Full year results for $AHL were released today.

Here's my view along with my assistant (Gemini).

Summary of FY25 Results Presentation:

The presentation details $AHL's financial and operational performance for FY25, focusing on its two main segments: Heat Transfer Solutions (HTS) and Distribution.

Key Financial Highlights (FY25 vs FY24):

• Sales Revenue: Increased by 8.9% to $153.1 million.
• Pro forma EBITDA: Decreased slightly by 2.8% to $17.7 million, primarily due to higher material/consumable costs, increased employee costs, and rising insurance costs.
• Pro forma NPAT: Rose by 2.9% to $7.2 million, attributed to a lower effective tax rate.
• Operating Cash Flow: $13.9 million, with a cash conversion ratio of 79% (down from 81% in FY24) due to increased inventory for data center orders.
• Capital Investment: $4.2 million (down from $5.3 million in FY24) following the completion of the Thailand office and factory re-lay.
• Net Tangible Assets per Share: Increased by 7.7% to $1.05.
• Dividends: Total FY25 related dividends of 3.48 cps (fully franked), an 18.4% increase from FY24, representing 50% of statutory NPAT.

Segment Performance:

Heat Transfer Solutions (HTS):

• Revenue increased by 14.8% to $89.9 million.
• Growth driven by increased sales in off-highway units in Asia and growing demand for data center backup generation.
• New power generation projects initiated in FY25 for FY26 delivery.
• Strategic actions include hiring an Asia regional sales director, delivering Alu Fin prototypes for in-field testing, developing low-cost units for SE Asia, optimizing the Thailand manufacturing facility, and doubling output capacity at the Lara site to meet data center demand.

Distribution (ADRAD):

• Revenue increased by 1.5% to $63.2 million.
• Revenue and margin growth in the second half due to refined pricing strategy, branch effectiveness activities, and range expansion.
• Growth initiatives include launching a delivery tracking app, initiating an e-catalogue revamp, growing the trade customer base by 6.5%, and finalizing the rollout of new analytics for price strategy and cost recovery.
• Branch expansion (Phase 1) and continued product range expansion are planned for FY26.

Balance Sheet:

• Robust financial position.
• Increase in contract assets reflects pending data center and project orders.
• Inventory growth supports data center and project delivery.
• Right-of-use assets and lease liabilities decreased due to lease management decisions and payments.

Outlook (FY26):

• Management is confident of improved business performance.
• Expected drivers include a strong order book, growing data center demand, anticipated increase in remote Powergen demand, efforts to grow the order book in SE Asia, and strategic initiatives for cost and efficiency improvements.

Opinion on the Report:

Overall, this is a good and positive report. Here's why:

• Revenue Growth: A healthy 8.9% increase in sales revenue indicates strong market demand and effective sales strategies.
• Strategic Focus: The clear articulation of strategies for both HTS and Distribution segments, and the progress made on them (e.g., expanding into Asia, data centers, product development, improving distribution channels), shows a well-managed and forward-thinking company.
• Resilient NPAT Growth: Despite headwinds like increased material and employee costs, the company managed to grow its pro forma NPAT, albeit modestly, which is a positive sign of underlying profitability and cost management efforts (or tax efficiency).
• Strong Balance Sheet: The description of a "robust financial position supported by operating cash flows" is reassuring for investors. Increases in cash and net tangible assets per share further reinforce this.
• Dividend Increase: An 18% increase in dividends signals confidence from management in future performance and a commitment to returning value to shareholders.
• Positive Outlook: The optimistic outlook for FY26, backed by a strong order book and growing demand in key areas like data centers and remote power generation, suggests continued positive momentum.

Areas to note (not necessarily negative, but points of attention):

• EBITDA Dip: While pro forma NPAT increased, the slight decrease in pro forma EBITDA indicates some pressure on operational profitability, mainly from cost increases. The company has identified these cost drivers (materials, wages, insurance), and their strategic initiatives for cost and efficiency improvements in FY26 aim to address this.

• Cash Conversion Ratio: The slight dip in the cash conversion ratio (from 81% to 79%) is attributed to increased inventory. This is understandable given the strong data center orders and project delivery, but it's something to monitor to ensure efficient working capital management.

In conclusion, $AHL appears to be navigating a challenging cost environment effectively while executing its growth strategies. The report paints a picture of a company with strong fundamentals and a positive trajectory for the upcoming fiscal year.

DISC - Held IRL & SM portfolios