Dowlais Group plc

Good day, ladies and gentlemen, and welcome to Daole's half year 2025 results. The presentation will commence shortly. After the presentation, we will conduct a Q&A session. If you wish to ask a question, you will be able to ask a question either through the Zoom webinar link provided separately or by submitting written questions using the ask a question button on the Spark Live webcast page. Please note this call is being live streamed to a webcast for a wider audience and will be recorded. I would now like to hand over to Liam Butterworth, Chief Executive Officer, to open the presentation. Please go ahead.

Good morning. Thank you for joining our 2025 Interim Results presentation. I'll start with a brief update on our first half performance and the progress made on the American Axle combination before handing over to Roberto for the financial review. I'll then return to cover our divisional performance and leave time for our usual Q&A session. The first half was marked by ongoing macroeconomic uncertainty and market volatility, largely driven by tariff-related disruption and other geopolitical events. Despite this challenging environment, we delivered a solid set of results. Strong execution of our restructuring and performance initiatives, more than offsetting the impact of lower volumes and tariffs, enabled us to deliver margin expansion. Although tariffs did impact the first half, the effect was lower than initially anticipated, and we continue to expect to recover these costs in the second half. As a result, we do not anticipate tariffs having a material impact on our four-year results. Commercially, both divisions continue to make good progress. Parametallurgy secured £55 million in new business wins, 62% of which was for EV or propulsion agnostic products. Automotive achieved bookings worth over £1.5 billion in forecast lifetime revenue, well diversified across products, customers and geographies. Around 54% of contract won were either extensions or new wins on ICE and mild hybrid programmes, while 46% were on electric or full hybrid programmes, reflecting a continuation of a broader slowdown in electrification. Finally, we continue to make good progress on the planned combination with American Axle. In July, shareholders of both Dowlace and American Axle overwhelmingly approved the proposed combination, marking a pivotal milestone in our strategic journey. The transaction will create a global leader in driveline and metal forming technologies, with approximately $12 billion in sales, roughly 50,000 employees, and over 170 facilities worldwide. With at least $300 million in expected room rate synergies, it has the potential to deliver significant long-term value for our shareholders. We remain on track to complete the transaction in Q4 2025, with American Axle having already secured regulatory approval in nine out of 15 jurisdictions and continue to engage constructively with the remaining authorities. I'll now hand over to Roberto to take you through the financial results.

Thank you, Liam, and good morning, everyone. Let me walk you through the group's financial performance for the first half of 2025. We delivered a resilient set of results in a volatile macroeconomic environment. Revenue was £2.46 billion, down 1.6% at constant currency, primarily due to lower volumes in driveline and powder metallurgy. Foreign exchange headwinds, driven by sterling strength, further impacted reported revenue, leading to a 4.2% year-on-year decline. Despite this, adjusted operating profit grew to £154 million, and we expanded our operating margin by 40 basis points to 6.3%, reflecting strong execution on our performance and restructuring initiatives. Adjusted basic earnings per share was 5.6 pence and an increase of 14% as a result of higher earnings and lower finance costs. Adjusted free cash flow was 29 million pounds cash outflow compared to a 10 million pound cash inflow in first half of 2024, primarily due to the impact of tariffs, higher restructuring outflows in line with expectations and the timing of dividend receipts from a China joint venture. Net debt increased to 1 billion and 34 million pounds, resulting in a leverage ratio of two times EBITDA. Adjusted revenue declined 1.6% as growth in the e-power train product line and China joint venture was more than offset by a decline in the driveline product line and powder metallurgy. Foreign exchange was a headwind, reducing reported revenue by £67 million, with the pound strengthening against the USD, the euro and the CNY during the period. Adjusted operating profits increased to £100 The increase in adjusted operating profit was primarily driven by £23 million of efficiencies resulting from our footprint restructuring and volume reduction initiatives, and £15 million from last year's decision to right-size engineering investments, largely in the e-powertrain product line. The four-year net benefit from engineering spend is expected to be approximately £10 million due to the engineering spent in the second half, in line with previous guidance in our 2024 full-year results. The impact of trade-related tariffs was £12 million, lower than initially anticipated due to several exemptions and postponements introduced since the US administration's original announcement in April. In line with our financial model, approximately £7 million of pricing impact was broadly offset by other ongoing performance initiatives. The margin improvement underlines the strength of our operating model and our ability to mitigate headwinds through disciplined execution. Foreign exchange headwinds in the period were £5 million higher than prior year, resulting in a reported adjusted operating profit increase of 2%. Moving to GKN Automotive, adjusted revenue declined 0.9% year-on-year to 1.98 billion pounds. The primary driver was a 4.6% decline in driveline revenue, reflecting a mix of weaker volumes and adverse customer mix. Additionally, we also saw the phasing out of legacy programs, with new platform ramp-ups expected to be more heavily weighted to the second half of the year. E-Power train revenue grew 5%, benefiting from a low base and the recovery of volumes on an all-wheel drive platform previously impacted by production delays. Adjusted operating profit was 132 million pounds, up 11%, with margin improvement improving by 70 basis points to 6.7%. This performance was supported by restructuring benefits right-sizing of engineering spend, and disciplined execution on other ongoing performance initiatives. In powder metallurgy, adjusted revenue declined by 4% to £489 million, impacted by volume softness in North America and Europe. China performed better, helping to partially offset the weakness. Adjusted operating profit declined 16% to £41 million with operating margin at 8.4%, largely as a result of lower volumes. Adjusted basic earnings per share for the period was 5.6 pence, up 14% year-on-year. This reflects both higher adjusted operating profit and a reduction in finance charges. Adjusted net finance charges were £50 million, £6 million lower than the prior year, larger as a result of higher interest income. Tax charges were £27 million, resulting in an effective tax rate of 26% due to higher withholding tax on account of dividend receipts from our subsidiaries. The lower share count following the conclusion of our buyback programme in January 2025 also contributed to EPS growth. Adjusted free cash flow was an outflow of £29 million compared to an inflow of £10 million in the first half of 2024. The decline reflects high restructuring and tax outflows in line with plan and several temporary effects, which include tariff costs, which we expect to recover in the second half, The timing of dividend receipts from our China joint venture, with only 70% received in H1 compared to 100% received in the prior year. Pension payments, slightly higher in the first half, but expected to be £30 million for the full year, slightly lower than in the prior year. And finally, a temporary increase in inventory to support footprint transitions. These headwinds are timing related and we expect an improved cash performance in the second half, albeit I still expect adjusted free cash flow to be lower than prior year. In addition, interest payments totaled £47 million, broadly in line with the prior year. Tax payments were £31 million, up slightly due to legislative changes in Italy and a tax audit settlement in Germany. Both items have been previously communicated. Restructuring cash outflows was 63 million pounds, up 12 million pounds versus the prior year. This was consistent with expectations and supports our wider performance and footprint initiative. Expectations for four-year outflows remain unchanged at 120 to 130 million pounds. Looking ahead at the remainder of the year, our four-year guidance remains unchanged, despite macroeconomic and specific market volatility as a result of U.S. trade actions. We continue to expect performance to be towards the lower end of our previously stated range of flat to mid-single-digit decline in adjusted revenue and an adjusted operating margin of between 6.5% and 7% on a constant currency basis. Adjusted free cash flow is anticipated to be below the prior year, reflecting the impact of lower volumes and increased restructuring expenditure. We remain confident in our ability to recover tariff-related costs in the second half through commercial and operational actions. Finally, on slide 14, you can find our usual guidance slide to help you with the modeling. If you have any questions on this or other modeling matters, please speak to Pierre or me. Thank you. I will now hand back to Liam.