Thank you for standing by, and welcome to the PWR Holdings Limited FY 2021 Results Conference Call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number 1 on your telephone keypad. I'd now like to hand the conference over to Mr Kees Weel, MD, CEO, and Executive Director. Please go ahead. Well, thank you. Good morning, everybody. Thanks for your time this morning. The six months goes around pretty quickly these days. Here we are for our 2021 result. I might say it's a very pleasing result for the management and the Board of PWR. We obviously have had some challenges over the last period of time with COVID, as nearly everybody else in Australia has. I think the less we talk about that, probably the better. I think everybody has had enough of that. We try to look positive for the future, and that's what we're doing. I'm not going to go through every page line by line. I guess the majority of people have got the document in front of them and had a good read of it, ready for the tricky questions later 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 year performance overview. 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 AUD 79.2 Million, EBITDA at AUD 29 million, and net profit after tax of AUD 16.8 million, and obviously a share per dividend of AUD 8.8, which we'll go through that later on. Performance trend, that page, I'll consider that as read and very self-explanatory for the performance trend from 2017- 2021. It's not too bad having looked at that. The TSR, as you see, we're in the rating about sixth in the top 50 companies of the ASX 300, obviously excluding energy, et cetera. There's a few people in front of us. Obviously, the Afterpay boys just got there by a long shot. I guess the rest are mainly into mining, et cetera. Excuse me. It's not too bad. Our investor highlights. As we always do, is spend quite a considerable amount of our revenue into R&D. Our CapEx has been around about that AUD 10 million-AUD 11 million the last four years. We don't think that's going to alter too much in the future. That's just the trend. The AS9100 certification, I will spend some time on that right now. We can skip over the rest of it later on. We put that in earlier this year. Unfortunately, we did put it in our busiest time of the year, and it did cost us a little bit of momentum. There were a couple of reasons why we done that. One was to get our certification with COVID. We sort of had to do it that time to get the certification people here, et cetera. 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. 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. If you're getting a radiator or cooler for your Mazda or your Holden, that goes through that same certification. That's only gonna do the product well in the future. The business growth across the markets and et cetera has been very good, particularly in America. America's been a big standout this year, obviously coming from a small base, they're being a standout, and particularly some of the hurdles and the headwinds that they're coping with COVID over there, and it's been trying at times. With our management and team over there, they're doing a fantastic job. Emerging Tech, I've spoken about this for some time now. I did say the last couple of years that we think it will dwarf our motorsports in time to come. 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. NPAT, to be over that 20%-21% on our revenue is very strong. It's certainly where me personally, I want it to be. I'm not being bullish on that at all. If we can keep that number around about that on the high side of 20%, like that 21%-22%, particularly when we get into some bigger revenue in the future years, I think that's certainly a great thing to have. EPS, that reads for itself. As you all know, our dividend policy has always been between 40% and 57% NPAT. The review, which we're not going to go over the numbers every time we see them, has been strong. Revenue up, EBITDA up, NPAT up. Our sales by currency just gives you a bit of an idea of what we're doing around the globe. Emerging Tech speaks for itself. Dividend, we've spoken about. 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 AUD 3 million, 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. The online store is raring 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 et cetera. I know Industrial, I'm not going to ignore Industrial. In Industrial there, it's a very, very small part of our business. 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 there is some fairly decent plans on foot to tackle that market. Our financial performance by the third page 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. Our loans and borrowings have come down a bit over the last 12 months. We have quite a pocket full of unutilized facilities to provide over to organic growth or whether we do a purchase at all. We feel we're sitting in a very good position as we always have been. 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. The whole thing is very strong and very pleasing to report about because there's nothing there that is a negative of where we sit. Our segment analysis, which we'll show you, particularly with PWR North America, which is the old C&R, so that name is generally starting to change to PWR North America to make it more of a global business. The OEM and Emerging Tech are the main driver of that area. On the way forward, we see that the aftermarket area will be very strong. 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 the Board and the leading staff on the higher end. That also pushes down to the floor. It's not easy, but when you have a great group of people around you, it does certainly make it easier for myself and some of the senior staff and the Board when you have great people around you. The key markets as we've known before, Motorsports, Automotive A ftermarket, OEM, aerospace and defense, and other Emerging Technologies as far as cold plates and micro matrix and additive manufacturing. Just starting on Emerging Tech. Obviously, as you've read, we've obtained the AS9100 certification for many reasons. I think you'll see that play out over the next couple of years. In Emerging Tech right at the moment, our two big players are cold plates and micro matrix. Some of the micro matrix product is going into high-end motorsport. You can't count it twice. We are leaving that in Emerging Tech. Although some of it is going into high-end motorsport. When it gets to a level that we can segregate it, we will do that. Again, 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. I had a discussion at the weekend with some of my engineers, we are certainly going to be pushing our bar and plate capability into Industrial, et cetera. That's something down the track. The battery and hybrid cooling system is starting to develop with the 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 two aluminum of high-end aluminum 3D printing. 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 some momentum with products going into some Aerospace, but also some very high-end Motorsport. Our CFD and modeling services is very strong. We've put a lot of effort into that over the last period of time. That side of the business will become a cost center, where we are being asked to supply some of that to outside customers that's not only into cooling but into engineering, so forth. Our superalloy brazing 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. As a lot of people don't know, the AS9100 certification is not for everybody. We are one of the few companies, independent Australian manufacturing companies that have that. There are also other companies that do that here, but they run on the back of their mother company in other parts of the world. 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 upskilling people. Our headcount is certainly continuing to expand. Certainly, a lot of business in our pipeline, and unfortunately, we have to put people on probably 6-12 months before some of these programs to hit. I'm sure everybody can do the math there. Facility expansion. We're certainly fairly full here in North America. There is a big push to obtain some premises in both Australia and North America. The outlook that we're doing that is for the next 10-year program. Watch this space on that. Our capital investment, certainly not too much different to what we've had before. I guess a lot of people are saying out there, "Well, how many more tools do you lot want?" When you're growing like we are and looking for that extra capacity and capability, we're certainly not frightened to spend on capital investment. Now we're starting to look at some small robots, et cetera, to do some of the work in some of the coming programs. Website or asset utilization. We'll take the red website as being a key part of the last six to nine months. Have a look at that. It's certainly doing us in Australia proud of how that reads. The online store, we've talked about this before. It has been completed and will be launched ready when we have production ready for that, which will be certainly before the end of this year. The OEM pipeline, and 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'll see all the nominated ones. There's some undisclosed ones there that are various numbers. Behind that, there's a few that aren't on there, because things are changing daily. There is some small programs that we're doing in America already for some startups. 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. There is some programs that we're doing in North America at the moment that are on a small level. There's only one way that will go, and that will be upwards. 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 dwarf motorsport in the years to come. 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 what we've been doing for some time now. 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 apprentices across a range of trades. Our work experience program. We've 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've certainly put in quite a number of CNC machines in our machine shop area. Not only that, but with fin machines 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. We're certainly spending quite a bit of time and effort on software and upgrade. We're also currently looking at an ERP system that we feel that we'll need for the future. We're doing everything possible we can for future business down the track. As I said, it's not about today. I think it's the next 10 years that we're working on. Yeah, 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 or scrutinized pretty thoroughly. I'd like to open that up to questions and any inquiries or queries that anybody might have. Thank you. If you'd like to ask a question please press star and one on your phone and wait for your name to be announced. If you'd like to cancel your request please press star then two. And if on the speaker phone please pick the headset to ask your question. Our first question is from Cameron McDonald of E&P. Please go ahead. Good morning, Kees, and 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 GT500 coming off in the next 12 or so months, and that's 6,000 vehicles. Without going into each one of those line items below, 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. Yeah, a good question, and a precise one. The GT500 has certainly been pushed out a little bit for two reasons. One reason is because during this last six months, they've had six weeks of no productivity there because they've been waiting on chips and what have you, to get these cars out. That's pushed it out a little bit. Obviously, with our revenue for last year or so, that was a bit of a negative why our revenue didn't quite hit the mark. What it also shows it certainly runs into, they are going to do some more vehicles, because originally they were only going to do eight vehicles total, 8,000 vehicles total. Now they've got another 7,000 odd vehicles to do to the end of the run of what they're saying. That runs into the first half of 2023, 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. Well, 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 Ford GT program. Thank you. The other comment I just wanted to get some more clarity on was just on the balance sheet, and you indicated that you're in a strong position, which you undoubtedly are, to take advantage of organic or other M&A opportunities. What are the sort of things you'd be looking for to complement your existing business from an M&A perspective if the right opportunity came along? Yeah. I think, as you know, we're pretty hard taskmasters and pretty hard to please. We're pretty hard to please. 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. I think if everybody does the history numbers, I think not too many of the M&As work out very well in history. We are 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. 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. What we see in the next four to five years, particularly, its organic growth is going to be exceptional. Yeah, 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? Oh, for sure. We have a lot of exposure to the pound, as we all know. It would be good to bolt on something in Europe. 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 Tweedie of Moelis 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? Um- As a percentage, perhaps. It's probably a hard one. I'd call it, I don't know, 20% 80% right at the moment. Sorry, 20% Motorsport, 80% would be Military Aerospace. The other way around. Okay. Excellent. Thanks. 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, three to five years out when commercializes military aerospace, 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 the battery cooling plates, et cetera, which is a growing part of our business for particularly hybrid cars, et cetera, in Europe. There's quite a bit of opportunity there, and we're already doing quite a bit of business with a couple of key manufacturers over there. There is some programs in our pipeline of some volume, and we feel that it's sort of going to level 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. It's a little of a leveling out side of it. As you guys know, we're not going to do it for nothing. It's got to still fall into our modeling of profit per part. We're certainly looking at some small production cells that will ramp up some of those opportunities in that volume area. Okay, brilliant. 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? Also, how do we think about that if that is the case? Coolers per car would obviously be down by numbers, but a revenue per vehicle in terms of cooling capacity, would that be similar just because the technology is more expensive? Yeah, correct. 100%. You got it right there. All right. Brilliant. Thank you, guys. That's it from me. Thanks. Thank you. Our next question is from Chris Savage of Bell Potter. Please go ahead. Thank you. Good morning, Kees. 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, answer 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&D and so forth for next year's car, because next year's car is a complete new car. A new chassis, new car, a new everything. There is quite a bit of money being spent on that. As far as money being spent on coolers 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 expense as they can. They are certainly trying to get more mileage out of the coolers 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. Particularly in MX land, there'll be a significant amount of MX coolers in the F1 cars next year. Okay. Thanks. How'd that go? Yeah, good. Follow up, you're talking about extra manufacturing facilities, what capacity uplift have you got now if you put on extra shifts at both Ormeau and Indiana? What extra shifts have you already put on? Yeah, we've just started a afternoon shift this last month and a half. At Ormeau? At Ormeau, 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. By the end of November, it'll be between 35 and 40 people doing an afternoon shift. Our afternoon shift is Monday, Tuesday, Wednesday, and Thursday, 2:00 P.M. to midnight. That'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 obviously we want to try to reduce our overtime and, one way of doing that is putting an afternoon shift on and copping the tariff they put on you for working in the afternoon. It's certainly a lot cheaper doing it that way than paying overtime. We feel in the future, here and America, that, not only will be afternoon shift, but it'll be a 24-hour shift in the, I won't say not too distant future, but I'd say the next three or four years, I think we'll be doing a 24-hour shift for sure. Part of your question was of space and what have you. We are looking at space in both countries right now. I don't like to comment about anything until we've got a signed piece of paper. We're very close in signing some stuff for both places. Would each place be a full manufacturing facility with furnaces and the like or more of a fab shop? Yeah, a bit of both. I'll just break it down for you if you like. The place in America will be specifically machine shop and now where our machine shop, the space that we use in the machine shop in North America presently, we'll be putting a vacuum furnace and a heat treatment furnace in there. The space here in Australia will be for general manufacturing across the board. Great. Thanks, Kees. Thanks. Thank you. A reminder to ask a question, please press star then one. Our next question is from Jamie Gordon of Bells. Please go ahead. Hi, Kees. How are you? Yeah, good, Jamie. How you going, mate? Yeah, good. Just a couple of things. You mentioned Emerging Tech's gonna be bigger than Motorsport, sports down the track. Is that a three-year plan or a five-year? 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 up to AUD 8 million point whatever it is. Just good 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. That's gonna take us out to about our AUD 16 million-ish. if you like, for 2022. If 2023, I guess in what we're doing, be something similar. There's your AUD 30 million. Yeah, I think we're starting to get there. Yep Yeah, probably about that 2024- 2025, I think we'll be well ahead of Motorsport. Great. Okay. Just, thanks for that. 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 assuming it was a choice he made. Is that just better for the business? Yeah. Look, that's correct 100%. Matt made the choice that he'd be better served for the company doing what he's well at. 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 he loves doing. You got to respect people for their wishes and what he wants to do. He's a hell of a good bloke, and I think it's the right decision for the business. 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. Yeah, great. All right. Well done. Chat soon. Thanks. Our next question is from Alexander Lu of Morgans. Please go ahead. Hi, morning to you. Oh, how are you, Alex? Very good, thanks. How are you? Very good, mate. That's good. Just a couple of questions from me. Maybe I'll start with the AS9100 certification. Just wondering, maybe if you could just talk about the process that you went through to get the certification and maybe just the opportunities that opens up, versus if you didn't have the certification, please. Yeah. The process, particularly for the AS9100, it's a next step in a certification-wise. We all have the ISO 9001, et cetera, we've had in the past as a quality program. The AS9100 is not only a quality program, but it's a management program in your business to manage your quality and also help you manage your business. That, as I said earlier, wasn't a easy thing to do. A lot of companies do have it, just they have it on special areas of their business and certain sections of their 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 an off-road car or whatever it might be, all those cools go through that certification. It's certainly a big job. Part of the reasoning why we've done it, when we've done it was because of COVID, across the world to get the right auditors here and to get the audit on time. We had to do it at that stage. 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. 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. In a nutshell, it's certainly going to be very rewarding for PWR to have that. It puts you in another league, I guess, in manufacturing. 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 seen it in other businesses, as soon as they start getting some growth in their numbers, they lose it on the quality side. That's something that we can't afford to do, and we won't let that happen. I think it'll serve us well or I know it'll serve us well. Okay. That's great. My other question was just around employee headcount and just looking to increase employee headcount by what? About 25%, over 18 months to December next year. Just wondering how easy will it be to find these people and to kind of fit in with your PWR culture? Do you think you'll get them for a fair salary given labor market tightness at the moment? I think it's a fair question. I think as everybody would know, the people that are still on the line especially, everybody knows it's difficult. The employee market is difficult and what have you. 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, but fair is okay. The problem is that we get people in 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. That's not putting us above anybody else, it's just what PWR is. For that, it does take some time and our headcount moving forward is for a reason. 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. I think we all know that the opportunities in the business there, or the opportunities for the business moving forward are endless. We are sport by choice, as Matthew Bryson would say, absolutely sport by choice. We feel that we don't be letting anything fall off the table. On top of that, we want to protect our boundary fence for the business, so that no one sneaks into our area of what we're doing. Okay. Thanks, Kees. Thanks, Alex. There are no further questions at this time. I'll hand the call back to Mr. Weel for closing comments. Thanks very much for joining, everybody. Yes, we'll hope to see everybody at our AGM, which is late October, be held down at PWR as normal. We hope to see everybody down there. There'll be some factory tours available, et cetera. If you are thinking about coming down, please book in and we'll make it happen for you. Thanks again, and have a great day. Thank you. That concludes today's call. You may now disconnect your lines.