Sea Harvest Group Limited (SHG) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the Sea Harvest Group 2025 Financial Year-end Results Presentation. I address you today with a far more positive mood than last time -- last year this time. We will reflect on the progress the group has made following a very challenging period between 2022 and 2024. That was a period where the business navigated demanding operating conditions, driven largely by catch rates, volatility and external market pressures. In response, we implemented a clear turnaround strategy, and I am pleased to report that this strategy is delivering results, and this is reflected in a strong operational performance, a more resilient balance sheet and continued optimization of our portfolio. We heard you, we heard our shareholders and we took action. These outcomes position the group well for the future and provide a solid foundation for sustainable growth. Ladies and gentlemen, we must remember that we operate in a global geopolitical tension and conflict environment with wars raging both in Europe and in the Middle East. Locally, we have persistent high unemployment. Our SA consumer remains under pressure. We have high crime rates in South Africa. However, in South Africa, we've seen easing inflation, the interest rate environment has eased, and we've come off the gray list. However, you must remember our business, we can't contract with the seas. Our team is doing well. Our staff is doing well and our management is doing well. We want to thank Felix and all our management team and all our staff and congratulate them for a good set of results. I will now hand you over to our Group CEO, Felix Ratheb; and our CFO, Muhammad Brey, who will take you through the results in detail and outline our strategic priorities and outlook going forward. Thank you.

Thank you very much, Chair, and good morning to everyone that has tuned in for this and dialed in for this presentation. I'll give an overview in terms of the business as well as the segmental performance because the business is quite diverse. I'll hand over to Muh to do the group financial results and spent some time on an outlook because I'm sure that that's what everybody wants to know and then quite a bit of time on questions. We had very good questions last year. It would be great if we had them again this year. That's our operation in South Arm, the Waterfront, our Viking division. If we look at our business in terms of a one-page snapshot, and I've tried to illustrate it differently this time. You can see that our business with an ZAR 8.7 billion revenue, 44% of that is our core Hake business. And that makes up 74% of our profit. So it's still the driving force of the business. In fact, if you look at our South African fishing operations being our Hake and Pelagic business, it's almost 90% of operating profit for the year. It's where the bulk of the employees also sit. We've got close to 4,500 people at sea and in factories of our total 5,500 people complement. So it's a dangerous job, it's a dangerous industry and very labor and capital intensive. From a geographic perspective, 48% is in South Africa, but 52% comes from offshore. And that's -- Europe is a very strong contributor in terms of revenue. We're predominantly Hake and Pelagic are very strong, Australia, but also other markets like our abalone business, in the Far East, China, Hong Kong, Singapore, et cetera. If we do a pro forma, as I'll come to it in my next slide with the sale of Ladismith, almost 64% of revenue will come from offshore, making the Sea Harvest share really a very strong hedge -- rand hedge. We have a portfolio of brands within our business. You'll know the Sea Harvest brand, an iconic brand, been around since 1964. It's the leading brand for the last 3 years in frozen fish and one of the strongest brands in terms of brand equity in the frozen fish segment. With the acquisition of Saldanha, we also are the second leading brand after the Lucky Star in retail in the canned pilchard space. We've got very strong brands like Cape Haddie and High Seas in the export markets. The Diamond Brand is the #1 canned abalone brand in Hong Kong. The Exmouth Wild Prawn brand is an iconic brand in Western Australia. And we've also got our portfolio of Ladismith and Mooivallei brands in the dairy space. So very strong brands in every area that the business operates. But I'd like to also point out that what is really a global brand from a South African perspective is the Cape Haddie or the Cape Hake brand, which is what we sell globally, as well as the Cape Abalone brand, which we are hoping to penetrate further into the Chinese market. As the Chair mentioned, we've had a record year and really most variables that impacts the business have been favorable. But I guess the biggest One has been the demand for seafood continuing to grow. I mean -- those that were around when we listed, I mean, that was the main investment theme. We're seeing that pricing continues to increase and demand for a healthy wild caught protein continues to increase. We've also seen some tailwinds in terms of the biomass, higher biomass, more hake out there. We've had a 42% increase in our catch rates, which has really driven then volume efficiencies across the group, which I'll show later in terms of positive variances from catch rates and volume. That's led to our HEPS being fourfold up to ZAR 2.19. This time last year, we were at ZAR 0.55. With strong cash flow conversion, it's enabled us to reduce our debt by ZAR 417 million, which again, we'll touch on later. With the focus of optimizing our portfolio and really focusing on our fishing assets, we've announced the disposal of Ladismith for ZAR 840 million, which I'll unpack shortly. And we've also disposed of our BM Foods business, which will return circa ZAR 1 billion back in terms of paying debt and really strengthening our balance sheet. Our main challenge for the year has been our abalone business, and that's every abalone producer in South Africa, where selling prices have come further down from where we were this time last year, which has led to a loss in the business and an impairment as well as having to fair value our biological assets downwards. You will have seen the announcement of our disposal of Ladismith Cheese. That was in late November last year. And that was really in line with our strategy of focusing on our core business being fishing. We have sold the business for ZAR 840 million with adjustments for working capital, et cetera, very common for a transaction this type. It's an EV multiple of 5.3x if you look at '25 numbers and a PE of 10.4x. It's been sold to Woodlands, one of the -- in my view, one of the best producers of dairy. So it's a good home for the business. And all proceeds will be used to pay our long-term debt. We're expecting it to close hoping in the first quarter, probably more reasonable in the first half of 2026. I've tried to put there a pro forma in terms of the impact on our 2025 numbers. So our net debt will reduce by close to ZAR 900 million to ZAR 1.4 billion. That will take our net debt-to-EBITDA ratio less than 1, which is comfortable and where we wanted to be. It's slightly dilutive in terms of HEPS. Our HEPS would have been ZAR 2.10 for this year, but quite accretive in terms of operating margin because it's a lower-margin business compared to seafood with the margin being at 18% for the year. These are just the high-level metrics, which are in the condensed financial statements and the SENS we sent out today. Group revenue up 21% with the GP margin up to 29%. That's effectively doubled the operating profit. Operating profit at ZAR 1.3 billion with a margin of 15%. That's led to HEPS of ZAR 2.19, up 300%, and EBIT margin -- EBITDA margin of 20%. It's allowed us to pay a much better dividend in terms of our cover of up 245% to ZAR 0.76. And pleasingly, the net debt-to-EBITDA ratio has come down significantly from 2.5x to 1.3x in terms of our performance. You'll recall, after our very difficult 3 years, as the Chair mentioned, we put together a turnaround strategy for the next 3 years with immediate focus areas and commitments in terms of what we wanted to focus as a management team. The one was to optimize our core business, which is our fishing business, investing capacity, increase quality, increase exports and really increase the margin. Our view was that this business should be making quite comfortably ZAR 700 million between the two businesses through the cycle. It was at ZAR 550 million the previous year. Happy to say from a traffic light perspective, that's green, and we've hit ZAR 1.2 billion for the year. The second one was to address the capital structure. Our view was that our debt was elevated. We needed to reduce our debt by 50% over the next 3 years. Although from a business point of view, it is cyclical, it's a very strong cash-generative business. By shoring up the balance sheet, we could be a lot more consistent in terms of dividends to our shareholders. Pleasingly, we've reduced debt by ZAR 417 million. And with the sale of Ladismith, as I've mentioned, that will reduce to ZAR 1.38 billion, which is a debt-to-EBITDA less than 1, also green. The difficult part of our business has been the growth businesses, as we've mentioned, both businesses were in trouble last year. The Australian business has turned around nicely, a breakeven to ZAR 65 million, but we've seen the opposite on the abalone business, where we had a ZAR 15 million profit last year, and we've accounted a ZAR 92 million loss this year. All macro factors, which we'll discuss in detail. The target has been that we wanted our EBIT margin back to 15%. That's what we committed that we would achieve in this business at listing. Happy to say that we've got it at 15% this year. Our ROIC should equal our WACC. Ours is a blended one because of offshore operations. It's 13%, we've achieved 13%. even more pleasingly is our ROCE, our return on capital employed has hit 18% this year. We wanted an improved dividend for our patient shareholders. That's at ZAR 0.76 this year. And our belief is that through the cycle, we should have a HEPS higher than ZAR 1.50 and not get to levels of ZAR 0.55 previously. And we've achieved ZAR 2.19. Of course, that is at a record high, and it's more through the cycle earnings that I, in particular, look at. I'm going to move into the South African Fishing Group. I'm not going to spend a lot of time in the next 2 slides because I'm going to unpack the Hake business and the pelagic business separately. But in terms of revenue, it's up 24%. GP is up 48%. You can see nice accretion in the GP margin and EBIT margin, 23% from our -- these South African operations and an EBITDA margin of 28% our EBITDA has doubled to almost ZAR 1.5 billion in this particular business. And this is the core of our business, makes up 89% of our earnings. From a metrics point of view, Hake makes up 75% of the revenue, but 82% of the EBIT. So particularly this year, if you remember last year, when we presented this, it was the exact opposite. They do seem to be a little bit countercyclical between the 2 businesses, but both very strong contributors in this particular year. Turning to Hake. We've seen some really, really good tailwinds in Hake. Firstly, we had a 5% increase in the TAC at the beginning of '25. We had anticipated this. We had spent quite a lot of time with scientists understanding where the biomass was and that the increases would be coming. The immediate reaction, and I'd like to thank the Board for taking those decisions very quickly was to invest in freezer trawlers. We've added 4 trawlers to our fleet within the last 2 years, 2 in this particular year. And that gave us the benefit to be able to capture all TAC that was allocated to us. Our Hake landings were up 17%. There's a reason why it's 17% when you've got a 5% increase in TAC, and that was because the previous year, we had quite a bit of fish in the water, which we didn't have repeated this year. With higher volumes, we've seen very good efficiencies in our factories, very good utilization on our fleets. And that's really been compounded by the fact that demand in all markets and channels locally, internationally, specifically for Cape Hake remains very, very strong. You can see that improved pricing of 10%, that's in foreign currency. And also, we've had some favorable conditions in terms of a lower fuel price as well as, I would say, a favorable exchange rate last year. With a focus over the last 3 years of not performing to the extent that we wanted, we focused on costs. We've taken probably around ZAR 122 million of cost out of the business, and that has benefited us in a year where it's turned like this year. I guess the only challenge that we could have thought of as a team was that we have Horse Mackerel quota that we weren't able to catch. We simply didn't have the capacity in terms of vessels, which we are addressing this year with the conversion of the Harvest Nandi to a Horse Mackerel dual trawler. I'm going to unpack the 3 most important valuable variables that impact our business and usually what I'm asked at most one-on-one presentations. The first one on catch rates. This is a chart of the last 25 years. I've been here for quite a long time, and those 3 years between 2004 and 2006 were very tough years, which repeated in '22 to '24. Don't ask me why, but usually, it's at the same time when fuel prices peak as well. So catch rates, you can see from '21 to '24 started coming down significantly and fuel price peaked. I mean those two variables moving in that direction will impact the business. Fortunately, in 2025, we had exactly the opposite. Catch rates increased by 42% big driver of efficiency in our business and the fuel price has come down by ZAR 2 a liter. So very, very good from that perspective in terms of those variables impacting our business. Of course, the biggest one impacting our business is pricing. I mean that comes down to the bottom line. And prices have been very firm. You can see that exports are 9% up very -- that's in foreign currency and you're looking at inflation of 2%. So you're looking at CPI plus 7% in those markets, which is phenomenal. It's mainly been driven by two factors. One, there is definitely an increase in demand in Europe for seafood, particularly white fish. But more importantly, we're also seeing constrained supply. We compete with Cod, Atlantic Cod. It's the second biggest specie in terms of white fish. Cod is down 50% in terms of quotas over the last couple of years. It's created a gap of around 600,000 tonnes of white fish in Europe. It cannot be filled with anything else. Hake is probably your next best bet, and you can see nice growth in revenue of 30%. Most of the additional fish has been channeled to the European market. That ultimately leads to local prices following, particularly on the food service side. So you can see 10% increase in out-of-home consumption of hake. And then ultimately, it will follow in retail being our business, both in mainline retail, which will be your predominantly Shoprite Checkers as well as our Woolworths business. If we look at the Hake metrics, in particular, revenue up 19%. That's driven 8% by volume, but you can see the big influencer is mix and price. I mean that's ZAR 342 million there, hardly anything on the exchange rate. You can see the GP margin jumping to 37% and the EBIT margin in this business jumping to 24% with EBITDA up 125%. I mean we've almost hit ZAR 1 billion in EBIT in this business. I mean the last time I've seen this type of performance was in 2003. So it's taken a while to get there, but we've eventually got there. So well done to Konrad and his team in the Hake business. If we look at a waterfall in terms of, well, what's led this record performance. You can see the volumes, the additional 17% of volumes contributed ZAR 74 million to EBIT. It's followed by the catch rates. The catch rates really result in positive variances on the fleet as well as the factories that's over ZAR 200 million positive in terms of -- on the cost of sales side. But the biggest benefit has been on the sales price. That's ZAR 330 million up. That's just price. So that's excellent and really shows the demand for the product. We've had some benefits in terms of our hedging, both on exchange rate and fuel. And you can see inflation was only ZAR 152 million, which was more than covered by everything else, hitting almost ZAR 1 billion of EBIT in the business. Nothing much has changed significantly from a local export other than the fact that most of those volumes are diverted to export. It's almost 60% of the portfolio there and driven really out of Europe. I mean the pie looks similar, but obviously, with 30% growth in exports, all of them are up. But most of the growth coming out of the traditional core markets like Spain, Portugal, Italy, Poland, Holland, France, very good growth in all the markets, nice growth in Australia and also in Africa in terms of our Horse Mackerel. From a channel perspective, and this is just to focus not only South Africa, this is global. We've seen nice growth in the retail environment. That's off the back of less cod available. So I mean, you have -- the shelves have to be full. So our retail business has grown first and quite significantly, not usually as profitable as our foodservice business globally. That's also gone up by 7% and our wholesale business has gone up. So you can see a very diversified channel mix globally, 53% being out-of-home where seafood is preferred, particularly wild fish, 38% in retail and 9% in wholesale, very nice diversified channel mix. Turning to our Pelagic business. This is the newly acquired business, the Saldanha business for canned and West Point for fishmeal and fish oil. We've seen very, very good catches in red-eye, very good fish oil yields for the year. And having that as well as having invested in efficiencies in the facility has allowed us to increase throughput through the facility. Costs were under control. We've also focused now after we've made all the investments in the factories. We're moving now to the fleet. We've commenced building 2 new vessels here in South Africa. One in -- will be commissioned and available by the end of this year and one the following year, and we have some very good partners on those vessels, too. From a challenge point of view, I'm not going to go into it in a lot of detail on this slide because the slides are coming up will tell you more. But we've had a record low anchovy and pilchard TAC. Also, we are seeing globally that pilchards are under severe supply constraints and difficult to get hold of and prices have increased. We've seen in this particular year, softer global fishmeal and oil pricing, but I must just caution that's coming off a record year. I mean we had fishmeal prices hitting $6,000 -- oil prices, $6,000 and fishmeal prices over $2,500, $3,000. That hasn't been seen before. So my personal view is that if you look at pricing across the cycle, these prices achieved in 2025 are at the upper end of that cycle. If we look at a TAC of anchovy over the last 25 years, and I did an average for you there, 25-year average is 368,000 tonnes, and our TAC last year was 35,000 tonnes. So we are at the bottom of the cycle by far. The same with the pilchard TAC. Although it's seen a bit of a rebound, especially in '24, you can see the 25-year average for pilchard has been 143,000 tonnes, and we're currently sitting at 44,000 tonnes. The reality is that 143,000 tonnes, this industry would be significantly more profitable and significantly less would need to be imported and converted from other parts of the world. So I believe there's a lot of upside coming from a resource perspective in this sector. As I say, what I've done here is I haven't compared our performance. This is different to what you'll see on the accounting side in our pack. This is like-for-like because we didn't own the business for the full year. So this is a pro forma '25 over '24. And you can see revenue was down predominantly driven by price. That's the fishmeal and fish oil price. That took ZAR 132 million out of the numbers, but nice growth in everything else. So you can see that the GP margin maintained at 26%. The EBIT margin in this business at a difficult time at 17%, so very healthy, solid, good business, yielding over ZAR 200 million. It was ZAR 216 million in EBIT for the year. Short waterfall. I'm not going to spend a lot of time going into this, but you can see the importance of the projects that we implemented, which gave us at ZAR 69 million in volume and efficiency gains, but we've lost it all on price being ZAR 82 million down for the year. This business is basically split into two. 50% of the product is sold locally in the can format. to lower LSMs as an affordable protein and 50%, which is the West Point business, which is the fishmeal and fish oil is exported. You can see on the right-hand side from a sales pricing point of view, being a lower LSM product, prices have sort of tracked inflation was around 4%. But you can see fishmeal was down 6% and fish oil was down 50%. The only reason you're seeing revenue down 27% was the unbelievable yields that we achieved on fish oil last year, mitigating that to a big extent. If you look at the markets that we sell this product to, the export markets, 97% goes to Europe. It's a very high-quality fishmeal and fish oil, predominantly used in finfish and mainly salmon and your sea bass and sea bream in Europe. And you can see a very nicely diversified channel mix, 44% being business to business, that would be the feed business, 21% would be the Saldanha brand, 11% wholesale. And that 24% is predominantly food, children's feeding schemes, et cetera, for schools. So quite an important part of this business still. Our seafood business in Australia. We've seen better prawn volumes and better pricing, but I'll show you that it's nowhere near the historical highs or the averages. We've seen good catches in Spanish Mackerel and scallop, which was a focus area. Phenomenal performance in our engineering business. We -- there's -- we do our own engineering internally for 4 months of the year, but we sell our services for the other 8 months of the year to the balance of the industry, the likes of Rio Tinto, BHP Billiton, et cetera. We've seen phenomenal growth, almost 50% growth in that business. Very good operational performance across all fisheries. Team has done an awesome job in terms of just being nimble and very good cost control. The challenges again are external. Unfortunately, climate change affects our Australian business more than other species. Prawns are at the bottom, shallower water. They're not like fish that can swim and find better suited sea temperatures. If there's not a lot of sea grass because of heat waves, they suffer, and that was the reason we've seen the impairment in this year with our prawn volumes way below the 15-year average, which you can see in this chart, you can see that although we've seen a rebound of 9% between '24 and '25, you can see that we are still 15% below the 10-year average, which was the basis that we invested and bought into these businesses. The same with the prawn pricing. You can see a rebound of 7% year-on-year, but still 18% down to post-COVID 2022. So the business has performed a lot better, but still has a way to go to reach where we want it to be. From a revenue waterfall, 19% up in revenue really coming from volume price and our engineering business, GP 33% up and operating profit basically moving from a breakeven to $5.7 million, which is what, $65 million in profit. EBITDA up 135% to almost AUD 11 million. You can see a waterfall here in U.S. dollars -- in Australian dollars in terms of EBITDA. You can see price and mix has had a benefit. Volume has had a benefit. Engineering has had a benefit and pretty much keeping expenses completely flat, giving us an EBITDA of $11 million. All channels were up. Retail was nicely up 26% in both Woolworths and Coles. Foodservice was up 19%. Exports were 15% up and a nicely diversified species portfolio. You can see 34% is prawns, 20% is hake, but it's quite diversified. It's a nicely diversified business in Australia. And from a revenue perspective, Australians love eating their own products. So -- and strong provenance from Exmouth, Shark Bay, et cetera, most of the product remains in Australia, where we get a better return. And most of the product is consumed out of home. And then you can see 88% is in foodservice, 6% in retail and 6% in exports. This has been the toughest part of our business. I'll start with the challenges. Market conditions deteriorated in the year. Our USD selling prices came down 24% in the year and 33% compared to the previous year. So when we bought the business. So it's been very, very tough. That has led to us having to mothballed 2 farms, one being in Kleinzee and the other one in Hermanus, our Whale Rock farm, which will hopefully be completed this year, the first half of this year. That has led to a fair value loss of ZAR 36 million, predominantly because of ForEx, which is much stronger and selling prices, and I'll show you later. But every category has been affected. Ironically, Live was the least affected with 18% down in foreign currency, 31% on can, 46% on dried, 33% on average. However, there is a positive. We are seeing that with bringing the Viking business within Aqunion, the quality has improved significantly. We've managed to take costs out of the business, almost ZAR 60 million in cost savings, well done to John and his team there and very good growth on the farms. I've just had a pro forma. The difference in 2023 selling prices to our 2025 volumes was more than USD 10 per kilo. That would have added ZAR 141 million in EBIT in this number. So that's what we've come from in 2 years' time. It's quite a significant jump. Saying that, though, obviously, the turnaround can also be as quick. From a revenue perspective, you can see that the team did an excellent job in terms of maintaining sales volumes to the market and ensure our presence is there and our product is appreciated. However, you can see the effect is all coming from price, ZAR 91 million loss in price, and that has gone down to the bottom line. GP margins went from 49% to 19% and you've seen an operating loss of ZAR 59 million, compounded by additional loss of ZAR 36 million on fair value. So it was a very, very tough year for the team. In terms of the metrics that we can control, you can see that the volume on the farms has increased to 1,300 tonnes. the value has decreased mainly because of the factors that I mentioned, that ZAR 36 million, but nice growth on the farms, especially if you take into account that the Buffeljags farms were sub 5% when we put the businesses together and now the combined farms are 7.3%. We believe our investment thesis still holds for this particular business. However, it's very reliant on China and Hong Kong in terms of consumer confidence. It's been the highest level of savings since COVID, 30% of everything is saved from a Chinese consumer perspective. Data from Rabobank and other banks are indicating that more than 100 million young Chinese workers are urbanizing by 2030. That's a big number. We've seen a very big increase in seafood consumption per capita and a reduction in pork per capita. So from a demand perspective, you couldn't have a more perfect product. It's appreciated by the Chinese. It's in the top 5 treasures of food that they love. They've been brought up on abalone. From a supply perspective, we are seeing the crisis, I call it a crisis because most farms are in ICU. You're seeing local farms closing, international farms in Australia and New Zealand closing. Even South Korea has reduced production by 20%. So we're seeing supply definitely coming out of the market. There's also a lot of pressure on government locally to curb the illicit abalone trade. It's actually bigger than the -- if we look at data of illicit abalone arriving in Hong Kong, it's close to 3,000 tonnes when our local abalone farm industry is 2,500 tonnes. So that too would reduce supply if curbed. That should bring at some point, equilibrium between supply and demand, leading to price recovery. And as I've said, we don't even look at going to pre-COVID levels of $38 a kilo. Even if we go midpoint of where we were post-COVID, it will add another $141 million to this business. So it can turn relatively quickly, but it's completely now related to the macro factors. Our farming practices in South Africa are very well developed. There's no disease on farms that we're dealing with red tide. Really, the issue is more around the market side. Finally, if we look at our dairy business and our Cape Harvest Foods, record performance this year from this business and really coming off very, very sound investments. We've never taken money out of this business. We've always reinvested everything. We put up a -- if you recall, a new butter plant. We've upgraded our cheese plant. We put in a third dryer powder plant. We then put a fourth powder plant last year in the beginning of the year became operational, an RD plant. So our powder business has done incredibly well. We've introduced value-adding in our cheese with sliced cheese. Our line was operational last year, completely at capacity in terms of sales. And we went off the grid in terms of solar power. There's quite a lot of sun in ladismith. And we are seeing that 25% of our electricity consumption is from the sun. So very, very good projects that have been well implemented, well done to Ronaldo and his team. And also, we've seen nice securing more milk. We've seen an 8% increase in milk in the year with lower price inflation on milk, mainly attributed a lot to the foot and mouth disease. And -- but saying that, though, us having to deal with and the team has done an excellent job with dealing with that between the 2 facilities. I guess the only challenge has been the -- as the Chair mentioned, the local environment, retail environment, in particular, from a consumer perspective, and that has tempered selling price inflation. Otherwise, this number could have been significantly better and more. But you can see from an EBITDA perspective, this business hit ZAR 175 million for the year, ZAR 135 million in operating profit, very good margins. And what's pleasing it's come from everything. Volume was 249, added ZAR 249 million. That's additional milk, but also the mix. It's not necessarily price. It's moving -- having the flexibility that when cheese is down to move to butter and powders, et cetera, et cetera. It's a very nicely diversified business. You can see that the butter and the cheese price actually came down in the year, but our powder prices have gone up, and that's predominantly mix, the types of powders that we were producing for the year. You can see nice milk flow increases over the years with nice stability in terms of the milk price in the last 2 years. Every channel is up. Retail was up 8%, but foodservice was the best benefit. It was 33% up. Even wholesale was up as we sell out of our depots and B2B is predominantly our butter business. which is really used in the baking industry. So you can see a nice portfolio in terms of revenue, 23% in retail, 38% food service, 6% in wholesale and 33% business to business, very much aligned to the strategy that we had with the team. I mean, we've even seen exports being 15% of our business this year. So very much aligning to the success we've had in our seafood business, being diversified in terms of channel mix, market mix, geography and not being reliant on any single customer. That's been the most important strategy that we've been driving in all the businesses that we own. I'll now hand over to Muh. He'll take you through the group's financial results for 2025. Thanks, Muh.

Thank you Felix. Turning to the group financial results for the year ended 31 December 2025. I will begin with a summary of the impairments taken during the year. In light of the prolonged marine heat wave and sustainability concerns in the Shark Bay Managed Prawn Fishery, the Australian government has progressively implemented effort restrictions, culminating in a 50% effort reduction, resulting in the group impairing 5 surplus vessels and goodwill in amounts of ZAR 47 million and ZAR 151 million, respectively. With market conditions in Hong Kong and China continuing to suppress abalone pricing and demand and in an effort to balance supply with demand, the group has mothballed the kleinzee farm with the Whale Rock Farm to follow in 2026, resulting in a ZAR 153 million goodwill impairment in this segment. The Ladismith disposal is expected to result in a book loss on sale of ZAR 134 million as a result of the proceeds being less than the carrying value. From a segmental perspective and pulling together the various businesses in the group, the South African Fishing segment, which includes our Pelagic and our Hake business, increased revenue by 24% to ZAR 5.1 billion, benefiting from the inclusion of the Palagics business for the full year and the improved fishing conditions. The firm price increases and the leveraging effect of the additional volumes drove operating profit up by 143% to ZAR 1.162 billion, with the operating profit margin in our fishing business almost doubling from 12% to 23%. The Australian segment also had a decent year, benefiting from some recovery in the prawn price and an excellent performance from our engineering business, contributing ZAR 65 million in operating profit at an operating profit of a margin of 6%. This from breakeven in the prior year. With Ladismith now accounted for as a discontinued operation, the Cape Harvest Food Group segment now consists of our factory shops and the remaining portions of our associate, BM Foods. Aquaculture had a particularly difficult year with the benefit of the inclusion of the Aqunion business for the full year, offset by sharply lower selling prices. The operating loss of ZAR 59 million was further compounded by a charge of ZAR 36 million in a negative fair value adjustment on biological assets. All in all, a decent year for the group with operating profit from continuing operations increasing by 140% to ZAR 1.17 billion and the operating profit margin doubling from 9% to 18%. Ladismith had an outstanding Swansong year with revenue up 23% to over ZAR 2 billion. And with the leverage of the improved volumes and low cost inflation drove operating profit up by 39% to ZAR 126 million at an operating profit margin of 6%. Looking back 6 years and over the particularly difficult 2022 to 2024 period, the improved performance has seen group operating profit from total operations increased to ZAR 1.3 billion, but more importantly, the margin back at our target level of 15%, this despite some headwinds in some of our segments. It was good to see the momentum of H1 carry into H2 in 2025. From a group P&L perspective, for the year to 31 December 2025, group revenue from continuing operations increased by 20% to ZAR 6.6 billion, benefiting from the inclusion of the Aquaculture business and Pelagic for the full period, good volume growth across most businesses and sound price increases, particularly in our Hake business. Gross profit increased by 35% to ZAR 2.26 billion at a GP margin of 34% with the volume efficiencies offset by softer pricing in our Pelagics and Aquaculture businesses. Other income of ZAR 263 million includes ZAR 40 million in insurance proceeds and ZAR 119 million in fuel and ForEx hedge gains. Net operating expenses, which include selling and distribution, marketing and other operating expenses increased by 4%, mainly as a result of the acquisitions. With focus, fixed costs decreased by 4% on a like-for-like basis to ZAR 1.25 billion. Benefiting again from the excellent price increases and volume efficiencies, group operating profit from continuing operations increased by 140% to ZAR 1.17 billion at an 18% margin. As set out in the previous slide, the group booked impairment losses of ZAR 153 million in Aquaculture and ZAR 198 million in Australia. Included in the fair value line is the ZAR 36 million loss on the negative fair value of biological assets, offset by the ZAR 18 million net gain on the contingent consideration. This resulted in group EBIT of ZAR 812 million at a 12% EBIT margin. Net finance costs decreased by 1% to ZAR 261 million with the benefits of the lower interest rates during the period, offset by the higher levels of the acquisition debt taken on in May 2024 as a result of the acquisition of Pelagic and Aqunion. The ZAR 52 million loss from discontinued operations being Ladismith is after the impairment of ZAR 134 million. On a pre-impairment basis, Ladismith delivered ZAR 81 million in profit after tax in 2025. After accounting for minority share of losses in Aquaculture, profit attributable to Sea Harvest shareholders was up 22% to ZAR 276 million. Looking then at the underlying performance of the business and cutting through the impairments, headline earnings from continuing operations increased by 466% to almost ZAR 650 million, this from ZAR 115 million in the year before. Likewise, group EBITDA from continuing operations increased by 85% to ZAR 1.55 billion with a group EBITDA margin at 23%. Adjusting the profit after tax for insurance proceeds and impairments, the group delivered headline earnings from continuing operations of ZAR 649 million and ZAR 81 million from our discontinued operation being Ladismith, resulting in total headline earnings for the year of ZAR 730 million, a 320% increase over the prior year. After accounting for the increased number of shares in issue as a result of the equity issue to Terrsan in May 2024, HEPS increased fourfold from ZAR 0.55 per share in the prior year to ZAR 2.19 in the current year. In line with our dividend cover, the group declared a dividend of ZAR 0.76 per share for the year to 31 December 2025 resulting in a total dividend of ZAR 274 million. Net working capital as a percentage of revenue has improved further from 19% in the prior year to 18% as the team focused on working capital after the very difficult 2024 year and a total of ZAR 69 million was invested in working capital in the 2025 year. The target is below our target net working capital percentage as of 20%. Turning then to CapEx and depreciation. The 2025 year saw the group use the improved performance to maintain our asset base. Of the ZAR 477 million expended on maintenance CapEx during 2025, ZAR 334 million or 70% was spent on vessel refits and maintenance, including as a result of increased regulatory scrutiny. In total, maintenance CapEx came in at 5% of revenue, while depreciation on PPE was ZAR 352 million or 4% as the business invests in its asset base. Expansion CapEx in 2025 was ZAR 185 million, which included the purchase of the additional Hake freezer trawler, the Harvest Gamesa, the completion of the freezer bought in the prior year, the Santo Doma, a new ice plant and a new product freezer at our Saldanha site, capacity expansion in the fishmeal plant at Pelagic and the completion of the roller dryer plant at Ladismith. The 2026 budget sees maintenance CapEx from continuing operations more normalized at ZAR 371 million. Turning then to the group cash flow waterfall for the year to 31 December 2025, noting that this is on a total operations basis. We opened the year with ZAR 290 million in cash and generated almost ZAR 2 billion in operating cash in 2025. Service invested a net ZAR 69 million in working capital, service interest of ZAR 275 million, settled tax of ZAR 216 million and invested ZAR 177 million in biological assets. And as I mentioned on the previous slide, ZAR 477 million on maintaining the asset base. We generated ZAR 50 million from the sale of excess property and assets and a further ZAR 20 million was received in insurance proceeds. The group utilized ZAR 93 million in dividends, settling ZAR 87 million a portion of the deferred consideration, repurchasing shares to the tune of ZAR 56 million and ultimately, expansion CapEx of ZAR 176 million, ultimately leaving a cash balance of ZAR 754 million for the year. Sea Harvest settled borrowings of ZAR 735 million, leaving cash of ZAR 19 million on the 31st of December 2025. From a net debt perspective, South African net debt has decreased by ZAR 353 million to ZAR 1.57 billion, with the SA net debt-to-EBITDA ratio improving from 1.9x at the end of the prior year to 1.1x at the end of 2025. Australia decreased net debt by ZAR 63 million to ZAR 677 million with a net debt-to-EBITDA ratio improving to 5.5x. It's worthwhile noting that the Australian debt is ring-fenced with a 15-year amortizing profile beginning in December 2027. Pulling it then together, group net debt has decreased by ZAR 417 million to ZAR 2.25 billion with the group net debt-to-EBITDA ratio improving from 2.5 to 1.3x as a result of both the lower levels of debt and the much improved performance. The improved performance has also seen ROCE improve from 10% in 2024 to 18% and with close focus during the year from all teams, the free cash flow conversion ratio has improved from 52% to 58%. Finally, from a capital allocation perspective, the group continues to consolidate. Organically, the group will pursue efficiency projects and organic growth opportunities that deliver required returns and ultimately, long-term value from our shareholders. The significant focus on the capital structure, as set out by Felix in our revised strategy at the beginning of 2025 continues with a target set to reduce net debt by 50% over 3 years through non-core asset disposals, maximizing our free cash flow generation and determined cost reductions. Good progress has been made in all these fronts as set out by Felix in Slide 8 earlier in the presentation. A strong balance sheet will support improved dividends in the future. The group continues reinvesting in the business, modernizing our fleet, seeking efficiencies in our factories, recruiting and retaining increasingly scarce skills and further diversifying our markets. Balancing optimal capital levels to support the business remains a focus with our Australian and Pelagic business more seasonal than our historic Hake business. I'll now hand back over to Felix to take us through an outlook for 2026, after which we'll take questions. Thank you.

Thank you, Mo. And now it's the million-dollar question, and that is, can we have this performance repeated every year? And as our Board was saying, can we have this level of dividend every year? I'm more confident, I must say, on the dividend flow than I am repeating this performance. And that's really because if we look at headwinds, a lot of those are external, not many -- not much we can do about it. So if we look at the macro that has changed since last year, we've got a significantly stronger rand. And although in the year, we are hedged 50%, we are exposed to the balance 50%. I think that's a big one. The second one, which I didn't even have on this slide because that's how quickly the world changes that over the weekend with the war in the Gulf, fuel has spiked and has gone up to almost $80 a barrel, which is another factor that affects our business. So both those are macro factors, but equally speaking, that can change relatively quickly, too. We've got lower volumes from a TAC perspective. That is to be expected, however, because we had very, very poor catch rates in 2024, and those are the catch rates that are put into the model for the 2026 TAC. So that we've expected. The other factors are environmental. So if you look at it from a marine heat waves point of view, we had another marine heat wave last year. We don't quite know what the recovery, if any, recovery there will be on the prawn resource or if it will get worse in Australia. And in terms of abalone, trade wars and real wars are not helping in terms of getting the Chinese consumer to spend more. So a lot of those are headwinds that we are facing external to our business. From a tailwinds perspective, though, as I've mentioned, cod is a slow-growing specie. It's a long-lived specie. It's not overnight going to appear. So I believe we're looking at 5 years in terms of this gap in terms of supply. We're going to see very strong demand out of Europe, specifically out of the U.K., which is predominantly a cod and fish type -- cod and chips type market. That will continue. We've also seen a spike in fishmeal and fish oil prices. That is almost 20% higher to this time last year, which will mitigate the stronger rand. And also, what we've seen is that the investment over the last couple of years in our factories and our fleet will allow us to at least optimize the volumes that we do have available and not leave anything in the water. I think those are things that we can control, and we will be focusing on. I mean the main one is really efficiencies. We've done a lot on costs. It's really becoming more and more efficient and getting more and more on the top line for our products that are highly sought after. So from a focus area as a team is catch our TAC. You never want to leave fish in the water. We've got more capacity, capitalize on international pricing, make sure that we don't leave anything on the table, both in Hake and Pelagics, and I'll be putting a lot of pressure on the sales teams for that. The team has done a good job diversifying abalone markets and channels, specifically moving to larger animals and not necessarily all in Hong Kong with markets like Taiwan and China, mothball our Whale Rock operation, take out more cost, unfortunately, out of the business. You don't want to be feeding animals that you can't sell. We are challenging the Pilbara fish trawl ban in Australia in the courts. Hopefully, we are successful with that. We're pretty confident in April. And then complete the sale of Ladismith, which will shore up our balance sheet significantly, improve our ratios and at the same time, with less debt, more available to be more consistent in terms of our dividend yield and dividend flow. That's it. Thanks very much. I'll take questions now. Over to you, Konrad and Fred.

Thank you. Thank you, Felix. And we are open to questions, comments. And we have some questions there. Is it Konrad?

Yes, we have. So some of the questions relates around what were the key challenges during the period, which I think you addressed at the end. And whether this level of performance can continue? In other words, are these earnings sustainable?

Thanks, Konrad. I guess, yes, I did cover it. I think the biggest challenge over the period has been our Abalone business. It's moved into a loss-making situation. ZAR 92 million is a big number. But we're very, very confident that if you look at this business 5 years ago, pre-COVID it is probably the darling of Aquaculture after salmon. Everybody wanted to get into it. Very strong margins, significant demand. I don't think anybody sold anything, it was just allocating. So I believe that is the challenge, and it's very, very difficult to -- I'm just hoping it doesn't go down the route of Japan, where you had a very export-oriented economy and as soon as it went to a consumer type of economy, you saw deflation. Unfortunately, we are seeing inflation still in China. So -- and a lot of savings, and we just need confidence, consumer confidence to go and spend more. I think that's been the real challenge.

Thank you. Then a question from Chris Logan from Opportune Investments. Aquaculture showed an operating profit loss of ZAR 59 million. Is China itself not becoming a large-scale producer of abalone?

I'll also answer the other question that you asked whether these earnings are sustainable. But let me answer that One first. Look, at the end of the day, China was always a very big producer of Abalone. Their numbers were anything between 180,000 tonnes and 200,000 tonnes. The current numbers are 250,000 tonnes. So clearly, there's more abalone available. And clearly, the consumer is consuming more and more abalone. It's a cheaper abalone and the consumer loves it. Now the issue is not there. I think from our side, have we maintained our premium over Chinese abalone because we are really the wagyu of abalone if you compare it to meat. And we have maintained that premium. There's been almost a $15 a kilo premium on South Africa and abalone. It's very highly sought after. I think the other thing to keep in mind is that our abalone becomes more expensive when you have to fly there in the live format, which is the format that they sell in China. So we have to find different ways of producing like drying, et cetera, bigger animals that don't grow their animals bigger. So we have to differentiate. I do believe, however, that when you go and you eat abalone at a white table cloth restaurant at the Hyatt or at the Shangri-La you're going to be asking for South African abalone. So I don't think that's where the big issue is. I think that the Chinese have always been producing significant abalone. And in fact, with our people on the ground there, it's showing that there are a lot of loss-making farms. What we see is a few green shoots in Hong Kong. We believe that the price has bottomed out and we are seeing prices starting to increase. We're hoping it's not a short-term phenomenon, but we are seeing green shoots more tourism, more people coming into Hong Kong. So there's definitely there are green shoots, but it's early days still. Konrad, the last one in terms of sustainability of earnings. As I've mentioned, I'm very, very confident on the top line from a price perspective. I think that in all our proteins, the price will go up. It's very much in demand. Macro factors, I can't comment on. I'd be making more money on fuel, if I could predict it than in fishing. So that's a tricky one. But I think that where the resources are from a TAC perspective, if we have a good anchovy or TAC this year, we could see a very good year in Pelagics because there's got good tailwinds in terms of pricing. But as Chair said, it's very different -- difficult to contract with the sea. But I believe that our balance sheet will strengthen further. And we will be able to at least deliver on a sustained dividend flow and returns. Also, at the same time, our management of costs need to continue. The team has done an excellent job in the last 3 years. I think that the Abalone team is phenomenal how much cost they've taken out of the business, and that needs to continue. So things that are in control are sustainable, things out of control are a little bit difficult to predict.

Thank you. The two questions are related. Next, it's Murray Moore from Allison Company Fund Managers. What are the current hake catches versus 2025? When is the research special going out to test the pelagic resource? What are your expectations? What's the current update on fishmeal and oil markets and pricing? The Peru outlook. And Horse Mackerel resource. The next question also...

Okay. Hold on. There's 4 questions in 1.

But it relates to that. So it just shows the -- Slide 21 shows a marked decline and had talked to TAC over the last 25 years with the current levels way below the 25-year average. Can you be confident the decline is not structural. So it relates to the results.

Okay. So can you give us the first question because you lost me there already.

Of course, current hake catches versus 2025.

Okay. The current hake catches versus 2025. January, February, very much in line to where they were last year. So we are not seeing but I'd like just to recall that and remind everyone that it's really March where catch rates increased significantly. But January, February, very much in line with last year and where we were tracking.

Right. And then the rest is regarding pelagic. When is the research special going out to test the pelagic resource?

The Africana, which is the vessel is currently out there and doing the survey. It's a little bit late, unfortunately, but it is doing a survey, which is very critical because there are signs of anchovy from our fishermen out there, and we need a TAC in anchovy if the resource is out there. And we need the research to be done. So it's currently doing the survey right now.

And do you have a current update on fishmeal and oil markets and pricing, including a Peru outlook?

Somebody said to me earlier, in terms of climate factors, we are seeing that we might be moving from a La Nina to an El Nino. We are definitely seeing Peru has not have the recruitment that it thought it would have. And we're seeing a spike in fishmeal and oil prices. I think fishmeal prices have increased by 20%, 25% and same with fish oil prices. So it's looking positive on the pricing side. I think the bigger risk in the pelagic side is that what volumes are we going to catch this year because we had nice tailwinds last year with red eye and I don't see that happening every year. So we need TAC of anchovy this year to be able to have a good year. In terms of the question whether it's structural, fishing resources go up and down. It's absolutely normal. So you see hake at the bottom, you'll see it at the top. The question is always is the fish gone, fish is there for 2,000 years. So it -- the models are showing that the resource is sustainable, it's above MSY and you are going to have these patterns which are affected from environmental factors. I don't believe it's structural, though.

To conclude that the longer question, what is your view on the Horse Mackerel resource?

Well, the Horse Mackerel resource as per what we hear from the department. We don't see a big decline in TAC. I think it's more a cashability issue on the resource. The fish seems to have migrated more to the bottom, probably looking for the right temperatures more than a resource issue. I think that -- so then it puts into question what type of hardware do you need out there to catch it? I think that's the bigger question. The resource is there. It's a matter of what is the right suitable vessel to catch it if it's moved?

A question from Paul Stuart Whitman from Rossendale. The Australian food services industry is under pressure. If your Australia business has another tough year, do you think it will require additional capital from South Africa?

I don't believe it will require additional capital from South Africa, no. I think the issue that the Australian business has a very high debt levels with a high interest burden. Fortunately, it's a 15-year amort facility. So it's not very onerous in terms of the repayment schedule and not very onerous in terms of covenants. But I think that's the bigger issue in Australia rather than -- I mean, the reality is with us having the Pilbara fish trawl ban, it's going to affect the business significantly. I mean, that was around 20% of Australia's earnings. So we're going to have to restructure, reengineer, rethink the business if we had to lose the court case. But I think that's the big issue. The Australian business hasn't really required capital. It's been more our abalone business as required capital.

Then combining questions here about the group strategy, do you believe the growth strategy has been successful and maybe combining with that, what should shareholders expect from the group going forward?

Look, we've acquired 11 companies or 11 businesses over a short-term period post-listing. Fair to say not all have worked out. Some of them have been transformative. I think that being able to acquire the third biggest Hake business being Viking Fishing was transformative. You can see it in terms of our margins. To be able to pick up a business that was founded 1905 by the Silverman family in St. Helena Bay in West Point/Saldanha, that's transformative. Those businesses don't come around every year. So that's been -- they have been very, very good acquisitions, and you can see it in the numbers. Mixed bag in Australia, whether it was the acquisitions or the growth or whether it's been environmental factors that have affected it. If we do our analysis, it's been factors out of our control, but one good question, has it been the right strategy there? Abalone is just timing. I believe that if we were sitting here presenting 45% operating margins, which is where they were pre-COVID. It would have been core and fantastic. But where we are now, it's been difficult. And I guess then there's what is the strategy outside of food? At the time that when we pursued that strategy, we believe with our board, it was the right decision. We were facing a fishing rights allocation process that we didn't know where we could land up. And we made that call. I believe, though, that we've done a very good job of the dairy business. It's a good growth sector. We're sad to be exiting that sector, to be honest. But I do believe that, that cash is better suited and allocated to pay debt right now. Otherwise, we'd have to get behind the dairy sector quite hard. In fact, rather than a Woodlands buying us, we would have to look at buying a type of Woodlands, which would get us in those categories, and I don't think there was appetite to do that, and hence, it was preferable to exit, and we exited at a fair price.

Thank you. A question from Sachin Modi from Prima Research. The supply agreement with Seavuna was set to expire in January 2026 with an option to extend for a further 3 years as the supply agreement being extended?

Yes, it has been extended. We're very close partners with Seavuna. We always have been. We do all the selling and marketing of their products. It's a vertical relationship, which has been in place. In fact, if I recall, then the Chairman will know that a lot better than me, but that is a true example of enterprise development in terms of transformation. And the way it was funded and the way it's grown with a very excellent job done by management on that side. And in terms of your other question in terms of where does the group go now in terms of looking forward? I think as we've said, let's look at our 3-year strategy. We're in year 2 of that strategy. We need to dispose off the businesses, focus on our core, get the balance sheet right, get performance more sustainable and more opportunities will come in the future, but it will be in the seafood space. We will remain in this space.

There are no further questions on the system.

Thank you, Konrad and thank you.

Yes. Thank you. Thank you, Muh. Thank you, Felix. Thank you to our audience and to the team. We wish them well for 2026, and we thank them once again for a good result of 2025 and best wishes for 2026. Thank you.