Thank you for standing by and welcome to the PWR Holdings Limited FY 'twenty one Results Conference Call. All participants are in a listen only mode. There will be a presentation followed by a question and session. I'd now like to hand the conference over to Mr. Keith Weil, MD's CEO and Executive Director.
Please go ahead.
Well, thank you. Good morning, everybody. Thanks for your time this morning. And the 6 months goes around pretty quickly these days. So yes, here we are for our 2021 result.
I might say it's a very pleasing result for the management and the Board of PWI. We obviously have had some challenges over the last period of time with COVID as nearly everybody else in Australia has. And I think unless we talk about that, probably the better. I think everybody has had enough of that. So, we try to look positive for the future and that's what we're doing.
So, I'm not going to go through every page line by line. I guess the majority of the people that have got the document in front of us had a good read of it, ready for the tricky questions later on. So I'll just start on I could start on the leadership team. We've all had a bit of a touch up on the photos. So, we'll skip past that page.
The performance overview is as it is with cash and deposits, I'll start down there. The market cap is what it is. Our debt, we paid down quite a bit of debt. Revenue of $79,000 EBIT at $29,000 and net profit after tax of $16,000,000 percent. And obviously, a share per dividend of 8.8 percent, which we'll go through that later on.
Performance trend, that page, I'll consider that as red and very self explanatory for the performance trend of from 'seventy eight to 'twenty one. So, it's not too bad, I look at that. The TSR, as you see, we're in the writing about 6th in the top 50 companies of the ASX 300, obviously, excluding energy, etcetera. There's a few people in front of us. Obviously, the after play boys just got there by a long shot.
And I guess the rest are mainly into mining, etcetera. So excuse me, it's not too bad. Our investor highlights, the had a spend as we always do, it has been quite a considerable amount of our revenue into research and development. And our CapEx has been around about that $10,000,000 to $11,000,000 in the last 4 years. So, we don't think that's going to offer too much in the future, but that's just the trend.
The AS9,100 certification, I will spend some time on that right now, and we can slip over the rest of it later on. We put that in earlier this year. Unfortunately, we did put in our busiest time of the year and it did cost us a little bit of I guess, it cost us a little bit of momentum. And a couple of reasons why we've done that was, one was to get our certification with COVID. We sort of had to do it that time to get the certification people here, etcetera.
And also, we were quoting on some aerospace and defense programs, and it was certainly a lot better read with our certification on the bottom of the page. So looking at that going forward, we certified our whole business. It's not just the product that we're doing for aerospace and defense. It goes across our whole company. So, if you're getting a radiator accrual for your Mazda or your hold up Holden, that goes through that same certification.
That's only going to do the product well in the future. The business growth across the markets and etcetera has been very good, particularly in America. America has been a big standout this year, obviously coming from a small base, but they're being a standout in particularly some of the hurdles and the headwinds that they're copping with COVID over there. And it's been trying at times, but with our management and team over there, they're doing a fantastic job. Emerging Tech, I've spoken about this for some time now.
We I did say the last couple of years that we think it will dwarf our motor sport in time to come. Well, I think it's starting to get the runs on the board and it's got a full tank of gas and it's raring to go. And Pat, to be over that 20% to 21% on our revenue is very strong. It's certainly where me personally I wanted to be. And I'm not being bullish on that at all, but if we can keep that number around about that on the high side of 2020, like that 2021 to 2022, particularly when we get into some bigger revenue in the future years, I think that's certainly a great thing to have.
TSR, that reads for itself. And as you all know, our dividend policy has always been between 40% and 60% impact. The review, which we're not going to go over the numbers every time we see them, has been strong. Revenue up, EBIT up, NPAT up. Up.
Our sales by currency just gives you a bit of an idea of what we're doing around the globe. Merging tech speaks for itself. Dividend, we've spoken about. So, our financial performance, I don't think there's any need to go through every line there. You've seen our revenue increase and a little bit of an offset of the currency movements in the last year of a little bit over $3,000,000 which was enough for sure.
The revenue mix continues to change a little bit with emerging tech increasing. And automotive aftermarket growth and demand is very strong and the online store is ready to go, which we'll talk about a little bit later on in the presentation. The pie chart there, that's certainly something that I know a lot of our investors look at. You can see exactly what it is, our growth and etcetera. I know industrial, I'm not going to ignore industrial.
Industrial there, it's a very, very small part of that business. But as I've said with other categories of our business in the past, I will say that we have got our eye and opportunistic eye on industrial in the next couple of years. It's not going to be tomorrow, but it is there is some very decent plans on foot to tackle that market. Our financial performance and by the 3rd phase and currency, I think it's very self explanatory. I don't think we need to go through any particular line there.
I'm sure there's people that have questions later on, so we'll save some time for that. Our balance sheet, we're still in a strong position. We still are spending quite a bit of money on CapEx with plant and equipment. Loans and borrowings have come down a bit over the last 12 months. And we have quite a pocket for unutilized facilities to provide able to seize organic growth or whether we do a purchase at all.
So we feel we're sitting in a very good position as we always have been. And if the right opportunity arises, obviously, we will do something about it. Working capital and cash flow, you can read through those key points there. It's The whole thing is very strong and very pleasing to report about because there's nothing there that is a negative of where we see it. Segment analysis, which we'll show you particularly with PWR North America, which is the old C and R.
So that name is generally starting to change through PWI North America to make it more of a global business. So the OEM and emerging tech are the main driver of that area. But then on the way forward, we see that the aftermarket area will be very strong. So getting into some of the supporting pages about PWR, I think you know what we are. We're very motivated to make sure we are the best in the world, and that doesn't come easily.
That comes with a fair bit of pressure from to the board and the leading staff on the higher end. And that also pushes down to the floor. So we're it's not easy, but when you have a great group of people around you and it does certainly make it easier for myself and some of the senior staff and the Board when you have great people around you. So, yes, the key markets as we've known before, motorsports, automotive, aftermarket, OEM, aerospace and defense and other emerging technologies as far as coal plates and micromatics and additive manufacturing. So just starting on emerging tech.
Obviously, as you've read, we've obtained the AS9100 certification for many reasons. And I think you'll see that play out over the next couple of years. In the Emerging Tech, right at the moment, there is, I guess, 2 big players over coal plates and micro matrix. Some of the micro matrix product is going into high end motorsport, but you can't count it twice. So, we are leaving that in emerging tech, although some of it is going into high end motorsport.
And so, when it gets to a level that we can segregate it, we will do that Again, so hydrogen fuel cells is a thing for the future. Bar and plate, we've been working on our bar and plate design, and that has been very fulfilling, particularly in high end motorsport. And had a discussion at the weekend with some of my engineers. And we are certainly going to be pushing our bar and plate capability into industrial, etcetera. So, that's something down the track.
The battery and hybrid cooling system is starting to develop with battery cooling plates, particularly for some of the OEM drivers that we'll see come more and more as the hybrid cars start getting more common out there. Additive Manufacturing, as everybody knows, we've put in 2 aluminum
sorry, I'll just
of high end aluminum 3 d printing. And that's certainly starting to gain some momentum. As people know, we've had that in for nearly 12 months now, and it's starting to gain same momentum with products going into some aerospace, but also some very high end motorsport. CFD and modeling services is very strong. We've put a lot of effort into that over the last period of time.
And that side of the business will become a cost setter. We are bringing ARC to supply some of that to outside customers that not only into cooling but into engineering, so forth. Our super alloy grazing capabilities, we have recently put in and commissioned our vacuum furnace and also our heat treatment furnace down at PWR in Queensland. It's certainly on the verge of getting filled up with capacity. The business outlook, the certification, we're as a lot of people don't know, the AS9100 certification is not for everybody.
And we are one of the few companies independent Australian manufacturing companies that have that. There are also other companies do that here, but they run on the back of their mobile company in other parts of the world. So it's a big ticket item for the staff and the business for PWR. Emerging Tech showing great growth potential. OEM, we continue to ramp up with long awaited programs now in production, which we'll get to.
Headcount increases, we've always been focused on training and employing and upscaling people. So, our headcount is certainly continuing to expand. We certainly a lot of business in our pipeline and unfortunately we have to put people on probably 6 to 12 months before some of these programs to hit. So, I'm sure everybody can do the math there. Facility expansion, we're certainly fairly forward here and North America.
There is a big push to obtain some premises in both Australia and North America. And the outlook that we're doing that is for the next 10 year program. So watch your space on that. Our capital investment, certainly not much different to what we've had before, and I guess a lot of people are saying out there, well, how many more tools do you like to want? But when you're growing like we are and looking for that extra capacity and capability, we're certainly not trying to spend on capital investment.
And now we're starting to look at some small robots, etcetera, etcetera to do some of their work in some of the coming programs. Website or asset utilization will take that thread. Website has been a key part of the last 6 to 9 months. Have a look at that. It's certainly doing us as Australia proud of how that reads.
Online store, we've talked about this before. It has been completed and be launched ready when we have production ready for that, which will be certainly before the end of this year. The OEM pipeline, this is the key OEM pipeline. So, these are the key ones. I thought it was necessary to put that in.
We put that in, in 2018, I think, in our annual report and it was very well received. It gives people a little bit of a flavor of what's happening and what we're doing. You can see all the nominated ones. There's some undisclosed ones there that are various numbers. Behind that, there's few that add on there because things are changing daily.
There is some small programs that we're doing in America already towards some start ups. We're a bit not frightened, but we're always a bit hesitant in putting everything down just in case one falls over. We're pretty proud, and we don't want to see us fail. But there are some programs that we're doing in North America at the moment that are on a small level. But there's only one way that will go, and that will be upward.
For emerging tech, with the things like our certification and our diversity of what we do and the timing, when you put all that together, there's quite a number of programs that are certainly available to us, and we're continuing to just add the pipeline up for that. Now, as I said before, I did make the comment a couple of years ago, time goes fast, that our emerging tech we feel will draw up motorsport in the years to come and just doing some numbers over the weekend, and that is certainly getting that way. Investing in our people, that comes as no surprise. It's sort of that's what we've been doing for some time now. But when your people numbers come up, you don't have to do much of a percentage to certainly make the numbers of your people increase.
I guess the strategies are recruitment, development, retention, apprenticeship program, which was spoken about before. I think we've got 37 don't quote me, 37 of apprentices across a range of trade, our work experience program. And we also got our employee assistance program to support the PWR team and employees. Investing in capability, I think a lot of people that haven't been there for the last 12 months or so, you'd be very surprised of what is available down there now with capability and machinery. We certainly put in quite a number of CNC machines in our machine shop area.
And not only that, but with machine and die designs. And as I said before, with the vacuum furnace and the heat treatment plant, we have ordered an extrusion plant to come in from overseas that will hopefully be here before Christmas. And we're certainly spending quite a bit of time and effort on software and upgrade. We're also currently looking at ARP system that we feel that we will need for the future. And we're doing everything possible we can for future business down the track.
So as I said, it's not about today. I think it's the next 10 years that we're working on. So, yes, well, that's pretty much it. I think it's a very comprehensive document that people can have a look at and look at down the track if they haven't already. I'm sure it's been analyzed pretty or scrutiny pretty thoroughly.
So I'd like to open that up to questions and any inquiries or queries anybody might have.
Thank
you. Our first question is from Cameron MacDonald of E&P. Please go ahead.
Good morning, Cees, and good morning all. Just two questions from me, if I can. The pipeline you've outlined in the OEM slide on Slide 20, Obviously, you've got the GT 500 coming off in the next 12 or so months and that's 6,000 vehicles. What's the without going into each one of those line items below, but are they going to add up to more than 6,000? Or are we expecting that the headline revenue from OEM might actually fall once the GT500 rolls off?
No. Yes. Good question and a size one. Yes, the GT500 is certainly being pushed out a little bit for two reasons. One reason is because during these last 6 months, they've had 6 weeks of no productivity there because they've been waiting on chips and what have you to get these cars out.
So that's pushed it out a little bit. So obviously, with our revenue for last year, so that was a bit of a negative why our revenue didn't quite hit the mark. But while it also shows that certainly runs into they are going to do some more vehicles because originally they're only going to do 8 vehicles total, 8,000 vehicles total. So now they've got another 7,000 odd vehicles to do to the end of the run of what they're saying. And that runs into the first half of 'twenty three, which is a great thing.
In between that, we have got some other programs coming along, which I mentioned before, some of the smaller programs that we're doing now that will probably run into some well, we will not we do know that some of those programs will run into those numbers. It mightn't be 7,000 as we say, but I think the revenue side will certainly counteract the revenue that would have been mainly the 4 GT program.
Okay. Thank you. And the other comment I just wanted to get some more clarity on was just on the balance sheet. You indicated that you're in a strong position, which you undoubtedly are, to take advantage of organic or other M and A opportunities. What are the sort of things you'd be looking for to complement your existing business from an M and A perspective if the right opportunity came along?
Yes. I think, as you know, we're pretty hard taskmasters and pretty hard to please. We're pretty hard to please. So, it's going to be it has to be something that will actually bolt on, something that can bolt on that's not going to weaken what we already have. And I think if history if everybody does the history numbers, I think not too many of the M and As work out very well in history.
So we are very, very cautious. We do get inquiries every month or so of potentials that what we've seen in the past 12 months, people being way off the mark in their expectations and what they're trying to do. When you have a business that we already have here that's returning 20% net on revenue, it's pretty hard to get something else that's going to be equal to that. So, I think what we've done with our organic growth in the past has been very, very good and very, very strong for the business. And what we see in the next 4 to 5 years particularly, its organic growth is going to be exceptional.
So yes, that's our answer. We're fussy. We're very fussy.
Is there any need at some stage in the future to have European manufacturing capability?
For sure. We have a lot of exposure to the pound as we all know, And it would be good to bolt on something in Europe. And we have actually looked at a couple of programs there, but not the right programs for PWR at this stage.
Great. Thank you. Thanks.
Our next question is from Tom Tweedy of Moody's Australia. Please go ahead.
Good morning, guys. Thanks for taking my questions. Just a couple from me. With your pipeline of emerging tech contracts at a high level, are you able to give us some color on what relates to military aerospace and what relates to motorsport as a percentage perhaps?
It's probably a hard one. I'd call it, I don't know, 20, 80 right at the moment.
I'm sorry, 20%, minus 40% would be emerging military aerospace?
The other way around.
Okay. Excellent. Thanks. And I was just going to ask also on the emerging tech side, you mentioned further capital investment in perhaps automation, robots and things like that. Looking say 3 to 5 years out when commercializes military aerospace, what how should we be thinking about automation on the emerging tech side?
Is there a low hanging fruit that you can automate a good portion of that process? Or is that going to have to scale headcount with the revenue there on that side of it?
On that side of it, certainly, with battery cooling plates, etcetera, which is a growing part of our business for particularly hybrid cars, etcetera, in Europe. There's quite a bit of opportunity there, and we feel we're already doing quite a bit of business with a couple of key manufacturers over there. And there is some programs in our pipeline of some volume. And we feel that it's got to get a little out. With some of the high volume programs, they're certainly happy to invest in automation, which is fine, but then the piece price goes down.
So it's a little bit of a leveling out side of it. But as you guys know, we're not going to do it for nothing. And we it's got to still fall into our modeling of profit per part. So, we're certainly looking at some small production cells that will ramp up some of those opportunities in that volume area.
Okay, brilliant. And sorry, just one other question. Just off the back of the OEM programs, sort of looking again further out, obviously, are you seeing a shift to perhaps some EV OEM programs coming on? And also how do we think about that if that is the case? Coolers per car would obviously be down by numbers, but the revenue per vehicle in terms of cooling capacity, would that be similar just because the technology is more expensive?
Yes, correct. 100%. 100%. You got it right there.
Thank you, guys. That's it for me. Thanks.
Thank you. Our next question is from Chris Savage of Bell Potter. Please go ahead.
Thank you. Good morning, Keyes.
Good morning, Chris.
Can you just give us a bit of color on F1 this season and the level of spend? And what's the outlook for next season with the new rules and regulations coming in?
Okay. Well, that's the first one. The color of this season, it's pretty good. Obviously, a lot of the teams now are spending quite a bit of money on R and D and so forth for next year's car because next year's car is a complete new car, a new chassis, new car, new everything. So there is quite a bit of money being spent on that.
As far as money being spent on tours per car for racing this year, it's probably come off a little bit because they're just trying to get through this season with the least amount of expenses they can. So, they are certainly trying to get more mileage out of the couriers for this year. Next year, I guess, it's a little bit of an unknown, and we think that the spend will be up for next year's car because of the technical side of what they're trying to get the coolers to do with the new car. So, particularly in MMX land, there will be a significant amount of MMX tours in the F1 cars next year.
Okay. Thanks.
How did I go?
Yes, good. And follow-up, just you're talking about extra manufacturing facilities, but what capacity uplift have you got now if you put on extra shifts at both Ormo and Indiana? And what extra shifts have you already put on?
Yes. We've just had an afternoon shift this last month and a half,
which At Ormo.
At Ormo. And we just started that at a I won't say at a small pace. We've currently got 10 or 12 people there today. By the end of this month, which is another week away, that will increase to nearly 20. I think it's 18, but I think, call it 18 or 20.
And by the end of November, it will be between 3540 people doing an afternoon shift. And our afternoon shift is Monday, Tuesday, Wednesday Thursday to 2 o'clock to midnight. So it's 40 hours for the week. The reason why we're doing that is we're just trying to make more use of our footprint. And because of we obviously, we want to try to reduce our overtime.
And one way of doing that is putting an afternoon shift on and copying the tariff they put on you for work in the afternoon, but it's certainly a lot cheaper doing that way than paying overtime. So we feel in the future here and America that not only the afternoon shift, but it will be 24 hour shift in the not I won't say not too distant future, but I'd say the next 3 or 4 years, I think we'll be doing a 24 hour shift for sure. We are part of your question was of space and what have you. We are looking at space in both countries right now. And I don't like to comment about anything until we've got a signed piece of paper, but we're very close in signing some stuff for both places.
And would each place be a full manufacturing facility with furnaces and the like or more of a fab shop?
Yes, a bit of both. No, each place the place in I'll just break it down for you, if you like. The place in America will be specifically machine shop. And where our machine shop the space that we're using the machine shop in North America presently, we'll be putting a vacuum furnace and a heat treatment furnace in there. And the space here in Australia will be for general manufacturing across the board.
Great. Thanks, guys.
Thank you.
Our next question is from Jamie Gordon of Bells. Please go ahead.
Hi, Keith. How are you?
Yes. Good, John. How are you doing, mate?
Yes. Good, good, good. John, just a couple of things. So you mentioned emerging tech is going to be bigger than motorsports, the other track. Is that a 3 year plan or a 5 year?
Or can
you give us a little bit of guidance on when that could happen?
Well, I guess if you look at history, we increased 100% from last year to this year, just gone. It's gone from up to 8.8. Whatever it is. And just for guidance and our own numbers, we feel we'll do around about 100% more for next year. We certainly have got that in our pipeline.
So that's going to take us out to about our 16 ish, if you like, for 2022. And if 2023, I guess, in what we're doing be something similar. So, there's your 30. I think we're starting to get there. So, yes, probably about that 24, 25, I think we'll be well ahead of most of it.
Great. Okay. And just thanks for that. And just secondly, more just a little bit of inbound. Just noticed that some management changes, Matt has stepped back to just design only.
Just want to sort of explain to people that was obviously a choice that I'm expecting was a choice he made. Is that just better for the business?
Yes. Look, that's correct 100%. Matt made the choice that he'd be better served for the company doing what he's well at, and he's been with me for 20 years, as everybody knows. He's a large shareholder. He loves and breathes what we do, and he felt his services were certainly better on the engineering side and the technical side of the business.
As you know, that's a big part of our business, the driver, and that's something we love doing. So you got to respect people for their wishes and what he wants to do. And he's a hell of a good bloke, and I think it's the right decision for the business. And it's not as if we're falling down around the top. The engineering side of the business is growing rapidly, and we need good leaders in that side of the business as well.
Yes, great. All right. Well done. Chat soon.
Thanks.
Our next question is from Alex Liu of Morgans. Please go ahead.
Good morning, Keith.
How are you, Alex? Very good. Thanks. How are you? Very good, mate.
That's good. Just a couple of questions from me. So maybe I'll start with the AS9100 certification. So just wondering, maybe if you could just talk about the process that you went through to get the certification and maybe, just the opportunity that, that opens up versus if you didn't have the certification, please?
Yes. The process, particularly for the IS-nine thousand one hundred, it's the next step in the certification wise, and we will have the ISO 9,000 and 1, etcetera, we've had in the past as a quality program. But the AS9,100 is not only a quality program, I'd say, management program in your business to manage your quality and also help you manage your business. So that, as I said earlier, wasn't an easy thing to do. A lot of companies do have it just do they have it on special areas of their business, and certain sections of the business might just have that certification and other sections don't.
We put it right across our business, which was a big challenge because if you're getting a radio for your Commodore or your Ford or whatever it might be or off road car or whatever it might be, that all those cools go through that certification. So it's certainly a big job. And part of the reasoning why we don't when we don't was because of COVID across the world to get the right orders here and to get the orders on time, we had to do it at that stage. So that's why we've done it. It wasn't ideal.
It probably cost us some money on some revenue that we missed out on. But on the flip side, some of the programs that we're involved in and also quoting on in Aerospace and Defense, we have to have that certification. So, in a nutshell, it's certainly going to be very rewarding for PWA to have that. It puts you in another league, I guess, in manufacturing. And as we grow, we want to grow our technology side, but we also want to grow our certification and quality right across the business because as we all know, we've been seeing another business as soon as they start getting some growth in their numbers, they lose it on the quality side, and that's something that we can't afford to do.
And we want that, that happens. So, I think it will serve us well. Well, I know it will serve us well.
Okay. That's great. And my other question was just around employee headcount and just looking to increase employee headcount by about 25% over 18 months to December next year. But just wondering how easy will it be to find these people and yet to kind of fit in with your PWI culture? And do you think you'll get them for a fair salary given your labor market partners at the moment?
I think it's a fair question. And I think as everybody would know, people that are still on the line, such everybody know, it's difficult. The employee market is difficult and what have you. But we're investing a fair amount of money on the employees. And unfortunately, because as you said about the PWR culture and how we sit, we are hard and hard that feels okay.
But the problem is that we get people in that we that say that they're pretty good, which is fine, but we feel that we have to do a fair bit of training with them to bring it up to our standard, and that's not putting us above anybody else. It's just what PWR is. And for that, it does take some time, and our headcount moving forward is for a reason. And some of the reasons that we haven't really highlighted in this presentation as yet because the things have got to happen and we don't say anything until we've got a piece of paper in front of us. But I think we all know that the opportunities in the business there or the opportunities for the business maybe are endless.
We are sport by choice, as Matthew Bryson would say, absolutely sport by choice. And we feel that we don't be letting anything fall off the table. And on top of that, we want to protect our boundary, our boundary fence for the business so that no one sneaks into our area of what we're doing.
Okay. Thanks, Kevin.
Thanks, Alex.
There are no further questions at this time. I'll hand the call back to Mr. Will for closing comments.
Okay. Thanks very much for joining everybody. And yes, we'll hope to see everybody at the at our AGM, which is late October, be held down at PWR as normal. And we hope to see everybody down there. There will be some factory tours available, etcetera, etcetera.
So if you are thinking about coming down, please book in, and we'll make it happen for you. So thanks again, and have a great day.
Thank you. That concludes today's call. You may now disconnect your lines.