Austal (ASB) 2015 AGM Report

Company/ASX Code : Austal Limited (ASB)
Venue :
3pm Fremantle Sailing Club Fremantle, Western Australia
Monitor : Dr Peter Tallentire
AGM Details / NoM : Friday 30th October, 2015
# of Attendees : Approximately 100 shareholders and visitors
# Holdings represented by ASA : 10
Value of Proxies : $250,000
# Shares Represented by ASA : 110,000
Market Capitalisation : $782 million

Best result in the company's 27 years

The meeting was opened by Chairman John Rothwell. His emphasis was on the substantial progress made by the Company in the preceding twelve months, including

  • Financial : record revenues and net profit; continued attainment of adequate cash generation; further debt reduction and negotiation of more favourable debt facilities; resumption of dividends; improved contribution from the US Service and Sustainment business.
  • Production: deliveries on major programs across all three shipyards; the recent move to prime contractor status in the US.
  • Prospects: further additions to the order pipeline.

He also raised the topic of the addition to the Board of Jim McDowell, and the “extensive defence industry experience” he brings to the table. In an overview of the current Board he expressed very significant satisfaction with the members’ capabilities and relevant industry experience. A similar level of satisfaction was expressed with the CEO Andrew Bellamy and the expertise and commitment of the management team he has built around him. In addition it was pointed out that the Company had been lifting its defence capabilities profile in this country, and was now well positioned to benefit from anticipated “upcoming defence shipbuilding opportunities”.

CEO Andrew Bellamy’s report focussed on the details of what had been achieved, and the presentation provided that detail broken down by geographic location and contract. In particular the Henderson shipyard had achieved production and margins that would be difficult to replicate in future years. Efficiencies had been gained from the learning experiences of the early stages of the Cape Class contract, and by running the shipyard at close to its maximum throughput as the contracted production matured. It was pointed out that future contract work was unlikely to achieve similar margins.

The Mobile (Alabama) shipyard was also a source of significant satisfaction, as the problematic LCS-6 was completed, and lessons learnt were necessary and in the process of being applied to LCS-8 and 10 which were already well advanced in their construction. The required adjustments would be more easily applied to subsequent vessels, due to their being at earlier stages of their construction. In spite of the problems the company was able to achieve Prime Contractor status for the remainder of the contract, and has been winning service and support contracts. It was hinted that the overall margins for the shipyard might yet be “tweaked” over time to achieve a slightly better outcome for the company.

It was clear that attending to the contract pipeline for Henderson and the Philippines would be necessary to maintain the earnings momentum the company has achieved.