Skellerup Holdings Limited (SKL) Earnings Call Transcript

Okay. Good morning, and welcome, everyone. I think we've just ticked over to 10:00 a.m., so we'll get underway. Tim and I will summarize the highlights from FY '25, provide some context around key impacts and the markets and applications we're focused on. Please remain on mute with your cameras off if possible. We'll take questions at the end and probably the best way to do that is to raise your virtual hand and then Tim will take those in turn. Overall, very pleased with the result and our position and it really reflects an excellent contribution from our businesses and people around the world. We'll move to Slide 2. Okay, so the graphs, you've seen these before. We've used these for a couple of years now. It shows revenue, gross margin percentage and EBIT over the past 7 years. So over that 7-year period, our EBIT has grown at a compound annual growth rate of 10%, and that's been underpinned by revenue growth and gross margin expansion. And these results really are an outcome of our primary focus on engineered polymer products for high-performance and conformance applications in the global market and show the resilience of our earnings over economic cycles. Many of the applications we sell into do not suffer from volatile demand. The 2 largest applications, which many of you will be well aware of, that our products are used in dairy and what we call potable water and wastewater. The products we sell into dairy are essential consumable products, meaning they are highly correlated to milk production and not milk price. 70% of the revenue we generate from sales of this application comes from international markets and the other 30% coming from the New Zealand market. The products we sell into potable and wastewater applications are most closely aligned to investment in new and improved infrastructure and population growth. And the demand for these products, again, is robust across the economic cycles, and that's proven by the results that we continue to achieve. Important to note that the achievement of the growth over the past 7 years and for a longer period of time, we've had 9 consecutive years of EBIT growth now, and they haven't been at the expense of investing in the future. Over this period and particularly in the last few years, we've increased our front-end presence in market and our development capability in our operating businesses and our manufacturing platform. Just last week, we took delivery of 4 injection molding presses for multicavity production at our Wigram facility in Christchurch. Over the past 12 months, we've invested in additional capacity and modernization, not only in New Zealand, but also in the U.S., Europe and China. Moving to Slide 3. Just focusing in on FY '25 here. As reported, you have seen earlier today, EBIT of $78 million, up 7% on the prior year and our ninth consecutive record result. Revenue growth from key markets in existing and recently launched products, and we'll talk a bit more detail on this later on. And as I commented on the outset, an excellent performance from our leaders and teams across the world. Operating cash flow strong at $66.5 million, down a little bit on the prior year as we deliberately increased our investment in inventory, which we talked about at the half year result to primarily mitigate around, at that point in time, what we saw as risks of tariffs being imposed, and, of course, that became a realized risk, and to support the growth in the business that we've achieved. So despite this investment in inventory, which has served us well, we've been able to fund the investment that we needed to make in equipment and people to meet our organic growth needs, a record dividend payout and a small reduction in debt. So our debt continues to remain at very low levels and give us the opportunity to continue to grow the business. Dividend, $0.255 per share for the full year, commensurate with the increase in earnings, up 6% on the prior year. Just some comments on tariffs before I hand over to Tim for the next few slides. The FY '25 impact from a direct point of view was minimal due to the management of inventory and the price/cost mitigation actions we were able to take. We estimate the increased cost as a result of the new tariffs were imposed were less than $0.5 million in FY '25. That's a direct impact. But there were some indirect impacts which had some influence on our results. Most notably, when there was some real escalation in tariffs in China, we like a number of other companies, suspended shipments for a period of time. And then when those tariffs came back to a more manageable level, began to ship product again, and that resulted in some surge in freight pricing at that time. So we did suffer some higher freight costs throughout the year, and that's one example of that. And then secondly, as some of our customers dealt with the impact of tariffs that influenced their demand patterns as well. And for example, we had one large customer in the health and hygiene sector that suspended delivery of products in May and June as they moved to make some changes in their assembly activities and where they carry out those activities. So there's both direct and indirect impacts on FY '25, but relatively minimal due to the actions we took, as I said, around managing our inventory levels and the actions we're able to take both with pricing with customers and reducing costs of our products. As we look forward to FY '26, with the actions that we've taken and the situation that we have in terms of where we manufacture our products and the various tariff levels that are applied, we estimate that the increase in tariff costs, based on levels as they currently are, is less than $5 million, but in the order of $4 million to $5 million for FY '26. And we would expect to more than offset that with revenue and earnings growth in FY '26. So it's a headwind to us, but we still expect to continue to improve and grow the business going forward. That cost is after taking into account the actions we've already taken. There's actions we will continue to take. But some of the opportunity to reduce the rest of that impact is harder to shift and that relies on making some more significant investments should we choose to in terms of where we undertake certain manufacturing activities. So I'll leave it there on tariffs. I'm sure there'll probably be some questions towards the end and hand over to Tim to go through the next few slides.

Thanks, Graham. So I'll just use the next few slides to reflect a bit deeper on the FY '25 result. So starting with our 7-year financial review. Revenue was up strongly 7%, or up 4% in constant currency terms, against the prior year. The increase was broad-based, with the Industrial division up 7% and the Agri division up 8%. Foreign exchange rates were a tailwind for us this year with the key U.S. dollar exchange rate down 3% on the average rate of the prior year. Gross margin is largely unchanged from the prior year, just above 43%. Improved margins in the Agri division through the impact of higher volumes and productivity gains were partially offset by a change in product mix in the Industrial division. Indirect costs continued to be closely controlled, were up 7% on the prior year. That was impacted roughly 1/3 by a weaker New Zealand dollar, 1/3 by investments in people, as Graham noted, in terms of product development and front-end sales resource and the other 1/3 investments in facilities, in travel costs and in marketing to service our customers and end markets. Overall, this meant EBIT was up $5.3 million to a record of $78 million. Finance costs were down by $1.1 million on the prior year as market interest rates declined, and we held a lower average level of debt. Favorably, we were able to successfully extend our debt facilities during the year, resulting in an additional reduction in total cost. The tax expense reflects an effective tax rate of 26.5%, comparable with the normalized rate for the prior year. And just a reminder that in the prior year, we reported an underlying NPAT due to us being required to make an adjustment for the removal of tax depreciation on buildings in New Zealand. The relatively lower finance costs and increase in EBIT meant a 9% improvement in underlying EBIT on the prior year. Underlying NPAT, sorry. Reflective of the group's strong financial position and operating cash flows, as Graham mentioned, we've increased the dividend to $0.165 per share, which represents a 92% payout ratio of after-tax profit, consistent with that in FY '24. Operating cash flow was slightly lower due to the previously mentioned investment in inventory to counter tariff and supply chain disruptions, ensure continuity of supply to customers and meet increasing market demand. In FY '25, we funded CapEx of $9.2 million, a record dividend payout of $48 million, and an increase in lease payments of $7.1 million, meaning our net debt closed $3 million lower at $12.4 million, or just less than 4% of total assets. Moving to our earnings bridge, which reflects the change from underlying NPAT reported in FY '24 to the record FY '25 result. For the Industrial division, we continue to see earnings growth from the key potable and wastewater applications through increased market share and the launch of new products, which Graham will talk about shortly. This included vacuum systems in the U.S. and Australia and increased demand for infrastructural pipe products in the U.S. market following a softer 2024. Robust demand for products in solar applications in the U.K. drove an increase in the roofing and construction earnings, and we continue to see increases in demand for pipe connection products in the U.S., which was somewhat offset by a continued weaker Australasian construction market. All other Industrial applications performed roughly in line with the prior year. Demand for dairy consumables remained strong throughout FY '25, contrary to the customer destocking that we saw in the first half of FY '24. Higher demand fueled higher production volumes and resulted in operating leverage and a significantly improved performance in the year. Footwear volumes and revenues were higher on the prior year, but were insufficient to counter some quite significant raw material costs increases as a result of lower production through our facility in China to manage down our inventory levels. 2025 corporate costs were slightly higher because the prior year included a reversal of a long-term incentive cost for the former CEO, which didn't repeat in the current year. Corporate costs are very well managed and remain less than 2% of total group revenue. The FX movement reflects the change in the pretax revaluation and hedging losses of around $400,000 this year, being favorable to the $1.3 million reported in the prior year. As I previously touched on, interest was lower and the effective tax rate reasonably unchanged, resulting in the record EBIT for FY '25 -- NPAT for FY '25. Turning briefly to group revenue by market. I note that Graham will cover the divisional split shortly, so I'll focus on the key changes for the year. North America continues to be our largest market by share of revenue, increasing both in absolute terms and as a proportion of group revenue. Growth in the U.S. was broad-based with sales of our OEM and own dairy consumables seeing significant growth, growth in vacuum systems and roofing and construction products and a return in demand for our high-performance marine foam. Decreases in the relative share of revenue for New Zealand and Australia are reflective of the tougher trading conditions in these markets, particularly the impact of the depressed construction activity with residential building consents in Australia at decade low levels. Growth in the U.K. and Ireland is driven by the supply of roof flashing products used in solar applications in the U.K. and to a lesser extent for specialist drainage products. Turning to group revenue by application and having touched on several of the key drivers previously, I note that we show strong growth across most of the group's applications. For our key applications, dairy had a strong return through strong demand throughout the year. Demand for products used in potable and wastewater applications was resilient with revenue in absolute terms for this application increasing by 7%. Roofing and construction revenues were higher due to the higher solar flashing revenue in the U.K. and pipe connections in the U.S. and revenue from sales of specialist footwear, as I mentioned, were higher based on an increase in volumes augmented by the launch of our new Red Band Low product as well as additional sales of Pink Band gumboots in support of the Breast Cancer Foundation. Other smaller applications performed largely in line with our expectations. With that said, I'll hand back to Graham to cover the divisional performance for FY '25.

Okay. Thanks, Tim. We're on Slide 8 now. Another record result for our Industrial division. Over the past 7 years, we've achieved a compound annual growth rate of 12% for EBIT. As Tim touched on, potable and wastewater, demand was solid. Infrastructural pipe applications, the demand was up both in North America and also in Australia, where we have recently, over the past 2 years, launched gaskets for polypropylene pipe, which is increasingly being used as a substitute for concrete pipe and wastewater applications. Somewhat countering that was some reduced demand for tapware in North America, reflecting the market and also some loss of market share by one of our customers. Roofing and construction, as Tim noted, was a standout from the U.K. where in multiunit new dwellings, there is a requirement to incorporate solar solutions as part of those builds. So we continue to see good growth in that sector in the U.K. in particular. And then as Tim also mentioned, U.S., we saw some small growth where our focus is primarily on the metal roof market, countered somewhat by a softer market in Australia and New Zealand, in particular, Australia, where we have a significant presence through our Deks business based out of Melbourne. As I noted earlier, freight and tariff impacts eroded our earnings slightly for the Industrial division. And then as we look forward, really we see we have continued strong opportunity, both with existing customers and new customers. And we talk about this a lot, but our capability to engineer and manufacture high-performance, high-conformance polymer products and increasingly integrating molded components in those provides us with something that generates some significant value for our customers and good growth opportunities for us going forward. We'll move to Slide 9. As Tim noted, what we're looking at here now is just for the Industrial division, we've got by market on the left and by application on the right. As you can see from the market graph on the left-hand side, North America continues to grow as a proportion of our Industrial division revenue. And that growth was broad-based as we noted, potable water, wastewater, roofing and construction. We did have a slight increase in our hygiene applications, albeit it was softer in the final quarter of the year. As I noted earlier, our largest customer in that application suspended deliveries in May and June as it went through some changes that they were making in terms of where they assemble and manufacture their products. U.K. and Ireland increased as a consequence of the roofing and construction demand, as we said. Australia and New Zealand was up fractionally in real dollar terms over FY '24 despite the headwind of roofing and construction and sport and leisure applications demand being a little bit more subdued and Asia was flat. We'll move on to Slide 10 in the Agri division. Obviously, the most significant contributor to the improved earnings in FY '25. So a result we're very pleased with. In part, the improvement was expected because we did not have, and we were not expecting to have, the destocking impact that we had in the first half of FY '24. So from an Agri division point of view, just to give you some context, roughly 75% of the revenue is generated from sales we make into dairy applications and the balance of that coming from footwear applications. From a dairy point of view, the growth was broad-based, both from a market perspective. International sales up at 10% on pcp, whereas domestic sales also up by 6% on pcp. And then in addition to that, we had that broad-based market growth. We also had good growth across both our OEM customers and our own branded products. And those branded products include some newly launched liners and newly launched car feeding. We talked about the Thriver product that we were to launch this year last year. That met our expectations in FY '25 with the revenue we've generated and probably exceeded our expectations in international markets. As we move into FY '26, we're in the peak calving feeding season in New Zealand right now. Demand for this product is good. We also have trials with versions from this range currently in progress in North America and Europe and I'm confident on the opportunities we have going forward with that product range. The strong demand and the investment we've been making in productivity and process improvements provided us with an additional boost to earnings. Obviously, higher demand with a fixed cost base always provides that opportunity. But as I note, that has been aided by the investments we've been making in equipment and process, as you expect, and therefore, translating into an excellent outcome from an earnings point of view at the EBIT level. Speaking of footwear now, as Tim noted, revenue growth in the New Zealand domestic market was achieved, including the newly launched Red Band Low. If you take a look at our annual report and you get some time later on today, there's a QR code in there, and you can see the Red Band Low racing down the course at the Red Bull Trolley Derby earlier on this year, which coincided with the launch of that product. And that's obviously a product that we expect to continue to generate revenue growth for us in the future. We're also working on a new lifestyle range of boots for which the first product will be launched in FY '26. So good prospects going forward for footwear. As Tim noted, the FY '26 earnings contribution was somewhat reduced due to the impact of higher raw material costs and a planned reduction in production to manage down inventory levels. A couple of years ago, we boosted production in response to COVID demand, which proved to be more than what we needed. So over the past 12 months, we've been working our way down, and we expect to be able to lift the production rate a little bit as we move closer towards the second half of the year and start to regain some of those efficiencies. That said, whilst the contribution was down on the prior year, this remains a very valuable and very profitable business to us. Looking forward from an overall point of view, as I noted earlier, the global demand for protein continues to increase. If you look at what the projections are in the market, they generally range from 4% to 6% to 7%. And we're seizing the opportunity that presents by investing in product innovation, investing in our capacity, investing in people, and we have a multichannel model to capitalize on this, not only in our traditional strong markets, but also in emerging and developing markets in Asia and in Eastern Europe. We'll move on to the next slide. I won't pause long here because Tim has covered a fair bit of this off. Again, what you see on the Agri division here you see on the left-hand side, our revenue by market and on the right-hand side by application. As I noted before there, roughly on the right-hand side, that split of revenue between dairy and footwear. And I just wanted to emphasize again here, this is a global business. 63% of the revenue across our dairy and footwear product range we generate from international markets. And there's understandably sometimes an assumption that this business is significantly leveraged off the New Zealand market, given that Agri is such a significant part of our business and our country's business, and it is important to New Zealand and important to us. But significantly, the international markets have a big say in what our results are for this division as well. And we continue to see good growth opportunities in international markets for, in particular, our dairy products, but also our footwear products. Just a note there on footwear. Our growth in New Zealand over the past 5 years has been aided by our increased presence in the big box retailers such as Bunnings and Mitre 10 MEGA and the new products we've talked about that we've added to the range. I think with that, we'll move on to Slide #12. Just a recap on environmental, social and governance matters. If you've had a look at the annual report and compared that to a couple of years ago, you will see the page count is quite a bit higher and to a large extent, that's due to the inclusion of our climate-related disclosures. What we found working through this process is we've genuinely gained some benefits by thinking about the risks and the scenarios and the opportunities that come with the impacts of climate change. The investments we have continued to make in our business mean that the intensity of our scope 1 and scope 2 emissions continues to reduce, which is obviously a positive outcome. And this year, the big activities have been the development of an emissions reductions plan, and we're using our largest Agri facility at Wigram as a pilot for that. And we've identified some excellent opportunities to deliver both good environmental outcomes in terms of reductions in emissions, alongside good commercial and financial outcomes as well. So that's been some good work and some great contribution by both Tim and his team and our team at Wigram. We've also worked on developing our first Climate Transition Plan. You can read about hat in the annual report. And just I think the understandable focus on climate means that sometimes the other environmental initiatives can perhaps get a little bit sidelined. And I wanted to highlight that we're trialing currently a recovery scheme in New Zealand whereby we are collecting liner waste to be used as a fuel substitute in the cement manufacturing process in the top of the South Island. So that's an activity we've got going on as a trial at the moment. And then final point on environment, scope 3, greenhouse gas emissions, that data gathering process, we reported these last year and again this year, the process of gathering that information and calculating those emissions remains a significant activity, which I think we manage as efficiently as we possibly can. I would say that the prospect of that needing to be subject to assurance next year scares me somewhat in terms of what cost that may bring to the business, and we don't really understand that yet. So I certainly have some reservations around the benefits of what's currently mandated in terms of those emissions requiring assurance next year. Moving on to social. The first point we make there is around health and safety. Our target is zero harm. Our people, our leadership, our teams embrace this, and I think we have an excellent culture around health and safety. All of our sites have monthly meetings and they have active committees. I participate as often as I can in some of those meetings, and I'll be in Europe in September and will be visiting 4 of our businesses and will have the opportunity to sit in those discussions and those activities there, too. We have a good, both internal and external framework. We've moved to a model over the past 12 months of ensuring that each of our sites and locations are subject to an external review each year, as well as our own internal activities. So a strong focus on this. We, as I noted at the outset, the target for us is zero harm. And I think that's the only target we would want to have. Just some other comments there. We do have part-time and hybrid arrangements. We regard that as a critical opportunity to both retain and attract talent, to be quite frank. And I think the important consideration is this is a case-by-case basis, a role-by-role basis, and it has to be a good outcome for both the group and our employees. Some of our employees have to work in international time zones reflecting the business that we're in. And so therefore, an arrangement whereby they spend at least some of their time working from home is absolutely the most [ simple thing ] we can do. We have no issues over pay equity. All of our leaders confirm annually that our pay levels are set on an equitable basis and no reports of discrimination or harassment. And just finally, on governance, there's been no change to our Board, as you would observe. We continue to benefit from a Board with, I think, a highly effective mix of skills, experience, and tenure. And I think it's a great benefit to ourselves, management running the company, and shareholders. Just to close, I want to recap on our business model and strategy and how this translates into earnings growth. The chart at the top, you'll have seen before. We emphasize that the critical element we have is we have a deep technical expertise both across the products and the formulations that we design, the manufacturing processes that we have, our capability to design tools and manufacture products. And we really focus that expertise on products for precision, high-performance and conformance applications. Our development is customer focused. So we work hard to try and understand the customers' need, whether that's an OEM customer or a broader market where we're selling a branded product to ensure that we focus our development on real innovation and performance to deliver maximum value for our customers. We have been investing in market presence, and from a manufacturing perspective, less so at this stage, but certainly from a people perspective in terms of having people in markets. And for the future, and I'm sure we'll have some questions on this, we would expect that we'll be manufacturing more of our product in the years ahead in market. It's not an imperative must-do-now activity for us. We have a very profitable model, a very scalable activity, but it's something that we'll be looking to do more of in the years ahead. And then I think a real strength is our business unit model, whereby we measure our business units, and we have accountability, capability and measurement at that business unit level. And if you look at the graph at the bottom, I think, our strategy and our focus is delivering great outcomes. So what we put together there for you is an indexation of our EBIT over a 7-year period compared to GDP growth in key markets over that same period of time. And using 2019 as the base year, cumulatively our EBIT has grown by 87%. And the cumulative GDP growth in our key markets over that period of time is 7% to 13%. So again, just emphasizing that point that we continue to believe we can generate strong earnings growth with the mix of products and the focus that we have regardless of the economic environment. So with that, we'll take questions. And I can see we've got a few hands up already. Tim?

Some early hands up. So I think, Guy, you were first. If you'd like to unmute yourself, I think we can fire away.

Yes. And well done on delivering through a period full of disruptions. And so maybe just starting on that, it looks like you've offset about half of the additional Trump tariff going into next year. So there's that $5 million [ hole ] to make up or offset. Can you talk a little bit about how the plan is to do that? Are there more mitigation levers that you need to pull? Or is this now requiring a bit more underlying growth to offset that last $5 million?

Yes, perhaps, the way we think about this, Guy, is this year, our total tariff cost was around about $5 million. Yes. And with the tariffs as they currently sit, imposed on a like-for-like basis, we would be looking at a number of about $18 million for FY '26 on a like-for-like basis. And there's a few elements to this. I'll just briefly go through it. The dairy products that we sell into the U.S. fall under a class exemption. So therefore, there's no great mitigation from us, but that reduces a tariff impact of around about $3 million that otherwise would apply. And then with the products that we [ contract manufacture ] in Vietnam, we're able to substantially offset the impact of the 20% tariff that now applies there with pricing and cost adjustments. And then the other key manufacturing platform for us is in China with our vacuum systems and footwear. We can offset some of the impact with cost changes and pricing increases, but we cannot offset all of that. So when we talk about the incremental cost of around about $5 million, or somewhat less than that in FY '26, the largest share of that is attributable to the products we currently assemble and manufacture in China. And so there's no magic answer for that other than considering could or should we do that somewhere else. And we've done a fair bit of work on evaluating that. Obviously, any change would take some time and require a transition. So there's not like an instant switch whereby that generates a saving that completely offsets the tariff. And frankly, we're going to continue to remain patient on that whilst there's uncertainty around where that Chinese tariff may land. Currently, as I said at the outset, there's the 30% tariff from the current cycle of administration and then there's some higher tariffs that apply to some of our products from the previous administration. So I think the important point is it does not negatively impact our ability to be profitable selling these products in the U.S. market now, but it's an additional cost to us. And so if you like, the $4 million to $5 million we talk about in FY '26 is a little bit harder to shift and is a bit more structural in terms of the actions we would need to take. That said, the underlying opportunities for us across the business, we're confident will more than offset that cost in FY '26.

No, I appreciate the color and all the moving parts there. Look, I know that you've long signaled shifting some of that supply chain and some of the manufacturing base in part to account for these tariff tensions. Can you talk a little bit -- I mean, you seem to have signaled a bit harder in this round about the additional cost or perhaps the size of investment required to do that. Could you talk a little bit more around that, whether you're just talking about CapEx related to perhaps North America manufacturing, but also whether or not there'd be any operational cost headwinds as you look to relocate or shift assembly or manufacturing?

Yes. I think probably the point that we were making in the commentary here is we're not signaling any material change in what we previously talked about in terms of capital investment that's required. If we do this organically, we can scale up at a rate that suits the speed that we want to go at. For example, we've talked about we could move to manufacture some of our high-volume products in North America. And we've been investing in establishing a more modern manufacturing capability and capacity at our Wigram facility to make that option easier if that's something we choose to do. So there's no urgent hurry for us to do this. What we do see, though, is good opportunities for us to grow sales, for example, in the Asian market. We sell a limited amount of product into China, but we think we have good opportunities to grow in that market. And so, in parallel, we're thinking about, hey, may we shift some of our product manufacturer, for example, on dairy rubberware, if we were to shift some of that from New Zealand to North America, we would match that with demand growth for our products into markets nearer to New Zealand and Asia, for example. So as we have developed that capability now, we have options in terms of whether we pursue that organically or whether we look to accomplish that with an acquisition. And we have optionality around timing because we don't have a problem here with a burning platform of unprofitable business. So no, we're not trying to signal a vast change in CapEx requirements. And we're thinking about this very carefully because shifting product and adding cost doesn't make a lot of sense to the bottom line.

Just one last one from me around the inventory buildup ahead of these tariffs. Has that inventory build managed to largely wash back through as we are today? And have you had any indications from the customer set that their own inventory builds have largely washed through and destockings occurred?

Yes. So firstly, on ours, Guy, we've continued to carry slightly higher levels of inventory, and you can see that in our numbers. It's not as high as it was at half year, but we've continued to carry high levels. For example, Vietnam was sitting at a tariff of 10% until recently. So we took the opportunity to build up inventory of some products that we were pulling out of Vietnam from a risk mitigation perspective, thinking that may go up, which has gone up to 20%. So we're still carrying some higher inventory levels. I don't believe that our customers in the U.S. have built up inventory of our products to mitigate tariffs. Pleasingly, a lot of our customers just see us as a supplier of products in North America. They don't think too much necessarily about where our product comes from. Now obviously, when we go to them with price increases because of the impact of tariffs, they do. But there's not been significant build of inventory by our customers in North America. So we're not concerned about a significant destocking from our Industrial customers in North America. In some applications, particularly in the performance marine foam level, there was an immediate knee-jerk reaction saying, hey, can we buy all the product you've got in America, which we declined. So yes, I don't think we've got customers sitting on substantial amounts of inventory because we've been pretty careful around how we manage that as well. But we have ensured that we [ built up ] our inventory levels to provide us with a period of time to manage through price increases.

All right, so, Rob, I think you were next on the draw. If you can unmute yourself.

Congratulations on yet another record result. Keen to kick off with a question on the outlook statement. So it seemed to speak to an acceleration in revenue growth in the next 12 to 36 months. And based on comments elsewhere, it looks like that might be driven by the water division within Industrial, specifically new products from existing customers. Could you give me some color on the programs that you see coming up that give you confidence?

Yes, Rob, we're not trying to signal an acceleration in revenue growth. The comment around the 12 to 36 months was more around the business model may change over the next 12 to 36 months as we perhaps implement some of the things we've talked about of more in-market manufacturing capability. We are targeting growth, particularly in the -- and we think we have opportunities to grow our sales in dairy applications perhaps more rapidly than we have in the past by targeting some of those developing markets of Asia and Eastern Europe. And so that's really the broad context of that. So those objectives and targets that we've got, we're not trying to project anything other than what we've talked about in the past in that we have confidence that we can continue to grow earnings at a similar rate to what we have been achieving over the past 7, 8 years. So that's the space that we're currently in. But I think, to answer your question more broadly around our opportunities for growth, we see good opportunities for growth in dairy application. And personally, I'm more excited about this than we have been able to be before because of the investment that we've been making in capability, both people and equipment. And I think the plans and opportunities we have for growth with both our own innovative products under our own brand and the relationships we have with OEM customers. So good prospects there. And then we continue to have a broad range of opportunities across the Industrial division. And despite the impact of tariffs and what have you in the U.S., that remains a market of great opportunity for us.

Okay. Makes sense. And just to be super clear, so for these new opportunities, you're not expecting an acceleration in OpEx. You'd expect margins to be perhaps broadly steady over the next few years, barring tariffs?

Yes, we would. Yes. So there's no step change in operational costs. We have been investing and we'll continue to invest in capability, but it's not at a rate that it's going to outstrip our earnings -- sorry, our revenue and margin growth.

Okay, cool. You had some pretty strong exit growth rates for revenue across both the businesses. Could you speak about what you've seen in July and August?

Yes. So we're only halfway through August. So we can probably reflect on the first 6 weeks of trading. I would say in line with our expectations thus far, Rob. So consistent with our objective to consistently grow the business. It's in line with our expectations. From an Agri point of view, in the New Zealand market, this June, July, August period or May, June, July, August period is always a peak season. Demand for both dairy and footwear in the New Zealand market has continued to be good in the new financial year. So we're well placed, particularly from an Agri point of view 6 weeks into the new year. The biggest question mark I have from an Industrial point of view is -- and you guys read all the macro data and what have you as well -- is with the impact of tariffs and costs passing through to consumers, what might happen to overall demand. Notwithstanding the comments I made at the start is from a potable water point of view, for example, our spend is more linked to -- sorry, our sales are more linked to infrastructural investment and population growth. But some of our other applications, the margins will suffer if there's a reduction in demand in response to cost increases in North America. So that's the greatest uncertainty that I see for us looking forward for the next 12 months.