PWR Holdings Limited (PWH) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the PWR Holdings Limited FY '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. Thank you. Good morning, everybody. Yes, I'll just -- I guess, we'll just go straight into it, of the performance highlights. In 3 areas, we've made a little bit different this year, but in 3 areas of revenue growth, investing in the future and shareholder return. Revenue growth was across all major markets. I'll call out a few numbers on this page of 48%, Aerospace and Defense, 19% of OEM, 13% of motorsports and 12% of aftermarket. The investing in the future. As we all know, last year or year before, we only done $5 million on CapEx. This was a catch-up on that, so $15 million of CapEx. There's 4 furnaces that have been commissioned over the last couple of months; $2 million on acquisitions and establishing our European manufacturing facility in the U.K., which is 40% more increase in factory space over there; and 90% head count increase across the globe; and a little bit over $0.5 million on updating our ERP system globally. Shareholder return. Our dividend policy is -- has always been between 40% and 60% of NPAT. This year, it's a total of $0.125, which is 58% of NPAT, which gives a 37% increase of shareholder price over '23 and 103% of shareholder return over the 3 years, et cetera, and 88 percentile when compared with the ASX 300. Performance challenges and responses. The recruitment and retention certainly has been a big challenge over the last 12 months, particularly. And you'll see there of our responses, I won't go into every one of them. It's fairly easy to explain, but we are spending quite a bit of money on career development and the PWR Academy, et cetera, et cetera. Inflation that is common across the board. We've been able to increase some prices of some pass-through costs for raw materials and wages and improving efficiency and particularly where we can have automation help us in that space. Factory space. Securing efficient factory space to support future growth. We are in the final stage of negotiation of a 20,000 square meter factory to be available by the 1st of July 2025. We actually will have a heads of agreement signed by this time next week, that is going to plan. Performance overview. I won't go through every line. I think it's very self-explanatory. It's been, I think, a very strong year. Cash balance has -- reflects the increased investment in equipment and acquisitions of Docking and BMR, and increase of raw materials and finished good inventories. EBITDA, offset increased by labor costs and insurance, investment in travel, marketing, computer costs, et cetera, cyber, ERP development. NPAT. We've put in a couple of extra lines in there for the D&A to explain that, where it is. It's all very well spending extra money on CapEx, but then you have the backflip of that of D&A costs that comes below the EBITDA line. So all in all, I think, a very, very strong result there. Performance trend. I won't go into that page too much. It just definitely shows you a very good, strong performance trend across all sectors. Our TSR return in the ASX 300, excluding the energy stocks, we're sitting on about 30. So we're very happy with that in a tough market. Revenue by sector, certainly, gives us a fairly good idea of where we come from. I have been saying our motorsports will be flat -- more of flat 10%, it's done me again. So we've roughly 13% growth on our motorsports. OE with 19% growth and automotive aftermarket 12% and aerospace and defense of roughly 48%. So motorsports growth across all sectors and categories. OEM of some of the existing and commencement of new programs continue to develop others. Automotive aftermarket is increasing and we've certainly increased production capacity to meet that demand. And we feel there's further growth, particularly in North America and Europe. And the bottom line, the aerospace and defense increasing in size and programs across a range of different customers. Revenue by currency, a fairly simple slide to look at. And I don't think I need to comment too much on that. It's very self-explanatory. The NPAT normalized for abnormal growth. This is a new slide that we put in mainly because we're spending -- spent quite a bit of money on our -- some ERP development, Silverstone exit of the lease there and, obviously, the new lease of the factory in Rugby, which currently, at this stage, we have 50% underutilized in its current state, but there's a reason for that, and that will come out over the next couple of months. Operating expenses. It's to be expected, our employee expenses certainly were up there. Certainly, a lot of pressure on employee wages, et cetera, in this current market, which I've mentioned before, the -- our other expenses looking at cyber, ERP, insurance, et cetera, et cetera, it's quite a bit of that. The expense reduction programs are training and tooling upgrades to reduce remakes and improve efficiency. We're starting to implement quite a bit of automation where appropriate and planning and what have you on our ERP system and data control and reduced in freight, particularly by setting up our new plant in the U.K. Balance sheet. As normal, hasn't changed too much. Very strong liquidity position and cash position, I should say. Inventory has gone up a little bit more, particularly for our Rugby site now. That will tend to ease over the next period of time as the timing of raw material turnaround decreases back to a new normal, hopefully. Plant and equipment, which I've mentioned before, of $15 million of investment in plant and equipment across the board. And it's with our 3 new property leases between 5 and 20 years to support expansion. We still have $10 million multicurrency and $7.5 million equipment lease facilities remain undrawn. And I think at the end of the day, it's a very strong balance sheet. Working capital. Key points, strong sales in June. Inventory includes nearly $3 million of raw material of long lead times in response to supply chain pressure. Inventory -- capital expenditure for new plant and equipment and acquisitions of Docking and BMR. These investments were, as you all know, we said in the half year, paid by cash flows and retained cash reserves. Liquidity position, very strong of undrawn facilities, which we've mentioned on the previous page. The business outlook. Organic growth across all -- with organic growth across all areas. European manufacturing consolidation now with the new acquisitions of 3,500 square meter facility. We feel that has already started to tick the boxes over there. Aerospace and defense has continued growth, particularly in the vertical lift programs and also some of the radar programs. We have increased our capacity in the States with commissioning of a vacuum furnace and heat treatment furnaces, and an anodizing plant and also there's a new batch furnace turning up there the week after next. OEM programs continue to deliver across the board. A few small new programs. And obviously, there's a development in the pipeline for some larger programs, which will become more evident later on this year. Automotive aftermarket. We have continued to increase production capacity to satisfy demand. We have -- we're just about to put another 2 -- another 10 welding bays in America, which will give us more capacity over there and mainly to chase that aftermarket business in America. Motorsports, continue to strive and develop more efficient cooling technology across all categories. Pipeline -- sorry, I missed a page there. Business outlook on emerging tech. You've got the EV market, which we've spoken about, cold plates mainly for radar systems that we're currently supplying. Micro matrix has been a very good uptick in different categories that we're starting to push micro matrix in. And additive manufacturing, 3D parts has really started to -- after 4 years of R&D with additive manufacturing, we are starting to send some invoices out, which is pleasing. Automation, there's quite a bit of emphasis going into automation now and also the future. Right now, we've only got two automatic core stacking tables, one in here and one in America, and starting to produce high run orders on that product. Pipelines. The pipeline for the key OEM, there's [Technical Difficulty] for the past few years now. You'll see a few more on there, et cetera. And as we keep going along the road, there's a few that will drop off and there will be a few that will be added on. So it's still a very healthy part of our business moving forward. Other pipelines, particularly in some of the tech side -- emerging tech side of motorsports that there's certainly a great deal of pipeline interest and also order book coming in the aerospace and defense area. European manufacturing site as -- we started that new site in beginning of February this year. And I'm very pleased to say that it's really starting to hit its straps and with output and also staff retention over there. So it's been a very worthwhile exercise, and we can see certainly a lot of development happening over there, which will certainly make a difference to the bottom line in the future. Investing in capability and capacity. This is what we've been doing for quite some time now. Capital investment, factory footprint, et cetera, which I won't go into because I have mentioned it before in this presentation. Cybersecurity, ERP system and capacity planning. We are having a big push for global capacity planning across the board and to really capitalize on our skills that we have in different parts of the world to make sure we get the best out of our people globally. Experienced leadership team. I don't think I need to go into that, all good-looking faces. Investing in people. Certainly being a challenge on getting new staff, et cetera, but we have been -- done a very good job, I think, at the end of the day. Our head count has increased. We made sure we're getting the right people and upskilling. Our apprenticeship program, PWR Academy, certainly creating a lot of interest and people are wanting to be part of that. Graduate engineering program, which has been running for some time now, and our Global exchange -- engineering exchange program between our 3 sites, which is working a treat. And our work experience program for younger kids coming out of school, et cetera. Retaining our staff. We certainly spend quite a bit of money but also time in retaining our staff with our STI program; our career development planning; supervisor training; our employee assistance program; Weely's Diner, we're all getting too fat down there; and our employee feedback. So with our employee feedback, we do take notice of what we put out there for remarks, et cetera, and we act accordingly. So that's pretty much it. Happy to take any questions. I'm sure there'll be a few. So I guess I'll open up for question time.

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

Can I just start off with motorsports, please? So 13% growth, including emerging tech, but I guess if you take that out, it's about 16%. So quite strong and better than what you'd expect from a flat 10%. So can you just maybe just talk around that strength in motorsports, if there's anything to call out there, please?

Yes, motorsports growth this year, surprisingly, as you've said and as we've seen, we're a bit surprised with that number. But it always comes up, as you know. But really, the real numbers are -- as I said, we had a fairly -- very strong productive output on our new site at Rugby, particularly in May and June, because you'll see that the numbers are certainly better in the last bit of the financial year. And I think by being there in the U.K., it's opened up other areas of motorsports that we may not have got before, but because we're there and I think leaning on the back of our [ FRM ] program, it certainly started to open up more interest, et cetera. But you got to remember that we did buy Dockings with that intent. And so I think a lot of it has come out of there. So we're very, very happy with that motorsports and the Docking acquisition.

Okay. And can I just go on to, I guess, costs and the increase in labor and also the setup costs of Rugby as well? So can you just talk about that? And I guess, your ability to offset the cost increases in general?

Yes. The cost -- certainly, I don't think I'm the lone ranger and talking about labor costs of what we're doing. But we -- I think we have the benefit of putting -- we have had the benefit of putting a price increase through last year and this year and -- which people are expecting, but that is mainly to offset raw material and labor costs. It's not that it gives us an extra margin. It's just an offset. The cost in Rugby, I think anybody that gets a chance to go to Rugby and have a look at that facility, they'd be very, very surprised and very pleased of how professional it is and how we've made use of every square inch of the half of the factory that we are currently operating out of. And it is world class. It's a world-class facility, and it's setting a benchmark. It will set a benchmark for our new premises that we'll be moving into in 2025 here in Australia. So automation, we're certainly pushing a lot into automation for future programs. So yes, there have been quite a bit of cost to set up Rugby at that standard and I'm glad we have because it has shown in this small period of time that it will give us a very good payback rate on that expenditure.

And what was the magnitude of the price increase, Kees, last year and this year? And when was it?

5% across most parts except F1. Is that right Martin?

Yes.

And that went out in July?

Yes. A lot of our price increases went down in July for effectively deliveries from the end of the first quarter. Some programs, the pricing -- the ability to change pricing structure is a little bit later for some of the Northern Hemisphere racing seasons, but majority of the price increases went through by the end of the first quarter.

Okay. And sorry, you meant July this year or you're talking about last year?

In both cases.

Okay. So it's 5% this year and was it 5% last year as well?

Yes.

Okay. And just one final one for me. So just on Slide 17. And with the aerospace and defense pipeline, it's obviously expanded quite a lot over the past 12 months. But could you maybe just talk about, I guess, the opportunities that you're seeing at the moment? And are you seeing that mainly in Australia, U.S. or Europe, please?

I guess, certainly, I'd say, you would talk the majority would be in the U.S. That's why we're spending a fairly substantial bit of CapEx over there and new furnaces, et cetera. But yes, there's certainly some programs here in Australia, which we know about. But I think the -- immediately, the short-term pipeline increase over there has certainly been the cold plates that we're doing for radar systems over there, but also the -- what we call the eVTOL, which is the electric lift vehicles. We -- I think it's fair to say that we're currently dealing with 4 of the leading ones. And they are really starting to make some traction over there on getting those vehicles ready to be in operation. So there's a couple of companies over there that are talking about being in operation next year and there's quite a bit of money being spent on new premises for building these electric lift vehicles over there and the backing of those companies. And needless to say that Boeing is a big backer of a couple of those companies. And we're starting to really ramp up our preproduction parts for those vehicles.

Your next question comes from Jack Dunn with Citi.

Just first one. Just one on the A&D projects that you've been winning. Are you able to touch on the margins for these projects and say how they may compare to some of the other segments of your business?

The margins are healthy, very healthy. I think a lot of people would know me. And I'm a 20% net guy. So we really pushed that 20% net program. So all the new programs we're doing, particularly in that area, are in excess of that 20% net.

Perfect. And then sticking with the A&D for a little bit here. Obviously, there was strong growth in '23. I was wondering if you could provide some color, if you would say one or two large contracts in there or that was sort of a culmination of multiple programs that drove the result? And then looking at the next 12 to 24 months, how should we think of the revenue profile for A&D?

I think the -- it's certainly increasing as we speak. We had, I call it, a reasonable year last year. I certainly think there will be a lot more this year and continue to grow of what we do in that area. And I think that yes, we -- I won't be cheeky and say we're scratching the surface. What I'm saying is that we're -- there's certainly a lot more to come and particularly that we've been doing a lot of homework and upfront R&D programs for aerospace and defense. So -- and most of them are coming through with preproduction orders, et cetera, as we speak.

Okay. Perfect. I just want to clarify something on the auto OEM pipeline. You mentioned the larger programs are still there. So just clarifying that those big ones [indiscernible] still in that pipeline? And then just sort of if you can provide an update of where they're up to.

The -- on the -- you're talking about the car program?

Yes.

No, the -- obviously, the jobs that we're doing, we've called them out before with Rimac and Valkyrie and X1 programs that still got a fair while to go. There's a program, an OEM program that we've just signed up in America and -- which is 500 vehicles, et cetera. So -- and then we've got some of the bigger ones that -- a couple in marine and, obviously, a fairly big one in MPV in the car program for 2026.

Okay. So that was -- just to clarify, that was -- the 120,000 vehicle program [indiscernible] program that was there in the half year [indiscernible] they are still in there?

Yes.

Your next question comes from Tim Piper with UBS.

Just a follow-up on the aerospace and defense. Just to understand the progression of some of these programs going from prototyping and R&D into production. You mentioned there's a few there that are sort of entering pre-production. Is there a way you can kind of represent a mix of those sort of programs in FY '23 going into '24 in terms of how many you expect to convert into actual production programs in '24 at this stage in terms of what you can see in the pipeline?

There's probably at least 4, if not 5, that will turn into production in '24, '25. And -- yes, and as time evolves, there's more that we're just doing small R&D programs for, et cetera, that are evolving into bigger ones. So yes, the -- I guess, the big push is particularly something that we're very good at with our cold plate programs, and that's mainly into electronic cooling. And a lot of those programs currently are taken up into radar systems and the -- and then other part of the business is doing those programs into the eVTOL areas of the 4 major companies that we're dealing with at the moment.

Got it. And probably hard to generalize an answer for this question, but as they transition from R&D and prototyping into production, I mean broadly speaking, what kind of step-up or multiplier would you kind of think about for these programs?

With the R&D side, it's very small numbers, but the margins per part are very high because there's a lot of effort goes into that. And as we progress into a supply arrangement, the numbers -- the quantity numbers increase dramatically and the per piece price decreases to where we can still have our, as I said before, our 20% NPAT margin.

Might have asked it the wrong way then. What would you kind of expect in terms of an earnings uplift as the transition is programmed in?

Yes. That, I guess, is built into, I suppose, our thinking as far as the progression of that part of our business as far as the -- as those programs expand year-on-year, as they become more developed and into production. So we will see some of those programs go into production and other prototype programs coming behind as that pipeline matures.

Okay. Got it. Just one other one for me. Just, sorry, following up on cost, asking a bit more specific way. Your thoughts around head count growth into '24 and sort of the mix between the U.S. and Australia? And maybe a second part of that is what's the sort of differential in wage inflation and what you're seeing in the U.S. versus Australia at the moment?

It's pretty general. It is pretty in general. I know a lot of people say, you pay people $12 an hour here in America, well, that's not the case. You pay for it anywhere. And I guess you get that in Australia as well or the U.K. As far as head count goes, it will flatten out a little bit. And I think the good part is right now that the market -- the people market out there is softening and starting to ease and being able to get the right people for probably what we would call the right money without paying exorbitant prices and what have you. So we feel that will probably come back a little bit as in costs. But then as we increase our productivity across the globe, it will be program-specific. And as I've mentioned through the presentation, we are spending quite a bit of time and effort and money on automation and anywhere we can automate something with a reasonable amount of expense that we will certainly push towards that and the -- no different to it there. Machining centers and what have you that are unmanned and go 24/7. So it's -- yes, we'd rather pay a little bit more for the machines and what have you, but they are running 24/7. So yes, I think that side of the business is increasing, that automation side of the business is increasing as we need to and as our investors would think we'd be doing. That's certainly where we're putting a lot of emphasis on moving forward.

The other key aspect with the people and efficiency is, as Kees mentioned earlier, the focus on training and making sure that the we can upskill our teams ongoing. And so that will help, I suppose, the efficiency per person. And in addition to that, making -- providing them with the right tools to be efficient and reduce remakes and increase revenue per head count.

Understand. Got it. I'm just trying to think about FY '23 head count growth was a bit of a year of investing into the pipeline ahead. Do you see '24 as a year of capitalizing and generating the operating leverage of that head count investment? Or is '24 also sort of a year where you do need to continue to invest a little bit ahead of the curve?

We certainly -- we'll be certainly investing ahead of the curve, but not as much as what we have been. I think the big expenditure won't be in '25, what have you. So we're -- yes, obviously, we don't want to put on more people right now and paying ridiculous prices. So we've got to manage that and manage it well because I feel that the prices all that extended is coming off a little bit and people are being more realistic for the -- what the remuneration requirement is and expectations are.

Got it. Sorry, just squeezing in one more. What I guess I'm trying to get to is '24, your confidence around bringing the NPAT margin up to the sort of 20% mark?

We never -- we'd like to. But I think as we increase our revenue number and what have you, we are going to have cost involved in some of that. And I think we'd be very happy to have it back around at 20%, and that's certainly what our push is, for sure. But I'm not going to say -- put my head on the Bible and say it's definitely going to be 20%, but we're certainly pushing for that.

Your next question comes from Chris Savage with Bell Potter Securities.

CapEx, so we had $15 million in '23. What's the outlook for '24 and '25, if I can push it?

Yes. No, good question. I think it's more of a timing thing in '23 that I think we've done $5 million the year before and $15 million, so still averages out about that $10 million. I think in '24, I would think we'll be around about that $7-ish million thereabouts. And '25, we are looking at some automation. We are looking at some automation equipment that we will be putting in the new building and in '25. So that could be -- so I think '25 could be around about that $14 million to $15 million.

And your favorite topic, D&A, continues to increase at a rate. Have you got to guide on that for '24? I'm guessing roughly $10 million?

That's a very good question.

Maybe one for Martin.

Yes. Can I slip that across the board, mate?

Yes. It would be in that order given that the furnaces that we're currently commissioning, we won't have a full 12 months' worth of depreciation on, but they will start to depreciate particularly in the second half. And we have seen an uptick in the amortization for the property leases for the right of use, which we had a half year for Rugby. Now we'll have a full 12 months of Rugby, which will flow through to that line, so it will be up around that $10 million.

Kees, I remember 12 months ago, you said '23 would be a year of consolidation, which in your language still meant 15% top line growth, which you more or less did. But then it would be a return to strong growth in '24 and '25, like above the 20% you did in '21 and '22. So do you think we can get back to a 20%-plus top line growth this year? Or are we still going to be sort of that mid- to high teens?

I would -- do I think we can get there? Yes. We have to have a few things go in our way, which I think we can. And I guess it's a bit like the stock market, we don't know what's going to happen tomorrow. But I think all the key drivers that we've got in place and continue to put in place are certainly heading that way to a better bottom line result. But yes, we -- as I said to the call earlier, are we confident? Of course, we're confident. We have a crack every day. But some of the things that are outside our control are probably the ones that are going to trip us up. So yes, I -- look, I think as we get some more automation in, particularly in '24 and '25, it will certainly give us a very good push to try to get that -- the NPAT around about that 20% to 21%.

I was more talking top line growth, Kees?

I beg your pardon. I'm sorry.

Will it get back up to that 20% plus?

We're very confident of that.

In '24?

Yes.

Great. And last question. I know Land 400 announced Land 129 late last month. There was some -- you weren't sure at the time what sort of revenue contribution or when it would start to you. Have you got any more clarity on that now?

No. Obviously, it hasn't been down selected for Hanwha. The government have spoken to Hanwha about, but as I believe, Hanwha now are negotiating with the government of what pricing and what's this and what's that. So it's very early stages. I think it's a typical government defense deal that will drag out. That took 2 years to announce anybody. Hanwha haven't got a factory yet. So I think that, yes, it will be a little while for that to play out, Chris.

First revenue is probably not until '26?

Correct, yes.

Your next question comes from Sarah Mann with MA Moelis Australia.

First question from me was just another one on motorsports. So obviously, really strong growth given that it's a pretty established business. But just compositionally interested in, I guess, the strength in the advanced cooling part rather than the emerging tech part. And then just in general, what your, I guess, outlook is around emerging tech for motorsports going forward as well, please?

Yes. I think that certainly, the emerging tech part of the business for motorsport is increasing. The advanced cooling part is as well, as we see it. I think the bigger ticket items, which I think we'll be able to call out after the end of this year, I think when we -- I think it'd be very evident of the increase, particularly in micro matrix in motorsport and all different categories of motorsport now. As you know, we have got a substantial amount starting to develop into F1, but now it's also going into some other motorsport categories below that, which is surprising, but very pleasing. So we feel that, that part of the business is -- has still got quite a bit of growth to come, particularly with the micro matrix area.

So it's just a timing issue then in terms of it looking at like a little bit weak this year. There's still plenty of growth opportunity and it should grow...

Absolutely, yes.

And then, I guess, just a follow-up question that's on, I guess, productivity on a per head basis kind of going forward. You mentioned you're kind of investing in automation. So just to clarify, it feels like we should be able to see, I guess, some of the higher revenue per head going into next year?

Yes.

Good. Okay, cool. And then just on the inventory as well. So you kind of mentioned there was a bit of extra stock in the period, partly because of the U.K. factory setup, but just general supply chain disruptions from before. Just interested in what you're seeing now in terms of the disruptions kind of normalizing and how this is going to kind of change your approach to managing inventory from here?

Yes. I think we've always had the -- a lot of inventory across the globe, certainly being a little bit closer to where the majority of it comes from, particularly Germany and some of the European countries for our Rugby facility, which is good. So we have a lesser lead time for that. So we think that will come down on lead times. Some of the lead times with freight and what have you are starting to normalize now. And so we feel that will be off to claw back with that. But some of the raw material that we had in stock here, which was probably a little bit over where we'd like, but we had to protect ourselves going through this last 2 years. So now we've reduced our ordering and -- from overseas and using up our -- starting to use into those product lines that we have a plentiful of here in Australia. So it's -- it will certainly level out and come down a bit over the next 12 to 18 months.

We made the decision in November last year to start to pull back the forward ordering. It does, given that the orders are already in place at that stage were then delivered over subsequent months. So we've started to see -- as Kees mentioned, the stock level started to come back, but we won't see the full effect of that. We'll continue to see that effect throughout this year.

So it's going to be a net benefit for you guys towards the end of this year?

Absolutely, yes.

Your next question comes from Cameron McDonald with E&P.

Two questions from me. Just one on emerging tech. In the second half, it was up 6% versus 31% in the first half. Is that just a timing issue? Or what sort of -- was there anything delayed? Like what was the sort of step-down in that growth rate?

Yes, it's more of a timing issue there, Cameron, really. There is just orders that come in and different -- for different customers we had.

Okay. And just coming back to the earlier question around this year being a year of consolidation before going back into sort of growth. And you spoke about the sort of revenue growth, being confident of sort of 20% plus. I mean I always thought you were always talking in the past about impact growth or -- as well as sort of that 20% growth. Am I mistaken in that? And then secondly, you look at EBITDA 9% growth this year. In the last 2 years, you've done in excess of 23%. Is that what you're thinking about when you say back to normal growth rate? Are you sort of looking at that 20% not only say the top line but also flowing through the P&L and creating that leverage? So EBITDA should sort of be back to that -- to that sort of historic growth rate level? I mean you've highlighted CAGR is 19% over the last 6 years. Is that the sort of benchmark we should be thinking about?

We're continuing to focus on being efficient and managing our costs while we're delivering growth. So that -- there have been some pressures in the last 12 months and some decisions to invest earlier to expand the capability of our ERP and so forth. So that's put some pressure on the growth rate of our EBITDA and down to our NPAT. We'll continue to focus on being as efficient as we can to bring that NPAT growth up more in line with revenue.

Your next question comes from Elijah Mayr with CLSA.

Congrats on another solid result. Just a couple of quick ones from me. Maybe just in terms of the contracts going forward. I mean you're obviously transitioning a lot of contracts into discussion and then from discussion to being a nominated supplier. Can you give us a sense of materiality a contract would need to be for you to make an announcement to the market when you have been awarded with such contract?

I think probably material will be probably around about that $5 million mark.

$5 million revenue per year, I would assume?

Yes, correct. Yes.

Excellent. And then just secondly, just in terms of the one-offs, I mean you had about $700,000 in FY '23, which was sort of taken above the line. Is there any expectation for further one-offs in FY '24 or similar sort of expansionary sort of cost in FY '24?

We're expecting the big investment, which is sort of an out-of-cycle investment in the ERP occurred in '23. We will see a little bit more of that cost in '24, but we've made some really good advances in the programs there. So we should -- we're expecting to see that to come back down and just become a part of ongoing development would expect to be part of business as usual. And the other, the cost, obviously, Silverstone leases, the exit costs are a one-off. And then as we more fully utilize Rugby, that will be just part of the business as usual cost as well. So at this stage, not expecting or don't have visibility on anything that we would call out as an abnormal at this stage.

No problem. And then just one last quick one. I know there's been a lot of questions on defense, but maybe just one more on the -- so the A&D side of things. Is there any impact, I guess, directly for contracts that you have bid in place or contracts may be coming up in the A&D space for sort of the United States Congress to add Australia as a domestic source for defense production? Or does that not really matter as much given the production facility already in the U.S.?

Doesn't -- yes. Well, that's mainly why we've spent that money in the U.S. for that production facility over there to be ITA accredited. And that allows us to do a lot more of that work over there, which we're expecting to come through. So yes, that's the whole reason why we're spending that money on that new facility over there.

Your next question comes from Jack Dunn with Citi.

Just one quick follow-up from me. You talked about the number of A&D programs going into production in FY '24, '25 of 4 to 5. How many were in production in FY '23?

Two.

All right. Perfect. And then just quickly on the 20% plus top line growth. Would it be skewed more to auto OEM or A&D that would drive that revenue growth profile?

It would be more between aerospace and defense, rather than OE. OE has certainly increased but aerospace and defense increased a lot more than OE, we have on our books for sure.

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

Okay. Probably not a lot more to say, but thank you very much for your interest. And yes, we'll be certainly looking forward to catching up with everybody in the half year and see what we can turn out -- make it turn out to be. So it's very exciting, and thanks very much for your interest.

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