Austal Limited FY2015 Andrew Bellamy, Chief Executive Officer Greg Jasn, Chief Financial Officer 26 February 2015
Highlights Financial Revenue: $680.2 millin EBIT: $45.0 millin ($33.7 millin underlying) NPAT: $28.9 millin ($21.0 millin underlying) Cash: $118.0 millin f perating cash flw with net cash psitin f $15.6 millin at 31 December 2014 Dividend: Interim dividend f 1.0 cent per share fully franked Operatinal Diversity: All business units grew revenue with Australia delivering significantly imprved margin perfrmance Maturity f prgrams: Supprted by further peratinal imprvements and strng asset utilisatin Order bk: $2.6 billin, securing wrk thrugh CY2018 Outlk Strategy: Stabilise shipbuilding margins, extend vessel pipeline fr lng-term revenue, and expand service business Grwth pprtunities: Middle East and Australia fcus SHIPS SYSTEMS SUPPORT 2
Objectives fr sustained grwth Strengthen peratins and balance sheet Onging bjectives Target pprtunities Shipbuilding margin achieved Successfully applied learning frm first-inclass vessels Wn new prgrams by leveraging ff existing vessels Strng cash generatin used t strengthen balance sheet Delivered Maintain cash generatin t supprt prgrams and dividends Reduce debt Deliver n maturing prgrams and explit learning frm first in class ships Extend existing prgram pipeline Pririty Invest in R&D t grw intellectual prperty base Refresh prduct range t deliver increased capability Grw lng term supprt and engineering services business Fcus SHIPS SYSTEMS SUPPORT 3
Revenue and earnings grwth Revenue (A$m) EBITDA (A$m) NPAT (A$m) FY2013 FY2014 FY2015 FY2013 FY2014 FY2015 FY2013 FY2014 FY2015 389.4 505.8 680.2 24.0 30.7 56.2 5.4 9.5 28.9 On track t meet revenue guidance f $1.2 billin FY2015 earnings included nn-cash freign exchange in relatin t revaluatin f intercmpany lans SHIPS SYSTEMS SUPPORT 4
Financials SHIPS SYSTEMS SUPPORT 5
Earnings summary Incme statement FY2015 (A$m) FY2014 (A$m) FY2013 (A$m) Revenue 680.2 505.8 389.4 EBITDA 56.2 30.7 24.0 - Underlying 44.9 37.7 28.4 EBIT 45.0 18.7 12.6 - Underlying 33.7 25.7 17.0 NPAT 28.9 9.5 5.4 Recrd revenue grew 34% ver Prir Crrespnding Perid driven by increased prductin thrughput and favurable freign exchange translatin f USA and Philippines results Underlying EBITDA was $44.9 millin after excluding nn cash freign exchange gains frm revaluatin f intercmpany lans EBIT margin increased frm 3.7% PCP t 6.6% 57% reductin in net interest expense as balance sheet strengthened by debt reductin - Underlying 21.0 14.4 8.5 SHIPS SYSTEMS SUPPORT 6
Freign exchange cnsideratins Cmpetitiveness Hedging plicy Prfit translatin Appreciatin f the USD increases cmpetitiveness Reduces the cst f freign inputs in the USA fr future cntracts Reduces price f Australian exprts Austal hedges 100% f cmmitted freign currency expsures including cst inputs and cntracted receipts Vlatility in exchange rates has n impact n cntracted prjects Appreciatin f the USD increases prfit translatin t AUD FY2015 effective translatin rate was 0.8725 due t time phasing f earnings Inter-cmpany lans USD 64.4 millin f USD inter-cmpany lans t USA FY2015 nn cash mark t market EBIT benefit f $11.3 millin Cnsidering cnversin f inter-cmpany debt t equity SHIPS SYSTEMS SUPPORT 7
Cash and debt Cash flw FY2015 (A$m) FY2014 (A$m) FY2013 (A$m) Operating 118.0 43.6 (20.9) Investing (3.6) (2.0) (6.6) Financing (38.4) (34.2) 86.5 Net increase 76.0 7.4 59.0 Cash / (debt) Net cash / (debt) Dec June Dec 2014 2014 2013 15.6 (68.6) (100.3) Operating cash flw was 170% higher than the PCP Finalisatin f the sale f Hull 270 cntributed $54.1 millin t perating cash flw Significant repayment f debt $84.2 millin imprvement in net debt / cash t clse the perid in a net cash psitin Austal des nt expect t cnsistently maintain a net cash psitin due t timing differences between prgress payment prfiles n vessel cntracts and cash csts f cnstructin SHIPS SYSTEMS SUPPORT 8
Grss debt ($millins) Discipline in lng-term debt reductin 250 200 211 150 154 135 114 100 50 0 9 4 1 0 Jun 2013 Dec 2013 Jun 2014 Dec 2014 AUD Denminated (AUD) USD Denminated (USD) SHIPS SYSTEMS SUPPORT 9
Segment breakdwn USA ($m) Ships Systems Supprt Other 1 Ttal Revenue 400.8 80.4 17.2-498.4 EBIT 31.4 1.2 (1.6) (3.6) 27.4 EBIT Margin% 7.8 1.5 (9.7) - 5.5 Australia Revenue 87.8-22.2-110.0 EBIT 11.8-2.9 (0.2) 14.5 EBIT Margin% 13.4-13.1-13.2 Philippines Revenue 14.9-5.4-20.3 EBIT 1.6-0.3-1.9 EBIT Margin% 10.5-6.0-9.3 Ships: Margins within r exceeding target range with very strng perfrmance in Australia Systems: USA sub-cntracts mst system integratin activity at lw margin Supprt: Australia margin nrmalised. USA impacted by write-dwn f bslete parts 1 unallcated verhead targeting grwth SHIPS SYSTEMS SUPPORT 10
Operatins update SHIPS SYSTEMS SUPPORT 11
Order bk Order bk f $2.6 billin as at 31 December 2014 secures revenue thrugh CY2018, including: 10 Littral Cmbat Ships fr US Navy 8 funded (ut f 10 vessel cntract) 10 Jint High Speed Vessels fr US Navy Fully funded, with 4 delivered (ut f 10 vessel cntract) 8 Cape Class Patrl Bats fr Australian Custms and Brder Prtectin Fully funded, with 4 delivered (ut f 8 vessel cntract), plus thrugh-life supprt 2 High Speed Supprt Vessels fr Ryal Navy f Oman Fully funded, cnstructin cmmenced this year Cmmercial vessels 2 high speed catamaran ferries SHIPS SYSTEMS SUPPORT 12
Prgress acrss the business USNS Fall River (JHSV 4) cmpletes acceptance trials ahead f delivery Keel laid n Cape Wessel (CCPB 7) Cape Nelsn (CCPB 3) delivered t the Australian Custms and Brder Prtectin Service USNS Fall River (JHSV 4) delivered t US Navy USS Mntgmery (LCS 8) christened Cape Nelsn (CCPB 3) fficially named USNS Trentn (JHSV 5) christened Launch f Cape Leveque (CCPB 6) July September Nvember January 2014 June August Octber December LCS & JHSV participated in RIMPAC Sale f Hull 270 GD/Austal team wins LCS Planning Yard cntract US Navy extends charter f Austal High Speed Vessel, Westpac Express Awarded 2 LCS service cntracts valued at apprximately US$15 millin Keel laid n USNS Brunswick (JHSV 6) Delivery f Cape Srell (CCPB 4) Awarded LCS cntract fr class services supprt SHIPS SYSTEMS SUPPORT 13
US Navy Littral Cmbat Ship 10 ship cntract awarded as prime cntractr, wrth US$3.5 billin 8 fully funded, with at least 1 mre expected t be funded in CY2015 Q1 2 LCS cnstructed and delivered by Austal fr GD (LCS 2 and LCS 4) Prgram maturing LCS 6 launched and christened first vessel as prime cntractr Schedule pressure n LCS 6 LCS 8, 10, 12, and 14 under cnstructin LCS prgram expected t be 52 ships Later ships will be upgunned as future frigate Dual surce acquisitin strategy likely t cntinue SHIPS SYSTEMS SUPPORT 14
US Navy Jint High Speed Vessel 10 ship award t Austal valued at US$1.6 billin (fully funded), securing wrk thrugh t CY2017 Prgram prgressing well matured int a phase f efficient prductin and predictable delivery JHSV 1, 2, 3 & 4 delivered JHSV 5 christened JHSV 6 & 7 under cnstructin Perfrmance is generating interest in the US (strng ptential fr prgram expansin), while variants are gaining tractin in the Middle East Ptential fr JHSV 11 t be awarded in CY2015 SHIPS SYSTEMS SUPPORT 15
Austal strngly psitined in US Austal-built vessels have cntinued t be funded and prgrams are maturing well US Freign Plicy remains fcused n Asia-Pacific defence strategy Additinal pprtunities fr thrugh-life supprt n LCS and JHSV cntinue t develp US Navy cnfirmed intent t upgrade LCS beynd ship 32 as future frigate LCS and future frigate prgram expected t be 52 ships rate f acquisitin will be decided by Cngress LCS variants attractive t internatinal market thrugh US Freign Military Sales SHIPS SYSTEMS SUPPORT 16
Australia Cape Class Patrl Bats $330 millin cntract fr the design, cnstructin and thrugh-life supprt f 8 Cape Class Patrl Bats fr the Australian Custms and Brder Prtectin Service Prgram has matured significantly, with efficient prductins driving margin grwth Delivery between March 2013 and August 2015 Delivered CCPB 1, 2, 3 & 4 Remaining vessels all under cnstructin Opprtunities exist fr new cntracts at hme and abrad SHIPS SYSTEMS SUPPORT 17
Australia High Speed Supprt Vessels US$124.9 millin cntract fr the design, cnstructin and integrated lgistics supprt f tw 72 metre High Speed Supprt Vessels fr the Ryal Navy f Oman Cnstructin has cmmenced at Hendersn shipyard Cmpletin f keel laying fr bth vessels in December 2014 Final vessel t be delivered in late CY2016 Deplyed with a similar missin t the JHSV prgram Strategy demnstrated f leveraging Austal s intellectual prperty and technlgy t new defence markets SHIPS SYSTEMS SUPPORT 18
Philippines $30 millin cntract frm the Abu Dhabi Natinal Oil Cmpany t design and cnstruct tw 45 metre high speed catamaran ferries Cnstructin has cmmenced with delivery expected in CY2015 Cntract fr custmisatin f Hull 270 wrth apprximately $6 millin 21 metre windfarm vessel delivered t Turbine Transfers in Octber 2014 Small cmpnents supply t Australian peratins New cntract required in FY2015 H2 t ensure fllw n wrk SHIPS SYSTEMS SUPPORT 19
Systems and Supprt Austal has established a glbal ftprint, strategic partnerships and the IP t prvide thrugh life supprt fr defence vessels Australian supprt business delivering cnsistent perfrmance US supprt business grwing but nging investment needed Planning Yard cntract awarded t GD/Austal team in August 2014 with ptential value f US$100 millin 2 LCS service cntracts awarded in Octber and x1 in December 2014 LCS sustainment cntract decisin delayed until FY2015 H2 SHIPS SYSTEMS SUPPORT 20
Outlk SHIPS SYSTEMS SUPPORT 21
Strategy United States Australia Philippines Leverage ff learning frm first in class vessels Augment cntracts with service and supprt wrk Extend pipeline beynd existing cntract awards Maturing f Cape Class Patrl Bat prgram Target cnstructin and supprt pprtunities in defence vessels fr exprt markets Develp hme market strategy twards future Navy prgrams Build cmmercial shipbuilding capability t psitin Austal fr market pprtunities Establish design capability Explre further integratin f supply chain with ther divisins, including prviding small cmpnents Operatinal imprvements, diversity f vessel prgrams, and lngevity f cntracts prviding strng cash generatin and increasing return n capital SHIPS SYSTEMS SUPPORT 22
Pipeline fr vessel prgrams Pursuing pprtunities t grw rder bk and secure additinal lng-term revenue Target markets US: ptential t extend existing LCS and JHSV prgrams Australia: replacement f Navy vessels including patrl bats and future frigates Middle East: pprtunity fr frigates, supprt vessels and patrl bats Eurpe and Asia Pacific: cmmercial vessels and wrk bats Vessels Future frigate evlved frm mdified Littral Cmbat Ship Patrl bats develped frm experience with Bay, Armidale and Cape class vessels High speed supprt vessels develped frm Westpac Express and JHSV Cmmercial vessels: ptential new market fr LNG-pwered ferries SHIPS SYSTEMS SUPPORT 23
Outlk $1.2bn revenue guidance fr FY2015 Fcus n ship cnstructin prfit margins, augmented by an increase in supprt wrk Diversity and lng-term nature f vessel prgrams prvides visibility n earnings and strng cash utlk Research and develpment t increase platfrm capability t drive new demand fr current ships and variant mdels Prudent cash management t ensure apprpriate capital structure supprted by refinancing in CY2015 Pursuing variant-style defence vessel cntracts in exprt markets, with particularly strng pprtunities in the Middle East SHIPS SYSTEMS SUPPORT 24
Disclaimer Andrew Bellamy, Chief Executive Officer Telephne: +61 8 9410 1111 Fr further infrmatin visit www.austal.cm Disclaimer This presentatin and any ral presentatin accmpanying it has been prepared by Austal Limited ( Austal ). It shuld nt be cnsidered as an ffer r invitatin t subscribe fr r purchase any securities in Austal r as an inducement t make an ffer r invitatin with respect t thse securities. N agreement t subscribe fr securities in Austal will be entered int n the basis f this presentatin. Our presentatin cntains frward-lking statements r prjectins based n current expectatins. These statements are nt guarantees f future perfrmance and are subject t risks and uncertainties. Actual results may differ materially due t: the availability f US gvernment funding due t budgetary r debt ceiling cnstraints; changes in custmer pririties; additinal csts r schedule revisins. Actual results may als effect the capitalizatin changes n earnings per share; the allwability f csts under gvernment cst accunting divestitures r jint ventures; the timing and availability f future impact f acquisitins; the timing and availability f future gvernment awards; ecnmic, business and regulatry cnditins and ther factrs. We disclaim any duty t update frward lking statements t reflect new develpments. Accrdingly, t the maximum extent permitted by applicable laws, Austal makes n representatin and can give n assurance, guarantee r warrant, express r implied, as t, and takes nt respnsibility and assumes n liability fr, the authenticity, validity, accuracy, suitability r cmpleteness f, r any errrs in r missin, frm any infrmatin, statement r pinin cntained in this presentatin. Yu shuld nt act r refrain frm acting in reliance n this presentatin material. This verview f Austal des nt purprt t be all inclusive r t cntain all infrmatin which its recipients may require in rder t make an infrmed assessment f Austal s prspects. Yu shuld cnduct yur wn investigatin and perfrm yur wn analysis in rder t satisfy yurself as t the accuracy and cmpleteness f the infrmatin, statements and pinins cntained in this presentatin befre making any investment decisin. SHIPS SYSTEMS SUPPORT 25