PWR Holdings Limited (PWH) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the PWR Holdings Limited HY '23 Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Kees Weel, Managing Director. Please go ahead.

Good morning, and thank you. Thank you for everybody dialing in, et cetera. So I guess we'll move straight into it as we're basically on time. Yes, the -- our first performance highlights, if you like, a strong business growth, solid overall key markets. The aerospace and defense was a big move as we all expected. OE was 17% growth. Aftermarket, which is good to see another 15%. Motorsports is trending on that lower side of growth as we all knew of 4%. The solid conversion of revenue to NPAT and the interim dividend of $0.036 per share. The performance challenges and investments. I guess it goes to out saying it's fairly common of recruitment and retention. There's certainly one of our challenges and inflation pressure of where it is. But the increase of sale prices were good to push through, where we could. And obviously, raw materials and wages were one of our costs of moving forward, improving our efficiency, streamlining our manufacturing process, including investment in automation where appropriate to increase revenue per headcount. Investing for the future. 5.8 million invested so far of the plant and equipment to support expanding production capacity. Our acquisition of docking engineering in the U.K. to provide a platform to build and grow a European manufacturing facility and capability. Customer engagement with the Board is opening up to us in this first half, it's certainly been important to travel. And one of our major costs were trade shows and the trade shows and travel to be investing in those customer relationships and marketing. Investment in cybersecurity, particularly indirect or property and sensitive personal data, investment in systems and services to bolster cyber security is critical, particularly our increase when we increase our footprint into aerospace and defense. Investment in enterprise resource ERP system, we have certainly increased our existing functionality to improve our visibility and planning cost control. New property leases increased capacity to support future growth, and that's particularly in our factory we have in another factor we have just for raw material down at Yatala and also the up-and-coming factory in the U.K. Performance overview. I think I'll just read through the key points. I'm sure everybody else is going through the numbers. The cash balance certainly reflects our investment plan and equipment and the acquisition of Docking engineering and increased raw material stocks. EBITDA and NPAT reflects growth in revenue offset by increased labor costs and insurance and the investment traveler and cyber security ERP, as we've mentioned before. The performance trend for the half year, I don't think we need to go over that too much from I'm sure everybody understands that's in a very positive position. Revenue by market sector, we probably go through the key points. Motorsport, back to a traditional race season, minor timing impact through to rate category cost caps, which we'll talk about later on. Automotive OEM commences a new program, including AMG X1 and the continuous of existing programs to offset the completion of the forward GT500 program in the U.S. in October. Automotive aftermarket improved production capacity. However, production capacity remains constrained, further growth potential is evident. Aerospace and defense, increasing in size and a number of programs across the range of customers. Revenue by currency for the half year. I don't think I need to go through that. It's fairly well explained. But as we all know, we do have a foreign ex exposure, particularly for the GP and what have you. So we have a lot of forward extended program on that. The GP exposure will reduce in the coming months as we continue to start manufacturing in the U.K. So it's a natural offset with that. Operating expenses. Needless to say, raw materials and consumables were up a little bit. Employee costs for a bigger head count. The wage increases and salary rates and also Australian super guarantee from 10% to 10.5%. Occupancy expenses includes increasing land tax, waste disposal and new properties. Other expenses, invested in customer engagement and marketing cybersecurity of ERP systems developed in line with our strategic goals and also increase in insurance premiums. The -- the balance sheet as we've always had a very strong balance sheet, strong liquidity and cash position. And I don't think I need to go through every line item there. It is very positive. And I think we'll move on from that, but it certainly puts us in a great position to move forward. Working capital and cash flow. We certainly had strong sales in December and that also increased our debt as compared to prior comparative period. Inventories include an extra $3 million investment in raw material that had long lead times and in response to supply chain pressures -- capital expenditure for new plant equipment and the acquisition of docking. These investments were financed from operating cash flows and retaining cash reserve, liquidity position and additional cash reserves, as you can see, is the 13.1% and undrawn finance facilities of a little bit over $7 - $8 million. Our business outlook organic growth, which has always been very positive for us. It's been very disciplined approach to selecting which opportunity to progress. Europe, the consolidated new acquisitions and expanding manufacturing from our new facility at Rugby. Aerospace and defense, continued growth in existing and new programs cost a range of applications, expand and aerospace and defense manufacturing came through in the U.S. with the installation of also a vacuum furnace and a heat treatment furnace and also an anodizing plant to put us in a good position to take on more of the programs that are coming up in the U.S. Our OE programs continue to deliver on existing programs, including AMG X1 program, while negotiating for future programs and the pipeline. Automotive aftermarket, a solid market demand, we are looking to further increase our production capacity, certainly with our U.K. facility that will help. Motorsports continue to support all major most ad categories as they strive to develop more efficient cooling technology as they move into the future. Business outlook, particularly for emerging technology and testing services. The EV market is -- we are well placed to deliver high-performance battery electronic curing products to the ever-expanding Prestige GB market. Coal plates, the coal plate market previously limited to automotive application is now spread into adjacent markets, providing an overall larger market. MicroMatrix opportunities continue to grow as the technology matures in current markets and also the R&D focus for aerospace and defense. Additive manufacturing, our 3D printer parts are now included in a growing number of high-end PWR crewing systems. Testing services include the largest thermo wind tunnel in the Southern Hemisphere, industrial CT scanning, CFD simulation, modeling, fine analysis, durability pressure tested plus more. Pipelines for future OEM markets. I won't go through everyone, but you can see it's increasing. There's a couple that have dropped off there, particularly that when we realize that there's not enough margin, we won't continue. And although we have dropped a couple off that doesn't mean to say we're still negotiating. But -- now the unlikely hood of that program in getting up is less than 50%. So we -- the ones that we drop off in that range. The pipelines for other, as you will see, a lot of these pipelines are for aerospace and defense. And that's -- as we increase our footprint into aerospace and defense and further footprint into the U.S. market, et cetera these pipelines in that area will just continue to increase, and we will make sure that we are very, very prudent in making sure our net number is around about that 20% mark. So we certainly will not be working for nothing in that area. Investing in Europe, our new facility is to increase support for our European customers that we have secured over the last while, and we have secured a 20-year lease for a 3,500-meter manufacturing facility in the U.K. As we speak, we are currently relocating our U.K. operations into -- in this facility and also dockings and BMR motorsport radiators, they'll be all moving in -- they'll be moving in this week as we speak. Our management team -- we've moved a couple of things around over in Europe for future growth. We've appointed Wayne Rogers, as Executive General Manager of PW Europe. He's got over 20 years' experience in motorsport and performance market sectors. Wayne will certainly be supported by a new level of senior people in the short term. We have Mick Curran, our General Manager of production in Australia over there currently. He will be there for 2 months and we also have -- which I think will come up further in the presentation of the comment of a young engineer to set up our engineering department in Europe. Investing in capability and capacity, capital investment -- an ongoing target of capital investment program is critical to stay ahead on the forefront of technology developments to ensure we have sufficient capacity and anticipated and planned growth. Future CapEx focused on increased capacity, new facility fit out and program Pacific equipment. Factory footprint, we continue to assess our optional factory footprint to ensure that we plan for growth while maintaining efficiency. As I said before, the new facility in the U.K. was secured in December for a future 20 years. North America. We moved into our new aerospace and defense machining center in the first half, and that's up and 100% going right now. Australia, we're discussing to continue for a new purpose-built factory ready to be moved into late 2025. new factories expect to support the growth for the next 10 to 20 years. And we have also secured a 1,500-meter factory 100 yards down the road from us now just for warehouse to -- for raw material and that provide the head space in our new car becoming available. Cybersecurity, protecting intellectual property, customer data, sensitive personal data is critical. We are continuing to invest in the last technology and service to secure our systems. This is important to invest as we pursue aerospace and defense programs. And just on that, the more footprint we are and push into market in particularly aerospace and defense, the more prudent it is to make sure we protect all our cybersecurity. Enterprise the ERP system, we're underutilizing the functions of our current ERP system and have embarked on several programs that's been now used for the ERP, improving visibility, planning and cost control. Investing in people. This is a continuous theme that most of you know that we recognize that our people are core to our future business and to deliver on current and future opportunities. PWR is investing in growth, headcount, re-growing our head count and developmental our skills of our people. People strategy includes investing in headcount. Growth requires ongoing investment to build in people to build headcount with focus on targeted selection and efficient upskilling. Our apprentice program currently employ a little bit over 40 presences across the range of trades and is continuing to expand the apprentice program. As we increase just a side note, as we increase our global trend, particularly in the U.K. for manufacturing, we will -- we're certainly starting an apprentice program in the U.K. as well. The graduate engineer program, we have 2 graduate engineering programs where graduates rotate between engineering teams gain variable experience before deciding their preferred specialization. So we have run -- with our Driveway engineering exchange program, we have between PWR Australia and North America and the U.K. to expand our professional experience of the engineers to reinforce the PWR DNA across all operations. The -- we have seen to run that -- seen the -- or fairly well up in the chain, engineer to the U.K. to set up our U.K. engineering facility. So we're closer to our customers etc. and plus, we also seen another young engineer to the U.S. in the last 6 months. Work experience program, PWR runs run a work experience program for high-school students, interest in Korea and advanced manufacturing in the local schools -- around [ Almoe ]. Retaining our staff -- retaining full staff is crucial to achieving our growth plans. We invest in up filling our staff to strive, provide and -- to strive to provide a rewarding career path. Our staff retention strategies include STI program that has been expanded in recent years to include supervisors and key team members, providing a direct link between PWR's performance and personal reward. The career opportunity planning, we are developing individual career plans and training pathways. Supervisor training -- regularly training for our supervisors so they can better support their teams. Employee assistance program, independent and confidential support to all our staff and their immediate families. Woolie's Diner, PWR provides only tea and lunch for all staff at PWR and North America provides free lunch 1 day a week. Employee feedback, we actively seek feedback from our staff through one of our many -- one of the many and staff surveys and build this feedback to our future plans. Now that's the -- that is the program. And I guess, we'll open it up for any questions that anybody might have out there.

[Operator Instructions] your first question comes from Alex Lu with Morgans Financial.

So can I just start with motor sports, please? And I think, obviously, things are back to normal and -- but it does sound like you had a minor impact there due to race category cost caps. So I just wanted to see if you could just talk about that, and I presume that's related to F1.

Yes, it is. Alex, yes, obviously, cost caps is stuff that everybody talks about and what have you but -- and it's really just a timing thing for us. Yes, we had 4 of our major F1 teams. ARKS to have product booked out in January rather than December because their cost cap runs from calendar year and they are up against their cost cap in December. And so all our costs to that were in our first half, as you would know. And obviously, when it gets booked out in January, the profit comes into January. So it's really a timing issue. But when you think about the costs that were there, the -- between those 4 teams, it was a little bit over $2 million, which was substantial when it comes down to a number. And that's probably the biggest SKU that's probably only counted for mentioned correctly in our presentation. But I think yes, well, I do know that sales and revenue and NPAT in January and February being very much up there, and we'll see a big clawback in this second half.

Okay. That's helpful. And just secondly, obviously, there's some cost pressures there, but you are looking to offset that through operating efficiencies and also price rises. So can you maybe talk about some of those operating efficiencies? And regarding the price rises, when are you looking to push them through and by how much, please?

Yes. Most of the general aftermarket price rise went through at 5% in September and the main price rise for the higher-end race categories and particularly F1 and the likes is more coming into line in products being sold in the -- from January onwards as the start of their season. So yes, you'll see certainly a difference in our NPAT conversion in the second half as it is always, and I go back to -- I go back to when it was normal, if you called it normal '19 and '20, our first half NPAT was like in the 12% and then the second half was 27%. So I know it won't be that big a skew from now as it evens off a bit, but there is certainly a SKU there that will come into play for this full year.

And sorry, Kees, did you say 5% in September? And what was the price rise in Jan?

The price rise in Jan was more -- it wasn't so much a particular percentage, but it was -- it was probably about the same, but it was obviously a bigger margin or a bigger rep number. So in -- particularly in January with the F1 teams, as you know, every year that we have a price increase in that area, and we keep pushing until we get pushed back. So it will be relevant in the second half.

Okay. And just finally for me, Keith. Just on margins, please. And I think you had quite a negative product sales mix, especially in the U.S. So just wondering if you could talk about that. And also, are you still comfortable with that 20% NPAT margin target longer term?

Yes. The U.S. has always been a little bit down on margin, and we're working very hard to lift that and lift that culture on that margin. And we big opportunities have always been, as we've said in the U.S., is the aftermarket program. And I'll be honest, we've been disappointed so far of how that's been, how it's been going along. We've put a lot of effort into a lot of cost into our first 6 months of upping that, particularly with salespeople, et cetera, to push that aftermarket program and also with fabricators and welders on that side. So we -- I think we'll see particularly in the next 6 months and beyond, a fairly good increase in our productivity in America. And I think what was the other part of your question?

Yes, 20% NPAT target longer term? Yes.

Yes. Look, I know we probably sport the market last year by '21 and what have you. And -- but yes, we're still very bullish about the 20%. Are we going to get 20%? I think we'll go very close. I certainly think it could be in the 19s, if not high 19s. Certainly not a 17 or 16, that is for sure. So we're still very bullish about that. It's on our mind every day of making sure that we're not working for nothing.

Your next question comes from Tim Piper with UBS.

Just curious on the second pipeline slide, just scanning your eyes down the page there, that's certainly got a lot heavier weighting towards aerospace and defense now probably a bit less in terms of motorsport MMX and that kind of thing. I mean, that pipeline is obviously growing really strongly. Is it fair to say some of these programs in aerospace and defense are getting larger and larger that you're sort of working on? And then the fact that motor sports isn't as prominent is that just because it's got crowded off the slide? Or is that sort of not aa -- as sort of vocal as aerospace and defense now?

Do you want to answer?

Yes, just a quick one, Tim. Just on the pipeline, it's Martin here. We were running out of space. So for the motor sports, we've decided to group them into, I suppose, categories of customer programs. rather than call them out as separate line items for each one. Otherwise, we be running over to the second page. So it's not wanting to -- the motor sport is actually increasing, but we thought it was appropriate to show and reflect the increasing pipeline within aerospace and defense. And then they just group the motorsports into different sort of categories or programs with multiple customers.

Yes, got it. Just on sort of the size of some of these aerospace and defense contracts that are appearing on the slide there. I mean, in terms of size and scope, is that growing?

Yes, it is, Tim. It's probably a little bit early to call out. And obviously, we won't call anything out unless we have a signed document, but there are some programs that are very hot at foot. And I think you'll see some announcements over this next 3 or 4 months because they are sizable, and we will have to announce them. So when that occurs, we'll let the market know, but we have quite a lot of -- as you can see by the pipeline, we have quite a lot of opportunities there. We just -- as I said before, we just want to make sure that we get involved with the right ones and that give us our best margins.

Yes. Got it. And just on the slide before, just maybe a clarification on that 500,000 vehicle program that we previously had appeared. So is that a timing issue in that the OEM has pushed out production on that? Or is this in terms of negotiating a recent margin out of that kind of contract?

A little bit of both. They pushed it back 12 months. They have pushed it back 12 months, but it's a very -- it's probably one of our slimmer margins that we've looked at and been involved in, and we're continuing to -- that's why we've dropped it off the page. But we continue to try to negotiate a better price. We're not out of the job, but we're not putting our hand up that we want to do it for that margin. So we have done quite a bit of R&D on that program, which we've been paid for, which is fantastic. But when it comes down to a price going for the program moving forward as production price, we felt there was other and bigger opportunities able to give us a better margin. So it's just being smart. We've got a certain amount of capability and capacity, which we're building over between now and '25 and '26. And we're going to make sure that capacity is filled up with the right programs.

Okay. So can I just clarify your answer to a previous question there just around the margin talking to 19%. Sorry, were you referring to longer term or FY '23 when you're talking about that figure?

The current year, I'm talking about it now. I think longer term, we'll still be in the 20s. We'll certainly get some tailwinds out of what we're doing in the U.K. We're very aggressive over there. And when we release that to the market. We've -- as a production facility moving forward, I think it will be very well received. And also, we're very bullish on our capacity and capability out of that factory.

Okay. And in terms of 1H/2H seasonality for revenue, you sort of suggested maybe not quite as strong this year. Are you sort of comfortable where things are at in terms of seasonality?

Yes. No, we're still very comfortable with that. And as I said, we'll certainly get some tailwinds out of -- particularly in April, May and June out of Europe, out of our new facility in Europe. And that will certainly trend positively into the following year as well. So we're very aggressive with our ramp-up over there. And everybody that's on board has signed up to a fairly aggressive platform on capability and also output of our daily and monthly output over there.

Got it. I might just squeeze in one more, if I can. Just on headcount, you call, in terms of labor availability and how you're going hiring, I think you ended at 485 in headcount as of December. Was that sort of ahead behind where you're kind of we're planning to be? And then how is that hiring situation sort of progressed over the last few months?

Yes. We're obviously a little bit behind where we'd like to be, but I think that the market is turning on that. Certainly, the market is turning. And whereas the last 12 months we've been fairly aggressive in trying to train people and what have you. But which is difficult in any market because we're getting a lot of demand for product. But we have taken a longer-term approach that we certainly start to not so much employ, but reinvest in more experienced people, although they cost a little bit more. But as we all say, you can't buy experience. So we felt there was a positive line there to look at more senior people. And rather than trying to aggressively train younger people with probably a little bit of difficulty there. So we'd rather employers, we all know, someone with a mortgage with a wife and 2 kids. So rather than a single guy that jumps from job to job. So it's more investing rather than employing people at the moment.

Our next question comes from Chris Savage with Bell Potter.

Most of the questions I wanted to ask have already been asked, but I might just add one more. Any update on the Land 400 given that was publicized in front and center 6 months ago?

I thought you've forgotten about that. We certainly have, not really. So the 400 program, I did see a clip on -- I'll just come back from overseas at weekend, but -- so I've had a few late nights and early or trying to adjust back into the Sleeping patent. But I did -- I did see a clip the other day of the Defense Minister holding a book of their future programs. So I think that defense has that. And I guess when that comes out, who knows, probably when they want some votes. But yes, look, we have not heard any more about that. But what I will say, Chris, and I think I've said to you before, there's other programs. As much as we do want this program, let me tell you because it's on our doorstep, but there is other programs, probably 10x the size of that, particularly in the U.S. that we're very involved in, in the early stages. So I guess, I think everybody that's probably on the call and beyond of stick to that of hearing the land 400 program and the excuses that the government are giving, et cetera. And -- but I guess, as soon as we know everybody else we know. But even if the government released to an individual contractor as is in Hanwha or Rheinmetall, who are the 2 people that are heading toward that program, I think it will be at least 6 months until we know exactly what the revenue number would be in our facility for that program. And we're on both vehicles that they've presented to the government. So I think the it's a very high chance that we would get that program, and I think we're in very good stead for that. So -- but you never got it until it's as we say money in the bank.

Sure. Maybe just a quick one for Martin. CapEx in the first half jumped up to 5.7% or thereabouts. Is it similar in the second half or a bit lower, should we expect?

It's probably going to level out around that 10% to 11% for the full year because we've got certain equipment with further furnaces, for example, that we've got part payments completed that will be finalized in the second half of the year. So I would expect it to be at or maybe slightly less.

And is that the new level going forward? Or is this going to be just a bit of a blip this year?

Around 10% is probably where we've -- it's probably broadly speaking, a normal.

Your next question comes from Elijah Mayr with CLSA.

Just a couple from me. I mean we've already sort of talked a little bit about the first half or the second half lift, maybe asking more explicitly, if I'm sort of looking at consensus for the full year NPAT sort of sitting around $23 million. Is that a number you guys are still comfortable at hitting for the full year? Or without some of those, I guess, delays sort of push some of that revenue into '24.

I think some of the layers will push a little bit of revenue into '24, but -- I think as we've said before, our NPAT to be around about that 19% to 20% Mark, I think we're still very bullish on hitting that number. That's for sure. Obviously, we spilled the market last year of having 21% and -- which has been reflected, but the -- I think moving forward -- we always have that 20% number in all our numbers that we do. Obviously, there are some costs this year. And we're building for the future, and I think that will be relevant of what we do. And I think the market knows that everything that we say we do and more. So I don't think there be any surprises out there.

Yes. And maybe just on the cost base as well, and we noted earlier in the call that there was some costs and some earnings in terms of timing with motorsports. Were there any sort of other group level costs that may have been coming through in the first half that won't be expected in the second half? Or is that cost growth expected to continue?

I'll let Martin answer. He's got some numbers here he will talk to you about.

We certainly called out the investment in client sort of customer relationships and that's trade show, travel, marketing, online store and so forth. We put a big push into that. So year-on-year, that is a big jump. And that's in the order of sort of $0.5 million, but that's comparing a year, the corresponding prior year first half was quite restricted and still just coming out of a lot of restrictions. So it's just getting it back to probably a more normal level, albeit we probably have invested a little bit heavier just to reconnect with a number of our customers. So that is likely to settle a little bit lower than it has been in the first half. Other costs, the ERP investment in the cyber security investment, there will be ongoing investments there. We'll do our best to obviously manage and control those costs. But with regard to the ERP, it's certainly a lot less as Keith mentioned previously, a lot less than embarking on a brand-new ERP and we'll get certainly benefits and efficiencies out of that investment.

And maybe just one on accreditation in the defense space. Are you guys still waiting on accreditation to come through for the defense industry security program for Australia and the National Institute of Standards technology for U.S.? And are those programs that are in the pipeline dependent on receiving that accreditation?

No. We have all the accreditation -- we have all the accreditations in place for both sites. So we certainly have the net cap and also the aerospace 9100 certification in place here in Australia and also in the U.S. So -- and amongst a whole lot of other accreditations. -- but they're the 2 highest ones that are required for particularly further aerospace, particularly aerospace programs.

So those other accreditations, are they still outstanding? Are you guys still pursuing those?

Well, we haven't got any outstanding accreditations that we need at this stage. So we're very up today.

Excellent. And maybe just one final one, I guess, on a long-term basis, there's a lot of manufacturing capacity to come online in U.K. and later on in Australia. If we're sort of looking at that FY '25 manufacturing capacity, what would be -- I mean, broadly, I guess, the revenue capacity given the increase in productivity in those spaces? Is there any sort of ballpark figure?

I think it's probably a little bit early to call that with respect. And it's probably a little bit early to call that, but we're certainly building our new facility with further growth for the next 10 to 20 years. So we're going to be investing in quite a lot of land and property as in leasing. And -- but we're also investing in some future automation programs for our CapEx area. So a lot of these programs coming up in some of the EV market moving into '25/'26, which we're heavily involved in currently. They will require some automation. That's not tens of millions, that's for sure, but it's to be certainly $5 million or $6 million, that's for sure, in that area, and that's sort of the ballpark on that. But as far as revenue numbers at this stage, it's probably a bit early to call to the market until we have signed agreements. So I think it's -- we won't be releasing any of that until we have signed agreements with our customers.

Your next question comes from Sarah Mann with Moelis Australia.

Question on aerospace defense. So we've kind of touched on it. The pipeline looks really good. It's growing, you're progressing the opportunities. I guess there's a bit of a lead indicator. Can you maybe give us some color around, I guess, how the level of interest from those aerospace and defense customers have changed or increased relative to, say, 6 months ago, noting that clearly, you've added a board member that's got really good background in defense. Just wondering if that's kind of led to, I guess, the step change in the interest levels?

Yes. I think it will -- with the new build member it was his first board meeting yesterday. So that was -- certainly he brought a lot the internal knowledge and what have you to the board meeting yet to be come to fruition, obviously. But as far as the revenue streams they're coming and future oversea coming aerospace defense, there's some other lines of revenue streams that will be coming in. Sorry, I can't call that at the moment. But it is substantial. So that will be released when that comes to fruition, I would say probably the next 3 months. So -- and that -- the good part about that is it's more in the 3D printing area of our business. So -- and our engineering. So there's an area there that won't affect too much of our production side, but certainly a great revenue stream for our 3D printing area and our engineering area. So things are getting wider spread, which is a good thing. And I think the -- I think the future in aerospace is very, very buoyant at this stage. And there is certainly a margin tent for some of these aircraft to be made in Australia. So I'm sure that's going to come out in the media in the next little while.

Got it. Okay. And then just in terms of the U.K., so the manufacturing site there, can you maybe talk a bit about how the setup and the integration is going? And then the other thing is, obviously, like labor over there is a bit of an issue. Is that something that you're thinking about that could impact the ramp-up in the short term? Or it's more of a medium-term thing and you've got the stuff that you need from the acquisitions now?

Yes. Yes, we're very bullish in -- I think that's the right word. It might be just PWR way. But we're very confident of getting our feet on the ground pretty quickly over there. We just moved into -- I just got the keys to the new facility, but a month ago. So to set that up the PWR way, if you like, we've got our current production manager there from Australia, one of our guys over there, McCullen, who's been with me for 20-odd years. And he is helping set that up the PWR way. And we -- we're very confident that we will turn some good numbers over there fairly quickly. And currently, like today, as we speak, we're moving both BMR and also docking into that facility. And we hope to have them bedded down in the next 2 weeks to the end of February, and we hope to be manufacturing a fairly substantial array of cores and units there beginning in March, but the full ramp-up we're bullish on April, May and June of that will certainly give us a good tailwind with some revenue and also some impact on that.

Right. Okay. And then last question for me is just like the OEM/AV opportunity. I mean, you've called out that it continues to grow, particularly the prestige and per your products are expensive, like I just feel like there's more and more press about how the Chinese automakers are picking up share and trying to grow quite aggressively both at the low end and the high end of the market. I mean how do you see the rise of these Chinese automakers in the EV space potentially impacting, I guess, what proportion of your product can penetrate?

Yes. I think -- yes, it's a good question. The market is so large. It is ridiculous. And as you would know, we only need a fairly small percentage of that market to make a very good number for us. The Chinese manufacturing to some of the high-end EV market is limited for what we see. And obviously, we're talking about EVs at a probably $400,000 upwards area. So we still see that a very good place for us. And it's a place where that I guess, the China I'm not rubbishing them, but the China product is not suited into that higher end mark. So it's not only the product, but it's a technical advantage that we offer of people working with us. And I think that's what PWR is we're a partner, not a supplier. And with all our partners that we've supplied anything that, that market is growing per supplier. And I think that's what the positive side of our where EV push is.

Your next question comes from Cameron McDonald with Evans & Partners.

Questions from me. I mean, you -- just pulling some of these numbers together. So you've got a 15.5% revenue growth rate. You've called out a revenue headwind of about 3.8% in the half year. So on a timing issue and the costs actually went into the half year as well. I have a look at Slide 9, you've only called out a 6.5% increase in the usage of raw material and consumables. So I'm just trying to close that gap between the 15 or even if you normalize it, it's closer to a 20% revenue jump versus the 6.5%. So in terms of manufacturing costs. So how -- can you break that down for me in terms of in terms of price action in the half versus perhaps product mix?

Yes. Broadly speaking, it's product mix. There has been some increases in raw material costs, but we've also seen some reductions in raw material costs, but it broadly comes down to change in product mix that's driving that difference.

Okay. And so where -- what products do you think were the beneficiaries or the driver of that, please? Is it more the emerging tech sort of ramp up? Is that the way we should look at that the 2.3 versus the 6.3% from last year?

It's the higher-end products that we produce that require a larger labor component is also driving that so that the more technical advanced cooling and emerging tech, where we with a little more was involved in the construction. So even the high-end OEM products require a lot of labor to construct. So it's the higher end products that the labor proportion is actually lower.

Your next question comes from [ Wade Tolson with Team Invest ].

You missed the staff turn of the KPI for in FY '22. Just wondered -- and you talked about staff and what you're doing there. Has turnover rate improved since the end of last year. In other words, reduced the turnover rate?

Yes, it has.

Yes, it has.

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

Yes. Thank you. Thanks very much, everybody, for participating this morning, and I hope you've gained some valuable insight to what we're doing and what the future of PWR is. So thank you very much. And I'm sure we will all run into one another how this next week or so. Thank you.