Good morning, and thank you for joining us for Adairs Limited's FY26 full year results. I'm Elle Roseby, Group CEO and Managing Director of Adairs, joined by Matt Edmonds, our Group Chief Financial Officer.

This morning, we lodged our FY26 results with the ASX. We'll speak for around 20 minutes, and then we'll take your questions.

The running order: I'll cover the group overview, Matt will take you through the group and brand financials, and then I'll come back for the brand highlights, the Vision 2030 strategy update, and current trading and outlook. Slide 3 to 4, the group overview and FY26 group performance.

I'm pleased with the FY26 results across Adairs and Mocka, with both businesses delivering strong sales and EBIT performance. This performance reflects sharper and more relevant ranges, improved margins, stronger customer engagement, and greater operating discipline, and a more deliberate approach to capital allocation.

Focus on Furniture had a particularly challenging year, most notably in Q4, and I'll take you through that in more detail later in the presentation, because I think it's really important to understand the context around that performance and the actions we are taking in response. Group sales grew 3.8% to $641.7 million.

Underlying EBITDA was $68.7 million, up 1%. Underlying EBIT at $55 million was broadly flat, and underlying net profit after tax rose 1.7% to $34.6 million.

Net debt reduced by $20 million, and dividends grew 9.5% on FY25. The statutory result is a loss of $39.4 million, driven by significant items that are predominantly non-cash, the largest being the impairment of Focus on Furniture goodwill and brand intangibles, and Matt will take you through the bridge later.

These results are consistent with the trading update we released on the 8th of July and finish at the top end of it. Group sales of $641.7 million were marginally above the top of the $640 to $641.5 million guidance range, with Adairs and Mocka both above the top of their sales ranges, and Focus within its range.

Group underlying EBIT of $55 million was in the upper half of the range, and net debt of $47.6 million came in better than the approximate $49 million indicated, and the impairment, the other significant items, and statutory loss all landed within the ranges flagged in July. Overall, our group results are in line with the July update and slightly ahead on sales, net debt, and statutory outcome.

Slide 5, group overview and performance. Slide 5 shows the three brands, and each are at different stages.

Adairs, our largest brand, delivered record sales of $459.2 million, up 3.9%, and pleasingly, through improved cost efficiencies and margin growth, underlying EBIT was up 14.9% to $41.1 million. Mocka, continuing its growth trajectory, saw sales of $71.2 million, up 22.9%, with EBIT up 32.1% to $10.1 million.

Focus on Furniture, the business is in turnaround, sales of $111.3 million, down 5.6%, and EBIT of $3.8 million. Adairs and Mocka together now generate over 90% of group earnings, and both grew earnings at expanding margins.

The turnaround task sits at Focus, and I will cover the plan in the brand section. On slide 6, Focus on Furniture: so what happened in half two, and specifically Q4?

Let me address Focus directly. A year ago, we said we expected improved outcomes at Focus in FY26, and we did not deliver them.

The year had two distinct phases. Through the first three quarters, delivered sales were broadly flat, up 0.2%, and in the fourth quarter, sales fell 25.5%.

There were two issues that drove that decline. The first was a difficult leadership transition.

For the incoming management team, the handover was limited, with reduced visibility of inventory planning, operating processes, and management information. This lack of data had a material impact on decision-making and interrupted inventory ordering, coupled with over-tightened store discounting discretion.

This disrupted trade through peak fourth-quarter trading. The second issue predates the transition: stale range and underinvestment in store presentation behind a multi-year pattern of gradual share loss.

The strength Focus is known for of value and quality had been impacted. The range has fallen behind on the core offer, fashionability, and variety, and product renewal and availability is a primary lever in the turnaround.

On the response, a sustainable management structure is in place with group executive oversight and a strengthened business unit advisory committee, including non-executive director participation. Ordering cadence was rebuilt through April and May, and inbound stock is restoring availability and lead times through Q2 FY27, and discounting discretion has been returned to store teams under clear governance.

The first exclusive design-led collections land in stores from October, with regular monthly injections throughout '27. A VM store presentation reset will be completed throughout Q2 across the network, and we have overlaid an additional light refurbishment to the Frankston store, which has outperformed the network, and these findings will evolve the store design experience going forward.

The market for larger ticket furniture was softer during the year. However, we attribute the shortfall primarily to factors within our control.

I'll now hand over to Matt to take you through the financials.

Thanks, Elle, and good morning, everyone. I'll start with the divisional results on slide 8, with group underlying EBIT at $55 million, broadly flat on last year, down 0.4%.

Within that, Adairs and Mocka together added $7.7 million of earnings, whilst Focus declined $8 million versus the prior year. In Adairs, sales of $459.2 million was up 3.9%, 4% in the first half and 3.6% in the second, with like-for-like store sales up 1.4%, and online up around 9% to $132.3 million, driven by strong Click & Collect growth, which now accounts for 4% of total sales.

Gross margin was 60.9%, down 10 basis points on the full year. Within that, margin did decline 300 basis points in the first quarter on deliberate clearance activity to reset the inventory, and then pleasingly recovered each quarter thereafter, with second-half gross margin up 150 basis points on the prior year.

This reflected elevated ranges, pricing discipline, and reduced promotional depth. Total cost of doing business was also a highlight, reducing by 100 basis points, reflecting continued efficiency in the supply chain, with total cost per unit down by 11%, and improved store productivity, which was up 5.2%.

Underlying EBITDA rose 12.8%, and underlying EBIT of $41.1 million was up 14.9% at a 9% margin, up 90 basis points. Importantly, second-half EBIT at Adairs grew 48.9% on the prior year, driven by strong margin expansion and disciplined, strong cost management.

Inventory closed at $66.4 million, broadly flat against 3.9% sales growth. Turning to Mocka, they recorded sales of $71.2 million, up 22.9%, 29.8% in the first half and 16.4% in the second, led by continued strength in Australia at plus 38%, and New Zealand flat at plus 0.4% as the offer there is reset.

Growth came with margin expansion, with gross margin of 60.2%, up 80 basis points, on product innovation at higher initial margins and increased share of full-price sales. Cost of doing business was flat, with warehouse and freight efficiencies funding continued customer acquisition marketing investment.

Underlying EBIT rose 32.1% to $10.1 million at a 14.1% margin, up 100 basis points, with inventory closing 14.7% lower. In Focus, sales were $111.3 million, down 5.6%, with the order book closing the year at $11.2 million.

Gross margin was 50.4%, down 40 basis points on the prior year. The sales decline in the fourth quarter came through traffic and conversion, which is why product renewal and availability is the primary lever identified in our turnaround.

Cost of doing business rose 590 basis points, reflecting deleverage on soft like-for-like sales, plus the annualized cost of the new Victorian distribution center and customer support office. Underlying EBIT ended at $3.8 million, down 67.6% at 3.4% margin.

Importantly, on a half-year basis, that comprises a first-half profit of $5.8 million and a second-half loss of around $2 [million?] .

That second-half performance is reflected in the impairment assessment, which I'll cover on slide 11. Turning to slide 9, group-level sales were $641.7 million, up 3.8%, with the store network reducing by a net six stores, from 194 down to 188, reflecting the disciplined portfolio management, including the Adairs New Zealand exit.

Underlying EBITDA was $68.7 million, up 1%. Depreciation rose 7% on distribution and store investments, taking underlying EBIT to the $55 million already quoted.

Net interest fell 14.7% on lower average debt, with underlying NPAT, excuse me, at $34.6 million, up 1.7%, and underlying earnings per share at 19.5 cents. Moving to slide 10, the balance sheet strengthened during the year.

Net debt was $47.6 million, down $20 million versus the prior year, now at 0.7 times underlying EBITDA, the lowest level in over four years. Inventory closed at $91.2 million, down 5%, and by brand, Adairs and Mocka positions are clean and current following the first-quarter clearance reset, and at Focus, the aged stock clearance is nearing completion, ordering has been reestablished, and stock is rebuilding with availability recovering into Q2.

Underlying operating cash flow was $65 million against $30.4 million last year, and a cash realization ratio of approximately 119%. Working capital released $14 million, led by the inventory reduction and payables timing.

That funded $17 million of debt repayment and $13.4 million of dividends. At the full year, dividends amount to 11.5 cents, fully franked, up 9.5% on FY25, representing 59% of underlying NPAT, and the dividend reinvestment plan remains available.

Moving on to slide 11, which bridges the underlying results to statutory loss. Underlying NPAT was $34.6 million.

The Focus on Furniture impairment deducted $56.7 million after tax, and technology upgrade costs, which were expensed as incurred, consistent with prior periods, and the $2.8 million of legacy store software write-offs deducts 13. AASB 16 lease accounting deducts $2.4 million, and the Adairs New Zealand exit costs deducts a further 1.8.

That reconciles to the statutory loss of $39.4 million, or 22.2 cents per share. On the impairment, following the fourth-quarter deterioration, we tested Focus cash-generating unit at the end of the year on a value-in-use basis.

The charge is $63.5 million pre-tax, which comprises of goodwill of $41.1—sorry, $41 million written down to nil, and $22.5 million against the brand intangibles. The impairment is non-cash and has no effect on the group's banking covenants or capacity to pay dividends.

In FY25, Adairs New Zealand contributed—sorry, in FY26, Adairs New Zealand contributed $12.8 million of revenue and an underlying EBIT loss of $0.8 million, for which we recognized additional exit costs of $2.5 million. The exit is expected to be EBIT accretive from FY27 with no material cost tail.

Approximately 3% of sales will leave the Adairs base, reported growth in FY27 will optically soften. In the pack, Appendix 4 sets out the continuing basis comparatives.

On that point, I'll hand back to Elle for the strategy update and the outlook.

Thanks, Matt. Turning to the brands and starting with Adairs, for FY26, the product transformation was concentrated in categories Adairs is best known for, our soft furnishings categories.

Soft furnishings delivered 4.6% sales growth for the full year, with gross margin dollars improving by 6% with an improvement of 100 bps. For soft furnishings in the first half, sales increased 3.5%, whilst gross margin dollars were up 3.4%, down 10 bps, primarily reflecting the increased clearance activity to discontinue inventory.

The second half is where we really began to see the impact of the product transformation and the new strategy executed. Sales growth accelerated to 5.6% increase, whilst gross margin dollars increased 8.5%, representing 190 bps improvement.

Importantly, this demonstrates the quality of sales performance as we move through to the transformation, with growth being delivered alongside meaningful margin expansion. These categories underpinned the second-half gross margin recovery Matt discussed.

Two other points: Linen Lovers held at around 1 million paying members, contributing more than 80% of Adairs sales, with the Qantas Frequent Flyer partnership now a meaningful driver of new member acquisition. The Store of the Future format, piloted at Bondi Junction, delivered customer conversion approximately 400 basis points above comparison stores and is earmarked for rollout from FY27 into the homemaker and large format networks.

Slide 15, Mocka: and turning to Mocka, the four categories launched during the year of outdoor, youth, lighting, and sofas delivered about $3.2 million of sales, broadening Mocka from a nursery and kids specialist toward a whole-of-home offer. Impressively, the Australian website was up 26% and transactions up 18% on last year.

Pleasingly, Mocka opened its first physical stores: Maroochydore in Queensland in June and Tower Junction in Christchurch in July. This is a deliberate test-and-learn.

Further stores are contingent on the performance of these sites, with early positive signs. Slide 17, Focus on Furniture, the two-year turnaround: Focus on Furniture's turnaround sequence across FY27 and FY28 applies the same framework, approach as Adairs and Mocka.

There are three strategic pillars that we are driving: product and range renewal, which is about exclusive design-led collections with regular newness, a clear category pricing architecture in place of ad hoc discounting, and a broader supply base; the brand and customer, we're prioritizing stock availability and a clear value, with a refreshed brand platform, disciplined trading calendar, and a rebuilt website and upgraded CRM; and retail execution, that's structured selling skills, a new in-store incentive scheme, rosters matched to demand, a progressive refurbishment of the Frankston format, which outperformed the network, and this is the refurbishment template going forward. On timing, the first half of FY27 will be difficult as the weaker fourth-quarter order book carries into the new financial year and stock recovers.

Benefits are expected to emerge from the later part of FY27 and build into FY28, with EBIT recovery over the medium term. The store reset is funded with limited capital expenditure, and we remain committed to a national network of 40 to 50 stores over approximately five years, from 27 stores that we have today, sequenced behind the product reset.

Now, slide 21 to 22 is Vision 2030. Turning to strategy, Vision 2030, it gives us our longer-term framework for growth, for where we invest, how we allocate capital, and how we create value over time.

Retail will always demand short-term discipline of the trading results, and planning promotional cycles, disciplined inventory management, and delivering seasonal performance. While short-term discipline helps you manage the business, it doesn't necessarily help you build it, and that's really what Vision 2030 is for.

It is one strategic framework across three brands, recognizing that each brand serves a different customer and plays a different role in the portfolio. At its core, it's about building stronger businesses.

The framework rests on three pillars: it's about product and brand, about being design-led, exclusive product, winning in the categories that we're famous for, with pricing discipline over promotional intensity, supporting higher and more predictable margins; it's about customer obsession, about superior in-store experience, deeper insight and personalization, and a connected omnichannel offer, supporting higher lifetime value at lower acquisition costs; and ways of doing business, it's about structural productivity, exiting what does not earn its place, and sharing group expertise. The sequence delivered at Adairs is here: range elevation, margin recovery, inventory productivity, and cost discipline, is the same sequence now being applied at Focus, supported by group experience.

Slide 22 sets out the priorities by brand: for Adairs, elevate the brand's proposition for our customer's channel of choice, and simplify the ways we go about our business, continuing to reduce complexity in our operating model and finding cost efficiencies; for Mocka, continue to grow the brand awareness and customer accessibility, whilst building the capability enablement for growth; and for Focus, we're resetting the brand and the operating model, and we will rejuvenate our stores and our products, and we are encouraged by the progress, but there is a lot more to do. Slide 24, FY27 trading update and outlook.

In the first eight weeks of FY27, group sales, excluding the exited Adairs New Zealand business, were down 4.5% on the prior year. Adairs real-time sales were steady at plus 0.4%.

However, there are material timing differences in the period. We are cycling heavy clearance activity in the prior year, and a Linen Lover event was moved to de-risk the ERP implementation.

Given the event timing and clearance comparison, the first eight weeks are not representative of the full year. Our internal analysis puts underlying Australian sales growth at approximately plus 2% over the eight weeks, with gross margin ahead of the prior year.

Mocka real-time sales were up 15.3%, with Australian momentum continuing, and Maroochydore and Tower Junction trading in line with expectations. Focus written sales were down 27.6%.

The inventory and availability issues from the fourth quarter have carried into the new year, as flagged, and are expected to recover through the second quarter. The order book was $11.8 million at week eight, up $0.6 million since June, but below the $13.4 million at the same point last year.

On the outlook, FY27 is focused on earnings quality: moderate net margin expansion, cost productivity, and disciplined capital allocation. The new Adairs ERP system goes live in early FY27, with implementation risks being actively managed.

Focus expects a difficult first half, with turnaround benefits emerging in the second half. On the store network, Adairs plans 7 to 10 new stores, 4 to 6 upsizes or refurbishments, and 2 to 5 closures.

Mocka has two stores trading, and in Q3 opens Mornington in Victoria, with further stores contingent on the pilots. Focus has no new stores planned; there are two relocations and 5 to 10 light refreshes, and group capital expenditure of $25 to $30 million, approximately half of which is uncommitted.

On currency, around 70% of FY27 US dollar requirements are hedged at $0.674 against an effective $0.664 in FY26. We are not providing FY27 earnings guidance.

Before we take your questions, what we control is how we listen and respond to our customers and the experience we provide them. It's the quality of our ranges, the discipline of our pricing, the productivity of our stores and supply chain, and how we carefully allocate capital.

That's exactly where our priority sits heading into FY27. Adairs and Mocka show this year what that discipline can produce, and we are applying that same rigor to Focus on Furniture, with our eyes wide open about how long that will take.

I'm optimistic about what this business can become and clear that it will be earned and not assumed. With that, Matt and I would welcome your questions.

Operator, please open the line.

Hi guys, hope you're well. First one, please, just on the Adairs brand—gross margin, it was about 61, just over 61% in the second half of fiscal '26.

Just looking back, I think in Feb this year, you sort of mentioned the aspiration was to get that gross margin back to fiscal '24 levels of around 63%, and that was before FX benefits. Just wanted to see what the new or revised thinking is for FY27 in terms of the gross margin benefits and obviously overlaying FX on that, too, please.

Hi, Aryan, how are you? Good, I hope.

Good, thank you.

I think at the half, we said, yes, aspirationally we'd want to get to 62. We've quoted the FX rate on the outlook page, you can calculate what that would work through in bips, but that would be about 60 to 80 bips just calculating through the FX.

As Elle said, we are focused on pricing discipline and promotional depth, but that's about as far as we would sit there on a gross margin position.

Sorry, did you say the FX is a 60 to 80 basis point benefit in FY27?

At the group, yeah, based on that 1 cent, yeah.

In terms of brand Adairs, isn't it more like a 150 basis point benefit to your gross margin, just given your hedge rates?

They're broadly similar across the brands, Aryan.

Oh okay. The thinking is into fiscal '27, 62% is the sort of base margin you're aspiring to, and then on top of that you've got a 60 to 80 basis point benefit, sort of 63-odd percent is where we're looking at?

I would sit there and say that's your model, not our guidance, Aryan, but, yeah.

Gotcha. Perfect.

Then second question, just on Focus, in the first eight weeks, you're down 28%. Obviously, there's some inventory availability issues.

How do we think about the cadence of the declines into the second quarter, just given the order bank, is the way to think about it, well, Q2 is going to still be down 20% plus, and then from third quarter onward, you can get back into growth or stabilize the business, please? I think

what we've said in the pack, Aryan, is obviously Q1 broadly reflects the exit rate that we called out for Q4. Availability and newness does land at the beginning of Q2, which we would hope to see some improvement in that growth rate.

Q3 would then stabilize, and then hopefully by Q4, we would be hopefully demonstrating some growth, obviously, comping the lower comps that we saw in Q4.

Right. Then just last one, just on the cost efficiencies, opportunity for cost efficiencies in the business in fiscal '27.

Can you just quantify if you can, just any efficiency benefits that you sort of have been implementing? Obviously, you've got the ERP, and sort of to what extent does that get offset by some of the more recent inflationary pressures like the fuel surcharges and, yeah, that'd be great, please.

I think what we've said through the pack and the voiceover today, Aryan, is we are focused on cost and cost productivity, and we would hope to offset inflationary pressures in FY27. I did call out some significant improvements in supply chain.

Now, that will annualize in FY27, but we are focused on ensuring that cost is managed in a good, disciplined way.

Great. Thanks, guys.

Morning, Elle. Morning, Matt.

Thank you for your time. Just on the CapEx, just to be very clear, $25 mil is before the tech upgrade of 5, if I'm reading that correctly.

Just help us frame whether FY27 is a bit of a catch-up year or the extent to which you're thinking about upsizes, refurbs, light refreshes, and so forth is more normal course of business moving forward.

Certainly, the $5 million is excluded from that 25, Allan, so that's a correct conclusion. We do call out that 50% of the capital is uncommitted in the sense of we haven't signed lease commitments on that yet from a new store point of view, and we will take those new stores on a case-by-case basis through '27.

We did call out some light refreshments in Focus, which are very capital light. Most of that is store layout and in-store design enhancements.

We have got a good pipeline of Adairs stores and certainly looking to increase the store portfolio to offset obviously the New Zealand exit that we did in FY26.

Really remember Mocka is in a trial mode

with

its three stores, depending on the success of that going forward, we are already reviewing what that portfolio could look like. Yes,

thank you. Maybe just layering in a query then on the ERP implementation.

Appreciate some of the comments you've sort of made around being careful with the whole process. Just what are the key measurement points for you in this half that you need to step through?

What with the delayed Linen Lovers piece, how do we think about the framing of when you are doing your key periods for Adairs through first half, please?

I think the important bit to note, Allan, is that we did cut over our online business onto the new ERP in end of June, early July, so that's over 30% of the Adairs business is now on the new platform, which is a good, strong result. The main implementation, the last phase of that implementation, is in Q1, so that's within the next few weeks, and that's an important in terms of cutting over the rest of the stores, obviously the financial systems and the stock systems.

We're at that high-risk phase of the main implementation, but the team are confident.

Thank you. Maybe just one on the Mocka store, the stores themselves.

Appreciate this July opening, June openings, we haven't seen CODB and the other sort of below-the-line items hit. When we are modeling these out, should we think that it's a store akin to a Focus store or an Adairs store or somewhere in between?

Just any sort of color you can provide on rough metrics we should be thinking about, please.

The way we would look at it is the contribution around the same as an Adairs store.

Thank you.

I'd like to thank everybody on the call today and look forward to more calls later on today and next week. Thank you very much, everyone.

I'd like to also just thank the teams that make this announcement possible, and also to the board for supporting us throughout this year. Thank you.