Careful there. Gateway did $3.3m NPBT for the 12 months to June. I assume it's a bit lumpier than just 3x that 4 month number in the P&L.

yes, I agree you shouldn't by multiplying the 4-month NPAT by 3.

I was taxing the full-year profit before tax at 30% and then taking 40% of that as Laserbond group Net profit after tax.

Gateway restores machinery and then on sells it so there earnings can definitely be very lumpy

Is anyone else concerned about the labour issues that LBL were experiencing in FY2024 being a direct result of them not wanting to pay very much for workers, so using intakes of migrant workers and then training them up, causing delays?

I would have thought that if they continue with that strategy it's going to cause some sort of bottleneck or point of delay in their ability to scale efficiently. I'm always concerned when the profitability and execution of a business of this nature gets back to something as basic as what they're prepared to pay their employees.

I do understand about the disconnect between the ATO requiring them to recognise revenue from their 40% of Gateway for 4 months but their inability to include it in their statutory accounts due to not having a controlling interest in the company at this point (40% owners), however I think they have more issues than just that.

I like the company and I like the tech they have, but I'm exiting them here on SM today because I feel I can get better bang for my buck elsewhere in the near-to-medium-term. LBL will be a company I'll have another look at in a year or two perhaps, but I didn't hold any IRL (since I sold in June) and won't hold any here either after today.

@Bear77 I don't think it is a case of LBL not wanting to pay up for skilled labour, but more an impact of LBL's core tech not being the direct outcome of a specific trade. The two which align the most are boilermakers and welders, but it can be a tough sell for LBL to hire one of those trades when they would need to be convinced to spend 6-12 months training to LBL's tech.

You know that’s a hell of an issue.

Other than paying above average salary I’ve got no idea how someone would overcome that problem in Australia...unless the business was located in an area of higher unemployment…

Thanks for that clarification @Wini - do you know why they prefer to use migrant workers? I note that their outlook statement contained this:

Mr Hooper also said, “The opportunities in front of LaserBond are substantial and exciting, with much vital activity in preparing and progressing our strategic objectives to capture the value they offer. Increased capacity and capability with the introduction of the new skilled migrant workers and higher calibre management and business development capability at senior levels combine with the unrelenting demand across the customer base, both in Australia and increasingly overseas, to enable the level of growth that LaserBond intends to achieve.”

So, I have concerns about labour availability/supply, the fact that they're calling out that they required higher calibre management, suggesting their management were not up to the task prior, and they are also talking about business development capability at senior levels - which would normally be ongoing in a growing business - which all suggests to me that there have been and may continue to be some scaling issues.

Do you have any concerns there @Wini ?

As the recently retired Chair of two medium sized manufacturing companies, I can assure you the onboarding of reasonable factory workers was our greatest problem - literally impossible to get within Australia using traditional staff seeking strategies. Employing from overseas is a solution and I do admire how Wayne has gone about this strategy. We did commence a strategy to create a Phillipines culture for one manufacturing line - and it shows significant promise - but there’s always an almost insoluble roadblock, in our case good old Government bureaucracy, whose mantra, I am sure is ‘confuse, delay, obfuscate, changed direction, act amendments, snail slow reviews and assessments”

Australia has morphed from a ‘can do’ nation to a ‘you do’ nation…but you cannot easily find a ‘you’.

Feels like there is a bit of a pattern here with locals avoiding labour intensive jobs

And it is not restricted to trades. Health and social care also has difficulty finding people.

Had an appointment with ACAT (Aged care assessment team) and they told me waiting list for home care package has increased from 6 mths to 1 year because they couldn't find people!

Maybe giving more incentives to do these jobs at local level may help rather than throw more money at training such as TAFE.

My son and I did a roadtrip on the weekend that took us through the SA Riverland, back to Wentworth in SW NSW, across to Robinvale, Vic, and back to Adelaide, and I was personally surprised to find that every single service station, roadhouse and cafe had Indian people (of Indian heritage) serving and working there, in all three states. The only place that didn't was the Crown Hotel in Wentworth where we had dinner Saturday night. Other than that, 6 stops, and every one had Indian people working there. Some of those jobs are not easy, such as a single guy that was serving customers at Boundary Bend general store, and cooking food to order, by himself, and all done with a smile. My son (who is 17) was asking why these people were all of Indian heritage and I said my best guess was that they were prepared to do those jobs, and that's why they got the jobs and kept them. I also know from my time at the Obela hommus factory that they always seem to have relatives that can quickly fill vacant roles as soon as other people quit (move on). In my 6 years there we went from 2 people of Indian heritage to almost half of the aprox. 60 people who work there. They were prepared to do the work, and it certainly wasn't always easy work.

On my last trip to WA we visited Guadagnino Orchards near Manjimup and bought a bunch of fresh produce from their farm-gate store - see here: https://www.facebook.com/AGuadagninoCo/ and we met the owner - Ray Guadagnino, who rocked up on a forklift having been stacking pallets in the cold store next door (there was no-one else serving so we had to wait for him) and we got talking - he told us about having to pull up whole orchard of trees or bulldoze them at one point because he couldn't find people to pick the apples - he was featured in this story about WA labour shortages in September 2020: https://www.abc.net.au/news/rural/2020-09-09/orchard-labour-shortages-pulls-tree-in-heartbreaking-decision/12644302. He told us that he now only employs migrant workers because he knows they are reliable and will turn up and work every day. He also provides housing for many of them on his farm.

Another story here about a farm that wouldn't be able to operate without workers from Tonga and Vanuatu: https://www.palmscheme.gov.au/stories/case-study-newton-orchards

Orchard work is physically hard work, and not everybody is prepared to do it clearly.

But getting back to LaserBond, it's machinery operation, and clearly if it requires 6 to 12 months of training to become proficient at it (as @Wini suggested), then it's skilled work for sure. So, still looks like a potential scaling issue to me, and the length of training required and the fact that it's always going to be new for every new worker (no prior exposure because LaserBond's gear is unique) means there are unlikely to be too many shortcuts, so it's just going to take labour supply and a lot of time. It doesn't mean they can't scale, but it likely means they can't scale quickly. So, for me, still a concern. Great tech, but hard to scale, IMO.

When unemployment is low and has been for a sustained period it makes it hard to fill almost any job, but particularly those that are perceived as "unattractive".

If you're going to do manual/physical kinds of jobs, you can make far more working on a unionised construction site as an (unskilled) Trades Assistant or in the mines, than aged care, fruit picking (added difficulty due to being seasonal work), hospotality/hoteling ,etc.

When it comes to skilled jobs, there is just far more demand than there is skilled people due to years of shifting employment focus from blue to white collar jobs.

The company I work for has a large service component focused on electrical and mechanical areas, including workshops and field service. We have a very difficult time filling roles in this part of the business as not many people in Australia have the skills with many people having retired from the industry or moved into other areas and younger people not coming into it..Field service in particular is tough on families and unattractive due to the travel to remote areas and associated time away from home.

We're combating this by having apprentices but that is a medium term solution and we also then can lose those trained people to competitors. We also tend to lose our people to our customers, particularly our field service engineers.

To fill these roles we've had to turn to overseas recruitment, despite all the costs, time and administration associated with doing so. It would be much easier for us if we didn't have to go down that route and could recruit locally.

They're treated as a Share in Associate @Silky84

Instead of their income and costs being incremental to Laserbond's, you'll just see the LBL share of net profit (or loss - but in this case profit) in the Share of Profit in Associate line. By the time you get down to NPAT it should be the same either way. You do get a snapshot of Gateway's performance in the notes though. It's just not that detailed.

@Silky84 note 7 in AR, profit from associate looks like $0.5m. in P&L as associate income

@Noddy74 Gateway doing 50% of it's PBT in the four months LBL owned some of it. Interesting, may just be seasonality but worth digging into to know what sustainable earnings momentum looks like.

They broke the basketball ring in the second half, so productivity increased. On a serious note, gateway has only been in its purpose-built site for less than a year. This site will help them grow and consolidate. Before this, they had four sites spread across Perth. They only have two sites, and the main one is in High Wycombe.