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Operator: Thank you for standing by, and welcome to the Sims Limited HY '26 Results Call. [Operator Instructions] Today's presentation has been lodged with the ASX, along with the results release. It may contain forward-looking statements, including statements about financial conditions, results of operations, earnings outlook and prospects for Sims Limited. These forward-looking statements are subject to assumptions and uncertainties. Actual results may differ materially from those experienced or implied by these forward-looking statements. Those risk factors can also be found on the company's website, www.simsltd.com. As a reminder, Sims Limited is domiciled in Australia and all references to currency are in Australian dollars, unless otherwise noted. I would now like to hand the call over to Stephen Mikkelsen, Group CEO and Managing Director of Sims Limited. Please go ahead. Stephen Mikkelsen: Thank you, and good morning from Sydney. Today, we are here to resume our half year results for FY '26. Presenting with me today is Warrick Ranson, our CFO. We are fortunate today to have all of our business unit leads here with me in Sydney. So we have John Glyde, our ANZ Managing Director; Rob Thompson, our President of North America Metals; and Ingrid Sinclair, our President for SLS. The presentation has been launched with the ASX, along with the results released. First up, I will provide an overview of the results and strategy, Warrick will then take us through the financial results. At the end, I will return to talk about the outlook, after which we will have Q&A. I will turn straight to Slide 5, which looks at our strategy and strategic priorities. By now, the left-hand part of this slide should look familiar as it has guided us for the last few years. I'm going to focus on some of our recent key strategic achievements. From a customer and supplier perspective, we have made great strides in increasing our unprocessed intake, particularly in NAM, and this is definitely driving increased margin when we process it into higher-value material. We have signed a couple of significant key supply agreements in ANZ with New Zealand Steel and Alter, and SLS is expanding into Ireland. Looking at operational efficiency. NAM has really improved its logistics infrastructure, particularly the ability to deliver domestically through rail, and this has allowed us to take advantage of the domestic shred premium. Work on Pinkenba continues at pace, including a fines plant. And rail infrastructure works at Otahuhu will allow us to effectively service the Glenbrook EAF. From an innovation agile perspective, we are transitioning to an outsourced global shared services model, which will improve our service offering, lower costs and improve our ability to integrate new operations as we grow. We've just about completed relocating the SLS senior management team to Irvine in California and are already seeing the benefits around innovative thinking and ideas from the increased collaboration. We've also added a new position to the senior team with a Chief Digital Officer. Given the strategic importance of deeper integration with hyperscalers, we've appointed a dedicated role to drive closer alignment with their operational workflows. The first 3 bullet points under invest responsibly are linked. Warrick and I will talk more about Tri-Coastal, the Houston land base, and the property strategy lead role in the coming slides. It is also worth noting that we have extended our debt facilities by 12 months as we position our balance sheet for further growth. Moving on to Slide 6. Firstly, safety on the left-hand side. Total recordable injury frequency rate for the first half has been maintained at best-in-class historical lows. And just as importantly, we are tracking well on our lead indicators. As a management team, we all continue to focus on making sure our employees can go home each day just as they came to work. On the right-hand side, you can see that we are progressing nicely across governance, systems, strategy and risk assessment in support of our climate commitments, including the integration of climate data into financial and operational systems to enhance transparency and decision-making. Moving on to Slide 7, and I'm conscious that Warrick is going to take us through the financial results in some detail. So I'm only going to highlight a few points from the consolidated result. Metal sales revenue was flat despite sales volumes being down 2%. This is all about the price and contribution of nonferrous, whether it be copper, aluminium or zorba. The market is very strong revenue is up nearly 70% and repurposed units are up close to 18%. SLS has had an incredibly strong first half driven by the demand for DDR4 memory. And we will talk about this in subsequent slides. A more subtle point to highlight is the flat metal trading margin percentage despite the significantly higher revenue from nonferrous, which has a high absolute margin, but lower margin percentage. This means that we have grown our ferrous trading margin percentage through disciplined buying of non-dealer material. I'm very happy with our cost control. And it is also pleasing to see the growth in return on invested capital. Returns have improved materially over the last 2 years, and we remain focused on closing the gap to our cost of capital. Slide 8 separates the main performance highlights between Metal and SLS. The only additional points I would comment on here is the 3.5 percentage point increase in unprocessed scrap in metal, driving higher shredder capacity utilization in metal, and the 7.7 percentage point increase in EBIT margin for SLS. Slides 9 and 10, look at the factors influencing our metal businesses. Let's look at Slide 9 first. The top 2 slides actually show how tariffs are providing protection for NAM and SAR in North America. You can see on the top left-hand side, the falloff in U.S. construction activity over the last year or so. All things being equal, this would have resulted in quite a depressed steel market in the U.S. But look at the right-hand top slide, and you can see the falloff in steel imports commencing with the introduction of Section 232 in 2018 and then continuing with the tariffs. U.S. steel manufacturers have benefited more from the fall in U.S. imports than they have suffered from falling construction spend. What these charts indicate for the scrap market is that domestic pricing has been supported by strong demand although softer construction activity continues to constrain intake volumes. The bottom chart explains ANZ's dilemma and depressed ferrous results. Quite simply, global ferrous scrap prices have fallen as Chinese exports have risen. Slide 10 shows why nonferrous is in many ways the hero of the metal results, and it is quite simple. The chart shows the price in Australian dollars that Sims actually realized for its sales of ferrous and nonferrous products. Ferrous has fallen from a bit under $570 to around $545. Nonferrous combined has risen from around $4,100 to nearly $5,000 on a blended basis. Focusing on NAM on Slide 11. These 4 charts capture the progress we have made at NAM and explain not only the turnaround of FY '25, but now the continued improvement in FY '26. Firstly, the top left chart shows the benefit of focusing on profitable tons. We have grown trading margin percentage by 5 percentage points over the last 2 years. This has been achieved by focusing on, amongst other things, unprocessed ferrous, which has increased by 12 percentage points over the same period, and this has increased shredder utilization by the same amount. Those shredder tonnes are producing more zorba, which like all nonferrous products has risen nicely in price. Finally, you can see that we are exporting less as we have grown our domestic channels to market. This is particularly so for shred, where domestic premiums to export have been growing and currently sit at $50 per tonne. As a point of interest, we sold around 85% of our shred domestically from the East Coast. This would have been around 10% just a few years ago. It is important to note we still maintain our export optionality if market dynamics change in the future. Slide 12 summarizes the Tri-Coastal acquisition we announced last week. As I said at the time of the announcement, over the last couple of years, we had materially turned the Houston business around, but we needed access to better options, both domestically and internationally to really drive performance. We had a suitable piece of land to achieve this at Mayo Shell but the capital cost to upgrade the port at Mayo Shell and the size of our existing ferrous business did not justify the CapEx. TCT gives us this deep-water access and therefore, optionality, but it also materially increases our presence in the market in excess of another 350,000 tonnes, significantly reduces our operating costs through the Enstructure service agreement contract, and it frees up the sale of all our land in Houston. We estimate in excess of USD 100 million, including Mayo Shell. From a numbers perspective, we have paid a bit less than 4x EBITDA post-synergies. The combined businesses and by that, I mean, our existing ferrous and nonferrous operations plus the TCT acquisition, are expected to have an annual EBITDA of USD 25 million and a return on invested capital of over 20%. Turning to Slide 13, SA Recycling. As the chart shows, SA Recycling has done a great job in ensuring resilience and its trading margin percentage. They have been pretty consistent at around 30% for the last 5 or 6 years. In the last 2 years, this has been achieved by increased revenue from nonferrous, including zorba, and this has combated the more depressed ferrous market. SA Recycling has strategically developed a really strong hub and spoke model in regional markets. It now has a very consistent source of unprocessed material being fed from around 150 feed yards into its 24 shredders. This means more zorba from shredding and more opportunity to attract retail nonferrous from peddlers. I expand on this theme a little more on Slide 14. Firstly, you will note the deliberate acceleration of the hub and spoke model. Since 2021, SA Recycling has acquired 76 yards compared with 52 for the 10 years preceding 2021. And you can see from the map that it is still a highly fragmented market, so there remains considerable further opportunities, and there is significant headroom in its existing shredders. Its strong cash flow and balance sheet strength support the growth. SA Recycling has developed a real expertise in integrating these small bolt-on acquisitions in implementing its operational and commercial practices. What all this means is that the business is underpinned by strong unprocessed inflows and strong nonferrous markets. This provides a very solid earnings base in the current market conditions. And when the ferrous market cycle turns, SA Recycling is very nicely positioned to capture the upside. Moving to Slide 15. There is no doubt that ANZ continues to operate in a subdued global ferrous environment, and it does not have the prediction of the tariffs that NAM and SA Recycling enjoy in the U.S. It does have a very strong nonferrous business, a good hub and spoke network and good domestic access for sales. In many ways, it is a business that is structured very similarly to SA Recycling. It is worth noting that the nonferrous contribution is even more important to ANZ as the fierce market conditions are considerably worse than North America. However, it will also benefit from an upturn in the ferrous market. With over the next couple of years, this is largely dependent on a meaningful reduction in Chinese exports of steel, which seems unlikely. Beyond 2 years, however, the structure of the ANZ market is likely to change as domestic EAFs come online and this is the focus of Slide 16. The chart shows that currently about 50% of the scrap generated in Australia is exported. However, by 2027, maybe 2028, this could reduce to under 20% as a result of increased EAF demand and additional charging of scrap and blast furnaces. This local demand is likely to support prices and potentially delink Australia and New Zealand from the full impact of Chinese exports. In our view, our Pinkenba site in Queensland will play the major logistics role in facilitating scrap finding its way to the right location at the most efficient price. This could well include importing scrap from our facilities on the West Coast of the U.S.A. No other participant in Australia or New Zealand has the capability to manage scrap flow between all states, New Zealand and the West Coast of the U.S.A. I now want to turn to SLS on Slide 17. The chart on the right tells the headline story of the dramatic rise in DDR4 chip prices. But what has driven this? There are 4 interrelated points I want to make. One, we still need DDR4 chips as they are the workhorse of many of our devices and the Internet of Things. Two, manufacturers are switching to making DDR5s with the demand from hyperscalers building AI data centers is almost insatiable. Three, this has created a structural supply-demand imbalance for DDR4s. High-quality repurposed DDR4s are a practical solution, but they are also limited. Fourth, a number of suppliers and market commentators are saying that the imbalance is likely to persist beyond 2027. I want to provide an update on our SLS expansion into Ireland, and this is on Slide 18. Firstly, the expansion is well underway, and we expect we will open the 120,000 square foot facility in early April. There will be some ramp-up in other costs, so I expect meaningful contribution to EBIT will not happen until sometime in June, maybe July. As the analysis shows, Ireland is an ideal place for expanding our data center infrastructure services. It is a major hyperscaler hub in Europe where we already have a presence. We have a proven track record in these types of facilities, and I expect it to look very similar to our Nashville site, which a number of you have visited. We currently anticipate growing the business over the next 2 years to repurpose approximately 1 million units per annum with a skew towards DDR4s. This is an exciting opportunity for us, and is driven by an existing relationship we have with a major hyperscaler. I'll hand over to Warrick now for a more detailed look at the financials. Warrick R. Ranson: Many thanks, Stephen and good morning, everyone. Despite mixed construction activity in Australia, continued elevated Chinese steel exports and softer U.S. consumer sentiment impacting prices, ferrous scrap markets remain supported assisted by the progressive expansion of EAF capacity globally. With export markets exposed to global scrap dynamics, we continue to leverage the arbitrage in our key domestic and international markets, and sold volume proactively between the 2 to maximize margins, reflecting the significant agility and flexibility embedded within both our inbound and outbound logistics chains. In parallel, nonferrous markets delivered a structurally strong performance and provided meaningful earnings stability, with LME copper increasing by approximately 13.5% year-on-year while aluminium prices rose by 9.8%. The Asian spot price for aluminum reached its highest level since 2022, supporting considerable zorba price increases, as Stephen mentioned. Not surprisingly, nonferrous trading accounted for over 40% of group revenue in the half, up from around 35% in the comparative period. Concurrently, of course, prices for DDR4 memory continued to increase exponentially, rising by over 450% year-on-year as demand continued to increase against diminished supply with manufacturing shortfalls and a focus on new generation cards continuing to uplift repurposing and resale activities. Across the business, we continue to deliver disciplined cost efficiency initiatives. Current activities such as moving to a global shared services platform and the operational changes now targeted for our Houston operations will continue to provide performance improvements in the business. We saw our overall cost base remain relatively flat despite increases from higher inflows of unprocessed material and NAM and volume growth in SLS and of course, general inflation across the board. I'll come back and talk about our cost performance shortly. Our statutory result reflects our targeted restructuring initiatives and noncash hedge book mark-to-market adjustments associated with the significant rise in copper and aluminum prices at period end. We continue to work on the recovery of our U.K. metal receivable following collapse of that third-party business in an extremely difficult market. But in line with prudent accounting practice, we updated the potential credit loss on the residual by a further GBP 30 million to reflect current estimates. Although we have effectively reversed our prior accounting position on the sale, we remain pleased with our decision to exit the U.K., the price we got for the business and the way we were able to maximize cash flow, particularly given the number of subsequent business failures in the industry there of late. Moving to Slide 21 now. And I've touched on the principal drivers of most of these already, so I won't dwell on this slide. Positive contributions by both the NAM and SAR businesses absorbed the impact of the current market pressures on ANZ. While the strong performance from our SLS business and a range of cost reduction initiatives, as I've mentioned, contributed further to the uplift in underlying results, reflective of the strength of the geographic and diversification aspects of our business. I'll expand on some of the other factors driving these various movements in subsequent slides. Moving to the metal business, more specifically, and in North America, total material inflows remained consistent with the prior comparative period and converted metal volume moderated by 3% as we prioritized unprocessed intake in line with our value strategy, improving our overall margin position. While this added to comparative costs, the team were able to generate a number of offsets through further site restructuring and productivity initiatives. Period-on-period, we actually experienced around a 5% reduction in average realized ferrous prices, generating a circa $13 million impact on the underlying EBIT for NAM, which we mitigated through that margin discipline and our cost-out initiatives. In ANZ, ferrous margins were again impacted by the subdued international market, which also flowed on to domestic prices. Favorable nonferrous prices provided overall revenue support and helped offset shredder downtime at our St. Mary's operation in the first quarter. Notwithstanding elevated consumable input costs, particularly in the areas of waste disposal and electricity charges, net operating costs continue to be well controlled here as well, noting the current result does include an $8.8 million reclassification reduction. While U.S. steel spreads improved over the course of the half, influenced by tariff-constrained imports, which are reflective of the U.S. domestic market, in December, our Sims Adams joint venture actually reported its first upmarket for ferrous pricing since April. Despite the comparative headwinds, the joint venture was able to close out the half year strongly, driving the uplift in nonferrous prices as zorba continued its surge. Our global trading platform was able to keep its costs flat. They saw reduced broker revenue following the cessation of trading activities for Unimetals in the U.K. early in the period. Moving to SLS now, and Stephen covered a number of the drivers here already. As we've noted, the business continues to see significant growth in the number of repurposed units as well as benefiting from the dynamics of the market. Pleasingly, we also expanded our hyperscale service offerings, adding diversification to the business' revenue streams. Increases in operating costs reflect both volume gains and expansion activities and the team continues to look at additional opportunities around automation and robotics to support its cost management program. The results further validates SLS's positioning within a structurally expanding hyperscaler ecosystem and its connected drivers. Moving to Slide 24 and touching briefly on central and functional costs now. As previously mentioned, we continue to look for cost out efforts in this area. We recently relocated our corporate office to further reduce costs as well as successfully transitioned our purchase to pay function to our new global shared services hub as part of a more extensive shared services model being progressed over the next 2 years. Following stabilization of the company's SAP platform implementation, project costs fell by $2.5 million, noting that we continue to incur costs in developing our new yard management software, which we hope to take live later this year. As previously advised, we elected to cease work on the development and commercialization of the plasma-assisted gasification technology that was being undertaken by Sims Resource Renewal during last year. This further reduced the central cost pool by some $10 million to $12 million per year. Moving on then to our overall cost performance for the half, and we continue to look for opportunities to simplify and optimize our organizational structure as well as further rationalize the existing operating portfolio. At a group level, we were once again able to keep total costs relatively flat over the period, limiting the increase to just on 4% of the rebased comparative half. Included in this was $16 million in additional variable costs related from the increase in unprocessed material and the higher repurpose units at SLS. Labor remains our largest cost element at around 40% of operating costs and ongoing labor efficiency initiatives continue to provide significant benefits in this area and in line with our previous cost-out commitments. The group completed the year with net assets of just on $2.5 billion at balance date, broadly consistent with June, reflecting a stronger comparative Australian dollar at period end, dividend payments and the further provisioning of the Unimetals receivable. Of note, this includes a $200 million expansion on working capital levels from the uplift in nonferrous prices impacting both our inventory and receivable values and a $72 million transfer to broker deposits related to our derivative trading activities following the run-up in copper and aluminium prices. And I'll talk a little bit more about the impact of this on the next slide. Pleasingly, as a result of our positive trading performance, the Board has determined an interim dividend of $0.14 per share payable in March. So a little bit more on our working capital movements and the group's focus. On Slide 27, we've isolated the overall movement to show the impact of those higher nonferrous prices on the business, which has been quite significant on a number of fronts. The impact of the run-up in the copper price from October in particular is certainly reflected in our numbers. Working capital performance through better managing inventory levels, receivable conversion rates and payment terms continues to be a key focus for us. Moving to Slide 28, and we put up this slide last week as part of our announcement on the Tri-Coastal acquisition. We've highlighted the potential to generate better returns from our property portfolio a couple of times now, and I just wanted to reinforce our focus on this area. We broadly categorized our properties into 4 areas with the third category, the most complicated and the area where we're most likely to spend a fair bit of time working through. As Stephen has previously mentioned, these are the sites where it's becoming obvious that over the next 5 to 10 years, the most valuable use of that land will not be in metal recycling. In most cases, this will require comprehensive planning, permitting and other dependencies to fully capitalize on value. As such, we're committing to a dedicated resource to ensure full management of the opportunity going forward and continuing our approach to disciplined capital recycling and unlocking embedded asset value. All that summarizes into our overall cash movement for the last 6 months. I've talked about most of these already, but just to touch on capital. The majority of this spend occurred in our North American operations primarily focused on improved metal recovery and incremental throughput initiatives, including the completion of channel dredging at our Claremont operations. In ANZ, investment continues into the redevelopment of our Pinkenba site, including the construction of a new copper recovery plant. We expect to remain within our previous guidance in this area of between $120 million to $140 million of sustaining capital for the full year. We've pulled out the restricted cash allocation on the derivatives to better reflect underlying EBITDA to operating cash conversion, noting these deposits will unwind in the second half. In October, we made our final dividend payment of $25 million in relation to the 2025 financial year. And as previously noted, the board has determined an interim dividend of $0.14 per share, fully franked, for 2026, in line with our capital management framework after taking into account the restricted cash impact. Back to you, Stephen. Stephen Mikkelsen: Thanks, Warrick. Let's turn to the outlook on Slide 32 (sic) [ Slide 31 ]. In our view, the outlook for secondary market pricing of DDR4 chips remains very strong, and it is the DDR4s that are materially driving the excellent performance in SLS. This strength comes from the demand for DDR5 chips driven by AI. Global production of chips is understandably heavily focused on DDR5s, and this is creating a structural imbalance in the supply and demand for DDR4s. We also anticipate continued strength in the nonferrous market, underpinned by the substantial copper and aluminium requirements for global renewable energy implementation and product electrification. Tariffs are expected to continue to provide some protection for our North American ferrous businesses, and this is likely to result in the continued premium for domestic shred sales in the U.S. Furthermore, whether be in the United States, Australia or New Zealand, rising EAF capacity provides a strong outlook for our ferrous scrap products. Finally, we cannot ignore the impact Chinese exports are having on ferrous prices, particularly for our business areas exposed to markets outside the domestic U.S. market. While it appears that prices have been trading at or near floor for a while now, there is little evidence to suggest China will reduce exports from current levels. Importantly, much of our recent improvement in earnings has been self-help driven. As market conditions normalize over time, we believe the business is structurally better positioned to benefit from cyclical recovery. Before we open for Q&A, as always, I want to thank our employees for their drive and commitment in delivering on our purpose and most importantly, doing that safely. Back to you, operator. Operator: [Operator Instructions] Your first question comes from Will Wilson from UBS. William Wilson: Congrats on what looked like a strong result. Just on ANZ, it looks like conditions picked up post the AGM trading update, you mind talking us through just the moving pieces there and what happened to the end market? Stephen Mikkelsen: Sure. We've got John in the room. So John, why don't you take us through that? John Glyde: A couple of things. Certainly saw improved volumes in the second quarter, particularly in nonferrous and zorba on pricing. We also, as you would remember, we had the outage in the first quarter, and we largely caught that up in the second quarter. As I said, volumes were up a little bit. We managed to take a few -- a bit of volume from our competitors, good cost control. We delivered a little better than expected. William Wilson: Cool. And then just more broadly across the metals business with nonferrous, just curious about how quickly those price rises result in more benefit -- more volume will benefit to the business more broadly, conscious that the rising price has been going through a while now, but you really had a step up over the last quarter, say, copper, for example, have you seen a kind of corresponding move in activity in that sense in volume activity? Stephen Mikkelsen: Let me give sort of a few general comments, and then maybe Rob can talk about NAM and John about ANZ. So I think overall the answer to that would be, yes. I mean, higher prices, by definition, drive more volume out of the market. That relationship has been here for a while now. And you're right. You're right to say that the nonferrous has been very firm for the last 18 months, but particularly for over -- like the run-up we had in price leading into December was quite extraordinary, and you would expect to see that drive more volume out, and we're well positioned to take that. But maybe, Rob, a little bit on how you see it from NAM's perspective. And John, and -- by zorba as well, by the way, too. I mean -- we'll talk about that a little bit later, then John, maybe ANZ's perspective. Robert Thompson: Yes. The only thing I can add is from a NAM perspective, about 2 years ago, we started to embark on our nonferrous improvement story, if you will, and fully integrated now with Alumisource, fully integrated now with our Northeastern metal trading copper granulation company. Those relationships -- those consumer relationships dovetailing with the infrastructure of data centers going up in every neighborhood in North America. It's been phenomenal. Stephen mentioned zorba. Utilization of our shredders is up 10% over 2 years, and the capture for that demand is definitely there. So volumes up, margins are absolutely playing a part in our turnaround story. John Glyde: Yes. What I would add, obviously, zorba, as Stephen mentioned, we saw considerable improvement in server pricing late in the half, but over the half. And you must remember that zorba really is a byproduct of our shredding activity, and therefore, any gain in that price sort of in some way or another filters through to revenue and quite frankly, EBIT. So that certainly helped. But from an ANZ perspective, ferrous markets are incredibly still very, very difficult. Obviously, in very recent times, we've seen the Aussie dollar strengthened, which isn't helping our translation on an FOB basis on export sales. And I think Warrick mentioned even on our translation on domestic sales on an export parity basis. So strengthening dollar certainly isn't helping, but still difficult ferrous, nonferrous is pretty strong. Stephen Mikkelsen: I mean I think as I said in my commentary, I really would describe nonferrous is the hero of this 6 months result from a middle point of view, and we'll just summarize it, it is -- it will get more volume out of the market. It must do its logical for that to happen. William Wilson: Yes. Okay. I mean it's hard to see what changes there in that regard. But just one last quick one for me on SLS. I'm just curious about the lags between DDR4 pricing and when it flows through to SLS, I'm somewhat a little bit surprised of being honest in terms of you gave your guidance 45-50 back in November, you saw another step-up in December in pricing, that, that didn't come through. But yes, maybe touch on the -- and then you came into the top end of guidance, I know, but just if you wouldn't mind touching on the lags there. Stephen Mikkelsen: Yes. I'll get Ingrid to maybe comment more specifically, but my overall thought on that is our contract position is pretty set as we go into December, we know what volumes we're getting, we know what sales we've made. So there is definitely a lag on that. I wouldn't say it's a particularly long lag. Ingrid, any further comment on that? Ingrid Sinclair: No, I think that's spot on, Stephen. We're normally a month or 2 months out from what you see in the price increasing. So obviously, we'll start seeing it in this year, this half. Stephen Mikkelsen: With the second half year. William Wilson: So fair to say that the December price rise and even in the back end of November really had no -- it was too late to kind of flow through that first half. Stephen Mikkelsen: Yes. I mean, some of it. A little bit of a got through. You see like we were at the top end of -- I mean -- to be frank, I'm getting my head around how we provide this guidance on SLS because we haven't done it before. So we're at the top end of what we provided, which sees that some of it is coming through. But you're right to think that, as Ingrid said, it's a month or 2 before it fully comes through. William Wilson: Okay. Yes. I held back from asking about SLS guidance, but that's really helpful. Stephen Mikkelsen: I'm sure we're going to get that question. Operator: Your next question comes from Peter Steyn from Macquarie. Peter Steyn: Yes. So perhaps curious on 2 angles as it relates to SLS. Firstly, is just run rate, it sounds like you would basically say that the run rate for the second half is probably incrementally higher than what you finished the second quarter at. And then I'm also interested in how one thinks about the Irish facility, you mentioned that you'd be sort of running at full tilt in June, July. But how material would this facility be in the context of the network sort of give me the sense that it is quite material. Stephen Mikkelsen: Yes, sure. And I'll get Ingrid to cover off Ireland because she's been heavily involved in that development. Maybe I'll cover off the implied question about second half for SLS. So the first overall comment I'd make, you're right, the strong pricing that we saw in December is now flowing through into our results. And it's fair to say that the start to the year for SLS has been very, very good. In terms of what does that mean for the full year, I'd make the comment that we're only 1-month in, and I think it's probably best what we've decided is best that we will provide some additional guidance next month at the March investor presentation in Nashville. By that point, we will have a -- we'll have a pretty good idea of where our first quarter is coming in and what pricing is looking like for the balance of the year. So -- but we just asked for some patience on that. We will do that additional guidance in March. But suffice to say that, yes, absolutely, the volumes are still good coming out of SLS as -- and it's very, very obvious the prices are still high, and we've got lots of reasons why we believe that -- those high prices remain. I think there is absolutely a structural imbalance there. So certainly a very good start to the half for SLS, but we'll provide more guidance in -- additional guidance in March. Ingrid, how are you thinking about Ireland? Ingrid Sinclair: Ireland. Yes. So Dublin will be ramping up in the second half of this year, and we expect to deliver full run rate sometime in fiscal year '27. So that's when we'll start seeing the full impact in '27. Stephen Mikkelsen: It's probably fair to say it is material to SLS's result because it's a big facility. I mean it's at ramp-up, we're expecting to repurpose another 1 million units out of there and it's -- Ingrid, is oriented towards or skewed towards DDR4s. Ingrid Sinclair: Very similar to the site in Nashville. Stephen Mikkelsen: Yes. So it is material, Peter. Let's just see when it's up and running, how things are. But it's -- we've highlighted it because it is important to the future of SLS. And I think it also signals potential further expansion outside the U.S. Our strong growth has been U.S. No doubt about it. Absolutely no doubt about it. But Europe is a market where we have a presence. But I think with the likes of Ireland, now our presence is going to become much more meaningful. Peter Steyn: Could I ask Ingrid just a quick follow-up. So the 1 million units, is that backed by the existing contract, i.e., so you're on full run rate at some point in '27. Will that be your run rates of units repurposed? Ingrid Sinclair: So yes, at the start of ramping up, it will be off of an existing contract that we have now in an existing client relationship. So yes, that will be... Stephen Mikkelsen: Yes, I agree with that. But I wouldn't -- I mean, it's certainly not a capacity. There will be room -- there will be -- yes, there will be room -- in the later years, they really, let's focus very much on servicing a very important customer. But I think in later years, there's further capacity in Ireland for other inflows there. Peter Steyn: Got you. So the 1 million is an eventual target for repurposed units and your initial start in your initial contract does not necessarily supply that level of volume. Stephen Mikkelsen: No, I think it's there. The 1 million is the initial and it's how do we grow beyond 1 million with the -- with additional activity. Peter Steyn: Perfect. Sorry, I'm going to sneak one last one in for Ingrid. Just around the customer relationships, how you think about the pull and -- push and pull from a commercial point of view. You're obviously making a lot of money out of this activity, Ingrid. Just curious how your customers view that? And if -- with current prices, they think differently about economic sharing. Ingrid Sinclair: Well, we have several relationships -- commercial relationships going on. And there -- it took us years to get here into this market, right? The quality that we deliver, the loyalty we have built with this particular client, and it's really truly a partnership. We offer services -- servicing, which is a flat fee. But then on the resale is where we share revenue. And that is an agreement we have negotiated with them and remain so even as pricing changes. Warrick R. Ranson: It's Warrick here, Peter. I think it's fair to say that we didn't -- we haven't set up Ireland with the hope of gaining customers. We actually set up Ireland in response to a customer request. And the -- we've been quite -- well, obviously, have a transparent relationship with that customer. They understand our operating model and our earnings, et cetera. So we're actually responding to the customer need. And I think that really sort of signifies, as Ingrid said, the relationship that we've been able to develop. As Stephen said, the million is a starting point, it's a strong growth area we'll be looking to hopefully grow that business -- that part of the business further. Ingrid Sinclair: Right. The 1 million is a... Operator: Your next question comes from Lee Power from JPMorgan. Lee Power: Stephen, I kind of -- I get the reticence of not wanting to give 2H guidance now on SLS given the moving parts. But can you maybe chat a little bit about what you saw on a backward-looking basis? Like what did SLS actually contribute EBIT-wise in the second quarter? Stephen Mikkelsen: Yes. Again, so -- okay, it contributed obviously more in the second quarter than in the first quarter. But I think what I -- probably the most relevant thing I can say is that, that ramp-up has continued into the first half. That's probably the best way to put it. And that's -- we -- pricing is still strong and volumes are good. And that's -- so the activity that happened in the second quarter has continued and frankly grown as we come into the first quarter, which is -- into the third quarter -- sorry, the first quarter of the calendar, third quarter of this year, which is why -- look, I'm very conscious that we will need to provide some more guidance around that. I just need to think -- we just need to get that first quarter under our belt. And by the time we speak next month we will -- we'll have the actual results for January and February, and we do find it easier to predict that result for March than we might for the metal business. So we'll have a very good understanding of what that March quarter is like. I'm expecting it to be good. And then I think based off that, we'll be able to provide some additional guidance on where we think the year-end is going to come in at. Lee Power: Okay. So through the back half or the first half, so through the second quarter, like is there much volatility within the quarter? Was that trend continuing because the pricing only really lifted in the back -- very back end of the calendar year, right? Stephen Mikkelsen: So let me -- so first of all, it was a strong half. It wasn't just a strong quarter. It was a strong half. And yes, there is some volatility. But in some ways, it's the right expression self-induced volatility. Maybe that's not the right expression, but it's volatility that we're not particularly worried about because it's just whether or not we -- does it suit our customers to ship the DDR4s at the end of the quarter or the beginning of the next quarter. So there is definitely some volatility, but we get a good understanding of what that volatility is going to be well before it happens, which is why I think we were -- by our standards, we're pretty accurate at the prediction of the SLS result for the full -- for the half. Lee Power: Okay. And then maybe for Ingrid, it sounds like your comments to Peter just around the commercial rate relationships and revenue sharing that you think the leverage to pricing holds. Like obviously, the battle, I think that everyone is having is that you look at what the pricing has done. I get the lags, but it kind of averaged $18 a unit for the pricing, the DDR4 pricing that you gave for the first half, and it's tracking at like $67 for the half currently. So it's obviously a very material dollar move half-on-half as well. So just any sort of color you can give us around the revenue sharing piece or that leverage might not come through for the business? Ingrid Sinclair: Well, no, as I mentioned the revenue share that we've negotiated stays in and the partnership that we have, in particular with this client is very strong where we're investing back into the business. So the expectation is that we will increase productivity through automation, and use some of this just to improve the business for them. And moving into Ireland really is to meet their capacity needs, and this is what we do throughout. So I don't see that a clawback trying to occur. This is a very solid relationship, and the market fundamentals are strong. We just don't see that. Stephen Mikkelsen: Well, I agree with that. And the thing I would say that, which I think I said the last time I would add, to that, having now visited a number of these clients is that this is not a core business for them. This is, our front office, their back office. And while it is absolutely meaningful to us and well, that's clear, is hugely meaningful to us. Their focus is very much on their front office, which is about giving us much of these hyperscaler data centers built as they can, getting AI rolled out, putting their resources into that area. So this is nowhere near as material to them as it is to us. And so therefore, what they're valuing is they value that we do it safely. They value we do it securely. They value that every single SLA that we've put to them we achieve, and that's through -- to me, frank, from Ingrid's perspective, that's through 5 or 6 years of hard work of building up these relationships. And just to repeat myself, yes, very material to us. I'm not so sure that they would want to switch suppliers to save themselves maybe a few $10 millions of a year and run the risk that they don't get the same level of service that they do from us. And that's what's hugely important. Ingrid Sinclair: If I can add, what's value to them is getting the repurpose DDR4, right? It's not the money. So we have this client who's starting their decommissioning earlier because they need the parts and new builds. So it's very much value on getting the tested repurposed DDR4s going back into their data centers. So that's really where the value. Stephen Mikkelsen: Yes. And I mentioned, if we turned up late and we promised that you would have the DDR4s on this state and they're not. I mean that's the risk that they run by going with someone else. And we've now got a really strong track record over the last 4,5 years to prove that we can do it. Lee Power: Yes. And then maybe just 1 more if I can sneak it in. So John, like -- I feel like you've undersold yourself a little bit given ANZ was breakeven in the first quarter, and you've delivered $22 million of EBIT for the half. Can you just maybe chat a bit about when we think about using that second quarter number going forward around like what the catch-up was or seasonality or something else going on because it's obviously a pretty solid quarter given what the backdrops are... John Glyde: So obviously, Lee, the second quarter was always going to be stronger than the first simply because of that catch-up process, which I got to say we, quite frankly, completed quicker than I thought we would. So we largely got it all done in the second quarter. So what -- I guess, where you're leading to is how should we look at the second half. As I said, ferrous markets haven't improved internationally, I would argue that we're sort of bouncing along or near the bottom in U.S. dollar terms. Nonferrous markets are strong. There's no doubt about it, both in retail nonferrous and zorba. But I guess the other headwind aside from Stephen mentioned a lot about China and the amount of semifinished steel making its way into our markets and our consumers is the Aussie dollar. And that's certainly what have we seen in the last sort of 6-week period, 8-week period, we've seen the Aussie dollar go from around $0.67 to $0.71. So that is certainly hurting. So I would have said second half at this point, and I will say, Lee, we are 1 month into it. We are in January, but I would say I think our second half is broadly going to be in line with our first half. Operator: Your next question comes from Brook Campbell-Crawford from Barrenjoey. Brook Campbell-Crawford: I just had one on SLS and trying to kind of understand how it all works like some of the others here on the call, but maybe just for the first half on Slide 23, you talked about sort of 70% of revenue uplift relating to price. So that implies a $90 million increase in sales because of price. And then the total EBIT for the business is of $35 million. Just can you kind of talk to that, why would you have a greater drop-through from revenue to EBIT, given the majority of it is driven by price. Warrick R. Ranson: It's Warrick here. Brook, remember, we don't get -- the revenue is gross, and then we obviously take out the percentage of -- that we retain in terms of the sales, so you don't get the full swing through. Brook Campbell-Crawford: Got you. Okay. That's the revenue share? Warrick R. Ranson: Yes. Brook Campbell-Crawford: Great. And then maybe just one on, I guess, on the Dublin side. I mean is the way to think about this 1 million units, we can see what the DDR4 price is, we can assume, let's say, a 30% revenue share and then an EBIT margin in line with what you've just delivered to kind of resulted in AUD 5 million EBIT from that facility once it ramps up? Is there -- that's obviously very simplified, but would there be any large flaws with making those assumptions? Stephen Mikkelsen: One is that some of the units will go back to be repurposed, not resold and repurpose as a service fee, which is less than... Ingrid Sinclair: Fixed fees. Stephen Mikkelsen: Yes, less than the resale. Just what -- I didn't quite hear, what number did you come up, I'm not going to say whether it's right or wrong. I just want to understand what number you came up with that back of the envelope. Brook Campbell-Crawford: Yes. Listen, I was just using your 1 million unit comments. And we can see that DDR4 price is like USD 70 a unit, I'm pretty sure. And then we could assume a revenue share of 30%, call it, and then just use the EBIT margin for the division of even 15% in the half, which I think gives you around AUD 5 million EBIT from that business. I was just using that framework and were to get some sort of steer if that's sensible out. Stephen Mikkelsen: I just need to go through your math here, because I'll be frank, I think that's a little light. it is frankly a little light. So just -- let's just think about your math on that because I'm just not quite sure that last that you're coming into. Maybe we can talk a bit about that. But again, maybe part of it will be in March, we'll be able to provide much more color with this additional guidance. But my initial reaction to that is that feels very light. Operator: Your next question comes from Daniel Kang from CLSA. Daniel Kang: Just continue with the SLS discussion. Maybe Ingrid, I just wondered if you can talk about the market share position of SLS at the moment. I think the initial plan was to get to round about 10% share of the addressable market. Are you there already? And maybe if you can shed some color on the competitive landscape on what the others are doing, given that you're branching out into Dublin. What are the capacity plans as well? Ingrid Sinclair: Well, I don't think we're anywhere near 10%. I think the market share is continuing to grow just as AI is exploding and this adjacent market is exploding accordingly. So I don't think we've captured anywhere near 10%. There's still a lot of upside to go. Our competitors, we talk a lot about Iron Mountain, SK Tes. But it also is the hyperscalers themselves taking it in-house. We don't see hyperscalers doing it because they're competing with their data centers, and they make more margin in their data centers versus switching to what we do. So we don't see much movement there, certainly for SK Tes and Iron Mountain. They are in Ireland already. So the Ireland is the -- basically the nucleus for Europe -- for European data centers. It's all located there. Still plenty of market. Stephen Mikkelsen: Is it fair to say that our biggest opportunity to grow market share is to -- is the work we're doing around showing to the existing hyperscalers who are not either doing it themselves or not doing at all that there's significant value by using SLS services. I think that's 1 of our main growth levers. Ingrid Sinclair: Definitely, because this is a way to get material at a cost-effective price point. Stephen Mikkelsen: It's a big market, Daniel, to get 10% aspirational that would be fantastic. It's a big market. There's plenty to go. Daniel Kang: Maybe a question for John. I think you commented on ferrous scrap markets still being pretty tough out there. What are the things that are you looking for, for the markets to improve? So can we see some improvement into the back end of this calendar year? John Glyde: A couple of things that Stephen has talked long and hard around the self-help piece and that doesn't go away. Ongoing cost discipline, ongoing discipline around buying, trying to direct more unprocessed products for our shredders is all sort of internal self-help. But I would say the other things that we've got coming on stream is Glenbrook, the New Zealand EAF comes on late Q4, around May, I think, is sort of power on and then there will be a ramp-up here from that. That would be good for us. We're very well positioned with the investment we've made there in rail infrastructure to service their needs. We've also got 2 fines plants that we're currently -- that are currently under construction now, and they will go through a commissioning late Q3 into Q4, and we'll start seeing some very significant benefits more so in F '27 from those 2 plants. We've got the MRP upgrade in Auckland, which is again, as Stephen talked about, self-help, metal out of waste, very good returns on that sort of investment. So it's a mix of things. As Stephen said, we don't -- and you guys on the call probably as well positioned or better positioned than us around the whole piece around China and when they're going to -- and if they go in to change direction. But ongoing strength in nonferrous markets, strong -- really strong zorba pricing, driven by the underlying copper and aluminium pricing. Ferrous is still tough. What we are seeing, and this leads to a conversation about well positioned. We are seeing that a lot of our competitors are doing it tough. And I think that will present us with some opportunities down the track around industry rationalization and consolidation. Operator: Your next question comes from Chen Jiang from Bank of America. Chen Jiang: Stephen, Warrick, John, and Ingrid. Maybe first question to Ingrid, SLS. A big increase of the revenue share from resale, I guess, majority due to higher memory prices. I'm just wondering what is the strategy for SLS to grow your earnings, if it's structured versus one-off sugar hit when the DDR4 prices normalize. I guess the SLS business is not only solely DDR4 prices. What are the levers you can pull from here, given the market is still, you mentioned very fragmented and you are less than 10% of the market share. Ingrid Sinclair: Yes. Well, that's very true. It's not all just DDR4. So we're also seeing increase in pricing in hard drives and the other elements we sell. So we don't just sell memory. We sell all components that are accessories to the data centers. How we're going to go is through volume. So we're going to see more volume coming through our current contracts and expanding geographically. And don't forget that once DDR4s have run their course, we'll start seeing DDR5s coming out so that this will replicate and just go on to the next technology shift. Stephen Mikkelsen: Can I have one more thing, Ingrid. Chen, you made an interesting comment about prices normalizing. And look, it's a very valid and interesting point. But the way we're looking at it, and this is a very unusual market structure. But the way we're looking at it is what does normalizing mean? Because you've got 2 really interesting things going on. Firstly, DDR4s, as I said before, DDR4s are the workhorse of the Internet of Things, are the workhorse of our computers. DDR4s are not going away anytime soon. So you don't have this falling demand in the next couple of years. You just don't have it. So you've got this demand, which is strong. But what you have is this falling dramatically falling supply, which has been absolutely turbocharged by AI and anyone who can make chips is making DDR5. So that's what they're turning to. No one is setting up new factories to make DDR4 of any quality because why would you? You might have put all your resources into DDR5. So from an economics point of view, you've got this -- weird is not quite the right word, but you've got this unusual situation where you've got strong demand and supply not there to meet that demand. And normally, you would think it would because it's been completely diverted somewhere else. So I'm not sure to say -- I mean, time will tell on how it plays out. But I'm not sure what normalizing means when you've got that market dynamic. Chen Jiang: Sure. I mean, normalizing. I mean, it almost trades like a commodity. So I'm not talking about demand, but more like a price given how the price has been over the last... Stephen Mikkelsen: Where it doesn't behave like a commodity. And I keep watching we're grappling ourselves with this because this is a new -- this is new for everybody, what AI is doing, where it doesn't behave like a commodity. When demand goes up or demand -- and pricing is going up, you would normally -- a commodity there'd be more supply come on, people would invest in things and more supply would come off on and that would dampen the demand -- dampen the price and normally, they overinvest. And so down price goes and then they will pull out in the commodity cycle. This doesn't really follow that cycle because you just can't -- you can't bring on more supply. Chen Jiang: Right. That's a very good point, Stephen. I appreciate that. And second question, if that's okay, again, focusing on SLS. Are you being able to provide any color on the resale revenue sharing across corporates or hyperscaler? Is that like how the contract work, understand, Ingrid, your team spent 4 to 5 years -- over the last 4 or 5 years, built a very strong relationship with hyperscalers and hyperscale revenue has been growing CAGR like 40% or 50%. But if you can give us any color on your existing contract position as well as if any new contract rather than just leverage to the DDR4 prices? Ingrid Sinclair: That's -- I don't think we can get into too much detail it's commercially sensitive on our contracts and what we've negotiated. But once we do, our contracts do run 3 to 5 years long. The percentages are negotiated upfront and just fixed through the contract. Stephen Mikkelsen: Yes, I think I agree. There's a lot of commercial sensitivity in that, Chen. But I'll go back and remake the point that why are we successful and why is Ingrid's team successful. It's around we've spent the last 5 or 6 years building up our proven capability to deliver and delivery, particularly when repurposing, which has the benefits that we get some resell as well. It's really important for these hyperscalers. But yes, I'm with Ingrid. I just don't want to get into detail on commercial contracts. Chen Jiang: Understand. Absolutely -- I fully understand. Well, let's put it another way from like contracts or relationships or even how your revenue model work? How is that different to your competitor, Iron Mountain and other small competitors given it's such a very fragmented market. I don't know if that's perfect competition or... Stephen Mikkelsen: Ingrid, I don't -- but for me, the business model is fundamentally the same across the industry. That's not it's... Ingrid Sinclair: Pretty much. I mean what -- what we are doing though as far as repurposing DDR4s, going back into the data center, we are the only ones that are doing that. Stephen Mikkelsen: We're absolutely... Ingrid Sinclair: Testing, reprogramming, and it's going back into data center. So it's competing against virgin material. So that is something very special that we do, and that is in strong demand by the hyperscalers. They need the parts, because they can't get it on the market. Stephen Mikkelsen: That is a good point, Ingrid. That's a big differentiator. The industry structure generally, but it's actually a very good point around that service that we're particularly good at. Operator: Your next question comes from Owen Birrell from RBC. Owen Birrell: Just a few questions from me. As with everyone's first question on SLS, a couple of angles here from my perspective. The first 1 is just looking at Slide 23, useful revenue by segment splits between resale, service and other. I'm wondering if you can give me a sense of the 5.3 million repurposed units during FY '26 -- first half FY '26, what split of those units by volume went to resale versus service? Stephen Mikkelsen: Just let me -- I mean, we -- obviously, we know that number. I'm just thinking just from a commercially thing, does that -- Warrick, what's your thought? Warrick R. Ranson: Let us have a think about that and we'll come back to you. Owen Birrell: Okay. Well, then let me ask a subsequent question to that. Is that split likely to change going into the second half? Like do you have forward commitments for more service volumes as opposed to resale or vice versa? Ingrid Sinclair: We do have service commitments, but the way it works, Owen, when you get in a rack, there is only a certain percentage that is fit for purpose to go back into a data center. So technically, there's only a certain percentage that can go in. So regardless of the increased need to go back into a hyperscaler, there's still a percentage that is for resale and revenue share. So the increased need would be met by a faster decommissioning cycle because they need the part. Owen Birrell: So indicatively, the splits between resale and service volume perspective are largely constrained and therefore don't fundamentally change from period to period. Is that kind of what I'm getting from that comment? Ingrid Sinclair: Yes, right. Because in a fully populated rack, there's only a certain percentage that can go back in. Stephen Mikkelsen: So I guess the other way of looking at it, we would not be expecting second half splits to be materially different to the first half. Ingrid Sinclair: I would expect the volumes to go up because they need more parts. Owen Birrell: Okay. Excellent. And just on [ NFSR ], I guess, in terms of -- from our perspective, understanding how the business -- the operating leverage flows through -- given the lease model that you operate, is it fair to say that it's a very high variable cost business. And are you able to give us a sense of, I guess, what the fixed to variable splits in the operating cost basis. Ingrid Sinclair: Yes. Well, the way we're attacking that, Owen, is we're automating. So we're going to automate wherever possible so we can bring productivity into the process and control that variable cost. But yes, normally, as you would scale, you would expect costs to increase, but we're going to attack it with automation. Owen Birrell: I mean my understanding was a lot of that automation was actually going to be leased anyway, so it essentially becomes more of a variable cost. Stephen Mikkelsen: Some of it is we do have a -- you're right. We -- the stuff we showed in Nashville was a -- on a volume base, yes, that's correct. But I think there's -- I think what Ingrid is talking about is we will end up to be charging. I think there's 2 things about SLS going forward. One is we will turbocharge automation because I think there's definitely productivity savings to be had there where we can effectively use our lease facility 24 hours a day through automation. And the other thing I would say -- the other thing I would say is moving forward, expect to see some additional expenditure going into R&D because what we know for sure is that in 3 or 4 years' time, the DDR5s that are going in now are going to come out. And they present a completely different challenge to DDR4. Some of them are in the good cooling. Some of them are more sensitive. So we are going to spend some money on R&D to make sure that we've got a business here that has the potential to last for decades because there's constant replenishment cycle with new equipment. Owen Birrell: Okay. Just final question for me, for Warrick. Free cash flow conversion was quite weak during this period. And I understand there's often seasonal swings and trade swings. Just were there any sales booked very late in the period that you haven't received the cash flow yet? Warrick R. Ranson: We always have some sales. I wouldn't say it's a material amount. I'd probably dispute the cause about free cash flow being weak. I mean I think you have to sort of, for us, you have to back out the amount, like in our working capital, we have to include the margin deposits. And we had, as I pointed out, effectively, we had sort of $200 million sort of come through because of nonferrous pricing. We managed to maintain our total working capital balance at around about pretty much the same level. So actually converting our activity into cash has actually been quite strong. So like if you take out that $70-odd million that went into those margin deposits, EBITDA to operating cash was pretty close to sort of 95%. So... Owen Birrell: It's just timing. I guess what I'm getting at is just timing and it should have potentially rectify itself into the second half. Warrick R. Ranson: Correct because yes, those margin deposits, et cetera, will come back down. Stephen Mikkelsen: One thing I would -- and the risk of -- as Rob's got a great expression breaking into jail. The one thing I would add to that, though, is that if nonferrous prices keep rising, we see them keep rising and rising and rising. 2 things will happen. That will boost profitability. But it also puts -- I mean, we've always been on this. It puts more money into working capital. We've done a huge amount to hold our inventory levels. And I think we -- I think Warrick is right, we've done a great job. The team has done a great job in managing that. But rising nonferrous prices boost profitability, but they absolutely increase our working capital requirement. So for the end of this year, at the end of 2026, we have another surge in prices on nonferrous. You will see a similar thing happen. Owen Birrell: Sure. Just one final question on SLS. You talked about sort of that pricing, I guess, sort of 1 month in advance. Is there a risk that you get a, I guess, the opposite trajectory? I mean, if prices come back down, is there any exposure that you have to falling pricing environment from an input cost perspective? Or is it purely just revenue share? Stephen Mikkelsen: It's revenue share and service fees. So I don't think so because it would flow through this. So we're not -- we don't take it. I think of what your question is, do we take inventory risk, we... Owen Birrell: Basically. Stephen Mikkelsen: Yes. There is a small amount, but it's not massive. You can't be perfect... Ingrid Sinclair: It spreads over pretty quick. Operator: Your next question comes from Harry Saunders from E&P. Harry Saunders: I'll start off with NAM for the sake of variety. So came in ahead of guidance, I mean anything you would call out to not sort of use this as a run rate for NAM in the second half given sort of current market conditions, perhaps? Stephen Mikkelsen: I think you're right. We've got Rob in the room and for the sake of rise, I think Rob is feeling a little... Robert Thompson: Harry, no, I think you could safely say that, as John said, we're only 1 month into our third quarter. The domestic market has increased twice in this third quarter for us, $30 in January and another $30 or so depending on the grade. Some markets are good. Nonferrous pricing is holding. If you recall last year, we had some severe weather where we operate. That is reoccurring this year as well with inbound flows. But I would say margins are going to hold this year and we'll have a better third quarter than last. Stephen Mikkelsen: It's probably fair to say, Rob, from an EBIT point of view, the impact of the cold weather has been nothing like it was last year at all here. Harry Saunders: Right. So this implies overall reasonable increase year-on-year in 2H EBIT, [ that's your call ]. Stephen Mikkelsen: I think that's a fair conclusion to draw. But I know Rob's comment, we're 1 month and we're 1 month in. Harry Saunders: Great. And I will go back to SLS now. I'm just wondering if you can outline the percentage of SLS revenue that is resale that was 61% in the first half, like what is memory within that? Stephen Mikkelsen: DDR4 memory in particular. Warrick R. Ranson: I think that comes back to Owen's question. We'll take that offline, Harry, and have a think about coming back to you on that. Stephen Mikkelsen: Yes. Obviously, to the extent we do dispose something, we'll disclose it to everybody. But we're just [ grappling ] in our minds what is commercially sensitive and what is sensible to talk to everyone about, which doesn't impact our business with either our competitors or our customers. But let's get back on that one. So -- and we'll definitely will. Harry Saunders: Okay. Then I'm going to ask this anyway. And I know you probably won't answer, but if the memory price does hold at the current level and based on -- you were saying earlier, the repurpose versus resold -- or reuse versus resold units don't vary materially in percentage terms. You must have some idea of what the pricing benefit should be in the second half. So I mean, can you talk through the potential benefit there in terms of quantifying, please? Stephen Mikkelsen: Holding -- I mean you're right, if you hold all those -- if you hold all of those things constant, you would expect the second half to be materially better than the first half because the prices rose into the first half. And if they come into the second half, we're clearly going to have increased absolute resale. We will without a doubt, we -- volume is looking good, so we would expect some increase in service fees. So that is -- yes, so if you hold all of that equal, you would expect a materially -- a material improvement in the second half versus the first half. What we'll do in March is try and provide some additional guidance on -- from what we've actually is happening where we think that number is. Harry Saunders: And then maybe just asking Brook's question in a different way. I mean, any reason not to look at Ireland is the 1 million annual units as a ratio of your existing -- or you did 5.3 in the first half, so call it 10 or 11 annualized, looking at that as just an EBIT ratio to unit? Stephen Mikkelsen: I think the mix is different. So when you're looking at the whole business, and I think this is a correct answer. You're looking at the whole business, which includes much more than just hyperscaler activity. And so it would skew higher than the business as a whole. Harry Saunders: Okay. Last question, if I may, on SLS. Just wondering if you get a pricing benefit from customer reuse or if that's kind of a fixed dollar amount. So you're only benefiting on the actual resale percentage? And also just the revenue share, I mean, is there anything to stop customers lowering that percentage when the contract is eventually renewed? And are there any major renewals coming up? Ingrid Sinclair: There aren't any major renewals coming up shortly. We're still another couple -- 2, 3 years out on our existing contracts. Stephen Mikkelsen: So the service fee is a fixed percent. Ingrid Sinclair: Service fees are fixed, that's correct. And we're -- it's volume. Stephen Mikkelsen: Yes. But Ingrid made a really interesting and valid point before, is that, in terms of the service fee of putting it back in, it's -- when a rack comes out, it's not a 100% redeploy it back into the unit. There is a substantial amount of those DDR4 that are not suitable to go back in and they find their way to the resell market. So just because we're getting -- if we get more -- well, in fact, we get more activity around -- around the service revenue, we will pick up more resale revenue with that as well. Harry Saunders: Okay. I'll sneak one more in. Just are you seeing any new competitors enter the market recently in SLS? Ingrid Sinclair: As Stephen has mentioned before, it took us years to get here and to get to the level of qualification with the clients to make their technical specs, the security specs, data security. So we are not, at this moment, seeing anybody -- any new entrants. It takes years just to... Stephen Mikkelsen: Our biggest competitors remain the hyperscalers doing it themselves or not doing it at all. Those are the -- that's where -- that's our next frontier. Operator: Your next question comes from Scott Ryall from Rimor Equity Research. Scott Ryall: I'm going to start, if that's okay, on Slide 22. And it's a question, I guess, for Rob and John. Specifically looking at the trading margin, just an observation first. Rob, I hope you're giving John a bit of a needle about beating them for the first time in 5 years, I say, based on my numbers. And I guess my question for both of you. So Rob, is your aspiration to get your trading margin up towards SA Recycling over the medium term? And John, is that decline? I mean you've spoken about the top line and the ferrous markets and nonferrous markets. How much of an impact on the trading margin did the outage has in the first half, please? John Glyde: I'll go first. As I said, over the half, we actually managed to clear most of the inventory that was accumulated during the outage. So we've got a small amount of overhang that will wash out in H2. So over the half, it was pretty much clear. The other thing I should point out around trading margin is proportionately having higher nonferrous volumes and higher nonferrous pricing actually impacts trading margin in percentage terms as opposed to dollar per tonne terms. So actually doing more volume at higher pricing in nonferrous has a negative impact on trading margin percentage-wise. Scott Ryall: Is it fair to say that's the biggest driver then, John? John Glyde: Sorry. Scott Ryall: Is that -- is it fair to say that that's the biggest driver -- the trading margin... John Glyde: No. ferrous is extraordinarily challenging. Robert Thompson: I guess, Scott, first of all, thank you for noticing that. A lot of work to the team. In terms of SA Recycling, they're a heck of a model to aspire to be. And I think the simple answer I can give you will be that, yes, through examples like TCT, the recent acquisition and some road map activity that is yet to be released to the market, some of the feeder yard, bolt-ons that we've talked about over the last several years, that's where we differentiate with SA largely. They have more than twice as many shredders and more than 2x the feeder yards where they're able to collect material at a much lower level of volume, but also at a higher margin. So NAM in the past has been built on big cities, big populations, we can have something in the middle. So yes, there's more work to be done, and we're going to continue clawing at it. Scott Ryall: Right. Okay. And then my second question is predictably for Ingrid. But it's a bit different, I think. I guess what I'm wondering, just when you're planning your business, Ingrid, what is the visibility that you actually have on a rolling 6- or 12-month basis? And you mentioned there's about 2 months lag for pricing. So do you -- does that mean whatever the traded prices now you're getting in 2 months, and therefore, in 3 months, you're not -- you can take an educated guess, but you're not quite sure what the price will be. And then I guess the same for the units. Do you have pretty clear line of sight on a rolling 3- to 6-month basis? Or is it longer based on your contract like what you've just done in Ireland. I just be interested to hear how your business settings actually work. Ingrid Sinclair: Scott, a tool that we use, which you can also subscribe to is TrendForce.com, and that gives some visibility certainly in this market, on the memory market pricing and so forth. Depending on the client, we do have some visibility because we're in their inventory systems. They're in our inventory system, so we can see the decommissioning cycle. So we don't necessarily know what's coming out of there, but we can see when racks will be decommissioned and come to us. So that does give us some planning visibility. Stephen Mikkelsen: And Ingrid, it's probably for you to say that when it's varied from that, it tends to come earlier, not later is what we've found. So that's been our planning challenge if something has arrived earlier than we do. Yes. Scott Ryall: But when do you feel most comfortable with making 95% confidence level as opposed to, say, 80% or something or 75%. When -- is that -- do you feel really confident on a 3-month basis as opposed to 6, 12, those sorts of things? Stephen Mikkelsen: I can say from my -- and Ingrid I'll let you think. By definition, the price is something that 2 months out gives you a lack of confidence in terms of what it's actually going to be, we've got confidence around what we think drives it. So when I look at our results, I feel pretty confident about what Ingrid's predicting 2, maybe 3 months out. Beyond that, there is just some very bit of what do you think the price is going to be. Is that probably the main variability. Ingrid can show me what the volumes are. I think 3 months out, we're reasonably confident on volumes and maybe it's going to come in earlier, which is, I guess, why we think we've chosen the March -- the March date should give us some degree of confidence around additional guidance for June. I mean whether it's at the 95%. 95% feels a little bit like a utility. We're not there. But it's certainly -- it's a reasonable level of confidence. Scott Ryall: Yes. Okay. And so just with that in mind and I know you've got very good reasons for having, followed a customer to Ireland. But -- so how much -- when you go and spend the money and I know what you're saying, Stephen, about R&D and automation and things like that. How do you get -- there's no business plan in the world that's riskless. But how do you get the confidence of at least making a minimum return on capital for that investment decision, please? Stephen Mikkelsen: Maybe, Warrick, you think a lot of that capital maybe. Warrick R. Ranson: Well, I think the beauty of the SLS model is it's capital light. So our investment there is, in terms of -- is really around the lease commitment and how we structure that. So we obviously cater for that within the way in which we approach that. But from a capital investment perspective, it's actually -- it's a great model. It doesn't -- there's not a huge amount of capital that goes into it. Operator: Your next question comes from Ramoun Lazar from Jefferies. Ramoun Lazar: Just a couple of questions on NAM and SA Recycling. Just on NAM, comments at the AGM for a meaningful step-up into the second half. Could you maybe build on Harry's question around NAM and how to think about the second half given the seasonality that we saw last year. And I guess what you're seeing there with the step-up in nonferrous pricing, what could we expect from NAM in that second half period? Stephen Mikkelsen: For me, it's around market -- I'm going to Rob answer the question. But to me, it's around market pricing and our operations within that market. But Rob, you think about this all day every day? Second half. How do you feel about second half and what's driving it differently from last year? Robert Thompson: Yes. I would say this to you. The way we've structured and I think the presentation that you've been able to see, the pivot over towards domestic consumption, whether it's ferrous or nonferrous and having those customers, it's a self-hedging margin preservation. So I'm buying and selling in the same markets. The international side, we're optimizing when it suits and we're dramatically changing the compositions of our cargoes based on best prices by commodity. So -- and nonferrous resilience is there. I think the scarcity of copper and aluminum, and really the demand pull has been good. In terms of what Warrick mentioned earlier about construction spend, I think we're coming into the season in the next 45 days or so, where we'll start to see some more construction demand. The steel mills are running in the high 70% utilization rates. Their margins are tremendously good, and they're not going to miss a heat. So they're looking for raw materials. We're looking pretty solid in the second half. Ramoun Lazar: Okay. I guess the step up in nonferrous would have given you more confidence around that meaningful step-up versus what you said at the AGM? Is that fair? Stephen Mikkelsen: I think unlike ANZ, I think in NAM, you need to be thinking about ferrous as well. So ferrous does gives us -- ferrous, we do have some confidence in nonferrous as well, unlike -- I mean ANZ, we're fairly confident that China is going to keep depressed and there's nothing going to happen in ANZ -- everything is about nonferrous. NAM, the domestic shred premium, what we've done around our logistics to make sure that we can sell domestically. And that number I said before, is quite amazing. 85% of our East Coast Street went domestically. 2 years ago, we would have been capable of doing 10%. So the increased demand in there's more [ AIs ], there is more [ AIs ] have come online. Rob's right around the construction activity. So we are feeling reasonably good about ferrous as well in North America versus first half. Ramoun Lazar: Okay. That's helpful. And then SAR, I guess, a pretty meaningful step up there in the first half versus PCP, and that far off the strong second half '25 result. I guess how are you sort of framing that business into the second half. Anything to think about in terms of headwinds or costs or anything like that, that could... Stephen Mikkelsen: No, I don't think there is, Ramoun, I think SAR is -- will enjoy the same market structure that ANZ than NAM is. What I would add to it, they can continue to produce a lot of zorba and we don't see zorba coming off in any meaningful way when things always strong. We don't see copper coming off. We don't see aluminum coming off. They have a good non-retail ferrous. I'm not seeing headwinds in the second half versus the first half. But you're right, second half of last year was very, very strong for them. And that would be great if they could replicate that. But we're 1 month in. Operator: Your next question comes from Charles Strong from Jarden. Charles Strong: I was just wondering whether you could quantify the impact of trading margins in percentage terms, there has been [ from greater ] nonferrous mix, whether at the regional level or across metals? Stephen Mikkelsen: So not specifically, but what I would say is, by definition, greater nonferrous lowers our trading margin percentage because we make greater margin per tonne on a much, much higher. So when you're selling copper, I don't know, $12,000, $13,000 a tonne, your trading margin percentage is always going to be lower because you're making more in absolute dollars. So if I then say why I think that's been -- when NAM has done particularly well is despite that dynamic, NAM has actually grown its trading margin percentage, which I think goes back to Ramoun's question a little bit, which has come from ferrous. It's grown quite nicely. Charles Strong: Just one more, if I may. You had net corporate cost saves. Do you see any further opportunity there with the outsourcing shred services or anything of the like? Warrick R. Ranson: There's always opportunity. I think what we've said before, we took a fair amount of cost out of the business sort of a year, 18 months back. We did say that we would start to plateau in terms of those major structural changes to the business. But we're always looking for sort of cost out, but I'd say they're more on the fringe. And it's really about just sort of maintaining our cost levels at sort of current rates at the moment, Charles. Stephen Mikkelsen: The only thing I would add on cost, Charles, is if nonferrous was the hero of the result in many ways, costs were a pretty good support act. I mean if you back out the variable costs that came from increased unprocessed and increased activity in SLS, the actual underlying cost base has performed really well in some still pretty inflationary times. I agree with Warrick. It's relentless the cost program, and we will continue being relentless. But I think probably the major, major cost reduction programs, well, I think we're more continuous improvement now, Warrick... Operator: There are no further questions at this time. I'll now hand back to Mr. Mikkelsen for closing remarks. Stephen Mikkelsen: Well, thanks, everyone, for joining the call. Thank you for the interesting questions, very good questions, and I will see a number of you -- we will all see a number of you over the coming days as we get out and about. Thanks very much. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Mark Chen: Good morning, everybody, and a warm welcome to those in person and online to Challenger's 2026 Half Year Results Briefing. I'm Mark Chen, Challenger's General Manager of Investor Relations. We're pleased to come to you today from 5 Martin Place in Sydney. Before we begin, I would like to acknowledge the Gadigal people of the Eora Nation, the traditional custodians of the land on which we are hosting this event today and pay my respects to both elders past and prison. Today's presentation will be delivered by our Chief Executive Officer, Nick Hamilton, and Chief Financial Officer, Alex Bell. It will then be followed by a Q&A session. You can ask a question either in person via the online portal or through the telephone. As you'll see from today's presentation, we've made a great start to 2026. That demonstrates both resilience of our earnings and the progress we're making in positioning Challenger for the next phase of growth. In the half, we've delivered earnings growth and returns above target alongside book growth, driven by rising demand for income and financial securities as retirement income tailwinds continue to strengthen. This performance is underpinned by disciplined capital management and a very strong balance sheet. Our capital position remains a clear differentiator providing flexibility to support growth and deliver shareholder returns as reflected in increased dividend and on-market buyback we have announced today. Overall, this is a result that Challenger -- it shows the Challenger is in great shape. It's delivering consistency through the cycle, and it is strongly capitalized and strongly positioned to capture the growth opportunity ahead. I'll now pass to Nick to take you through the results. Nick Hamilton: Thank you, Mark, and thank you for everyone for joining us. So this year, it marks a significant moment for Challenger, as we step into a new era of opportunity and growth for our business and more broadly, Australia's retirement income market. We are a business that's been committed to providing -- to supporting financial confidence for those approaching or entering retirement for more than 4 decades. Our experience and quality reputation as a leader in guaranteed retirement income has made us a trusted voice with the industry, government and regulators on ways to develop Australia's retirement income market. After many years of seemingly waiting, the industry is now moving and the difference in a year is stark. Retirement is fundamentally different and the decisions an individual makes into and through retirement, requires something distinct to what we have today, and that is now recognized. We are months now from entering a new capital regime for annuity providers. And for Challenger, this is a very material moment. Any way that you look at the changes, they will be extremely positive for our business. Today, we've announced our first half results, a buyback for our shareholders and more details on the growth opportunity that has arrived for our business. We'll talk through each of these this morning, and I'm joined by our CFO, Alex Bell, who will provide more details on our first half 2016 financials. Let me start with an overview of the 3 key points in our announcement today. First, we're financially strong. We've grown earnings, maintained our disciplined expense management approach and increased returns to shareholders. Second, we have the capital flexibility we need to grow and deliver returns. And third, we are positioned to grow due to strong momentum behind our strategic initiatives, including our contribution to APRA's review of capital standards, which will see some of the biggest changes for providers of longevity products in a generation. Establishing key partnerships with super funds and advice technology platforms, expanding our offshore reinsurance partnership and delivering our transformation program across customer investment and data platforms, which will usher in a very contemporary and digitally enabled business model. Looking at the first half headline numbers. At the halfway point for the year, very pleasingly, we are delivering earnings growth in an environment where credit spreads are at historically tight levels. Alex will say more on this in her presentation. The significant increase in our statutory result reflects our positive asset experience and gains across our investment portfolio. Strong book growth in the period was driven by a record level of annuity sales. Domestic annuity sales were up 37% to $3.1 billion, and offshore sales up 13%, also to a record level. Our longer-term annuity sales also increased, driven by higher domestic Lifetime and MS Primary volumes. Our group return on equity at 11.4% is above our full year target of 10.7%. We're extremely well capitalized, providing us flexibility to support our growth and deliver returns to shareholders. Our performance demonstrates the strength of our fundamentals, and we've continued to build for growth. Today, our growth opportunity is underpinned by unique demographic and industry tailwinds. We have a world-class accumulation system that is projected to see retirement assets grow nearly fourfold to $4 trillion during the next 20 years. An aging population is one of the most significant trends, around 780 Australians retire every day, or the equivalent of a city the size of Wollongong retiring every year. However, as Australians move from accumulation to decumulation, the vast majority are not transitioning to solutions designed for this stage of life. This is despite our own research, showing 78% of people would be happier with at least partial guaranteed income for life. Unlocking demand for retirement solutions is core to our focus and where we have been driving changes during recent years. At the same time, we're seeing significant increases in demand for income from higher net wealth investors, particularly through private credit strategies as more people search for investment options that provide higher income. Our other major tailwind is a growth in offshore reinsurance markets, particularly in Japan and more broadly Asia. More than 35% of the population in countries, including South Korea, Hong Kong and Japan, will have populations aged over 65 in 2050. This year, we'll mark 10 years of our reinsurance business with MS Primary in Japan where we have recently surpassed $7 billion worth of new business cumulatively written. The strength of the partnership will see us further expand how we deliver offshore reinsurance, including a significant opportunity for growth. As a leader in retirement income over 4 decades, Challenger has developed unique competitive advantages that will allow us to shape the future of retirement in Australia. We have competitive advantages across our customer proposition, distribution capability, asset origination and as a manager of long-term insurance investments and capital. On customer we have invested to maintain our strong brand awareness for retirement income. The future customer experience will deliver simple end-to-end integration into the financial ecosystem. The replatforming of our customer technology to a modern registry and new customer interfaces will put Challenger in a unique position in the retirement market. This half, we delivered the first phase of our customer technology uplift and Phase 2 is now well advanced. And once complete, we'll open our business to customers in entirely new ways. And as we say here, it will be on customer time. We have an expansive distribution footprint, and our partnerships will drive new momentum as the market develops on the premise of a retirement income system. We have established partnerships with some of the largest superannuation funds, platforms and advice technology providers in the country. Our 2 recently announced platform and superannuation partnerships with BT and MLC will launch real innovation in how retirement solutions are delivered at scale. And through the design of new retirement advice in the Iress Xplan and iff planning tools, for the first time, financial advisers will be able to model retirement plans, which incorporate guaranteed lifetime income. We're continuing to discuss partnerships with a number of other providers in the retirement sector, and we're very optimistic about further partnership opportunities over the coming months. We're also remaining focused on the offshore opportunity as our annuity sales reached record levels. Challenger has operated with a limited Bermudan license since 2016. We are working with the BMA to expand our offshore reinsurance business, which will allow us to reinsure products more broadly than we can today. Our asset origination capability remains key as we look ahead. Quality asset origination supports our life business, and it will also enable us to expand fee-related earnings under the Challenger brand. We recognize that the market environment has changed. Demand for Australian credit has risen. Our own demand is growing and will be driven by changes to our asset allocation and our growth. During the first half through the strength of our fixed income asset origination capability, including our whole loan transaction team, we raised $5.9 billion in origination volumes, which included $2.5 billion of private credit originations. And as noted in our announcement on Monday, 9 February, we are in talks with Pepper Money on a potential transaction to acquire an equity stake of up to 25% as part of our broader asset origination strategy. Whilst there is no certainty of a transaction at this stage, we will keep the market informed on any material developments. On investment excellence, we are focused on delivering superior returns to customers and meeting their evolving needs. A key part of this is continuing to innovate the retirement and savings products we offer. In September, we launched our LiFTS income notes platform, the first of its kind in the market. And we acquired an equity stake in London-based Fulcrum Asset Management, a leading liquid alternatives manager. We are focused on being disciplined managers of capital. As part of our capital management framework, we're making Challenger a less capital-intensive business that is pointed for growth and has capital flexibility. Today's announcement of a proposed $150 million buyback is an initial step ahead of the changes to capital standards. This action demonstrates our strong capital position. We will continue to look at our capital management initiatives as the standards come into effect. And with that, I'll now hand to Alex to present our first half financials. Alexandra Bell: Thank you, Nick, and a very good morning to everybody. I'm delighted to now present to you our financial performance and outlook for the first half of the 2026 financial year. At a time when credit spreads remain near cyclical lows and market conditions are tight, we're delivering exactly what investors look for in this environment. We have grown earnings, we have generated returns above our targets, and we have increased dividends, all supported by a strong balance sheet and disciplined capital management. The key message for this half is consistency. We are delivering earnings growth despite a challenging reinvestment environment. By holding a more defensive portfolio at this point in the cycle, we can take advantage of attractive opportunities when they arise, and we're not taking undue risk to achieve higher returns. We achieved a normalized earnings per share of $0.333, representing a 2% increase. with normalized net profit after tax of $229 million, also up 2%. Statutory NPAT reached $339 million, a particularly strong result, reflecting positive total return across each asset class in the Life investment portfolio. We've increased value creation for our shareholders with normalized return on equity of 11.4%, which remains above our target. Outperformance against this target increased to 70 basis points, up from 40 basis points in the prior comparative period, reflecting the Board's confidence in our outlook, we have increased the fully franked interim dividend by 7% to $0.155 per share. These outcomes highlight our ability to generate consistent returns through the cycle, maintaining capital strength and flexibility. Turning to the key drivers of our earnings result. Group net income increased 1% to $487 million driven by Life cash operating earnings, which benefited from higher average investment assets and funds management fee income supported by higher non-FUM-related revenue. Importantly, we're continuing to demonstrate strong cost discipline, with total expenses flat on the prior period at $154 million. Inflationary pressures, especially on technology costs were offset by realized efficiencies in our operating model. As a result, the cost-to-income ratio improved 30 basis points and outperformed the target range of 32% to 34% for the period, the lowest we've ever delivered for a half. For the Life company, we delivered reliable spread earnings despite cyclical dynamics in credit spreads. Life normalized NPAT was $226 million, up 1% and supported by higher average investment assets and ongoing pricing discipline. Book growth of 5.8% and annuity book growth of 7.4% resulted in a 5% increase in our average investment assets, which will underpin future earnings and returns. This slide highlights the cyclical dynamics impacting COE earnings. This half, our margin has moderated to 2.95%. Credit spreads across the fixed income spectrum remain historically tight, which has reduced reinvestment spreads in the near term. Our disciplined approach to pricing has moderated the impact of this effect. To support the change in sales mix this period, we've deliberately increased our allocation to liquid assets with cash and equivalents of $3.3 billion at 31 December, up 27% or $700 million on the prior period. This strategy reflects attractive opportunities in liquid assets to back some of the shorter-duration institutional business we've written this half as well as providing flexibility to deploy capital into higher-yielding assets as opportunities arise. Like many insurers globally, this approach ensures we are not prioritizing short-term yield at the risk of long-term value. Sales momentum in life was particularly strong this half. Total life sales increased 11% to $5.1 billion, driven by record annuity sales of $ 3.8 billion, up 32%. Domestic annuity sales rose by 37%, supported by strong institutional demand and continued demand for guaranteed income solutions. Lifetime annuity sales of $0.7 billion were up 12% for the period. Our offshore reinsurance annuity sales also reached a record, increasing 13% to $0.7 billion, further diversifying our liability book and demonstrating our strong relationship with MS Primary, the expansion of which is a strategic priority for future growth. The balance sheet continued to exhibit a stable composition by asset class. What has evolved is the increase in high-quality fixed income assets within the portfolio. In the last year, we have invested $1.6 billion of additional fixed income, almost all of this being deployed into cash and AAA securities. This move up in quality ensures we are well positioned for any repricing. As evidence of our commitment to investment excellence, we've achieved a strong scorecard this period with total return across all asset classes significantly exceeding the COE investment yield that we include in our normalized result. This generated a substantial after-tax asset experience of $105 million for the period, which supports a strong statutory earnings result. Now turning to Funds Management. Funds Management delivered normalized NPAT of $29 million, up 7%, driven by higher net fee income and continued cost efficiencies across the platform. While average funds under management were lower period-on-period, the focus here is flow, quality and margin sustainability, not just headline fund. 2025 and the start of 2026 has been one of the most difficult periods for active equity managers domestically and globally. Fidante continues to showcase the strength of its multi-affiliate model with total net flows of $1.5 billion for the half. The platform remains one of Australia's largest active managers with 83% of strategies externally rated as recommended or highly recommended. During the half, we recognized $12.6 billion of FUM from adding Fulcrum Asset Management to the affiliate platform. and derecognized $2.9 billion upon completion of the Ares distribution agreement, demonstrating the success of our diversification strategy, alternatives now represent 15% of Fidante's FUM. This shift demonstrates the platform's ability to adapt to evolving investor preferences and broaden its investment offering. A strategic priority for Challenger has been to grow our Challenger Investment Management business and to scale originations for Challenger Life and third parties. Challenger Investment Management continues to deliver on its mandate to grow third-party capital and scale origination for the Life company balance sheet. This investment team will form part of our group investment capability under our new group CIO, going forward. Third-party FUM has increased at a 38%, 4-year CAGR to $3.1 billion, supported by investor demand for credit and income strategies and by the listed CIM LiFTS notes launched this period. For our Life company balance sheet, the originations remain well diversified with $5.9 billion of new originations across public and private opportunities. Our capital strength remains a key differentiator. This period, S&P upgraded the capital rating for CLC and Challenger Limited by 1 notch to and A+ and A-, respectively. S&P noted that the upgrade in ratings reflects CLC maintaining its market leadership position in the Australian annuity market, better regulatory settings and strong retirement savings trends that will support earnings. At 31 December, the Life company had $1.7 billion of capital above APRA's minimum requirements, with a PCA ratio of 1.58x based on the current capital standards. This capital position supports ongoing organic growth, continued dividend growth and disciplined capital management initiatives such as an undertaking to do an initial buyback of $150 million. This slide serves as a reminder of our capital allocation framework and the progress that we have made to maximize shareholder returns. In addition to supporting meaningful organic growth this period, we have announced a $0.155 per share fully franked interim dividend that is up 7%. In respect of capital returns, we intend to undertake an initial on-market buyback of $150 million, subject to market conditions and regulatory approval. This reflects our confidence in our ability to support organic growth and return excess capital to shareholders. Last Monday, we announced that we were exploring an investment in Pepper Money. Whilst not finalized a modest minority stake like this would require no integration and would be just one of the ways to accelerate the expansion of our asset origination capability. Importantly, we are maintaining a strong and resilient balance sheet through these actions and remain disciplined and focused on delivering shareholder value, demonstrating that we are good allocators of capital. Although not yet effective, I wanted to spend a couple of minutes reminding investors why APRA's proposed changes to capital standards are so important and what to expect from the 1st of July 2026. Using our 31 December '25 balance sheet, our reported PCA ratio of 1.58x is expected to increase 16 basis points to a pro forma of 1.74 on day 1. If spreads were at their long-term average, the improvement in PCA ratio from applying the new standards would be even greater, equivalent to an increase in pro forma PCA to around 1.82x. These numbers reflect the lower PCA requirement from the enhanced liability offset within the credit spread stress and the interaction of the standard and advanced illiquidity premium approaches on CET1 through the cycle. We view these reforms as very supportive of financial resilience reducing capital procyclicality and creating a more favorable environment for retirement income innovation, consistent with the objectives that APRA has outlined and the sector's policy focus. Then as we move forward with the implementation of APRA's capital standard changes, we anticipate a meaningful shift in our asset allocation mix over time with an increased emphasis on fixed income assets, and a corresponding decrease in growth assets. This change is expected to lower capital intensity of our portfolio and reduce earnings volatility throughout the economic cycle. By adopting a higher proportion of fixed income, we aim to achieve more predictable spread income, which will then be further supported by the expansion of capital-light fee income streams. Although investment gains will continue to vary over time, we expect them to remain positive through the cycle. The overall effect of these changes will be a relative improvement in return on equity as we gradually shift away from capital-intensive assets that currently yield lower relative ROEs. In managing our equity base, earnings per share will remain a key focus, guiding our efforts to optimize earnings with the most efficient use of our equity capital base. The proposed changes to APRA's capital standards in FY '27 will be an opportunity to revisit our existing normalized cash operating earnings framework that we use for management reporting and ensure that it is fit for purpose as Challenger evolves. With the appointment of Damian Graham as Group Chief Investment Officer, we are aligning our investment capability under a single leadership structure. So consistent with this, we intend to evolve our internal and external reporting away from separate business unit segments to a more integrated Challenger group view. Looking ahead, we reaffirm our FY '26 normalized EPS guidance of $0.66 to $0.72 per share, with $0.333 delivered in the first half. Our through-the-cycle targets for ROE, cost-to-income and capital remain unchanged, and we continue to see strong structural tailwinds across retirement income, advice integration and asset origination. In summary, the first half of FY '26 was characterized by solid financial delivery and continued strategic momentum. During the period, we've delivered earnings growth and returns above our target. Our focus on disciplined capital management allows us to maintain significant capital flexibility, ensuring that we remain well positioned to respond to market opportunities and challenges as they arise. I will now hand back to Nick, and I look forward to taking your questions as part of Q&A. Nick Hamilton: Thank you, Alex. I'll now cover our key focus areas as we look ahead. So we have a clear strategy that meets a significant demographic and retirement tailwinds. Launching our new customer technology platform before the end of this financial year will deliver simple end-to-end integration into the financial services ecosystem for our customers. We're embedding partnerships with some of the largest superannuation platform and advice technology providers, which will help to deliver retirement advice and sales at scale. And we're actively expanding our reinsurance business in partnership with MS Primary to capture the growth opportunities we see offshore. We will continue to expand our asset origination capability through the scaling of our private credit functions to underpin our long-term growth. We're driving innovation and investment excellence, and we're targeting our second LiFTS note issue in the next 6 months. In Fidante, we have an impressive global network of investment firms. We're focused on supporting their ongoing growth and the investment capabilities they provide to customers. And against the backdrop of the APRA capital standards reform for retirement income products, we're becoming a less capital-intensive business. To close, a reminder of our key points today. We have financial strength, and in the first half, we've continued to deliver our key initiatives. Our capital position is enabling strategic flexibility and growth while delivering returns to shareholders. And finally, we've done the work to position Challenger as a growth-enabled business with a significant opportunity that has arrived in the retirement income market. We'll now move to Q&A. Operator: [Operator Instructions] Mark Chen: Just a reminder of the process, we'll take questions first in the room. We'll then go over to the telephone and via the online portal. In terms of protocol, can I please ask you, when you ask your question, please introduce yourself and if possible, because there's a number of people in the room asking questions, just ask all your questions at once, and you'll just enable an efficient process. We'll start off in the room. So we start off with Simon over there first. Simon Fitzgerald: Simon Fitzgerald here from Jefferies. I'll ask the 3 questions at once then just really quickly. Firstly, I wanted to just take you back to the slide that you put up when we talked about the capital changes, which I understand still haven't come into place. But the $150 million buyback, and I know that's independent of those changes. But just wanting to know if you wanted to point out that any other uses of that excess capital such as perhaps repayments of hybrid capital or anything like that, that you might want to point out? Secondly, just on the short-dated sales. There's now 2 big lumps that you've done in the first quarter and the second quarter. So just wanting a little bit of help in terms of how dilutive that would be to the margin, but also in terms of -- it doesn't seem like you had the assets there to begin with, given that we've seen an increase in the cash as well in terms of the investments. So interested to know a little bit more about the dynamics of that. And then lastly, a little bit more on the margin in terms of any effects you might want to call out -- sorry, about any cap bonds or ILS securities that didn't turn up this time that we normally see in the second half. Anything you could add to that? Nick Hamilton: Thanks, Simon. I might -- let me just kick off on the sales one to start with, and then we can come the uses of capital and margin. So I think what you -- if you step back from the sales, what you're seeing is we're continuing to focus on longer-dated sales, like that is a priority. The message to the team as we move towards our new technology that will integrate into the system where it doesn't today is just continue to drive longer-dated sales through the retail market. We're benefiting from strong growth that MSP is seeing, and you're seeing that coming through the reinsurance volumes. Over the course of this period, there's been a bit of a switch in the institutional business where sales that you've typically seen in Index Plus have been coming in to the term annuity side, institutional term side. And there's explanations for that. But what I want to make absolutely clear is we're right in this business to meet our returns. So with our Liquids team have identified some opportunities in markets that they can deploy capital into. The pricing environment in institutional term has been more attractive to us right now than it has been for a long while. And so we have been able to map attractive pricing dynamics with investment opportunities there for that shorter-dated business. So very much consistent with meeting the ROE. But our focus is bridging through to the new technology, driving longer-dated sales as we can, and then the strategic partnerships running into to step change at medium term. But your comment there on dilutive, it's clearly it has to be because it goes into the denominator. And that's just an out working. But as we've said many times, we run the business, particularly around pricing. We run the business to meet the ROE target and pleased with that. On the first question, which was uses of capital... Alexandra Bell: Yes, I can take it, yes. It's all good. So obviously, we do have the new APRA capital standards coming up, and that presents an opportunity on day 1 where we expect to have excess capital. I think hopefully, what you've seen today is that we're thinking about capital in a lot of dimensions. It's not binary. It's not one thing or another. We're trying to satisfy a number of different options from a capital perspective. You called out specifically any considerations for our Challenger Capital Notes 3. So we do note that those come up for their optional exchange date in May this year. But you'll understand from an APRA perspective, it's important that we don't set any expectations around our intentions for that. But you can rest assure that it's clearly a consideration for us as we think about the optimal capital stack. From a buyback perspective, look, what we've signaled today is $150 million. We recognize that that's not large. That's not what we're saying the capital excess is on day 1 of the capital standards. We're operating under the current capital standards today. So it's something sort of really modest and executable that we can do today. And what we're hoping investors will take away is a signal of our intent around ensuring that we are optimizing the uses of capital and doing that in advance of those changes to capital standards. And then I think you had a last question just around the margin. So look, there is sometimes a little bit of seasonality between the first half and the second half. We've seen cat bond distributions typically more slightly weighted to the second half. But I think if you take a step back, Nick's point are right, what we should be focusing on is meeting the ROE. So we have written some shorter duration business this period, but at good ROE. So what you should hear is that the business we're writing is meeting or exceeding those ROE targets. Mark Chen: Can we go to Freya and then to Sid? Freya Kong: Freya Kong from Bank of America. Can you help me reconcile the higher liquids holding in the portfolio versus a higher PCA capital intensity this period? Anything I'm missing in that? Second question on you're talking about offshore market opportunities. You've talked about Japan, but Asia more broadly, which regions are you looking at? And I guess, what's the strategic rationale for expanding this business versus focusing on the opportunity that you have domestically? Do you have enough bandwidth for both domestic and international growth? And then just lastly, clarifying, should we be viewing this buyback completely independent of any acquisition of Pepper Money stake? Nick Hamilton: Okay. So there's 3 questions there. Thank you, Freya. So I might -- let me start with offshore and give some context there because in many ways, this isn't new, new for us. I mean, we have -- since December 2016, we have been reinsuring business with MSP. And if you look at the volumes that we've been reinsuring even in the last 2 or 3 years, have almost doubled. And so our partnership with them is excellent. What we do note there are some products that we would like to reinsure which out of Australian jurisdiction are difficult. And by taking what is already -- we've got a long relationship operating with the BMA and expanding or building the platform to expand the products that we're able to reinsure is a really sensible adjacency for us. Now this is not new. You're not -- this is not something we're announcing we've just looked at in the last recent period. Members of the team have been working on this for coming up 2 to 3 years. So the capabilities that we have inside Challenger today, whether it be on the investment side, the LLM side, the actuarial teams, they are able -- and because they do it today anyway across for MSP, able to support the delivery of the new licenses that we'll achieve and consistent with new product development we've done for many years with MSP, new products that we'd look to reinsure. So it's a very sensible strategy because the partnership and it gives us a beachhead and an opportunity then without needing to make a business case on any grand business case. It gives us the opportunity to look at other markets. Because of the stability of that relationship, Challenger being a trusted brand in the region, well regulated, domiciled in Australia. There are just other opportunities that we believe in the fullness of time, we will be able to unlock but very much built around what we do with MSP today. Then we might go to -- do you want take the PCA one? Alexandra Bell: Yes. So I'll take the PCA one. So again, I'm sort of happy to take the PCA on offline too in terms of showing the insights of the calculation. But if you look at the capital intensity, the capital intensity of the balance sheet has remained roughly the same, particularly if you look at the asset risk charge and the overall composition of the balance sheet is steady. That cash balance was higher at 30 June too. So that increase is really comparing us now versus where we were at 31 December 2024 in terms of that increment. But there's no increase in capital intensity. And obviously, as we have written lots of new business over time, we have also invested in some alternative assets over that period, which is still highly capital intensive. So the relative capital intensity has stayed about the same. And then you had a question around the buyback as well. And so yes, we should definitely view that as completely independent of any considerations we might have around the proposed transaction with Pepper. The buyback is being done with a view to our long-term view around capital management as well as how we're feeling about APRA's new capital standards coming in. So yes, not contingent at all. Siddharth Parameswaran: Siddharth Parameswaran from JPMorgan. A couple of questions. Firstly, just on your Slide 22 where you show us an indicative view on what the ROE would look like under the new standards. I just wanted to firstly check, is that to scale and scale starting from 0 and at the bottom? And if that is the case, I mean, it would suggest that economically speaking, it makes a lot of sense under the new standards to just reallocate the capital that's backing the real estate alternatives and equity right to fixed income? It looks like it'd be like a 50% increase in your ROE from what you're getting at the moment on those assets. It suggest that's what we should be growing into. Is that the strategy rather than giving it back to shareholders. That seems economically what would make sense based on that chart. Am I reading that correctly? So that's question one. Question two is just around the guidance. I just wanted to make sure that I'm reading what you're -- where do you think you're likely to end up? You've kept the guidance range the same on EPS, but the midpoint would imply a 7% step-up from the first half levels. The top end would imply an even much bigger step up again. It seems like they're quite big step-ups given that the first half was -- saw quite a lot of margin contraction. So I just want to check where do we sit versus that guidance? And maybe just a final one, just on asset origination. Just wanted to check. Obviously, you're talking about geographic expansion in terms of product sales. Are you thinking about geographic expansion also in terms of asset origination. Nick Hamilton: Maybe just close off the last one first. We're not. We -- I mean, to the extent that organically, we have built out capability in London today, which has been in place for 5-plus years to manage access to assets, but we've got a number of really good partnerships across the world with global leaders in credit origination, which we use to support the balance sheet today, and will continue to do so in any growth environment, including to support growth in the offshore reinsurance, which is just stepping up from what we do today in any event. So there's no plans there to do more offshore there. Alexandra Bell: And maybe I'll take your other 2 questions, Sid. So on Slide 22, I was expecting the question about scale. I wondered if you bring a ruler. So it's not to scale the graph that we've done but it's intentionally there to try and show a directional impact. So it doesn't include expenses, for example, and how we've done the calculation, and it can be imperfect to come up with a perfect ROE by asset class because you've got to allocate target surplus across them. So the idea is to give you an indicative relative sense of what we're currently thinking about as the relative value and relative returns that we're earning on those asset classes. And it does then lead to the right conclusion that you've drawn, which is that if the current conditions around those relativities persist, you should see us swapping out growth assets like real estate, although doing that in a careful way, and we've sold 4 properties this period, selling out real estate and to some extent, some of the alternative assets too and putting those towards fixed income. Now you got to do that in a way that protects the EPS outcome for shareholders. And so you've got to manage that equity denominator at the same time in doing that. Nick Hamilton: The second one was on guidance. Alexandra Bell: And the second one was on guidance. So yes, from a guidance perspective, so $0.333 for the first half, reiterating the full range of $0.66 to $0.72 per share. And maybe just a reminder, of why we set that range. There's a number of headwinds and tailwinds that we think about in terms of where the business could go in the period and some of the contributors to our final outcomes are still variable. So things like performance fees and transaction fees can move us around that range. So can some of the distributions on our asset returns. There is a little bit of seasonality, which we spoke about before. But that's just to give you a sense of why we're stuck with the full range. Mark Chen: Just to remind on that chart, Sid, I mean, obviously, we have a footnote there. That is a pretax ROE target, that line, and its pre-expenses. So when you're doing your comparisons. I can see either Kieren or Nigel has the microphone. Nigel Pittaway: Nigel Pittaway here from Citi. Okay. A few questions. First of all, cost-to-income ratio, it looks like your guidance actually implies that goes up second half. So is that just conservatism? Or is there more sort of cost to come through second half to drive that ratio up? Secondly, probably overly simplistic view of the capital would be leasing $400 million from day 1 as a result of the new standard, $150 million is going on the buyback and $280 million is earmarked for Pepper Money. I presume that's overly simplistic, but if so, why? And then given you're going to need so much fixed income moving forward, whether or not the Pepper Money deal goes ahead, do you expect to have to do more such deals to guarantee your supply? And why does a minority stake in Pepper Money get you what you want? Nick Hamilton: Well, let me -- thanks, Nigel. Let me start. We'll go work from the back up again. So I guess first comment to say about Pepper, for the avoidance of doubt, is clearly the news flow was taken out of our hands. And the deal remains very much incomplete and there's no certainty that we'll execute an agreement. But if you went back to slides that we've put up since '22, we've talked about expanding the aperture of our asset origination capability. And in so doing, we have built out our own internal team further. We've also created a new whole loan servicing and origination capability. So we look at Pepper, likely look at our other partnerships where it gives us a whole lot of optionality about growth in the future. That is a really well-run business. It's a big originator, its growth has been really strong, and it's a business that we know well. So as you would expect. And the opportunity, to the extent anything was to -- we were to execute any agreements there, it would give us strategic access to assets not just for now but long into the future across a whole lot of lending verticals that Pepper today originate across. So that's the sort of the premise to it. And I would make a comment that we have, to this moment in time, being able to, as an incredibly reliable funder into the non-bank lending market and other originators in the domestic here in Australia, we have been able to meet our requirements. But we recognize that whilst supply of asset is growing, demand for assets will continue to grow over time, and our demand is going to continue to grow over time for the reasons not just the capital standard changes, but also the expectations on book growth through time. So we we're not flagging any other transactions here. That's definitely not the message. The news flow has been taken out of our hands. We really do look forward to the extent it's appropriate to update the market on that to provide more context on the sort of the structure in the agreement. Alexandra Bell: So maybe moving to cost-to-income ratio, Nigel. We're sitting just below the range of 32% to 34% for the first half. Again, there is some seasonality to our cost spend. So we do expect some of our project spend to be weighted towards the second half, but I don't expect that to move it materially. So being at or around the very bottom of that range is the right way to think about the cost-to-income ratio for the second half. And then your question around capital. Look, we've spoken about this a little bit. what's really important to take away is this idea of looking at the capital options and the uses of capital in their entirety and how to best ensure that we are sort of meeting the requirements of everybody equally, recognizing that organic growth for us is obviously a primary focus to the extent to which we are realizing the growth of the business, having capital to back that is a primary importance. But with the capital standard changes, returning any excess capital to shareholders is equally important to us. And so that $150 million, you should think about it as initial. We certainly are not thinking about it in the context of the remaining being for Pepper there. If that transaction were to complete, there are a number of funding options that we could look at. We were really explicit in our release last Monday that we definitely have no intention of raising fresh common equity, but the options are broad. Nigel Pittaway: [indiscernible] Alexandra Bell: So that's the -- yes. So I think Nick touched on that. A minority stake gives us a seat at the table with Pepper would, if it were to complete. And I think importantly, that gives us a level of access to assets that you would not be able to do just by an ordinary flow arrangement, many of which we have already today. Mark Chen: Can we go to Kieren? Kieren Chidgey: Kieren Chidgey, UBS. A couple of questions. I might just circle back to the Life margin trajectory, Alex, the credit spread compression you talked about, can you just be clear whether or not given you mark-to-market your entire book every half if we've seen the full impact of this lower credit spread environment in your margins yet? Or if there is a sort of flow through yet to sort of come through into the future period? Secondly, I guess, a follow-up question on Sid's guidance question. I'm just interested in what are the scenarios that land you in the top half of that range. Is it plausible? Or are we now sort of looking more at a sort of a best estimate that is in the lower half of the range for this year? And then thirdly, on the APRA capital changes, you've had some time to digest these. Now interested in your thoughts around where your target ratios are likely to land. Alexandra Bell: Okay. All right. I'll take you to those in turn. So I guess coming back to the COE margin. I won't reiterate the drivers in terms of where we've got to for this half. But we don't, as you know, guide to a particular exit rate in terms of how we're thinking about the second half, and that is fundamentally because it is just about working of the mix of the business that we write as well as the credit spread environment that we're in. To your point around how much of it has come through. Like credit spreads have been really tight for quite some time now. So if you think about the duration of our fixed income book, it's about 3 years. And depending on when you think it started being low, like it's been low for 18 months at least. So there is -- most of it is in that COE margin now. A lot of the higher-yielding fixed income has started to roll off as we think about the impact that, that has on that COE margin. So as I said, there's a little bit of seasonality to it, but it will more be a function of the book growth and the mix of the sales that we write, Remembering, of course, that some of that shorter duration institutional business as long as we're getting good pricing for it and it's meeting our ROE is still good business to write. And you will probably remember me sitting here last time talking about Index Plus in that way. It can be -- as long as it's meeting our ROE, it can be accretive to margin, but good for ROE and that's the right economic and rational decision for us to make from a management perspective. Coming back to the range, look, there are things that can move us around that range quite a lot, particularly some of the funds management variables. For the first half, that $0.333 per share is about 48% of the midpoint. I think last year, at this point, we've done 49% at the midpoint. So it's not a huge delta. So I wouldn't be pointing to any particular exact specific point within the range at this stage. And then from a capital standard perspective, look, we've looked at the outcomes in terms of kind of day 1. We've got an Investor Day coming up in May, and we'll provide much clearer guidance around the impact that it has on our ranges and metrics I spoke very briefly about the mention of maybe thinking about how our own COE framework evolves, too. And so we'll make sure that there's an education of the market around any changes we make to metrics and targets. Mark Chen: Okay. It looks like there's no more questions in the room. We'll move to the telephone. Operator, can we move to the first question? Operator: Your first question comes from Lafitani Sotiriou with MST Financial. Lafitani Sotiriou: Just one follow-up on the reinsurance update. Can you just go into a little bit more color on the expanded products that the expanding footprint in Asia, the language. I know you've been working on it for a few years. You've seen like quite a big step for you guys? And can you also add some color around what conversations or any, if any, that have occurred with Dai-ichi about reinsurance arrangements there? Nick Hamilton: Laf, thank you. Let me just try to bring it back a little bit to how we got here. So 10 years of reinsuring with a major Japanese group like MSP. Over that time, we have periodically, I think it was probably 2 years ago we moved to a new product. So we're probably reinsured about 4 to 5 different products with MSP. Within the Japanese market, demand and preferences change through time. And so our team have been able to work with them to meet the designs of new products and you're seeing the benefit of that coming through the sales. What we note, though, and starting to take offline, is there's certain of the products we're now limited from being able to in the Australian market reinsurer into Japan. And that is too -- that is a limitation. And it's something that if we can solve, which we are going to now solve with an extended license in Bermuda, that will allow us to use the MSP relationship as our beachhead to support a build-out of that capability, leveraging our own internal systems and capabilities. And then it gives us optionality around growth. So the first growth we would seek is through new product reinsurance with our existing partner in MSP. And I'll probably just round off, I mean, make the comment around Dai-ichi. I'd put Dai-ichi in the same category as other Japanese insurance. There is significant demand for panel reinsurers in the Japanese market. We think we offer a differentiated proposition. We've been able to prove how we can build through strong relationships with MSP, what is now a 10-year partnership. And so we do think there are other opportunities, and we wouldn't limit it just to one name or another. I make mention of the other markets simply because there are other opportunities in those markets. Challenger operates globally. We have an office in Japan. We have team members up and down all the time. So it's not a -- I would just not characterize it as a huge new, new for us. It's an exciting evolution of an existing business strategy that we have today. Lafitani Sotiriou: And just the timing of it. So how long do you think will license comes through? And will there be any other additional capital considerations? Nick Hamilton: So on the licensing, it will be this half, we're working towards. It's obviously subject to the BMA regulatory approvals, but it's something that we've been at for a while now. And the next steps there would be transitioning the portfolio with MSP, the statutory fund assets across. There'd be no implications to capital because it would use with the sort of almost convergence of Australian standards with international standards, the amount of capital that we would back up with is more or less equivalent to that, which we have today backing those liabilities. Operator: The next question comes from Julian Braganza with Goldman Sachs. Julian Braganza: Can I just ask, firstly, what is baked in your guidance just for book growth going into the second half. Are you expecting that to continue to be strong, consistent with the first half trend? Maybe I'll start with that one. Alexandra Bell: Thanks, Julian. So look, we don't talk explicitly around the book growth assumptions that we make. Remembering that the sales that we deliver in the second half of any year have very small impact on the actual profit outcome for the year. And so the 2 would not be that linked in any event. Julian Braganza: Okay. Okay. And then maybe just in terms of the pricing for growth. Are you setting this against your current ROE target? Or are you expecting this against potentially a lower ROE target under the new capital standards? Just want to be very clear how you are pricing for growth today. Alexandra Bell: Yes. Both very easy question for that. The pricing today is to our existing ROE target, not least because we are still very much operating under the existing capital standards until we're not on the 1st of July. Julian Braganza: Okay. Got it. And then just in terms of the funds management business, can you maybe just clarify how you're thinking about flows from here given the pressures that we've seen as well as the sustainability of the margin that we've seen over the first half? Nick Hamilton: Thanks, Julian. We'll give Alex a break there. So in terms of funds management, you break apart our 2 businesses. We have our Challenger investment management in the Fidante platform. Alex has a great slide in the pack there just showing the growth of Challenger Investment Management and as you'll be aware, that's been a strategic priority over the last number of years. We've seen, obviously, demand for income and higher income products really increase. I think the approach we've taken to growing it has been really strong and the announcement of the launch of our new LiFTS platform just gives us a pathway to support different channels within that domestic market. So really exciting what we're seeing coming through the CIM team. Within Fidante, you've really got to look at -- there's a broad range of strategies in there. The announcement around Fulcrum, which increases the alternatives business there at about 13% of FUM is very exciting because you were seeing really strong growth in alts managers, liquid alts managers globally as allocators are shifting between passive and active or thinking about the shift, I should say, from active and whilst they'll have significant exposure to passive, a lot of them are finding halfway houses in liquid alt strategies to provide portfolio diversification. So it's very much in line with where market dynamics are right now because the corollary of that is clearly the -- and it's not contained just to our business, but active equity fund management has found it very difficult in the last number of years to produce excess returns to the passive benchmarks. And you can find an argument on both ends of the spectrum here pretty -- depending on what your perspectives are. I think what we would say is when we look at our managers, they're incredibly highly regarded. They're well rated. They're sticking to their investment processes. And to the extent that we see a normalization across markets, they'll benefit materially in that environment. So there's a lot of support going on around the customer bases there. But then within the fixed income managers on the platform, there's some really strong performance in Fidante there and should be supportive of flows going forward. All of that comes to margin and mix is always a little bit hard to read. We've seen some benefits from a large denominator simply because we had some very large low-value money sitting in that book. which came out over the last 12 months. So there's always going to be a mix of things, but we're prioritizing clearly growth in those strategies and protecting margin across that book. Operator: Your next question comes from Andrei Stadnik with Morgan Stanley. Andrei Stadnik: Can I ask my first question around the last COE margin? Can you talk a little bit about the impact of tighter spreads isolated from the impact of lower cash rates? Alexandra Bell: Yes, sure. Thanks, Andrei. So the COE margin is, if you think about the math of it, you've got the earnings and the numerator and you've got your average investment assets in the denominator. So the first thing to say is we did grow earnings. Those earnings -- the numerator is up 2% period-on-period, but the average investment assets grew by more than that. So that's why you've got the margin coming down, and that's because of the book -- the strong book growth that we had during the period. That numerator then includes the investment yield that we are earning on assets, less the funding cost that we pay away to our annuitants. And so from a cash rate perspective, the cash rate impact, particularly of small movements and particularly in the short term, is really netted off between those 2. The impact on the investment yields then felt equal and opposite on the interest expense. So those sort of net off. The credit spread environment, though affects really just that investment yield. And so to the extent to which there is increased competition for assets more tricky reinvestment spreads to get that puts pressure on that investment yield, recognizing that a meaningful part of our balance sheet is in fixed income. Andrei Stadnik: Just to check on that. So I thought the earnings on shareholder funds went through there, so the impact of lower cash rate does have an impact. I appreciate it's not overly large. But how should we think about that and particularly going into the second half in terms of any lag, the impact of the rate cut versus the benefit of the rate increase that came through in February? Alexandra Bell: Yes. So I think the shareholder funds revenue does go through there, too. I guess that's the first thing to say. But the shareholder funds are made up of the same composition as the policyholder funds. That's also got 75% of fixed income in there. So there are assets that are more exposed to that cash rate like property over time, but small movements of 25 basis points here and there. And in 1 half, you're not going to see any big impacts from cash rates. Mark Chen: The other thing as well, Andrei, it will take a little bit of time to season through as well. So obviously, you're not going to get the full benefit come through from a cash rate increase over the last year in the current financial year. Andrei Stadnik: That's helpful. And look, for my other question, can I just follow up on what I think you were replying to Freya. I think the analyst pack, Page 48 shows a small increase in capital intensity. But how do we reconcile a small increase in capital intensity versus the move to hold more in liquid during the half? Alexandra Bell: Yes. Thanks, Andrei. So maybe we can show you the detailed calculation offline, too. If you look at Slide 48 of the analyst deck, you'll see the compositional parts of PCA. If you actually just look at asset risk charge over investment assets, it is flat. So the increase is really coming in the combined stress, where the biggest movement is actually in deferred tax assets. So there were larger deferred tax assets this period than they were in the previous period, which means we have to hold slightly more PCA. So it's not a function of the actual asset mix at all, but happy to show you that in detail. Operator: There are no further questions on the phone line at this time. I'll now hand the conference back. Mark Chen: Okay. Unless there's any further questions in the room, I think that closes today's briefing. Irene and myself, we're both on the phone today. So if there's any other questions, feel free to call through. Thanks again for your time and your interest in Challenger.
Operator: Thank you for standing by, and welcome to the Reliance Worldwide Corporation Half Year Earnings Call. [Operator Instructions] I would now like to hand the conference over to Mr. Heath Sharp, CEO. Please go ahead. Heath Sharp: Good morning, everyone. Welcome to RWC's Financial Year 2026 Half Year Earnings Call. This is Heath Sharp. I'm joined here in Atlanta by Andrew Johnson, our CFO. Today, we'll cover our results for the 6 months ended 31 December 2025. Then we'll move to Q&A. Before I get into the numbers, I want to recognize the effort behind this half. This has been a demanding period. The results are in line with the tariff impact we forecast, but they're not at the level we aspire to deliver. Notwithstanding, they required tremendous execution to achieve. Our teams have worked incredibly hard. I'm very proud of their efforts. They have navigated an ever-changing tariff environment with discipline and speed, and they've continued to progress major strategic initiatives at the same time. That combination matters, and it positions us very well as markets recover. With that, let's get started on Slide 3 with some details on the first half. We continued to face headwinds during the period. U.S. tariffs impacted earnings and margins. End markets in the U.S. and U.K. remained soft. As we previously guided, the FY '26 tariff impact on operating earnings is expected to be $25 million to $30 million. That impact was weighted to the first half, and that is reflected in today's results. Even in this environment, we delivered strong cash generation. Cash flow remained a key strength of the business. I want to recognize our finance teams across all 3 regions. Their discipline on working capital enabled a further reduction in net debt. Operationally, we made strong progress on major projects, and we executed well across multiple product initiatives at the same time. In EMEA, our New Poland assembly plant was commissioned and began production during the half. That was a major achievement delivered at pace. In the U.K., customer service performance improved meaningfully. Order lead times reduced and fulfillment rates lifted. In the Americas, we finalized plans to augment U.S. manufacturing with a new facility in Mexico. The team did a comprehensive job in evaluating options and selecting the best path forward, and we are now actioning that plan. In Australia, we launched SharkBite Max across our customer base. It was a substantial rollout and implementation was excellent. Finally, our tariff mitigation actions remain on track. Diversification of sourcing away from China continues, and pricing actions have now been completed and will flow through the second half. Turning now to Slide 4, and the financial overview for the half. Reported net sales were down 4.6% versus the prior corresponding period. Underlying sales were down 1.9% after adjusting for several items. Those adjustments include demand pull forward in the Americas in the prior first half, the exit of selected product lines in the Canadian market and the sale of our manufacturing operations in Spain. For the balance of this presentation, we will refer to underlying sales. This is consistent with the guidance we provided in August. Adjusted EBITDA was down 22.5% to $111.4 million. This reflects tariffs and lower volumes. Adjusted NPAT was $52.2 million, adjusted EPS was $0.067 per share. The distribution declared for the half totals USD 0.04 per share. That is evenly split between a $0.02 interim dividend and an on-market buyback equivalent to USD 0.02. I will now hand over to Andrew to take you through the results in more detail. Andrew Johnson: Thank you, Heath, and good morning, everyone. Moving to Slide 5. Let me start by saying this was a tough half. Although we are not satisfied with the financial results, we did perform in line with our top line guidance. We maintained strong cash discipline and have positioned the business for materially better performance in the second half. Underlying net sales were down 1.9% versus the first half of FY '25, which is in line with our guidance in August. Underlying net sales adjust for items we have called out in prior periods. Number one, the demand pull forward in the first half last year in the Americas. Number two, the exit of low-margin product in Canada; and number three, the sale of our manufacturing operations in Spain. The real story of the half is in the margin compression driven by tariffs and weaker end markets. Adjusted EBITDA of $111.4 million was down 22.5% on PCP, with our margin falling from 21.3% in the first half last year to 17.3% this year. The 400 basis point margin hit breaks down into 3 pieces. First of all, roughly 250 basis points is derived from the tariff impact, about 100 basis points from lower volumes and operational deleverage and the balance from the EMEA investment and service capabilities, and the competitive pressures on the DWV market in Australia. I'll walk you through the regional details in the following slides. Despite the earnings pressure, we delivered $4.4 million in cost savings during the period through procurement, manufacturing efficiencies and distribution optimization. These actions, combined with our tariff mitigation measures, will deliver improved margins as we move through the second half. On a housekeeping note, we had 2 nonrecurring items during the period. These were a profit on sale of our warehouse in France and final Holman restructuring and integration costs. The net effect of these 2 at the EBITDA line was $0.3 million. Before I move on to the regions, I just want to reiterate that the first half absorbed the worst of the tariff impact, approximately 2/3 of the FY '26 annual impact of $25 million to $30 million. Our mitigation actions are working, and we expect improvement in margins across every region in the second half. Turning to Slide 6 and the performance of the Americas segment. Americas, as you know, is ground 0 for the tariff story. Underlying sales were 3.4% lower than the PCP, but more significantly, EBITDA margins compressed 410 basis points to 16.9%. Adjusted EBITDA was down 25.4% on PCP to $69.1 million. In the U.S., we continue to experience weak markets and are not assuming a significant improvement in FY '26. U.S. existing home sales remain near multi-decade lows, while long-term mortgage rates have eased, we believe long-term rates need to decline materially further before we see sustained turnover improvement. However, we remain confident that we are well positioned to benefit when the recovery does come. Also negatively impacting revenues by approximately $7 million was the movement in inventory weeks on hand by some of our major customers versus the PCP. Channel inventory appears broadly normalized now, and we are not expecting further material reduction. But we are also not assuming weeks of stock to increase in half 2. On a positive note, on tariff mitigation, we are executing well across a very complex set of initiatives, despite what has been at times of moving goalpost on tariffs. We've made good progress on 3 critical work streams. First, we've diversified sourcing away from China to lower tariff countries. This is well underway and accelerating. Second, we've implemented pricing adjustments across the entire U.S. customer base. Those are now in place and flowing through. Third, we're executing on cost reduction initiatives that will build momentum in H2. As Heath has referenced, we intend to augment our U.S. manufacturing operations with a new facility in Mexico. This new facility is about manufacturing flexibility, cost optimization and, of course, tariff mitigation. The Mexican operation will be focused on lower volume, manually assembled products that will complement our high-tech, high-volume Cullman facility. We are partnering with a local operator to derisk execution, keeping capital requirements modest and within our existing guidance. We expect to be operational in 2027. Looking at the results for the Asia Pacific region on Slide 7. APAC delivered 0.6% sales growth in local currency, but margins were under significant pressure. EBITDA margins fell 340 basis points to 8.6%. Two factors drove this. First, competitive intensity in PVC pipes and fittings impacted both volumes and margins. We address pricing discipline aggressively during the period, and we're already seeing sequential improvement in PVC margins in Q3. Second, we had lower manufacturing overhead recoveries as we source more from third parties, which impacted manufacturing volumes. Also impacting earnings in the half was wetter-than-usual weather in some of the states in Australia, which meant a delay in the spring selling season for watering products. On the positive side, SharkBite Max launch across the Australian market has performed well. Looking forward, we expect APAC margins in the second half to be higher than both prior year and the first half. So the PVC market has stabilized. We're recapturing overhead efficiencies. Pricing continues to move through and SharkBite Max momentum continues. Moving on to Slide 8 and EMEA. EMEA showed resilience with underlying sales down just 1.3% in local currency, but we made deliberate investments that compress margins. In the U.K., sales were down 1.6%, with plumbing and heating down 1.3% on weak remodel demand. But our focus for the half was on fixing service levels. We've achieved substantial reductions in order lead times and meaningful improvements in fill rates. These improvements came at a cost. We incurred incremental expenses that we view as short-term investments. As we optimize these processes and commission our New Poland facility, we expect to manage out these excess costs. Continental Europe was the bright spot with underlying sales up 5.7% after adjusting for the Spain disposal in the previous year. We saw growth in Germany, France and Italy driven by new product launches with key distributors. These are early-stage wins that should build momentum. U.K. minimum wage increases also pressured margins. This is exactly why the Poland plant is strategic. It gives us competitive cost structure flexibility as U.K. labor costs rise. For H2, we expect EMEA margins to be higher than H1 as service delivery costs normalize and Poland ramps up. On Slide 9, despite earnings headwinds, we delivered good cash performance. Cash generated from operations was $102.6 million, down 19% on lower earnings but operating cash flow conversion was 92.1%, beating both PCP and our 90% target. This is a testament to disciplined working capital management. We reduced net debt by $21.2 million in the half and $70.2 million over the past 12 months. Net leverage declined to 1.39x maintaining strong covenant headroom and financial flexibility. Turning to Slide 10. On working capital, the story is really about inventory. The balance increased $33 million during the half, predominantly from tariff impacts on inventory values, strategic positioning ahead of sourcing transitions and inventory build to support customer initiatives. Importantly, this was largely offset by working capital management elsewhere. Receivables were down through tighter collections and payables were up through improved supplier terms. Net working capital as a percentage of sales was 29%, up only modestly from 27.4% in the PCP. Capital expenditure continues to trend down $12.6 million or just 2% of sales. We're maintaining discipline here while funding critical projects like Poland and Mexico within existing guidance. Looking ahead to H2, we expect inventory levels to normalize as tariff transitions complete and we optimize stocking positions. Cash generation should remain strong. And with that, let me now hand back to Heath. Heath Sharp: Thanks, Andrew. Turning to Slide 11. This is our tariff update. The key message is clear. We are executing strongly across the full set of mitigation actions. We continue to make robust progress reducing purchases from China. And we are shifting sourcing to lower tariff countries largely in line with plan. Pricing actions have now been completed, and those increases are flowing through the current half. We have delivered this progress despite shifting tariff conditions over the past year. While the goalposts have continued to move, our approach has remained disciplined. For FY '26, there is no change to our expected tariff impact. We still anticipate a net EBITDA impact of $25 million to $30 million. Looking to FY '27, there is a small change. We now expect a residual net EBITDA impact of $5 million to $7 million. Our previous target was 0 FY '27 impact. This reflects changes in country and material tariffs and points to our decision to invest in manufacturing in Mexico. Importantly, the Mexico facility strengthens the business. It improves manufacturing flexibility, and it supports our long-term tariff mitigation strategy. Over time, the Mexico plant and final sourcing changes will deliver a full tariff offset. On Slide 12, we set out our assumptions and outlook for the remainder of FY '26. As Andrew said, we are not assuming a material improvement in end market demand in the second half. However, we are targeting improved operating margins in each region. In the Americas, we expect second half underlying sales to be up mid- to high single digits on the PCP. That is partly driven by pricing flowing through and it also reflects a softer comp due to last year's pull forward. We also expect Americas EBITDA margin to improve in the second half versus the first. Margins will still be lower than FY '25 due to tariffs, but the trajectory improves as mitigation actions take hold. In Asia Pac, we expect second half sales to be broadly flat to up low single digits. We expect operating margins to improve meaningfully. This reflects stabilization of our PVC fitting segment, and it reflects the actions we have already executed. In EMEA, we expect broadly flat underlying sales. We expect EBITDA margin to improve in the second half. We are now bedding in the customer service improvements, and we expect some of the incremental first half costs to unwind. We will also begin to see benefits from the Poland assembly plant. At a consolidated level, we expect second half external sales to be up mid-single digits, and we expect full year FY '26 external sales to be broadly flat on the PCP. We expect second half EBITDA margin to improve versus the first half. Full year EBITDA margin will be lower than FY '25. This sequential improvement reflects tariff mitigation and operational actions. Slide 13 sets out our priorities for the second half and beyond. A major focus, of course, is copper. Copper volatility is an industry-wide issue and it is 1 we are tackling directly. In the near term, we will execute the traditional offsets. That includes supply chain optimization, tight cost and overhead control and pricing actions into the market. We expect these actions to largely offset the copper impact for FY '27. At the same time, we are accelerating longer-term actions. These actions will structurally reshape the cost base. We are progressing material substitution that includes polymers and it includes alternative metals. We are also progressing product and component redesign, and we are assessing alternative manufacturing processes. Internally, we have set a clear goal. By FY '29, we aim for copper to no longer be a material part of the RWC P&L. This will influence our manufacturing footprint over time, and it will strengthen our long-term competitiveness. The investments we have already made in automation and assembly create flexibility and it will be augmented by our new plants in Poland and Mexico. On Slide 14, let's take a step back for just a moment. As we look beyond this half, it's worth coming back to what RWC is built to do. Our strategy is unchanged. We are executing against a clear vision to be the complete plumbing global leader across repair and remodel, new construction and commercial plumbing serving both residential and commercial buildings, distributed through wholesale, retail and OEM channels. Now I'll wrap up on Slide 15 before we open to Q&A. The core message is simple. RWC is well positioned for long-term growth. We have a strong leadership team, and we are aligned on global priorities. Across the organization, execution remains strong, and collaboration across regions continues to strengthen. Our differentiated position is a real advantage. We have strong channel partnerships built on value creation. We bring products that earn their place on the shelf. We also have industry-leading brands they are recognized for innovation and service. We have a clear strategy. We will grow through product innovation. We will grow through customer experience and service levels and we will grow through industry-leading execution. We also remain well positioned from a manufacturing capacity perspective. We have invested significantly since 2021. As volumes recover, we will see meaningful operating leverage. We continue to see strong long-term macro drivers, aging housing stock supports repair and remodel. Under building supports new construction over time and labor shortages continue to favor smart product solutions. Finally, RWC has a strong balance sheet. That gives us flexibility. It supports organic growth, it supports M&A and it supports ongoing shareholder returns. With that, I'd like to open up the call to questions. We will take questions first from those on the conference call line, then Phil will read any questions received via the webcast. Operator: [Operator Instructions] The first question comes from Niraj Shah with Goldman Sachs. Niraj-Samip Shah: Just a couple on copper for me. Firstly, can you remind us of what the process is with your customers in terms of taking the price action, how that might vary by channel? And then secondly, where you have copper intensity in the portfolio like SharkBite or valves. Can you talk about how this might compare with competitor or alternative products, just thinking about the risk of substitution as the copper price is reflected in product price? Heath Sharp: Sure. So we've talked a little bit over the years of the mechanism for pushing through pricing. Ultimately, it's just a little bit different by channel. But fundamentally, in the case of copper, where it's a clear index, and that information is available to everyone. That's the foundation of the submission and you provide the information in the standard format that, that particular customer wants. It's a process we're pretty familiar with. We've gone through it now all too many times. So pretty comfortable that we know what to do there. And can run through that process. The question on alternatives in the marketplace. I think -- I think we've got a good idea of what our end users need. I think that's absolutely a differentiator for us. Niraj, You've been to our training center here in Atlanta and we talk a lot about spending time in the field. So any changes we make to our product will be based on knowledge of the market, what our end users value, what's important for them. We're also not going to make any changes without having undertaken the appropriate trial and focus groups and field tests and whatever else. Obviously, right now, with copper, we're in the same position as everyone else. So it's not a commercial disadvantage for us. It's just time and effort to handle that. I actually see the project to move to alternative materials. That's a real opportunity for us. It's a sort of project I think we do very well. It's a sort of project that energizes our people. And I think it's an opportunity for us to show that innovation and disruption that we're known for and to solidify the strength of our brands. So it's clearly going to be our #1 priority for the next few years. And I think that's entirely appropriate. Operator: Next question is from Ramoun Lazar with Jefferies. Heath Sharp: Gary, I think we lost Ramoun. Operator: The next question comes from Lee Power with JPMorgan. Lee Power: Can you maybe talk to the level of pricing that you actually, got? So how much is it contributing in that second half mid- to high single-digit growth, Heath? And then I get the kind of the weaker PCP in Americas and a few other moving parts, but maybe just your view on how the core U.S. market is actually tracking? Are things stable? Or are we still seeing declines? Heath Sharp: So I think on the market generally, it's -- I think it declined just a little bit further in the last period. It's a little tricky at the moment to look through pricing moves in the market to determine exactly what's happening with volumes. I think pricing is only just starting to move through now. So overall, the market feels like it was off by another few points at least over the last 6 months. Look, in terms of the pricing action we've taken, I think as we've set out in August and then earlier last year, we've got a very comprehensive model of all our cost imports literally by SKU. We then cross reference that to the particular channels and the particular markets. And we'll take the pricing action that we feel is appropriate. Based on the nature of the product, our position in the market and a whole host of other factors. So I don't want to point to any specific numbers on pricing. I don't think we've called that out anywhere, and that's quite a quite a sensitive issue. So I think we revert to, again, what we've talked about a few times is all those combined activities with sourcing, cost saving, pricing has yielded the result in line with what we guided to in August. Lee Power: Okay. And then just on EMEA outlook, can you confirm that that's constant currency? Because I guess the currency has moved a lot and it would seem very conservative if it was in constant currency. Andrew Johnson: It is in constant currency. Lee Power: And then just a final one. Your point, Heath, that you were chatting about material substitution and alternative metals, like SharkBite's obviously very well known as a brass fitting brand, and there's a lot of other products out there where they're plastic resin based. So how do you -- like how do you think it actually -- like how do you manage what has been core for Sharkbite for a long period of time. And then you try and strip out what customers know the product as if you looked at polymers or some other materials? Heath Sharp: I think carefully. But I also would point to the tremendous amount of work we did during the SharkBite Max transition. We learned a lot there. And I would say the heart of that project was to disconnect assembly from the body manufacturing. And that's what allowed us to bring assembly to the U.S. as you know, Lee. But if you think that through to the next level, disconnecting the body from the assembly process also disconnected the choice of material for the body from that assembly process. So that was in our mind all along. So it has been part of what we've tested. So we've got a range of options there. I think we've got a pretty good handle on the right direction to go. I don't really want to provide anymore information on that at this point, but we'll be making those trials and making -- and taking the right action, we believe, over the coming months. Operator: The next question is from Harry Saunders with E&P. Harry Saunders: Firstly, just wondering with about 2/3 of the tariff impact has been in the first half or sort of $18 million roughly. Therefore, sort of implies a $9 million to $10 million step up in the second half, all else equal before other factors. Should we then be factoring in some other positive or negative factors in the second half, such as seasonality and maybe some of those one-off factors you discussed in some of the regions rolling off? I mean could we maybe just step through a bridge to the second half given more complex than most sort of second half movements, please? Andrew Johnson: Thanks, Harry. This is Andrew. I'm not going to bridge it, but let's just kind of talk through it. You are absolutely right. We will see a reduced impact in the second half in terms of the tariff impact. We're still sticking to the $25 million to $30 million. And so roughly 1/3 of that would hit in the second half. So that will certainly be an improvement over the first half. Some of the other items that we've called out, APAC PVC margins are already recovering. We expect that to continue. And in EMEA, we're working really hard to optimize those service costs that flowed through. And of course, we'll have more of an impact of Poland as those volumes ramp up. And I think lastly, we are executing well on cost savings. We've called out $8 million to $10 million. So you could take another round of cost savings in the second half very similar to what we achieved in the first half. So overall, we think that's going to support the margin improvement in the second half. And that's pretty clear line of sight, at least on those 4 things that I mentioned. Harry Saunders: That's helpful. Maybe asking another way. I appreciate you may not be able to answer. The second half margin clearly should be up on the first half, but lower than PCP. I mean is there any indication at all which one we're closer to in the second half, just given a lot of movements today. Andrew Johnson: Yes. Look, I think volume is going to be the wildcard. I think if we can see a good volume uptick, although we're not planning on it, volume is going to move that needle either closer to last year, or closer to the first half. So it's really hard to say, Harry. Harry Saunders: And maybe just a comment on cost out measures. Just to be clear, are you sort of indicating there's some incremental cost out versus the first half run rate in the second half potentially? Andrew Johnson: No. What I'm saying is that run rate will continue. So we'll see another roughly $4 million or $5 million in the second half to get you that $8 million to $10 million for the full year. Harry Saunders: And just lastly, can you just talk through, I guess, in that Americas guidance for sales versus volumes? I know we touched on this, given the tariff pricing impact? Or is that something you can't answer. Andrew Johnson: No, we're not going to talk specifically about the tariff pricing actions and the impact. But that certainly drives a significant part of that guidance we've given in Americas for the top line. Operator: The next question is from Brook Campbell-Crawford with Barrenjoey. Brook Campbell-Crawford: I just had 1 on volume in the second half. Andrew, you noted that's the key swing factor in the second half in Americas. I'd love just to hear your thoughts around elasticity relating to all these prices that have gone through for, I presume, tariffs and copper. What's your kind of assumptions there and impacts to demand from prices going up? And have you kind of thought through that one providing the second half guidance. Andrew Johnson: Yes, it's really hard to say, Brook, I think that certainly, there is some point where pricing will impact demand. I'm not sure we're seeing it at this point because you have to remember that the whole industry has had to push price related to either tariffs or copper tariffs. And so we're kind of all in the same boat. Not saying it won't impact demand at some point, but it's just not something we're really seeing at this point. Heath Sharp: Look, I also point you to the fact that, that a really good chunk of what we do, particularly here in the U.S. is absolutely repair and maintenance. So far less discretionary, which helps. I think the bit of the market that's more susceptible, of course, is that remodel and particularly the larger -- the larger remodel. The other issue that works in our favor to a degree is the fact that our products, particularly in that repair and maintenance area are a pretty small percentage of the overall cost of the project. So I'm not sure where we're at and what our pricing is dramatically moves the needle on demand. Brook Campbell-Crawford: That's helpful. And just one on the Mexico facility. How should we think about the cost reduction from that relative to I presume things being done at Cullman at the moment that will get shifted across. And then just bigger picture, how do you get comfort that there won't be sort of further changes in tariffs that would impact Mexico and sort of, I guess, become a complicating factor on planning this new project? Heath Sharp: Yes. Look, I'm not sure we have any comfort whatsoever with regard to tariffs being stable. It's an ever-moving -- an ever-moving target. But we took this action with that in mind. We've been considering a facility in Mexico for a while now. And the opportunity from tariffs was, I guess, the last catalyst to get us over the line to make that move. But our view is solidly that having a flexible lower labor cost production facility pretty close to our markets is going to be a useful thing for the fullness of time irrespective of tariffs. So I'm very comfortable with where we're headed. We've also taken, and we talked about this in Sidney at the Investor Day last October, we've taken a no-regrets approach, if you like. So low CapEx, fast and reversible. So this is not a $100 million project. We're talking about couple of million dollars, a few million dollars' worth of sort of OpEx, CapEx. That's the order of magnitude. But I think the optionality it gives us is pretty significant. So yes, at the moment, there would also be some additional tariff benefit, and that's great. But long term, we think it's a pretty useful facility to have regardless. Operator: The next question is from Peter Steyn with Macquarie. Peter Steyn: Perhaps just furthering that line of questioning briefly, Heath, the $5 million to $7 million impact that you've called out in '27, you sort of suggested that that's as a consequence of moving goalpost in tariffs more so than perhaps as a consequence of you not taking price associated potentially with some of the production that you moved to Mexico. Is there an impact like that, so very much like what we've just seen over the last 6 months? Heath Sharp: I think there's a few factors that converge there, Peter. Look, we were looking at the history of tariffs last week as we were getting ahead around this call. And even though we've lived, we were surprised when we put it down on a sheet of paper, how much has changed. I think there was of the top 12 countries we source from, it was 9 or 10 of them, the number had changed from the original number. Perhaps more significantly, some of the materials tariffs have changed, whether that be steel or copper. And then even beyond that, once you get into the detail of what the funds locally manufactured, whether it's melt and pour or whether it's processed or subsequently processed, also changed during the period. So if you put all that together, is there were a handful of items in our original plan, where moving them was not going to yield as much of a benefit as we first thought. It was going to take some effort, and there's risk in all of that. So we simply decided to look closer to home for a longer-term solution as opposed to moving -- only to have to move it again. I think there are some things we've moved that we will subsequently move again and perhaps bring to Mexico. And I think -- the final point I'd make there is -- there's some low-volume production we will take out of -- ultimately take out of Cullman, move to Mexico, but only some we're definitely eyeing some other things we're now doing in other parts of the world, whether that be Southeast Asia or even the U.K. and Europe that we may ultimately bring to Mexico. So there's a lot of factors at play there. And in the end, we thought it was prudent to reduce risk just a little bit and make that sort of not have a secondary move, but only have an initial move. And that's really what's led us to that change in the FY '27 guide. Peter Steyn: That's useful. And then just curious, obviously, around the inflationary pass on perspective, if you could just give us a sense of how customers are reacting. You're obviously -- or maybe channel partners are reacting. You're obviously moving things around a fair amount. How are you managing that process? And how are they responding? Heath Sharp: Peter, I'd say no one's real happy right now. It's us, our peers, our customers, our vendors, our end users, I mean, there's everyone along the way is absorbing just a little bit. Everyone's passing on as much as they can. It is having somewhat of an inflationary impact on the very final product. Ultimately, we all do what we have to do. I mean this has got complete visibility. It's not a thing that's unique to us or unique to our product or our category. So that helps. I think everyone's just frustrated that it's taking a whole lot of time and effort that ultimately we'd all prefer to be putting into something else. So there's nothing specific that I'd call out there in terms of big over the odds wins or big problems. We're just working through it. Operator: The next question is from Daniel Sykes with Jarden. Peter Steyn: I just wanted to touch on APAC and the EBITDA margin there. Whether you could provide some color on what drove the decision to source more externally versus manufacturer. It seems from the guidance around look-forward EBITDA margin for APAC, it seems transitory. But I just wondering if you could help us understand why it was so acute this half. Heath Sharp: Look, ultimately, it's a cost-driven decision. Volumes in the Aussie market are really quite low relative to the rest of the world. You'll recall that back when we were doing all of the U.S. manufacturing and assembly in Australia, we were able to do the volume for Australia as well within that context. But now we've taken that volume -- assembly volume out of Australia. It makes it very hard to justify that level of cost and overhead to an Australian-only product. And hence, we've outsourced it. And it was an approach similar to what I just mentioned for Mexico. So low capital, fast and ultimately just gave us flexibility, and that's the direction we've gone and obviously, a unit cost advantage as well. Peter Steyn: Great. And just in terms of the comments around inventory levels in Americas, obviously, the $7 million hit from customer destocking. Is that something that's finished now? Or how does it look forward through to H2? Are you expecting some kind of inventory drop again through H2 in the guidance? Andrew Johnson: We are not expecting further reduction. And I think I mentioned that in my prepared comments, what -- but at the same time, we're not expecting those weeks of stock to increase either. From where we sit today, we feel like it's normalized and we should be fairly stable from here forward. Operator: The next question is from Keith Chau with MST Marquee. Keith Chau: First question, Heath, just going back to the point around elasticity. It certainly seems to me that at least part of the answer to demand elasticity due to cost impulse is answered by actions taken by Reliance with substitute materials alternative manufacturing change in product design. And I think you made the point in the presentation that the goal is to make copper a nonmaterial part of the P&L by FY '29. So these actions actually seem a lot more significant than the changes that have been made to the core product set over the course of history. Is it as extreme as substituting a metallic fitting with the plastic fitting? Or is it more about changing the alloys and the production process and [indiscernible] push to connect products? Heath Sharp: Look, it's going to vary by product. I mean in some cases polymer solution will be the answer. I think in many cases, we'll probably end up with a stainless steel solution. I think the bigger question is how you actually go about processing that metal and which particular version of stainless you choose. I mean there's a little bit in it, but I think it's all [ handlable ]. That page I think it was 13 -- the copper page in the deck is there's really 2 parts of that slide. There's the near term on the left-hand side and then the long term. And near term, as we put there, it's the same levers we've had at our disposal previously. I mean that's when copper is at where it is today, plus or minus a little bit, I think those mechanisms are fine. We just have the view that -- well, look, it's volatile right now, and we're a little bit tight on dealing with that. That makes it hard. But we also have the view that data centers, electrification of vehicles and whatever else is not going to make it any easier for us to source copper at sensible prices going forward. So we really have put a stake in the ground and then pivoted to the right-hand side of that page is how do we remove the volatility, how do we protect ourselves from that long-term -- long-term impact. That's the approach we're taking. To some extent, someone from the Americas team made this comment the other day is copper is the new China. We took action over the last 12 months or so to sort of decouple ourselves from China. We're taking a similar approach to copper right now. It will take longer. It's a multiyear project. It's got some challenges in it, but I think we can pull those off. And I think it actually helps us in the marketplace. We'll have to do it carefully at pace, but carefully. And of course, none of that, though, in the event, heaven forbid, copper precipitously dropped in price. We can always get back to making these products in copper. So it is reversible, although I don't expect that will be an issue for us. I very much don't want to be sitting here in a few years' time and talking about copper at 18,000 or 20,000 or 21,000 because elasticity -- all those conversations are going by that point. Keith Chau: And Heath, just thinking about this on the longer term because I guess when you're talking about product substitution or material substitution, it's always a discussion to be raised around the earnings power of the business and what it means if you do move to polymer for some products from metal because effectively, the embedded value of the product -- sorry, the embedded cost in the metallic product is higher than a plastic product, but Reliance has always been a business that sells value. And I think in the past, you've talked about putting labor on the shelf. So maybe simplistically, the question is, can you retain the current earnings power of the business, all else being equal, if there are changes to the product design and material substitution, are you confident that you can still generate the same dollar -- the same unit dollar profit per product sold? Heath Sharp: Keith, we're acutely aware of that model. We live it every day and have fought for you. So we're not about to make decisions that upend that. I would also say, and you've seen this firsthand over many years, this is a super conservative market in the U.S. Clients don't like changing full stop, and they certainly don't like changing to a material that's perceived as a less robust material. All of those things will factor into our consideration as we make these changes. I'm pretty comfortable that we can make the appropriate moves here. Your question is absolutely valid and one that we're absolutely all over, I believe. Keith Chau: And maybe if I can, a couple of quick ones for Andrew, just to cover off. Andrew, I think it was asked before around some of the costs that will come out of the P&L for EMEA as those investments to improve service levels and establishment of the Poland facility kind of come to an end. So if we just isolate it to those 2 factors, is the quantum of cost reversal in the second half or FY '20 somewhere in the range of like low single-digit millions in pounds? Andrew Johnson: We think so. I mean, look, if you look at that 270 basis point drop that we saw in the first half, the majority of that margin drop, you can tie back to those production inefficiencies. I'm not saying we're going to get -- we'll be completely clear of those in the second half, but the team is making really good progress to get the overhead recoveries and the labor recoveries back to where they were. So that's going to get most of that back that you just mentioned. Inflation is still an issue in the U.K., and it has been for years now, of course. But gosh, when you take a step back and look at it, we've seen significant increases and the national minimum wage, and it has impacted our business. We do push through price. We'll push through price again in the second half, which will certainly help. So we're on our way back to kind of, of course, getting towards 30%. I'm not saying we'll get to 30% in the second half. I think we'll need volume to get all the way there. But at least covering off on those 2 things that hit us in the first half, you should see a significant improvement in the second half. Keith Chau: And then the final couple is, one, whether you can update us on the copper sensitivity for the business? And secondly, again, a small point, but any fee benefits factored in for the second half of FY '26 guidance? Andrew Johnson: Yes. So from a copper standpoint, we're at USD 900,000, and that's the EBITDA impact for every $100 movement in the LME. And that's pretty consistent with where we were last year. I think you also have to factor in that there's a tariff cost, a copper tariff cost that's not in that number, and there's -- that's probably another 25% on the number that I just gave you. So that's kind of what we're looking at. We -- because of the lag, we can tell you what copper will be in the second half. Copper on average will be about $10,600 a ton in the second half. It was about $9,600 last year. So that gives you the relative movement in copper. We'll see $4 million, $4.5 million in additional copper costs in the second half. And Keith, what was the second part of that question? Keith Chau: Just whether there were any freeze benefits factored for the second half of the FY '26 guidance. Andrew Johnson: It did get quite cold. I don't think it was any more significant than some of the colder weather we had last year. We're tracking kind of the impact. We always have more clarity the further we get through the second half and kind of look back because, obviously, customers have inventory levels that have to be drawn down and then you see reorders. So it's it tends to kind of flow through later than you would think. So sitting here today, I don't have a perfect visibility on what any freeze impact may have been. So we'll just have to see how the half progresses. Right now, it would be very marginal in terms of the difference this year versus last year. Operator: The next question is from Ramoun Lazar with Jefferies. Ramoun Lazar: Just a couple of follow-ons from me. Just on APAC, maybe Andrew can answer this. I guess just with the changes in the manufacturing and sourcing, where could we expect those margins to get to now that you've made those operational changes, Andrew? Andrew Johnson: Well, we're working through those. I mean I think that the team has done a really good job of getting their hands around price. And that's started to flow through on DWV in the first half. And then we've got other pricing initiatives that we'll see come through in the second half. From a volume standpoint, I mean, you've been following our business for a while now. And you can -- as you can imagine, intercompany volumes in terms of the product being shipped to the U.S., I don't expect that to increase year-over-year. And that's always a big variable in that APAC P&L because essentially, it's a manufacturing business when it comes to that copper production and the SharkBite bodies that are provided to the U.S., where this goes from here, I think volume, and I always have to go back to that. Volume is always a big driver. Our target for that region, we haven't lost sight of the mid-single-digit EBITDA margin target, but I do think it's going to take us a couple of years to get there. Ramoun Lazar: Yes. That's helpful. And then just a follow-on from Keith's question just around the U.S. growth in the second half to get to that high single digit, are you assuming for that to happen, you need to see some benefit from the freeze or is that just predicated on potentially a broader volume recovery gets you to that high single-digit top line growth number in the Americas? Andrew Johnson: No, we're not in really banking any big benefit from the freeze in the second half. And as I mentioned earlier, the majority of that's going to come from pricing. Ramoun Lazar: So no sort of major volume recovery expected in that mid-single to high single-digit top line growth in the second half for Americas? Andrew Johnson: Not really. I mean the team is doing some good things. Nothing I really would call out. There's some business we've -- on the OEM side that we've been able to move forward with that's going to help out. And Heath mentioned the softer comp last year because you recall, revenue was pulled ahead to the first half last year. So that's going to create a favorable comp. And those are the primary things that I would call out in terms of what's going to get us to that top line guidance that we provided. Operator: Next question is from Shaurya Visen with Bank of America. Shaurya Visen: Just a quick follow-up on copper, for Andrew, perhaps. Andrew, look very detailed in terms of the steps you have taken to reduce the impact of copper. I was just curious to understand whether hedging is something you've looked at? And if yes, could you help us with some numbers on what's hedged and at what price? Andrew Johnson: Yes. We have looked at hedging and actually, we're going through a very small hedging trial as we speak. It's something we want to have potentially as a tool in the future, but it's not something that we're currently doing. And again, if we do decide to hedge, it's really just -- it's not going to be opportunistic. It's really just going to be to take some of the commodity volatility out of the P&L. But we haven't made a decision on how we're going to move forward, but it is something we've considered and actually conducted a small trial and currently doing that as we speak. Operator: The next question is from Daniel Kang with CLSA Australia. Daniel Kang: Andrew, just -- probably just a housekeeping question here. Just wanted to clarify your guidance for Americas and EMEA. You called out some adjustments to the exit of low-margin products in Canada and then I guess, the sale of the manufacturing plants in Spain. Can you just quantify for us these 2 adjustment factors? Andrew Johnson: Sure. I think -- so let's walk through those. So we had -- last year, we had an S/4 HANA implementation as would typically happen. Some customers bought inventory ahead of that. And then we had a load-in of some appliance connectors into one of our customers. If you take those 2 together, it's low double-digit millions. And then if you take the low-margin product that we exited, that's mid-single digits. And hopefully, that gives you enough information to get you where you need to be. I'm not going to give you exact numbers, but that will get you really close. Daniel Kang: That's great, Andrew. And just in terms of APAC Holman, can you help us with the level of contribution Holman provided in the period and the level of synergies that you've been able to extract? Andrew Johnson: Sure. I'm not going to -- look, Holman, we've had the business now, and this is our second financial year. We've done a lot to integrate those 2 businesses. So pulling out profit and EBITDA margins, it's pretty difficult. Nicole and her team are managing as one business today and the accounting obviously follows that. Revenue was down slightly versus the prior year. And as we've mentioned, there was a really slow start to the watering season, it started to pick up late in half, but it's still left us with slightly lower volumes than we had in the first half last year. Overall, we're still excited about the business. It's really driven revenue opportunities and synergies on both sides. So that's not only RWC selling more products into Bunnings. But of course, selling some of that Holman product through some traditional RWC customers. Daniel Kang: Just last one, if I may. I realize market conditions obviously fairly tough at the moment. It is for the entire industry. Wondering, Heath, if you can talk about the M&A outlook? And are you actually seeing more opportunities come about because of the current conditions? Heath Sharp: No, I'd say it's the opposite. Everyone over here is positioning, taking the view that it's better to be early than late. So valuations are pretty spicy, unfortunately. Operator: The next question is from Sam Seow with Citi. Samuel Seow: Just 1 on material substitution. I think that's obviously a great initiative. But in terms of the profile, could you perhaps outline the rough shape when you expect that sensitivity of copper to start really dropping away the most, maybe make reference to that $900,000 you've given us. But yes, just any rough approximation on the shape of that sensitivity and when you think it will start to materially drop away. Heath Sharp: So look, I don't -- no small thing we're jumping into here. I would like to think -- look, I'm not sure we'll catch anything in '26. So certainly, we'll start catching some things in '27. But Sam, there's a reason we pegged it as '27, '28, '29 project because there's some work in it. But we think during the course of those 3 years, it will sort of incrementally yield benefits. Samuel Seow: So just back-end weighted '28, '29, you suspect? Heath Sharp: I think that's the goal we've set for ourselves, yes. Samuel Seow: That's helpful. And then I'm going to try a question then on FY '27. I know in a normal year, we wouldn't talk about it. But given it's not really a normal year and the copper price we're seeing now is likely to hit your P&L in first half '27. Just wondering if there's any reason, your bigger customers reopen contracts out of cycle? Or is the percentage of copper in your fitting is just too low a percentage? Just anything to consider about first half '27. Heath Sharp: So look, there's not a whole lot else to -- there's no magic answer here. No silver bullet is. We're pretty comfortable we can offset the number in the copper impact in '27 based on our estimations for copper for the '27 year. All I can really say, absolutely, it's in focus for us, and we believe the whole industry. The good question you asked, the volatility at the moment makes aggressive moves a little bit difficult, but there must be pricing. There's no question. There has to be pricing here. And we believe, as in the past, it will be an industry-wide move, and we'll move as part of that. So very attuned to that, spending some good time and effort on it. But at the same time, working really hard on the cost saving side of things and the supply chain side of things and continuing to pull those levers that are absolutely at our disposal today. Samuel Seow: That's helpful. And then maybe then on the cost side of things, maybe a more holistic question, but there's plenty of things eying on at the moment, the tariff mitigation and et cetera. Is there any kind of cost that might reverse when things settle down or anything you can kind of help us or point to. I mean there's obviously a lot of non-BAU work happening within your business. Just if there's anything you can kind of point to or quantify that might kind of reverse as we kind of go through the next couple of years. Andrew Johnson: Look, I mean, it's hard to point out anything specifically. Costs are really only going in one direction these days, at least from what we can see. But I just want to remind you that we've done fairly well over the last few years on cost reduction initiatives, and we've got our $8 million to $10 million pretty much in hand for this year. We're working on more for the following year, and that's outside of Poland and Mexico, and those will certainly bring cost savings for the business. We're -- we don't expect it to be easy. In fact, we expect it to be hard, and we're going to have to work on costs every day and we have, and we'll continue to do that. And I just want to look at -- if you look at our SG&A for the first half, which really as the CFO is something it's pleasing to see and that I think we've kept a really tight grip on our SG&A costs, and they've been flat to down in the regions, even more so than the cost savings that we've called out, and that's just indicative of us controlling those discretionary costs and keeping things really tight, and we'll continue to do that. Operator: The next question is from Nathan Reilly with UBS. Nathan Reilly: Just zeroing in on your decarbonization project. I'm just trying to get a bit of a sense of the scale of the [indiscernible]. So maybe just help me just in terms of what proportion of your SKUs might be sort of subject to that redesign and material substitution project. I'm also curious to understand what level of sort of step-up in R&D or other costs you might be looking at just to sort of test and implement that project. Heath Sharp: Thanks, Nathan. Look, I must admit it to here. I haven't got an exact number in terms of a number of SKUs or a percentage. I mean it's -- there's a pretty decent chunk of our business that or a large number of our products that have copper in them. So it's not an insignificant thing. I mean there's [indiscernible] pipe, a lot of polymer fittings, all the [indiscernible] business is polymer. So there's also, I guess, a chunk that isn't. I mean it's a U.S. story here, by and large, isn't it? So I think -- so not insignificant. It's not the entire business by any stretch. We will have to invest a little bit, but I mean, we're talking about low single-digit millions of investment we'll have to put in this. This is not a whole new office and a whole new raft of engineers or so on. We're pretty comfortable we can handle it by and large with the people and the teams that we have. It just means that becomes the priority doesn't it? And honestly, it's -- as we sit here, it's difficult to think of something that's potentially more valuable to us, not just from a cost point of view, but from a market leadership and innovation disruption point of view. So we're pretty positive that it's a project that can serve us on multiple fronts. So we'll put the effort in. Nathan Reilly: And would you anticipate you'd be running kind of parallel SKUs, 1 sort of. Heath Sharp: No. Operator: The next question is from James Casey with Ord Minnett. James Casey: It's been a long call, so I'll keep this brief. Just in terms of the CapEx profile, CapEx to sales kind of looks to be a tad over 2% this year, kind of peaked in FY '22 at around 5%, I think. If you kind of -- are you underinvesting at the kind of low point in the cycle? And would you flex that up as the cycle improves? Am I reading that incorrectly? Andrew Johnson: Look, I think we invested a significant amount back in 2021 and '22. I think we're very well placed. If we hadn't, then we would need to be -- or the question of being concerned would be valid. I think we're in a really comfortable position at the moment, James. James Casey: And then I understand your comments around the second half '26 looking the same as the first half '26 just in terms of outlook. Just in trading for the first 7-odd weeks this year, with interest rates heading lower, albeit slowly. Have you seen any improvement in the U.S.? Heath Sharp: No, not really. Operator: There are no further questions at this time. I'll now hand back to Mr. Sharp for any closing remarks. Heath Sharp: Okay, do we have any questions online? Philip King: They've all been answered, Heath, with the extensive Q&A we've already had. Heath Sharp: Okay. Very good. Look, I'd like to thank everyone. It was a long call as someone mentioned, but I thank you all for your interest this morning, it's certainly been an interesting half for us. But as we sit here, we're actually really quite optimistic and energized as we head into the second half. I think a whole lot of externalities, which have impacted us over the last little bit and a whole lot of direct action that we have taken and are taking that's going to set us up really quite well to do better in the second half and beyond. So with that, we will get back to it. Appreciate everyone's time. Thank you. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Fredrik Ruden: Good morning, everyone, and welcome to EG7 fourth quarter earnings release. My name is Fredrik Rüdén. I'm Deputy CEO and CFO in the company, and with me, I have my colleague and the company's CEO, Ji Ham. We will start with the presentation and then end with a Q&A session. And if you have any questions, please e-mail our Investor Relations e-mail address, and then we'll take that by end of this. So by that, I hand it over to you, Ji. Ji Ham: Thanks, Fredrik. Good morning. Thank you for joining us this morning. Let's go to the first slide. We're pleased to report SEK 437 million of net revenue for the fourth quarter, a strong ending to our 2025. Net revenue declined 4.4% from the year before, excluding foreign exchange impact, SEK 80 million of adjusted EBITDA, which represented 18.2% margin. Some of the key highlights for the quarter included Daybreak delivering strong results with 11% net revenue growth year-over-year, and that's in local currency, excluding foreign exchange and adjusted EBITDA, which came in 26% higher at SEK 33.4 million for the quarter. Palia continues to perform well, 146% net revenue growth year-over-year. And now it is the largest revenue contributor for Daybreak's live game portfolio and Big Blue Bubble, even though it's performed -- had some difficulty throughout the year, December was a great ending to the year with a 27% growth in MAU and 59% net revenue sequentially growing from November. And that momentum is also carrying into January, which is a great sign. And Fireshine, net revenue grew by 10% year-over-year, and Jurassic World Evolution 3 physical release in Q4, along with digital launches of A.I.L.A and Lens Island contributed to that revenue growth. Next slide, please. For the full year 2025, SEK 1.6 billion of net revenues. When you exclude foreign exchange, net revenue declined by 1.1%. Adjusted EBITDA came in at SEK 254 million and margin was at 15.6%. Some of the key achievements that we had throughout the year. Daybreak portfolio has performed really well for the year, live titles, Lord of the Rings Online, Dungeons & Dragons Online and DC Universal Online, all back to growing and demonstrating growth and that momentum carrying into 2026 as well. And Palia, one of our main highlights for the year, platform expansion into PlayStation and Xbox with 70% year-over-year net revenue growth, when you compare the second half of 2024 to second half of 2025. And Fireshine is continuing to grow with this indie digital publishing, a nice revenue growth for the year and continuing to build out the back catalog with Core Keeper being a main component of that growth in addition to the physical distribution business that continues to do well. Petrol is back to profitability. And along with Petrol being back to profitability, all of our business units for the group is now cash flow positive, contributing toward growth. Next slide, please. Some of the headwinds that we encountered for the year, one of the main ones, foreign exchange impact, net revenue declined by 1.1% for the full year when you exclude foreign exchange, but without that, actually looking at it just from SEK, you're looking at 5.1% decline. So there is a significant distortion in our numbers with foreign exchange swings, which has been very volatile for 2025. So this is something that we are looking into, being able to present our numbers in a way that presents it in a more comparable manner for investor base and shareholders to be able to understand it better. So looking at the local currency versus looking at -- just looking at it from a SEK perspective, which has a lot of this distortion that's coming in with the volatility in the foreign exchange is what we're aiming to do. So going forward, we will be looking at better presentation of our numbers so that our investor base could understand that better. My Singing Monsters is another one where we had lower user numbers throughout 2025. This was an unexpected decline in the springtime with a lower organic user acquisition that lasted until December when we had the trends reversed pretty meaningfully with the viral uptick that happened with a successful collaboration with a big influencer on TikTok, but this was unexpected. And that did impact our revenues and profitability to be lower for 2025. We're very much encouraged by the reversal that's happened in December and that momentum carrying into January. EverQuest IP infringement, so this is another one that's impacted our performance for Daybreak's portfolio of live service titles, especially EverQuest. Good news is that Daybreak did prevail here. We were able to win a preliminary injunction, shutting down the competitive title that was infringing on EverQuest IP. But nonetheless, that event did have a negative impact on EverQuest performance for some time throughout 2025. There is a positive momentum with EverQuest with the injunction having been put in place. We're getting users back. EverQuest is performing well again, but once again, some amount of impact that resulted in Daybreak's numbers being lower this year because of this situation. But for 2026, we do expect trends to normalize as we gain players back from this particular situation going forward. Cold iron game release delayed. So this one is a big one, right? So for 2025 originally targeted for release, this now is being delayed to Q3 2026. So we're making great progress there. We do expect this game to be contributing significantly for our performance of 2026. But nonetheless, that delay is something that has impacted our 2025 performance to a certain extent. Piranha Games net revenue declined by 45% year-over-year. This was due to MechWarrior 5: Clans having released in Q4 2024 and no new game release for 2025 for Piranha. So when you look at the comparison of product and content slate and pipeline for Piranha comparing '24 to '25, you see that decline in its net revenue and profitability. Otherwise, we had some restructuring in order to get businesses like Petrol get back to profitability. We also had some significant impairment cost along with the Q4 that did impact our 2025 negatively on the profitability side. Next slide, please. Looking forward for 2026 and beyond. So the Daybreak momentum, we have encouraging momentum coming at a number of our titles. DC Universal Online, LOTRO and DDO, all demonstrated nice growth for 2025. And once again, we do see that momentum carrying through 2026 as they're coming out of the gates quite strongly for 2026. Palia expansion, second annual expansion is something that we expect to release sometime late spring. So we're excited for Palia to continue to grow. 2025 was a pivotal year for the game. We expect the additional content that we could bring will continue to build on that momentum and get Palia profitability and become a meaningful contributor, bigger than where it is today for the entire portfolio. Cold Iron's game launch, we're looking at Q3 2026. As mentioned, this is something that we have invested significantly in. We're quite optimistic about its potential performance and looking forward to its release in 2026. Fireshine's pipeline, Fireshine continues to grow with their indie digital publishing business, 10 titles currently forecasted for 2026, about 50% in digital, 50% in physical. And one of the key titles that they're seeing a lot of positive momentum around is Far, Far West. So it's a brand-new title that's already been announced. 400,000 players have come into play test the game and their Steam wish list is approaching 400,000 people. And based on that early signs, we are quite excited and also encouraged by the potential positive performance from this title coming from Fireshine later this year. Long-term targets, growth targets that we are retracting at this point. We did announce our 2026 target at Capital Markets Day in 2023. We are revisiting that given some of the delays with our product pipeline, including Cold Iron's game. So we intend to schedule another Capital Markets Day coming in Q1 2027 to be able to talk about our updated strategy or targeted and our expectations for what we want to deliver from the shareholder and shareholder value creation. So that's coming up next year. But for now, we are retracting our 2023 announced Capital Markets Day guidance for 2026. Next slide, please. Fredrik, over to you. Fredrik Ruden: Thank you, Ji. Next slide, please. Fourth quarter net revenue was SEK 437 million, representing 4% FX-neutral decline. The difference from fourth quarter last year is mainly attributable to SEK 49 million lower net revenue from the launch of MechWarrior Clans in Q4 last year and a significant SEK 53 million impact from unfavorable currency fluctuations. Net revenue increased from previous quarter, explained by strong fourth quarter momentum, as we talked about, supported by content upgrades in several titles such as EverQuest, Palia and an active release pipe for Fireshine. The full year net revenue was SEK 1.626 billion. The full year adjusted EBITDA margin was 16%, which is a bit low but pretty much in line with historic average. Next slide, please. More predictable revenue comes from the live service and back catalog titles. Net revenue from this portfolio was SEK 346 million, representing 4% growth. And to show growth despite unfavorable currency movements in this cash generative and more predictable part of the business is mainly a good indicator on how we perform long term. Over the last 12 months, net revenue amounted to SEK 1.626 billion, of which SEK 1.273 billion derives from the more predictable revenue base. And the two most cash-generative businesses, Daybreak and Big Blue Bubble are included in these figures and delivered, excluding Palia, a net revenue of SEK 873 million, with SEK 189 million EBITDA. That's a KPI that we mentioned now and then. So EBITDA minus capital expenditures. So this corresponds to an EBITDA margin of 22% in 2025. Next slide, please. Daybreak is the largest contributor to the net revenue, generating SEK 195 million. And as Ji pointed out in SEK, this is a decline but represents an organic increase in local currency of 11%. This increase is explained by generally strong momentum fueled by content upgrade Ji mentioned and a strong 70% growth for Singularity 6 in the second half of the year. And Singularity 6 was acquired 2024 and consolidated from July 1. So the second half of the year is the first kind of real comparable period that we have. The adjusted EBITDA came in at SEK 33 million, corresponding to 17% EBITDA margin. And Big Blue Bubble delivered net revenue of SEK 55 million corresponding to a 32% decline in SEK or CAD 23 million. And we mentioned this also with the drop in active users over the year, but an uptick between November and December due to a new influencer strategy. And this gave an activity peak in December, which also generated a good start of January. So the net revenue in November was CAD 2.1 million. And in December, it was CAD 3.3 million which is the highest ever since the massive viral peak a few years back. And in January, the preliminary net revenue is CAD 3.1 million. Next slide, please. Net revenue Fireshine was SEK 126 million correspond to around 10% growth in local currencies and 1.5% in Swedish krona, which is explained by the physical release of Jurrasic world Evolution 3 and digital releases of Palia and Lens Island, and adjusted EBITDA was SEK 16 million. And in the press release that we sent out this morning, we also highlight some trends. So -- and in there one message is that we have successfully invested in transforming Fireshine towards digital releases, which give resilience from the physical decline and a more diversified and future-proofed pipeline going forward. And over the past 5 years, the high-margin digital net revenue increased from nothing to GBP 11 million in 2025 and Petrol generated SEK 27 million in net revenue, but with a negative EBITDA, which, to some extent, is explained by a write-down of that debt. Next slide, please. Piranha delivered net revenue of SEK 34 million with an adjusted EBITDA of SEK 11 million, correspond to a 31% margin. And what Piranha is doing is that they continue the successful leveraged DLC strategy for MechWarrior. Next slide, please. Our financial situation remains solid. We invested SEK 61 million, of which SEK 42 million divided equally between Palia and Cold Iron. The level of investment in the more predictable revenue base remained low. Operational cash flow increased to SEK 74 million, which is approximately SEK 40 million higher than the adjusted operational cash flow in previous quarter. And by end of the quarter, we had SEK 43 million in net cash position and SEK 390 million in cash. And we still have the flexibility in the unutilized revolving credit facility of SEK 100 million and the potential of issuing more bonds with the SEK 1 billion frame that we have. Next slide, please. So to improve the transparency for investors to evaluate the company to structure foundation for potential strong value creation, the Board has in the beginning of 2026 taken several initiatives, which for clarity were communicated in separate releases, and Ji mentioned this also. So we will conduct a strategic review. We will, during 2026, evaluate all ongoing projects. And based on this, present a strategic update when all important data points have come to surface. We have also agreed to accelerate the contingent consideration for Daybreak. And for those who remember this, this derived from a 15-year tax deductible amortization of which the benefit was agreed to equally be shared between buyers and sellers when Daybreak was acquired. So now we have agreed to pay SEK 5 million for the years 2024 and 2025, and another SEK 6 million for this year and all future remaining years. And what this will give us is improved annual cash generation of USD 1 million to USD 3 million per year over the next 12 years. It will also generate a positive impact to net profit for 2026 and it terminates the continued consideration related party relationship. And in addition to that, we did an impairment of SEK 2.51 billion, of which SEK 1.86 billion is not correlated to performance expectation in any ongoing projects, but it is reflecting a strategic decision to move game development to a more cost-efficient geography. This gives also SEK 120 million lower annual amortization for 2026, which also improved our potential to generate positive net profit. And the last press release this morning then aimed to increase transparency. And in today's press release, we show several local currency KPIs over the past 5 years. We also point out important trends and the value of the tax losses carryforward. And for further information about these releases, please have a look at them yourself. They are all presented on the Internet already. So by that, I hand over back to you, Ji. Ji Ham: Thanks, Fredrik. Let's go to the last slide. Next, please. So some of the key takeaways for our Q4 as well as the year-end 2025. Positive signals in terms of our core franchise is delivering nice growth, so Palia growing by 146% year-over-year for Q4. And the number of Daybreak live titles performing really well, demonstrating growth for 2025 with strong momentum going into '26 and Big Blue Bubble once again softer 2025, but we're very encouraged by the momentum that they're showing with the viral uptick that they experienced in December, and that's following into 2026. That should be providing a nice foundation for progress for 2026. And secondly, we have key launches set to really drive growth for 2026. Q3 release target [indiscernible] for Cold Iron's title, which we're optimistic for performance to make significant contribution to the group's overall performance for 2026. Palia has got its second annual expansion coming out, sometime next spring. Last year's expansion did extremely well. So we're very encouraged by the new update with new content, new features and systems that the player and the communities will be able to really enjoy to continue to grow that community and the game's performance. And Fireshine is continuing to grow with 10 new titles planned for 2026, 5 physical, 5 digital and digital titles being something that we continue to build that baseline foundation of that catalog revenue, which becomes very much recurring and mimics live service titles in many, many ways. So we're looking forward to their continuing growth there. And Daybreak's proven franchises, overall portfolio showing strength. EverQuest rebounding from 2025 as well as these number of games that we mentioned as continuing to show momentum from '25 coming into 2026. And lastly, strategic actions underway. Board has been very active to start out 2026, highly focused on delivering shareholder value here, so increasing transparency along with additional data that we shared relating to a number of our titles and business units, balance sheet cleanup with accelerated contingent consideration settlement that Fredrik talked about, also laying the groundwork for that value creation. We're looking forward to being able to share a lot more about where we want to take the business, where the group could go and what type of value creation we could deliver with a strategic framework that we intend to present through a Capital Markets Day that we hope to host first quarter 2027. So that concludes our Q4 presentation, and we will follow with the Q&A session. Fredrik, back to you. Fredrik Ruden: Thank you. So having a look at the questions we have received. So here's one Hjalmar from Redeye. Do you believe that improved performance for My Singing Monsters is sustainable? Ji Ham: It's too early to tell, but nonetheless, once again, part of the decline related to My Singing Monsters in 2025 was a lower engagement on platforms such as TikTok and in December, along with that partnership that they were able to establish with a very well-known influencer, they were able to get that engagement level on TikTok significantly higher. The strategy going forward for Big Blue Bubble is to be able to continue those types of partnerships. So on a quarterly basis, they intend to work with influencers to feature My Singing Monsters' content and keep the engagement high on social media platforms, such as TikTok to continue to push and maintain that engagement level. So while it's too early to say whether December uptick and what momentum we're seeing into January is a sustainable momentum for the long term, we do believe the strategy that Big Blue Bubble is going to be undertaking is something that could be replicated for similar type of success going forward. Of course, it depends on what type of influencer, how many followers they have and et cetera, but nonetheless, along with them investing into this effort, we do have optimism that Big Blue Bubble will be able to continue keeping the players highly engaged for social media platforms. Fredrik Ruden: What are your expectation for Palia from here? Is it stable at a new level? Or do you see further upside potential? This is also from Hjalmar at Redeye. Ji Ham: Yes. We expect Palia to continue to demonstrate growth. The game is not complete yet. It's not quite 1.0. 2025 was a major step, along with the expansion release and also expanding to PlayStation and Xbox last May, but they followed that up with significant additional feature and content update that happened in September as well as in December 2025. And going forward, they intend to have these big annual expansions that come out, so it was May last year, we're intending that this could be May of this year as well, subject to development is progressing. And along with that, they're going to be bringing significant amount of new content, new ways to play, lots of additional content for community to enjoy, to expand the game and also expand gameplay type for the experience. So we do think it's a multiyear journey for them to continue to grow and continue to build out the overall experience for the community, but with a lot of what's planned for 2026, there's a lot of excitement for what they could bring, and we expect that to drive additional growth for Palia for '26 and beyond. Fredrik Ruden: Thank you. How firm is the release date of the Cold Iron game project? Is it mainly timing or optimized sold units? Or does the game still need additional polishing? Ji Ham: Yes. So based on where it's trending and what we know today, we do have a high degree of confidence for Q3 release. And as with any other game, it's never done until it's done. So there's continuing effort going into polishing as well as improving the game, but nonetheless, based on the trajectory and the momentum around the current development, we do expect that Q3 is a very good target for when we could release the title. Fredrik Ruden: How should we view the MechWarrior franchise following the write-down? Is the IP still relevant for your long-term portfolio? And I can explain -- I can take that one. So the write-down was reflecting the Clans game, which was one major game that was launched in 2024. And even though that game generated very high meta critics and the quality in itself, it didn't meet our commercial expectations. And the book value of that title and the DLC connected to the regional game, that was what we wrote down. So long term, MechWarrior, the DLC strategy that we have for Piranha is something that we will continue to evaluate. I don't know if you want to add something to that, Ji. Ji Ham: No, I think that's exactly it. So it's not so much about the MechWarrior IP itself because we see that MechWarrior Mercenaries DLC is performing really, really well, as evidenced by DLC #7 that came out in September of last year. So we still do believe that there's continuing upside with the IP itself. But as to the Clans title, that did underperform our expectations, and that's the reason why we did take that write down. Fredrik Ruden: Can you explain a bit more about the write-down and shift of development assets to Canada? And this is a question we get from a couple of the investors. Will it lower your employee cost in 2026? Ji Ham: It's something that we believe will create significant value going forward in terms of lowering the overall cost of development. So when you look at, let's say, British Columbia province in Canada, when you look at the staffing cost of that particular area versus what we have in the U.S., the cost differential could be as great as 40%. So in California, which -- where Daybreak is based, we have a significant number of staff here, including Singularity 6, working on Palia. Talented group of team members that we highly [indiscernible] even they continue to do amazing work for us. But as we think about building out additional capabilities for new titles, or whether it's backfilling loss of employees on our current teams or building out new titles that we may be investing -- we may want to invest in, it's very compelling for us to be targeting growth in a region like British Columbia, where cost of development per head could be as low as 40% below where California cost us. Hence, the reason why, whether it's a new title utilizing third-party IP or an IP that we may own, we want to spin up a new team for that particular effort. We do think it makes a lot of sense to be setting up a studio, which we already have. We did set up a brand-new studio under EG7 ownership in British Columbia and for future titles, as well as existing teams looking to build additional staffing for content development, we are looking to move development into Canada to augment what we're already doing in the U.S. So yes, it may not be super immediate in terms of, hey, does 2026 cost of development go lower than where we are today. It may take some years. Nonetheless, I think for the long term, being able to have a balanced approach of not only having our existing teams based in the U.S. continue to do what they do but building out new products, we're augmenting our teams in the U.S. with lower cost, but highly talented staff based in Canada, I think ultimately will create nice value and lower overall cost of development for the organization. Fredrik Ruden: Thank you. And I think this is a question for myself, from Mikael [indiscernible]. In addition, EG7 is focused on cleaning up the balance sheet and delivering an improved and positive net profit number for 2026, among other things, giving flexibility to both dividends and share buybacks under the current bond agreement. Can you please elaborate about this? Yes. So the impairment takes out not only a risk of potential write-down in the future but also reduces or could potentially in this case, it reduces the annual amortization by SEK 120 million. Both write-down and amortizations have a negative impact on the net profit. In the bond terms, we need to have positive net profit to be able to do buybacks or dividend. So by doing what we have done now gives us subject to that we deliver a positive net profit for 2026, the possibility to do dividends or buybacks after 2026. So that's an important alternative, which also was communicated from the owner group represented by the Chairman in November, if you remember that. Okay. So I'll look further in this list of questions. Are you still going to focus on M&A growth? Ji Ham: Yes. We do believe M&A is an important aspect of our continuing efforts to grow. Of course, we have our organic investments and existing portfolio of games that are performing well. But nonetheless, in order to accelerate growth, we do want to also target strategic opportunities that makes sense. But we have been very selective, we have been very careful given the market circumstance. We are looking at multiple opportunities. We turned down a lot more than we have spent time on. There are interesting opportunities that still exist, but we want to be quite, I would say, prudent and careful about deploying capital and in situations that ultimately aligns really well with what we're trying to do going forward. So yes, the short answer is yes, absolutely. M&A is a very important part. As to how aggressive we intend to be and how quickly we could secure deals, we want to be very prudent in terms of evaluating and also securing deals. So it's not a core, I would say, in terms of where we are today that could predictably drive growth, but we do want to make sure that it's part of our strategy going forward. Fredrik Ruden: I can take this question also. It's also from Redeye, Hjalmar. Will Fireshine continue with physical publishing or is the write-down an indication that this business is not profitable? So the -- if you have the right kind of cost base then physical publishing will also be profitable. You have lower operational profit margin on that, maybe around 10% compared to the digital, which is more scalable. But since the physical part has gone down historically and will continue to go down, it's not -- it hasn't the same kind of future resilience, which is something that we think is challenging for Fireshine forward, as long as we keep getting physical missions then we will continue doing that. But I think the important thing looking at Fireshine that we have invested around GBP 50 million over the past 3 years to grow the digital release pipeline up to where we are standing at this point. And I guess that's the most important value for Fireshine going forward. So in 2025, we reached GBP 11 million in net revenue from that part. So that's the answer to that question. This is a question for Elia Ivanov. How much additional funding is still required to reach the Cold Iron launch? And what we have communicated there is that we have another USD 4.5 million that we -- U.S. dollar that we will invest in developer advance. I think that concludes the Q&A session. So thank you, everyone, for listening into today's call, and have a good day. Ji Ham: Thank you, everyone. Goodbye.
Stefan Wikstrand: Good morning, everyone. And whilst we're waiting for the attendee list to fill up. [Operator Instructions] And then we'll answer them when we get to that point on the agenda. But I think attendee list seems to be not moving anymore. So then I will hand over to Vlad for the remarks for the fourth quarter. Vladislav Suglobov: Thank you, Stefan. Welcome, everyone, to our report. I'll start by giving you a brief overview of the quarter. Stefan, can we move on to the next slide, please? So revenue declined 9% year-over-year in USD terms. But because of the exchange rate changes, it went down 21% when expressed in Swedish krona and was SEK 221 million for the period. Sequentially, it was down 2% from Q3 to Q4 in USD terms. And looking at the 3 main pillars of our revenue generation, our 3 main games, we have achieved stabilization of 2 of these. Hidden City had a strong performance during the quarter. It grew sequentially 8.3% from Q3, really strong result. Sherlock declined sequentially by 5% after delivering a strong performance in Q2 and Q3. And looking at the same -- looking at the game year-over-year, it declined only by about 5%, which was significantly less than before, even in the first half of the year. Its performance was negatively affected by specific events that happened in November. But outside of November, the underlying trend remained consistently strong. So we consider that Sherlock and Hidden City are stabilized in revenue. But at the same time, we have the Jewels family of games that declined year-over-year by 19% in USD and sequentially by 12%. And the performance of Jewels family of games is the reason we continue to see the revenue decline for the group. The team has a plan to fix this performance, but it is not a fast plan to execute. We expect to see improvements by the middle of the year, or we will consider what we call harvesting the game, which is optimizing the team to the minimum to produce the best cash flow while the game continues to decline. So that's basically the reason you're looking at negative trend in the top line in this quarter. Monthly average gross revenue per paying user hit a new record of USD 71.7. Our gross margin reached an all-time high of 71.6%. That's up from 69.1% last year, thanks to the continued success of G5 Store. During the quarter, we continued to build momentum in strengthening the top line revenue performance. We increased UA spend to 23% of revenue on the higher end of the previously communicated range compared to 17% last year. We intend to remain on the higher end of this bracket going forward in an effort to stabilize and turn around the top line trend. We will continue to invest profitably in the growth of our portfolio revenue through existing and new games in order to turn around the top line dynamic. Earnings in the quarter were impacted on one hand by the currency exchange related to the weakening USD, which is the main currency of our revenue generation, and on the other hand, by the increased UA spend. At the end of the quarter, our cash position stood at a strong SEK 216 million. It is actually virtually unchanged compared to the end of Q3, if adjusted for working capital fluctuations and USD-SEK exchange rate. We remain debt-free, and we continue to have a strong balance sheet, something we are very proud of. And on the right side, you can see the chart of G5 Store continuing to take over the percentage of the total net revenue generation in the company quarter after quarter. With that, let's move on to the next slide. And let's talk about G5 Store with a bit more detail. It continues to deliver solid growth. It became our second largest distribution channel now, up from being the third, and the way it's going, it may soon become our #1 distribution channel. We wouldn't be too surprised. The low single-digit processing fees have increasingly become a key driver of our margin performance, given that third-party app stores typically charge between 12% and 30%. This cost efficiency directly contributes to our improved profitability and the expansion of our gross margin. During the quarter, G5 Store accounted for 23.4% of total gross revenue, up significantly from 16% last year. And furthermore, the G5 Store played a key role in stabilizing Sherlock and Hidden City as these games continue increasing the audience and revenue on G5 Store for over 5 years now. Gross revenue growth for G5 Store in USD terms was 20% year-over-year and 3% sequentially. In addition to the continued progress with G5 Store, we continue to gain momentum with processing payments of our players on mobile platforms directly. Web shop and other G5 systems that internally we started calling G5 Pay, allow players on mobile platforms to make payments directly to G5 through their browser, which dramatically lowers the payment processing fee. During the quarter, such directly processed revenue accounted for 6.4% of total net revenue from mobile platforms, a substantial improvement compared to only 3% in Q3. And we believe that this percentage has more room to grow in the coming quarters. As mentioned in the previous quarters, we will further scale the revenue of G5 Store by opening it up for distribution of third-party games that are or were successful on mobile platforms. We have now launched the first 2 games late in the fourth quarter. And we see very encouraging results. We consider it proven at this point that distribution through the G5 Store can create a very attractive incremental revenue for mobile developers. Based on what we see so far, after only 1 month on the G5 Store, quality games can make up to an additional 15% of their mobile revenues through the G5 Store. We will scale this initial success, both through acquiring users into the distributed games, and through bringing more great third-party games to the G5 Store. The interest in the distribution on the G5 Store is growing among third-party developers and the number of new games are already added to the G5 Store. Our goal is to have a curated catalog to bring more high-quality games to the G5 Store and maintain high player satisfaction. As we increase the number of games on G5 Store and expand user acquisition, it may start positively affecting the overall top line dynamic in the coming quarters. I would also add that this initiative with third-party game distribution in G5 Store leverages our experience as a publisher. As you know, we've had a lot of success publishing premium and then free-to-play games on mobile platforms. And we've created some very prominent hits through these partnerships. So the developers know us. There is good traction in attracting games to the G5 Store, because it's a well-known business model for the company, and we have very good understanding of what developers need. And for the majority of developers right now, an incremental revenue from other platforms is a very important thing to have. So I think we are doing it at a good moment in time. With that, let's move on to Slide #5 and talk about -- look a bit more in detail on the quarter leading up to another record gross margin. So our own games accounted for over 70% of net revenue and active own games accounted for 61% of total net revenue, down slightly from 62% last year. This has to do with the improvement of the performance of Hidden City. Our gross margin reached a record high of 71.6%, up from 69.1% a year ago, primarily due to the continued growth of the G5 Store. Monthly average gross revenue per paying user reached a new high of USD 71.7 and it increased 1% sequentially and 9% year-over-year. This reflects the continued trend for the improvement of the underlying quality of our audience. G5 Store is a key factor with its generally higher paying users, players and overall smaller player numbers than on mobile platforms. In the quarter, we also saw at first in a little while a sequential improvement in the broader audience numbers, where MAU and MUU grew by 1% and 2%, respectively, while DAU and MUP declined 1% and 2%, respectively. All in all, basically a stable sequential performance when it comes to audience metrics, which is a significant improvement compared to previous years and a testament to the stabilization of Sherlock and Hidden City. Let's move on to the next slide. Let's look at our operating profit for the quarter. Operating loss for the period came in at SEK 6 million compared to profit of SEK 32.8 million last year, and this resulted in an EBIT margin of minus 2.7% compared to positive 11.8% last year. The lower EBIT was impacted by foreign exchange revaluations. Adjusting for that, the EBIT margin would be positive 0.8% compared to 9.6% last year. And even bigger impact on EBIT was the increase in the amount of user acquisition that I spoke about, that we have deployed during the quarter to stabilize the revenue of 2 main games, Sherlock and Hidden City, and also to support the scalability test of the game called Twilight Land, which was unfortunately discontinued based on the results of this test. So UA increased by 6 -- by whole 6 percentage points compared to Q4 2024. And during the quarter, the net capitalization impact on earnings was SEK 0.8 million compared to minus SEK 3.0 million last year. Now let's turn to the next slide to talk about our cash position. Capitalization impact on cash flow was minus SEK 23.2 million, less than the minus SEK 25.5 million last year. The movement of working capital was negative minus SEK 26.4 million compared to minus SEK 21.5 million last year. We have large fluctuations in working capital between the quarters with a few large counterparties. In Q4, we also see some year-end effects from earlier payments. Total cash flow during the third quarter was minus SEK 31.1 million compared to positive SEK 18.9 million last year. Total cash at the end of the period stood at a strong SEK 216 million, down from the same period last year. But, again, one has to remember that our business primarily is denominated in USD and that we are holding our reserves in our functional currency in the USD, which declined about 16.5% to SEK compared to the close of 2024. In USD, we closed the quarter with USD 23.5 million compared to USD 25 million a year ago, not that much of a difference. And also buybacks of SEK 2.7 million were made during the fourth quarter. All right. And that was the last slide on performance, and let's sum it up and some outlook for the future. As we enter into 2026, we have multiple strategic initiatives that we are pursuing. We will continue to execute on the G5 Store strategy and expand our third-party offering with additional selected high-quality games from the initial launches that we have made. Once again, we see that high-quality free-to-play games have the potential to earn up to 15% in incremental revenue from launching of G5 Store. We will continue developing G5 solutions for processing payments from players on mobile platforms directly. These are web shop and other modules that together we call G5 Pay. We want to see the percentage of payments for mobile platforms made directly to us grow over time. We'll continue to work on stabilizing and growing our main revenue pillars. Sherlock and Hidden City are starting to perform better and the road map of improvements will be implemented for Jewels of Rome in the first half of the year. For user acquisition, we will continue to be in the higher bracket of our previously communicated range of 17% to 22% of revenue. We have promising games in the pipeline, one of which is showing the best metrics we have seen in soft launch. That's cautiously encouraging. We have also formed several smaller agile teams that are rapidly testing innovative game concepts at a higher pace. So -- and we are excited to see what will come from that area in the next few quarters. Resources that were freed up from the Twilight Land game, that was closed as I mentioned, were reallocated to strengthen these strategic initiatives or let go. We will continue to work actively on the cost structure to maintain the high momentum we have in the product and in the G5 Active store development, while also being fiscally responsible to be able to continue to fund these initiatives from operations. We continue to have a strong balance sheet and 0 debt, a foundation to be able to pursue all the initiatives that we have going as we enter into 2026. And thanks to our stable performance, we are proud that the Board was able to propose a dividend of SEK 2 per share, corresponding to approximately SEK 15 million. With that said, I would like to thank the whole G5 team for their outstanding work in 2025, and I look forward to a prosperous year ahead. This concludes our presentation, and let's open the call for questions. Stefan Wikstrand: [Operator Instructions] We have a few of those already there, so we'll get back to those. But we'll start with Simon Jonsson from ABG. Simon, you're -- there you go. Simon Jönsson: I have first a few questions on G5 Store. And I wonder what's your visibility in third-party games joining? Do you have like a prospects lined up? Or how does it work? Vladislav Suglobov: Well, we have -- we know -- we happen to know a lot of studios that we worked with over the years or that we know through industry contacts. And we have a business development team that basically knows the industry, and they know developers of a certain caliber, that we believe is the sweet spot for us, for the G5 Store, that we believe can really benefit from launching their games on G5 Store. So there's a balance to be found between the quality of these games and the size of their business so that this additional revenue through the G5 Store can be sizable enough for them, but the games are successful enough that we can expect them to perform really well on G5 Store. So you can think of developers that have games that are roughly the size of our games, for example, or approaching that. And we -- as I mentioned, we have very large developers actually very, very much interested because the situation in the market is that everyone is looking to maximize the revenue through -- incremental revenue through different channels. And in that sense, G5 as a channel, as we've seen with the first 2 games that we've launched, really delivers. So we are being thoughtful about who we invite on G5 Store and a little bit selective, but we also want to try some genres that we actually do not have in our catalog, as you can see from the first releases, but we can be even more bold and try genres that are further away from our core offering. So a number of deals is already signed and the developers are working on providing the builds that we will launch in G5 Store. This is already ongoing and new deals are being negotiated as we speak. So there's -- a little pipeline of games is formed. We don't want to bring tens of games or at least not yet to G5 Store in 1 year, but we will look at the performance of the new releases and decide as we go. Simon Jönsson: All right. Yes, that makes sense. Then on the cost side, I mean, are you taking costs for this -- the third-party initiative right now, like upfront costs, which is weighing on the margins? Or is this -- are those potential costs quite negligible? Vladislav Suglobov: Well, we certainly have to develop certain SDKs and frameworks to be able to launch external games. So -- but the team -- the platform team that does it is relatively small compared to teams that actually do make games. So it's not very significant. When it comes to the deal terms, I wouldn't want to reflect on specific deal terms, but it's kind of a usual industry standard for distribution of games. And they are -- they're not very costly, so to speak, as usually in distribution, because we're not talking about funding the development or exclusive publishing. So these -- the commitments that distributors make, they're relatively limited. Simon Jönsson: All right. In terms of you making like some kind of payments for the rights or something like that, is that something you think will occur? I mean, we have seen it in other cases in the industry when companies are using other platforms for distribution. There's sometimes some kind of fee for that, some right. Is that something you think you will have to pay as well? Or do you think that it will be more revenue sharing? Vladislav Suglobov: Well, again, I think that there's clearly a need for the developers that are similar in size for incremental revenue. And it is not the -- I think the practice that you're saying that it exists, it's a practice from different kinds of games and casual games. I don't think that practice even exists. I think developers are quite eager to distribute their games on alternative channels. And I think we are aiming at finding the right partners. The space is very fragmented, as you can imagine. There are many games that are making sizable amounts of money, but they're not like top hit games, and these games can really use incremental revenue. But we're not looking to obtaining like super brand, high -- like high brand recognition games, at least not yet. So that's just -- I wouldn't say that it's relevant to our business model at the moment. There are many developers out there who just want to find additional revenue for their games, and this is what we are providing. Stefan Wikstrand: Yes. But I think I see where Simon is coming from, but it's not like we're paying huge amounts for some exclusive rights that would be kind of significant or take any kind of significant balance sheet risk if we would capitalize that either. So if I would answer that question shortly, if I interpret you correctly, I would say, no. Vladislav Suglobov: Yes. The short answer is no. And again, we're not talking about any exclusive distribution or exclusive partnerships. So it's just a distribution through G5 Store, while developers are free to distribute their games elsewhere. So it doesn't cost us outrageous commitments and everything is within very reasonable, and we're more than satisfied with the initial launch. Simon Jönsson: All right. That's helpful. Then just a final one on the capital allocation. You reduced the dividend as a result of lower earnings, of course. But what's your view on share buybacks now? Is -- Have you changed your view on that in some kind of way? Or what's your view or the Board's view? Vladislav Suglobov: No, we still have the mandate from the Board. We still do make buybacks. We did buybacks in Q4. We're likely to continue doing it in the future. That's -- the position hasn't changed. Stefan Wikstrand: Then we have Erik Larsson from SEB. Erik Larsson: Let's see. Now you can hear me, I think. Great. Yes, I just wanted to follow-up on some of the distribution of third-party games. So it sounds pretty promising, but could you just speak a bit more to how did this -- these initial signs were -- or how did it come in versus your expectations? Have you had to do like material changes along the way these first few weeks? Or just any flavor there would be interesting. Vladislav Suglobov: Essentially, what we are doing with new releases is we are letting them be exposed to the audience that we have accumulated in G5 Store and that continues growing through user acquisition in our own games. And as you know, as always with mobile free-to-play audiences, there is a percentage of people who pay and they drive virtually all of the revenue. And then there's a very large percentage of people who never pay anything at all, but they still play these games. And what is achieved by widening the offering is that we are -- we're making it possible for those audiences that are not monetizing in the games that we have, to monetize in the games that we bring in. We obviously have to think a little bit about the cannibalization. That's why we want to have a curated experience, at least for now and bring in games carefully by sort of complementing the games that we have in our store rather than competing with them. And our thinking was that basically, because we are in a situation where our games are not doing terribly well on mobile, but they continue to grow on G5 Store, we thought there can be other developers in exactly the same situation where they are a little bit stuck on mobile, and they're looking how to increase their revenues, but they cannot do it on mobile. And it may work exactly the same way as it works for our games, which are stable on mobile, but they're growing on G5 Store. And that's exactly what we tried, and that's exactly what we saw is that these games that we brought to the G5 Store, they are very stable. They're unable to grow on mobile stores in the present market environment. But once we put them on the G5 Store and expose them to our audience, they found players, they found paying players and their revenues started growing fairly quickly pretty much organically. And this confirmed our thesis that if we had more games in G5 Store, the G5 Store would be even more successful. So we just need to -- we can help other developers earn incremental revenue, but also bring even larger audience to the G5 Store and improve the offering of games that we have in the G5 Store. So it's an interesting snowball sort of to try and roll down the hill. We've been working on G5 Store and on bringing people to G5 Store for over 5 years now. And we've gathered in G5 Store some of the highest paying users actually, driving the revenues within G5 Store, people who are very loyal to the brand, people who really love these casual games and really love playing them on large screens. So that's our thinking there. And so far, we see confirmations of the original idea that it's worth pursuing. Erik Larsson: Okay. And then just a final question on, I guess, materiality, because it does sound very promising, but at the same time, it sounds like you want to manage expectations. So for 2026, how much impact could this be? Are we talking low single-digits, high single-digits or even double-digits in terms of share of revenue? Just to get a sense if you could comment that? Vladislav Suglobov: From these external games? Erik Larsson: Yes. Vladislav Suglobov: Well, I wouldn't want to set expectations too high. So I think low mid-single-digits would make more sense than aiming even higher. But we -- the truth is we do not know. The games are in route to G5 Store. It's not entirely dependent on us. Developers have to allocate resources to create these versions. We have to test them and so forth. It usually takes time. Time line moves a little bit. We'd like to release as many of the games that we have signed in G5 Store already this year. And then some of the games that we will be bringing into G5 Store this year, they are very big on mobile, but also some are in genres that are a little bit off from our core offering. So we don't know exactly how well they will perform, but it's very exciting to try and launch something very different. So it's really hard to say, but we want to move there as fast as we can and try things. Stefan Wikstrand: And then we have Hjalmar Ahlberg from Redeye. Hjalmar Ahlberg: So yes, also a kind of a follow-up on the G5 Store there. A bit curious on how you see -- I mean, in terms of growth of the total, so to say, players that find G5 Store, I guess you see potential that more players come into these new games, but you also kind of invest UA in terms of getting players that have not found your games coming directly to the G5 Store, if you understand my question? Vladislav Suglobov: Yes. Again, the logic is that we're basically doing for other developers what we have achieved for ourselves in G5 Store, where we have managed to find a way to continue to grow our very high-quality, casual free-to-play games within a PC environment, within our direct store distribution, even when they don't really grow in the current market situation on mobile platforms. And not -- I mean, not only we see organic traffic in G5 Store, and we see a substantial amount of organic traffic in G5 Store, we also do user acquisition as well. We do it for our own games, and we want to try exactly the same thing for third-party games because there's -- nothing is different, except that we will only operate this game within the G5 Store, and we can acquire organic traffic or rather improve our offering within G5 Store, which should benefit organic traffic, but also bring in -- use our knowledge of user acquisition in this environment to bring in users into these new games in the G5 Store in order to cross-pollinate, so to speak, all of these games. And we do have cross-promotion between all the games. So the games that we bring in, they benefit from our existing audience and the cross-promotion exposure within our existing games. But then there's probably going to be situations where our games will benefit a little from the audience that we bring into the other games, third-party games that we bring to the G5 Store. As always, like I said, like 95% of people, or 90% of people never monetize, right? So you can -- you don't have to move around the 10% that monetize, and we try to avoid it as much as possible, basically just try to leave people be if they monetize. But we can move around people who do not monetize in the hopes that they will monetize in some other game that they will particularly like. And so by expanding our offering and by bringing more users through profitable user acquisition in these games and ours, we can continue growing G5 Store, but we can continue growing it with more games than we have now, right? Because right now, our selection is offered to our own games. And when we open it up to games of other developers, this selection can grow several times over very easily. And these games can be really, really good. If our game that makes a certain amount of money on mobile platforms is still growing on G5 Store, there's a good chance that another game that's making this amount of money, about this amount of money on mobile platforms, cannot grow there, can still grow on G5 Store. And that's the thesis that we have. And so far with the first 2 games, we see the confirmation. Hjalmar Ahlberg: Okay. Sounds promising there. And also a question on -- I mean, Jewels, you've been able to kind of stabilize Hidden City and Sherlock, as you said. Are you hopeful for Jewels or do you see that it's more difficult with that -- those games compared to the other 2? Vladislav Suglobov: Yes. Well, this game, unfortunately, has the most game design debt, so to speak. Our thesis is that the match-3 genre has sort of moved a little bit away from this type of games. It's been, I think, about 6 years since we released it. So some catching up needs to be done. And there are some major changes that are coming into the game, which we think will benefit it in any way. Question is whether this will benefit the game by expanding its life cycle and just, like kind of increasing its terminal value, or are we going to be able to actually go back to stabilization and possibly growth. So we will find out in the next couple of quarters. That's the ambition. Hjalmar Ahlberg: Okay. And looking at your pipeline of new games here, I mean, Twilight, as you see, didn't work out to be a global launch, but you still have some new promising games there. How do you think about the process here? I mean, you've changed development funnel to a few years back. Twilight was quite a long time in soft launch. Is this the kind of way it can be going forward? Or do you think it will be quicker processes going forward, I mean, comparing for -- to Twilight, for example? Vladislav Suglobov: So Twilight Land is actually quite old game. So we launched it even before we've changed the new funnel process. So it's the last one that we had in development, which was initiated before the process was put in place. Since the new process was put in place, we've killed quite a number of games and usually in the early stages. I do not think we brought a single game to the scalability phase under the new funnel. So this one that I'm cautiously excited about is the first game that actually made it to the scalability phase, and it was initiated after we have the new funnel process. So we think about it the same way. The problem is that the bar is very high in the market for a number of reasons, including decisions on how mobile user acquisition is being made by large players by their action or in action. It is a very high bar to be able to create a game that is scalable. We will still be doing it. However, this is what makes us exciting about -- excited about G5 Store. That it's -- at some point, you start thinking, well, it's really hard to acquire users on mobile and you have to pay this tax to the app stores, which is quite insane actually. So you are essentially investing money to pay this tax to them, which doesn't make a lot of sense. It did make sense some years ago. Now it's almost impossible to do business this way. So you have to have either a groundbreaking game, which we hope to have. We just need to raise the bar, aim higher or we have to find an alternative way to work with our players. And this is where G5 Store and G5 Pay come into play. If you look at the G5 Store, the size of G5 Store business, it's pretty significant already, and it continues growing. So I think it's time we open it up for other games. And we try to work even more actively on expanding the G5 Store as a direct way to reach our players just by passing mobile app stores entirely. Stefan Wikstrand: Okay. We have one question in the Q&A box currently. [Operator Instructions] What we have currently is from [ Olle 898 ]. I don't know if we have a new Olle or if he just added an 8 in the end. But can you say anything about what happened in Sherlock in November? Vladislav Suglobov: Yes. So let's call it a live ops incident. There were actually several incidents, which affected the revenue. And conclusions were made from that. We hope they will not be repeated. Sometimes it happens. It doesn't happen very often. But live ops is driving a lot of monetization in G5 Store and then mobile stores. And if something doesn't work, there can be material consequences in the percentage of revenue that's lost. And so we had a few hiccups, unfortunately, in November, which affected the performance of Sherlock specifically. Stefan Wikstrand: Okay. That was the last question as far as I can tell. Yes, I think then we'll just wrap it up here. Vlad, any final remarks? Vladislav Suglobov: No. Thank you so much. Very thoughtful questions, and you gave me opportunity to talk about G5 Store, my favorite topic. Thank you again for joining our call today. I wish you a good rest of your day. Stefan Wikstrand: Thank you all. Thank you all. Bye. Vladislav Suglobov: Bye.
Graham Kerr: Good morning, everyone, and thanks for joining us today. On the call with me is our Deputy CEO, Matt Daley; our Chief Financial Officer, Sandy Sibenaler; and our Chief Operating Officer for Southern Africa, Noel Pillay. I'd like to start with safety, where we're seeing improvements in key measures following our sustained effort to improve performance through our global safety improvement program. During the half, we achieved further significant improvement in significant hazard frequency, which demonstrates improved hazard awareness and a more proactive reporting culture. We've also seen positive reductions across our lagging indicators. While the data is encouraging, we're determined to continuously improve our safety performance. Moving to our financial results. I'm pleased to say we have delivered strong financial results for the half, underpinned by our operating performance and higher prices for base and precious metals. Our FY '26 production unit guidance is unchanged across our operated assets off the back of our continued focus on delivering safe and reliable operating performance. This performance enabled us to capture the benefits of the positive market conditions for our key commodities. We've delivered underlying EBITDA of USD 1.1 billion with group operating margin of 28.2% and growth in underlying earnings of USD 435 million. Our balance sheet remains strong with net debt of USD 25 million at the end of the period, enabling us to invest in both high returning growth and deliver returns to our shareholders. Looking ahead, commodity price tailwinds, coupled with planned drawdown of inventories at Mozal is expected to add to the group's cash generation in the second half. Our strong financial performance has translated into high returns for shareholders with today's announcement of a fully franked ordinary dividend of USD 175 million in respect of H1 FY '26 and USD 100 million increase in our USD 2.6 billion capital management program with USD 209 million remaining to be returned to shareholders. We're continuing to work to increase our production of copper, zinc and silver into structurally attractive markets. During the half, we advanced construction of our large-scale long-life Taylor zinc-lead-silver project. And across our broader Hermosa complex, we returned further high-grade copper exploration results from the Peake deposit, which supports the potential for a continuous copper system connecting to Taylor. As part of the scheduled project execution at Taylor, an assessment of project milestones and capital expenditure will be completed in H2 FY '26 and will be informed by the pricing of additional underground and surface infrastructure packages scheduled to be awarded during this period. At Cannington, we announced today a 28% increase in the underground ore reserve while also targeting further potential growth through both underground and open pit development options. Sierra Gorda progressed options to grow future copper production. We have defined an exploration target at Catabela Northeast adjacent to the Catabela pit, ranging from $1.1 billion to $2.9 billion -- billion tonnes, sorry, highlighting the potential for future mine life extension. In addition, the feasibility study for Sierra Gorda's fourth grinding line is nearing completion with an independent review of the feasibility study to be completed by the joint venture partners to support a potential joint final investment decision in mid-calendar year 2026. We're also pursuing further growth in copper and zinc through our Ambler Metals Joint Venture in Alaska. In closing, I'd like to thank our teams around the world for their work to deliver these results. Our operations are performing to plan, capturing the benefits of higher commodity prices. Our balance sheet remains strong, and our performance is translating to increased returns for our shareholders. Looking ahead, we're focused on continuing our positive momentum into the second half of the year and delivering our growth projects in base metals. Thank you. I'm now happy to take questions. Operator: Your first question comes from Izak Rossouw from Barclays. Ian Rossouw: Just a follow-up on what you were saying in the previous call, Graham, around Sierra Gorda. Just wanted to better understand some of the changes you've made there around management, what's driven that? And I guess, obviously, there's been some delay on the engineering and sort of approvals of the fourth grinding line. So just wanted to get a bit more of a background on that. Graham Kerr: Yes. Thanks, Ian, and I appreciate the question. Look, Sierra Gorda for us, obviously, is an asset that we think gives us the right exposure to copper. It was one that we believe when we acquired it was undervalued in terms of its current performance, but also its future options. And those options include the fourth grinding line, that oxide material sitting on the surface, but also exploration potential. So it's great to see the work that's been done to sort of get towards Catabela Northeast, and I think there's a lot more work to be done on that. And obviously, the oxide facility is something we'll have a look at once we settle on the fourth grinding line. The fourth grinding line itself had a number of issues we had to resolve around some work around additional thickness and bringing the thickness up to scrap where we can get a solid state of about 62% to be able to get to that next level of licensing to basically expand the facility. But if I was going to be honest, look, we -- both ourselves and Sierra Gorda probably weren't quite happy with the project Directors' performance. And as a consequence, that probably reflected on the person who is leading the Sierra Gorda business at the same time. So we agreed to make a change about halfway through last calendar year. And as part of that, we brought in a new asset leader as well as a new project director to sort of move into that fourth grinding line role. And obviously, both of them have bought a little bit of a fresh perspective on the project, certainly got it moving in the right direction now, which we're far more comfortable with. Now it's the case of finishing the engineering, having an independent review and then going back to both partners to basically approve it going forward. I wouldn't say materially, there's been a major change in technical capabilities or project execution. It's more been about the quality of the people leading the project, which I think were in much better shape today, plus some of those conditions precedent around the solids, et cetera, that we had to do. Ian Rossouw: Okay. And then just a follow-up on Hermosa around the awarding of some of the surface contracts. You said you're going to do a few more of the underground and surface in the second half. How are we tracking so far against budgets and time lines? You'll do a reassessment in the second half, but just wanted to get a sense of how are we tracking at this stage? Graham Kerr: Yes. So the second half, we always plan to sort of do this review based on when we knew the packages of work were coming in. So to date, if you look at the total spend to date, you're talking about just over $1 billion, and that's about 48% of the schedule we had in the budget. What has worked really well for us has been the first 2 surface packages have come in at the price that we would have expected as part of the estimate. What's also worked well is things like the mobile equipment at the same time. I think the shafts themselves, we just finished the first piece of lateral through development on the 3680 level for the bench shaft, and that was executed slightly ahead of budget and on cost. The shafts, if you look at the bench shaft, that's about 56% complete, so 459 meters of 824. Now that we've finished that first underground mining at 3680 level, we'll start resuming the sink in quarter 3 FY '26. The bench shaft has had some challenges along the way in terms of steel supply, but probably more importantly, a little bit of water at the start, even though water is less than what we expected and some underperformance by Redpath on their side. Main shaft, we're at about 370 meters versus 898 meters. So it's about 41% complete. And the main shaft has certainly taken some valuable lessons from the bench shaft and continues to make much better progress. In saying that when we look at the schedule to date and the trend lines, we don't see any major movements in dates and production -- expected production and capital costs. But again, I'm always saying until we get to the bottom of those shafts because both of those contracts will be time and materials, I'm always nervous. And as we get in the second half of this financial year, we expect to have come in the next 2 packages of surface construction work. We will also have the quote in for basically the underground lateral development. And by the time we start our review, it means probably 80% of the capital would have been committed which sort of puts you in a much better position to do a complete rebaseline. Not certainly raising alarm bells at the moment. It's a normal part of the process. The one unknown besides the shaft for us is also around the tariffs. To date, we haven't seen any material impacts. But in saying that it just bounces around from day to day, never quite knowing where it lands, but that's the environment we're operating in for a period of time. What I would say, what is going really well, all the foundations work on the process plant, the cable trays are all in. And at the same time, our approval, our draft EIS came out in the fourth quarter of our financial year '25. We expect to have the final EIS out in this half. This is our second half of financial year '26. And we're still expecting to have a record of decision, so full federal permits for Taylor, Clark and Peake in the first half of FY '27. So that's been a real great process for us. Ian Rossouw: Great. And then maybe just lastly on the labor side. Obviously, you've previously said where the project is located, there isn't much competition for sort of skilled labor. Is that still the case? Is that still been okay from, I guess, competing against some of the other projects in the north? Graham Kerr: Yes. So I think -- the way I think about it at the moment, we have seen very low rates of turnover in our professional people. We still managed to attract good quality people as the project grows and we start thinking about commissioning and operating and getting prepared for that. People has not been an issue for us. And while there's a lot of projects in the U.S. talked about, there's very few that are actually in the midst of execution like we are. I also think Tucson is not a bad place to base yourself. And the project itself has certainly got a lot of momentum in the U.S., which I think is super helpful compared to other projects that have self started. And I think most people in the industry over there appreciate that we're going to get a federal approval within 4 years, even though we don't need it technically to 8 years into production. Ian Rossouw: Okay. And then maybe just on Brazil aluminum. What were sort of the underlying issues around the performance there? Obviously, it's not something -- an asset you're operating, but just wanted to get a bit more color there. Graham Kerr: Yes. Look, from outside, it's incredibly frustrating because it has been a long, painful drawn-out process, and we've got our third piece of, if you like, revised guidance from Alcoa over the journey of the restart. The most recent event is they experienced some instability in December last year, where they had an unplanned, if you like, outage of 80 pots that need to be taken offline. So that means at the moment, we're back to about 565 pots online versus a capacity of 710, which is about an 80% capacity. Alcoa have deployed a set of specialist people from their operating center of excellence, and they've worked from down there. They provided some more supervision. They've revised the plans. Disappointing to see now the production guidance for '26 has been guided down to 135,000 tonnes. at 140,000 tonnes in FY '27 versus the capacity of 179,000. These are obviously South32 share. We have offered to provide some assistance if we can, particularly as you think about Mozal, Portuguese speaking, a very well-run smelter. It's up to [indiscernible] want to take it on. They certainly are the operator. They certainly understand that we're frustrated and disappointed in this performance. Operator: [Operator Instructions] Your next question comes from Myles Allsop from UBS. Myles Allsop: Maybe -- obviously, it looks pretty clear that with Mozal, it's beyond the point of doing a U-turn and it's going on care and maintenance. I mean what is the estimated cost of restarting it just to give us a sense as and when we come through. Also just on Hillside as well, obviously, there's a bit of a kind of clock ticking towards the power contract renewal. You've talked about decarbonizing Hillside in the past. And if you can't get a green power source, then it may not be part of the portfolio. Could you just give us a quick update on the Hillside side as well? Graham Kerr: Yes. So maybe start with the basics around Mozal just for people on the call. We use about 940 megawatts an hour, 940 megawatts in terms of capacity of power. The smelter is on 24/7, 365 days. So it's a perfect load for utility. We have generally drawn all our power from the Cahora Bassa, which is owned by the Mozambique government by an entity called HCB. Around this time last year, they started to tell us that after 2 years of severe drought that they were lacking the ability to provide Mozal's power needs. That would be at least probably 2 years for the basin to recharge and then they have some maintenance that they need to do, which means we're probably not going to have full power somewhere between the next 2 to 4 years, a little bit unknown. The challenge for that is you need power. It's 1/3 of your cost base, no power, no aluminum smelter. We've been trying to engage to actually get some power off of Eskom. There is no real incentive for Eskom to do that. If you look globally today outside of China, less than 1% of Western smelters have a power contract in excess of 50. The current regulatory environment at the moment and the only formal offer we've seen from Eskom is for us to pay megaflex, which is closer to USD 100 megawatt hour, which makes it totally untenable. So that does mean we have been talking about this for a while about going into shutdown. We were hoping, obviously, that we would have maybe some breakthrough by Eskom. That gives a big impact for our people, roughly 4,000 to 5,000 people that depend on this in terms of contractors, our people and another knock-on impact of about 20,000. People are impacted. It's about 1 in 3 jobs in Maputo. It's probably about 3.9% of GDP. So it will be a significant loss of the government of Mozambique and the Mozambique's economy. So we are planning to go into care and maintenance even if you got me a power contract today that was affordable, it made sense. We have run out of pitch and coke over the next couple of weeks and the lead time on those items are somewhere between 5 to 8 weeks, which you're never going to get it in time to keep the pots running when the power contract runs out. We made the decision in December to stop buying materials because we did not see a breakthrough coming, if you like, on the power contract, and hence, we didn't want to keep pouring money out the door that you were never getting back. Now to actually keep the smelter in care and maintenance, you're probably talking about an ongoing cost of about $5 million a year, 100% terms. The closure and rehab estimate is about $119 million. We wouldn't be looking -- obviously work closely with the government of Mozambique. We wouldn't be looking to go into full closure mode until the HCB power contract and future was understood because once they do come back online, they've got a lot of power and not a lot of offtakers. So this could become viable going forward. The challenge I would say is as you've seen with Brazil, restarting a smelter over a number of years is very difficult. It's not like a mine. So that will be the challenge. Now when it comes to Hillside, Hillside is powered by Eskom. Today, we're allocated pretty much coal-fired based on the grid factor. The reality is Eskom every single week and year is making progress on renewables and nuclear coming into their network. We are working closely with them over time to get a more balanced solution. What we do have is time in that space. We have time because the current power contract doesn't expire until 2031. From a regulatory environment in South Africa, unlike exporting power to Mozambique, there is what's called a heavy industrial tariff that allows Eskom to be more flexible, if you like, on power, considering what impact that has on the country, but also their own performance. The other thing is we sell roughly 30% of our aluminum from Hillside downstream, which goes to people like Hulamin and other, if you like, suppliers who make products out of it. There's a hell of a lot more jobs dependent on this in South Africa and particularly in an area that's sensitive to the ANC around KZN. So we have a lot more confidence in how Hillside is going. And I think certainly, the interactions with Eskom have given us no reason to doubt that they see Hillside is an important part of the equation for them going forward. Myles Allsop: That's helpful. Just maybe in terms of the transition with Matt, can you give us a kind of a quick update on the timing when you'll be handing over the keys? And what advice are you giving that over the next kind of sort of 3, 6 months? Graham Kerr: Yes. Look, absolutely. So Matt joined us last week for his first week, and I'll get him to say a couple of words in a second. Matt had his first week with us in South Africa, where we had a Board meeting for most of the week, he visited HMM. Obviously, this week, he's been in our head office and also going through results presentation and he's on this call. He'll be coming on the road with me for -- on the East Coast to meet all our investors, and he'll be doing the U.S. and other places around the world. And in between that and over the next couple of months, he'll be visiting all the operations. So Matt now has accountability for all the operations reporting to him, and that gives him a chance to understand our business very quickly. And the reality from my side, my #1 objective is to set Matt up for success. So when he feels comfortable and he's ready to go, well, he showed a run going forward. I guess the piece of advice I'd always give him is the key, I think, for our assets because of the geographic spread, because of the age and some of the complexity. Yes the focus there is on making sure that, a, we run our business safely and reliable. The base business needs to deliver on its safety production costs and cash flow commitments to fund the growth of the business. And the next piece for me is delivering on our growth projects because once you come out the other side of Hermosa and Sierra Gorda, you'll be very longed in cash. You've also got some other options in the growth pipeline that I think will be super exciting like Ambler, Catabela Northeast, Clark and some other exploration. But maybe, Matt, a good chance for you to say a couple of words. Matthew Daley: Yes. Thanks, Graham, and nice to meet everyone. Looking forward to getting to see some of you in the coming weeks as I travel with Graham. Listen, early days for me, definitely only week #2, but focus at the moment is getting a really good understanding of the business. So lots of listening and learning, visiting the assets and talking to people across the company. What stands out thus far is you've got a really great quality of assets in the portfolio, generating cash, lots of optionality and obviously, the organic growth projects that Graham has mentioned. And I think the way the team thinks about investment decisions with a real focus on value has just been really, really pleasing. Opportunity for me going forward is just to build off that really strong base, right? So to focus on improving operational performance, managing risk and allocating capital really well. So yes, excited to be joining the team, and thanks very much, Graham. Graham Kerr: Thanks, Matt. Does that help with questions? Myles Allsop: Yes. No, that's very helpful. Maybe one last one because we're getting asked by investors as well around the potential for consolidation in Alumina in Western Australia. And do you think there is a lot of value that can be created? Or do you feel that you're in a relatively much stronger position given where you are with the permitting? Graham Kerr: Look, I think, obviously, we're in a great position in terms of having the approvals for our next series of mine developments. Alcoa was going through that process, which was a long painful process. And obviously, they have different landholdings than we do, some water issues to deal with that we don't. So they're better to comment on that. But certainly, we're very pleased to be past that piece and actually executing on our projects going forward, and they're actually going well. Look, I think in the Southwest, there's been a long history of engagement around things like land swaps, technology exchange. Do I think potentially there is more synergies to be had there? Look, I think that is a conversation absolutely worth revisiting over time. But probably like we were very focused on getting our next approvals. I'm sure Alcoa are very focused on that in the short term. Operator: Your next question comes from Alexander Robert Pearce from BMO. Alexander Pearce: Graham, you've previously highlighted the potential upside from the Sierra Gorda oxide project. Have you got any update on where this project stands at the minute? And has the recent improvement in copper prices made any difference to kind of bringing that study forward? Graham Kerr: Yes. Look, I mean, we probably -- if you think about the order priority, I guess we're sort of focused on the fourth grinding line first because that 20% production throughput increase, I think, is important, lower cost, more copper, et cetera. Catabela Northeast is to understand how attractive could the fourth grinding line to be to feed it. I think the oxide material, we've still got some work to be done on that. There's some early thinking done on it, but I guess we're trying to focus our best people on the other 2 opportunities first. But if you think about that opportunity, that oxide material, we got about 110 million tonnes stockpile there, and it's probably got a grade of roughly about 0.38. I think what we're looking for at the moment is we're completing a feasibility study to understand what we could do around lost low-cost heap leaching. And I think at the same time, there's a number of other operators who are close by that potentially have some capacity. So the key for us is to understand what would it cost to do it ourselves versus what could we do in terms of toll treating it through someone else's plant and what are we willing to pay. And hopefully, we have a greater sense of that towards the back end of this calendar year. Operator: [Operator Instructions] You do have a follow-up question from Ian Rossouw from Barclays. Ian Rossouw: Just a follow-up on that, Graham, around the Sierra Gorda, Spence and some of the other operations in the area. I mean, is there an opportunity for more sort of operational, I guess, synergies? And I guess, as you say, using some of the other capacity, but sort of a more regional consolidation. Just wanted to get your thoughts on that. Graham Kerr: Look, in all these things, there's 3 obviously mines that are super close within the stone throw of each other. If you had your time again, you'd sit back and say, why didn't they sort of do one major piece of infrastructure and then actually use the different products to actually feed that mill would have made the best economic sense. Obviously, that decision was made a long time ago by different people who don't sit in the chairs now. I do think longer term or even medium term from our perspective, there is opportunities to explore synergies between those existing operations and one would clearly be the oxide material at Spence. But also as we understand Catabela Northeast and how big that could be, that gets closer and closer towards Spence. So I think there is a discussion to be had there when the time is right. The challenge in all these things is when you have more and more players involved, it's a bit harder to sort of get, if you like, to a position where everyone feels comfortable. Operator: Your next question comes from Tim Clark from SBG Securities. J. Clark: Congrats on the results. I'm just interested in just a little bit more color on Cannington. You've had a nice reserve increase, which is positive. And then there was a bit of commentary around underground resources and seeking open cost and underground opportunities. There's obviously been quite a big move in the silver price. And in the past, you've spoken about having a very conservative silver price sort of forecast in the mine plan. I wonder if you could just give us a little bit more color on how you're thinking about Cannington and how you see it evolving over the next year or so? Graham Kerr: Yes. Look, I'd start with a couple of points that I think are worth sort of drawing out and some of these were including in our slide presentation today. And the first one is when you look at Slide 11 in our pack, we talked about the zinc-lead-silver margin, which obviously today is Cannington despite the fact that Cannington is almost, what, 28 and a bit years old, and it tells you how old I am because I was a graduate when we were actually building that and I was working there. We're still making margins between the last 3-ish years, 46% to 53%. So it is a high-value business. You've already got the capital infrastructure there. You've got the workforce in place. So anything we can do to extend the life of Cannington I think, is super important and a low-cost option and a return for our shareholders. We would be fair to say probably 18 months ago, I was probably less optimistic about the team's ability to extend the life. This isn't driven by what price in terms of what's happened with the silver price, and we'll come back to the silver price in a second. This has probably been more around the discovery of bit areas of new, if you like, sources of material we can bring to the underground. It does require us to spend a little bit of money in the short term. So over '27 and '28, we will spend roughly USD 65 million to USD 80 million, and that's on some ventilation electrical shaft infrastructure, but that does potentially allow us to increase even further the underground. So what we did announce today was about a 28% increase in the Ore Reserve from 3 million tonnes to 13 million tonnes. And that adds about 2 years life, if you like, to the underground. We think there's more work to be done on that could potentially open up more ore to be added and extend the life of the underground. And one of the slides I did love in the presentation that we shared with people today, again, when you go back to the age of Cannington and you think about when we actually started our journey some of the short life assets from day 1, everyone was asking, well, how long is Cannington going to last for because our Ore Reserve in FY '15 was only 21 million tonnes. We've already mined out 26 million over the time frame to today. We've added back in another 17 million, and we've got 13 left to go. So that sort of gives you a sense of the work that the team has done. And the underground resource itself has about 45 million tonnes. So the job of the team is going to be how much can we extend the life out. We have also done a bit more work on the open pit to have understood the potential of the underground. That allows us to redesign the pit in a different way and probably focus, if you like, on a more value-add way to take it forward as well as we've done some work on some of the remnant old low-grade stockpiles that existed on surface that have been historically difficult to process through the concentrator and the team have found a way through that they can manage that far better. So I think that what that does mean is Cannington has a lot of optionality, if you like, on the base production and how we can continue running it. That's before you consider the silver price. So we would have probably been using a silver price south of $40 when we did all this work. The question is how long does the silver price last for. But certainly, we would expect to complete more work on this over the next, if you like, 12 months and be in a much greater position to know what the future looks like at Cannington, but it certainly is looking optimistic. J. Clark: Very useful. And thank you very much for all of your support over time if we don't get to catch up with you again. It's been much appreciated. Operator: There are no further questions at this time. I'll now hand back to Mr. Kerr for closing remarks. Graham Kerr: Thank you, and thank you, everyone, for taking the time today. I'm sure you're all very busy. I would like to take the opportunity to thank our teams again around the world for the hard work they've done to deliver these results. I think we are running our operations to plan at the moment. We are, therefore, capturing the benefits of higher commodity prices. As always, we pride ourselves on our capital decisions and our balance sheet remains strong. Our strong performance is leading to increased return for our shareholders as our model is designed to. And looking ahead, if you look at some of the spot prices versus the first half, there's more upside. We haven't changed our cost or our production guidance. And at the same time, we've got a series of growth projects in our base metals business to continue to reshape our portfolio. But thanks, everyone, for your time today, and have a safe day.
Stefan Wikstrand: Good morning, everyone. And whilst we're waiting for the attendee list to fill up. [Operator Instructions] And then we'll answer them when we get to that point on the agenda. But I think attendee list seems to be not moving anymore. So then I will hand over to Vlad for the remarks for the fourth quarter. Vladislav Suglobov: Thank you, Stefan. Welcome, everyone, to our report. I'll start by giving you a brief overview of the quarter. Stefan, can we move on to the next slide, please? So revenue declined 9% year-over-year in USD terms. But because of the exchange rate changes, it went down 21% when expressed in Swedish krona and was SEK 221 million for the period. Sequentially, it was down 2% from Q3 to Q4 in USD terms. And looking at the 3 main pillars of our revenue generation, our 3 main games, we have achieved stabilization of 2 of these. Hidden City had a strong performance during the quarter. It grew sequentially 8.3% from Q3, really strong result. Sherlock declined sequentially by 5% after delivering a strong performance in Q2 and Q3. And looking at the same -- looking at the game year-over-year, it declined only by about 5%, which was significantly less than before, even in the first half of the year. Its performance was negatively affected by specific events that happened in November. But outside of November, the underlying trend remained consistently strong. So we consider that Sherlock and Hidden City are stabilized in revenue. But at the same time, we have the Jewels family of games that declined year-over-year by 19% in USD and sequentially by 12%. And the performance of Jewels family of games is the reason we continue to see the revenue decline for the group. The team has a plan to fix this performance, but it is not a fast plan to execute. We expect to see improvements by the middle of the year, or we will consider what we call harvesting the game, which is optimizing the team to the minimum to produce the best cash flow while the game continues to decline. So that's basically the reason you're looking at negative trend in the top line in this quarter. Monthly average gross revenue per paying user hit a new record of USD 71.7. Our gross margin reached an all-time high of 71.6%. That's up from 69.1% last year, thanks to the continued success of G5 Store. During the quarter, we continued to build momentum in strengthening the top line revenue performance. We increased UA spend to 23% of revenue on the higher end of the previously communicated range compared to 17% last year. We intend to remain on the higher end of this bracket going forward in an effort to stabilize and turn around the top line trend. We will continue to invest profitably in the growth of our portfolio revenue through existing and new games in order to turn around the top line dynamic. Earnings in the quarter were impacted on one hand by the currency exchange related to the weakening USD, which is the main currency of our revenue generation, and on the other hand, by the increased UA spend. At the end of the quarter, our cash position stood at a strong SEK 216 million. It is actually virtually unchanged compared to the end of Q3, if adjusted for working capital fluctuations and USD-SEK exchange rate. We remain debt-free, and we continue to have a strong balance sheet, something we are very proud of. And on the right side, you can see the chart of G5 Store continuing to take over the percentage of the total net revenue generation in the company quarter after quarter. With that, let's move on to the next slide. And let's talk about G5 Store with a bit more detail. It continues to deliver solid growth. It became our second largest distribution channel now, up from being the third, and the way it's going, it may soon become our #1 distribution channel. We wouldn't be too surprised. The low single-digit processing fees have increasingly become a key driver of our margin performance, given that third-party app stores typically charge between 12% and 30%. This cost efficiency directly contributes to our improved profitability and the expansion of our gross margin. During the quarter, G5 Store accounted for 23.4% of total gross revenue, up significantly from 16% last year. And furthermore, the G5 Store played a key role in stabilizing Sherlock and Hidden City as these games continue increasing the audience and revenue on G5 Store for over 5 years now. Gross revenue growth for G5 Store in USD terms was 20% year-over-year and 3% sequentially. In addition to the continued progress with G5 Store, we continue to gain momentum with processing payments of our players on mobile platforms directly. Web shop and other G5 systems that internally we started calling G5 Pay, allow players on mobile platforms to make payments directly to G5 through their browser, which dramatically lowers the payment processing fee. During the quarter, such directly processed revenue accounted for 6.4% of total net revenue from mobile platforms, a substantial improvement compared to only 3% in Q3. And we believe that this percentage has more room to grow in the coming quarters. As mentioned in the previous quarters, we will further scale the revenue of G5 Store by opening it up for distribution of third-party games that are or were successful on mobile platforms. We have now launched the first 2 games late in the fourth quarter. And we see very encouraging results. We consider it proven at this point that distribution through the G5 Store can create a very attractive incremental revenue for mobile developers. Based on what we see so far, after only 1 month on the G5 Store, quality games can make up to an additional 15% of their mobile revenues through the G5 Store. We will scale this initial success, both through acquiring users into the distributed games, and through bringing more great third-party games to the G5 Store. The interest in the distribution on the G5 Store is growing among third-party developers and the number of new games are already added to the G5 Store. Our goal is to have a curated catalog to bring more high-quality games to the G5 Store and maintain high player satisfaction. As we increase the number of games on G5 Store and expand user acquisition, it may start positively affecting the overall top line dynamic in the coming quarters. I would also add that this initiative with third-party game distribution in G5 Store leverages our experience as a publisher. As you know, we've had a lot of success publishing premium and then free-to-play games on mobile platforms. And we've created some very prominent hits through these partnerships. So the developers know us. There is good traction in attracting games to the G5 Store, because it's a well-known business model for the company, and we have very good understanding of what developers need. And for the majority of developers right now, an incremental revenue from other platforms is a very important thing to have. So I think we are doing it at a good moment in time. With that, let's move on to Slide #5 and talk about -- look a bit more in detail on the quarter leading up to another record gross margin. So our own games accounted for over 70% of net revenue and active own games accounted for 61% of total net revenue, down slightly from 62% last year. This has to do with the improvement of the performance of Hidden City. Our gross margin reached a record high of 71.6%, up from 69.1% a year ago, primarily due to the continued growth of the G5 Store. Monthly average gross revenue per paying user reached a new high of USD 71.7 and it increased 1% sequentially and 9% year-over-year. This reflects the continued trend for the improvement of the underlying quality of our audience. G5 Store is a key factor with its generally higher paying users, players and overall smaller player numbers than on mobile platforms. In the quarter, we also saw at first in a little while a sequential improvement in the broader audience numbers, where MAU and MUU grew by 1% and 2%, respectively, while DAU and MUP declined 1% and 2%, respectively. All in all, basically a stable sequential performance when it comes to audience metrics, which is a significant improvement compared to previous years and a testament to the stabilization of Sherlock and Hidden City. Let's move on to the next slide. Let's look at our operating profit for the quarter. Operating loss for the period came in at SEK 6 million compared to profit of SEK 32.8 million last year, and this resulted in an EBIT margin of minus 2.7% compared to positive 11.8% last year. The lower EBIT was impacted by foreign exchange revaluations. Adjusting for that, the EBIT margin would be positive 0.8% compared to 9.6% last year. And even bigger impact on EBIT was the increase in the amount of user acquisition that I spoke about, that we have deployed during the quarter to stabilize the revenue of 2 main games, Sherlock and Hidden City, and also to support the scalability test of the game called Twilight Land, which was unfortunately discontinued based on the results of this test. So UA increased by 6 -- by whole 6 percentage points compared to Q4 2024. And during the quarter, the net capitalization impact on earnings was SEK 0.8 million compared to minus SEK 3.0 million last year. Now let's turn to the next slide to talk about our cash position. Capitalization impact on cash flow was minus SEK 23.2 million, less than the minus SEK 25.5 million last year. The movement of working capital was negative minus SEK 26.4 million compared to minus SEK 21.5 million last year. We have large fluctuations in working capital between the quarters with a few large counterparties. In Q4, we also see some year-end effects from earlier payments. Total cash flow during the third quarter was minus SEK 31.1 million compared to positive SEK 18.9 million last year. Total cash at the end of the period stood at a strong SEK 216 million, down from the same period last year. But, again, one has to remember that our business primarily is denominated in USD and that we are holding our reserves in our functional currency in the USD, which declined about 16.5% to SEK compared to the close of 2024. In USD, we closed the quarter with USD 23.5 million compared to USD 25 million a year ago, not that much of a difference. And also buybacks of SEK 2.7 million were made during the fourth quarter. All right. And that was the last slide on performance, and let's sum it up and some outlook for the future. As we enter into 2026, we have multiple strategic initiatives that we are pursuing. We will continue to execute on the G5 Store strategy and expand our third-party offering with additional selected high-quality games from the initial launches that we have made. Once again, we see that high-quality free-to-play games have the potential to earn up to 15% in incremental revenue from launching of G5 Store. We will continue developing G5 solutions for processing payments from players on mobile platforms directly. These are web shop and other modules that together we call G5 Pay. We want to see the percentage of payments for mobile platforms made directly to us grow over time. We'll continue to work on stabilizing and growing our main revenue pillars. Sherlock and Hidden City are starting to perform better and the road map of improvements will be implemented for Jewels of Rome in the first half of the year. For user acquisition, we will continue to be in the higher bracket of our previously communicated range of 17% to 22% of revenue. We have promising games in the pipeline, one of which is showing the best metrics we have seen in soft launch. That's cautiously encouraging. We have also formed several smaller agile teams that are rapidly testing innovative game concepts at a higher pace. So -- and we are excited to see what will come from that area in the next few quarters. Resources that were freed up from the Twilight Land game, that was closed as I mentioned, were reallocated to strengthen these strategic initiatives or let go. We will continue to work actively on the cost structure to maintain the high momentum we have in the product and in the G5 Active store development, while also being fiscally responsible to be able to continue to fund these initiatives from operations. We continue to have a strong balance sheet and 0 debt, a foundation to be able to pursue all the initiatives that we have going as we enter into 2026. And thanks to our stable performance, we are proud that the Board was able to propose a dividend of SEK 2 per share, corresponding to approximately SEK 15 million. With that said, I would like to thank the whole G5 team for their outstanding work in 2025, and I look forward to a prosperous year ahead. This concludes our presentation, and let's open the call for questions. Stefan Wikstrand: [Operator Instructions] We have a few of those already there, so we'll get back to those. But we'll start with Simon Jonsson from ABG. Simon, you're -- there you go. Simon Jönsson: I have first a few questions on G5 Store. And I wonder what's your visibility in third-party games joining? Do you have like a prospects lined up? Or how does it work? Vladislav Suglobov: Well, we have -- we know -- we happen to know a lot of studios that we worked with over the years or that we know through industry contacts. And we have a business development team that basically knows the industry, and they know developers of a certain caliber, that we believe is the sweet spot for us, for the G5 Store, that we believe can really benefit from launching their games on G5 Store. So there's a balance to be found between the quality of these games and the size of their business so that this additional revenue through the G5 Store can be sizable enough for them, but the games are successful enough that we can expect them to perform really well on G5 Store. So you can think of developers that have games that are roughly the size of our games, for example, or approaching that. And we -- as I mentioned, we have very large developers actually very, very much interested because the situation in the market is that everyone is looking to maximize the revenue through -- incremental revenue through different channels. And in that sense, G5 as a channel, as we've seen with the first 2 games that we've launched, really delivers. So we are being thoughtful about who we invite on G5 Store and a little bit selective, but we also want to try some genres that we actually do not have in our catalog, as you can see from the first releases, but we can be even more bold and try genres that are further away from our core offering. So a number of deals is already signed and the developers are working on providing the builds that we will launch in G5 Store. This is already ongoing and new deals are being negotiated as we speak. So there's -- a little pipeline of games is formed. We don't want to bring tens of games or at least not yet to G5 Store in 1 year, but we will look at the performance of the new releases and decide as we go. Simon Jönsson: All right. Yes, that makes sense. Then on the cost side, I mean, are you taking costs for this -- the third-party initiative right now, like upfront costs, which is weighing on the margins? Or is this -- are those potential costs quite negligible? Vladislav Suglobov: Well, we certainly have to develop certain SDKs and frameworks to be able to launch external games. So -- but the team -- the platform team that does it is relatively small compared to teams that actually do make games. So it's not very significant. When it comes to the deal terms, I wouldn't want to reflect on specific deal terms, but it's kind of a usual industry standard for distribution of games. And they are -- they're not very costly, so to speak, as usually in distribution, because we're not talking about funding the development or exclusive publishing. So these -- the commitments that distributors make, they're relatively limited. Simon Jönsson: All right. In terms of you making like some kind of payments for the rights or something like that, is that something you think will occur? I mean, we have seen it in other cases in the industry when companies are using other platforms for distribution. There's sometimes some kind of fee for that, some right. Is that something you think you will have to pay as well? Or do you think that it will be more revenue sharing? Vladislav Suglobov: Well, again, I think that there's clearly a need for the developers that are similar in size for incremental revenue. And it is not the -- I think the practice that you're saying that it exists, it's a practice from different kinds of games and casual games. I don't think that practice even exists. I think developers are quite eager to distribute their games on alternative channels. And I think we are aiming at finding the right partners. The space is very fragmented, as you can imagine. There are many games that are making sizable amounts of money, but they're not like top hit games, and these games can really use incremental revenue. But we're not looking to obtaining like super brand, high -- like high brand recognition games, at least not yet. So that's just -- I wouldn't say that it's relevant to our business model at the moment. There are many developers out there who just want to find additional revenue for their games, and this is what we are providing. Stefan Wikstrand: Yes. But I think I see where Simon is coming from, but it's not like we're paying huge amounts for some exclusive rights that would be kind of significant or take any kind of significant balance sheet risk if we would capitalize that either. So if I would answer that question shortly, if I interpret you correctly, I would say, no. Vladislav Suglobov: Yes. The short answer is no. And again, we're not talking about any exclusive distribution or exclusive partnerships. So it's just a distribution through G5 Store, while developers are free to distribute their games elsewhere. So it doesn't cost us outrageous commitments and everything is within very reasonable, and we're more than satisfied with the initial launch. Simon Jönsson: All right. That's helpful. Then just a final one on the capital allocation. You reduced the dividend as a result of lower earnings, of course. But what's your view on share buybacks now? Is -- Have you changed your view on that in some kind of way? Or what's your view or the Board's view? Vladislav Suglobov: No, we still have the mandate from the Board. We still do make buybacks. We did buybacks in Q4. We're likely to continue doing it in the future. That's -- the position hasn't changed. Stefan Wikstrand: Then we have Erik Larsson from SEB. Erik Larsson: Let's see. Now you can hear me, I think. Great. Yes, I just wanted to follow-up on some of the distribution of third-party games. So it sounds pretty promising, but could you just speak a bit more to how did this -- these initial signs were -- or how did it come in versus your expectations? Have you had to do like material changes along the way these first few weeks? Or just any flavor there would be interesting. Vladislav Suglobov: Essentially, what we are doing with new releases is we are letting them be exposed to the audience that we have accumulated in G5 Store and that continues growing through user acquisition in our own games. And as you know, as always with mobile free-to-play audiences, there is a percentage of people who pay and they drive virtually all of the revenue. And then there's a very large percentage of people who never pay anything at all, but they still play these games. And what is achieved by widening the offering is that we are -- we're making it possible for those audiences that are not monetizing in the games that we have, to monetize in the games that we bring in. We obviously have to think a little bit about the cannibalization. That's why we want to have a curated experience, at least for now and bring in games carefully by sort of complementing the games that we have in our store rather than competing with them. And our thinking was that basically, because we are in a situation where our games are not doing terribly well on mobile, but they continue to grow on G5 Store, we thought there can be other developers in exactly the same situation where they are a little bit stuck on mobile, and they're looking how to increase their revenues, but they cannot do it on mobile. And it may work exactly the same way as it works for our games, which are stable on mobile, but they're growing on G5 Store. And that's exactly what we tried, and that's exactly what we saw is that these games that we brought to the G5 Store, they are very stable. They're unable to grow on mobile stores in the present market environment. But once we put them on the G5 Store and expose them to our audience, they found players, they found paying players and their revenues started growing fairly quickly pretty much organically. And this confirmed our thesis that if we had more games in G5 Store, the G5 Store would be even more successful. So we just need to -- we can help other developers earn incremental revenue, but also bring even larger audience to the G5 Store and improve the offering of games that we have in the G5 Store. So it's an interesting snowball sort of to try and roll down the hill. We've been working on G5 Store and on bringing people to G5 Store for over 5 years now. And we've gathered in G5 Store some of the highest paying users actually, driving the revenues within G5 Store, people who are very loyal to the brand, people who really love these casual games and really love playing them on large screens. So that's our thinking there. And so far, we see confirmations of the original idea that it's worth pursuing. Erik Larsson: Okay. And then just a final question on, I guess, materiality, because it does sound very promising, but at the same time, it sounds like you want to manage expectations. So for 2026, how much impact could this be? Are we talking low single-digits, high single-digits or even double-digits in terms of share of revenue? Just to get a sense if you could comment that? Vladislav Suglobov: From these external games? Erik Larsson: Yes. Vladislav Suglobov: Well, I wouldn't want to set expectations too high. So I think low mid-single-digits would make more sense than aiming even higher. But we -- the truth is we do not know. The games are in route to G5 Store. It's not entirely dependent on us. Developers have to allocate resources to create these versions. We have to test them and so forth. It usually takes time. Time line moves a little bit. We'd like to release as many of the games that we have signed in G5 Store already this year. And then some of the games that we will be bringing into G5 Store this year, they are very big on mobile, but also some are in genres that are a little bit off from our core offering. So we don't know exactly how well they will perform, but it's very exciting to try and launch something very different. So it's really hard to say, but we want to move there as fast as we can and try things. Stefan Wikstrand: And then we have Hjalmar Ahlberg from Redeye. Hjalmar Ahlberg: So yes, also a kind of a follow-up on the G5 Store there. A bit curious on how you see -- I mean, in terms of growth of the total, so to say, players that find G5 Store, I guess you see potential that more players come into these new games, but you also kind of invest UA in terms of getting players that have not found your games coming directly to the G5 Store, if you understand my question? Vladislav Suglobov: Yes. Again, the logic is that we're basically doing for other developers what we have achieved for ourselves in G5 Store, where we have managed to find a way to continue to grow our very high-quality, casual free-to-play games within a PC environment, within our direct store distribution, even when they don't really grow in the current market situation on mobile platforms. And not -- I mean, not only we see organic traffic in G5 Store, and we see a substantial amount of organic traffic in G5 Store, we also do user acquisition as well. We do it for our own games, and we want to try exactly the same thing for third-party games because there's -- nothing is different, except that we will only operate this game within the G5 Store, and we can acquire organic traffic or rather improve our offering within G5 Store, which should benefit organic traffic, but also bring in -- use our knowledge of user acquisition in this environment to bring in users into these new games in the G5 Store in order to cross-pollinate, so to speak, all of these games. And we do have cross-promotion between all the games. So the games that we bring in, they benefit from our existing audience and the cross-promotion exposure within our existing games. But then there's probably going to be situations where our games will benefit a little from the audience that we bring into the other games, third-party games that we bring to the G5 Store. As always, like I said, like 95% of people, or 90% of people never monetize, right? So you can -- you don't have to move around the 10% that monetize, and we try to avoid it as much as possible, basically just try to leave people be if they monetize. But we can move around people who do not monetize in the hopes that they will monetize in some other game that they will particularly like. And so by expanding our offering and by bringing more users through profitable user acquisition in these games and ours, we can continue growing G5 Store, but we can continue growing it with more games than we have now, right? Because right now, our selection is offered to our own games. And when we open it up to games of other developers, this selection can grow several times over very easily. And these games can be really, really good. If our game that makes a certain amount of money on mobile platforms is still growing on G5 Store, there's a good chance that another game that's making this amount of money, about this amount of money on mobile platforms, cannot grow there, can still grow on G5 Store. And that's the thesis that we have. And so far with the first 2 games, we see the confirmation. Hjalmar Ahlberg: Okay. Sounds promising there. And also a question on -- I mean, Jewels, you've been able to kind of stabilize Hidden City and Sherlock, as you said. Are you hopeful for Jewels or do you see that it's more difficult with that -- those games compared to the other 2? Vladislav Suglobov: Yes. Well, this game, unfortunately, has the most game design debt, so to speak. Our thesis is that the match-3 genre has sort of moved a little bit away from this type of games. It's been, I think, about 6 years since we released it. So some catching up needs to be done. And there are some major changes that are coming into the game, which we think will benefit it in any way. Question is whether this will benefit the game by expanding its life cycle and just, like kind of increasing its terminal value, or are we going to be able to actually go back to stabilization and possibly growth. So we will find out in the next couple of quarters. That's the ambition. Hjalmar Ahlberg: Okay. And looking at your pipeline of new games here, I mean, Twilight, as you see, didn't work out to be a global launch, but you still have some new promising games there. How do you think about the process here? I mean, you've changed development funnel to a few years back. Twilight was quite a long time in soft launch. Is this the kind of way it can be going forward? Or do you think it will be quicker processes going forward, I mean, comparing for -- to Twilight, for example? Vladislav Suglobov: So Twilight Land is actually quite old game. So we launched it even before we've changed the new funnel process. So it's the last one that we had in development, which was initiated before the process was put in place. Since the new process was put in place, we've killed quite a number of games and usually in the early stages. I do not think we brought a single game to the scalability phase under the new funnel. So this one that I'm cautiously excited about is the first game that actually made it to the scalability phase, and it was initiated after we have the new funnel process. So we think about it the same way. The problem is that the bar is very high in the market for a number of reasons, including decisions on how mobile user acquisition is being made by large players by their action or in action. It is a very high bar to be able to create a game that is scalable. We will still be doing it. However, this is what makes us exciting about -- excited about G5 Store. That it's -- at some point, you start thinking, well, it's really hard to acquire users on mobile and you have to pay this tax to the app stores, which is quite insane actually. So you are essentially investing money to pay this tax to them, which doesn't make a lot of sense. It did make sense some years ago. Now it's almost impossible to do business this way. So you have to have either a groundbreaking game, which we hope to have. We just need to raise the bar, aim higher or we have to find an alternative way to work with our players. And this is where G5 Store and G5 Pay come into play. If you look at the G5 Store, the size of G5 Store business, it's pretty significant already, and it continues growing. So I think it's time we open it up for other games. And we try to work even more actively on expanding the G5 Store as a direct way to reach our players just by passing mobile app stores entirely. Stefan Wikstrand: Okay. We have one question in the Q&A box currently. [Operator Instructions] What we have currently is from [ Olle 898 ]. I don't know if we have a new Olle or if he just added an 8 in the end. But can you say anything about what happened in Sherlock in November? Vladislav Suglobov: Yes. So let's call it a live ops incident. There were actually several incidents, which affected the revenue. And conclusions were made from that. We hope they will not be repeated. Sometimes it happens. It doesn't happen very often. But live ops is driving a lot of monetization in G5 Store and then mobile stores. And if something doesn't work, there can be material consequences in the percentage of revenue that's lost. And so we had a few hiccups, unfortunately, in November, which affected the performance of Sherlock specifically. Stefan Wikstrand: Okay. That was the last question as far as I can tell. Yes, I think then we'll just wrap it up here. Vlad, any final remarks? Vladislav Suglobov: No. Thank you so much. Very thoughtful questions, and you gave me opportunity to talk about G5 Store, my favorite topic. Thank you again for joining our call today. I wish you a good rest of your day. Stefan Wikstrand: Thank you all. Thank you all. Bye. Vladislav Suglobov: Bye.
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 Kerry Group Full Year 2025 Results Call. [Operator Instructions] I would now like to turn the call over to William Lynch, Head of Investor Relations. Please go ahead. William Lynch: Thank you, operator. Good morning, and welcome to Kerry's Full Year 2025 Results Call. I'm joined on the call by our CEO, Edmond Scanlon; and our CFO, Marguerite Larkin. Edmond and Marguerite will take you through today's presentation. And following this, we will open up the lines for your questions. Before we begin, please take note of our disclaimer regarding forward-looking statements. I will now hand over to Edmond. Edmond Scanlon: Thanks, William. Good morning, everyone, and thank you for joining our call. Beginning with the overview of 2025 on Slide 4 and starting with performance. We're pleased to report that we delivered another year of strong end market volume outperformance, margin expansion and earnings per share growth. While overall market volumes remained relatively subdued through the year, we continue to demonstrate our ability to consistently outperform our end markets with volume growth of 3%, highlighting the strength and relevance of our business. This growth was driven by a strong performance in the Americas throughout the year, led by foodservice innovation and increased nutritional renovation across a broad range of customers, given our positioning as a leader in sustainable nutrition with customers looking to address nutrition, taste, cost or sustainability aspects. We also delivered strong margin expansion of 80 basis points, with EBITDA margins just under 18%. And we're well on track to achieve our margin targets, which we will give you more color on later. Moving to earnings. We delivered constant currency EPS growth of 7.5% in 2025, which is stated after the dilution from the Dairy Ireland disposal in the prior year. This was on top of the 9.7% growth we delivered in 2024, and we're looking to achieve another year of high single-digit EPS growth in 2026. Earnings compounding has always been an important part of Kerry's story, and we reaffirm this with our high single-digit plus EPS growth target out to 2028 when we refreshed our margin and EPS targets last year. From a strategic perspective, we continue to evolve our business through targeted capital investments and portfolio development activity, enhancing our technology capabilities, supporting new innovations and delivering even more value for our customers. Just to touch on some of the key developments in the year. Firstly, on technology capabilities. These included the opening of our new state-of-the-art Biotechnology Centre in Leipzig in Germany, and a number of other technology developments, which I'll outline later when we look at each of the regions. On innovations, key innovations in the year included our next generation of fermentation-derived Tastesense Sweet and Salt reduction technology ranges; the launch of our new Plenibiotic postbiotic for digestive and skin health; a breakthrough enzyme system, which delivers significantly more effective natural sweetness; new fermentation-based solutions under our Kerry experience portfolio; and new natural cocoa replacement systems, which replicate authentic cocoa taste using less than half the cocoa raw materials. And on footprint and customer access, we extended our APMEA manufacturing presence into Egypt, and within East Africa while expanding our capacity in the Middle East and Southeast Asia. And we strengthened our customer innovation network through new centers in Frankfurt, Indonesia and Dubai. So to summarize, 2025 was another year of strong market outperformance, combined with continued strategic developments. Moving next to the business performance overview. We achieved group revenue of EUR 6.8 billion and EBITDA of EUR 1.2 billion. Volume growth was 3% for the full year and 2.8% in Q4, well ahead of food and beverage end markets, driven by good innovation activity and continued product renovation activity with our customers. Pricing was pretty flat in the year, with input costs turning deflationary in Q4. EBITDA margins were up 80 basis points, driven by accelerated efficiencies, portfolio developments, operating leverage and mix. Across our technologies, we had good growth across savory taste, Tastesense Salt and Sugar reduction technologies, botanicals, natural extracts, proactive health ingredients, taste solutions for high-protein applications, enzymes and biofermented ingredients. From a channel perspective, foodservice achieved volume growth of 4.6%, supported by strong innovation activity, including new menu items and seasonal launches. Growth in the retail channel was supported by a step-up in retailer brand innovation and renovation activity to enhance the nutritional profile across a range of customers. And finally, growth in emerging markets of 5.3% was led by a strong performance in Southeast Asia and LatAm. Moving next to our end-use market breakdown. Starting with the food EUM, where all categories delivered volume growth. In snacks, we had good growth, driven by our savory taste and Tastesense Salt reduction technologies. And in bakery, growth was driven by our enzymes preservation and taste systems. Moving to beverage, where growth was supported by the performance of our Tastesense Sugar reduction technologies, natural extracts and proactive health ingredients. And we had good growth in pharma through our proactive health technologies into supplement applications. Turning next to performance by region and starting with the Americas, where we had continued strong performance across both North America and LatAm. Revenue for the region was EUR 3.7 billion, with full year volume growth of 3.8% and 4.4% in Q4. EBITDA margins increased by 60 basis points to 20.3%. In North America, growth was again led by snacks, along with the dairy and bakery end-use markets as we enabled our customers to innovate and renovate within categories. By channel, we had good growth in foodservice through strong innovation activity despite soft traffic in places, and with good growth in retail across global, challenger and retailer brands, particularly around the area of improving nutritional profiles. Within LatAm, strong growth was achieved in Brazil and Central America across the snacks and meals end markets in particular. And in business developments in the region included investment in enhancing our coffee taste extraction capabilities in Pennsylvania, which continues to be an area of innovation focus for our customers across many different food and beverage applications. Moving to Europe, where a soft finish to the year meant volumes were slightly back in 2025. Revenue in the region was EUR 1.4 billion, with EBITDA margins increasing by 90 basis points. We had good volume growth in beverage across nutritional and refreshing beverages, with our integrated taste technologies and proactive health ingredients. Volumes in the retail channel reflected subdued market conditions, while foodservice achieved good overall growth despite a soft finish to the year. And business investments in the region included the expansion of our enzyme capacity in Ireland and our cocoa taste capabilities in Grasse in France. Moving next to the APMEA, where we had a good overall performance given market disruption in places. Revenue for the region was EUR 1.6 billion, with volume growth of 4.2% and EBITDA margin expansion of 70 basis points. Growth was primarily driven by Southeast Asia with solid growth in the Middle East and Africa and volumes in China remaining challenged. Across our end markets, growth was led by bakery through food protection and preservation systems as well as reformulation activity in areas including cocoa. Growth in our channels was led by foodservice with leading regional coffee chains and quick service restaurants, while growth in retail was led by good performance in taste with regional leaders. Finally, business developments across the region included new manufacturing facilities in Egypt and Rwanda, combined with continued expansion of capacity in the Middle East and Southeast Asia. And with that, I'll hand you over to Marguerite for the financial review. Marguerite Larkin: Thank you, Edmond, and good morning, everyone. Turning to Slide 12 and beginning with our financial overview. We achieved group revenue of EUR 6.8 billion in the year, reflecting volume growth of 3%, which represented a strong end market outperformance. EBITDA increased to EUR 1.2 billion, reflecting 5.7% organic growth. We delivered strong EBITDA margin expansion of 80 basis points, adjusted earnings per share growth of 7.5% in constant currency and 3% in reported currency. Return on capital employed was 10.6%, with underlying improvements being offset by a negative year-on-year currency effect of 20 basis points. And we achieved good free cash flow of EUR 643 million, representing an 81% cash conversion. Turning next to our group revenue bridge on Slide 13. Volume growth was 3%, as I mentioned, with slightly lower pricing of 0.3% and a transaction currency benefit of 0.1%. Foreign currency translation was 3.9% adverse due to the significant movement in the U.S. dollar and emerging market currencies versus the euro in the year. And acquisitions net of disposals was a net decrease of 1.4% in the period with disposals primarily relating to, firstly, the prior year revenue associated with the exit of a manufacturing agreement with Kerry Dairy Ireland, as previously communicated. And secondly, disposal of some noncore activities in Europe and North America to enable the efficient execution of our Accelerate 2.0 footprint optimization strategy and the contribution from acquisitions, primarily relating to the lactase enzyme business. Moving now to our group margin bridge on Slide 14. We are pleased with the strong EBITDA margin expansion of 80 basis points in the year. Looking at the key moving parts. Firstly, on operating leverage and mix, we had a 20 basis points improvement, with both operating leverage and mix contributing to the expansion. Our Accelerate programs contributed 40 basis points. This was primarily attributable to Accelerate Operational Excellence, which was successfully completed in the year, delivering annual recurring benefits ahead of expectations. We also initiated Accelerate 2.0 with initial benefits coming through in the final quarter. Foreign currency was a headwind of 10 basis points, and acquisitions and disposals contributed to a net positive 30 basis points, with 10 basis points from acquisitions and 20 basis points from disposals, as mentioned. Overall, we are well on track to achieve our targeted margins of 19% to 20% by 2028. Next, to free cash flow on Slide 15. We generated good free cash flow of EUR 643 million in the year, representing cash conversion of 81%. The main drivers were, firstly, our EBITDA increased year-on-year, as I just mentioned, noting that 2024 free cash flow comparative includes the contribution from Kerry Dairy Ireland. On the average working capital, the increase was driven by lower trade payables, mainly attributable to sourcing alternatives implemented as part of our tariff mitigation strategy and new procurement initiatives with some strategic suppliers. Point-to-point working capital was higher due to exceptionally low working capital days at the prior year-end and timing of other receivables at the year-end. The increase in net finance costs paid is principally due to the timing of bond interest payments across 2024 and 2025. And our net capital investment aligned to our strategic growth areas was EUR 300 million as we continue to invest to support our growth through the extension of our technology capabilities and capacities in all 3 regions, as Edmond referenced. Now turning to our debt profile and credit metrics on Slide 16. As you can see, the profile of our EUR 2.2 billion net debt is good, with a weighted average maturity of 6.5 years and no significant repayments until 2029. Our credit metrics are strong with a net debt-to-EBITDA ratio of 1.9x, and we have a very strong balance sheet, which will continue to support the further development of our business. Now to update you on Accelerate on Slide 17. In 2025, we completed Kerry Accelerate Operational Excellence, which focused on delivering manufacturing and supply chain excellence and efficiencies. The program's successful completion is delivering recurring annual benefits ahead of projections and has established a strong foundation for Accelerate 2.0, which will run until 2028, driving continued margin expansion through footprint optimization and embedding digital excellence across the organization. We initiated Accelerate 2.0 as planned during the year with good progress in both North America and Europe with the commencement of footprint optimization, including the disposal of some related business activities. We have reduced our manufacturing footprint from 124 facilities in 2024 to 119 at the end of 2025, and we will continue to optimize this appropriately over the coming years. Our digital excellence program is well underway, and we are making good progress. Some of the digital initiatives we advanced during the year include continued expansion of decision intelligence capability, utilizing agentic AI to automate a substantial volume of operational decisions in key areas of the business, including supply chain, new product development and enablement functions. At our GBS centers, we increased the use of robotic process automation to improve efficiencies and unlock capacity. In our manufacturing operations under connected plant, we are rolling out a number of initiatives, including digital-enabled predictive maintenance to optimize efficiency, related spend and asset reliability. And we commenced the use of digital manufacturing twins to simulate and standardize execution, reduce variability and increase production yields and throughput. From a commercial perspective, we are continuing to drive improved customer experience, leveraging our KerryNow customer portal, which provides our customers with real-time 24/7 access. These initiatives will improve our customers' and employees' experience, drive improved productivity and profitability while supporting growth and business development. Our continued progress on digital automation and accelerating how we scale AI across the business, supported by our recognition as a Microsoft Frontier firm will be an important enabler of our margin expansion targets. We will continue to update you as we progress on Accelerate 2.0, which, as a reminder, is expected to deliver a projected recurring annual saving of circa EUR 100 million by 2028 as a total net cost of circa EUR 140 million. Now moving to Slide 18 and other financial matters. Finance costs of EUR 52 million in the year reflected good cash generation and interest income. Non-trading items were an overall net charge of EUR 74 million, primarily relating to the progress we made under our Accelerate programs with the balance relating to disposals and acquisition integration activity. On the input costs, there was deflation in the final quarter, leading to small overall deflation in the year. We are currently expecting limited overall deflation in 2026. For taxation, we had an effective tax rate of 14.1%, and the current outlook is for a tax rate of 14% to 15% in 2026. Capital returns for the year included share buybacks of EUR 500 million and dividends paid of EUR 215 million. And we have announced we will be initiating a new EUR 300 million share buyback program today. On currency, the translation headwind on earnings per share in 2025 was 4.5%. And based on prevailing exchange rates, we are forecasting a headwind of circa 4% on the EPS in 2026. Finally, to summarize our financial performance for 2025. We are pleased with our overall performance where we delivered volume growth well ahead of our end markets, strong EBITDA margin progression, which supported continued good earnings per share growth. And with that, I'll pass you back to Edmond. Edmond Scanlon: Thanks, Marguerite. Before we move to our outlook for 2026, we'd like to give a progress update on our key metrics and medium-term targets on Slide 20. Having just completed the fourth year of our plan, we've made good progress across each of the key pillars of growth, return and sustainability. Starting with volumes. We've averaged 3.8% growth in this time frame. And while it's a little lower than where we'd like it to be, it's important to recognize that this represents a significant market outperformance of over 300 basis points. On EBITDA margins, we've delivered strong progress over the past number of years. We will achieve our 2026 target range in the year ahead, and we are well on track to achieve our 2028 target of 19% to 20%. You'll recall, we reinstated EPS growth as a key measure last year with our targets of high single-digit plus EPS growth up to 2028. Earnings compounding has been a key feature of Kerry's history, and we're laser-focused on delivering consistent high single-digit plus earnings growth. On returns, we stepped up our cash generation with cash conversion above 80% and ROACE improvements in recent years. And on sustainability, we've made great progress against our targets, reducing carbon by 52%, food waste by 54% and increasing our nutritional reach to almost 1.5 billion consumers globally. Finally, moving to the 2026 outlook. Our continued strong end market outperformance highlights the strength and relevance of our strategic positioning across our markets, channels and customer base. We will continue to further advance our strategic business development while supporting our customers as their innovation and renovation partner. We remain strongly positioned for volume growth and margin expansion with a good innovation pipeline despite the soft consumer demand environment. And we expect to deliver constant currency adjusted earnings per share growth of 6% to 10% in 2026. Before we move to Q&A, on behalf of the Board and the senior management team, I'd like to acknowledge our outgoing Board Chair, Tom Moran, who will be retiring following our AGM this year. Throughout his tenure as Chair, Tom provided strong Board leadership, particularly through the business transformation we undertook in recent years. We'd like to sincerely thank him for his valued contribution to Kerry over his tenure, and wish him the very best in the future. Fiona Dawson has been named Chair Designate. Fiona has been a Non-Executive Board Director since 2022, and brings deep industry experience given her executive career in the consumer food and beverage sector. A full announcement has been published this morning with further details. So with that, I'll hand you back to the operator, and we look forward to taking your questions. Operator: [Operator Instructions] Our first question comes from the line of Patrick Higgins with Goodbody. Patrick Higgins: A couple of questions on top line kind of outlook, maybe one for Edmond and one for Marguerite. Just in terms of volumes, Edmond, how should we think about volume growth for the year ahead? How should we -- how are you viewing end markets versus the kind of flattish that you've been flagging in the past year? And maybe talk through the regional outlook. And then, Marguerite, on input cost inflation, you flagged limited, so I assume that means limited pricing as well. How should we think about pricing? But then also disposals, obviously, disposals a bit of a feature in '25. KDI now has been lapped. Should we expect more disposals associated with the Accelerate program? Edmond Scanlon: Thanks, Patrick, and I'll kick off here. So just in terms of the volume outlook, we're taking a similar approach in 2026 as how we approach 2025 at this time of the year. So currently, we're seeing overall market volumes being similar to last year. Against the backdrop, we're looking at our volumes being in the same zone as we had in 2025. In terms of the outlook by region for 2026, as you can see, the Americas had a very good year in 2025 with volume growth of 3.8%, 4.4% in Q4, and we look to continue that strong market outperformance in 2026. I think then in Europe, let's say, volumes are back overall in 2025, and we would expect to be in growth in 2026. And in the APMEA region, we're looking to make progress in 2026 well into that mid-single-digit volume range and moving towards high single-digit volume growth for the region over the next year or 2. And maybe just I'll finish in terms of channel. We're looking at volumes in the foodservice channel to continue to outperform and to be ahead of retail in 2026 as well. Marguerite Larkin: And Patrick, just on your 2 other points. Firstly, on the input costs and pricing. For 2026, we currently expect some limited overall deflation in the year on the input costs. And as you say, consequently, some limited deflationary pricing. In terms of the disposals and the outlook for 2026, we made very good progress, as you will have seen on our footprint optimization plan during 2025. And in terms of the impact of those in 2026, you should expect disposal revenues of circa EUR 60 million or less than 1% of revenues from those divestments. Based on current plans, we expect limited further business disposals in connection with the footprint optimization. Operator: Your next question comes from the line of Ed Hockin with JPMorgan. Edward Hockin: My first one is on Europe that took a bit of a step back in volumes in Q4, whether you could elaborate a bit how you're expecting this region to perform going forward, especially now you've got the new President of the region, Marcelo. What is it you think he can be doing to try to stimulate volumes growth in the region, which has been flat to slightly negative for the past 2 years? And then my second question, please, is coming back on the channel mix, it looks as though foodservice accelerated a bit in Q4, and you say foodservice should be ahead of retail in 2026. Can you maybe give us an indication how you're seeing some of the kind of KPIs of traffic and reformulation activities, limited time offerings, promotional intensity with your customers and how you'd expect some of those leading indicators, how they're looking now and expect them in 2026? Edmond Scanlon: Thanks, Ed. The key change in Europe in the quarter was soft volumes in the foodservice channel towards the very end of the year. So year-to-date September, foodservice in Europe achieved mid-single-digit volume growth, and then volumes turned negative at -- towards -- in Q4, and that was partly due to year-on-year performance of seasonal products and LTOs in the channel as well as traffic in general. And retail volumes were slightly back in the quarter and in the full year as well. I think in terms of, let's say, our approach to Europe, I mean, obviously, it's going to take a little bit of time. The dynamics in Europe versus North America are quite different. That said, we do expect 2026 to be better than 2025. We will be in positive territory in 2026. And look, let's see how the year progresses. Then maybe your question with regards to foodservice. And let's say, North America being a key driver of that. Despite flat to negative traffic in North America, we had very, very strong growth, and we're very pleased with the overall performance in foodservice in the final quarter. And maybe just to give some details on that on the quarter itself, we did have significant launch activity in Q4. We had flagged that, that level of activity was quite elevated. The second thing was the performance of LTOs was strong and slightly ahead of expectations. The reality is that limited time offerings and seasonal offerings are actually at an all-time high in the foodservice channel as players continue to strive to connect and reconnect with as many consumers as they possibly can and to try and bring as much excitement to the menu as they possibly can. And then the third point is we did see also an increased level of customer promotion activity as well also in the quarter, and that promotional activity for sure impacted -- positively impacted our performance in Q4. In terms of let's say, the go forward, I think it's fair to say, look, we had an exceptional Q4 in foodservice. We don't expect, let's say, every quarter to repeat what we saw in Q4 2025. With that said, we do expect another strong year of performance in foodservice. And like we've said in the past, we believe we can deliver at least 400 basis points on average market outperformance in that channel, and our view hasn't changed. I think in terms of, let's say, the key underpins there, we have to wait and see. Will that level of promotional activity continue into 2026? I think based on, let's say, what we saw at the end of '25, I think customers would be encouraged to continue on that promotional activity, and we don't see any let-up in LTOs. In terms of reformulation, specifically within the foodservice channel, reformulation there is more kind of around value offerings. And it's also about -- it's also about, let's say, trying to bring excitement to the menu. So probably less of a feature is nutritional reformulation within the foodservice channel, that's more so in the retail channel. And I would say, reformulation in foodservice is around cost and around bringing as much efficiency to that operator as possible. And we don't see that changing as we look out into 2026. Operator: Our next question comes from the line of Alex Sloane with Barclays. Alexander Sloane: A couple of questions from my side, if that's okay. Edmond, if I can just sort of dig in on Europe a little bit further. So obviously, slightly weaker in the fourth quarter. You've explained that was kind of foodservice, but an outlook to be in growth for '26. Could you just talk to the kind of phasing there? I mean, could we be expecting it in the first half to be in growth? Or is this more kind of a second half phasing to that recovery? And the second one for Marguerite. The net debt was a bit higher than consensus for the full year, free cash flow a bit lower. I wondered, is there any kind of one-offs or phasing impacts within that free cash flow delivery, perhaps on working capital? Or is it just a case that consensus was in slightly the wrong place? Edmond Scanlon: Thanks, Alex. I'll kick off here. I would say, from an overall perspective, so from a total group perspective, we wouldn't be calling out any phasing as we look into 2026 across the quarters as we sit here today. But in Europe, we do see, let's say, that, let's say, improvement of that progression basically happening over the course of the year, probably slightly second half weighted rather than first half. But at a corporate level, we wouldn't be calling out any kind of phasing H1, H2, but specifically in Europe, maybe slightly more H2 weighted. Marguerite Larkin: And Alex, just on the free cash flow and working capital, yes, there are some timing impacts at the year-end. Our working capital days are a little bit higher than we expected. And maybe just to give you a little bit of color and context. Firstly, it's important to note that the 2024 year-end working capital days of 29 days were exceptionally low. And we said at the time, you might recall, that working capital days in the mid-30s was a more normalized level. And our working capital days at the year-end came in at about 41 days, which as I referenced, is a little higher than we expected. A couple of drivers on the year-on-year increase. Firstly, lower trade and other payable days. And 2 primary drivers within that. Firstly, mainly due to business decisions taken on sourcing alternatives implemented primarily as part of our tariff mitigation strategy and also reflects some new procurement initiatives with certain strategic suppliers. The second component, more of a timing one, reduction year-on-year in relation to performance-related incentives. And then the second component on our working capital, we had higher trade receivables just given organic revenue mix in the second half of the year, which was driven by the Americas and APMEA and some timing on other receivables, which will reverse in 2026. In summary, I would say, Alex, we expect working capital days to move back to between circa 35 and 40 days in 2026. And we expect FY '26 to be a year of good cash conversion of 80% plus and similar or better on a point-to-point basis. So hopefully, that gives you some better context on the moving parts. Operator: Our next question comes from the line of Fulvio Cazzol with Berenberg. Fulvio Cazzol: Yes. I suppose most of my questions have been answered, but I was just going to ask a question on capital deployment, how your M&A pipeline is looking? Are you looking to potentially add any other technologies or businesses in some of the more strategic developing markets? If you can just add a bit of color on anything you see there. Edmond Scanlon: Yes. Thanks, Fulvio. In terms of M&A, we did make 2 small bolt-on acquisitions through the course of 2025, one in the area of coffee extraction that we talked about earlier in the year, and that helped us to increase both our capability and capacity for coffee extraction, a key, I would say, a growth area and focus for us now and into the future. And the second bolt-on was a -- or basically our first manufacturing footprint in Egypt. And Egypt is an important market in itself, but having a manufacturing footprint there not only gives us access to that market, but also gives us the opportunity to serve better the North African markets. In terms of the pipeline going forward, basically, we're calling out 3 areas. Firstly, we will continue to look at expanding our presence in emerging markets, similar to what I just described with that bolt-on in Egypt. The second area is around proactive health. We have had a very strong performance in the year in proactive health. We see supplements as a space that has been growing close to double digits. And we feel we have already a nice portfolio in our proactive health portfolio, but we are out there looking for technologies that have strong science and clinical foundations and those opportunities are continuing to be evaluated. And the third area then is around fermentation. Again, it's a space where we have invested in recent years. We continue to invest organically, but we continue to be out there also looking for opportunities to build out our capability and capacity in fermentation. Operator: [Operator Instructions] Our next question comes from the line of Matthew Yates with Bank of America. Matthew Yates: Just a couple of small ones really around the Accelerate program. Just wondering, on the European performance, is there any effect here from either the footprint rationalization or a more sort of proactive and conscious decision from the management there to sort of focus on the margin at the expense of volumes? Or is this purely an illustration of sort of end market conditions? And then just in terms of the 2026 guide, I think your bridge, your waterfall chart showed about 40 basis points of margin improvement last year from the Accelerate program. Are we talking a similar order of magnitude in '26? And associated with that, a similar order of magnitude in exceptional costs, I think it was EUR 47 million last year. Edmond Scanlon: I might kick off there, Matthew, and Marguerite might want to add. As we think about Europe, and bear in mind -- or when we think about Europe, it's a Western Europe geographic, let's say, footprint that we're talking about here. Our expectations for Europe at the best of times is that we expect volume growth to be in that 1% to 2% zone. Clearly, we're shy of that at the moment. And like I said previously, we do expect Europe to be in positive territory in 2026. In terms of margin development in Europe, despite the lower volumes, we had very strong performance in margin expansion in Europe, and that was down to the Accelerate program. We are running that program extremely well. The execution of that program is very, very strong. We closed and exited 7 facilities throughout the course of the year. That was ahead of expectations, and a significant portion of that was in Europe. But like I said, the dynamics in Western Europe have been challenging. We believe we have the right team in place. We believe they're focused very hard on the right level of customer engagement, being super proactive with customers. And we expect all that work to start paying off here as we move towards the -- as we move towards 2026. Marguerite Larkin: And maybe just to add on the contribution from Accelerate. So in the context of the costs that we expect in FY '26, we expect circa EUR 50 million in the year in relation to Accelerate 2.0, as Edmond has referenced. We're making very good progress on Accelerate 2.0. It will be the primary driver of expansion in 2026. And looking overall from a margin perspective, we're looking at another year of good margin expansion of 60 basis points or greater for 2026. And as I say, Accelerate 2.0 will be the primary driver of this expansion with some operational leverage, mix and portfolio benefits coming through. So well on track in terms of that margin expansion delivery. Operator: Our last question comes from the line of Cathal Kenny with Davy. Cathal Kenny: A quick follow-up on margin, Marguerite, is it the expectation that all 3 regions will see a margin increase in '26, just in the context of that 60 basis points or greater? And one question on the regions, China. Just interested to know the outlook for the Chinese business is for '26. Edmond Scanlon: Thanks, Cathal. I might kick off here. In terms of, I guess, maybe the APMEA region, when we look at the APMEA region, we kind of look at it in 3 portions. Middle East, Africa, we continue to see solid performance there; Southeast Asia, quite strong performance; and China, while volumes were slightly back on the prior year, we did see some progression H2 versus H1, but probably not the level of progression that we expected, so slightly short of expectations. We do feel that 2026 will be a year of progression in China. We feel that there's 2 areas in particular that we're really focusing on in terms of driving that progression. Number one is there is a shift in China with some of our key customers on the retail side that they are putting more of an emphasis on export markets. And we feel we're very well positioned to enable those customers to be successful in those export markets, whether it's into Southeast Asia or back into the Middle East and Africa. And the second area is that there's been, I would say, a very fast acceleration from a consumer perspective around clean label and healthier products, and this is coming from some government guidelines around the 3 lows, meaning low salt, lower sugar and low saturated fat. And again, you can see based on our performance in North America and the Americas, especially around snack and bakery, we're exceptionally strong as it relates to reformulating. That has been driving growth in those end-use markets, and we expect to be deploying those types of technology solutions, both from a portfolio perspective and a capability perspective, the similar opportunities that we expect to see in China. So the market seems to be moving in our direction in China, which is a real positive. And we believe we have the portfolio and the capability to help on that reformulation drive. And that has been a key underpin of growth for us in the Americas in 2025 and 2024, and expect that to continue into 2026. Marguerite Larkin: And in terms of the margin expansion, no major call-outs by region. You should expect all regions to have good margin expansion in the year ahead. Operator: And at this time, we have no further questions. I will now turn the call back over to Kerry for closing remarks. William Lynch: Thank you, everyone, for joining us on the call today. We just wanted to note that we are presenting at the CAGNY conference this Thursday, and hopefully, you get the opportunity to join us or to listen into that conference presentation where we will give further insight in terms of the strategy and the execution thereof over the year ahead and the following years. Thank you. Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect your lines. Have a pleasant day.
Mark Chen: Good morning, everybody, and a warm welcome to those in person and online to Challenger's 2026 Half Year Results Briefing. I'm Mark Chen, Challenger's General Manager of Investor Relations. We're pleased to come to you today from 5 Martin Place in Sydney. Before we begin, I would like to acknowledge the Gadigal people of the Eora Nation, the traditional custodians of the land on which we are hosting this event today and pay my respects to both elders past and prison. Today's presentation will be delivered by our Chief Executive Officer, Nick Hamilton, and Chief Financial Officer, Alex Bell. It will then be followed by a Q&A session. You can ask a question either in person via the online portal or through the telephone. As you'll see from today's presentation, we've made a great start to 2026. That demonstrates both resilience of our earnings and the progress we're making in positioning Challenger for the next phase of growth. In the half, we've delivered earnings growth and returns above target alongside book growth, driven by rising demand for income and financial securities as retirement income tailwinds continue to strengthen. This performance is underpinned by disciplined capital management and a very strong balance sheet. Our capital position remains a clear differentiator providing flexibility to support growth and deliver shareholder returns as reflected in increased dividend and on-market buyback we have announced today. Overall, this is a result that Challenger -- it shows the Challenger is in great shape. It's delivering consistency through the cycle, and it is strongly capitalized and strongly positioned to capture the growth opportunity ahead. I'll now pass to Nick to take you through the results. Nick Hamilton: Thank you, Mark, and thank you for everyone for joining us. So this year, it marks a significant moment for Challenger, as we step into a new era of opportunity and growth for our business and more broadly, Australia's retirement income market. We are a business that's been committed to providing -- to supporting financial confidence for those approaching or entering retirement for more than 4 decades. Our experience and quality reputation as a leader in guaranteed retirement income has made us a trusted voice with the industry, government and regulators on ways to develop Australia's retirement income market. After many years of seemingly waiting, the industry is now moving and the difference in a year is stark. Retirement is fundamentally different and the decisions an individual makes into and through retirement, requires something distinct to what we have today, and that is now recognized. We are months now from entering a new capital regime for annuity providers. And for Challenger, this is a very material moment. Any way that you look at the changes, they will be extremely positive for our business. Today, we've announced our first half results, a buyback for our shareholders and more details on the growth opportunity that has arrived for our business. We'll talk through each of these this morning, and I'm joined by our CFO, Alex Bell, who will provide more details on our first half 2016 financials. Let me start with an overview of the 3 key points in our announcement today. First, we're financially strong. We've grown earnings, maintained our disciplined expense management approach and increased returns to shareholders. Second, we have the capital flexibility we need to grow and deliver returns. And third, we are positioned to grow due to strong momentum behind our strategic initiatives, including our contribution to APRA's review of capital standards, which will see some of the biggest changes for providers of longevity products in a generation. Establishing key partnerships with super funds and advice technology platforms, expanding our offshore reinsurance partnership and delivering our transformation program across customer investment and data platforms, which will usher in a very contemporary and digitally enabled business model. Looking at the first half headline numbers. At the halfway point for the year, very pleasingly, we are delivering earnings growth in an environment where credit spreads are at historically tight levels. Alex will say more on this in her presentation. The significant increase in our statutory result reflects our positive asset experience and gains across our investment portfolio. Strong book growth in the period was driven by a record level of annuity sales. Domestic annuity sales were up 37% to $3.1 billion, and offshore sales up 13%, also to a record level. Our longer-term annuity sales also increased, driven by higher domestic Lifetime and MS Primary volumes. Our group return on equity at 11.4% is above our full year target of 10.7%. We're extremely well capitalized, providing us flexibility to support our growth and deliver returns to shareholders. Our performance demonstrates the strength of our fundamentals, and we've continued to build for growth. Today, our growth opportunity is underpinned by unique demographic and industry tailwinds. We have a world-class accumulation system that is projected to see retirement assets grow nearly fourfold to $4 trillion during the next 20 years. An aging population is one of the most significant trends, around 780 Australians retire every day, or the equivalent of a city the size of Wollongong retiring every year. However, as Australians move from accumulation to decumulation, the vast majority are not transitioning to solutions designed for this stage of life. This is despite our own research, showing 78% of people would be happier with at least partial guaranteed income for life. Unlocking demand for retirement solutions is core to our focus and where we have been driving changes during recent years. At the same time, we're seeing significant increases in demand for income from higher net wealth investors, particularly through private credit strategies as more people search for investment options that provide higher income. Our other major tailwind is a growth in offshore reinsurance markets, particularly in Japan and more broadly Asia. More than 35% of the population in countries, including South Korea, Hong Kong and Japan, will have populations aged over 65 in 2050. This year, we'll mark 10 years of our reinsurance business with MS Primary in Japan where we have recently surpassed $7 billion worth of new business cumulatively written. The strength of the partnership will see us further expand how we deliver offshore reinsurance, including a significant opportunity for growth. As a leader in retirement income over 4 decades, Challenger has developed unique competitive advantages that will allow us to shape the future of retirement in Australia. We have competitive advantages across our customer proposition, distribution capability, asset origination and as a manager of long-term insurance investments and capital. On customer we have invested to maintain our strong brand awareness for retirement income. The future customer experience will deliver simple end-to-end integration into the financial ecosystem. The replatforming of our customer technology to a modern registry and new customer interfaces will put Challenger in a unique position in the retirement market. This half, we delivered the first phase of our customer technology uplift and Phase 2 is now well advanced. And once complete, we'll open our business to customers in entirely new ways. And as we say here, it will be on customer time. We have an expansive distribution footprint, and our partnerships will drive new momentum as the market develops on the premise of a retirement income system. We have established partnerships with some of the largest superannuation funds, platforms and advice technology providers in the country. Our 2 recently announced platform and superannuation partnerships with BT and MLC will launch real innovation in how retirement solutions are delivered at scale. And through the design of new retirement advice in the Iress Xplan and iff planning tools, for the first time, financial advisers will be able to model retirement plans, which incorporate guaranteed lifetime income. We're continuing to discuss partnerships with a number of other providers in the retirement sector, and we're very optimistic about further partnership opportunities over the coming months. We're also remaining focused on the offshore opportunity as our annuity sales reached record levels. Challenger has operated with a limited Bermudan license since 2016. We are working with the BMA to expand our offshore reinsurance business, which will allow us to reinsure products more broadly than we can today. Our asset origination capability remains key as we look ahead. Quality asset origination supports our life business, and it will also enable us to expand fee-related earnings under the Challenger brand. We recognize that the market environment has changed. Demand for Australian credit has risen. Our own demand is growing and will be driven by changes to our asset allocation and our growth. During the first half through the strength of our fixed income asset origination capability, including our whole loan transaction team, we raised $5.9 billion in origination volumes, which included $2.5 billion of private credit originations. And as noted in our announcement on Monday, 9 February, we are in talks with Pepper Money on a potential transaction to acquire an equity stake of up to 25% as part of our broader asset origination strategy. Whilst there is no certainty of a transaction at this stage, we will keep the market informed on any material developments. On investment excellence, we are focused on delivering superior returns to customers and meeting their evolving needs. A key part of this is continuing to innovate the retirement and savings products we offer. In September, we launched our LiFTS income notes platform, the first of its kind in the market. And we acquired an equity stake in London-based Fulcrum Asset Management, a leading liquid alternatives manager. We are focused on being disciplined managers of capital. As part of our capital management framework, we're making Challenger a less capital-intensive business that is pointed for growth and has capital flexibility. Today's announcement of a proposed $150 million buyback is an initial step ahead of the changes to capital standards. This action demonstrates our strong capital position. We will continue to look at our capital management initiatives as the standards come into effect. And with that, I'll now hand to Alex to present our first half financials. Alexandra Bell: Thank you, Nick, and a very good morning to everybody. I'm delighted to now present to you our financial performance and outlook for the first half of the 2026 financial year. At a time when credit spreads remain near cyclical lows and market conditions are tight, we're delivering exactly what investors look for in this environment. We have grown earnings, we have generated returns above our targets, and we have increased dividends, all supported by a strong balance sheet and disciplined capital management. The key message for this half is consistency. We are delivering earnings growth despite a challenging reinvestment environment. By holding a more defensive portfolio at this point in the cycle, we can take advantage of attractive opportunities when they arise, and we're not taking undue risk to achieve higher returns. We achieved a normalized earnings per share of $0.333, representing a 2% increase. with normalized net profit after tax of $229 million, also up 2%. Statutory NPAT reached $339 million, a particularly strong result, reflecting positive total return across each asset class in the Life investment portfolio. We've increased value creation for our shareholders with normalized return on equity of 11.4%, which remains above our target. Outperformance against this target increased to 70 basis points, up from 40 basis points in the prior comparative period, reflecting the Board's confidence in our outlook, we have increased the fully franked interim dividend by 7% to $0.155 per share. These outcomes highlight our ability to generate consistent returns through the cycle, maintaining capital strength and flexibility. Turning to the key drivers of our earnings result. Group net income increased 1% to $487 million driven by Life cash operating earnings, which benefited from higher average investment assets and funds management fee income supported by higher non-FUM-related revenue. Importantly, we're continuing to demonstrate strong cost discipline, with total expenses flat on the prior period at $154 million. Inflationary pressures, especially on technology costs were offset by realized efficiencies in our operating model. As a result, the cost-to-income ratio improved 30 basis points and outperformed the target range of 32% to 34% for the period, the lowest we've ever delivered for a half. For the Life company, we delivered reliable spread earnings despite cyclical dynamics in credit spreads. Life normalized NPAT was $226 million, up 1% and supported by higher average investment assets and ongoing pricing discipline. Book growth of 5.8% and annuity book growth of 7.4% resulted in a 5% increase in our average investment assets, which will underpin future earnings and returns. This slide highlights the cyclical dynamics impacting COE earnings. This half, our margin has moderated to 2.95%. Credit spreads across the fixed income spectrum remain historically tight, which has reduced reinvestment spreads in the near term. Our disciplined approach to pricing has moderated the impact of this effect. To support the change in sales mix this period, we've deliberately increased our allocation to liquid assets with cash and equivalents of $3.3 billion at 31 December, up 27% or $700 million on the prior period. This strategy reflects attractive opportunities in liquid assets to back some of the shorter-duration institutional business we've written this half as well as providing flexibility to deploy capital into higher-yielding assets as opportunities arise. Like many insurers globally, this approach ensures we are not prioritizing short-term yield at the risk of long-term value. Sales momentum in life was particularly strong this half. Total life sales increased 11% to $5.1 billion, driven by record annuity sales of $ 3.8 billion, up 32%. Domestic annuity sales rose by 37%, supported by strong institutional demand and continued demand for guaranteed income solutions. Lifetime annuity sales of $0.7 billion were up 12% for the period. Our offshore reinsurance annuity sales also reached a record, increasing 13% to $0.7 billion, further diversifying our liability book and demonstrating our strong relationship with MS Primary, the expansion of which is a strategic priority for future growth. The balance sheet continued to exhibit a stable composition by asset class. What has evolved is the increase in high-quality fixed income assets within the portfolio. In the last year, we have invested $1.6 billion of additional fixed income, almost all of this being deployed into cash and AAA securities. This move up in quality ensures we are well positioned for any repricing. As evidence of our commitment to investment excellence, we've achieved a strong scorecard this period with total return across all asset classes significantly exceeding the COE investment yield that we include in our normalized result. This generated a substantial after-tax asset experience of $105 million for the period, which supports a strong statutory earnings result. Now turning to Funds Management. Funds Management delivered normalized NPAT of $29 million, up 7%, driven by higher net fee income and continued cost efficiencies across the platform. While average funds under management were lower period-on-period, the focus here is flow, quality and margin sustainability, not just headline fund. 2025 and the start of 2026 has been one of the most difficult periods for active equity managers domestically and globally. Fidante continues to showcase the strength of its multi-affiliate model with total net flows of $1.5 billion for the half. The platform remains one of Australia's largest active managers with 83% of strategies externally rated as recommended or highly recommended. During the half, we recognized $12.6 billion of FUM from adding Fulcrum Asset Management to the affiliate platform. and derecognized $2.9 billion upon completion of the Ares distribution agreement, demonstrating the success of our diversification strategy, alternatives now represent 15% of Fidante's FUM. This shift demonstrates the platform's ability to adapt to evolving investor preferences and broaden its investment offering. A strategic priority for Challenger has been to grow our Challenger Investment Management business and to scale originations for Challenger Life and third parties. Challenger Investment Management continues to deliver on its mandate to grow third-party capital and scale origination for the Life company balance sheet. This investment team will form part of our group investment capability under our new group CIO, going forward. Third-party FUM has increased at a 38%, 4-year CAGR to $3.1 billion, supported by investor demand for credit and income strategies and by the listed CIM LiFTS notes launched this period. For our Life company balance sheet, the originations remain well diversified with $5.9 billion of new originations across public and private opportunities. Our capital strength remains a key differentiator. This period, S&P upgraded the capital rating for CLC and Challenger Limited by 1 notch to and A+ and A-, respectively. S&P noted that the upgrade in ratings reflects CLC maintaining its market leadership position in the Australian annuity market, better regulatory settings and strong retirement savings trends that will support earnings. At 31 December, the Life company had $1.7 billion of capital above APRA's minimum requirements, with a PCA ratio of 1.58x based on the current capital standards. This capital position supports ongoing organic growth, continued dividend growth and disciplined capital management initiatives such as an undertaking to do an initial buyback of $150 million. This slide serves as a reminder of our capital allocation framework and the progress that we have made to maximize shareholder returns. In addition to supporting meaningful organic growth this period, we have announced a $0.155 per share fully franked interim dividend that is up 7%. In respect of capital returns, we intend to undertake an initial on-market buyback of $150 million, subject to market conditions and regulatory approval. This reflects our confidence in our ability to support organic growth and return excess capital to shareholders. Last Monday, we announced that we were exploring an investment in Pepper Money. Whilst not finalized a modest minority stake like this would require no integration and would be just one of the ways to accelerate the expansion of our asset origination capability. Importantly, we are maintaining a strong and resilient balance sheet through these actions and remain disciplined and focused on delivering shareholder value, demonstrating that we are good allocators of capital. Although not yet effective, I wanted to spend a couple of minutes reminding investors why APRA's proposed changes to capital standards are so important and what to expect from the 1st of July 2026. Using our 31 December '25 balance sheet, our reported PCA ratio of 1.58x is expected to increase 16 basis points to a pro forma of 1.74 on day 1. If spreads were at their long-term average, the improvement in PCA ratio from applying the new standards would be even greater, equivalent to an increase in pro forma PCA to around 1.82x. These numbers reflect the lower PCA requirement from the enhanced liability offset within the credit spread stress and the interaction of the standard and advanced illiquidity premium approaches on CET1 through the cycle. We view these reforms as very supportive of financial resilience reducing capital procyclicality and creating a more favorable environment for retirement income innovation, consistent with the objectives that APRA has outlined and the sector's policy focus. Then as we move forward with the implementation of APRA's capital standard changes, we anticipate a meaningful shift in our asset allocation mix over time with an increased emphasis on fixed income assets, and a corresponding decrease in growth assets. This change is expected to lower capital intensity of our portfolio and reduce earnings volatility throughout the economic cycle. By adopting a higher proportion of fixed income, we aim to achieve more predictable spread income, which will then be further supported by the expansion of capital-light fee income streams. Although investment gains will continue to vary over time, we expect them to remain positive through the cycle. The overall effect of these changes will be a relative improvement in return on equity as we gradually shift away from capital-intensive assets that currently yield lower relative ROEs. In managing our equity base, earnings per share will remain a key focus, guiding our efforts to optimize earnings with the most efficient use of our equity capital base. The proposed changes to APRA's capital standards in FY '27 will be an opportunity to revisit our existing normalized cash operating earnings framework that we use for management reporting and ensure that it is fit for purpose as Challenger evolves. With the appointment of Damian Graham as Group Chief Investment Officer, we are aligning our investment capability under a single leadership structure. So consistent with this, we intend to evolve our internal and external reporting away from separate business unit segments to a more integrated Challenger group view. Looking ahead, we reaffirm our FY '26 normalized EPS guidance of $0.66 to $0.72 per share, with $0.333 delivered in the first half. Our through-the-cycle targets for ROE, cost-to-income and capital remain unchanged, and we continue to see strong structural tailwinds across retirement income, advice integration and asset origination. In summary, the first half of FY '26 was characterized by solid financial delivery and continued strategic momentum. During the period, we've delivered earnings growth and returns above our target. Our focus on disciplined capital management allows us to maintain significant capital flexibility, ensuring that we remain well positioned to respond to market opportunities and challenges as they arise. I will now hand back to Nick, and I look forward to taking your questions as part of Q&A. Nick Hamilton: Thank you, Alex. I'll now cover our key focus areas as we look ahead. So we have a clear strategy that meets a significant demographic and retirement tailwinds. Launching our new customer technology platform before the end of this financial year will deliver simple end-to-end integration into the financial services ecosystem for our customers. We're embedding partnerships with some of the largest superannuation platform and advice technology providers, which will help to deliver retirement advice and sales at scale. And we're actively expanding our reinsurance business in partnership with MS Primary to capture the growth opportunities we see offshore. We will continue to expand our asset origination capability through the scaling of our private credit functions to underpin our long-term growth. We're driving innovation and investment excellence, and we're targeting our second LiFTS note issue in the next 6 months. In Fidante, we have an impressive global network of investment firms. We're focused on supporting their ongoing growth and the investment capabilities they provide to customers. And against the backdrop of the APRA capital standards reform for retirement income products, we're becoming a less capital-intensive business. To close, a reminder of our key points today. We have financial strength, and in the first half, we've continued to deliver our key initiatives. Our capital position is enabling strategic flexibility and growth while delivering returns to shareholders. And finally, we've done the work to position Challenger as a growth-enabled business with a significant opportunity that has arrived in the retirement income market. We'll now move to Q&A. Operator: [Operator Instructions] Mark Chen: Just a reminder of the process, we'll take questions first in the room. We'll then go over to the telephone and via the online portal. In terms of protocol, can I please ask you, when you ask your question, please introduce yourself and if possible, because there's a number of people in the room asking questions, just ask all your questions at once, and you'll just enable an efficient process. We'll start off in the room. So we start off with Simon over there first. Simon Fitzgerald: Simon Fitzgerald here from Jefferies. I'll ask the 3 questions at once then just really quickly. Firstly, I wanted to just take you back to the slide that you put up when we talked about the capital changes, which I understand still haven't come into place. But the $150 million buyback, and I know that's independent of those changes. But just wanting to know if you wanted to point out that any other uses of that excess capital such as perhaps repayments of hybrid capital or anything like that, that you might want to point out? Secondly, just on the short-dated sales. There's now 2 big lumps that you've done in the first quarter and the second quarter. So just wanting a little bit of help in terms of how dilutive that would be to the margin, but also in terms of -- it doesn't seem like you had the assets there to begin with, given that we've seen an increase in the cash as well in terms of the investments. So interested to know a little bit more about the dynamics of that. And then lastly, a little bit more on the margin in terms of any effects you might want to call out -- sorry, about any cap bonds or ILS securities that didn't turn up this time that we normally see in the second half. Anything you could add to that? Nick Hamilton: Thanks, Simon. I might -- let me just kick off on the sales one to start with, and then we can come the uses of capital and margin. So I think what you -- if you step back from the sales, what you're seeing is we're continuing to focus on longer-dated sales, like that is a priority. The message to the team as we move towards our new technology that will integrate into the system where it doesn't today is just continue to drive longer-dated sales through the retail market. We're benefiting from strong growth that MSP is seeing, and you're seeing that coming through the reinsurance volumes. Over the course of this period, there's been a bit of a switch in the institutional business where sales that you've typically seen in Index Plus have been coming in to the term annuity side, institutional term side. And there's explanations for that. But what I want to make absolutely clear is we're right in this business to meet our returns. So with our Liquids team have identified some opportunities in markets that they can deploy capital into. The pricing environment in institutional term has been more attractive to us right now than it has been for a long while. And so we have been able to map attractive pricing dynamics with investment opportunities there for that shorter-dated business. So very much consistent with meeting the ROE. But our focus is bridging through to the new technology, driving longer-dated sales as we can, and then the strategic partnerships running into to step change at medium term. But your comment there on dilutive, it's clearly it has to be because it goes into the denominator. And that's just an out working. But as we've said many times, we run the business, particularly around pricing. We run the business to meet the ROE target and pleased with that. On the first question, which was uses of capital... Alexandra Bell: Yes, I can take it, yes. It's all good. So obviously, we do have the new APRA capital standards coming up, and that presents an opportunity on day 1 where we expect to have excess capital. I think hopefully, what you've seen today is that we're thinking about capital in a lot of dimensions. It's not binary. It's not one thing or another. We're trying to satisfy a number of different options from a capital perspective. You called out specifically any considerations for our Challenger Capital Notes 3. So we do note that those come up for their optional exchange date in May this year. But you'll understand from an APRA perspective, it's important that we don't set any expectations around our intentions for that. But you can rest assure that it's clearly a consideration for us as we think about the optimal capital stack. From a buyback perspective, look, what we've signaled today is $150 million. We recognize that that's not large. That's not what we're saying the capital excess is on day 1 of the capital standards. We're operating under the current capital standards today. So it's something sort of really modest and executable that we can do today. And what we're hoping investors will take away is a signal of our intent around ensuring that we are optimizing the uses of capital and doing that in advance of those changes to capital standards. And then I think you had a last question just around the margin. So look, there is sometimes a little bit of seasonality between the first half and the second half. We've seen cat bond distributions typically more slightly weighted to the second half. But I think if you take a step back, Nick's point are right, what we should be focusing on is meeting the ROE. So we have written some shorter duration business this period, but at good ROE. So what you should hear is that the business we're writing is meeting or exceeding those ROE targets. Mark Chen: Can we go to Freya and then to Sid? Freya Kong: Freya Kong from Bank of America. Can you help me reconcile the higher liquids holding in the portfolio versus a higher PCA capital intensity this period? Anything I'm missing in that? Second question on you're talking about offshore market opportunities. You've talked about Japan, but Asia more broadly, which regions are you looking at? And I guess, what's the strategic rationale for expanding this business versus focusing on the opportunity that you have domestically? Do you have enough bandwidth for both domestic and international growth? And then just lastly, clarifying, should we be viewing this buyback completely independent of any acquisition of Pepper Money stake? Nick Hamilton: Okay. So there's 3 questions there. Thank you, Freya. So I might -- let me start with offshore and give some context there because in many ways, this isn't new, new for us. I mean, we have -- since December 2016, we have been reinsuring business with MSP. And if you look at the volumes that we've been reinsuring even in the last 2 or 3 years, have almost doubled. And so our partnership with them is excellent. What we do note there are some products that we would like to reinsure which out of Australian jurisdiction are difficult. And by taking what is already -- we've got a long relationship operating with the BMA and expanding or building the platform to expand the products that we're able to reinsure is a really sensible adjacency for us. Now this is not new. You're not -- this is not something we're announcing we've just looked at in the last recent period. Members of the team have been working on this for coming up 2 to 3 years. So the capabilities that we have inside Challenger today, whether it be on the investment side, the LLM side, the actuarial teams, they are able -- and because they do it today anyway across for MSP, able to support the delivery of the new licenses that we'll achieve and consistent with new product development we've done for many years with MSP, new products that we'd look to reinsure. So it's a very sensible strategy because the partnership and it gives us a beachhead and an opportunity then without needing to make a business case on any grand business case. It gives us the opportunity to look at other markets. Because of the stability of that relationship, Challenger being a trusted brand in the region, well regulated, domiciled in Australia. There are just other opportunities that we believe in the fullness of time, we will be able to unlock but very much built around what we do with MSP today. Then we might go to -- do you want take the PCA one? Alexandra Bell: Yes. So I'll take the PCA one. So again, I'm sort of happy to take the PCA on offline too in terms of showing the insights of the calculation. But if you look at the capital intensity, the capital intensity of the balance sheet has remained roughly the same, particularly if you look at the asset risk charge and the overall composition of the balance sheet is steady. That cash balance was higher at 30 June too. So that increase is really comparing us now versus where we were at 31 December 2024 in terms of that increment. But there's no increase in capital intensity. And obviously, as we have written lots of new business over time, we have also invested in some alternative assets over that period, which is still highly capital intensive. So the relative capital intensity has stayed about the same. And then you had a question around the buyback as well. And so yes, we should definitely view that as completely independent of any considerations we might have around the proposed transaction with Pepper. The buyback is being done with a view to our long-term view around capital management as well as how we're feeling about APRA's new capital standards coming in. So yes, not contingent at all. Siddharth Parameswaran: Siddharth Parameswaran from JPMorgan. A couple of questions. Firstly, just on your Slide 22 where you show us an indicative view on what the ROE would look like under the new standards. I just wanted to firstly check, is that to scale and scale starting from 0 and at the bottom? And if that is the case, I mean, it would suggest that economically speaking, it makes a lot of sense under the new standards to just reallocate the capital that's backing the real estate alternatives and equity right to fixed income? It looks like it'd be like a 50% increase in your ROE from what you're getting at the moment on those assets. It suggest that's what we should be growing into. Is that the strategy rather than giving it back to shareholders. That seems economically what would make sense based on that chart. Am I reading that correctly? So that's question one. Question two is just around the guidance. I just wanted to make sure that I'm reading what you're -- where do you think you're likely to end up? You've kept the guidance range the same on EPS, but the midpoint would imply a 7% step-up from the first half levels. The top end would imply an even much bigger step up again. It seems like they're quite big step-ups given that the first half was -- saw quite a lot of margin contraction. So I just want to check where do we sit versus that guidance? And maybe just a final one, just on asset origination. Just wanted to check. Obviously, you're talking about geographic expansion in terms of product sales. Are you thinking about geographic expansion also in terms of asset origination. Nick Hamilton: Maybe just close off the last one first. We're not. We -- I mean, to the extent that organically, we have built out capability in London today, which has been in place for 5-plus years to manage access to assets, but we've got a number of really good partnerships across the world with global leaders in credit origination, which we use to support the balance sheet today, and will continue to do so in any growth environment, including to support growth in the offshore reinsurance, which is just stepping up from what we do today in any event. So there's no plans there to do more offshore there. Alexandra Bell: And maybe I'll take your other 2 questions, Sid. So on Slide 22, I was expecting the question about scale. I wondered if you bring a ruler. So it's not to scale the graph that we've done but it's intentionally there to try and show a directional impact. So it doesn't include expenses, for example, and how we've done the calculation, and it can be imperfect to come up with a perfect ROE by asset class because you've got to allocate target surplus across them. So the idea is to give you an indicative relative sense of what we're currently thinking about as the relative value and relative returns that we're earning on those asset classes. And it does then lead to the right conclusion that you've drawn, which is that if the current conditions around those relativities persist, you should see us swapping out growth assets like real estate, although doing that in a careful way, and we've sold 4 properties this period, selling out real estate and to some extent, some of the alternative assets too and putting those towards fixed income. Now you got to do that in a way that protects the EPS outcome for shareholders. And so you've got to manage that equity denominator at the same time in doing that. Nick Hamilton: The second one was on guidance. Alexandra Bell: And the second one was on guidance. So yes, from a guidance perspective, so $0.333 for the first half, reiterating the full range of $0.66 to $0.72 per share. And maybe just a reminder, of why we set that range. There's a number of headwinds and tailwinds that we think about in terms of where the business could go in the period and some of the contributors to our final outcomes are still variable. So things like performance fees and transaction fees can move us around that range. So can some of the distributions on our asset returns. There is a little bit of seasonality, which we spoke about before. But that's just to give you a sense of why we're stuck with the full range. Mark Chen: Just to remind on that chart, Sid, I mean, obviously, we have a footnote there. That is a pretax ROE target, that line, and its pre-expenses. So when you're doing your comparisons. I can see either Kieren or Nigel has the microphone. Nigel Pittaway: Nigel Pittaway here from Citi. Okay. A few questions. First of all, cost-to-income ratio, it looks like your guidance actually implies that goes up second half. So is that just conservatism? Or is there more sort of cost to come through second half to drive that ratio up? Secondly, probably overly simplistic view of the capital would be leasing $400 million from day 1 as a result of the new standard, $150 million is going on the buyback and $280 million is earmarked for Pepper Money. I presume that's overly simplistic, but if so, why? And then given you're going to need so much fixed income moving forward, whether or not the Pepper Money deal goes ahead, do you expect to have to do more such deals to guarantee your supply? And why does a minority stake in Pepper Money get you what you want? Nick Hamilton: Well, let me -- thanks, Nigel. Let me start. We'll go work from the back up again. So I guess first comment to say about Pepper, for the avoidance of doubt, is clearly the news flow was taken out of our hands. And the deal remains very much incomplete and there's no certainty that we'll execute an agreement. But if you went back to slides that we've put up since '22, we've talked about expanding the aperture of our asset origination capability. And in so doing, we have built out our own internal team further. We've also created a new whole loan servicing and origination capability. So we look at Pepper, likely look at our other partnerships where it gives us a whole lot of optionality about growth in the future. That is a really well-run business. It's a big originator, its growth has been really strong, and it's a business that we know well. So as you would expect. And the opportunity, to the extent anything was to -- we were to execute any agreements there, it would give us strategic access to assets not just for now but long into the future across a whole lot of lending verticals that Pepper today originate across. So that's the sort of the premise to it. And I would make a comment that we have, to this moment in time, being able to, as an incredibly reliable funder into the non-bank lending market and other originators in the domestic here in Australia, we have been able to meet our requirements. But we recognize that whilst supply of asset is growing, demand for assets will continue to grow over time, and our demand is going to continue to grow over time for the reasons not just the capital standard changes, but also the expectations on book growth through time. So we we're not flagging any other transactions here. That's definitely not the message. The news flow has been taken out of our hands. We really do look forward to the extent it's appropriate to update the market on that to provide more context on the sort of the structure in the agreement. Alexandra Bell: So maybe moving to cost-to-income ratio, Nigel. We're sitting just below the range of 32% to 34% for the first half. Again, there is some seasonality to our cost spend. So we do expect some of our project spend to be weighted towards the second half, but I don't expect that to move it materially. So being at or around the very bottom of that range is the right way to think about the cost-to-income ratio for the second half. And then your question around capital. Look, we've spoken about this a little bit. what's really important to take away is this idea of looking at the capital options and the uses of capital in their entirety and how to best ensure that we are sort of meeting the requirements of everybody equally, recognizing that organic growth for us is obviously a primary focus to the extent to which we are realizing the growth of the business, having capital to back that is a primary importance. But with the capital standard changes, returning any excess capital to shareholders is equally important to us. And so that $150 million, you should think about it as initial. We certainly are not thinking about it in the context of the remaining being for Pepper there. If that transaction were to complete, there are a number of funding options that we could look at. We were really explicit in our release last Monday that we definitely have no intention of raising fresh common equity, but the options are broad. Nigel Pittaway: [indiscernible] Alexandra Bell: So that's the -- yes. So I think Nick touched on that. A minority stake gives us a seat at the table with Pepper would, if it were to complete. And I think importantly, that gives us a level of access to assets that you would not be able to do just by an ordinary flow arrangement, many of which we have already today. Mark Chen: Can we go to Kieren? Kieren Chidgey: Kieren Chidgey, UBS. A couple of questions. I might just circle back to the Life margin trajectory, Alex, the credit spread compression you talked about, can you just be clear whether or not given you mark-to-market your entire book every half if we've seen the full impact of this lower credit spread environment in your margins yet? Or if there is a sort of flow through yet to sort of come through into the future period? Secondly, I guess, a follow-up question on Sid's guidance question. I'm just interested in what are the scenarios that land you in the top half of that range. Is it plausible? Or are we now sort of looking more at a sort of a best estimate that is in the lower half of the range for this year? And then thirdly, on the APRA capital changes, you've had some time to digest these. Now interested in your thoughts around where your target ratios are likely to land. Alexandra Bell: Okay. All right. I'll take you to those in turn. So I guess coming back to the COE margin. I won't reiterate the drivers in terms of where we've got to for this half. But we don't, as you know, guide to a particular exit rate in terms of how we're thinking about the second half, and that is fundamentally because it is just about working of the mix of the business that we write as well as the credit spread environment that we're in. To your point around how much of it has come through. Like credit spreads have been really tight for quite some time now. So if you think about the duration of our fixed income book, it's about 3 years. And depending on when you think it started being low, like it's been low for 18 months at least. So there is -- most of it is in that COE margin now. A lot of the higher-yielding fixed income has started to roll off as we think about the impact that, that has on that COE margin. So as I said, there's a little bit of seasonality to it, but it will more be a function of the book growth and the mix of the sales that we write, Remembering, of course, that some of that shorter duration institutional business as long as we're getting good pricing for it and it's meeting our ROE is still good business to write. And you will probably remember me sitting here last time talking about Index Plus in that way. It can be -- as long as it's meeting our ROE, it can be accretive to margin, but good for ROE and that's the right economic and rational decision for us to make from a management perspective. Coming back to the range, look, there are things that can move us around that range quite a lot, particularly some of the funds management variables. For the first half, that $0.333 per share is about 48% of the midpoint. I think last year, at this point, we've done 49% at the midpoint. So it's not a huge delta. So I wouldn't be pointing to any particular exact specific point within the range at this stage. And then from a capital standard perspective, look, we've looked at the outcomes in terms of kind of day 1. We've got an Investor Day coming up in May, and we'll provide much clearer guidance around the impact that it has on our ranges and metrics I spoke very briefly about the mention of maybe thinking about how our own COE framework evolves, too. And so we'll make sure that there's an education of the market around any changes we make to metrics and targets. Mark Chen: Okay. It looks like there's no more questions in the room. We'll move to the telephone. Operator, can we move to the first question? Operator: Your first question comes from Lafitani Sotiriou with MST Financial. Lafitani Sotiriou: Just one follow-up on the reinsurance update. Can you just go into a little bit more color on the expanded products that the expanding footprint in Asia, the language. I know you've been working on it for a few years. You've seen like quite a big step for you guys? And can you also add some color around what conversations or any, if any, that have occurred with Dai-ichi about reinsurance arrangements there? Nick Hamilton: Laf, thank you. Let me just try to bring it back a little bit to how we got here. So 10 years of reinsuring with a major Japanese group like MSP. Over that time, we have periodically, I think it was probably 2 years ago we moved to a new product. So we're probably reinsured about 4 to 5 different products with MSP. Within the Japanese market, demand and preferences change through time. And so our team have been able to work with them to meet the designs of new products and you're seeing the benefit of that coming through the sales. What we note, though, and starting to take offline, is there's certain of the products we're now limited from being able to in the Australian market reinsurer into Japan. And that is too -- that is a limitation. And it's something that if we can solve, which we are going to now solve with an extended license in Bermuda, that will allow us to use the MSP relationship as our beachhead to support a build-out of that capability, leveraging our own internal systems and capabilities. And then it gives us optionality around growth. So the first growth we would seek is through new product reinsurance with our existing partner in MSP. And I'll probably just round off, I mean, make the comment around Dai-ichi. I'd put Dai-ichi in the same category as other Japanese insurance. There is significant demand for panel reinsurers in the Japanese market. We think we offer a differentiated proposition. We've been able to prove how we can build through strong relationships with MSP, what is now a 10-year partnership. And so we do think there are other opportunities, and we wouldn't limit it just to one name or another. I make mention of the other markets simply because there are other opportunities in those markets. Challenger operates globally. We have an office in Japan. We have team members up and down all the time. So it's not a -- I would just not characterize it as a huge new, new for us. It's an exciting evolution of an existing business strategy that we have today. Lafitani Sotiriou: And just the timing of it. So how long do you think will license comes through? And will there be any other additional capital considerations? Nick Hamilton: So on the licensing, it will be this half, we're working towards. It's obviously subject to the BMA regulatory approvals, but it's something that we've been at for a while now. And the next steps there would be transitioning the portfolio with MSP, the statutory fund assets across. There'd be no implications to capital because it would use with the sort of almost convergence of Australian standards with international standards, the amount of capital that we would back up with is more or less equivalent to that, which we have today backing those liabilities. Operator: The next question comes from Julian Braganza with Goldman Sachs. Julian Braganza: Can I just ask, firstly, what is baked in your guidance just for book growth going into the second half. Are you expecting that to continue to be strong, consistent with the first half trend? Maybe I'll start with that one. Alexandra Bell: Thanks, Julian. So look, we don't talk explicitly around the book growth assumptions that we make. Remembering that the sales that we deliver in the second half of any year have very small impact on the actual profit outcome for the year. And so the 2 would not be that linked in any event. Julian Braganza: Okay. Okay. And then maybe just in terms of the pricing for growth. Are you setting this against your current ROE target? Or are you expecting this against potentially a lower ROE target under the new capital standards? Just want to be very clear how you are pricing for growth today. Alexandra Bell: Yes. Both very easy question for that. The pricing today is to our existing ROE target, not least because we are still very much operating under the existing capital standards until we're not on the 1st of July. Julian Braganza: Okay. Got it. And then just in terms of the funds management business, can you maybe just clarify how you're thinking about flows from here given the pressures that we've seen as well as the sustainability of the margin that we've seen over the first half? Nick Hamilton: Thanks, Julian. We'll give Alex a break there. So in terms of funds management, you break apart our 2 businesses. We have our Challenger investment management in the Fidante platform. Alex has a great slide in the pack there just showing the growth of Challenger Investment Management and as you'll be aware, that's been a strategic priority over the last number of years. We've seen, obviously, demand for income and higher income products really increase. I think the approach we've taken to growing it has been really strong and the announcement of the launch of our new LiFTS platform just gives us a pathway to support different channels within that domestic market. So really exciting what we're seeing coming through the CIM team. Within Fidante, you've really got to look at -- there's a broad range of strategies in there. The announcement around Fulcrum, which increases the alternatives business there at about 13% of FUM is very exciting because you were seeing really strong growth in alts managers, liquid alts managers globally as allocators are shifting between passive and active or thinking about the shift, I should say, from active and whilst they'll have significant exposure to passive, a lot of them are finding halfway houses in liquid alt strategies to provide portfolio diversification. So it's very much in line with where market dynamics are right now because the corollary of that is clearly the -- and it's not contained just to our business, but active equity fund management has found it very difficult in the last number of years to produce excess returns to the passive benchmarks. And you can find an argument on both ends of the spectrum here pretty -- depending on what your perspectives are. I think what we would say is when we look at our managers, they're incredibly highly regarded. They're well rated. They're sticking to their investment processes. And to the extent that we see a normalization across markets, they'll benefit materially in that environment. So there's a lot of support going on around the customer bases there. But then within the fixed income managers on the platform, there's some really strong performance in Fidante there and should be supportive of flows going forward. All of that comes to margin and mix is always a little bit hard to read. We've seen some benefits from a large denominator simply because we had some very large low-value money sitting in that book. which came out over the last 12 months. So there's always going to be a mix of things, but we're prioritizing clearly growth in those strategies and protecting margin across that book. Operator: Your next question comes from Andrei Stadnik with Morgan Stanley. Andrei Stadnik: Can I ask my first question around the last COE margin? Can you talk a little bit about the impact of tighter spreads isolated from the impact of lower cash rates? Alexandra Bell: Yes, sure. Thanks, Andrei. So the COE margin is, if you think about the math of it, you've got the earnings and the numerator and you've got your average investment assets in the denominator. So the first thing to say is we did grow earnings. Those earnings -- the numerator is up 2% period-on-period, but the average investment assets grew by more than that. So that's why you've got the margin coming down, and that's because of the book -- the strong book growth that we had during the period. That numerator then includes the investment yield that we are earning on assets, less the funding cost that we pay away to our annuitants. And so from a cash rate perspective, the cash rate impact, particularly of small movements and particularly in the short term, is really netted off between those 2. The impact on the investment yields then felt equal and opposite on the interest expense. So those sort of net off. The credit spread environment, though affects really just that investment yield. And so to the extent to which there is increased competition for assets more tricky reinvestment spreads to get that puts pressure on that investment yield, recognizing that a meaningful part of our balance sheet is in fixed income. Andrei Stadnik: Just to check on that. So I thought the earnings on shareholder funds went through there, so the impact of lower cash rate does have an impact. I appreciate it's not overly large. But how should we think about that and particularly going into the second half in terms of any lag, the impact of the rate cut versus the benefit of the rate increase that came through in February? Alexandra Bell: Yes. So I think the shareholder funds revenue does go through there, too. I guess that's the first thing to say. But the shareholder funds are made up of the same composition as the policyholder funds. That's also got 75% of fixed income in there. So there are assets that are more exposed to that cash rate like property over time, but small movements of 25 basis points here and there. And in 1 half, you're not going to see any big impacts from cash rates. Mark Chen: The other thing as well, Andrei, it will take a little bit of time to season through as well. So obviously, you're not going to get the full benefit come through from a cash rate increase over the last year in the current financial year. Andrei Stadnik: That's helpful. And look, for my other question, can I just follow up on what I think you were replying to Freya. I think the analyst pack, Page 48 shows a small increase in capital intensity. But how do we reconcile a small increase in capital intensity versus the move to hold more in liquid during the half? Alexandra Bell: Yes. Thanks, Andrei. So maybe we can show you the detailed calculation offline, too. If you look at Slide 48 of the analyst deck, you'll see the compositional parts of PCA. If you actually just look at asset risk charge over investment assets, it is flat. So the increase is really coming in the combined stress, where the biggest movement is actually in deferred tax assets. So there were larger deferred tax assets this period than they were in the previous period, which means we have to hold slightly more PCA. So it's not a function of the actual asset mix at all, but happy to show you that in detail. Operator: There are no further questions on the phone line at this time. I'll now hand the conference back. Mark Chen: Okay. Unless there's any further questions in the room, I think that closes today's briefing. Irene and myself, we're both on the phone today. So if there's any other questions, feel free to call through. Thanks again for your time and your interest in Challenger.
Operator: Thank you for standing by, and welcome to the Sims Limited HY '26 Results Call. [Operator Instructions] Today's presentation has been lodged with the ASX, along with the results release. It may contain forward-looking statements, including statements about financial conditions, results of operations, earnings outlook and prospects for Sims Limited. These forward-looking statements are subject to assumptions and uncertainties. Actual results may differ materially from those experienced or implied by these forward-looking statements. Those risk factors can also be found on the company's website, www.simsltd.com. As a reminder, Sims Limited is domiciled in Australia and all references to currency are in Australian dollars, unless otherwise noted. I would now like to hand the call over to Stephen Mikkelsen, Group CEO and Managing Director of Sims Limited. Please go ahead. Stephen Mikkelsen: Thank you, and good morning from Sydney. Today, we are here to resume our half year results for FY '26. Presenting with me today is Warrick Ranson, our CFO. We are fortunate today to have all of our business unit leads here with me in Sydney. So we have John Glyde, our ANZ Managing Director; Rob Thompson, our President of North America Metals; and Ingrid Sinclair, our President for SLS. The presentation has been launched with the ASX, along with the results released. First up, I will provide an overview of the results and strategy, Warrick will then take us through the financial results. At the end, I will return to talk about the outlook, after which we will have Q&A. I will turn straight to Slide 5, which looks at our strategy and strategic priorities. By now, the left-hand part of this slide should look familiar as it has guided us for the last few years. I'm going to focus on some of our recent key strategic achievements. From a customer and supplier perspective, we have made great strides in increasing our unprocessed intake, particularly in NAM, and this is definitely driving increased margin when we process it into higher-value material. We have signed a couple of significant key supply agreements in ANZ with New Zealand Steel and Alter, and SLS is expanding into Ireland. Looking at operational efficiency. NAM has really improved its logistics infrastructure, particularly the ability to deliver domestically through rail, and this has allowed us to take advantage of the domestic shred premium. Work on Pinkenba continues at pace, including a fines plant. And rail infrastructure works at Otahuhu will allow us to effectively service the Glenbrook EAF. From an innovation agile perspective, we are transitioning to an outsourced global shared services model, which will improve our service offering, lower costs and improve our ability to integrate new operations as we grow. We've just about completed relocating the SLS senior management team to Irvine in California and are already seeing the benefits around innovative thinking and ideas from the increased collaboration. We've also added a new position to the senior team with a Chief Digital Officer. Given the strategic importance of deeper integration with hyperscalers, we've appointed a dedicated role to drive closer alignment with their operational workflows. The first 3 bullet points under invest responsibly are linked. Warrick and I will talk more about Tri-Coastal, the Houston land base, and the property strategy lead role in the coming slides. It is also worth noting that we have extended our debt facilities by 12 months as we position our balance sheet for further growth. Moving on to Slide 6. Firstly, safety on the left-hand side. Total recordable injury frequency rate for the first half has been maintained at best-in-class historical lows. And just as importantly, we are tracking well on our lead indicators. As a management team, we all continue to focus on making sure our employees can go home each day just as they came to work. On the right-hand side, you can see that we are progressing nicely across governance, systems, strategy and risk assessment in support of our climate commitments, including the integration of climate data into financial and operational systems to enhance transparency and decision-making. Moving on to Slide 7, and I'm conscious that Warrick is going to take us through the financial results in some detail. So I'm only going to highlight a few points from the consolidated result. Metal sales revenue was flat despite sales volumes being down 2%. This is all about the price and contribution of nonferrous, whether it be copper, aluminium or zorba. The market is very strong revenue is up nearly 70% and repurposed units are up close to 18%. SLS has had an incredibly strong first half driven by the demand for DDR4 memory. And we will talk about this in subsequent slides. A more subtle point to highlight is the flat metal trading margin percentage despite the significantly higher revenue from nonferrous, which has a high absolute margin, but lower margin percentage. This means that we have grown our ferrous trading margin percentage through disciplined buying of non-dealer material. I'm very happy with our cost control. And it is also pleasing to see the growth in return on invested capital. Returns have improved materially over the last 2 years, and we remain focused on closing the gap to our cost of capital. Slide 8 separates the main performance highlights between Metal and SLS. The only additional points I would comment on here is the 3.5 percentage point increase in unprocessed scrap in metal, driving higher shredder capacity utilization in metal, and the 7.7 percentage point increase in EBIT margin for SLS. Slides 9 and 10, look at the factors influencing our metal businesses. Let's look at Slide 9 first. The top 2 slides actually show how tariffs are providing protection for NAM and SAR in North America. You can see on the top left-hand side, the falloff in U.S. construction activity over the last year or so. All things being equal, this would have resulted in quite a depressed steel market in the U.S. But look at the right-hand top slide, and you can see the falloff in steel imports commencing with the introduction of Section 232 in 2018 and then continuing with the tariffs. U.S. steel manufacturers have benefited more from the fall in U.S. imports than they have suffered from falling construction spend. What these charts indicate for the scrap market is that domestic pricing has been supported by strong demand although softer construction activity continues to constrain intake volumes. The bottom chart explains ANZ's dilemma and depressed ferrous results. Quite simply, global ferrous scrap prices have fallen as Chinese exports have risen. Slide 10 shows why nonferrous is in many ways the hero of the metal results, and it is quite simple. The chart shows the price in Australian dollars that Sims actually realized for its sales of ferrous and nonferrous products. Ferrous has fallen from a bit under $570 to around $545. Nonferrous combined has risen from around $4,100 to nearly $5,000 on a blended basis. Focusing on NAM on Slide 11. These 4 charts capture the progress we have made at NAM and explain not only the turnaround of FY '25, but now the continued improvement in FY '26. Firstly, the top left chart shows the benefit of focusing on profitable tons. We have grown trading margin percentage by 5 percentage points over the last 2 years. This has been achieved by focusing on, amongst other things, unprocessed ferrous, which has increased by 12 percentage points over the same period, and this has increased shredder utilization by the same amount. Those shredder tonnes are producing more zorba, which like all nonferrous products has risen nicely in price. Finally, you can see that we are exporting less as we have grown our domestic channels to market. This is particularly so for shred, where domestic premiums to export have been growing and currently sit at $50 per tonne. As a point of interest, we sold around 85% of our shred domestically from the East Coast. This would have been around 10% just a few years ago. It is important to note we still maintain our export optionality if market dynamics change in the future. Slide 12 summarizes the Tri-Coastal acquisition we announced last week. As I said at the time of the announcement, over the last couple of years, we had materially turned the Houston business around, but we needed access to better options, both domestically and internationally to really drive performance. We had a suitable piece of land to achieve this at Mayo Shell but the capital cost to upgrade the port at Mayo Shell and the size of our existing ferrous business did not justify the CapEx. TCT gives us this deep-water access and therefore, optionality, but it also materially increases our presence in the market in excess of another 350,000 tonnes, significantly reduces our operating costs through the Enstructure service agreement contract, and it frees up the sale of all our land in Houston. We estimate in excess of USD 100 million, including Mayo Shell. From a numbers perspective, we have paid a bit less than 4x EBITDA post-synergies. The combined businesses and by that, I mean, our existing ferrous and nonferrous operations plus the TCT acquisition, are expected to have an annual EBITDA of USD 25 million and a return on invested capital of over 20%. Turning to Slide 13, SA Recycling. As the chart shows, SA Recycling has done a great job in ensuring resilience and its trading margin percentage. They have been pretty consistent at around 30% for the last 5 or 6 years. In the last 2 years, this has been achieved by increased revenue from nonferrous, including zorba, and this has combated the more depressed ferrous market. SA Recycling has strategically developed a really strong hub and spoke model in regional markets. It now has a very consistent source of unprocessed material being fed from around 150 feed yards into its 24 shredders. This means more zorba from shredding and more opportunity to attract retail nonferrous from peddlers. I expand on this theme a little more on Slide 14. Firstly, you will note the deliberate acceleration of the hub and spoke model. Since 2021, SA Recycling has acquired 76 yards compared with 52 for the 10 years preceding 2021. And you can see from the map that it is still a highly fragmented market, so there remains considerable further opportunities, and there is significant headroom in its existing shredders. Its strong cash flow and balance sheet strength support the growth. SA Recycling has developed a real expertise in integrating these small bolt-on acquisitions in implementing its operational and commercial practices. What all this means is that the business is underpinned by strong unprocessed inflows and strong nonferrous markets. This provides a very solid earnings base in the current market conditions. And when the ferrous market cycle turns, SA Recycling is very nicely positioned to capture the upside. Moving to Slide 15. There is no doubt that ANZ continues to operate in a subdued global ferrous environment, and it does not have the prediction of the tariffs that NAM and SA Recycling enjoy in the U.S. It does have a very strong nonferrous business, a good hub and spoke network and good domestic access for sales. In many ways, it is a business that is structured very similarly to SA Recycling. It is worth noting that the nonferrous contribution is even more important to ANZ as the fierce market conditions are considerably worse than North America. However, it will also benefit from an upturn in the ferrous market. With over the next couple of years, this is largely dependent on a meaningful reduction in Chinese exports of steel, which seems unlikely. Beyond 2 years, however, the structure of the ANZ market is likely to change as domestic EAFs come online and this is the focus of Slide 16. The chart shows that currently about 50% of the scrap generated in Australia is exported. However, by 2027, maybe 2028, this could reduce to under 20% as a result of increased EAF demand and additional charging of scrap and blast furnaces. This local demand is likely to support prices and potentially delink Australia and New Zealand from the full impact of Chinese exports. In our view, our Pinkenba site in Queensland will play the major logistics role in facilitating scrap finding its way to the right location at the most efficient price. This could well include importing scrap from our facilities on the West Coast of the U.S.A. No other participant in Australia or New Zealand has the capability to manage scrap flow between all states, New Zealand and the West Coast of the U.S.A. I now want to turn to SLS on Slide 17. The chart on the right tells the headline story of the dramatic rise in DDR4 chip prices. But what has driven this? There are 4 interrelated points I want to make. One, we still need DDR4 chips as they are the workhorse of many of our devices and the Internet of Things. Two, manufacturers are switching to making DDR5s with the demand from hyperscalers building AI data centers is almost insatiable. Three, this has created a structural supply-demand imbalance for DDR4s. High-quality repurposed DDR4s are a practical solution, but they are also limited. Fourth, a number of suppliers and market commentators are saying that the imbalance is likely to persist beyond 2027. I want to provide an update on our SLS expansion into Ireland, and this is on Slide 18. Firstly, the expansion is well underway, and we expect we will open the 120,000 square foot facility in early April. There will be some ramp-up in other costs, so I expect meaningful contribution to EBIT will not happen until sometime in June, maybe July. As the analysis shows, Ireland is an ideal place for expanding our data center infrastructure services. It is a major hyperscaler hub in Europe where we already have a presence. We have a proven track record in these types of facilities, and I expect it to look very similar to our Nashville site, which a number of you have visited. We currently anticipate growing the business over the next 2 years to repurpose approximately 1 million units per annum with a skew towards DDR4s. This is an exciting opportunity for us, and is driven by an existing relationship we have with a major hyperscaler. I'll hand over to Warrick now for a more detailed look at the financials. Warrick R. Ranson: Many thanks, Stephen and good morning, everyone. Despite mixed construction activity in Australia, continued elevated Chinese steel exports and softer U.S. consumer sentiment impacting prices, ferrous scrap markets remain supported assisted by the progressive expansion of EAF capacity globally. With export markets exposed to global scrap dynamics, we continue to leverage the arbitrage in our key domestic and international markets, and sold volume proactively between the 2 to maximize margins, reflecting the significant agility and flexibility embedded within both our inbound and outbound logistics chains. In parallel, nonferrous markets delivered a structurally strong performance and provided meaningful earnings stability, with LME copper increasing by approximately 13.5% year-on-year while aluminium prices rose by 9.8%. The Asian spot price for aluminum reached its highest level since 2022, supporting considerable zorba price increases, as Stephen mentioned. Not surprisingly, nonferrous trading accounted for over 40% of group revenue in the half, up from around 35% in the comparative period. Concurrently, of course, prices for DDR4 memory continued to increase exponentially, rising by over 450% year-on-year as demand continued to increase against diminished supply with manufacturing shortfalls and a focus on new generation cards continuing to uplift repurposing and resale activities. Across the business, we continue to deliver disciplined cost efficiency initiatives. Current activities such as moving to a global shared services platform and the operational changes now targeted for our Houston operations will continue to provide performance improvements in the business. We saw our overall cost base remain relatively flat despite increases from higher inflows of unprocessed material and NAM and volume growth in SLS and of course, general inflation across the board. I'll come back and talk about our cost performance shortly. Our statutory result reflects our targeted restructuring initiatives and noncash hedge book mark-to-market adjustments associated with the significant rise in copper and aluminum prices at period end. We continue to work on the recovery of our U.K. metal receivable following collapse of that third-party business in an extremely difficult market. But in line with prudent accounting practice, we updated the potential credit loss on the residual by a further GBP 30 million to reflect current estimates. Although we have effectively reversed our prior accounting position on the sale, we remain pleased with our decision to exit the U.K., the price we got for the business and the way we were able to maximize cash flow, particularly given the number of subsequent business failures in the industry there of late. Moving to Slide 21 now. And I've touched on the principal drivers of most of these already, so I won't dwell on this slide. Positive contributions by both the NAM and SAR businesses absorbed the impact of the current market pressures on ANZ. While the strong performance from our SLS business and a range of cost reduction initiatives, as I've mentioned, contributed further to the uplift in underlying results, reflective of the strength of the geographic and diversification aspects of our business. I'll expand on some of the other factors driving these various movements in subsequent slides. Moving to the metal business, more specifically, and in North America, total material inflows remained consistent with the prior comparative period and converted metal volume moderated by 3% as we prioritized unprocessed intake in line with our value strategy, improving our overall margin position. While this added to comparative costs, the team were able to generate a number of offsets through further site restructuring and productivity initiatives. Period-on-period, we actually experienced around a 5% reduction in average realized ferrous prices, generating a circa $13 million impact on the underlying EBIT for NAM, which we mitigated through that margin discipline and our cost-out initiatives. In ANZ, ferrous margins were again impacted by the subdued international market, which also flowed on to domestic prices. Favorable nonferrous prices provided overall revenue support and helped offset shredder downtime at our St. Mary's operation in the first quarter. Notwithstanding elevated consumable input costs, particularly in the areas of waste disposal and electricity charges, net operating costs continue to be well controlled here as well, noting the current result does include an $8.8 million reclassification reduction. While U.S. steel spreads improved over the course of the half, influenced by tariff-constrained imports, which are reflective of the U.S. domestic market, in December, our Sims Adams joint venture actually reported its first upmarket for ferrous pricing since April. Despite the comparative headwinds, the joint venture was able to close out the half year strongly, driving the uplift in nonferrous prices as zorba continued its surge. Our global trading platform was able to keep its costs flat. They saw reduced broker revenue following the cessation of trading activities for Unimetals in the U.K. early in the period. Moving to SLS now, and Stephen covered a number of the drivers here already. As we've noted, the business continues to see significant growth in the number of repurposed units as well as benefiting from the dynamics of the market. Pleasingly, we also expanded our hyperscale service offerings, adding diversification to the business' revenue streams. Increases in operating costs reflect both volume gains and expansion activities and the team continues to look at additional opportunities around automation and robotics to support its cost management program. The results further validates SLS's positioning within a structurally expanding hyperscaler ecosystem and its connected drivers. Moving to Slide 24 and touching briefly on central and functional costs now. As previously mentioned, we continue to look for cost out efforts in this area. We recently relocated our corporate office to further reduce costs as well as successfully transitioned our purchase to pay function to our new global shared services hub as part of a more extensive shared services model being progressed over the next 2 years. Following stabilization of the company's SAP platform implementation, project costs fell by $2.5 million, noting that we continue to incur costs in developing our new yard management software, which we hope to take live later this year. As previously advised, we elected to cease work on the development and commercialization of the plasma-assisted gasification technology that was being undertaken by Sims Resource Renewal during last year. This further reduced the central cost pool by some $10 million to $12 million per year. Moving on then to our overall cost performance for the half, and we continue to look for opportunities to simplify and optimize our organizational structure as well as further rationalize the existing operating portfolio. At a group level, we were once again able to keep total costs relatively flat over the period, limiting the increase to just on 4% of the rebased comparative half. Included in this was $16 million in additional variable costs related from the increase in unprocessed material and the higher repurpose units at SLS. Labor remains our largest cost element at around 40% of operating costs and ongoing labor efficiency initiatives continue to provide significant benefits in this area and in line with our previous cost-out commitments. The group completed the year with net assets of just on $2.5 billion at balance date, broadly consistent with June, reflecting a stronger comparative Australian dollar at period end, dividend payments and the further provisioning of the Unimetals receivable. Of note, this includes a $200 million expansion on working capital levels from the uplift in nonferrous prices impacting both our inventory and receivable values and a $72 million transfer to broker deposits related to our derivative trading activities following the run-up in copper and aluminium prices. And I'll talk a little bit more about the impact of this on the next slide. Pleasingly, as a result of our positive trading performance, the Board has determined an interim dividend of $0.14 per share payable in March. So a little bit more on our working capital movements and the group's focus. On Slide 27, we've isolated the overall movement to show the impact of those higher nonferrous prices on the business, which has been quite significant on a number of fronts. The impact of the run-up in the copper price from October in particular is certainly reflected in our numbers. Working capital performance through better managing inventory levels, receivable conversion rates and payment terms continues to be a key focus for us. Moving to Slide 28, and we put up this slide last week as part of our announcement on the Tri-Coastal acquisition. We've highlighted the potential to generate better returns from our property portfolio a couple of times now, and I just wanted to reinforce our focus on this area. We broadly categorized our properties into 4 areas with the third category, the most complicated and the area where we're most likely to spend a fair bit of time working through. As Stephen has previously mentioned, these are the sites where it's becoming obvious that over the next 5 to 10 years, the most valuable use of that land will not be in metal recycling. In most cases, this will require comprehensive planning, permitting and other dependencies to fully capitalize on value. As such, we're committing to a dedicated resource to ensure full management of the opportunity going forward and continuing our approach to disciplined capital recycling and unlocking embedded asset value. All that summarizes into our overall cash movement for the last 6 months. I've talked about most of these already, but just to touch on capital. The majority of this spend occurred in our North American operations primarily focused on improved metal recovery and incremental throughput initiatives, including the completion of channel dredging at our Claremont operations. In ANZ, investment continues into the redevelopment of our Pinkenba site, including the construction of a new copper recovery plant. We expect to remain within our previous guidance in this area of between $120 million to $140 million of sustaining capital for the full year. We've pulled out the restricted cash allocation on the derivatives to better reflect underlying EBITDA to operating cash conversion, noting these deposits will unwind in the second half. In October, we made our final dividend payment of $25 million in relation to the 2025 financial year. And as previously noted, the board has determined an interim dividend of $0.14 per share, fully franked, for 2026, in line with our capital management framework after taking into account the restricted cash impact. Back to you, Stephen. Stephen Mikkelsen: Thanks, Warrick. Let's turn to the outlook on Slide 32 (sic) [ Slide 31 ]. In our view, the outlook for secondary market pricing of DDR4 chips remains very strong, and it is the DDR4s that are materially driving the excellent performance in SLS. This strength comes from the demand for DDR5 chips driven by AI. Global production of chips is understandably heavily focused on DDR5s, and this is creating a structural imbalance in the supply and demand for DDR4s. We also anticipate continued strength in the nonferrous market, underpinned by the substantial copper and aluminium requirements for global renewable energy implementation and product electrification. Tariffs are expected to continue to provide some protection for our North American ferrous businesses, and this is likely to result in the continued premium for domestic shred sales in the U.S. Furthermore, whether be in the United States, Australia or New Zealand, rising EAF capacity provides a strong outlook for our ferrous scrap products. Finally, we cannot ignore the impact Chinese exports are having on ferrous prices, particularly for our business areas exposed to markets outside the domestic U.S. market. While it appears that prices have been trading at or near floor for a while now, there is little evidence to suggest China will reduce exports from current levels. Importantly, much of our recent improvement in earnings has been self-help driven. As market conditions normalize over time, we believe the business is structurally better positioned to benefit from cyclical recovery. Before we open for Q&A, as always, I want to thank our employees for their drive and commitment in delivering on our purpose and most importantly, doing that safely. Back to you, operator. Operator: [Operator Instructions] Your first question comes from Will Wilson from UBS. William Wilson: Congrats on what looked like a strong result. Just on ANZ, it looks like conditions picked up post the AGM trading update, you mind talking us through just the moving pieces there and what happened to the end market? Stephen Mikkelsen: Sure. We've got John in the room. So John, why don't you take us through that? John Glyde: A couple of things. Certainly saw improved volumes in the second quarter, particularly in nonferrous and zorba on pricing. We also, as you would remember, we had the outage in the first quarter, and we largely caught that up in the second quarter. As I said, volumes were up a little bit. We managed to take a few -- a bit of volume from our competitors, good cost control. We delivered a little better than expected. William Wilson: Cool. And then just more broadly across the metals business with nonferrous, just curious about how quickly those price rises result in more benefit -- more volume will benefit to the business more broadly, conscious that the rising price has been going through a while now, but you really had a step up over the last quarter, say, copper, for example, have you seen a kind of corresponding move in activity in that sense in volume activity? Stephen Mikkelsen: Let me give sort of a few general comments, and then maybe Rob can talk about NAM and John about ANZ. So I think overall the answer to that would be, yes. I mean, higher prices, by definition, drive more volume out of the market. That relationship has been here for a while now. And you're right. You're right to say that the nonferrous has been very firm for the last 18 months, but particularly for over -- like the run-up we had in price leading into December was quite extraordinary, and you would expect to see that drive more volume out, and we're well positioned to take that. But maybe, Rob, a little bit on how you see it from NAM's perspective. And John, and -- by zorba as well, by the way, too. I mean -- we'll talk about that a little bit later, then John, maybe ANZ's perspective. Robert Thompson: Yes. The only thing I can add is from a NAM perspective, about 2 years ago, we started to embark on our nonferrous improvement story, if you will, and fully integrated now with Alumisource, fully integrated now with our Northeastern metal trading copper granulation company. Those relationships -- those consumer relationships dovetailing with the infrastructure of data centers going up in every neighborhood in North America. It's been phenomenal. Stephen mentioned zorba. Utilization of our shredders is up 10% over 2 years, and the capture for that demand is definitely there. So volumes up, margins are absolutely playing a part in our turnaround story. John Glyde: Yes. What I would add, obviously, zorba, as Stephen mentioned, we saw considerable improvement in server pricing late in the half, but over the half. And you must remember that zorba really is a byproduct of our shredding activity, and therefore, any gain in that price sort of in some way or another filters through to revenue and quite frankly, EBIT. So that certainly helped. But from an ANZ perspective, ferrous markets are incredibly still very, very difficult. Obviously, in very recent times, we've seen the Aussie dollar strengthened, which isn't helping our translation on an FOB basis on export sales. And I think Warrick mentioned even on our translation on domestic sales on an export parity basis. So strengthening dollar certainly isn't helping, but still difficult ferrous, nonferrous is pretty strong. Stephen Mikkelsen: I mean I think as I said in my commentary, I really would describe nonferrous is the hero of this 6 months result from a middle point of view, and we'll just summarize it, it is -- it will get more volume out of the market. It must do its logical for that to happen. William Wilson: Yes. Okay. I mean it's hard to see what changes there in that regard. But just one last quick one for me on SLS. I'm just curious about the lags between DDR4 pricing and when it flows through to SLS, I'm somewhat a little bit surprised of being honest in terms of you gave your guidance 45-50 back in November, you saw another step-up in December in pricing, that, that didn't come through. But yes, maybe touch on the -- and then you came into the top end of guidance, I know, but just if you wouldn't mind touching on the lags there. Stephen Mikkelsen: Yes. I'll get Ingrid to maybe comment more specifically, but my overall thought on that is our contract position is pretty set as we go into December, we know what volumes we're getting, we know what sales we've made. So there is definitely a lag on that. I wouldn't say it's a particularly long lag. Ingrid, any further comment on that? Ingrid Sinclair: No, I think that's spot on, Stephen. We're normally a month or 2 months out from what you see in the price increasing. So obviously, we'll start seeing it in this year, this half. Stephen Mikkelsen: With the second half year. William Wilson: So fair to say that the December price rise and even in the back end of November really had no -- it was too late to kind of flow through that first half. Stephen Mikkelsen: Yes. I mean, some of it. A little bit of a got through. You see like we were at the top end of -- I mean -- to be frank, I'm getting my head around how we provide this guidance on SLS because we haven't done it before. So we're at the top end of what we provided, which sees that some of it is coming through. But you're right to think that, as Ingrid said, it's a month or 2 before it fully comes through. William Wilson: Okay. Yes. I held back from asking about SLS guidance, but that's really helpful. Stephen Mikkelsen: I'm sure we're going to get that question. Operator: Your next question comes from Peter Steyn from Macquarie. Peter Steyn: Yes. So perhaps curious on 2 angles as it relates to SLS. Firstly, is just run rate, it sounds like you would basically say that the run rate for the second half is probably incrementally higher than what you finished the second quarter at. And then I'm also interested in how one thinks about the Irish facility, you mentioned that you'd be sort of running at full tilt in June, July. But how material would this facility be in the context of the network sort of give me the sense that it is quite material. Stephen Mikkelsen: Yes, sure. And I'll get Ingrid to cover off Ireland because she's been heavily involved in that development. Maybe I'll cover off the implied question about second half for SLS. So the first overall comment I'd make, you're right, the strong pricing that we saw in December is now flowing through into our results. And it's fair to say that the start to the year for SLS has been very, very good. In terms of what does that mean for the full year, I'd make the comment that we're only 1-month in, and I think it's probably best what we've decided is best that we will provide some additional guidance next month at the March investor presentation in Nashville. By that point, we will have a -- we'll have a pretty good idea of where our first quarter is coming in and what pricing is looking like for the balance of the year. So -- but we just asked for some patience on that. We will do that additional guidance in March. But suffice to say that, yes, absolutely, the volumes are still good coming out of SLS as -- and it's very, very obvious the prices are still high, and we've got lots of reasons why we believe that -- those high prices remain. I think there is absolutely a structural imbalance there. So certainly a very good start to the half for SLS, but we'll provide more guidance in -- additional guidance in March. Ingrid, how are you thinking about Ireland? Ingrid Sinclair: Ireland. Yes. So Dublin will be ramping up in the second half of this year, and we expect to deliver full run rate sometime in fiscal year '27. So that's when we'll start seeing the full impact in '27. Stephen Mikkelsen: It's probably fair to say it is material to SLS's result because it's a big facility. I mean it's at ramp-up, we're expecting to repurpose another 1 million units out of there and it's -- Ingrid, is oriented towards or skewed towards DDR4s. Ingrid Sinclair: Very similar to the site in Nashville. Stephen Mikkelsen: Yes. So it is material, Peter. Let's just see when it's up and running, how things are. But it's -- we've highlighted it because it is important to the future of SLS. And I think it also signals potential further expansion outside the U.S. Our strong growth has been U.S. No doubt about it. Absolutely no doubt about it. But Europe is a market where we have a presence. But I think with the likes of Ireland, now our presence is going to become much more meaningful. Peter Steyn: Could I ask Ingrid just a quick follow-up. So the 1 million units, is that backed by the existing contract, i.e., so you're on full run rate at some point in '27. Will that be your run rates of units repurposed? Ingrid Sinclair: So yes, at the start of ramping up, it will be off of an existing contract that we have now in an existing client relationship. So yes, that will be... Stephen Mikkelsen: Yes, I agree with that. But I wouldn't -- I mean, it's certainly not a capacity. There will be room -- there will be -- yes, there will be room -- in the later years, they really, let's focus very much on servicing a very important customer. But I think in later years, there's further capacity in Ireland for other inflows there. Peter Steyn: Got you. So the 1 million is an eventual target for repurposed units and your initial start in your initial contract does not necessarily supply that level of volume. Stephen Mikkelsen: No, I think it's there. The 1 million is the initial and it's how do we grow beyond 1 million with the -- with additional activity. Peter Steyn: Perfect. Sorry, I'm going to sneak one last one in for Ingrid. Just around the customer relationships, how you think about the pull and -- push and pull from a commercial point of view. You're obviously making a lot of money out of this activity, Ingrid. Just curious how your customers view that? And if -- with current prices, they think differently about economic sharing. Ingrid Sinclair: Well, we have several relationships -- commercial relationships going on. And there -- it took us years to get here into this market, right? The quality that we deliver, the loyalty we have built with this particular client, and it's really truly a partnership. We offer services -- servicing, which is a flat fee. But then on the resale is where we share revenue. And that is an agreement we have negotiated with them and remain so even as pricing changes. Warrick R. Ranson: It's Warrick here, Peter. I think it's fair to say that we didn't -- we haven't set up Ireland with the hope of gaining customers. We actually set up Ireland in response to a customer request. And the -- we've been quite -- well, obviously, have a transparent relationship with that customer. They understand our operating model and our earnings, et cetera. So we're actually responding to the customer need. And I think that really sort of signifies, as Ingrid said, the relationship that we've been able to develop. As Stephen said, the million is a starting point, it's a strong growth area we'll be looking to hopefully grow that business -- that part of the business further. Ingrid Sinclair: Right. The 1 million is a... Operator: Your next question comes from Lee Power from JPMorgan. Lee Power: Stephen, I kind of -- I get the reticence of not wanting to give 2H guidance now on SLS given the moving parts. But can you maybe chat a little bit about what you saw on a backward-looking basis? Like what did SLS actually contribute EBIT-wise in the second quarter? Stephen Mikkelsen: Yes. Again, so -- okay, it contributed obviously more in the second quarter than in the first quarter. But I think what I -- probably the most relevant thing I can say is that, that ramp-up has continued into the first half. That's probably the best way to put it. And that's -- we -- pricing is still strong and volumes are good. And that's -- so the activity that happened in the second quarter has continued and frankly grown as we come into the first quarter, which is -- into the third quarter -- sorry, the first quarter of the calendar, third quarter of this year, which is why -- look, I'm very conscious that we will need to provide some more guidance around that. I just need to think -- we just need to get that first quarter under our belt. And by the time we speak next month we will -- we'll have the actual results for January and February, and we do find it easier to predict that result for March than we might for the metal business. So we'll have a very good understanding of what that March quarter is like. I'm expecting it to be good. And then I think based off that, we'll be able to provide some additional guidance on where we think the year-end is going to come in at. Lee Power: Okay. So through the back half or the first half, so through the second quarter, like is there much volatility within the quarter? Was that trend continuing because the pricing only really lifted in the back -- very back end of the calendar year, right? Stephen Mikkelsen: So let me -- so first of all, it was a strong half. It wasn't just a strong quarter. It was a strong half. And yes, there is some volatility. But in some ways, it's the right expression self-induced volatility. Maybe that's not the right expression, but it's volatility that we're not particularly worried about because it's just whether or not we -- does it suit our customers to ship the DDR4s at the end of the quarter or the beginning of the next quarter. So there is definitely some volatility, but we get a good understanding of what that volatility is going to be well before it happens, which is why I think we were -- by our standards, we're pretty accurate at the prediction of the SLS result for the full -- for the half. Lee Power: Okay. And then maybe for Ingrid, it sounds like your comments to Peter just around the commercial rate relationships and revenue sharing that you think the leverage to pricing holds. Like obviously, the battle, I think that everyone is having is that you look at what the pricing has done. I get the lags, but it kind of averaged $18 a unit for the pricing, the DDR4 pricing that you gave for the first half, and it's tracking at like $67 for the half currently. So it's obviously a very material dollar move half-on-half as well. So just any sort of color you can give us around the revenue sharing piece or that leverage might not come through for the business? Ingrid Sinclair: Well, no, as I mentioned the revenue share that we've negotiated stays in and the partnership that we have, in particular with this client is very strong where we're investing back into the business. So the expectation is that we will increase productivity through automation, and use some of this just to improve the business for them. And moving into Ireland really is to meet their capacity needs, and this is what we do throughout. So I don't see that a clawback trying to occur. This is a very solid relationship, and the market fundamentals are strong. We just don't see that. Stephen Mikkelsen: Well, I agree with that. And the thing I would say that, which I think I said the last time I would add, to that, having now visited a number of these clients is that this is not a core business for them. This is, our front office, their back office. And while it is absolutely meaningful to us and well, that's clear, is hugely meaningful to us. Their focus is very much on their front office, which is about giving us much of these hyperscaler data centers built as they can, getting AI rolled out, putting their resources into that area. So this is nowhere near as material to them as it is to us. And so therefore, what they're valuing is they value that we do it safely. They value we do it securely. They value that every single SLA that we've put to them we achieve, and that's through -- to me, frank, from Ingrid's perspective, that's through 5 or 6 years of hard work of building up these relationships. And just to repeat myself, yes, very material to us. I'm not so sure that they would want to switch suppliers to save themselves maybe a few $10 millions of a year and run the risk that they don't get the same level of service that they do from us. And that's what's hugely important. Ingrid Sinclair: If I can add, what's value to them is getting the repurpose DDR4, right? It's not the money. So we have this client who's starting their decommissioning earlier because they need the parts and new builds. So it's very much value on getting the tested repurposed DDR4s going back into their data centers. So that's really where the value. Stephen Mikkelsen: Yes. And I mentioned, if we turned up late and we promised that you would have the DDR4s on this state and they're not. I mean that's the risk that they run by going with someone else. And we've now got a really strong track record over the last 4,5 years to prove that we can do it. Lee Power: Yes. And then maybe just 1 more if I can sneak it in. So John, like -- I feel like you've undersold yourself a little bit given ANZ was breakeven in the first quarter, and you've delivered $22 million of EBIT for the half. Can you just maybe chat a bit about when we think about using that second quarter number going forward around like what the catch-up was or seasonality or something else going on because it's obviously a pretty solid quarter given what the backdrops are... John Glyde: So obviously, Lee, the second quarter was always going to be stronger than the first simply because of that catch-up process, which I got to say we, quite frankly, completed quicker than I thought we would. So we largely got it all done in the second quarter. So what -- I guess, where you're leading to is how should we look at the second half. As I said, ferrous markets haven't improved internationally, I would argue that we're sort of bouncing along or near the bottom in U.S. dollar terms. Nonferrous markets are strong. There's no doubt about it, both in retail nonferrous and zorba. But I guess the other headwind aside from Stephen mentioned a lot about China and the amount of semifinished steel making its way into our markets and our consumers is the Aussie dollar. And that's certainly what have we seen in the last sort of 6-week period, 8-week period, we've seen the Aussie dollar go from around $0.67 to $0.71. So that is certainly hurting. So I would have said second half at this point, and I will say, Lee, we are 1 month into it. We are in January, but I would say I think our second half is broadly going to be in line with our first half. Operator: Your next question comes from Brook Campbell-Crawford from Barrenjoey. Brook Campbell-Crawford: I just had one on SLS and trying to kind of understand how it all works like some of the others here on the call, but maybe just for the first half on Slide 23, you talked about sort of 70% of revenue uplift relating to price. So that implies a $90 million increase in sales because of price. And then the total EBIT for the business is of $35 million. Just can you kind of talk to that, why would you have a greater drop-through from revenue to EBIT, given the majority of it is driven by price. Warrick R. Ranson: It's Warrick here. Brook, remember, we don't get -- the revenue is gross, and then we obviously take out the percentage of -- that we retain in terms of the sales, so you don't get the full swing through. Brook Campbell-Crawford: Got you. Okay. That's the revenue share? Warrick R. Ranson: Yes. Brook Campbell-Crawford: Great. And then maybe just one on, I guess, on the Dublin side. I mean is the way to think about this 1 million units, we can see what the DDR4 price is, we can assume, let's say, a 30% revenue share and then an EBIT margin in line with what you've just delivered to kind of resulted in AUD 5 million EBIT from that facility once it ramps up? Is there -- that's obviously very simplified, but would there be any large flaws with making those assumptions? Stephen Mikkelsen: One is that some of the units will go back to be repurposed, not resold and repurpose as a service fee, which is less than... Ingrid Sinclair: Fixed fees. Stephen Mikkelsen: Yes, less than the resale. Just what -- I didn't quite hear, what number did you come up, I'm not going to say whether it's right or wrong. I just want to understand what number you came up with that back of the envelope. Brook Campbell-Crawford: Yes. Listen, I was just using your 1 million unit comments. And we can see that DDR4 price is like USD 70 a unit, I'm pretty sure. And then we could assume a revenue share of 30%, call it, and then just use the EBIT margin for the division of even 15% in the half, which I think gives you around AUD 5 million EBIT from that business. I was just using that framework and were to get some sort of steer if that's sensible out. Stephen Mikkelsen: I just need to go through your math here, because I'll be frank, I think that's a little light. it is frankly a little light. So just -- let's just think about your math on that because I'm just not quite sure that last that you're coming into. Maybe we can talk a bit about that. But again, maybe part of it will be in March, we'll be able to provide much more color with this additional guidance. But my initial reaction to that is that feels very light. Operator: Your next question comes from Daniel Kang from CLSA. Daniel Kang: Just continue with the SLS discussion. Maybe Ingrid, I just wondered if you can talk about the market share position of SLS at the moment. I think the initial plan was to get to round about 10% share of the addressable market. Are you there already? And maybe if you can shed some color on the competitive landscape on what the others are doing, given that you're branching out into Dublin. What are the capacity plans as well? Ingrid Sinclair: Well, I don't think we're anywhere near 10%. I think the market share is continuing to grow just as AI is exploding and this adjacent market is exploding accordingly. So I don't think we've captured anywhere near 10%. There's still a lot of upside to go. Our competitors, we talk a lot about Iron Mountain, SK Tes. But it also is the hyperscalers themselves taking it in-house. We don't see hyperscalers doing it because they're competing with their data centers, and they make more margin in their data centers versus switching to what we do. So we don't see much movement there, certainly for SK Tes and Iron Mountain. They are in Ireland already. So the Ireland is the -- basically the nucleus for Europe -- for European data centers. It's all located there. Still plenty of market. Stephen Mikkelsen: Is it fair to say that our biggest opportunity to grow market share is to -- is the work we're doing around showing to the existing hyperscalers who are not either doing it themselves or not doing at all that there's significant value by using SLS services. I think that's 1 of our main growth levers. Ingrid Sinclair: Definitely, because this is a way to get material at a cost-effective price point. Stephen Mikkelsen: It's a big market, Daniel, to get 10% aspirational that would be fantastic. It's a big market. There's plenty to go. Daniel Kang: Maybe a question for John. I think you commented on ferrous scrap markets still being pretty tough out there. What are the things that are you looking for, for the markets to improve? So can we see some improvement into the back end of this calendar year? John Glyde: A couple of things that Stephen has talked long and hard around the self-help piece and that doesn't go away. Ongoing cost discipline, ongoing discipline around buying, trying to direct more unprocessed products for our shredders is all sort of internal self-help. But I would say the other things that we've got coming on stream is Glenbrook, the New Zealand EAF comes on late Q4, around May, I think, is sort of power on and then there will be a ramp-up here from that. That would be good for us. We're very well positioned with the investment we've made there in rail infrastructure to service their needs. We've also got 2 fines plants that we're currently -- that are currently under construction now, and they will go through a commissioning late Q3 into Q4, and we'll start seeing some very significant benefits more so in F '27 from those 2 plants. We've got the MRP upgrade in Auckland, which is again, as Stephen talked about, self-help, metal out of waste, very good returns on that sort of investment. So it's a mix of things. As Stephen said, we don't -- and you guys on the call probably as well positioned or better positioned than us around the whole piece around China and when they're going to -- and if they go in to change direction. But ongoing strength in nonferrous markets, strong -- really strong zorba pricing, driven by the underlying copper and aluminium pricing. Ferrous is still tough. What we are seeing, and this leads to a conversation about well positioned. We are seeing that a lot of our competitors are doing it tough. And I think that will present us with some opportunities down the track around industry rationalization and consolidation. Operator: Your next question comes from Chen Jiang from Bank of America. Chen Jiang: Stephen, Warrick, John, and Ingrid. Maybe first question to Ingrid, SLS. A big increase of the revenue share from resale, I guess, majority due to higher memory prices. I'm just wondering what is the strategy for SLS to grow your earnings, if it's structured versus one-off sugar hit when the DDR4 prices normalize. I guess the SLS business is not only solely DDR4 prices. What are the levers you can pull from here, given the market is still, you mentioned very fragmented and you are less than 10% of the market share. Ingrid Sinclair: Yes. Well, that's very true. It's not all just DDR4. So we're also seeing increase in pricing in hard drives and the other elements we sell. So we don't just sell memory. We sell all components that are accessories to the data centers. How we're going to go is through volume. So we're going to see more volume coming through our current contracts and expanding geographically. And don't forget that once DDR4s have run their course, we'll start seeing DDR5s coming out so that this will replicate and just go on to the next technology shift. Stephen Mikkelsen: Can I have one more thing, Ingrid. Chen, you made an interesting comment about prices normalizing. And look, it's a very valid and interesting point. But the way we're looking at it, and this is a very unusual market structure. But the way we're looking at it is what does normalizing mean? Because you've got 2 really interesting things going on. Firstly, DDR4s, as I said before, DDR4s are the workhorse of the Internet of Things, are the workhorse of our computers. DDR4s are not going away anytime soon. So you don't have this falling demand in the next couple of years. You just don't have it. So you've got this demand, which is strong. But what you have is this falling dramatically falling supply, which has been absolutely turbocharged by AI and anyone who can make chips is making DDR5. So that's what they're turning to. No one is setting up new factories to make DDR4 of any quality because why would you? You might have put all your resources into DDR5. So from an economics point of view, you've got this -- weird is not quite the right word, but you've got this unusual situation where you've got strong demand and supply not there to meet that demand. And normally, you would think it would because it's been completely diverted somewhere else. So I'm not sure to say -- I mean, time will tell on how it plays out. But I'm not sure what normalizing means when you've got that market dynamic. Chen Jiang: Sure. I mean, normalizing. I mean, it almost trades like a commodity. So I'm not talking about demand, but more like a price given how the price has been over the last... Stephen Mikkelsen: Where it doesn't behave like a commodity. And I keep watching we're grappling ourselves with this because this is a new -- this is new for everybody, what AI is doing, where it doesn't behave like a commodity. When demand goes up or demand -- and pricing is going up, you would normally -- a commodity there'd be more supply come on, people would invest in things and more supply would come off on and that would dampen the demand -- dampen the price and normally, they overinvest. And so down price goes and then they will pull out in the commodity cycle. This doesn't really follow that cycle because you just can't -- you can't bring on more supply. Chen Jiang: Right. That's a very good point, Stephen. I appreciate that. And second question, if that's okay, again, focusing on SLS. Are you being able to provide any color on the resale revenue sharing across corporates or hyperscaler? Is that like how the contract work, understand, Ingrid, your team spent 4 to 5 years -- over the last 4 or 5 years, built a very strong relationship with hyperscalers and hyperscale revenue has been growing CAGR like 40% or 50%. But if you can give us any color on your existing contract position as well as if any new contract rather than just leverage to the DDR4 prices? Ingrid Sinclair: That's -- I don't think we can get into too much detail it's commercially sensitive on our contracts and what we've negotiated. But once we do, our contracts do run 3 to 5 years long. The percentages are negotiated upfront and just fixed through the contract. Stephen Mikkelsen: Yes, I think I agree. There's a lot of commercial sensitivity in that, Chen. But I'll go back and remake the point that why are we successful and why is Ingrid's team successful. It's around we've spent the last 5 or 6 years building up our proven capability to deliver and delivery, particularly when repurposing, which has the benefits that we get some resell as well. It's really important for these hyperscalers. But yes, I'm with Ingrid. I just don't want to get into detail on commercial contracts. Chen Jiang: Understand. Absolutely -- I fully understand. Well, let's put it another way from like contracts or relationships or even how your revenue model work? How is that different to your competitor, Iron Mountain and other small competitors given it's such a very fragmented market. I don't know if that's perfect competition or... Stephen Mikkelsen: Ingrid, I don't -- but for me, the business model is fundamentally the same across the industry. That's not it's... Ingrid Sinclair: Pretty much. I mean what -- what we are doing though as far as repurposing DDR4s, going back into the data center, we are the only ones that are doing that. Stephen Mikkelsen: We're absolutely... Ingrid Sinclair: Testing, reprogramming, and it's going back into data center. So it's competing against virgin material. So that is something very special that we do, and that is in strong demand by the hyperscalers. They need the parts, because they can't get it on the market. Stephen Mikkelsen: That is a good point, Ingrid. That's a big differentiator. The industry structure generally, but it's actually a very good point around that service that we're particularly good at. Operator: Your next question comes from Owen Birrell from RBC. Owen Birrell: Just a few questions from me. As with everyone's first question on SLS, a couple of angles here from my perspective. The first 1 is just looking at Slide 23, useful revenue by segment splits between resale, service and other. I'm wondering if you can give me a sense of the 5.3 million repurposed units during FY '26 -- first half FY '26, what split of those units by volume went to resale versus service? Stephen Mikkelsen: Just let me -- I mean, we -- obviously, we know that number. I'm just thinking just from a commercially thing, does that -- Warrick, what's your thought? Warrick R. Ranson: Let us have a think about that and we'll come back to you. Owen Birrell: Okay. Well, then let me ask a subsequent question to that. Is that split likely to change going into the second half? Like do you have forward commitments for more service volumes as opposed to resale or vice versa? Ingrid Sinclair: We do have service commitments, but the way it works, Owen, when you get in a rack, there is only a certain percentage that is fit for purpose to go back into a data center. So technically, there's only a certain percentage that can go in. So regardless of the increased need to go back into a hyperscaler, there's still a percentage that is for resale and revenue share. So the increased need would be met by a faster decommissioning cycle because they need the part. Owen Birrell: So indicatively, the splits between resale and service volume perspective are largely constrained and therefore don't fundamentally change from period to period. Is that kind of what I'm getting from that comment? Ingrid Sinclair: Yes, right. Because in a fully populated rack, there's only a certain percentage that can go back in. Stephen Mikkelsen: So I guess the other way of looking at it, we would not be expecting second half splits to be materially different to the first half. Ingrid Sinclair: I would expect the volumes to go up because they need more parts. Owen Birrell: Okay. Excellent. And just on [ NFSR ], I guess, in terms of -- from our perspective, understanding how the business -- the operating leverage flows through -- given the lease model that you operate, is it fair to say that it's a very high variable cost business. And are you able to give us a sense of, I guess, what the fixed to variable splits in the operating cost basis. Ingrid Sinclair: Yes. Well, the way we're attacking that, Owen, is we're automating. So we're going to automate wherever possible so we can bring productivity into the process and control that variable cost. But yes, normally, as you would scale, you would expect costs to increase, but we're going to attack it with automation. Owen Birrell: I mean my understanding was a lot of that automation was actually going to be leased anyway, so it essentially becomes more of a variable cost. Stephen Mikkelsen: Some of it is we do have a -- you're right. We -- the stuff we showed in Nashville was a -- on a volume base, yes, that's correct. But I think there's -- I think what Ingrid is talking about is we will end up to be charging. I think there's 2 things about SLS going forward. One is we will turbocharge automation because I think there's definitely productivity savings to be had there where we can effectively use our lease facility 24 hours a day through automation. And the other thing I would say -- the other thing I would say is moving forward, expect to see some additional expenditure going into R&D because what we know for sure is that in 3 or 4 years' time, the DDR5s that are going in now are going to come out. And they present a completely different challenge to DDR4. Some of them are in the good cooling. Some of them are more sensitive. So we are going to spend some money on R&D to make sure that we've got a business here that has the potential to last for decades because there's constant replenishment cycle with new equipment. Owen Birrell: Okay. Just final question for me, for Warrick. Free cash flow conversion was quite weak during this period. And I understand there's often seasonal swings and trade swings. Just were there any sales booked very late in the period that you haven't received the cash flow yet? Warrick R. Ranson: We always have some sales. I wouldn't say it's a material amount. I'd probably dispute the cause about free cash flow being weak. I mean I think you have to sort of, for us, you have to back out the amount, like in our working capital, we have to include the margin deposits. And we had, as I pointed out, effectively, we had sort of $200 million sort of come through because of nonferrous pricing. We managed to maintain our total working capital balance at around about pretty much the same level. So actually converting our activity into cash has actually been quite strong. So like if you take out that $70-odd million that went into those margin deposits, EBITDA to operating cash was pretty close to sort of 95%. So... Owen Birrell: It's just timing. I guess what I'm getting at is just timing and it should have potentially rectify itself into the second half. Warrick R. Ranson: Correct because yes, those margin deposits, et cetera, will come back down. Stephen Mikkelsen: One thing I would -- and the risk of -- as Rob's got a great expression breaking into jail. The one thing I would add to that, though, is that if nonferrous prices keep rising, we see them keep rising and rising and rising. 2 things will happen. That will boost profitability. But it also puts -- I mean, we've always been on this. It puts more money into working capital. We've done a huge amount to hold our inventory levels. And I think we -- I think Warrick is right, we've done a great job. The team has done a great job in managing that. But rising nonferrous prices boost profitability, but they absolutely increase our working capital requirement. So for the end of this year, at the end of 2026, we have another surge in prices on nonferrous. You will see a similar thing happen. Owen Birrell: Sure. Just one final question on SLS. You talked about sort of that pricing, I guess, sort of 1 month in advance. Is there a risk that you get a, I guess, the opposite trajectory? I mean, if prices come back down, is there any exposure that you have to falling pricing environment from an input cost perspective? Or is it purely just revenue share? Stephen Mikkelsen: It's revenue share and service fees. So I don't think so because it would flow through this. So we're not -- we don't take it. I think of what your question is, do we take inventory risk, we... Owen Birrell: Basically. Stephen Mikkelsen: Yes. There is a small amount, but it's not massive. You can't be perfect... Ingrid Sinclair: It spreads over pretty quick. Operator: Your next question comes from Harry Saunders from E&P. Harry Saunders: I'll start off with NAM for the sake of variety. So came in ahead of guidance, I mean anything you would call out to not sort of use this as a run rate for NAM in the second half given sort of current market conditions, perhaps? Stephen Mikkelsen: I think you're right. We've got Rob in the room and for the sake of rise, I think Rob is feeling a little... Robert Thompson: Harry, no, I think you could safely say that, as John said, we're only 1 month into our third quarter. The domestic market has increased twice in this third quarter for us, $30 in January and another $30 or so depending on the grade. Some markets are good. Nonferrous pricing is holding. If you recall last year, we had some severe weather where we operate. That is reoccurring this year as well with inbound flows. But I would say margins are going to hold this year and we'll have a better third quarter than last. Stephen Mikkelsen: It's probably fair to say, Rob, from an EBIT point of view, the impact of the cold weather has been nothing like it was last year at all here. Harry Saunders: Right. So this implies overall reasonable increase year-on-year in 2H EBIT, [ that's your call ]. Stephen Mikkelsen: I think that's a fair conclusion to draw. But I know Rob's comment, we're 1 month and we're 1 month in. Harry Saunders: Great. And I will go back to SLS now. I'm just wondering if you can outline the percentage of SLS revenue that is resale that was 61% in the first half, like what is memory within that? Stephen Mikkelsen: DDR4 memory in particular. Warrick R. Ranson: I think that comes back to Owen's question. We'll take that offline, Harry, and have a think about coming back to you on that. Stephen Mikkelsen: Yes. Obviously, to the extent we do dispose something, we'll disclose it to everybody. But we're just [ grappling ] in our minds what is commercially sensitive and what is sensible to talk to everyone about, which doesn't impact our business with either our competitors or our customers. But let's get back on that one. So -- and we'll definitely will. Harry Saunders: Okay. Then I'm going to ask this anyway. And I know you probably won't answer, but if the memory price does hold at the current level and based on -- you were saying earlier, the repurpose versus resold -- or reuse versus resold units don't vary materially in percentage terms. You must have some idea of what the pricing benefit should be in the second half. So I mean, can you talk through the potential benefit there in terms of quantifying, please? Stephen Mikkelsen: Holding -- I mean you're right, if you hold all those -- if you hold all of those things constant, you would expect the second half to be materially better than the first half because the prices rose into the first half. And if they come into the second half, we're clearly going to have increased absolute resale. We will without a doubt, we -- volume is looking good, so we would expect some increase in service fees. So that is -- yes, so if you hold all of that equal, you would expect a materially -- a material improvement in the second half versus the first half. What we'll do in March is try and provide some additional guidance on -- from what we've actually is happening where we think that number is. Harry Saunders: And then maybe just asking Brook's question in a different way. I mean, any reason not to look at Ireland is the 1 million annual units as a ratio of your existing -- or you did 5.3 in the first half, so call it 10 or 11 annualized, looking at that as just an EBIT ratio to unit? Stephen Mikkelsen: I think the mix is different. So when you're looking at the whole business, and I think this is a correct answer. You're looking at the whole business, which includes much more than just hyperscaler activity. And so it would skew higher than the business as a whole. Harry Saunders: Okay. Last question, if I may, on SLS. Just wondering if you get a pricing benefit from customer reuse or if that's kind of a fixed dollar amount. So you're only benefiting on the actual resale percentage? And also just the revenue share, I mean, is there anything to stop customers lowering that percentage when the contract is eventually renewed? And are there any major renewals coming up? Ingrid Sinclair: There aren't any major renewals coming up shortly. We're still another couple -- 2, 3 years out on our existing contracts. Stephen Mikkelsen: So the service fee is a fixed percent. Ingrid Sinclair: Service fees are fixed, that's correct. And we're -- it's volume. Stephen Mikkelsen: Yes. But Ingrid made a really interesting and valid point before, is that, in terms of the service fee of putting it back in, it's -- when a rack comes out, it's not a 100% redeploy it back into the unit. There is a substantial amount of those DDR4 that are not suitable to go back in and they find their way to the resell market. So just because we're getting -- if we get more -- well, in fact, we get more activity around -- around the service revenue, we will pick up more resale revenue with that as well. Harry Saunders: Okay. I'll sneak one more in. Just are you seeing any new competitors enter the market recently in SLS? Ingrid Sinclair: As Stephen has mentioned before, it took us years to get here and to get to the level of qualification with the clients to make their technical specs, the security specs, data security. So we are not, at this moment, seeing anybody -- any new entrants. It takes years just to... Stephen Mikkelsen: Our biggest competitors remain the hyperscalers doing it themselves or not doing it at all. Those are the -- that's where -- that's our next frontier. Operator: Your next question comes from Scott Ryall from Rimor Equity Research. Scott Ryall: I'm going to start, if that's okay, on Slide 22. And it's a question, I guess, for Rob and John. Specifically looking at the trading margin, just an observation first. Rob, I hope you're giving John a bit of a needle about beating them for the first time in 5 years, I say, based on my numbers. And I guess my question for both of you. So Rob, is your aspiration to get your trading margin up towards SA Recycling over the medium term? And John, is that decline? I mean you've spoken about the top line and the ferrous markets and nonferrous markets. How much of an impact on the trading margin did the outage has in the first half, please? John Glyde: I'll go first. As I said, over the half, we actually managed to clear most of the inventory that was accumulated during the outage. So we've got a small amount of overhang that will wash out in H2. So over the half, it was pretty much clear. The other thing I should point out around trading margin is proportionately having higher nonferrous volumes and higher nonferrous pricing actually impacts trading margin in percentage terms as opposed to dollar per tonne terms. So actually doing more volume at higher pricing in nonferrous has a negative impact on trading margin percentage-wise. Scott Ryall: Is it fair to say that's the biggest driver then, John? John Glyde: Sorry. Scott Ryall: Is that -- is it fair to say that that's the biggest driver -- the trading margin... John Glyde: No. ferrous is extraordinarily challenging. Robert Thompson: I guess, Scott, first of all, thank you for noticing that. A lot of work to the team. In terms of SA Recycling, they're a heck of a model to aspire to be. And I think the simple answer I can give you will be that, yes, through examples like TCT, the recent acquisition and some road map activity that is yet to be released to the market, some of the feeder yard, bolt-ons that we've talked about over the last several years, that's where we differentiate with SA largely. They have more than twice as many shredders and more than 2x the feeder yards where they're able to collect material at a much lower level of volume, but also at a higher margin. So NAM in the past has been built on big cities, big populations, we can have something in the middle. So yes, there's more work to be done, and we're going to continue clawing at it. Scott Ryall: Right. Okay. And then my second question is predictably for Ingrid. But it's a bit different, I think. I guess what I'm wondering, just when you're planning your business, Ingrid, what is the visibility that you actually have on a rolling 6- or 12-month basis? And you mentioned there's about 2 months lag for pricing. So do you -- does that mean whatever the traded prices now you're getting in 2 months, and therefore, in 3 months, you're not -- you can take an educated guess, but you're not quite sure what the price will be. And then I guess the same for the units. Do you have pretty clear line of sight on a rolling 3- to 6-month basis? Or is it longer based on your contract like what you've just done in Ireland. I just be interested to hear how your business settings actually work. Ingrid Sinclair: Scott, a tool that we use, which you can also subscribe to is TrendForce.com, and that gives some visibility certainly in this market, on the memory market pricing and so forth. Depending on the client, we do have some visibility because we're in their inventory systems. They're in our inventory system, so we can see the decommissioning cycle. So we don't necessarily know what's coming out of there, but we can see when racks will be decommissioned and come to us. So that does give us some planning visibility. Stephen Mikkelsen: And Ingrid, it's probably for you to say that when it's varied from that, it tends to come earlier, not later is what we've found. So that's been our planning challenge if something has arrived earlier than we do. Yes. Scott Ryall: But when do you feel most comfortable with making 95% confidence level as opposed to, say, 80% or something or 75%. When -- is that -- do you feel really confident on a 3-month basis as opposed to 6, 12, those sorts of things? Stephen Mikkelsen: I can say from my -- and Ingrid I'll let you think. By definition, the price is something that 2 months out gives you a lack of confidence in terms of what it's actually going to be, we've got confidence around what we think drives it. So when I look at our results, I feel pretty confident about what Ingrid's predicting 2, maybe 3 months out. Beyond that, there is just some very bit of what do you think the price is going to be. Is that probably the main variability. Ingrid can show me what the volumes are. I think 3 months out, we're reasonably confident on volumes and maybe it's going to come in earlier, which is, I guess, why we think we've chosen the March -- the March date should give us some degree of confidence around additional guidance for June. I mean whether it's at the 95%. 95% feels a little bit like a utility. We're not there. But it's certainly -- it's a reasonable level of confidence. Scott Ryall: Yes. Okay. And so just with that in mind and I know you've got very good reasons for having, followed a customer to Ireland. But -- so how much -- when you go and spend the money and I know what you're saying, Stephen, about R&D and automation and things like that. How do you get -- there's no business plan in the world that's riskless. But how do you get the confidence of at least making a minimum return on capital for that investment decision, please? Stephen Mikkelsen: Maybe, Warrick, you think a lot of that capital maybe. Warrick R. Ranson: Well, I think the beauty of the SLS model is it's capital light. So our investment there is, in terms of -- is really around the lease commitment and how we structure that. So we obviously cater for that within the way in which we approach that. But from a capital investment perspective, it's actually -- it's a great model. It doesn't -- there's not a huge amount of capital that goes into it. Operator: Your next question comes from Ramoun Lazar from Jefferies. Ramoun Lazar: Just a couple of questions on NAM and SA Recycling. Just on NAM, comments at the AGM for a meaningful step-up into the second half. Could you maybe build on Harry's question around NAM and how to think about the second half given the seasonality that we saw last year. And I guess what you're seeing there with the step-up in nonferrous pricing, what could we expect from NAM in that second half period? Stephen Mikkelsen: For me, it's around market -- I'm going to Rob answer the question. But to me, it's around market pricing and our operations within that market. But Rob, you think about this all day every day? Second half. How do you feel about second half and what's driving it differently from last year? Robert Thompson: Yes. I would say this to you. The way we've structured and I think the presentation that you've been able to see, the pivot over towards domestic consumption, whether it's ferrous or nonferrous and having those customers, it's a self-hedging margin preservation. So I'm buying and selling in the same markets. The international side, we're optimizing when it suits and we're dramatically changing the compositions of our cargoes based on best prices by commodity. So -- and nonferrous resilience is there. I think the scarcity of copper and aluminum, and really the demand pull has been good. In terms of what Warrick mentioned earlier about construction spend, I think we're coming into the season in the next 45 days or so, where we'll start to see some more construction demand. The steel mills are running in the high 70% utilization rates. Their margins are tremendously good, and they're not going to miss a heat. So they're looking for raw materials. We're looking pretty solid in the second half. Ramoun Lazar: Okay. I guess the step up in nonferrous would have given you more confidence around that meaningful step-up versus what you said at the AGM? Is that fair? Stephen Mikkelsen: I think unlike ANZ, I think in NAM, you need to be thinking about ferrous as well. So ferrous does gives us -- ferrous, we do have some confidence in nonferrous as well, unlike -- I mean ANZ, we're fairly confident that China is going to keep depressed and there's nothing going to happen in ANZ -- everything is about nonferrous. NAM, the domestic shred premium, what we've done around our logistics to make sure that we can sell domestically. And that number I said before, is quite amazing. 85% of our East Coast Street went domestically. 2 years ago, we would have been capable of doing 10%. So the increased demand in there's more [ AIs ], there is more [ AIs ] have come online. Rob's right around the construction activity. So we are feeling reasonably good about ferrous as well in North America versus first half. Ramoun Lazar: Okay. That's helpful. And then SAR, I guess, a pretty meaningful step up there in the first half versus PCP, and that far off the strong second half '25 result. I guess how are you sort of framing that business into the second half. Anything to think about in terms of headwinds or costs or anything like that, that could... Stephen Mikkelsen: No, I don't think there is, Ramoun, I think SAR is -- will enjoy the same market structure that ANZ than NAM is. What I would add to it, they can continue to produce a lot of zorba and we don't see zorba coming off in any meaningful way when things always strong. We don't see copper coming off. We don't see aluminum coming off. They have a good non-retail ferrous. I'm not seeing headwinds in the second half versus the first half. But you're right, second half of last year was very, very strong for them. And that would be great if they could replicate that. But we're 1 month in. Operator: Your next question comes from Charles Strong from Jarden. Charles Strong: I was just wondering whether you could quantify the impact of trading margins in percentage terms, there has been [ from greater ] nonferrous mix, whether at the regional level or across metals? Stephen Mikkelsen: So not specifically, but what I would say is, by definition, greater nonferrous lowers our trading margin percentage because we make greater margin per tonne on a much, much higher. So when you're selling copper, I don't know, $12,000, $13,000 a tonne, your trading margin percentage is always going to be lower because you're making more in absolute dollars. So if I then say why I think that's been -- when NAM has done particularly well is despite that dynamic, NAM has actually grown its trading margin percentage, which I think goes back to Ramoun's question a little bit, which has come from ferrous. It's grown quite nicely. Charles Strong: Just one more, if I may. You had net corporate cost saves. Do you see any further opportunity there with the outsourcing shred services or anything of the like? Warrick R. Ranson: There's always opportunity. I think what we've said before, we took a fair amount of cost out of the business sort of a year, 18 months back. We did say that we would start to plateau in terms of those major structural changes to the business. But we're always looking for sort of cost out, but I'd say they're more on the fringe. And it's really about just sort of maintaining our cost levels at sort of current rates at the moment, Charles. Stephen Mikkelsen: The only thing I would add on cost, Charles, is if nonferrous was the hero of the result in many ways, costs were a pretty good support act. I mean if you back out the variable costs that came from increased unprocessed and increased activity in SLS, the actual underlying cost base has performed really well in some still pretty inflationary times. I agree with Warrick. It's relentless the cost program, and we will continue being relentless. But I think probably the major, major cost reduction programs, well, I think we're more continuous improvement now, Warrick... Operator: There are no further questions at this time. I'll now hand back to Mr. Mikkelsen for closing remarks. Stephen Mikkelsen: Well, thanks, everyone, for joining the call. Thank you for the interesting questions, very good questions, and I will see a number of you -- we will all see a number of you over the coming days as we get out and about. Thanks very much. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Graham Kerr: Good morning, everyone, and thanks for joining us today. On the call with me is our Deputy CEO, Matt Daley; our Chief Financial Officer, Sandy Sibenaler; and our Chief Operating Officer for Southern Africa, Noel Pillay. I'd like to start with safety, where we're seeing improvements in key measures following our sustained effort to improve performance through our global safety improvement program. During the half, we achieved further significant improvement in significant hazard frequency, which demonstrates improved hazard awareness and a more proactive reporting culture. We've also seen positive reductions across our lagging indicators. While the data is encouraging, we're determined to continuously improve our safety performance. Moving to our financial results. I'm pleased to say we have delivered strong financial results for the half, underpinned by our operating performance and higher prices for base and precious metals. Our FY '26 production unit guidance is unchanged across our operated assets off the back of our continued focus on delivering safe and reliable operating performance. This performance enabled us to capture the benefits of the positive market conditions for our key commodities. We've delivered underlying EBITDA of USD 1.1 billion with group operating margin of 28.2% and growth in underlying earnings of USD 435 million. Our balance sheet remains strong with net debt of USD 25 million at the end of the period, enabling us to invest in both high returning growth and deliver returns to our shareholders. Looking ahead, commodity price tailwinds, coupled with planned drawdown of inventories at Mozal is expected to add to the group's cash generation in the second half. Our strong financial performance has translated into high returns for shareholders with today's announcement of a fully franked ordinary dividend of USD 175 million in respect of H1 FY '26 and USD 100 million increase in our USD 2.6 billion capital management program with USD 209 million remaining to be returned to shareholders. We're continuing to work to increase our production of copper, zinc and silver into structurally attractive markets. During the half, we advanced construction of our large-scale long-life Taylor zinc-lead-silver project. And across our broader Hermosa complex, we returned further high-grade copper exploration results from the Peake deposit, which supports the potential for a continuous copper system connecting to Taylor. As part of the scheduled project execution at Taylor, an assessment of project milestones and capital expenditure will be completed in H2 FY '26 and will be informed by the pricing of additional underground and surface infrastructure packages scheduled to be awarded during this period. At Cannington, we announced today a 28% increase in the underground ore reserve while also targeting further potential growth through both underground and open pit development options. Sierra Gorda progressed options to grow future copper production. We have defined an exploration target at Catabela Northeast adjacent to the Catabela pit, ranging from $1.1 billion to $2.9 billion -- billion tonnes, sorry, highlighting the potential for future mine life extension. In addition, the feasibility study for Sierra Gorda's fourth grinding line is nearing completion with an independent review of the feasibility study to be completed by the joint venture partners to support a potential joint final investment decision in mid-calendar year 2026. We're also pursuing further growth in copper and zinc through our Ambler Metals Joint Venture in Alaska. In closing, I'd like to thank our teams around the world for their work to deliver these results. Our operations are performing to plan, capturing the benefits of higher commodity prices. Our balance sheet remains strong, and our performance is translating to increased returns for our shareholders. Looking ahead, we're focused on continuing our positive momentum into the second half of the year and delivering our growth projects in base metals. Thank you. I'm now happy to take questions. Operator: Your first question comes from Izak Rossouw from Barclays. Ian Rossouw: Just a follow-up on what you were saying in the previous call, Graham, around Sierra Gorda. Just wanted to better understand some of the changes you've made there around management, what's driven that? And I guess, obviously, there's been some delay on the engineering and sort of approvals of the fourth grinding line. So just wanted to get a bit more of a background on that. Graham Kerr: Yes. Thanks, Ian, and I appreciate the question. Look, Sierra Gorda for us, obviously, is an asset that we think gives us the right exposure to copper. It was one that we believe when we acquired it was undervalued in terms of its current performance, but also its future options. And those options include the fourth grinding line, that oxide material sitting on the surface, but also exploration potential. So it's great to see the work that's been done to sort of get towards Catabela Northeast, and I think there's a lot more work to be done on that. And obviously, the oxide facility is something we'll have a look at once we settle on the fourth grinding line. The fourth grinding line itself had a number of issues we had to resolve around some work around additional thickness and bringing the thickness up to scrap where we can get a solid state of about 62% to be able to get to that next level of licensing to basically expand the facility. But if I was going to be honest, look, we -- both ourselves and Sierra Gorda probably weren't quite happy with the project Directors' performance. And as a consequence, that probably reflected on the person who is leading the Sierra Gorda business at the same time. So we agreed to make a change about halfway through last calendar year. And as part of that, we brought in a new asset leader as well as a new project director to sort of move into that fourth grinding line role. And obviously, both of them have bought a little bit of a fresh perspective on the project, certainly got it moving in the right direction now, which we're far more comfortable with. Now it's the case of finishing the engineering, having an independent review and then going back to both partners to basically approve it going forward. I wouldn't say materially, there's been a major change in technical capabilities or project execution. It's more been about the quality of the people leading the project, which I think were in much better shape today, plus some of those conditions precedent around the solids, et cetera, that we had to do. Ian Rossouw: Okay. And then just a follow-up on Hermosa around the awarding of some of the surface contracts. You said you're going to do a few more of the underground and surface in the second half. How are we tracking so far against budgets and time lines? You'll do a reassessment in the second half, but just wanted to get a sense of how are we tracking at this stage? Graham Kerr: Yes. So the second half, we always plan to sort of do this review based on when we knew the packages of work were coming in. So to date, if you look at the total spend to date, you're talking about just over $1 billion, and that's about 48% of the schedule we had in the budget. What has worked really well for us has been the first 2 surface packages have come in at the price that we would have expected as part of the estimate. What's also worked well is things like the mobile equipment at the same time. I think the shafts themselves, we just finished the first piece of lateral through development on the 3680 level for the bench shaft, and that was executed slightly ahead of budget and on cost. The shafts, if you look at the bench shaft, that's about 56% complete, so 459 meters of 824. Now that we've finished that first underground mining at 3680 level, we'll start resuming the sink in quarter 3 FY '26. The bench shaft has had some challenges along the way in terms of steel supply, but probably more importantly, a little bit of water at the start, even though water is less than what we expected and some underperformance by Redpath on their side. Main shaft, we're at about 370 meters versus 898 meters. So it's about 41% complete. And the main shaft has certainly taken some valuable lessons from the bench shaft and continues to make much better progress. In saying that when we look at the schedule to date and the trend lines, we don't see any major movements in dates and production -- expected production and capital costs. But again, I'm always saying until we get to the bottom of those shafts because both of those contracts will be time and materials, I'm always nervous. And as we get in the second half of this financial year, we expect to have come in the next 2 packages of surface construction work. We will also have the quote in for basically the underground lateral development. And by the time we start our review, it means probably 80% of the capital would have been committed which sort of puts you in a much better position to do a complete rebaseline. Not certainly raising alarm bells at the moment. It's a normal part of the process. The one unknown besides the shaft for us is also around the tariffs. To date, we haven't seen any material impacts. But in saying that it just bounces around from day to day, never quite knowing where it lands, but that's the environment we're operating in for a period of time. What I would say, what is going really well, all the foundations work on the process plant, the cable trays are all in. And at the same time, our approval, our draft EIS came out in the fourth quarter of our financial year '25. We expect to have the final EIS out in this half. This is our second half of financial year '26. And we're still expecting to have a record of decision, so full federal permits for Taylor, Clark and Peake in the first half of FY '27. So that's been a real great process for us. Ian Rossouw: Great. And then maybe just lastly on the labor side. Obviously, you've previously said where the project is located, there isn't much competition for sort of skilled labor. Is that still the case? Is that still been okay from, I guess, competing against some of the other projects in the north? Graham Kerr: Yes. So I think -- the way I think about it at the moment, we have seen very low rates of turnover in our professional people. We still managed to attract good quality people as the project grows and we start thinking about commissioning and operating and getting prepared for that. People has not been an issue for us. And while there's a lot of projects in the U.S. talked about, there's very few that are actually in the midst of execution like we are. I also think Tucson is not a bad place to base yourself. And the project itself has certainly got a lot of momentum in the U.S., which I think is super helpful compared to other projects that have self started. And I think most people in the industry over there appreciate that we're going to get a federal approval within 4 years, even though we don't need it technically to 8 years into production. Ian Rossouw: Okay. And then maybe just on Brazil aluminum. What were sort of the underlying issues around the performance there? Obviously, it's not something -- an asset you're operating, but just wanted to get a bit more color there. Graham Kerr: Yes. Look, from outside, it's incredibly frustrating because it has been a long, painful drawn-out process, and we've got our third piece of, if you like, revised guidance from Alcoa over the journey of the restart. The most recent event is they experienced some instability in December last year, where they had an unplanned, if you like, outage of 80 pots that need to be taken offline. So that means at the moment, we're back to about 565 pots online versus a capacity of 710, which is about an 80% capacity. Alcoa have deployed a set of specialist people from their operating center of excellence, and they've worked from down there. They provided some more supervision. They've revised the plans. Disappointing to see now the production guidance for '26 has been guided down to 135,000 tonnes. at 140,000 tonnes in FY '27 versus the capacity of 179,000. These are obviously South32 share. We have offered to provide some assistance if we can, particularly as you think about Mozal, Portuguese speaking, a very well-run smelter. It's up to [indiscernible] want to take it on. They certainly are the operator. They certainly understand that we're frustrated and disappointed in this performance. Operator: [Operator Instructions] Your next question comes from Myles Allsop from UBS. Myles Allsop: Maybe -- obviously, it looks pretty clear that with Mozal, it's beyond the point of doing a U-turn and it's going on care and maintenance. I mean what is the estimated cost of restarting it just to give us a sense as and when we come through. Also just on Hillside as well, obviously, there's a bit of a kind of clock ticking towards the power contract renewal. You've talked about decarbonizing Hillside in the past. And if you can't get a green power source, then it may not be part of the portfolio. Could you just give us a quick update on the Hillside side as well? Graham Kerr: Yes. So maybe start with the basics around Mozal just for people on the call. We use about 940 megawatts an hour, 940 megawatts in terms of capacity of power. The smelter is on 24/7, 365 days. So it's a perfect load for utility. We have generally drawn all our power from the Cahora Bassa, which is owned by the Mozambique government by an entity called HCB. Around this time last year, they started to tell us that after 2 years of severe drought that they were lacking the ability to provide Mozal's power needs. That would be at least probably 2 years for the basin to recharge and then they have some maintenance that they need to do, which means we're probably not going to have full power somewhere between the next 2 to 4 years, a little bit unknown. The challenge for that is you need power. It's 1/3 of your cost base, no power, no aluminum smelter. We've been trying to engage to actually get some power off of Eskom. There is no real incentive for Eskom to do that. If you look globally today outside of China, less than 1% of Western smelters have a power contract in excess of 50. The current regulatory environment at the moment and the only formal offer we've seen from Eskom is for us to pay megaflex, which is closer to USD 100 megawatt hour, which makes it totally untenable. So that does mean we have been talking about this for a while about going into shutdown. We were hoping, obviously, that we would have maybe some breakthrough by Eskom. That gives a big impact for our people, roughly 4,000 to 5,000 people that depend on this in terms of contractors, our people and another knock-on impact of about 20,000. People are impacted. It's about 1 in 3 jobs in Maputo. It's probably about 3.9% of GDP. So it will be a significant loss of the government of Mozambique and the Mozambique's economy. So we are planning to go into care and maintenance even if you got me a power contract today that was affordable, it made sense. We have run out of pitch and coke over the next couple of weeks and the lead time on those items are somewhere between 5 to 8 weeks, which you're never going to get it in time to keep the pots running when the power contract runs out. We made the decision in December to stop buying materials because we did not see a breakthrough coming, if you like, on the power contract, and hence, we didn't want to keep pouring money out the door that you were never getting back. Now to actually keep the smelter in care and maintenance, you're probably talking about an ongoing cost of about $5 million a year, 100% terms. The closure and rehab estimate is about $119 million. We wouldn't be looking -- obviously work closely with the government of Mozambique. We wouldn't be looking to go into full closure mode until the HCB power contract and future was understood because once they do come back online, they've got a lot of power and not a lot of offtakers. So this could become viable going forward. The challenge I would say is as you've seen with Brazil, restarting a smelter over a number of years is very difficult. It's not like a mine. So that will be the challenge. Now when it comes to Hillside, Hillside is powered by Eskom. Today, we're allocated pretty much coal-fired based on the grid factor. The reality is Eskom every single week and year is making progress on renewables and nuclear coming into their network. We are working closely with them over time to get a more balanced solution. What we do have is time in that space. We have time because the current power contract doesn't expire until 2031. From a regulatory environment in South Africa, unlike exporting power to Mozambique, there is what's called a heavy industrial tariff that allows Eskom to be more flexible, if you like, on power, considering what impact that has on the country, but also their own performance. The other thing is we sell roughly 30% of our aluminum from Hillside downstream, which goes to people like Hulamin and other, if you like, suppliers who make products out of it. There's a hell of a lot more jobs dependent on this in South Africa and particularly in an area that's sensitive to the ANC around KZN. So we have a lot more confidence in how Hillside is going. And I think certainly, the interactions with Eskom have given us no reason to doubt that they see Hillside is an important part of the equation for them going forward. Myles Allsop: That's helpful. Just maybe in terms of the transition with Matt, can you give us a kind of a quick update on the timing when you'll be handing over the keys? And what advice are you giving that over the next kind of sort of 3, 6 months? Graham Kerr: Yes. Look, absolutely. So Matt joined us last week for his first week, and I'll get him to say a couple of words in a second. Matt had his first week with us in South Africa, where we had a Board meeting for most of the week, he visited HMM. Obviously, this week, he's been in our head office and also going through results presentation and he's on this call. He'll be coming on the road with me for -- on the East Coast to meet all our investors, and he'll be doing the U.S. and other places around the world. And in between that and over the next couple of months, he'll be visiting all the operations. So Matt now has accountability for all the operations reporting to him, and that gives him a chance to understand our business very quickly. And the reality from my side, my #1 objective is to set Matt up for success. So when he feels comfortable and he's ready to go, well, he showed a run going forward. I guess the piece of advice I'd always give him is the key, I think, for our assets because of the geographic spread, because of the age and some of the complexity. Yes the focus there is on making sure that, a, we run our business safely and reliable. The base business needs to deliver on its safety production costs and cash flow commitments to fund the growth of the business. And the next piece for me is delivering on our growth projects because once you come out the other side of Hermosa and Sierra Gorda, you'll be very longed in cash. You've also got some other options in the growth pipeline that I think will be super exciting like Ambler, Catabela Northeast, Clark and some other exploration. But maybe, Matt, a good chance for you to say a couple of words. Matthew Daley: Yes. Thanks, Graham, and nice to meet everyone. Looking forward to getting to see some of you in the coming weeks as I travel with Graham. Listen, early days for me, definitely only week #2, but focus at the moment is getting a really good understanding of the business. So lots of listening and learning, visiting the assets and talking to people across the company. What stands out thus far is you've got a really great quality of assets in the portfolio, generating cash, lots of optionality and obviously, the organic growth projects that Graham has mentioned. And I think the way the team thinks about investment decisions with a real focus on value has just been really, really pleasing. Opportunity for me going forward is just to build off that really strong base, right? So to focus on improving operational performance, managing risk and allocating capital really well. So yes, excited to be joining the team, and thanks very much, Graham. Graham Kerr: Thanks, Matt. Does that help with questions? Myles Allsop: Yes. No, that's very helpful. Maybe one last one because we're getting asked by investors as well around the potential for consolidation in Alumina in Western Australia. And do you think there is a lot of value that can be created? Or do you feel that you're in a relatively much stronger position given where you are with the permitting? Graham Kerr: Look, I think, obviously, we're in a great position in terms of having the approvals for our next series of mine developments. Alcoa was going through that process, which was a long painful process. And obviously, they have different landholdings than we do, some water issues to deal with that we don't. So they're better to comment on that. But certainly, we're very pleased to be past that piece and actually executing on our projects going forward, and they're actually going well. Look, I think in the Southwest, there's been a long history of engagement around things like land swaps, technology exchange. Do I think potentially there is more synergies to be had there? Look, I think that is a conversation absolutely worth revisiting over time. But probably like we were very focused on getting our next approvals. I'm sure Alcoa are very focused on that in the short term. Operator: Your next question comes from Alexander Robert Pearce from BMO. Alexander Pearce: Graham, you've previously highlighted the potential upside from the Sierra Gorda oxide project. Have you got any update on where this project stands at the minute? And has the recent improvement in copper prices made any difference to kind of bringing that study forward? Graham Kerr: Yes. Look, I mean, we probably -- if you think about the order priority, I guess we're sort of focused on the fourth grinding line first because that 20% production throughput increase, I think, is important, lower cost, more copper, et cetera. Catabela Northeast is to understand how attractive could the fourth grinding line to be to feed it. I think the oxide material, we've still got some work to be done on that. There's some early thinking done on it, but I guess we're trying to focus our best people on the other 2 opportunities first. But if you think about that opportunity, that oxide material, we got about 110 million tonnes stockpile there, and it's probably got a grade of roughly about 0.38. I think what we're looking for at the moment is we're completing a feasibility study to understand what we could do around lost low-cost heap leaching. And I think at the same time, there's a number of other operators who are close by that potentially have some capacity. So the key for us is to understand what would it cost to do it ourselves versus what could we do in terms of toll treating it through someone else's plant and what are we willing to pay. And hopefully, we have a greater sense of that towards the back end of this calendar year. Operator: [Operator Instructions] You do have a follow-up question from Ian Rossouw from Barclays. Ian Rossouw: Just a follow-up on that, Graham, around the Sierra Gorda, Spence and some of the other operations in the area. I mean, is there an opportunity for more sort of operational, I guess, synergies? And I guess, as you say, using some of the other capacity, but sort of a more regional consolidation. Just wanted to get your thoughts on that. Graham Kerr: Look, in all these things, there's 3 obviously mines that are super close within the stone throw of each other. If you had your time again, you'd sit back and say, why didn't they sort of do one major piece of infrastructure and then actually use the different products to actually feed that mill would have made the best economic sense. Obviously, that decision was made a long time ago by different people who don't sit in the chairs now. I do think longer term or even medium term from our perspective, there is opportunities to explore synergies between those existing operations and one would clearly be the oxide material at Spence. But also as we understand Catabela Northeast and how big that could be, that gets closer and closer towards Spence. So I think there is a discussion to be had there when the time is right. The challenge in all these things is when you have more and more players involved, it's a bit harder to sort of get, if you like, to a position where everyone feels comfortable. Operator: Your next question comes from Tim Clark from SBG Securities. J. Clark: Congrats on the results. I'm just interested in just a little bit more color on Cannington. You've had a nice reserve increase, which is positive. And then there was a bit of commentary around underground resources and seeking open cost and underground opportunities. There's obviously been quite a big move in the silver price. And in the past, you've spoken about having a very conservative silver price sort of forecast in the mine plan. I wonder if you could just give us a little bit more color on how you're thinking about Cannington and how you see it evolving over the next year or so? Graham Kerr: Yes. Look, I'd start with a couple of points that I think are worth sort of drawing out and some of these were including in our slide presentation today. And the first one is when you look at Slide 11 in our pack, we talked about the zinc-lead-silver margin, which obviously today is Cannington despite the fact that Cannington is almost, what, 28 and a bit years old, and it tells you how old I am because I was a graduate when we were actually building that and I was working there. We're still making margins between the last 3-ish years, 46% to 53%. So it is a high-value business. You've already got the capital infrastructure there. You've got the workforce in place. So anything we can do to extend the life of Cannington I think, is super important and a low-cost option and a return for our shareholders. We would be fair to say probably 18 months ago, I was probably less optimistic about the team's ability to extend the life. This isn't driven by what price in terms of what's happened with the silver price, and we'll come back to the silver price in a second. This has probably been more around the discovery of bit areas of new, if you like, sources of material we can bring to the underground. It does require us to spend a little bit of money in the short term. So over '27 and '28, we will spend roughly USD 65 million to USD 80 million, and that's on some ventilation electrical shaft infrastructure, but that does potentially allow us to increase even further the underground. So what we did announce today was about a 28% increase in the Ore Reserve from 3 million tonnes to 13 million tonnes. And that adds about 2 years life, if you like, to the underground. We think there's more work to be done on that could potentially open up more ore to be added and extend the life of the underground. And one of the slides I did love in the presentation that we shared with people today, again, when you go back to the age of Cannington and you think about when we actually started our journey some of the short life assets from day 1, everyone was asking, well, how long is Cannington going to last for because our Ore Reserve in FY '15 was only 21 million tonnes. We've already mined out 26 million over the time frame to today. We've added back in another 17 million, and we've got 13 left to go. So that sort of gives you a sense of the work that the team has done. And the underground resource itself has about 45 million tonnes. So the job of the team is going to be how much can we extend the life out. We have also done a bit more work on the open pit to have understood the potential of the underground. That allows us to redesign the pit in a different way and probably focus, if you like, on a more value-add way to take it forward as well as we've done some work on some of the remnant old low-grade stockpiles that existed on surface that have been historically difficult to process through the concentrator and the team have found a way through that they can manage that far better. So I think that what that does mean is Cannington has a lot of optionality, if you like, on the base production and how we can continue running it. That's before you consider the silver price. So we would have probably been using a silver price south of $40 when we did all this work. The question is how long does the silver price last for. But certainly, we would expect to complete more work on this over the next, if you like, 12 months and be in a much greater position to know what the future looks like at Cannington, but it certainly is looking optimistic. J. Clark: Very useful. And thank you very much for all of your support over time if we don't get to catch up with you again. It's been much appreciated. Operator: There are no further questions at this time. I'll now hand back to Mr. Kerr for closing remarks. Graham Kerr: Thank you, and thank you, everyone, for taking the time today. I'm sure you're all very busy. I would like to take the opportunity to thank our teams again around the world for the hard work they've done to deliver these results. I think we are running our operations to plan at the moment. We are, therefore, capturing the benefits of higher commodity prices. As always, we pride ourselves on our capital decisions and our balance sheet remains strong. Our strong performance is leading to increased return for our shareholders as our model is designed to. And looking ahead, if you look at some of the spot prices versus the first half, there's more upside. We haven't changed our cost or our production guidance. And at the same time, we've got a series of growth projects in our base metals business to continue to reshape our portfolio. But thanks, everyone, for your time today, and have a safe day.
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