VEEM LTD — Interim / Quarterly Report 2017

Mar 13, 2017

Euroz Investor Briefing March 2017

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 transaction. 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 associated 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 this document and make no recommendati on or warranties concerning any Public Offer. No representation or warranty, express or 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 limitation, 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 is not) an indication of future performance. Actual results could differ materially from those referred to in this document.

FORW ARD-LOOKING STATEMENTS

Certain statements, beliefs and opinions contained in this document, particularly those regarding the possible or assumed future financial or other performance of the Company, industry growth or other trend projections are or may be forward looking statements. 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-looki ng 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-looki ng statements. Forward-looki ng 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 otherwise stated.

NOT FINANCIAL PRODUCT ADVICE

No attempt has been made to independentl y 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 recommendati on 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 recommendati on. 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.

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The VEEM Board

Brad Miocevich

Chairman

Mark Miocevich Managing Director & CEO

Ian Barsden Non Executive Director

VEEM Key Management

Les Kay General Manager

Paul Steinmann

Business & Development Manager – Marine

VEE

ASX Code

$0.63

Share Price

Mike Coyle

Tracy Caudwell Joint Company Secretary

Peter Torre Joint Company Secretary

Business & Development ManagerIndustrial and Defence

Tracy Caudwell Finance and Admin Manager

Steven Vidakovic

– Global Sales Manager Gyrostabilisers

$81.9 million Market Capitalisation

130 million

Shares on Issue

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Established and highly regarded industry leader

• VEEM is a Perth based high-technology specialist manufacturer of premium marine propulsion and gyrostabilisation systems.

• Passionate about design and engineering excellence.

• An industry leader with an outstanding brand and reputation built over 48 years.

• Financially strong with a long history of profitability.

• A long term investor in R&D and technology, which has created significant intellectual property and barriers to entry.

• A computerised numerical control ( CNC ) manufacturer with world class facilities using global best practice and substantial automation.

• Embracing a step change in earnings, with an opportunity to increase sales within the global gyro-stabilisation market.

• Listed on the ASX on 26 October 2016 at a 22% premium to the IPO price.

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5

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----- Start of picture text -----

2012
2005/6
Continuing our story New w orkshops Fast loop
manufacturing
combining Osborne
Park into Canning process
Vale implemented
four year $30m
2016
LCS contract
w ith Austal Conquest
Propellers
2006/7 Ships secured
2000 released
1987 Propeller Interceptor
style propeller
Quality System Export
released and 2015
1968 accreditation and 1994 commenced
Operations Implementation of ABE framew ork patents Gyro
obtained released
commenced ERP System adopted
1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016
1982 1989 1995 2016
Miocevich Acquired SS Integrated SS 2002 2008 VEEM lists on
brothers Engineering Foundry and Timcast VEEM Ltd the ASX
assume control VEEM Corp acquired established
of the business
2001
2011
IPS w orkshops
acquired Gyro assets
acquired
----- End of picture text -----

Continuing our story

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Leading, high technology specialised supplier

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Sales and Production update

▪ Units Completed: 7 x VG120[1]

▪ Units in Production this year:

• 7 x VG120

▪ 6 x VG260

• Units Sold: 6 x VG120

▪ Future vessels specified in: 4

• Future vessel lines specified in: 5

• Strong engagement with: 6 manufacturers

▪ Key targets: 6 further manufacturers

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Note 1: Including the VEEM test vessel

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VG120 sea trials on MY Tango after installation in November 2016

• 61% roll reduction was achieved with the VG120 was turned on.

• Wider operational area opened up for the MY Tango due to roll management.

• Guest transfer to and from the tender is faster, safer, and more comfortable.

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• New CNC machine increasing propeller production capacity to include 4.6m diameter propellers. Will be commissioned in the second half of the year.

• New European Business development manager Jonathan Shaw.

• Large amount of orders from Riva Yachts in Italy in the last 6 months.

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New CNC machine currently being installed at VEEM

• Capability to machine items up to 4.5mtr in diameter x 1.9mtr turning capacity envelope, and a 7m long x 3.6m wide x 1.9m high milling envelope.

• Largest 6-axis CNC Machine of this type in the Southern Hemisphere.

• Will increase production efficiencies up to 30%

• The machine measures 20m long, 10m wide and 6.7m high, and weighs just over 86 tonnes.

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Conquest Propeller have been developed to specifically meet the demands of the replacement propeller market

• Since the release of Conquest late last year, VEEM has been actively engaging propeller distributors around the world

• Current number of dealers and stockists around the world: 51

• Number of Conquest propellers sold this financial year: 132

• Sales expected to increase with the summer season approaching in the Northern Hemisphere

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Sales update

• Completed 4 shaft line jobs to the value of $240,000.

• Letter of intent for 19 vessels to the value of $2.8 million with an option for an additional 2 vessels.

• Quoted on additional shaft line jobs to the value of $3.2 million.

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Strategy

VEEM has strong capability and sees specific growth opportunities in:

• high-end marine propulsion equipment (propellers and shaft lines) for the Superyacht, Luxury and Sports Motor Yacht market;

• Conquest Propeller range for the replacement propeller market; and

• marine gyroscopic stabilisers for Superyachts and Luxury Sport Yachts.

Drivers for Growth

• Sales and Marketing via third party distributors and agents.

• Continuous research and development.

• VEEM has developed a global supply chain that allows the business to ramp up production without working capital restraints.

• VEEM creates a natural hedge for business operations by using a range of global suppliers to protect its intellectual property.

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A’$000,000	H1 FY 16	H1 FY 17	H1 FY17(5)
			Prospectus Forecast
Operating Revenue	16.88	21.00	23.38
Normalised PBT (1)	2.15	2.87	2.93
Normalised PAT (2)	1.89	2.69	2.40
Pro Forma EBITDA (3)	3.31	3.68	3.92
Pro Forma EBITDA Margin	19.6	17.5%	16.8%
Pro Forma EBIT (4)	2.03	2.75	3.01
Statutory NPAT	1.89	1.23	2.00
Earnings Per Share (cents)	1.56	0.99	1.54

Normalised profit after tax (PAT)[2] was $2.69 million compared to a forecast of $2.4 million

Note 1: Defined as Profit Before Tax excluding once off IPO and share registry costs of $1.5 million Note 2: Defined as Profit After Tax excluding once off IPO and share registry costs of $1.5 million Note 3: Defined as EBITDA excluding once off IPO and share registry costs of $1.5 million Note 4: Defined as EBIT excluding 0nce off IPO and share registry costs of $1.5 million Note 5: FY17 Prospectus Forecasts assuming a 50/50 spit betw een H1:17 and H2:17

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	31 December 2016 $	30 June 2016 $
ASSETS
Current Assets
Cash and cash equivalents	848,619	646,970
Trade and other receivables	6,936,101	10,217,218
Inventories	7,536,481	5,976,840
Other assets	463,653	584,300
Total Current Assets	15,784,854	17,485,328
Non-Current Assets
Property, plant and equipment	11,566,601	11,740,233
Intangible assets	7,454,839	6,958,710
Deferred tax assets	1,067,000	625,812
Total Non-Current Assets	20,088,440	19,324,755
Total Assets	35,873,294	36,810,083
LIABILITIES
Current Liabilities
Trade and other payables	4,293,585	4,481,960
Financial liabilities	3,004,175	4,868,818
Provisions	1,056,414	1,011,402
Tax liabilities	189,065	858,499
Total Current Liabilities	8,543,239	11,220,679
Non-Current Liabilities
Financial liabilities	392,033	699,243
Deferred tax liabilities	750,556	673,099
Total Non-Current liabilities	1,142,589	1,372,342
Total Liabilities	9,685,828	12,593,021
Net Assets	26,187,466	24,217,062
EQUITY
Issued capital	5,140,616	400,637
Retained earnings	21,046,850	23,816,425
Total Equity	26,187,466	24,217,062

▪ Strong Balance Sheet with limited debt

▪ Gyro Inventory build up during the six months to 31 Dec 2016

▪ Additional product development during the period.

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Total world domination in the marine propulsion and gyro-stabilisation markets

▪ Business performed as expected.

• Gyro sales and production have commenced as planned.

• First installation of VG120 on MY Tango completed and successful.

• Successful installation of VG120 on VEEM Viking test vessel with single phase power.

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VG120 installed on VEEM Viking Test Vessel

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