Welcome to LaserBond's investor webinar to discuss the company's FY25 results. On today's webinar, we have CEO Wayne Hooper and CFO Matt Twist, who will go through the presentation released on the ASX this morning. To ask a question, please do so via the Q&A button at the bottom of the screen, and we'll do our best to get through as many of those as possible. I'll now hand it over to Wayne.
Thank you, Ben. If we move through to the next slide 3, business overview. What we do, we're in the business of surface engineering. What we do is actually make wearing components for industry last longer and have a much longer life. If you're aware, all wear normally occurs at the surface, and by engineering the surface with our advanced technology, we deliver much extension to the life of wearing components. That lowers costs for our customers, reduces downtime importantly, and most importantly, reduces scrap as well. Our segments, we have our services division, which is involved in the reclamation of worn components, and particularly in high-wear applications or in capital-intensive industries where downtime costs a significant amount of lost production and money. Our products division, where we manufacture and surface engineer products that go into industries where they're subject to high wear.
Through our surface engineering, we dramatically extend the life and allow the customers or the end users of that equipment to keep the equipment running for much longer. We also have our technology segment where we're offering our technology under licenses to our licensees, and all of this is underpinned by our R&D, which has been a focus of the organization since we started back in the 1990s. Next slide, thanks. Importantly, we're committed to sustainability, and what's more, we assist all of our customers and end users improve their sustainability by dramatically extending the life of the wearing components, but also dramatically reducing the amount of scrap that they produce. So parts can be reclaimed and rebuilt with improved performance so that they avoid having to scrap the parts. Internally, we're committed to sustainability through our and we are certified to ISO 14001 in that respect.
So investment highlights, why would you invest in LaserBond? We are a market leader. We have a national presence, and now since we've about 18 months ago, we invested in our operation with Gateway in Perth, and that's going extremely well. And we're a market leader in the technology and the application in surface engineering. We have very strong financials. We've always been profitable, and we've had strong earnings growth, and we will be continuing that. Thank you, Matt.
Thank you, Wayne, for the quick business overview, and thank you for everyone that's registered this morning. I'm just going to give you a brief overview of the financial performance and position of the company in FY25. In FY25, we achieved record revenue of AUD 43.5 million. That revenue does not include the revenue from our investment in the Gateway Group as their accounts are not consolidated. They won't be consolidated until we exceed the 50% ownership, which is expected from March 2027. That record revenue resulted in a net profit after tax of AUD 3.8 million for the year, a growth of 10% on PCP. The board has declared a final FY25 dividend of AUD 0.008 per share, bringing our dividends in line with recent history after the reduction for our interim dividend.
Our cash on hand has remained steady, with growth expected from the recovery of receivables after our stronger revenue in the second half of the year. After our recent investments to support our productivity, including resource utilization across all of our facilities, plus some cost optimization initiatives, we delivered tangible benefits throughout the second half. These investments increased our operating expenses by 13% on PCP to AUD 13.8 million. The results of these investments and initiatives have resulted in increased gross profit margins and record months for production output for all of our facilities. It is a tale of two halves, as per the title of this slide. After our strategic investments throughout FY24 and the impact of those investments on our first half results due to the increased overheads, we provided revenue and net profit before tax guidance for the second half.
This was based on our confidence in and commitment to the tangible benefits expected from this investment. For the second half of FY25, we reported revenue of AUD 23.2 million, representing a 14% growth on the first half, and a net profit before tax of AUD 3.7 million in the second half after the AUD 1.3 million reported in the first half. Our strong performance in the second half has resulted in strengthening balance sheet position across a number of metrics, with net assets increasing by 7% to AUD 41 million and working capital increasing by 13% to AUD 15 million, which reflects the benefits from our strategic investments throughout FY24. I'm now going to hand back to Wayne for the operational highlights.
Thanks, Matt. So I'd like to talk about our segments. Our services segment, as I mentioned, we reclaim parts. This segment is focused on that, and our investments in people and capabilities earlier in FY24 and earlier in FY25 are paying off. Our services division had an 18.4% growth on FY24. 12% of that was in the second half. Importantly, we've continued our strong growth that we've had for many years. We've had a compound annual growth rate of our services segment in excess of 23.4%. So services customers have equipment out of service whilst components are being reclaimed, or many of them do. Turnaround time is critical, and our national presence, combined with investments in capacity and our focus with our quick response teams, are delivering the results. Our product segment. Products, we've got that slide, Matt.
It's up.
Here we are. Thank you. Our product segment. We did have some challenges in the first half with some reduced orders from our OEM customers as they got their stock levels correct. But the second half saw a 34% increase in revenue after we worked closely with the OEMs to improve their forecasts and order regularity. We expect similar volumes in FY26, and we'll be launching new LaserBond branded products to continue growth within the products division. Our technology segment. The completion and successful rapid commissioning of the first modular LaserBond cladding cell was a milestone. There is significant interest from potential new licensees, and during August 25, just recently, we signed a technology agreement with a global manufacturer of mining and excavation equipment. Revenue of AUD 2.3 million for the equipment associated with this sale is expected to be recognized in FY26.
Research and development has been a focus of the organization since we commenced trading back in 1992. Multiple projects are carried out in conjunction with particular major customers delivering specific solutions in their particular applications, and that's a focus of R&D. One highlight was achieving a 60% increase in material deposition rates for a particular application, significantly increasing our capacity as well as productivity. During FY26, we'll be focusing on delivering commercial solutions from the R&D outcomes that we've been seeing. Gateway Group. The investment in Gateway Group 18 months ago or thereabouts contributed AUD 3.25 million in FY25 to our net profit after tax. As I mentioned, the first modular LaserBond cladding cell was commissioned in June 2025, and many jobs are coming through for this work, so they're seeing strong demand already. Gateway are also installing other surface engineering equipment that LaserBond runs in their expanded facilities.
They've invested in their facilities as well, so with our guidance, they're installing other equipment, and we expect strong growth there as well. Active engagement by their large customers in their expanded or enhanced capabilities is delivering and promised to deliver strong growth for Gateway and LaserBond as a consequence, and they're also growing into other markets beyond their traditional mining base. Thank you, Matt. Talk about our strategy. In April, we announced a temporary pause to U.S. expansion plans in response to rapid changes to market conditions following Liberation Day. We have been focusing and delivering growth from our domestic capacities, and we expect and we'll continue to do that. As global market conditions stabilize, international expansion will be revisited. Continued focus on export markets for our product segments in particular will continue, and we will continue delivering to our international customers. Next slide. Our outlook.
We have tremendous opportunities for growth both domestically and internationally, including our technology. We are driving relationships with large customers using our national footprint for national agreements. Our national footprint allows us to make sure that we can deliver timely, particularly in our service segment, deliver timely or reduce our lead times and allow them to keep their equipment running. So we expect to sustain very strong growth after our investments in capacity earlier. We'll be scaling the business to maintain global leadership in the field of surface engineering. That's our final slide, I think. Just as a passing or final comment, you would have seen an announcement this morning about a new CEO for the business. It's not because I'm fully retiring.
It's because we've been planning succession with the board for some time leading up to my eventual retirement in a few years, or ultimately, I'll be here for a while. But importantly, Rob Freeman, the man we appointed, he is a very strong candidate or was a very strong candidate for the CEO. He has led businesses in the related field. He's been in, when I say led, he's been CEO of larger businesses associated with reclamation using other forms of surface engineering in the same sort of space as he has. As a CEO, he has reported to boards, and he has scaled those businesses significantly. He will be joining our business from the 1st of September, so in a week. So you'll see him at the AGM as well as any future announcement.
Under Rob's guidance, I'm confident that as a major shareholder, I'm confident he's going to drive the growth of this business going forward, and we're really looking forward. We're excited about getting him on board. So thank you very much. Thanks, Ben.
Thanks, Wayne and Matt. Just a reminder, if you'd like to ask a question, please do so via the Q&A button on the screen. We've had a fair few come through. A couple regarding the margin improvement. So the first one from Conor O'Prey of Canaccord. Can the strong margin improvement in services and products in the second half be maintained throughout FY26, or is there some seasonality impacting that improvement?
While we had a good question. While we had some challenges in the products division in the first half, we don't generally see any seasonality. But yes, our budgets show that we expect to maintain the margins in FY26. That's what we expect. So I hope that answered the question. Matt, do you want to add anything to that?
No. I've got nothing to add to that.
All right. Thank you. Another one from Conor. Is the second half revenue run rate in products of AUD 8.4 million the correct base from which to estimate FY26 revenue in that business?
We expect to maintain, and we expect to grow the products division through maintaining existing orders from our, the existing order rate from existing large customers as well as their own products. So this is for the FY26. We have budgeted on growth in the products division based on that.
All right.
Matt, do you want to add anything? Please do.
That's fine.
Regarding Gateway, the standalone operation, the year-on-year revenue and profit margins seem to have declined full year or year-on-year or full year-on-full year, and particularly in the second half. Could you please comment on the underlying driver for this and how the segment is doing so far in FY26?
So Gateway did have a very strong FY24, particularly the second half when we saw the results of that. They had a specific project that came to conclusion. However, the business has grown significantly on FY23 as well. So we expect that growth to continue from their base business. In addition to that, as I've mentioned earlier, we've just commissioned in the last couple of months their first LaserBond cladding cell, and they are investing in the support equipment and other surface engineering equipment that will deliver them growth in the surface engineering field. So we expect Gateway to continue growing.
I would just add to that, just for a reference to everybody, that 2024 in your report, note number seven for investments in associates, it reports the Gateway's revenue in 2023. Their 2023 did not include any special projects like the second half of FY24 did.
All right. Thank you. We have a couple of questions. One from James Wilson of Wilsons Advisory. He's going to actually speak here. So just one second. James, can you hear us?
Yeah, I can. Okay. So that was a bit of a surprise. I can stop typing now. That's good. Well done. Good result.
Thank you.
It was actually my first question, which I finished typing, so you don't need to read it out again. Is the annual report mentions Rob Freeman's consulted to LaserBond for a while? I'm just wondering how long he has consulted for and specifically what was he consulting or what part of the business. And can you actually mention some more specific, some previous roles and which companies he's been with?
Yeah, sure. Okay. We didn't use the term he's consulted for a while. He has consulted the business.
Sorry, he's consulted. Okay. Sorry.
He was actually working on risk assessment and our business plan for expansion to the U.S. prior to our things changing earlier this calendar year where we decided, "Oh, let's put that on pause." So he did actually assist with the analysis there. He has been involved in his previous roles. He's been driving acquisitions and expansion of businesses as well. He was the CEO within the Haynes Industrial.
That's right. Yeah.
Yeah, which is a division of Sime Darby, a Malaysian listed company that also in other divisions owns Hastings Deering, Caterpillar Dealers as well as many other areas. The Industrial side , he was a CEO, and he was responsible and did grow that division of the Haynes Industrial with all of its various operations. There's several, including some operations in North America. He grew that business strongly. So he's led that organization. He's got a history of leading organizations with growth. He's also very much a people person. He knows how to lead people, and I'm convinced he's going to continue to drive the strong culture that we've got in the organization to deliver results.
Yeah. Sounds good. Good background, and where's he going to be based?
It's a national role. He lives in Brisbane, but he'll be in Sydney a lot as well as on all of our sites, bearing in mind that we're expanding the WA with Gateway as well. So he'll be there as well.
Yeah. Great. Actually, can I ask a few while I've got the mic? Is that okay, Ben?
Yeah. It's got a fair few. So James, yeah, a couple will be fine, and then we can answer some others. Thank you.
Okay. Well, maybe I'll come back if there's time. Just one more. So you mentioned Gateway there. Yeah. Look, I mean, the equipment's not, as you say, sort of fully installed, but the laser's been operational for a while. I'm guessing, though, that wasn't much in last year, mostly this year. How's it started this year? Can you sort of give us just a feel? Maybe not exact numbers, but.
Matt, we don't have exact numbers for the laser, but I know they're busy. There's work coming through for it.
I do have exact numbers for June. June was quite low because they're only starting production. I don't have exact numbers since the 1st of July yet, other than knowing that the demand, the number of sheer volume of customers approaching them is generating a lot of opportunity.
Yeah. So they're already starting to get busy with that equipment. So we expect good results from that this year. Yeah. To point out, we only commissioned the equipment in June, right?
Yes. Yes. Yeah. No. That makes sense. Okay. Thanks, Ben. I'll come back later. Cheers. Thanks.
Thanks, James.
Thanks, guys.
Thanks, James.
All right. So next question from Brendan Agius of Curran & Co. Do you expect to be able to continue growing LaserBond-branded product sales into the US without US production facilities?
The short answer is yes, we do. The tariffs are. We are currently in a favorable position with respect to tariffs with 10%, but it's a bit of a moving ball at the moment. Look, we are targeting that. We've got our steel mill customers over there that some of them are just taking it in their stride and ordering. Yes, we do expect to continue to grow that and we'll be focused. We're also focusing on other markets for LaserBond products, including the Middle East. We're getting strong interest from over there as well. We've got closer customers. Our international focus will be in the Indo-Pacific as well. We'll be growing the products division, yes.
All right. Thank you, Wayne. This one's regarding technology. So just noting that in the last 10 or 15 years that the company's technology has improved due to research and good management. They ask, "Are you using AI? If so, are you finding benefits? And do you use any robotics?
Sorry, what was the second part of that question? Do you use robotics?
Robotics.
Robotics. Yeah. Yeah. Well, yeah. Of course, our robotics are involved in all of our surface engineering operations, including thermal spray and laser cladding. Do we use AI? We're looking at it in terms of the equipment. We certainly use AI, or some of us use AI within our own operations to improve our productivity from an admin point of view. But using AI on the floor is something that we're exploring, and it will come sometime in the future.
All right. Thank you. Describing the product segment, we mentioned that volume steady before additional growth from new products. Should we expect volume to be steady on a second-half basis or on a full-year basis?
Essentially, a full-year basis because demand has stabilized. Although one of our customers is saying they've got a new site that they're delivering for, so there'll be increase. We expect to increase it, but for our own forecasts, internally, we're saying about the same sort of volumes going forward from existing products with growth from new ones. Want to add anything to that, Matt?
No. Just another one on the technology division. Very encouraging to say the 2.6 in licensing sales. What margin can we expect from the modular laser cladding cells? Historically, the tech division saw gross margin in the range of 30%-50%.
That is something that we don't like to discuss because we don't want to actually give the heads up to other people about what we're making out of the equipment, but it's good margins, so in a public forum, we're not willing to sort of talk about that in detail. For analysts, we can give them some update, I guess, if we need to.
Next question. How big do you estimate is your addressable market in Australia and internationally?
Sorry, can you speak up, Ben?
Yeah. No problem. Sorry. How big do you think your addressable market is in Australia and internationally?
It's a good question. It's growing because it's about, particularly for our services division, for example, everyone's got wear problems. And we know that with our quick response teams and national footprint, reduced lead times, we're growing that business significantly. What's more, it's growing business because the particularly larger customers with their reporting, global customers with their reporting required on sustainability, they're all saying we need to make sure the industries we work in are more and more sustainable. So they're looking to reduce the amount of scrap that they produce. So it's growing. To put a dollar amount around it, all I know is that we've got lots of customers that are growing because they need our services, and we expect to continue the same sort of growth rates that we've had.
All right. Thank you, Wayne. Regarding the U.S. expansion plan, which is now deferred, what will need to change in the U.S. operating environment for the board to restart the process?
Basically, we want to see a bit more stability. I will mention that many of the materials that we use in surface engineering are imported as well. And so we need to make sure we have a bit more certainty on the tariff environment because our operations in, say, in North America will need to have imported materials as well. So those sort of things feed into our decisions on when we'll progress. We strongly believe we'll have some stability in the not-too-distant future, but we just need to keep a very close eye on it.
All right. Thank you. In regards to the new LaserBond cladding cell design, given some disappointment with previous design and problems with licensed sales, how is this new design better, and what gives you confidence that the commercial outcome will be better?
There's a few things there. One is that the cost and turnaround time have been improved. We've reduced turnaround time. Two, we have standardized and spent a lot of time developing the control software of the equipment to make sure that it's robust, that it is, and that it provides solutions for a whole range of applications for our licensees. Whereas in the past, previous systems have been more focused on particular applications, and then when they want to do something a little bit different, then we have to get involved in programming and other issues. So we've actually spent a lot of time getting it and proving that it is robust, that we won't have any issues. So that's the focus, and we know it will deliver increased volume and increased margins in the future.
All right. Thank you. This one's a bit of a longer one, but how will LaserBond continue to balance the short-term market expectations versus the balanced and sensible long-term approach that Wayne has captained thus far, i.e., the investment of last year was not well received by the market for the impact it had on earnings, but then this last half has shown that it was a good call. Can LaserBond continue this approach under the new CEO?
Yes. Yes. Look, we delivered with the quick response teams and we knew the growth was available, we deliberately employed skilled migrants to continue growth, right? And they are delivering. And look, we're looking towards the future, but I will admit that 15% and 1H it did affect our bottom line. That in combination with the product's revenue being a bit down gave us a pretty poor first half. But we have a view to the future. We will be balancing that out more moving forward. Under the new CEO, I'm sure that we will be delivering and continue to deliver results. With our skilled workforce, we've done a lot of training with these people, and that's ongoing. I will also mention that our apprenticeship program, our trainee programs, is critical to the business as well. And we're continuing to grow that. That's going extremely well.
So we have close to 40 trainees and apprentices across the whole business, and that doesn't include Gateway. But they're our tradesmen of the future. They're our skilled workers of the future. So we're already doing that, and we'll continue to increase our capacity and capabilities.
I would also like to add that the board has developed a strategic roadmap out to FY28 and beyond. The incoming CEO will be essentially held accountable to the objectives to meet those objectives.
Yeah.
And the plan for the business remains the same. Just the person at the head brings in different perspective, fresh eyes working with Wayne for the next few years.
In fact, as part of his interview process for all the candidates for the role, that was one of the things that we discussed. Here's our strategic plan. How are you going to deliver it? And Rob came up with some very fantastic answers. He's the right man.
All right. Thank you. That does conclude the Q&A segment of this webinar. We do have a number of questions to respond to, and we will do that in due course. I'll now hand it back to Wayne for closing comments.
Thanks, Ben. Thanks for organizing this, and thank you, everyone, for attending and listening to our presentation or viewing our presentation. We appreciate your questions. We appreciate your support of LaserBond if you're already a shareholder. If you're not, we hope you will be. Thanks once again.
Thank you.