VEEM LTD — Interim / Quarterly Report 2024

Feb 21, 2024

==> picture [296 x 87] intentionally omitted <==

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 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 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.

FORWARD-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 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. Neither the Company, nor 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.

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.

2

Agenda

1. 1HFY24 Highlights

1. Executive Summary

2. Financial Results

3. Operational Performance

4. Outlook

5. Q&A

==> picture [288 x 257] intentionally omitted <==

==> picture [275 x 174] intentionally omitted <==

3

1HFY24 Highlights

Revenue Total Activity[1] EBITDA[2] $37.5m +37% Revenue, EBITDA and NPAT down on the prior year due to raw materials and $39.7m $6.9m +65% freight cost increases, general staff shortages and COVID impact on customers, su liers and staff. pp EBITDA Margin[2] EBIT[2] NPAT[2] 18.4% +310bps $4.6m +103% $3.5m +92%

Increased propeller capacity by over 25% with two new machines commissioned Operating Cashflow in FY22. Lead times did not reduce indicating strong demand.[2] EPS[2] Interim Dividend $4.4m +203% 2.58cps +92% 0.77c

==> picture [226 x 302] intentionally omitted <==

1. Total Activity = Sales + change in WIP

2. Includes one-off Sharrow expenses of $0.5m which is considered non-recurring.

4

Executive Summary

• VEEM’s revenue for the half-year was $37.5m (up 37% on 1HFY23) with total activity (Sales + change in WIP) of $39.7m (up 24% of 1HFY23) on the back of increased job hours.

• EBITDA and NPAT were $6.9m and $3.5m, up 65% and 92% respectively on 1HFY23. Cashflow from operations was $4.4m, up 203% on 1HFY23. These amounts include non-recurring costs in relation to the Sharrow Project of $0.5m.

• Gyro sales for the half-year were $5.0m with orders in hand of $9.2m on the back of Strategic Marine accelerating their gyro purchases, now requiring all 12 gyros in FY24.

• 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. VEEM expects contractual performance acceptance testing to be completed in the coming weeks.

==> picture [306 x 188] intentionally omitted <==

• The increased propeller capacity installed late in FY23 was utilised early in the half to reduce the order backlog in propellers. Subsequently propulsion sales have stabilised with revenue of $16.5m for the half, up 41% on 1HFY23.

• Revenue from the submarine program was $6.2m for the half-year with total defence revenue of $8.6m. In addition there was milestone invoicing of the Hunter Class demonstrator project.

• Strong cash flow allowed net debt reduction of $2.0m after capex of $2.6m (incl. intangibles). R&D spend for the period was $2.3m.

• Tony Elms appointed Chief Technical Officer for marine products.

5

==> picture [296 x 87] intentionally omitted <==

VEEM LTD

1HFY23 Result

Profitability increase driven by propeller, gyro and defence businesses

• Work in Progress increased by $2.2m which, when added to revenue, demonstrates $39.7m of activity for 1HFY24. • Increased job hours and productivity. • The increased propeller capacity installed late in FY23 was utilised early in the half to reduce the order backlog in propellers. Subsequently propulsion sales have stabilised with revenue of $16.5m for the half, up 41% on 1HFY23. • Gyro sales of $5m were up 200% on 1HFY23. • ASC revenue was up 5% on the prior period with a large portion of a full cycle docking being delivered. • Hollow bar revenue was up 36% on 1HFY23. • Margins remained solid and overheads were well managed resulting in a material improvement in EBITDA and net profit after tax. • Includes non-recurring costs in relation to the Sharrow Project of $0.5m.
		1HFY24 A$mil.	1HFY23 A$mil.	% Change
	Revenue	37.5	27.4	37%
	EBITDA*	6.9	4.2	65%
	Profit before Tax	3.9	1.9	112%
	Net Profit after Tax (NPAT)	3.5	1.8	92%
	Earnings Per Share (EPS)(cents)	2.58	1.35	92%

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

7

Balance Sheet

Reduction in Borrowings

• The Company held cash on hand of $0.6m at 31 Dec 2023 (30 June 2023: $2.4m) with an undrawn overdraft facility of $3.4m and $1.4m undrawn on the trade facility.

• The working capital position improved with inventory reducing and WIP increasing.

• Strong cash flow allowed net debt reduction of $2.0m (bank debt and HPs).

• Capex of $2.6m included robotics and tooling for propellers and $1.5m in intangibles which is predominantly further gyro development.

• $0.5m of the capital purchases above were funded through HP arrangements.

	31 Dec 2023 A$mil.	30 June 2023 A$mil.	% Change
Current Assets	37.6	35.0	7%
Non-Current Assets	56.2	56.5	-1%
Total Assets	93.8	91.5	2%
Current Liabilities	17.4	16.8	3%
Non-Current liabilities	26.4	27.9	-5%
Total Liabilities	43.7	44.7	-2%
Net Assets	50.0	46.8	7%
Retained earnings	38.2	35.4	8%
Total Equity	50.0	46.8	7%

8

Cash Flow

Solid cash flow from operations and debt repayment

• Cashflow from operations was $4.4m (1HFY23: $1.4m) which was helped by the increased gyro sales and orders which have early milestone payments. • $1.6m of bank debt and $0.9m of HPs were repaid. There were $0.5m of new HPs to fund asset additions. • At 31 Dec 2023 VEEM had an undrawn overdraft facility of $3.4m and $1.4m undrawn on the trade facility.		1HFY24 A$mil.	1HFY23 A$mil.	% Change
	Cash flow from operations	4.4	1.4	203%
	Cash flow from investing activities	(2.0)	(2.4)	-16%
	Cash flows from financing activities	(4.1)	(0.2)	1874%
	Net (decrease)/increase in cash	(1.8)	(1.2)	46%
	Cash at end of period, net of overdraft	0.6	1.4	-55%

9

Cash Flow

Investing

• Development costs (Intangibles) $1,410k

• Property plant & equip. $640k

*Note at 31 December 2023 there was an undrawn overdraft of $3.4m and undrawn trade facilities of $1.4m.

10

==> picture [296 x 87] intentionally omitted <==

VEEM LTD

Gyrostabilisers

• Revenue from gyros was $5m for the half-year, 200% up on 1HFY23. Orders on hand at 30 June were $9.2m including $6.2m of Strategic Marine orders per below.

• Strategic Marine accelerated their orders for 12 gyros under the exclusivity agreement for fast crew boats in SE Asia from three years to all being delivered in FY24.

• The agreement with Strategic underscores the value of a gyro in a commercial/workboat environment in terms of safety, efficiency, productivity, operability and financially. Commercial operators are now the primary adopters of this technology with all sales during the period, and most orders, being for commercial vessels, including defence.

• VEEM has maintained its higher level of marketing and brand-building for its marine products with a focus on digital and social media.

==> picture [339 x 195] intentionally omitted <==

• VEEM has continued to invest in the development of its gyro product over the period with a number of modifications improving performance and reducing costs.

• During the period VEEM engaged three new service techs in Europe and North America to ensure that gyros are commissioned efficiently and the customers are satisfied.

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

==> picture [338 x 114] intentionally omitted <==

12

Propulsion

• The increased propeller capacity installed late in FY23 was utilised early in the half to reduce the order backlog in propellers. Subsequently propulsion sales have normalised with revenue of $16.5m for the half, up 41% on 1HFY23 and 30% over 2HFY23.

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

• Included in propulsion is $1m of shaftline sales, up 27% on 1HFY23.

• 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 2024 VEEM signed an exclusive worldwide agreement for the manufacture and sale of Sharrow propellers for inboard vessels. Refer to the next slide for details.

==> picture [456 x 366] intentionally omitted <==

13

Propulsion – SHARROW by VEEM

• The Sharrow Propeller was invented by Gregory Sharrow in 2012. Its design has solved the most basic problem of rotary propulsion. Specifically, tip cavitation and vortices have been eliminated or significantly reduced, offering incredible performance gains over traditional propellers.

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

• Agreement signed with Sharrow Engineering for VEEM and Sharrow to partner together to design Sharrow propellers for inboard powered vessels. VEEM will then exclusively manufacture and sell the SHARROW by VEEM range of propellers worldwide for inboard powered vessels with propeller sizes 0.5m to 5.0m diameter.

• The agreement is for 17 years (or longer if the patents expire after that date). VEEM will pay Sharrow a licence fee based on the sales of the SHARROW by VEEM propellers.

• Progressing with the project is subject to VEEM’s acceptance of the performance of the Sharrow design with the testing to be completed in the coming weeks.

• VEEM will be initially manufacturing the SHARROW by VEEM propellers at its plant in Western Australia which has capacity for 450 to 500 propellers a month. 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.

• Overall market is 100,000 vessels which would be in the order of US$2.6 bn. The new boat market is 15,000 vessels worth in the order of US$338 million per annum.

==> picture [321 x 193] intentionally omitted <==

==> picture [321 x 215] intentionally omitted <==

14

Defence

• VEEM continues to be a reliable, local source of highly sophisticated critical components for the Collins Class submarines. Revenue from the submarine program was $6.2m for the half-year (up 5% on 1HFY23) with overall defence revenue of $8.6m (up 7% on 1HFY23).

• VEEM is currently manufacturing blades and hubs for the Hunter Class Frigate Program (HCFP) demonstrator program for BAE Systems Australia. The value of the demonstrator contract is $1.7 million, with successful completion of the task by Q2 2024 ensuring VEEM qualifies as a supplier to the HCFP. VEEM is one of only two suppliers globally to be able to produce this level of precision.

• Success with this project and the recent high-level defence supplier security qualification is expected to lead to further Australian defence work (see Federal Government announcement on 20 February 2024) as well as the potential to export equipment for other naval shipbuilding programs around the world, including other Type 26 frigate programs.

• VEEM also continues to be awarded contracts for numerous other defence projects including army vehicles and naval projects such as patrol boats (eg. Austal’s ECCPB).

• VEEM continues to monitor developments with AUKUS and other defence initiatives to ensure it is in the best position to win its share of the local precision manufacturing work programs. BAE systems is the prime contractor for the new British AUKUS submarines which are to be used as the template for the new Australian submarines.

==> picture [361 x 271] intentionally omitted <==

==> picture [360 x 104] intentionally omitted <==

15

Engineering Products and Services

• VEEM’s hollow bar product revenue for 1HFY24 was $3.3m which is an 36% increase over 1HFY23 due to strong demand and increased capacity.

• Delivery continued for the Latrobe Magnesium’s Latrobe Valley Stage 1 Demonstration Plant which will continue over the next three years.

• Demand generally for foundry-led, precision engineered products remains strong.

• The increased hours worked reported for May and June 2023 continued for the full half-year through a number of initiatives to improve recruitment and retention of staff. This gives confidence for the second half of FY24.

==> picture [354 x 216] intentionally omitted <==

16

==> picture [296 x 87] intentionally omitted <==

VEEM LTD

Outlook – Marine Products

Gyrostabilisers:

• Sales and orders from Strategic Marine and others as well as recent leads and enquiries highlight that the commercial market for gyrostabilisers is now understanding the value a VEEM gyro can deliver in terms of operational, HSE and commercial benefits.

• With the continued investment into marketing, regional specialist technicians and further product improvements VEEM expects the solid revenue growth to continue.

Propulsion:

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

• Recent increases in production output are expected to continue.

• New equipment just received is expected to further increase efficiencies and margins.

• Margins protected against cost increases by regular pricing reviews.

Sharrow by VEEM:

• Subject to successful acceptance testing in the coming weeks, the SHARROW by VEEM product is expected to be introduced to customers in the fourth quarter of FY24.

• Further design refinements expected to be generated as the different series are rolled out through FY25.

==> picture [301 x 180] intentionally omitted <==

==> picture [301 x 154] intentionally omitted <==

18

Outlook – Non-Marine Products

Defence:

• Defence revenue expected to remain strong with deliveries under the Collins Class submarine full cycle docking to continue for the rest of FY24.

• 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 in FY24 and will pursue options to leverage off the high-level qualifications (incl security) with BAE/Kongsberg/Navy to supply other defence programs including overseas T26 programs.

• VEEM is active and well positioned to take advantage of further defence work opportunities that may arise out of AUKUS and other defence programs.

Engineering:

• Demand for the traditional engineering products and services is expected to continue.

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

General:

• VEEM expects to be able to continue at the higher level of hours worked through the rest of FY24.

• VEEM remains vigilant in terms of cost increases and availability of materials and components globally due to issues like the conflict in the middle east impacting global shipping. Mechanisms are in place to protect pricing and margins.

==> picture [254 x 389] intentionally omitted <==

• Liquidity adequate to fund current planned operations and capital expenditure.

19

==> picture [960 x 394] intentionally omitted <==

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

Q & A
----- End of picture text -----

20

==> picture [296 x 87] intentionally omitted <==

VEEM LTD

Corporate Overview

Corporate Snapshot
ASX Code	VEE
Share Price(21 February 2024)	$1.20
Market Capitalisation(21 February 2024)	$163m
Shares on Issue	136m

Substantial Shareholders	%
Miocevich Family	50.20%
Perennial Value Management	10.74%

==> picture [476 x 311] intentionally omitted <==

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

VEE Share Price History
1.4 10
9
1.2
8
1
7
6
0.8
5
0.6
4
3
0.4
2
0.2
1
0 0
Volume Close $
Vol. - Million
----- End of picture text -----

22

==> picture [182 x 54] intentionally omitted <==

Contact

==> picture [37 x 37] intentionally omitted <==

==> picture [30 x 30] intentionally omitted <==

==> picture [296 x 87] intentionally omitted <==

VEEM LTD

==> picture [329 x 430] intentionally omitted <==

==> picture [114 x 38] intentionally omitted <==

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

PRINCESS YACHTS
----- End of picture text -----