Q2 2026 Zotefoams PLC Earnings Call

Speaker #1: Questions are encouraged tab situated on the right-hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself; however, the company can review all questions submitted today and publish responses where it's appropriate to do so.

Speaker #1: Before we begin, I'd like to submit the following poll, and I'd like to hand you over to Ronan Cox, CEO. Good afternoon, sir.

Speaker #2: Thank you very much, Lily. And good afternoon, everyone, and thank you for joining us for the ZOTEFOAMS 2026 syndrome results. I'm m Ronan Cox, Group CEO, and I'm joined here by Nick Wright, our Group CFO.

Speaker #2: Today I'll begin with the business performance and the strategic context. Next, I'm going to take you through the financials in detail. We'll cover the strategic progress together, and I will close on the outlook before we take your our questions.

Speaker #2: If we go to the next slide, please, Lily. I'll take a disclaimer as read, and then we move on. Just quickly on business performance, let me start with how the business performed in the first half.

Speaker #2: And if we go on again, Lily. Next slide, please. Thank you. So the first half really shows diversification and discipline execution working together. That's the key message here.

Speaker #2: Sorry, I think that we're probably a few slides ahead. Can we go back, Lily, please? Yeah, there we go. That's the one. Thank you.

Speaker #2: So diversification and discipline execution working together. Group revenue was up 23% to 95.2 million pounds. It's really important to be clear about the quality of the growth.

Speaker #2: It includes the first full half-year contribution from OKC, and that was acquired growth. So on an organic basis, revenue grew by 4% or 6% at a constant currency basis.

Speaker #2: The important point is that growth was broad. Non-footwear markets were particularly strong, with doubling of Asia and the contribution of OKC together more than offset that footwear normalization that we have been signaling for quite some time.

Speaker #2: After an exceptional run starting in around about H2, Q4, 2004, following the whole way through in 2005, that normalization has come in in 2026 and H1.

Speaker #2: The mix that we've seen in H1 is wide profitability has improved. Adjusted operating profit was up 34% to 16.3 million pounds. And indeed, the adjusted operating margin improved 130 basis points to 17.1%.

Speaker #2: Adjusted earnings per share were up nearly 29%, and the balance sheet is really strong, with leverage sitting just about one times and a new 19 million pound multi-currency revolving credit facility is in place.

Speaker #2: And indeed, we have increased our interim dividend by just over 5%. In short, what I would say is that the group has absorbed really significant footwear normalization but still delivered really strong revenue and profit and margin growth.

Speaker #1: 21% adjusted earnings per share. We're up nearly 29%, and the balance sheet is really strong, with leverage sitting just about one times on a new $19 billion currency revolving credit facility is in place.

Speaker #2: For me, this is the proof point of the strategy. And if we go to the next slide, please, then. And this is a brief reminder of that strategy and a brief reminder of where we are going.

Speaker #2: So expanding beyond the core is moving from execution to impact. So the strategy that we laid out, as much as a year and a half ago at our capital markets day, is now starting to have impact.

Speaker #1: And indeed, we have increased our interim dividend by just over 5%. In short, what I would say is that the group has absorbed really significant but were normalization, but still delivered really strong revenue and profit and margin growth.

Speaker #2: Health and safety remains the foundation of everything that we do. Around it sits our priorities. But with so much going on across the group, as I say, health and safety is incredibly important for us as we're installing factories and upgrading facilities.

Speaker #1: For me, this is the proof point of the strategy. And if we go to the next slide, please, then— and this is a brief reminder of that strategy and a brief reminder of where we are going.

Speaker #2: It is our number one priority. As I say, around that, our priorities are about getting closer to the customer, around driving innovation and sustainability leadership, with a much sharper industry and customer focus.

Speaker #1: So expanding beyond the core is moving from execution to impact. So the strategy that we laid out, as much as a year and a half ago at our capital markets day, is now starting to have impact.

Speaker #2: Then driving that discipline to M&A beyond the core with high-performing teams. I think the thread that connects all of this is the shift from selling a product to serving industries.

Speaker #1: Health and safety remains the foundation of everything that we do, around it sits our priorities. But with so much going on across the group, as I say, health and safety is incredibly important for us as we're installing factories and upgrading facilities.

Speaker #2: Moving up the value chain, building capability, closer to where our customers are. So if we then start to go into the different regional performances, we go to the next slide, please, Lily.

Speaker #1: It is our number one priority. As I say, around that, our priorities are about getting closer to the customer, around driving innovation and sustainability leadership, with a much sharper industry and customer focus.

Speaker #2: Thank you. We're going to start with EMEA. EMEA delivered record revenue up almost 20% with non-footwear growth more than offsetting the anticipated footwear normalization that I mentioned earlier.

Speaker #1: And then driving that disciplined M&A beyond the core, with high-performing teams. I think the thread that connects all of this is the shift from selling a product to serving industries.

Speaker #2: Transport and smart technologies really continue to build on strong momentum that we've seen toward the end of last year, including a growing aerospace and a growing space business, which are both key drivers to the underlying growth.

Speaker #1: Moving up the value chain, building capability, closer to where our customers are. So, if we then start to go into the different regional performances—if we go to the next slide, please.

Speaker #2: That footwear normalization was as expected after that exceptional demand that started in and around Q4 2024 and continued the whole way through 2025. Revenue was 28.5 million in footwear, so it is not insignificant, but that was down 23%.

Speaker #1: Thank you. We're going to start with EMEA. EMEA delivered record revenue, up almost 20% with non-footwear growth, more than offsetting the anticipated footwear normalization that I mentioned earlier.

Speaker #1: Transport and smart technologies really continue to build on strong momentum that we've seen toward the end of last year, including a growing aerospace and auto industry, which are both key drivers to the underlying growth.

Speaker #2: The one thing I really want to stress is that the long-term opportunity in footwear is intact. And indeed, the shift of production to Vietnam is central to that long-term growth opportunity.

Speaker #1: That footwear normalization was as expected after that exceptional demand that started in and around Q4 2024 and continued the whole way through 2025. Revenue was 28.5 million in footwear, so it is not insignificant, but that was down 23%.

Speaker #2: Okay, company contributed just under 15 million in its first half, in its first full half, and that was ahead of plan and it was earnings creative, with some early cross-selling wins being registered in H1.

Speaker #2: Margin improved modestly to 22.8%, reflecting really good cost discipline. There was some partial offsets from mix and wage inflation, and indeed, higher input costs with some of the headwinds that we've seen from the conflict.

Speaker #1: The one thing I really want to stress is that the long-term opportunity in footwear is intact, and indeed the shift of production to Vietnam is central to that long-term growth opportunity.

Speaker #1: Okay, company contributed just under $15 million in its first half, in its first full half, and that was ahead of plan and it was earnings creative, with some early cross-selling wins being registered in H1.

Speaker #2: In the Middle East. But again, great discipline to see those margins nudging up. And our global innovation hub at Groin is progressing at pace.

Speaker #2: This is going to strengthen the research and development of the innovation that supports all of the group growth. If we go to the next slide, please, Lily.

Speaker #1: Margin improved modestly to 22.8%, reflecting really good cost discipline. There was some partial offsets from mix and wage inflation, and indeed higher input costs with some of the headwinds that we've seen from the conflict.

Speaker #2: I'm touching on North America. North America really was a standout with revenue up 29%, and the segment margin up a whopping 930 basis points to 17.6%.

Speaker #2: So growth was broad, and it was across both transport and smart technologies and construction. And other industrial. And new business and key account wins were really important here.

Speaker #1: In the Middle East. But again, great disciplined to see those margins nudging up. And our global innovation hub at Groin is progressing at pace.

Speaker #1: This is going to strengthen the research and development of the innovation that supports all of the group growth. If we go to the next slide, please, Lily.

Speaker #2: And on top of that, we had record manufacturing output growth at both Walton which is in Kentucky and Oklahoma. You'll see one of the pictures there is us celebrating the opening of the LP2 investments, with the Lieutenant Governor in Kentucky and we did that last month.

Speaker #1: I'm touching on North America. North America really was a standout, with revenue up 29%, and the segment margin up a whopping 930 basis points to 17.6%.

Speaker #1: So growth was broad, and it was across both transport and smart technologies and construction. And other industrial. And new business and key account wins were really important here.

Speaker #2: So that big investment that we went through in 2025 and started to commission properly in 2026 really taking traction and helping us significantly. Also in North America, we've got a fully reshaped commercial organization that in and of itself is driving stronger customer engagement, and it's really helping us to grow the commercial pipeline here.

Speaker #1: And on top of that, we had record manufacturing output growth at both Walton— which is in Kentucky— and Oklahoma. You'll see one of the pictures there is us celebrating the opening of the LP2 investments, with the lieutenant governor in Kentucky, and we did that last month.

Speaker #2: I would also say that the margin step-up reflects the new operational leadership that we have in North America. So fundamentally better performance out of the factory.

Speaker #1: So that big investment that we went through in 25 and started to commission properly in 26, really taking traction and helping us significantly. Also in North America, we've got a fully reshaped commercial organization that in of itself is driving stronger customer engagement, and it's really helping us to grow the commercial pipeline here.

Speaker #2: With higher volumes, better mix, stronger operational gearing. And that operational gearing we've set it for a very long time. Gearing in our factories is really important.

Speaker #2: Volumes really help the profitability. And that was helped by that second low-pressure vessel that, as I said, is now fully operational and we commissioned fully in the last couple of months.

Speaker #1: I would also say that the margin step-up reflects the new operational leadership that we have in North America. So fundamentally better performance out of the factory, with higher volumes, better mix, stronger operational gearing.

Speaker #2: So moving to the next slide, please. And Asia is and continues to be a small business today, but it is strategically very important for us.

Speaker #1: And that operational gearing we've set it for a very long time. Gearing in our factories is really important. Volumes really help the profitability. And that was helped by that second low-pressure vessel that, as I said, is now fully operational and we commissioned fully in the last couple of months.

Speaker #2: Even with the existing small business there, revenue more than doubled to 2.9 million. Driven principally by that construction and other industrial demand. Most of the legacy demand in Asia is around that construction and other industrial market coming from TFA.

Speaker #2: Mainly in China and indeed in India. But the bigger story is the platform that we're building in Asia. The bigger story is the Vietnam footwear facility.

Speaker #1: So moving to the next slide, please. And Asia is and continues to be a small business today, but it is strategically very important for us.

Speaker #2: And that is very much on track for first stage trial from October. So in a couple of months' time. Autoclaves are on site. I'll come into more detail on Vietnam later in the presentation, but you'll see a picture here.

Speaker #1: Even with the existing small business there, revenue more than doubled to 2.9 million. Driven principally by that construction and other industrial demand. Most of the legacy demand in Asia is around that construction and other industrial markets, coming from TFA.

Speaker #2: There'll be a bigger picture in later on the presentation. Autoclaves are on site. And indeed, the south Korea footwear innovation center is has to be opened.

Speaker #1: Mainly in China and indeed in India. But the bigger story is the platform that we're building in Asia. The bigger story is the Vietnam footwear facility.

Speaker #2: It is operational. It's already hosting customers. Deepening collaboration with those key customers and footwear partners. So still more installation to do there, and I'll touch on that as well later in the presentation, but still already incredible progress.

Speaker #1: And that is very much on track for first stage trial from October. So in a couple of months' time. Other players are on site.

Speaker #2: And then if we turn to the next slide, please, Lily. Touching on vertical performance, the profile of the business is more balanced. So what we've seen is transport and smart technologies growing by 76%.

Speaker #1: I'll come into more detail on Vietnam later in the presentation, but you'll see a picture here. There'll be a bigger picture in later on the presentation.

Speaker #1: Other players are on site. And indeed the South Korea footwear innovation center has been opened. It is operational. It's already hosting customers. Deepening collaboration with those key customers and footwear partners.

Speaker #2: Some of the largest vertical. As I said, supported by those sort of industries like aerospace, space, automotive. And then we have construction and other industrial, which grew 41%, the largest part of that growth coming from North America.

Speaker #1: So still more installation to do there, and I'll touch on that as well later in the presentation. But still, already incredible progress. And then if we turn to the next slide, please, Lily.

Speaker #2: Then a reasonable amount coming from that doubling of sales coming in Asia. Consumer and lifestyle was down 19%, and that is the full respect reflection of the normalization of that footwear demand after that 2025 exceptional run.

Speaker #1: Touching on vertical performance, the profile of the business is more balanced. So what we've seen is transport and smart technologies growing by 76%. Some of the largest vertical, as I said, supported by those sort of industries like aerospace, space, automotive.

Speaker #2: The long-term opportunity remains in Vietnam. And that is really, really important. We are not we are still a very confident we're not stepping away from that.

Speaker #1: And then we have construction and other industrial, which grew 41%, the largest part of that growth coming from North America. Then a reasonable amount coming from that doubling of sales coming in Asia.

Speaker #2: So that long-term opportunity still exists and will be realized as we commission and optimize the facility there. This rebalancing of the portfolio is exactly the strategy that we put in place, and it is exactly the strategy actually starting to deliver.

Speaker #1: And consumer and lifestyle was down 19%, and that is the full reflection of the normalization of that footwear demand after that 2025 exceptional run.

Speaker #2: This is what we designed. And this is what we are achieving, what we designed. So with that context, let me hand over to Nick.

Speaker #1: The long-term opportunity remains in Vietnam, and that is really, really important. We are not— we are still a very confident— we're not stepping away from that.

Speaker #2: He's going to take you through the financials in more detail. Over to you, Nick.

Speaker #3: Thank you, Ronan. And good afternoon, everyone. If we go to the next slide, 2026 has started well with a strong performance that demonstrates the growing breadth and resilience of our business.

Speaker #1: So that long-term opportunity still exists and will be realized as we commission and optimize the facility there. This rebalancing of the portfolio is exactly the strategy that we put in place, and it is exactly the strategy actually starting to deliver.

Speaker #3: Ronan has already covered revenue and adjusted profits. So in terms of a few other key items on this slide, adjusted profit before tax increased 34% to 15.3 million.

Speaker #1: This is what we designed, and this is what we are achieving, what we designed. So with that context, let me hand over to Nick, who's going to take you through the financials in more detail.

Speaker #3: Adjusting items, total 1.3 million. 0.9 million of this is non-cash amortization of acquired intangibles. Adjusted earnings per share increased 29% to 25.7 pence. And finally, we have proposed an interim dividend of 2.63 pence per day and increase of 5%.

Speaker #1: Over to you, Nick.

Speaker #2: Thank you, Ronan. And good afternoon, everyone. If we go to the next slide, 2026 has started well with a strong performance that demonstrates the growing breadth and resilience of our business.

Speaker #2: Ronan has already covered revenue and adjusted profits. So in terms of a few other key items on this slide, adjusted profit before tax increased 34% to 15.3 million.

Speaker #3: These headlines reflect the momentum in our business and the benefits of diversification alongside disciplined execution. So let me take you through the financial performance in more detail on the next slide.

Speaker #2: Adjusting items, total 1.3 million. 0.9 million of this is non-cash amortization of acquired intangibles. Adjusted earnings per share increased 29% to 25.7 pence, and finally, we have proposed an interim dividend of 2.63 pence per day and increase of 5%.

Speaker #3: Group revenue increased 23% to 95.2 million. But more significantly, gross profit grew 26% to 33.9 million, demonstrating strong cost control. This includes our rapid response to the conflict in the Middle East.

Speaker #2: These headlines reflect the momentum in our business and the benefits of diversification alongside disciplined execution. So let me take you through the financial performance in more detail on the next slide.

Speaker #3: The war in Iran has resulted in higher raw materials and transport costs, which we have passed on to customers through surcharges. We have also experienced some supply chain disruption, although none of our goods go through the Strait of Hormuz.

Speaker #2: Group revenue increased 23% to 95.2 million. But more significantly, gross profit grew 26% to 33.9 million, demonstrating strong cost control. This includes our rapid response to the conflict in the Middle East.

Speaker #3: Our customers top priority is typically security of supply. So we've safeguarded that by investing in raw materials where necessary. Gross margin improved 100 basis points to 35.6%.

Speaker #2: The war in Iran has resulted in higher raw materials and transport costs, which we have passed on to customers through surcharges. We have also experienced some supply chain disruption, although none of our goods go through the Strait of Hormuz.

Speaker #3: This benefited from the OKC contribution price increases and surcharges. Partly offset by raw higher raw materials utility and freight costs and wage inflation. SG&A expenses increased to 17.6 million, largely reflecting the inclusion of OKC as well as the build-out of teams in Asia and innovation.

Speaker #2: Our customers' top priority is typically security of supply, so we've safeguarded that by investing in raw materials where necessary. Gross margin improved 100 basis points to 35.6%.

Speaker #3: Looking at the breakdown by region, operating profit in Amir increased 22% to 16.8 million, with a margin of 22.8%. This was driven by OKC and a strong non-footwear performance.

Speaker #2: This benefited from the OKC contribution price increases and surcharges. Partly offset by higher raw materials utility and freight costs and wage inflation. SG&A expenses increased to 17.6 million, largely reflecting the inclusion of OKC as well as the build-out of teams in Asia and innovation.

Speaker #3: Partly offset by the normalization of footwear, which was down 23% following exceptional demand last year. In North America, operating profit almost tripled to 33 to 3.3 million, with margin improving to 17.6%.

Speaker #2: Looking at the breakdown by region, operating profit in Amir increased 22% to 16.8 million, with a margin of 22.8%. This was driven by OKC and a strong non-footwear performance.

Speaker #3: The second low pressure vessel is now fully operational. This gives us additional capacity to process higher volumes at marginal cost, driving strong operating leverage.

Speaker #2: Partly offset by the normalization of footwear, which was down 23% following exceptional demand last year. In North America, operating profit almost tripled to 33.3 million, with margin improving to 17.6%.

Speaker #3: Operating profit in Asia improved to 0.5 million from break-even last year. And this was driven by construction and other industrial demand in India and China.

Speaker #3: Asia also absorbed the first half startup costs incurred in Vietnam and Korea. And we expect Asia to become materially more important as Vietnam comes on stream.

Speaker #2: The second low-pressure vessel is now fully operational. This gives us additional capacity to process higher volumes at marginal cost, driving strong operating leverage.

Speaker #3: Looking at the right-hand side of the slide, net finance charges increased to 1.1 million, reflecting higher average borrowings following the OKC acquisition and our ongoing investment in Asia.

Speaker #2: Operating profit in Asia improved to 0.5 million from break-even last year, and this was driven by construction and other industrial demand in India and China.

Speaker #3: Adjusted profit before tax increased 34% to 15.3 million. The tax charge was 2.4 million and effective tax rate of 15.7%. This is up from 14%, reflecting lower tax deductions from patents and the addition of OKC, which is taxed at 25%.

Speaker #2: Asia also absorbed the first-half startup costs incurred in Vietnam and Korea, and we expect Asia to become materially more important as Vietnam comes on stream.

Speaker #2: Looking at the right-hand side of the slide, net finance charges increased to £1.1 million, reflecting higher average borrowings following the OKC acquisition and our ongoing investment in Asia.

Speaker #3: This resulted in adjusted profit after tax of 12.6 million, up 29%. Turning now to cash generation and our balance sheet on the next slide, cash generated from operations was 8.2 million, compared with 15.8 million last year.

Speaker #2: Adjusted profit before tax increased 34% to £15.3 million. The tax charge was £2.4 million, with an effective tax rate of 15.7%. This is up from 14%, reflecting lower tax deductions from patents and the addition of OKC, which is taxed at 25%.

Speaker #3: This is a year of strategic investment, which reflected in both working capital and capital expenditure. Net working capital increased by 14 million. Around half of this reflects higher inventory in the UK and US, both to maintain customer supply and to manage the transition of footwear from the UK to our new sites in Vietnam.

Speaker #2: This resulted in adjusted profit after tax of 12.6 million, up 29%. Turning now to cash generation and our balance sheet on the next slide, cash generated from operations was 8.2 million, compared with 15.8 million last year.

Speaker #3: Receivables also increased due to normal seasonality in OKC and higher activity levels in the US. We continue to focus on managing working capital across receivables, payables, and inventory.

Speaker #2: This is a year of strategic investment, which reflected in both working capital and capital expenditure. Net working capital increased by 14 million. Around half of this reflects higher inventory in the UK and US, both to maintain customer supply and to manage the transition of footwear from the UK to our new sites in Vietnam.

Speaker #3: Capex of 7.2 million mainly relates to investment in Asia and the innovation hub in the UK. Return on capital employed was 15.8%. Net debt increased to 39.1 million, from 31.5 million at the year end, and this reflects our strategic investment and the deferred consideration paid on OKC.

Speaker #2: Receivables also increased due to normal seasonality in Q2 and higher activity levels in the US. We continue to focus on managing working capital across receivables, payables, and inventory.

Speaker #3: Despite this, our leverage ratio remains below one times, well below our target of two times. Following our refinancing in January, we have a new 90 million multi-currency revolving credit facility.

Speaker #2: Capex of £7.2 million mainly relates to investment in Asia and the innovation hub in the UK. Return on capital employed was 15.8%. Net debt increased to £39.1 million, from £31.5 million at the year-end, and this reflects our strategic investment and the deferred consideration paid on OKC.

Speaker #3: Giving us liquidity headroom of 50 million. Turning now to the movement in net debt on the next slide, we started the year with net debt of 31.5 million.

Speaker #3: We generated 8.2 million of cash from operations. Invested 7.2 million in capex and paid 3 million of deferred consideration on the OKC acquisition. A further 3 million is expected in October, with the final 1.3 million in the first half of next year contingent on OKC delivering its targets.

Speaker #2: Despite this, our leverage ratio remains below one times, well below our target of two times. Following our refinancing in January, we have a new 90 million multi-currency revolving credit facility.

Speaker #2: Giving us liquidity headroom of 50 million. Turning now to the movement in net debt on the next slide, we started the year with net debt of 31.5 million.

Speaker #3: We paid net interest of 0.7 million, tax of 1.4 million, and returned 2.6 million to shareholders in dividends. Finally, there was a net outflow of 0.9 million from other items, bringing closing net debt to 39.1 million.

Speaker #2: We generated 8.2 million of cash from operations. Invested 7.2 million in capex and paid 3 million of deferred consideration on the OKC acquisition. A further 3 million is expected in October, with the final 1.3 million in the first half of next year contingent on OKC delivering its targets.

Speaker #3: So before I conclude, if we move to the next slide, let me remind you of our approach to capital allocation. We deploy capital to drive long-term sustainable growth and create value for our shareholders.

Speaker #2: We paid net interest of £0.7 million, tax of £1.4 million, and returned £2.6 million to shareholders in dividends. Finally, there was a net outflow of £0.9 million from other items, bringing closing net debt to £39.1 million.

Speaker #3: And this slide sets out our priorities. First, we are investing in geographic expansion and product innovation, particularly in Asia and the UK. We are also building a scalable platform to drive efficiency and improve return on capital employed.

Speaker #3: And this includes digitization and the deployment of AI. Second, we intend to maintain our progressive dividend policy. And third, we have a disciplined approach with high hurdles for acquisitions in line with our strategy.

Speaker #2: So before I conclude, if we move to the next slide, let me remind you of our approach to capital allocation. We deploy capital to drive long-term sustainable growth and create value for our shareholders, and this slide sets out our priorities.

Speaker #2: First, we are investing in geographic expansion and product innovation, particularly in Asia and the UK. We are also building a scalable platform to drive efficiency and improve return on capital employed, and this includes digitization and the deployment of AI.

Speaker #3: And fourth, we will return any surplus capital where this represents greater value for shareholders. So in summary, we've delivered strong revenue and profit growth despite the normalization in footwear, as we continue to diversify and grow the wider business.

Speaker #3: We are pleased that OKC is performing ahead of plan. We're making good progress with our strategic investments in Vietnam, South Korea, and the UK.

Speaker #2: Second, we intend to maintain our progressive dividend policy, and third, we have a disciplined approach with high hurdles for acquisitions in line with our strategy.

Speaker #3: And we've achieved this while maintaining a strong balance sheet with leverage below one times and significant liquidity headroom. Thank you very much, and I'll now hand back to Ronan.

Speaker #2: And fourth, we will return any surplus capital where this represents greater value for shareholders. So in summary, we've delivered strong revenue and profit growth despite the normalization in footwear, as we continue to diversify and grow the wider business.

Speaker #1: Great. Thank you. Thank you, Nick. We go to the next slide, please. Just going to spend a little bit of five minutes just talking through strategic progress.

Speaker #2: We are pleased that OKC is performing ahead of plan. We're making good progress with our strategic investments in Vietnam, South Korea, and the UK.

Speaker #1: So if we go to the next slide, I think the first round of progress is around diversification. Transport is part technologies. And OKC are actually driving growth at more than offsetting that footwear normalization.

Speaker #2: And we've achieved this while maintaining a strong balance sheet with leverage below one times and significant liquidity headroom. Thank you very much, and I'll now hand back to Ronan.

Speaker #1: As we mentioned earlier, OKC has contributed just under 15 million pounds in its first whole half year. Well-held plan. And it's an early proof point for disciplined value accretive M&A.

Speaker #1: Brilliant. Thank you. Thank you, Nick. We go to the next slide, please. Just going to spend a little bit of five minutes just talking through strategic progress.

Speaker #1: Our approved partner network continues to roll out across both North America and EMEA. And then the cost discipline and productivity gains together with much stronger profitability in North America are really supporting the margins.

Speaker #1: Let's go to the next slide. I think the first round of progress is around diversification. Transport is part technologies. And OKC are actually driving growth at more than offsetting that footwear normalization.

Speaker #1: While footwear margins are temporarily moderated. If we go to the next slide, and we'll delve into Vietnam, this is the second strand. Which is really all about getting closer to the customer.

Speaker #1: As we mentioned earlier, OKC has contributed just under 15 million pounds in its first full half year, well ahead of plan, and it's an early proof point for disciplined value accretive M&A.

Speaker #1: Vietnam gives us in-region scalable footwear optimized manufacturing with a much shorter lead time and a factory that is designed from the bottom up for sustainability.

Speaker #1: Our approved partner network continues to roll out across both North America and EMEA. The cost discipline and productivity gains, together with much stronger profitability in North America, are really supporting the margins.

Speaker #1: We've received all of the permitting required in the business. All of the construction licenses. We've started to receive machinery. You see some pressure vessels there in the picture.

Speaker #1: While footwear margins are temporarily moderated. If we go to the next slide, and we'll delve into Vietnam, this is the second strand. Which is really all about getting closer to the customer.

Speaker #1: Hiring is accelerating. And indeed, the first injection molding machine has been delivered on site and trials have been run through that. Lab equipment goes in this month.

Speaker #1: Vietnam—this gives us in-region, scalable footwear-optimized manufacturing with a much shorter lead time, and a factory that is designed from the bottom up for sustainability.

Speaker #1: And the first autoclaves that are already there are going to be fully commissioned in September with the first stage trials of product going through our customer, to begin in October.

Speaker #1: We've received all of the permitting required in the business, all of the construction licenses, we've started to receive machinery, you see some pressure vessels there in the picture.

Speaker #1: And that's really about proving out the efficacy of the whole manufacturing process there. So incredible progress in that facility. That's really risen out of the ground.

Speaker #1: Hiring is accelerating. And indeed, the first injection molding machine has been delivered on site and trials have been run through that lab equipment goes in this month.

Speaker #1: And there's substantial in nature now. So all on track, which is excellent progress in H1. If we go to the next slide, alongside Vietnam, then we have the South Korea footwear innovation center.

Speaker #1: And the first autoclaves that are already there are going to be fully commissioned in September, with the first stage trials of product going to our customer to begin in October.

Speaker #1: And actually, the two are completely intertwined. There is no point in doing one without the other. Vietnam needs the innovation center in South Korea to actually make it viable long term to feed it with the innovations that are going to help us get more platforms in future.

Speaker #1: And that's really about proving out the efficacy of the whole manufacturing process there. So incredible progress in that facility. That's really risen out of the ground and is substantial in nature now.

Speaker #1: So that innovation center accelerates a super critical full material development and shortens that footwear. Those footwear development cycles. And we work in this innovation center alongside the key partners.

Speaker #1: So all on track, which is excellent progress in H1. If we go to the next slide, alongside Vietnam, then we have the South Korea footwear innovation center.

Speaker #1: And actually, the two are completely intertwined. There is no point in doing one without the other. Vietnam needs the innovation center in South Korea to actually make it viable long term to feed it with the innovations that are going to help us get more platforms in future.

Speaker #1: And those are the key partners that are they're essentially the T1 shoe manufacturers. They're the people that work directly with our materials. So at that innovation center, the construction is complete.

Speaker #1: First injection molding machine is in situ. Almost all of the lab equipment has been installed there. And indeed, we have already been hosting our customers there and the large autoclaves with super high pressure ranges.

Speaker #1: So that innovation center accelerates a super critical full material development and shortens that footwear, those footwear development cycles. And we work in this innovation center alongside the key partners.

Speaker #1: They're coming in 2027. But that facility is already hosting people, hosting tier one footwear manufacturers who were helping work with new models and new designs for our customer.

Speaker #1: And those are the key partners that are they're essentially the T1 shoe manufacturers. They're the people that work directly with our materials. So at that innovation center, the construction is complete.

Speaker #1: First injection molding machine is in situ. Almost all of the lab equipment has been installed there. And indeed, we have already been hosting our customers there and the large autoclaves with super high pressure ranges.

Speaker #1: And then if we go to the next slide, I'm going to hand over to Nick, who's just going to talk you through the UK business.

Speaker #2: Thank you, Ronan. So turning to our UK business, we have continued to invest in automation and process improvement in Croydon. As footwear transfers to Vietnam, and we make greater use of our facility in Poland, our UK site will carry higher fixed cost base than the business needs.

Speaker #1: They're coming in 2027. But that facility is already hosting people, hosting tier one footwear manufacturers who were helping work with new models and new designs for our customers.

Speaker #2: So today, we have announced proposals to optimize our UK business across all functions. This means that Croydon will focus on materials innovation, and non-footwear applications, for the other six key industries.

Speaker #1: And then if we go to the next slide, I'm going to hand over to Nick, who's just going to talk you through the UK business.

Speaker #3: Thank you, Ronan. So turning to our UK business, we have continued to invest in automation and process improvement in Croydon. As footwear transfers to Vietnam, and we make greater use of our facility in Poland, our UK site will carry higher fixed cost base than the business needs.

Speaker #2: And I want to be clear that we remain committed to our UK manufacturing base in Croydon. Croydon is also home to our global innovation hub, which is progressing at pace.

Speaker #2: The board has approved starting a collective consultation process, which is expected to affect more than 100 roles. These are proposals at this time. No final decisions have been taken, and no decisions on individual roles will be made until the consultation has concluded.

Speaker #3: So today, we have announced proposals to optimize our UK business across all functions. This means that Croydon will focus on materials innovation, and non-footwear applications, for the other six key industries.

Speaker #3: And I want to be clear that we remain committed to our UK manufacturing base in Croydon. Croydon is also home to our global innovation hub, which is progressing at pace.

Speaker #2: And our priority is to consult openly, and fairly, and to support our colleagues throughout the process. Subject to that consultation, we expect the changes to deliver annualized savings of around 4 million pounds, with payback of under a year.

Speaker #3: The board has approved starting a collective consultation process, which is expected to affect more than 100 roles. These are proposals at this time. No final decisions have been taken, and no decisions on individual roles will be made until the consultation has concluded.

Speaker #2: The associated one-off costs, including the redundancy and impairment of plant that's no longer required, will be treated as adjusting items. These do not change our adjusted expectations for the full year.

Speaker #3: And our priority is to consult openly, and fairly, and to support our colleagues throughout the process. Subject to that consultation, we expect the changes to deliver annualized savings of around 4 million pounds, with payback of under a year.

Speaker #2: I will now hand back to Ronan, who will cover our investment in AI and our outlook. Over to you, Ronan.

Speaker #1: Brilliant. Thank you, Nick. And as Nick alluded, the final strand of our investment strategy is around AI, which is now starting to drive productivity innovation and growth, rather than sitting on the side of the business.

Speaker #3: The associated one-off costs, including the redundancy and impairment of plant that's no longer required, will be treated as adjusting items. These do not change our adjusted expectations for the full year.

Speaker #1: Our customer tools powered by the ZOTEFOAMS PLC Q2 engine are already generating leads and giving customers high accuracy material recommendations. This is available on our website today.

Speaker #3: I will now hand back to Ronan, who will cover our investment in AI and our outlook. Over to you, Ronan.

Speaker #1: And then we have ZOTE Labs, which is in its beta version. And I'll dig into a bit more detail in a moment. But this is accelerating material innovation through AI-driven recipe design, feasibility scoring.

Speaker #1: Brilliant. Thank you, Nick. And as Nick alluded, the final strand of our investment strategy is around AI, which is now starting to drive productivity, innovation, and growth, rather than sitting on the side of the business.

Speaker #1: And this is drawing on more than 2.1 million technical files and more than 6 million academic and patent papers. AI is also active in operational planning now in the business.

Speaker #1: Our customer tools, powered by the ZOTE IQ engine, are already generating leads and giving customers high-accuracy material recommendations. This is available on our website today.

Speaker #1: It's improving forecasting. It's improving production efficiency. And all of this is done with really robust government framework with our Blackwell protection, ensuring it is secure and responsible.

Speaker #1: And then we have ZOTE Labs, which is in its beta version. And I'll dig into a bit more detail in a moment. But this is accelerating material innovation through AI-driven recipe design, feasibility scoring.

Speaker #1: And to bring this to life, I'm going to try and bring it to life with a very short video clip with ZOTE Labs in action.

Speaker #1: And this is drawing on more than 2.1 million technical files and more than 6 million academic and patent papers. AI is also active in operational planning now in the business.

Speaker #1: And if we go to the video. So ZOTE Labs, we've developed it's a proprietary AI platform that brings together over 100 years of technical knowledge, more than 2 million internal files, millions of scientific publications, into a single connected system.

Speaker #1: It's improving forecasting. It's improving production efficiency. And all of this is done with a really robust government framework, with our Blackwell protection, ensuring it is secure and responsible.

Speaker #1: We've got FORGE, this health engineers explore new formulations and concepts. And it accelerates early stage development while capturing really valuable technical expertise and reasoning.

Speaker #1: And to bring this to life, I'm going to try and bring it to life with a very short video clip with ZOTE Labs in action.

Speaker #1: The great thing is that with a single click, we can take data from FORGE, and we can push that into what we call BENCH, which is carrying forward that design intent and assumptions and rationale.

Speaker #1: And if we go to the video. So ZOTE Labs, we've developed it's a proprietary over 100 years of technical knowledge more than 2 million internal files, millions of scientific publications, into a single connected system.

Speaker #1: And this allows specialist agents to build on each other's work. We've got an application selector. And this application selector really helps them identify opportunities and support customer conversations faster with greater confidence.

Speaker #1: We've got forged that helps engineers explore new formulations and concepts. And it accelerates early stage development while capturing really valuable technical expertise and reasoning.

Speaker #1: We also have then Academy. And this gives our team the ability to explore those millions of scientific publications in a single environment, helps us discover knowledge and insights at scale that honestly, otherwise, would have been impossible for the business.

Speaker #1: The great thing is that with a single click, we can take data from forge and we can push that into what we call bench, which is carrying forward that design intent and assumptions and rationale.

Speaker #1: And this allows specialist agents to build on each other's work. And we've got an application selector. And this application selector really helps team identify opportunities and support customer conversations faster with greater confidence.

Speaker #1: And then finally, an area of great impact for us is Gas Lab and Permeate. So our most expensive assets are our gasing equipment. And this is using AI modeling to help reduce unnecessary trials and accelerate this development.

Speaker #1: We also have then Academy. And this gives our team the ability to explore those millions of scientific publications in a single environment, helps us discover knowledge and insights at scale that honestly, otherwise, would have been impossible for the business.

Speaker #1: Permeate enables the platform to continuously grow by bringing new knowledge into the system under expert oversight. Together, these capabilities create a platform that protects institutional knowledge, accelerates innovation, and actually improves our business with every single interaction.

Speaker #1: And then finally, an area of great impact for us is Gas Lab and Permeate. So our most expensive assets are our gassing equipment. And this is using AI modeling to help reduce unnecessary trials and accelerate this development.

Speaker #1: And that ZOTE Labs, it's built today. It's delivering value now. And it's creating a more competitive advantage for the future right now. So moving to Outlook.

Speaker #1: Permeate enables the platform to continuously grow by bringing new knowledge into the system under expert oversight. Together, these capabilities create a platform that protects institutional knowledge, accelerates innovation, and actually improves our business with every single interaction.

Speaker #1: Now we go to the next slide, please, Lily. So the first half really underpins our confidence in the full year and indeed in our medium-term ambitions.

Speaker #1: Our full year expectations are unchanged. And the continued momentum supports the delivery in line with market expectations. The business's broader and more balanced with non-footwear, OK company, and Asia offsetting the footwear normalization.

Speaker #1: And that ZOTE Labs—it's built today, it's delivering value now, and it's creating a more competitive advantage for the future right now. So, moving to Outlook.

Speaker #1: And the margin progression is supported by that disciplined execution and a materially stronger North American profitability. The strategic investments in Vietnam, South Korea, and indeed the UK global innovation hub are on track.

Speaker #1: Can we go to the next slide, please, Lily? So the first half really underpins our confidence in the full year. And indeed, in our medium-term ambitions.

Speaker #1: Our full-year expectations are unchanged. And the continued momentum supports the delivery in line with market expectations. The business's broader and more balanced with non-footwear, OK company, and Asia offsetting the footwear normalization.

Speaker #1: And as you've heard from Nick today, we have set out proposals for these articles just proposals to optimize our UK business alongside the build-up of Vietnam and the greater use of Poland and the continued investment in innovation automation and process improvement.

Speaker #1: And the margin progression is supported by that disciplined execution and a materially stronger North American profitability. The strategic investments in Vietnam, South Korea, and indeed the UK global innovation hub are on track.

Speaker #1: It's the right steps to keep the UK footprint fit for the long term. This is about continued investment in our UK manufacturing business. This is getting the right fit footprint for the future.

Speaker #1: And as you've heard from Nick today, we have set our proposals—these are still just proposals—to optimize our UK business, alongside the build-up of Vietnam and the greater use of Poland, and the continued investment in innovation, automation, and process improvement.

Speaker #1: On footwear, I want to be really straight with you. As the production transfers to Vietnam, and as we move from foam sheets to 3D preforms, we expect footwear revenue to be lower through the second half of 2026 and indeed into 2027.

Speaker #1: It's the right step to keep the UK footprint fit for the long term. This is about continued investment in our UK manufacturing business. This is about getting the right fit footprint for the future.

Speaker #1: Before recovering from 2028. This is not unexpected. This is a planned transition. It is not a change in the long-term opportunity. We remain very confident in the medium term ambition of revenue above $230 million and operating profit above $40 million by the full year 2029.

Speaker #1: On footwear, I want to be really straight with you. As the production transfers to Vietnam, and as we move from foam sheets to 3D preforms, we expect footwear revenue to be lower to the second half of 2026 and indeed into 2027.

Speaker #1: So while the timing of profit progression will reflect that transition we are increasingly confident in the materially stronger value creation from 2028 onwards. So that's the presentation with that.

Speaker #1: Before recovering from 2028. This is not unexpected. This is a planned transition. It is not a change in the long-term opportunity. We remain very confident in the medium term ambition of revenue above 230 million and operating profit above 40 million by the full year 2029.

Speaker #1: Nick and I will move over to take your questions and I see that we've got quite a few in. So let me just have a quick scan through.

Speaker #1: And we'll just go top to bottom. First come, first served. So first question is, will pre-tax profit be flat in 2027 compared to 2026 due to lower footwear sales and margins balanced by growth and other areas and by cost cutting in the UK?

Speaker #1: So while the timing of profit progression will reflect that transition we are increasingly confident in the materially stronger value creation from 2028 onwards. So that's the presentation.

Speaker #1: With that, Nick and I will move over to take your questions and I see that we've got quite a few in. So let me just have a quick scan through.

Speaker #1: Nick?

Speaker #2: Yes. Thank you, Ronan. So we are at the very start of our planning process for 2027 in terms of going through our three-year five-year plan and moving into our budget process.

Speaker #1: And we'll just go top to bottom. First come, first served. So first question is, will pre-tax profit be flat in 2027 compared to 2026 due to lower footwear sales and margins balanced by growth in other areas and by cost cutting in the UK?

Speaker #2: And therefore, we have not given formal guidance for 2027. That said, we are very cognizant of the 2027 being a year of transition for the reasons that Ronan has highlighted.

Speaker #2: But I would hope there would be some modest progress in terms of profitability between 2027 and 2026. But we're in the process of finalizing those plans.

Speaker #1: Nick, one second.

Speaker #2: Yeah. Thank you, Ronan. So we are at the very start of our planning process for 2027 in terms of going through our three-year five-year plan and moving into our budget process.

Speaker #2: As Ronan said, it is a year of transition. And that will be reflected in those plans.

Speaker #1: Perfect. Thanks, Nick. Next question is, will the expansion in Vietnam move the revenue concentration back to footwear? Or do you think the foundations away from footwear will grow equally?

Speaker #2: And therefore, we have not given formal guidance for 2027. That said, we are very cognizant of the 2027 being a year of transition for the reasons that Ronan has highlighted.

Speaker #1: We want to grow both. That's the bottom line here. Footwear, there's an amazing opportunity. But the strategy is now set that development of the business in Vietnam, I think, is key.

Speaker #2: But I would hope there would be some modest progress in terms of profitability between 2027 and 2026. But we're in the process of finalizing those plans.

Speaker #1: I can see that business growing materially. But we've also got great avenues for growth in the rest of the business. So we want to grow we want to grow both.

Speaker #2: As Ronan said, it is a year of transition. And that will be reflected in those plans.

Speaker #1: Perfect. Thanks, Nick. Next question is, will the expansion in Vietnam move the revenue concentration back to footwear? Or do you think the foundations away from footwear will grow equally?

Speaker #1: And the success of having a more balanced business I think that that's the way that we would like to be. But that doesn't mean that we hold back footwear.

Speaker #1: We press on footwear. And we press on everywhere else at the same time. What is the current spare capacity in the USA? And do you line of sight of filling that capacity?

Speaker #1: We want to grow both. That's the bottom line here. Footwear, there's an amazing opportunity. But the strategy is now set that development of the business in Vietnam is key.

Speaker #1: The capacity is very much dependent on Nix. I think that what we have consistently said is that we believe that we could double the revenues in the US for taking it very close to $100 million without having to invest significantly.

Speaker #1: I can see that business growing materially. But we've also got great avenues for growth in the rest of the business. So we want to grow we want to grow both.

Speaker #1: And the success of having a more balanced business I think that that's the way that we would like to be. But that doesn't mean that we hold back footwear.

Speaker #1: We think the big pieces of investment have already been made there. So the next question is your 2029 forecast for sales of 230 million operating profit of 40.

Speaker #1: We press on footwear. And we press on everywhere else at the same time. What is the current spare capacity in the USA? And do you line of sight of filling that capacity?

Speaker #1: Does this forecast include M&A? So no, it doesn't. M&A would layer on top of that. And why are you confident of 17.4% operating margin?

Speaker #1: The capacity is very much dependent on Nix. I think that what we have consistently said is that we believe that we could double the revenues in the US for taking it very close to 100 million dollars without having to invest significantly.

Speaker #1: Well, I think that we can a lot about our business is about getting operational gearing. I think we're right sizing a facilities. And when we optimize, we've got experience of those sort of margins.

Speaker #1: We think the big pieces of investment have already been made there. So the next question is your 2029 forecast for sales of 230 million, operating profit of 40.

Speaker #1: And we're confident that we can maintain those. Where do you expect footwear operating margins to reach in 2028 compared to, say, H1 2026? I think that's getting to a level of granularity we prefer not to get to.

Speaker #1: Does this forecast include M&A? So no, it doesn't. M&A would layer on top of that. And why are you confident of 17.4% operating margin?

Speaker #1: Simply because it can be identified down to one single customer. I think that we can have very healthy margins and give great value at the same time to our key customer there.

Speaker #1: Well, I think that we can a lot about our business is about getting operational gearing. I think we're right sizing a facilities. And when we optimize, we've got experience of those sort of margins.

Speaker #1: So I am confident that that move to Vietnam will be very successful for that business. How do non-footwear operating margins normally compare to footwear operating margins?

Speaker #1: And we're confident that we can maintain those. Where do you expect footwear operating margins to reach in 2028 compared to, say, H1 2026? I think that's getting to a level of granularity we prefer not to get to.

Speaker #1: Nick, do you want to answer that?

Speaker #2: Yeah. So across the range of products outside of footwear, we have a wide range of margins. It's the truth. So some are higher margins than footwear.

Speaker #1: Simply because it can be identified down to one single customer. I think that we can have very healthy margins and give great value at the same time to our key customer there.

Speaker #2: And some of those product ranges are lower. So it really is a range you can see that the non-footwear growth in the first half we have also as well as growing that improve our margins.

Speaker #1: So I am confident that that move to Vietnam will be very successful for that business. How do non-footwear operating margins normally compare to footwear operating margins?

Speaker #2: So overall, it is very much as Ronan has highlighted before, mixed dependent. But we are confident that there's good opportunities to grow the non-footwear business and to grow that and have good margins in non-footwear as well.

Speaker #1: Nick, do you want to answer that?

Speaker #2: Yeah. So across the range of products outside of footwear, we have a wide range of margins. It's the truth. So some are higher margins than footwear.

Speaker #2: And some of those product ranges are lower. So it really is a range. And you can see that the non-footwear growth in the first half we have also as well as growing that non-footwear revenue we've managed to improve our margins.

Speaker #1: Great. Next question is, when do you expect the footwear operations to run so smoothly? So I assume that means that footwear operations in Vietnam by June 2027.

Speaker #1: I think that we've made incredible progress at commissioning machines, first testing in October, real sort of production will start towards the end of Q1, middle of Q2 next year.

Speaker #2: So overall, it is very much as Ronan has highlighted before, mixed dependent. But we are confident that there's good opportunities to grow the non-footwear business and to grow that and have good margins in non-footwear as well.

Speaker #1: That's dependent on the programs that we focus in there. It normally takes a factory, a good amount of time to operate and optimize. So I think that will be up and running.

Speaker #1: Great. Next question is, when do you expect the footwear operations to run so smoothly? So I assume that means that footwear operations in Vietnam by June 2027.

Speaker #1: With initial production in June 2027, it's going to take through the whole of 2027 to optimize. In fact, I think that we will be optimizing that factory forever as most factories do.

Speaker #1: I think that we've made incredible progress at commissioning machines, first testing in October, real sort of production will start towards the end of Q1, middle of Q2 next year.

Speaker #1: I think the main learning is going to take place the whole way through 2027. And that's why we very much prescribe footwear in 2027 as a year of transition.

Speaker #1: That's dependent on the programs that we focus in there. It normally takes a factory, a good amount of time to operate and optimize. So I think that will be up and running with initial production in June 27.

Speaker #1: The first battleship that you make is always a little bit more expensive. The second one's better. The third one's better and better. And you optimize.

Speaker #1: And it's no different if you're making midsoles or ships. So we'll use all of 2027 to optimize. I think that by the time we get to the end of 2027, we'll be in a good place.

Speaker #1: It's going to take through the whole of 2027 to optimize. In fact, I think that we will be optimizing that factory forever, as most factories do.

Speaker #1: But I would imagine optimization will be it will be a case of continuous improvement forever. OK. Having customers in the Korean development facility is this outside of the exclusive deal?

Speaker #1: I think the main learning is going to take place the whole way through 2027. And that's why we very much prescribe footwear in 2027 as a year of transition.

Speaker #1: No, it's not. It is when we talk about customers, our direct customers in the footwear industry are the tier one producers for Nike with whom we have the exclusive contract.

Speaker #1: The first battleship that you make is always a little bit more expensive. The second one's better. The third one's better and better. And you optimize.

Speaker #1: And it's no different if you're making midsoles or ships. So we'll use all of 2027 to optimize I think that by the time we get to the end of 27, we'll be in a good place.

Speaker #1: They are very, very important in the supply chain. They are very important as development partners. Nike don't make any shoes. They make all the shoes.

Speaker #1: But I would imagine optimization will be a case of continuous improvement forever. Okay. Having customers in the Korean development facility—is this outside of the exclusive deal?

Speaker #1: So actually, this is coming together really, really close as a component supplier with all of those tier one and that's what we use a development center to do.

Speaker #1: No, it's not. When we talk about customers, our direct customers in the footwear industry are the tier one producers for Nike, with whom we have the exclusive contract.

Speaker #1: Because we work together to design now to design and help with the design of new models and bring new fantastic foams onto those shoes.

Speaker #1: So that is what we focus on. OK. The like for like sales of 6%, how much of this growth is volume? Do you want to describe the big volume movements there, Nick?

Speaker #1: They are very, very important in the supply chain. They are very important as development partners. Nike don't make any shoes. They make all the shoes.

Speaker #1: Do you want to describe that?

Speaker #1: So actually, this is coming together really, really close as a component supplier with all of those tier one and that's what we use a development center to do.

Speaker #2: Yeah. So it's very as we've talked, it's all about mix. So volumes in both our mere factory in the UK and Poland and the US this first half have been very, very high.

Speaker #1: Because we work together to design now to design and help with the design of new models and bring new fantastic foams onto those shoes.

Speaker #2: So we've been producing at record volume. So in terms of replacing some of that footwear with non-footwear revenue, some of that is at lower margin and therefore higher volumes.

Speaker #1: So that is what we focus on. Okay. The like for like sales of 6%, how much of this growth is volume? Do you want to describe the big volume movements there, Nick?

Speaker #2: So there's quite a lot of increased volume that's gone through the business in the first half. But we've also benefited from price and also from the surcharges that I've mentioned as well.

Speaker #1: Do you want to describe that?

Speaker #2: Yeah. So it's very as we've talked, it's all about mix. So volumes in both our mere factory in the UK and Poland and the US this first half have been very, very high.

Speaker #1: Excellent. OK. Next question is, can you see the Nike group recovering in 2027 and why? So I wouldn't really comment on Nike itself. I don't think that would be appropriate.

Speaker #2: So we've been producing at record volume. So in terms of replacing some of that footwear with non-footwear revenue, some of that is at lower margin and therefore higher volumes.

Speaker #1: What we see is that the running sector, the running shoe sector within Nike remains very strong and competitive. We believe in winning with the winners.

Speaker #2: So there's quite a lot of increased volume that's gone through the business in the first half. But we've also benefited from price and also from the surcharges that I've mentioned as well.

Speaker #1: And we see Nike as a winner. And as the single largest footwear brand in the world, I think that we're very happy that they're the people that we're working with at the moment.

Speaker #1: Excellent. Okay. Next question is, can you see the Nike group recovering in 2027 and why? So I wouldn't really comment on Nike itself. I don't think that would be appropriate.

Speaker #1: So OK. Next question specific to the Croydon facility. There has been significant investment in Croydon during the last 10 years. Does the repurposing mean that the auto claims will be redundant?

Speaker #1: What we see is that the running sector, the running shoe sector within Nike remains very strong and competitive. We believe in winning with the winners.

Speaker #1: If so, can they be repurposed or sold? Or will the cost be written off? I think the first thing that just to really stress is that the discussions around Croydon are only proposals should those proposals go ahead we still think that the Croydon facility is a fantastic facility.

Speaker #1: And we see Nike as a winner. And as the single largest footwear brand in the world, I think that we're very happy that they're the people that we're working with at the moment.

Speaker #1: So okay. Next question, specific to the Korean facility, there has been significant investment in Croydon during the last 10 years. Does the repurposing mean that the auto trades will be redundant?

Speaker #1: We're just focusing on making it fit for the future. We would see that we would continue to use much of the equipment there. And anything that we didn't, I would have thought if the proposal went ahead that we could find other ways to use it.

Speaker #1: If so, can they be repurposed or sold, or will the cost be written off? I think the first thing to really stress is that the discussions around Croydon are only proposals. Should those proposals go ahead, we still think that the Croydon facility is a fantastic facility.

Speaker #1: So as I said, these are only proposals at the moment. But Croydon, as a site and the next question is, what is your plan for the site in Croydon?

Speaker #1: Well, first, we've got a wonderful workforce there. We're consulting on them on these proposals. And we will treat them with great dignity and respect as we go through that.

Speaker #1: We're just focusing on making it fit for the future. We would see that we would continue to use much of the equipment there. And anything that we didn't, I would have thought if the proposal went ahead that we could find other ways to use it.

Speaker #1: We see a long-term future for that site. Today, it exports a huge amount of its material. Tomorrow, it will be innovating and making different products I would suggest.

Speaker #1: So as I said, these are only proposals at the moment. But Croydon as a site in the next question is, what is your plan for the site in Croydon?

Speaker #1: Some of it created in the innovation hub in Croydon and servicing its customers closer to that base. I still see an ongoing role for the Croydon site.

Speaker #1: Well, first, we've got a wonderful workforce there. We're consulting on them on these proposals. And we will treat them with great dignity and respect as we go through that.

Speaker #1: We've got, as I say, great people, great equipment. What we are proposing to do is to work with our colleagues to make it even fitter, to make sure we've been on Croydon for over 90 years.

Speaker #1: We see a long-term future for that site. Today, it exports a huge amount of its material. Tomorrow, it will be innovating and making different products.

Speaker #1: We as a business are over 100 years old. We see still a long and we want to have a long future for the Croydon facility.

Speaker #1: We wouldn't be putting our innovation center on that site if we didn't have faith in the future. Great to see the updates on Vietnam and Korea.

Speaker #1: I would suggest some of it be created in the Innovation Hub in Croydon and service its customers closer to that base. I still see an ongoing role for the Croydon site.

Speaker #1: Can I suggest you formally share more updates on the positive progress incrementally as it occurs rather than just in results? Fair point. We'll think about that.

Speaker #1: We've got, as I say, great people, great equipment. What we are proposing to do is to work with our colleagues to make it even fitter, to make sure we've been on Croydon for over 90 years.

Speaker #1: We do concentrate all of our updates really with our customer. So we'd think about how we might do that. It might be commercially sensitive to do that beyond this.

Speaker #1: We as a business are over 100 years old. We see still a long and we want to have a long future for the Croydon facility.

Speaker #1: We wouldn't be putting our innovation center on that site if we didn't have faith in the future. Great to see the updates on Vietnam and Korea.

Speaker #1: But the point taken, let me take it away and think about that. We can certainly post more stuff on the likes of LinkedIn as we're there to show as machines come on board.

Speaker #1: Can I suggest you formally share more updates on the positive progress incrementally as it occurs rather than just in results? It's a fair point.

Speaker #1: So maybe that will be the format. Nick, this is a perfect one for you. Just by reading the first two words, it says net debt.

Speaker #1: So net debt has continued to rise despite the improving profitability. Largely due to higher working capital. Can you quantify how much of this is increase?

Speaker #1: We'll think about that. We do concentrate all of our updates really with our customer, so we would think about how we might do that. It might be commercially sensitive to do that beyond this.

Speaker #1: How much of the increase is temporary and linked to the Vietnam transition? And when investors should expect working capital to unwind and net debt to begin falling?

Speaker #1: But the point taken, let me take it away and think about that. Would can certainly post more stuff on the likes of LinkedIn as we're there to show as machines come on board.

Speaker #1: Over to you.

Speaker #2: Yeah. So it's a great question. So in terms of the working capital movement, as I've said in the presentation, about half of that relates to inventory.

Speaker #1: So maybe that will be the format. Nick, this is a perfect one for you. Just by reading the first two words, it says net debt.

Speaker #1: So net debt has continued to rise despite the improving profitability. Largely due to higher working capital. Can you quantify how much of this is increase?

Speaker #2: And of that, it's just slightly over half relates to footwear. The other half of that is really about making it's about a combination of the increased activity levels in North America and making sure that we can secure we secure supply for our customers.

Speaker #1: How much of the increase is temporary and linked to the Vietnam transition? And when investors should expect working capital to unwind and net debt to begin falling?

Speaker #2: So that is our customer's top priority that they can see security of supply in the current situation. I would expect that we will be carrying higher levels of working capital as we manage that transition from the UK to our new facility in Vietnam, probably throughout the rest of this year and through 2027.

Speaker #1: Over to you.

Speaker #2: Yeah. So it's a great question. So in terms of the working capital movement, as I've said in the presentation, about half of that relates to inventory.

Speaker #2: And of that, it's just slightly over half relates to footwear. The other half of that is really about making it's about a combination of the increased activity levels in North America and making sure that we can secure we secure supply for our customers.

Speaker #2: It's absolutely important that we make that transition a success and a key to that success is making sure that we at all stages can continue to meet the needs of our customer with product.

Speaker #2: So that is our customer's top priority that they can see security of supply in the current situation. I would expect that we will be carrying higher levels of working capital as we manage that transition from the UK to our new facility in Vietnam, probably throughout the rest of this year and through 2027.

Speaker #2: And that's what we're committed to doing to support them through that transition. So I expect that working capital will be high throughout 2027 as we manage that transition.

Speaker #2: And then we'd expect it to normalize.

Speaker #1: Perfect. Last question is, has the partnership with Sohang going? I think that it's been tremendous. I genuinely don't think that we would be where we are without the partnership.

Speaker #2: It's absolutely important that we make that transition a success and a key to that success is making sure that we at all stages can continue to meet the needs of our customer with products.

Speaker #1: They've got in-region in-country experience, Korea, Vietnam. They know the footwear industry. We have rented the facility off their sister company. They have allowed us to employ people from their business that are experts in injection molding, which is we have been an extrusion business.

Speaker #2: And that's what we're committed to doing to support them through that transition. So I expect that working capital will be high throughout 2027 as we manage that transition.

Speaker #2: And then we'd expect it to normalize.

Speaker #1: They've brought that injection molding expertise but we're expertise. Have this navigate everything in and around establishing a business there. So they've been tremendous. Wonderful partners.

Speaker #1: Perfect. Last question is, how's the partnership with Soham going? I think that it's been tremendous. I genuinely don't think that we would be where we are without the partnership.

Speaker #1: They've got in-region in-country. Experienced Korea and they know the footwear industry. We have rented the facility off their sister company. They have allowed us to employ people from their business that are experts in injection molding, which is we have been an extrusion business.

Speaker #1: Great people. Fantastic to work with. And I think they've been really, really helped us with establishing the business to where we are at the moment.

Speaker #1: So OK. Actually, we've wow. We've managed to get through all the questions. Lily?

Speaker #3: That's great. Thank you for taking the time to address all those questions that came in from investors. And of course, the company can review all questions submitted today and will publish those responses on the InvestorMeet company platform.

Speaker #1: They've brought that injection molding expertise footwear expertise. Have this navigate everything in and around establishing a business there. So they've been tremendous. Wonderful partners.

Speaker #3: Just before redirecting investors to provide you with their feedback, which knows particularly important to the company, Ronan, could I please just ask you for a few closing comments?

Speaker #1: Great people. Fantastic to work with. And I think they've been really, really helped us with establishing the business to where we are at the moment.

Speaker #1: Thank you, Lily. I think there's probably five things it's quite a lot to leave you with. But five things I'd like you to sort of take away today.

Speaker #1: So, okay. Actually, wow, we've managed to get through all the questions. Lily?

Speaker #1: I think that first of all is that the H1 is a proof point. It's not a promise. So H1 is hard evidence that the expanding beyond the core strategy is working profits up, margins up, growth in other sectors.

Speaker #3: So that's great. Thank you for taking the time to address all those questions that came in from investors. And, of course, the company can review all questions submitted today.

Speaker #3: And we'll publish those responses on the investor meet company platform. Just before redirecting investors to provide you with their feedback, which is particularly important to the company, Ronan, could I please just ask you for a few closing comments?

Speaker #1: That's really important. The broader and more balanced business than we were a year ago. I think the second thing is that footwear is normalizing to plan.

Speaker #1: Thank you, Lily. I think there's probably five things. It's quite a lot to leave you with. But five things I'd like you to sort of take away today.

Speaker #1: And the future of the footwear platform is being built. OK? Near to the customer, shorter supply chain, lower cost. There is a short-term drag, but we will be structurally stronger in this market from 2028 onwards.

Speaker #1: I think that first of all is that the H1 is a proof point. It's not a promise. So H1 is hard evidence that the expanding beyond the core strategy is working profits up, margins up, growth in other sectors.

Speaker #1: Third thing I would say is that discipline M&A is paying. So we had our first M&A H1 has shown that we can do that in OKC has been an earnings accretive acquisition ahead of plan.

Speaker #1: That's really important. The broader and more balanced business than we were a year ago. I think the second thing is that footwear is normalizing the plan and the future of the footwear platform is being built.

Speaker #1: Fourth is that we've got a very strong balance sheet. And we are self-funding. The transition. So as we transform and we work on our transition, leverage remains below one.

Speaker #1: Okay? Near to the customer, shorter supply chain, lower cost. There is a short-term drag, but we will be structurally stronger in this market from 2028 onwards.

Speaker #1: We've got a $50 million headroom. Dividend is up. We can fund Vietnam. We can fund the innovation hub. And we can fund the whole OKC purchase.

Speaker #1: Third thing I would say is that discipline M&A is paying. So we had our first M&A H1 has shown that we can do that in OKC has been an earnings accretive acquisition ahead of plan.

Speaker #1: And then finally, and the fifth point is these are we've got a fantastic business with built by the colleagues that are all around us.

Speaker #1: Croydon has been at the core of the business. It will continue to be an incredibly important part of this business going forward. What we have proposed is about the fitness for the long term.

Speaker #1: Fourth is that we've got a very strong balance sheet. And we are self-funding. The transition. So as we transform and we work on our transition, leverage remains below one.

Speaker #1: It is not a retreat from the UK. Far from it. We are repositioning the site around innovation. We are repositioning it around different applications while committing ourselves to UK manufacturing.

Speaker #1: We've got a £50 million headroom. Dividend is up. We can fund Vietnam. We can fund the Innovation Hub. And we can fund the whole OKC purchase.

Speaker #1: We are entering into a consultation process. These are just proposals. But this is not a retreat from the UK. And that's it. So I'd like to thank everyone for joining us this afternoon.

Speaker #1: And then finally, and the fifth point is these are we've got a fantastic business that's built by the colleagues that are all around us.

Speaker #1: Croydon has been at the core of the business. It will continue to be an incredibly important part of this business going forward. What we have proposed is about the fitness for the long term.

Speaker #1: Thank you for all your questions. And thank you to all our shareholders for all of your support. Thank you very much.

Speaker #1: It is not a retreat from the UK—far from it. We are repositioning the site around innovation. We are repositioning it around different applications, while committing ourselves to UK manufacturing.

Speaker #3: All right. And Nick, thank you for updating investors today. So please ask investors not to close this session and to now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations.

Speaker #1: We are entering into a consultation process. These are just proposals, but this is not a retreat from the UK. And that's it. So I'd like to thank everyone for joining us this afternoon.

Speaker #3: This may take a few moments to complete. And I'm sure it'll be greatly valued by the company. On behalf of the management team, we'd like to thank you for attending today's presentation and good afternoon to you all.

Speaker #1: Thank you for all your questions. And thank you to all our shareholders for all of your support. Thank you very much.

Speaker #3: Ronan and Nick, thank you for updating investors today. So please ask investors not to close this session and shall now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations.

Speaker #3: This may take a few moments to complete, and I'm sure it'll be greatly valued by the company. On behalf of the management team, we'd like to thank you for attending today's presentation and good afternoon to you all.

Browse all earnings call transcripts