Dear fellow shareholders,

For the financial year ending 30 June 2024 (FY24), the NAC Investment Portfolio fell by –27.98%, compared to the Benchmark S&P/ASX 300 Industrials Accumulation Index (XKIAI), which increased by +17.70%. FY24 was an extremely disappointing year from a performance perspective and brings the return of the NAC Investment Portfolio to +6.28% p.a. since inception.

I want to be very clear and acknowledge that this performance is not an acceptable return, and when heading into FY24, we did not think producing such a poor result was even a remote possibility. My fellow Directors and I, many of our staff, and our extended networks and families are some of the largest investors in the Company, so this underperformance hits home in a profound way.

As I will elaborate in this letter, I firmly believe the current share prices of many of our core investments do not truly reflect their long-term value. We remain steadfast in our view that the true value of these investments are significantly higher than where they stand today. Throughout the year, we have spoken with many sources to stress test our investment thesis for each of these investments, and they have overwhelmingly corroborated our viewpoint regarding long-term value. As an investor in emerging companies, we expect that these businesses should be able to substantially grow their earnings per share (EPS) over time and frankly, most of our core investments have not hit our internal growth hurdles this financial year. However, this is not to say these businesses will not be able to grow EPS to substantially higher levels in FY25 or FY26. If this occurs and the macro environment becomes more favourable for such businesses, we believe the re-rate to fair value will be significant.

We believe we are business owners, and our investing mentality should be aligned to this. That is why we will often seek board representation on the companies we invest in, through a NAOS representative. At present, a NAOS representative sits on the board of eight of our investments, which we believe helps to support the respective executive teams and ensure they are taking the right steps to achieve their long-term strategic goals. If they successfully execute, this should lead to maximised shareholder value over the long term.

Has The Market Structure Changed Investing Forever?

Earlier in the year, highly regarded US-based investor, David Einhorn, gave an excellent analysis on what is moving markets today, particularly on the changing structure of the market.

He argues that a significant portion of investment capital in the market either cannot assess valuations due to a lack of training, does not care about valuations (i.e. passive index funds or ETFs), or intentionally ignores valuations in favour of price-focused strategies (i.e. technical or quantitative strategies).

Einhorn illustrates this with an example of two companies both having a fair value of $1 billion. If one is undervalued by the market and has a market capitalisation of $500 million, and the other is overvalued with a market capitalisation of $2 billion, a market capitalisation-weighted index fund investing $5 will allocate $4 to the overvalued company and only $1 to the undervalued one. This leads to the overvalued stock receiving disproportionately more investment, causing it to outperform, while the undervalued stock underperforms.

This issue is compounded when new investments into index funds come from redemptions from active managers who had previously allocated more to undervalued stocks. When money is withdrawn from these active managers and reinvested in index funds, the undervalued stock faces net selling, and the overvalued stock sees net buying, driving their valuations further apart.

The rise of passive investing over recent years has seen several trillion dollars redeployed in this fashion, which in Einhorn’s words “has fundamentally broken the market”.

Looking at the ASX, Commonwealth Bank of Australia (ASX: CBA) would be the prime example of this in the domestic market. As at 30 June, CBA shares were trading at $127.38, just below their record high. The share price has increased by +26.2% over the last 12 months and, inclusive of dividends, has delivered a total shareholder return of +31.7%, markedly higher than the S&P/ASX 200 Accumulation Index FY24 return of +11.4%. Where the increase in CBA shares ties in with Einhorn’s comments is in relation to its EPS growth. FY24 EPS is expected to decrease by –1%, then looking ahead to FY25, consensus estimates are forecasting earnings growth to be negative again, circa –3%. As such, CBA currently trades on a price-to-earnings (P/E) multiple of 21.9x and, given the decrease in EPS for FY25, this will increase to 22.7x.

Based on these metrics, I would argue the investment case for CBA goes against many of the fundamentals of investment analysis, such as looking for businesses that can provide sustainable EPS growth, as well as seeking businesses that do not require an ever-increasing amount of capital to achieve this, which leads to a reduced return on equity (ROE).

Commonwealth Bank – Share Price vs. EPS

Commonwealth Bank – Key Metrics

So, why is the price of CBA shares at a record high? When considering the current macro environment, one that is more conducive to low credit growth and increasing bad debts, this appears illogical. However, let us not forget CBA is the second-largest business on the ASX by market capitalisation and is also a highly liquid one. It has provided investors with a relatively stable stream of dividends and in theory, should continue to do so. If you have exposure to an exchange traded fund (ETF) that seeks to provide exposure to the ASX 100, Australian financials or even large listed businesses in Asia, chances are that CBA will form part of that exposure. As these ETFs continue to increase in size and popularity, many of them will continue to acquire CBA shares regardless of price and/or value.

Interestingly, when looking at global banking peers, CBA would rank the fifth most expensive in terms of valuation. This is out of 120 banks that have a market capitalisation greater than $85 billion (for context, ANZ Group has a market capitalisation of $86 billion).

Looking to the S&P 500 in the US, a notable trend that has been occurring for some time now is that the market breadth (or the number of stocks moving up versus those declining) has been decreasing at an ever-accelerating rate. Despite this, the S&P 500 has already set 30 all-time highs so far in CY24. The S&P 500 recorded a gain of +22.7% in FY24, but as we can see from the chart overleaf, the major contributors to this performance were five of the so-called “Magnificent 7”, namely NVIDIA, Microsoft, Amazon, Alphabet and Meta Platforms. Due to their already large market capitalisations, given their substantial returns, we estimate they have contributed >95% of the S&P 500’s FY24 return.

S&P 500 vs. Magnificent 7 - FY24 Share Price Return

While this may seem like a bubble, we believe it is in fact hard to justify current prices as such when we look at the current earnings and EPS% growth of each of these businesses. As an example, NVIDIA has a P/E of 50x but its forecasted EPS is expected to grow ~120% for CY24, which will see the P/E halve. For Meta, the current P/E is 25x, with forecasted CY24 EPS growth of +30%. When you then overlay the average market capitalisations of the Magnificent 7 of $2.2 trillion with their average cash balances of US$32.3 billion, you can argue the current valuations are justifiable. The trends these businesses are exposed to are high growth in nature, generally scalable (globally) and have a market dominance that gives them a high level of pricing power. All these characteristics are very hard to find in one business, let alone seven.

EPS Growth Expectations – Magnificent 7 vs. S&P 500

So, what does all of this mean for investing in emerging companies, especially those outside the resources and technology sectors? The answer is not simple. In very basic terms, investment in such businesses needs to be attractive relative to all other investment options. In a world where we have mega-tech businesses, significant expansion of private credit (non-bank lending) and more speculative investments such as venture capital, there are various options available to all investors.

For investors in emerging companies, returns are driven by three key outputs:

• earnings per share;
• the valuation multiple applied to these earnings; and
• dividends.

If an emerging company is unable to grow its earnings at a reasonable rate, then the valuation multiple applied by investors to these earnings will reduce. For example, if earnings remain flat, and the P/E multiple falls from 12x to 9x, this will lead to a 25% reduction in share price. Investors will then be reliant on dividend yields for any return.

In the current environment, many investors focus on short-term news flow and extrapolate these findings. For many businesses with cyclical attributes this had led to significant downside share price movements. I would argue this becomes self-fulfilling, as falling share prices result in smaller market capitalisations and often reduced liquidity as investors move up the liquidity curve. This in turn makes it less attractive for the company to remain a listed business, as the valuation premium reduces (or evaporates), leading to an inability to raise funds and further reduced liquidity for shareholders.

At NAOS, we continue to believe that investing in emerging companies that have a clear moat, are run by proven and aligned management teams, coupled with a long runway of growth in favourable industries, will ultimately yield strong long-term results. Economic cycles will impact earnings in the short term, but in our view, it is important to remember many large and successful businesses, such as Reece Ltd (ASX: REH), have experienced periods where their share price flatlines or even falls (especially in their early years). Acquiring shares in times such as these can yield tremendous results and we would argue such opportunities exist today.

Events of Significance for Investee Companies in FY24

Given the FY24 Investment Portfolio performance, it is easy to assume there were no significant events that may lead to strong shareholders returns in the upcoming year. However, in our view, there were a number of notable events that could shape the respective businesses for many years to come. They have not yet led to a change in the share prices of these investments, mainly due to their minimal impact on short-term profitability, but in our view significant potential upsides exist.

COG Financial Services (ASX: COG)

Acquisition of 19.99% Stake in Centrepoint Alliance (ASX: CAF)

COG is Australia’s largest finance broking and aggregation (FB&A) business, with >$9 billion of loans financed through the COG network. It also has two complementary divisions, being Novated Leasing, and Asset Management (the majority of which is made up of commercial lending aggregation business Equity One). Importantly, all of these divisions do not require COG capital to write loans, instead employing a “clip the ticket” type model, which has a high ROE and maximises cash flow for COG shareholders without taking outsized risks. We believe the divisions will continue to grow through a combination of taking market share and cross selling other products, such as insurance. However, the growth potential in these divisions will ultimately be limited by the size of each market and the number of acquisition opportunities available, coupled with the price vendors are seeking.

Via its recent acquisition of a 19.99% stake in Centrepoint Alliance (ASX: CAF), COG has dipped its toe into the financial advice market, which according to market estimates is worth $5.4 billion annually. CAF supports over 500 licensed advisers and more than 190 self-licensed practices, offering a range of services to support financial advisers, including technology, lending services, licensing, and back-office support.

In many ways the COG and CAF models are very similar, despite operating in different industries. Both companies aim to provide a supportive structure to allow their members to grow their businesses sustainably and have all the necessary tools to meet their business needs. However, there is a sizeable difference in their addressable markets: the transactional volumes that are processed within the asset finance market are estimated to be $40 billion annually, while the financial advice market is $5.4 billion annually. Two key factors significantly differentiate these markets. Firstly, the fees charged on these volumes are significantly higher in the financial advice sector compared to finance aggregation. Secondly, the financial advice market is much more fragmented following the Financial Services Royal Commission, whereas the asset finance market is dominated by the Big Four banks and players such as COG and Australian Finance Group (ASX: AFG).

Applying a longer term lens, our view is that COG has taken an exposure to the financial advice industry based on notable positive characteristics including:

• Regulatory Reform – The financial advice industry has undergone significant regulatory scrutiny and legislative changes over the past 3–5 years, to ensure it is fit for purpose. These changes have provided advisers with greater clarity around the framework they need to work within to provide sound advice for their clients. Key reforms include minimum educational and tertiary requirements.
• Reduced Adviser Numbers – As a result of these regulatory changes, there has been a significant reduction in the number of advisers within the industry. As at the start of 2024, there were 15,677 advisers, compared to 26,500 five years ago. This has clearly resulted in a significant reduction in the options available for people seeking advice, and the advisers who remain should likely be of a higher quality and part of more robust businesses or infrastructures.
• Wealth Transfer – It is no secret there is significant intergenerational wealth transfer occurring within Australia as the baby-boomer generation enters its retirement phase. Due to the amount of wealth that will be transferred, and the associated complexity of this, we believe the demand for advice will increase significantly over the next 2–10 years.
• Highly Fragmented Market – What was once an industry dominated by large financial institutions including the Big Four banks, is today an industry with no clear number one, and a top 10 that is made up of numerous businesses of a similar scale to CAF. Several smaller operators, including CAF, are seeking to scale their business through an owned-and-aggregation model, but at current growth rates it will be many years until there is one, let alone multiple large aggregators in the financial advice industry.

It will be interesting to see how COG moves forward with its shareholding in CAF. Many market participants will be acutely aware of the last time COG acquired a substantial shareholding in a listed entity (Earlypay, ASX: EPY); it did not go according to plan, and COG still holds this investment albeit at a much lower value than its acquisition cost. For COG shareholders, it will be imperative that COG acts decisively in looking to scale its ambitions in financial advice. If it does seek to scale this division, we believe the industry structure and similar business variables make it a strategy worth pursuing.

MaxiPARTS (ASX: MXI)

Acquisition of Independant Parts

The management team of MXI continue with its strategy of providing the business with geographic reach, product diversification and financial scale, with the acquisition of Western Australia-based Independant Parts (IP). This acquisition solidifies MXI’s ambition to be one of the largest players in the aftermarket truck parts space with a nationwide presence, and in revenue terms puts it at a similar size to that of Supply Network Limited (ASX: SNL) and the commercial division of Bapcor (ASX: BAP).

MXI paid ~$30 million for IP, which generated ~$45 million of revenue and $3.4 million of EBITDA (pre-AASB 16) in FY23. IP has four standalone branches but many more “embedded” sites. These embedded sites are essentially an IP store located within a client’s main operation. For example, a mining business that has the scale and requirement for an onsite parts provider to minimise any downtime to their mining operations. This set-up ensures a continuous supply of necessary parts, critical for mining operations. It also allows the parts provider to get a better understanding of clients’ needs on an ongoing basis, so they can ensure they always have the right parts in stock.

From our perspective, there were several positive and negative attributes of this deal.

Advantages:

• Increased WA Presence and Client Diversification – Prior to this acquisition, of all the states MXI operates in, it was weakest in Western Australia (WA). But as the acquisition of Forch has shown (>90% of its revenues were WA sourced prior to acquisition by MXI), WA is a state that has substantial demand for MXI’s products and services. The acquisition of IP now provides MXI with broader access to these markets across WA and the opportunity to expand its embedded business model. Clearly, many clients in WA will operate in the resources industry, which diversifies MXI from the traditional eastern seaboard operators who rely on general logistics movement.
• Embedded Business Model – We believe that ~50% of IP’s revenue is derived from sites that are part of their embedded business model, a model that MXI did not employ prior to the acquisition of IP. We would argue this embedded model provides MXI with a significant competitive advantage, allowing it to deal directly with the customer at their site, truly understand their needs, and tailor services to meet those needs. If MXI delivers high-quality service, is easy to do business with, and offers fair pricing, it becomes difficult to see MXI being displaced from these sites, especially due to the time-critical nature of many of these part requirements. Furthermore, this successful embedded business model in WA could potentially be replicated on the east coast, providing MXI with valuable optionality.
• Core Business Growth and Margin Expansion – As both margin and revenue growth formed the core part of our original investment thesis, it was pleasing to see MXI continue to grow revenue as well as margins. The increasing demand for non-genuine truck parts, as customers recognise the benefits of non-OEM products, plays a significant part in MXI’s top-line growth. Additionally, compared to its closest listed peer, Supply Network Limited (ASX: SNL), the EBITDA margin differential is >8%. Although a number of variables mean this is not an “apples to apples” comparison, regardless we believe MXI has the opportunity for this margin profile differential to materially reduce over time.

Disadvantages:

• Sophisticated Vendor, Price Paid and Deal Structure – The IP business was previously majority owned by a WA-based private equity firm. Sceptics will argue that such an investor/owner would have ensured the earnings potential of the business was maximised prior to sale. The fact that MXI paid 100% cash for the business also lends to the argument that MXI may have paid a full price with minimal protection if the forward earnings do not grow as expected. We should point out that during the trading update provided in May 2024, management flagged that “the trading results for IP are tracking in line with expectations, with the WA market still remaining buoyant”, so while we have high expectations for the newly acquired business, it will be a focal point during the FY24 results.
• Equity Raising – An attribute that first attracted us to MXI was the significant free cash-flow generation, driven in part by strong gross cash-flow conversion, minimal capex and approximately three years of income tax losses. As such, we found it a little disappointing that MXI’s board opted to fund the acquisitions with a $17.2 million placement (with no access to retail investors) at a 10% discount to the last share price. Looking forward, assuming management continues to execute as it has done so previously, we would expect the board to adopt a capital management strategy that is more aligned with MXI’s cash-flow generative nature and balance sheet strength.

MXI remains one of our highest conviction investments held in the NAC Investment Portfolio, with Peter Loimaranta and his team doing an exceptional job in a short period of time. Despite a weaker than expected 2H FY24 from a trading perspective and some missteps in guiding the market regarding cost increases associated with new leases, MXI operates in an industry with strong long-term fundamentals and has significant opportunity to increase its margins over time.

Urbanise.com (ASX: UBN)

Entry into Expanded Strata Market Opportunity

In Q4 FY24, UBN provided an in-depth update on its Horizon 3 strategy, aimed at driving long-term, sustainable growth by leveraging the footprint of strata lots and facilities users on the UBN platform. UBN has been working on integrating and automating solutions to enhance the connection between strata management and their respective service providers. Currently, UBN connects with thousands of individual strata managers, who often manage hundreds of individual strata lots. These lots require services from various external service providers such as insurance providers, financial institutions, and numerous maintenance providers (plumbers, builders etc.).

This integration provides a significant opportunity for UBN with a relatively low amount of risk because:

• the solution is an add-on, not a new, unproven software platform;
• it will target the current user base;
• data will be shared via secure APIs, eliminating the need for manual processing with multiple service providers; and
• this is an existing and proven market, with some of UBN’s peers offering similar but outdated and non-cloud-based solutions, which limits their scalability.

This new service will leverage the current UBN infrastructure without requiring significant one-off capital expenditure or a significant ongoing increase in the fixed cost base. We have long stated that UBN has industry-leading software and a cost base to support it, but has lacked a revenue base that reflects the significant investment in software development over many years.

UBN estimates the size of this market opportunity to be between $30 million to $45 million, based on the assumption that approximately $20 billion of strata-related transactions occur annually, with a fee of 0.14% to 0.30% applied to these transactions. This fee is comparable to what other service providers charge for similar solutions, although we would argue that UBN’s technological solution is superior.

Although UBN is yet to secure a deal with a major service provider, it has stated it has generated leads and targeted opportunities with strata managers. Under the assumption that UBN can capture a 10% market share relatively quickly, with a 0.20% transaction fee, this would imply an additional $4 million of annualised recurring revenue (ARR). UBN has previously stated that it expects to be FCF breakeven within FY25 (excluding Horizon 3), so if the above was to occur, we would expect UBN to move well into profitability. This would position UBN to grow its sales base in a more sustainable manner. If the business can execute successfully on this opportunity, in our view the valuation applied to UBN could potentially be 4–7x ARR.

FY25 Outlook

There is no doubt that being an index-unaware active manager with a focus on emerging companies has never been more challenging. Despite this, we fundamentally believe and remain steadfast in the belief that investing in emerging companies, with a long-term and concentrated portfolio structure, can lead to substantial positive returns.

I would argue the current share prices applied to most, if not all, of our core listed investments factor in no earnings growth or even negative growth over the long term. However, as history has shown us, extrapolating a current earnings profile can prove to be a misguided approach, when earnings are either depressed (and also valued on low earnings multiples), or at inflated levels (and also trading on lofty earnings multiples). This can explain why large amounts of variability can affect a company’s share price over time.

In our view, three key factors will dictate the returns of the NAC Investment Portfolio over the next few years.

Firstly, a number of our largest investments are highly exposed to long-term structural tailwinds. In our opinion, these tailwinds have not disappeared over the past 12 months and in some cases, have only become stronger. However, for well-documented reasons the activity levels generally associated with these industries has recently stalled. We believe that as these return to normal, the emerging businesses that have a large exposure to these industries (such as residential construction) will benefit significantly.

Having said this, a number of our larger investments, such as MXI and UBN, have compelling internal initiatives underway that could grow their earnings base significantly with little correlation to the underlying macro environment. For UBN, successfully executing on new market opportunities and partnering with tier-1 counterparties could be a pivotal moment for the business, greatly expanding its total addressable market. With regards to MXI, the focus is on increasing profit margins, and there are numerous strategies the business can employ to achieve this. Although a significant margin increase will not happen in a single year, we estimate that even a 0.5% increase in EBITDA margins could drive a >15% increase in NPBT. As management continues to roll out further Japanese aftermarket parts, grow the Forch consumables business and achieve organic revenue growth, we believe these strategies will have meaningful impacts on the overall margin outcome.

Secondly, businesses will need to continually innovate and refine their strategies to ensure they meet their customers’ changing needs, and we are confident our investments are nimble enough to execute successfully in this regard. We also do not believe that many of our businesses reacted as effectively as they could have in 2H FY24 from an efficiency perspective. In FY25, they will need to ensure they are being as efficient as possible to maximise the value of their asset base, particularly if cost rationalisation activities have occurred in response to the more challenging economic climate of late.

Thirdly, as listed companies they also have the clear advantage over their private counterparts to use their listed scrip to acquire businesses that bring with them a compelling strategic offering. Potential opportunities for strategic M&A activity are also likely to increase given the depressed valuations across many emerging companies.

There is no doubt that the above factors come with a significant amount of execution risk. However, due to the recent investor exodus from emerging companies, in our view the valuation multiples currently applied to many emerging companies have not been as depressed for 10 or even 20-years. Consequently, when these businesses grow their earnings base at a rate even slightly above market expectations (e.g. >5%), we would argue the re-rating of these businesses has the potential to be significant. As we have seen over the past 12–24 months, when a listed business remains undervalued over a significant timeframe, there is a real possibility the company will be acquired and delisted. In 2024 alone, within the building materials sector, three of the largest listed businesses saw takeovers, namely Boral (ASX: BLD), Adelaide Brighton (ASX: ABC) and CSR Limited (ASX: CSR), all of which had been listed since the 1960s.

We also believe that in most cases the people who run our core investments are highly aligned, highly motivated and highly capable. This also gives us great confidence the strategies are being implemented with strong fundamentals behind them and a high level of energy to achieve the outcomes in a desirable timeframe. While some may argue that executives/management teams have a poor ability to judge what fair value is for their respective businesses, we would argue that these same people have a deep understanding of the long-term strategic value of their respective businesses.

In conclusion, we are striving for improved returns following the recent unsatisfactory performance. We take full responsibility for these results and remain committed to restoring value and delivering long-term performance.

My fellow NAC Directors and I continue to increase our shareholdings, and NAOS has also recently committed to reinvest up to 10% of its annual management fee into acquiring NAC shares on-market.

The entire team at NAOS is acutely aware of the trust you have placed in us to manage your capital and we greatly appreciate your ongoing support.

If shareholders have any questions, please do not hesitate to contact me directly.

Kind regards,

Sebastian Evans
Managing Director and Chief Investment Officer
NAOS Asset Management Limited 

How does MaxiPARTS prioritise gender DEI within your workforce?

At MaxiPARTS we embrace DEI, recognising the array of differing perspectives and balance this brings to the success of our business. Our diversity enhances our decision-making processes and fosters open, transparent and inclusive communication channels from the warehouse to the boardroom.

In FY22, we established and published three-year targets to increase our company-wide female representation from 15% to 20%, and for our Sales & Distribution division to increase from 7% to 15% by FY25. We are pleased to say we have successfully achieved our company-wide target of 20%, while our Sales & Distribution division currently stands at 14%.

Females make up 40% of our directors and the board is currently led by its first female chair.

What strategies does MaxiPARTS employ to attract and retain diverse talent?

Operating within a traditionally male-dominated industry, we take a proactive approach to our recruitment and hiring practices. This entails adapting our advertising platforms and vacancy adverts to better reflect our job offers, as well as promoting our inclusive culture that values and respects diversity. We also encourage shortlists with a diverse nature of candidates.

As part of our employment offer, we listen to the needs of our people and can provide flexible working arrangements in roles that allow this. This enables our workforce, especially working mothers or family carers, to strike a harmonious balance between their family and professional responsibilities. Our paid parental leave and additional flexibility includes flexible start/finish hours, hybrid work from home/office work patterns, keeping-in-touch days, part time contracts and staged retirements.

How does MaxiPARTS foster a culture of inclusivity and support for DEI in the workplace?

Through our DEI journey, we have established resource groups where women can share experiences and support each other. Two key areas have been our 2023 MaxiPARTS Women’s Forum and our National Association of Women in Operations (NAWO) Annual Mentorship program for our female leaders. For a number of years now we have had female employees participating in the NAWO Mentorship program, which provides external guidance on building a successful career path. We also use our internal succession and development process to aid in individual skill and experience identification and development.

In pursuit of fostering a comprehensive understanding of DEI, our MaxiPARTS managers undertake the SBS Inclusion and Diversity program. This program is designed with a primary emphasis on eliminating unconscious bias, which can affect hiring practices, team dynamics and overall company culture.

How do you measure progress and hold yourselves accountable for achieving these objectives?

We employ a variety of methods to evaluate our progress and ensure accountability. These include regular data analysis and assessment of our established DEI key performance indicators (KPIs). These encompass diversity metrics, feedback received from our engagement and exit surveys, together with direct conversations with our people, monitoring our retention rates and talent acquisition efforts, and monthly reviews of our strategic plan initiatives to ensure alignment with our broader vision.

Looking ahead, what are the goals that MaxiPARTS has set to further advance gender DEI within the organisation and the broader industry?

We are currently focusing on further strategies to foster continuous growth and embrace diversity across the business. Following recent acquisitions, we will conduct training to ensure seamless integration of MaxiPARTS’ established frameworks into our traditional business model. While we have conducted numerous training programs for our staff in the past, this remains an ongoing endeavour, especially concerning recruitment strategies. Additionally, we are steadfast in our commitment to narrowing the gender pay gap, a goal we pursue through regular recruitment efforts and annual salary reviews.

As we near the end of the current timeframe for our diversity targets, the board and executive team will evaluate and define a new set of KPIs to ensure we continue to maintain our momentum and further bolster our overall diversity profile.