AUSTAL LIMITED — Interim / Quarterly Report 2018

Feb 26, 2018

FY2018 H1 results

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David Singleton, Chief Executive Officer Greg Jason, Chief Financial Officer

27 February 2018

FY2018 H1 Highlights

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5,250
Employees
9
3
Ferries Ordered
Ships Delivered in H1
Worth $380 million
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Order Book
~ $3.4 billion
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Revenue $653 million 42 1 Naval Ships Ordered Ships on Order (worth >A$700 million)

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FY2018 Vessel Construction Programs

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FY2018 Sustainment & Refurbishments 10 CCPB 6 ACPB 6 LCS 9 EPF

Operational Highlights

• USA Business progressing as expected :

• Shipbuilding margin increased from 6.6% to 7.6%

• LCS 12 & EPF 9 delivered

• ~ $750 million for new vessel (LCS 30 Oct 2017)

• Commercial ferry market remains strong:

• $380 million of new orders (Total order book $435 million)

• Trimaran hull becoming a strong seller

• Commercial revenue will increase ~ 50% in FY2019

• Sales team, design team & production facility expansion

• China sales developing

• OPV Australia

• Under negotiation, may take several months

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LCS 14, the seventh Independence-variant Littoral Combat Ship (LCS) built by Austal, successfully completed acceptance trials December 2017 in the Gulf of Mexico.

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USNS City of Bismarck (EPF 9) at sea – photo courtesy of US Navy

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FY2018 H1 Financials

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Earnings

$m	FY2018 H1	FY2017 H1	Change
Revenue	652.9 $	649.2 $	3.7 $
EBITDA	46.5	33.3	13.2
EBIT	29.2	18.1	11.1
NPAT	25.6	9.3	16.3
EPS	7.4	2.7	4.7

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• Revenue

• Stable despite higher exchange rate for translating USD earnings

• EBIT & EBITDA

• Significant increase

• FY2017 H1 was depressed by legal settlement

• FY2018 H1 impacted by timing of Sustainment profits

• NPAT

• EBIT flow through

• Lower current US tax due to tax reform

• Lower deferred US tax due to tax reform

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Segment breakdown

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$m	Concept	Ships	Systems	Support	Other	Total
USA	Revenue EBIT EBIT Margin %	416.4 $ 31.7 7.6%	81.6 $ 2.1 2.6%	59.7 $ 2.6 4.4%	- $ (0.3) -	557.7 $ 36.2 6.5%
Australia	Revenue EBIT EBIT Margin %	44.4 $ (3.1) (7.0%)	- $ - -	36.5 $ 3.1 8.5%	- $ - -	80.8 $ (0.0) (0.0%)
Philippines	Revenue EBIT EBIT Margin %	22.6 $ (1.1) (4.8%)	- $ - -	- $ - -	- $ - -	22.6 $ (1.1) (4.8%)

• USA: Shipbuilding margin towards upper end of guidance range, still expect 6 – 8% for full year. Support was impacted by timing of award fees across reporting periods.

• Australia: Breakeven result reflects inadequate shipbuilding throughput, PPB will generate circa 20% revenue growth into FY2019. Strong support was driven by ACPB despite onerous CCPB support contract.

• Philippines: Shipbuilding reflects throughput which will approximately double from FY2018 to FY2019 with the growth and delivery of the commercial order book.

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Cash and debt

$m Cashflow	FY2018	**FY2017 **	Change
	H1	H1
Operating	(16.9) $	(43.8) $	27.0 $
Investing
Sustaining	(3.6)	(2.8)	(0.9)
CCPB 9 & 10	(3.0)	(30.0)	27.0
Financing
Debt	(6.9)	(11.7)	4.8
CCPB 9 & 10	-	18.9	(18.9)
Dividends	(6.3)	(5.9)	(0.4)
FX differences	(1.8)	4.4	(6.2)
Net Movement	(38.5) $	(70.9) $	32.4 $
Cash	Dec 17	Dec 16	Change
Cash @ bank	112.0 $	153.5 $	(41.5) $

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 Negative operating cash flow:

• ~ $240 m operating cash flow over last 4.5 years

• $50 m working capital movements month to month

• Cash flows from delivery of EPF 9 & LCS 14 to be received post 31 December 2017

• Investing:

• Typical sustaining capex

• Financing includes:

• Disciplined approach to debt reduction, US$(4.5) m of Go Zone Bond reduction during the half

• $6.3 m of dividends (net of reinvestment scheme)

• Cash

• Continued strong cash position

• Announced 2 cps interim dividend

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Net cash / (debt) – subject to volatility in working capital

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Net Debt $(11) m excluding
A$ M
CCPB 9 & 10 residual buyback guarantee
$100 Jun 2016
$52 M
Dec 2015
$31 M
$50 Jun 2017
Dec 2016
Dec 2014 Jun 2015 $19 M
$13 M
Cash
$7 M $(4) M
$0
(Debt)
($50)
Dec 2013
Dec 2012 $(100) M
$(101) M Dec 2016
$(33) M
($100) Dec 2017
Jun 2014 Jun 2017 $(72) M
$(78) M $(46) M
($150)
Jun 2013
$(137) M
($200)
Dec 2012 Jun 2013 Dec 2013 Jun 2014 Dec 2014 Jun 2015 Dec 2015 Jun 2016 Dec 2016 Jun 2017 Dec 2017
End of quarter
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FY2018 H1 operational performance

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USA operations

• Shipbuilding margin improvement

VESSEL PROGRAMS:

• Littoral Combat Ship (~$7.5 billion program)

• Turnaround developing well and confidence continues to grow

• LCS 12 delivered in the half and LCS 14 imminent

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USS Mobile (LCS 26) first plate cut | Mobile, Alabama

• Awarded LCS 30 through a competitive tender (LCS 28 in June 2017)

  • Vessel pricing reflects current known costs therefore expect normalised profit level

• USA FY2018 appropriations look positive

• Expeditionary Fast Transport (~$2.5 billion program)

• EPF 9 delivered

• EPF 10, 11 and 12 under construction

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USNS Burlington (EPF 10) naming ceremony | Mobile, Alabama

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Australia operations

• Shipbuilding – at front-end design phase on two significant vessel programs throughout CY2017 but construction volume to increase in FY2018.

• Pacific Patrol Boat (~$305 m, 19-ship program)

  • Strategically important; in line with budget and time.

  • First vessel delivery October 2018.

  • Recognise profit from FY2019.

• Mols (~ $90 m, 109 m vehicle / passenger ferry)

  • Over 50% complete and on schedule.

  • 20% productivity improvements demonstrated.

• Cape Class Patrol Boats 9 & 10

  • 3-year charter commenced late in FY2017.

  • Expect engagement on charter extension over next 12 months.

 Support contracts

• CCPB in-service support: in line with previous provisions.

• o ACPB remediation: Performing well.

• Significant technology investment underway to keep progressing ferry capability ahead given strong market conditions.

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Mols Linien under construction | Henderson

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Pacific Patrol Boat under construction | Hope Valley

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Asia (Philippines & China)

 Philippines

• FRS - ferry for Germany will be delivered in FY2018 H2. ($22m, 56m vessel)

• VS Grand Tours $5 m - Construction of a 30 m ferry just commenced.

• Fjord Line (~ $108 m, 109 m vehicle passenger ferry). First metal was cut February 2018.

• Braveline $44 m – Construction of 2 x 50 m ferries will commence in FY2018 H2.

• Aremiti ferry $30 m – Construction of a 49 m ferry will commence in FY2018 H2.

 China

• 6 x ~ $5 - 6 m, 35 m high-speed catamarans in Aulong Joint Venture.

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FRS ferry | Philippines

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Fjord Line 109m Ferry | Philippines

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Disclaimer

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David Singleton, Chief Executive Officer Greg Jason, Chief Financial 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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