U.S. markets closed
  • S&P 500

    +73.47 (+1.95%)
  • Dow 30

    +572.20 (+1.85%)
  • Nasdaq

    +196.65 (+1.55%)
  • Russell 2000

    +45.29 (+2.11%)
  • Crude Oil

    +0.19 (+0.29%)
  • Gold

    -0.30 (-0.02%)
  • Silver

    +0.01 (+0.03%)

    -0.0060 (-0.50%)
  • 10-Yr Bond

    +0.0040 (+0.26%)

    -0.0077 (-0.55%)

    +0.3620 (+0.34%)

    +1,545.27 (+3.18%)
  • CMC Crypto 200

    +39.75 (+4.21%)
  • FTSE 100

    -20.36 (-0.31%)
  • Nikkei 225

    -65.78 (-0.23%)

Edited Transcript of PWH.AX earnings conference call or presentation 22-Feb-21 12:30am GMT

·29 min read

Half Year 2021 PWR Holdings Ltd Earnings Call Feb 22, 2021 (Thomson StreetEvents) -- Edited Transcript of PWR Holdings Ltd earnings conference call or presentation Monday, February 22, 2021 at 12:30:00am GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Kees Cornelius Weel PWR Holdings Limited - MD, CEO & Executive Director * Matthew Bryson PWR Holdings Limited - COO ================================================================================ Conference Call Participants ================================================================================ * Alexander Lu Morgans Financial Limited, Research Division - Analyst * Cameron McDonald Evans & Partners Pty. Ltd., Research Division - MD & Head of Research * Chris Savage Bell Potter Securities Limited, Research Division - Senior Industries Analyst * Tom Tweedie Moelis Australia Securities Pty Ltd, Research Division - Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Thank you for standing by, and welcome to the PWR Performance Products H1 FY '21 Results Presentation Conference Call. (Operator Instructions) I would now like to hand the conference over to Mr. Kees Weel, Managing Director. Please go ahead. -------------------------------------------------------------------------------- Kees Cornelius Weel, PWR Holdings Limited - MD, CEO & Executive Director [2] -------------------------------------------------------------------------------- Thank you very much. Good morning, everybody that's on the call. I appreciate your time. Yes. Just -- I guess you still want to walk through a page turn on the results. We'll do that, and then we'll refer to some calls. I'm sure there'll be some questions there. So I think it's a very solid result, to say the least, a lot of the -- a lot of our results we can't talk about, but I think the numbers we can talk about. So just starting off on the revenue line, I'm just going to pick through the key points, and we'll leave the rest to questions. Everybody's read it, revenue up 25%; EBIT up 60%; and NPAT up 90%. And I think the rest is fairly self explanatory on that page. I don't think we need to take too much time. On our performance, with the revenue line, it's across all categories. It's not just motorsports or emerging tech or OEM, it is a lot across all categories. Obviously, emerging tech is the new up-and-coming area. So that will -- we'll take control of it a little bit later on when we talk about it. Sales movement with currency. That's all self-explanatory. The -- I will talk about C&R. C&R has been a very big contributor for this first half. They have really excelled over there, particularly in the conditions. As we all know, COVID's been a problem, but. It's certainly been a fair pain as a business operating in America. And to have our sales well over our budgetary (inaudible), well up from last year to -- as the credit to the guys who have pulled it together. The EBIT margin is self-explanatory. And obviously, we had the -- some JobKeeper receipts in there, which I'll talk about because everybody (inaudible) on that. And NPAT, about 90% over last year. The dividend, it's still on our lower percentage of what we pay out to be conservative, at an increase of 47%. Cash flows, probably save a few questions there. You'll see how the hell do you do that. But we've had a couple of different categories. Don't have -- prepaid some contractual commitments due to -- some due to timing, and that was just over that Christmas in the period. So some of the checks coming in early, so -- where we had to put them in. Working capital speaks to itself. EBIT to cash conversion. Loans drawn down on the end of June last year were fully repaid. Cash on hand is a little bit up from last year's $16.8 million against last year at $7.9 million. If we go to the next page. It is very self-explanatory with the graphs, et cetera, are really -- I guess the other thing we'll talk about is forward sales orders in the pipeline for the second half and also the first half of next financial year. We'll talk about a bit later on. You look at the pie graph on the next page, it's both -- I pull them out, OEM and emerging tech and the aftermarket were probably the big ones there. It's quite encouraging, and motorsports still has some growth in there but have motorsports fill out what we call our key technology driver for that. And our financial performance, we spoke about that before. I don't think we need to go over that again. As we all know, that the our forward hedging is always 3 to 6 months in advance to give us some protection. On that slide, what have you. So I think that's pretty good. Balance sheet. Very strong balance sheet, like really strong. And as we know, over the last 3 years, we've spent a lot of money on CapEx, and that's about to come to an end to a degree. Obviously, not as much as we've done in the last 3 years. I think the last 3 years has been around about $10 million per year on CapEx, and that will come back a bit moving forward. So everything else on the page is self-explanatory. Everybody has got their questions lined up, I'm sure. Working capital and cash flow, same thing. I don't think there's anything there that doesn't -- that would alarm anybody on that side. So that's all pretty good. Probably the most important page is the next couple of pages of the second half of '21 and looking forward to '22 and continue past that. Capital expenditure, we feel it's going to level off a little bit. Efficiency and quality improvements are certainly a thing that's starting to push down to the bottom line. The OEM programs. I think we all know that we've been talking about these for a while. And we have the forward contract, which is being contributor right now. Right now, that contract will go through to September. We have got orders from Ford America through June, September. So yes, it may go a little bit further, but (inaudible) September past what we expected anyway. Then obviously, the other programs that are going to come in possibly a little bit on -- in June with the Valkyrie and possible, a little bit of the AMG 500 amg-x1, I should say, which we've spoken about many times before. And -- but we can only tell you what we know and aim to what we're told. So that's okay. Same, the USD and the GP, the pound is -- we've certainly got a very good hedging program there. Yes, we put that line in there about (inaudible), but I see getting a jab today. So happy days. Happy days. I don't know about the (inaudible), but maybe they won't be happy. Brand. We are and we have been starting to roll out PWR Global. And in time, you'll see a little bit of the C&R fade off. What have with obviously still have for some programs in America, et cetera, so you'll see a big push for our global branding as PWR brand globally. The online store, we have spoken about this before. It's very close. We roll out -- I'm sitting next to Mr. Bryson here. Next month, we're positive, very positive about that we'll roll out. And as soon as we get the bugs out of that, end of show, we'll be pushing that through to America and then on to Europe. So that has come about because of -- during COVID, we've had a very big push for domestic sales and et cetera. And we have been working on this online store for over 12 months. So it hasn't just dropped in, but it certainly gave us a lot of confidence in the last 12 months of what can happen if you give it a crack. So that's something. Emerging technology. Look, it's exciting. You've seen the numbers. I think we've done $4.2 million for the full year last year, and we've done $4.6 million for the half of this year. It goes to show that -- where that's coming from. And as I've said earlier, we've been spending money on R&D and CapEx and what have you in previous years. And now we're just starting to see the filtration of that money coming in and the programs being started. It does take a little while. We've spoken about aerospace and military and aerospace defense and what have you for the last couple of years. It does take a little in those programs. And those programs are starting to see some light and shed some light through to the bottom line, so we're very excited about that. The vacuum brazed cold coal plates and micro matrix probably 2 of our big drivers on that. But now we're also seeing a lot of questions and R&D programs coming up for hydrogen fuel cell heat exchangers, et cetera. Bar and plate applications have been doing that for the last 12 months and being very successful there in those programs. So -- and notice inside the battery and hybrid cooling systems are a very (inaudible) to see what we're doing. We haven't spoken too much about on this preso with the additive manufacturing. We've been -- we've had that for some time now. We've been talking about for 5 years. We've had equipment in for the last bit over or around about 12 months. We've -- 3D print that's came in at the start of COVID. So we had to commission those ourselves, and it just does go to show with the talented people we do have that they are certainly up and running, and that's been very good for the future. So -- and then the CFD simulation model services that we've been offering around the world are starting to really pay off. And we've -- as I've said before, we've spent money here and commit money there. We've put a lot of money into that area. We did hire someone from overseas to -- and relocated to Australia and what have you. So it's been a great story. The super alloy brazing capability. When we just put in our new vacuum furnace, what have you, when we did model that up, we -- to brag, I don't mean, it's saw the temperature of around about that 600 C with the super alloy, particularly with (inaudible) and titanium and those types of stainless steel, et cetera. We need a temperature of around about 1,600 C. So when we did put (inaudible) furnace, it was more expensive, but it certainly gives us some good range now right throughout future programs. So I know that's sharp and sweet. I think that's -- everybody likes it. We've -- so more than happy to take your questions and get them in. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question comes from Cameron McDonald of E&P. -------------------------------------------------------------------------------- Cameron McDonald, Evans & Partners Pty. Ltd., Research Division - MD & Head of Research [2] -------------------------------------------------------------------------------- Question just on motorsports, one relating to Formula 1. With the additional sort of 8 races, if you like, falling into the second half of this financial year, how do we think about the benefit that, that's providing to the -- for the FY '21, given that you've already had a full calendar year already condensed into the first half? -------------------------------------------------------------------------------- Kees Cornelius Weel, PWR Holdings Limited - MD, CEO & Executive Director [3] -------------------------------------------------------------------------------- Yes, that's a good question. That is a good question, but I certainly think that the first half was -- and up putting our hand on our heart. We probably did expect a little bit more out of it in the first half and didn't come to fruition really because of a lot of those races. They didn't know whether they're going to have 5 races or 10 races or whatever. So there are sort of race from hand-to-mouth with parts and what have you -- we were sending parts over the world. So it was certainly not the normal. I think you should think about this next half or the half that we're in now -- I think you should think about that, go back to '19, go back to the '19 number. It's going to give you a fair indication for that. So that's how I think you should think about that. -------------------------------------------------------------------------------- Cameron McDonald, Evans & Partners Pty. Ltd., Research Division - MD & Head of Research [4] -------------------------------------------------------------------------------- Okay. Great. And then with the growth in emerging technology, as some of those new products start to be sold into what has been traditional motorsport customers, how do we think about the potential cannibalization between emerging tech and motorsport? -------------------------------------------------------------------------------- Kees Cornelius Weel, PWR Holdings Limited - MD, CEO & Executive Director [5] -------------------------------------------------------------------------------- Yes. I don't think there'll be too much of that. It's obviously going to be a wee bit of that. Nonprogram, very small part of that. I don't think (inaudible) too much of that because it's particularly emerging tech. We got -- we've got 3 or 4 key things in the (inaudible) micro matrix, cold plates and also 3D printing and the likes. So they're into that emerging tech side. And so I don't think you'll get too much of dropout of motorsport and then -- and jump straight into emerging tech. I think there might be 1% or 2%. I don't think it's going to be a 5% or 10% or a 15% swing in that with some of the programs that we're in. So these programs that we're in are programs that -- are new and stuff that we have developed ourselves. And over the last couple of years and given people the -- I guess the view of -- they can do better in different areas that we're not (inaudible) now. -------------------------------------------------------------------------------- Unidentified Company Representative, [6] -------------------------------------------------------------------------------- Systems are changing, and there is increased opportunity rather than stealing from existing business (inaudible). -------------------------------------------------------------------------------- Cameron McDonald, Evans & Partners Pty. Ltd., Research Division - MD & Head of Research [7] -------------------------------------------------------------------------------- Just very quickly, just on Page 11, the defense and aerospace, can you just confirm that you're actually generating revenue from sales to the defense and aerospace industry at the moment? -------------------------------------------------------------------------------- Kees Cornelius Weel, PWR Holdings Limited - MD, CEO & Executive Director [8] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Cameron McDonald, Evans & Partners Pty. Ltd., Research Division - MD & Head of Research [9] -------------------------------------------------------------------------------- Excellent. And the last question for me. Just can you make some comments about the interview you've given in the financial review today in particular, interested about the discussions you're having in the electric vehicle space? -------------------------------------------------------------------------------- Kees Cornelius Weel, PWR Holdings Limited - MD, CEO & Executive Director [10] -------------------------------------------------------------------------------- Yes, I don't think it's -- I don't think there's anything new there. We've obviously been in that area for some time now. But certainly, the hyper electric vehicle space is very much our area. We're not into Tesla. We're not into hundreds and thousands of cars and that type of thing (inaudible) high volume range, but we are certainly in the range of those hyper vehicles, which is -- several of them happening right now, which we are on, being built in Europe. And we -- that's certainly our area that 100 to 150 vehicles a year, and that space is increasing. There is people -- I'll be careful what I say here, but there is people trying to show their -- flex their muscle, I suppose, of what they can do and -- in electric vehicles in the premium side. -------------------------------------------------------------------------------- Unidentified Company Representative, [11] -------------------------------------------------------------------------------- Not just land-based. -------------------------------------------------------------------------------- Kees Cornelius Weel, PWR Holdings Limited - MD, CEO & Executive Director [12] -------------------------------------------------------------------------------- Yes. And it's not just land-based either. And certainly, the vertical lift areas that's drones, helicopters and you name it, is quite a bit of business going on there. And yes, we are actively dealing with those people as far as a PO and a check are concerned. So yes, the -- that side of the business, as we have said before, is growing. It's exciting. And we feel that we'll have a reasonable amount of income on the emerging tech for this half and -- but 2022 will be exciting. That is for sure. -------------------------------------------------------------------------------- Operator [13] -------------------------------------------------------------------------------- Our next question is from Chris Savage of Bell Potter Securities. -------------------------------------------------------------------------------- Chris Savage, Bell Potter Securities Limited, Research Division - Senior Industries Analyst [14] -------------------------------------------------------------------------------- And Kees, I might keep going with exploring some of the comments you made today in the AFR, have you got Mercedes now in F1? -------------------------------------------------------------------------------- Kees Cornelius Weel, PWR Holdings Limited - MD, CEO & Executive Director [15] -------------------------------------------------------------------------------- We're working with them, yes. -------------------------------------------------------------------------------- Chris Savage, Bell Potter Securities Limited, Research Division - Senior Industries Analyst [16] -------------------------------------------------------------------------------- So will you be trying? -------------------------------------------------------------------------------- Kees Cornelius Weel, PWR Holdings Limited - MD, CEO & Executive Director [17] -------------------------------------------------------------------------------- Pardon? Sorry, I've just got Matt Bryson here with me. As everybody knows, he's here as COO. And been our engineering manager for 20 years. So yes, sometime it's got to pass by him. -------------------------------------------------------------------------------- Matthew Bryson, PWR Holdings Limited - COO [18] -------------------------------------------------------------------------------- We are doing some work with them now, Chris. But I wouldn't choose to say much more than that. We're always careful about saying who we do what for, but work has progressed in that area. -------------------------------------------------------------------------------- Chris Savage, Bell Potter Securities Limited, Research Division - Senior Industries Analyst [19] -------------------------------------------------------------------------------- Okay. And just on that online store. I know Matt, that's kind of your baby as well. How does that change the outlook in automotive aftermarket? Is that now we could potentially double the revenue there in the next few years? -------------------------------------------------------------------------------- Matthew Bryson, PWR Holdings Limited - COO [20] -------------------------------------------------------------------------------- Look, I would absolutely hope so. I mean I think we've had the view that automotive after -- performance aftermarket, not only in Australia, but absolutely in the United States is an underperformer for us as a brand. Going to the online format was sort of the catalyst to rebrand the North American facility now for PWR North America. It still has its logo with some recognition towards C&R, but it is fundamentally now operating under the PWR logo and products produced out of there, produced under the PWR logo. That is to get a common global brand. And absolutely, we're looking to push our brand to -- and take opportunity to capitalize on some of the high level programs that we are involved with and we're able to speak of, to promote our brand. You will see through a lot of our digital and certainly, social media channels going forward, a much increased presence, not only talking about some of the programs that we can speak of, but also providing a little bit of a window into PWR as a factory, promoting the Australian and the U.S.-made product. And really leverage some of the high level program and credibility that we've got into that performance aftermarket. And the intention behind that is not only could it -- it's good margin work, but it's also to provide a foundation going forward that justifies all of your resources and all of your capacity that would be fundamentally shared with a lot of these niche OEM programs that we're going into. Certainly, the likes of COVID and the likes have showed us that some of these programs can be difficult to read in terms of timing, but we've absolutely got the potential and will capitalize on those when they are available. But being able to leverage the performance aftermarket gives us a good solid foundation that we can drive those business -- that area of the business. And it also allows us to develop and grow the business in a slightly different direction in terms of capability and resource that is different from the highly resource hungry and engineering aspects of motorsport and defense and aerospace. So this allows us to grow -- or certainly, continue to service the motorsport industry as we always have, grow the defense and aerospace, which will be in a higher technology bracket, but it's automotive aftermarket -- performance aftermarket is about growing the business back to it [through]. -------------------------------------------------------------------------------- Chris Savage, Bell Potter Securities Limited, Research Division - Senior Industries Analyst [21] -------------------------------------------------------------------------------- And just on emerging tech, Kees, I know you can't really give us much color on the contracts or the clients just due to the nature of those clients. But can you give us an idea of how many contracts you've got now in that space? Is it like OEM where you only have working on a few contracts? Or are we now talking couple of a dozen multiple. -------------------------------------------------------------------------------- Kees Cornelius Weel, PWR Holdings Limited - MD, CEO & Executive Director [22] -------------------------------------------------------------------------------- Yes. No, it's fairly widespread, Chris, particularly. We've got a couple of things in that basket when you look at micro matrix, which we've been working on for some time, as you guys know. And obviously, this last 12 months with 2 of the contracts that we've had with cold plates particularly in defense and those categories. So look, there is quite a bit of pipeline there. We've certainly -- we put a lot of structure and resources and CapEx and programs around this area of business going forward. And yes, I have said in some commentary that we feel that -- I think the wording is that we feel that emerging tech would possibly dwarf motorsports in future years. Now that's not to say motorsports is going to fall away. Our technical and our technology push and what have you is mostly always driven out of motorsports. So it's certainly -- we're certainly not going to close the door on that, but I think the big driver in future revenue lines is certainly going to be in that area. So the -- to answer your question and around that way, there is certainly a lot more than half a dozen. There's quite a few different customers. -------------------------------------------------------------------------------- Chris Savage, Bell Potter Securities Limited, Research Division - Senior Industries Analyst [23] -------------------------------------------------------------------------------- Just last quick question back on that AFR article again. Is the target FY '24 to have emerging tech ahead of motorsports? -------------------------------------------------------------------------------- Kees Cornelius Weel, PWR Holdings Limited - MD, CEO & Executive Director [24] -------------------------------------------------------------------------------- As you know, journalists, and I'm not quite sure if you'd fall on the line of that. But sometimes they print what they like to print. Maybe it's probably not what we've seen. But look, I think '24 might be a bit early, but it -- I think we'll probably have a better idea at the end of '22 of how we are. But you only have to look at where we are now. We're at -- we're probably 25%. At the end of this financial year, we'll be probably at 25% from emerging tech against motorsports. And I'll tell you what, once you start rolling in that area, things will go fairly quickly, as they have done with -- in the (inaudible). So yes. I think 24%, 25% is certainly on our radar to do that justice. -------------------------------------------------------------------------------- Operator [25] -------------------------------------------------------------------------------- Our next question is from Alex Lu of Morgans. -------------------------------------------------------------------------------- Alexander Lu, Morgans Financial Limited, Research Division - Analyst [26] -------------------------------------------------------------------------------- My first question is just on the change in sales mix. So despite obviously, emerging tech and OEM growing quite strongly. You did make a comment that you were able to maintain gross margins steady. So I was just wondering, with the change in the sales mix going forward and the growth in those areas, how do you think about gross margins in the future? -------------------------------------------------------------------------------- Kees Cornelius Weel, PWR Holdings Limited - MD, CEO & Executive Director [27] -------------------------------------------------------------------------------- Yes, I think it all comes down to the EBITDA line, Alex. The mix of business is certainly changing for sure. But then your ROE line is obviously fairly lowly priced on some of the ROE programs. They (inaudible) you down there anyway. But it is usually a pretty good program to be involved with for future business, and that will continue. But then you look at -- and that's one of the things that Matthew just spoke about before with our aftermarket, our performance aftermarket business. We feel there's certainly a big (inaudible) to be done there. And that's obviously a lot better margin than ROE program (inaudible) some of the defense and aerospace programs that we're in. Now we're into areas that other people can't manufacture. So when you're the new kid on the block, they give you the hardest part. So whatever the hardest part they have, they use -- I'll just try these on these guys. So -- and we've been able to keep it going at every corner. So I think that will speak for itself. So I think we can still continue to have that EBITDA line very strong and certainly, our bottom line, very strong. So I wouldn't take too much concern in gross margin. -------------------------------------------------------------------------------- Alexander Lu, Morgans Financial Limited, Research Division - Analyst [28] -------------------------------------------------------------------------------- Okay. And maybe a question on OEM. So obviously, a few programs -- or bigger programs ramping up towards the end of this year and early next year, and obviously go for about 12 to 18 months or so. But how do you think about, I guess, replacing those programs in the medium term? And maybe just talk about that OEM pipeline as well, please? -------------------------------------------------------------------------------- Kees Cornelius Weel, PWR Holdings Limited - MD, CEO & Executive Director [29] -------------------------------------------------------------------------------- Yes. We've -- certainly, when we do our full year result, we'll update ROE program for sure. It's probably time for a readjustment on there. There's quite a few programs that we're involved in early stages. And as you know, the Valkyrie and the x1 program and also the GT40 program, if you like, in America, that's still the GT40 program still got another 2 years to run. So all that would be a small contributor, but it's still a very -- contributor. But the amg and the x1 will certainly run for 2 years, 18 months to 2 years for sure. So -- and we're looking at programs that are going to slot into that '23 area right now. So yes. So I've said this 12 months ago that our ROE contributor to the revenue line is going to fall between $10 million and $18 million. I know that's a fair gap, but it'll fluctuate in different years, but I think that still -- we're still pretty confident that's where it'll be. -------------------------------------------------------------------------------- Alexander Lu, Morgans Financial Limited, Research Division - Analyst [30] -------------------------------------------------------------------------------- Okay. And one last one from me, just on the competitive environment, Kees. So are you seeing any one emerge as a competitive threat, especially in that, I guess, motorsports division? And then going into the emerging tech side, I presume you're the new kid on the block, so how does -- what's the competitive environment like with the, say, military and aerospace, please? -------------------------------------------------------------------------------- Kees Cornelius Weel, PWR Holdings Limited - MD, CEO & Executive Director [31] -------------------------------------------------------------------------------- Yes. That's a good question. We're -- well, I guess we wait in -- it's no difference how (inaudible) are stars in motor. We are in there because we're with the space. That wasn't quite what we thought (inaudible) correctly and what have you. So we made a business of that. Aerospace and defense is very similar. It's very tight. It's a big community, if you like, very clicky, what have you. But how we started that, Alex, and I'll just explain how that started 2 years ago, when Andy, Scott and myself were in the State, we were just working for new ideas and new things that we could grow our company with, and we came across cold plates, et cetera. And yes, and the word was that there was a lead time of 36 weeks. And we hear that sort of stuff and we go Holy smokes, now there's an opportunity. That's something for PWR. And on our first program, we -- which we -- this contract, which were just in the phase of finishing our first contract, we got that down to in 2012 in 15 weeks. So we (inaudible) happy to pay us a premium for -- they call that a rash-fee. And that was certainly something we enjoyed and what have you. But it certainly wasn't rash, that's for sure, but we're happy to take the extra money. But -- and that gives opportunity, and that's what the world is all about. People are -- want to sit around playing cards or you go to work and work. That's what PWR's -- that's what we do and enjoy every bit of it. And I think that's -- sort of explains it pretty much. -------------------------------------------------------------------------------- Operator [32] -------------------------------------------------------------------------------- (Operator Instructions) our next question is from Tom Tweedie of Moelis Australia. -------------------------------------------------------------------------------- Tom Tweedie, Moelis Australia Securities Pty Ltd, Research Division - Research Analyst [33] -------------------------------------------------------------------------------- A couple of quick ones. First of all, on Formula 1. Do you have any view at this stage of what the proposal to freeze the power unit development from 2022 what implications that may have on cooling, given the correlation between cooling and the power units. Have you got a view on that yet? -------------------------------------------------------------------------------- Matthew Bryson, PWR Holdings Limited - COO [34] -------------------------------------------------------------------------------- Yes, certainly, that freeze has now been agreed with all parties. '22 was driving quite a lot of technical change anyway. The physical layout of the car is different. The packaging of the cooling systems presents different challenges as well as different opportunities. So the engine freeze doesn't change other aspects that will continue to evolve year-on-year. The coolers will change due to changes with power unit as well as also aerodynamic changes, and that will continue to happen year-on-year. So we don't see any real change in the way that the customers will evolve their designs with PWR. That will continue to be the case. And of course, as they work towards a -- what will be a new engine likely in 2025, they will start to work in those areas, and that will present different opportunities for PWR also. I mean there is no release of exactly what they're going to do with that engine formula for 2025. But within the teams, it's highly anticipated that it will remain a hybrid formula. So combined with combustion engine and EV drivetrain, but it will take a larger percentage of its overall power unit, also overall power output will be from the EV. So it'll just be an increased amount of power output from the EV, which again will drive new developments and a requirement for new and improved cooling solutions. -------------------------------------------------------------------------------- Tom Tweedie, Moelis Australia Securities Pty Ltd, Research Division - Research Analyst [35] -------------------------------------------------------------------------------- The other thing I just -- we sort of touched on it, but I just want to try get a little bit more detail. With the emerging technology, are you able to give us a sense to what percent of that growth was from motorsport and what was x as in the aero/military versus what drove as a result that up to? -------------------------------------------------------------------------------- Kees Cornelius Weel, PWR Holdings Limited - MD, CEO & Executive Director [36] -------------------------------------------------------------------------------- I think I answered that earlier on, but there's -- I don't think there's too much that's come out of motorsport and gone into emerging tech. We could do some numbers on that. But I think (inaudible) may be very small if not in that 3%, 4% range. It's not 10% or 15%. That's for sure. And as we move forward, I think the other drivers in emerging tech are somewhat -- they're going to be outside motorsport, although motorsport will that -- will use some of that emerging tech for sure. But I think the big drivers in emerging tech will be outside the motorsports area as well. -------------------------------------------------------------------------------- Tom Tweedie, Moelis Australia Securities Pty Ltd, Research Division - Research Analyst [37] -------------------------------------------------------------------------------- Okay. Okay. And just quickly, how many of the teams are you able to tell us are using micro matrix or cold plate at this stage for this season? -------------------------------------------------------------------------------- Kees Cornelius Weel, PWR Holdings Limited - MD, CEO & Executive Director [38] -------------------------------------------------------------------------------- I can't tell you that. -------------------------------------------------------------------------------- Tom Tweedie, Moelis Australia Securities Pty Ltd, Research Division - Research Analyst [39] -------------------------------------------------------------------------------- I can't tell you that. Okay. Probably a final question for me is just on the OEM ramp-up. You pointed out, obviously, 2 programs coming on at June or by end of June. From a capital investment perspective, the up-front spend that you have on OEM, has that already been set up for these programs already? Or do you have to obviously tool up and personnel up getting closer to the start of those programs at the start the financial year? -------------------------------------------------------------------------------- Kees Cornelius Weel, PWR Holdings Limited - MD, CEO & Executive Director [40] -------------------------------------------------------------------------------- Yes. A lot of that has -- we've already built that into our program right now. Certainly, personnel-wise, you just don't do an extra $10 million of work because the current big OE program is in America, and that's done in the States. And the next 2 are a little bit different. And as in the amg-x1 and the Valkyrie will be done here in Australia. The majority of them will be done here. Some of the -- some parts of those programs will be done the States. We will be putting some extra pivot on to bolt through that at this end. So it's not huge, but it's (inaudible) to say that we will do that. We'll have to see at some power, manpower and -- behind those programs. -------------------------------------------------------------------------------- Operator [41] -------------------------------------------------------------------------------- Thank you. Mr. Weel, there are no further questions at this time, would you like to make some closing comments? -------------------------------------------------------------------------------- Kees Cornelius Weel, PWR Holdings Limited - MD, CEO & Executive Director [42] -------------------------------------------------------------------------------- Yes, thank you. I'd just like to thank everybody for the call. I think the -- certainly, the first half has been a little bit what we expected, but we're always -- we always say that we underpromise and over deliver, and we've done that for 5 years. We're in (inaudible) 5 years now. We haven't changed our perception on that. And yes, we think this -- well, we know the second half will be a very solid second half. So thanks, everybody, for the interest. And no doubt, we'll talk to you on the full year result. Thank you. -------------------------------------------------------------------------------- Operator [43] -------------------------------------------------------------------------------- Thank you. That concludes today's call. Thank you for joining us. You may now disconnect your lines. -------------------------------------------------------------------------------- Kees Cornelius Weel, PWR Holdings Limited - MD, CEO & Executive Director [44] -------------------------------------------------------------------------------- Thank you very much.