Austin Engineering Limited (ANG) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Austin Engineering FY '23 Results Briefing. [Operator Instructions] I would now like to hand the conference over to Mr. David Singleton, CEO and MD. Please go ahead.

Good morning, everybody, and thank you for taking the time to dial in this morning. I know it's a busy time at this time of the year. the beautiful sunny day here in Sydney, feels like a good backdrop for the presentation this morning. The format will be, I'll just open up with some opening remarks on the major results of the FY '23 year. I'll then hand over to David Bonomini, who's the CFO. David will dive into those results in a little bit more detail. And then -- and David will hand back to me. I've got a few things that I'd like to go through with you, which I think would be interesting. And I'm sure we'll talk about over the next two or three days as we come around and see investors, but that overview -- that will include a market overview how we see the market at the moment in our sector. We'll talk a little bit about our competitive advantage and how that is playing out. I'm going to talk a little bit about where we sit on the risk curve because that's in everybody's minds at the moment, the risk that sits in the market I'll talk then a little bit about -- I'll make some sector comments on different parts of the business around the world. And then finally, we'll end up with a bit that I know you're all interested in which is the guidance for FY '24. Okay. So I'll start on the next slide. So we have -- you can see from this group revenue is just over $258 million, that's up $55 million on last year, 20% -- 27% by revenue. That is a combination, of course, of the acquisition we made of Mainetec, which contributed about $30 million in the past year that they were involved and an 11.3% increase in revenue on a like-for-like basis. But having had several years of revenue at about $200 million, I think FY '23 was really a breakout year for us in terms of increasing revenue at all of our locations around the world. I think a particular note, though, in that revenue slide is the quality of that income. And 89% of our revenue in FY '23 was recurring revenue from clients who either buy from us every year or buy from us very regularly. So really good quality of revenue on that basis. Normalized EBITDA was up to -- was up 11% to $31.3 million. We have normalized the results this year, and you'll see in the ASX announcement when you get to read that, what those key subjects were about. But we've written off some IT costs from a few years ago. We have also made a provision against the warranty cost, which I'll talk about a little bit later in this presentation. We've got some costs associated with some discontinuing activities and some FX costs as well. And that's why we've normalized that because we feel that all of those are either historical or loan on costs that we won't see in FY '24. We put our NPAT -- revised NPAT guidance of $17 million to $19 million and came out pretty well smack in the middle of that, $18.1 million of NPAT, which is up 8.4% on the FY '22 figure. And that relates because of the write-offs that I've talked about previously relates to a statutory NPAT of $7.1 million. I think a particular note, and I think will be a feature of FY '24 as well has been a much stronger operating cash flow up 15 -- up to $15.8 million, which is over 3x what it was in FY '22. But a particular note on that is that, that $15.8 million of operating cash flow is despite the fact that we increased inventory steel stocks during the year by $28.3 million, which means that absent of that, the result would have been dramatically stronger, and we feel that, that increase in stock will unwind during FY '24. So we'll turn into cash essentially during FY '24. Again, order book is up, and it has been up strongly in the last couple of years, up 35% to $143.7 million that's our biggest opening order book. I think ever, certainly in the last several years and puts us in a very strong position, of course, as we move into FY '24. And I'll just move on just quickly to the next slide, and you can see a couple of graphs that have plucked out just to show the impact of all of that on the results of the business over the last couple of years since we put the Austin 2.0 strategy. And together, we've seen our return on equity comprised to about 16% fairly consistently in FY '22 and FY '23. And you could see a much stronger EBITDA performance year-on-year from what was the previous norm. And I'll hand over now to David Bonomini, and David will now take you through the financial results in a bit more detail.

Thanks, David, and good morning, everyone. It's great to be here with you today. And I'm just looking at Slide 17, which is -- that is the financial performance from continuing operations. As Dave mentioned, our group revenue for FY 2023 year was 258 million a 27% increase. This was driven with the addition of Mainetec contributed about $32 million of that increase, but we're also seeing strong sales performance across the U.S. and Indonesia through recurring customers and new product sales. The normalized group EBITDA for FY '23 grew to $31.3 million with a 10% higher than $29 million in FY '22. U.S. and Indonesia particularly in the second half have increased our EBITDA margins to the Austin's target levels. There's a strong focus on cost reduction. There's also a very strong focus on improving the manufacturing systems and technology. And we've also seen an increase or a slight shift in terms of new product sales, particularly around the bucket checks and client handlers through our business, all targeted under the in 2.0 Austin strategy. D&A and net interest expense that has increased slightly. Part of this is due to the Mainetec alignment to the Austin depreciation guideline. And also we incurred with the debt increase in interest rate. The group normalized net profit after tax is adjusted for one-off legacy costs, but it also includes about $2 million worth of the Mainetec [ instigation ] costs -- and on a normalized basis, is up 8.4%, $18.1 million. Turning to the operating cash flow Slide 18. Cash flow increased significantly during the course of the year to $15.8 million compared to $4.7 million the prior year. The cash flow increase was driven by strong profit conversions from the U.S. and Indonesia. Offset partially, as Dave mentioned, by the increase in working capital. The working capital increase was primarily due to the buildup of steel half due to the higher revenue, 27% and obviously driving some [ impression ] inventory, primarily through the managing supply chain sides. The [ real ] order delay had a slight impact and the introduction of the company's bulk procurement program Austbuy. Austbuy driving cost reduction. So it's really adding some great value through increasing purchase power, but it's also contributed to increasing inventory amount. This is anticipated, as Dave mentioned, to reverse in FY '24 as we take a less conservative view [indiscernible] and the improvement in Austbuy stock terms across the region. Cash flows from investing activities was a net outflow of about $21 million due to the Mainetec acquisition, which contributed about $11 million of that. But we're also invested heavily during the last 12 months in terms of new [ plant ] equipment included in that was investment in manufacturing technology, but also the expansion of Indonesia and Chile, which we're seeing some strong benefits during the latter part of the FY '23 year. Borrowings increased from the funding of Mainetec. And we saw cash hold at $20.1 million against the prior year. As we met -- as Dave also mentioned, cash is anticipated to improve in FY '23. We're very confident of the inventory levels reversing as we consume that stock during the first half of FY '24 and the consumer operational improvement across the business will continue to drive and increase the operating cash flow of the business. Turning to Slide 19, which is work on capital. You'll be pleasing to say that the strategies under working capital, particularly around the customer advance payment, the work in progress was maintained. Customer advance payments increased to $19.2 million, which is really offsetting all the work in progress we have about $20 million. This indicates to us that there's strong cash flow to support the future business growth, even though the business is growing, we're still kind of neutralized around our working progress. We brought up in inventory. I mentioned $26 million in inventory, anticipated to reduce during the course of FY '24, and we see cash flow -- our cash position strengthening. We continue to also see a shift in customer trading terms to ex-works. There's been a strong focus from the business to hold, which has seen held at prior year level even though the revenue has grown to 27%. Turning to the next slide, net debt. Total assets in the business is about $47 million. Inventory contributed to that. Also the investments I mentioned earlier, but sort of Mainetec acquisition increase in tangible assets as well. Pleasing is that gross net debt of $14.1 million, really only increased as a result of the debt funding of $11 million for Mainetec. We are paying down that debt over the course of two years remaining on a 3-year term loan and that's progressing well. And our debt-to-equity ratio of 11% is anticipated to decrease during the FY '24. And the continuous business growth, improved operational performance will continue. We also are bringing the reduction in inventory. And we really are anticipating to see that net debt moved to a net cash position during the course of FY '24. I'll now pass it back to David.

Okay. As I said at the beginning, I'd like to make some comments on a number of things in this last stage of the presentation. And I'd like to start with talking about a market overview. And I know there are lots of different views on the commodity market at the moment. But I want to really go through how we are seeing it in Austin. What we see is what continues to be an extremely strong market across the world. It doesn't matter whether we look in Chile, the United States, in Asia, Europe, or here in Australia, a very strong market with very limited competition around the world. Indeed, there is no single international market competitor that competes with us in those markets. But I want to emphasize one thing, and I heard a similar comment being made recently by [ certain ] group. And that is that our market is very much a production-driven market. It's not directly linked to commodity prices or the investment cycle in those communities. It's really a business. We produce wear products that by their very nature, do wear around. And therefore, our business is very much linked to production and the number of hours of those products in production. Indeed, our products are designed around a usage level a number of hours of use in production. And that market is driven by -- really by two things. As a customized engineered designer and builder of products, it's driven by the performance advantage that we can give our customers. Often that's increased tailored or digging efficiency that we can get on the bucket. So it's a performance advantage and the capacity to deliver into the market in the time frames that are required. It's absolutely not a price-driven or commoditized market. And what we really see is who can deliver on those two things. That's the performance advantage and the ability to deliver on time, who delivers on those things wins the market share. The other point I was going to make to you is that you will be very aware which you've seen in the mines operating costs that we are currently operating in an inflationary market environment driven both by wages and raw material input costs. However, for Austin as a business, our cost base is in a deflationary cycle. And it's in a deflationary cycle for two reasons. One is our Austbuy program that delivers steel into our different units has brought down the cost of our materials extensively over the last couple of years and still has some way to go. And we've seen a 2% reduction in the average labor content of our products across all of those markets, primarily as a result of the fact that we are producing more product these days in our Asian facility than we have ever done before. As a result of this, we've been able to increase pricing steadily in all regions around the world. And even though our cost base has been reducing. The next thing I want to talk about was competitive advantage of the Austin business around the world. And what you're seeing at the moment is that the market, particularly in the United States and Australia is very much capacity constrained, constrained by access to labor and access to production facilities as well. Now this actually turns out to be a very good position for Austin because unlike our competition, like any of our competition, we have access to Asia and manufacturing capacity in a management, but in a constrained market. We have been able to deliver effectively into that market. We are today delivering equipment into the United States and into Australia that we simply couldn't do without our Asian facilities. And really, Asia is very much our ACE in this currently constrained market environment. And we haven't seen anybody else who we compete with, there's nobody else in either the United States or here or anywhere else around the world has access to this type of capacity. And you can see that in our numbers. So our Indonesian business revenue is up 2.5x now over the last two years and is projected to have another sharp increase in FY '24. Indeed, we're now moving to what we call the [ P30 ] project in Indonesia, which is to increase trade production there to 30 trays per month by the end of this calendar year. And I would just compare that to two years ago when we were typically producing less than 10 tray a month in that facility. It just shows you at that sharp increase we are seeing and how important those Asian facilities are to the [ group ] and the cost effectiveness of this business. We've implemented a 70% increase in the productive capacity in Chile, and we're seeing that as a significant increase in the revenue base in South America as well, and that's been very pleasing to see. And now we are leasing additional production space in the United States, which we've just done. And the U.S. is increasingly using the [ TAM ] as a facility, which can help them to deliver the very high revenue opportunities that they've got in front of them as well. The other part of that competitive advantage is that we are -- we have been investing now for two years in advanced manufacturing activities, and that's driven rate efficiency in our operations where we've deployed it. and greater quality of our products as well. And that's been very satisfying to see that at a time that we're growing market share with growing revenue, but we're also improving quality across the group. And that's all going to be augmented in Australia by a $5 million grant that we just received from the WA government to invest in advanced manufacturer. As I've said, we have outside of the OEMs, the Caterpillar, Komatsu, Hitachi type OEMs. We have very limited competitors who are engineering led that is to say that our design and engineering-led in the market. Indeed, when you look around us, we have two competitors here in Australia, one on the West Coast and one on the East Coast, privately owned. We have no real cross U.S. competitors in that market. We are really any competitors these days in Asia, and we have two competitors in Chile. So very limited competition base around the world. And that, of course, is helping us significantly improve our market share in those areas. One of our biggest competitive advantage is now and will be even more so in the future is the Austbuy program, which David mentioned before. This is a program that is leveraging the scale of our operations around the world to reduce the price of steel. We buy about $100 million worth of high-grade specialized high hard steel for our operations, and we're now doing that essentially out of Australia and then distributing that material through the rest of the world. And the price advantage is that's given us on our single biggest input cost after labor is quite dramatic and is having a big impact on our overall our competitiveness and also on our ability to drive increased margins. In fact, in some markets like Asia, for instance, where the cost of materials is by far the highest input cost, and this is giving us an advantage, which is really hard to beat on any competition that we do see in those areas. All of this, of course, is continuing to drive pricing benefits. And the outcome of that is we are winning more, which you can see in the revenue side. and we are improving margins across the board. That was really what I wanted to talk about on competitive advantage. I want to talk a little bit now about risk and risk management. And because I know that's a hot topic in the market at the moment. And recognize, we recognize that investors are very risk focus at the moment. So this is something that we should just sort of talk about where Austin sits in that process. I wanted to just emphasize again at this point that we are very much production focused rather than commodity pricing focused. And although there seems to be a lot of discussion about commodity prices softening but they really still are relatively elevated levels compared to the long-term averages. But again, our business is very much linked to production tonnes move, not to commodity prices. So the likes of Rio Tinto and BHP and those sorts of companies who are seeing and moving vast quantities of material, that's where our business is linked. And you can see that in our. And you can see that in our 89% repeat business slide, which is #26 in your [indiscernible]. You can see that we have 89% of our revenue is from repeat customers, of which 56% of that is customers who buy from us annually, every year, a buy of buckets and trays and other machinery. And then about 33% of that is made up from repeat customers who don't necessarily have an annual buy, but we see them on a continuous basis. That gives us a great deal of confidence in the business going forward. The other feature of the results this time has been the increase in the product diversity, which has been something that I've been interested in for the last couple of years. And with addition of Mainetec and also our focus on the bucket business has seen us increase the bucket of other products in our portfolio from 16% of our revenue with 29% of our revenue in FY '23 and probably going to increase further into FY '24 as well. That's particularly important because buckets in particular, are of interest because that's a recurring revenue stream where bucket we sell a bucket and then it comes in for a rebuild every 12 months thereafter. And we've been reorientating our Australian business around that opportunity, which is going a bucket and then being available to do the rebuilds that occur on an annual basis. The other part of our risk management is that our customer base covers pretty well all commodity types. So whether it's iron ore, whether it's copper, nickel, gold, lithium, oil sands in Canada, pretty well every commodity base is represented in our business. And also, we have a very wide diversity of customers. We're pretty well sell to just about every major customer and OEM that you can think of around the world. So whether that's BHP, Rio Tinto, Glencore, [indiscernible] in Australia, Komatsu, Caterpillar, and so on and so forth a very wide range of customers and pretty well all of the flush customers around the world. And that also gives us good risk management as we move forward. Okay. I'm going to move on now to some sector comments and probably the only disappointing part of FY '23 for us has been the performance of our third based operations. And that's something that obviously that we've been very focused on in the last period of time and as we move into FY '24. FY '24 however is going to be quite a different market for Australia as we have moved our tray manufacturing capacity out of Australia up into Indonesia. That means our Australian business will recognize about half of its income, profit income this year and from activity, which actually is carried out and very well in Indonesia. So what I think I note is the reorders here in Australia for trays, They'll build those, they will then be built and delivered out of our Indonesian operation, which has hardly missed a peak over the last couple of years. We still see this market in Australia is extremely strong and characterized, as I said previously, by the ability that you have the ability to deliver capacity and quality into the Australian market and you're going to be very successful. And we're seeing that as we've converted our Australian third and facility in Macau on the East Coast over to bucket production, we've seen both of those facilities at very high capacity levels. In fact, both in Perth and in Queensland was pretty well and at full now. until the end of this current year and into the early half of next year and indeed are now working with -- on some opportunities to increase that capacity. In Australia, we've just received our first 15 migrant workers out of the Philippines to increase capacity on the West Coast. And we have another 30 more out of the Philippines lining up to arrive in September and slightly later in the year as well. And that would be a really positive input into FY '23. Then I just wanted to make a comment on warranty disclosure that we made about well, several months ago to the market. And I know there's been some discussion about that on the market side. This is essentially an isolated incident, involves 26 trays, which were made on 2020 into 2021. So up to three years ago. these trays are now under repair at the operator site. The evidence I can give from you that this is not causing us any real concerns is that customer that's involved in this has continued to buy substantial numbers of trade census warranty issue and was identified. And the reason for that is typically, my experience over many years in manufacturing with warranty claims. It's not so much a warranty issue that causes problems, it's the way that you deal with that warranty issue when it arrives. And if you deal with that in a professional and effective fashion, usually, the customer to deal with that themselves quite effectively. And that's what we received in this case. So pretty much an isolated incident. The global cost of this represents less than 1% of our revenue stream from this product category in FY '24. Our warranty costs, historically, if you go back over the last few years have been very low by any standards, frankly. And we -- our prediction is that warranty cost to FY '24 and forward, we'll go back down to that low level in the future. I'll move on now to the United States. The U.S. has been an outstanding success over the last two or three years with good very solid growth in that business through that period of time. It's another story very similar in many ways to Australia, where labor limitation for the mining companies has led them to move away from repairing truck trays, heavy truck trays and repairing those on an annual basis on their own sites because of those labor restrictions now moving to lightweight trays, which give them huge benefits in payload, potential benefits have come from increased payload, but also means that they don't repair those dump bodies on site. They replace them at the end of the year life be that somewhere between 3 to 5 years typically. The result of that has been that we've seen a market shift in the U.S. to be much closer to the Australian type of market. We have more of the miners and our building or using customized engineered lightweight truck bodies rather than OEM truck bodies in a very solid period of growth in that country. And as I said to you because of that we've had to produce more product in Indonesia ship added to the U.S., which makes very good [indiscernible] benefits as well as delivering more capacity, and we have just signed a lease on our small new facility very close to our facility in Casper to help them improve their manufacturing capacity as well. Chile, which is probably our single most competitive market because we have two competitors in that market has also been strong. The Chilean business has done a fantastic job over the last two years of going from a business that was perennially losing money up until two years ago, and have performed very strongly in FY '22 and FY '23. And we're seeing Chile, like the U.S.A., like Indonesia now well inside our target EBITDA margin at the business unit level of 18% to 20%. And we expect that to continue into FY '24. So if I just think about that in the Chilean context, we were below that earnings target in the first half of the year as we're going through a restructuring in Chile and an improvement of their operational base fundamentally increasing capacity in Chile in the first half and that created some costs, a fairly strong recovery in the second half and into FY 2024. And so great business down there in Chile. And I think the future is strong because ranged against our competitors, We are a company that is very much an engineering customized led reducer of these products rather than a builder of [indiscernible] cutter style products. Lastly, I'm just going to talk about Indonesia quickly. This business, and I've mentioned it a few times as being an absolute revelation for us over the last couple of years. It's gone from being a minor business in our organization to second only in revenue to the United States and growing extremely quickly. We are seeing it move to, as I said, production of 30 trays a month by the end of this year, and we are considering a further lift in production to 40 trays a year later on in FY '24. This business has by far the lowest operating cost base of any of our businesses in the group, folks from an overhead point of view and also from a direct operating cost point of view, and we very much becoming the [ showpiece ] manufacturing facility across the company. And I will say that from my perspective, the Indonesian business is very much part of the special, source if you like, of the company and [indiscernible] to our [indiscernible] but also to drive up the quality of product that we are producing. I'll finish now on guidance. And this is our FY '24 guidance. We see another increase in revenue as we go into FY '24. The revenue guidance for the first half of FY '24 is between $120 million to $140 million, which is now 90% -- more than 90% covered by firm order book. That's up 60% on what we achieved in FY '23, which in itself was a record year. So very strong revenue outlook in the first half. And I'll just mention why we gave first half revenue rather than full year revenue. As you know, our business is a fast turnover consume goods type of business. We large groups, but nonetheless, essentially consumer goods business. I mean you kind of have that supermarket type model where when they wake up on a Monday morning, have actually got no revenue whatsoever until somebody walks in the door during the day on Monday and [indiscernible]. And I think our business is very similar to that. And we've got a fast turn over the business we orders pretty well every day of the week, and we pretty well deliver those 2, 3 months later. And so our focus is very much on the next half a very strong half underpinned by a strong order book. First half impact is in the range of $10 million to $12 million, again, about roughly double from the first half of FY '23 as we start to see all of those cost benefits and [indiscernible] and issues that I've talked about on growth into the financial performance of the business. On the order book, as I said, it's up strongly, it's up to 50% for the full year forecast revenue at this time last year or ending of July last year, we were at 42%. So the order book is not only significantly much stronger than even we were as we went into FY '23, a very pleasing position on the order book as well. And then cash flow, we see cash flows being very strong in FY '24. And as we said earlier, it was near $16 million of operating cash flow last year, but that was despite a big wind up in steel inventories, which we will see reduced significantly through this year as we're seeing that into sales, therefore, good operating cash flow coming out of EBITDA and cash being liberated out of that inventory build as well. So good year in the into cash flow as well. And that's the end of the comments that I wanted to make. Okay. So we'll move over to Q&A.

[Operator Instructions] Your first question comes from Philip Pepe from Shaw and Partners.

Congratulations on a solid result, especially that cash flow. Just on the Batam operation in the Asian operations, a couple of announcements you put out early in the year. suggest that some of your customers are happy to pick up from the region instead of you having to transfer the trays to them. So what does that mean for your ability to source Australia or service Australia or Batam but other countries as well?

Philip, thank you for the question. We've worked very hard over the last two years to improve the inherent underlying cash flow in the business. And the way that we've done that is want to push much more strongly for deposits upfront. So we typically now achieve a 30% profit on placement and order. And the second thing that we pushed for is the ability to be able to invoice ex-works. And that's very important to cash flow because the transport time to site, the commissioning time can delay two or three months to that final payment and [9indiscernible]. So going to an ex-works type of payment means that we get cash into the business much faster. So that's really been what that's about. And then we invoice separately if the customer wishes us to transport overseas. And we really see two types of customers. We see big customers like Rio Tinto, for instance, mineral resources, those types of people who've got their own logistics chain, and they're very happy to organize shipment from an ex-works location in Indonesia into Australia. And in fact, we said earlier this year that for the very first time, we were delivering product out of Indonesia into -- directly into the Pilbara. We've never done that before, and we've been delivering into Port Hedland and [ Tampia ] through that process. But a lot of that actually organized by the miners themselves. So that's one type of customer novelty customer is somebody is perhaps smaller or doesn't have to deal with the logistics issues, and therefore, we arrange transport into Africa into Europe, sometimes into North America and sometimes into Australia ourselves. We've set up a much stronger logistics business inside our own organization to make sure that we do that effectively and as cheaply as we possibly can, particularly as we're delivering out of Indonesia. So all of that really has been about tightening up cash flow. That's why you see our cash on customer advances roughly equal work in progress, and you've seen cash held up in the business of cash flow improving over the last couple of years.

[Operator Instructions] your next question comes from James Lennon from Petra Capital.

Two questions, if I can. First one, just on the guidance. Your order book implies you're sort of looking at around $290 million revenue for the year. And if you back out the Mainetec which is probably about $40 million annualized, if you assume no growth from acquisition. The guidance kind of -- I'm just a bit confused because I thought you were sort of saying that the delayed orders you had second half '23 would flow into first half '24. But looking at the guidance you're giving for the full year versus the guidance you even for the first half it sort of implies a fairly even, but I just wanted to sort of understand how you've come about with that guidance.

So if you back out the impact of Mainetec in FY '23, the underlying revenue was around $223 million. And as you point out there, you back out the Mainetec in FY '24, we go from about $220 million to about $250 million using your numbers. So that's a pretty substantial about 15% underlying increase in revenue. We do see that there are some opportunities as well around that. I think you've asked me a couple of times about we had a delayed order in FY '23. Would that double up in FY '24. The recent news is that does appear to be the situation. That is -- the delay in order has been one, as you know, and we've announced and is being produced at the moment, up in Indonesia that customer has indicated to us that the FY '24 order but also for this year. And therefore, we are essentially going to see in FY '23 and an FY '24 order for that customer. in this financial year. So that will drive sales in the second half. How that plays out, of course? It depends on how we see the order build were in the next 6 months or so. But I think underlying is a really strong trend. So 15% underlying inferred revenue increase, plus there's opportunity around a doubling up of income from one of our biggest single customers.

Okay. Great. And the second one was, you mentioned, I think, the Chile margin was sort of below what you expected in '23, but you're pretty confident that that's going to amend itself in '24. Is that right? Are you looking at sort of 18% to 20%.

Not quite right. And I'm sorry if I led you to misunderstanding, James. What I said was that in the first half of FY '23, and you can see that in the sector results that we provided at the end of that first half. It was a sort of muted financial performance in Chile as we went through the big program of increasing production capacity in Chile, but they came back extremely strongly in the second half. And the result was that, overall, they hit our target margin at the BU level, which we -- which is the 18% to 20% EBITDA margin for the full year, which given that they were under that in the first half, suggested they had a very strong second half. And the reason I say that is no reason not to believe that, that strength in the second half of FY '23 will then flow into FY '24. We see the order book for that. We see the work coming through. So I think Chile will have another as all the makings of having another positive and strong year in FY '24.

Okay. So just with the segment reporting in the annual report, why is the margin there, about 7% for the year? Is that there some other costs there that you're not referring to? Is that the case?

Yes. In terms of David here, in terms of the -- we allocate the corporate charges. So when you look at the -- so that's kind of masking the true underlying performance of the individual sectors. So you pull that corporate cost allocation that we apply. Yes, that's where we get back to that 18% to 20% margin. And that's the same with the U.S. in the U.S. it looks somewhat distorted. We're going to going forward, we're going to look to tidy that up to give a bit more transparency maybe pull out the reallocate everything. So we allocated, for example, the Mainetec acquisition, all the one-off cost write-offs, et cetera, and so like that, which is really not probably a true representation of the actual business. So we'll look to tidy that up in the half and then going forward to make it a bit more clearer and then maybe asset where we have unallocated overhead costs that really aren't supporting those businesses.

Okay. Great. And just one last one, just on Perth. Can you give a comment, I may have missed -- I may not have heard if you did mention it, but -- just in terms of the run rate first, how is the margin looking there? I guess, across the Asia Pacific more generally, but in Perth, I think you have [indiscernible] result...

Yes, much stronger. I mean many of the issues that we had within Perth in the FY '23 year were related to manufacturer to trade. And as I said, that's an shifted now to Indonesia. They're just finishing off their very last trade actually at the moment, probably running slightly into September, but we reverted over the Perth facility to bucket facility. And the reason that we've done that is that the bucket rebuild in particular, which is a sizable part of the overall business in Australia is worth it not only be done in Australia, so we continue with that and some new buckets being built as well. So if I look at going for instance, the majority of what we're doing there is the rebuilds of buckets that we would have previously delivered to market come back to their annual rebuild. And that's a cycle that we're expecting to see more of in Perth but in fact, One of the interesting things has been that when we move the structures all that capacity up to Indonesia, that, of course, let the big capacity in that capacity almost like a vacuum what that capacity has done is substantial over of rebuild work or buckets and new buckets as well. So we're still expanding the capacity even though based on last year's production, most of their hours that they would have performed last year that moved up to [indiscernible].

There are no further questions at this time. I'll now hand back to Mr. Singleton for closing remarks.

Okay. Thank you for taking the time. I know it's a busy time of the year, and we're going to see many of you over the next three days or so. If you've got any comments if you want to ask on the fall and you want to call me, then please feel free to do so. I still think that we have a long way to go being the advantages that we're getting out of the Austin 2.0 strategy. There is unquestionably has increased our competitiveness around the world, and that's what's driving our sales increase, and it has increased our margins, which you can see in the returns. And that will only get raised out this year as by is more broadly implemented around the company. And as the Indonesia business continues to grow and deliver a highly competitive product into and to the rest of [indiscernible] . There has been a very strong year. Interesting and one of the things that we will be doing this year is investing more in our sales operations around the world. So in the United States, Chile, Australia and through Asia. We have been and will continue to increase our sales function. So it's almost in spite of the fact that we haven't made that investment last year. We're seeing a good growth in sales, and we're leveraging up our sales force now because we know that we have the capacity to lever into the strong market. So we are very much looking forward to FY 2024 as well as we are [indiscernible] going into it. So thanks for your time, and I look forward to seeing some of you over the next 2-3 days.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.