VEEM LTD — Investor Presentation 2020

Aug 30, 2020

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VEEM LTD VEEM LTD INVESTOR PRESENTATION 2020 RESULTS PRESENTATION MARCH 2020 31 AUGUST 2020

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 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 otherwise stated.

NOT FINANCIAL PRODUCT ADVICE

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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PAST PERFORMANCE

FY2020 HIGHLIGHTS

01[Revenue of $44.4m in line with prior year ($45.0m) ]

07

Net Assets up $1.6m to $32.6m, Healthy cash balance of $3.6m at 30 June 2020

Gyro sales tripled from 2019 to $4.8m with $4.1m of 02 new orders received in the first 6 weeks of FY2021

08

$9m submarine component contract awarded in March 2020 for delivery in FY2021

Normalised* EBITDA of $5.5m 03 up $1.2m (26%) on 2019

09

Defence business steady with strong sales of marine ride control fins replacing the deferred sub work

04 Normalised* profit before tax up $0.1m to $2.2m

Normalised NPAT of $1.9m compared to 05 $2.5m in 2019 due to increased tax expense Final dividend of 0.225 cps declared 06 based on normalised NPAT

New gyro facility completed and in operation in time for the new orders received in early FY2021

10 the new orders received in early FY2021 11 Banking facilities extended to 2023 12

First VG1000SD completed for Damen ships – largest operating marine gyrostabilizer in the world

• Normalised EBITDA and NPAT are after removing the impact of JobKeeper and AASB 16 from the statutory accounting result. Refer to slide 2 for reconciliation.

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FY2020 FINANCIAL RESULT

	FY20 $ Statutory Result	AASB 16 Entries	JobKeeper	FY20 $ Normalised Result	FY19 $*
Revenue	44.4	-	-	44.4	45.0
EBITDA	7.5	(1.6)	(1.5)	4.4	4.4
Profit before tax	3.2	0.5	(1.5)	2.2	2.1
NPAT	2.5	0.5	(1.1)	1.9	2.5
EPS (cents)	1.90	0.38	(0.84)	1.44	1.97
Net Assets	32.6	-	-	32.6	30.1

Two significant items in the 2020 result that were not part of the comparative 2019 result – the impact of AASB 16 Leases accounting changes and the JobKeeper subsidy. To make the years comparable, the effects of AASB 16 and JobKeeper have been reversed to arrive at a 2020 “normalised” profit which is then comparable.

The negative effect of AASB 16 in 2020 of $0.5 million will diminish over the next four years and then become a positive adjustment for the last five years of the lease term increasing to a positive impact on statutory profit during the last year of the lease of approximately $0.5 million.

• Certain amounts shown here do not correspond to the 2019 financial statements and reflect adjustments made – refer to Note 24 of the 2020 financial statements.

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GYROSTABILIZER FY2020 HIGHLIGHTS

Gyro sales tripled from 2019 to $4.8m with improved enquiries and leads into FY2021

$4.1m of new orders received in the first 6 weeks of FY2021 incl. two VG1000SD gyros, one for Damen ships and one for a private owner

New gyro facility completed and in operation by endFY2020. Estimate can handle up to $100m of orders per annum

First VG1000SD completed for Damen ships – largest operating marine gyrostabilizer in the world with angular momentum of 520 kN.m

Second order for Damen in July 2020 demonstrates market acceptance that VEEM gyros deliver significant physical and financial benefits for commercial vessels.

Vessel end-user for second Damen order is Naviera Integral, an offshore oil field supply contractor, marking VEEM’s first gyro sale into this market.

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GYROSTABILIZER FY2020 HIGHLIGHTS

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Sales of VEEM Gyros ($m)
$4.0
$3.7m
$3.5 orders on
hand for delivery SALE OF
before 31 FIRST
$3.0 December 2020 VG1000
$2.5
$2.0
$1.5 FIRST VG145
AND VG260
SOLD
$1.0 SALE OF
FIRST
VG120
$0.5
$0.0
Dec-16 Jun-17 Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20 Dec-20E
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$4.1m of new orders received in the first 6 weeks of FY2021 Gyro sales tripled from 2019 to $4.8m

New gyro facility completed and in operation in time for the new orders received in early FY2021

First VG1000SD completed for Damen ships – largest operating marine gyrostabilizer in the world

• Assumes AUD:USD exchange rate of 0.71.

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COVID-19 FY2020 IMPACT

Implemented enhanced hygiene measures, eliminated travel and other unnecessary exposures

April 2020 revenue down triggering JobKeeper eligibility - $1.5m in FY2020

COVID-19 response team in place up to 30 June 2020

All boatbuilders are currently open and ordering propellers

Europe and USA government lockdowns closed shipyards resulting in falls in quotes and orders in April 2020

Some supply chain issues temporarily, all back to normal before 30 June 2020

One gyro delivery deferred, now due for delivery before 31 Dec 2020

Freight disruptions now settled with longer, but reliable, lead times being the norm

Domestic engineering products and services quotes and orders also down

No positive tests within VEEM

VEEM remains vigilant in monitoring domestic and world developments and potential impacts Defence business was contracted for so little impact

7

GYROSTABILIZER OUTLOOK

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Defence take-up is expected to mature over a longer period of time due to the conservative nature of this industry. VEEM will continue to educate the defence industry on the product with a longer-term view to wide-spread take-up.

Superyacht market take-up of the product is expected to increase rapidly as more vessels with gyrostabilizers join the global fleet and word spreads as to the effectiveness of the stabilization.

Adoption of the technology on larger vessels is expected to continue with shipbuilders offering a VEEM gyrostabilizer as an option and end-users increasing their demand for the enhanced experience that a more stable vessel provides.

Additional stabilization enhances the commercial argument for installing a gyrostabilizer through more operating days and safer, more efficient operation. We expect the take up of gyrostabilizers on commercial vessels to increase through FY2021 and beyond.

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OUTLOOK FY2021 AND BEYOND

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PROPULSION

• Expected to continue to grow, both organically for propellers and through new product innovation with shaftlines.

• Propulsion is an area of innovation for VEEM with a focus on finding further ways to make the worldleading propellers more efficiently, hence continue to offer the premium product at reasonable prices while maintaining gross margins.

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DEFENCE

• FY2021 will be a solid year for defence with the bulk of the $9 million submarine component contract with ASC being delivered.

• VEEM expects to continue to win defence-related contracts where casting and precision engineering is required

• Federal government’s increased drive for local content, on naval vessels in particular, is expected to drive growth

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ENGINEERING PRODUCTS & SERVICES

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

• Forever pipe is expected to increase its presence in overseas markets.

• Continued innovation to improve product offering in this area.

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

The outlook remains subject to the future impacts of the COVID-19 pandemic.

9

CORPORATE OVERVIEW

Corporate Snapshot
ASX Code	VEE
Share Price(28 Aug 2020)	$0.47
Market Capitalisation(28 Aug 2020)	$61.1m
Shares on Issue	130m

Substantial Shareholders
Miocevich Family	61.54%
Perennial Value Management	14.93%

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12-MONTH SHARE PRICE PERFORMANCE
1.2 $0.70
$0.60
1
$0.50
0.8
$0.40
0.6
$0.30
0.4
$0.20
0.2
$0.10
0 $0.00
Volume Close
Millions
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Contact

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VEEM LTD

MARCH 2020 Investor & Media Relations

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