PWR (ASX:PWH) executives said the company delivered “clear earnings momentum” in the first half of fiscal 2026, citing strong volume growth, early signs of operating leverage, and the completion of a major factory relocation that had weighed on execution in the prior year.
Acting CEO Matthew Bryson, joined by CFO and incoming CEO Sharyn Williams, told investors that group revenue rose by “almost 28%” in the half, with growth weighted to a stronger second quarter as disruption from the final stages of the factory move and temporary power arrangements eased. Net profit after tax (NPAT) increased 38% to AUD 5.7 million, outpacing revenue growth as throughput improved and utilization of an expanded labor base increased.
Factory transition completed; accreditations maintained
Management also highlighted the completion of recertification to AS9100 and Nadcap following the relocation, which Bryson said ensured there was no disruption to PWR’s aerospace and defense credentials. The company described the Australian site as scaled with capacity to support long-term growth “well into the next decade,” while pointing to progress on U.S. accreditations and production capability for aerospace and defense products to better serve customers locally.
Motorsports and aerospace & defense drove first-half growth
Breaking down performance by sector, Bryson said the key growth drivers in the half were motorsports and aerospace & defense (A&D). Motorsports revenue grew 40%, which management said exceeded expectations due to earlier Formula One race testing (commencing “2–3 weeks earlier”) and higher uptake of technical services. Bryson also pointed to a broadening motorsports customer base outside of Formula One and increasing adoption of PWR core constructions, which he said contributed to market share gains tied to improved thermal performance, packaging, and aerodynamic advantages.
Aerospace & defense revenue grew by “over 30%” on the prior comparable period, with contributions from defense, commercial aerospace (including EVTOL), and a developing maintenance, repair and overhaul (MRO) segment. Management noted that after delays stemming from customer design changes, 75% of a U.S. government project was recognized in the second quarter, although production spanned both quarters.
In OEM, management attributed strong growth partly to cycling a softer comparable period that included completion of two concurrent high-volume, high-complexity programs. Bryson said newer programs are maturing into production phases and are expected to underpin “stable” second-half revenue relative to the first half. Automotive aftermarket revenue declined, which management said reflected a deliberate move to adjust discount structures and streamline the catalog toward higher-volume vehicles to improve margins amid a challenging discretionary spending environment.
Costs, cash flow, and capital investment
Williams said raw material costs were broadly in line with the prior comparable period as a percentage of revenue, but the business faced “increasing costs, both direct and indirect,” associated with U.S. tariffs. She said these were being managed through increased U.S. production, supply chain adjustments, and pricing strategies.
Employee expenses increased in absolute terms with higher volumes but declined as a percentage of revenue, which Williams said reflected operating leverage. Average headcount increased by about 5% versus the prior comparable period, and she cited early benefits from a scheduling and capacity planning system. Williams also noted tightening labor availability in some skill sets, resulting in more vacant roles, and said wage inflation ranged from 5.5% in Australia to 7% in the U.S., with the U.K. around 2%.
The CFO said relocation to the new factory drove a step-up in fixed costs, including occupancy, right-of-use expenses, depreciation, and debt finance costs, temporarily diluting return on equity. Even so, she said NPAT rose 39% versus the prior comparable period. The company declared a fully franked interim dividend of AUD 0.03 per share, payable in March 2026, representing a 53% payout ratio and aligning with its 40% to 60% payout policy.
Working capital rose AUD 2.5 million since June 2025, driven by higher inventory to support stronger revenue and A&D programs. Cash conversion remained “over 100%” on a rolling 12-month basis. Free cash flow was negative for the period, which Williams attributed to final investment-cycle spending as the company completed construction elements of the new factory, particularly controlled environment areas.
First-half capital expenditures totaled AUD 12.7 million, focused on completing the Australian facility and installing equipment to expand capacity and capability, including automation, compliance, and business continuity. Full-year CapEx is expected to be about AUD 22.5 million, including an incremental AUD 2 million related to energy infrastructure for an electrical connection upgrade and substation. Williams said this connection occurred in late September and supports solar power investment to reduce reliance on grid electricity.
Net debt was AUD 13.4 million at Dec. 31, with cash of AUD 10.6 million and undrawn facilities of AUD 18.5 million. Management said net debt had already declined from peak levels earlier in the half and expects further deleveraging in the second half.
Outlook: moderating motorsports growth, steady A&D cadence, modest margin improvement
On outlook, Bryson said motorsports revenue growth is expected to remain strong but moderate in the second half, reflecting some pull-forward of demand due to earlier Formula One design work and January testing. For A&D, management expects continued momentum and a broadly even first-half/second-half split. OEM is also expected to be broadly even across halves, while aftermarket growth is expected to remain muted as the business reshapes its sales mix.
At a group level, management reiterated its expectation for “modest” statutory NPAT margin improvement in fiscal 2026, driven by higher volumes and early productivity gains, partly offset by incremental Australian factory costs of AUD 5.5 million, U.S. cyber accreditation spending, and one-off costs tied to the factory move and CEO transition. In Q&A, management said the one-off costs were in the first half, and that the U.S. cyber accreditation effort (CMMC) was “predominantly second half weighted,” with about 75% in the second half.
Williams also said the company sees a pathway to NPAT margin recovery over the medium term as the major capacity investment phase is largely complete and operating leverage builds, with an aim to rebuild margins toward fiscal 2024 levels over a 3–5 year period.
During questions, management said the Stapylton facility has around 70% of floor space “spoken for,” with people described as the primary constraint. Bryson said labor utilization is in the “high 90s” and machinery and equipment utilization is around 50%, leaving room to flex production as staffing expands.
About PWR (ASX:PWH)
PWR Holdings Limited engages in the design, prototyping, production, testing, validation, and sale of cooling products and solutions in Australia, the United States, the United Kingdom, Italy, Germany, and internationally. It operates in two segments, PWR Performance Products and PWR C&R. The company offers tube and fin heat exchangers, bar and plate heat exchangers, high temperature polymer SLA and aluminium powder DMLS additive manufacturing machines, liquid cold plates, brazed chassis, industrial computed tomography, and micro matrix heat exchangers; and manufactures and supplies motorsport radiators, intercoolers, and oil coolers.
