AUSTAL LIMITED — AGM Information 2015

Oct 29, 2015

2015 Annual General Meeting

Andrew Bellamy, Chief Executive Officer

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30 October 2015

Highlights

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RECORD EARNINGS
Driven by multiple
vessel programs
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RESUMED DIVIDENDS
Total of 4.0 cents per
share, fully franked
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LOWERED DEBT
Expect net cash position
by end FY2016
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$3.0 BILLION
ORDER BOOK
Secures work
through CY2020
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CLEAR GROWTH
STRATEGY
Targeting significant
pipeline of work in key
markets
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Record earnings and strong balance sheet

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Revenue (A$m) EBITDA (A$m) FY2013 FY2014 FY2015 FY2013 FY2014 FY2015 902.8 1,122.9 1,414.9 62.6 79.3 109.1 NPAT (A$m) Net debt (A$m) FY2013 FY2014 FY2015 30 June 13 30 June 14 30 June 15 6.1

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Segment breakdown

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($m) Ships Systems Support	**Other1 **	Total
USA Revenue 914.2 160.0 45.5 EBIT 59.6 2.0 4.3 EBIT Margin% 6.5 1.3 9.5	-	1,119.7
	(7.5)	58.4
	-	5.2
Australia Revenue 171.2 - 40.6 EBIT 26.3 - 5.7 EBIT Margin% 15.4 - 14.0	-	211.8
	(0.2)	31.8
	-	15.0
Philippines Revenue 29.3 - 9.4 EBIT 2.3 - (1.3) EBIT Margin% 8.0 - (14.2)	-	38.7
	-	1.0
	-	2.6

• USA: Schedule pressure on LCS 6 (now delivered), and a significant growth in profitability of the Support business

• Australia: Significant margin improvement from efficiencies on Cape Class Patrol Boat program

• Philippines: Delivering commercial vessels at profitable margin

1 unallocated overhead targeting growth

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Overview – shipbuilding programs

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• Order book of $3.0 billion as at 30 September 2015 secures revenue through CY2020, including:

• 11 Littoral Combat Ships for US Navy 10 funded, with 1 delivered, funding expected in FY2016 for eleventh vessel

• 10 Expeditionary Fast Transports (formerly Joint High Speed Vessel) for US Navy Fully funded, with 5 delivered

• 8 Cape Class Patrol Boats for Australian Border Force All 8 vessels delivered, plus through-life support

• 2 High Speed Support Vessels for Royal Navy of Oman Fully funded

• Commercial vessels

  • 2 high speed catamaran crew boats

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Progress across the business

Vessels delivered FY2015 –

• Cape Nelson (CCPB 3)

• USNS Fall River (EPF 4)

• Cape Sorell (CCPB 4)

• Cape Jervis (CCPB 5)

• USNS Trenton (EPF 5)

• Cape Leveque (CCPB 6)

• Cape Wessel (CCPB 7)

• Cape York (CCPB 8) delivered in August 2015

• USS Jackson (LCS 6) delivered in August 2015

• 2 x 45m high speed catamaran ferries delivered to ADNOC in August 2015

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Operations update

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US Navy – Littoral Combat Ship

• 10 ship contract awarded as prime contractor, worth US$3.5 billion and additional 1 ship option

• Margin and schedule pressure on LCS 6, first in the block-buy contract. Austal implementing experience from LCS 6 to incrementally grow margin on subsequent vessels

o LCS 8 – preparing for trials in late CY2015

• LCS 10 – launched and christened

• LCS 12, 14, 16 & 18 – under construction

• LCS program expected to be 52 ships

• Later ships (LCS 33 – 52) will be “upgunned” as future frigate

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US Navy – Expeditionary Fast Transport

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• Formerly Joint High Speed Vessel (JHSV), renamed by US Navy to Expeditionary Fast Transport (EPF)

• 10 ship award to Austal valued at US$1.6 billion (fully funded), securing work through to CY2017

• Program progressing well – matured into a phase of efficient production and predictable delivery

• EPF 1, 2, 3, 4 & 5 – delivered

• EPF 6 – launched & christened

o EPF 7, 8 & 9 – under construction

• US Navy interested in growing size and role of EPF fleet (strong potential for program expansion), while variants are gaining traction in the Middle East

• Confident of extension to program beyond existing block buy – EPF 11 funded by Congress

• Procurement contract awarded in October 2015

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Austal strongly positioned in US

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Austal-built vessels have
continued to be funded and
programs are maturing well
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US Foreign Policy remains
focused on Asia-Pacific
defence strategy
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US Navy committed to
upgrading final 20 LCS as
future frigates and meet 52
vessel target – rate of
acquisition to be decided by
Congress
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Option awarded to Austal on
LCS 26 (can be exercised in
CY2016), while EPF 11
approved by Congress (yet to
be contracted)
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Winning service contracts on
LCS and investing in support
business to best position
Austal for additional work
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LCS variants attractive to
international market through
US Foreign Military Sales
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Australia – Cape Class Patrol Boats

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• $330 million contract for the design, construction and through-life support of 8 Cape Class Patrol Boats for the Australian Border Force (formerly Australian Customs and Border Protection Service)

• Program matured significantly, delivering significant efficiency gains that drove margin expansion

• Final vessel delivered on schedule in August 2015

• Austal now performing through-life support on completed vessels

• Opportunities exist for new contracts at home and abroad, with Austal able to deliver efficiencies gained from first block contract

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Australia – High Speed Support Vessels

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• US$124.9 million contract for the design, construction and integrated logistics support of two 72 metre High Speed Support Vessels for the Royal Navy of Oman

• Construction is progressing well at Henderson shipyard

• Completion of keel laying for both vessels in December 2014

• First vessel launched in October 2015

• Second vessel to be delivered in late CY2016

• Deployed with a similar mission to the EPF program

• Demonstrated strategy of leveraging Austal’s intellectual property and technology to new defence markets

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Australia – High Speed Support Vessels

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Australian defence shipbuilding

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• The Federal Government's plan for a strong and sustainable naval shipbuilding industry was announced 4 August 2015

Initiative	Impact on Austal
The Government will invest over $89 billion in ships and submarines for the Navy over the next 20 years.	A large, long-term order book of work available to naval shipbuilders in Australia. Austal in a competitive position to win a large portion as Australia’s only global prime defence contractor.
The Government will implement a continuous build of surface warships in Australia.	Replacement of project-based orders with continuous build program offers long-term operational and revenue stability and efficiencies.

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Australian defence shipbuilding

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Initiative	Impact on Austal
Bringing forward the Future Frigate programme to replace the ANZAC class frigates from 2023 to 2020. The Future Frigates will be built in South Australia based on a Competitive Evaluation Process (CEP), which will begin in October 2015.	Variant of Austal’s LCS a potential platform for future frigate. (Upgunned LCS soon to be classed as a frigate by US Navy) Early CEP provides early revenue potential if successful. Possible expansion to South Australia to utilise Common User Facility at Techport, South Australia, in response to Government’s geographic requirement for the vessels’ construction.
Bringing forward construction of Offshore Patrol Vessels (SEA1180) to replace the Armidale class patrol boats by two years, with a continuous onshore build commencing in 2018 following a Competitive Evaluation Process.	Early CEP provides early revenue potential if successful plus revenue stability through continuous build. Austal will submit a competitive proposal: • It has built all of the patrol boats for Australian Navy and Customs for the past 17 years • Company’s export competitiveness demonstrates cost competitiveness • Capacity constraints in SA may limit construction to one class of vessel (future frigate) Capability requirements of Offshore Patrol Vessel expected in Government Defence White Paper to be released later this year.

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Philippines

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• Delivered two 45 metre high speed catamaran ferries to Abu Dhabi National Oil Company (ADNOC) in August 2015 under a $30 million design and construct contract

• Completed customisation of Hull 270 and delivered wind farm vessel to Turbine Transfers

• Commenced construction on two crew boats, to be delivered in Q3 CY2016:

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• 70 metre catamaran under US$34 million contract

• 58 metre catamaran under US$20 million contract

• Targeting new commercial vessel contracts, including fielding growing interest from the European ferry market

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Systems and Support

• Austal is steadily adding experience and capability to deliver a growing portfolio of Naval sustainment contracts

• US expanding activity beyond own vessels:

• Prime contractor for Post Shakedown Availability (PSA) and other post delivery test and trial programs on all Independence Class LCS

• Teamed with GD awarded Planning Yard services contract for the entire LCS fleet

• Australia transitioned Cape Class from construction phase to support phase, demonstrating value of Austal’s integrated design, build and sustainment products

• Footprint spanning Darwin, Henderson, Oman and Philippines well positioned to support increasing regional forward deployment of LCS and EPF

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Strate and Outlook gy

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Strategy

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Sustain the business

• Maintain current annual revenue in medium to longterm through new contracts

• Additional defence vessel contracts in existing markets

• Export variant defence vessels

• Capture new opportunities in commercial vessels

Strengthen the business

• Improve margins by driving efficiencies / productivity in procurement and labour without impacting safety and quality

Diversify the business

• Grow annuity-style revenue by building on existing expertise, including sustainment work on Austal-built vessels

• Focus on strategic partnerships, investments in infrastructure and IT, upskilling staff, and differentiating from competitors

Scale the business

• Position Austal for future Navy programs in Australia

• Organic and acquisitive growth opportunities

Growth strategy to be supported by maturing vessel programs, significant order book, strong financial position and effective risk management

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Outlook

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Margin improvement at US
operations as lessons learnt
from LCS 6 are applied –
greatest effect to be on
vessels at early stage
construction
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Target export opportunities
from Australia shipyard
through variant-style
defence vessels
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Good opportunity for award
of additional LCS and EPF
in addition to existing block
buy contracts
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Pursue organic and
acquisition opportunities to
grow support business in
US, with sustainment on
vessels reaching critical
mass
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Position Austal for Pacific
Patrol Boat replacement,
Future Frigate, and OPV,
and seek extension of Cape
Class Patrol Boat program
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Net cash position by end of
FY2016 to support growth
opportunities and underpin
dividends
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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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