good afternoon and welcome to the team internet group plc investor presentation throughout this recorded presentation investors will be in listening mode questions are encouraged to be submitted at any time by the q a tab situated on the right hand corner of your screen please just simply type in your questions and press step before we begin i'd like to submit the following call i'd like to hand you over to management team michael good afternoon sir good afternoon and good afternoon to everyone and thank you for joining us today my name is michael riedel group CEO of Timothy and group and with me is Billy Green our group CFO let me start with the headline of today's presentation because it's a simple one these results contain no surprises everything you see today was set out earlier this year and delivered and trust me when I say we would like no surprises to become a habit at the internet you can see the agenda on the screen and it's also the story of the company right now in five chapters first what we said and what we delivered and we hold ourselves to our own words then the results by segment followed by the balance sheet and financing and I know this is where some of you have questions and we'll take them head-on then we proceed to the strategic review and other sources of value and finally we'll look into the outlook and then um we will we will see enough time for your questions as many of you will have a few so let's jump straight in um what we said and what we delivered this slide is a scorecard and it's deliberately the first thing we show to you on the left you see the commitments that we made publicly each one dated and sourced you can look every one of them up yourselves and on the right what actually happened first we said h1 trading would be in line with consensus it was in line with consensus abidai head of the second half of last year and the group operating profit finally back in the black second we promised that we would build comparison at our full year results in june we told you comparison would continue to broaden and grow strongly and it did it grew net revenue 38 percent profits 56 percent and it opened a substantial new customer acquisition channel which will which will feed into further growth in future periods it is now becoming the second earnings pillar of this group third we said and we had guided this through all of 2025 that search would complete its transition and return to profitability it did exactly that profitable in june with real ebitda and adsense for domains is not a thing anymore all of our revenues now come from related search on content and other products that we've built around that fourth we said we would strengthen the balance sheet as you've seen earlier this year the facilities were amended covenant headroom was materially widened and the full refinancing is advancing billy will give you a bit more color on this two of the rows on the slide carry arrows rather than ticks because they are in motion first that's that which we reaffirmed today will be broadly in line with market consensus by year end and secondly the strategic review where we gave you an update this morning and i'll come to it back properly in chapter four so when i said in line with consensus the headline numbers and slide title is the summary in line with consensus ahead of the second half of 2025 and with a step up in the quality of earnings and let me take the six boxes below very briefly first gross revenue 179 million dollars admittedly down one third year on year but i want to be very direct about that number this decline was totally expected it's the impact of the search transition that we've guided you through for the last 18 months and which is now complete every other number of the slides tells you what the transition has brought second net revenue is now 61 million dollars the gross margin is up from 28 percent to 34 percent total pick up of six percent points and that's the step up in quality a richer mix and more of every revenue dollar that stays with us and doesn't go to third parties third adjusted EBITDA of 90 and a half million dollars which is below the first half of last year as reflect but ahead of the second half of 2025 which means the trough is behind us the second half of our is systematically stronger than our first half of all years and we'll expect the same pattern for this year then the operating profit 3 million US dollars and that is the group's first half year operating profit since the first half of 2024 at the end of the biggest transition in this company's history we returned to making money on the bottom line adjusted eps profits after all deductions amortization etc and the net debt is now sitting at 117 million dollars but billy will give you some more flavor about that and how it's going to come down over the next couple of quarters when I when I say the the quality of earnings has increased I'm also referring to the revenue mix in the first half of this year 87% of the net revenue was sitting in DAS and comparison and both are growing so expect that pattern to maybe become even stronger now the shape of the group is very is very is very different the IS description business and comparison as I will lay out to you later pretty much the endgame in online discovery products that we are very proud of and that we have very high hopes in but let's wait for the specific slide the the revenue only fell where it was expected which is which is which is search where there was simply no way to compensate in the given time the massive amount of revenue of adsense for domains the product that google has has sunset in in april this year but already today we are making very solid revenues with our sock and other substitute products let's now let's now go into the three segments each by themselves um ds the title says it it keeps compounding and we are working here with value discipline with time on our side the net revenue is up by eight percent um against both halves of last year the profit is up 28 percent and with a margin of 34 percent on net revenue and our value-added services like registry services ssl certificates trustee services and software now make up almost 19 of our revenue compared to only slightly north of 17 percent so um the um the diversification um or the addition of additional services on top of our super resilient um domain renewal revenue streams is working you will you will you will notice um from the information in the rns today that the domain volumes are slightly down and that is deliberate we've traded volume for quality so there is we ended relationships where customers did not pay the price or did not leave us the margin that was required to process the internal cost that engaging with them with them required and so we are seeing both the gross margin going up and the EBITDA conversion that's the figure how we measure EBITDA as a percentage of net revenue is also going down because this has also been helping us streamlining our our processes and we are now largely done with this we are not done with this process so expect that at the latest in 2027 we will then again see growth on all three numbers and not only on that revenue and the EBITDA the and And while we have an additional slide on this video review later, what's important to see is this is a growing asset and there is absolutely no need to accept any discounts for urgency. Every month that we own this business throws off good cash and the business only becomes more valuable as long as we hold on to it. Coming to comparison. comparison which is now the second earnings pillar and which is compounding revenue internationally and i want to spend real time here because this is the heart of what the equity story would be after a potential sale of the as so let's start with how we make money because it's unusual and it's the whole point we are paid only when someone completes a purchase at one of our e-commerce partners not per click not per view we take all the conversion risk and we are rewarded for taking it because for for the merchant it doesn't get any better than this they pay for the results and only for the results and doing this well is super hard and only few can and we are very happy that we are the leader in this business model in the largest market in Europe how does this translate into figures net revenue up 38 percent profits up 56 percent and 68 percent conversion of net revenue in ebitda profits growing faster than revenue that's the operator leverage that we've built in this business and the growth that's driving is has three drivers in order and in order the revenue grows against the largely fixed content and technology base so we have we have all we have all the resources in-house to drive the growth engine we are going for deeper monetization we are we are layering manufacturer commissions on top of retailer commissions which means that out of every sale that we refer to a merchant we we are generating more value for us and um and also internationalization is progressing you see that you see that the the percentage of the percentage of international sales has gone up from five percent to five point two percent but this is first against the um the backdrop of a very strongly growing uh german business and secondly in the in the first half of two thousand twenty six given that we need give given that we have a promise to keep which is to a trade in line with expectations we've put most of the investment in in the already profitable international markets and less investment into the international markets that still need to become profitable so in particular of france is super meaningful and has um has multiplied by um low to mid single digit integer multiple so that's that's a mark where we now are all slowly becoming a proper powerhouse what we've also what we've also done in the first half of the year is um is developing new conversion funnels which open a substantial new acquisition channel alongside classical search those who have seen early presentations where we had the screenshots of what we do they will know that a lot of the traffic comes from classical Google search text ads which is the easiest to convert traffic however we have also built new conversion funnels that help us converting shopping ads and in the future also you know in the future also help us engage with customers on social media vastly expanding the universe of customers which which we which we can work together so over that over that we basically have the head trick of growing and diversifying internationally in each market addressing new customer bases that are not coming through search engines and last but not least working with e-commerce partners and the merchants alike to extract the value that we create for our customers and transform it into financial success for us coming on to search the transition is complete as I said before the business has finally gone into its first monthly profit in June the margins are maturing and the move away from AdSense is complete AdSense was already negligible in the first half of this year and it will be zero in the in the second half of the year next generation monetization including arsoc and other formats that we've recently built is now 90 of the segment revenue um and a year ago it was only 24 so you see how profound how profound the transformation has been so um what do we mean with the years of of journey optimization on on the right hand on the right hand side the the transition that that our demand side partner Google is is requiring is something that we always said is something we we embrace and think is something something useful the speed at which it happens is is more challenging but today today we are talking about daily revenues which are um in the same order of magnitude as the revenues that we had um with adsense for domains at the time that we acquired the business at the end of 2019 um we are we are seeing margins i'm talking about gross margins maturing and um this is this is one of the this is one of the businesses where we have not only applied generative ai which is something that is that is very important all our business but one of the features which has helped us to stay in the business and turn profitable again is a very consequential application of the gentic ai the level the level of automation that we've now built into this business is quite unbelievable i could not have imagined something like this two years ago and but this also means that we are still afloat whereas an estimated half of our former peers in the market have shut the shop but who knows team internet knows we never give up and we just work until we found a solution to the challenge and here it seems we found it that was it on the trading picture next chapter three balance sheet and financing cash flow net debt leverage and the refinancing. I'll hand this part over to Billy, who knows all the details about it. Thank you.
Thank you, Michael. Drilling in more detail into a couple of the factors relating to the cash flow for the period, taking them in the order that they're presented on the page here, on the right side of the page you'll see um as as forecast as anticipated and as as accrued at the time we settled um the final tax liabilities in respect of fiscal years 2022 and 2023 um just to go into sufficient detail in respect of and everybody everybody asks this why tax liabilities in respect to fiscal year 2022 and 2023 are payable several years hence. There's a number of jurisdictions in which we operate where the final tax liability for the year is subject to a final assessment by the tax authorities. You then owe the final tax bill once that's been assessed and for us it's mainly Germany. So we estimated and accrued at the time as appropriate the correct amount of tax in respect of 2021 2022 2023 and profits for every year and our estimation process for accruing those taxes has been very good we knew in a forecast that at some point the final assessment would take place the final assessment of fiscal years 2022 and 2023 closed in the second half of last year of 2025 we started then paying off the well we were issued the final tax bill we started paying the liability in the late very late 2025 and then that's that's finally been completely concluded in 2026 so that's why you have a material tax cash outflow in the first half of 2026 despite the fact that current profits are at a lower level than they were back then so we continue to accrue the appropriate amount of tax for each period and even at the level of profitability we're at. Now there is some tax that's due in respect of 2025 and 2026. But that again will likewise wait until those years are assessed. So the most peak years of our profitability have now been tax assessed. And that's why we have a material cash outflow in the first half of 2026. The other factor that's perhaps less visible in the financials, you'll see within the first line of the cash flow statement there, we have a net cash outflow from operations. I wouldn't want anybody to think that in the first half of the year, the underlying core generation of cash from the business was negative. You've actually got within there continuing strong cash generation from the business offset with the non-recurring impact of one particular registry customer within the DIS business whose account was not renewed. And that has a one-off negative impact on working capital so the impact of that is an outflow of funds in the first half of the year but now that that's behind us the the future working capital needs of both the DIS business and all of our businesses look very secure and have no further unusual very unusual impacts like that so we're looking forward to in the second half of the year cash generation returning to the very strong net levels that we've enjoyed in the past. And that's why we're targeting and expect to see net debt decrease back down through the end of the year, which we'll now come on to in the ensuing slides. The next slide shows exactly what I'm referring to. You've got a visual representation of closing year-end net debt of 87.6 million dollars and it's it's worth bearing in mind that we overachieved rather in terms of operational cash conversion in terms of we had a higher than usual cash holding at the end of 2025. We then experienced the corporation tax and the registry deteriorations in the first half of 2026 which leads us to 117.6 million net debt as of the 30th of June but we're still targeting a decrease in net debt to around 100 million dollars by the end of the year absent the non-recurring factors that I referred to it's important that we continue to focus on deleverage and net debt at the year end it will certainly be significantly lower than where it is today whether it gets down as low as the 94 million that was in the consensus of the analysts who follow us on Friday or whether it's somewhere between 94 and 100 I mean really every little counts there are a lot of actions that we that will take within the second half of the year to ensure that net debt lands in the region of around 100 million dollars close to the consensus of 94 as it was on Friday so there's a lot that we can do to influence net debt being significantly lower by the end of the year. Net debt is, of course, not only important in respect of financial reporting to the equity markets, but also for the purposes of our regular covenant reporting to the lenders with whom we enjoy a continued very good relationship and continuation of the facilities agreement. We just thought we should point out and we'll continue to talk about over the ensuing months and quarters. There is a difference between the basis under which leverage is calculated for accounting purposes and for facilities agreement purposes. So for accounting purposes, you can calculate the level of leverage from what's available in the financial statements. The net debt figure is a figure that we, of course, disclose and describe in as much detail as appropriate as to what the component parts of that net debt figure is. Likewise, the adjusted EBITDA that we used is a it's been a very consistently applied metric over the last several years. I can't recall the last time we made a change to the presentation of adjusted EBITDA. It still fulfills the function that it had when I joined the group in 2019, stripping out non-recurring or non-trading costs so that we get a true underlying view of the real genuine underlying profitability of the business. And that's what adjusted EBITDA fulfills for us. We naturally disclose both adjusted EBITDA and GAAP IFRS operating profit, but for leverage purposes, we use adjusted EBITDA. So that's what leads you to the 3.1 that we use to track. There are differences between that accounting basis that you could calculate based on the available information in the financial statements and the basis that's used for the covenant calculation for our lender group. those differences fall into two categories and those of you who work with covenants on a regular basis will recognize that these are reasonably standard adjustments that are usually made in many covenant situations. Firstly in terms of the net debt definition covenants in terms of external lending often include items that are correctly presented off-balance sheet under IFRS. Letters of credit is one example. That's where we have commitments with our bankers that we've enjoyed continuity of. Again, since before I joined the group in 2019, we've had some millions of dollars of letters of credit that are available to us. They are added to the potential debt for the bank leverage covenant calculation. Likewise, the EBITDA definition, definitions of EBITDA vary for different uses. There are various customary standard add backs in respect of what one example that that will be familiar to people who deal with covenants regularly is rent, normal office rent and rates or property taxes more broadly that are levied on on lease contracts. they are under IFRS they're excluded from the P&L and from EBITDA they're capitalized and amortized but for covenant purposes those those rent costs are added back as they are a cash flow of the business so there are differences as well in the EBITDA definition but overall as long as we can give the correct level of understanding to the market about the distinction between the different leverage calculations there's nothing in there I believe that people won't have seen and experienced elsewhere and nothing that tends to create any significant confusion. The final point that I'll make in respect of cash flow and balance sheet, and it's moving more onto the balance sheet side of things and looking prospectively, strategically at where the liquidity of the business is going. As we announced in June, and then we reiterated in July, and we're saying it again today, the revision, the amendment that was made to our facilities agreement in June meant that we enjoy a less restrictive level of headroom on our bank covenants. um we we aligned the maturities of that facility um so that so that no no uh no lender within the facility um needs to be repaid out that facility until october of next year um so whilst we continue refinancing discussions in the background in case the strategic review doesn't lead to the full liquidity event that we anticipate and in case that doesn't happen there are refinancing options that are executable that we can turn to in advance of that facilities agreement maturity in October of 2027. So our balance sheet doesn't depend on a transaction arising from the from the strategic review we feel as a as a company that the likely outcomes of that strategic review which Michael will go into in a bit more detail in a minute we believe that they're the most appropriate for the company but liquidity wise the company doesn't need those it's something that's within our within our optionality to execute and there are you know various paths to deleverage as Michael alluded to within the within the income statement section of the of the presentation there is there is there is there is there is there is plenty in terms of ongoing profitability that enables enables us to deleverage on an ongoing monthly and quarterly basis now that we're through the couple of non-recurring cash outflows in the first half of the year we look forward to deleveraging in the second half of the year and there's a lot that we can still influence um that enable us to to pick up the pace on that um i'll now pass back over to michael to talk about the strategic review and other value adding factors in a little more detail thank you billy and yes as we say chapter four strategic review and value the review itself the damages claims and what happens with that capital afterwards first strategic review where
Where we are in this morning's exact words, the review is at an advanced stage. Discussions are ongoing with a view to reaching a transaction in the term and remain engaged with multiple parties interested in all or parts of the division. The board has also today reaffirmed its expectation that the value would materially exceed $160 million dollars just to come back where what is the genesis of this word it was the market cap at the day when we first or announced the transaction so that guidance was set in november it has now been reaffirmed four times including this morning and any retransaction is expected to complete around the year end and as and as we must say of course the boilerplate language there cannot be certainty that the transaction will be agreed but i'd like to um i'd like to add um two sentences of my own on top of what was written and printed this morning you saw on the ds slide why we negotiate without urgency the asset grows while we talk and nothing on the balance sheet forces our hand as billy has just presented so for the record here's my commitment we will conclude this review on terms that reflect the full fair value of what we've built and we are not managing towards a specific calendar date we only one on one DAS we can only sell it once and it will be at the right terms and conditions moving on to the damages claims so as having suffered competitive disadvantage and corresponding damages has been established by final regulatory decisions courts in several jurisdictions have been ruling favorably for other claimants in comparable proceedings and the number only this is the only fact that the changes from one read out of this slide to the other and our own recovery process is well in the way it is it is self-funded and which the board has assessed as the economical superior route and also to reconfirm again a successful outcome would be material in the context of our current market cap however the outcome the timing and the exact amounts remain uncertain and therefore the company can also at this stage not recognize an asset on the balance sheet what's important though is this claim runs on its own track it is independent of all the other things that we doing so anything that comes out here is additive to any outcome of this review or any of any of the improvements to the to the current trading independent valuation but not not a trade-off to anything else that we're doing the the question then is given that both events would would lead to an inflow of material financial resources what what happens with the capital and the sequence is a quite logical one and however the amounts and the timing are yet to be set by the board once once we get to the stage that we have that we've got binding agreements first retire the debt an appropriate balance sheet precedes every other use of capital we will we will not let leverage constraint as company's flexibility again we learned our lessons from the past second return of excess capital the distribution following any disposal or a major major award from from the from the antitrust claims the method is yet to be determined tend offer a buyback a special dividend we will decide on that at the time the money becomes available to us and i really mean it when i say we are generally interested in your preferences between those so anyone who wants to provide any feedback this this week is a good time to tell us third we will reinstate the dividend policy which we suspended in 2025 based on the events around search but we only suspended it it was never cancelled and with a materially deleveraged company and and the highly profitable comparison and as we expect also profitable search division both of which also have great cash conversion all conditions to be a dividend paying company would be fulfilled and m1a would only be in addition to it um for a long period of time in particular 2018 through the end of 2022 m1a has almost been the raison d'etre for a central group as we called ourselves back then while we still see m1a as a as an important strategic tool we will be much more selective in in our future approach to this topic so what's and what's then the what's in the outlook what's on the outlook first we're executing the 2026 plan across the group further grow dis broaden comparison and and grow into new customer groups and and new in new countries manage search for profitability based on its new monetization products we will continue the we will continue the review and keep you up to date whenever there is anything meaningful to report and the sentence that i would like to leave with you our earnings are traditionally and not only traditionally i should say structurally weighted to the second half and that doesn't change just because the the search division is now of less scale than it was for example in 2023 but this it applies to both comparison and search that q4 is simply the peak activity the peak activity of e-commerce whether in the united States with Thanksgiving or in Europe with with Christmas you even even in China Q4 is the strongest season in in e-commerce so we expect the pattern to hold true and that's why we are that's why we're confident that we will see a stronger half second half of the year and continue the trend of year-on-year earnings growth in the second half of 2026 thank you for now i'm happy to go into your questions now great i um well we've we've been hurrying a bit to have sufficient time not sure whether we can get through all of the questions on screen management noted at the last meeting that search was profitable in june can the board confirm whether the profitability has continued month to month through July and August, whether the profitability is broad-based across partners or concentrated in specific relationships.
Shall I start with that first one, Michael, because it's mainly financial. Yeah, July and August have continued in a very similar vein in search to where we ended up in June. So it was pleasing that June we saw at the start of a reversal of some consecutive months of loss making within search um july and august have continued very similarly to june so we wouldn't claim that june july august um are stellar in terms of performance but the the the difference between um being a drain on profitability and cash as search was in january through may and actually contributing uh has been has been significant um august results are we don't have the final results yet and and i would fully expect seasonally august tends to be a relatively weak month as opposed to q4 for example october november december the advertising industry before you even get into the e-commerce industry and the comparison segment the advertising industry q4 is absolutely flying whereas august I wouldn't be surprised if August is, say, lower than July and June, but the business is still operating in a much better position than it was earlier in the year. So we've started the second half of the year in search significantly better than we started the first half of the year and also in a significantly better spot than we ended last year. So it's contributing rather than rather than holding us back now, which is where we had hoped to get to following a period of transition in the first half of the year. To answer the second part of the question, whether the profitability is broad based across partners or concentrated in specific relationships, it will it will continue to be the case within our search business. there will be certain valued partnerships that we must focus on extracting the maximum amount of revenue from. If we were to believe that we can somehow operate that business while navigating around the larger ad technology and search players, then that wouldn't be the best outcome. So there is still a concentration of an amount of the revenue with certain revenue partners, but that's because we we've shown in the past that we can win and generate huge profits with those partners so there is there is still some concentration there but there's there's there's a broader mix of partners than that used to be the case when adsense for domains was at its peak in 2022 and 2023 but we're very happy with the the balance between different sizes of partners and continue to hopefully take all available partnerships forward thanks thanks thanks billy uh second question comparison delivered exceptional percentage epic dark growth in h1
material head of both revenue and net revenue growth can the board break down the main drivers of that operation leverage specifically whether it reflects changes in client mix vertical mix or geographic mix in particular is comparison now benefiting from a u.s. footprint and if so can the board comment on how scalable the u.s. opportunity is and how meaningful it could become for the future so first we've seen we've seen similar growth in the german-speaking core markets as we've seen internationally as I as I mentioned our investment focus in organization was France where we are the most advanced so France materially outgrew the German speaking core markets but materially materially it comes from us doing smarter business getting higher conversion rates getting higher basket sizes getting higher commission rates um from from the transactions these are the things that make that from uh similar from from slightly growing uh traffic numbers we then go to more gross revenue more net revenue and the finally the ebitda is the fact that with um with today's agentic ai i'm not talking about generative ai which we've been using for many years in um in this in this division with agentic ai also needs to hire in line with growth um is very much reduced which leads to revenue growing faster than traffic net net revenue growing faster than gross revenue and ebitda growing faster than than the net revenue on your specific a question on on the u.s yes we have launched our u.s portal and on purpose we um we we first wait a few months um to to let the website settle organically before we before we start running um advertising campaigns for these for the sites just like we've done it uh in france which is now the the best example of how to scale a market um successfully so current currently the u.s revenues are still neglectable in the total scheme of thing and of course the united states is the trophy prize for pretty much every every industry and we will invest um in this in the in this business when the when the when the time when the time is right um generally internalization is a massive driver the the three um predominantly german-speaking core markets germany austria and in switzerland uh all represent seven percent of the global e-commerce market so theoretically there is a 15 times revenue expansion opportunity it would of course be delusional assuming that we have the same market change that we have in germany in every country but just gives you it just gives you um a rough size of the opportunity so even if you only extract 10 of the potential that would already imply 150 growth of the business over the next couple of years next question what's the main reason for the lies for delays in the is sale um is it because of valuation if so will you hold out for the evaluation you previously expected or will accept current market conditions and conclude the sale swiftly i think i answered that already um i've not been charged with getting rid of this business i've been i've been charged with extracting the maximum value for this business and i think it looks it looks good but we are not quite there yet um i would like to gently push back on the word delay again this is not this is not a sprint where the target is the shortest number of days to get to the outcome but it's to get to the right outcome and the transaction is of course much more than just a price tag it's it's a it's a carve-out plan it's an integration plan on the other side it's it's due diligence it's all kinds of terms and conditions in an SBA representations and warranties withholding amounts W and I insurance and many many other things that that they need to they need to be in line before both parties would before two parties would be happy to to put ink on the paper and again I made very explicit on this review slide the deal will happen when we get the right value we can sell yes only once and that's that's why the optimization will be optimizing for price and not for timeline the next question you now describe this review as being at advanced stage with multiple parts interested in all or parts of the s and the and the transaction target in the near term can you explain what has material changed since july and whether the board is now evaluating firm proposals rather than expressions of of interest yes the um the um we're now on a much more firm level and we're still exploring different options some some people would wants to own certain parts of the AS at very high valuations and we need to find as a board the best balance out of out of optimizing the value without without stripping out certain parts of the business that might then turn which might then make other in other bidders be less interested in in the in the process we are we are being advised in this process by ever core one of the one of the leading investment banks for for sales mandates so we are in good hands here and we've shown every every word in the rns was carefully chosen including the term near term um next question is we were previously guided the board expect the outcome strategy review including any potential agreements to be announced in the first half of q3 yeah um so it's it has not happened that that that way but again um as i mentioned before extracting the the the right value at the right terms and conditions with no with no risks of later clawbacks and other things that that's our main focus and if it takes a few more weeks the board is happy um to give the company and the and and the buyers a few more weeks to understand the the business so well that they that they can actually that we can actually sell it for an all upfront price with with no with no clawbacks um as sorry please keep me genuine if i if i if i skip in the in the list of um of questions as
oh yeah i think i think the next one's about the dis sale again about uh about the period it's taking and then there's a question about net debt which i'll take um per today's update the market has noted the increase in net debt shareholders were not updated as to increase tax payments what is the current net debt position um bit bit surprised because we have talked a lot about cash tax for some time now it's been included in our forecasts and we've guided all the analysts that follow us to include it in their forecasts we knew that at some point the tax the final tax bill in respect of those prior years fiscal year 22 fiscal year 23 would come through so it has been in our forecast and should have been expected by by shareholders um so there's um the increase in net debt is something that we we knew that in the quarter or in the half year in which those tax liabilities were paid off net debt would increase um the current net debt position is exactly as stated in the in the deck 117.6 million um but while august is seasonally a challenging month um the the next couple of months september october november um we always generate more cash and we always deleverage in the second half of the year absent any factors as mike referred to absent any kind of strategic factors like m&a and dividends that there's no cash there's no cash payments to make this year um net debt will be lower at year end significantly lower um it's it's a challenge for me and the rest of the team in the business uh whether we can get under 100 million um you know we've we've when we've when we've had aspirational targets in the past we've almost always hit them in terms of where we want to get to with net debt so you can expect a much more pleasing position um by the end of the year thanks thanks thanks thanks billy um i'm just trying to
understand the next question which is i think also around the ds process i think we've said all we can say on the ds process already based on the other questions that we've seen um next one i see is could you please update as to progress with google lawsuit and if any settlement talks are underway so um first we never disclose parties um in which we are in litigation with and would also under no circumstances give any give F give any details about specific conversations that we would have with any with any party but our our case our case here is strong and and we we see no we see no reason to initiate any settlement talks with whoever the counterparty is from our site um so um we'll leave it to leave it to the process with the courts um then search opex is that the right question yeah search opex were around 10 million dollars in h126 do you think 20 million is the new base opex for search or will it decline further i can i can clearly confirm that all today the run rate is material lower which would lead to a lower number than that annualized and there is no there is no race in the finish line to to make our businesses more more efficient again i mentioned before that this is a great case of what you can do with um not with generative ai but with agentic ai and um the the very consequential application of agent guys basic what what has allowed us to stay in this market whereas many other with many other companies had to close the shop talking about ai could you address the threat of ai to the market's future revenues of tig given increasing sophisticated generation ai or if open is to be believed first latest model attaining full agi thank you um yes that's um that's a great that's a great uh that's a great topic and um as you as you see from from from the figures um and we are now almost almost four years after the launch of chat gpt which i think was on the 8th of november 2022 and our traffic numbers are still showing upwards um our conversion is showing upwards um so it seems our model is still very relevant um even even today and why why why why is that because we are beating the large language model vendors with their own weapons what we what we do here is we know we know or in advance what customers are interested in and we pre-built comparison websites admittedly hundreds of thousands of them but this has a lot of advantages first of all our compute cost and we are using the exact same models that these other companies building to generate content but through pre-built process uh our compute cost is um about 99 lower than it is for an anthropic or open ai many of you will have seen their their financials in their preparation for an ipo so the cost base is clearly the weakness the akili seal of these of these companies secondly pre-built websites loads much faster um which in e-commerce is super critical or after one second wait time normal e-commerce shoppers start closing the browser um so whereas um whereas chat gpt is still thinking people have already looked at all the products on our website and maybe already clicked out to amazon one of our other partners while while chat gpt is still still writing it just not a good customer experience further also pre-building them has two more advantages than just the speed of loading and the cost it takes away the prompting skills of the user not everyone is a master as a master prompt engineer so we give them the best results without relying on how good somebody can can can prompt and last but not least this also allows overcoming some of the major vulnerabilities of large language models namely hallucination and data decay the previous website can be checked for accuracy the life result cannot and that's four reasons why it's both why our model is more economical and secondly the better customer experience and that's why we thrive whereas admittedly a lot of a lot of online publishing business out there are suffering materially I think we still have two minutes let me see Billy would you recommend taking any specific one yeah I think the I think the next question that i see that i wanted to particularly wanted to answer was uh search lost 2.6 million in h1 broke even in june small profit in june to be fair signaling strong month over month growth in h1 is that trend expected to continue through h2 and do you expect search to become a meaningful
profit contributor through 2027 and into 2028 so taking each stage as it comes getting back from loss into modest profit in June and continuing through today. We then anticipate that Search will continue to contribute in the second half of this year and will mop up as much as possible of the loss it generated in the first half of the year. So the first gate really is can it get to enough of a profit in the second half to ensure that it that exceeds the loss for the first half and therefore it breaks even for the year. That's gate one. Gate two would be can it actually contribute a meaningful amount of profit this year that's obviously more challenging will it become a meaningful profit contributor through 2027 into 2028 absolutely there's given the journey it's been on already this year and and continues through the year end now as a contributor it must generate more meaningfully to profit in 2027 and 2028 and through a combination of the higher revenue as michael alluded to earlier um and the better margin and the lower opex all those factors within the pnl all point towards 2027 being a much much more stable consistent growth year for the search business so so better times continuing thank you
for that and um i see this engagement in the q a has been has been stellar um we apologize that we would probably need at least another 15 to 20 minutes to go through the remainder of the questions in in quality but um as uh as it has been our commitment over the last few sessions we will we will follow up um with imc in in order to make sure that um that all questions are addressed um either individual or at minimum aggregated basis um given that there's a lot of questions of course uh aggregating around accumulating around the the strategic review with that um so i should say thank you for your questions including the skeptical ones those are the ones worth asking and let me close where i started today contained no surprise and that was the point what we told you earlier this year we delivered trading in line comparison growing into a second earnings pillar, surge profitable in June, the balance sheet strengthened and the group's first half-year operating profit in two years. I should stop and close on this note. Thank you again and speak to you soon.
Operator
Perfect, thank you for updating investors today. Could please ask investors not to close this session as you'll now be automatically redirected to provide your feedback which will help the company better understand your views and expectations. On behalf of the management team of Team Internet Group ALC, we would like to thank you for attending today's presentation and good afternoon to you all.
