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

Good morning, ladies and gentlemen. A very warm welcome to the half year financial results presentation of Sea Harvest Group. We are delighted to present a very and most pleasing set of half year results. This morning, we are also happy to deliver our first interim dividend. This is despite the fact that the past 6 months, we've faced a number of headwinds. However, our Sea Harvest team did very well to deliver a record result. The year started with a [indiscernible] hitting our operations in Australia and sinking a vessel. Thankfully, we have no fatalities and no injuries. The wall in the middle is in the past 6 months has also, as we all know, had an extremely negative result globally. With a fuel supply in our back and the pricing of fuel also going through the roof. The rand got stronger with the period it is negative for our export business. And more recently, we have been affected by the [indiscernible] we have ever had a few positive posters. We have had good catch rates, a positive export market and an increased global demand for sustainable seafood. These are all contributed to, as I said, a record result. And here, to give you the details of that result, I hand you over to Felix Ratheb. Felix, over to you.

Thank you, Chairman. I'll try and not be too long today. I'll give an overview and a segmental performance. I'll hand over to Mo to look at the group financial results. Give a short outlook, and I'm sure there'll be lots of questions which we can leave quite a bit of time for at the end. That's a beautiful picture of our [indiscernible] operations. Fortunately, we have a bit too low to have any fly over there. So if we look at our results and we look at our business. So we acquired 11 companies in 9 years. So we listed the business and try to grow the business and really get the business right. So I would say, many -- most of them, 80%, 90% worked out, 10, 20 didn't work out as it is with all acquisitions. But we believe now we've got the business where we want it to be. So these are the 4 pillars of our business. The core B now [indiscernible] business. We employ those to 3,000 people there, have 34 vessels around South Africa with 5 processing operations. And that is really a mixture of 3 businesses that we've put into one, which is of course [ Saldana ] operation, our Viking operation that we acquired in Carson and our Mossberg operation. So it's quite a sizable diversified at business. Our pelagic business under the Saldana brand, predominantly doing anchovy and red eye for export into meal and oil and then locally doing filters in the Saldana brand. An operation out in [indiscernible] Bay. We have 710 employees and 6 vessels. Our Australian operation, which predominantly now is a prawn business. It's a vertically integrated prawn business with 16 vessels and 4 locations across the whole of Western Australia. And finally, our Abalone business. The Abalone business is the largest abalone business in the Southern Hemisphere. Again, it's the bringing together of [indiscernible] Viking and to an extent, the feed plant in [indiscernible] again, vertically integrated with farms, processing operations and markets around the world with close to 500 employees. So that is our business and the pillars of our business going forward. From a revenue perspective, 65% of that business is hake with 21% being our Pelagic business. 10%, our Australian business and 4% being our Abalone business, which is growing. If we look at EBIT for this year, again, the hake result carries us. 79% of our EBIT is in hake and 21% being in Pelagic for the first half. Taking into account that the other 2 businesses are more weighted towards the second half. And that mirrors sort of the employees in terms of revenue and employees. So close to 70% of our employees in hake and 17% in Pelagic. We have had a bit of a change in terms of our market mix, our geography mix, where you can see now that 63% of our earnings are from offshore and for the first time, our European business is actually bigger than our South African business, with 44% of revenue out of Europe versus 37% out of South Africa. You can see Australia is still sizable in our lives of 10% of our revenue. And then you're seeing other markets in terms of, obviously, Asia being China, that's our Abalone business and 4% being predominantly the U.S. which we've seen growing quite nicely in our portfolio and to an extent, various African countries. The chair did a very, very good job in terms of highlighting the challenges and highlights that we face. As the Chair mentioned, our -- one of our biggest challenges this year has been that it's been the lowest recorded pelagic fishing season in both -- predominantly in [indiscernible] I'll show you a little bit of that later. So that didn't start off well. We have a stronger rand and, of course, being 63% into euros and U.S. dollars. That hasn't been positive for our business. And we've seen a material increase in the fuel price. To add to that, we also had an issue with our trawling business, our fish trawling business in an area called the [indiscernible] in Western Australia, where the government and there was a prohibition order in terms of fishing and trawling for fish with eventually converting to some other form of fishing being track. We are challenging that in the high court, but I'll come to that a little bit later. But there were also lots of highlights. I think the biggest one being the demand, which we continue seeing increasing in Europe. And that is for wild fish. This is mainly our Hake business. And internationally, with what's happened with cod, happened with the Russia, it continues to benefit us. And we've seen double-digit price increases. That's not only in our Hake business, but also in pelagic business, which I'll come to. Until this point in time when we were presenting the results, which was the end of June. In fact, we had one of our best cultured catch volumes that we've had in many, many years. I mean to the extent that the TAC increased substantially until we had the virus that the Chairman spoke about. We've seen record fish meal and fish oil prices, predominantly related to the super El Nino that we are seeing in Peru an improved performance in our aquaculture business. We went through 3 tough years with the resource very low and fuel very high, and we had to really focus on cost and take a lot of cost out of the business that's benefiting us going forward. My one team have put together a very sound foreign exchange and fuel hedge policy, which is benefiting us in a time where we're seeing these very, very sharp movements in both those uncontrollables and importantly, we can successfully concluded the sale of Ladysmith on the 30th of April, which was one of our strategies in terms of strengthening the balance sheet and using all those proceeds to settle debt. We're also in the final phase of disposing of the last of the businesses that we have in BM Foods, resulting really in a complete basically wild core and aquaculture play. You'll recall the strategic objectives we set ourselves in the beginning of 2025 when we had a really poor year. And that was, one, to get the EBIT margin above the 15% level. We currently in the first half of 2026 at 17%, ensuring that through the cycle, our earnings or our EPS is above ZAR 1.30. We hit ZAR 1.95 last year. We are ZAR 0.97 in the first 6 months. I'm pretty confident we'll be way above that. Our ROIC to at least be equal to our WACC that's sitting at 13% versus our WACC and 13%. More pleasingly, though, if we look at our businesses, and Mo might talk about it a bit later, is that -- our return on capital employed in our hake business has hit close to 40%, which is the highest ever been. We've also seen task ourselves with improving dividends. We paid a good dividend at the beginning of this year based on last year's financials at ZAR 0.76 and we've, for the first time, paid a maiden dividend of ZAR 0.24 because our performance allows that. Taking the full year dividend so far this year, close to 1, which is a significant yield looking at our share price, where it's trading right now. From a metrics point of view, I'm not going to go into this in detail because Mo covers that in detail. Group revenue was 6% down. That was predominantly driven by volumes. Lower CAC, lower pelagic catch prawn season starting later, et cetera. So virtually all of our businesses were affected with that. However, we're seeing EBIT up by 2% and [indiscernible] up by 14%. And that's -- that's the selling price story that I spoke about a little bit sooner. You can see that we protected our gross profit margin, even though we had those high fuel prices, and in a way, lower revenue from the exchange rate. And our EBIT margin actually improved to 17% with our EBIT margin up to -- our -- we paid close to, if I recall, ZAR 570 million in debt in the last 6 months. taking our net debt-to-EBITDA ratio to 1.1x, off a peak of 2.8 at 1 stage. So done incredibly well in terms of delivering on our strategy of reducing debt in our business. That is now a picture of our facility in [ Saldana Bay. ] We'd love to take people out there if we can make a visit a site visit on day -- and 1 of our freezer toll is the harvest and V, which is probably the largest presale in the South African treasury -- our hake business has had an excellent first half. Because of the cycle, we've seen the TAC reduced to around 145,000 tonnes, which is probably where the TAC should be. When we when we're seeing levels of 139 , it's on the lower end, 150 on the higher end. So we're probably where we want to be in terms of PAC. And we're seeing stable catch rates. Yes, they're off the high of last year. So if 1 looks at it, it's 9% lower than last year. But I'll show you a chart that comes afterwards that these are not or catch rates. The rand has been stronger 3% to the euro and 10% almost the dollar that hit us by ZAR 70 million in the first half. And our average fuel price increased by 20%. It's only 20% because really the big increases came in May and June. For the rest of the year, it's almost double the price that we were paying previously. However, we've seen very strong demand in the international market. As I've said, COD is a slow growing fresh and TAC is low. We will probably see that for a couple of more years. The sanctions against Russia are getting stronger. We're not seeing a lot of Pacific Cod coming into Europe, even from China, a reprocessed in China. So we're seeing very, very strong demand. And there, we've seen selling prices increase by 14%, and that's sort of the 3% reduction in the exchange rate. We've also had some benefits in terms of the foreign exchange for the ForEx and fuel ledgers. And that's really because of the sharp movement in those 2 in a very short period of time. And we're seeing very, very good efficiencies in our fleet and factory. I mean to give you a stat, our freezer pollers, which are our 4 biggest treat all is we're running at almost a 90% utilization for the first half, which is absolutely excellent. This is a chart that I showed, which I keep showing and that is to give you an understanding of the catch rates for the last 26 years now. And you can really see the period that our businesses will definitely since [indiscernible] have struggled. And that was between that 2004, 2006, where we saw cash rate dip to that 7 tons a day level. We started seeing that in '23, '24 and 2022. So those 3 years were also -- and then we've seen a nice redone. It's come back a little bit in the first half. But as you can see, 9.7 tonnes per day is higher than the last many, many years. So it's a very acceptable catch rate. Unfortunately, though, we're seeing that chart at the top, which is whenever you see that jaw widening, it is a concern, but we've managed to close that gap this year because of selling prices. And that's fuel prices doing that. and catch rates coming down. That's always one of my worries in this business. But we can only focus on what we can control. And this time, it was controlling really the selling prices. And you can see it on this chart. You can see that locally, I would say demand for seafood local is incredibly strong, but the consumer would struggle to pay more than CPI plus 1% or 2% in this environment. And that's the reason you're seeing 4% to 5% increase. It is only half a year. So one needs to look at a full year effect because the price increases were implemented a little bit later. However, still, you can see the marked difference in the export market. The international market price increases, this is net -- this is excluding exchange rate was 17%. So pretty much recovering a lot of the losses that we had in fuel. And you can see our export business was 12% up, even though we've had a reduction of with a 12% increase and the 5% reduction in TAC, you can see that our export component in our business has now heated 64% in the first half. So there is arbitrage in the export market. It is giving a better return and more fishes channel to the more profitable markets. What we are also seeing is significant demand coming out of the U.K., which we haven't had before. predominantly a card market and really the United States, too, it's been very, very positive from that perspective. You can see where -- most of our product has been sold, 81% of our product is sold in Europe, and that's across many, many countries in Europe, starting from Portugal, Spain, France, Holland, U.K., Poland, all over the place. So it's many, many countries. It's not one country. And then you can see slightly less in Australia as we've diverted more products to more lucrative markets. And then you're seeing other markets holding, and that's predominantly with the U.S. coming back as well and wanting more of our product. From a channel perspective, pretty much seeing a nice increase in retail globally. So firm demand globally for our product. also nice growth in food service at the expense of wholesale, wholesale is mainly out of our depot selling to consumers or distributors, and we are seeing that level of the market coming under pressure. But for me to remind everyone, we've only got so much product and 5% less because of the TAC reduction. So we have to allocate to markets where we get the best returns. It's a very nicely balanced business with, let's call it, half in food service, 40% in retail and 7% in wholesale. If we look at the metrics then what transpired. So revenue increased by 7% from 1.8 to 2.2 and you can see the 4% reduction in volume, that was ZAR 71 million of our revenue. But you can see that big jump, clawing back ZAR 283 million in price. In fact, it was a negative on the exchange rate of ZAR 69 million. So very, very positive in terms of that one particular chart in the middle explains everything. You could see our GP is up, our EBIT was up 7%, off a very, very good high last year. and EBITDA up 10%. So you can see EBIT margin in this business at 22% right now. If I look at our waterfall in terms of the increase in EBIT, you can see we posted ZAR 231 million in the first half last year, which was a record. We're then seeing ZAR 252 million that we called back in price. We lost some on the lower volumes, the 4% reduction or the 5% reduction in TAC. You then see the effect of cash rates coming through. So it's ZAR 50 million. That's 9% results in ZAR 50 million in lost and then we've got ZAR 57 million in exchange rate, plus another ZAR 15 million in fuel. The fuel has been mitigated from the hedge. So that's not the full effect of fuel. And then obviously, inflation, normal inflation coming through. And you've seen the nice increase to ZAR 463 million in this business. That is our facility in Catalina Bay, our fish meal and canning facility. As I've said, it's -- this business probably is the best result that we've seen in our business because of the challenges faced in this business. It's a weakest in use fishing season on record. We're seeing El Nino globally, particularly in Peru. But what we are also seeing is that the fact that we are having all these issues with pelagic species everywhere, even us trying to import from Morocco or Mexico or Japan or Russia, Sardines for reprocessing has been very difficult to source. Fortunately, though, we actually had a very good local catch in the first 6 months. which has mitigated the effect of what's transpiring globally. What we are seeing is that with the super El Nino prices have gone through the roof, a nice term that the Chairman used we've got 53% increase in fish meal prices and close to 70% -- 76% increase in oil prices. So these are record prices we're seeing for meal and oil. And we don't -- and you'll see later on the highlights, I don't foresee this disappearing anytime soon. I think we're going to be in with these type of prices, at least for the first half of next year. And at the same time, we've really focused on costs in this business in terms of making sure that it's a low-cost business, knowing that it's very variable and quite cyclical pelagic versus, let's say, ha, which is a lot more stable. And here's what I was talking about in terms of the anti-A, -- you can see that the anchors of close to 0.5 million tonnes and down to 30,000 tonnes this year. What was disappointing is even with the 30,000 tonnes [ TAC, ] we're already sitting in September, had any has been caught. So there's been no anchovy out there. It's the lowest we've ever seen. We saw a nice rebound on the [ colo CAC. ] You can see that the department issued 66,000 tonnes and our fisherman could see a lot of cultures out there throughout the year. But unfortunately, towards the last 3 weeks, we had the problem with fish washing up in our shares on our shores high mortalities of pulses. I think this is the other one. If you look at it from a first half, look at the good landings of [indiscernible] and the poor landings of industrial fish. Now what I've done here, I've superimposed red eye on top of anchovies, you can see the actual landings on both species. And even with that, I mean, that whole 72,000 tonnes landed was red eye. So you can see the effect that we've had. So delivering a result that we've delivered or the team has delivered with these type of what nature has given us is quite phenomenal. So yes, revenue is down. It's driven by 30% reduction in volume. Price draw back more than half of that ZAR 135 million, and we lost a little bit on ForEx. But you can still see the gross margin was protected at 25%. EBIT margin we're still at 17%. And the business posted ZAR 122 million with a ROCE of close to 29% in the first -- rolling 12 months. So still a very good performance in a very, very difficult environment. And you can see where the numbers are from an EBIT perspective. So it was ZAR 144 million. If we did nothing, we would lost ZAR 103 million in volume. But then you're seeing the impact of price. Unfortunately, the exchange rate was a problem. And inflation, we've kept off net of savings was only ZAR 22 million. So ZAR 22 million of last year is ZAR 144 million, but still a very respectable performance in a very difficult environment. You can see here the mix has changed slightly, whereas last year, it was more exports, and that was because we had more of the anchovy fishmeal revenue. This year, it's swung because we've had quite a lot of canned product being court processed and sold. We see nice increases in the canned business with 5%, but you can see fishmeal and oil reduction in volume, but massive increases in pricing. From a channel perspective, just to give you an outline that it's still the same. Everything in fishmeal and oil is exported predominantly to Europe. And if you look at our Saldana brand, you can see 40% is B2B. 24% is under the Saldana brand in retail. 14% is wholesale and 22% is food service. So a very nice balance mix to optimize the return of our portion. If we look at our Australian business, and ironically, this was one of the vessels affected during our tropical cyclone [indiscernible] Fortunately, not a lot of damage to this particular vessel. But what we saw is that we started off with the tropical cyclone, it affected all our business from the perspective that we couldn't load offload, which meant we had to delay our pawn season. At the same time, we sell engineering hours to -- during this season -- this period to external parties. We had to really use those hours to repair our vessels that were damaged during the storm. There was no scallop quota issued, which -- and I'll show you the effect of that. And then we had the fight with the government in terms of the [indiscernible] So we took the Department of Fisheries to the High Court. We believe that the science didn't really justify the decision, and it was a knee-jerk reaction, and we're waiting for a judgment from the courts. From a highlights perspective, because ironically of the storm, you have a lot of water, a lot of rain and a lot of the rivers are flushing out, which brings a lot of food and flushes out a lot of the prawns so we were expecting actually a very good fan season, and it has been. It has been a very, very strong catch season. We're sitting in September. We've actually made our full year budget by September. So it will be a very positive season. We're also seeing firmer prawn pricing, particularly because other fisheries around Australia haven't seen the same type of recovery. So there's less supply and at the same time, we took quite a lot of cost out of this business in January this year post the [indiscernible] band because that was a big portion of our EBITDA, which I'll show you. There's not much to show you the numbers because this is really an H2 business. So effectively, the trading business has carried the first half of the numbers, which is not a lot. And without the fish trawl, you can see the volumes are down and the revenue is down. So it was really focusing on the costs here and trying to break even from an EBITDA perspective, which we did. I mean we are basically at a breakeven in the first 6 months in terms of EBITDA. This is the effect that it's had in the business. So we've towed back from price and mix, but the full band was significant. I mean if you look at that $2.3 million EBITDA is what we posted in the first half of last year million of that was immediately taken away with the provision order that was implemented. So it's material to this business. And you can see the volume impact, and that's predominantly because of scallops. And then the effect of oral after that on the engineering, the loss of the vessel, you can see all of those being impacted. So it's been a very, very tough year for the Australian team. I'm happy to say that spend some time there and the way they've led from the front in terms of management and got the business back on track, and I'm actually excited that we'll have a decent half 2 in this business. The mix hasn't changed materially. It's still very much driven to foodservice. We've seen nice demand coming from exports in the second half for our prawns and a nicely diversified business. Recall that still our biggest part of this business is selling our KP. Australia is a very, very big market for our sea-frozen skinless bonus fill -- that's still a big portion of our business, but a very nicely diversified business with prawns, scallops, crab the engineering services we provide, which is an extension of what we do for ourselves. So a very nicely diversified business. That's our aquaculture operation at [indiscernible] that's in [indiscernible] So we've had challenges from the perspective that what we've tried to do is reduce loss-making products that we sell which is our canned product, which is predominantly on the smaller sizes. We focus on growing the farms with bigger animals, which give you a better return. And that meant we had to hold back on sales to allow the animals to grow. So that you're seeing a reduction in volumes. Our feed business, which is incredibly profitable, was also lower for the year because with all the other farms struggling and reducing production, both in South Africa and in Australia and New Zealand, where we supplied we're seeing lower sales of our feed into those markets, which has meant we needed to reinvent ourselves and do something different. And at the same time, because 100% of what we sell here is in U.S. dollars, the 10% stronger rand did affect this business. [ Avon ] are positive. Selling prices are 6% up versus the same time last year. But importantly, if we look at the last quarter of last year, prices are up by 22%. So we believe that, that was the bottom. We're seeing a better size and quality coming out of our farms. We've diversified markets out of Hong Kong, we stronger in Taiwan doing quite a bit in Singapore. Most importantly, though, is that the duties in China directly have been lifted, and that allows us now to have conversations and supply product directly into China not need to go via Hong Kong. Our cost-cutting exercises have been successful. Our CEO and our COO, they have managed to take out ZAR 90 million in costs within a year. That's significant. It's mothballing boring 2 farms and taking out a lot of costs to save the business. And I'm happy to say that if we look at the last 2 months, we're actually in the black, and that's been very positive after a very difficult last 2 years. And then you can see all of them are up in terms of pricing with the average price coming up by 22%. So from a revenue perspective, it's 18% down versus last year, mainly driven by volume and the negative with the ForEx. I mean, if you took the ForEx away, we would probably be a breakeven. And you can see that from an EBITDA perspective, we have a positive because we've got a positive fair value gain. And that's really because I'll show you afterwards, the biomass is very similar in terms of volume. But from the price increase of 22%, mitigating the 10% reduction from the exchange rate has meant that we've got a fair value gain. From a metrics perspective, pretty much very similar in terms of volume. Fair value has gone up because of the metrics that I mentioned. And we have had warmer waters in -- particularly in the [indiscernible] area, which we've seen a reduction in the growth rate slightly but we have seen that subsequently been picking up during the winter. That's our harvest in [ Sandia [ vessel, our Chairman here, purchased in Iceland, one of our flagship vessels. And I'll hand over now to Mo.

Thanks, Felix. Turning to the group financial results for the interim period to 30th June 2026. From a segmental results perspective and pulling the various businesses in the group together. The Sea Harvest had business delivered solid results despite significant headwinds, including the 5% lower HTAC lower catch rates, stronger exchange rate and 20% higher average fuel prices. Segment revenue increased by 7% to ZAR 2.1 billion with a 4% lower sales volumes and a 3% stronger exchange rate, offset by 14% price increases in constant currency. Disciplined cost control and efficiencies complemented by ZAR 87 million in ForEx and fuel hedge gains resulted in EBIT increasing by 7% to ZAR 463 million, and the EBIT margin maintained at 22%. Revenue at Sales pelagic decreased by 19% to ZAR 711 million with a 30% decrease in volumes as a result of the weak industrial fishing season and the 10% stronger rand to the U.S. dollar offset by price increases of 15% across fish meal, fish oil and canned fish. Improved local purchase catches boosted canned fish margins and together with disciplined cost control, partially mitigated the impact of the lower industrial fish volumes. This resulted in segment EBIT of ZAR 122 million, 15% behind the prior year. And pleasingly, the EBIT margin picked up by 1 percentage point to 17%. A firm performance in a difficult period. The ban on the fish trawl in the [indiscernible] Australia, which traditionally has been a steady year-round owner, the cyclone, the delayed start of the prawn fishing seasons, and lower external engineering activity in H1, resulted in revenue in Australia decreasing by 30% to ZAR 317 million with a decrease [indiscernible] double-digit price increases. Consequently, the segment reported a loss before interest and tax of ZAR 25 million. And in order to mitigate some of the challenges in the period, a second round of cost cutting was implemented, targeting an annualized cost saving of AUD 1 million. Australia as an H2-weighted business. Aquaculture revenue decreased by 18% to ZAR 126 million as a result of the reduced sales of lower-margin Abalone products lower Abalone feed sales as a result of the closure of local and international farms and the 10% stronger rand to the U.S. dollar. The revenue decrease was tended by improved Abalone size and quality driving market and product diversification and ultimately leading to U.S. dollar price increases. Benefiting from ongoing cost rationalization initiatives, which as Felix pointed out, totals ZAR 80 million since 2024 on an annualized basis and ZAR 23 million in fair value gains on the revaluation of biological assets, the segment narrowed its loss before interest and tax from ZAR 39 million in the prior year to ZAR 13 million in the first half of 2026. All in all, a solid performance in the period despite significant headwinds. Looking back 6 years. And despite the challenges in the first semester, H1 2026 has seen the group delivered record EBIT of ZAR 547 million and pleasingly an increase in the EBIT margin to 17%. From a group P&L perspective, for the 6 months to 30th of June 2026. Group revenue from continuing operations decreased by 6% to ZAR 3.3 billion, was a 14% lower sales volumes and 3% stronger exchange rate offset by double-digit price increases across all businesses. With the lower volumes, gross profit decreased by 8% to ZAR 1.04 billion with a gross profit margin at 32%. Other income of ZAR 133 million includes ZAR 92 million in foreign exchange and fuel hedge gains and ZAR 28 million in insurance income. Benefiting from increased focus, operating expenses has decreased by 6%, with selling and distribution, marketing and fixed overheads are well controlled during the period. Fair value gains of ZAR 23 million related primarily to firmer pricing and an improved seismic in our aquaculture business. Net finance costs have decreased by 18% to ZAR 109 million benefiting from lower average interest rates during the period and lower levels of debt following the receipt of the proceeds from the lady switchers in mid-May 2026. The effective tax rate comes in at 30% due to unutilized tax losses at [ Aqua casa. ] Profit after tax from continuing operations increased by 10% to ZAR 309 million and headline earnings from continuing operations has increased by 13% to ZAR 320 million. The group delivered EBITDA from continuing operations of ZAR 759 million at a 23% EBITDA margin, and in a rolling 12-month basis at around ZAR 1.5 billion mark. In a difficult environment, the group delivered both [indiscernible] and earnings per share of an increase of 14% and 10%, respectively. In line with the revised strategy set at the beginning of 2025 to reduce debt and increase our returns to shareholders. The group declared its made an interim dividend of ZAR 0.24 per share for the half year to 30 of June 2026, resulting in a total interim dividend of ZAR 87 million. Net working capital as a percentage of revenue has sticked up to 22%, above our target range of 20%, but not out of line with prior years. generally see an investment in working capital being the peak of our pelagic and Australian fishing seasons, with H1 2026, further impacted by increased export sales in the Hake business, which generally has longer terms and the timing of sales and receipts compared to the back end of 2025. H2 generally sees an unwind of our working capital position and stock holdings are worked through. H1 2026 saw the group spend some ZAR 268 million in maintaining its asset base with circa 82% of that is spent on maintaining our fleet and our efforts while expansion CapEx in H1 of ZAR 46 million included the completion of the Harvest Monday as a host Macro feeder that we on joined our fleet in July. The addition of a new Spire offers in our heat plant and a new ice machine at the Saldana site. Depreciation in PPE was ZAR 189 million in the first half of the year. Turning now to the group cash flow workflow for the 6 months to 30th June 2026 on a total operations basis. The group opened 2026 with ZAR 19 million of cash and generated ZAR 782 million of operating cash. Sea Harvest ] invested a net ZAR 194 million in working capital, utilized ZAR 100 million in servicing interest ZAR in tax and a further ZAR 7 million in the growth of biological assets, while ZAR 319 million was spent on CapEx during the first half. The group generated ZAR 792 million from the sale of Lady Smith. In addition, a further ZAR 122 million was extracted as dividends in the period leading up to the closing date. Group utilized ZAR 107 million to settle let a further ZAR 275 million to settle the final 2025 dividend while ZAR 19 million was utilized to repurchase shares with the group ultimately closing the period with ZAR 354 million cash. A similar waterfall has been prepared on a net debt basis with the group opening, the period was ZAR 2.23 billion of debt and closing with ZAR 1.66 billion, a decrease of ZAR 560 million. South African net debt has decreased by ZAR 546 million to ZAR 1 billion with the [indiscernible] net debt-to-EBITDA ratio improving from 1x to 0.2x. Australian net debt has decreased by ZAR 15 million to ZAR 662 million. The inference Australian debt was refinanced during the period at the same margin, but now with a 50-year amortizing profile. In total, group net debt has decreased to ZAR 1.66 billion, a decrease of ZAR 1 billion from the end of December 2024. With the group net debt-to-EBITDA ratio improving from 2.5x to 1.1x over that same period, of course, also aided by the improved performance. The investment in working capital and CapEx and dividend, which totaled ZAR 275 million, has tempered the debt reduction in H1, with H2 generally being the stronger cash generation semester for the group. Benefiting from the improved performance, ROCE has picked up by one percentage point to 18%, while the free cash flow conversion came in at 54%, slightly lower as a result of our investment in working capital over the period. 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 creation for our shareholders. The significant focus on the capital structure has set out in our revised strategy continues with a target set to reduce debt by 50% over 3 years. through noncore asset disposals, maximizing free cash flow generation and determined cost reductions. Good progress has been in all respects with the net debt having been reduced by ZAR 1 billion or 38% since December 2024. The stronger balance sheet allows for increased shareholder returns with the group significantly increasing its dividend at the end of 2025 and also announcing its made an interim dividends in these results. Sea Harvest continuously investing in the business, renewing the fleet, driving factory efficiencies recruiting and retaining increasingly scale skills and further diversifying markets. Balancing optimal capital, working capital levels to support the business remains a focus considering the seasonal Australian and aquaculture businesses in the group. I'll now hand it over to Felix to take us through an outlook for the balance of 2026, after which we'll take questions. Thanks.

Thank you, Mo. I think the one thing that we need to accept is that these headwinds will be with us. We've accepted that the fuel price is going to remain at these elevated levels. We don't see this all finishing anytime soon and we've built that into our analysis. It will be more pronounced in the second half because, obviously, we only had it for March and well, really the last 2 months, May and June. The other thing is that the rand is strong. We don't see any reasons why it will get weaker in the short term. So we've got to live with that uncontrollable. We pretty much have said that the balance of the year will be very, very tough for our [indiscernible] business. With whatever -- it's still unknown. And as you've seen in the media, the department, still investigating what the effect will be on the biomass, whatever it it's going to be negative. So from our perspective, that's another negative. We're still fighting on the fish trawl ban. Could be a positively we got that back -- but for now, that continues. And the Abalone markets haven't really fully recovered. I think that those we must expect going into the second half. We do have some tailwinds, and that is the price increases that we've achieved. We'll see themselves into the second half. And demand is definitely still there in terms of hake. We've also got enough hake capacity and increased horserace capacity with the conversion of one of our presales into a horse [indiscernible] vessel for the second half. We're seeing better sizes coming through in terms of the abalone and we are heading towards Chinese New Year towards the end of the year, which is a stronger time of the year for us in terms of sales. The same thing with our prawns, as I've mentioned sooner. Now we've cut all our fans, we've got to go sell them and get the best return. So that's a tailwind, too. We've got more volume. And also in terms of making sure that we continue with this trajectory of focusing on costs. I think there's not -- in terms of our focus areas. One is we need to catch our allocated TAC. That's very important, leaving fish in the water is a no no. Secondly, I think we can try and capitalize further on firm demand globally, but further diversify our Abalone markets and really agitate in terms of getting our fresh back from the Australian department officials. So that's been our focus areas. I'd rather spend a bit more time taking on questions. Thank you.

We have questions it's question time now. And Conrad, have you got any questions there?

Yes, Mr. German 2 questions from Talya Ginsberg from [indiscernible] I'll read both and I'll ask Felix Ratheb to answer. Firstly, why has the price of hake shot up, that's the first question. Secondly, I never thought I would ask this, but how has [indiscernible] affected deposit market? Has it been severe?

Thanks, Conrad. I think the first question is probably the most important question. To start off with, I would say shot up is a fair term. I mean you'll know that I've been sitting here for many years and always saying the price of hake keeps going up. But generally, having CPI plus 5, which we've had in the last 2, 3 years has been very positive and this year has been significantly more than that. So that's a fair comment. I think the one thing is that the -- it's supply driven, number one, you are seeing less white fish in Europe, particularly because of the issues with cod. It's a long-lived species and with reduced quotas, there's just not enough fish to fill that gap. I think that's the first thing. The second thing is that the ban on Russian fish continues, and we are seeing that particularly on the Pacific Cod side, creating a further gap that's compounded by that. I think the third thing is that demand for whitefish keeps growing. People want to eat healthier, to once you live longer. And that trend continues. And I think fourth and probably the most important, I genuinely believe, and I sit on a lot of boards and globally and deal with a lot of people and I would say we have the A team in terms of our international team, our selling team, and they managed to achieve wonders in very difficult time. So I'd like to thank them. There's definitely the that we have. So you put all 4 of those together and you get the result that you've seen in terms of performance. The second question, look, it's a very -- also a very, very good question. I think the first thing to remember is that the culture or the canning business have effectively become an import business. We were importing converting and then selling. The positive is that we saw a very good recovery in our full chip cash. And so although you didn't have any change in the market in terms of -- except we were using local purchase rather than imported purchase process, which is significantly more margin to all the operators. That's the negative from that perspective. What I think is going to happen for -- and we haven't seen it happen yet within the market. So this has only happened in the last 3, 4 weeks, whatever has happened in the last 3, 4 weeks, we're going to see 2, 3 months' time in the market. But I do believe what we will see with the effect that we're having globally and the fact that we cannot mitigate that in the next 6 months, we're going to see shortages on canned product. I do believe that across all the brands. And we're going to see price increases. That's only one that will balance supply and demand. So that's coming until we see a recovery in 1 of the fisheries. Maybe Morocco bounces back or Mexico. But right now, none of them have. So if you've got less product, all you can do is try and recover your cost. So I think that will be the effect. In terms of the virus, as I've said, will there be an effect on the biomass. I do believe there will be an effect on the bias. How bad is it? We don't know. We need to see if it affected any juveniles, and we can only do that if we do a survey. So there's a lot to still understand in terms of what transpired out there. And also, what effect the environment had on the fish because I don't believe it's just the culture herpes virus that has caused that there must have been other environmental factors. And that's why the department officer has said, please, right now let us investigate and try and understand better what has transpired.

Question from [indiscernible] Group. How do you see the TSC going forward? What is your prognosis for the next 3 to 5 years?