Western Australia-based Austal has grown revenue and EBIT by more than 30 per cent and delivered strong operating cash generation of more than $100 million for the six months ended 31 December 2018.
The half-year result was driven by continuing improvements across the company’s US Navy shipbuilding programs, as well as greater throughput in commercial ferry contracts and, importantly, significant growth across Austal’s US support business. Austal generated $851.5 million revenue across its shipyards, with Australasia making up 20 per cent of revenue – reflecting the benefit of investments made to expand capacity across the segment.
Austal chief executive David Singleton welcomed the strong results, saying, "Austal has delivered strong revenue and earnings in the half but what is even more pleasing is what lies beneath those headline numbers."
Austal expects FY2019 group revenue of about $1.9 billion (assuming that the USD/AUD exchange rate continues at the current level) in line with the company’s update on 4 February 2018. FY2019 US shipbuilding margin is projected to be in the range of 7-8 per cent.
The expected revenue growth in the second half of FY2019 is not anticipated to result in a proportionate increase in FY2019 H2 earnings as previously advised, given that a significant portion of that revenue will be from early stage procurement and production for new vessel designs or existing designs that are undergoing material modifications or upgrades (particularly the LCS and EPF programs), and profit has been recognised at a lower level for revenue generated during those phases of construction.
"We were awarded contracts for four additional LCS following a competitive tender process, bringing the total number of ships currently under construction or scheduled to be built to 47 and valuing our order book at a record $5.2 billion, up more than 54 per cent from a year ago," Singleton added.
The level of cash generation in the first half has been strong but includes a number of progress payments and a reduction of working capital, which has skewed the full-year performance into the period.
Singleton said the significant increase in work won during the first half of the financial year – both across US Navy shipbuilding programs and support work – drove growth in FY2019 and is positioning the company well beyond this.
"With a record $5.2 billion order book, Austal has secured work out to 2025 that provides a strong foundation to grow the business further. We are also seeing the benefit of a lower exchange rate that is enhancing our revenue and earnings in Australian dollars, whilst making Austal more competitive in winning new commercial vessels and defence exports," Singleton said.
Austal has shipyards in Australia, the US and the Philippines, and service centres worldwide, which for 30 years have designed and constructed in excess of 300 vessels for over 100 operators in 54 countries.
Austal’s capabilities and strong reputation for quality shipbuilding grew from its early success in the development of high speed passenger and vehicle passenger ferries, offshore and wind farm vessels. Locally, Austal has employed 6,000 Australians over the past 30 years, with 888 staff employed around the country, while the company has employed 10,000 people internationally over the same period.