PWR HOLDINGS LIMITED — Call Transcript 2025

Aug 24, 2025

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PWR Holdings Limited (ASX: PWH)

25 August 2025

FY2025 Results Call | Transcript

A;ached is the transcript of the FY2025 results call held on Friday, 22 August 2025. This announcement has been authorised by the Company Secretary.

For further informaJon please contact:

Kees Weel Managing Director +61 7 554 7 1600

Matthew Bryson Sharyn Williams Acting Chief Executive Officer Chief Financial Officer +61 7 5547 1600 +61 7 5547 1600

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TRANSCRIPTION Company: PWR Holdings Limited (ASX: PWH) Date: 22 August 2025 Duration: 64:27 Reservation Number: 10047801

[START OF TRANSCRIPT]

Operator: Thank you for standing by, and welcome to the PWR Holdings Limited FY25 Results Call. All participants are in a listen-only mode. There will be a presentation, followed by a question-and-answer session.

If you would like to ask a question, you will need to press the star key followed by the number one on your telephone keypad. If you would like to ask a question via the webcast, please enter it into the Ask a Question box and click Submit.

I would now like to hand the conference over to Mr. Kees Weel, Managing Director. Please go ahead. Kees Weel: Good morning, everyone. Before I hand over to Matthew and Sharyn, I just wanted to update you on a number of items, including my health and recovery. Presently, I'm back at work on a part-time basis right now. As I continue to improve, I will increase that time that I spend in the office.

I'm still actively doing physio and rehab. Most of you will see me during the presentations during this next week. You will certainly see me at our AGM at our new premises at 28 Quarry Road Stapylton here on the 17th of October.

I will now hand over to Matt and Sharyn, who have done an exceptional job in my absence. So thank you. Matthew Bryson: Thank you, Kees. I am Matthew Bryson, Acting CEO; and I'm joined by Kees Weel, Managing Director; and Sharyn Williams, Chief Financial Officer of PWR Holdings Limited. I joined PWR in January 2000, working alongside of Kees and his son, Paul, from the very early days and helping to grow the business

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from its foundation. Initially, joining in the capacity of design and mechanical engineering, this quickly grew to include key customer contact responsibilities as it was evident that PWR's real competitive advantage was through customer engagement to partner with them to engineer a solution that they wanted rather than selling a developed part number.

During my years at PWR, I've held responsibilities through engineering, operations and commercial functions, and I now lead an excellent team who share the same passion and sense of achievement to deliver world-class solutions to our diverse global customer base.

Since stepping into the Acting CEO role, I've been drawing on that background and working with Sharyn and the rest of the team to keep the momentum going as we position PWR for the growth and opportunity we see ahead, whilst Kees remains supportive of our team and our objectives. Today, I'm pleased to present our full year results for financial year '25. This presentation will provide an overview of our financial performance, strategic priorities and future plans.

Turning to Slide 4. FY25 has been a transitional year, one where we delivered on guidance while investing in the foundation of our next phase of growth. I'll touch on key achievements and challenges over the past year, including the transition to our new Stapylton headquarters while continuing to drive growth in our core markets.

For the financial year '25, revenue was down 6.7% to 130.1 million, in line with the guidance set at the first half result. This was a solid performance delivered during the relocation of our Australian facility and the impact of Cyclone Alfred, which cost us four days of production.

The declines in EBITDA and NPAT reflected OEM contract completions, relocation costs and investment in our next phase of growth. Importantly, cash conversion was robust, giving us the flexibility to invest and the balance sheet remains strong with modest leverage.

The factory transition gained momentum in May and June with our foundation production areas operational at Stapylton. This was a proud milestone for the team delivered in the face of continued delays to our permanent electrical

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connection. But in true PWR style, we mobilised three generators and managed the move effectively to ensure continuity of our production.

Looking forward, we enter FY26 with a strong order book position across Motorsports and A&D. Our ongoing shift towards emerging tech solutions continues to strengthen our competitive positioning, broadening our customer base and improve our visibility as the pipeline matures.

At the same time, we've scaled our operational capability to support this global growth. So while FY25 was a transitional year, it has strengthened our platform, not only in Australia, but in our US and UK operations as well. We, therefore, start FY26 with increased capacity, expanded capability and a resilient order book, positioning us well for profitable growth this year and in the future.

Turning to Slide 5, strategic priorities. Despite being a transitional year, we delivered on the 4 key strategic priorities in FY25, the new Australian factory, our A&D platform, profitable growth and our global operating model. The new Australian factory is now operational at Stapylton.

Phase 2, the final stage of the relocation is expected to be completed by the end of this calendar year '25. This phase will see a steep change in our controlled atmosphere production areas to improve capability, business continuity, product quality and compliance.

Our A&D platform continues to mature with further NADCAP accreditations in the US facility, installation of new furnace and anodising capabilities in Australia and strong growth in the number of relationships PWR has where we are an approved supplier.

We saw continued growth in our key market segments of Motorsport and Aerospace and Defence. Our R&D investments continue to bear fruit, reflected in the 21% growth in emerging technology revenue.

Our progression towards a global operating model continued with both our US and UK sites increasing manufacturing volumes on the back of enhanced capabilities and targeted capacity investments.

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Our key driver of this success is our team. Pleasingly, team turnover has improved by 9 percentage points. This is a critical success factor in our skilled workforce to bring knowledge and experience required to deliver high-quality outcomes for our customers.

Turning to Slide 6, revenue and market sector. This slide breaks down revenue by market sector. This FY25 mix highlights significant growth in Aerospace and Defence, steady growth in Motorsports and declines in OEM and aftermarket revenues.

Aerospace and Defence delivered a 28% year-on-year growth with H2 flat on H1. Importantly, no revenue from the US government project was recognised in FY25.

So this represents a solid result. Initial orders were fulfilled for MRO, maintenance, repair and overhaul customers, creating a revenue stream for PWR -- a new revenue stream for PWR.

Motorsports delivered growth in both halves, reflecting the consistency of this revenue stream across a broadening customer base. We generated growth in Formula 1 and World Endurance Championship programs and saw increased adoption of new technology solutions in likes of MotoGP, driven by packaging and aerodynamic performance gains.

Our Formula 1 powertrain programs are maturing, specifically in our micro matrix and battery cell cooler projects for an increasing number of car manufacturers and teams participating in the LMH and LMDh, hypercar classes where we are supporting steady growth.

OEM revenue declined following the completion of two concurrent high-volume, high-complexity OEM programs and cancellations and delays in niche EV programs. However, H2 performance improved, supported by incremental spares orders from high-end platforms.

Automotive aftermarket revenue declined due to two factors: a deliberate revision of discount structures to improve our margins and softer domestic sales as the Ranger program matured following strong launch phase revenues.

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To Strategy and turning to Slide 8, our company journey and future plans. We're very proud of our journey over the past 10 years since listing. Over that time, we've achieved milestones, including becoming a leader in Motorsports, diversifying into Aerospace and Defence and achieving vertical integration.

Looking ahead, our focus is on further building the Aerospace and Defence platform, capturing share in adjacent markets and leveraging the platform to drive the next phase of growth.

Turning to Slide 9, the global leader in thermal management. To recap on PWR, we are a global leader in thermal management with a flexible, vertically integrated manufacturing capability. Our advanced manufacturing capabilities and global footprint support our growth in emerging technologies and new markets.

We have a strong presence in Motorsports, Aerospace and Defence and other high performance cooling applications. This sets us up well to capture the Aerospace and Defence opportunity as outlined on Slide 10 to follow.

Slide 10, positioned to capture Aerospace and Defence growth. The global Aerospace and Defence thermal management system market is forecast to grow at 6.6% CAGR, reaching over USD$24 billion by 2034. This represents a significant opportunity for PWR, and we are investing in and leveraging our technical expertise and innovative solutions to capture that growth.

PWR has made great progress delivering revenue of $26.9 million in FY25, a 56% CAGR since FY21. Our competitive advantages are driving this growth. Our vertically integrated global footprint, specialised equipment and capabilities and strong R&D leverages Motorsports technology transfer.

We will continue to invest in our compliance readiness to further strengthen our position as evidenced by NADCAP accreditations, our CMMC 2.0, which are critical to us to achieving approved supplier status.

The number of approved suppliers has increased from 11 in FY21 to 46 in FY25 to now include the key Defence players. This is a testament to our commitment to excellence and our ability to meet the stringent requirements of

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our partners and positions us well to capitalise on the long-term growth of the A&D market.

Turning to Slide 11; capabilities and capacity for future growth, we continue to build our Aerospace and Defence platform, investing in specialised equipment and maintaining robust quality system accreditations, including NADCAP for heat treatment and chemical processing.

Our CMMC 2.0 cybersecurity program aligns us with the US Department of Defence standards, which have evolved from a self-assessed approach to an externally audited standard, which has resulted in higher costs than initially planned.

We've strengthened simulation and testing capabilities, production planning, procurement controls and our manufacturing capability and warehousing now spans three locations to support growing demand.

A key enabler is our expanded Australian factory, where we have doubled our capacity to support revenue growth for the next 25-plus years. The new space enhances production flow efficiency and allows for increased automation. This investment is expected overtime to reduce unit costs through productivity gains and improve the working environment for our team, including development opportunities via the new PWR Academy.

During FY25, we rigorously planned to minimise disruption during the transition, and we will continue to do so as we progress Phase 2. We anticipate further modest financial impacts in FY26 H1 through Phase 2.

The electrical connection is now expected to be completed in October, and we will experience some production interruption of up to a week as the substation is connected to the grid. We're looking to obviously minimise that where we can.

We will continue to power operations with four generators until this time. Phase 2 in its entirety is expected to be finished by December '25. Once completed, this will deliver a new -- will deliver a steep change in our environmentally controlled production areas to meet customers' demand for these high-end products.

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Turning to Slide 12, strategic plan. PWR's strategic plan focuses on four key areas: innovation, profitable growth, sustainability and investing in our people. In the area of innovation, we are committed to continued R&D investment, which is generating increasing revenue from new technologies and an expanded product range.

We're investing in new automated and higher capacity equipment and exploring enabling technology to design applications and solutions using alternative materials. From a profitable growth perspective, we have confidence in our forward pipeline and are disciplined in our production and capability expansion. Our capital is allocated towards growth segments of Aerospace and Defence, motorsports and emerging technology.

We are focused on achieving efficiency gains through automation and process optimisation over the medium term. And we are optimising manufacturing costs by leveraging our global operating model and production flexibility.

Moving on to sustainability. We are committed to sustainable practices, including the installation of solar and water treatment plant at our new Stapylton headquarters. We are members of the Defence Industry Security program in Australia and are upgrading our cybersecurity with our US CMMC accreditation underway. We're also measuring Scope 1 and Scope 2 emissions across our global operations.

Finally, investing in our people. We have a global team of 590 skilled dedicated and passionate people. Our team retention is focused on workplace benefits and flexibility. The PWR Academy facilitates a current pipeline and a multiskilled workforce to support growth areas. We are expanding talent pathways to broaden our reach and support innovation and growth. Our team are key to our success.

Sharyn Williams:

I'll now hand to Sharyn to walk through our financial performance in more detail. Thanks, Matt. I'll walk through the key parts of our financial performance outlined on Slide 14. The transition from our Ormeau location to Stapylton sets us up well for future growth.

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As flagged earlier this year, a relocation of that magnitude created some disruption and inefficiency as we operate across both sites as we decommissioned and recommission machines. Despite this, in almost a week of lost production from Cyclone Alfred, we delivered $130 million of revenue at the upper end of the guidance range.

As Matt mentioned earlier, FY25 revenue was driven by Aerospace and Defence and Motorsports. Motorsports delivered 4% growth and delivered growth across both halves compared to the prior year. Aerospace and Defence recorded a strong 28% annual growth but was flat half-on-half.

The absence of any of the $9 million US government project revenue was the main factor we saw the second half flat on the first half. Importantly, the production on these parts have commenced in H2, providing momentum moving into financial year '26.

As flagged at the half year, OEM and aftermarket revenue came in lower than the prior year, but with different dynamics at play. OEM declined year-on-year due to the completion of two major OEM programs. However, the positive was OEM delivered a stronger second half with the US division growing year-onyear.

We evolved the aftermarket strategy at the start of FY25, focused on ensuring our asset is matched by appropriate returns. This transition is twofold. Firstly, prioritising repeatable products. This can be done via high-performance workshops and distributors or high-volume platforms like the Ford Ranger compared to one-off or low-volume custom designs.

Secondly, standardising our discount structures to protect margins in a way that balances volume impacts. These changes were made against a challenging backdrop with consumer spending constrained, which didn't weigh on volumes However, they position aftermarket for more sustainable profitability.

At the group level, while revenue was down 7%, the larger impact was on NPAT. I'll unpack the drivers of this by focusing on margins and overheads. Firstly, our individual product margins are very robust. They reflect our premium

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products, and we're seeing this through our quoting tools and the way that we're pricing our products.

Manufacturing margins, however, reduced slightly due to lower revenues in terms of quantity. There was also some increase in production head count in UK and US as the volumes ramped up in these locations.

Late in the first half, you saw our discipline around headcount, where we right sized head count in line with our expected revenue decrease in the second half before reinvesting in production head count in May and June to support our anticipated FY26 growth.

We saw a 1 percentage point increase in raw materials as a percentage of revenue with some inflation in repairs and maintenance and consumables coming through as well as our increased machinery footprint increasing these cost lines.

Matt touched on the opportunity we have in the Aerospace and Defence market, transforming the business to have the capability and capacity to capture this opportunity is a central part of our strategy. To execute on this, we are investing ahead of this revenue curve, which does mean higher overhead in the short to medium-term, before revenues fully materialises.

These costs are deliberate and targeted supporting the criteria and compliance levels required to be an approved supplier. Examples of this include the NADCAP accreditation to the US, the implementation of our new quality assurance system and additional resourcing in A&D engineering and sales teams to facilitate a growing pipeline of supplier relationships.

These investments are largely fixed costs which we will be able to leverage as the pipeline matures from the approved supply status growth that we've seen to moving into production and delivery for these customers.

In the P&L, the cost increases I just referred to, can largely be seen in the 13% increase in employment costs year-on-year. Approximately 4% to 5% of this was increase in average headcount year-on-year, which we've outlined on the performance overview slide.

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This also reflects some change in composition and location of the headcount, where we see annual wage rate increasing as we transform our headcount across locations and also into professional roles such as the A&D roles. We did see wage rate growth above inflation. Our R&D investment increased to 12.7 million, up from 11 million in FY24, demonstrating our commitment to innovation and long-term growth.

We saw a 21% increase in emerging technology revenues, which is a testament to this R&D investment over time. Our NPAT before the relocation cost was 12.4 million delivering a 9.5% margin. After relocation costs, NPAT was 9.8%.

Turning now to tariffs. As announced in April 2025, the impact of US tariffs in our FY25 year was not material. It ended up being around $300,000. We have included the latest available information in an appendix on Slide 26. An important aspect of tariffs is the impact will be both direct and indirect.

Direct tariffs are imposed as product is imported into the US business, and the indirect impact is the inflation that flows through US suppliers' cost bases. We have taken steps to address this tariff impact, including customer discussions on tariff funding, incorporating land and costs, including tariffs into our quoting tools, exploring manufacturing locations and also local supply chain opportunities. We've also sought to understand how tariffs interact in the Defence space and also prototype and sample spaces.

Lastly, we're also undertaking reviews of tariff valuation methodologies to ensure that we are commercially minimising our tariff impact where possible. It has certainly been a complex area to navigate, and we have seen some variations in interpretation since implementation, although we are starting to see this stabilise now.

The most material tariff for PWR is the 10% country tariff on goods partly manufacturing in Australia and finished off in the US and less material, but still applicable tariff in some cases, is the motor vehicle tariffs. Fortunately, our motorsport products for non-passenger vehicles remain under the 10% country tariff.

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However, differing motor vehicle parts fall within the definition of motor vehicles and others do not. So there is a subset of PWR's motor vehicle products that are captured under the 25% passenger vehicle tariff. In addition, a small volume of aluminum derivatives imported into the US face higher tariffs, although this impact is expected to be minor.

One area of complexity to understand has been tariff stacking. For example, the motorsports tariffs do step with the country tariff to a total of 35% where the aluminum tariffs do not start.

Again, this applies to a less material portion of our US imports than products that have the 10% country tariff. Overall, we expect a direct tariff impact in FY26 to be about 1.5 million, with the indirect inflationary effects likely to flow through into our US site cost base over time. We continue to monitor the interpretations of the tariff announcements on our business.

Finally, a fully franked final dividend of $0.02 per share was announced, bringing the total FY25 dividend to $0.04 per share, in line with our proportional payout policy of 40% to 60% of NPAT. We remain disciplined in our capital allocation decisions, balancing shareholder returns with investment in growth.

Moving on to Slide 15. Our capex and Australian factory update. Capex to FY25 was $40.6 million, about $1 million loan anticipated due to timing. The focus of this investment was predominantly the expansion of our Australian sites and the addition of new equipment, which expands our production capabilities, capacity, automation opportunities compliance and business continuity.

For FY26, we estimate capex of $21 million, which includes $1 million carried over from FY25. This investment will see us complete the Stapylton factory upgrade, extend our US A&D capabilities and also our emerging technology capabilities.

To call out some specific investments. It does include the Stapylton electrical connection upgrade in substation, which has proven to be more complex than initially discussed with Energex, adding an incremental $2 million.

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Once this is connected in October, our investment in solar power will reduce our reliance on grid electricity, which ideally offsets the costs due to having a larger factory footprint.

Further investments include a step change in our controlled atmosphere environments, new materials capabilities and new software for our scheduling and planning system to enable realisation of efficiency gains.

The Australian factory FY25 operating expenses came in below estimates for the relocation and transition to the new site. Moving into financial year '26, we do expect some modest one-off costs of around $0.5 million as we relocate our controlled atmosphere production to Stapylton.

This new site will lift our cost base in 3 areas: firstly, increased right-of-use asset depreciation and interest due to our new 15-year lease. It is structured with attractive incentives, reducing our total lease cash outflows in year one.

However, as you'll be aware, AASB16 front loads lease expenses meaning we will see an increase, as outlined on the slide, in lease expenses per year from FY26.

Secondly, leasehold improvements and equipment depreciation will increase year-on-year. The current estimate of 2.3% per year reflects the new fit-out, our equipment and this unwinds in our depreciation expenses.

The final area to call out is the incremental debt expense given we are drawing down debt. We expect this will increase our debt cost in FY26 to about $700,000.

Our strategic investments in capex and particularly the Australian factory, are essential for supporting our growth and enhancing our production capabilities. These investments will enable us to meet the increasing demand for our products and ensure our long-term success.

Moving now to working capital on Slide 16. Our working capital decreased by $7 million since June '24. This is driven by strong revenue collections and higher payables.

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Cash conversion remains strong at over 100%, with favourable cash collection timings which mitigated the EBITDA reduction, resulting in operating cash flow down by $4 million.

Free cash flow was negative as expected this year, reflecting the ongoing investment cycle. Importantly, we purposefully built cash reserves of around $21 million ahead of these commitments, demonstrating the disciplined approach to self-funding growth where possible.

FX remains an important factor for the business. As a net exporter, a weaker Aussie dollar benefits us, especially against the USD and Great British pounds. A key advantage of our global manufacturing strategy is the natural hedge that it provides with our cost base increasingly denominated in USD and GBP. We actively manage FX risk, maintaining hedges to provide some budget certainty and to act as shock absorbers when FX rates fluctuate.

Turning to Slide 17, our balance sheet. Our balance sheet does remain strong with cash of $4.5 million and undrawn facilities of $25 million. We have made investments in factory footprint, equipment and technology while maintaining a conservative leverage position.

Since listing, the group has pursued growth with a disciplined approach. Strong cash generation has funded reinvestment, leaving minimal leverage on the balance sheet.

We remain committed to maintaining financial discipline while chasing the opportunities in front of us, alongside a strong commercial focus on generating returns from our investments. As the group expands its capabilities, we are already seeing the early signs of the targeted growth opportunities being realised.

Matt will now talk through the pipelines, current trading and outlook.

Matthew Bryson:

Thank you very much, Sharyn. Turning to Slide 19, our A&D pipeline. Our Aerospace and Defence pipeline continues to strengthen with a broadening customer base contributing to order book resilience.

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Currently, 80% of the top 40 programs scheduled for FY26 are secured programs, while EVTOL contributes less than 20% of the FY26 to '28 pipeline, it represents global upside given uncertain timing and scale.

The strong pipeline momentum is underpinned by the strong uplift in approved supplier status, up 119% on pcp to 46 relationships. This now covers all key defence players, including Tier 1 primes. On the right-hand side of the slide, we have provided the key segments for A&D.

The initial circa USD$9 million government order is now expected in FY26. Production is underway despite external delays. We are optimistic about potential follow-up orders in future years upon successful delivery of this order.

As discussed earlier in the past, a pleasing aspect of the A&D result was the fulfilment of initial MRO orders. MRO or maintenance, repair and overhaul focuses on existing platforms such as commercial aircraft.

MRO typically represents 60% to 70% of total project lifecycle costs, offers longer lead times and provides greater visibility. PWR is continuing to grow its presence here, helping to balance the business by further diversifying the customer base into more predictable revenue streams.

Turning to Slide 20, OEM, Motorsports pipeline. Our Motorsports product development in emerging technologies is strong, and we're excited by all that 2026 and beyond has to offer for PWR.

As mentioned in prior slides, our program growth in micro matrix and battery cooling cell carriers are primary drivers underpinning this growth and new technical regulations in Formula 1 drives innovation within the teams and their critical supply chain partners such as PWR.

New regulations of the scale being implemented we'll see a rapid development of solutions to continue to optimise performance throughout the early seasons. So we see this as being a dynamic and changing environment for sometime to come.

Adding to our list of supporting Motorsports emerging technology opportunities is a strong presence and growth in LMH and LMDh classes, now the premier

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sports car endurance racing classes with increased manufacturer participation. We're building on the number of programs we supply to OEM.

And whilst our revenue in this sector has recently declined on prior year due to high-end program completions, our presence in niche OEM opportunities continues to expand with new program engagements offering volume such as the 800-vehicle hypercar referenced on this slide and with the support and commencement of the Ford Mustang S650 program late in FY26.

Our future focus in OEM is not exclusive to automotive with industrial and marine sector leads giving confidence in the opportunities for PWR event cooling and emerging technology adoption. Our work also in MRO and exploring different materials also provides opportunity in these new spaces as well.

Turning to Slide 21, our business update and outlook. So with a disciplined strategy and strong platform, we remain confident in our ability to achieve our strategic objectives while creating long-term shareholder value. Our strategic priorities are the new Australian factory Phase 2, the electrical connection currently scheduled for October '25.

At the completion of our Micro Matrix wind tunnel and additive manufacturing facilities by the end of calendar year '25 and to leverage investment to deliver productivity gains. We will build our R&D platform through US accreditations cyber and footprint expansion, expanding our customer base and product range, balancing higher value longer term with higher volume, repeatable business such as MRO. Adding UK accreditations and capability staged to match opportunity, our global operating model will optimise cost and manufacture through global footprint and production flexibility.

Our medium-term pathway to margin recovery through strategic investment in capacity, capability and accreditations underpinning growth. Execution focus on maturing pipeline and capitalising on opportunities. Our final summary and business outlook is across Motorsports and Formula 1 regulations and pipeline building momentum expected to grow support growth in FY26 and beyond. Aerospace and Defence, with delivery of our order of the US government project expected in FY26 with a focus on capitalising on accelerating global

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defence spend. Our OEM medium- to long-term pipeline is rebuilding momentum and expect stable revenue in FY26.

The Performance aftermarket showing muted growth due to continued reshaping of the sales mix towards higher value, higher volume projects. We expect modest margin improvement in FY26, influenced by higher volumes with improved operating leverage and early productivity gains, partly offset by investment in US tariffs with current estimate being $1.5 million through -- though final impact may vary.

We have US cyber accreditation, CMMC 2.0, approximately $800,000 ongoing. We have our CEO transition as a one-off, approximately $500,000 and our Australian factory, referring again back to Slide 15.

This concludes our results presentation, and we thank you all for joining the call today and for your continued support of PWR. On behalf of Kees, Sharyn and myself, thank you.

Operator:

Thank you. If you would like to ask a question, please press star one on your telephone and wait for your name to be announced. If you would like to cancel your request, please press star two.

If you are on a speakerphone, please pick up the handset to ask your question. If you would like to ask a question via the webcast today, please enter into the Ask a Question box and click Submit.

Your first question comes from Alex Lu from Morgans Financial. Please go ahead.

Alex Lu:

Sharyn Williams:

Morning, guys. Morning, Kees, Matthew and Sharyn. Kees, great to have you back on board and wish you a swift recovery. Can I just start with margins, please? And just that modest margin outlook that you're expecting in FY26. Just wondering, does that take into consideration all the one-off costs or do we need to kind of back them back out?

No, in terms of the modest margin increase, you'll see that where we've called out some margin improvement, that's only partially offset by the cost below. So on a net basis, we're still expecting some margin improvement at the bottom

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line. Just to expand on margin, Alex, we look at margin in two buckets. One is product margin on each individual product.

We're still seeing very robust, very strong margins on individual products that represents the premium products that we sell. So a really strong product margin still. The second bucket of margin is where we've increased capacity. And it's in that area, Alex, where we're really looking at, we've now increased capacity, so not fully utilising that capacity or overheads, etcetera, and that's where we're seeing some margin compression, not at the individual product level.

Alex Lu:

Okay. Great. That's good. And then just to clarify, Sharyn, on those one-off costs. So you've got the $0.7 million relocation generated costs and then you've got the CEO search costs of $0.5 million. Do you -- and I guess the tariff cost of $1.5 million, do you think that could be mitigated in FY27? And just wondering anything else that's one-off, please?

Sharyn Williams: Sure. Certainly, that tariff impact, we are looking to mitigate. And as we outlined at the half, we've certainly got some opportunities there -- sorry, at our announcement in April. We've got some opportunities there in terms of already having a US location of manufacturing, which is a real positive. Certainly, commercial discussions with customers happen because we're not largely locked into long-term contracts for a lot of our Motorsports, for example.

We're also making sure that we're really interpreting the tariffs correctly and making sure that when those products are imported, that they are reflected correctly. We did see a bit of noise in that space, and I'm sure the customs people have been very busy with people querying and having to correct tariffs, but we're certainly very active in this space. So ideally, we can mitigate that over time.

Alex Lu:

Okay. Thanks, Sharyn. And maybe just one last one for me, please, on Aerospace and Defence revenue. So that was up 28% in FY25. It doesn't sound like it was driven by EVTOL. So just wondering what types of projects or work drove that revenue increase? And I guess, what types of work are you seeing in the pipeline?

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Matthew Bryson:	Yes. Thanks, Alex. I'll take that one. Yes, obviously, there is some EVTOL in
	FY25 results. But we've got quite broad engagement across that industry.
	Certainly seeing some uptick with regards to MRO. That's a space that you
	hear us more recently talking a lot about, wasn't previously a focus for the
	business when we first went into that A&D market sector, but recognise that
	quite quickly now and then engaged with some key partners that are offering
	opportunity that is more scalable as we increase our production capability and
	capacity to grow into that more at our speed, less dependent on some of the
	programs that may be defence related.
	So we -- there's a good mix of that from, I'll say, cold plates. That's always been
	a strong area for product growth and revenue for Aerospace and Defence. And
	I'll say, other emerging tech areas with Micro Matrix, some interesting additive
	programs as well and some programs supporting, I'll say, alternate energy
	source propulsions. So yes, it really is quite broad and certainly some exciting
	foundations that sort of underpin our A&D space.
Alex Lu:	Great. Thanks a lot, Matthew. Thanks a lot, Sharyn
Operator:	Thank you. Your next question comes from Elijah Mayr from Goldman Sachs.
	Please go ahead.
Elijah Mayr:	Good morning, Matthew, Sharyn and Kees. And good to hear you back in
	action, Kees. Just a couple of questions. Maybe just firstly on -- following on, I
	guess, on A&D and more broadly emerging tech. Just noting that sort of down
	half-on-half and you sort of called out some delays there. How should we think
	about that in first half '26 and I guess, sort of wider FY26 in terms of when those
	delayed revenues will be coming through and just the overall growth in that
	emerging tech and A&D division in FY26 given the transition?
Matthew Bryson:	So yes, we still see very strong growth in A&D. As far as the delays that we've
	called out, that now is seemingly freed and we have expectation of that US
	government project to be delivered in full in FY26 with the information we have
	available to us now. And then from an overall revenue perspective, we still see
	A&D being our strongest growth long-term markets.

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Elijah Mayr: Is that expected to grow in FY26, just to understand there is a bit of transition still happening in first half? Matthew Bryson: No, it is definitely still expected to grow in FY26. Elijah Mayr: Excellent. And then maybe just on the transition, sort of expected to come in before the end of the year in December. Just noting December and January can be a tough time to get things done. What's the risk that this completed transition stretches into second half '26 or how confident are you to get in place and fully operational by the end of the calendar year? Matthew Bryson: At this point in time, we have no expectation for that to go beyond calendar year. I think it's fair to say that the experience of moving into this factory has taught us that you can't always rely on third parties, which is an unfamiliar space for PWR. Obviously, well publicised delays with regards to electrical connection to this factory is evidence to that. But with respect to the things that are inside of PWR's control and from what we see from externals, we see no reason why we won't be fully here and operational in all capacities by the end of calendar year. Elijah Mayr: Excellent. I might just sneak in one clarification question. Just with the mediumterm margin targets over three to five years, is that referring to net profit margins or just margins across the board? Sharyn Williams: Correct, net profit. Elijah Mayr: Got it. Thanks, guys. Matthew Bryson: Got it. Thank you. Operator: Thank you. Once again if you like to ask a question on the phone, please press star one on your telephone and wait for your phone to be announced. Your next question comes from Tom Tweedie from MA Moelis Australia. Please go ahead. Tom Tweedie: Good morning, team. Thanks for taking my questions. Just a bit of a follow-up question on A&D and this contract. Are you expecting the 8.9 million to be delivered across FY26 or is there any weighting to 1 half and then also any

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further orders that may potentially come through, would they be delivered in FY26 tail end or would that more be an FY27 story? Matthew Bryson: Yes. Look, at the moment, we expect the weighting of delivery of that project to be forward in H1. I don't think we'd make a statement saying that it will be assured of being fully delivered in H1. But at the moment, the program expectation is the majority of that will be delivered in H1. And probably too early to say with regards to next phase of that project, whether or not follow-up orders will be able to be included in FY26, but obviously, aim to just deliver on the orders that we have in place and obviously get that in, get that further qualified and that opens the opportunity for -- if the program allows for those orders to be placed perhaps early enough to see that. Tom Tweedie: Brilliant. Thanks. I was just going to also follow up on the margin questions we've had. Just in terms of these three to five year targets back to FY24 margins, should we expect them to be a little bit back-end weighted to that forecast, just given all the factors you've got coming through in FY26 or should it be fairly linear from now through to, say, three or four years' time? Sharyn Williams: It's a really good question, Tom, because growing into our footprint and our resource cost base is a large driver of that. So your comment around weighting more to the back end as we mature that revenue pipeline would be an accurate one rather than a linear approach to that. Tom Tweedie: Brilliant. And just one more question, if I may. Just with the new rules going into F1, can you just give us a sense of the step change if the number of coolers on the car and then the percentage mix going from traditional coolers to micro matrix, what that uplift is, obviously, mindful that may be driven by the engine OEMs rather than the teams themselves. But can you just give us a sense of what that step change is from the current regulations? Matthew Bryson: Yes. Look, the total number of coolers hasn't necessarily changed too much. It's really the mix of coolers that are required for this particular type of, I guess, power unit. The biggest single change to the regulations is from a power unit perspective, the introduction of a much more powerful electric contribution.

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And therefore, the cell carriers, the battery cooling cell carriers have I'll say, somewhat tripled in size and complexity to deal with the thermal challenge. To give that a little bit of scale, the cars next year will drive out the pits with enough fuel to do an entire race with enough electrical energy to do one lap.

So the rate of regeneration and deployment of that electrical energy is substantial and -- because they are literally recovering and spending that electrical energy around the duration of a single lap. The heat generated in that rate of regeneration and deployment is significant and it has driven a requirement for more advanced cooling solutions that's pushed us in areas of materials development, product innovation.

So that has been a very significant part. It has allowed engagement with more power unit manufacturers going into 2026, as did the opportunity to then engage with power unit manufacturers as well with regards to other supporting systems like water to air charge coolers, which now are micro matrix solutions.

The vast majority of the grid will be -- will have Micro Matrix on the car going into 2026. And that's driven by a larger number of, I'll say, water systems and they're solving many of those other fluid challenges like oil with Micro Matrix, water cooled Micro Matrix coolers.

So it's a complementary technology that allows some aggressive packaging, which obviously becomes to the vehicle's advantage from an aerodynamic perspective if they've got more freedom with regards to what they can do with the body work.

There is a regulation change as well that allows greater freedom of the geometries that are able to be produced with our heat exchange solutions, which is an enabler of greater core complexity and it gives the teams more freedom to design more aggressive aerodynamic strategies if we've got some more geometrical freedoms with our core shaping.

There is an expectation going into the New Year that with almost all teams, no one is delivering an optimised car at the start of the season. There will be launch cars. There will be initial, I'll say, race cars and there is an expectation that all teams will go through a, I'll call it mid-season.

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But it's probably earlier in the season upgrade when they start to run these cars on track and they learn the intricacies of both the deployment of the electrical energy, how that's going to be used across a lap.

And there's also fairly significant impact on the cooling of Formula 1 car with the new aerodynamic regulations that allows for movable front and rear wings, where the low pressure behind the car has a significant effect on the amount of air that's drawn through as well as, as you appreciate that the front wing influences how air flows over, under and through the car.

So that's a new development going into 2026 and it will have some influence over the cooling of the car. Obviously, a lot of this is simulated, but the reality is that a lot of the teams will not really know until they actually get cars on track, which happens at the end of January and we anticipate an aggressive period of optimisation.

That is likely to span not just the initial season, but with any new regulation change, there is a period of time where it takes for the, I guess, teams to start to diverge towards optimised solutions. So exciting times ahead in Formula 1.

Tom Tweedie:

Thanks. That’s really comprehensive. Thanks for taking my question.

Operator: Thank you. Your next question comes from Tim Piper from UBS. Please go ahead.

Tim Piper:

Good morning, team. Just one on the A&D sector. I mean, through the Preso, you've obviously talked a lot about investment for growth going forward, but also a lot of investment to meet sort of accreditation, compliance and regulatory requirements of servicing that industry. Maybe two parts of the question. You've seen sort of headcount start to increase again into the end of the year.

Sharyn, I think you said that was more production-related headcount. Is that correct? And then from here, any sort of sense you can kind of give us around sort of headcount and/or potential system type investment that's required simply from a compliance point of view, and that's sort of just a cost to play in the space?

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Sharyn Williams:

Sure. In terms of headcount, you're right, May and June was largely production related. We did have some roles going into the Motorsports design area, just leading into FY '26. I think there was around five roles going to that area as well.

So moving forward, when we look at the A&D compliance space, we have called out a number of those items such as CMMC in the outlook slide, that is one example of a compliance item, where that cost or that approach used to be self-assessed and the US government has now changed that to be a third-party audited process, which incurs incremental cost.

Where we have seen the approved suppliers go from 11 over time to 46, that's kind of the lead indicator for how these incremental costs start to pay back dividends. So getting from 11 to 46, some of the costs as examples that lead us to where we are now has been quality assurance, not only the system itself.

And I'm not talking an IT system, talking about the quality assurance system as a business, which does require headcount to maintain it. There's a lot of documentation controls required a lot of review and auditing to make sure those processes and approach are adhered to.

So that's quality is largely in that headcount space. From an IT system, that cyber that I called out, the CMMC is important, but also things like ITAR where, especially in the US, whose eyes can look at information, how we as a global business transfer information so that it's compliant, means there is some IT required to make sure that access to systems and documents can be controlled, when you have extra IT, you also have headcount that then needs to maintain that IT.

So it's largely in headcount to make sure our compliance system is operating effectively and IT to make sure that we've got systems taking some of that manual workload out. So over time, these things do stabilise and then the revenue can leverage through on them. But at the moment, we are still in that period of implementation across three sites.

NADCAP has been implemented for two of our processes in the US, which is great. But also that involves resources to do that, not only in preparing it, even

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having customers or third parties come and audit us as a supplier and does take time. So hopefully, that gives you a bit of a feel that it's not just IT systems, it's largely business system and process that people need to control.

Now this isn't a cost that keeps going into perpetuity. There is an element of it matures across three sites, and then we can leverage that. But we just do want to call out that there's still investments too.

Tim Piper: Very comprehensive. Thanks. Second one, the MRO opportunity, I understand it's obviously early days there at the moment. Any sense you can kind of give us on contribution so far? And maybe over the next couple of years, sort of what percentage of A&D revenue that opportunity could potentially represent?

Matthew Bryson: Yes. I'd say modest contribution at the moment, but we certainly see it as something that we can grow substantially into. It's a more accessible market than the program-specific opportunities that we have with, shall we say, with defence primes. But I guess, a bit like the, maybe the aftermarket of automotive, it's a little bit more in our control with regards to product development and engagement with market opportunities.

So we certainly see it growing to become a significant contributor. To date, it has been modest, but it's driving us in product design and new materials development that will not only provide opportunity in the MRO space of aerospace, but the product developments have similarities that were requirements for industrial applications, marine applications. So yes, it's providing a good foundation for future growth.

Tim Piper: Got it. And A&D did 28% growth or sort of incremental $6 million of revenue in FY25 with none of that $9 million contract order in there. Thinking about FY26, do we sort of think about the underlying A&D doing a similar kind of growth run rate again and then layer that $9 million over the top?

Sharyn Williams: Yes. A&D in terms of the composition of revenue, given where we're at in the maturity pipeline, it can't really be looked at as take the current year and then add on top because A&D is still in different periods within the customer life cycle.

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So for example, in 2024, where we had some really strong upfront EVTOL engineering revenues, etcetera, they then drop down as we move into potential production, the customer goes away and does what they need to do before we enter into production volumes and contracts.

So it's probably a case of factoring that $9 million contract within your growth rate that you're thinking of rather than banking the FY24 number and building on top on top. We just want to make sure we're quite tempered in our maturity on A&D and how those revenues flow out over time.

We're still very confident on the long-term opportunity and hope we spelled that out in the pack in terms of the size of the prize. We just want to make sure the maturity of those 46 customers were approved for, is factored in over the next few years appropriately.

Tim Piper: Got it. Sorry, just one quick one. You mentioned three to five-year margin recovery refers to NPAT margin. The comment around modest margin recovery or improvement in '26, is that also NPAT margin? Or is that EBITDA margin?

Sharyn Williams: Correct, NPAT. Tim Piper: Right, thanks.

Operator: Thank you. As there are no further questions from the phone, we will now pause briefly before addressing questions from the webcast. Your first question today from the webcast comes from Jeff and Julie Rogers.

They ask, what caused the delay in the connection of power to the new factory? Have generators been provided in lieu or force majeure situation?

Matthew Bryson: Yes, we are on generators at the moment. I don't know if I need to call them out by name in terms of why we're delayed. But I can say that part of the delay has been the fact that connection to PWR and upgrade doesn't just affect PWR, it affects the area and businesses around us. So that's been one of the delaying elements of getting connection.

Sharyn Williams: Yes, certainly third-party related in terms of not being able to get connection to the grid.

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Operator: Thank you. Unfortunately, we have run out of time for any further questions. I'll now hand back to Mr. Bryson for any closing remarks. Matthew Bryson: Thank you very much. Yes, once again, I would just like to thank all in attendance for joining the call this morning. I appreciate the questions, and thank you all again for your continued support of PWR. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.

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