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Operator: Thank you for standing by, and welcome to the Breville Group Limited FY '26 first half results investor and analyst briefing. [Operator Instructions] I would now like to hand the conference over to Martin Nicholas, Group CFO. Please go ahead.
Martin Nicholas: Thank you, and good morning to everyone. I'm Martin Nicholas, Breville's Group CFO, and it's my pleasure to welcome you to the presentation of our first half 2026 results. I'll be walking you through the group's financial results, and then Jim Clayton, our CEO, who will provide an operational and strategic update. But I'd like to start our presentation today by acknowledging and paying our respects to the traditional custodians on whose land we meet today. I would like to pay respect to their elders, past and present, and further extend that respect to all Aboriginal and Torres Strait Islanders present today. We celebrate the continuing contribution of their food culture and their connection to and custodianship of this country. Turning to the presentation. We'll start on Slide 4, with an overview of our first half results. A challenging but encouraging half that demonstrated both BRG's tactical agility and consistent growth track record. We delivered double-digit revenue growth, continue to invest in the future of the business and successfully managed the significant impact of U.S. tariffs while maintaining profitability and improving our net debt position. Let's walk through each of those highlights. In first half '26, we delivered double-digit revenue growth of 10.1% against a backdrop of resilient premium consumer demand, supported by continued NPD and the coffee tailwind. Record sales of $1.1 billion for the half represent a doubling of revenue over the last 6 years. Our group gross margin was impacted by the significant impost of increased U.S. tariffs on China and on the rest of the world. We successfully mitigated much of this impact and future-proof the business with the diversification of our 120-volt production to new lower tariff locations. Jim will say more about this later in the presentation, but the relocation project has been highly successful, and we met our target of having 80% of gross margin -- U.S. gross margin manufactured outside of China by December 2025, a remarkable operational achievement. We held our prices on our U.S. core range and took selective price increases on our tail range, and we worked our distribution mix. This clawed back some of the remaining on cost with some also offset by gross profit increases in other theaters. Net-net, our gross margin decline was successfully contained to 130 basis points, and we grew gross profitability by 6.3%. During the half, we kept our focus on driving future growth with investments in our new markets, China, Middle East and Korea and an increased investment in marketing and in D&A itself partly driven by manufacturing diversification. The resulting flattish EBIT of $145.8 million was in line with our plan. Our underlying cash flow was strong and net debt improved over the prior comparative period. Overall, an encouraging half, and I'm pleased to note that a fully franked interim dividend of $0.19, an increase of 5.6% on the prior period we paid in March. So let's go into a bit more detail. Turning to Slide 5, we see key segmental results. The Global Product segment grew revenue by 10.9% or 9.3% in constant currency. Our NPD landed well with the Oracle Dual Boiler and the Encore ESP Pro generating strong consumer responses and helping to drive double -- drive healthy double-digit coffee growth. Our cooking and food preparation categories, both recorded high single-digit revenue growth. Our direct countries where we have boots on the ground, grew in double digits in constant currency, with our newest geographies, Korea, China, Mexico and the Middle East growing at over 50%. We saw slower growth in distributor-led geographies, which cycled a strong first half '25. While tariffs remain uncertainty -- while tariff uncertainty remains, with the Supreme Court ruling still awaited, the USMCA renewal in July and feasibly new tariffs, we are ready to tactically respond to these new challenges if and when they occur. Our Distribution segment fulfilled its tactical role, delivering an increase in gross profit of $2.1 million. Turning to Slide 6. We show our geographical theater performances. And our first half '26 pleasingly saw underlying strength in all theaters. The Americas grew total revenue by 11.1% in constant currency, with coffee in double-digit growth led by premium NPD launches and a really strong performance from the Barista Express. Food preparation also grew double-digit, with cooking in high single-digit. Exciting also to note that 300 extra store-in-stores were installed in Best Buy in the U.S.A. in November. Turning to APAC, our direct markets, that's Australia, New Zealand, Korea, and now China, delivered double-digit constant currency revenue growth. NPD landed well, and although still small, China sales were encouraging, with Korea continuing to go from strength to strength. Total theater growth was 6.1%, with cyclically weaker sales growth in distributor-led markets after a strong first half 2025. In EMEA, our direct markets, the U.K., the EU, and the Middle East, again grew in double digits, led by coffee and NPD. Growth was strongest in the EU and the Middle East, with the U.K. in solid single-digit growth against a challenging economic backdrop. Overall theater growth of 7.6% includes more moderate performances in distributor markets, including Turkey, the Nordics, and Southern Africa, after a strong first half 2025. Turning to Slide 7. Here, we see our EBIT growth drivers across the first half. Volume growth was healthy, but U.S. tariffs increased COGS, leading to gross profit growth of 6.3%. In terms of operating expenses, we maintained our discipline in investing in future growth drivers, investing $12.9 million or approximately 60% of the OpEx increase in growing new markets in marketing and in D&A itself driven by new production facilities and NPD. Outside of ForEx translation, the increase in our other OpEx was modest. EBIT growth of $1 million or 0.7% was in line with our plan and reflects the gross tariff exposure we absorbed during the half, our tactical approach to managing through this turbulent period whilst keeping an eye on sustaining and investing in future growth. Turning to Slide 8, we look at the balance sheet. Here, we saw a healthy half of underlying cash generation, delivering an improved net debt position despite funding an increase of $42 million in U.S. tariff cash payments in the half. Reported inventory was flat year-on-year with lower unit holding in the U.S. effectively offsetting a cost per unit tariff-led increase. Inventory was broadly flat in our other theaters. Looking ahead, our transition to our new manufacturing facilities will necessitate an earlier build of 120-volt inventory for the FY '27 peak season. We will start building for peak in March rather than July with our resulting reported June inventory balances planned to be higher than in previous years. Turning to receivables. These seasonally peaked in December at $515.7 million, or 7.6% above prior year, with debtor days in line with the prior period. In January, as peak receivables were collected, the group moved back into a net cash position of $70.1 million as at the 31st of Jan 2026, which compares to $18.7 million in the prior period. PPE and development costs together reflect the continued investment in our growth drivers, our tooling investment in alternative manufacturing sites, our store-in-store CapEx investments and our investment in new products and solutions. As more new products are developed and then launched, capitalized development costs will grow in turn fueling future growth. The intangible balance shown here is a good leading indicator of expected future growth, with the growing balance signaling that we have a number of projects moving towards launch or recently launched. As mentioned earlier, with strong underlying cash flow, our December 31 net debt position improved by over $11.5 million over the pcp to $43.6 million. Our balance sheet remains in good health. At 0.2x the last 12 months EBITDA, BRG remains conservatively geared, and we have significant cash and unused debt facilities, providing flexibility for further expansion. Before concluding my review and handing over to Jim, there are 4 key takeaways from our first half performance that I'd like to emphasize. Firstly, our revenue growth drivers remain robust with NPD, new geographies, our direct markets and the coffee tailwind delivering another record half. Our net sales have doubled over the last 6 years. Secondly, the impact of U.S. tariffs have been well managed within a flattish EBIT and the timely manufacturing diversification of our 120-volt variants was a remarkable logistical achievement. Thirdly, we continue to manage the business for the long term. While short-term margin pressure was real, we have increased our strategic investment in our growth drivers. Lastly, this is all underpinned by a strong underlying cash flow, low leverage and a healthy balance sheet, providing funding flexibility for further expansion. So overall, a very solid set of results. And with that, I will hand over to Jim.
Jim Clayton: Thanks, Martin, and good morning to everyone. Now that Martin has walked you through our first half '26 results, I'm going to pivot to our manufacturing diversification program, some updated numbers from our Beanz service, show you our new products and highlight a few marketing investments and lay out our new transformation program, then end with my thoughts on the second half and outlook for the year. On Slide 11, as a reminder, our manufacturing diversification program began in FY '23 with the production of the Barista Express in Mexico. We accelerated the program in FY '25 and set the objective of sourcing at least 80% of U.S. gross profit dollars from locations outside of China by the end of the first half of '26. I'm pleased to report that we achieved this goal. I cannot overstate the complexity of this task given the speed. Working closely with our manufacturing partners, we moved what we planned slightly ahead of schedule and equally importantly, are delivering the same quality of products off the new lines. In the second half, the program enters its next phase, continuing to move remaining SKUs while transitioning already moved SKUs into a component localization exercise to optimize the long-term production costs. The approach we've taken with our supply chain was designed to minimize risk and disruption while still achieving our objective. Our NPD team still works directly with our manufacturing partners in China on new products, and all 240-volt products continue to be produced in China. It's just the vast majority of our 120-volt variants for the U.S. market that have moved to other locations. The heavy lifting is complete. The team is now working through the program tail at a controlled pace. Slide 12. Now on to the snapshot of the Beanz Service. The growth rates you see here represent calendar year '25 over '24. The service continues growing at an accelerated pace, a testament to consumer demand and service quality. When services grow this quickly, they typically experience infrastructure problems. Our team has stayed ahead of the curve. We just handled the volume spike of Black Friday through Christmas and our platform and roaster partners didn't miss a beat. The architecture and processes are battle-tested and sound. Now on to new products. In FY '26, we've been rolling out the Oracle Dual Boiler, which recently won the best new product at the World of Coffee in Dubai, the IQ Toaster and the Encore ESP Pro from Baratza. All 3 products are performing quite well in market, and we're getting positive consumer reviews. In late December, Williams-Sonoma launched the new mixed metals range. The brass range we launched with them last year performed quite well, and they're equally excited about this range. Many kitchens in the U.S. have a mixed metals design, so these products will slip stream quite nicely into that look and feel. On to Slide 17. I've told you I will only disclose launch products, but I'm making an exception here because this demonstrates something important about our portfolio strategy. This is the Mara X3 by Lelit launching next month in Europe and the U.K. Lelit established itself in the prosumer category with Bianca also in the picture, bringing flow profiling popularized by Slayer in the commercial space to the prosumer. Mara X3 now brings this capability to the heat exchanger platform through the Pagaia, which is Italian for paddle, a small finger-driven knob that gives users total control of pressure throughout the shot. Pressure profiling lets you get the best result possible in the cup for any given coffee. What makes this particularly noteworthy is that Pagaia is leveraging a BRG patent. It's a concrete example of Lelit joining BRG and then unlocking value for its customers using BRG IP. Mara X3 combines this new capability with a refined design language as well as Lelit's patented temperature control capability. Slide 18, I've highlighted a few of our go-to-market investments that we implemented in the first half of '26. If you recall, we opened a cafe on the first floor of our headquarters in Seoul. What you see in the upper left is the next iteration of this format, a stand-alone cafe in Seongsu, a hip shopping area in Seoul. This is a cafe first Breville store second format, and it is performing quite well. In the upper right, you see our store in store in El Palacio de Hierro in Mexico City. Palacio is the most premium department store in Mexico. We delayed going in until they agreed to let us execute store-in-store formats. So this store actually represents our entry into the retailer. And at the bottom, you see an image of a large project we executed in October, November, which was rolling out 300 stores in stores in Best Buy. Best Buy consolidated their entire in-store SDA offer to 3 primary brands and 2 secondary brands. The primary brands, which are Breville, Dyson and SharkNinja will execute store-in-store formats, though we moved first. De'Longhi and Bella, which is a mass market brand, are the secondary brands which share an aisle. All other brands were deranged. This is a material change to the retail channel structure in the United States. Slide 19. I'd now like to spend a bit of time talking about the next phase of BRG's transformation. Slide 20. To be fair to the team, they've been on quite a journey. On my first day, I promised change and said it would never stop, and I'm doing my best to keep that promise. As a quick recap, Phase 1 was about a total replatforming of the company, organizational structure, key processes and the technology platform. With that in place, we kicked Phase 2, which was about globalization. With the basics of a hardware company in place, we started Phase 3, which was the art to solutions like Breville+ and Beanz, each phase built on the last replatforming globalization solutions. Phase 4 is different. AI doesn't sit on top of what we built. It cuts across every function, every geography, every process. It's holistic. And because of the foundation we've laid, we are executing at pace. Slide 21. In August of 2025, Cisco surveyed over 8,000 companies globally to assess AI readiness across 6 dimensions: strategy, infrastructure, data, governance, talent and culture. Only 13% qualified what they call pacesetters companies positioned to execute. Pacesetters, they claim are 1.5x more likely to achieve measurable gains in profitability, productivity and innovation. We didn't participate in the survey, but when you map BRG against the criteria, a single global instance, centralized data lake with AI configured data streams, AI capable engineering team, formal governance structure, we're squarely in the top 13%. This isn't aspirational. It's a description of what we've already built. I know many of you over the years with commentary on our corporate platform, here's proof that it matters. Those investments position us to rapidly fold AI into our architecture. Slide 22. Our program has 3 components. First, training and enablement. This is a top-down effort. As a result of our initial training program, we now have over 1,000 employees actively using AI every month. We are now in the throes of Phase 2 training, which teaches employees how to amplify their individual capabilities by leveling up their AI skills. I am personally leading this phase, training every geography and function across multiple LLMs. I accept this is unusual, not many CEOs are personally doing this. It's both an indication of how important I believe this transformation is, and it signals that becoming an AI-driven organization is nonnegotiable. Second, agents and process automation. This is a process-driven component led by our CTO and his team. They're partnering with functions to implement agents in high-impact areas, specifically targeting high-volume, high friction, low-risk processes first, pacing here is thoughtful and deliberate with significant test and learn. Third, AI infrastructure. This is led by our data science team and is aimed at AI enabling our entire platform plus implementing governance and security, which our CIO leads. We are well down this path, so this is an adaptive project that will morph as the technology evolves. While we have many agents in production, I want to give you one example to show you what this looks like. In October, we took BRG AI live for our customer services teams globally. This is an AI support service that touches every facet of customer support, training, documentation, case resolution and knowledge management. These are the early results from our global team. Onboarding time is down 40%. Employee turnover has dropped significantly. Support documentation is both faster to create and of higher quality. Cases are resolved in fewer interactions, cutting time to resolution, which in turn reduces product replacements. Two things worth noting here. First, these results are coming from Phase 1 of the project. We haven't even optimized it and we' added incremental capabilities. Second, we built it ourselves. A single engineer built BRG AI in 3 weeks, followed by 1 month of user acceptance testing before going live. This signals the state of our underlying platform as well as the talent within our team. Most companies would have to outsource this to a vendor. We have the internal capability to build our own AI solutions, which I believe will manifest itself as a fundamental advantage going forward. This AI program is truly transformational because AI isn't just a new tool in the toolbox. It is a re-architecting of the entire enterprise. You eat the elephant one bite at a time. While there are many benefits, I'm most excited about 2 in particular, quality and speed. Taking a 6-month process and turning it into a higher quality 3-month process, increased decision-making velocity and you increase enterprise velocity, making us more adaptive to both opportunities and challenges. Slide 24. As I think about the second half, it's certainly a continuation of projects in flight, the AI transformation program and the manufacturing diversification program. A knock on from the latter is that we will see a change in how we build inventory for peak season. We will peak earlier and the curve will be flatter. As Martin mentioned, we will buy the same amount of inventory, but we will build the 120-volt variant earlier, which will naturally affect the June reported inventory and cash levels. Slide 25. Given the magnitude of the U.S. tariffs that our value chain is absorbing in FY '26, we expect EBIT for the year to be a slight uptick over last year. Absent material changes to the U.S. tariff program, this is a onetime event with FY '27 running against an FY '26 baseline. With that, I'll now hand the call back to the operator for any questions you might have on our first half '26 results.
Operator: [Operator Instructions] The first question today comes from Shaun Cousins from UBS.
Shaun Cousins: Just a question regarding the tariff impact. You noted that was well managed. Beyond the tail pricing, was the real skill and the real way it was well managed just that retailers, the distribution mix and the product mix, noting you launched some new products. Just curious around how you've managed the tariffs and how that's gone relative to your expectations, please? And if that's the plan for the second half '26 as well, please?
Martin Nicholas: No problem, Shaun. The biggest action that we took or the biggest mitigant that was played was the moving of the 120-volt manufacturing out of China into lower tariff locations. That's probably the biggest mitigant that was played. And then we talked -- you mentioned also about distribution mix and around pricing on the tail. But we tried to later to that in the presentation. The biggest thing was getting out of higher tariff location into lower tariff location. That's gone extremely well, extremely well. And then we've honed our channel distribution and taken some price rises. And I also called out a little bit that we had slightly improved gross margins outside of the U.S.A., which in the total group result also gave us some mix benefit.
Operator: The next question comes from Tom Kierath from Barrenjoey.
Thomas Kierath: Just following on from Sean's question on the tariffs. Is it fair to say that first half '26, that's like the peak impact from tariffs because you were selling a bunch of product that was made in China. And then as we kind of get into maybe FY '27, you should actually see some relief on that front and maybe some gross margin expansion?
Martin Nicholas: I think that's right, all else being equal. And that's a big statement, Tom. I don't think we've had a period so far where we've had stability in tariffs. But if everything freezes exactly like it is now, yes, you're right. We will increase the mix of product that bought into inventory then sold that came out of those new plants, and we will have decreased the amount that came out of China. So yes, there would be a positive mix impact going forward, all else being equal. And then we've got foreign exchange, we've got pricing. We've got shipping costs. We've got all that noise, normal noise going on. But just related to the tariff part, you're right, we'll have a better mix going forward in second half '26 and definitely into first half '27.
Operator: The next question comes from James Leigh from Goldman Sachs.
James Leigh: My question is around the indirect markets, noting that there's some cyclical weakness that you've called out there. How have conversations with distributors gone in those markets? And how should we think about this going into the second half?
Jim Clayton: So what's basically happening is distributors roll on a bigger wave in a sense than what happens inside of a half because their lead times are a lot longer. So if you look at them -- I mean, if I'm pulling CAGR, I pull them over a 2-year period in a sense because they ebb and flow because of the longer lead times. And this is that natural -- we had a, let's call it, the up wave in the first half of '25. You've got that as a denominator, which then drives the down wave. And it's because we're reporting revenue on what we sell them, not what they sell out. And so this is how they manage their inventory as it flows through.
Martin Nicholas: Correct. And we called out, James, this time last year, we called out really strong performance from distributors. Go back 2 years, we called out weaker performance in distributors. So it's definitely a cycle or a wave that's flowing through. And the scale of that volume, it's about $40 million in EMEA, maybe $20 million in APAC. So it's not the largest part, but it's enough at the edges to either enhance the growth number for the theater or slightly dampen the gross number for the theater. And that's why we've got in a habit of calling out how distributors have gone half after half after half.
Operator: The next question comes from Craig Woolford from MST Marquee.
Craig Woolford: My question is a different one. Just on the property, plant and equipment growth, it was quite high, but then the depreciation and amortization increase was meaningful, but not quite matching that. Should we expect a significant step-up in depreciation and amortization in the second half as the sort of tooling depreciation kicks in?
Martin Nicholas: Yes, but it's not really the tooling. That's more the store in stores going into Best Buy that you've seen boosting the actual CapEx spend or the fixed assets in the first half. And yes, they will start amortizing. They went live in December. So they're now amortizing in the second half.
Craig Woolford: Should it match PP&E growth, like is in just a question.
Martin Nicholas: Yes, should match, if not slightly exceeded as you catch up. So yes, we've modeled and we expect a step-up in D&A in the second half. If you just look at it half on half on half, that's been happening over the last 4 or 5 years even. So each half, we invest more and then depreciation amortization catches up with a lag. Last half year, it was tooling in the factories. This half, it's SIS in Best Buy. and each one is lagged slightly. So yes, I would expect it to catch up, great.
Operator: The next question comes from Sam Haddad from Petra Capital.
Sam Haddad: Just a question around pricing. Just to clarify, so you remain steadfast on your core products and only raise prices on your noncore? And how are you seeing competitors respond so far? And any further clarity on price elasticity with U.S. consumers?
Jim Clayton: So one, just to be clear, we're only focused on the United States. What I would say on the -- if I'll pick on espresso first or coffee first, which is basically everybody held steady. So in coffee, yes. In coffee, there wasn't really any movement at all. On the other core category in the U.S. would be ovens, and you saw some of both, right, which is you saw some hold and some move. And that's been stable since it happened. It's kind of like everybody made the first move, which was either no decision or a decision, and there hasn't been a lot of movement since then.
Operator: The next question comes from Olivier Coulon from E&P Financial.
Olivier Coulon: The localization cost opportunity, can you maybe try to quantify for us what the size of that could be when you get to where you want to be? So I suppose maybe a good way to look at it is what are the first half FOB prices for the 120-volt range out of the new territories versus what you were buying them out of China? And what's the target relative to China?
Martin Nicholas: Yes, I'll try and answer that, Olivier. But there's a lot of movement in mix going on through that first half. I think that was the point of an earlier question. So in the first half, our FOBs were partly out of China at China tariffs and then progressing to out of -- as an example, espresso machines out of Indonesia with Indonesian lower tariff. The second wave now is to -- what you're referring to is to localize some of the componentry out of Indonesia rather than bringing the componentry from its original locations. That wave is underway now. But as it bites, I think that's more going to impact FY '27 onwards because we're already building the inventory for peak season '27 now. So we're already -- it's not going to impact second half '26. It's too much of a lag as we now look to localize. Broadly speaking, we'd hope that the FOBs out of Indonesia, Cambodia, Mexico would be similar to the original FOBs out of China, but you've got to strip the tariffs out of all of them to see whether you're in an advantaged or disadvantaged position. Overall, the world has got more tariff than it was 1.5 years ago. So overall, even out of the new locations, you're paying the tariff. Are we doing localization initiatives? Of course. And we always look to reduce our FOBs where we can, of course, but it will take some time for that to flow through. I think there's other factors flowing through the margin, which is the mix, which I'm more monitoring over the next 6 months, say.
Jim Clayton: I think the other thing I'd add on localization is this will have a longer tail, which is there's kind of 2 ways you solve this problem. One is to find a local supplier of that particular component or teach them how to do it and qualify them and so forth. And then the other thing that's happening is a lot of the -- let's call it, core manufacturers to the entire vertical themselves are setting up manufacturing locations in Southeast Asia and Mexico, it takes them time because they have to move, set that up. And once they do, then effectively, everyone in that geography benefits from that. So all of these are lots of moving pieces because now we're at the bond level. And so it will -- you'll just be chippi-ng away at it over time.
Martin Nicholas: Is the next wave of focus on localization? Yes, it is. And we just see that flow through over the coming months and years.
Olivier Coulon: But I suppose -- maybe if I allow one quick though. I suppose if mix is a positive in FY '27 versus FY '26 as a mix of location, Indonesia versus China, et cetera, localization should also be a positive in FY '27 and beyond versus FY '26. Is that kind of how we can think about it?
Martin Nicholas: Agreed. All else being equal, both of them are tailwinds, yes.
Operator: The next question comes from Apoorv Sehgal from Jarden.
Apoorv Sehgal: Just on the EMEA business, can you unpack the slight softness you called out in the U.K.? I mean you talked about the challenging macro, but can you talk about any kind of category-specific trends that may have driven the softness? And how do you think Breville performed versus peers in the U.K.
Jim Clayton: I mean, there wasn't anything -- I mean -- well, to be fair, I didn't look at it at that level of granularity. I mean, just honestly, because I don't. So I can't -- I don't think there was any one thing or another, so to speak, right? It was just flip side is still growing, right? It just wasn't whatever it was.
Martin Nicholas: Almost the point we're making, Apoorv, it was still growing high single digits against a pretty miserable high street environment. Times are pretty tough in the U.K., and we were quite pleased to have a single-digit growth in the U.K. It was lower than the rest of EU and Middle East, but it was still positive.
Jim Clayton: I mean, if it was minus 15%, I would have looked at high single digit, where the roll-up of Europe as a whole is double digit. I move on to the next issue.
Operator: [Operator Instructions] The next question comes from Tim Lawson from Macquarie.
Tim Lawson: Can I just dig into the weakness in the third-party distributors for a minute. Did you say that in Australia -- sorry, in APAC, that about $20 million is from third-party distribution in the revenue.
Martin Nicholas: That's right. Yes.
Tim Lawson: Because if I put that into a sort of simple table, I assume I've got this right, and you've got double digit in your direct distribution, that suggests that, that third-party distributor was materially, materially negative. Is that correct?
Jim Clayton: Yes. I think this is -- so you just need to be careful, which is that would mean last whatever. First half of '25 is materially, materially positive, like...
Martin Nicholas: APAC, we printed plus 16% in first half '25.
Jim Clayton: Yes. It's a wave. It's not a weakness. It's a timing -- so there's a big difference between these 2 things. So you just got to be -- this is the reality of distribution. And I think what EMEA is more exposed like in the Americas, we don't really have a ton, right? So you don't have this kind of third wheel rolling around. But EMEA has the most exposure in a sense to the size of revenue that comes from distributors and then APAC has got a smaller number, and they will all roll on a wave. It's never a straight line.
Tim Lawson: Okay. I'm just trying to understand, is there some problem with that. I mean I appreciate you're trying to point a 24-month sort of story. But do they have like the working capital to deal with the sort of demands that you're putting on them? Do you need to move to a direct distribution model in those markets?
Jim Clayton: No, no, no. There's nothing wrong with them. Like I may move for a different reason. There's nothing wrong with them. This is just a cycle. So if there's something wrong with a geography, we'll switch. So -- or if we think there's a better opportunity. So as an example, one of the things that rolled through EMEA is we switched distributors in South Africa. And when you do that, you got the drawdown and then the cutover and all this kind of bit, right? So that was basically the EMA story was we decided to move from one distributor to another, and that's kind of a onetime event. And then you've got other distributors that are just cycling the construct of when they place the order versus when we reported the half. So you just can't -- I don't know how to describe this other than you cannot tell how distributors are performing by looking at any half, you have to pull it out over like an 18-month period to get a sense of is there something wrong with this distributor?
Martin Nicholas: They buy inventory, they work through inventory. They buy inventory, they work through inventory. And depending on where they are in that cycle, Tim, you've either got a strong positive or you can have a negative during that period. And that's why we call it out mainly at the halves. We seldom talk about the full year because once it's diluted over a full year, it hardly dense the number.
Tim Lawson: So can you see the inventory that sits at the third-party distributors? And is it materially lower than what it was this time last year?
Jim Clayton: No, I can't see it. Meaning I don't -- I can't log into their systems. They bought and then when they're placing -- they have to place orders really far out, so to speak. So within that construct, you have a whole lot of visibility to what's coming because they have to deal with a very long lead time. I mean, if I go back to '15 and '16, there used to be this kind of hole when we weren't direct kind of anywhere other than Commonwealth, that was a big piece, and it all moved this way. And they had 9- to 12-month lead times. And so they have to kind of buy -- they put all their orders in to get everything that they need for a period. So as an example, they have to -- they've got to order like early in the second half, so that they can have a high season. And while we were going peak inventory, like we were starting for high season in July, they got to get in front of that because we're about to blow through all the capacity as our direct markets climb. So they got to go all the way in the back and order really early. And then so all of a sudden, you'll go, oh, my goodness, that was a big order. And then they'll go apply it for 6 months because they did that. And then it's just wavy is all it is.
Martin Nicholas: I think the key message, Tim, is that in markets where we're direct, we grew double digits America, double digits EMEA, double digits APAC. And then there's this volatile smaller piece, which can impact the reported number, and that's why we shared it with you. But the key message is how we're performing in those direct markets that we focus upon.
Operator: The next question comes from Sean Xu from CLSA.
Sean Xu: You talked about the extra product display in Best Buy in the U.S. Did you see much benefit in the first half from this arrangement? And what's the early signs there?
Jim Clayton: Yes. So there's a meaningful impact, right, with Best Buy. So there's -- you've got the question of did Best Buy steal market share from someone else? In that instance, we don't see it in the total, right? But what this decision in Best Buy is going to materially affect the players that were chosen and more materially affect the ones who weren't because it's like 1,000 doors. And by the way, this is not just happening in small domestic appliances, it's TVs, it's every category. They very much rationalized and hit their winners and got rid of everything else. So what you end up with is this construct of there's a range out that happens, which is across all 1,000 doors. They've made this decision. Now in the tail, they won't carry as many of the SKUs, but they're only going to carry SKUs from the 5 that they chose because that's all they buy from now. So you'll get this load in, so to speak, happen across the system. And then you're going to see an accelerated sellout from Best Buy by definition because all of a sudden, they deranged at the same time they expanded range kind of in your SKUs. And if you're going to Best Buy, you're either buying Dyson, SharkNinja, or Breville or you're going to the second tier and getting something from De'Longhi or Bella, and that's all you can buy. So in a sense, all of those brands will feel a tailwind to the extent that they have SKUs on the shelf. So of all the players, we have the biggest range in the sense of number of SKUs. And it's pretty sat. I mean, honestly, it's something if you go to the states, you kind of have to see it to believe it. I used to work at LG. So I wanted to go to the TVs and see what they did, and it's a big call.
Sean Xu: And you guys have a very similar, not exactly the same, but very similar arrangement Target. That's my understanding. Is that right? And what's the context there, please?
Jim Clayton: So yes. So Target, we went into Target maybe...
Martin Nicholas: 3 years ago.
Jim Clayton: 3 years ago. And we -- you can ask them how they want to describe it. I would say we're kind of the lead horse in Target. It's performing exceptionally well. And we didn't really talk about this, but there was a big store-in-store play on the Best Buy side, which is what hit PP&E is going to roll through. There was also a big investment on the Target side of stepping up that offense but it's not -- they're sleds or it's a different kind of format that we just ran through OpEx because it's not something that you would -- that will definitely last for a longer period of time. But Target has got us leaning into them as well. So both of those retailers are getting a big, let's call it, a Breville tailwind in the sense as they pull this through. I think the only thing I would add is Target didn't go through the deranging side of the equation, which is they're picking who they're going to lean into and let kind of invest in the aisle, so to speak, kind of category captain like, but they'll still have all the other brands. The big change in Best Buy was not just that first part, but it was the deranging of KitchenAid, Keurig, Vitamix, Nespresso, like you go down, it's everyone. And that's the part that's pretty fascinating.
Operator: The next question comes from Sam Teeger from Citi.
Sam Teeger: Just wondering, given the success you're having in new markets such as Mexico, Korea, China and the Middle East, what's the likelihood of additional new markets in the second half or FY '27? And what geographies would have the most appeal?
Jim Clayton: So there won't -- I don't mind saying this because we're so busy. There's not going to be a new market in '27. The geographic expansion lever is always on. I think the U.S. put a lag in that construct, which is we had to pull a material portion of the team out to move the entire 120 staff into all these different locations. So in a sense, that was the geographic expansion that's happening, so to speak. And then you'll also see it across -- within this construct, I'm talking about the Breville Sage brand. You'll see continued movement of the other brands as they slip stream behind it. But we -- what I can say is we're not done. We're just busy.
Operator: Thank you. That does conclude today's question-and-answer session. The conference has now concluded. Thank you for participating. You may now disconnect.