VEEM LTD — Annual Report 2024

Aug 21, 2024

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VEEM LTD

DISCLAIMER

THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER OR ADVERTISEMENT

This document, including the information contained in this disclaimer, is not a prospectus, product disclosure statement or other disclosure document and does not constitute, or form any part of, an offer to sell, or a solicitation of an offer to buy, the Shares. This document does not constitute an invitation, offer or recommendation to apply for or purchase the Shares and does not contain any application form for the Shares. This document does not constitute an advertisement for an offer or proposed offer of the Shares. Neither this document nor anything contained in it shall form the basis of any contract or commitment and it is not intended to induce or solicit any person to engage in, or refrain from engaging in, any transacti on. No person is authorised to give information or make any representation in connection with any Public Offer which is not contained in this document. Any information or representation not so contained may not be relied on as being authorised by the Company, the Lead Manager or any person assoc iated with them. This document does not constitute an offer to sell, or the solicitation of an offer to buy, any securities in the United States. The Shares have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (Securities Act) or the securities laws of any state or other jurisdiction of the United States, and may not be offered or sold, directly or indirectly, in the United States absent registration under the Securities Act or in a transaction exempt from, or not subject to, the registration requirements of the Securities Act and any other applicable U.S. state securities laws.

DISTRIBUTION

Distribution of this document outside Australia may be restricted by law. Persons who come into possession of this document who are not in Australia should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws.

NO LIABILITY

The Company has prepared this document based on information available to it at the time of preparation, from sources believed to be reliable and subject to the qualifications in this document. To the maximum extent permitted by law, Limited Parties accept no responsibility or liability for the contents of his document and make no recommendation or warranties concerning any Public Offer. No representation or warranty, express o r implied, is made as to the fairness, accuracy, adequacy, validity, correctness or completeness of the information, opinions and conclusions contained in this document. To the maximum extent permitted by law, none of the Limited Parties accepts any responsibility or liability including, without l imitation, any liability arising from fault or negligence on the part of any person, for any loss whatsoever arising from the use of this document or its contents or otherwise arising in connection with it.

Neither of the Lead Manager, nor any of its affiliates, related bodies corporate (as that term is defined in the Corporations Act) and their respective directors, employees, officers, representatives, agents, partners, consultants and advisers have authorised, permitted or caused the issue, lodgement, submission, despatch or provision of this document, and none of them make or purport to make any statement in this document and there is no statement in this document which is based on any statement by them.

PAST PERFORMANCE

Past performance information in this document is given for illustration purposes only and should not be relied upon as (and i s not) an indication of future performance. Actual results could differ materially from those referred to in this document.

FORWARD-LOOKING STATEMENTS

Certain statements, beliefs and opinions contained in this document, particularly those regarding the possible or assumed fut ure financial or other performance of the Company, industry growth or other trend projections are or may be forward looking state ments. Forward-looking statements can be identified by the use of 'forward-looking' terminology, including, without limitation, the terms 'believes', 'estimates', 'anticipates', 'expects', 'predicts', 'intends', 'plans', 'propose', 'goals', 'targets', 'aims', 'outlook', 'guidance', 'forecasts' , 'may', 'will', 'would', 'could' or 'should' or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors because they relate to events and depend on circumstances that may or may not occur in the future, assumptions which may or may not prove correct, and may be beyond the Company's ability to control or predict which may cause the actual results or performance of the Company to be materially different from the results or performance expressed or implied by such forward-looking statements. Forward-looking statements are based on assumptions and contingencies and are not guarantees or predictions of future performance. No representation is made that any of these statements or forecasts will come to pass or that any forecast result will be achieved. Similarly, no representation is given that the assumptions upon which forward looking statements may be based are reasonable. None of the Company, the Lead Manager or any other Limited Party, makes any representation or warranty as to the accuracy of any forward looking statements contained in this document. Forward-looking statements speak only as at the date of this document and the Limited Parties disclaim any obligations or undertakings to release any update of, or revisions to, any forward-looking statements in this document. All dollar values contained in this document are in Australian dollars (A$) unless otherwisestated.

NOT FINANCIAL PRODUCTADVICE

No attempt has been made to independently verify the information contained in this document. You should make your own assessment in considering an investment in the Company and should not rely on this document. In all cases, you should conduct your own investigations and analysis of the financial condition, assets and liabilities, financial position and performance, profits and losses, prospects and business affairs of the Company and its business, and the contents of this document. This document is not, and should not be construed as, a recommendation by the Company, related bodies corporate (as that term is defined in the Corporations Act), or any of their respective officers, employees, directors, shareholders, partners, representatives, agents, consultants or advisers or any other party referred to in this document (each a Limited Party and, together, the Limited Parties ) to invest in the Company. The information in this document is of a general nature and does not constitute financial product advice, investment advice or any recommendation. Nothing in this document constitutes legal, financial, tax or other advice. The information in this document does not take into account the particular investment objectives, financial situation or needs of any person. You should seek legal, financial, tax and other advice appropriate to your jurisdiction.

2

Agenda

1. FY24 Highlights

2. Executive Summary

3. Financial Results

4. Operational Performance

5. Outlook

6. Q&A

Deputy Prime Minister and Defence Minister, the Hon Richard Marles MP (second from right), and Sam Lim, MP for Tangney (left), inspect a SHARROW by VEEM propeller with VEEM MD, Mark Miocevich (second from left) and CEO Trevor Raman (right).

3

FY24 Highlights

Revenue Total Activity[1] EBITDA[2] $80.6m +35% Revenue, EBITDA and NPAT down on the prior year due to raw materials and $81.6m +29% $14.8m +48% freight cost increases, general staff shortages and COVID impact on customers, su liers and staff. pp EBITDA Margin[2] EBIT[2] NPAT[2] 18.3% +160bp $9.4m +60% $7.0m +70% Increased propeller capacity by over 25% with two new machines commissioned Operating Cashflow in FY22. Lead times did not reduce indicating strong demand. EPS[2] Final Dividend $8.4m +77% 5.15cps +70% 0.77c

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1. Total Activity = Sales + change in WIP

2. Includes non-recurring costs: a) amortisation of Liver Cancer research project of $0.5m ($0.4m after tax); and b) Sharrow initial expenses of $0.8m ($0.7m after tax).

4

Executive Summary

• VEEM’s revenue for the year was $80.6m (up 35% on FY23) with total activity (Sales + change in WIP) for FY24 of $81.6m (up 29% on FY23).

• EBITDA and NPAT were $14.8m and $7.0m, up 48% and 70% respectively on FY23. These amounts include non-recurring costs: a) amortisation of Liver Cancer research project of $0.5m ($0.4m after tax); and b) Sharrow initial expenses of $0.8m ($0.7m after tax).

• Cashflow from operations was $8.4m, up 77% on FY23.

• Gyro sales for the year were $12.3m, up 147% on FY23 on the back of Strategic Marine accelerating their gyro purchases. Orders in hand of $3.4m at 30 June 2024.

• Agreement signed with Sharrow Engineering for the exclusive worldwide licence to manufacture and sell Sharrow designed propellers for inboard vessels for at least 17 years. The propellers will be branded SHARROW by VEEM. The roll out to customers has commenced.

• The increased propeller capacity installed late in FY23 was utilised early in the year to reduce the order backlog in propellers. Subsequently propulsion sales stabilised with revenue for the year up 30% to $32m.

• Revenue from the submarine program was $17m (up 35% on FY24) for the year with total defence revenue of $21m (up 23% on FY24).

• VEEM has invested over $4.6m in capital and development expenditure during FY24 towards robotics for its Baile Rd facility, an automated guided vehicle and gyro engineering product improvement.

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• EPS of 5.15 cents per share*, up 70% on the prior period.

• Includes non-recurring costs: a) amortisation of Liver Cancer research project of $0.5m ($0.4m after tax); and b) Sharrow initial expenses of $0.8m ($0.7m after tax).

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VEEM LTD

FY24 Result

Profitability increase driven by significant increases in propeller sales, defence revenue and accelerated gyro revenue.

• Customer Work in Progress increased by $1.0m which, when added to revenue, demonstrates $81.6m of activity over FY24. • Propulsion sales increased 30% due to increased capacity available to initially clear a backlog, then meet the strong order book. • Defence revenue was significantly higher due to the delivery of the majority of components for a Collins Class submarine full-cycle docking. • Gyro sales more than doubled as a result of the acceleration in delivery of the Strategic Marine three- year contract into 15 months. • Increased labour hours during FY24 – 19% increase on FY23 due to improved retention and productivity. • Includes non-recurring costs: a) amortisation of Liver Cancer research project of $0.5m ($0.4m after tax); and b) Sharrow initial expenses of $0.8m ($0.7m after tax).		FY24 A$mil.	FY23 A$mil.	% Change
	Revenue	80.6	59.6	+35%
	EBITDA*	14.8	10.0	+48%
	Profit before Tax	8.1	4.9	+66%
	Net Profit after Tax (NPAT)	7.0	4.1	+70%
	Earnings Per Share (EPS)(cents)	5.15	3.03	+70%

*EBITDA is earnings before interest, tax, depreciation and amortisation.

7

Balance Sheet

Capital investment to drive future profitability

• The Company held cash on hand of $0.2m at 30 June 2024 (net of $0.4m overdraft)(30 June 2023: $2.4m) and had an undrawn overdraft facility of $3m.

• The trade facility which is used to facilitate the propeller business and was drawn to $0.7m at year end ($1.3m undrawn).

• The working capital position increased due to the increased activity.

• VEEM invested over $4.6m in capital and development expenditure during FY24 including 3 new robots for the Baile Rd facility, an automated guided vehicle and gyro engineering product improvement.

• $1.4m of the capital purchases above were funded through HP arrangements.

• Debt repayments of $4.0 million.

	FY24 A$mil.	FY23 A$mil.	% Change
Current Assets	39.2	35.0	+12%
Non-Current Assets	54.7	56.5	-3%
Total Assets	94.0	91.5	+3%
Current Liabilities	16.6	16.8	-1%
Non-Current liabilities	25.1	27.9	-10%
Total Liabilities	41.7	44.7	-7%
Net Assets	52.3	46.8	+12%
Retained earnings	40.6	35.4	+15%
Total Equity	52.3	46.8	+12%

8

Cash Flow

Solid cash flow from operations and investments in assets

• Cashflow from operations was $8.4m (2023: $4.7m) reflecting the higher EBITDA result for FY24. • The investment cash outflow of $3.2m is the portion of the $4.6m of capital and development expenditure not funded by HP arrangements*. • Debt repayments of $4.0m ($2.1m commercial & trade facilities and $1.9m in HP repayments). • A $2m trade facility is in place to facilitate the propeller business and had $1.3m undrawn at year end. • At year end VEEM had $3.0m undrawn on its $3.4m overdraft facility.		FY24 A$mil.	FY23 A$mil.	% Change
	Cash flow from operations	8.4	4.7	+77%
	Cash flow from investing activities	(3.2)	(3.7)	+15%
	Cash flows from financing activities	(7.4)	(1.2)	-532%
	Net (decrease)/increase in cash	(2.2)	(0.2)	-859%
	Cash at end of period, net of overdraft	0.2	2.4	-93%

*Capital equipment purchases funded directly by hire purchase arrangements do not show in cash flow from investing (or elsewhere in the cashflow statement).

9

Working capital

• Primarily increases in debtors ($3.1m) and work in progress ($1.0m) offset by other working capital balances.

Cash Flow

Statutory EBITDA $14.8m Less AASB 16 leases -$2,1m

Net repayment of borrowings

Adjusted EBITDA $12,7m

• Net bank borrowing repayments - $2.1m (includes trade and commercial facilities)

• • Repayment of HPs - $1.9m

-$4.5 Investing • Development costs: $1.9m • Property plant & equip. : $1.3m (excludes those funded by HPs*) $12.7 -$4.0 -$3.2 -$1.7 $2.4 -$1.3 -$0.2 $0.2 ~~Opening cash Adjusted EBITDA Working capital Net borrowings Investng cash fow Dividends Interest paid Income tax paid Cash Closing~~

• Development costs: $1.9m

• • Property plant & equip. : $1.3m (excludes those funded by HPs*)

*Capital equipment purchases funded directly by hire purchase arrangements do not show in cash flow from investing (or elsewhere in the cashflow statement).

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VEEM LTD

Gyrostabilisers

• In FY24 VEEM sold 18 gyros (FY23: 7) generating revenue of $12.3m (30 June 2023: $5.0m).

• The growth was primarily driven by the acceleration of the Strategic Marine order for 12 Gyros over 3 years announced in FY23. The decision to make gyros standard on their new fourth generation crew vessel accelerated this to 10 gyros being delivered FY24

• VEEM holds the dominant position as the only major supplier in the large marine gyrostabiliser market which has a high barrier to entry. This market is estimated to be US$1.1bn for new builds and US$13.5bn for retrofits.

• Enquiries and orders show the commercial market for gyros is becoming better educated in the operational, HSE and other benefits of gyros for crew transfers and other workboats.

• VEEM is planning the release of a new Mark II version later in 2024 which come with a five-year warranty (previously 1 year). The new model contains all lessons learned from the 49 gyros operating in the field.

• Five gyro service technicians now operating around the world based in strategic locations.

• In October 2023 Tony Elms joined VEEM as Chief Technical Officer for marine products.

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Propulsion

• Propulsion revenue $32m, up 30% on FY23.

• New machines in FY22 and FY23 meant a capacity increase of over 80% since December 2021, available for all of FY24.

• During the year VEEM acquired further robotics and tooling as it continues to optimise and automate the propeller process.

• Increased in propulsion marketing and sales team heading into FY25 with the aim of broadening its geographical spread and also increasing its offerings to include shaftlines and associated equipment.

• VEEM continues to develop its processes and pursue new initiatives in relation to the propeller business where it can leverage its reputation and client base as the premium product in the market for high-speed, high-performance propellers.

• In October 2023 VEEM signed an exclusive worldwide agreement for the manufacture and sale of Sharrow propellers for inboard vessels. Refer to the next slide for details.

Deputy Prime Minister and Defence Minister, Richard Marles, and Mr Sam Lim, MP for Tangney, inspect a patrol boat shaft and propeller with VEEM MD, Mark Miocevich. Photo courtesy of Richard Polden Photography.

13

Propulsion – SHARROW by VEEM

• October 2023 VEEM signed agreements for VEEM and Sharrow to partner together to design and then VEEM to exclusively manufacture and sell Sharrow propellers worldwide up to 5 metres in diameter for inboard motor vessels.

• The award-winning Sharrow propeller design has made a significant impact on the outboard motor market with outstanding improvements in fuel efficiency, noise, vibration and handling.

• VEEM will initially manufacture the SHARROW by VEEM propellers at its plant in W.A..

• The roll out has begun with the initial focus being on a small group of select customers that have pre-ordered online, with designs optimised and tested for each vessel. First deliveries and sales 1HFY25.

• If the adoption rates follow the same patterns as the Sharrow outboard motor propellers, then VEEM expects to be building increased capacity in the next few years.

• The SHARROW by VEEM propellers will cost more to make in both raw materials and manufacturing time leading to premium pricing which outboard motor customers have shown they are willing to embrace due to the tangible benefits realised.

• Underwater noise testing has been conducted with very encouraging results. This is an area of particular interest to the defence market and participants looking at the sustainability of boating and marine life.

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14

Defence

• Overall defence revenue was $20.9 million, up 23% on FY23.

• VEEM is developing demonstrator blades for BAE Systems Australia's Hunter Class Frigate Program under a $1.7m contract. Successful completion in H1 FY25 will confirm VEEM as a qualified supplier, making it one of only two global companies capable of this level of precision.

• Success with this project and subsequent high-level defence supplier qualification is expected to lead to further Australian defence work as well as the potential to export equipment for other naval shipbuilding programs around the world, including other Type 26 frigate programs.

• VEEM continues to be awarded contracts for numerous defence projects including army vehicles and naval projects such as patrol boats and submarines (eg. Collins Class Submarines, Austal’s Evolved Cape Class Patrol Boats, ANZAC Frigates).

• VEEM is active in the Defence space and is well positioned to take advantage of further defence work opportunities that are now emerging from Hunter, Austal, AUKUS, autonomous vessel and other weapons defence programs, especially as VEEM now has an enhanced security rating.

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15

Engineering Products and Services

• VEEM’s hollow bar product revenue for FY23 was $7.1m which is a 13% increase over FY23 due to strong demand and increased capacity.

• The balance of revenue from engineering products and services was $8.7 million, up 20% from FY23 due primarily to improved recruitment and retention of staff which has facilitated additional hours being available to satisfy demand.

• VEEM’s traditional engineering business focuses on foundry-led, precision-engineered products, including custom designs and its own hollow bar products (e.g., Forever Pipe). Demand for these products was strong throughout FY24 and this has continued into FY25.

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16

Corporate

• Mr Tony Elms appointed as Chief Technical Officer for marine products. Mr Elms is world renowned for his gyrostabiliser knowledge and experience and has also been working on the Sharrow development since commencing in October 2023.

• Board succession with Angus Murnaghan joining the Board in June 2024 and Ian Barsden retiring on 30 June 2024 after decades of service to VEEM.

• Management succession implemented with Trevor Raman being promoted from Chief Operating Officer to Chief Executive Officer and Tino Kapfumo being promoted to Chief Financial Officer and Company Secretary.

• Managing Director, Mark Miocevich, continues in that role and David Rich the previous Chief Financial Officer, has taken up the role of Head of Corporate Development and remains a Company Secretary.

VEEM Managing Director, Mark Miocevich, said: “It is with great pleasure that we have promoted Trevor Raman to the new position of Chief Executive Officer and Tino Kapfumo as Chief Financial Officer. Trevor’s management of VEEM’s operations over the last 15 months has been instrumental in delivering the increased output, revenue and resultant profit increases we have generated whilst Tino has delivered exception performance as our Finance Manager making him the ideal professional to become VEEM's new CFO.

New CEO, Trevor Raman (far left) and new CTO, Tony Elms (far right rear) with visitors from General Dynamics Electric Boat and Defence West.

“Both Trevor’s and Tino’s appointments are part of the executive development program we have been working on at VEEM in order to set the platform for VEEM to continue its recent growth path.”

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VEEM LTD

Outlook

Gyrostabilisers:

• VEEM is the only real supplier to the large gyro market (US$1.1bn in new builds alone) with significant barriers to entry.

• Increased investment into marketing and improved product (new “Mark II” with 5 year warranty) expected to generate continued sales growth

• Commercial applications expected to be the main adopters in the short-term with recreational following.

Propulsion:

• Global demand for VEEM’s propellers is expected to remain strong.

• New equipment to continue to drive for increased efficiencies and margins.

• Increased marketing and sales team with the aim of broadening geographical spread and increasing its offerings to include shaftlines

• SHARROW by VEEM rollout in progress now with initial sales in FY25 as the series designs are developed with sales increasing into FY26.

Defence:

• Defence revenue expected to remain strong with deliveries under the current Collins Class submarine full cycle docking to complete Q1 FY25.

• Other defence work for a number of different prime contractors, including Austal, is also expected to continue with the building of patrol boats and other platforms.

• VEEM will deliver the Hunter demonstrator program shortly and seek to leverage off the high-level qualifications with BAE/Kongsberg/Navy to supply other defence programs including overseas T26 programs.

• VEEM is active and well positioned to take advantage of AUKUS early opportunities that may arise.

Engineering:

• Demand for the traditional engineering products and services, including hollow bar, is expected to continue.

• VEEM will continue to focus on recruitment and maintenance of labour resources through a number of initiatives.

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Q & A
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VEEM LTD

Corporate Overview

Corporate Snapshot
ASX Code	VEE
Share Price(21 August 2024)	$1.79
Market Capitalisation(21 August 2024)	$243m
Shares on Issue	135.8m

Substantial Shareholders	%
Miocevich Family	50.18%
Perennial Value Management	13.74%

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VEE Share Price History
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VEEM LTD

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Contact

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