, but it will probably be made up of indicative activity plans, which are topped up with spot work, okay? Whether that will be lumpy during the year? I don't know. I really don't know. But remember, it resets 6th of April. So what will definitely happen is the volumes will go up. We know this partly because we've rebooked patients, right? So we've rebooked patients we had to cancel. So it will pick up. Will it bob around? Probably. But I think it's worth saying we do talk to local commissioners all the time. Whilst this may look like a big fracture at the very top level, locally, we're talking to commissioning boards and trust daily. Our hospital directors and our NHS commissioning team have super strong relationships with them. So as far as we'll have visibility, this team will be on it. Is there anything you'd add to that, Peter? Peter Corfield: No. Justin Ash: Is that a good description? Yes. So that's pretty much what it looks like. So maybe, but I think overall, our assumption is the numbers we've given you today. Sebastien Jantet: And then last question is just on self-pay. So obviously, it's always been a competitive area, but it's kind of even more competitive now that everyone is trying to make up the backlog, the kind of hole in the revenue line from the NHS. What makes you think that you're going to be able to outperform and accelerate in that market versus your peers when presumably they're all investing in this space as well and all pushing hard there, too? Justin Ash: So I think -- so if you look at our market shares locally, which we spend a lot of time looking at, we held share over the last couple of years, okay? And the truth is in the last couple of years, we weren't hugely differentiated in the way we brought ourselves to market, okay? I think we're differentiated on quality. But in terms of our business processes, they were quite local. They were a bit clunky. We had good teams, but we had 38 separate hospitals, okay? So what have we done? We've done quite profound research into what really matters to self-pay patients in particular, okay, which is being able to get through on the phone and being able to get booked in on the day they call and ideally get booked in within 2 days for their first consultation. If in particular, their MSK patients, they want to be able to get their MRI within 2 days or on the day that they're there. And that all leads to a high likelihood that they will then have their admission with us, okay? So what do we do? So that's one of the main reasons we put patient support centers in place because we've gone from -- we were holding share when we were answering 60% of calls. We're now answering 95% of calls, number one. Number two, one of the things which has happened because of patient support centers is that for the vast majority of consultants, we now are able to book directly into their diaries. And therefore, we can get people booked in quickly. And we can start tracking a KPI of how quickly people got their outpatient deployment as apart from it being an aspiration. And AI, which I mentioned a couple of times, is an interest and AI is actually delivering results in the business. Putting that in MRIs means that we literally have every day empty slots in our MRIs. We're able to deal with our underlying volume. But because we've got nearly 50% more capacity, it means that literally you can walk down the corridor and get your MRI if you need scanning. The hospitals have worked really hard on managing outpatient and theater availability. So I think the answer is we have lined ourselves up to be super effective in the things that matter to our patients as well as then delivering them a really outstanding service. And also, I would be able to say, I think we've probably got the best invested estate because we've been investing consistently. So when they come here, it looks really good and that matters to patients. So I think we've got all those things in place. And Harbant about to add something. Harbant Samra: I was going to say, I was going to go on the estates point as well, but I'll add a little bit more color. The look and feel of our estates, I mean, it's visible to anybody, right? It is a more competitive market. I agree with what you said. But in terms of the look and feel of our estates and our facilities, we are very proud of what we've achieved. We've also made a lot of tactical investments to support our consultants. So don't forget how important they are in that conversation as well in terms of where the patient is going to go as well. So a lot of the robotics, for example, that was done with that in mind. So we're moving confidently on that basis. Justin Ash: And then the final part is the marketing. We have really invested under Peter's leadership in super sophisticated digital online marketing. We have a partnership with Google. We know we're getting better hits. We know we're getting better flow through. And we're going to bring them -- our website is okay, but it's not brilliant. We're going to bring in a new website this year, which will make that patient journey much easier. And as it gets up and running, one of the ways you win, as you know, online is we're making your content super attractive so that people search on your site, okay? And that's before the CRM system, which will integrate across all patient types and between primary care and secondary care in time. So I think the answer is because we're super, super focused on this, and we've been working on it for the last couple of years. Kane Slutzkin: It's Kane Slutzkin from Deutsche. Just on the NHS sort of improvement through Q2 to Q4, what are you guys assuming for traffic there? Because I know usually, we sort of see a little uplift late on 0 is obviously pretty low. So just wondering what you... Harbant Samra: 0 is pretty low. You don't need me to tell you that. But... Kane Slutzkin: What do you -- is that in the 5% to 10%. Is that... Harbant Samra: Sorry. That is in the 5% to 10%. So the way to look at it is that they issued their consultation in December. It's not really a consultation. The only reason it will change if there is an exceptional pay award. They've already done their pay award recently. I think they -- was it 3.3%. 3.3%. So I mean that's essentially already factored into the tariff. There is an opportunity for us to continue to do what we've done in the past, which is to tap into higher acuity. And that's what we'll certainly seek to do in this environment if tariff is so, I guess, underwhelming. But the opportunity to outperform 0%, I mean it's not a great deal, but we will obviously do our best. Justin Ash: And by the way, Harbant showed it. We have really focused on hips and knees, and we have focused on higher acuity. And that continues, by the way. So that might give us a little bit of upside from mix on there. Although once you're at 60%, there's obviously a limit to how far you can go, but that focus continues. Kane Slutzkin: All right. Just on energy prices, I know we chat about it earlier, you're saying you're sort of hedged into Q1 now or Q1 '27... Harbant Samra: Next year and even beyond that. Kane Slutzkin: Yes. You were hedged partially for '26. I'm just wondering when did you initiate this? Harbant Samra: So it's a rolling arrangement we have. Most of that was fixed back in about October and November. We take a pretty conservative approach towards doing it. So all of our energy needs are now under fixed price arrangements through to the end of Q1 2027 and then it tapers down to 50% by the midyear. But clearly, we're watching developments closely, and we'll take more action to continue to work out whether we want to increase that sooner rather than later. We'll see. But we're in a good place. Kane Slutzkin: Great. And just finally, on the property, you guys usually do your sort of annual reevaluation. I assume it's still 1.4. Is there any sort of comfort -- I don't know, maybe you can't actually comment on this part of the review, but not... Harbant Samra: I'm looking at IDC. Justin Ash: The lawyers have all poked up in the call. Kane Slutzkin: Can ask just last one on the Primary Care. You mentioned you expect very little M&A this year. It's obviously quite a fragmented market. Is that just because you've got enough sort of going on? Justin Ash: So we may do a little bit. But having put in a number of businesses, the next stage is to integrate it because if you're doing M&A, it's really important you've got a platform, which is aligned to do it. So in order to then accelerate M&A in due time, we want to get the businesses which we've got, which are performing well fully integrated. This is partly to do with also bringing in systems, so CRM. So we have visibility. So one of the things that we don't have today is easy visibility from going into a clinic and then booking through to a hospital. We want to make that super easy because in order to have really successful M&A, you've got to be able to have all your systems set up smoothly to plug in. Secondly, we think there's quite a lot of organic opportunity that we're going to focus on it. So it's not a change of strategy. It's just we've got plenty to deliver within primary care. It's doing very nicely. We're just going to double down a bit on our organic opportunities for the next few months. Natalia Webster: Natalia Webster from RBC. Just a follow-up on the private side on PMI and self-pay. You've talked about sort of the various factors that give you confidence on improvement there, but just curious on what you're expecting in terms of the mix of improvement in volumes versus improvement in pricing and mix as well? And then secondly, on cost efficiencies, you say you're tracking ahead of plan of the GBP 30 million in 2026. While some of that will come from annualization of savings in 2025, are you able to talk a bit more on your plans for 2026 and where you're seeing those additional cost savings? Justin Ash: Sure. Thank you. Well, I would say on private, we won't go into the complete plan of volume versus mix, but we are starting to see volume improvement. So it's not just mix and price. We're definitely seeing volume improvement, particularly in self-pay, which is very encouraging. So I think that's the answer on that one. Harbant, cost efficiencies? Harbant Samra: Cost efficiencies. So how we're thinking about '26, I mean, the way I'd do that, Natalia, is break it down into probably 4 buckets. A big chunk of what we're going to deliver in 2026 is actually already linked to the action we took in 2025. So there's an annualization effect from all the actions we took last year. And if you recall some of the things we did in the middle of last year, the restructuring, et cetera, you'll see the full year impact of that. And then just more generally, we've also taken action in the center early this year in January, where we restructured some of our teams. So over half of the savings that we're currently targeting for this year is really underpinned by the actions we've taken. The other 2 buckets, the way I'd look at those is that we've clearly got our transformation activity, which is underway. So digitalization, for example, and that forms part of the number, which is more than GBP 30 million. Again, I can't give you a specific number, but it's more than GBP 30 million. And then lastly, we brought forward some of the operational efficiencies that are on our list for maybe back end of this year and into next year to help to underpin the overall savings target, which means that we can say with confidence we've got enough there to offset at least or even more than the NHS shortfall during Q1. Justin Ash: Thank you. Any other questions in the room? Let me just check first if there are online questions. Operator: Yes, we have a question from David Adlington. David Adlington: Can you hear me? Justin Ash: We can. David Adlington: Firstly, maybe just the government focus on reducing waiting lists. Obviously, I would have thought the private sector would be a key part in addressing those waiting lists. In the short term, at least it seems to have swung around to a bit of hiatus on the NHS commissioning side. I suppose a big picture question is what's more important to the government at the moment, budgetary pressures or waiting list? And do you expect that to change between now and the next election? And then a second one, just want to get your thoughts on the bone cement shortage in the U.K. and whether you thought you might have any impact from that? Justin Ash: Okay. So on the first one, I think you may have to ask the government if there's any. But look, seriously, it's obvious that financial discipline in the NHS is top of the agenda at least this year. That's clearly the case. That's what's happened. It's also clearly the case that waiting lists are of great importance. And waiting list comprises 2 things, right? There's 7.4 million people. Of that, just under 6 million are waiting for a consultation diagnosis and just over 1 million are in treatment, okay? Those over 1 million people in treatment will be very top of mind for the NHS. I know they are. And that's why we've given a balanced guidance because that pressure won't go away. There is financial pressure. I suppose our guidance says we think the financial pressure slightly outweighs the waiting list pressure. I think our view is that in the medium term, that waiting list pressure will be compelling for any government. And that's why we say we think this is a transitionary period. So I guess we've given our view, but I don't have an official view from anybody else. You'd have to talk to government or NHS. In terms of bone cement, we have multiple suppliers. We found alternative supply just to top up from that supplier, and we just carried on unaffected. Operator: Thank you very much. We have no further raised hands online. So I will hand back to Justin. Justin Ash: So I think we've got another question in the room, Seb. Sebastien Jantet: I'm going to try this one and see if you answer it. So just looking at how the first half might look versus the second half in terms of kind of profit splits. Normally, I'd be quite comfortable having a crack at it, but there's obviously quite a lot of moving parts going around this year in the first half and the second half. So I'm wondering if you're able to give us any sense of what that might look like in terms of shape of the first half versus second half. Harbant Samra: Yes, happy to. At a headline level, I would expect to be slightly more weighted towards the second half. One of the reasons for that is whilst we're confident about delivering all the savings, clearly, some of those will appear in the second half. But again, there are a couple of other pretty significant moving parts for NHS, the question you asked earlier in terms of the lumpiness of the commissioning will also determine how that weighting plays out. But that's what I would expect. Justin Ash: Anybody else for questions? Okay. Well, thank you so much for attending both in person and online. Thank you for your questions, and we'll close the session. Thank you very much. Have a good day.
David Paja: Okay. Good morning, everybody. I'm delighted to welcome you to today's presentation covering our financial year 2025. Let's move to the first slide. This is today's agenda. First, I'm going to take you through the highlights of the year. Hannah will then present our financial performance. And after that, I will give a strategic update, including our new divisional structure, our growth drivers and our updated medium-term targets. After the summary and outlook, we'll take your questions. So let's start with the highlights of the year. 2025 has been my first full year as Chief Executive of the group, and it has been a year of significant evolution for the business with 2 significant M&A transactions, resilient trading in a challenging market and great progress in our growth initiatives. As a result, today, we announced renewed and more ambitious medium-term targets. In 2025, we have acquired OrthoLite and divested our U.S. Yarns business. We have demonstrated once more our ability to gain market share, reflecting the benefits of differentiators that our competitors cannot match. And our new target, organic adjacencies have added 1 percentage point to growth at group level. Finally, we have delivered a record level of free cash flow of $160 million. For reference, this is more than the free cash flow that we have delivered in the past 10 years combined, and it reflects the new and improved cash generation profile of the group following the end of U.K. pension contributions and the end of large restructuring activities. With that, I will hand over to Hannah to take you through our financial performance. Hannah Nichols: Thank you, David, and good morning, everyone. Now before I start, it's worth noting that the Americas Yarns business has been treated as a discontinued operation and is therefore excluded from the numbers presented here. I'm pleased to report that the group has delivered a resilient performance in 2025 set against a backdrop of macroeconomic and tariff uncertainty from the second quarter onwards. Revenue was $1.46 billion, flat on an organic constant exchange rate basis, comfortably outperforming our core apparel and footwear end markets, which we estimate were down low to mid-single digit for the full year. EBIT was $290 million, in line with expectations, and up 3% on an organic CER basis. Pleasingly, group operating margin increased by 80 basis points to 19.8%. And in the second half, we matched our strong first half performance organically despite challenging markets, showcasing the resilience of the group. Earnings per share was in line with expectations at $0.093 with higher EBIT offset by higher pension-related interest charges and the timing of the share placing in July 2025. The group generated $160 million of free cash flow pre-dividends, reflecting the powerful dynamics of high margins and low capital intensity and timing benefits from the OrthoLite acquisition. In line with our guidance, year-end leverage increased to 2.2x following the OrthoLite acquisition, and we expect leverage to fall below 2x by the end of 2026, underpinned by the cash-generative characteristics of the enlarged group. So turning to our margin performance. The group delivered strong margin expansion in 2025 with EBIT margin increasing by 80 basis points to 19.8%. As you can see from the chart on this slide, the margin improvement reflects pricing discipline as we successfully managed pricing pressures during the year and mix benefits with a focus on premium and sustainable product lines. In addition, our teams continue to focus on driving productivity, including procurement savings and operational improvement actions. Margins also benefited from strategic project savings, including the footwear division manufacturing site consolidation and the move of operations to Indonesia. In line with expectations, OrthoLite contributed to $11 million of operating profit in the last 2 months of the year. If we now turn to the divisional performance, starting with the Apparel division. At $769 million, revenue was up 1% on a CER basis. This was a strong performance in a year that started with market growth momentum but softened following the U.S. tariff changes in April with market conditions remaining challenging through the rest of the year. The division continued to gain market share, outperforming the core apparel threads markets, which we estimate were down around 3% in the year. This was achieved through a focus on delivery and service and supported by our flexible global manufacturing capabilities. The division benefited from favorable mix with year-on-year growth in premium thread sales and recycled thread products. In addition, there was good growth in the China domestic market, which requires high levels of operational agility to meet demanding customer lead times. EBIT increased by 4% on a CER basis to $156 million and EBIT margin increased by 60 basis points to 20.2%. The margin expansion reflects the benefits of the favorable product mix and pricing discipline alongside prudent cost control and an ongoing focus on productivity gains. If we turn to Footwear, at $440 million, revenue was 2% lower than 2025 on an organic CER basis. This reflected a period of growth until the end of April, followed by customers taking a cautious approach to ordering. And in the last few months of the year, we saw brands managing down inventory further in response to the uncertain 2026 outlook. As such, we estimate our core footwear end markets were down around 4% to 5% for the full year. Despite this challenging backdrop, the division outperformed with estimated organic market share growing to around 30%. The division also successfully maintained pricing despite downward pressures. EBIT was $105 million, flat on an organic CER basis compared to the prior year. The division delivered a strong EBIT margin of 23.9%, an increase of 40 basis points, reflecting pricing strategy and prudent cost control measures alongside operational actions taken in the past year, including footprint consolidation in Europe and the rebalancing of the division's manufacturing towards Indonesia. The acquisition of OrthoLite was completed at the end of October 2025, and 2 months trading are included in the 2025 divisional results. The 2025 full year profit performance for OrthoLite was in line with our expectations with above-market revenue growth and high levels of cash generation. Turning to Performance Materials. Now this is the last time that we will talk about Performance Materials in this format given the move to the 2 divisional structure. However, we are pleased with the improvements made in 2025. Revenue in the year was $256 million, flat on an organic CER basis, reflecting a return to growth in the second half of the year of 2%. Industrial revenue was 1% lower than prior year, with share gains in automotive thread, partly offsetting softness in other industrial end markets. The division also saw strong demand in 2 organic adjacency target areas: Safety Fabrics, which delivered 40% revenue growth in the year; and composite tapes for the energy market, which grew 21% in the full year after a particularly strong performance in the second half. As expected, EBIT was $29 million, an increase of 10% on an organic basis, with margin increasing to 11.3%. The organic margin improvement reflects the benefits of operational actions and the stronger second half trading with Q4 exit rate margins at 11.8%, approaching the bottom end of the medium-term targets set out in March 2025. In the second quarter, we exited from the noncore U.S. Yarns business, improving the quality of the portfolio with the divisional margin increasing 390 basis points, including Americas Yarns results in the 2024 comparator. In addition, the small acquisition of VizLite was completed in October 2025, accelerating our Safety Fabrics growth strategy. If we turn to the income statement, there are certain areas worth highlighting. At $2 million, exceptional items significantly reduced from 2024 with previous strategic projects now complete. Acquisition-related items included $27 million for the amortization of acquisition intangibles and $20 million for acquisition transaction costs, mainly relating to the OrthoLite acquisition. Finance costs were $41 million, higher year-on-year due to the impact of the 2024 U.K. pension buy-in payment and including $3 million of exceptional charges associated with acquisition loan financing. At 29%, the full year effective tax rate remains well controlled and in line with expectations. As a result, 2025 adjusted earnings per share was $0.093. The higher EBIT was offset by higher finance costs given the 2024 pension buy-in and the increased number of shares in issuance following the successful capital raise that took place in July 2025 to part fund the OrthoLite acquisition. And finally, given the full year performance and our confidence in the group outlook, we're pleased to propose a final dividend of $0.0228, resulting in a full year dividend of $0.0328, up 5% year-on-year. If we now turn to look at cash flow and leverage. The group delivered strong cash performance in 2025, generating $160 million of free cash flow. This reflects the low capital intensity of the group, a lower level of exceptional cash flows and the positive contribution from OrthoLite. As you can see from the chart, the working capital inflow in the year was $13 million, reflecting disciplined working capital management and a timing benefit from OrthoLite. Working capital as a percentage of sales was 11% in 2025. In 2026, we expect this ratio to return to a more typical level of around 12%. Capital expenditure was $32 million as we maintained a disciplined approach to investing in growth opportunities. We expect capital expenditure to increase to the $40 million to $45 million range, including the OrthoLite business, as we continue to allocate cash in support of our organic growth strategy. The exceptionals cash flow of $24 million included cash outflows related to strategic projects, which are now complete, and was significantly lower than 2024, which included $128 million of cash outflow associated with the U.K. pension scheme. Acquisition-related cash flows of $793 million, mainly relate to the completion of OrthoLite transaction at the end of October 2025. And as a result, net debt, excluding lease liabilities, was $815 million at the end of the year, representing a pro forma leverage of 2.2x, in line with our previous guidance. And given the cash generative characteristics of the enlarged group, we continue to expect leverage to fall below 2x by the end of 2026. And finally, moving on to modeling guidance for 2026 and beyond. Now I won't run through all the details on this slide. However, the main focus is to provide you with more color around the building blocks for the group cash flow in 2026 and the medium term. I've already touched on some of the guidance areas, including working capital and capital expenditure. In terms of the other areas to draw your attention to, it's worth calling out that we expect the effective tax rate to reduce slightly over the medium term given the benefits of the OrthoLite acquisition. In terms of OrthoLite cost synergies and integration costs, we're maintaining the guidance we provided at the time of the acquisition announcement, and we will provide you with progress updates as the integration progresses. In addition, in the appendices to this deck, we set out some indicative 2025 numbers under the new 2 divisional structure to assist you with your modeling going forward. So in summary, we've delivered a resilient performance in 2025 with strong cash generation, which sets us up well for 2026. I will now pass back to David to provide a strategic update. Thank you. David Paja: Thank you, Hannah. As I said earlier, I cannot understate the strategic progress that we've made during the year with substantial improvements and positive momentum. The reshaping of our portfolio has included the divestment of our U.S. Yarns business in June 2025, following the closure of the Toluca, Mexico facility in December 2024. These actions have removed slower growth and lower margin business from the portfolio. Notably, this action has enhanced group margins by 100 basis points, and it has enabled us to focus our investment on other businesses in the portfolio. In October, we completed the acquisition of OrthoLite for an enterprise value of $770 million, which has accelerated our strategy to create a leading Tier 2 supplier in footwear components by adding an exciting, high-growth and high-margin business to our portfolio. OrthoLite brings with it compelling revenue and cost synergy opportunities. I will share more on OrthoLite later. These significant changes have facilitated the streamlining of the group into 2 divisions, Apparel and Footwear, enabling us to reduce internal complexity and better align our underlying technologies. We have continued to take share. We delivered flat organic revenue during 2025, a year in which we estimate our markets declined by a low to mid-single-digit percentage. This proves again the resilience of our business model and our ability to grow faster than the market in all conditions. Our target adjacencies have delivered quickly, contributing 1 percentage point to group revenue growth overall, in line with our guidance. Especially pleasing this year was the growth from our Safety Fabrics, which I will come back to later, and energy tapes. We expect our revenue in these target adjacencies to continue to scale up over time as we expand the customer base and introduce new products. We have consolidated our divisional structure into 2 divisions. The former Performance Materials businesses of Personal Protection and Industrials, which accounted for 80% of PM sales, have been incorporated under Apparel. And the Telecom & Energy business, 20% of PM sales, under Footwear. We now have 2 divisions with technology cohesion, scale and strong operating margins. The Apparel division is predominantly focused on textile engineering with thread as the main product category and 2 exciting growth opportunities in Safety Fabrics and Coats Digital. The Footwear division is predominantly focused on polymer science with a more diverse product portfolio and OrthoLite as its largest business. This change provides increased focus and operational simplicity. Coats has a number of levers to generate organic growth in excess of 5% per annum on average through the cycle. We estimate that our underlying markets can grow on average 3% through the cycle. We will continue to outpace our markets by 100 to 200 basis points as the industry consolidates around fewer, stronger players. We have consistently gained share over the past few years. And in 2025, we have done it again in a difficult market context. Last year, we launched the initiative to grow in target organic adjacencies, and this strategy has already delivered 1% of group growth in 2025, which will continue as we scale up. Set together, this is how we will deliver more than 5% growth, 200 basis points ahead of the underlying market on average through the cycle over the medium term. Additionally, our strong cash generation provides us as we deliver with optionality to enter attractive inorganic adjacent markets as we did with OrthoLite. We continue to monitor companies with differentiated positions, a sustainability focus, cross-selling and cost synergy opportunities. This slide summarizes our key differentiators on one page. These differentiators are the drivers of our share gains. The Apparel and Footwear supply chains are very fragmented, but they are consolidating to cope with increase in product complexity, the increase in sustainability requirements and the changes in sourcing countries. Coats is in an enviable position to gain market share because we have the scale and capabilities to support our customers where it matters to them. At the bottom of this chart, you will see that the strength of our customer relationships is underpinned by our people and our culture of customer centricity. We have built deep trust with our customers through a track record of delivery over the years in any market conditions. Service is king for our customers, and this translates into the operational and commercial excellence focus at Coats. Customers value our high product quality and our ability to deliver it consistently from all our manufacturing sites, including accurate color matching, which is a key differentiator. And our investments in operational agility are paying off as orders are becoming more fragmented. Our service is also reflected in the way that our commercial and technical teams support our brand customers and manufacturers every day around the world to make the right product choices and improve their manufacturing productivity. At the top of the house, you can see our 3 key growth enablers. Our scale and financial strength allow us to invest more than other companies in sustainability in both products and operations, innovative new solutions and digital systems that make customer interactions more efficient and enhance supply chain transparency. This is how we win in the marketplace. Sustainability is at the heart of both Coats' and OrthoLite's strategies. Our sustainable thread portfolio grew 43% in 2025 and contributed to our share gains in the year. But we also drive sustainability in how we run our operations. In 2022, we set ambitious 2026 targets, and we are well advanced in many areas. Since 2022, we have achieved a 30% reduction in our Scope 1 and 2 emissions, ahead of our 2026 target of 22%. We have also achieved zero waste to landfill a year early. And women now occupy 33% of our top 150 leadership roles, ahead of our 30% target for 2026, a significant improvement as we continue to ensure equality for all employees. OrthoLite shares the same sustainability DNA with a similar focus on increasing recycled material content, developing breakthrough innovations like Cirql or making operations more sustainable. Our target organic adjacencies represent an addressable market of approximately $2 billion, growing at more than 5% per annum. We have increased the size of this addressable market from $1.3 billion to $2 billion since last year because we have added a new product category, high-visibility trims within Safety Fabrics. All these initiatives represent opportunities to offer new differentiated product categories to our existing customers, building on our expertise in textile, engineering and polymer science. In Safety Fabrics, we are bringing innovative protective materials to workers in hazardous jobs, combining premium protection with comfort and lightweight. In energy, we're expanding our range of highly engineered tape products that protects critical on and offshore pipeline applications. In Coats Digital, we provide to our apparel customers software products that optimize their production planning and costs. In Footwear, our woven upper technology, ProWeave, delivers increased performance and more design freedom with lighter weight. In lifestyle, we are extending our structural components offering from luxury to premium handbag customers. These 5 adjacencies, combined accounted for $45 million sales in 2025 with great momentum going into 2026. Let me give you more color on our Safety Fabrics initiative, which grew strongly in 2025. Safety regulation continues to tighten globally, and customers are demanding products that are not only protective, but also comfortable to wear. We already sell thread for safety applications, and we are now using those existing customer relationships to offer highly engineered fabrics and high visibility trims, leveraging our core know-how in textile engineering and polymer science and our cost-competitive supply chain in Asia. In the second half of 2025, we brought to market our latest innovation in protective clothing, FlamePro ARC, which offers superior protection against electric arc hazards. What sets this technology apart is that protection comes together with extreme lightweight and comfort, allowing workers the enhanced mobility and comfort needed to perform their roles. We also have a portfolio of high visibility trims, which can be paired with our safety fabrics, bringing life-saving identification characteristics in all types of ambient light, including no light. In the second half of 2025, we acquired VizLite, a small company with a lot of potential, whose glow-in-the-dark technology is already enhancing our portfolio. We combine it with our existing retro-reflective, fluorescent trims to create 3 layers of visibility in environments with reduced or no light. This technology has been specified for U.K. firefighters and has significant potential for growth in other parts of the world and other applications. The acquisition of OrthoLite is an excellent example of our strategy of making inorganic investments into adjacent markets. This high-quality business improves the quality of the group in terms of growth and profitability potential. OrthoLite is highly complementary to our existing Footwear business, creating a leading Tier 2 supplier of footwear components. In 2025, OrthoLite delivered full year profit in line with our expectations. So a good start. The complementary nature of these footwear businesses gives us the opportunity to create additional value from the acquisition in 2 significant ways. Firstly, we have identified $20 million of joint cost synergies, which we expect to deliver by 2028 through savings in joint footprint optimization with significant overlap in operational footprint and from strategic procurement initiatives, operational excellence and systems implementation. In 2026, we expect to deliver $5 million of these savings. In addition, there is significant overlap in our respective customer portfolios, route to market and leadership in sustainability. These commonalities present opportunities to accelerate growth through cross-selling as well as the development of joint innovation initiatives. This builds on our recent track record from the multiyear integration of the Texon and Rhenoflex footwear acquisitions in 2022. Innovation is at the core of OrthoLite. The adoption of open-cell foam technology will continue to increase in the core footwear market as well as positive mix given the shift towards molded insoles. But new OrthoLite products will also create additional opportunities in 3 adjacencies not served by OrthoLite until now, expanding our addressable market in insoles. In 2026, we plan to launch the first insoles made of open-cell foam technology with electrostatic discharge protection targeted at safety shoes. OrthoLite's technology will provide both comfort and protection in one insole. A leading European brand is currently testing the product with positive results. Within the core premium footwear market, we are also entering 2 new product categories. Using the Cirql technology, we have developed our first supercritical foam insoles, a solution that addresses requests from brands for a lower density, high rebound insole. These are aimed at the trail and road running markets and are also currently being tested by 2 leading brands. In parallel, we continue to assess the commercial potential and go-to-market strategy for the Cirql technology in midsoles, which we expect to complete in the first half. The third adjacency is very exciting as it perfectly shows how we can leverage the combined technology capabilities of Coats and OrthoLite to make technological breakthroughs. We have integrated in one product the comfort of OrthoLite's insoles with the performance of Coats' carbon plates, and we are aiming to launch this product starting in the aftermarket. This is just the beginning of the collaboration between our innovation teams, and we are excited at the many opportunities this may create. With the significant changes to the portfolio in 2025, we have looked again at our medium-term targets to ensure they remain appropriate. Based on this exercise, we have upgraded and simplified parts of our medium-term framework. We have maintained our above 5% revenue CAGR target through the cycle, expecting that the portfolio quality we have now will support a more consistent delivery ahead of the market. Our growth will be a combination of market growth of 3%, and our ability to continue to deliver growth ahead of the market through market share gains and target organic adjacencies. With the acquisition of the margin-accretive OrthoLite business and the associated synergies and with increased confidence in our business potential following the 2025 margin performance of 19.8%, we have increased our group margin target range by 200 basis points to 21% to 23%. Reflecting the contribution of OrthoLite, we have also increased our cumulative free cash flow target over the next 5 years from $750 million to $1 billion. This major step-up reflects the highly cash-generative nature of the group, including OrthoLite. We have also improved the quality of our measure of free cash flow, which is now defined as after exceptionals. This underlines how determined we are as a management team to drive cash generation for the benefit of shareholders. Finally, we have maintained our target of a strong double-digit EPS CAGR post M&A or share buybacks over a medium-term time frame. Our capital allocation strategy remains consistent. Our target debt leverage range is 1 to 2x EBITDA. We intend to allocate capital to support our organic growth, continue to deliver a progressive dividend and pursue disciplined M&A or share buybacks. With circa $1 billion of free cash flow generation over the next 5 years, we're excited about our future prospects, and committed to delivering EPS growth in excess of 10%. So to conclude, 2025 was a year of strong strategic progress with a resilient operating performance and where we outgrew our markets. While we expect our Apparel and Footwear markets to remain uncertain in 2026, we anticipate delivering organic revenue growth with easier comparatives as we move through the year. Our growth will be underpinned by our ability to outgrow the market. That said, we are mindful of the potential impact on demand and supply chains as a result of the conflict in the Middle East, which we are assessing. However, it is too early to provide an update. If conditions do prove more challenging, then the example of the past few years highlights our ability to adapt and the resilience of the group's trading. Importantly, we also expect OrthoLite to significantly outperform the underlying footwear market as its technology differentiation enables it to win new customers and share. We expect to deliver further adjusted EBIT margin expansion in the year from a full year OrthoLite contribution as well as from the modest organic margin improvement. Consistent with our enhanced ability to generate cash, we will have another year of strong free cash flow generation. We go into 2026 with upgraded medium-term targets, reflecting our enhanced portfolio of businesses and optimism about the future of the business. Thank you very much for listening. We're happy to take your questions now. Charles Hall: Charles Hall from Peel Hunt. David, could you just talk a little bit more about the adjacencies, that $2 billion total addressable market. What do you see as a realistic share of that, say, on a 5-year view? How much of that would be organic? How much of that would be M&A? And how do you see the margin profile of sales in that area? David Paja: Thank you, Charles, for the question. So we're pretty excited about the opportunity of growing into that $2 billion market. Obviously, our starting revenue last year was $45 million, with a good growth from the year before. But we see this driving at least 1% of organic growth at the group level going forward. This is based on just organic moves. I mean most of those efforts are organic. They are obviously built into our framework. And we believe that those adjacencies can deliver margin rates in line with our group medium-term targets. So obviously, there's going to be a scaling-up effect over maybe the first few years, but we see the margin potential there to reach that group level ambition. So look, overall, probably we always look at -- also check M&A opportunities. And obviously, we're exploring these spaces, but most of our focus is on organic work right now. Charles Hall: Got it. And then on the tariff situation. Obviously, we're in a year in now to tariffs. Has everything settled down in terms of supply chains? And do you see any changes as a result of the sort of recent tariff changes? David Paja: I think the direction of travel is quite clear. It was already kind of clear at the mid of last year. And it's fairly settled right now. So we don't think there's going to be a huge change in terms of where things are going relative to where they stand now. Obviously, we are monitoring the situation in the Middle East, but that's going to create probably more disruption in the near term. That disruption will require operational agility, which is one of our strengths. So we're ready to handle that as we've done in the past few years. And there might be a little bit of, again, shift of volumes temporarily maybe away from the Middle East as well, going back maybe into other locations. But strategically, in terms of overall market direction, we think it's quite settled and the near term, it will just require agility, which we are ready for. Mark Fielding: Mark Fielding from RBC. I've got 3 questions, but I'm going to ask the first 2 together and then I'll come to the other one because they're sort of linked. Firstly, can we talk a little bit more about OrthoLite's performance so far? I mean, obviously, you said it was performing ahead of the market. But I mean, the implication of your sort of 5% decline in Footwear in the second half as the market is down high single digits. So I'm just -- a bit more clarity on whether OrthoLite is stable, growing or still actually down a bit with the market, just better than that market and how we think about that evolving this year? And the reason that ties to my second one was, I mean, quite sensibly, your medium-term targets, you've sort of dropped the divisional part. But historically, you were targeting 3% to 4% growth in Apparel and 7% to 8% in Footwear. So do we still think about that as the sort of medium-term split? Or is there any changes because you've slightly rejigged the divisions, et cetera? David Paja: Yes. So I'll start with OrthoLite. OrthoLite substantially outperformed the market, the underlying footwear market and also outperformed our own Footwear business last year. And if you recall, that's because they have a couple of growth levers that we don't have in the rest of our business. One is technology penetration. Open-cell foam insoles are increasing in adoption within the footwear market. And the other driver is their shift from flat insoles to molded insoles, which raises their average selling price. So these 2 drivers are helping them deliver substantial growth ahead of the underlying market. Having said this, they also saw a sequential impact from the market decline that happened in the back end of the year. As Hannah mentioned, we saw some destocking in the footwear market in the last couple of months of the year. OrthoLite felt the same trend. But we see, as we are now obviously in Q1, we start to see kind of a sequential -- some level of sequential recovery from what happened at the end of Q4. And we expect OrthoLite to deliver strong growth ahead of market this year as well. Maybe to your second question, over the medium term, we still expect Footwear to be a higher growth division than Apparel. We think the fundamentals in there support a higher underlying market plus with the addition of OrthoLite, we think that, that's going to act as another incremental, I would say, accelerator to our performance within that market. So we see that medium term still the trend. Mark Fielding: Okay. And then just my third question, the high visibility trims business, just so I understand that a little bit. I'm assuming the market structure is relatively similar to others as in that you sell to a garment manufacturer who then includes it in the garments. And then I suppose I'm just checking, what does it mean that you are specified for U.K. firefighters? Does that mean they all have to have it? Or it's just something that could be used? David Paja: Yes. So the high visibility trims is a product that makes a lot of sense for us. And actually, for those who haven't noticed, [ Chris ] is wearing one of our products. So typically, you have -- in that particular product, that's our fabric. So it's a protective fabric. It has our thread and it has the high visibility trims. So that shows how you can go for that particular application with very complementary offerings. And by the way, as I said in my remarks, it just builds on our capabilities in textile engineering and polymer science. So it's at the core of what we know how to do. With regards to the question on VizLite, in particular, it's now specified on all U.K. firefighter applications. So that's a technology, a fluorescent technology that glows in the dark. So in a pitch dark room or when there's heavy smoke and you can see anything, this technology will glow by itself without the need for any light input. So it's a very interesting IP. That's what attracted -- what made it very attractive to us. There's about -- even though we specified it as a technology, there's only about 30% of U.K. firefighters that have already started tendering it because the other specification for the other 70% is more recent. But we expect that other 70% to start tendering this technology relatively soon and then kind of ramp up progressively over the next 5 years. So we're excited about that. We're also excited about the opportunity of this glow-in-the-dark technology to expand into other firefighter applications globally outside of the U.K. And as well as we see that as a technology that can be applied to other end markets even in the core Footwear and Apparel businesses. So we look at it as an IP acquisition. It's a relatively small company now, but we think very complementary and differentiated and it helps us scale up in a direction that makes a lot of sense to us. David Richard Farrell: David Farrell from Jefferies. I've got a couple of questions. I'll take them one at a time. 2026 is a World Cup year in North America. If I remember back to the 2022 Capital Markets Day, there was some excitement about kind of ProWeave. Is there anything in your forecast for higher sales as a relation to the Soccer World Cup? And if so, would that come in '26 or at the back end of '25? David Paja: So I think there's a couple of questions there. I'll take it as one in general on the Olympics and then the other one is more about ProWeave in particular. So on the Olympics, look, we have not planned for a bump or a significant one-off benefit of -- in our sales from the Olympics. So it's not something that we are accounting for. And there's a lot of discussion out there on how much of a bump these type of events generate in reality. Yes, with regards to ProWeave, it's one of the adjacencies obviously, that we're doing. It's a relatively niche technology that basically applies only to kind of relatively high-end applications. We already deployed it across almost 10 different shoes. So it's already being sold on 10 different shoe models for different brands. But we continue to drive with the help of OrthoLite, actually, that's one of the cross-selling areas we're working together to increase penetration in some of the major brands. But it will always be -- I mean, we know that is a little bit limited for its kind of high-end characteristics. I think I mentioned last year, the interest of ProWeave goes a little bit beyond in terms of longer term, how we see the upper space as an interesting space. And we see this as kind of the entry point with a very kind of high-end type of technology. David Richard Farrell: One for Hannah. If I look at the capital allocation slide, there's nothing in there for net debt reduction. Obviously, you're coming at that from going into '26 for the next 5 years at 2.2x leverage. Should actually some of that capital allocation be thought about? Or is the reduction in the leverage coming just from the EBITDA? Hannah Nichols: No, absolutely. Our focus is, on '26 is on reducing the net debt. We see it in terms of capital allocation actually as an output of allocating capital to support organic growth. It's sort of a natural outcome, which is why it's not explicitly referenced on the slide. But absolutely, our priority is on deleveraging. And we've talked about the cash generation of the group. You've seen that evidence in 2025. And with OrthoLite as well, that sort of clearly enhances the cash generation. So short answer is yes. David Richard Farrell: And final question, kind of EcoVerde. I guess over the last few years, the kind of higher selling point of that has been a real benefit of driving Apparel organic revenue growth above the market. How much is left to go from that as a tailwind as you look out over the next kind of 5 years? And can you just talk about kind of new customer bases versus kind of a replacement of existing customers? David Paja: Yes. So our 100% recycled thread product, EcoVerde, the EcoVerde brand is I think has been a phenomenal success for the group. I mean, literally 5 years ago, there was no sales. And last year, it was $550 million, which is about half of all the thread that we make. So it's been an impressive ramp-up that has required a substantial effort to develop a new supply chain, adapt our manufacturing processes, requalify all our color recipes. So we see that as something that is very difficult to replicate. Now from here, where do we go? We are at about 52% now with -- in terms of penetration. We think it can go -- it can keep going still. But obviously, as you increase towards 60% or beyond 60%, you're going to the very, very price sensitive pieces of the market. So we see that as a substantial differentiator, difficult to replicate with some room to grow. But in terms of sustainability, what we're doing now is we are continuing to drive recycled penetration, so kind of continue to push that, but it will moderate in terms of growth rate. You won't see the 50% kind of ranges that we've seen this year. And at the same time, we've launched a big initiative on supplier decarbonization, which will complement our efforts to get to our Scope 3 targets. So now when we go to brands, we have both the big push we have on recycled. And on top of that, supplier decarbonization as another big kind of driver for their sustainability -- to achieve their sustainability goals. James Bayliss: James Bayliss from Berenberg. Two, if I may. On Footwear customers, you noted they were managing down their inventory levels in the last few months of 2025. Can you just give us a sense of where that trend is for the first few months of 2026? Do you feel that levels are steady and in the right place now, absent any further shocks or Middle Eastern ramifications? And then my second question on market share. Your ambition seems to be to continue to grow for 1% to 2% per year over the medium term, but you're coming from quite a high base already. Are there any regulatory considerations in local markets or any territories where growth will be naturally more limited than others that we should be aware of? David Paja: Yes. So I'll start with the latter question. So on market share, yes, we're at close to 30%, right, on both divisions. We still see this as a number that continues to increase and going to continue to increase. The reason is, I mean, it may look like a big number, but when you look at manufacturer by manufacturer, in general, they like to concentrate thereby on fewer, stronger players, and it's not unusual to have manufacturers, so Tier 1s that buy 60%, 70% from us. So at a manufacturer level, they don't have an issue. They actually typically want to have kind of a core supplier that is at that high level, and brands also are trying to consolidate the number of Tier 1s. So we think those 2 trends, the fact that the Tier 1s are not necessarily trying to kind of limit the share they give to their largest supplier, and the fact that brands are trying to reduce the number of Tier 1s, I think, continue to play in our favor going forward. And sorry, remind me the first question was on -- yes, the sequential for Footwear. So I mentioned a little bit earlier, we saw the last 2 months were a little bit tough. We're obviously focused on delivering our profit and cash commitments, which we did. But we saw a substantial slowdown in the last 2 months of the year in Footwear in particular. But we've seen a sequential improvement in Q1. So it's not back to where it should be, but we've seen a sequential improvement that makes us think that, that kind of destocking that was done towards the back end of the year was already completed. Andrew Ford: Quick question. Andrew from Peel Hunt. I wondered if within that sort of market data information that you provided, whether there was anything, more detail you could bring out of that because I could see that -- sorry, I've lost the train of thought. I'll move on to the next one. So the other one is around competition on sustainability. Obviously, 5 years ago, EcoVerde, it was quite sort of a greenfield area for you. Just wondering where -- what the competition is currently within that area? I'll come back to the other one as I remember it. David Paja: So on sustainable threads, we see ourselves as by far the leading provider. As I mentioned before, it's actually not easy to transition to recycled polyester. It's a completely different supply chain. You need to develop suppliers that basically recycled PET bottles, so plastic bottles. And the quality requirements are very sensitive to our manufacturing process. So you need to kind of make sure that you define very clear requirements. Otherwise, your productivity goes down quite substantially. And on top of that, you need to redo all your color recipes for all the -- I mean, on average, on a given year, we delivered 200,000 different sets of color. And doing that is a gigantic piece of work. We have systems that allow us to do that very, very efficiently. But we find it like a very substantial differentiator when you combine all those things for people to replicate to the scale that we've done. And obviously, with scale comes also negotiation ability in terms of pricing and everything. So overall, we think we've built something that is very substantial in terms of scale and difficulty to replicate, and we don't see any competitor anywhere near that. Andrew Ford: Great. I'll try again with the other one. So I was just wondering about whether that was a broad-based sort of market decline? Or was it sort of within more sort of specific niches that either hindered you more than the market or was actually helpful sort of your relative -- I guess, the granular detail of that market movement, if you like? David Paja: Yes. The bigger -- so at the back end of the year, the bigger drop was in Footwear. Footwear is always more volatile. If you go over time just because of the average price of one of these athletic shoes is typically higher than a typical apparel garment. And for the second reason, there's fewer larger brands. So it's more concentrated around a few big brands like Nike, adidas, et cetera. So typically, you see a little bit of more kind of volatility when they decide to either destock or restock. So that's something we've seen in the past. We don't -- we haven't seen it in a particular OEM or a particular part of the market is being quite broad-based, but that's also because we are -- in Footwear, in particular, we have a higher percentage of exposure to those brands relative to Apparel. Hannah Nichols: I was just going to say, I think if you look at Apparel and the markets decline there, we really play to our strengths in Apparel in terms of our global footprint, our agility. And actually, when we look at our sort of the trends within the market share gains, a lot of those came after the tariff announcements because of our ability to react to the shifts and the agility. So it's really played to our strength, I think, is what I'd say about the Apparel piece. Mark Fielding: Sorry, Mark Fielding again. Just a couple of follow-ups on those questions. I mean, firstly, in terms of the recycled thread, I mean, there was conversation in the past about future sort of natural biodegradable threads, et cetera. I'm just curious how you think about the next generation in that? And then also possibly linked but more immediate. In terms of in Hannah's presentation, you talked about the price mix benefit. And then in Apparel, you talked specifically about mix, whereas it was price strategy in Footwear. Maybe a bit more elaboration on that. And just a reminder, I mean, is my impression that EcoVerde is slightly higher revenues, not higher margins? So it's not a mix benefit, but I'm just double checking that. David Paja: So I'll let Hannah comment on the second one. With regards to the next step in terms of recycled product, the big focus is going from PET bottle recycling to textile recycling, what is called textile to textile. So instead of just taking plastic bottles and recycling them into polyester, you would recycle garments. And starting with waste from manufacturing processes, there's a lot of waste generated by the Tier 1s in the manufacturing process. So we're very actively working in that space. This year, we've launched our first textile to textile recycled products. Today, it's a more expensive technology than the PET bottle recycling. But like we did a few years ago, as we led in the industry PET bottle recycling, we are now leading as well in textile to textile, it's now in the market. So we're selling -- it's still small volumes because it's higher priced. But we're doing a lot of work through our sustainability innovation center in India with all the supply chain that is developing the capabilities and the scale to make this happen. So we also have innovation in that same hub around all the type of products like you're saying, biodegradable or natural origin, not oil-based at all. But those, we see them as more at this stage probably those would be a further step away. So I would say the next step will be going more to textile to textile. And there's quite a lot of, I would say, interest from the brands. The leading brands in sustainability, they are already starting to at least look at that textile to textile as the next step. Hannah Nichols: And I think your question was about Apparel mix and what's driving that. So it's actually a combination of both premium products, but with premium products, they are more likely demand recycled product offerings. So it's a combination of the 2, which is where Apparel have benefited. So the correlation with the margins of recycled thread because they're going into premium products that they are typically higher margin, if that makes sense. David Paja: Okay. So if there's no other question, well, you see, basically, we delivered strong 2025, and we entered '26 with good momentum. Thank you very much for joining us today. We wrap up the call here. Hannah Nichols: Thank you.
Operator: Ladies and gentlemen, welcome to the LEG Immobilien Full Year 2025 Conference Call and Live Webcast. I am Valentina, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Frank Kopfinger, Head of Investor Relations. Please go ahead. Frank Kopfinger: Thank you, Valentina, and good morning, everyone, from Dusseldorf. Welcome to our call for our full year 2025 results, and thank you for your participation. We have in the call our entire management team with our CEO, Lars von Lackum; our CFO, Kathrin Kohling; as well as our COO, Volker Wiegel. You'll find the presentation document as well as the annual report and documents within the IR section of our homepage. Please note that, there is also a disclaimer, which you'll find on Page 2 of our presentation. And without further ado, I hand it over to you, Lars. Lars Von Lackum: Thank you, Frank. Good morning, everyone, and thank you for joining our analyst and investor call today. I am very proud to share that 2025 has been an outstanding year for us. We have delivered AFFO of EUR 220.5 million, marking a 10% increase, the highest level in our company's history. This performance is a clear reflection of our disciplined execution, our strong portfolio and our willingness to capture opportunities, like we did with BCP. Building on this success, we are proposing a dividend increase of 8% to EUR 2.92 per share. This reflects the full 100% payout of our AFFO, a strong signal of both cash generation as well as our financial health. We have also made solid progress on the balance sheet. Our loan-to-value ratio has improved to 46.8%, and we remain on track to reach 45% in 2026. This improvement was supported by a 3% positive valuation effect, which is backed by our own disposals and markets building higher confidence, although admittedly, markets remain at lower transaction volumes. On the portfolio side, we have completed or agreed on the sale of 3,100 units in 2025. These disposals further optimize our balance sheet and the efficiency of our portfolio. We are well on track with further disposals in 2026. The planned sale of the Glasmacher development plot in Dusseldorf has made significant progress. Renowned real estate developer, Hines signed a purchase option for the site with LEG just yesterday. We confirm our 2026 guidance with AFFO expected between EUR 220 million and EUR 240 million. We will grow cash generation also this year, while weathering higher interest costs as well as lower subsidies. Looking further ahead, I am equally excited about our midterm growth outlook. From 2028 to 2030, we see strong potential driven by a substantial part of units running off subsidization in 2028 and by the creation of a new operating model based on comprehensive digitalization across our business. These initiatives will not only strengthen our competitive position, but at the same time, create long-term value for all stakeholders. In summary, 2025 has been a year of achievement, strategic progress and measurable results. We have delivered growth, improved resilience and positioned ourselves for an even stronger future. Thank you to our teams for their dedication and to our investors for their trust. The foundation we have built today ensures that the years ahead will be just as successful. Let's now turn to Slide 6 and the 2025 financial highlights, a year that truly embodies our theme of promised and delivered. We entered 2025 with a clear set of targets, and I am proud to say we did not just meet them, we partially exceeded them. Starting with the net cold rent. We closed the year at EUR 919.9 million, representing a 7% increase year-over-year. This growth was supported by a healthy 3.5% like-for-like rent increase, but equally by the successful integration of BCP, which added 9,000 high-quality units to our portfolio. This integration was executed seamlessly and has already begun contributing to earnings as planned. On operating profitability, our adjusted EBITDA margin came in at 78.1%, well above our planned level of 76% and even above our improved guided level of roughly 77%. Those 110 basis points of outperformance reflect both our tight cost discipline and our continued success in driving efficiencies across operations. Moving to our earnings metrics. FFO I reached EUR 481.5 million, a 5.2% increase, lending right above the midpoint of our guidance range of EUR 470 million to EUR 490 million. Even more impressively, AFFO grew by a strong 10% to EUR 220.5 million, lending smoothly within our improved guidance range of EUR 215 million to EUR 225 million. This marks a record high for the company. And speaking of returns, our dividend proposal of EUR 2.92 per share reflect a 100% payout ratio of AFFO. Year-on-year, this is an increase of 8% and ensures that our investors benefit directly from these strong results. Let me now turn to one specific growth driver going forward, our subsidized units coming off restriction from 2028 onwards. Today, we have around 30,000 subsidized units that are still subject to rent regulation under the so-called cost rent regime. These units are currently rented out for about EUR 5.40 per square meter, which is significantly below market levels. By comparison, the relevant market rent for a similar mix of units is roughly EUR 9 per square meter. This means there exists a rent gap of more than 60%. As these units get off restriction, we can start closing that gap in a controlled and sustainable way like we have done with smaller numbers of subsidized units over the past years. In general, we will apply the 15% or 20% rent increase on all units getting off restriction depending on whether they are based in tense or non-tense markets. However, the cost rent adjustments executed in 2026 as well as the new lettings in 2026 and 2027 absorb parts of that maximum rent increase potential. As of today, we assume that this limits the rent increase potential to around 12% in 2028. On the portfolio level, that alone translates into about 1 percentage point to our overall rental growth in 2028. And importantly, the effects do not stop there. We expect spillover effects into 2029 and beyond as further adjustments and relettings will deliver further rent growth. This will become a recurring and predictable growth driver for our residential portfolio as it will take quite some time until we can close the gap towards market rent level. In short, as soon as these restrictions expire, we are going to not only unlock immediate rental uplift, but also secure a long-term structural growth contributor. That will support our earnings trajectory well beyond 2028 until the gap towards market level is fully closed. Let me now turn to our second midterm growth driver that will become equally important to LEG's value creation going forward, our technology and digitalization agenda. Our industry environment has changed fundamentally. The regulatory framework in the German residential real estate sector is becoming even more restrictive, whether in terms of rent regulation, energy efficiency requirements or tenant protection. The traditional levers for operational optimization are reaching their limits. This makes it even more important to identify new sources of efficiency and value creation. And we are firmly convinced that technology and digitalization represent the most significant untapped lever available to us today. We have made a very deliberate strategic choice in how we approach this. We are dedicated to building a completely new operating model by making the best use of technology and digitalization, not just implementing software, but truly embracing it and redefining the way we serve our tenants. We manage our buildings, we steer our contractors. Rather than diverting resources to building proprietary software, we pursue a disciplined Buy & Partner strategy. And we have chosen 2 world-class partners to execute on this vision. The first one is ServiceNow. With ServiceNow, we are building an end-to-end system architecture that spans our entire operative value chain from customer service to technical operations to administrative processes. This gives us the flexibility to deploy AI at every touch point along that chain rather than in isolated pockets and thus enables us to drive automation to unprecedented levels. We are, to our knowledge, among the first residential real estate platforms globally to adopt ServiceNow as a core platform, and we see this as a genuine competitive advantage. The second is SAP. We have made a consequent commitment to building on the most modern ERP system available in the market. In fact, we have been operating on the latest version of SAP since the end of 2024. This positions us ahead of many peers who are still facing complex migration journeys. Together, SAP and ServiceNow form our central tech backbone, enabling not only system consolidation and process standardization, but critically the systematic scaling of AI across our operations and administration. Our technology investments are designed to drive AFFO and FFO I optimization along 3 core value drivers: efficiency, top line and investment management. The first focus will be on efficiency, streamlining our customer-facing technical and administrative processes with best-in-class AI-powered solutions. Beyond that, we see meaningful opportunities to leverage technology for revenue growth and smarter capital allocation across our portfolio. We are investing meaningfully in this transformation with the bulk of spending concentrated in the near-term implementation phase. This is a conscious front-loading of investment. From 2028, we expect these initiatives to turn cash flow positive, building to a contribution of more than EUR 10 million in AFFO from 2030. In short, in an environment where traditional optimization levers are increasingly constrained, we are building the technological foundation that will make LEG a more efficient, more scalable and ultimately more profitable platform for the years to come. And with this, I hand it over to Volker for some insights into the operations. Volker Wiegel: Thank you, Lars, and good morning to everyone from the shiny AI future back to 2025 and specifically to our rent development. As we mentioned earlier in the year, rent growth followed a different quarterly trajectory compared to last year. After 9 months, we were at 3.1%, but I'm very pleased to report that, as promised, we delivered fully on our guidance range of 3.4% to 3.6%. We closed the year right at the midpoint of 3.5% like-for-like in-place rent growth. At year-end, the average in-place rent of our residential portfolio stood at EUR 7.04 per square meter on a like-for-like basis. This compares to EUR 6.81 in the previous year. The drivers behind this growth were well balanced. 2% came from rent table increases and another 1.5% from modernization and reletting activities. Looking across our market segments, stable markets showed the highest momentum with 3.8% like-for-like rent growth, while higher-yielding markets grew by 3.1%. Our free financed units specifically saw rent increases of 4%, which reflects the underlying strong momentum in the market. Specifically, we saw rent table publications in Hilden with 11%, Wilhelmshaven with 7% and Leverkusen with 5%. However, the growth momentum seems to have reached its maximum level, while years with higher rent growth are reflected in the published rent tables, lower growth rates will limit this development going forward. As expected, there was no effect yet from the cost rent adjustment for the subsidized portfolio in 2025. Importantly, this growth came with an ultra-low vacancy. Our like-for-like EPRA vacancy rate remained at 2.3%, virtually unchanged versus last year, confirming the strong demand we continue to see across our markets. Looking ahead, for the current fiscal year, our goal is to deliver 3.8% to 4% like-for-like rent growth as already indicated with our Q3 numbers. The cost rent adjustment should contribute around 40 to 50 basis points to that result. Moving on to our investments in 2025 on Slide 10. Our guidance for the year was to invest more than EUR 35 per square meter, and I'm pleased to confirm that we exceeded that target coming in at EUR 36.11 per square meter. In absolute terms, we invested slightly more than EUR 400 million into our portfolio, an increase of 10% year-on-year. This increase to the prior year was largely driven by the integration of the BCP portfolio where we had to accelerate necessary investment measures. Looking at the composition of investments in more detail. CapEx accounted for EUR 228 million or EUR 0.46 per square meter, while maintenance represented EUR 175 million or EUR 15.65 per square meter. Altogether, this brought the per square meter figure up by 6.2% versus last year. Our capitalization ratio remained broadly unchanged at 57%. With substantially lower new construction activity, recurring CapEx still increased by a moderate 2%, reaching EUR 261 million. Overall, 2025 was another year of disciplined and targeted portfolio investment. We delivered above guidance, managed the BCP integration successfully and continued to invest responsibly in the quality and long-term value of our housing stock. For 2026, we are guiding for investments of more than EUR 35 per square meter, which remains similar to the investment level of 2025. Let me now touch on one of our operational growth drivers, our value-add businesses. These operations are a key pillar of LEG's strategy and a reliable growth driver for the company. They allow us to generate additional earnings beyond pure rent growth, while at the same time, those improve service quality and efficiency for our tenants. I'm very pleased to report that in 2025, we achieved strong FFO I growth of around 20% in this segment, increasing from EUR 50 million in 2024 to around EUR 60 million in 2025. While others in the market are still talking about the value-add additions, we are delivering real results. The foundation of this success lies in our technician and craftsmen services, our project management and electrical service units and of course, our energy and heating business as well as the multimedia business. In particular, we are very optimistic about the continuing growth of our energy services, which benefit from the ongoing focus on energy efficiency and shift towards heat pumps as well as our small repairs and in-house maintenance business. Beyond these established value-add services, we are also building momentum in our Green Ventures. These include new climate-focused services such as RENOWATE for serial refurbishment; termios, with smart thermostats for hydraulic optimization and dekarbo for the installation and maintenance of heat pumps. It is important to note that the Green Ventures are not yet included in the financial numbers shown on this chart, but they will become a meaningful growth contributor over the next few years. Between 2024 and 2028, we strive to generate a cumulative contribution of around EUR 20 million from our Green Ventures. To sum up, our value-add business combines stable cash flows, operational synergies and sustainability, while our Green Ventures offer the chance to participate in one of the fastest-growing segments in our market, decarbonization of real estate. They significantly enhance the resilience and profitability of LEG's business model and will continue to be a strong source of earnings growth forward. Let's now take a look at our disposals in 2025 on Slide 12. In total, we completed or agreed on sales for around 3,100 units and a total of more than EUR 250 million. During the year, we sold 2,252 residential units for total proceeds of around EUR 190 million. After deducting financing redemption fees and taxes, net proceeds amounted to roughly EUR 100 million. The transaction market remained subdued throughout the year. Overall, investment volumes in the German residential sector declined by about 4%. Even more telling, the share of large-scale transactions above EUR 100 million fell sharply from 63% in 2024, down to just 34% in 2025. You find additional information for the transaction activity in the German market on Slide 29 in the appendix. Against this challenging backdrop and while maintaining our strict disposal discipline, we are very satisfied with the year's outcome. All in all, disposals were executed at or above book values, fully in line with our policy of value-preserving capital recycling. The chart on the slide shows the units that have been transferred in 2025, but there's more to come. Year-to-date, we had already signed additional sales contracts for roughly 950 units, representing around EUR 70 million in proceeds. These transactions will transfer in the first half of 2026, and we already issued a press release about the majority of them in early January. Within these transactions, we also made strong progress on the Glasmacher district development plot in Dusseldorf. This would certainly contribute to our deleveraging strategy. As already described by Lars, we were able to agree with Hines on an option to buy the plot. The next step will be an agreement between Hines and the city of Dusseldorf. In case that works well, we expect to sign the deal by end of September, the latest. However, please be aware that the sales proceeds will follow the progress made in the building permission process. Moreover, we continue to advance our broader disposal program of up to 5,000 units, including around 1,400 units in Eastern Germany. Overall, our selective approach, i.e., focusing on sales of smaller portfolios or even single multifamily houses in the current market environment clearly demonstrates our ability to deliver on disposals. We remain focused on execution, disciplined pricing and support to our balance sheet as well as improvement of the overall quality of our portfolio. And with this, I hand it over to Kathrin. Kathrin Köhling: Thanks, Volker, and good morning also from my side. Let us now look at Slide #13, which covers our most recent portfolio revaluation. The results clearly confirm that market conditions are stabilizing. They also reflect the upward trend seen in leading market indicators such as the VDP Property Index and the German Real Estate Index GREIX. While the VDP Index recorded an increase of around 5.3%, the GREIX showed an increase of 4.8% for 2025. Against this backdrop, our portfolio valuation result in the second half of 2025 posted a 1.8% uplift, which was even stronger than the 1.2% increase we saw in the first half of the year. Altogether, for the full financial year 2025, we saw a valuation result of 3%, demonstrating clear upward momentum. Further details can be found in the appendix on Slide 30, where we show valuation changes by market segment. Our gross yield now stands at 4.8%, which continues to offer a comfortable spread versus bond yields, an important buffer in a still cautious investment environment. On a net initial yield basis, excluding incidental acquisition costs, we stand at 4.3%. The average gross asset value per square meter amounts currently to EUR 1,710, ranging from about EUR 2,320 in high-growth markets to EUR 1,190 in higher-yielding markets. Overall, the valuation result confirms that the correction phase of the past 2 years is behind us. We remain confident that this recovery path will continue into 2026, driven by renewed investor interest, more stable financing conditions and the intrinsic strength of the German residential sector. The trend has turned positive and the positive outlook is being supported by the view of major real estate experts such as CBRE, JLL as well as Moody's. Let's turn to Slide #14 and take a closer look at the development of our AFFO in 2025. We ended the year with an AFFO of EUR 220.5 million, representing a 10% increase year-on-year or about EUR 20 million higher compared to the prior year's EUR 200.4 million. The main driver behind this growth was, as expected, higher net cold rent. Altogether, this contributed roughly EUR 60 million. From that, about EUR 28 million comes from organic rent growth and another EUR 49 million from the acquisition of BCP. These positive effects more than offset the EUR 17 million negative impact from disposals. Net cash interest rose by EUR 12 million, driven by the increase in debt due to BCP and by higher refinancing costs. Still, I would like to highlight that we were able to keep our average interest cost at a very competitive 1.66%, which is an excellent outcome given the current interest rate environment. In addition, our Green Ventures still in their early investment phase, had a temporary negative impact of EUR 4.2 million on AFFO in the reporting period. Maintenance and CapEx spending amounted to about EUR 13 million more after subsidies, reflecting the enlarged asset base. To sum up, 2025 was another solid year of strong growth and recurring cash flows, underlining both the resilience of our operating platform and the profitability contribution from the BCP integration. Finally, let's turn to Slide #15, which highlights LEG's financing structure and key figures, starting with our loan-to-value ratio. We closed 2025 at 46.8%, coming down by 110 basis points year-on-year. That puts us well on track to reach our target of 45% during 2026. This continued deleveraging is driven by our solid cash generation, disposal proceeds as well as valuation effects. In addition to LTV, another key indicator, especially with regard to our bond covenants is the interest coverage ratio or ICR. Our ICR stands at a very strong 4.3x, and also all other bond covenants have ample headroom. For those interested in more detail, we've provided the full overview in the appendix. Our average interest cost increased modestly by just 17 basis points to 1.66%, still a very low level in today's market environment. At the same time, the average debt maturity remains comfortable at 5.5 years. Our liquidity position remains very strong, with more than EUR 800 million available as of year-end 2025 and undrawn revolving credit facilities of EUR 750 million. As already discussed in the last earnings call, all debt maturities for 2026 are covered. At the beginning of this year, we redeemed our EUR 500 million bond, and we are now evaluating refinancing options for the 2027 maturities, including the next bond, which comes due only in November 2027. We'll continue to take an opportunistic and disciplined approach here, depending on market conditions. All in all, our balance sheet is resilient. Our maturity profile is well structured, and we are in a very strong financing position with ample flexibility going forward. And with this, I'll hand it back to Lars. Lars Von Lackum: Thanks, Kathrin. Let me conclude today's presentation, with a brief summary of our guidance for 2026, as shown on Slide 16. These targets were already introduced with our Q3 2025 results, and I'm happy to reconfirm today that our guidance remains fully in place. For 2026, we expect a further improvement in our cash generation with AFFO between EUR 220 million and EUR 240 million. That represents continued growth on top of the strong performance we delivered in 2025. In line with that, our FFO I is expected to come in between EUR 475 million and EUR 495 million, supported by an adjusted EBITDA margin of around 78%. On the operational side, we target like-for-like rent growth between 3.8% and 4%, driven by our solid rent dynamics, targeted modernizations and the cost rent adjustment for subsidized units. Our investment volume will again exceed EUR 35 per square meter, ensuring that we maintain the quality, energy efficiency and long-term attractiveness of our housing stock. On the balance sheet, we remain fully committed to further deleveraging. With our LTV expected at around 45% by year-end 2026, we are well on track to achieve this. As announced, we plan to distribute 100% of AFFO to our shareholders, reflecting both our strong cash flow generation and our disciplined capital allocation approach. We will propose a dividend of EUR 2.92 either in cash or shares, the latter depending on the market environment. Beyond the financials, we also continue to make measurable progress in sustainability. In 2026, we target a CO2 reduction of about 7,600 tonnes. And by 2029, we aim to lower our relative CO2 emission saving costs per ton by 20%. To sum it up, LEG remains on a clear and consistent path, generating reliable cash flow, maintaining financial discipline and building long-term value for our shareholders and tenants alike. As we've said before, cash flow remains king and the best metric to steer our business. Our 2026 guidance once again underlines the strength and resilience of our business model. And with this, I come to the end of our presentation, and we are now looking forward to answer your questions. Operator: [Operator Instructions] The first question comes from Marios Pastou from Bernstein. Marios Pastou: I've got 2 questions from my side. So firstly, on the 5,000 unit disposal pool. Can you provide an update here on the progress you're having with current discussions? I think on the last update call, you mentioned you were in exclusivity in East Germany. So any comments on the progress there would be helpful. And then secondly, on the slide with the 16,000 units coming off restriction in 2028. Based on your prior experience when adjusting the rents, do you foresee any vacancy risk here, the uplift being 15% or 20% depending on the cap level seems like quite a step change in one go. So any comments there will be helpful. Lars Von Lackum: Marios, thanks a lot for your questions. So with regards to the 5,000 units disposal portfolio we have on the market, around 1,400 units are in Eastern Germany. So for parts of it, we are in exclusivity. And unfortunately, still the transaction times are much longer than initially expected. This is partially due to the financing and the more stricter view of banks with regards to real estate. Those processes still take much longer than we had forecasted. So therefore, yes, there are still portfolios in exclusivity. And certainly, we hope that we can close those over the course of Q1 and Q2. With regards to the remaining 5,000 units, we are selling those in smaller portfolios as well as single multifamily houses exactly as Volker has laid out during his presentation. So it is unfortunately not the case that we see bigger investors or transaction liquidity to have increased since the beginning of the year. So let's wait how the discussions at MIPIM next year -- next week will look like. It might certainly be that this brings additional liquidity to the market. With regards to the subsidized units, which run off, you might have seen that most of those which are getting off restriction are those in the high-growth markets. So the non-tense markets account for around 2/3 of those units getting off restriction. So therefore, I have full confidence in Volker and his team that they will relet those very quickly and easily because the undersupply in those markets is quite strong. Volker Wiegel: And even to add up, we don't see the risk of higher -- significantly higher fluctuation. Of course, there will be some fluctuation, but not in a way that we will not be able to cover it. And on Slide 27 in the appendix, you see the spread to the market rent, and you see that it's hard to find a substitute which is at the previous cost. Operator: The next question comes from Veronique Meertens from Van Lanschot Kempen. Veronique Meertens: A few from my side. So first, on the Dusseldorf land plot, could you please elaborate what you exactly meant with the time line you see for the sales proceeds of this disposal because I didn't fully understand it. Lars Von Lackum: Veronique, thanks a lot for the question. So unfortunately, first of all, let me say that certainly, we have a U.S. investor on the other side. So confidentiality requirements are quite strict. I try to give you as much of an insight as possible as of today's stage. So we have signed a purchase option with Hines yesterday, and they can make use of that call option until the end of September. If they are agreeing to that call option, we have a fully laid out contract with regards to the acquisition of the plots. So that contract will then be signed immediately and all those terms and conditions are pre-agreed, certainly including the price and the payment pattern. The payment pattern then foresees that a certain part of the sales proceeds will be paid by year-end, and the remaining payments will depend on the progress of the building permission process. And that is what I can disclose as of today. Veronique Meertens: Okay. That's clear. And then maybe that also rolls into my next question. So your LTV target is still 45%. It sounds that you're not probably get all the proceeds of this disposal in '26. So how strict is that target? How do you expect to get there as in what have you assumed in terms of disposals and value gains? And also, are you willing to sell at a discount if that means that that's what's necessary to meet that target? Lars Von Lackum: Yes. So Veronique, as you know, we have currently 5,000 units in the market. We will strictly stick to the levels which we were sticking to for all the previous years, which means we are not willing to sell below book value. So that is what we have executed over the last -- much more difficult years, and we will also stick to that guidance for this year. In order to arrive at those 45%, certainly a contribution comes from the sales proceeds, and we are also seeing a positive development in the market. Let's wait whether that is consistent over the year. Certainly, we now have a big war in the Middle East. If that tends to be longer than initially assumed, that certainly might have an impact. As of today, and looking into whatever we heard at least, it might be not that, that war is extending for weeks. So therefore, if that's not going to happen, we are quite confident that we can reach our 45% target. And this is, as of today, what we are now striving for, and we are quite confident to reach that within 2026. Operator: The next question comes from Andres Toome from Green Street. Andres Toome: You have a pretty clear focus on disposals for the next 12 months or so, it seems. But I was just wondering on the other side of it, if large disposals in the market today require "portfolio discounts", then is there a case where you can see actually accretive acquisition opportunities yourself to be a buyer, which would be financed through an equity raise? And I guess I'm particularly thinking about some of these news flows around open-ended funds for German residential that need to fulfill their redemption needs. Lars Von Lackum: Yes, Andres. And thanks for your question. So with regards to our own acquisition activity, I think we have just acquired a big portfolio, BCP, 9,000 units, integrated that fully. Certainly, we are being offered bigger portfolios on a regular basis. I can tell you that we have not seen any of those willing sellers to give in on price. So therefore, there was nothing comparable with regards to any acquisition opportunity with regards to the quality and also the pricing of the BCP portfolio. Looking at our share price, I think it would be very, very difficult to identify anything which in the current market would then really end up with an accretive value for our shareholders, making the next acquisition. So therefore, our focus currently is strictly on deleveraging, reaching that 45% target, getting sales executed. Andres Toome: That's clear. And then maybe related to this, maybe not in terms of pure straight equity raise, but are you perhaps seeing any options where the seller would accept LEG shares as a buying consideration? I think we've seen some of these examples in other geographies in Europe, but I wonder if there's any discussions around that in Germany. Lars Von Lackum: So currently, we haven't had that discussion with any of the willing sellers. Andres Toome: Understood. And then my final question was just on the points you made around AI. And I think one of the points you highlighted was gaining also some revenue upside. I just wanted to understand how does that work in a regulated residential market? What are the levers you can pull beyond the regulatory constraints you already have in putting through in place rent increases? Lars Von Lackum: Yes. As you know, Andres, the number of criteria with regards to the rent tables can be up to 100 for a single rent table. So the qualitative criteria, which you need to take into consideration is quite a long list. Certainly, being more precise on those different criteria can certainly give you additional upside to just mention one of the examples with -- which certainly gives you an additional rental potential to be realized if you are using more AI. Operator: The next question comes from Thomas Neuhold from Kepler Cheuvreux. Thomas Neuhold: I have 2. The first one is a follow-up on the Gerresheimer project. I understand you're bound by NDA. But I was wondering, would you be able to sell the land plot at or above book value? Can you comment on that? Lars Von Lackum: Yes, so the book value is at around EUR 71 million, and we've been able to realize a substantial uplift on that if we get the sales contract signed end of September. Thomas Neuhold: Good. The second question is on the regulatory environment. I was wondering, if there have been any recent important news on the planned change to the rent regulation. Did you hear anything important? Lars Von Lackum: Yes. So if you look at the current discussion in Berlin, I think on a federal level, you might be aware that there are still discussions on how the regulation for refurbished apartments will look like, how index rents will be limited and also how those pure payments are being regulated. So those are the 3 big issues the Social Democrats are currently forcing through. And from our perspective, that is already a given and that's going to be agreed. With regard to the city of Berlin, there's certainly a lot of discussion and let's wait of what's going to happen now. As you know, we do not own a single unit in Berlin. So we will be not affected by whatever is being decided or at least being discussed in the upcoming election in Berlin. Operator: The next question comes from Kai Klose from Berenberg. Kai Klose: I've got 3 quick questions, if I may. The first one is on the -- actually, the first 2 are on the AFFO statement. Could you indicate or give more details on the increase for the nonrecurring special items from EUR 16 million to EUR 33.9 million and if there will be a similar level or similar increase in '26? Second question is on the green investments, which -- investment income from Green Ventures, where you mentioned that this will leave the investment phase in '26. So can you read that there will be a positive contribution to the AFFO in 2026? And the third question would be on maintenance. You mentioned there was an increase in '26 -- '25 because of the BCP portfolio. Has this been -- this increase only in '25? Or can we expect slightly higher levels because of ongoing work for BCP -- ex BCP assets in '26? Kathrin Köhling: Thanks, Kai, for your questions. With regard to the first one on the nonrecurring special items, this was a special case this year because of BCP. Obviously, we had some integration costs that took place this year, and that's why this number was higher than in the previous year. As long as we don't buy another BCP this year, this should be lower next year. Volker Wiegel: On the second question on Green Ventures, yes, we expect a positive result will not be record high. And of course, there's more risk in these ventures as it's new, but we expect a positive result and yes, expect breakeven. Lars Von Lackum: And to conclude the round here, so with regards to the maintenance expenditures we had in 2025, we do not expect an additional expenditure on the BCP portfolio within 2026. Operator: The next question comes from Paul May from Barclays. Paul May: Three, if I may, probably doing one at a time might be easier. Just following on from the question earlier around acquisitions out of the open-ended funds. I appreciate you said they're not willing to move on price, but there comes a point where they don't have a choice. They do need to meet those redemptions. So I assume that opportunity may still come. You mentioned it wouldn't be accretive for investors if you fund it with equity. Just wondering how you're viewing that, whether you're viewing that on a cash flow basis or whether you're viewing that on a kind of balance sheet made up value basis. That would be great. And then we live it next to separately. Lars Von Lackum: Yes, Paul, thanks for your question. So with regards to the acquisition opportunities out in the market, I think you rightly assume that certainly some of those open-ended funds will sell portfolios. What we still see in those discussions is that liquidity there does not seem to be so stretched that they are under pressure to do really fire sales. So therefore, currently, no indication for them really giving in on price. Certainly, and you might have seen that, we had 2 funds which have also stopped accepting redemptions. You can close down on the fund for 3 years. So that once again also might be a prolonged period where you are not seeing those funds to really do for selling. So therefore, that is what we've currently seen in the market with regards to those funds currently offering portfolios in the market. Secondly, with regards to how we view those acquisition opportunities, we certainly look at it from a cash flow basis, but also from an NTA perspective. And currently, we were not willing to really offer our shareholders any exposure towards those acquisitions. From our perspective, we are well advised to be strict on sales and do our deleveraging path in 2026, in order to arrive at that 45% LTV target. Paul May: Just sort of following on that, I guess, you mentioned the trend in the market, I think it was in Kathrin's commentary has turned positive. I mean, to some extent, the only thing that's positive is valuation prints. Transaction market is lower. Swap rates and bonds have moved higher now versus the average through 2025. So one might argue that the activity levels are lower and worse versus the valuation prints that have got better. Just wondering how you're reconciling those 2 things, which seem to be moving in opposite directions. Kathrin Köhling: Yes. So happy to take your question. When you just look at what is happening in the market with the undersupply that we continue to see, we still expect that rent growth will be a key driver for property values also this year. And yes, it is -- it has been a low year in terms of transaction volumes last year. But when we look at what the big valuators are expecting for this year, they are expecting at least transaction volumes, which are a little bit higher than last year. So we've seen around EUR 9 billion last year. We'll probably see around EUR 10 billion this year. So there are some positive signs. I mean, given currently the Iranian conflict, things look quite different these days, but we have to see what will happen ultimately over the next weeks. If we were to come back to a rather normal environment, which we've had like a week ago, then I'm quite positive that we will see what I just said. Paul May: I think the brokers were quite positive on improving last year as well and ended up being slightly worse, but just be interested to see how that comes out. And then I think again for you, Kathrin, just another one. So over the next 6 years, I think it is roughly, you've got about EUR 1 billion of debt maturing. I think it's just over EUR 1 billion of debt per annum with an average cost of about 1.3% at the moment. Obviously, the cost of that will likely go up by somewhere around 220, 230 basis points, which I think implies a financial headwind to FFO of about 28% versus 2025 FFO and about 63% headwind to AFFO based on FY '25 AFFO. I appreciate that we offset to some extent by rental growth. But just wondering your thoughts there, how you're going to manage that? And obviously, you mentioned disposals, but those in theory come at a higher EBIT yield than your financing costs. Otherwise, you're better off refinancing and holding on to those assets. So I just wonder how you're going to manage that sort of headwind to FFO and AFFO moving forwards over the next 6 years. Lars Von Lackum: Yes. Thanks a lot for your question, Paul. With regards to our midterm planning, our assumption currently is that we can realize, on average, a 5% growth of our key KPI, AFFO over the coming years despite the headwind from interest rates, which you have just mentioned. Certainly, exactly as you mentioned, we are expecting the core business to deliver strongly due to the undersupply in the market and the additional element, which we have disclosed hopefully, in a bit more detail as of today, the substantial number of subsidized units running out of those subsidization schemes and then being treated as free financed units. Secondly, you've seen what happened to the value-added businesses. We are quite confident that we can grow those value-added businesses going forward. That was certainly a very strong year, EUR 50 million to EUR 60 million. So please do not extrapolate that going forward. But that's certainly a contribution we are going to see. Green Ventures, you heard that. That was the last investment year. Last year, they are supposed to contribute substantially. Cumulatively, we strive for a profit of around EUR 20 million until 2028. That's an ambitious target. Certainly, as always, it's under risk if you are talking about start-ups, but the market certainly on the decarbonization side is huge. And finally, we will strive for a new digital operating model, and that certainly will give rise for efficiency gains, lower investments and certainly and most importantly, also additional top line. So with those elements, we feel comfortable to say over the next years, despite the headwind from interest rates, we can increase AFFO per year at around 5%. Paul May: Cool. Perfect. And just to check, the marginal financing costs you're assuming in that 5%, just so you got a sense. Lars Von Lackum: The marginal financing cost for a 10-year financing in the -- in the... Paul May: In your planning, you mentioned 5% per annum AFFO growth. So I just wondered, what is the assumed marginal financing cost? Lars Von Lackum: Yes. So what we do is that we certainly use the interest rate curve as of the time where we are preparing and finally deciding the midterm planning, which was October last year. So certainly, if that is going to change, that will have an impact. But believe me, everyone here in the management team and the full team is fully dedicated to deliver those returns going forward. Paul May: Okay. So we're about sort of 15-ish basis points higher on that versus October last year. Operator: The next question comes from Thomas Rothaeusler from Deutsche Bank. Thomas Rothaeusler: A couple of questions, I think 2 or 3. The first one is on subsidized rents and the adjustment potential, more looking at the long-term upside. I mean, should we expect a structurally higher rental growth rate from '28 considering the higher reversion potential? I mean, you can almost double the rents over time, as you've shown. Maybe you could provide a rough idea about the long-term impact on rental growth. Volker Wiegel: You will have significant impact on the next 3 years starting 2028. Thomas Rothaeusler: But I mean from there, like more the very long term, I mean, you can basically adjust by 12%, as I understand, in '28. But then from there, actually, there is much more adjustment potential, I think, given the low level where subsidized rents come from. Volker Wiegel: Yes, it's -- well, you see the spread to the market rent, and it will take time to adjust it until it's there. And market rent also develops. So this will -- there will be a significant gap that we need to close. And of course, we have the German rent regulation where we can adjust all 3 years then the rents. And we haven't simulated for the next 20 years, but it will have a structural impact over the next decade, I would say. Thomas Rothaeusler: Okay. And then on value-add services, I mean, which contributed a record EUR 60 million in '25. Just wondering what to expect in the coming years? Lars Von Lackum: Yes. So please do not expect that value-added services are now increasing on a regular basis by 20%. That would be highly unrealistic. So that we had -- that lower growth over the last 3 years was certainly very much driven by the energy crisis and the Ukraine war. So that was a strong impact on the Energy Services business. So from our perspective, for this year, assumes something in the growth range for the AFFO. So that will be growing pretty in line with AFFO for this year. Thomas Rothaeusler: Okay. Last one, yes, on property values. I'm just wondering if you could -- if you already got any indication from your appraisers for the first half? Kathrin Köhling: Yes, we just finished our last valuation. So as always, we will start with our new valuation with our cutoff date end of March. And then we'll have more insights once we meet again in May, and then we will give you an indication on H1 as we've always done. Operator: The next question comes from Neeraj Kumar from Barclays. Neeraj Kumar: I've seen a couple of questions on equity raise, so I'll probably not ask that. But on the other side, I would say that it's assuring that you see your values are strong and you don't look to sell below book values. But given your current share price, which seems to be pricing more than 50% discount to your NTA, do you see a potential in saying disposal of EUR 500 million assets of your least profitable assets at 10% discount to your book value and then using those proceeds to buy back shares? If yes, why you're not considering it? And if not, then how do you think about your share price here? Do you think it's fairly representing your property values? I'm just trying to understand if we should be believing your reported property values or your share price implied property values here. Lars Von Lackum: Yes. Thanks a lot, Neeraj, for the question. So it's always difficult with hypothetical questions. So we have not thought about doing that, and we will not do that. So from our perspective and looking at the value increases, especially with those with the lowest yields, those have grown substantially in value over the last 2 years. So therefore, from our perspective, that's nothing which we would -- we would look at. Neeraj Kumar: Okay. So if I understand correctly, like selling assets at 10% discount to book value is not accretive, if you were to use that to buy your shares at more than 50% discount to book value? Lars Von Lackum: This is not what I said, Neeraj. I said that we are not thinking about doing so because from our perspective, the highest value creation on those assets is still to come due to the strong undersupply in the especially high-growth markets. Neeraj Kumar: Got it. And last question. You seem to have been able to refinance your debt with good success with Baa2 rating. I was just trying to understand how critical the LTV target of 45% or a potential rating of Baa1 for you is? Or you think that is better in terms of running with high leverage and doing more share accretive stuff here? Kathrin Köhling: Yes. So of course, as I've always said, the 45% LTV is definitely something that would help to get an upgrade from Moody's on our rating. Although, as you know, it's not the only thing -- the only KPI and the only qualitative factor they look at. So obviously, we would love to have a better rating, but is it essential? Like do we need it to refinance? No. We have refinanced also in the past years. We have refinanced at very attractive levels. So it is not an absolute need that we get this rating upgrade. But however, it's still something nice to have. Operator: [Operator Instructions] The next question comes from Manuel Martin from ODDO BHF. Manuel Martin: Two questions from my side, please. One follow-up question on the units getting off restriction in 2028. Having looked from a political perspective, have you heard anything from the political players in the locations where the units will come off restrictions, i.e., could there be some headwinds to be expected? Maybe you can elaborate a bit on that and thereafter, will be my second question. Lars Von Lackum: Yes, Manuel, thanks a lot for the question. So we have not heard from any political resistance. If you look at the prices of those subsidized units, EUR 5.40 versus the market level EUR 9, that is the difference you're currently seeing in the market. We paid back the subsidized loans already in 2018. So there was a waiting period for another 10 years. So therefore, from our perspective, nothing to be expected on the political side, no political pushback also with regards to those units, which were getting off restriction over the past years. So also no political pushback to be expected from that bigger portfolio. Volker Wiegel: And maybe to add, we are in close contact with almost every mayor and every bigger location, and they understand what's going on and accept it. Manuel Martin: Okay. Perfect. Second question about project development, you're not actively doing that. Do you think this could become an option again for LEG to restart project development? It might be a bit too early, but maybe you can say a word on that, please. Lars Von Lackum: Yes. So very happy to do so, Manuel. We are still struggling to come up with a return worthwhile taking the additional risk on our balance sheet. It is still something which certainly we have explored with that big plot in Dusseldorf of 19 hectares. Finally, we were not making or coming up with a business plan, which will have at least brought about the return worthwhile spending additional money on that plot. So therefore, from our perspective, no, the current regulation is still very strict. The Bau-Turbo, so that's speeding up of building permission processes, we have not seen that really kicking in. We still wait for that building type E, which is assumed to reduce some of the requirements with regards to the building type and the building qualities. Also, those reductions are still not being decided or not in a way currently being discussed politically, which would come then finally to lower construction costs. So therefore, from our perspective, no, we currently do not see any real benefit of that for us to reenter the development market. So that is the current status there. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Frank Kopfinger for any closing remarks. Frank Kopfinger: Yes. Thank you, Valentina, and thanks for all your questions. And as always, should you have further questions, then please do not hesitate and contact us. Otherwise, please note that our next scheduled reporting event is on the 13th of May when we report our Q1 results. And with this, we close the call, and we wish you all the best and hope to see you soon on one of our upcoming roadshows and conferences. Thank you, and goodbye, everybody. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Operator: Good day, and thank you for standing by. Welcome to the Scandinavian Tobacco Group Full Year 2025 Results Conference Call and Webcast. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Torben Sand. Please go ahead. Torben Sand: Thank you, and good morning, and welcome to Scandinavian Tobacco Group's webcast for the Full Year and Fourth Quarter 2025 results. My name is, as said, Torben Sand, and I'm Director of Investor Relations and External Communications. And I am today, as usual, joined by our CEO, Niels Frederiksen; and our CFO, Marianne Rorslev Bock. Please turn to the next slide for today's webcast agenda. Niels will start the presentation by giving you a brief overview of the highlights, including a snapshot of the key financial data. Niels will also summarize a few of the highlights from our new strategy that we launched last year, Focus2030. Then Niels will move on to share more details on the performance of our product categories before Marianne takes over and give you an update on the financial performance in our 3 reporting divisions. Marianne will also give more details about the financial performance, including comments on cash flow, leverage and capital allocation. Niels will conclude the call by giving some insights into the expectations for the full year 2026. After the pre-prepared presentation, we will conduct a Q&A session where we will be pleased to take any questions you might have. Before we start, I ask you to pay special attention to our disclaimer on forward-looking statements, which can be found on Page #3 in this slide deck. Now please turn to Slide #5, and I leave the word to our CEO, Niels Frederiksen. Niels Frederiksen: Thank you, Torben, and welcome to the call. 2025 became a challenging year for Scandinavian Tobacco Group with a combination of external disruptions and internal operational issues. Tariffs and lower consumer sentiment in the U.S. directly impacted our handmade cigar business and the category experienced fierce price competition, both in retail and in the online distribution channels. Our machine-rolled cigar business continued to be under pressure, while our investment in our nicotine pouch business delivered good contributions to the group's financial performance. Throughout the year, we have concentrated our efforts on protecting our market positions, integrating Mac Baren and growing our handmade and nicotine pouch businesses. And given the difficult circumstances, I am satisfied with our results for the year despite having to reduce our full year expectations in May as a consequence of the increased tariffs. 2025 was a year where we launched our new strategy, Focus2030, and we released new financial ambitions, and we adapted a new more flexible shareholder return policy. At our Capital Markets Day on November 20 last year, we unfolded the new strategy but today, we will also provide a few highlights on this later in the call. We expect 2026 to be a year where geopolitical uncertainty will remain a market condition and economic growth will be challenging. For Scandinavian Tobacco Group, this means that our main priorities in the year will be to stabilize earnings in our machine-rolled cigar and smoking tobacco business and inject new energy and growth into our strong handmade cigar business. We will also continue to grow our promising nicotine pouch business. Now please turn to Slide #6. Let me now share a few financial highlights for the year. Marianne will give more details about the financial performance and the quarterly development later in the presentation. But reported net sales were DKK 9.36 billion compared with our guidance of DKK 9.1 billion to DKK 9.2 billion, and the EBITDA margin before special items was 19.8% compared with our guidance of 19.5% to 20.5%. Overall, this results in an EBITDA before special items in line with our expectations. The free cash flow before acquisition came in more than DKK 200 million below our guidance due to a delay in the collection of certain receivables due to the SAP implementation in Europe. The issue has been solved and as the deviation is a phasing issue, the free cash flow will be equally positively impacting 2026. Marianne will give you more details in her part of the call. Adjusted earnings per share were DKK 10.8, in line with our guidance of DKK 10 to DKK 12 per share. Please turn to Slide #7. On 20th November, we launched our new 5-year strategy in connection with the Capital Markets Day, and you can find a recorded version of the event on our website. The purpose of Focus2030 is not only to create value by executing the strategy but also to develop a company that is even better positioned to deliver value beyond 2030 and we are confident that we can do so. We've defined 3 strategic priorities, each important for us to deliver on the ambitions for Focus2030. Firstly, to create a sustainable and stable machine-rolled cigar and smoking tobacco business, primarily focused on Europe. Secondly, to grow our attractive handmade cigar business anchored in the U.S. but with a stronger global footprint. And thirdly, to build a larger nicotine pouch business with even more upside in an attractive category. And in the process, we intend to turn the declining earnings trend around and we have -- sorry, in the process, we intend to turn the declining earnings trend around that we've seen over the past 3 years and create value for consumers, employees and shareholders. The new strategy is anchored in our strong brands and strong market positions across our diversified portfolio. However, the market conditions and the strategy call for us to allocate resources differently going forward to ensure that we focus on and capture what we see as the largest growth opportunities. And our power brands strategy is tailored to facilitate this. The strategy addresses the areas that we need to fix because they are not performing up to expectations, but also the areas where we do well and where we need to push further to deliver even better results, all with a combined ambition to build a sustainable and growing company with more potential beyond 2030. We also introduced new financial ambitions, which are to significantly improve the return on invested capital from about 7.9% in 2025 to more than 11% in 2030, to deliver an incremental increase in EBIT and a free cash flow generation exceeding DKK 1.2 billion in 2030. Acquisitions as well as divestments of less core assets will continuously be evaluated, assuming these potential transactions support our strategy as well as our financial ambitions. The shareholder return policy has been adapted to be more -- to a more flexible dividend payout ratio policy based on 40% to 60% payout ratio against adjusted earnings per share, supplemented by share repurchases when the projected leverage ratio allows. Please now turn slide to Slide #8. To meet our financial ambition and the objectives in Focus2030, we need to deliver on 3 strategic priorities. Growing handmade cigars will be defined as growing net sales as well as delivering incremental profit growth to the group. The key growth drivers are expected to -- the key growth drivers are expected to be delivered by a combination of increasing our market share of own brands in the U.S. from approximately 13% to more than 15% in 2030 as well as through an expansion in our retail network. This expansion will be driven by our power brands, which in 2025 have 5% overall market share. Stabilizing the machine-rolled cigar business requires a focus on protecting profits and cash flow. The path to success is offsetting the structural volume decline in the categories through price management and market share gains. Mitigating structural market trends through intensified market share focus is reflected in the ambition to increase volume market share in key European markets from 26.8% in 2025 to more than 29% in 2030. And a key component to the profit growth will also be through simplification of our portfolio by almost 50%. Finally, accelerating our nicotine pouch business is expected to deliver important contributions to the group's growth in net sales and profits in Europe. We expect to build on existing market share positions in Sweden and in the U.K. but also in other markets where our capabilities within distribution and access to the market provide us with an advantage. Now let's turn 2 slides -- to Slide #10. Machine-rolled cigars and smoking tobacco comprised 50% of group net sales in 2025 with handmade 35%, nicotine pouches at 5% and others at 10%. Others include accessories and bar sales, amongst others. For the full year, organic net sales growth was minus 3%, where handmade cigars delivered flat organic net sales, machine-rolled cigars and smoking tobacco minus 1% and nicotine pouches a negative 17% growth. However, the organic growth for nicotine pouches does not reflect the underlying progress of our power brand, XQS, which delivered a high double-digit organic growth. The negative growth for the category was significantly impacted by the discontinued online distribution of ZYN from the second half of 2024. For the first time, we are giving details on the gross margin structure for our product categories. For the group, the gross margin before special items was 44% for the full year of 2025. The product category machine-rolled cigars and smoking tobacco delivered a 51% margin, handmade cigars, 41% and our nicotine pouch business, 36%. Going forward, we intend to share these details in order for you to get a sense of the progress we make in our strategic priorities. Now let's move on to each of the categories, and please turn to Slide #11. The market for handmade cigars in the U.S. continued to contract in 2025 by an estimated mid-single-digit percentage. For 2026, we expect a 4% total market volume decline rate. We still estimate the underlying longer-term decline rate to be a lower single-digit number. For the full year 2025, reported net sales decreased by 4% for the category with organic net sales being broadly unchanged. Reported growth was impacted by the development in currencies. Increasing organic net sales in retail and pricing were offset by underlying volume declines in the U.S. market and by international sales. Gross margin before special items have been on a declining trend for the past 2 years. For 2025, the margin was 41.4%, with the main drivers for the decline being fierce competition in our online distribution channel, and negative impact from increasing tariffs and consumers trading down. The data illustrated in the chart show the development in the last 12 months data, not the specific quarterly data. For the fourth quarter, our category performance was 1% organic net sales growth and was positively impacted by business-to-business sales in the U.S. and continued growth in our retail stores. The sales of handmade cigars to U.S. wholesalers and distributors, the business-to-business market continued to recover in the fourth quarter and delivered a 6% increase following a low single-digit growth in the third quarter. Sales in our retail stores continued to increase, driven by new store openings, although the same-store sales were slightly down due to a temporary rebuild of our largest store in Dallas, Texas. And finally, our online sales of handmade cigars were broadly unchanged, where sales to our international markets decreased during the quarter. Now please turn to Slide #12, and we'll talk about machine-rolled cigars and smoking tobacco. For machine-rolled cigars and smoking tobacco reported growth in net sales was 2% for the full year. The growth was impacted by the acquisition of Mac Baren from the second half of 2024, while organic growth in net sales was slightly negative by 0.5%. The gross margin before special items was 50.8%, broadly in line with the full year of 2024. But as the graph also indicates the last 12 months margin declined -- sorry, the last 12 months margin declined significantly throughout 2024, primarily as a result of the high volume decline rates we experienced in machine-rolled cigars throughout 2024. In that context, the stabilization of the category margin is encouraging, although still not satisfactory. The current margin level remains negatively impacted by changes in product and market mix as well as disruptions caused by our SAP rollout in Europe. With the financial ambitions we have communicated, we need to protect and improve the margin, not only for machine-rolled cigars but also for smoking tobacco. For the fourth quarter, organic net sales for the category were unchanged, comprised by a low single-digit growth in machine-rolled cigars and a low single-digit decline in smoking tobacco. Now let me give you an update on the market share development in our machine-rolled cigars. The total market for machine-rolled cigars in Europe is estimated to have declined by 1.2% in the full year of 2025 based on preliminary data for our 7 key markets and with the decline rate for the fourth quarter estimated to be 2.8%. The data can deviate somewhat quarter-by-quarter and year-by-year from the underlying trends, and we don't regard 2025 market development as an indication of a sustainable improvement. Our base scenario of 2% to 3% structural decline rate is maintained, and for 2026, we expect a 3% market decline in Europe. Measured by our market share, we experienced a stabilization in the fourth quarter compared with the third quarter. The market share index was 26.3% for the fourth quarter and 26.8% for the full year of 2025. As mentioned with the Focus2030 strategy, we will invest in strengthening our positions as stronger market share positions are crucial to deliver long-term value in the category. With this, please turn to the next slide. So moving on to next-generation products, which comprises our nicotine pouch business and currently accounts for 5% of group net sales and slightly less of gross profits. For the full year 2025, reported net sales growth was 2% and organic growth was minus 17%. However, these data points do not give the full picture of the positive development we experienced for the category. The full year growth was significantly impacted by the discontinued distribution of ZYN in the U.S. but the reported growth rates were also impacted by the nicotine pouch portfolio we acquired from Mac Baren in the middle of 2024 and the ongoing streamlining of the brands, ACE and GRITT now being sold in fewer markets. Importantly, our brand XQS delivered 55% organic net sales growth and the market share in Sweden increased from 7.8% in 2024 to 12.3% in 2025. And by the end of 2025, the market share was above 13%. Our market share in the U.K. also improved during the year, although it is still only close to 1%. The category gross margin before special items was broadly unchanged at the level of 35% for the full year 2025 compared to 2024. As a result of the continued expansion of XQS to new markets and with investments to increase market positions, the EBITDA margin was only slightly positive for the year. During the fourth quarter, our nicotine pouch business delivered 42% reported net sales growth and 37% organic net sales growth. XQS -- the XQS brand delivering 87% organic growth, driven by a strong performance in the U.K. and Sweden. With this, I will now leave the word to Marianne for more details on the financial performance, please turn 2 slides to Slide #15. Marianne Bock: Thank you, Niels. In 2025, the commercial division Europe Branded comprised 36% of group net sales, North America Branded & Rest of the World, 33% and North America Online & Retail 31%. For the full year, organic net sales growth for the group was minus 3%. Europe Branded delivered minus 1%; North America Branded & Rest of the World, minus 5%; and Online & Retail, minus 4%. For Online & Retail, growth was impacted by the discontinued distribution of ZYN from the second half of 2024. In the table, we have shared an overview of the margin structure for each of the divisions measured by gross margin before special items as well as EBITDA before special items. For Europe Branded, the gross margin before special items was 48%. North America Branded & Rest of the World delivered 46% and Online & Retail, 38%. These differences in margin by division reflect product and market mix and for Online & Retail business being a direct-to-consumer business, whereas the 2 other divisions are business to business. The group margin was, as already mentioned, at 44%. Measured by EBITDA, the margin differences are even wider with Online & Retail delivering the lowest margins, while North America Branded & Rest of the World delivered the highest margin, primarily as these markets do not have own sales organizations. We'll now move to each of the divisions. So please turn to Slide #16. I will begin with Europe Branded. For the full year, reported net sales grew by 6%, largely due to the acquisition of Mac Baren in the third quarter of 2024. Organic net sales growth was slightly negative as increased sales of nicotine pouches were offset by declines in machine-rolled cigars and smoking tobacco. During the year, our gross margin before special items decreased from nearly 49% in '24 to 48% in '25. The decline was driven by changes in product mix with a strong growth in net sales of our nicotine pouch brand, XQS and lower sales of smoking tobacco. The same factors contributed to a decrease in the EBITDA margin, which fell from 21% in '24 to 19.8% in '25. Overall, profit margins for Europe Branded are affected by shifts in product and market mix as well as disruption in product availability. Reported and organic net sales growth for the fourth quarter was 6%, driven by both nicotine pouches and machine-rolled cigars. However, declines in both gross margin and EBITDA margin were due to the rapid growth of nicotine pouches compared to other product categories. Now please turn to Slide #17. For the full year, reported net sales decreased by 4% and organic growth declined by 5%. The acquisition of Mac Baren contributed positively to reported growth, while the weakening of U.S. dollar against the Danish krone has a nearly equal negative impact. The full year gross margin before special items decreased from almost 51% in '24 to 46% in '25, primarily due to changes in product and market mix. This was most notably affected by lower sales of high-margin machine-rolled cigars and smoking tobacco products. For the fourth quarter, reported net sales for North America Branded & Rest of the World fell by 12%. Organic growth was negative by 7% as growth in handmade cigars could not offset a high single-digit decline in machine-rolled cigars and smoking tobacco. The category other, which includes sales of accessories and similar items, also experienced negative growth during the quarter. The decline in the gross margin during the fourth quarter was even steeper compared to the full year decrease as the quarter was compared to a particularly strong fourth quarter in 2024. Additionally, lower sales of machine-rolled cigars were primarily driven by reduced sales in our high-margin markets in Australia and Canada. These dynamics were also the main factor behind the significantly lower EBITDA margin before special items during the fourth quarter, impacting not only North America Branded division but also the group margin for the period. Now please turn to Slide #18. For the full year, North America Online & Retail reported growth in net sales decreased by 8%. Organic growth was down 4% but excluding the discontinued distribution was slightly positive. Underlying organic growth included gains in our retail stores, while our online business experienced a slight decrease. In retail, we are seeing the benefits of opening new stores over the past year. However, same-store sales were marginally lower due to a renovation of our largest store in Fort Worth, Texas, as Niels mentioned earlier. Competitive pressure remains strong in the online channel but our pricing strategies are gradually improving our market share. Throughout the year, both gross margin and EBITDA margin were affected by the intensified promotional activities aimed at expanding our market position. For the fourth quarter, reported net sales decreased by 8.6%, primarily due to currency fluctuation. Organic growth was down 0.5%, with retail achieving 7% growth and online business showing a slight decline. Gross margin and EBITDA margin before special items in the fourth quarter were impacted by the high level of promotional activities, which have continued into 2026. I'll now move to an update on group financial performance. Please turn 2 slides to Slide #20. Throughout the presentation, details regarding developments in net sales, gross margin, EBITDA margin have already been given. Now I would like to provide a few additional comments on select financial details and key metrics. In 2025, special items amounted to negative DKK 200 million compared to DKK 279 million in '24. These costs can be divided into DKK 130 million for the SAP implementation and DKK 70 million for reorganizations and the integration of Mac Baren. We expect special costs in '26 will total approximately DKK 275 million before gradually tapering off in '27. Higher net financial costs were driven by both increased net debt and the refinancing of our corporate bond, which took place in September '24. We refinanced our existing EUR 300 million bond, which matured in '24 with a new facility of similar DKK 300 million. However, the new bonds were issued with a coupon interest that was almost 3.5 percentage points higher, reflecting the prevailing market rates at that time. Financial costs, including exchange losses, increased by nearly DKK 100 million compared to 2024. We have already addressed the effect of the discontinued distribution of the ZYN nicotine pouch product, which negatively impacted group organic net sales by 1.3%. This implies that the underlying decline for the year was 1.8%. Finally, I'd like to address the decline in return on invested capital, which is a key KPI for us as we strive to meet our new financial ambition. Return on invested capital decreased to 7.9% from 9.4% in '24, while our ambition is to achieve a return on invested capital above 11% in 2030. Excluding the impact of special items, which are included in the calculation, return on invested capital was 9.3% in 2025, almost similar to '24. The decline in return on invested capital for the year was primarily due to lower EBIT as invested capital remained broadly unchanged at DKK 14.5 billion. Please turn to Slide #21. Niels mentioned in his opening remarks, the free cash flow before acquisitions was approximately DKK 200 million below our guidance. The free cash flow was DKK 595 million compared to DKK 931 million in '24, and our guidance range was DKK 800 million to DKK 1 billion. In the fourth quarter, free cash flow before acquisitions was DKK 147 million compared to DKK 604 million in the fourth quarter of '24. The lower cash flow during the quarter relative to our expectation was due to delays in collecting of receivables associated with our ERP implementation in Europe. This issue has now been resolved. Payments are beginning to be recovered, and we anticipate working capital will return to normal levels during the coming months. The delayed payments are expected to have a positive effect on cash flow during the first half of 2026. The effect on working capital during the fourth quarter resulted in an unusually negative contribution from changes in working capital with a reduction of DKK 17 million in the quarter, which was DKK 180 million lower than the positive contribution during the fourth quarter of '24. Typically, working capital changes are positive in the fourth quarter of the financial year. Other factors contributing to the lower cash flow in the fourth quarter included a reduced EBITDA and higher taxes paid, which in the illustration is included in investments and other. Now please turn one slide to Slide #22. In the fourth quarter, the leverage ratio increased from 2.9x by the end of third quarter to 3x by the end of 2025. The increase is due to a decline in EBITDA before special items compared to the fourth quarter of last year. Compared to '24, the leverage increased from 2.6x. Throughout '26, we remain fully committed to lowering the leverage ratio and working towards our target ratio of 2.5x. This is a top priority for us this year, and if our earnings come under greater pressure than anticipated, we will take necessary steps to ensure the leverage ratio is reduced. Now please turn to Slide #23. In November, we announced our capital -- new capital allocation policy, which is guided by a leverage target of 2.5x. This target determines the level of investments and shareholder payout, giving us the financial flexibility to pursue growth opportunities while delivering shareholder returns. It also emphasizes our commitment to maintaining an investment-grade credit rating. We transitioned to a payout ratio-based dividend policy, ensuring dividend distributions are closely aligned with our underlying financial performance. The dividend payout ratio is set between 40% to 60% of adjusted earnings per share. This approach will take effect with dividend allocation related to the '25 financial results and will impact the dividend proposal for the upcoming Annual General Meeting in April. Since our listing in 2016, we have consistently delivered on our shareholder returns and intend to continue doing so. Given the current leverage ratio, we believe it is prudent to propose a dividend payment of 2025 in the low end of the payout range. The Board of Directors plan to propose a dividend payout per share of DKK 4.5 corresponding to a payout ratio of 42%. As we normalize our leverage in the coming years, we intend to create greater capacity for share buybacks, which continue to be an essential component in our overall capital allocation policy. With this, I will now hand the presentation back to Niels. Please turn 2 slides to Slide #25. Niels Frederiksen: Thank you, Marianne. For 2026, we expect the consumer trends to be unchanged for most of our product categories and markets and broadly similar to historic trends. We do appreciate that uncertainties are elevated and the risk for external disruptions remain high. However, we believe we have established good control of our internal processes and operations following the implementation of the SAP solution throughout Europe, and we are now well prepared to execute on our new strategy. For 2026, we expect group net sales growth at constant currencies to be in the range of minus 2% to plus 2%. The expectation reflects that total market volumes for machine-rolled cigars in Europe will decline by 3% and consumption of handmade cigars in the U.S. will decline by 4%. Improving our market shares, growing our U.S. retail and nicotine pouch businesses are expected to offset the volume declines in our core combustible categories. For 2026, we expect the EBIT margin before special items to be in the range of 13% to 14.5% compared with the 14.9% in 2025. The expectation reflects that 2026 will be a year of stabilization and where we will continue investing to facilitate our long-term ambitions in Focus2030. Pricing is not expected to fully offset the impact from cost increases, changes in product and market mix as well as our increased promotional activities to protect and improve our market share positions. On a more technical note, an increase in the amortization of trademarks of approximately 1 percentage point on the EBIT margin before special items is expected to be largely offset by an expected higher income from certain duty refunds. The increase in amortization reflects the group's new strategic direction with stronger focus on power brands, implying that brands outside the scope of power brands going forward are classified with a finite useful lifetime. For 2026, the free cash flow before acquisitions is expected in the range of DKK 950 million to DKK 1.2 billion, reflecting the expectations for net sales and margins as well as the delayed payments from trade receivables, which Marianne talked to, impacting cash flow positively in 2026 with an expected effect on cash flow during the first half of this year. Now this concludes our presentation for today's call. I'll now hand the word back to the operator, and we are ready to take questions. Thank you. Operator: [Operator Instructions] And now we're going to take our first question over the audio lines. And the question comes from the line of Niklas Ekman from DNB Carnegie. Niklas Ekman: First question is regarding the guidance for 2026 because at the Capital Markets Day in late November, you talked about an ambition for a low single-digit growth of EBIT. And it looks now like even the upper end of the full year guidance suggests a decline and the low end, a quite significant decline. So can you elaborate a little bit on this? Is there anything that has worsened since the Capital Markets Day in November? Marianne Bock: Thanks for the question. So when we talk about a low single-digit increase in EBITDA, it is over the strategy period. We are believing that 2026, which we also said at the Capital Markets Day is what we call a year of stabilization. We need not only to stabilize the internal disruption that we have seen in '25 but we also need to stabilize both our handmade cigar business and our machine-rolled cigar business. And that will entail investments into regaining market share but also in promotions. So we still believe that over the strategy period, we will see low single-digit growth in EBIT. But in '26, we could see a decline. Niklas Ekman: Can I also ask about your view on margins and potential cost reductions and particularly given the quite steep margin decline we've seen in recent years. You've now have margins that have dropped below pre-COVID levels and the guidance for '26 suggests a further decline. Are you in a stage now where you are looking more actively at your cost base again and maybe at initiating more significant cost reductions in order to curb the margin decline? Or what's your view on that? Marianne Bock: Yes. Thanks again, Niklas. So if we talk margins in '26, margins in '26 will also be impacted by mix, which means that our nicotine pouch business, we expect to grow but we are also seeing declines in our fine-cut business that has very high margins. When we talk about cost programs, we announced at the Capital Markets Day a cost program of DKK 200 million over the coming years. We are, as we speak, executing on these cost programs. We have full plans in place for those DKK 200 million, and we will see that coming in, during '26 and also '27. I would also say that if we see markets are worsening compared to our expectations, we will, of course, look at our cost levels. Niklas Ekman: Okay. Very clear. I'm also curious, when I look through the report, you used to talk a lot about the growth enablers. And now you talk more specifically about next-generation products and the retail stores. Is this a definition that you have removed? And is this because you don't -- you no longer see the international handmade business as a major growth driver? Niels Frederiksen: Yes, it's a good question, Niklas. I think that with the new strategy, you can say that retail expansion and nicotine pouches still play a central role. But the growth in international handmade cigars is still important to us, but we have prioritized doing well in handmade cigars in the U.S. more. So referring to the growth enablers as we originally defined them makes less sense. We now want to be more focused on stabilizing earnings in the machine-rolled cigars, smoking tobacco, growing the handmade with a focus on the U.S. and growing nicotine pouches. So we will try to articulate the degree to which we succeed with these things in a different way than referring to the growth enablers. Niklas Ekman: Very clear. And just a final question. Am I right to assume that buybacks are quite unlikely in '26. When I look at your leverage ratio and your aim to get net debt below 2.5x EBITDA, I guess the only way to get there is if you stick to dividends and not buybacks. So buybacks are unlikely in '26. Is that a right assumption? Marianne Bock: I think the short answer is yes. Operator: Now we are going take our next question, and the question comes from the line of Sebastian Grave from Nordea. Peter Grave: I apologize for those being broadly in the same line of Niklas. But I'll start off with a question on the margin here. So for the guidance of '26, you're guiding for quite steep margin declines compared to '25, even from a fairly low starting point in '25. And I know you talked about increased investments in market shares. But I mean, on the flip side, I would assume that you should see some tailwind from Mac Baren synergies. There should also be some SAP efficiencies and cost takeouts as highlighted in the Capital Markets Day. So at least in my view, it looks like underlying the margin pressure here is way more pronounced than what is -- we can see from the highlighted numbers here. So could you maybe help me understand how this works and how exactly this aligns with your articulated ambitions of protecting earnings in the short term? Marianne Bock: Yes. Yes. Let me start out, Sebastian. And first of all, thank you for asking questions, and then Niels can also elaborate. But if you look at our guidance range, both when we look at top line and also margins, it is quite wide ranges if you compare to our business. And it is a signal of uncertainty on our total markets, how they're going to develop but also uncertainties in the external world. So we are anticipating a slight decline in margins in '26 due to the reasons that I mentioned to Niklas. We are on track on the synergies for Mac Baren. You talk about SAP synergies. There will also come synergies in on the SAP implementation. But as we are still rolling out, we're focusing on that rather than executing on those synergies for now. Niels Frederiksen: Yes. I can add, Sebastian. I think when you look at Europe and machine-rolled cigars, you have the area where you have a lot of mix of product and market. The thing that is, let's say, not new but is more sustained and we can also see it continuing into 2026 is the promotion pressure applied across all sales channels in the U.S. So even though we take price increases and we continue to have a high focus on that, margins are under pressure simply to stay competitive, both on a, let's say, a brand level to regular retail and on an online level competing in the U.S. So these are some of the key dynamics that are in play and which we are obviously working very closely to improve but that is what is reflecting the margin pressure that Marianne also referred to. Peter Grave: Okay. So what I'm hearing you saying, Niels, is that you are in a difficult consumer environment in a structurally declining category with fierce competition. And hence, is there any reason to believe that invest in these currently elevated investments in market shares that they should taper off in the near term, i.e., in '27, '28? Niels Frederiksen: Yes. I think that the way to think about this is that market conditions have intensified, if I can put it like that. And our strategy aims at protecting and enhancing market shares, and that comes with a higher promotion pressure. Our job over time is to let's say, improve or lower that promotion pressure and still do well on market shares but it requires the market conditions to improve. So you can see the combination of total market declines and the -- let's call it, the fight for market share is what is putting the pressure on the market. And we have, of course, an expectation that over time, that will normalize. We've not seen promotion pressure like this and downtrading on this for some time. Peter Grave: Okay. That is fair. And my last question is going back to the ambitions of harvesting some DKK 200 million efficiency gains as you talked about in the I understand that some of these ambitions have already translated to initiatives but can you maybe help explaining how much of the DKK 200 million is already reflected in the '26 guidance and how much we should expect beyond that? Marianne Bock: Yes. So I would -- for the '26, I would think it in the level of around DKK 100 million. Peter Grave: Okay. Okay. So half of the efficiency gains... Marianne Bock: Sorry, Sebastian, then going into '27, we'll be closer to DKK 200 million but probably not fully, and we'll see the last part coming in, in '28. Operator: [Operator Instructions] And we're going to take our next question on the audio line. And it comes from the line of Damian McNeela from Deutsche Numis. Damian McNeela: The first one is on Canada and Australia because I think in the press release last night, you called out challenging conditions there and the impact that, that's had on the business. You did mention in the presentation. Can you talk a little bit about what's happening in those markets and what the outlook for this year is, please? That's my first question. Niels Frederiksen: Thank you, Damian. And if I start with Australia, for those that follow the industry closely, it's maybe no surprise that we have seen an explosion in illicit trade. So a lot of tobacco companies, including ours, have seen earnings decline by quite a bit in Australia. And this is, let's say, increased for us in the sense that we had because of regulatory changes, a relatively higher sales in 2024 than in 2025. So the net impact of Australia on our profitability is quite distinct. So Australia is very much about a total market that is going illicit. And we are not losing market share, but basically losing volume simply because the legitimate market is lower, and it's a high profit market as we debate that will be discussed. For Canada, the situation is a little different. Also here, our market share position is strong and broadly unchanged. But in Canada, there is a -- from time to time, a larger sales into the Indian districts and the government have restricted some of those licenses they issue for selling in Indian districts, and that has affected our sales in Canada in 2025. So those are the 2 main explanations around Canada and Australia and them being among our highest margin markets does affect the average margin and total costs. Damian McNeela: Yes. And just as a follow-up on that Canada point, that's likely to remain the case for the medium term, is it? Niels Frederiksen: It's been -- over the years, this has been an on and off issue. So there's nothing wrong with selling in the Indian districts but they need licenses and sometimes the government takes it away from them and then a period passes and they get reinstated. So we are still of the view that they may come back but there's no guarantees around it. Damian McNeela: Yes. And so the guidance assumes no return for those... Niels Frederiksen: Yes. Yes. Damian McNeela: Yes. Okay. And then in MRC Europe, it looks like margins have stabilized, but market share losses have continued. I was just wondering whether you could sort of call out some of the competitive dynamics in your -- a couple of the bigger markets that you operate in. Just to give us a sense of how the business is performing now that the sort of ERP system is up and running and fully implemented? Niels Frederiksen: Yes. Let me try to give a few examples. So 2 of the key markets in our strategy is France and Spain. And as we have been resolving the inventory availability issues up until the end of 2025, we are seeing that market share is responding positively into 2026 but it's also us recovering from a low level. So we are still saying we have to be patient around how fast we can regain market share into 2026. But at least in these 2 markets, you can say that we have inventory availability back to where we would like to have it. When you look at other key markets in Europe, the situation is a little different. We have markets like the U.K. where there is a higher decline rate of machine-rolled cigars, and there's also a shift from regular machine-rolled cigars where we are strong to increasingly small cigars where we are competing up against some of the larger tobacco companies. So even though those categories grow, the mix in margin become again a net negative. When you then look to the Central European markets of Benelux and Germany. Here, we are, again, still concentrating on getting customer service levels back to where they need to be. And also here, you have in certain markets, this new dynamic of consumers shifting between what we call mainstream small cigars and little cigars, which are also cigars but sold at a lower price and typically in 10-pack cigarette type packaging formats. So it's -- what I'm really saying is it's quite a complicated picture when you look across the markets. What's important to remember is we have really strong market positions in many of these places, France, Spain, Benelux, U.K., and that's what we're trying to leverage to get the market share back. Marianne Bock: And then you were also asking about the competitive situation. And here, we are seeing -- which we've also seen over the years that our competitors are reluctant to take the same level of price increases, which we think is necessary to cover both volume decline and cost increases. Damian McNeela: Okay. So that hasn't changed at all. Marianne Bock: No. Niels Frederiksen: No. Damian McNeela: No. Okay. And then just on -- I guess this is a slightly more philosophical one. You've changed guidance from EBITDA to EBIT margins. I was just wondering if there was anything behind that decision to do that. Torben Sand: Yes, maybe I can answer that. First of all, we believe also now where we have a more distinct and clear focus on return on invested capital, it goes more in line with giving a guidance on EBIT. Secondly, the EBIT level also includes what we have seen in the past few years, increased investments and therefore, depreciation in especially our retail business. And then we have also noticed from kind of studies we have made with the market that it's a more common practice to guide on the EBIT level. So that's the key reasons for us changing that. Damian McNeela: Yes. Okay. That's clear. And then perhaps if I may, one last one, just on the XQS brand. Can you just sort of give a sense of the areas of focus for growth? I mean, obviously, Sweden is pretty strong already. Do you see increased investment behind the brand through the course of '26? Niels Frederiksen: We are seeing increased investments behind the brand, Damian. If you look at the geography, we talk a lot about Sweden. We talk a lot about the U.K., which are 2 important markets for us but we also consider, let's say, Scandinavia at large, and we are opening a new subsidiary in Norway later in the year. They will, of course, also include nicotine pouches in their portfolio. Finland is also in the focus area and certain Eastern European countries. So we are focusing on the European geography to build momentum also outside of Sweden. Operator: Thank you. Dear speakers, I have no further questions. Please continue. Torben Sand: Okay. Yes. Thank you. And I was simply just going to close off the call now. Thank you for listening in. Thank you for the questions. And yes, we will meet again in May after our first quarter results. Thank you, and have a good day. Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
Amanda Blanc: Okay. Good morning, everyone, and thank you for joining us today for our full year results presentation. I'll start with a quick update on our 2025 performance and how Aviva will deliver today and for the future before Charlotte takes you through the results. Then we'll open for questions. So let me begin with the key messages. Aviva has delivered another outstanding set of results in 2025, extending our multiyear track record of delivery. We have achieved our 2026 targets of full year early and have now raised our ambitions. And we have enormous potential to go even further for the longer term. We are set up to make the most of the opportunities across the market, whether that's with artificial intelligence as technology changes the game, general insurance as the importance of scale and brand grows, wealth as the market expands with regulatory tailwinds or in retirement for the next wave of pensioners as the U.K. ages. And I'll cover some of these in more detail later. So let's get into the numbers, which include the 6-month contribution from Direct Line. As you can see, it's been a great year. Operating profit rose 25%. IFRS return on equity increased and cash and capital generation are growing. We now have over 25 million customers and an opportunity to serve even more of their needs with over 7 million of those customers being multiproduct holders. Operating EPS growth is well into the double digits. And today, we are announcing a final dividend of 26.2p per share, up 10% year-on-year. And we are resuming the share buyback now at a higher level of GBP 350 million. Every business contributed to these results. In General Insurance, premiums are up 18%. We are now approaching the sub 94% combined ratio ambition, and we are already achieving this in our U.K. business. In Wealth, we are extending our #1 position with over GBP 230 billion of assets. And we are growing with record net flows of almost GBP 11 billion. In Protection, we have improved margins and are nearing completion of the AIG Protection integration program. In Health, we have grown in-force premiums by double digits with a low 90s combined ratio. And in Retirement, we have written GBP 4.6 billion of bulk annuities at attractive returns, supported by real asset origination in Aviva Investors. Turning now to targets. As I've said, today's results mean that we have already delivered our 2026 targets. This is a fantastic achievement, and I'm really proud of Aviva's performance. So I want to thank the whole Aviva team for their hard work. In November, we set new 3-year targets across operating EPS, IFRS return on equity and cash remittances. These now include Direct Line and better reflect our trajectory as a diversified capital-light business. Charlotte will cover more details on the numbers shortly. But now I'd like to talk about Aviva's longer-term potential. This has been a journey where we have driven sustained growth, served more customers and stepped up for shareholders year in and year out. And we continue to create longer-term value with smart strategic M&A resulting in today where we are the U.K.'s only diversified insurer with a clear strategy that is delivering results. Our focus is now on hitting the new targets, further accelerating beyond 75% capital-light and realizing the full benefit of Direct Line. But this is just the next step in our journey. There is more long-term potential beyond this 3-year time horizon. Clearly, we are set up to capitalize on a range of opportunities across all our markets, but I'll prioritize three of these today. First, how we outperform right through the cycle in General Insurance; secondly, why we are uniquely positioned to lead in Wealth; and thirdly, how we are using artificial intelligence to shape the future of Aviva. And supporting all of this is one constant, our leading customer franchise and preeminent brand. So let's start with General Insurance. This is and always will be a cyclical market. And after more than 325 years in the industry, we know how to navigate cycles. And we have been through disruption time and time again. Direct Line changed the industry by selling directly over the phone. Price comparison websites then reshaped the market. And now we have generative AI with autonomous vehicles to come. And through all of these changes, Aviva continues to deliver, bringing in fantastic people, launching innovative products like Aviva Zero, expanding distribution onto PCWs and through Lloyd's and so much more. And we have tripled profits over the last 5 years. The U.K. is the most competitive insurance market in the world with high regulatory barriers to entry. And Aviva is the standout #1 insurer here and the only player operating at scale across Personal and Commercial Lines. We have always adapted and we will keep adapting. When we acquired Direct Line, we knew that market conditions would continue to evolve. And the same is true when we set our new group targets. But we also knew that Aviva has the scale, discipline, technical expertise, proprietary data, brand strength and diversified group model to grow profitably. And there's plenty of room to grow, unlocking value from Direct Line, expanding partnerships, scaling SME in Canada, building out our Lloyd's presence, not to mention the opportunity with our 25 million customers. The market will keep changing, and that's exactly why we invest in innovation. We are ahead on EVs, telematics, automation and AI, and we'll stay ahead. So our portfolio is built to deliver performance for years and decades to come. Looking first at Personal Lines in the U.K. Owen and the team have a track record of outperformance, delivering profitable growth through COVID, periods of high inflation and pricing practices where many others struggled. And though the market is challenging today, we are still writing at target margins. It is not by chance that we have been able to do this. Our scale is unrivaled with breadth across distribution and game-changing amounts of proprietary data. We have the only wholly owned repair network in the U.K., which saves us around GBP 500 per repair. And we have huge potential with Direct Line, not just with the cost synergies, but growth headroom with leading brands and new products such as Pet, Green Flag Rescue and Micro-SME. Turning now to Commercial Lines, where it's a similar story. We are successfully navigating tougher conditions. We have built up our pricing strength, and we are able to quote above the technical prices in our models. Putting margins first has always been our priority, and that's why we have delivered consistent profits year-after-year. We have unique strengths to win in this market. So let me just highlight a few. We are a leader in SME and mid-market, and these segments are more resilient. We have first-class underwriting with strength across motor fleet and liability. So we are very well positioned for any future shift with autonomous vehicles. And with access to Lloyd's through Probitas, we can tap into a wide range of attractive lines, having launched 8 since the acquisition. This now includes high net worth, which is complementary to our already leading proposition here. So across both Commercial Lines and Personal Lines, we are well set up for success today and in the future. Moving to Wealth, which is a huge opportunity for us. There are GBP 2.7 trillion worth of assets today, growing at double digits, and the market is set to surpass GBP 4 trillion by 2030. This strong growth is underpinned by clear structural trends and regulatory tailwinds. At Aviva, we have a leading Workplace and Adviser Platform businesses. And we are leveraging advice capabilities in Succession Wealth and scaling fast in Direct Wealth. We have built a competitive edge that no one else can match. We have a leading customer franchise with a significant affluent opportunity. Our holistic offering and trusted brand means that we can support customers throughout their lifetime. We have always invested in our platform, which is ranked by de facto as the #1 in the market. Our modern technology platform brings scale benefits. And of course, we have leading investment solutions with Aviva Investors. And the performance of our Wealth business is testament to all of this. Since 2022, we have grown assets faster than the market, and we have improved margins at the same time. In Workplace, our profit margin is up by almost 2 points over the last 2 years, which makes this business a key driver of growth and a major contributor to our profits. So we are on track for our GBP 280 million Wealth profit ambition in 2027. And the importance of Wealth within our portfolio is growing. It is fast approaching 10% of our group earnings, further increasing our share of attractive fee-based income. But the longer opportunity here is even more exciting. Take Workplace. It is a highly attractive market, which has grown four-fold over the past decade. And with a constant flow of employer and employee contributions, it is expected to triple over the next decade. This growth is not only strong, but it is also very resilient. Aviva has an incredible track record here, and we're accelerating. The business is a genuine growth engine with 1,500 scheme wins over the last 3 years and a near 100% retention. And we are very pleased to now be the sole administration partner for the Mercer Master Trust, expected to bring around GBP 8 billion worth of assets over the next 12 to 18 months. The strength of our proposition is powered by leading Aviva Investors default funds. And we recently launched our My Future Vision Fund, which gives customers access to private markets and reinforces our commitment to the Mansion House Compact. So when you bring together our Workplace, Direct Wealth, and Advice businesses, you get a truly unique Wealth offering. We are able to retain and serve customers from their very first job all the way through to their retirement. And we are tapping into 4.5 million affluent customers who hold more than GBP 1 trillion worth of assets. We're also leveraging technology and innovation to deliver advice and guidance at scale. Targeted Support is a huge opportunity for us. This is a new service that sits between guidance and full financial advice, and it will allow us to offer easy-to-access support to so many more people. Our first journeys here will focus on how people save for their pensions, launching around the middle of this year. And there's still so much more to share on the Wealth business. So we will do a deeper dive at the next in-focus session, which will be in Q4 this year. Finally, turning to Artificial Intelligence. So we know that this is going to be transformational. And here at Aviva, we have a greater opportunity than most. For any opportunity that you have seen in the media, and there's been quite a few recently, there are key enablers that you actually need to drive the value. It is not enough to just have the technology. You need access to millions of customers, the ability to deploy and reuse at scale, capacity to invest, and most importantly, proprietary customer and claims data. Aviva has all of these in spades, and our diversified model is more resilient for any disruption. This technology isn't new to us either. We have been using traditional AI capabilities for over a decade now. In fact, over 98% of retail business in U.K. Personal Lines is priced with machine learning. And we have been training over 150 machine learning models in claims with our own data for years. Generative AI and Agentic are just the next steps on this journey. And because of our targeted investments in technology and talent, we already have many of the AI-ready foundations in place, so we are well positioned for this shift. We have built an in-house platform to deliver use cases at speed, and we are already seeing tangible benefits. We have halved the time taken to review each case in medical underwriting. And we have also reduced call wrap times by 20% for customer service agents in Direct Wealth, which we are now rolling out more broadly in IW&R. All of our colleagues have access to AI tools, and we continue to enhance and streamline all of our data. We are proud of what we've achieved so far, but we are aiming much higher and always balancing ambition with pragmatism. Our focus now is on prioritizing progressively bigger end-to-end opportunities where AI can transform areas like customer engagement and distribution, underwriting and claims right through to back-office operations. This is the kind of change that will shape Aviva's future. And some of this is closer than you think. So let me give you an example in U.K. General Insurance claims. We have already saved nearly GBP 100 million through our claims transformation and Agentic has the potential to unlock much more. Over the next few months, we will be testing an AI-enabled claims agent built in-house and launching later this year. This will enable us to handle simple claims from start to finish without human support. And the best part is that this is voice-enabled. Most claims begin on the phone. So this will be transformative for customers, delivering faster, clearer and more consistent outcomes. And finally, I'm delighted to announce our partnership with OpenAI, which is a really important step for us. Combining OpenAI's cutting-edge capabilities with our expertise and data will help us to deliver powerful AI solutions for our customers and our colleagues. So there's a lot more to come, and we'll share more with you at our half year results in August. Now I'll finish with what brings all of this together. Aviva's powerful unique model. We have diversification and growth advantage with market-leading positions and a majority capital-light portfolio. We have a customer advantage with almost 22 million U.K. customers and a leading brand. We have a scale, technology and data advantage, including the opportunity that AI brings. All of this gives us real confidence for the future over the next 3 years and well beyond. And with that, I'm going to hand over to Charlotte, who's going to take you through the results in more detail. Charlotte Jones: Thanks, Amanda, and good morning, everyone. It's great to be here for another full year results presentation. 2025 was a strong year for Aviva once again, as we continued our growth momentum. Operating profit was up 25% to GBP 2.2 billion, which translated to an EPS of 56p and a return on equity of 17.5%. Cash remittances were up 4% to GBP 2.1 billion, and this excludes the funding for Direct Line, which is reported separately. Solvency of 180% is at the top end of our working range, supported by GBP 2.3 billion of own funds generation or OFG, the solvency measure of operating performance. In November, we said we were on track to meet our 2026 group targets a year early, and I'm pleased to confirm that we have achieved that. We exceeded our GBP 2 billion operating profit target before the contribution from Direct Line. The group total of GBP 2.2 billion is in line with November's guidance. And we comfortably achieved our OFG target a year early and are ahead of schedule on our cash remittance target. This demonstrates the grip we have on performance management to actively manage through the cycle and outperform peers. So given our excellent progress, we set new and ambitious 3-year targets in November, reflecting the shape of our group today and our plans for the next 3 years. These targets allow better comparability with peers, align with our capital management framework and support our plans to grow in capital-light businesses. These targets are ambitious and achievable. They take into account the outlook for each business, including good visibility of where we are in the cycle. So we're targeting an 11% operating EPS CAGR from 2025 through to 2028. This reflects the operating earnings growth and share count reduction from regular and sustainable capital returns. So our 2025 EPS of 56p is ahead of the 55p baseline that we set in November, as the last few weeks of the year saw more benign weather than expected. And we're not assuming this favorable weather repeats. So the 11% target is from the 55p baseline and builds to around 75p by 2028. We're really confident in our plans to drive progressive earnings across the group. And combined with share buybacks, we're well placed to achieve this and our other group targets. So I'll now unpack the group results in a bit more detail, starting with General Insurance, which was 56% of business unit operating profit. Top line growth has been an impressive 14% over recent years, and margin has improved too, with the combined ratio better by 1.6 points. The investment return has grown in line with the portfolio, all of which together means operating profit has grown to almost GBP 1.5 billion. In the U.K. and Ireland, premiums grew 27%. A large component of this was the addition of Direct Line reported as part of U.K. Personal Lines, where we saw 50% premium increase. Commercial Lines premiums grew 7% as we build GCS, integrate Probitas and leverage the strength of our SME and mid-market propositions. The combined ratio in the U.K. for both Commercial and Personal Lines is a strong 93.9%. This is a 1 point improvement, reflecting the earn-through of pricing and some favorable weather. In Commercial Lines, positive prior year development was more than offset by elevated large losses in the current year. And including Ireland, COR was 94.1%, reflecting the impact of storm Eowyn back in Q1. Overall, operating profit for U.K. and Ireland grew 52% to over GBP 1 billion. Now in 2026, growth will benefit from a full year of premiums for Direct Line. Now looking at the U.K. and Ireland business as a whole, we expect to deliver a 2026 combined ratio of better than 94%, subject, of course, to normal weather patterns. We come from a position of strength with good rate adequacy and relative to the softer market, we have held rate. We leverage the strength of our brand, scale, pricing sophistication, proprietary data and diversification. And we have extensive experience in managing pricing cycles and disruption. So we're really well placed to navigate the current conditions. Premiums in Canada, up 2% in constant currency. The Canadian market is at a different stage in the pricing cycle compared to the U.K. And so Personal Lines grew as we secured pricing increases across property and auto, maintaining strong retention. This was offset by some portfolio actions taken in Commercial Lines that I covered at the half year. And the undiscounted core was almost 3 points better, largely reflecting weather experience, which was broadly in line with our budget compared with the elevated cat activity in 2024. There was improved large loss experience compared to '24 as well as pricing actions earning through. Investment income was marginally down, but operating profit was up 49% to GBP 408 million. And for 2026, we expect to deliver a combined ratio approaching 94% for Canada. The Personal Lines rating environment remains supportive with further pricing increases expected. In Commercial Lines, though, the dynamics are similar to the U.K. with softer conditions that vary line-by-line. So across the portfolio, we will navigate the cycle with discipline. Now moving to Insurance, Wealth and Retirement and starting with the Insurance businesses, Health & Protection. Demand for Health has been affected by cost of living pressures for consumers and small businesses re-prioritizing spend to absorb the national insurance changes. Despite this, in-force premiums were up 12%, and we maintained a low 90s COR. Operating profit was up 9% as the business grows in line with our ambition. Now as expected and in line with the first 9 months, protection sales were lower following the consolidation of AIG and Aviva propositions back in August 2024. Margins have improved by 90 basis points as we reprice the business. And all of this is in line with our integration plans. Operating profit was up 97% as we had some adverse assumption changes back in 2024. And in '25, we recognized a onetime integration benefit following the legal transfer of business acquired from AIG. Now moving to Wealth. Workplace net flows were up 6% as member contributions grew and we onboarded new schemes. The resilience of this business is demonstrated by the impressive GBP 1 billion of regular monthly contributions. Our Adviser Platform performed strongly with flows up 11% despite elevated outflows around the time of the U.K. budget. And in our Direct business, the customer base grew by almost 1/3 to over 100,000, and we're continuing to invest in developing the proposition. Wealth operating profit was up 36% with operating margin improving by 1.1 basis points as the business grows and leverages the cost base. Operating profit as a portion of revenue is 23%, up 4 points. And as Amanda mentioned, we are on track to meet our near-term ambitions. And beyond that, the opportunity is even more exciting for the group's long-term growth. We have a strong brand proposition and scale from which to build. So we anticipate further improvements in operating margin and profit progression. In Retirement, we wrote a more typical GBP 4.6 billion of BPA following an elevated 2024. Importantly, Aviva Investors originated GBP 3.5 billion of real assets to support the business. Now this is an increasingly competitive market, and our team has continued to trade well and with discipline. We achieved a mid-teens IRR, well above our low teens guidance, and the business has been written a relatively low strain. Individual annuity sales were up 19% to GBP 1.6 billion, our highest level since 2015 pension reforms, supported by a new product launch. Operating profit was 5% lower as higher releases from the contractual service margin were offset by a lower investment result. And we expect to remain active this year in retirement, and we'll be disciplined in the competitive environment. Now turning to costs and efficiency. The ratios are broadly stable despite the temporary uplift effects from acquisitions and new partnerships. Across the group, we continue to invest in exciting growth and productivity initiatives, including the use of AI and in automation. And we expect this investment to drive efficiencies in each of our businesses. It will improve operating leverage and unlock significant long-term value from our extensive customer base and proprietary data. Now the application of our consistent capital allocation framework is a critical part of what we do to optimize our diversified group. And this slide summarizes how we think about performance and financial strength and what that means for uses of capital. We continue to build sustainable growth in earnings and cash and work to maintain our balance sheet strength. We grow the regular dividends. We invest in the business for growth and efficiency, and we return capital to shareholders. Nothing here is new, but it's important that you see we do this really well. And as an example of the framework in action, I'll pause for a moment on solvency. One of the advantages of the model we have built is proactive balance sheet management. A year ago, our cover ratio was 203% as we prepared to complete the Direct Line transaction. This used 31 points of capital ahead of the realization of the capital synergies. We've delivered elevated management actions of 11 points and accelerated 3 points of Direct Line synergies by temporarily moving the business to standard formula. This has supported building solvency back up to 180%. The underlying capital generation of 16 points includes a couple of points of favorable one-offs, including positive weather and reinsurance pricing impacts, which we can't assume will repeat, but we do expect to unlock the remainder of the Direct Line synergies. Specifically, we're on track to deliver at least GBP 350 million or 7 points of solvency around the end of this year. And looking forward, we expect a progressive build of operating capital generation of around 20 points in 2027. This assumes normal levels of management actions of around 200 points. And depending on whether these impact own funds or SCR or both, this translates to between 2 and 4 points of solvency. This level of capital generation will continue to grow and provides headroom in excess of the annual dividend and regular buyback. Now moving to a few words on Direct Line. The integration continues to progress well and at speed. We have successfully implemented our pricing models into Direct Line with an improvement in written calls in the fourth quarter. We've made excellent progress on the Direct Line branded PCW sales, doubling the number of policies in Q3 and almost doubling them again in Q4. We've transferred GBP 2.9 billion of assets to Aviva Investors with more to come. And we've made good progress rationalizing two office locations and three motor repair sites. We're progressing and removing duplicate roles and have an incredibly strong leadership team in place with a proven track record. All of this is enabling us to deliver material financial benefits. So in November, you'll remember, we uplifted our cost savings ambition to GBP 225 million and confirm Direct Line's own cost program of GBP 100 million had been achieved. We have delivered the first GBP 50 million of cost savings in the second half of 2025. This will fully earn through in '26 and contributed around GBP 10 million to operating profit in 2025. We expect to deliver the remaining GBP 175 million of savings fairly evenly over the next 3 years. And we're also investing around GBP 50 million to unlock claims cost benefits of at least GBP 50 million each year. And all the work on the acquisition balance sheet has now been completed. Now I'll briefly cover the delivery of our commitments on dividends. Today, we've announced the final dividend of 26.2p, giving a total dividend of 39.3p, a 10% increase on 2024. This includes the regular dividend growth plus the 5% uplift we promised following the acquisition of Direct Line. We've also resumed the buyback, launching a new GBP 350 million program increased to reflect the higher share count. And as we go forward, our consistent dividend policy of mid-single-digit increases in the cash cost of the dividends builds from this higher point. And combined with the resumption of the regular buyback, this will deliver a highly -- a higher progressive DPS development. So to summarize, 2025 was another great year for Aviva and the outlook for '26 and beyond is positive. Our diversified business model and the addition of Direct Line leaves us well placed to continue our track record of growth and earnings momentum. We will continue to invest in data, customer engagement and operating efficiency, ensuring we keep winning in an ever-changing world. And of course, we will maintain a firm grip on performance management across the group. All of this gives us great confidence in delivering the ambitious targets we have set and the future beyond that time frame. And with that, I'll hand back to Amanda. Amanda Blanc: Okay. Thanks, Charlotte. So before we move to Q&A, let me conclude with the key points. We have real momentum, and we are building on it every single year. 2025 extends our track record of strong profitable growth. We have already delivered another set of targets, and we are driving towards the raised ambitions that we have set for our next chapter. Aviva is in a stronger position than ever. And this isn't just a strong position for the next few years. Aviva is uniquely placed for longer-term success. Here is why. We are the U.K.'s national champion and the only diversified insurer. We are accelerating capital-light and unlocking higher returns. We have an outstanding customer franchise of more than 25 million customers globally. We are the U.K.'s most trusted insurance brand. We have proprietary data at scale, driving better pricing, better risk selection and better customer outcomes. And all of this fuels our superior returns for shareholders with strong and sustainable earnings growth and attractive dividend and regular share buyback. So these strengths and many more give me deep confidence that we will unlock the full potential of Aviva in the years ahead. So thank you for listening. Let's move to your questions. Unknown Executive: Thank you. And as usual, if you just raise a hand and give us a moment to get a microphone to you. We'll start at the front here with Andrew Baker. Andrew Baker: Andrew Baker, Goldman Sachs. First one, I guess, on your '26 combined ratio guidance. If I look at U.K. and Ireland, I think the underlying is about 96.7% in 2025. So it's quite a jump to get to less than 94%. So can you just help us with the bridge there? And then similarly on Canada, how do you get from sort of the 96.5% underlying to approaching the 94% that you've highlighted? And then secondly, I can see you added a slide in the appendix giving a bit more detail on autonomous vehicles. Are you able just to give us sort of your view on maybe the timing here, opportunities, threats and I guess, ultimately, how you think Aviva is positioned to win in this market? Amanda Blanc: Okay. Charlotte, do you want to take the first one? Charlotte Jones: Yes, I'll take the first one. Thanks, Andrew. So look, I'll start by saying we're very pleased with the COR of 94.6% for the group. And underlying COR has increased across the group from 1.4% to 96.7%. But I'm very comfortable with the position. So let me try and explain. So in Canada, we've seen about 0.7% of improvement in the underlying as we've seen price increases earn through, and we've seen auto theft trends improve. And we see having put around 10% through in Personal lines and those trends continuing, we can see the continued trend towards the sort of approaching 94%. We took those portfolio actions in the Commercial book. So again, some of that profitability will improve as a result of that, already coming through in the second half, but you'll get a full year effect of that. In the U.K., yes, the underlying COR I've got is 96.3%. But in there, you've got some elevated Commercial Lines, large loss experience, which was kind of in the second half. So just as I won't assume weather is better than long-term averages and I don't assume prior year development coming through. I also assume that large losses will be at a kind of regular loss loading. And when you look at the nature of the large losses, they were idiosyncratic in nature. So they were good underwriting decisions, just a bit of bad luck. So again, I wouldn't assume they repeat. Now they were about 1.7 points higher than the long-term averages or the loadings that we set. So if I take that off the 96.3%, you can see that's already quite a lot of an improvement. Then I've got Direct Line coming in, in the second half, it's still not at the performance level we would want it to be. So it's got a negative impact in the second half. But as we see that earning through and we see more of the cost synergies come through, then again, that will drive a lot of the improvement. So we have the plans, and we've got the good line of sight to the guidance we've given. Amanda Blanc: On autonomous vehicles, so yes, we did put the slides in the deck because we sort of thought that there might be one or two questions on it. There's obviously been a lot of media activity on this in the last couple of weeks. But you've also -- you've seen sort of two extremes of that really. This is going to -- everything is doomsday scenario to the sort of major manufacturers coming out only last week and saying that they've abandoned their Level 3 driving system plan. So I think that we've got to just manage some of the noise that sits around the topic. Now on saying that, we do recognize that this will bring a change in the market. And just the same as I think we've adapted to hybrid vehicles, to electric vehicles, pricing sophistication, now generative AI, I think we sort of feel very ready for this. Our view is we've looked at the WEF analysis and the BCG analysis. And we would concur that the widespread adoption is not expected until the 2040s. And even then, I think if you think about the upgrading of the car park globally is going to cost trillions of dollars. I mean, I don't think we should just underestimate even that an average car price today versus what it costs to have a fully autonomous vehicle, you're talking about tens of thousands of cost difference. So I think you sort of have to balance that. But when it comes to it, who's going to win in this autonomous vehicle world? Well, I think, first of all, this is the most competitive market in the world, as I said in the presentation. So I would bank on the U.K. being able to deal with this. We've got a deep -- as Aviva, we have deep understanding of vehicle technology. So we are the #1 insurer for EVs today. We have our own repair network. So the feedback loop in terms of that repair is going to be important. We've got -- we're one of three telematics players in the market. We've got about 3 billion miles of telematics data since that product was first offered. By the 2040s, as you can imagine, we're going to have a lot more data. So all of that data will matter. But I think ultimately, you're never going to have this as being a pure Commercial Lines product because at some point, the vehicle may get stolen, and I don't think that the vehicle manufacturer is going to take responsibility for that. There will be times when the vehicle is being driven in difficult driving conditions on country roads where it's not going to be fully autonomous. And so what you're going to need is this balance between Personal Lines and Commercial Lines. And I would put Aviva out there to be able to deal with that as probably the only player in the U.K. today that actually can. So I think we have to be circumspect about it. We have to recognize that the market will change. But I think genuinely, we are thinking it's a good way off. But we thought we'd put the slide in because we thought you may be interested. Unknown Executive: If we come to Farooq. Farooq Hanif: Just one numbers question and one non-numbers question. So on the numbers, I noticed your investment income in General Insurance was up quite a lot, certainly compared to what I expected. Is that a sustainable level? And will that get the margin with the unwind of the discount as well? I mean, can we expect that to sort of be a sustainable level that might grow from here? And then secondly, on -- going back to AI, I mean, there's also been a lot of kind of wild scenarios about how Wealth will be affected by AI and how distribution will be killed and margins will disappear and lots of doomsday stuff on that, too. So what are your thoughts on Wealth, particularly around Targeted Advice and how you could use Gen AI to your advantage? Charlotte Jones: Okay. Yes. So I think nothing particularly to call out on the investment income. It is obviously affected by having the Direct Line portfolio. But the rates that we were earning is pretty consistent. So LTR as a percentage of average assets aligned to the prior at 4.2%. So nothing untoward or nothing particularly to call out in the investment income. So, no. Amanda Blanc: Okay. So on AI in Wealth specifically, but I think more broadly. If we think about the investment that needs to go into AI and how you will reuse that across the business, I think if you think about Aviva, if you think just even on claims summarization, we've taken things for motor that we will apply to home, to travel, to health, to protection, to various other areas. So if you think about the investment spread across the business, we feel that we're in a good position to be able to sort of get more maximum use and maybe keep more of the benefit of that and not pass all of that on to -- in a competitive environment. On Wealth specifically, if we think about this new term of the moat, which is obviously new to all of us in the last -- the AI moat, like what is Aviva's AI moat? And I would say that one of the biggest moats that we have is our workplace pension business. Why is that the case? Because it is basically connected to employer, employee and provider. And effectively, with 4.5 million workplace pension customers, with the data that we have on those customers, we know what they are saving and the ability for us to be able to use AI and all the other data that we may have on them from things like motor, home and everything else to be able to provide a more personalized proposition via targeted support or simplified advice or going right through to sort of the full fat advice. I think that we're in a really good position to be able to capitalize on that. So I think we've seen disintermediation in many places before. Take price comparison website. I mean that massively transformed the motor market and disintermediated to almost a whole extent where today, 95% of quotes come that way. As a mass affluent player, we are in a perfect position to be able to manage that any potential disintermediation. But I still believe that advice will be there. I just think that the advisers will be given better information, more support, and they'll spend more of their time with the customers, where the customers want that face-to-face advice. But I think for those many people, 91% of the population today that don't take advice. AI will facilitate the ability to be able to do that and mean that they will get better guidance. And you've got 12.5 million people in the U.K. today that do not save enough for their retirement. I think it gives a real opportunity to be able to do that. So I would say we're bordering on the sort of excited end of the scale in terms of the opportunity that, that provides Aviva. Unknown Executive: Larissa? Larissa van Deventer: Larissa Van Deventer from Barclays. Three quick ones on my side. The first one, just on Canadian Commercial. Is the culling now done? Or should we expect some of that to linger into 2026? On the Life value of new business, if you could please give us a little bit more color on what drove the decline and how we should think about margin evolution going forward, basically was to separate the one-offs from any structural change that you may see? And the last one on Workplace. You've been very positive on this for some time. What needs to happen for you to meet your targets? And do you see -- and specifically on that, how do you see margin or potential margin compression in that space? Amanda Blanc: Okay. So I'll pick up one and three and then hand over to Charlotte to take the margins bit of three. So on the Canadian portfolio remediation, yes, that is largely done. And I think if we think about Canada, we really see a big opportunity there to improve the performance of the Canadian business. I think there's a number of areas, a push out in terms of SME, a move more from Ontario as well as into Quebec, where we're not largely represented in Quebec today. We've got big partnerships with Loblaw and RBC, which we will be capitalizing on. And so I think the Canadian business has made some really strong improvements that they will continue to build on over the coming period. And that's why Charlotte was able to give the guidance that she wanted to there. On the Life VNB, Charlotte, and then hand back on Workplace. Charlotte Jones: Yes. So I suppose there's a couple of things. In general, there's an element coming down because of the retirement levels of the BPA volumes being less. Then we've got a slightly strange effect coming through in Wealth in the fourth quarter, and that's allowing for some assumption changes, which kind of are relevant for the whole year, but they come through in the fourth quarter. There's a little bit -- so there's a little bit on Retirement margin and a little bit on Wealth. But I would encourage you on Wealth to always look at the flows and the operating margin and how we're improving the operating leverage there and therefore, the opportunities on the profitability. The VNB metric isn't that applicable, but we give it so that you can see the overall IWR level. Amanda Blanc: I mean on Workplace, so what gives me the confidence here? Well, I think the progress that has been made, you've only got to look at the sort of the progress towards the GBP 280 million ambition. And that is primarily driven by the contribution from the Adviser Platform and the Workplace business. So Workplace AUM is up 19% to GBP 153 billion. So strong new business and growing member contributions. Net flows of GBP 7 billion, so that's 6% of AUM. We're getting regular GBP 1 billion member contributions every month. We talked about the new scheme wins, the win rate of 75%, which I think is pretty impressive. And so we've got a very positive outlook on Workplace. And we announced the new deal this morning with the Mercer transfer, that's GBP 8 billion being transferred in over the next 12 to 18 months. So I think the team are in -- they're doing exceptionally well here. On the margin, Charlotte, do you just want to comment on Workplace margins? Charlotte Jones: Sorry, yes. On Workplace margins, we have shown the improvement in the operating margin. So if I look at it at the overall Wealth level, it's gone from about 7% to 8.1%. If I look at Workplace, which has not been so much diluted by some of the investment that we're spending, it's improved from about 10.7% to 11.5%. So all the pressure that you constantly always expect at the revenue margin level, which continues to be there, we're compensating by the scale that we have, the operating leverage that, that drives and that keeps going forward. And so, we also gave you a stat on sort of the expense margin as well, which is sort of like the inverse of a cost/income ratio. And again, that's showing an improvement to 25% now for the whole Wealth business. So I think we've got to keep on it. We've got to make sure that we're protecting as much of the revenue margin as we can. And we do that through being competitive. We have to be competitive, but then there's a lot of incremental contributions into Workplace that sometimes attract a slightly higher margin per item. So we have to keep mind on that, but the real driver is making sure that the operating leverage continues to build. Unknown Executive: Andrew? Andrew Crean: It's Andrew Crean, Autonomous. Could you talk a little bit about Direct Lines, premiums and your retentions there? Is that working out the way you planned as you renew business? Secondly, I noticed the CSM, the net flow -- value net flow is negative to the tune of about 2%. Is that something which you think will continue in the long term, i.e., that your releases will be more than your expected return on new business? And then can you talk about U.K. retail pricing? What's happening in the market in terms of rates? And how you see rates going over this year? Amanda Blanc: Okay. Shall I pick up? Charlotte Jones: Yes, do pricing first and I'll do the two. Amanda Blanc: Yes. So on the -- we're not going to break down the individual brands, Andrew, in terms of like policy count or retentions because we don't do that for Quotemehappy, for Aviva Zero, and everything else. But what I would say is that I think we are incredibly pleased with the Direct Line deal. Actually, one of the real strengths in the Direct Line portfolio is the retention and their ability to retain. And we were with some of the teams earlier this week where their marketing team, particularly were commenting on the strength of the talent within the team around retention. So we feel very good that the team is set up to do that. On the -- on the pricing of the portfolio, on motor, which I assume is the sort of where you're heading. So what do we think about this? So we always give you the numbers. So bear with me just a second. So if we think about our performance in 2025 on Personal Lines motor new business, we were up about 1% on rate. I think the Pearson Ham data was showing rate down minus 11%. On home, we were sort of broadly flat, I think, on new business, and we were up about 8% on rate for home. So I think that shows really good discipline. And I think what it shows is us using our different distribution channels effectively. Obviously, we've got the Nationwide deal, which has come in for travel and home, and that will build over the course of this year. In terms of what we see going forward, I think that obviously, we see inflation in the sort of mid-single digits. We've -- Charlotte talked about us guiding to overall 94%. So that will give you confidence, hopefully, that we will be disciplined. And we do see that the rates are starting to flatten out. And I think the competitors are saying the same thing. You saw the ABI data come through just a few weeks before. So we believe that it is time to start increasing the rates, and we will be very disciplined about how we do that in what is obviously still a competitive market. Charlotte Jones: Then on the CSM, if I look at it, excluding Heritage, it's pretty stable at just under GBP 6.5 billion. Obviously, with a lower volume of BPAs, you've got a smaller amount of that new business CSM going in. Then my interest accretion, that's a little bit higher because we had the higher opening CSM and because of the business written back in 2024, and that was written at higher rates than the portfolio average. So that's kind of driving that. Then experience variances were broadly neutral, whereas the previous year, they've been a bit positive. And assumption changes are relatively minimal across the both. So when I look at the release, it's a bit higher because my starting point is higher. Now if I put Heritage back in there, because that's got no new business and is only coming out, then there's a bit -- the reduction is down to 7.7% from 7.768%. So it's pretty marginal. When I look at the percentage, the release is 10.3%. Again, that's slightly higher than the previous year, which was 10.1%. But that sort of level is expected to repeat. But again, it will depend a little bit on mix and volumes of new business written. But I think it's always important to remember, this is the capital-intense part of the portfolio, and it's throwing off cash that we're investing in Wealth and Health. And obviously, protection is within the CSM. But it's stable to level and obviously will be impacted by how much annuity business we write in every year. But again, it's only part of the picture for IWR. Unknown Executive: Give it to Dom. Dominic O''mahony: Dom O'Mahony, BNP Paribas. Three questions, if that's all right. Just one clarification on the Mercer flow piece. If I've understood that correctly, is that just straight GBP 8 billion to the flows sort of over and above what you would get normally? Maybe if you could just expand on that, that sounds very helpful. Second question, just to come back on the investment income. I think opening yields presumably are lower than 12 months ago. Could you just speak to whether that -- well, firstly, whether that's actually right for your portfolio, but also whether that's a headwind to investment income across the different business lines and/or discounting and/or whether there's anything you could do to offset that? And then the third question, just on the capital generation. So OCG underlying, I mean, much stronger than I was expecting with -- in particular, the SCR growth is interesting, because I think it was ever so slightly negative in the second half as in a release. Is that the reinsurance change that you referred to, Charlotte? I wonder if you might just expand on why the SCR dynamic within the OCG is so benign? Amanda Blanc: So I'll answer the first one, which is a very straightforward one. And then I'll leave Charlotte to answer the two difficult ones. Charlotte Jones: So look, let me just repeat your OCG question again. It's obviously strong, strong underlying and strong management actions. Dominic O''mahony: The SCR, which underlying GBP 36 million headwind in the full year, I think it's about GBP 20 million better than it was in the half year, which implies an underlying release of SCR, a small one. I did this math on the gee, so I might have got it wrong. But I assume that the reinsurance piece that you just -- you spoke to earlier is an SCR release in the underlying? Charlotte Jones: That's correct. Dominic O''mahony: Just wondering how big that is, whether there's anything else explaining the very good print there. Charlotte Jones: So within the underlying -- so management actions tend to apply only to really the IWR world and then we have a little bit in international. So anything that's sort of not run of the mill in the GI businesses still sits in underlying. So yes, there's some approaching a point coming through from -- in the OCG from the reinsurance. There's a little bit of an additional benefit coming through from weather. Then we -- what else have we got? Yes, that's the main thing. Then obviously, we've got the 3 points coming through from Direct Line moving that to standard formula in the short term. We did -- we talk about -- in the IWR side, we talk about moving to the -- moving the credit model and getting an improvement on the way we model credit risk. That's predominantly a benefit in IWR, but there actually is a little bit of a benefit coming across the other areas as well. So that's also impacting the SCR as well. Dominic O''mahony: And sorry, just to clarify, the Direct Line model change, that's going through the underlying, not through the other? Charlotte Jones: Yes, that's right. Dominic O''mahony: Okay. Understood. That was very clear. Charlotte Jones: And then what was your -- your other question was on investment income again. I mean, there's really not a particular headwind. It's a very consistent portfolio. We've got the bigger size and scale because the book is bigger. Then we've added Direct Line. The mix of assets is similar. We've moved the assets across to Direct Line. That's a helpful thing from an investment income perspective as well as fees for Aviva Investors. And then again, nothing much. There's a bit of a mix point, I suppose. And overall, it's a little bit helpful for discounting, but nothing really major to call out. Unknown Executive: Mandeep? Mandeep Jagpal: Mandeep Jagpal, RBC Capital Markets. Two questions for me, please, both on Life. Firstly, given the fixed income market conditions, how have you invested your annuity premiums you received in 2025 versus your target allocation? And does the current allocation create an opportunity for more management actions or margin enhancement in the future? And then on the Retirement IFRS earnings, in the appendix on Slide 56, it looks like experience variances, the line there was quite negative for both operating profit and CSM. Could you provide some color on what drove that negative line? Is there anything to call out here in terms of changing trends in longevity or mortality in the U.K. post the COVID period? Charlotte Jones: Right. So the first question was on the mix of assets supporting the Retirement business. I mean, in general, we've continued to keep a low reliance on corporate bonds in the low spread environment. So that's meant that we've largely written at a relatively low capital spend. When I look at the mix between liquids and illiquids, it's still kind of around the target mix that we have, which is a little over 50% in the illiquids. So we've kind of achieved that. The GBP 3.5 billion of real assets gathered by AI have contributed to that. Obviously, that will be more than 50%. So some of that is then actually in a warehouse ready for deals that we do this year and a portion of that has been an element of back book activity as well. So that's roughly the mix there. And we constantly look at what rebalancing we can do for the back book where as part of the overall ALM. But -- and the spreads, as I say, in corporate bonds has meant that we haven't allocated as much there. So we've still got a higher allocation of gilts. On your second question, which was Retirement IFRS 17. Let me -- I might -- Yes. So look, I think what we've got in Retirement is historically, we've ended up with a little bit of new business, which is slightly unintuitive for the Retirement business because normally, when you write Retirement business, it all goes into the CSM. But in the last few years, we've ended up with a bit of benefit, and that's because the way it's allocated to the CSM is based on the target asset mix at the time and the pricing thereof. If by the time we actually transact, it's slightly different and then that will drive a new business line. So this year, we haven't got that repeating, which is more likely what you would expect from IFRS 17. But in the past, we've ended up with a little bit of new business coming through. In terms of assumption changes, I mean, they were honestly relatively benign. And then you've kind of got experience variance effects. We had more coming out of the CSM because we started with a bigger position. And then the investment return was a little bit lower, and that is because we use a 1-year rate to derive the expected return, and we saw a slightly bigger discount unwind from the higher opening CSM. So -- I mean, there's a few mixed pieces going up and down. But overall, that is a function of IFRS 17. Unknown Executive: Tom? Charlotte Jones: Longevity. What was your question on longevity? Amanda Blanc: Was there have been any changes, any trends? Charlotte Jones: So on longevity, what I would say there is, we have moved to the latest tables. We have reflected essentially the CMI '24, moving from CMI '23 to '24 hasn't led to a big release or anything. We continue to apply a 0 weighting to '22 and '23. And that's -- instead of that, we apply a sort of temporary uplift for the mortality rates in the post-pandemic drivers. So things like the COVID and the NHS pressures. As we kind of look forward, we retain -- so -- and we assume that will run off over a 10-year period, but we keep that under review. We then retain our long-term improvement rate, so we assume that, that continues to improve. So longevity still continues to improve, but the tapers sort of once people are in that 85-plus age bracket. We generally have greater mortality improvements than we see in the general population. That's a function of our portfolio. And so there is -- we are assuming greater mortality improvements than the population more generally. And that will include, but not exclusively factors such as weight loss drugs and other sort of improvements in medical experience. So we are still having an assumption that longevity is improving. Unknown Executive: Tom? Thomas Bateman: Thomas Bateman from Mediobanca. Just a question on Wealth. It's a bit of a fluffy question. But obviously, the GBP 280 million guidance for, I think it's, 2027 is really good in Wealth, quite a big jump from where we are. Could you just break us down? I think it's investment spend, but there's quite a big jump there. Is it just that? And more generally, when you talk about Wealth, it always seems so fantastic, the win rate is really good. So how are you tracking versus that longer-term GBP 500 million guidance? I think it was 2030 or something. And second question, again, on AI. I hear everything else you're saying on the group impact, but you haven't talked much about cost impact on AI. Is that something that we could expect to hear more from you in the long term in terms of cost savings? And third question, just very quickly on the new lines of business at Probitas, what's the contribution from them? Amanda Blanc: Okay. I can pick up one and three, and Charlotte will pick up two. So on Wealth, on the GBP 280 million, so I think if we sort of go back to the in-focus session that Doug did 2 years ago now, we talked then about the getting to the GBP 280 million would be primarily driven by the two big lines of business, which would be -- which is the Workplace business and the Adviser Platform and that we would be investing in the Direct Wealth over the course -- the biggest investment was in 2024. Then there was more investment in 2025. And then that sort of -- that will drop out or become more normalized. I wouldn't say drop out, because you're always going to be investing in the business as we move forward. So that's why we have -- so there is an investment drag, yes. And obviously, we've had some success in Direct Wealth. We've now got 100,000 customers. We've built the platform. We've put proposition onto that platform. And so we see some real traction in that business. So -- but I think we've always said that the benefit from Direct Wealth comes after this GBP 280 million ambition. So are we confident about the continued growth of Wealth post the GBP 280 million? Absolutely. Because we can see that the Workplace engine continues to grow. I mean, I feel like I'm sort of boring you to death on this, but it is quite important, like Workplace contributions are today, that market is GBP 760 billion. It will be GBP 1.3 trillion by 2030. And I'm going to make a number of like GBP 2 trillion by 2035 or something like that, and I'm looking to the team to not to say that, that is the right number. So as we have a close on 25% market share there, and we're retaining at a high level, and you've seen the benefits of the operating margin improvements, we've invested in the technology platform. Doug talked about that when he presented. So we're on modern technology. We're sort of built for this business to just keep growing and growing efficiently. And then you've got some of the tailwinds coming from the regulatory environment. So yes, I'm super positive because it's a growing market. We are really good at it. We've got the sort of AI opportunity and 4.5 million current members, and we've just -- and we're winning schemes like the Mercer scheme. So I feel very good about that. In terms of -- what was the second question? Charlotte Jones: Second question, AI and cost benefits, et cetera. I mean, I think it's very hard to put a specific cost benefit on this yet. Obviously, we -- when we are thinking about it, and what's already embedded in our numbers. So I think on one of my slides, I talked about as an annual BAU spending on growth, efficiency and customer change initiatives, we have about GBP 450 million. That's embedded in the business plans for the markets and the functions, and it's separate to the I&R spend that we have and regulatory-driven stuff. But it's a wide range of investment in our business. And that's a recurring amount that's been going on for a number of years. And as each -- as part of the planning cycle, we work through how we're going to spend that money and some of the projects are multiyear. But you've heard us talk about things like the development of the app, the single source of the customer data, the work on Direct Wealth. That is all -- some of it is automation, some of it is AI. You've heard us talk about claims summarization, which takes call hold time down by 50%. You've heard us talk about the large language models that we're developing that enables protection and underwriting to be done with automated reading of many doctors' notes. So all of that is driving productivity. And each time we spend money on those initiatives. There's a business case that's put forward that has benefits. And that's how we allocate all of the change money across the group. So this is no different. And so to the extent that we've got those activities in flight and they're driving benefits to the business, they are part of the improvements that will drive us to those EPS targets. That's real, and that's built into all our numbers. As we start talking about some of the more advanced things that are still an early stage, such as the Gen AI agent or the Agentic agents and where they will drive benefit, there are probably benefits beyond the planned time horizon. So they're not so incorporated in the targets that we have. But they are partly funded. And as the business cases build, we will start to think through how much of that annual budget is allocated in that direction. So I think it's very dynamic. But what I'm trying to say is, yes, where it's real and tangible and we can put our arms around it, it's both funded and it's included in the benefits that are in the numbers that you can see, where it's more early stage and it's likely to leave benefits longer term, then it's outside of the target range. But people have talked around 15% to 20% of savings. And you can sort of begin to imagine how that might come. Now some of that will be in the work we do with outsources, because a lot of the -- a lot of the work that we have with outsources is the real mechanical stuff that we would look to automate and drive savings there. So some of it will come in the way we deal with those third parties as well. So it's a multiple range of things. What I'm trying to do is give you assurance that it's normal course for us to be investing, have business cases, reflect those in the numbers and deliver. Amanda Blanc: On Probitas, so obviously, we are benefiting from the greater access to markets with the 8 lines of business. So illustratively, for 2025, we wrote about GBP 73 million worth of new business that neither Probitas on their own or Aviva's GCS would have written without previously. So I think we are showing progress. But here, I would say, again, it's about discipline in the current market environment. We've got those lines of business. We're not just going to write for the sake of top line. We will write profitable business. Unknown Executive: Give it to Nasib and then Fahad. Nasib Ahmed: Nasib Ahmed From UBS. So firstly, on capital management, I think pro forma, you're at 187% plus on the solvency. You're above the holding company cash of GBP 1 billion. And Charlotte, you were saying you're generating solvency above the dividend and the share buyback. And similarly on the cash remittances, if I roll that forward, you're generating more cash than you need. What is the binding constraint on distributable cash? Is it leverage where you're kind of around 30%? Secondly, on bulk annuities, it seems like the second half last year was very competitive and probably getting more competitive with the transactions that are probably going to close this year. Why are you still in this market given your focus on capital light? And then thirdly, on PYD first half versus second half, it seems like you've done some reserve strengthening in the second half, both in Canada and U.K. If you can talk a little bit about that. Amanda Blanc: Okay. I'll let Charlotte do one. I'll do two and she can do three. Charlotte Jones: Yes. So look, I think -- just trying to think how best to answer your question. I mean, look, we are talking around -- we're at 180%. Now I'm struggling with your number, 187%, what are you... Nasib Ahmed: With Direct Line coming through 7 points. Charlotte Jones: I see. Okay. So the way I think you need to think about it is, we gave guidance for '27 of 20 points. I am going to get to your question, but let me just set the scene how I see it. So for 2027, I'm giving guidance of 20 points. And that comes from the sort of 12 points that we've had in the past, which is kind of like the 1 point a month of regular underlying OCG plus about 3 points coming from Direct Line. So we had about 1.5 points. This is just the regular performance of Direct Line. We had about 1.5 points in the latter part of the second half of the year. So if I take the 12 points plus the 3 points that's coming from Direct Line, then I think of the business improvements, I'm getting to an underlying of about 17 points. And management actions on a recurring basis will be about 3 points. That gets me to the 20 points. So that's kind of '27. That's looking beyond when the Direct Line synergy benefits come through. So at that point, dividends will probably be about 14 points and buybacks is about 4 points. So 20 versus 18 kind of gives me the couple of points of headroom. '26 is a complicated year because you've kind of got a higher SCR going into the year. I would definitely expect that the underlying generation will continue to improve, but we will be focusing hugely on getting the 7 points of synergies coming out of Direct Line. And then kind of that will then drive the SCR down. But obviously, all the time, there's new business growth, which is driving the SCR up. So each year, the same number of points is leading to more pound notes in terms of capital generation. When I think of just the near term, we've got dividends and buybacks to come out. So my 180% will go down. I've also got a bit of solvency, a bit of a few debt instruments or previously grandfathered instruments that stopping. So I've got some drags on capital coming from that. So I'm not sure I would give the pro forma, and I really don't want to give guidance for '26 because it's quite a complicated year. But what the 20 points looking through that to '27 is, I think, important for modeling. And it is a step-up from '25 when you think of -- obviously, we had extremely high levels of management actions, but that aside, it is a step-up on that. Amanda Blanc: On bulks, so first of all, I think your question was why do we do it? Well, we're actually quite good at it. So we've been doing it for a very long time. We are delivering results that are sort of mid-teens IRRs. So I think that's a pretty good return. It is a significant contributor to the cash and the dividend payment of the group. And what we've always said is that the role of bulks is to sort of stay like this, whilst the capital-light businesses go like this. But we've never said that bulks don't play an important role. So we've got -- we're confident in the business. We've written GBP 4.6 billion of deals -- business across 86 deals. Yes, it's competitive, but our IRRs are attractive. We've got a really strong proposition called Clarity, which is the smaller deals, which we've sort of launched over the last couple of years. We've got a very experienced team. And yes, there are new competitors in the market. But what you have to do when that happens is you have to sit back, you have to make sure that you are disciplined and you allow them to do what they will do. And it's not easy in this market from a regulatory perspective, making sure that you are disciplined to do this well. So we will watch how that plays out. But we would still say that our GBP 15 billion to GBP 20 billion sort of guidance for 2025 to 2027 is there. The other thing I would say is that on individual annuities, which is part of this business, the sales are up 19%. And in our guided retirement proposition, which has got how do people draw down, how do they retire, that individual annuities plays a really important role as does equity release. So I think you have to look at the combination effect of bulks of individual annuities and equity release. And I think that, yes, it will be competitive. And we will maintain discipline. I've said that about every line of business. And I think that's going to be the way that we will play this. We've got a scale position today, and we will make sure that we manage this business for profit. And that's mine and Charlotte's role, and the team are all completely aligned with that. On Canada? Charlotte Jones: So PYD, first half, second half reserving, I mean, we definitely had a positive impact on core from PYD. That's in the disclosures. And it was kind of actually across all the markets. I'm not going to go into the detail of reserving, but we had some larger losses, as I talked about before. We will reserve adequately for those. As we've looked through, again, best estimate reserving across the place, but there are -- there have been some areas that we've strengthened reserves here and there, but nothing major to call out. Unknown Executive: I'm aware others are reporting this morning. So we'll take one last question from William Hawkins at the back, and then we'll take the other questions offline afterwards. William Hawkins: William from KBW. Hopefully, I'll be quick for the others. First of all, thank you for providing more financial information in Excel format. I know it's a really small point, but it is really helpful. Two questions. It feels like ancient history, but can you just go back to the Life Insurance Stress Test and just tell us, did you learn anything that you thought was commercially helpful for your business or your understanding of the market? And then secondly, a lot of talk today about the 94% combined ratio for 2026. What's your feeling about the long-term sustainability of underwriting margins? Is this a ratio that can keep improving because of the great stuff of AI and how you can keep growing the business because you've got amazing diversification? Or is this still a cyclical business? And so at some point, combined ratios have to be poorer. I'm not clear about sort of the long-term view on that. Charlotte Jones: Should I take Life Stress Test? So look, I think the Life Stress Test was, as you say, somewhat ancient history at this stage, but it was back in December -- or November, December when it was reported. I think it did provided some helpful reassurance that the sector is well capitalized and can deal with reasonably severe stresses. And -- but it was done entity level, so it wasn't kind of group level. But nonetheless, the individual and the collective disclosure and the confirmation from the PRA that the framework is working well and they see the sector is resilient. I think was a net positive and partly because -- more specific than that, partly because we do a lot of stress and scenario tests anyway, we work through that. And for us, it is important how the group behaves overall. So neutral to helpful, I suppose. Amanda Blanc: And on the 94% COR, so I think we have to congratulate the U.K. team for getting to 93.9% in a very sort of competitive and dynamic environment. You asked, is insurance going to be still cyclical? My bet on this having done 35 years is, I think it probably is going to continue to be cyclical. I think the winners that come out of that cyclicality, if that's the right word, are those that are constantly looking at the cost and looking at the innovation within the business, making sure that you have pricing discipline that you're able to sort of flex according to the market. The investment in AI and machine learning that we know that, that makes a massive difference to our ability to be able to price in a sophisticated way. But in a competitive environment, you're always going to be giving some of that back because your competitors, it's a bit like an arms race. You will invest in something, you will have a fraud tool or you're not getting rid of that fraudster. What you're doing is pushing that fraudster somewhere else. They'll keep trying, you have to keep going. So I would say in the U.K. market, particularly as I think the most competitive market, I would say that we will be aiming for that 94%, which we've said, I think, for the last 4, 5 years, weather aside, that's where we're aiming. Obviously, we will constantly be looking to improve all of the time, but you also have to recognize cyclicality and the competitive nature of the market. But I think we are set up to win because of our scale, because of our supply chain and because of all of the data that we have and the sophistication that we have within the business. And on that, I'm conscious that you have other places that you might need to get to. So I just want to thank you very much for your questions. Obviously, we're around. If there are any follow-up questions, apologies that we couldn't get to absolutely everybody. But -- we have the brunch next Friday with Charlotte, which I'm sure you will deeply enjoy and you'll be able to ask her all the very detailed questions on appendices and everything else. So thank you very much.
Operator: Ladies and gentlemen, welcome to the Aareal Bank AG Full Year 2025 Investor and Analyst Conference. I'm [ Moritz, ] the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Jurgen Junginger, Head of Debt IR. Please go ahead, sir. Jürgen Junginger: Agenda covers our results for 2025, our outlook for '26 and an update on our strategic plan, Aareal Ambition. I'm joined today by our Management Board, our CEO, Christian Ricken; Nina Babic, our CRO; CFO, Andrew Halford; and Chief Market Officer, Christof Winkelmann. Christian and Andy will take you through our presentation, which will be followed by a question-and-answer session. Now I'm pleased to hand over to Christian. Christian, the floor is yours. Christian Ricken: Yes. Thank you very much, Jurgen. Good morning to everyone, and thank you very much for attending today's call. Before turning to today's presentation, I would like to refer briefly to the recent events in the Middle East. There is no doubt that geopolitical uncertainties have increased, tensions have escalated, there is heightened caution across most business areas. We are aware of that. As a result, investment activity in many sectors may slow or become less predictable for some time. So far, Aareal has not been directly affected by the events of the last week nor more broadly by geopolitical events over the last year. However, we are, of course, monitoring the situation very closely. Now let me turn to our results for 2025 and our outlook for 2026. And I will also provide you an update on our strategic plan, Aareal Ambition. Starting with Slide 3. First, our results for 2025. And as you can imagine, this slide, this chart has become my actual favorite chart because it's a very well reflection of the delivery of the bank. We target an adjusted profit for the year of over EUR 375 million, which we comfortably achieved. On the basis of this good result, the management took action incurring an additional charge of EUR 55 million to support the repositioning of our U.S. business. The adjusted operating profit after the additional EUR 55 million charge was EUR 326 million, which is very similar to the equivalent profit in 2024. Turning to our 2 business segments, both achieved strong results for 2025. Banking & Digital Solutions made a significant contribution to group profits and Q4 average deposits, including retail rose to EUR 17.8 billion. New business in Structured Property Financing reached EUR 12.4 billion for the year, which was a record result. Much of this volume came from Europe, and I will say more about our regional approach later. By the end of 2025, we had reduced nonperforming loans to EUR 1.1 billion. We are planning to bring this balance below EUR 1 billion in the current year, and we are confident we can achieve this in the first half of the year. Our capital ratio continues to be solid with our CET1 fully-phased ratio at 15.5% at the end of 2025. At this conference last year, we introduced our new strategic plan, Aareal Ambition, and I'm pleased to report that we are well on track. As a result, we are well placed to reach our target of around 13% adjusted post-tax return on equity in 2027 still. Our increased focus on Banking & Digital Solutions and our repositioning in the U.S. in Structured Property Financing underpin this progress. I will further -- I will provide further comments on our Aareal Ambition plan later in this presentation. Before moving into the details of our results, I wanted to illustrate the importance of both of our business segments to the overall results. I'm on Slide 4 now. As you can see, Banking & Digital Solutions has contributed significantly to the group's operating profit in each of the last 3 years since the return of, as I would call it, normal interest rates. BDS deposits, including retail rose to an average of EUR 17.8 billion in the fourth quarter of 2025. The business has around 4,300 clients and currently executes payments transactions amounting to EUR 167 billion every year. I would like to thank the staff in this business for their efforts in 2025 and their continued commitment. In Structured Property Financing, the loan volume is over EUR 34 billion, spread across over more than 20 countries and 5 property types. I also would like to thank the staff in this business for their diligence and care as we have grown by taking a conservative approach to risk. I will now hand over to Andy, who will provide further details on our results for 2025. Andy, over to you. Andrew Halford: Thank you very much, Christian, and good morning to everybody. So Slide 6, let me just pick up some of the high-level numbers. So net interest income was down 12% to EUR 934 million, which was mainly the expected impact of lower interest rates. Loan impairment charges are down by 19% to EUR 322 million. As Christian just mentioned, this includes the additional charge of EUR 55 million to support the repositioning of the U.S. business, which includes a faster reduction in U.S. office loans. The efficiency measures that we put in place led to a reduction of 8% in adjusted administrative expenses, which fell to EUR 317 million. The cost-income ratio for 2025 was, therefore, 33%. The other components line includes a EUR 20 million positive one-off, which arose in the second quarter from the successful restructuring of a former legacy nonperforming loan. Overall, adjusted operating profit was EUR 381 million, excluding the additional EUR 55 million charge and EUR 326 million, including the charge. Nonrecurring items amounted to EUR 30 million compared to EUR 34 million the previous year and related to efficiency measures, IT infrastructure investments and other material nonrecurring items. The effective tax rate for the year was higher at 40%, which includes charges arising from the repositioning of the U.S. business. AT1 costs are up by EUR 8 million compared to 2024. This is because our new AT1 issue overlapped with the previous AT1 for about 3 months. Taken together, the adjusted post-tax return on equity was 7.5%, excluding the additional loan impairment and tax charges arising from the actions taken to support the repositioning of the U.S. business. Our solid CET1 ratio fully-phased increased to 15.5% at the end of the year compared to 15.2% at the end of the previous year. Now let's move to Slide 8 and the key profit and loss account items for Banking & Digital Solutions. As Christian has highlighted, BDS continues to make a significant contribution to the bank's overall profitability. In 2025, BDS contributed an adjusted operating profit of EUR 152 million, which is down by 7% compared to the previous year, but this is more than accounted for by the decrease in net interest income, which is down 9% to EUR 246 million. The impact of lower rates is fully in line with our expectations. However, it was offset in part by the strong growth in the housing industry deposits. In BDS, the customer base and share of wallet is constantly growing. Admin expenses are down by 4%, benefiting from tight control of costs and nonrecurring items reflects the investment in digitization that we are making to provide a seamless customer journey. On Slide 9, we look further into Banking & Digital Solutions' net interest income and admin expenses. Net interest income, although down compared with 2024, was above expectations. As I just explained, the impact of lower interest rates was as expected, but was partially offset by the growth in deposits. This growth was continuous during 2025, and therefore, net interest income increased throughout the year. I'll come back to deposits on the next slide. Admin expenses were tightly controlled with strict cost discipline maintained. Turning to Slide 10, which focuses on deposits. Our strong deposit franchise continues to reduce our dependence on the capital markets. As I've mentioned, deposits grew throughout the year. Housing industry and retail deposits in total rose to an average of EUR 17.8 billion in the fourth quarter of 2025. This is an increase of 4% since the fourth quarter of 2024 and an increase of 7% since the first quarter of 2025. Retail deposits have structurally improved and now have an average initial lifetime of around 4 years. The steady increase in housing industry deposits in 2025 reflects our successful sales efforts. These deposit volumes have gradually increased in recent years and reached an average of EUR 14.7 billion in the fourth quarter of 2025. Rental guarantee deposits and maintenance reserves have grown continuously. Sight and term deposits are largely stable. When interest rates returned in 2022, there was a shift from sight to term deposits as depositors sought to capture income. This transaction -- transition has now ceased and today's sight deposits only reflect clients' operating cash and therefore, are expected to be very sticky. Now let's turn to Structured Property Financing and to Slide 11. Net interest income is down 13%, reflecting the impact of lower interest rates and is in line with expectations. Loan impairment charges are significantly down, including the additional charges, admin costs are down benefiting from the efficiency measures that we have introduced. Overall, SPF contributed EUR 174 million to the group's adjusted operating profit. As noted earlier, the other components line includes the positive one-off effects of the restructuring of the former legacy nonperforming loan and the tax charge includes charges arising from the repositioning of the U.S. business. Turning to Slide 12. Let's look further at net interest income from SPF. As I've just said, net interest income was in line with expectations. The result was impacted by lower interest rates. For example, the euro short-term rate decreased from 3.8% at the end of 2024 to 2.3% at the end of 2025, a significant reduction. Net interest income was also affected by proactive strengthening of our subordinated funding and by the weakness of the U.S. dollar. Those factors were partially offset by the growth of our loan book. Turning to Slide 13 and to SPF's admin and loan impairment charges. The efficiency measures adopted across the group are also reflected in the admin expenses of this business segment, which are down 9% to EUR 222 million in 2025. Including the additional EUR 55 million charge, loan impairment charges are significantly down by 19% compared to 2024. Excluding this charge, the decrease would be 33%. Loan impairment charges are heavily biased towards the U.S. and U.S. office loans in particular. Risk costs for the rest of the business are at or below normal levels. At this point in the cycle, we are, therefore, freeing up capacity primarily from U.S. office to redeploy it into the European markets where the returns are presently very strong. I'd now like to hand back to Christian, who will talk about business developments in more detail. Christian Ricken: Thank you, Andy. Now let's turn to Structured Property Financing's new business on Slide 14. We achieved record new business, as I already said, of EUR 12.4 billion in 2025, which was well ahead of our target of EUR 9 billion to EUR 10 billion for the year. Newly acquired business amounted to EUR 8.1 billion, which was up EUR 1.8 billion compared to 2024. The average loan-to-value ratio for newly acquired business was still a conservative 57%, which provides a comfortable risk profile. Gross margins were also good, averaging 234 basis points. Renewals were around similar levels to the previous year. Those figures continue to demonstrate that we are actively identifying attractive market opportunities. Sustainability has been and continues to be an integral part of lending decisions. In 2025, we again supported the green transformation of commercial properties with EUR 5.1 billion of green loans included in our new business numbers. Looking at the geographical distribution of new business, 78% was in Europe, 15% in the U.S., 4% in Canada and 3% was in the Asia Pacific region. As planned, we have increased our focus on Europe and reduced activity in the U.S., concentrating on premium assets and long-standing trusted partners. Our strategy on asset classes has also evolved. Hotel finance continues to be our largest area of new business. However, we are currently taking a more selective approach to new office financing while maintaining our increasing conservative financing of Logistics and Residential, especially Alternative Living properties. Let's now turn to the next slide, which shows our current portfolio. We are at Slide 15. The portfolio totaled EUR 34.3 billion at the end of 2025. This is within the targeted range of EUR 34 billion to EUR 35 billion. As you can see from the 2 pie charts at the bottom of the slide, we are still highly diversified, both by region and property type. We continue to have a clear focus on properties in the major metropolitan areas. We are not financing new construction. Have exposure of only 10% in Germany and no exposure at all to Russia, China or the Middle East. In the U.S., we are focusing on our core strengths. For example, hospitality-related asset classes. We have significantly reduced the U.S. office portfolio, which is down by 1/3 compared to the balance at the end of 2024 and want to reduce this portfolio further. Green loans stood at EUR 11.3 billion at the end of 2025, representing around 1/3 of our total loan book. These loans include the financing of refurbishments as we continue to support commercial properties green transition. Turning to Slide 16 and to nonperforming loans. We are continuing a very active management of nonperforming loans and the balance stood at EUR 1.1 billion at the end of 2025. This is down by 29% compared to the balance at the end of 2023. U.S. office nonperforming loans are down by around 40% over the same period. The Stage 2 coverage ratio stood at 3.1% with the ratio -- sorry, with the Stage 3 ratio at 29% at the end of 2025. The nonperforming loan ratio stood at 3.2%. The U.S. office market remains challenging and U.S. office loans continue to represent over half of total nonperforming loans. More than 25% of the U.S. office loans is nonperforming compared to less than 2% for all other categories. Business outside the U.S. is performing significantly below our long-run average cost of risk. As we have explained, management has taken action to support the repositioning of U.S. loans. We are, therefore, confident that we can reduce total nonperforming loan balance below EUR 1 billion during the first half of 2026 already. Now let me hand over back to Andy for an update on our funding, liquidity and capital positions. Andrew Halford: Thank you, Christian. So on to funding, liquidity and capital. Slide 18 shows our broadly diversified funding mix, solid liquidity ratios and capital markets activity. Following a very active year, liability terms have been successfully extended. Deposits represent around 45% of our total funding volume. The largest part comes from the housing industry with an additional EUR 3 billion from retail deposits. As I mentioned earlier, these retail deposits now have an average initial lifetime of around 4 years. Our liquidity ratios are solid with a net stable funding ratio at 113% at the end of the year and the average liquidity coverage ratio at 209% for the fourth quarter. We're pleased to report that during the year, Fitch revised Aareal Bank's outlook to positive from stable and confirmed its senior preferred rating at BBB+. We demonstrated our full access to the capital markets during 2025. We increased our AT1 capacity by approximately EUR 100 million by replacing the former outstanding EUR 300 million issue with a new issue of USD 425 million, and we issued EUR 100 million of Tier 2 capital. In addition, we completed 3 benchmark Pfandbriefe transactions totaling EUR 2 billion and private placements totaling SEK 1.85 billion. Those were Aareal's first Swedish currency issues since 2006. We also completed our first Significant Risk Transfer or SRT transaction in the fourth quarter. Investors assumed a portion of the credit risk attached to a EUR 2 billion portfolio of European commercial real estate loans in return for a risk premium. This transaction strengthened our capital efficiency. Next, let's look at the Treasury portfolio, which is shown on Slide 19. The Treasury portfolio stood at EUR 9 billion at the end of 2025, up from EUR 8.2 billion the year previous. In terms of asset classes, the portfolio comprises public sector borrowers and covered bonds. It, therefore, has a strong liquidity profile. High credit quality requirements are reflected in the ratings breakdown. 100% of the portfolio has an investment-grade rating with 87% having a rating of AA or higher. Asset-swap purchases ensure that there is low-interest rate risk exposure. The portfolio is almost exclusively in euros and has a well-balanced maturity profile. Turning now to capital on Slide 20. Our ratios continue to be solid. Our CET1 ratio was up from 15.2% a year ago to 15.5% at the end of 2025 on the Basel IV fully-phased basis. Growth in the loan portfolio increased risk-weighted assets but was overcompensated by the reduction in risk-weighted assets that came from our first SRT transaction that I just referred to. This transaction had a total positive CET1 effect of around 0.5 percentage points. Both the Tier 1 ratio of 17.6% and the total capital ratio of 21.1% were further strengthened by the additions to our AT1 and Tier 2 capital during the year. Our leverage ratio at 7.2% at the end of the year is well above regulatory requirements. Now I'll hand back to Christian, who will cover our outlook for 2026 and provide an update on our strategic plan Aareal Ambition. Christian Ricken: Yes. Thank you, Andy. I'm turning now to the outlook on Slide 22. Macroeconomic and geopolitical uncertainty factors are, of course, difficult to predict, and we are monitoring developments closely. However, let me repeat that so far, we have not been affected by current geopolitical events. We are successfully reducing our exposure to U.S. offices. And more broadly, we see a slight improvement in sentiment towards the entire commercial property sector. As a result, Aareal has moved forward into 2026 with confidence. For 2026, we are targeting an adjusted operating profit approaching EUR 400 million. This level of adjusted operating profit would result in an increased adjusted post-tax ROE approaching 8%. In the Banking & Digital Solutions business segment, we expect total deposits to increase further to an annual average of around EUR 17.5 billion. In Structured Property Financing, we aim to keep the credit portfolio at around EUR 34 billion and reduce nonperforming loans below EUR 1 billion in the first half of 2026. Now moving on to Slide 24. I will provide an update on our strategic plan, the Aareal Ambition. We launched Aareal Ambition very successfully in 2025. Let me briefly remind you of the targets we showed you last year. We have 4 strategic targets. They are, first, to strengthen our core businesses; second, to expand our activities; third, to enhance efficiency; and fourth, to maintain a disciplined approach. We are applying these targets across the group. This means that we are continuing to grow our Structured Property Financing activities selectively. In Banking & Digital Solutions, we are targeting growth from existing housing market clients and by further -- by moving further to adjacent markets, for example, the Netherlands. We are also optimizing the scalability of our infrastructure. And on the risk, capital and funding side, we are maintaining discipline over our capital and liquidity ratios. So let's now look at each of these objectives in a little bit more detail. Moving on to Slide 25. The group is now positioned with 2 growth engines within one bank, and this is how we will move forward. In Structured Property Financing, we are sharpening our focus and emphasizing our key areas of competitive strength. This means that we are mainly concentrating on Europe and on hospitality-related asset types. In the U.S., we are actively adjusting the mix and size of our business. In Banking & Digital Solutions, we are accelerating growth. We are targeting an increase in deposit volumes by both nationally and internationally and introducing lending to the housing industry or I would better say, reintroducing lending to the housing industry. In addition, we are building an integrated deposit management platform to serve both our corporate and retail clients. On the risk funding -- sorry, risk, capital and fundings, our objective is strong capital generation and continuation of our solid capital ratios. We also intend to further reduce nonperforming assets. Our infrastructure objectives center on AI and cloud-led technology to create a resilient, efficient and modern platform for the group. In parallel, we will continue to execute our cost efficiency program. Turning to Slide 26 on Structured Property Financing. As I have said, we will grow our areas of competitive strength. And as always, we will continue to adopt a conservative approach to risk while seeking attractive returns. There will be greater emphasis on Europe and greater focus globally on hospitality-related asset types. In the U.S., business will continue to reduce office loans. As a result of these actions, we expect loan volumes to remain stable at around EUR 34 billion. We are also continuously leveraging and broadening our off-balance sheet financing business. We expect to continue to have a portfolio of around EUR 7 billion in these capital-light activities. Moving on to Slide 27 and to Banking & Digital Solutions. We are accelerating deposit growth and expanding our product range. We are currently focused on housing industry customers in Germany. Our first objective is to add new customers, new markets and new channels. We plan to add new groups, for example, small property managers. We plan to add new markets, for example, the Netherlands, France and Spain. And we plan to add a new channel for retail deposits, we plan to have our own platform in addition to the existing option of platforms like Raisin. We also aim to add new ERP partners. Our second objective is to expand beyond the housing industry and into other B2B segments and to do so in Germany and internationally. And thirdly, we are introducing lending services to the housing industry where we have a strong relationship, knowledge and expertise. To support these initiatives, we will continue to invest in digitized end-to-end bank processes and digital product offerings. As a result of these initiatives, we are now targeting combined housing industry and retail deposit volume of more than EUR 18 billion in 2027 compared to an annual average of around EUR 17 billion in 2025. We will also be targeting lending to the housing industry of around EUR 1 billion by 2027. Next, risk, funding and capital on Slide 28. Here, we continue to have 2 major KPIs. We are targeting a Basel IV CET1 fully-phased ratio of at least 13.5%, unchanged on the objective, which we introduced last year. Secondly, we aim to reduce nonperforming loans as a percentage of the loan portfolio to under 3%. To achieve this, we will continue with strong capital generation supported by capital management. We will also continue to optimize funding sources and the risk return from our treasury portfolio. We will, of course, maintain Aareal's conservative approach to risk, proactive credit risk management and our solid balance sheet. Turning now to Slide 29 and to infrastructure. Our objective is an AI and cloud-led transformation along with continued execution of our efficiency program. We aim to create a state-of-the-art platform to support the group's business in the future. As I said, our objective is a modern, resilient and efficient platform. We are also actively driving a technology and efficiency mindset across the bank while streamlining operations and digitizing processes as part of our efficiency program. Our new infrastructure-related KPIs are to achieve gross savings of an additional EUR 40 million in total and a cost-to-income ratio of around 30% by 2027. Moving on to Slide 30. We confirm our 2027 target for the adjusted post-tax return on equity at around 13%. As we have shown on earlier slides, management took action incurring an additional charge of EUR 55 million to support the repositioning of our U.S. business. Excluding the additional charge and the tax impact of repositioning in the U.S., the 2025 adjusted post-tax return on equity was 7.5%. Looking to the future, 2 main factors are expected to drive the increase in return. Firstly, an improved risk profile will reduce our cost of risk on an ongoing basis. And secondly, as I have just described, we are accelerating growth in Banking & Digital Solutions, assuming a normalized CET1 ratio of 13.5%, which takes us to the targeted adjusted post-tax return on equity of around 13%. Turning to Slide 31. Let me highlight our ambitious 2027 targets. As I have just demonstrated, we aim for an adjusted post-tax return on equity of around 13%, a CET1 fully-phased ratio of at least 13.5%, a cost/income ratio of around 30% and an NPL ratio of around 3%, a lot of 3s, but these are our targets. And we continue to be on track to meet those. Now moving to our closing slide, I want to round up with a few key takeaways. Both our business segments achieved a strong operating performance in 2025. We have significantly reduced loan impairment charges and costs. Management was able to take action to support the repositioning of our U.S. business. We have successfully launched our strategic plan Aareal Ambition, and we are well on track. We are sharpening our focus in both businesses. And we are confirming our adjusted post-tax return on equity target of around 13% in 2027. Andy, I and the team will now be pleased to take your questions. Operator: [Operator Instructions] And the first question comes from Corinne Cunningham from Autonomous. Corinne Cunningham: Three from me, please. First one, if you can give us a bit more background on what's happening with margin development. You've told us what's happening for new, and you said renewals. I think you said renewals were flat margins. So maybe just a bit more color on what's happening there and guidance on NII going forward. And on the SRT, can you explain the interaction between what's going on in the background in capital? You had a positive impact from the SRT, but your capital ratio was flat. Obviously, you made a loss, but any other moving parts in there with RWAs, please? And then last point, if you can give us a bit more background specifically on what the EUR 55 million, and you call it repositioning of the U.S. portfolio. But does that basically just mean additional provisioning to make assets easier to sell? If you could explain what that means in more detail, please? Christian Ricken: Okay. Thank you very much. So yes, I would like to allocate the question to my dear colleagues. So Christof will take the first one from the market's perspective; Andy, you would talk to the SRT and Nina, you cover the EUR 55 million. Christof Winkelmann: Yes. So also good morning from my side to everybody. To the question as to how the spread is between new versus existing business or prolongations, they are plus/minus within the average number that we've given you. We don't really publish the individual numbers, but you can take plus/minus 10 basis points from the published figure is where the range is for prolongations and new business for us. Andrew Halford: Let me just pick up on the CET1, the SRT question. So simple math, 15.2% a year ago, the SRT gave us about 0.5 percentage point benefit, 15.7%, and we ended the year at 15.5%. So 0.2% reduction from sort of trading, if you like. That is just primarily the impact of the slightly bigger loan book that we had over the year and hence the slightly higher RWAs. So that's the pretty simple composition of the movements of that number. Corinne Cunningham: Sorry. I was just going to ask Q-on-Q, I was looking more Q-on-Q. And is that literally the same, so higher loan book? Or were there other things specifically in Q4? Andrew Halford: No, it is exactly the same. There is nothing abnormal. Nina Babic: Cunningham, I will take the question on the EUR 55 million, the management action, which we have taken. So what is behind that? So in the end, it's a support for us going forward. So it's nothing on the year 2025. It's as an overlay booked for us, giving us a support on the U.S. repositioning going forward. It's not allocated on any kind of nonperforming loans, but gives us also leeway going forward to stay cautious and to follow up on our very cautious and conservative approach with regard especially to the U.S., as you have seen also on the NPL book, the main part of it is allocated on U.S. office. So that's why we want to stay active here and progress on the targets I've just described. Operator: Ladies and gentlemen, this was already the last question. So I would now like to turn the conference back over to Jurgen Junginger for any closing remarks. Jürgen Junginger: Thank you for joining us this morning. But as always, the IR team is happy to take follow-up calls if you have further questions. So have a good day, and thank you again for listening. Thanks. Bye. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect. Thank you for joining, and have a pleasant day. Goodbye.
Luc Van Ravenstein: All right. Good morning, everyone, and welcome to the Elementis 2025 Results Presentation, and thank you for joining us. Great to see you. In terms of agenda, I'll begin with our highlights for the year and Kath, our new CFO, will then run you through our financial performance. Then I'll take you through our strategic progress over the past year and finally, to our outlook for 2026. And we'll then open for questions. It has been quite the year. Looking back 10 months into the job, I'm really proud of everything we've achieved together. We delivered strong profit growth and margin expansion despite soft demand environment, and that's a clear proof of the quality and resilience of our business. From a strategic perspective, the sale of the Talc business and launching our Elevate Elementis strategy were more than milestones. They set the foundation for this company can achieve when we focus and move forward as one team. And we're making solid progress across all of our strategic priorities, such as innovation sales up to a record of 16.4% and 0 lost time accidents. So lots of positive momentum. You might remember a version of this slide from our last half year result presentations. Our portfolio has fundamentally transformed over the past years. We've reshaped Elementis into a pure-play specialty chemicals business, focused on our 2 segments, Personal Care and Coatings. Selling Talc was a major step in making this happen, and it was my first priority when I started as CEO. And with Chromium sold in 2023, we exited these commoditized capital-intensive businesses, and it was absolutely the right decision. It allows us to focus on our core strengths and capabilities. As you will have seen this morning, I'm pleased to share that we've agreed to sell our pharmaceutical business to ABF, and this sale is in line with our strategy as well, further sharpens our focus. More on this on the next slide. In November, we added Alchemy to the portfolio, a fantastic bolt-on right in our personal care sweet spot. It's a fast-growing, high-margin business that strengthens our position in skin care and cosmetics. So this is the new Elementis. We're a company with a unique position built on 3 real differentiators: hectorite, rheology and formulation solutions. And we're really pleased with the shape of the portfolio, and we're well positioned for growth. So we announced today that we reached an agreement to sell our noncore pharmaceutical manufacturing business to ABF. Last year, the business made $35 million in revenue. Our pharmaceutical business was originally acquired as a part of SummitReheis in 2017. It manufactures antacids and pharmaceutical excipients from our Ludwigshafen site in Germany. And while the business has performed well, it's clear that it no longer fits with our strategic focus. And because of that, the sale we announced today is the best outcome for both the Pharma business and for Elementis. It's a straightforward, clean transaction. It will reduce our capital intensity and on a pro forma basis, will deliver an uplift to 2025 group operating margins. We're working towards the completion in Q2. With the Talc business sold, we accelerated the delivery of all of our 2026 financial targets by 1 full year, which is a fantastic result. And with Elevate Elementis, we shared our new targets, mid-single-digit revenue growth, operating margins of more than 23% and 3-year operating cash conversion to be above 90%, ROCE, excluding goodwill, of more than 30%. And our proven track record gives us the confidence that we can meet these targets and be among the top of our peer group. Moving to sustainability. Next slide. Starting with safety, which is fundamental to how we operate. Last year, we achieved our first 0 lost time accidents since 2019. That's a big milestone. On the environment, we continue to make good progress. The divestments of Talc and Chromium have significantly reduced our carbon footprint, which is now nearly 80% lower than 2019. And we continue to transition to a more sustainable and responsible business. For example, at our hectorite mine, we moved to almost entirely renewable energy from a 0% base last year. Finally, on people, we've made a lot of changes in the organization with Fit for the Future, which was a big reorganization for us. And the engagement scores actually improved with voluntary attrition down by 40%. We're well below industry average now. But for me, even more importantly, I see it when I visit our sites, how proud the team is when I visit the Newberry, which is where we have our hectorite site or when I visit the new Porto team. And with that, I'm delighted to hand you over to Kath, our new CFO, to cover our financial performance. Katharina Helen Kearney-Croft: Thank you, Luca, and good morning, everybody. Before I begin, I'd just like to share some initial reflections of my first few months in Elementis. I've been here for 4 months now and 2 months as the CFO, and I've been genuinely impressed and frankly, relieved by what I've seen. I've had a really warm welcome with lots of people taking time out of their busy schedules to help me on-board. And it's clear, everyone is working with real commitment to unlock the full potential of Elementis. I've had the opportunity to visit locations in the U.K., Europe and U.S.A., and I really enjoyed learning about the business. There's nothing quite like the manufacturing environment, seeing products being made and looking to see what we're talking about in the meetings. And the real highlights for me have been hands-on in the Alchemy lab and visiting the hectorite mine. What has really stood out is the passion, dedication, commitment and pride of our people. They care deeply about the company and rightly so. And I'm confident that we can continue to build on these strong foundations, demonstrating that we have opportunities to grow revenue and profit and continue to generate strong cash and returns. When I look at the macro backdrop for 2025, we could be standing here looking at a very different set of results, and I'm definitely glad that I don't have to present that. Despite the challenging market, we have made good progress in 2025, and the team have done a fantastic job. And it's in this context, I'd like to cover the results for the prior year. Following the sale of Talc, the 2024 P&L and cash flow figures have been restated for continuing operations and used for comparison purposes. I wanted to show a brief overview of the metrics for 2025. Most of these will cover in the following slides, so we won't go into detail here other than highlighting. Despite a small decline in group revenues, we delivered strong growth in adjusted operating profit and a 150 basis point improvement in margins. In combination with lower net finance costs and a lower number of shares following the buyback, adjusted earnings per share was up 14.2% to $0.137, an outstanding performance considering the challenging operating environment that Luc referenced earlier. And as we turn to look at group revenue, you'll see that despite the backdrop, we delivered a resilient performance with overall revenue down 1% on a reported basis and 1.9% on a constant currency basis to $597.5 million. Bridging from 2024, we had a favorable FX tailwind of approximately $5.2 million. Volumes were down $5.6 million due to the weak demand environment in Coatings, resulting in a reduction of $14.1 million, and this was partially offset by volume growth in Personal Care of $8.5 million. On pricing, we delivered $7.8 million across both businesses, a testament to the specialty nature of our portfolio. Of note, a combination of proactive pricing, procurement agility and supply chain optimization actions helped us to fully offset the direct impact of tariffs in the year. And we believe the latest news on this topic, at least of Saturday, 21st of February, will continue to leave us in a neutral position. Turning lastly to mix. This was down $13.7 million, primarily due to a combination of one-off sales in Coatings of $3.4 million in 2024, not repeated in 2025, along with the continued softness in industrial coatings and decorative end markets. And AP actives saw strong growth in lower-priced but margin-accretive products as well as a consumer-driven shift from aerosol to roll-on formats in LatAm. As we turn our eyes to adjusted operating profit, we delivered strong growth, which increased 4.6% to $126.7 million. Within this, we benefited from favorable FX of $1.9 million. Lower volumes had an adverse impact of $1.9 million and the net price impact after offsetting inflation was $10.5 million. These headwinds were mitigated by the ongoing delivery of our self-help initiatives, which led to $18 million of total cost savings in the year and more to come on this shortly. As noted earlier, our strong profit performance helped drive higher margins, increasing 150 basis points to 21.2%, so let's take a look deeper into the reporting segments. Starting with Personal Care. Revenue was up 2.4% to $224.5 million with strong growth in skin care and cosmetics, offsetting a slight decline in AP actives. Looking at the regional performance, we saw higher revenues in EMEA and Americas with Asia flat compared to last year. Adjusted operating profit was up strongly at $72.8 million or 16.9% and importantly, brings the absolute profitability of the Personal Care segment in line with the Coatings segment. This improved profitability was driven by improved volumes and pricing alongside cost savings. The higher profits in turn helped to drive higher margin, which is up 410 basis points to 32.4%, including the benefit of one-off volume and cost savings in H1 previously noted at the half year. And lastly, on this slide, I wanted to highlight that our results in 2025 included the pro rata contribution from the recent acquisition of Alchemy, a small quantum for the year given the late acquisition timing, but meaningful strategically. And now moving on to the Coatings segment. We delivered a resilient performance with revenue of $373 million compared to $386.4 million last year, with a decline in Coatings partially offset by strong performance from our Energy business. The year-on-year decline was impacted by the benefit of high-margin one-off sales in Q4 2024. The drop-through from the lower revenue led to a lower adjusted operating profit of $70.4 million. However, the combination of higher pricing and our self-help actions supported the operating margins, finishing the year at 18.9% compared to 20.3% in the year before. You will recall at H1, we highlighted some operational challenges at St. Louis that were holding back our Coatings performance. Whilst there's still progress to be made, I wanted to share positive news that the debottlenecking program at St. Louis is progressing well and leading to improved performance, which Luc will cover more fully later. Last year, we successfully completed the balance of our 2-year $30 million cost savings program by delivering $12 million via our Fit for the Future restructuring and supply chain initiatives. In addition to this, we announced in July a further $10 million in savings that we were aiming to deliver over the remainder of 2025 and 2026. These are net of planned additional R&D spend, which will increase our total spend from 2% of revenue to 3% over the next 2 years. As we announced this morning, we have delivered $6 million of savings already, and we will deliver the balance of $4 million by the end of 2026. Our cost saving programs have reduced complexity and improved operational efficiency. We will continue to proactively identify opportunities to streamline our cost base and capture further efficiencies as we deliver on our growth agenda and become a simpler and leaner company. Now taking a look at free cash flow. A key feature of this business is its strong cash flow generation. And I'm pleased to report that we generated good free cash flow of $41 million in 2025 compared to $51 million in the prior year. Looking at the key components, higher adjusted EBITDA was more than offset by the working capital outflow in the year, driven by higher receivables due to lower debt factoring and strategic inventory build. We also had higher CapEx as we increased our investment to support adjacent market growth and capital investment in support of the St. Louis improvement program. As a result of these movements, our adjusted operating cash flow was $104.7 million compared to $123.2 million in the prior year. As we move down the cash flow statement, it's worth calling out 2 items. Firstly, our cash taxes were lower by $4.4 million, primarily due to an IRS refund received relating to a 2024 claim to utilize net operating losses for prior periods. And also adjusting items were $6.7 million lower as the Fit for the Future program finished during the year. Our balance sheet remains robust. And whilst leverage ticked up to 1.3x, this was after acquiring Alchemy and returning cash to shareholders. Looking at the key movements from left to right, we started the year with a net debt balance of $157.2 million, adding back the free cash flow of $41 million as well as the proceeds from the Talc sale of $52.5 million, we had an increase in cash available for distribution of $93.5 million. Of this amount, we returned $79.1 million through our first buyback program and the 2024 final dividend and the 2025 interim dividend. The share buyback program led to the purchase and cancellation of approximately 4% of our issued share capital. In October, we completed the disposal of the disused Eaglescliffe site for a negative cash consideration of $11.1 million. I would like to specifically note the strategic divestment of both Talc and the Eaglescliffe site have enabled us to significantly reduce our environmental liabilities and provisions. In November, we completed the acquisition of Alchemy for a total upfront consideration of $20.1 million. Taking off the FX of $11.4 million, we ended the year with a net debt balance of $185.4 million and a net debt-to-EBITDA ratio of 1.3x. Our aim is to maximize return on invested capital while maintaining a strong balance sheet and strategic optionality. In relation to investments, our CapEx program will be focusing on investing in growth and productivity. We will also invest in R&D and have plans to increase total spend here from 2% to 3% of revenue. To complement these organic growth investments and as we demonstrated with the acquisition of Alchemy, we will selectively pursue bolt-on acquisitions whilst maintaining a strong balance sheet. On dividends, our policy is for a payout ratio of around 30% of adjusted earnings. And as we announced this morning, the Board has recommended a final dividend of $0.03, taking the full year dividend for 2025 to $0.043, up 7.5% from last year and represents a 31% payout ratio. In considering future additional returns, we will assess several factors, including prevailing market conditions, our existing progressive dividend policy, the investment requirements of the business and our desire to maintain a leverage around 1x net debt to EBITDA over time, which we anticipate we will achieve on an organic basis in 2026. In light of the announcement of the pharmaceutical manufacturing business disposal, our expectation is to distribute the net proceeds to shareholders following completion. and we will provide a further update upon closing. And lastly, for your reference, we've included some technical guidance for 2026 on Slide 19. So with that, I'll now hand over to Luc, who will take you through our strategic progress over the last 12 months and the outlook for the year. Thank you. Luc Van Ravenstein: Thank you, Kath. For those less familiar with Elevate Elementis, this is our new strategy. We presented that in July. The plan is simple. We have 3 strategic priorities. First, top line growth, and this is about focusing on what we do best in the areas that make Elementis unique without the distractions of Talc and Chromium. Our objective is to grow revenue by mid-single digit over the medium term. And in the next slides, I'll share a view of our growth opportunities and our progress in 2025. The second priority is about service delivery. Our ambition is to be best-in-class and the first choice for our customers. We've made some great progress, and I will show that later. Third, simplification and agility. We're building a simpler and leaner Elementis that empowers colleagues, makes us more agile and allows us to execute at pace. Delivering against these 3 priorities is what will drive value creation and will help us to deliver the new medium-term targets. So looking at our first priority. For us to grow and unlock our full potential, it is important to focus on what makes Elementis unique and what will allow us to win. We call these our winning differentiators, and let me briefly touch upon them. Hectorite, this is a very special asset. It's a white mineral that comes from our mine with long-term reserves. It has really unique properties because of its chemical composition and its platelet structure. We don't just sell hectorite. We modify it, add value to it, for example, by making preformulated gels for cosmetics, and our customers love its efficiency. You only need a tiny amount to get a big effect. It's natural, and it delivers the kind of premium skin feel that consumers are looking for. Rheology, this is the science of flow. It's what's needed to stabilize ingredients in a paint can. It's also what makes sunscreen spread evenly on a skin. And here, Elementis is the global leader. Formulation Solutions, this is our expertise built up over the years of our customers' formulations. It's how our people work together with our customers to improve the performance of a paint or a skin care product day in, day out. And our colleagues in the labs have worked at AkzoNobel or Estee Lauder. They talk our customers' language, and that's a huge benefit. Now we operate in big attractive markets, as you can see here. Our focus, though, is to target these niche areas where our winning differentiators set us apart. And we work together with our customers to improve their products. For example, in skin care, we're replacing synthetic additives by hectorite, giving a more premium texture. And in industrial coatings, we help the transition from solvent-borne to high-performance water-based formulas. I'm not going to go into the detail of all of these here, but the point is we are using our expertise and our unique portfolio to help our customers make better and more sustainable products. So lots to go for in our current markets. And outside of our existing markets, there is a large new adjacent space for us that we're tapping into as well. We're using the same model, and we have entered areas that we're going to scale. One example is hectorite for geothermal energy. And here, because the wells are extremely deep, you're facing ultra-high temperatures at which hectorite is stable. We're using our formulation knowledge and existing customer relationships to grow with this market. We had our first sales in 2025 and have a number of field trials planned for this year in the U.S. and Germany. So lots of exciting opportunities and potential for growth. So we're focusing on the right areas, building on our winning differentiators, but what levers are we pulling to now bring in this growth? First, we're investing more in R&D, 50% more. For example, in application knowledge to support customers, and we're building a hectorite center of excellence. We're already seeing the benefits. Last year, innovation sales reached a record of 16.4%. That has doubled in the last 5 years. We launched 19 new products, of which we sent more than 1,500 samples to our customers. Some of the innovation highlights from last year on the right-hand box. We launched DEOLUXE, our patent-pending non-metal-based active, and this is looking quite promising. Several large customers are testing, and we expect the first sales in the second half of this year. We also launched a number of new hectorite products, BENTONE ULTIMATE, also patent pending. It's a highly active hectorite technology that delivers exceptional skin feel, mostly for lipstick and mascara. And in coatings, we launched THIXATROL 5050W for metallic pigment orientation and waterborne automotive coatings. So lots of excitement around innovation. And next, we're covering more customers directly, also local and regional accounts. We want to understand firsthand about their needs. And we've made good progress last year. We now service about 67% of our customers directly. We're also building a local-for-local footprint, and this reduces cost and increases reliability. More and more customers are demanding local supply, particularly in China. So this is how we're going to look at growing organically. To complement our organic growth, we're looking at bolt-on acquisitions, but in a very disciplined way and only when it fits our strategy, which does not depend on M&A. But the acquisition of Alchemy is a great example. In November last year, we announced the acquisition of Alchemy right in our Personal Care sweet spot. And Alchemy develops innovative rheology modifiers for personal care. They are fully natural and can fully replace synthetic raw materials in cosmetics. And the business has done really well in recent years, delivering double-digit revenue growth and operating margins in line with our Personal Care business. And we're bringing on a team with incredible expertise in this market. We're already working together on new products, including with hectorite, quite a nice synergy. The point is, with Elementis behind it, Alchemy can scale faster, leveraging our global sales network as well as our application capabilities. It's a great example of how bolt-ons can strengthen our core and accelerate growth. To make the most of this growth agenda, we need to be the best supplier to our customers. An important measure is On-Time-In-Full. And in July, we shared our target to deliver a 20% uplift over the medium term. And I'm pleased to share that we're now already halfway, and we'll stay focused on this. Second, we talked about St. Louis in July, one of our largest sites, and we have been dealing with some backlogs there. We had a big opportunity, 30% by unlocking capacity. I've made some leadership changes there, brought some experienced people back, and we're seeing the results, a 20% improvement since the first half of 2025. That puts us 2/3 the way there. At the end of the day, all of this comes down to customer focus and mindset, whether you work in sales, R&D or in the plant. And with some of the changes we've made, we have a new top-notch customer service center in Porto, we've seen a 50% reduction in customer response times. We've also received external recognition that you can see on the screen, which is a great acknowledgment for the team. We're building a simpler, leaner Elementis. And to us, this means driving agility, faster execution and responsiveness, so we can scale and deliver more value to our customers. And we've made good progress. We've streamlined our organization and leadership team. We've eliminated the stranded costs related to Talc. And some of these things were low-hanging fruit like reducing office spaces that we didn't really need. And some things took more coordinated effort like qualifying 50 new suppliers that led to quite significant procurement savings. Looking ahead of 2026, we're not done here. There'll be more procurement savings to come. We're making our supply chain more efficient, and we'll continue to move towards a local-for-local model. This is a continuous journey. All right. On to our last slide, outlook. While we remain mindful of the recent geopolitical uncertainty, we're confident in another year of progress. We're seeing great momentum and excitement building in the business. And I'm pleased that we've made a solid start to 2026 and our priorities for the year are clear: deliver organic growth through R&D and customer intimacy, achieve best-in-class customer service levels; and lastly, drive operational efficiency and continue to deliver cost savings. And the team and I are fully focused on delivering this plan. Thank you very much. And with that, let's move to Q&A, please. Everybody could please say their name, speak to the microphone, so that folks on the call know who you are. Thank you. Vanessa Jeffriess: Vanessa Jeffriess from Jefferies. Just wondering if you could speak first about how the first quarter has started given weather in the U.S. and improving beauty markets and how you think about seasonality for the year given coatings is normally stronger in the first half, but we're probably not going to see much improvement soon. Luc Van Ravenstein: Hi Vanessa Jeffriess from Jefferies, thank you for that question. We had a solid start of the year which is encouraging -- Q4 was relatively soft. So solid start in coatings as well, which particularly was softer in Q4. And the seasonality is -- we expect it to be quite typical, 52-48 balance. So yes, encouraging start. Vanessa Jeffriess: And then just on your new growth areas, great that you were able to execute on Alchemy. But how do you think about the mix between achieving that growth from bolt-on M&A and not diluting margins, given I can't imagine there's much out there making the margins you are. Luc Van Ravenstein: Yes. Absolutely. Look, this is an organic-led strategy. So we're really focusing on organic growth, which there are great opportunities in our existing segments, as we say, Personal Care and Coatings as well as these new areas that we talked about. It really is organic-led. Look, we work with many, many companies out there, such as Alchemy. We knew that for a long time, this company -- those could be nice new arrows to our bow. But again, it's really organic-led. You're right, our margins are in a nice spot. We're driving them up further. And it's difficult to find companies that are actually accretive to our margins. Alchemy was one of those, by the way. So we're very happy to use them to grow faster. Vanessa Jeffriess: And then just on pharma. I know that you didn't give profit, but based on past commentary, I would guess that, that's making probably 10% margins. So it seems like you sold at a multiple similar to your own group multiple, which is interesting. I think since your undervaluation, but what else is left in the group do you think that is making similar margins and could be sold? Luc Van Ravenstein: I think you're absolutely spot on in terms of your analysis around the margins and what we did there with pharma. So for us, this was a really good step from a margin and a CapEx perspective, but also from a strategic perspective, most importantly. Pharma was really an activity that it's a really great piece of business, but it doesn't fit with us. Looking at the rest of the portfolio now, we're really pleased with the portfolio we have. We don't have any other business in this kind of margin area. So yes, right now, it's about growth really. That's what we're focused on. We're pleased with the portfolio. Kevin Fogarty: Kevin Fogarty from Deutsche Numis. If I could kick off firstly on innovation. So you called out some several examples of progress, I guess, in new rheology markets. It feels like you're making sort of more progress there perhaps rather than the current ones. It's obviously sort of quite a different sale in terms of new markets rather than the current. I just wondered if you could sort of talk a little bit about that process. And sort of I guess, culturally, how is that different in terms of what you're trying to do there relative to what Elementis has done in the past? You're at 16% in terms of innovation sales. Just thoughts on the 20% target you've got out there? And just secondly, if we can think about Personal Care, just if you could frame the benefits from cost savings perhaps during the year. Any thoughts on Personal Care Asia and dynamics there during the year would be quite useful and just sort of confidence on retaining the margin, which is clearly at a significantly higher level than in the past? Luc Van Ravenstein: Yes. Thank you, Kevin, for those questions. Perhaps I can take the first couple and then Kath, you can help me on the third, if you don't mind. Thank you. So in terms of the new markets, so indeed, look, we have a large market in Personal Care and Coatings where we have great opportunities for growth. We talked in July, for example, about replacing some of the synthetic additives in sun care. That's our existing markets, huge opportunities. And if I look at our growth going forward, probably the largest piece of growth is actually going to come from those existing markets. We have exciting opportunities in new markets for sure as well, where, frankly, we've started to look into only relatively recently. Some of these opportunities, we will actually be able to address and bring in with our current sales force, application knowledge, et cetera. I gave a little example of geothermal. So geothermal drilling is actually -- is happening a lot with our existing customer base already, the Schlumberger of this world. So we have the access to customers. We have the knowledge of deepwater drilling through our oil and gas business. So that's an opportunity we'll bring in with our existing setup. Other opportunities, for example, we've identified a new opportunity for hectorite to remove PFAS out of wastewater. That's really interesting, but we're not going to build a whole sales force and application knowledge to -- for wastewater removal. So there, we might work with a partner, right? So I think for these new opportunities, very large, some of them will bring in with our existing knowledge. Some we will build, some knowledge we'll build, for example, in the construction market. And some we'll just have to partner up with other people. So that's the way I look at that, but a lot of innovation coming from our existing markets. Your second question was around innovation and about our path towards the 20%. Absolutely key indeed, because if you think about everything we do in innovation, innovation sales typically generate 5% to 10% higher margins than the rest of our sales. So it's really important. It also helps us to -- in our relationship with our customers and our relevance to our customers. So we've made great steps last year, 200 basis points up to 16.4%. We foresee to further progress that with all the activities that are ongoing towards indeed our medium-term target of 20%, but we're making some good progress and the investment in R&D, which sometimes is also simply about bringing that application knowledge in is going to help. Your third question was around Personal Care, particularly Personal Care Asia. For us, Personal Care in Asia is still a relatively smaller business compared to the European and the U.S. Personal Care business. We had some movements in Personal Care in the first half last year, Korea, color cosmetic market is a big one for us, and there was some order timing for which H1 was relatively softer. We had a better second half of the year. So we continue to see good momentum. What I would say is in the fourth quarter, we did see in antiperspirant some softness, particularly from some format changes in Latin America, as I think Kath referred to. So aerosols moving to roll-ons. That's for the antiperspirant business. But in general, we see good momentum. We're very happy with the margins. As said, Alchemy is accretive there or it is actually in line with our Personal Care markets margins. I don't know, Kath, if you want to add anything on the margin point that Kevin was asking about. Katharina Helen Kearney-Croft: So I think last year, we made good progress with the Fit for the Future finalization and the start of the new cost savings. Personal Care specifically also benefited from the closure of the Middletown site. So that is directly related to Personal Care. But from the other perspective, a lot of it ends up being in allocations because we've got joint plants and back office, which ends up being allocated. Angelina Glazova: Angelina Glazova from JPMorgan. I have 2 questions. First, I wanted to ask about the midterm targets on margins for 23%. You have already talked us through some drivers for growth that you see in the midterm. How should we think about Elementis bridging the gap in operating margins from current level to target of 23% plus? And do you see any particular drivers as more important relative to others? And then there is also clearly a difference in margin profiles between the 2 divisions. So how do you see that developing? And is there anything maybe for the Coatings business where you see those actions that could help lift the margins? And then secondly, looking at 2026, are there any particular items in terms of cash flow generation, net debt development that we should be mindful of? Luc Van Ravenstein: I'll kick-off with the first question and then if you don't mind, to complement and go on to the second question. So in terms of the margin development, look, we made a nice step in the right direction. Actually, selling the pharma business is going to help us, like Vanessa just said, a little bit more. Look, this is really about growth. And as we just discussed, we're growing in areas that are actually margin accretive. Hectorite, we're actually looking to selling more hectorite and growing that double digit. So that's going to help the mix. That's going to help our margin development. Obviously, we're taking some more cost out this year, but there is a limit to that at a certain point. We're really -- the big reorganizations are behind us. We have Fit for the Future behind us. So this is about high-margin growth. Obviously, we continue to look at how we can do things more efficiently. We'll always think about how we can do things at a lower cost and having Kath come in with a fresh pair of eyes a couple of months ago has also really helped in that respect. But it is about growth and about high-margin growth, and that's the way we're going to really get to that 23% plus level. Kath, anything to add? Or you want to go to the second part? Katharina Helen Kearney-Croft: Well, I think it's also related to the profiles in Personal Care. It has got higher margins and higher growth, and therefore, that would naturally generate some accretive margin. Luc Van Ravenstein: Yes, good point. Katharina Helen Kearney-Croft: With respect to cash flow and net debt, so Page 19 has some technical guidance. We're flagging CapEx will be between 4% to 5% in 2026. We will also expect a small working capital outflow in the year. I referenced in my script that we still had some factoring at the end of 2025, we will not be factoring in 2026. And so that will naturally unwind. And then with the sales increase that we're expecting, we will need to fund that. I think from a sort of just big picture, we are expecting to be circa 1x leverage on an organic basis by the end of 2026. And when I say organic, I'm ignoring the sale of the pharma business because as we said, we expect to give the net proceeds back. Unknown Analyst: This is Madhumanti Sanyal from CaixaBank. So I want to know if there is -- if you think there is a strong synergy between the Coatings and the Personal Care business, like if Coatings continues to show lower-than-expected performance, would you consider a sale of the Coatings business without affecting the performance of the Personal Care business? Luc Van Ravenstein: Thank you for the question. Look, Coatings and Personal Care are different markets, right? So our customers in Coatings are Sherwin-Williams and PPG and AkzoNobel and in Personal Care, you talk to L'Oreal and Estee Lauder. So the markets are different. But in terms of how we operate at Elementis, there's a lot of synergies. So most of our manufacturing plants are actually multipurpose and multi-market plants. So they service both markets, so both Coatings and Personal Care. Our plant in Livingston in Scotland and the U.K. is about half-half Personal Care, Coatings. So in that respect, there's a lot of synergies. Also, if you look at the products that we manufacture and the knowledge that we have in our laboratories, we talked about rheology, we talked about hectorite, all of that ends up in both Coatings and Personal Care. So the product knowledge, the manufacturing footprint synergy, these businesses are intertwined. So no. But I would add to that as well is that we're actually quite pleased with the performance of Coatings. If you look back at Coatings, where we were 7, 8 years ago, the margins of the Coatings business were in a bad year, 10 percentage points around that. In a good year, it was 14%, 15%. Right now, in a low demand environment, we're at 18.9%. So we're actually quite pleased with the Coatings performance, and we're excited about the opportunities ahead. Operator: I've got some questions from Sebastian Bray at Berenberg. Has there been any change in the energy business that led to the strong performance as you've highlighted, despite the oil price decline? One. Second question, what are management's thoughts on additional buyback after receiving proceeds from the sale of the pharma business? And thirdly, are there any signs of the recovery in hectorite sales in Personal Care? Did these grow in 2025? And if not, why this was the case? Luc Van Ravenstein: Shall I take 1 and 3 and you do 2? Katharina Helen Kearney-Croft: Sounds good. Luc Van Ravenstein: All right. Let's do it. So Energy business, we're actually very pleased with the performance of the Energy business. And it is a relatively small business, give or take, $40 million, but it did very, very well last year. One thing that Sebastian might remember, we closed our Charleston site in the U.S. back in 2019 or early 2020, and that was at the time a purely energy-focused business, or plant, I should say. We moved the manufacturing of those products to St. Louis. So that helped us in terms of margins. That's one thing that helped us. I would also say that by doing so, we really transformed the energy business, which if I look --when I joined Elementis 14 years ago, it was a much larger business. But now we really focus this business, one on manufacturing only from St. Louis, focus on hectorite. Why on hectorite? Because we really have a unique winning differentiator with hectorite because it works very well for deepwater drilling. So if you go very deep, you have to drill at temperatures of 250, 280 degrees Celsius and hectorite is stable at those temperatures. So we refocused the team. We have a smaller portfolio. And actually looking at last year, we've had a lot of success indeed in difficult conditions for drilling such as deepwater. We talked about the geothermal energy opportunity. So that's what we're doing here. Smaller business, relatively small team, close the plant down to do cost out and focus on the areas that make Elementis unique. And we'll continue to do that actually. The third question was around Personal Care and hectorite. Yes, we have grown. Obviously, last year, with the markets being a little bit soft, also the Personal Care growth was low single digits also in hectorite. But if I look at Personal Care, again, I'm turning the clock back 14, 15 years ago when I joined, this was a $30-or-so million business. We actually reported it at a certain point under oil and gas, you wouldn't believe that. But that was a purely hectorite business. And we understood where else we could sell hectorite in Personal Care in adjacent areas. So looking at the last 5, 10, 14 years, hectorite in Personal Care has grown really, really nicely. Last year was relatively lower growth, but still growth. But looking at the opportunities ahead in Personal Care as well, replacing synthetics, which continues to be very, very exciting opportunity, entering skin care, which is a $20 million or so business for us now, we're going to scale that, lots of exciting opportunities. Katharina Helen Kearney-Croft: So I think with respect to the question on share buybacks. So as we said this morning, following the sale of the pharma manufacturing business, upon closing, we expect to distribute those funds to shareholders. We also have the target of net debt to EBITDA of about 1x, we expect to be there by the end of 2026. So that will give you a signal of what we're expecting in this year. And then as we look forward, we'll continue to take into consideration where we are on leverage and expectations. Operator: Sorry, I've got to pretend to be Anil now. Anil Shenoy from Barclays has sent 2 questions as well. We didn't see any guidance on 2026. So are you happy with where the consensus is at for adjusted EBIT? And if so, could you help to bridge the gap between 2025 EBIT to 2026 consensus EBIT. What are you assuming in terms of growth? And what are you assuming in terms of savings? Luc Van Ravenstein: Shall I do the first part and you the second? Katharina Helen Kearney-Croft: Okay. Luc Van Ravenstein: All right. Thank you, Anil, for those questions. Look, we had a solid start of the year, like we just mentioned. So we're quite happy with that. And therefore, comfortable with the consensus. In terms of the bridge EBIT '25, '26, I mean, Kath, do you want to add on that? Katharina Helen Kearney-Croft: So as I mentioned, we expect the incremental $4 million in savings to come through. We do expect volume growth, so we'll get some natural leverage and some margin accretion continue to drop through, and that's how we're moving from 2025 to 2026. So sort of steady as she goes with the additional cost savings. Operator: And just some last questions from Chetan Udeshi from JPMorgan. Are you expecting Q1 sales to be up compared to last year? And secondly, we didn't see volume growth this year. What are your expectations for volume growth for '26? Luc Van Ravenstein: I think for Q1, as I said, we made a solid start. I think the most important is that if you look at where we -- the exit rate of Q4 last year was relatively softer. So we're happy to see good progression after that. For the full year, again, back to the previous questions from Anil, we're comfortable with where consensus is. We are looking at a typical balance between H1, H2, which I think also can help Chetan in terms of his modeling. Anything to add, Kath? Katharina Helen Kearney-Croft: [indiscernible] but I would just note the geopolitical situation has weakened. So we have an expectation, and we hope we will deliver that, but some things are out of our hands. But we will maintain our focus on our strategic targets. Luc Van Ravenstein: Yes, we're 2 months in. It's early days. Good point. Unknown Analyst: [Technical Difficulty] Luc Van Ravenstein: Not so much anymore, actually. When we own Talc, I had the Dutch gas price on my phone here. I was tracking it every half an hour, and I didn't get a lot of sleep. Luckily, we don't have that business anymore. And we are in specialty chemicals. So if you look at how we generate our margins, it's about adding value to our customers' formulations rather than trying to squeeze out a cent on our costs. So very much a different situation than where we were a year ago. Good question. Thank you. And we'll continue to monitor. I mean, I think perhaps one of the things to add, we continue to monitor the situation, the situation that Kath mentioned, obviously, that the recent occurrence in the Middle East. And if our input costs go up, we typically look to price to compensate for that input cost increase, definitely. Thank you. Good question. No more questions? Katharina Helen Kearney-Croft: Can we just get a mic to you? Vanessa Jeffriess: Sorry, just to clarify what you just said that you're happy with consensus sales and EBIT, but you've got the loss of Pharma business, which is $35 million sales and $3.5 million EBIT, right? Katharina Helen Kearney-Croft: So that's on a pre-adjustment for pharma, but I do suggest that people wait until it actually closes before adjusting numbers. Operator: I am seeing no questions on the conference line. So with that, thank you very much. Luc Van Ravenstein: Thank you, everybody. Katharina Helen Kearney-Croft: Thank you.
Operator: Hello, and welcome to the Rentokil Full Year Results 2025. My name is Carla, and I will be coordinating your call today. [Operator Instructions] I will now hand you over to your host, Andy Ransom, Chief Executive, to begin. Please go ahead when you're ready. Andrew Ransom: Good morning, everyone, and welcome to our full year results presentation for 2025. After my opening remarks, Paul will provide a review of our financial performance. I will then focus on the execution of our plan in North America as well as providing a brief update on our International region, our categories and our adoption of AI. We'll then open the floor for your questions. And as usual, details of how to ask a question can be found on the web portal. 2025 has been a year of encouraging progress with group revenues increasing by 3.8% and with organic revenue growth of 2.6%. Our H2 performance was particularly encouraging with group revenues increasing by 4.5% and with organic revenue growth being 3.5%. My main focus for today, however, will be on North America, looking at our performance in 2025 and how we're building on that platform in 2026. This time last year, we set out our plan for growth in North America, and it has been a year of encouraging progress with our performance, particularly in the second half, improving significantly. Whilst we're not there yet where we want to be, organic growth reached 2.6% in the fourth quarter. This was underpinned by strong execution, rolling out our new marketing plan, investing in our regional brands, opening 150 small local branches through our satellite program and delivering $25 million of in-year cost savings through our efficiency program. Our International business also saw improving organic revenue growth of 3.4% in the second half. This combination of improved growth and cost efficiencies delivered adjusted operating profit growth of 5.4% and positions us well to deliver our plans for 20% net operating margins in North America next year. Now looking to 2026, we have clear plans in place to build on the progress made last year. Our focus continues to be on growth, where we plan to expand our multi-brand strategy, deploying around 30 regional and local brands instead of the 9 we had previously indicated, and we'll continue to increase our local presence, taking our network of small local branches to around 220. As I'll explain in a little more detail later on, the team in North America has also used the pause in integration to develop a simpler plan for the creation of a single unified field operation. On systems, we've developed a new branch data portal, meaning we can maintain our existing systems for longer. And on pay plans, we're taking a more simplified approach to harmonizing pay policy where, in essence, service colleagues joining us next year will join our new plan, whereas existing colleagues will be given the choice of the new plan or to be grandfathered in their existing plan. So this combination of maintaining more brands and their branches, continuing to use our existing branch systems, whilst also simplifying the pay plan process means less change at the front line and more focus on the customer and indeed on growth. Fueling this growth and supporting our 2027 financial targets is our efficiency program, and Paul will now take you through this in more detail along with the rest of the financials. Paul Edgecliffe-Johnson: Thank you, Andy, and good morning, everyone. I will now walk you through our key financial highlights for 2025 and look at our regional performance in more detail before closing on cash flow and capital allocation. As a reminder, unless I state otherwise, all numbers are on a continuing operations basis following the sale of our France Workwear business, and any comparative performance is on a constant currency basis. Revenue was up 3.8% to $6.9 billion with organic revenue growth of 2.6%. Adjusted operating profit increased by 5.4% to just over $1 billion. This resulted in a group adjusted operating profit margin of 15.5%, a 30 basis point increase year-on-year. After an adjusted interest charge of $204 million, up $29 million due to the cost of additional bond debt issued in the year and an adjusted effective tax rate of 25.3%, adjusted basic EPS increased 2.4% to $0.2591. I have spoken previously about our focus on maximizing cash, and I'm particularly pleased with our free cash flow performance with 24.5% growth to $615 million and free cash flow conversion of 98%. This reflects disciplined working capital management and also some one-off benefits, including real estate sales. With the growth in profits and free cash flow and the proceeds from the sale of France Workwear, partly offset by an adverse foreign exchange impact of $181 million on year-end net debt, our leverage ratio improved to 2.6x, down from 2.9x a year ago and close to our target range of 2 to 2.5x. Reflecting this performance, the Board is recommending a full year dividend of $0.1239 per share, an increase of 3%, in line with our progressive dividend policy. Turning to North America. Revenue grew 3.2% to $4.3 billion with organic growth of 2.3%. Pest Control Services was up 1.1%, while Business Services grew 8.9%. I'll come back to talk about these performances in more detail shortly. Adjusted operating profit for the region was $749 million, up 5.1%, bringing our adjusted operating profit margin to 17.4%. This improvement reflects the early benefits of our cost efficiency program, which delivered $25 million of savings in the year. Operationally, we are seeing our strategic initiatives strengthen key KPIs with colleague retention up 2.8 percentage points to 82.2% and customer retention increasing to 80.5%. We also completed 12 bolt-on acquisitions in the region with combined revenues of approximately $27 million in the year prior to purchase. Looking at our performance in North America in more detail. Fourth quarter organic revenue growth in Pest Control Services improved to 2.6% from 1.8% in the third quarter and 0.1% in the first half. This sequential improvement demonstrates the results we're seeing from the strategic initiatives we put in place at the start of this year. Lead flow, a key metric to indicate future growth in our contract portfolio, grew over 7% across the second half of the year, driven by our revised sales and marketing strategy. This has included a shift towards a more targeted digital marketing approach with a bigger focus on driving organic leads and also increased investment in our regional brands to boost lead generation and brand awareness. The ongoing rollout of smaller local branches through the satellite program to bolster customer proximity and local presence is proving successful with branches with one of these localized hubs attached to it, generating more than double the lead flow of those without. We've also improved our execution by moving sales accountability directly back into the branches. In addition to winning new customers, we have retained more through a relentless focus on customer service, and we've been able to sustain strong pricing discipline through the year. Andy will talk more about these initiatives shortly and how we will continue to build into 2026. Turning to Business Services. We were pleased with fourth quarter organic growth of 7.8% against a strong prior year comparative, which included $6 million of emergency vector control revenue, which did not repeat in 2025. Across the year, Business Services organic revenue growth of almost 9% was supported by double-digit growth in both our distribution business and our brand standards business, with the latter benefiting from significant new business wins. Throughout the year, we have been executing against our plans to simplify the North American business, improving the efficiency of our cost base and creating fuel for growth. We are increasing discipline in our day-to-day operations with improvements in organizational design and simplification of processes. The streamlining of operations led to headcount reductions of over 500 roles by the end of 2025. We are also reducing cost in the business through outsourcing and moving non-core functions to lower-cost locations. This has allowed us to scale our back office operations more effectively while reducing our fixed cost base. To date, around 430 roles have successfully been offshored. We're using technology to automate manual processes and improve our overall efficiency while better leveraging the benefits of our purchasing scale through managing our third-party spend and consolidating spend with suppliers. As well as reducing costs, we continue to drive improvements in how we invest our sales and marketing spend to optimize ROI and have reallocated some $20 million of marketing spend away from suboptimal paid lead activity to higher efficiency channels and campaigns. We rapidly mobilized to deliver $25 million of savings in 2025, targeting the cost areas that were easiest to impact quickly. There remains very significant opportunities for us to create efficiency in our cost base. As we drive up efficiency in the business, we are also investing back in a targeted way to drive organic growth. In 2025, this has included incremental marketing investment and strategic initiatives such as the rollout of smaller local branches and enhancing our capabilities in areas from pricing to data insight. This is helping us to identify the levers to elevate performance and amplify the benefits of our strategic initiatives. Improving our data has been and will continue to be fundamental to our ability to optimize our marketing budgets to maximize our reach into available customer demand. We have already delivered a double-digit reduction in our cost per lead, and there is more to do. Balancing driving cost out with funding investments behind sustainable improvements in organic growth has been key to improving both top line growth and profit margin, and we will continue to balance this carefully as we progress towards our North America margin target of over 20% in 2027. Moving to our International business, which encompasses all regions outside North America. Revenue grew 4.8% to $2.6 billion with organic revenue up 3%. Organic revenue growth improved in the second half, up 3.4% compared to 2.6% in the first half. We saw our strongest performance in Europe, driven by healthy demand and solid pricing in Southern Europe, while growth in Asia was supported by the fast-growing economies of India and Indonesia. Adjusted operating profit increased 5.7% to $518 million, with margins increasing 20 basis points to 19.8%. The U.K. and Sub-Sahara Africa delivered double-digit growth, reflecting a strong revenue performance. Asia and MENAT also displayed margin resilience despite a backdrop of high wage inflation. Customer retention remained strong at 85.7%, and excellent colleague retention was seen throughout the year at 90.3%. We also completed 24 acquisitions in the region with combined annualized revenues of approximately $36 million. Turning now to central costs, which in the year were $191 million, up almost 7% and up 9% at actual rates with some 85% of our central costs in sterling. In addition to underlying inflation, this growth represents multiyear ongoing investments in proprietary technology, digital applications and AI capabilities to support colleague efficiency, customer satisfaction and to generate revenue. In 2026, we expect continued above inflation rates of growth in addition to an FX headwind. One-off and adjusting items, excluding termites, were $92 million in 2025, primarily incurred in North America as part of the overall cost efficiency program. Looking forward to 2026, we are expecting a similar level of spend. Moving now to the termite provision, which, across the year, we have increased by $201 million with an additional $122 million in the second half after the $79 million in half 1. The trends that we saw in the first half of the year have continued. These included an increase in the number of complex residential and commercial litigation claims compared to 2024, albeit at a lower level than at the time of acquisition. More detail on this is included in a slide in the appendix, and a continued increase in cost per claim as our proactive strategy to solve customer problems and reduce litigation continues. In addition, during the second half, we have resolved numerous large commercial legacy claims at a cost ahead of the historic average and increased the long-term inflation assumption in our provision model from 2% to 3.2% as a result of persistently high inflation in legal defense, housing and building materials costs. The cash cost of settling claims in 2025 was $95 million, and we expect a similar level of cash payments in 2026. Turning now to cash flow. We generated free cash flow from continuing operations of $615 million, representing an adjusted free cash flow conversion of 98%. This was ahead of our guidance of 80% and a further improvement from the half year. We reduced the working capital outflow by $67 million to an outflow of $59 million through our disciplined focus on debtor management and supplier harmonization, moving to more consistent credit terms across our supplier base. Although some of this improvement was one-off in nature, the underlying discipline remains, and we are focused on continuing to improve in this important area. Our overall free cash flow conversion also benefited from $20 million of real estate sales. Our gross CapEx of $196 million was in line with guidance, and we would expect a similar level of spend in 2026. Cash interest increased by $41 million to $222 million following our refinancing activities earlier in the year. Cash tax was $7 million lower at $100 million, mainly due to legislative changes in the U.S. Looking ahead, we continue to target a free cash flow conversion above 80%. Our strong operational cash generation, combined with strategic divestments, has allowed us to make progress in strengthening the balance sheet. Net debt at the end of the year was $3.65 billion compared to $4 billion at the start of the period. The key cash inflows in the year were $636 million of free cash flow and $391 million in net proceeds from the sale of our France Workwear business, which completed on the 30th of September 2025. Beyond the immediate cash influx, this disposal has simplified our International business, reduced our ongoing capital expenditure requirements and structurally improved our group cash conversion. We reinvested $121 million of cash in bolt-on M&A, which remains core to our growth strategy. This was less than originally planned with some slippage of deals into 2026. Our pipeline for 2026 remains strong, and we're targeting spend of around $200 million. The cash impact from one-off and adjusting items amounted to $100 million for the year. These costs were largely attributable to transformation costs in North America, which, combined with other cash one-off items, will be a further outflow of around $80 million to $85 million in 2026. Our closing net debt was impacted by $181 million adverse FX translation movement. Nonetheless, we are pleased to see progressive strengthening in our balance sheet with our net debt to adjusted EBITDA ratio reducing from 2.9x to 2.6x, bringing us close to our target range of 2 to 2.5x. Turning now to capital allocation, where our framework is built around 5 key priorities designed to balance growth, shareholder returns and financial resilience. Our primary focus is on organic investment as it drives the best ROI, deploying capital to support the long-term growth of our business. We will also continue to pursue targeted inorganic growth through bolt-on M&A. We have a strong track record of successfully integrating acquisitions to drive value creation, and we will remain selective and strategic in identifying opportunities that complement our existing portfolio, strengthen our market position and deliver long-term shareholder value. We remain committed to a progressive dividend policy, ensuring that dividends grow over time. Our approach reflects confidence in the underlying strength of our business and our ability to generate consistent cash flows while maintaining financial flexibility. We recognize the importance of returning excess capital to shareholders at the appropriate time. When we do have surplus capital beyond our reinvestment needs, we will evaluate opportunities to return it, always ensuring that such actions align with our broader financial strategy. Finally, we remain focused on maintaining a strong and resilient balance sheet. Overall, our capital allocation strategy is designed to strike the right balance between investing for the future, delivering long-term value to shareholders and maintaining financial strength. So in summary, we have delivered an in-line performance in 2025. We are encouraged by the clear signs that our revised North America strategy is working and the improvement in growth in the second half from our International businesses. Our focus on cash is improving our operational cash conversion and reducing leverage towards our target range. As we balance investing in sustainable organic growth and driving up the efficiency of the business, we remain firmly on track to achieve our $100 million cost reduction target and our goal of a North America margin above 20% in 2027. Although the first month of 2026 in the U.S. has seen some disruption from extreme weather, as we look forward, we have confidence in delivering in line with market expectations. Thank you. I will now hand you back to Andy. Andrew Ransom: Thank you, Paul. So over the next few minutes, I'm going to start by highlighting the strength of the pest control market, both in the U.S. and globally before diving into North America's performance. I'll then finish with brief updates on our international growth and emerging markets, on our 2 categories and on the good progress we are making with the use of generative AI across the business. As you can see, the global pest control market has demonstrated consistent, resilient growth, expanding from $15.4 billion a decade ago to an estimated $29 billion in 2025. This represents a robust 6.6% compound annual growth rate over the last 10 years. Looking ahead, the market forecast for growth in the pest control industry remains very healthy with a projected 6.2% CAGR through to 2035. This growth is driven by multiple consistent factors, including increasing urbanization and growing middle classes, which drive demand for professional pest services. Heightened demand for higher hygiene standards across all sectors and as you would expect, climate change are also contributing to a rise in pest activity, all combining to create a sustained need for our services. In Hygiene & Wellbeing, which accounted for 17% of group revenues in 2025, we are the leaders in an attractive global market, which is expected to grow at around 4% annually through to 2030. This is being driven by an aging global population and their increasing hygiene needs, social and demographic trends such as urbanization and increasing middle classes, so similar to pest control, a heightened focus on hygiene standards post the pandemic and greater environmental and regulatory compliance requirements. So we're operating in 2 very healthy global markets. Let's now get into the main focus of today's presentation, that's our plan for North America, where we're continuing on our journey to create an undisputed powerhouse in pest control. This is founded on a number of key themes. First, as I've just shown, we operate in an attractive noncyclical growth market with the U.S. accounting for approximately 50% of the world's pest control market and where we are now a leader for commercial, residential and termite services. Second, we are laser-focused on scale and on density. And this is not just about size. It's a fundamental understanding of how density unlocks significant economies of scale and efficiency opportunities. Third, we are building power brands like Terminix and other well-known regional brands such as Western Exterminator and Florida Pest Control, giving us strong brand equity in every city in the United States and, in turn, supporting other parts of the business' need for local digital leads, local sales, local pricing and recruitment. And finally, everything is powered by our proven, repeatable low-cost operating model, centered on being an employer of choice and maintaining an unwavering focus on customer service. Importantly, as you know, we are primarily a contract-based portfolio business with around 75% of Pest Control revenues in the U.S. being under contract. Now looking back, the integration of Terminix required 2 main thrusts: Firstly, to create a unified enterprise in the U.S.; and secondly, to create a single unified field operation. To date, at an enterprise level, we've successfully established a single leadership structure. We've completed the complex legal merger. We've aligned on our core back-office stack of systems, for example, for people management. We've introduced a single approach to procurement, and we've harmonized our management salary and benefit structure. Crucially, we've also made investments that will drive future performance. We've launched our first U.S. Pest Innovation Center, which is focused on residential pest control, termite and mosquitoes. We've placed an intense focus on being an employer of choice, making excellent progress in turning around colleague retention, particularly within Terminix. And we've also invested in new data and pricing capabilities. These are all important steps in unlocking the true long-term potential of the combined business. Now as you know, in 2024, we began pilot migrations to create a single unified field operation. And while these were very successful at delivering the expected cost synergies, and they did not negatively impact on the retention of our field-based colleagues, we did, however, experience a negative impact on our growth. The combination of fewer locations and a complex change agenda saw lower levels of inbound leads and some customers reacting negatively to the change in their technicians, eventually leading to lower customer retention in the migrated branches. Therefore, we made a decision to pause the full-scale migration throughout last year and to focus on returning the business to growth. This time last year, we outlined a new growth plan to address the root causes of the lead flow and customer retention reductions. And as you know, we saw encouraging signs of progress at the half year and again at Q3. And pleasingly, this has continued into the fourth quarter. The detailed plan that we set out in 2025 extended across a number of key areas, but was essentially focused on operational execution. For leads, we revised the marketing plan to add greater emphasis on organic leads on more local web content and on beginning to leverage AI optimization for local search. For 2025, we focused on 9 core regional brands alongside the Terminix brand, and a key part of the plan was to roll out our small branches under the satellite program to give us greater customer proximity. For sales, we moved ownership of field operations back into the branches, making the branch managers fully accountable for their local sales performance. This was coupled with a dedicated door-to-door pilot over the summer in around 25 territories. And as Paul has already highlighted, we also began driving business simplification, including the outsourcing of a number of key functional activities. Whilst this was all underway, our North America team has been working on plans to build on the successes of 2025 and to introduce a much simpler approach to branches, brands, systems and to pay. So let me provide a brief update. Our people, of course, are our greatest asset and our commitment to being an employer of choice is yielding excellent results. We've seen a 19% improvement in Terminix technician retention since the acquisition. And in 2025, North America colleague retention was up a further 2.8% to 82.2%. This is absolutely foundational to our future success. On the customer front, we delivered very encouraging improvements in customer satisfaction ratings, and we've continued our focus on the end-to-end customer experience, delivering a 0.4 percentage increase in customer retention now at 80.5%. And this will continue to be an area of maximum focus going forward. Our marketing focus shifted in 2025 to generate more organic leads through local brands and local content, where we optimize the content of around 1,200 individual web pages. And while only a very small part of the overall impact last year, we've also begun to leverage AI to optimize our local search presence so that when customers need pest control, Terminix is increasingly the AI cited domain to be shown in the search results. Critically, the successful rollout of our local network of new small branches under the successful satellite program brings us much closer to the neighborhoods where our target customers are living. By the end of last year, we had around 150 of these small branches open. In addition, our successful toe in the water with a dedicated door-to-door sales program in 25 territories last year will be expanded to around 40 territories this year. This local approach was reinforced with our focus on 9 regional and local brands alongside Terminix, which together drove a turnaround in residential lead flow, which was up 7.1% in the second half against the same period last year. As you've already heard from Paul, in addition to growth, efficiency was a big theme for 2025 and will continue to be so in 2026. Clearly, improving our marketing, our lead generation and our sales execution only matters if we're efficiently installing and subsequently billing our new customers. We continue to focus on increasing our speed to install rate. And in 2025, we introduced new KPIs to track the percentage of installs within 24 and 48 hours of signing. Overall, performance was good in '25, but this is another area where there is room for further improvement this year. By improving these operational performance areas, we have, in turn, improved our financial performance. Organic growth for Pest Control Services increased through the year, achieving 2.2% in H2 compared to 0.1% in the first half. This culminated in a strong fourth quarter, delivering organic growth of 2.6%. And importantly, the progress on contract revenue was particularly pleasing, up by 2.4% in Q4, alongside a healthy 5.6% increase in jobs. So an encouraging 2025 and one on which to build in 2026. Our brand strategy is a core lever for growth and the original plan focused primarily on both the core Terminix and Rentokil brands. The new plan outlined last year saw us add investment and focus on 9 highly recognized regional and local brands, which included the relaunch of their stand-alone websites and which delivered an encouraging increase in our inbound lead flow. And going forward, we will now invest in around 30 brands and support each of them with our best practice digital and marketing approaches. We'll have the Terminix brand as our national flagship, the 9 brands that we supported last year and a further 20 local and regional brands in key cities where their local brand equity is strong. Next, our focus is on the local branch network. And I've already highlighted the impact of the 2024 pilots and our pivot this time last year to focus on more branches. We've now added 150 small local branches, and the path forward is to continue that rollout, where we will open an additional 70 in 2026, taking our local network of branches to around 800 by the end of this year. This combination of keeping more local brands and their branches and by expanding our network of small branches as part of the satellite program gives us greater customer proximity and a stronger local brand presence. The most significant recent refinement to our plan involves our approach to data and branch systems harmonization. Our updated approach provides us with the immediate benefits of operational harmonization. We're launching Branch 360, which is a unified reporting and insight solution. It's been designed to provide a single pane of glass for our field leadership and our sales and marketing teams. By integrating data across our current branch infrastructure, this system-agnostic platform delivers consistent KPIs and daily accountability without being dependent on a single fully integrated back-end system. This ensures a standardized management experience across the entire organization regardless of the legacy platforms in place at the local level. Going forward, every branch manager will utilize a standardized performance interface that displays critical financial, operational, leads and sales metrics. Rather than requiring managers to manually extract and interpret data, Branch 360 will push actionable insights and reports directly to them on a daily basis. Finally, the team in North America has also developed a new approach for pay plans. The original plan required a branch-by-branch system harmonization to have been implemented before we could change the pay plans. Our new approach is to decouple pay plan implementation from systems harmonization. This year, we will harmonize branch manager pay, and then we'll focus on sales team pay in commercial pest control. This removes complexity and frustration of the different plans, and it's something that we expect to be well received. Finally, for our largest population, the technicians, we're taking a very pragmatic approach. New colleagues will be onboarded directly onto the new plan from 2027. However, we will give our current colleagues the choice to either opt into the new plan or to be grandfathered in their existing plan with no obligation to change. To conclude our dive into North America, we've continued to make good progress on employer of choice and on customer service. We've increased residential lead flow, underpinned by the rollout of 150 small local branches and our additional brands. This execution has led to an improved organic growth performance, which was particularly encouraging in the fourth quarter. Going forward, we're building on this growth platform with a focus on 30 brands and increasing the number of small local branches, which will continue to roll out at pace this year. And we now have a new simpler approach for branch data and systems and for pay plans. There is still a lot of work to be done, but clearly, we are seeing encouraging progress. So before we conclude and take any questions, a brief look at International and our categories as well as at generative AI, which I know will be of interest to you. As you saw earlier, our International businesses continue to operate in strong and resilient growth markets, with revenue in Pest Control up 5.4% in 2025 and increasing by 4% in Hygiene & Wellbeing. International growth markets delivered a solid financial performance with our revenue up 4.4% and profit up by 4.7%. Here, technology and innovation are our core competitive advantages. Our PestConnect deployment continues to progress well with around 100,000 additional devices installed in 2025, bringing our total to over 600,000. And in the Netherlands, for example, over 50% of our commercial pest control portfolio is now connected through technology. Our emerging markets continue to perform well, posting revenue growth of 6.2% and profit growth of 10.8%. And here, we are continuing to execute our cities of the future M&A strategy to capitalize on the development of the mega cities, which has resulted in 24 deals over the last 3 years and has secured leading market positions in key growth markets, including India and Indonesia, and this will be an outstanding platform for future long-term growth. I won't go into this slide in detail, but it's a summary of our overall Pest Control category performance globally and where organic revenue growth increased from 1.8% in the first half to 3.4% in the second. And similarly, in Hygiene & Wellbeing, which increased organic growth from 0.9% in the first half to 3.6% in the second and, as you can see, has delivered consistent revenue growth post pandemic. So this is my 50th and my last presentation to you. And looking ahead, if there's just one area in particular that I will be very excited to see develop, it's how the business adopts generative AI to enhance its productivity and efficiency as well as providing further service differentiation to our increasingly digital savvy customer base. Although clearly, it's still early days, we're making good progress. In 2025, we successfully launched Google Gemini AI to all 60,000 plus of our colleagues, and we had over 1 million users in just the first 6 months alone. On the service side, our innovations like PestConnect Optix, which was launched last year, uses AI to identify individual rodents from images sent from the field. And we've created our own in-house AI portal, lovingly named Rat-GPT, where over 100 dedicated AI agents are already in use or in development. The power of this focus on AI is perhaps best demonstrated by just a couple of brief examples of our Agentic AI solutions currently being piloted. Our prospect prioritization solution is a fully developed system, which uses multiple AI agents to analyze the wide range of leads that we receive. We receive Internet leads. We receive telephone leads, field-based leads, small leads, national account leads, jobs leads, contract leads, leads in high and low-density areas. And what this new agent will do is score each lead based on conversion likelihood, sales value and a range of other metrics, and then will nudge the salesperson to prioritize the best of the leads. Equally impactful is our on-the-go technician assistant. So if you can imagine a technician walking towards a customer site, this GenAI-powered tool will be speaking to the technician, giving them vital information; information about the site's history, the last infestation details, what the open recommendations are, what the bill payment status is and other important practical information. These are just 2 ways in which we are taking the power of AI and deploying it across the company. Clearly, there are many significant opportunities ahead of us, and we're really only just starting. So to wrap up, for the final time, I've included our RIGHT WAY scorecard in the appendix for you to read. But in short, as I prepare to hand over the baton to Mike, I personally feel very encouraged by the group's performance in 2025. Clearly, there is still much more to be done, but I'm very pleased to see our progress in North America, and I'm highly optimistic about the long-term prospects for the company where I will be cheering on from the sidelines in the future. Thank you very much. Paul and I will now be very happy to take your questions, and there will be a brief pause for the operator to line up any questions. Thank you. Operator: [Operator Instructions] And our first question comes from Andy Grobler with BNP Paribas. Andrew Grobler: Just a couple from me, if I may. Firstly, in America and operationally, as the strategy moves to kind of more branches, more systems, more brands and so forth, how would you balance the cost of doing that against and the visibility that you need from a central perspective. Is there a risk that some of these branches become somewhat independent through that process? And then secondly, just in terms of cash costs with termite costs going up in '25 and looking to '26, what are your expectations going in the longer term for those -- both for those termite costs and for the one-off integration costs over the next 2, 3, 4 years? Andrew Ransom: Thanks, Andy. I'll take the first one and hand it to Paul for the second. Look, I don't think so is the answer to your question in terms of risk either on the cost side or indeed on the risk of loss of control of lots and lots of small branches. If I take the second limb of that first. The Branch 360 single pane of glass, in particular, is going to give us the best visibility that we've ever had at branch level. At the moment, if you're a branch manager, across our suite of branches, you've got to have about 42 different tabs if you want to complete the full suite of KPI metrics and measures. And going forward, every single branch is going to have the same desktop open with the same KPIs, metrics, measures, dashboards and push reports going to them centrally. So I actually think we're going to have better control, visibility and consistency across our branches than we've ever had. And many of the smaller branches opened under the satellite program are really an extension of the larger local branch. So they're run by the same branch managers. So I don't think there's any risk there at all of loss of control, quite the opposite, I think. In terms of cost, the smaller branches are relatively cheap, if I can use that word, relatively inexpensive. The costs have been included in our plans, in our budgets, in our forward look on our numbers. So not a significant increase. And the majority of the increased investment on the brand side is actually on organic search. So it's not so much on the paid search, which is quite expensive. It's on organic, supporting their independent websites, web pages, et cetera. So I think the increased cost is modest. It's all factored into our forward-looking numbers. And I think it's going to give us great, great transparency and consistency on the branch level. So Paul? Paul Edgecliffe-Johnson: Look, on the cash side, I think the first thing that we should all remember is this is a very cash-generative business, and we've proven that in 2025. So we brought the leverage down. Cash conversion was at 98%, and we're going to keep pushing really hard on this. The working capital outflows were significantly lower in '25 than they were in 2024. In terms of the sort of one-off areas, the cost of the termite provision, $95 million in 2025 cash cost. We expect it will be about the same in 2026. Our strategy is to try and close off claims as quickly as we can, whether that's litigated claims or non-litigated claims. It's good to push them through, get them to resolution, and that's our plan so that we can put this behind us as quickly as possible. I can't tell you really exactly what the cash is going to be in '27 and 2028, how that will track down. Expectation is that it will track down because we are dealing with large complex claims now. That's what's put up the provision in the second half. And so we will see it ameliorating over time, but I can't tell you exactly the trajectory on that. In terms of the costs related to the transformation plan, the cost-out plan, we will continue to see those costs in 2026. I'm really pleased with how the plan has gone in 2025, how quickly we've managed to get cost out, but there's a lot more to do. The returns on this, obviously, though, are very, very good. So where we see an opportunity to take cost out of the business, yes, it will have a onetime cost for redundancies or restructuring, but we'll continue to pursue those. Thanks, Andy. Andrew Grobler: And just one further thing. Andy, thank you for however many years it's now been, and best of luck with whatever the future brings. Andrew Ransom: Appreciate it, Andy. Operator: The next question comes from Suhasini Varanasi with Goldman Sachs. Suhasini Varanasi: A couple for me, please. I just want to get some more color on the door-to-door pilot that you implemented in 2025. In the places where you implemented it, is it possible to understand the proportion of new sales that came from this new channel versus your traditional or digital channels? That's the first one. And the second one, I think Business Services has been delivering very strong growth despite the headwinds in vector control services in 4Q. Just wanted to understand the drivers behind this and your expectations for 2026. Andrew Ransom: Thanks, Suhasini. The door-to-door program, we're pleased with it. It did not make a major contribution to the revenue performance, relatively modest, but we were pleased with it. It's our first toe in the water for door-to-door. And as I've said before, it's become a big channel. I still think we're learning on the job with this. And I'm on the record of saying in the past, I've always had a slight concern about door-to-door that the customer retention rate on door-to-door isn't as strong as it is where a customer has reached out to find us. And that's proven to be the case. So retention rates have been lower in the door-to-door business, but absolutely in line with what we modeled. So we put a big tick against the program in 2025 as a success, but as a pilot. And we've included, I'd say, a relatively modest ambition in 2026. We're moving up from 25 territories to about 40 territories. If it continues to go well, and I don't see why it wouldn't, in '26. It will obviously be up to Mike and the team, but I wouldn't be surprised to see that getting potentially materially bigger in '27. So not a big contributor. We don't break it out separately. More to come for in '26. Let's see how we get on. If it continues to go well, I think that could be a much more material potential opportunity in the future. Business Services, yes, it's had a really good year actually off a less good year in '24. So you've got a little bit of comp benefit, I would say, '25 on '24. Just a reminder what's in Business Services, half of Business Services or just over half of Business Services is our distribution business, our products distribution business, which is really quite different from everything else. Everything else is a contract portfolio services business. The products business is selling pest products and turf and ornamental products to the industry and to individual consumers. That is a very lumpy business. It can go in waves, and we've had a very strong finish to the year in that business. But it's a good business. It's a good, well-run, solid business. So I don't see -- I'd be surprised if it grows as strongly in '26 as it did in '25, but I would say it's a good performing business, and it's going nicely. The other businesses are contract portfolio businesses. They are Business Service operations. So we have brand standards, which looks after franchise properties and goes and checks if they are living up to the standards that the franchise owner has set. That's a good business, running very nicely. We've won some big new recent accounts. So I would expect that business to perform pretty well in '26. We've got our plants business, Ambius, which is a nice business, doesn't grow at the sort of rates that Pest Control does. So that's a slower growth business, and I'd expect that to be similar in '26. So look, I think it's had a great year, slightly flattered by a poor year in '24, but solid businesses, well run, and I don't see why they shouldn't make a decent contribution in '26, but perhaps not at the stellar growth rates we've seen in '25 would be my best view. Operator: And the next question comes from Annelies Vermeulen with Morgan Stanley. Annelies Vermeulen: I had two questions, please. So firstly, on the rebranding of the retiring brands, I think you said a lot of those are one-branch businesses. So how many branches or brands does that involve? And what was the criteria for the decision on that segment specifically? Were there certain things that you look for in terms of signing those off? And then secondly, on the pay plans for the technicians, have you collected feedback on this from your existing technicians? And what was that based on? And if so, do you expect it to meaningfully continue to contribute to improving retention from here? And are there any additional costs associated with having to run 2 pay plans? Andrew Ransom: Thanks, Annelies. On the rebranding, those who've got a good and long memory will remember that we've got about 80 brands, give or take. So we're going to keep 30. So that means there's 50 -- I unfairly call them 1 horse towns. There are 50 brands. They're almost exclusively single city or single town brands. It doesn't mean to say we don't love them and like them, but it doesn't make economic sense to support those 50 individuals. So they are the 50 smallest. In aggregate, those 50 brands don't even represent 10% of the total revenues. So they will be retired quietly, slowly, gently over the next couple of years. And the criteria really was just based on scale. It's the ones that have got the least footprint, the smallest brands in small towns and smaller cities. And we tested brand equity as well. So we actually tried to work out how strong are these brands in the market. And the ones where we've got strong brand equity, we've retained and the ones where the brand equity is weak, we've taken a decision that it's better to migrate those to a strong brand equity local brand, whether that's Terminix or it might be one of the other 30. On the pay plans, no, look, there's not additional costs. There's the absence of some savings, but it's not material. And again, it's all fully costed in the plan. But as I said in the remarks, it's a very pragmatic decision. As I've explained several times over the last 2 or 3 years, we do have quite a distribution on a bell curve of pay for technicians and some have got legacy pay plans that look quite generous compared to the pay plans we've been operating across the business for some time now. And we've just taken a pragmatic decision that we will grandfather those. So if you want to stay on the pay plan that you're on because you like it, because you think it's generous, because you've worked out how to maximize your income, you can stay on it. So for the pay plan that we're moving to for the new people that joined from '27 onwards, we're essentially taking an existing pay plan that works quite well. We've modified it slightly. So there's absolutely no reason to believe it will be anything other than business as usual and a successful new pay plan. But it does mean we're running more than one pay plan for longer than we originally wanted. So there was some modest cost improvement originally planned to move to a single pay plan. We've foregone that saving. But as I say, relatively modest and included in our forward-looking plans. Annelies Vermeulen: Great. Thank you for the engagement, Andy. Best of luck. Andrew Ransom: Thank you. Cheers. Pleasure. . Operator: And the next question comes from Bill Kirkness with Bernstein Societe Generale Group. William Kirkness: I have two questions, please. Firstly, as organic growth rehabilitates, I assume there's some market share gains happening. And if so, can you just talk about where you see those? Are they quite broad-based? Or are they sort of focused with the smaller peers or larger operators? And then secondly, you mentioned the weather impact in Jan. I just wonder if that's so material as to disrupt this sort of improving momentum we're seeing in North America pest or whether actually you've got enough self-help to drive ongoing improvements regardless of the adverse weather? Andrew Ransom: Thanks, Bill. Look, market share in pest control is a notoriously difficult endeavor, there's about 18,000 to 19,000 pest control companies in the United States, and we're operating across hundreds of cities. So in any particular town, any particular city, customers have got massive choice. Typically, they've got a choice of 10 to 20 local players. And so trying to work out when we improve where the share improvement is coming from and vice versa is really, really difficult. You can only really see in a live dynamic way, whether you're winning or losing share on the big national account piece. And that isn't really what's driving our improvement in organic growth. I'd say it's broad-based, and it's coming essentially from improvement in our operations in residential and termite, and it's across multiple towns and cities. So really difficult to say where we're winning or where we're winning from. But most of it, I would say, is local movement as such. On the weather, look, the way it works in our North American business, the way the entire industry works in North America is you only get paid and you only recognize revenue once you have done the work. So if you get a weather event, as we saw for a few days in January and you can't get your colleagues out on the road to do their routines. If you're not visiting that customer, then you're not billing that customer and that revenue doesn't happen. But that doesn't mean that revenue has gone. What that means is you work like crazy in the month of February to catch up the visits that you missed in the month of January. And clearly, that's what we will have been doing in February to try and catch up that work as much as possible. February weather, we thought was going to be a bit wobbly as well. At one point, there was a couple of snow days. But in actual fact, the weather in Feb turned out fine in the end. So we draw attention to it simply because it happened. It was material. It wasn't just one day. It was a few days down the Eastern Seaboard. But we will be working very hard to catch it up through February and into March. So we're not flagging a major issue, but clearly some softness in the month of January. Operator: The next question comes from Nicole Manion with UBS. Nicole Manion: One on the price and volume split in North America piece. There are a few mentions in the release about the robust pricing environment. I think that's actually sort of fairly consistent with what you said earlier in the year. But is there anything to call out here in terms of the pricing piece still accelerating or just holding at a similar level? And then secondly, sorry if I've missed this, I think you can sort of back it out from the numbers on branches that you have given in the release and the presentation. But could you sort of just confirm the total sort of branch base number as of the end of 2025 in North America? Paul Edgecliffe-Johnson: Thanks, Nicole. So in terms of price and volume, we're still very encouraged by what we're seeing on price. We do manage to get inflation plus, which we've seen through the year. And as you've seen, the organic growth has been ticking up quarter by quarter. So we are continuing at a similar level on price and clearly doing better on volume. We're still losing a bit of volume if you look at that number that we printed in the fourth quarter, but it's improving sequentially. And in terms of the number of branches, well, we said that by the end of this year, we expect to get up to approximately 800, and that's going to include 220 of these sort of small local branches or satellite branches, which we're at 150 on. So the 70 delta is the change from 730-ish at the end of this year to 800-ish at the end of 2026. Nicole Manion: Got it. All the best, Andy. Andrew Ransom: Appreciate it. Cheers, Nicole. Thanks. Operator: And the next question comes from Jane Sparrow with JPMorgan. Jane Sparrow: Two questions, please. Just on the regional brands and the Terminix brand, it sounds like the improvement in lead generation is largely being driven by the reinvigorated regional brands. Can you perhaps comment on the main Terminix brand and how that is performing? And then secondly, of those branches where there's a high proportion of people sticking on the old plan, is there any noticeable divergence on KPIs on your new one pay scorecard versus the other branches where more people are on the new plan, please? Andrew Ransom: Jane. Yes. Look, the Terminix brand is doing well, but you're correct in your deduction that the regional brands must have done really well. They did do really well. Super pleased with the performance of quite a number of the 9 regional brands. And as I said in an earlier answer, a lot of that has come through really focusing on organic search performance, and that's what's given us the encouragement in part to go with the 30 brands. So that's excellent. But the big, big battleship brand, Terminix, is going well and has performed very nicely. We haven't seen as big percentage increases, but it is performing nicely. And there, we do things like market testing for brand recognition, unaided brand recognition. Can you name a pest control company in the United States? Can you name a pest control company that you would consider using if you had a pest control problem. And we've had a recent survey on that, and the data has come out very, very strong. It's a powerhouse brand, and it's got fantastic brand recognition. And so it's performing well, but we do support Terminix significantly with paid search as well as organic search. And over time, what we'll be looking to do, particularly as we get more into the AI generative search, we'll be looking to move further down the organic search for Terminix as well. So it's performing well, but a big part of the rebound in lead performance has come from those regional brands and the reason why we're supporting the 30 going forward. In the second question, that's way too early to say what that looks like in terms of branches with a high proportion of people on old pay plan, which is largely heritage Terminix brands and then performance of branches with people on newer pay plans. So it's too early to call that. What we have been doing, and Paul has made this observation a few times, we've been much more into the data than we've been before. We've got a Head of Data and Data Science. We've got a small data science team, actually not so small these days, analyzing data from branches and really trying to work out, well, where we've got fantastic performing branches versus poor performing branches, what are the factors that are contributing? Is it tenure? Is it pay? Is it geography? Is it commercial versus residential, all of those factors. And we're getting more insight into that, not ready to call it on that, but pay plan might be one element out of about a dozen, but there is no binary read across between old pay plan equals great performance, new pay plan doesn't. That doesn't exist. But the point of the question, what drives different branch level performances and what are those factors, that's really why we're super excited about the 360 single pane of glass. Mike and the team are going to have much better data over the next few years than we've certainly had for the last 2 or 3 years. But no correlation at this point to call out, Jane. Jane Sparrow: Okay. All the best for the future apart from the obvious foot front. Andrew Ransom: Yes. Well, I would say the same to you, Jane. I would say I hope Spurs don't get relegated, but I would be lying if I said that. So good luck, Jane. Operator: [Operator Instructions] And our next question comes from Allen Wells with Jefferies. Allen Wells: Most have been answered, but just two quick ones. Firstly, Paul, just on the $100 million cost saving plan. Obviously, we've had lots of moving parts over the last 12 to 18 months with the change in brand strategy, less closures, more satellites, changing brands, changing remunerations. As we sit here today, could you maybe take a step back and simplify down how we should think about the maiden building blocks of the $100 million and what will be delivered in 2026? That's the first question. And then maybe just secondly, just following up on the remuneration plan and the allowing of grandfathering, et cetera. Obviously, we're a couple of years into this process now. And what drove the need to change that at this stage? What have you seen? What were staff telling you? And why now? That would be my question. Paul Edgecliffe-Johnson: Thanks, Allen. So in terms of the cost plan, I'll happily take a step back and many of you will remember that we had our integration cost savings back in the day. That got a little bit difficult to track through. So when I came in, I said, take the 2024 cost base, there will still be inflation on that cost base, but we will take $100 million of that. And that's what we are tracking well against. So I've said that we've taken $25 million out of the cost base in 2025. We came sort of at that from a cold start. So most of the savings were manifested in the second half. So if you think about that, that means that on a run rate, it's more than double that, that we're achieving, we are investing back into the business. So whether it's the new capabilities we've talked about in pricing, in data, in many other areas of the business or the additional resources we're making available for marketing and for our additional branch network, that's all being funded. So it's a fuel for growth strategy, and we'll continue to do that. So we will tackle back-office costs, we'll tackle inefficiencies, we'll tackle spans and layers, all the normal opportunities that you would see in a very large-scale business to take cost out. There is significant opportunity. What we are doing is going after the right cost at the right time. Some we will leave a little because they might be a bit more disruptive to the business. So the focus at the moment has been on that back office cost, cost of finance of accounts payable, et cetera, et cetera, removing roles, offshoring roles, et cetera. But still lots to do, and we will get that $100 million out by the time we're reporting the 2027 results and to get the margin up to 20% plus. And look, in terms of the pay plans, the whole plan that we're coming up with in terms of how we simplify the go-forward integration is not to cause disruption. It's to settle people down. If there was some anxiety in technicians that perhaps they wouldn't like the new plan as much as their current plan, fine. They can just grandfather on to their current plan. We want people to get focused on doing their jobs well. We are an employer of choice in the industry, and that's the most important thing to make people go out and delight customers every day. And if there's something getting in the way of that, then we've removed that. So yes, that's our thinking. Operator: And the next question comes from James Beard with Deutsche Bank. James Beard: I've got two, please. Firstly, you noted the improvement in residential leads in the second half. I was wondering if you could talk through the time that you expect those to convert over and how that improvement in resi leads is splits between contract and jobbing. And then secondly, going back on to pay plans, again, you said no change to residential sales staff pay plans in '26. When should we expect any sort of change to residential sales staff pay plans, please? Andrew Ransom: Thanks, James. '27 is the answer to the second question. Sorry, I should have said that. In terms of the time it takes from lead into sale into install is a really good question. I mean, that's a proper pest control question, James, that's really down in the weeds, but it's really, really important. Because if it's residential, if you've got a mouse running around your kitchen, when do you want that solved? You want it solved immediately. So the speed from which we can take a residential lead, and the same is true of termite. You've just discovered termites munching away in your basement or your cellar, you want that sorted quickly. And what we've seen is why I mentioned the new KPIs, operational KPIs in terms of how quickly are we getting from the lead to the sale to the install and it only becomes revenue when you do the install. We've got to get faster and we've got to get more consistent at that. So we are now getting a good proportion of the leads converted, sold and installed within 24 to 48 hours. And that's the sort of time window we are giving ourselves because if customers are having to wait 3 days for their mouse running around the kitchen to be dealt with or for the worry of the fact that termites are in their house, for many customers, that's too long. On the commercial side, time is much less critical. Commercial customers, that's fine. You can come next week, you can come next month unless they've got an emergency. So yes, look, it's a really, really key part of the business. And if we look through 2025, what we saw, particularly in the second half was a -- if you go at the top of the funnel and come down, really good improvements in the leads coming into the business. So MQLs, which we track on a daily basis. We look forward to that. At 4:00 every afternoon, we get a daily report on MQLs. Really good progress on SQLs. So what percentage of MQLs turn into sales-qualified leads. So that's gone really, really well. Really good progress on sales. So the marketing leads are good leads. They're turning into sales leads. The sales colleagues are selling and then it gets less good in terms of how many of those sales actually get converted into revenue. So that's the critical thing that the team are now working on is the next challenge as they work from the top of the funnel and they're working through down into the middle and into the bottom of the funnel. So that's why these KPIs of what percentage of sales are getting turned into activity with the customer is super critical. So good, good progress, and I think that's where Mike will have the team focused this year is improving the conversion of actual sales into -- turning into revenue. In terms of the split between contract and jobs, I have explained many, many times, we're a portfolio business, portfolio, meaning a book of contract revenues, roughly 75% of the U.S. For group level, we're more about 80-20. But at North America, U.S. pest, it's 75% contract portfolio, 25% jobs. Really good performance on jobs, over 5% organic growth in jobs in the fourth quarter and improving performance on contract portfolio. But it's that contract portfolio that we've got to get into consistent, healthy positive quarter-on-quarter improvement. We've seen some of that now, but we've got to build on that. It's only when we get that and back to the question we had a while ago about price versus volume. We've got to get that volume growth consistently back into the portfolio. It feels like it's coming. It feels like it's building, but that's where we need to push on in 2026 and into 2027. Only when we get that plus the jobs, will we get the business back into industry levels of growth and beyond. But I'm really confident the team are all over this. But good performance on jobs and an improving performance on contracts as well. James Beard: And all the best in the future, Andy. Andrew Ransom: Appreciate it. Cheers. Thank you. Operator: [Operator Instructions] And our next question comes from James Rose with Barclays. James Rosenthal: I've got a few on commercial, please. In the release, this has been flagged as a particular growth area. I wonder can you expand on your growth plans there? Secondly, is it right that commercial branches will be running on new systems, so slightly different ones to resi and termite branches? And then finally, how progressed are you in bringing some of the innovations and technology you have in the international and European business into the U.S. And what's the opportunity there? Andrew Ransom: Thanks, James. Yes, look, good question. Rentokil is the undisputed global leader in commercial pest control. The Terminix acquisition brought with it a big business in residential and termite. But Rentokil, which operates in, what, 88, 89 countries is globally renowned for its commercial pest control business. So we should be punching above our weight in commercial in the United States. And we're not yet where we need to be in commercial. I think in part because we've had so much focus on getting the resi business right and getting the termite business right. We've recently taken the decision to give independent leadership of the commercial business to one person. We've got an individual who probably knows more about commercial pest control than just about anyone on the planet. He's an export from the United Kingdom. So we've given it dedicated leadership. In terms of the plan for the business, improving customer retention has to be at the first part of that plan. We still don't have retention where it should be. Customer retention in commercial should be very high typically. It needs to be higher. It is going to be -- the commercial business will all be on PestPac, which is the core system that Rentokil has been using for 3 or 4 years now in the United States. So there won't be any great surprises or drama there. So that should be relatively straightforward. And you're absolutely right to raise the question of innovation. I was chatting to Mike the other day, and he's been introduced to some of the really cool innovations that we've got in pest control and commercial pest control, in particular. And we've got some really interesting ones coming in the pipeline over the next year or 2. But we have manifestly been weakest at deployment of commercial pest control innovation, in particular, our connected solutions in the United States. And we're going to fix that. That needs to be a key priority for 2026. We need to see the U.S. really starting to adopt and drive innovation. That's why the individual that's in charge of the business has been chosen in part because he's got great experience with that innovation. So look, I think it's an area we should be punching above our weight given our global position. The systems are relatively straightforward in the innovation agenda. It just needs execution now. We've got the products. We've got the services. We've got the technology. We just have to execute. And it's easy for me to say, particularly as I'm about to walk out the door and say, over to you, Mike. It is easy to say, but that's what we do around the world. So I'm confident we will do that in the United States. Super. Thank you very much, James. I'm looking at Heather across the table here. Are we done with the questions? No more questions. Unbelievable. Thank you all very much. I can't believe that is it. As I said earlier, that was my 50th set of results, and I think quite a good one to sign off on. It has been an immense privilege to be CEO of this company for the last few years. We've gone from a reasonably unstructured conglomerate to a pretty focused world #1 in our chosen industries, which is a pretty cool thing, I feel. And it's been, as I say, a great privilege to be here, but the success we've made in the last decade or so is absolutely down to the people in the organization. I've always said if we get the colleague strategy right in Rentokil Initial, everything else follows. And I think we have got a wonderful culture in this company. So I do want to pay tribute to the 60-odd thousand colleagues and all the ones that went before them in creating the brilliant company that it is. And believe it or not, I do want to thank you a lot. It's been great dealing with you for such a long time, doing my best to answer your questions. Will I miss it? I think I probably will a little bit, but I'll get over it. So thank you all for your interest in the company. It's been great getting to know many of you. And for the next few weeks, I really look forward to handing over to Mike. We're having a great transition. He's having a lot of fun getting to know all the people around the business, and I'm sure he's going to be a great success. And personally, I think the company is set fair for long-term value creation, which is, at the end of the day, what it's all about. So thank you all for your support of the company, your questions and in many cases, your friendship as well. So thank you all very much indeed.
Dame Carolyn McCall: Good morning, everyone, and welcome to ITV's 2025 Full Year Results. As always, I'm here with Chris Kennedy, our CFO and COO. I'm going to start this morning with a brief summary of the 2025 highlights and then Chris will talk you through our financial and operating performance in a bit more detail. ITV delivered a good performance in 2025 outperforming market expectations despite the challenging market backdrop. We have transformed ITV and are demonstrably a much leaner and more agile business with a strong digital platform. We have capitalized on numerous growth opportunities as a result and are generating strong levels of cash. We've created 2 attractive and resilient businesses in ITV Studios and Media & Entertainment. We have successfully changed the shape of ITV and achieved a key strategic target. 2/3 of our total revenue now comes from Studios and M&E digital and that really demonstrates the scale of ITV's transformation. Before discussing our results, I wanted to mention the leak in November about potential transaction. As you know, we confirmed that we were in preliminary discussions with Sky regarding the possible sale of our M&E business. We are actively engaged with Sky and we will provide an update to you when we can. The effectiveness of our strategy to diversify ITV's revenue streams is clear in our results with the growth in ITV Studios and our digital M&E business combined with our disciplined cost management largely offsetting a difficult linear advertising segment. In line with our dividend policy, the Board has proposed a final dividend of 3.3p giving an unchanged full year dividend of 5p, a total payment of around GBP 190 million. I'll now hand over to Chris to go through the numbers in more detail. Chris Kennedy: Thank you, Carolyn. Good morning, everyone. ITV Studios continues to demonstrate strong momentum with total revenue climbing 5% to GBP 2.13 billion. This performance highlights our ability to consistently outperform the broader market. Notably, external revenue rose by 10% reflecting our successful move toward global streaming partners and the rapid scaling of our digital distribution via Zoo 55. The U.S. unscripted business had a good year with a strong slate of deliveries. Love Island U.S. was the most watched streaming TV original season of 2025 in America, greatly increasing the value of the format. Overall performance in the U.S. was down year-on-year due to the phasing of deliveries and some short-term market softness. We're already seeing good momentum in 2026 and are confident that this year will be much stronger. Our U.K. and international arms saw 14% revenue growth driven by high demand from both streamers and broadcasters. Adjusted EBITA for Studios was GBP 297 million and EBITA margin was 13.9%. The year-on-year change in the margin reflects a lower proportion of catalog sales in our revenue mix as we previously guided. We remain highly efficient. We delivered GBP 31 million in cost savings this year and continue to leverage our world-class talent and unique IP to drive recurring value. Turning to Media & Entertainment. The highlight is the continued evolution of our digital business. Digital advertising revenue grew 12% to GBP 540 million and total digital revenues were up 10% to GBP 614 million. This strong trajectory is a testament to the success of ITVX, Planet V and our data-driven ad products. Total advertising revenue fell 5%, better than guidance with our digital growth providing an important and profitable hedge against double-digit linear advertising decline. We've been incredibly disciplined on costs within M&E. Content costs were down 5% reflecting an ever more optimized investment strategy. Noncontent costs fell by 6% with permanent cost savings of GBP 32 million and temporary savings of GBP 15 million. This ensured that our M&E adjusted EBITA margin remained steady at 11.8% despite the decline in advertising revenue. The balance sheet remains robust. We ended the year with net debt of GBP 566 million and a leverage ratio of 1x. Our cash generation remains good with a profit to cash conversion of 65% as expected and over the 3 years from 2023 to 2025, cash conversion averaged around 80%, in line with our target. This provides us with the flexibility to reinvest in our growth drivers and provide meaningful cash returns to shareholders. Our capital allocation is clear. We reinvest for profitable growth, maintain an investment-grade balance sheet and return surplus cash to shareholders. We've maintained an ordinary dividend of 5p and continue to keep our capital structure under review. A core pillar of our strategy is reshaping our cost base to better reflect viewer dynamics and enhance productivity and profitability. In 2025, we accelerated our efficiency efforts delivering GBP 63 million in permanent noncontent savings across the business. This brings our cumulative permanent savings since 2019 to GBP 253 million. Looking forward to 2026 taking the year as a whole, Studios will show good revenue growth with margin at the lower end of our target range. As is usual, revenue, profit and margin will be weighted to the second half with momentum continuing into 2027. In M&E, digital revenue is predicted to continue its strong trajectory in 2026. We anticipate Q1 TAR to be down around 2%, which is better than we expected. And looking forward to the rest of the year, we have a strong schedule of sports being the only commercial broadcaster of the expanded FIFA Men's Football World Cup and the new Men's Rugby Nations Championship, both of which will boost ad revenue from Q2 onwards. Finally, you can find detailed planning assumptions in the appendices in the slide deck. Thank you. Carolyn, back to you. Dame Carolyn McCall: Thank you, Chris. As you know, our strategic vision is to be a leader in U.K. advertiser-funded streaming and a diversified and expanding global force in content. Our strategy is familiar to you. Just to summarize it in 3 key pillars: expanding Studios, supercharging streaming and optimizing broadcast. So let's turn first to expanding Studios. ITV Studios has built a unique and leading position in the global content market. It has 3 core competitive advantages and value drivers. Its world-class talent who are producing some of the most successful shows around the world; second, its global scale and diversification are creating a strong platform for further growth; and three, its unique and valuable IP library, which combined with Zoo 55, its digital studio, maximizes the monetization of our IP globally and this is underpinned by a culture of cost discipline. All of this ensures the business is well positioned to continue to grow ahead of the market and drive attractive margins. So let's take these value drivers in turn. First, ITV Studios culture. It's entrepreneurial and offers creative autonomy and it's backed by global distribution and resource and that attracts and retains industry-leading talent. This is a position we continue to enhance through strategic acquisitions, talent deals and partnerships and that delivers both creative scale and revenue synergies. Most recently in 2025, we acquired Moonage Pictures in the U.K. They're the producers of The Gentleman for Netflix and also Plano a Plano in Spain, the producers of Suspicious Minds for Disney+. So the success of this strategy is really clear I think from the creative output and other recently acquired labels also demonstrate the success of this strategy. So Rivals by Happy Prince for Disney+ is returning for a Season 2. Skyscraper Live for Netflix by Plimsoll, which saw Alex Honnold's free solo quite terrifying ascent of one of the world's largest tallest skyscrapers in Taipei. Our track record on retention is really, really strong. In the U.K. where we do the majority of talent deals, about 75% of our label MDs and creative leaders stay with the business post earn-out. ITV Studios also has a formidable portfolio of world-leading brands and formats through our established scripted and unscripted labels. Love Island is now in 28 markets. It continues to expand with successful spinoffs such as Love Island Games and Beyond the Villa. Squid Game: The Challenge was Netflix's biggest reality competition and has been recommissioned for a third series. ITV Studios is constantly refreshing its portfolio with new formats like Nobody s Fool and Celebrity Sabotage, both of which launched on ITV this year and have already started to sell really well internationally. They're original shows. ITV Studios also has a strong slate of high quality returnable scripted brands that demonstrate incredible longevity. Line of Duty is an example, Gomorrah is another example and there are newer brands like Ludwig and Vigil, which have all been recommissioned. So the global content market remains large and attractive. It's expected to grow about 1.5% to 2% this year. ITV's resilience though comes from having a diversified portfolio by geography with 59% of revenue generated internationally, by genre with 32% of revenue from the scripted and by customer with 28% of revenue from the growing streamers where we have a proven track record of success now. We have deep strategic relationships with every major global content buyer, which combined with a very strong pipeline of new and returning hits, ensures that we capture further share of the key growth areas, which are scripted and unscripted commissions for streamers and IP distribution. Now a significant driver of our long-term value is our unique IP library, which now exceeds 100,000 hours of content. ITV Studios adds thousands of hours of content every single year and licenses this to over 350 customers globally. That scale allows ITV Studios to maximize the monetization of its IP and we already generate GBP 400 million of high margin revenue through our global partnerships business. Most recently this is through Zoo 55, a key area of incremental growth. Zoo 55 distributes ITV Studios IP across 3 areas. Social video where we had over 24 billion views across 200-plus social channels globally last year; FAST enabled platforms where we have partnerships with multiple partners such as Samsung, Tubi, Xumo and viewing here has been up 28% year-on-year; and the third is games and gaming where we've got 40 games live at the moment across 19 of our brands and that is going to continue to expand. And some of the key brands we distribute include Hell's Kitchen, River Monsters, the Graham Norton Show, Come Dine With Me, Love Island and there are hundreds more. So as you'd expect, we are leveraging AI to deliver content more effectively and efficiently. For example using it for subtitling, content selection and curation. Overall in 2025, Zoo 55 generated over 47 billion global views, which was up over 30% year-on-year and that drives double-digit revenue growth. ITV Studios is on track to achieve GBP 120 million of high-margin digital revenue from Zoo 55 by the end of 2027. So the combination -- this particular combination of talent, scale and quality IP ensures that ITV Studios remains a very attractive and resilient business and it delivers high quality earnings. As a creator, owner, producer and distributor of IP; ITV Studios captures the full value of its world-class content from initial idea to global delivery. Around 60% of its revenues are recurring. This is coupled with Studios diversified revenue streams and low-risk production model, remember, where we only produce programs once they have actually been commissioned. Together, this ensures ITV Studios drives growth ahead of the market at attractive margins and delivers strong cash flow. I'm now going to turn to Media & Entertainment, which includes our pillars of Supercharge Streaming and Optimise Broadcast. We have completely transformed M&E into a strong and resilient streamer and broadcaster with a very disciplined cost base, well positioned to deliver profitable digital revenue growth and strong cash generation. It leverages its compelling position and value drivers, which include wide reach in the U.K., leading platforms in ITVX and Planet V, an extensive first-party data set and deep and established relationships with advertisers and commercial partners. We are really pleased with the success of ITVX and Planet V. Since its launch in 2022, ITVX has built incredible momentum delivering 25% CAGR in total streaming hours and 16% CAGR in digital advertising revenues. Planet V, our first-class addressable advertising platform, allows brands to target audiences by leveraging an extensive first-party data set of over 40 million registered users. Now that can be augmented of course with third-party data from our partners like Tesco and Mastercard for really granular targeting. It is a powerful engine for growth bringing in over 1,500 new advertisers to ITV since its launch. Digital advertising now represents 31% of our total advertising revenues. With this momentum, digital advertising revenue is outperforming our original plan when we launched ITVX, which is fantastic news. And given the strong performance of ad-funded streaming and our focus on profitable growth, we have, as you know, pivoted our digital strategy by doubling down on AVOD and deprioritizing subscription video on demand. Therefore, it's going to take slightly longer than initially anticipated to reach the overall GBP 750 million digital revenue target. Importantly, this has saved significant incremental content and marketing spend. As a result, as this slide shows, we reached breakeven 2 years earlier than planned recouping our entire investment in ITVX 4 years earlier than projected. In doing so, we've created a profitable ITVX platform with attractive growth prospects. So building on the foundations of our strategic investments in ITVX and Planet V, we are now competing effectively for a greater share of the GBP 9.5 billion online video advertising segment and attracting new ITV advertisers. We're expanding our digital reach through strategic partnerships, the SME strategy and through commercial innovations. Our YouTube partnership for example is successfully extending reach with over 40% of ITV's content viewed on the platform coming from under 35s. Our YouTube sales team continues to grow from partnering with 8 brands at launch to 800 today. We've recently agreed a major deal with Banijay to sell all their advertising around their YouTube content. We've also added new partnerships with TikTok and expanded our relationship with Disney+ to include their content on ITV1's peak schedule. With our SME strategy, we're removing barriers to entry for TV advertising, simplifying the buying process and leveraging AI to produce cost-effective advertising. We're making good progress towards the launch of our self-serve advertising platform in collaboration with Sky, Channel 4 and Comcast's Universal Ads, which we will be testing later this year. And in a first of its kind in the U.K., we launched picture-in-picture adds, which you might have seen in the 6 Nations. This drives incremental reach and value with sensitivity to the viewer experience. We're also increasing our inventory and can now do targeted advertising on our linear channels on the Sky and Freely platforms. And if that weren't enough, in addition, we're leveraging our brand, IP and first-party data to drive profitable non-advertising digital revenue. We've just launched the Birthday Draw. You might have heard the ads for that all across Global Radio and it's a partnership with Global for GBP 1 million cash price. We're also evolving ITV Win into a premium destination, bringing scaled competitions to audiences with new games. So it's early days for both of those, but we expect these 2 initiatives to drive double-digit growth in interactive revenues. Now finally, to our third pillar, which is Optimise Broadcast. We continue to demonstrate our strength and resilience in delivering mass audiences. In 2025, ITV delivered 91% of the Top 1,000 commercial audiences. To reinforce this value, we're collaborating with Channel 4 and Sky on Lantern, an outcomes program to clearly measure the effectiveness of TV advertising. We have a fantastic slate for the year focusing on drama, entertainment, reality and sport and we optimize our spend and deliver the most valuable audiences for advertisers. We're significantly increasing live sports. We are the only commercial broadcaster with the rights to the Men's Football World Cup, as Chris said, which includes 19 more matches on ITV, a 60% increase. In addition, we have the rights to all England Men's rugby games this year. In summary, we're really confident we will continue to create value for shareholders. With the profitable growth of ITV Studios and the M&E digital business underpinned by strong cash generation, we will continue to deliver attractive returns to shareholders. None of this of course would be possible without ITV's unique blend of creativity and commercialism, which is fueled by the talent and commitment of our people. And I just want to take a minute to say how proud we all are of what we do, the work that's done in ITV, but especially how proud we are of our colleagues and we're incredibly grateful to them for their hard work and achievements. Thank you. We're now ready to take your questions. Operator: [Operator Instructions] The first question today comes from Annick Maas of Bernstein. Annick Maas: The first one is on the advertising market. I mean your Q4 was better than anticipated. Your guide for Q1 is better. Can you tell us a bit more what the sentiment is in the ad market? Is this coming from across the board? Is it just certain campaigns or advertisers? That's the first one. The second one is on programming costs, which I guess also the guide is better than what was expected despite owning actually the World Cup rights. So is there something in there that is AI cost savings or what is really explaining the program cost savings? Just thinking also ahead how we should therefore think about program costs going forward? And same question for Studios. You're guiding to the bottom end of your margin guide because of the revenue mix. I thought production would probably be within your whole industry, the 1 segment where you can put through AI savings the quickest. So is that so or if not, why not? And then maybe just 1 last one, which is on studio growth more generally. If you look to the midterm, I guess some of your competitors have been saying that the sort of growth level that you've seen for the last 5 years or so in the production world are slightly coming down. Is this something you are seeing or is it that you are taking share of the others and therefore, you can consistently grow better? Dame Carolyn McCall: Okay. On the ad market, I think Q4 was largely down as a result of a pause by advertisers while they waited to see what the budget was going to be and so it was down year-on-year and we had expected it not to be like that. So that was the story behind Q4. Q1 is definitely trading better than we thought because the run rate from Q4 feeds into Q1 if that makes sense. Thus, February was really improved on January and March has improved further not just on February, but on March. So you're right, it's definitely better. I think that the fact that we have the World Cup in Q2 and Q3 means that we're having very, very active conversations with many, many advertisers. So I mean just to give you an example of that. We have more inventory because we've got 19 more matches, that's 60% more than we had at the World Cup in Qatar. We're talking to about 100 advertisers at the moment and that is spanning 20 different categories. So we're very actively engaged with a huge number really of advertisers. And where we would say the trend really was, the Q4 was down on virtually all categories except 1 or 2. Q1, you'd have seen supermarkets doing well. You'd have seen travel was actually doing very well, let's wait and see on that one. But there's no discernible trend on categories in Q4 and Q1 whereas I think now with Q2 and Q3, the range of advertisers we're talking to would kind of indicate that all categories should be quite active in those quarters. So that is very good news. And I think the other really interesting thing is we're getting a lot more interest in the World Cup from very big global brands and they're looking really to create high quality content and very bespoke creative advertising around kind of high-end content. So using players, using teams, et cetera. That's all brilliant for TV because it's the thing TV does best. You can't really do that in any other medium. So that's I think really good and we've agreed to sponsor and that will be announced. So I think the advertising market certainly, because the World Cup will lift it, should be a strong year for us. Your second question was costs I think. Chris Kennedy: I think specifically content costs. So you're right. Last year we didn't have one of the big mens events and we've obviously got the FIFA World Cup, as Carolyn said, and we've also got the new Rugby Nations Championship as well, which runs Q3 and then into Q4. So really a strong slate of sport all the way through from Q2 to Q4 and we have managed that within the overall envelope of content and that happens in several ways. There's some self-help in there. We did a reorganization of daytime soaps, which completed at the end of the year. The new schedule started 1st of January. That saved us some money on those shows while maintaining exactly the viewer experience as we had before. In fact with the power hour in the soaps, that was viewer led. People were saying we don't want to watch an hour of the same soap, we'd like 2 half hour episodes and that's worked really, really successfully. So we've saved some money there and that's enabled us to reinvest elsewhere in the schedule as well as affording the World Cup. And longer term, the team have just got -- they get better and better and better every year using the really granular viewer data that we've got through ITVX now to inform windowing decisions, acquisition decisions, commissions, we can see how a show grows and also making the marketing a lot more effective as well. So all of that means that -- I think you asked about where do we think that content cost will go longer term. We're really pleased that we've held it at plus or minus the same level ever since the launch of ITVX. Dame Carolyn McCall: Yes, because we've absorbed a lot of inflation in that. Chris Kennedy: Yes, exactly. And so that's what we're looking to do going forward whilst continuing to grow that viewing on ITVX. Dame Carolyn McCall: And then on your Studios question, I'm just going to -- we'll take it in 3 parts because you asked a margin question, you asked AI question, you asked a growth question. Let me kick off on the AI question because I think you're right. I think AI obviously lends itself very well to Studios. And I think the first thing to say is our fundamental belief is that we use AI on creativity only to enhance and augment it, but we then use it in a very, very strategic way where we integrate it in everything we do end-to-end. So it's a very integrated way of working in Studios. And we've had quite a lot of experience already now because we've been doing this probably for the last 18 months to 2 years where we started with having what we call the Skunk Works and now actually it's kind of embedded in all the labels. So whether that is tools for R&D, research and development or preproduction or postproduction or editing or production planning and indeed marketing, we're kind of using it for the whole end-to-end process in Studios. And what we try and do there is that of course there's efficiency gains, we use that to offset inflation and then try and bank some of that. And then we use productivity gains to get people to do more interesting things for instance in development to try and get more shows in. So the more resource we free up, we actually reuse that in a higher value kind of function if that makes sense. So that's what we're doing on AI. Chris Kennedy: And then Studios, you talked about the margin guidance and we've guided for bottom end. Our Studios business has industry-leading margins. We are the best in the business and the team have to work really hard at that. Last year they made GBP 31 million of cost savings. That came from some quite difficult decisions around label reorganizations in some geographies. At the same time, we're refilling the pipe. So we've made 4 bolt-on acquisitions and those take some time to integrate the back office. So the whole strategy is around maintaining the margin within that 13% to 15% range. It will go up and down depending on the mix of business we do in the year and where we are in the cycle, but very pleased with the level they're at. And the whole point about Studios is we want profitable growth and that means maintain the margins within that range. Dame Carolyn McCall: And in terms of growth, we see the market growing. So it's a very big market, it's GBP 230 billion market. It's growing at about 1.5% to 2.5% according to Ampere. And our goal really is to be ahead of market growth and to take share. So that continues. That continues to be part of our strategy. Chris Kennedy: And you'll have seen that we've done that consistently over the last 8 years, consistent growth. And from a compound average basis over the course of that period, we've outgrown the market and we'll continue to take share. Operator: Our last question today comes from Julien Roch of Barclays. Julien Roch: My first question is on the World Cup. Based on previous additions, can you give us an indication of the impact either millions of pounds or percentage? Second question is impact of AI on a cost basis, I know it's early days. But Stroer who reported this morning said that within 5 years they thought they could save EUR 50 million thanks to AI, which is about 3.5% of their operating cost. So any indication there? And then the last question is on your linear inventory, where are you in terms of that inventory being sold digitally or programmatically so it can be included in the kind of new AI platform that all the agencies are developing? Chris Kennedy: Okay. So on the World Cup, we don't guide for the uplift for individual tournaments. But you'll have seen performance on '25 versus '24 where we had the FIFA Men's World Cup. You can see the categories that outperformed when we have those. So as Carolyn said, we're really looking forward to the rest of the year with sport. It should give us an uplift and it should bring the whole advertising market in the U.K. up with it. But we don't give the exact tournament by tournament guide on that. Dame Carolyn McCall: No. I mean just as a little fact on sports. The reason we really focused on live sport is in '25 when there wasn't a Euros or a World Cup, our reach of sport on ITV1 was 46.2 million people, which is fantastic and we would expect to exceed that in terms of our reach obviously this year because of the rugby and the football. We've got all the racing. It's an unprecedented year for sport for us. Chris Kennedy: And then, Julien, on the AI question, could you repeat it? I didn't quite pick up what the question was there. Julien Roch: So everybody is saying that AI is going to transform our lives. Every company is going to generate more revenue and they're also going to save a lot of cost. And Stroer who reported this morning said that in their view, AI would allow them to save EUR 50 million within 5 years, which is 3.5% of their operating cost. So I was wondering whether you already have sized the potential efficiency gain from all those wonderful AI things we're all going to do all the time. Chris Kennedy: The way we look at AI is exactly how you described it, where can we use it to augment creativity? Where can we use it to increase revenue and create new revenue streams? And on the flip side, how can we use it to create efficiency so that same number of people can do more with the AI tools? On the efficiency side, it absolutely fits into our long-term cost saving program. We've demonstrated that we are relentless about the efficiency within the organization. We've taken out a huge amount of cost over the last 6 years. We'll continue to do that. It's a multiyear program and within that, AI will obviously help with the next leg of that program. Dame Carolyn McCall: Because we integrate it. We build it into the continuous cost improvement program. So it's something that we task ourselves with, but it's not always about -- there's a net cost saving, but then there's also an offset against inflation. There's an offset against other costs because cost of production is going up. So we just look at it in a much more integrated way than that. And I missed the company actually, Julien. Did you hear who the company was? No. Who was saying that they would do the EUR 50 million, it's just interesting for us. Julien Roch: Stroer, the German outdoor company. Dame Carolyn McCall: I mean there will be significant savings. But in Studios in particular, we're very focused on how we can release resource to do more stuff that will generate more hits. I mean that's the kind of philosophy in Studios, which is why we will gain efficiencies and we will net off inflation, but we also want to reinvest in, say, making sure development is stronger. Chris Kennedy: Yes. I mean I think it really is -- I hate to use the phrase, but it really is in the DNA of ITV, this everyday efficiency. If you look at M&E, noncontent costs were down 5% last year and that is a lot of hard work by a lot of people across a whole range of initiatives. There aren't big set piece efficiency programs. It's baked into people's every day. Dame Carolyn McCall: I think the third question was linear inventory. Chris Kennedy: Yes. So last year we finished the year, 30% of the linear inventory could be -- was capable of having a targeted ad within it. By the end of '26, we're looking to bring that up to 50%. Obviously we will not be using anywhere near 50% for the targeted industry -- targeted advertising because we can now make the choice both for advertisers and for ITV about what is the best use of that inventory? Is it better to use it for a targeted ad or is it better in a mass reach campaign. One of the reasons we've doubled down on sport is that those big live audiences are more valuable than ever. So we would not be doing a targeted ad in the World Cup because that is the only place an advertiser can get the huge audiences that we attract. So over the course of this coming year, you will see coming out of ITV commercial a few more ad products where they will be -- they've already developed them in conjunction with advertisers and they're releasing those to do that targeted advertising in the live streams. Julien Roch: My question was not about targeted advertising. It's more being able to buy linear advertising on a digital platform, right? Because all the agencies are developing those AI platforms that they're going to give to their clients where clients can buy across media at a click of a button. And so if TV is not on those platforms, some clients will be lazy and maybe deemphasize TV. So it's more on whether you can buy digitally the linear advertising. Chris Kennedy: Yes. Understood. And absolutely, the commercial teams are really engaged with the agencies both on the buy side in terms of buying linear inventory, but also doing the outcomes work, launching Lantern in conjunction with Sky and Channel 4 to give measurability. All of the work we're doing to demonstrate the value of TV because if those models are rational, TV should benefit because we have the highest ROI of any media. So absolutely, we're working with them. Dame Carolyn McCall: Is that what you meant, Julien? Julien Roch: Yes. But only working with agencies, you can have many reasons. You can do both at a click of a button on those platform alongside Hugo and Meta and not only ITVX or targeted, the whole inventory. Dame Carolyn McCall: So I suppose that goes to the distribution strategy and our distribution strategy is to be in as many places. I mean I think we've got something like 98% coverage now of all platforms with ITVX and then a bit lower than that for channels. But our strategy is to be in as many places as possible on the right commercial terms, which then allows us to benefit from their reach and our inventory. Operator: We have no further questions at this time. So I'd like to hand back to Carolyn for closing remarks. Dame Carolyn McCall: Just want to say thanks very much for joining us today. We know it's a very busy day out there so thanks for your time. Bye for now.