Austal Limited

ASB Details

Austal Limited (ASX: ASB) is an Australia-based global shipbuilder, defence prime contractor, and maritime technology partner. It offers services that include designing, constructing, and supporting defence and commercial vessels.

H1FY21 Performance – For the First Half Ended 31 December 2020 

For the first half ended 31 December 2020, the revenue of the company was reported at $840.3 million, down 19% YoY. The fall in revenue was led by several factors, including an appreciation in the average USD: AUD exchange rate from 0.684 in H1FY20 to 0.724 in H1FY21, a decrease in USA throughput, a fall in Australasia commercial shipbuilding following the delivery of three large ferries and some COVID-19 related delays. However, the company managed to report EBIT growth for the period of 17.6% YoY to $70.5 million, primarily led by better shipbuilding margins in both the USA and Australasia, some of which are regular, and others were of H1FY21 specific. The increase in EBIT contributed to 28.7% YoY growth in the NPAT to $52.4 million for the interim period.

Financial Snapshot (Source: Company Reports) 

Recent Update

• As per the release dated 18 June 2021, the company delivered the 11 Guardian-class Patrol Boat (GCPB) to the Australian Department of Defence.
• On 9 June 2021, the company stated that Austal USA has been awarded a US$44 million fixed price, undefinitised contract modification for the design, procurement, production implementation and demonstration of autonomous capability on Expeditionary Fast Transport (EPF) 13.
• On 23 June 2021, the company announced that Austal USA has won a contract for concept studies and preliminary design by the United States Navy (USN) for the Light Amphibious Warship (LAW) program.
• On 23 June 2021, the United States Department of Defense has awarded Austal USA a modification to a previously awarded Littoral Combat Ship (LCS) program contract. Notably, the modification offers Austal with the total potential additional value of USD44,384,296 (around A$58,742,000).

Outlook

The company revised its EBIT for FY21 in the ambit of $112-$118 million, with reduced revenue of ~$1.55 billion from earlier guidance of $125 million EBIT and revenue of ~$1.65 billion for FY2021. This downward revision was necessitated due to delays experienced on programs and associated costs because of Covid-19 related border closures, travel restrictions, and resourcing challenges along with the requirement to make provision for expected future expenses towards civil penalty proceedings commenced by ASIC in the Federal Court of Australia.

The company has a strong balance sheet which supports investment in both organic and inorganic growth opportunities. It has deployed capital to make a strategic investment in a capacity building which will help the company to add to its healthy $2.9 billion order book in the short to medium term. In the meanwhile, ASB has won a US$235 million (approximately A$295 million) undefinitised contract by the United States Navy. It was also recently awarded a US$44 million contract modification for Expeditionary Fast Transport (EPF).

Key Risks

The company is exposed to financial risks that include interest rate risk, foreign currency risk, credit risk, and liquidity risk. Meanwhile, COVID-19 presents both logistical challenges for an integrated network of shipyards and the restricted travel that impacts demand for large vehicle ferries.

On 10 June 2021, the company announced that civil penalty proceedings have been commenced by the Australian Securities and Investments Commission (ASIC) against Austal and its former CEO Mr. David Singleton in the Federal Court of Australia. Austal would be considering the documentation given by ASIC before deciding the next steps. The company would also advise the shareholders of all the material developments with respect to the proceedings.

Stock Information

On 23^rd June 2021, the stock of ASB ended the trading session in red as there was a fall of 2.393% to A$2.040 per share.

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