Aurizon Holdings Limited

Good morning and welcome to the first half 2026 results.

We are in Brisbane today, therefore I acknowledge the traditional custodians of this land, the Turrbal and Yagra people and pay my respects to the Elders past, present and future for they hold the memories, the traditions, the culture and hopes of Aboriginal Australia. We must always remember that under the ballast, sleepers, rail systems and office buildings where Arizon does business was and always will be traditional Aboriginal land. I'm joined on the call by Gareth Long, Acting CFO and Group Executive Strategy, and the rest of the management team. This morning we announced the appointment of Ian Wells as CFO and Group Executive Strategy, commencing in April. Ian is an experienced global finance leader across the resources and infrastructure sectors, most recently at FMG, including five years as Group CFO. His expertise will be instrumental as we continue to optimise our portfolio, allocate capital with discipline and invest in long-term growth. I look forward to welcoming Ian to Aurizon in April. Gareth Long, who has been Acting CFO in Group Executive Strategy, will transition to the role of Group Executive Enterprise Services, leading functions including asset management, procurement, technology, people and safety. Turning to safety, Our focus at Aurizon is protecting our employees, customers and the communities in which we operate. It was pleasing to see a step down in the actual and potential serious injury fatality frequency rate when compared to the second half last year. However, the total recordable injury frequency rate deteriorated slightly, driven by lower severity injuries. Efforts have been stepped up in response to this movement with safety intervention activities enacted where required. Level crossings continue to be a safety issue for the rail industry. Just last week, the Australian Transport Safety Bureau published their investigation into a collision between a passenger train and a truck near Alice Springs. Despite advanced road warnings, a stop sign and the sounding of the train's horn, the truck continued at the level crossing, resulting in a collision with the truck driver, sustaining serious injuries. We have updated our Community Engagement Program, reframing the importance of waiting at a level crossing as an act of responsibility for the people that matter most. The billboards have been rolled out at target locations and will also be used across social media. Collectively, we must step up efforts and investment to improve safety at level crossings. This includes the rail and road industries, all levels of government, enforcement and road safety agencies and the general community. Turning to the results. Today we present a strong set of results and more importantly represents the continued execution of strategy. That is, Disciplines Coal and Network Business Units specifically noting increased reliability in the Central Queensland Coal Network bulk and containerised freight growth, including lower cancellation of services and strong shareholder returns driven by capital efficiency. Underlying EBITDA increased by 9%, supported by solid contributions from network, bulk and coal. Revenue growth was driven by regulatory revenue and higher volumes, while disciplined cost control, including the successful execution of last year's $60 million cost-out program, further strengthened our position. This performance has flowed through to underlying NPAP, free cash flow and importantly to earnings per share, up 20% with the impact of the buyback program being seen. Reflecting the stability and resilience of the business and with the expectation of lower capital growth, we increased the dividend payout ratio to 90%. Further increasing shareholder returns, today we announced an extension of the buyback program by $100 million. This follows the completion of around 85% of the original $150 million buyback announced in August. Turning to the business units. Although volumes were flat, network earnings increased by 4%, driven by higher regulatory revenue. Importantly, a customer-supported submission on a new 10-year undertaking was lodged to the regulator in December. The agreement brings certainty to all network stakeholders and from an horizon perspective increases revenue across the undertaking period. Coal earnings benefited from a 1% volume uplift, improved yield and disciplined cost management, delivering a 6% reduction in unit costs. Two coal contracts have been extended to FY2028 and FY2034 respectively, pushing out the contract book as shown in the appendix. You may recall that we will have available capacity in the Hunter Valley once the contract comes to a close in June. As noted at August results, we have three options regarding the deployment of this capacity. They are pursuing tender opportunities, maintaining spot fleet capacity and or reappointing the assets to bulk. Each of these options remain available at this time. Bulk earnings increased to a record first half result of $117 million, up 39% on the prior period. The uplift was driven by higher volumes and the non-recurrence of prior year impacts, particularly the provision for doubtful debts. Volume growth was supported by... increased base metals haulage, including BHP Copper South Australia, new iron ore customers, and additional grain haulage due to lower cancellations in the context of a record harvest in Western Australia. Earnings for the other segment, including containerised freight, declined by $11 million, entirely due to the prior period including legal settlement proceeds of $18 million. national interstate TEU volumes increased by almost 30%, with capacity utilisation of 69% across the half. While near the 70% break-even utilisation as published at Establishment of Containerised Freight, EBITDA break-even has not yet been achieved due to Additional costs due to increased freight frequencies and third-party network outages, most notably the cross-river rail disruptions in south-east Queensland and the mixer freight carried. To mitigate rail disruptions in south-east Queensland, we entered a three-year agreement with SCT Logistics in November to haul a Ryzen freight into and out of Brisbane from their southern side terminal. This resolves local access challenges, improves customer frequency options and frees a rising capacity for redeployment. In Western Australia, the Kewdale terminal is expected to become operational in the first half of FY2027, improving efficiency and performance for our east-west services. We continue working with NYK on supporting the import and distribution of motor vehicles through land bridging. These discussions are now at CEO level, and I was in Tokyo in January to progress. I look forward to updating the market in due course. Late last year, we submitted a draft 10-year undertaking to the Queensland Competition Authority to apply from July 2027 to 2037, known as UT5+. The proposal was developed through months of constructive negotiation with the submissions supported by customers. Importantly, it was lodged some 18 months prior to the current undertaking expiring, which is an amazing feat. Those with a longer corporate memory will recall how different this outcome is compared to the submission of the original UT5 undertaking. In addition to providing all users and Arizon network with long-term certainty, the agreement brings customer benefits such as a new throughput-linked incentive payment, five-year rolling access agreements, a network-led continuous improvement group, retention of collaborative maintenance processes and customer oversight of major procurement contracts. For Horizon, UT5 Plus delivers an average annual revenue uplift of $45 million, flowing entirely to EBIT. The uplift is driven by updated WAC parameters, the introduction of a throughput payment and changes to depreciation that bring forward cash flows. The initial WAC will be set between January and April 2027 based on prevailing market parameters. The undertaking is subject to QCA's usual process and we expect to see progress through this calendar year. Beyond securing long-term earning certainty for Network, it has been a year of delivery driving value for shareholders. Following the June announcement and October commencement, we now provide integrated logistics, rail, road and port, for BHP's South Australia copper operations. This represents 1.3 million tonnes per annum and total revenue of $1.5 billion in revenue over 10 years. This is the largest known road-to-rail conversion in Australia and was made possible by our strategic investments in One Rail, Flinders Logistics and the Gilman Terminal. South Australia is a growing copper province and presents a great opportunity for Aurizon. Moving to the cost side, we delivered the previously announced $60 million in annualised cost savings, exceeding the original $50 million target. These savings can be seen in today's results with flat operating costs despite a 4% increase in revenue and against a high inflation environment. Having the right assets in the right regions is key for Aurizon's continued success. We've had a long presence in the Yulgan region of Western Australia hauling iron ore for export at Esperance. Although impacted by the decision by Mineral Resources to cease operations at the end of 2024, the very same fleet of locomotives and provisioning sheds are back in use in the haulage of iron ore for two new customers in that region. The historical INOR volume hauled by MRL has now been fully replaced by our other customers. Finally, to Capital Management. We have completed $425 million of on-market buyback in the past 18 months at an average price of $3.36, including $125 million so far this financial year. The cancellation of 126 million shares has increased earnings per share by 7.4%. Today we further increase shareholder returns with a step up in the dividend payout ratio and a $100 million extension of the buyback. These achievements reflect my priorities, delivering growth, maintaining a competitive cost base and executing disciplined capital management. Finally, I want to address the Network Ownership Structure Review. The review has now concluded with a decision to retain Arizon's existing integrated model in Central Queensland. The group's portfolio composition is reviewed regularly, including an assessment of the integrated above and below rail model in Central Queensland. The outcome of the review was last published externally in 2019 and found that the benefits of integration of above and below rail outweighed the benefits of separation at that time. I commissioned a new comprehensive review last year considering the same assessment criteria as previous review with a particular focus on the shareholder value. The review assessed a broad range of whole of business and minority structure options for network, including monetisation and demerger scenarios, noting that a transaction would be pursued if it delivered shareholder value. An investment bank was appointed to assist in running a comprehensive market-sounding process for potential alternatives. Each alternative was evaluated across numerous valuation benchmarks and discussions were held with more than a dozen institutional investors. Retail brokers were also consulted to investigate investor appetite and valuation metrics. The review and recommendations were independently assessed by Flagstaff. The review confirmed Horizon's view that the central Queensland coal network is a highly attractive and unique set of assets connecting the globally significant premium coking coal basin to export markets. Supported by regulatory settings, network's value under Horizon's integrated model is derived from several factors. stable earnings and cash flows via supportive regulatory frameworks, including revenue and inflation protection, accelerated depreciation, primarily returning invested capital across a rolling 20 year period, supporting our strong investment grade credit rating and has underpinned $6 billion of shareholder returns over the past decade. We also see value in the operational alignment of the integrated model. The operational overperformance of network, which is monitored using a suite of interrelated measures, benefits throughput for all above rail operators. This is calculated to benefit Horizon by up to $75 million per annum. A standalone entity may not achieve this level of alignment with above rail operators. In addition to lost synergies, there is also the creation of dis-synergies, depending on the structure of the change in ownership. In a demerger, this is calculated at $30 to $40 million per annum, primarily consisting of the duplication of corporate functions. Beyond any transaction costs, such as tax considerations, the loss of $100 million per annum is significant and therefore was incorporated when assessing value to shareholders. This is particularly the case for ownership structures where the value outcome is not certain. We received numerous expressions of interest from well-credentialed investors which validated the quality of network. However, the proposed valuations did not meet threshold required to create meaningful shareholder value compared to the tangible benefits being captured by Horizon under the integrated model, while introducing significant additional uncertainties, complexities and risk. Therefore, we have determined that returning 100% of network remains the option that best delivers long-term value for Horizon shareholders at the present time. The review is now concluded. Turning back to the results and to Gareth.

Thank you, Andrew. Today we present a strong set of results with coal, vault and network business units, each contributing to their uplift in earnings. Step-up in shareholder returns has been delivered with an increase in the dividend payout ratio to 90% and a 100 million buyback extension. Turning to the table, revenue increased by 4% driven by network regulatory revenue and stronger volumes from both coal and bulk. Coal also benefited from stronger yield, which I'll return to shortly. Despite an uplift in revenue and a higher inflationary environment, total operating costs were flat against the prior corresponding half. This was largely driven by the $60 million cost-out programme undertaken last year. Net finance costs were broadly in line with the second half last year, but 10% higher when compared to the first half, due to the hybrid issuance undertaken in May 2025. underlying free cash flow of $335 million was 41% higher than the prior corresponding period. A higher cash tax rate was recorded for the half at 32%, largely driven by timing differences, including take-all pay. We expect these timing differences to unwind in the second half, which will see our cash tax rate fall to below 30% at year-end. The dividend of 12.5 cents per share has been declared 90% franked, representing a higher payout ratio of 90% of underlying net profit after tax. This is in addition to the 100 million extension of the current buyback, taking the total FY26 buyback to up to 250 million. This follows the completion of the 300 million buyback last year, Demonstrating our strong cash flow generation and disciplined capital management. Statutory EBITDA is 3 million lower than the underlying result due to the impact of the following. There was a 4 million over recovery in network track access revenue. As previously announced, this is the first year of recognising the regulatory allowable revenue in underlying earnings, regardless of volumes. Although deducted from underlying earnings, a positive timing adjustment of £4 million is captured in the statutory earnings. This was offset by two significant items. One million of transformation costs, which represents the remaining redundancy cost from the cost-out program undertaken last year, and six million for technology upgrade costs. Horizon has commenced an upgrade of its enterprise resource planning system. This is a migration from a legacy system and we expect total implementation costs to be in the range of 90 to 100 million to be spent over the FY26 to FY28 financial years. This will be treated as a significant item. FY26 costs are expected to be approximately 25 million including 6 million in the first half. The variance from these timing differences and significant items at the statutory MPAT line is a negative 2 million. Moving now to Network. Network EBITDA increased 21 million or 4% to 516 million. This was driven by higher access revenue. Boggings were flat compared to the prior corresponding period at 109.8 million tonnes. In the bridge on the right you can see access revenue was 26 million higher driven by an uplift in allowable revenue due to high return on and off capital and due to an increase in the maintenance allowance. Note these figures are net of energy costs which are passed through to network customers. Operating costs increased by 2 million due to higher maintenance costs. As I noted earlier, an over-recovery of 4 million in track access revenue was collected in the first half of FY26, with an equivalent timing adjustment reduction recognised in the underlying result. This year is the first of two transition years with the updated approach to underlying revenue recognition for network. That is, we recognise the full maximum allowable revenue or MAR including the prior year's revenue cap. Next year, FY27, will be the last transition year and includes 50 million of REV cap from an under-recovery from FY25. From FY28, the MAR will be booked, less any revenue cap given it will already have been recognised in the respective year. As usual in the appendix, we include a full MAR table, including the revenue cap adjustment I just spoke of, in addition to the impact of the long foreshadowed end of GAAP from FY28. The table also includes preliminary values for UT5 Plus from FY28. Moving to coal. Coal volume increased 1% to 101 million tonnes, with revenue increasing by 3%. We also saw a reduction of 4% in operating costs, which resulted in an uplift in earnings of 13%. In the EBITDA waterfall chart on the right, you can see the benefits of the additional tonnes hauled, equating to 9 million net of the costs of hauling the additional volume. Inside the dotted area, we show the yield increase of 10 million. You may recall in August last year, we provided full year guidance for coal, including the expectation of lower yield. That is, the benefits of price indexation were expected to be negated by an unfavorable custom mix on a rate per ton basis. As can be seen in the chart, the customer mix impact on yield was limited, resulting in the overall positive yield. Operating costs decreased by 15 million, supported by the rollout of Traingard, in addition to benefiting from favourable maintenance scheduling. We do expect second half earnings to be lower. This is due to the anticipated customer mix having a negative impact on yield, and higher operating costs, driven by both projected haulage and the reversal of the favourable maintenance scheduling mentioned earlier. Moving now on to bulk. Bulk earnings increased to $117 million, an uplift of 39%. The result was driven by an increase in volume and the non-recurrence of prior year impacts, primarily the provision for doubtful debts booked during the period. Bulk revenue was up 6%, at 595 million, driven by base metals, grain and new iron ore customers, non-recurrence of the July 24 derailment in WA, partly offset by lower iron ore volumes in South Australia and the Northern Territory. Operating costs were flat at $478 million. However, when excluding fuel and access costs, which are largely a pass-through, operating costs were up $21 million. This mainly reflects additional costs associated with volume growth. Excluding doubtful debt provisions, operating costs increased by 3%. Looking ahead, bulk earnings in the second half are expected to be broadly in line with the first half. Potential upside from the ramp-up of contracts that commenced in the first half, including BHP Copper and the new iron ore haulage, is expected to be largely offset by weather impacts and third-party track closures experienced in January, as well as further third-party track closures in Queensland anticipated later in the year. Higher operating costs driven by both... Sorry. While containerised freight doesn't have a dedicated slide in today's presentation, as it is not reported as a separate business unit, it's worth calling out the continued momentum we saw during the half. Volumes increased by 23% with the second half last year. However, despite this volume growth, higher operating costs were incurred primarily to mitigate the impacts of the Cross River Rail project in South East Queensland. With the previously announced SET contracted solution in place, we expect a stronger second half. Now moving to gearing and funding. As shown in the chart, the work undertaken during the half has further lengthened, smoothed and diversified the funding profile. Horizon's credit profile continues to remain attractive to bank and debt investors, with the network's recent refinancing and upsizing of its institutional loan facilities being just under two times oversubscribed, despite a reduction of the existing margins. As a result of this refinancing, Horizons Bank Group has expanded by three lenders to 26 banks across its facilities. Also within the chart you will note an upcoming maturity in FY26 being our €778 million Network Euro Medium Term Note, which will be repaid using available Committed Undrawn Banking facilities. Now we have a total of 1.35 billion of undrawn facilities in network. Further detail on our funding activities can be found in the debt slide in the appendix of this presentation, as well as in the Appendix 4D. Looking at some of the other metrics on the page, I know the group gearing was 55.5% compared to 56.2% in FY25. The funding strategy remains unchanged, that is, to ensure we access multiple pools of capital and lengthen the debt maturity profile to align with Horizon's long-duration assets. Importantly, we maintain a commitment to strong investment grade ratings with Horizon Operations and Horizon Network's credit ratings, both at BBB+, BAA1. This commitment is supported by Group Net Debt EBITDA, which now stands at 3.1 times. Moving to capital allocation. Strong free cash flow generation and lower capital expenditure have underpinned higher shareholder returns through dividends and buybacks during the half. As shown in the chart on the left, total half-year capex was $327 million, down 5% on the prior period. Non-growth capex was $247 million, representing a 17% reduction and reflects lower bulk transformation spend as terminals such as Gilman came online and the timing of asset renewal expenditure within network compared to the prior period. As a reminder, around 70% of total non-growth capital is invested in the network business, which directly feeds into the regulated asset base. As reflected in the chart, total growth capex for the half was $80 million, $36 million higher than previous half, largely due to the capital requirements for bulk for the new BHP contract and containerised freight for the Kewdale freight terminal in Perth. As Andrew will discuss shortly, growth capex guidance is unchanged, while non-growth, including transformation capex guidance, has been reduced to 580 to 600 million, which is broadly in line with last year and largely reflects timing differences. Long-term expectations for non-growth capex remain around 550 to 600 million per year, although this is constantly reviewed in conjunction with our long-term volume outlook. Turning to the right-hand side of the slide, the proportion of forecast capital allocated to shareholders in FY26 is expected to be broadly in line with last year and consistent with levels seen between FY16 and FY21. Dividends have benefited from the increase in the payout ratio to 90% of underlying impact. In line with our capital management framework, we are able to maintain our strong investment grade credit ratings and deliver capital back to shareholders while at the same time focusing on earnings growth. In closing, it is encouraging to see revenue growth across our coal, bulk and network business units with all three contributing to the uplift in first half earnings. Looking ahead, Horizon's strong cash flow generation, underpinned by regulatory revenue, contracted revenue, and CapEx profile positions the company to enhance shareholder returns while continuing to invest prudently in the long-term sustainability of the business. Thank you. I'll now hand back to Andrew.