AUSTAL LIMITED — AGM Information 2013

Oct 24, 2013

2013 AGM – CEO presentation

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Andrew Bellamy, Chief Executive Officer

25 October 2013

Highlights

Financial

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• Record revenue of $902.8 million, a 38% increase on FY2012.

• Earnings consistent with guidance:

• $62.6 million EBITDA.

• $35.7 million statutory NPAT.

• Balance sheet strengthened and simplified debt facility in place.

Operational

• EBIT margin almost doubled at US – 5.2% for full year.

• Australia operations returned to small profit; Philippines profitable in its first full year of operations.

• Streamlined geographical structure for service division.

• Order book of $2.2 billion, securing work through to 2017.

People & Strategy

• Management team strengthened and Board renewal taking place.

• Cash management priority to deliver on record work in hand.

• Potential defence vessel exports into Asia and Middle East.

• Opportunities for support work with the expected deployment of US and Australian defence vessels in Asia Pacific.

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Financial growth targets met

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Revenue (A$m) EBITDA (A$m) NPAT (A$m) FY2012 FY2013 FY2012 FY2013 FY2012 FY2013

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653.0
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902.8
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35.5
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62.6
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11.0
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35.7
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 Strong improvement in earnings and revenue:

o Revenue of $902.8 million.

• EBITDA of $62.6 million.

o NPAT of $35.7 million.

• EBIT margins at USA operations grew as efficiencies from first-in-class vessels were implemented.

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Delivered on divisional outlook

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November 2012 outlook	End FY2013
USA
• Apply learnings to improve margins.	• 5.2% EBIT margin for FY2013; $39.2m EBIT.
• JHSV 10, LCS 14 & LCS 16 contracts to be funded.	• All three contracts funded, with LCS contracts funded post-sequestration.
• Revenue in excess of $700m for FY2013.	• Strong revenue growth to $749.4m for the year.
Australia – Henderson Shipyard
• Execute Cape Class contract.	• Cape St George (CCPB 1) delivered; phased increase in construction activity on subsequent CCPBs.
• Pursue defence export opportunities.	• Pipeline development continuing.
• Operate at break-even for FY2013.	• $0.5m EBIT in FY2013.
Philippines Shipyard
• Complete mobilisation and ramp up.	• First ship delivered; staff mobilised to deliver on contracts.
• Continue full capacity operations.	• Won additional wind farm vessel contract from repeat customer; continuing construction of 80 metre catamaran.
• Operate profitably for FY2013.	• $5.0m EBIT in FY2013.
Service
• Continued growth, position to benefit from US Navy forward deployment.	• Realigned division to best service deployment of US Navy vessels in Asia-Pacific.

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Objectives for sustained growth

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Restructure Improve Ongoing Pursue balance operations delivery opportunities sheet

• •

• Reduced net debt Achieved targeted and simplified +5% EBIT margin debt structure. at US operations.

• Profitable at Australian and Philippines shipyards.

• Restructured service division to drive efficiencies.

• •

• Cash Continue to target management opportunities for initiatives to profit additional variantfrom delivery of style defence record amount of vessels and work in hand. commercial ships.

• Scope for service work with deployment of vessels in AsiaPacific.

• 8% EBIT margin in US over next 3 years.

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DELIVERED
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FOCUS
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UPSIDE
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Financials

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Earnings summary

Income statement	FY2013 (A$m)	FY2012 (A$m)	Change (A$m)
Revenue	902.8	653.0	+249.8
EBITDA	62.6	35.5	+27.1
EBIT	38.1	16.6	+21.5
NPAT	35.7	11.0	+24.7
EPS	12.03¢	4.62¢	+8.35¢

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• Strong growth and met guidance for the year.

• USA: EBIT margin improved from 2.7% in FY2012 to 5.2% in FY2013, with lessons learnt from first-in-class JHSV.

• Australia: Operations returned to profit through Cape Class vessel.

• Philippines: Profitable in its first full year of operations.

• Service and support: Division restructured, affecting earnings but efficiencies to improve with better alignment with work opportunities.

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Balance sheet

Balance sheet summary	At 30 Jun 2013 (A$m)	At 30 Jun 2012 (A$m)	Change (A$m)
Total assets	946.5	826.0	+120.5
Total liabilities	539.3	548.9	-9.6
Net assets	407.2	277.0	+130.2

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• Growth in asset base, reflecting increasing scale of USA business.

• Balance sheet strengthened by successful $77.9m capital raising.

• Net debt reduced by $54.8m since 30 Sept 2012.

• One of two stock vessels removed from balance sheet.

• Reduced capital expenditure on property, plant and equipment with major expansion programs complete, totalling $21.3m – FY2014 to be at similar levels.

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Debt position

• Significant steps taken to reduce net debt and gearing, and simplify the Company’s debt profile.

• Net Debt/EBITDA at 2.12x, within Board’s target range (1.5x-2.5x)

• Completed $77.9 million capital raising, with funds used to pay down debt.

• US$35 million of unutilised Go Zone Bonds retired in Feb 2013.

• New syndicated facility agreed with banks – simplified terms with maturity in Dec 2015.

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Pre-capital raising At 30 Jun 13
250 50%
38.7%
200 40%
150 30%
25.1%
100 20%
50 10%
$187.7 $132.9
0 0%
Net debt Gearing
A$m
Gearing
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Note: Includes restricted cash components.

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Operations update

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Major progress across the business

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•Commenced		•Joey Turano •CCPB 1	•Joey Turano •CCPB 1
steps to •JHSV 1			appointed delivered.
improve the	delivered		President at •Initiated	•JHSV 2
balance •Craig			Philippines efficiency	delivered.		•USS
sheet – debt	Perciavalle		Shipyard. changes to	•JHSV 3		Coronado
position	promoted to	•Greg Jason systems and		launched		(LCS	4)
reduced and	President of		appointed service	•Keel laid on		delivered to
simplified.	Austal USA.		CFO. division.	LCS 8.		the US Navy.
November	December		January April	June		September
2012				2013
November	December		March May		August			October
•Rear Admiral	•Funding		•Funding •JHSV 2	•Keel laid on			•JHSV 1
USN	confirmed for		confirmed for completed		third Cape			successfully
(Retired)	JHSV 10,		LCS 14 & 16. acceptance		Class vessel.			completes
John “Dugan”	worth		•Graham trials.	•Fourth		wind		US Navy
Shipway	US$144m.		Backhouse •Keel laid on		farm vessel			operational
elected to			appointed JHSV 4.		contract			testing and
Chair Austal			President of		awarded.			evaluation.
USA.			Australian
			Operations.

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Order book

• Order book of $2.2 billion secures revenue until 2017, including:

• Littoral Combat Ships for US Navy x6 funded (out of 10 vessel contract) x2 delivered under 2 vessel contract from General Dynamics.

• Joint High Speed Vessels for US Navy Fully funded, with x2 delivered (out of 10 vessel contract).

o Cape Class Patrol Boats for Australian Customs and Border Protection Fully funded, with x1 delivered (out of 8 vessel contract), plus through-life support.

o Commercial vessels

x3 27 metre wind farm support catamarans. x1 21 metre wind farm support catamaran. x1 80 metre vehicle-passenger catamaran.

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Littoral Combat Ship

• 10 ship contract awarded as prime contractor, worth US$3.5 billion.

• 6 fully funded, final 4 ships contracted to be funded in FY2014 and FY2015.

• 2 additional vessels constructed and delivered by Austal for General Dynamics (LCS 2 and LCS 4).

• Program progressing well: o LCS 4 delivered in September.

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• LCS 6 to be launched before end CY2013.

• Opportunities exist beyond 10-ship award, including further LCS vessels in US and variants in Middle East.

“The LCS is the weapon system that will close our littoral shortfalls and bridge the gap from conventional naval tactics to the future conflict.”

Cdr Dale Heiken and Cdr Jeff Miller Authors of article ‘The Right Ship at the Right Time’, in wellknown independent US Naval Institute magazine Proceedings June 2013

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Joint High Speed Vessel

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• 10 ship award to Austal valued at US$1.6 billion (fully funded), securing work through to 2017.

• Program is maturing and has been considerably de-risked, following lessons learnt in construction and delivery of JHSV 1:

• JHSV 2 delivered and JHSV 3 launched in June 2013.

• Austal well placed to secure a role servicing the JHSV vessels.

• Potential for program to be extended and technology adoption to penetrate new markets.

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“Flexible. That’s probably the word I’ve heard more than anything. We can do a lot of things to it.”

Mark Deskins Deputy Program Manager, Naval Sea Systems Command, as quoted in Navy League of the United States publication Seapower Magazine August 2013

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Austal well positioned in US

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Austal-built vessels
have continued to be
funded
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US focused on Asia-
Pacific defence
strategy
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Additional
opportunities for
through-life support on
LCS and JHSV and
future block-buy
contracts.
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Cape Class Patrol Boat

• $330 million contract to design, manufacture and support 8 new Cape Class Patrol Boats, including $50 million support work – underwriting activity at Henderson shipyard until H1 FY2016.

• Making good progress with efficiencies improving.

• CCPB recently entered operations for Customs.

• CCPB 2 nearing completion.

• o Proposing faster build.

• Australian defence requirement for Cape Class-style vessel, including early replacement of Armidale fleet, with further opportunities for varianttype vessels existing offshore.

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“[Cape] is, in some ways, a more capable vessel than even the Armidale Class patrol boats deployed by the Navy.” Hon. Tony Abbott Prime Minister of Australia 11 October 2013

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Philippines

• Enables Austal to compete in the

• global commercial market

• Delivered a profit in its first full year of operations.

• First ship delivered December 2012.

• Growth to 500 employees achieved as planned and technology transfer to improve competitive position.

• Full order book in short-term, with wind farm vessels and vehiclepassenger catamaran.

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• Ongoing opportunities in wind farm vessel market.

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Service and systems

• Provides long-term opportunity and stability for Austal through annuity-style work.

• Global footprint, especially in the Asia Pacific region, to provide through-life-support for vessels such as the LCS and JHSV.

• Ships designed for 20 to 30 year life.

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“The JHSV could prove especially valuable in the Asia-Pacific region, where the distances make range and the ability to maintain good high speed key considerations in terms of deploying assets.”

Daniel Taylor Special Correspondent for Navy League of the United States publication Seapower Magazine August 2013

• Support contracts expected to begin to be awarded in this financial year.

• Also work opportunities for Australian vessels, with Austal currently servicing the Armidale fleet.

• Streamlined geographical structure to improve efficiencies, drive margins, and create better alignment with expected work.

“The LCS is poised to engage with our allies and friends in the Western Pacific at a level not experienced since World War II.”

Cdr Dale Heiken and Cdr Jeff Miller Authors of article ‘The Right Ship at the Right Time’, in well-known independent US Naval Institute magazine Proceedings June 2013

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Outlook

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Strategy

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United States

Henderson

Philippines

Support

• Progressive growth in margins as vessel programs mature

• Augment contracts with service and maintenance work.

• Extend pipeline beyond existing contract awards.

• Increase efficiencies on Cape Class Patrol Boats, following first-inclass vessel, with faster build.

• Target construction and support opportunities in defence vessels to sustain the shipyard, including Australian defence requirement for Cape-style vessel.

• Continue building technological capabilities for commercial shipbuilding.

• Expand vessel construction capacity according to market potential.

• Utilise our service network to target service work in Asia Pacific in anticipation of US Navy and Australian Customs deployment.

• Leverage existing defence systems capabilities to pursue new opportunities.

Strengthened balance sheet, simplified debt structure and prudent cash management practises in place to support record amount of work in progress

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Outlook

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Revenue of approximately $1
billion in FY2014.
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Funds from potential sale of
surplus assets and the
remaining stock vessel would be
used to reduce debt.
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Progressive growth in profit
margins, augmented by increase
in service and systems work
over time.
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Weaker Australian dollar
improving translation of profits
and export competitiveness.
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Prudent cash management in
place to allow delivery on record
amount of work in hand, with no
dividend in the short-term.
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Pursuing variant-style defence
vessel contracts.
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Disclaimer

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Andrew Bellamy, Chief Executive Officer

Telephone: +61 8 9410 1111

For further information visit www.austal.com

Disclaimer

This presentation and any oral presentation accompanying it has been prepared by Austal Limited (“Austal”). It should not be considered as an offer or invitation to subscribe for or purchase any securities in Austal or as an inducement to make an offer or invitation with respect to those securities. No agreement to subscribe for securities in Austal will be entered into on the basis of this presentation.

Our presentation contains “forward-looking” statements or projections based on current expectations. These statements are not guarantees of future performance and are subject to risks and uncertainties. Actual results may differ materially due to: the availability of US government funding due to budgetary or debt ceiling constraints; changes in customer priorities; additional costs or schedule revisions. Actual results may also effect the capitalization changes on earnings per share; the allowability of costs under government cost accounting divestitures or joint ventures; the timing and availability of future impact of acquisitions; the timing and availability of future government awards; economic, business and regulatory conditions and other factors. We disclaim any duty to update forward looking statements to reflect new developments.

Accordingly, to the maximum extent permitted by applicable laws, Austal makes no representation and can give no assurance, guarantee or warrant, express or implied, as to, and takes not responsibility and assumes no liability for, the authenticity, validity, accuracy, suitability or completeness of, or any errors in or omission, from any information, statement or opinion contained in this presentation.

You should not act or refrain from acting in reliance on this presentation material. This overview of Austal does not purport to be all inclusive or to contain all information which its recipients may require in order to make an informed assessment of Austal’s prospects. You should conduct your own investigation and perform your own analysis in order to satisfy yourself as to the accuracy and completeness of the information, statements and opinions contained in this presentation before making any investment decision.

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2013 Annual General Meeting

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25 October 2013