NAOS Emerging Opportunities Company Limited (NCC) Earnings Call Transcript & Summary

Good morning, everyone. My name is Sebastian Evans, I'm the Chief Investment Officer of NAOS Asset Management. This morning, we'll be running through the webinar for the end of FY '26 or quarter 4. It seems like an eternity ago, essentially an investor update and a question-and-answer session for all investors. So a little bit of housekeeping before I start. I'm sure most of you on this call have been on this before. They are recorded. We will send the recording out either late today or early tomorrow. There is a Q&A ability with this webinar. So generally, what we do, there's a little box you can use in oom.estion.est to get to that question. Generally, I get every question done depending on how long it takes. If that doesn't seem to work for you, feel free to send an e-mail to inquiries at naos.com.au and someone from the team will then send me an e-mail or put it in the chat box for you, and I'll address that question as best I can. To that end, I'll move along to the disclaimer. For those of you that know, it's been a pretty eventful Q4. So we will be talking about a number of stocks, Rob specifically. Obviously, don't ever treat this as goal. It doesn't take any into account your own personal circumstances. It's not -- should not be construed to be financial advice. It is general advice only. So please seek expert advice regarding investments and tax that takes into account your own personal circumstances. And then finally, the acknowledgment of country. We do want to acknowledge the traditional owners of country throughout Australia and recognize their continuing connections to land, waters and communities. We pay our respects to all Aboriginal and Torres Strait Islander cultures and to elders past, present and future. The only slide on NAOS for those of you who don't know NAOS, obviously, we are been around now. This is my -- I think it's my 19th year. Rob has been here for a similar amount of time. We are quite different to some of our peers. We're rather hands-on investors. We do take a long-term approach to investing. We have a speaker today, Angelo DeAngelis, who's the CEO of Saunders Group, SMD is the code. As an example, we've been an investor in Saunders probably now for, I don't know, probably the best part of 7 or 8 years, roughly, maybe a little bit longer. So we do like to partner with businesses that are run by proven and aligned management teams that have a true unique moat and a capital structure and economic framework that allows them to grow in theory, over the long term because they are the best investments that can compound capital for a long period of time and in theory, deliver excellent results for our shareholders. We are very aligned. As you would know, many NAOS staff and directors are some of the largest shareholders in all of the NAOS LICs. As you would know, I don't own any equities outside the NAOS LICs. So I'm firmly aligned with all ordinary shareholders. So when we perform, obviously, we do well. When we don't, it hurts just as much as it does any ordinary shareholder within the NAOS LICs. We are concentrated. As you would know, we own roughly 10 to 12 investments currently in each LIC. We're seeking to move that probably close to 15 investments over the next 6 to 12 months. But we do take large minority investments in these businesses, anywhere between 5% and 35%. And then finally, we are index unaware. As you would know, our performance generally differs significantly from the Small Ordinaries Index. Less than 1% of our investments form part of the small odds. So you'll find our performance generally ebbs and flows when stock-specific catalyst occurs, not necessarily how the index moves up or down. Just there, you can see it's our portfolio composition across all 3 LICs. So the 3 LICs put together. I think what we're trying to get across to investors is the industry exposure is relatively diversified even though we are concentrated. You can see a number of notable industries in the bottom left corner. If you do look at the investment type, you can also see the proportion of listed versus unlisted. So we do have the ability to invest in private businesses that don't have to be pre-IPO businesses. You may note that in our last quarterly investment report, which was provided a couple of weeks ago, we have sold out of Arum group in our NCC fund. So it's an example of a business that was private, we've held it for a number of years and did seek and achieve an exit even though that business didn't list. And then moving on to the quarter that was. And I think if you look at the -- it's funny how quarterly performance can change so significantly. Very interesting to see across the 3 funds, some very different performance outcomes. Pleasing to see NCC there had an excellent quarter, had an excellent year. If you look at the yearly performance, driven in large part from some significant stock-specific catalysts that occurred, especially in Q4, you would have seen some events such as Comms Group sold their -- one of their divisions for a substantial amount of money. If you move to the other 2 investments -- LICs, I should say, NAC had a poor quarter we would say had a disappointing even though it was in line with the benchmark, we're not interested in the benchmark performance. We'd say it's probably an underwhelming year, but it did come on the back of a very strong FY '25. And just like NSE, which also had a poor year, especially when you look at the Small Ords Index. Those 2 funds, in particular, driven by a couple of investments that even though -- and I'll touch on this, the performance of the underlying investments has been very good. We've seen some significant multiple or valuation multiple contraction across our end of the market. There's no doubt small and microcap valuations across the ASX have contracted significantly regardless of business performance, I would say, and that's been driven by the magnitude of factors such as macro, but also micro with a lot of funds continuing to leave the microcap investing space. It has seen a number of, I suppose, long-term sellers in a number of these investments that we've owned. But as I'll touch on later in the presentation, we don't believe it really shows or hides the true value of some of those investments. And you would have seen we provided a July performance update for NCC and NAC with those funds up 10% for NSC and 14% for NAC for the month of July alone. So it's a good start to the year, but we firmly believe as a team that we have a lot more events to occur. Hopefully, over the next 6 to 12 months, that can drive some really significant outperformance across all of our LICs. So I'll touch on a little bit of a macro backdrop in the funds before I hand over that to Angelo from Saunders Group. I think if we touch on Q4, it's probably been no different to Q3 and Q2, which is the rising wall of uncertainty driven by the significantly volatile macro backdrop. I think I'm almost sick of talking about it because it's forever changing for anyone that reads the news daily, day-to-day can be significantly different on the, I suppose, the short-term outlook of where the global economy and the geopolitical framework sort of sits. I think if you pick 4 variables that really affected our investments, it would be obviously rising interest rates, interest rates, suppose adjusting for some of the inflationary pressures that we're seeing in Australia, the Middle East conflict, which depending on weak it is, it's either close to pausing or ceasing or it's on the precipice of blowing up into something much larger. Government fiscal policy settings, interestingly, recently, they seem to be getting a lot more airtime. And I'll touch on that in regards to the effect they're having on house prices, what that does to investor confidence, asset allocation from investors. I'm getting that question a lot, especially leading to this webinar, what are we seeing from investors in regards to the tax changes. And uncertainty is just not good for investing full stop. Yes, it does create opportunity, but in the short term, it drives lower valuations in my view. And then the last one, the big one, data centers, AI, artificial intelligence, when everyone is talking about data center construction globally, but also in Australia, the subsequent funding requirements, long-term demand assumptions, all those things that has a knock-on effect down a very long supply chain. It is affecting a number of businesses, and I'm sure even Angelo might be able to touch on that briefly for his business, but it's something that I think investors are always trying to get their head around to something that continually changes. And I would argue people really don't really understand the long-term effects of artificial intelligence and how it will play out over the next 2 to 3 years. And this is just to highlight that, I've got another one of these charts. But just to put in perspective, when you look at the amount of debt being issued to fund some of these artificial intelligence build-out, whether it's data centers themselves, you can see here that from a perspective, it provides that it's larger than all of those other debt uses that I've listed there below. So auto loans, auto loans, commercial mortgage-backed securities, student loans, credit cards, all of those things. And I also got a chart last night that these estimates have been revised again. I think it was something like $260 billion just over the past little while. So it's a really large part of debt markets globally, but obviously, especially in the U.S. So it is becoming not -- I wouldn't say a risk, but very much a focus point for both equity but also now debt investors, especially in regards to the sort of more investment-grade debt offerings. I think another thing that also has played out is just, I think, confidence in this country. There does seem to be a lot of negative sentiment around and has been around now for quite a while. I think I would say when you look at this business survey here, you can see the readings have been poor in June 2026. But interestingly, we would say the feedback we hear from CEOs, consumers, landlords is quite varying. It is very different. Getting feedback from a large property landlord this morning who operates in the retail space had some very anecdotal feedback was that demand within the retail space of consumer base has actually been better probably than what people think. they had the analogy that because a lot of people can't travel either because of obviously the geopolitical tension, the subsequent cost of traveling overseas, more people have been staying within Australia, and therefore, they've been spending more money on goods and services within Australia. So they've seen quite a -- I wouldn't say buoyant, but a more constructive outlook for retailers within Australia, which is not something we hear from a lot of other fund managers and equity investors. So we would say it's going to be a very interesting reporting season in August, but we would also say expectations are also very low. So I think you'll see some significant volatility occur as equity investments release their full year results for FY '26, depending on what the outcome is. And again, as I touched on earlier on, this is, I think, what's starting to get more traction across Australia, and that's obviously house price growth, which really hasn't turned into growth. It's now turned into falling values. And even though 1% and 2% figures don't seem like amount -- a large amount, it's really -- from our perspective, and as many people on this call would know, it really drives confidence. People feel wealthier, they're more inclined to spend. If they've got more, I suppose, home equity, then obviously, they're more inclined to take a holiday, buy a new car, whatever it may be, do a renovation. But if that falls and especially if those homeowners are gear, the negative effect can be significant. And I think if this continues, I'm a big believer that you will see a change either from government in regards to some of these tax changes or whatever it may be, but you will see it play out in the economy if it continues for a reasonable period of time. So I think it's something that needs to be watched. And it's also notable that the declines are in the larger capital, Sydney and Melbourne. Obviously, Perth, Down have been very strong to a lesser extent, Queensland. But obviously, with the Olympics coming up there over the next sort of little while, the backdrop for Brisbane, in particular, still looks pretty constructive. -- if there anything I think falls into this bucket. That's why they're on this chart. So someone can ask Angelo this particular question. But getting into reporting season, we're probably in a little bit of a unique situation. I can't really remember this has occurred before. But most of our core investments have already pre-released. So we know roughly what I suppose the headline figures are going to be. We don't know the detail. I'm sure the devil can be in the detail. But I think from a very top-down perspective, most of our core businesses for FY '26 grew their earnings per share. And my team was nice enough here to put this in a visual representation. But you can see from an earnings perspective in the blue chart from FY '26 to '25, some of these businesses recorded some significant earnings growth from an EPS perspective, which we believe is the best way to measure an outcome of our business' performance for a particular year. Unfortunately, what we haven't -- well, before I get to that, the other key thing is obviously net debt. So some people might say, well, the business is growing, but it's highly geared, I'm not going to apply a big multiple to it. It's too risky. What we've seen more recently, and I think MaxiPass is the standout for this, which Rob will touch on potentially, and I'll touch on later, a lot of this earnings growth and profit is translating into cash, which is really pleasing. Cash is king. If you've got a net cash balance sheet, it allows you to reinvest in your business. It allows you to acquire other businesses. It allows you to implement strong constructive capital management strategies. It gives you a lot of optionality and lowers the overall risk profile of your business. So most of our largest investments are in a net cash position or will be very soon. And in some cases, they're a significant net cash position. Frustratingly, though, and surprised I've got any hair left in some cases, -- from December onwards, January onwards, what we've seen is a significant detraction in what people are willing to pay for these businesses. So I'll pick on MaxiPARTS again. But MaxiPARTS has seen their share price fall by roughly, I think, 40% to 50% over the last 6-month period. They provided a trading update 2 weeks ago. It was ahead of guidance. Their cash position was well ahead of guidance. It sees them with a net cash balance sheet of $7 million, and they're trading on a price to earnings multiple today based on current year earnings of about 8x, whereby some of their peers are in high teens or even the 20s. And from our perspective, it's purely a function of a number of things, but a function that MaxiPARTS is a smallly liquid business. They have also been hurt by 1 or 2 of their largest shareholders receiving redemption requests, which therefore pushes the share price down even further. They haven't been alone. If you look at some of the other businesses here, very few of ours have been able to rerate. They've simply gone sideways even for some excellent performing businesses such as XRF Scientific. In the case, Saunders, Saunders has rallied. Move Logistics, we think, is an interesting one. For those of you who have been listening to me for the last couple of years, we've been saying, wait until they get back to profitability. Rob was over there last month. They've come out with a release saying they've hit their goals, which was returning to profitability. For some strange reason, even though that business is now profitable, the share price is lower today than where it was roughly 6 months ago, which, in our view, makes absolute 0 sense. But it does mean the underlying value in the business is there. It just needs to rerate. And if it won't rerate from just an investor standpoint, we think it will rerate from -- for a number of other reasons, whereas capital management or corporate activity something will occur. And Jarrod put this slide together just before I finish, and I think it's quite topical and really highlights why we invest in small caps or emerging companies. This business here, we've sort of tried to highlight on one page is XRF Scientific, one of our larger investments. And it really highlights, I suppose, the long history some of these small caps have of compounding earnings. But most importantly, they have multiple growth levers to use, and Angela might touch on this in his business. But essentially, we look for small caps that have more than one lever to grow earnings. So in the case of XRF, they create their own products. They sell them to Tier 1 miners and Tier 1 sort of laboratories around the world that test resources, I suppose, chemical assays and things like that. So they've been able to take that product profile. They've expanded overseas. As you can see, their office expansion to Canada, Germany, Melbourne. So they've increased their network. They've also taken that, I suppose, that know-how and say, well, all right, we've got the customer base. We might only be in 1 or 2 product segments. So let's start to build out our product development. So they might have a good relationship with BHP. So they build a new product to get them into another part of BHP's business. And based on, I suppose, the trust they have between the 2 parties, they start to take share of some of their other suppliers as they increase their R&D spend and build out that product development. And then thirdly, if they have the earnings multiple, the cash flow and the balance sheet to do it, they can fund M&A internally. And XRF has been excellent at doing this as they've built out a global distribution network. They said, well, all right, instead of us doing the product development, which can take 2, 3, 4, 5 years, we'll acquire some private businesses that don't have the same distribution network as we have. So it allows them to speed up the -- suppose the R&D pipeline and then plug and play into their distribution networks. They might have an excellent A good example is the Orbis acquisition in 2021. They got a great lab jaw crusher product that they knew some clients needed globally, and then they plug that into their global distribution footprint. And I suppose it leverages their earnings profile in a very short period of time. But a lot of our small caps, we think, fit this bill, whether it's MaxiPARTS, XRF, Big River Group, whatever it may be. They have a lot of, I suppose, levers for growth and not just reliant on one because obviously, if you are reliant on one and that one becomes an issue, your ability to grow earnings over the next 12 to 24 months can be severely hindered. And just touching on this, obviously, we have had quite a few updates since we put out our quarterly results. As I said, MaxiPARTS, they provided upgraded FY '26 profit forecast just a couple of weeks ago. We think that's an outstanding outcome considering what occurred in March and February, given obviously the war in Iran and obviously, what's that done to fuel prices and especially diesel prices, which is MaxiParts' end market. But they've also built out the business, made it a more robust business, hired a new CFO and also a GM of their Parts division from -- that both have excellent pedigree. And now with the cash conversion sitting on a net cash balance sheet, we would expect some very aggressive capital management initiatives to be announced at the full year result if the share price remains where it is today. As I also touched on Move Logistics, they've hit their guidance which was to return to profitability after being loss-making for a couple of years. Again, we would say an excellent outcome in what's been a pretty weak macro environment in New Zealand or a lot weaker than here. Again, we think cash flow should be strong, should see them with, I suppose, a negligible level of net debt in the short term. And considering the second half was much stronger than the first half, it bodes well for FY '27. And some of you may note that Mainfreight provided a trading update, I think, last week. And that actually -- they spoke about the New Zealand business seeing improved momentum, which also bodes well for Move. And then finally, Rob might touch on this later, but Firmus, one of our private investments, they announced a new project in Indonesia that will generate some significant revenue over the first 6 years of operations from calendar year '27. I think it's mid or early calendar year '27. And they also completed a close to $3 billion equity raise to 3 or 4 large parties -- and subsequently to that, obviously, we've revalued our investment upwards post that completing last Friday. So with that, I'd like to introduce Angelo DeAngelis, who's the Managing Director and CEO of Saunders International. As I said, we've been an investor in Saunders Pro for close to a decade now, a business that we've seen evolve from probably a family business in sort of Bankstown when we first saw it to what's become quite a sophisticated national contracting business with Tier 1 clients and also the Commonwealth government announcing, I think, and Angelo can correct me, but I think it was -- they announced a defense contract a couple of weeks ago, where they are now the lead contractor for that project in Malaysia. So we've seen this business come a long way. It's really starting to hit its straps. Angelo has been CEO of PR for 12 months now. and he's kindly provided some time to provide an overview of the business and probably more importantly, some of the industries they operate in and the thematics driving the growth in those respective industries. So I'll pass it on to Angelo, and I'll come back later in the Q&A section.

Thank you, Seb, and good morning, everyone, on the call, and thank you to NAOS for the opportunity to talk about our business. Firstly, for those of you who are unfamiliar with Saunders, this is sort of a 10- to 15-minute overview more of the key themes driving the business forward. So it will be reasonably short and brief, but I wanted to give you a sense of the key drivers that are going to shape this business for the next decade. As Seb mentioned, I'm recently appointed to the role of MD and CEO of Saunders. I've been in the Chair officially since October 1 and have been with the organization for 4 years preceding that as the Chief Operating Officer. Today, as I said, is really going to give you a quick overview of some of the key thematics driving the business forward. And I assume that you all have a bit of knowledge perhaps of Saunders. But if you don't, just a quick intro, maybe on to the next slide, please, Seb. Saunders, of course, has been around for 75 years. We're celebrating that milestone this year. Predominantly, its background DNA was building bulk fluid storage facilities, i.e., the big sort of big storage fuel tanks and water reservoirs dotted across the national landscape. And so for the last 75 years, that's been its bread and butter. Over the last 5 years, I guess we've moved on a diversification strategy to build all of the critical infrastructure associated to either side of that tank. A tank is a big storage vessel, of course. There's a pipe that comes in one side and the pipe that goes out the other end. And the critical infrastructure at both ends of that pipeline is what we've started to focus on over the last 5 years. And the organization now really describes itself as an integrated infrastructure services business. You can see the core capabilities listed on the table there. Obviously, our DNA is building fluid storage and transfer infrastructure, but we also deliver all of the other associated infrastructure support, the structural mechanical piping, the automation control systems. We do that in for water and civil infrastructure, and we also do asset and maintenance services on the facilities that we build. The easiest way to describe the new Saunders, I guess, is that we build critical infrastructure in high compliance markets. And the little caveat we have around that, from a business perspective is we have a high barrier to entry, and I'll talk briefly about that on the next slide, please. Some of the key market thematics, of course, for Saunders. Obviously, we're well positioned to take advantage of the significant spend over the next decade on building critical infrastructure and that investment is coming from both government, from private and public sector investment. I'll zero in on a couple of those specifically today because they're fairly topical, but I might skip over the other 2 just briefly to give you a sense of the breadth of the organization. Saunders works in 4 key markets, defense and government, water, energy and resources and industrials. To give you a sense of the breakdown of the portfolio from both an earnings perspective and a pipeline perspective, about 45% water, 25% energy, 20% defense and 10% resources gives you sort of a rough breakdown of the portfolio. And as I mentioned, we build critical infrastructure in those 4 markets that you can see outlined there. Obviously, those markets are quite broad, and we play in a very specific niche part of those markets. In the defense sector, we build defense fuel infrastructure for both the Australian Defense Force and the U.S. Defense Force in the Indo-Pacific, and I'll talk about those in a bit more detail in a moment. Obviously, in the water sector, we build critical water infrastructure, sewer treatment plants, wastewater treatment plants, pumping stations, sewer reline projects, all associated water infrastructure, and we do that for both water utilities around the country and also increasingly for councils across the country as well. And I'll talk about these again in a bit more detail in a moment. Obviously, in the energy sector, we play in the specific niche part of fuel infrastructure again in both operating refineries that exist in the country and all of the fuel terminals dotted across the nation. Our key clients are all of the fuel majors, Tier 1 and Tier 2, and I'll talk about that again in a bit more detail on the subsequent slide. And then finally, in the resources sector, as I said, probably 10% of our business is targeted to that sector. Obviously, in the short time I've got, the key spending from an investment perspective, of course, is in defense. We can all recall the recent federal budget and the increased spending for fuel resilience -- but that's also flowed through to defense spending as well. And the federal government also talked about increasing defense spending to 3% of GDP in the coming years. And we all can wake up every day and see what President Trump is doing around the world and what that means for the U.S. defense in the Indo-Pacific region. From our perspective, as I said, we built critical fuel infrastructure. We see ourselves as the preeminent bulk fuel storage constructor in Australia, and we can see ourselves taking advance of that -- advantage, sorry, of that increased spending over the coming years. Our forward pipeline has just under $1 billion of opportunities in the defense space for identified projects that the federal government and the U.S. government has identified in the region. In the past 8 months, there has been 4 defense fuel projects awarded onshore Australia and one for the Australian government in Malaysia and the Saunders has secured all 4 of those projects. And that little picture on the right-hand side, as Seb mentioned, is a recent award that we announced last month where we've secured our first head contract for -- with the Australian Department of Defense, where we're building critical fuel infrastructure for the Australian government on their only offshore base, which is located in Penang in Malaysia. Next slide, please. In the water sector, of course, everyone can see that there's significant investment well into the next decade on water infrastructure nationally. It's being driven, of course, by key thematics of growing population and aging infrastructure and the various issues that we hear every day about these forever chemicals in the water, PFAS. All of the water utilities are acutely aware of that. And so we're seeing a very large pipeline over the next 10 years of both state and federal investment in water infrastructure. I think no matter where you live in the country, no matter which capital city that you live in, on the fringes of all of those capital cities, you're seeing growth corridors, newest housing estates. Everyone's got to drink, everyone's got to go to the toilet, of course. And so significant investment to support all of that growing population. But even in the existing capital cities, there's significant investment from all of the water utilities in replacing aging infrastructure. And that little picture on the right-hand side there, the Siddeley Street S Pipeline project is a project that we're delivering for Greater Western Water in Melbourne. We're doubling a 750-meter sewer pipeline project underneath Melbourne CBD. And that's a typical project that we're seeing coming in earmarked from all of the water utilities around the country as they're starting to realize that the water infrastructure in the capital cities is some of it's getting up to 100 years old in some of these locations around the country. From a pipeline perspective, as I said, we can see all of the water utilities across the country. We have strong visibility of their forward capital investment program. And so we uniquely target those, of course, about where -- which one of those are coming to market first, second or third, and we've prioritized those, but we can see those well into the next 5 or 6 years with all of the water utilities around the country. If you go to the next slide, this is the one, I guess, that's pretty topical and most people want to talk about in most meetings I have, of course. We all can see what's going on in the world and the interruption of the international fuel supply chain and what that's done for our local and domestic fuel storage. Australia has had 30-odd days of jet, diesel and unleaded storage capacity in this country forever. And it's never been a problem, of course, until the international fuel supply chains have been interrupted as a result of the Middle East war. And we're all aware, of course, the federal government has come out in the recent budget and allocated $10.7 billion of additional fuel security investment. That equates to roughly 2 billion to 3 billion liters of additional jet, diesel and unleaded fuel storage. As I mentioned at the outset, we see ourselves as the preeminent fuel storage constructor. And so I think we're uniquely placed to work with both state and federal governments, but more importantly, the fuel majors on building that additional capacity. As we speak, all of the fuel majors, BP, Ampol, Mobile, Viva, all of the mid-tier fuel storage terminal companies are all busily putting their proposals together to the federal government to take advantage of that additional government spending. is reasonably agnostic on that, to be honest, where we work with all of those fuel majors. We have long-term relationships over 75 years with many of them. We work in all of their current facilities as we speak. We work in both operating refineries as we speak. And so we're -- as I said, we're reasonably agnostic on where that money ultimately and that additional storage gets spent and built. And so we're busily obviously positioning ourselves to take advantage of that. But as we speak, we work in 15 major hazardous facilities nationally with all of those contractors -- sorry, all of those fuel majors -- and we see ourselves as having both the capability and the balance sheet, more importantly, to be able to deliver that fuel storage as the government works through that process in the coming months. And then finally, perhaps on the last sheet, in the resources space, as I said, Saunders is well diversified across 4 key sectors. And in the resources sector, the capital investment that's going on over the last few years in gold processing infrastructure is where we uniquely play at the moment. But we essentially take advantage of the short- to medium-term movement in commodity prices, and we follow the investment cycle that the miners play at the moment, of course, it's in the gold sector, and we have 5 current projects with the gold miners around the country, delivering gold processing infrastructure. Maybe the next slide, yes. As I said today, it was just a quick overview of 10 to 15 minutes, perhaps just to give you a sense of of Saunders. We're uniquely placed to take advantage of the strong tailwind and investments that are in the markets that we play in. As I said, we deliver critical infrastructure that's not easily turned off. And we can see in each of those 4 markets that we operate in, particularly in the niche part that we play in, we can see significant investment well into the next decade of spending on critical infrastructure that supports each of those markets. What we've been busily doing in Saunders over the last few years, I guess, has been diversifying our market. And in the last 10 minutes, I gave you just a quick overview of those 4 markets. But -- but more importantly, I guess, we've been repositioning our brand, moving away from Saunders, the tank company to Saunders the integrated infrastructure services company. Importantly, all of our client base are seeing the additional capability that we've built into the portfolio over the last 5 years. And I guess at the moment, we're busily trying to take advantage of that. We've got our full year results obviously being released in 3 weeks' time on the 27th of August. I encourage you to join that at 2:00 p.m. on the 27th if you've got some more interest. Obviously, we're in a bit of a blackout period at the moment, so I can't share too much information on the business. But certainly, at that webinar update on the 27th, I'll certainly give more information. So I'll be here for the rest of the session. I'll be here until the end. And as Seb said at the beginning, happy to take some questions if there are any at the end of the session. I'll hand back to you, Seb, or Rob.

Yes. Thanks, Angelo. I appreciate you taking time out your clearly busy schedule to give us an update and Seb's comments earlier. I remember the first time we went out to a site out in Bankstown. It's a long way from where the business has transformed to where it is today. So credit to you and the team, and thanks for sticking around. We'll do the Q&A at the end. Next slide, please, Andrew. I'll just do a quick round the ground on some of the notable investee companies and their activities throughout the quarter that was, starting with Urbanise, which a lot of investors on the call know has been a long-term holding for -- within the NAS portfolio, and we are the largest shareholder in that business. They had a very, very busy quarter with a lot of strategic news. And I suppose to summarize our investment thesis there very briefly, we're very focused on the strata division that they do have, and we see there's material opportunity to grow that over the long period of time. And it's underpinned by a big part of what we look at as a strong competitive advantage that's sustainable. We think with the Urbanise Strata offering, the competitive advantage comes down to a few factors, including the fact that a lot of their key competitors are not cloud-based. And by default of that, Urbanise is one of the only ones, if not the only one that's investing heavily into AI at the moment to not only better what they've got, but also create new products, and we've seen some media commentary around what they've done recently in the quarter. Coming to the major news out of the quarter, it's something we've touched on numerous of these calls is that the NAB partnership. And I think it's probably fair to say that when you're building a new technology platform, certainly with payments underpinning it with a major bank, nothing happens overnight. So when this was first announced and the strategic investment by NAB happened back in, I think it was May 2025. We're now sitting here today and as of the end of July and starting in August, we're now seeing pilot customers starting to be able to use that payments integration and full holistic new Urbanise offering into the marketplace. So we expect that to continue for a period of time. And would encourage investors to look at the investor update that Urbanise put out in June this year, June 2026 to see that the building blocks that Urbanise have got in place for very strong ARR growth from approximately $8 million today to what could be $24 million in their presentation in terms of line of sight based on some fundamentals that we do not think are too hard to achieve from where they are now. So in terms of what we're looking for next, it's seeing these payment capabilities and these pilot trials progress into first revenues. And obviously, as well, the company has announced the search is on the way for new nonexecutive director position, and we expect to see an update out of that during the next few months. In terms of Comms Group, again, a very busy quarter for a company that has been a reasonably new one, but one we've been -- had strong conviction in and we're obviously now a substantial shareholder in as well. In terms of why we think this business, the jewel in the crown, so to speak, is their global wholesale offering, which for those on the call in a very simplistic way, what they might do is if you just pick a multinational corporation as an example, say, let's pick Coca-Cola. They've clearly got assets all over the world and even if you think about something as basic as vending machines. If you think about all the vending machines they might have in the Asia Pacific region, they would have a number on those vending machines, whereby if something goes wrong or you need to call help or you want to speak to a customer service offering, there is a number there. In a lot of these countries, Coca-Cola through their major telco provider might be Vodafone or Tata or someone like that, would not have the expertise and the carewithal or they just want a solution for a region. And what Comms Group are able to provide is the digital infrastructure that might underpin the Asia Pacific region, they can give in-country numbers and all of the back-end offerings that make a seamless, quick and easy and efficient offering to large customers. So we think there's a good business that they've got there in their global offering and pleasingly, that is stayed within the group. But what we did see during the quarter was the announcement of the divestment of their on-platinum managed IT assets, and that was for a figure of $30 million, which if you look at what the share price was prior to the time, it was a very material part of the market cap prior to the announcement of this deal. This was above market expectations, no doubt, and certainly our expectations as well. So what we're expecting to happen next is that asset is not yet settled. So we expect that over the coming weeks to months and then really interested to see what the Board and management team decide to do in terms of capital management because Comms Group will be a business that has franking credits attached with the sale. So we would expect some sort of franked dividend to come out of that. Obviously, they can repay some debt, but then it's also about what's next post this settlement of this on Platinum division where we think, as I said earlier, the global wholesale division is the jewel in the crown. We think that has ample upside. So we think the opportunity to grow from where they are now as a reduced to shrink to great of operation is still very material. Coming to the next slide, I'll briefly touch on XRF Scientific, which for investors on the call, if you want to know more, you can dive into the latest quarterly report we put out in late July, where we did our stocking focus was XRF. We provide a lot more detail there. In terms of the quarter that was, again, Sebastian had a slide earlier around this business has been a consistent grower and a consistent grower through acquisitions and bolt-ons over a long period of time, and that continued during the quarter with the acquisition of a noncore asset out of Bronco, which is a large U.S. listed business. We think XRF will be able to acquire a very strategic asset in terms of how they can grow going forward and did it for a very, very compelling valuation. So we would expect the next quarter to see obviously the results coming out. We're in the reporting season now, but we also would think that this Brunker acquisition is going to start to see the operations set up in the U.S., so they're going to open an office there, and there's a new product pipeline that will be developed and the company has touched on that in the previous release that we should expect to see new machinery across various parts of their business out in the coming months. And typically, when you see a new machinery launched by Axar, if it does, it has translated to strong revenue growth in the past. So we're excited to see what they do come out with. Big River, Saunders said Angela said he was a 75-year-old business for one better. Big River is well over 100 years old now in terms of the originations of that up in Grafton many, many years ago. And obviously, it's been a key part of the NAOS portfolio for a long period of time as well. The quarter that was -- they have provided an update. And if you consider a lot of the rhetoric we've touched on today is clearly in terms of the Middle East and the flow-on effects across the building industry and the construction space has been felt in that kind of 3Q, 4Q part of the domestic landscape. And we did see Big River and mentioned some softness there. But I suppose looking at that as a short-term issue and what we were pretty excited to see out of that was the margins were able to -- the gross margins were actually able to grow despite some choppiness in the market and the cash generation was very strong. So we do think the management team have been keeping to their knitting and have been focused on improving the margin profile of this business because when you think about a distribution business, every incremental increase in margins has a dramatic impact to the bottom line. We also saw the company come out and establish first guidance for FY '27, which was talked around as being double-digit EBITDA growth. Now double digit could imply anything from 10% to 99%. And certainly, we're not suggesting the latter. But at the former end of 10%, this does seem like it is based on what we can understand with the acquisition of JBS, even annualizing that, we would expect that to be readily achievable for Big River in terms of what's coming up in the next quarter as well, they've announced a strategic review. And when you look at the share price today, it's below where it was even the time of the IPO despite it being a far stronger, far more well diversified and more resilient business since that period of time. So we would expect further updates from the strategic review process with Greenstone in due course. And then coming to the slide, with EchoIQ, this will be a new one we haven't put in, and we do try to put in some different ones here and then into these updates. So for those, I'm sure many of you on the call would have heard of EchoIQ who've been following the small cap end of the markets, but it is an AI-driven technology that has a genuine competitive advantage in our opinion, based on the data agreement they have in place for Echocardiograms, which is with the National Echocardiogram institution within Australia. This is the leading data package globally, and they have the ability to have exclusivity on that for a number of years. And as we know with AI, the data inputs are what matter in terms of getting the quality outputs and EchoIQ, I should say, is in a very, very commanding position to have that as a defendable moat around their business. In terms of what happened during the quarter, they deployed their Echo aortic stenosis product, which is an existing FDA-approved product that is generating revenue. They did deploy this in Mount Sinai in the U.S. during the quarter. But -- and probably more importantly was the research collaboration they announced with the Mayo Clinic for their new product, which is the heart failure product, which is currently undergoing the FDA submission and review. The Mayo Clinic is looking to be the leading commercialization partner of that. And Mayo Clinic, as we know, is one of the leading hospital groups globally and people certainly look at what they do as a way I suppose as a key opinion leader in the space. Plenty of other news as well during the quarter for EoIQ was obviously the deal they signed with ProMedicus, which is -- as we know, one of the absolute leading businesses in the health care space globally and one of the best businesses on the ASX. They've done a partnership deal there where EchoIQ will receive funding, but also the commercial and distribution model, I suppose, agreement alongside that as well. So we're pretty excited to see where that goes. And obviously, there's plenty of catalysts coming up. But I do want to state, given there is FDA decisions and plenty of, I suppose, outcomes here that are out of anyone's control, this is very much a risk-weighted and risk-adjusted position within the portfolio of NAOS. And finally, Pharmax Group, which, again, a mission-critical digital infrastructure, one we've touched on in a recent quarter and focus in one of our quarterlies. It is probably hard to overstate how critical this piece of infrastructure that sits within the pharmaceutical and pharmacy kind of ecosystem. They are the gateway that circa 99% of all transactions in that space flow on over. And if you want to sell diabetic drugs in Australia, you have to have Pharmex within your software offering within your pharmacy. So it is not a nice to have, it is a must-have. And their business note, we've -- as I touched on earlier, we've exited our position in Aeramentum, but we saw a lot of hallmarks when we first looked at Pharmex where they've got a layer of a network and a moat that's already in place and the ability to scale high-margin layers on top of what they already have is something we saw work well with Aeramentum, and we see hallmarks of this being able to be implemented with Pharmex and we're starting to see that with some of the revenue layers they've got in place around marketplace, which they have touched on as a strong growth area that occurred within the quarter. They announced that to market. And obviously, the initial works with Sigma Healthcare and to refresh Pharmex have done an equity deal with Sigma and Chemist Warehouse, who are already a user of the gateway and of the platform to be more of a strategic partner over the coming years. And we've seen our announcement of FirstWorks with Sigma being a focus on the New Zealand wholesale market as the next cab off the rank with what to expect there. And that is it for me. So with that, I will hand it over back to Seb for the final part in the Q&A.

Thank you, Rob. So yes, just to finish up before I go to questions. And as I said, if you have any questions, just please feel free to write those in the Q&A box on the right-hand side, hopefully, for you. But yes, I think, look, for the remaining part of calendar year '26, essentially the first part of FY '27. Yes, we think it's going to be a very eventful 6-month period for the NAOS funds for a variety of reasons. But first and foremost, it brings with the reporting season. Investors' attention spans are generally short. So we dare say everyone will be focused on the first 2 months of trading for FY '27 as opposed to the 12 months that was for FY '26. But we -- as always, it really gives people a chance to understand value and the value of a particular business. We think that's especially important for us given most of our investments are in that small and microcap space. And as I've harped on and probably to unblue in the face, even though the value -- I suppose, the underlying business momentum has been strong. This hasn't led to share price increases. And I think, hopefully, it will allow people to understand the momentum some of these businesses have, the unlevered balance sheets, the capital management options, the M&A options and even potential corporate activity that may occur over the short to medium term. I touched on it at the start. It feels like investor expectations are low. There's no doubt about that. It feels like everyone you talk to is in a little bit of a pessimistic downward spiral for a variety of reasons. Maybe it's just that time of the year we're coming to the end of winter. But that generally bodes well for equity investing because when expectations are low, it's not hard to beat those expectations. And that last point here is quite key that everyone's spoken about a big IPO season, and we've been speaking about it now for a while, hasn't occurred. But obviously, market consolidation has continued to occur probably quite quietly behind the scenes. So Steadfast is a notable takeover that's in the process of going through the hoops. There was another one the other day, Energy EOL that received a big premium bid. Market consolidation continues. It's leading to many or fewer and fewer quality small caps remaining listed. We don't see this slowing down, frankly. And what that leaves you with is more ETFs owning a fewer number of stocks, leads to significant dispersion across valuations, across a number of businesses depending on the liquidity profile, but hopefully, it leads to more opportunity over the medium to long term. As I've said here, you can see there how just subdued -- that IPO window has been for the first half to '26. The second half was a little bit better with some notable IPOs such as FDC, but nowhere near where some people's expectations were. And there are obviously a few primed for later in this calendar year. I won't touch on these one by one. I think Rob has touched on a lot of these. But as I said, we're expecting a catalyst-rich calendar year '26. The Big River result, the strategic review, which is probably no surprise given the new corporate shareholder on the share register. MaxiPARTS, I've touched on Thermost, I no doubt we're going to get questions on, but both from an operational point of view and an IPO perspective, that will be topical. CCG, Rob touched on there, what they do with the funds, I suppose the strategy going forward for maximizing value for all shareholders. And even Angelo gets a [ Guernsey ] at the end here, but Saunders. It's a big one for us and no pressure on Angelo, but obviously, the business came off a loss-making FY '25. To Angelo's credit, he stuck his neck out with his team and provided guidance for the full year of '26. That saw the business return to a reasonable profitable business in the second half. But no doubt, our view is, given the momentum we're seeing in that business, the opportunity to increase margins, I think if you annualize that second half as a base case from my perspective, obviously, is not Angelo's perspective, really highlights in our view, the undervalued business that Saunders is, especially relative to some of the other contractors in the space, which have, in some cases, gone vertical, but obviously, it comes down to execution. Finally, before I go to questions, dividend reinvestment plan. Our results are coming up. They start on the 18th of August from memory, give or take. So -- but if you do wish to reinvest your dividend proceeds, please refer to that link at the bottom of the slide. We go through a number of points on why it may be beneficial for you or may not be in some cases. But if you are considering it, please go to that link on the website and read more about it. And if you need any help along the way, don't hesitate to contact us either directly via the phone or via e-mail at inquiries@naos.com.au. With that, I'm going to take off on some questions. I have e-mailed -- I've replied to a number of e-mails. So I'm going to go to the Q&A function Q&A section here. So I'll just go one by one. There is one for Angelo, if you're still there. So I'll start with Angela and you don't have to listen to my dribble for too much longer. So Angelo, this is from Peter, who I know is an avid watcher sand, so strap yourself in. But what is -- and Peter's question is, what is the proportion of recurring revenue that will be saying will be carried over from FY '26 to '27.

Yes, yes. I think the easiest way for me to answer that question, yes, obviously, we haven't given our latest work in hand numbers. We'll do that in a couple of weeks' time. So the last reported number was the number we gave out at the half year of $549 million of work in hand. I think the best way I articulate that, Peter, and for others is that typically will burn over a 3-year period. Now we have these contracts that go out longer duration and these panel contracts in the water sector. So I think a reasonable way to look at that is sort of that will burn over 3 years, and then it's an easy way to take a view of of how much of that will be next year versus the year after versus the year after. Of course, that diminishes -- you burn through it faster, of course. But I think that's a reasonable way to look at it. You can probably look at that work in hand number and divide it by 3 and form a reasonable view of what we'll burn in each of the years.