Bubs Australia Limited

Good day and welcome to the Bubs Australia limited party of 26 results. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, please press star 1 again. For operator assistance throughout the call, please press star 0 and finally, I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Joe Coutts, CEO, to begin the conference. Joe, over to you.

Thank you very much and good morning everybody. We're here this morning to talk about our R1F26 results. If we could tab please. And if we could tab again please. Just as we get started at BUDS we acknowledge the traditional custodians of the lands on which we operate. We pay our respects to elders past and present. Please. I'm Joe Coote, CEO at BUDS. I've been in my role now just seven months so very excited and proud to share with you our half month results. I'm joined here this morning by Naomi Iqbaluq, our CFO. So this morning we'll take you through the headlines of our results. We'll update on our trading markets. Then Naomi will take over and walk us through our financial results. and then we'll round out with a strategy update. Yes, so as I said I'm very excited and proud of the team actually to report that we have exceeded our commitments in H1 of F26. These results have been achieved through certain strategic clarity, focus on growth, and then a lot of disciplined execution, particularly in relation to our stock rationing and our air freight. But overall, it's a great result. If I just headline through the main numbers, revenue was $55.5 million, which was up 14% from prior year. There's a heavy weighting of the U.S. market, which quarter over quarter grew, sorry, over half grew 48%. Our gross profit exceeded our guidance at 48. Our underlying EBITDA previously was 4.4 million positive, which on a comp basis cycles off a negative 0.7, so we're very happy with that. Then those factors together draw us to today share an upgraded outlook for F26. We're feeling very positive about these results and through the balance of the year. A couple of other highlights just as we get started. We have now moved from strategy development into strategy deployment and so it's very pleasing to share that we have now got a number of initiatives that are rolling forward and I'll share some of the outcomes that we've delivered at the back end of this presentation. One of the core things we're focused on is building a high performing culture. We've done quite a lot of work on this in the half. We've got a group of people now very motivated and committed. We have very clear accountabilities focused around executing in the day and also building a stronger business in the future through deploying strategic initiatives. Over the half, we've made five leadership appointments, one of which myself. We've got a new leader from outside the business leading our commercial business in the USA. We've set up a global chief marketing officer also based up in the US. We've also secured the gentleman Chris Lazarus who is running the US to come back to Australia and he's running Australia and the rest of the world after having delivered great outcomes in his time in the US. Finally we've brought on a leader of our corporate services group. So there's a lot going on at the leadership level but also more broadly we have done our inaugural team engagement survey and we're focused on working with the teams to deliver our high performance outcomes. Finally, U.S. market access. We continue to make strong progress with the FDA. Interesting to note that overnight one of our competitors in the U.S. has secured permanent access, and so that's a precedent that we believe stands up in good stead to continue our positive engagement. That, please. Then if we tab again I'll start to talk about the markets. Just as we're getting started on our markets it's just important to note that we live in a dynamic global environment. I think it's unprecedented in a lot of ways, certainly in the 30 years that I've been in business. As we look at it there's really three things that we feel are dynamics that are impacting our business. Firstly, the demographic forces. So in the mass market globally in infant formula, there are some negative impacts from declining birth rates. I would call out China as one example where the birth rate was down 17% and then the infant formula dollar sales were down 5%. But pleasingly, our business in China is growing. So we have a strong business model and a strong brand. The other thing to note in terms of demographics is that Our consumers, we're very clear who they are. They're a premium natural consumer. So these cohorts of parents are looking for products similar to the products that we have that are a little differentiated from the mass market. They do tend to attract a higher margin and so that's the sub-category of the broader category that BUBS participates in. From a regulatory and geopolitical, we are watching with interest rate, environment, currency with our exposure to the US. strengthening of the Aussie against the US with the Aussie currently spot rate a little over 70. So we're watching that. Obviously the tariff environment is interesting to say the least. There's a lot of volatility there. We did watch the recent high court decision in the US and we are working with our advisors in the US to optimise our position in the US in relation to tariffs. Finally, competitors and consumers. There has been globally two quality issues in our industry. They're being managed and worked through. We are well aware of those issues and we're very confident in our quality systems and we continue to move forward on the basis of the strong quality reputation that we have as bubs and obviously from our Australian source. So to summarise, we feel well positioned to navigate the dynamic global environment. Our brand resonates strongly with our targeted consumers. We operate in diversified markets so we have some ability to move between those markets and finally we have an attractive margin structure given we have the exposure to the premium natural oil sub-segment. Going into the US market, we've seen very strong volume and value growth in the half We have worked very well with the large retailers and so if you look at the overall category, we're fortunate to participate in that premium natural category which is up 44% against the total category only up 3%. We're 8% of that premium natural subcategory and so in terms of then the retailers that look to work with, we've done some great work and we're just cycling through at the moment the annual range review process. We're at target, we'll increase stores, we'll increase the number of products that we have in stores. Amazon gives us the natural coverage and we're number one in GOAT on Amazon. Walmart very pleasingly we're stepping up very significantly in store count and also the number of products we have in their stores and then additionally very pleased to note that we have ranging at Sprouts which is one of the top premium natural banners in the US and then Sam's Club which is part of the Walmart group is the club element of that business and we set secured ranging at Sam's Club. So if I go straight to the bottom right you can see the chart there. At the start of February this year we were a little over 5,500 stores. We're now going into a cycle of growth as these retailers do their annual resets and so by the end of the year We're forecasting to be over 8,500 stores with those additional placings. So we're going into a very exciting time where the business will work through the intake of those products and we believe that that will be a positive for us as we move forward. During the half we did cycle through some stock rationing. We were rationing the US as a priority. We did undertake an air freight program. I'm very proud that the team executed that very well operationally. We did maintain service level. A lot of that was recognised by the retailers with these additional ranging outcomes that we've secured. With the new marketing focus based up in the US, we are very clear who our consumer is. We are moving more and more to some of the next generation digital platforms like TikTok. We've got exposure to Reddit. AI is becoming a real reality in search and so our marketing has been related to secure those exposures and we feel really good going forward in relation to our prospects in the US. So moving through to China, it's encouraging performance in China. Our growth interestingly in the past period has been concentrated in the second and third where we are seeing a preference for some of the consumers to move to premium products like Buffs. We're very happy that we're running a very strong business in China, great team. Again, some of the macro headwinds, but because we're in that premium subcategory or imported product, because we have a great team, we're doing well. Interestingly, in the half, we did rebalance our stock, so we had a little bit of additional We've run that down so our sell-out looks higher than our sell-in and that sets us up really well for the second half. We're very pleased with the channel performance. The online to offline, the O to O channel is going great guns for us. We've secured an additional 77% of stores and our sales through in those stores is up 50%. CBEC, which is the imported product, we've maintained our number one position on Tmall. and we have worked through some of the stock rationing and the stock balancing challenges now and then coming into the second half we believe we're well set for sustained growth in China. The chart on the bottom right really shows the story. The two channels we play in, the O2O and the CBEC, both showing strong growth. Australia we're very focused on. investing to re-establish our growth trajectory. Fair to say that while we've maintained our number one GOAT position, we need to do better in Australia. We're working on that. One of the key things we've done, we've entered the year with our advertising promotion set at about 8% of net sales. In the second half, that's been upgraded to 12%. We've started that. We've seen some positive results. We did do a little bit of price activity, which has been well received by our consumers and retailers. We have started to activate through healthcare professionals. We have improved on-shelf availability as we've worked through the stock rationing, and we feel really well set to see a continuation of growth in the Australian markets. I would note also that we did discontinue our food portfolio in the half and so we're very, very focused on our core range of infant formula and as we go forward we believe we'll be cycling into stronger performance in our core home market of Australia. So our final segment is our rest of world segment. Again, we were impacted by some stock rationing. Additionally, we did have some regulatory challenges, particularly in the Vietnam market where the health authority has changed some of their requirements. So we've been very diligent to work that through with our distributor partner Ms Chow. So we have re-signed our distributor relationship. That business has a great capability in healthcare professionals where we believe We do well in terms of reaching the parents that will be great customers for bubs. During some of the challenges, we've done a great job to maintain supply. We are active on some of the very modern platforms up there on the right. There's actually a picture of myself on my trip up to Vietnam on TikTok. We do a number of in-store activations, so that other picture is an in-store activation in the modern trade where we have a very strong following. Japan continues to be a strong market for bubs and then Malaysia is an emerging market where we've doubled distribution points in the last 12 months. So it's been resilient against some of the challenges and again we feel positive moving forward with our positions in the rest of the world markets. We tab and as we tab I'll hand over to Naomi Malouk, our CFO, and she'll take us through the financial results.

Good morning everyone and really pleased to be here today. If we could just tab across to the income statement please. So looking at the P&L, the great takeaway here is our underlying EBITDA result which came in at $4.4 million. versus 0.7 million on the prior corresponding period. The EBITDA reported number came in at 3 million versus 0.6 in the prior corresponding period. The revenue increase in the USA was the major driver for these results, increasing by 48%. Overall, revenues were up by 14% versus the prior corresponding period. Growth profit also held up surprisingly well despite the impacts of air freight and tariffs but we still managed to come in at 48% and the product mix in terms of more sales being sold through into the USA allowed us to achieve this result despite the additional tariffs and air freight we incurred. Operating expenses came in approximately 3% down to $24.5 million versus $25.2 million, and this was primarily due to the completion of the FDA growth studies. So overall, ending the year at $4.4 million on an underlying basis, which was a great result for Bob's. We can move across now to the balance sheet. The key takeaway on the balance sheet is the inventory number. You can see that it has increased from $20.1 million to $28.1 million. We are still progressing through with our inventory rebuild and that will carry on for the next half. We expect that number to be approximately $8 million to $10 million higher by the time we get to the end of this financial year. You can see trade and other receivables have also increased by 3.7 million. That is in line with the increase in revenues. Trade and other payables also up to 15.7 million from 10.3 and that is largely due to extra payments to suppliers for raw materials, in particular goat milk solids and fresh milk supply from Australian farms. You'll also see there that our right of use assets have increased up to $6.1 million. This is simply due to the renewal of the lease at our Deloraine Dairy facility, which is our manufacturing and head office site in Dandenong South. Move across now to cash flow. The main takeaway here on the cash flow is obviously the net cash used in operating activities. So we had a net cash outflow of $5.7 million versus an outflow of $0.5 million at the half last year. This was largely expected and most of it relates to the inventory rebuild process, which we are still currently in the middle of. And as I mentioned earlier, we will continue to invest in inventory in the second half. One of the key takeaways subsequent to December of 2025 is obtaining formal approval from NAB to extend the limit on our working capital facility. So that has actually increased up from $10 million to $20 million and will be very helpful as we go through this inventory rebuild process. Moving across now to margin, we can see that margin has been maintained at 48%. It is down slightly from the 50% but well above the guidance we were giving of the 40% to 45% range. As I said previously, we have incurred tariffs and air freight which has been significant. Despite those facts, we've been able to deliver more of our revenues in the USA market which are at a higher margin and that's helped us to achieve a really, really positive result. As we cycle through to the next half, we actually anticipate to incur a higher level of air freight and tariffs and so we still expect margins to come in at the 40% to 45% range by the time we get to the end of the year. Moving across to net working capital. We can see networking capital has gone up. We are landing in at 33.4 million for the first half versus 23.2. This all relates to the inventory build and the increasing inventories, mainly from 20 million to 28. You can see, however, that the average networking capital as a percentage of sales has dropped down to 23.9%. It was 25.8 at H2 FY25 and then at H1 it was 30.7. That measure really just shows how efficient we are in terms of delivering additional revenues against our working capital and it just shows that we have the ability to generate more sales on an average basis versus our net working capital. Inventory came in at 28.1. If you look at the chart just below, we were at 30.3 at the same point last year. So you can see we are quite low given the uplifting revenues. You can see inventory as a percentage of sales is down to 26%. We expect that to pair back up to around 30% by the time we get to the end of the year. Moving now to the FY26 EBITDA guidance bridge on a full year basis. You can see we landed last year on an underlying number of 0.6 million. We're expecting to come in at 9.5 million on an underlying basis by the end of this year. And our EBITDA reported number is expected to come in at 4.5 million. So the main impacts there are the air freight and penalty tariff which we're assuming to come in around $5.8 million. We also had a one-off payment from Alison Willis in relation to the legal proceedings and that was $0.8 million. We do not expect any further funds to be received in relation to this legal proceeding. I'll now just summarise the FY26 outlook that we've provided. We do anticipate revenues to come in at $120 to $125 million. It reflects 22% to 27% growth on the prior corresponding period. As I mentioned earlier, We're still targeting that 40% to 45% range on gross profit. That will be lower than what we have delivered for the first half. But as Joe alluded to at the beginning of the call, there's lots of moving pieces there. We have additional air freight coming in, additional tariffs on non-AU products. and we are living in a very dynamic and changing world with Donald Trump, and who knows where the tariffs will land. So those are some of the moving pieces that we're dealing with at the moment. In terms of reported EBITDA, we're going to land at between $4 and $6 million, and the underlying is going to come in at between $9 and $11 million. That concludes the financial review. I'll hand back now to Jo for a strategy update.

Thanks Naomi and if we could just tab through to the strategy summary page. If we tab again. This is a chart that we will be showing you very regularly as we move forward. As I said at the start of the call, we've moved from strategy development to strategy deployment. We are standing up a transformation office as we speak and so we're excited to share some of that with you at our strategy update later in March which we will confirm shortly. We will have the new team members in from offshore as well as some of the new roles that we have here in Melbourne. and so we will drill into this strategy at that point in time. But fair to say we feel very comfortable. It's very crisp and clear. It's very focused, as I said, on execution and the delivery of performance improvement initiatives and I'll save further discussion on that for our strategy update. So we tab over. I did just want to highlight some of the initiatives that we have underway. Some of these are very substantial. Some was carried on for a number of years and some we have already concluded. So I'll just highlight a couple here if I start on the left. We have done consumer research in China and the US to confirm our consumer target cohort and it's very clear who those consumers are and it's very clear they align to the premium natural subcategory. Moving into the second point, we have upgraded our digital marketing activities to continue our presence on platforms like Meta and Google, but we're moving into some of the new platforms like TikTok and particularly Reddit, which is driving a lot of the AI search that we're seeing. So our consumers tend to be, we call them seekers and explorers, They tend to be very savvy with their use of digital technology and so we're really focused on that and we're very happy with the initial results that we're seeing. Annie, our new global CMO, will share more of that when she's down with us in March. If we move across to portfolio optimisation, we've really had stunning results from the range reviews in the US. We're also excited to share that we've ranged in a very premium supermarket banner in China called Belay. We really have great coverage now across those two key markets, obviously, as well in our home market with Coles, Woolies and Chemist Warehouse. So, you know, we are working with the supplier partners. We have great ranging. Now it's about the marketing to step it up and really get the, you know, We will share quite a bit on our product development roadmap in March. We have some exciting things to share there but we're also very, very focused on who we are so there'll be some little adjacencies that we'll be looking at that can help us grow our business further, faster. We move across to supply chain, very clear dollar in the bank example where our supply chain team has done a great job. We've done some work in our warehouse where we've got additional capacity and we're packing containers now and we've got a runway underway that will bank $400,000 per annum of cash savings. So the next one down there in the supply chain that's a work in progress I did want to mention is looking to the US for sourcing of ingredients, the whey proteins that we use as well as the whole milk. Additionally looking at the supply network. Supplying in the US from Australia can be challenging. It's a long, thin supply chain. We have tariffs at the border. Geopolitically it's a good thing as well to be participating in the economy in the US. So we're doing a classical buy, build and rent analysis. We've quite progressed through that. As we grow and outgrow essentially our capacity here in Australia, we have aspirations to look at what a US supply network might be for pumps. If we move across to enablers just to round out, we're very focused on culture and high performing team. We have a great team assembled, very excited to work with such a great group of people. We're also bringing in partners so we've got a great partner. looking at our procurement area through an AI lens. They're a US-based start-up firm called DeSilo and they're doing great things for us in that space. Additionally, though, we're very focused on some of the core processes that run business like Bubz, which is around operations excellence. So just being safe every day, delivering high quality, meeting our promises to our retailers and obviously driving our assets and being efficient in how we spend our cash. And finally, our integrated business planning is another area of focus, particularly the balancing of supply and demand. And as we're a high-growth business, we really need to be looking ahead to see what our growth will be and then convert that back into capacities in terms of shipping, in terms of procurement and in terms of manufacturing. And that's where we've also got a lot of focus. But I'll leave it there. I'm happy to take questions. I'm very excited to showcase the great team that we have when we're together in March. But for today, I'll leave it there and maybe hand back to some questions. Thank you.

If you wish to ask a question on the phone, please press star followed by 1 on your telephone and wait for your name to be announced. That is star 1 if you wish to ask a question. And your first question comes to the line of Philip Pepe from Shore and Partners. Your line is open.

Hi, guys. Thanks for taking the question and well done on a good result. Just looking at your guidance, revenue in particular, you've got a slightly greater second-half bias than usual. Is that because you're expecting Australia and China and some of the other regions to start to grow in the second half to add revenue to what's already a strong US growth?

Yes, so we are expecting revenues to normalise in the other regions as well in the second half. So we are expecting a better performance in China due to those selling sellout rates through to the distributor normalising. So we should see an uptick in China, in particular USA as well will grow further due to that additional ranging of stores that Jo spoke about. So we are expecting a better half for the USA as well.

And have we started to see that in February?

It depends on when the range reviews start. I'll hand over to Joe to answer that question.

Yeah, Phyllis, we have seen things pick up in China and Australia just in the recent periods. The way the US business works, which I know you understand, is there's an annual range review cycle. So we have had confirmation of that range review outcome, and so that massive intake, particularly into Walmart and Target, is currently underway. So the product we've been air freighting up into the US is sitting in the warehouse. It's staged and it's ready to go. The purchase orders are rolling in, and it's really a big pipe of fuel into those stores, and then we wait and see how the consumer offtake goes, and then we'll replenish back to those stores. But it's quite a big step up, so it's exciting at one level, but it's also... operationally quite a challenging task to execute but it will derive a step up in our sales, absolutely.

As your next question comes from Jonathan Sneap from Bell Potter. Your line is open.

Yeah, hey, can you hear me OK?

Yes, we can.

Great. Just a quick one. The cost you've called out, the US tariffs, air freight, like obviously one component of that is probably going to be around a little longer than the other. Are you able to kind of split out, you know, which elements Is air freight as opposed to tariff?

Yes. So we've noted that in the P&L slide. So there's $1.8 million in air freight and there was about $0.4 million in penalty tariff. So that is tariff over and above the 10% that we incur on non-AU fresh milk supply. So when we purchase goat milk solids from overseas, they might come from the Netherlands or New Zealand or another part of the world. They are actually tariffed at a higher rate and it's much higher than the 10%.

And how does that flow into your second half thinking? Is the mix kind of the same or does it start to move more towards tariffs given I assume you probably were selling through some stock that was kind of already there? Yeah, we're expecting...

Yeah, we're actually expecting the impact to be larger in the second half, and we're expecting a larger revenue number to come through in the second half. We've got this ranging happening at Walmart that we've been speaking about, so we really have to get the pipe fill there done on that. That means extra product, and we are going to need to still source from overseas to meet that demand, and some of that is also going to have to be air freighted as well. So we'll also incur additional air freight, which will be at a higher level than this first half.

Yeah, okay. And look, can I just ask around China? I mean, it seems like when I look at all your peers, even some of the bigger ones, there's a massive channel shift that's been going on from China label to English label over the last six months, if not last 12 months. And traditionally, Bubz has done pretty well in their environment, not just from Seabeck and O2O, but also from Daegu. Are you seeing anything in the Daegu channel at all in terms of resumption of growth? at the moment. Interested in your thoughts there.

Yeah, we're not seeing a lot in Daigo. As I said, yeah, we see that shift to English label and our team does a great job marketing on platforms. but our O2O growth, as we shared, is very pleasing as well. So we're in that general trade, but with a CVEC product. So, yeah, if that continues, they're favourable to our current positioning, absolutely. So it should be something that we benefit from, I would agree. I can't see that we've seen a lot of it at this point, but, yeah, we're bullish China more because of the capability of the team and our products. And so, yeah, that could be another headwind potentially for us.

Okay. And if you looked at, I guess, some of these product scares, most of the, I guess, the recalls have happened from Europe. And I know it's kind of early days because it's been kind of rolling through December and January more so than anything else. Have you seen any, I guess, benefits start to come maybe from some of that cross-border activity slowing off from Europe and shifting down into regions where you haven't had major product recalls like down here at all? Or is it too early, do you reckon, to see anything like that?

Yeah, look, it's mixed. I mean, the thing as an industry, you know, the families that are impacted by those recalls are where our thoughts go first. And then second, just for our industry, you know, these quality issues are something that we would prefer not to see. You do... highlight the recall from Europe, there is also a separate one in the US. So it is a dynamic in the US as well. It's a little bit different in the US, but it's essentially a quality-related issue. So there is, I'd say, consternation amongst the parents who are formula feeding. So we're working very hard with our customer service and marketing teams to reassure people that the BUBS products remain safe. and we've got a huge focus on our quality. I would say that in pockets we do see that our sales are responding to some of the gaps that we're seeing. I would also say that in the US some of the ranging outcomes that we've achieved that are so stellar are probably somewhat buoyed by the quality issues in some of the people that are participating currently. But with that said, it's a mixed bag and Yeah, I'd absolutely come back to my opening point, which is, yeah, we really feel for these parents who are navigating these difficult times in our industry, and we prefer not to see any quality issues anywhere.

Great. Thank you. As a reminder, if you do wish to ask a question on the phone, please press star followed by 1 on your telephone and wait for your name to be announced. That is star 1 if you wish to ask a question. Currently there are no further questions on the phone so I'd like to hand back. Apologies, you have a question from the line of Mark Topey from Select Equities. Your line is open.

Thank you. Good morning. I just want to ask on the production side of things just how you're placed and just give us a bit more insight into how you're ramming up for the inventory build up. I guess we've got a sense of where you might be producing it, but I'm just wondering about your capability going forward to meet demand.

Yeah, Mark, I mean, the way the supply chain works, there's the physical logistics, which has a fairly long, thin supply chain from Australia to predominantly China, US, so that's one element. But in the sort of production side, we essentially have a two-stage production process We have our own facility in Melbourne in Dandenong and that facility runs at about 40% to 60% of nameplate capacity. So we run that facility on a two-shift basis six days a week and that facility has been operating very well over the past half and the team that runs that facility do a great job. So we do have capacity there. We work with a network of partners in terms of then turning the milk into powder and So we have a network of supply partners across Victoria and again they're doing great work and we have some capacity there. Where there are some challenges is in the goat milk solids and so some of that comes off farm here in Victoria and then we do supplement selectively from some offshore sources that Naomi mentioned, primarily the Netherlands and New Zealand. So you put all that together, the outlook is positive. It's just, it takes time to really, there's a long lead time in each of those steps to secure the goat solids, push it through the dryers and then into the blending and canning lines to get onto a container and across to the US. It's a long, thin supply chain as I said at the start. But look, we're very confident that we will rebuild and we will have sufficient safety stock, particularly up in the US and we'll be able to secure the sales that present in these additional range we have in the US retail trades.

Great, obviously to meet that demand. And then just secondly, what's your read on the goat milk sort of perception in China? There seems to have been a little bit of up and down in terms of demand and at one point goat milk was very strong in terms of some of the other producers in that market. How are you sort of converting the consumers over even in the US to the goat milk product?

Yeah, it ranges. Like total goat as a percentage of total is one number and then it tends to be a higher percentage in the subcategory. The premium subcategory has higher participation in goat. In the US it's almost solely in that premium natural subcategory. So the total addressable market, if we can collectively as an industry grow goat, that will be very beneficial to pubs. In the US at the moment it's about 3% of total market which is about 6% of the subcategory. So yeah, a percentage point there because we're about a third of the market. China is a little bit different. China, the participation rating goat as you call out has dropped back a little bit. It's a different sort of proposition in China. It's been more mainstreamed in China over a number of decades and beyond I would suggest So, yeah, we watch that carefully in China, but certainly with our exposure, being a dominant goat player, a tick-up in goat participation in infant formula would be very beneficial. We also have an adult goat product, Caprolac, in China, so goat in adult is also something we're excited about. And then in Australia, goat, I think, runs at about 6% to 8% of category. So, again, we're number one in goats. So we do watch those numbers from a total addressable market, and if we can collectively grow the goat participation, we naturally, you know, rising tide raises all boats. So, yeah, that's a really good metric to look at, and we look at it carefully.

Yeah, and just lastly, just on the Aussie dollar, just touch on FX and any sort of implications there in terms of the sort of to the Aussie dollar where it is at the moment?

Yeah, we don't certainly – we're an infant form of the company so we don't try and play the currency market but in terms of our risk management strategy, I'll just hand over to Naomi.

Yeah, so that uptick that we saw in AUD versus USD only sort of came in around the end of January and up into early Feb so we're sort of trading around that 0.7 level now. We actually hedge all of our transactional exposure and we've taken hedges out already through to the end of this year. We'll be going through our budget process for FY27 and we'll have to obviously re-rate what that rate is looking like so that will have a subsequent effect on the revenues that we report coming through from the USA. But if we do our comparatives in the financials on a constant currency basis, we'll be able to see the true underlying performance.

Right, so if I interpreted that, so there's some crimping of a margin then from the higher Aussie dollars. Is that the way I'm kind of hearing that?

Only on a reported basis, not within the result reported in the USA, so only on consolidation. because we're an AUD business. Not transactional because that'll be hedged through but you'll be hedging through at higher rates so it will have some impact. So there will be an impact but if it moves higher than 0.7 you're protected against it. If it moves lower and you've hedged in at 0.7 then you'll have the opposite effect.

So that implies you're not repatriating cash from the US? Is that you've got some natural hedge over there? No, no, no.

We are repatriating cash over, but there's two separate effects. So there's the transactional effects and there's the reported effects, which are two different things.

Okay, all right, got it. Okay, I was just trying to understand that. All right, terrific. All right, well, that's helpful. Thank you for that.

No worries.

As a reminder if you do wish to ask a question please press star followed by 1 on your telephone and wait for your name to be announced. That is star 1 if you wish to ask a question. Currently there are no further questions on the phone line so I'd like to have back.

Well just to round out, thank you very much for your attendance this morning and we look forward to having follow-up discussions. See you at the final strategy session in March and the end of year. Thank you.

That does conclude our conference for today. Thank you for participating in Man Out or Disconnect.