VEEM LTD — Interim / Quarterly Report 2022

Feb 21, 2022

ASX MEDIA RELEASE 22 FEBRUARY 2022

1H FY22 RESULTS PRESENTATION

VEEM Ltd (ASX: VEE) (‘VEEM’ or ‘the Company’), manufacturer of disruptive, high-technology marine propulsion and stabilization systems is pleased to provide a copy of a presentation to be made by Managing Director Mark Miocevich and Chief Financial Officer David Rich at a webinar later today in relation to the Company’s results for the half year to 31 December 2021.

The investor webinar is today at 2:00pm AEDT (11:00am AWST). Investors and interested parties can register for the investor webinar at the link below:

https://us02web.zoom.us/webinar/register/WN_0CnWnB2CQSmwRHOgj_egtQ

After registering, you will receive a confirmation email containing information about joining the webinar.

This ASX announcement was authorised for release by the Board of VEEM Limited.

Further information:

VEEM Managing Director CFO & Company Secretary Investor Relations Mark Miocevich David Rich Simon Hinsley +61 8 9455 9355 +61 8 9455 9355 +61 401 809 653 simon@nwrcommunications.com.au

ABOUT VEEM LIMITED (ASX: VEE)

VEEM Ltd is a designer and manufacturer of disruptive, high-technology marine propulsion and stabilization systems for the global luxury motor yacht, fast ferry, commercial workboat and defence industries. VEEM’s market leading Gyrostabilizers significantly reduce the rolling motion of vessels in waves, increasing on-sea time and improving personnel safety and efficiency in a wide range of ocean conditions.

VEEM is also a successful producer of high-performance propellers, fin systems and specialised components delivering consistent profits, cash flow and dividends while also reinvesting in research and development for new products and processes.

Proudly headquartered in Perth, Western Australia, VEEM operates from a 14,700sqm purpose-built fabrication and manufacturing facility, including Australia’s largest non-ferrous foundry. VEEM employs approximately 180 staff in Australia, including graduates and apprentices, and maintains a highly skilled research and development team in-house. Celebrating its 50th anniversary in business in 2018, VEEM listed on the Australian Securities Exchange in 2016. www.veem.com.au

FOLLOW US ON SOCIALS

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• linkedin.com/company/veem ltd/ twitter.com/VEEM_Ltd

VEEM LIMITED ASX: VEE

CanningVale, veem.com.au Western Australia 6970

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VEEM LTD

MARCH 2020 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. Forwardlooking 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 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.

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1H FY22 Summary

Propulsion sales were higher than the prior comparative period and the previous six months as a result of the increased capacity generated through new machines and improved 01 processes, and despite delays in the arrival and commissioning of the new machines.

Engineering products and services revenue was up on both the prior comparative period and 02 the last six months, with strong demand expected to continue for foundry-led, precision engineered products.

03 Work commenced on the next submarine full-cycle docking program to commence delivery in April 2022.

As forecast in the trading update at the AGM in November, Revenue and EBITDA were down 04 on the prior comparative period to $26m and $3m, respectively. NPAT was $0.3m, despite the challenges during the period.

The tight labour market means lower capacity (hours) due to skills shortages and increased 05 costs. Raw material price increases eroded margins, with price rises flowing through to 2H FY22. Rare casting defects issue had the dual impact of additional costs and reduced capacity for new orders.

VEEM is in a strong position going forward with an existing robust core business which has 06 allowed it to invest in and support the focus on driving the growth of the disruptive VEEM Gyro product into the global marine market.

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Westport Yachts
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1H FY22 – G yro Summary

Revenue from sales of gyrostabilizers was $1.6m for the period. COVID has delayed decision making, particularly orders in the new build market, including the launch of the Damen FCS 01 7011 (delayed over 12 months).

Production continued at a steady rate, with the inventory value of complete gyros and work in progress increasing by $3m to $6m. As VEEM continues to build gyros to a plan, it 02 is able to sell from inventory, which is proving popular with customers, particularly in the retrofit market. 03 The volume and quality of leads, combined with recent orders, provides confidence to expect 2H FY22 orders and sales to be up on FY21 and escalating into FY23.

Of the 44 gyros sold to date, there are 17 not yet commissioned, demonstrating the lead times that can occur between VEEM delivering the gyro and the owner experiencing the 04 benefits and spreading the word or ordering another, in the case of commercial vessels.

Appointed a Senior Production Manager, Head of Sales and Business Development – Europe, as well as an after-sales and service supervisor in the US to drive the gyrostabilizer 05 growth – this is already showing great progress.

VEEM’s significant investment to date and ongoing development now provides major barriers to entry for potential competitors. R&D is focused on taking our robust technology into smaller frames where it can compete against the small recreational gyrostabilizers on the market.

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1H FY22 Financial Results Summary

	1H FY22 A$mil. 1H FY21 A$mil. 1H FY21 Excl. Jobkeeper# A$mil. % Change Excl. Jobkeeper# Revenue 26.3 28.4 28.4 -7% EBITDA 2.9 5.7 4.2 -31% Profit before Tax 0.3 3.5 2.0 -86% Net Profit after Tax (NPAT) 0.3 3.0 1.9 -83% Earnings Per Share (EPS)(cents) 0.2 2.3 1.5 -83% Cash Flow From Operations 1.2 3.7 2.7 -57% Net Assets 42.7 36.6 35.5 20.3%

JobKeeper income for 1H FY21 is adjusted in EBITDA, PBT, NPAT, EPS, Cash Flow from Operations and Net Assets. *30 June 2021

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Outlook – Gyrostabilizers

VEEM holds the dominant position as the only major supplier in the large marine gyrostabilizer market, which is estimated at US$1.1bn for new builds and US$13.5bn for retrofits (current fleet).

Significant investment to date and ongoing development now provides major barriers to entry. VEEM is seeking to exploit this by driving sales growth and taking its robust technology into smaller frames to compete against the recreational products.

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The volume and quality of leads and recent orders provides confidence to expect 2H FY22 orders and sales to be up on FY21 and escalating into FY23. The ability to sell from inventory is attractive to customers, particularly in the retrofit market.

The addition of new key senior and customer-facing staff in the very large European market, in particular, is a key step forward in the drive to increase sales of VEEM gyrostabilisers.

Damen’s new walk to work vessel, the FCS 7011 (the VEEM VG520SD is a key component), is expected to have its global gala launch in the Netherlands by the end of March. The vessel is designed to revolutionise offshore crew transfers.

With new senior staff on board, more customers experiencing the benefits of the gyro and the quality and quantity of leads from many areas of the marine industry, VEEM is confident that the gyro revenue will escalate significantly over the coming months and years.

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Gyrostabilizers – All Set to Go …

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Sales and Marketing Team Engineering & Product Design Production Capability Supply Chain and Procurement

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Outlook – Pro ulsion & Defence p

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PROPULSION

• Demand expected to continue to grow due to increased demand globally. Many yards booked out to 2023-4.

• New key superyacht builders adding VEEM as primary supplier.

• Sales growth expected to be limited by capacity.

• One new machine received waiting to be commissioned. Three smaller machines ordered for late 2022 delivery.

• Rising raw materials costs and, to some extent, labour will require monitoring and price rises to ensure VEEM continues to offer its premium product at competitive prices while maintaining gross margins.

DEFENCE

• 2H FY22 will see the initial deliveries of the next fullcycle docking (work already underway) along with normal levels of spares.

• Austal ride control and propulsion work is expected to be ongoing, with overall revenue lower due to completion of LCS contract.

• Federal government’s increased drive for local content, on naval vessels in particular, is expected to drive growth through BAE Systems Australia and others.

• Completion and qualification of the pilot propeller blade as part of for the Hunter Class Frigate Program for BAE Systems Australia is expected in the coming months.

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Outlook – Hollow Bar & Engineering On-Demand

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HOLLOW BAR/FOREVER PIPE

ENGINEERING ON-DEMAND

• Sales of VEEM’s hollow bar product are expected to remain steady with regular demand and reliable margins.

• Marketing of the Forever Pipe product and the expanded offering of bends and T-pieces will continue with an emphasis on significantly improved life-cycle and plant safety.

• Continuing to bid on, and win, work across the country where utilisation of the Company’s foundry-led precision engineering capability enables VEEM to provide specialist solutions for customers.

• Maintaining the engineering capability and expertise also supports the marine and defence businesses.

• Local 24/7 Dynamic Balancing division is busy and this is expected to continue.

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Summary

VEEM is a designer and manufacturer of disruptive, high-technology marine propulsion and stabilization systems for the global luxury motor yacht, fast ferry, commercial workboat and defence industries.

From a precision engineering background, over decades VEEM has developed it own range of products concentrating on disruptive, technology-led, high-margin products with large addressable markets and significant barriers to entry.

Every year VEEM invests significantly in research and development. This is directed at the creation and enhancement of new products as well as the reduction in time and cost of Westport Yachts production in order to keep pricing competitive, increase margins and add capacity.

VEEM has a strong underlying precision engineering business which generates ongoing profitability and cashflow as well as providing a foundation of technical skills and resources for the evolving product range.

VEEM’s marine propulsion and stabilization products are world leaders in their markets. The propulsion market is well established with very strong demand at present and into the future. VEEM’s sales growth in propellers in the short term is limited by capacity constraints.

VEEM holds the dominant position as the only major supplier in the large marine gyro market, which is estimated at US$1.1bn for new builds and US$13.5bn for retrofits (current fleet).

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VEEM LTD

APPENDICES

Corporate Overview

Corporate Snapshot
ASX Code	VEE
Share Price(21 Feb 2022)	$0.88
Market Capitalisation(21 Feb 2022)	$119m
Shares on Issue	136m
Substantial Shareholders
Miocevich Family	50.20%
Perennial Value Management	11.82%

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12-MONTH SHARE PRICE PERFORMANCE
3.5 $1.60
3 $1.40
$1.20
2.5
$1.00
2
$0.80
1.5
$0.60
1
$0.40
0.5 $0.20
0 $0.00
Volume Close $
Millions
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VEEM Gyro Potential Market Size $14.6bn - by Segment

Commercial

Superyachts

Commercial Defence Superyachts Potential Market Size: Potential Market Size: Potential Market Size: Order book – US$0.7bn Order book – US$0.1bn Order book – US$0.3bn Fleet – US$9.6bn Fleet – US$1.4bn Fleet – US$2.5bn

Refer to VEEM’s ASX Release of 12 May 2021 for details and assumptions.

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VEEM LTD

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Contact

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