Austal Limited

Thank you for standing by and welcome to the Oslo Limited FY26 half year results call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question and answer session. If you would like to ask a question during this time simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question press the star 1 again. For operator assistance throughout the call please press star 0 and finally I would like to advise all participants that this call is being recorded. I'd now like to welcome Paddy Gregg, Chief Executive Officer to begin the conference. Paddy, over to you.

Good morning, everybody, and welcome to our 2026 Happier Results Call. I'm Paddy Gregg, the CEO, and I'm joined by our CFO, Christian Johnson. We will be presenting in the same format as usual with me giving business overview and context while Christian focuses on the financial details. And as always, we plan to present for no more than 30 minutes till our time for questions. I think it's been a very exciting half for the company. You know, we've seen the strategic shipbuilding agreement provide the backbone for significant contract awards in Australia, with the signing of the Landing Craft Medium contract before Christmas, and then last week, the signing of the Landing Craft Heavy contract. These two contracts total about $5 billion and take the order book to a record $17.7 billion. That translates to about 76 ships in build or scheduled in our shipyards, providing certainty of jobs and revenue for a decade. You'll see revenue and employee numbers are growing in line with the order book as programs come online, and that's translating into earnings too. We announced a revision to guidance a couple of weeks ago that was caused by a forecasting error. Very disappointing, but we are still delivering a very strong financial performance this year despite this. The outlook's fantastic, both in the United States and in Australasia. So I'll talk through where the business is today. Christian will take you through the details of the financials, and I'll finish by updating you on where I see the strategic outlook for the company. So for those of you that are following along in the pack, Austal, at a glance, a couple of slides that cover the key facts for anyone who doesn't know Austal. So we're operating five shipyards in four countries with eight service centers in four countries. Seventy-six ships under construction are scheduled. 64 vessels under sustainment contracts. And importantly, we continue to add to the order book, and it stands at a record high. We've received orders for some 22 ships this year and delivered two. Employee headcount globally is over 4,600 and growing daily, and recruiting people to deliver that record order book. And the vast majority of our work is in the defense sector these days, and defense will continue to grow relative to the commercial sector. But interestingly, we'll start to see more balance between the U.S. and the Australian operations. So if I talk about the financial highlights, and as I said, Christine will go into the details. So jumping straight in, we're building sustainable growth seen through the order book that was predominantly in the U.S. and now followed in Australia with the signing of those land and craft medium and heavy contracts. We also signed two more evolved Cape class vessels before Christmas. And while that used to be big news, I think that was lost due to the size and scale of the landing craft announcement. And for me, this is all about us creating long-term value for shareholders. When I look at the results, I see lots of greens across the key financial measures, demonstrating strong business performance with year-on-year improvement and foundation laid for growth. Encouraging EBIT slightly skewed to the first half. Revenue throwing in line the forecast as new programs move from design phases into construction with a big increase compared to the previous corresponding period. You know, it's really encouraging as the legacy programs start to tell off. And, of course, we saw the delivery of the last LCS last year. And the order book at $17.7 billion secures revenue for years. It's grown in Australia following the strategic shipbuilding agreement and the landing craft medium and heavy. There's growth in submarine module production. The commercial yards have got a really sound order book and future potential for growth, particularly in the low-emission space. And indeed, in Australia, we expect to start general purpose frigate contract discussions this financial year with the Commonwealth of Australia. Both the submarine module manufacturing facility, MMF3, and the final assembly sheds for the large steel ships, FA2, as we call them, are fully funded and in construction and ready to support future growth. I'll put a slide in the pack where you can see the progress on MMF3. And stage one opening is due this financial year, bringing that project online. Of course, cash was projected to be lower than full year due to the capital investment in facilities and increase in capacity and capability. It was a little bit lower than we expected due to a couple of late milestone payments in December. As announced, we settled the request for equitable adjustment on tax. And for me, that really demonstrates the strength of relationship we have with a customer in the U.S. Interestingly, we're becoming victims of our own success, and we have become the lead yard for that program. And we're in discussions with the customer about the implications of that. And Christian will talk about that a bit more in the financial section. And so, you know, looking at the order book slides, we include programs and revenues for those of you who still like to try and build your own financial model. It doesn't include the commercial vessels, but with relatively fewer of these and our ASX announcements, I'm sure you have the information you need to factor those into your forecasting models. For me, it's really pleasing to see those commercial orders have returned following the challenges we saw during COVID and really excited about seeing the Philippines Yard ramping up and testing those low emission technologies. ready to be deployed in the defence world as and when necessary. So I'll hand over to Christian now and he'll talk you through some of the financial highlights.

Thank you, Paddy. It's turning to slide eight. It's my pleasure to present Hostos FI26 first year first half performance. Before I get into the details, the key message is that we've had double digit growth across all key financial performance metrics, revenue, earnings and impact. which represents the results of the focused efforts of our employees across the group to construct and deliver ships, submarine modules, sustain services, and additive manufacturing to our growing customer base. The balance sheet is stable and we have a robust cash balance to support the significant capital investment we have underway as we complete two key infrastructure growth projects in the USA, which have combined spend of more than a billion dollars. The order book is an all-time high of $17.7 billion, which underpins continued growth over many years. Group revenue increased by 34.4%, which was a solid growth across the group, and pleasingly all segments experienced growth, which is an exceptional outcome. USA shipbuilding increased 29%. based on increased revenue from the OPC, TATS, and submarine contracts, which more than offset the completion of the LCS and EPF programs. It should be noted that the company's auditors had a qualification in their opinion relating specifically to the judgment on the TATS and AFDM programs. Whilst the company is in ongoing discussions with its sole customer in the US and is seeking some contractual relief, The company's auditors, Deloitte, included a qualification in their review opinion to reflect the position that, whilst the company considers it has sufficient evidence to support the judgments made in respect of the contractual relief for these programmes, the auditors have concluded that they need additional evidence above what has been provided and so have qualified on this particular judgment on these particular programmes. Further details appear in the notes to the half-year report. USA support revenue increased by 11%, primarily due to additional contribution from the growing additive manufacturing business, which is performing strongly. It was particularly pleasing that Australasia shipbuilding continues its growth with an increase of 83%, which has two key drivers being the appointment of Austal as the Commonwealth of Australia's softened shipbuilder and the work performed on the first two key contracts under this umbrella being the landing craft medium and landing craft heavy contracts for the Australian Army. In addition, the work completed from our Asian shipyards was a strong contributor to this performance. while Australasia's support business improved by 27% due to the increase in servicing work driven by an expansion of the fleet requiring sustainment services. It is pleasing to see ships built by Austal continue to be serviced by Austal across our regional service centres. Moving to EBIT, earnings growth of 41% across the group was extremely pleasing with EBIT of 60 million for the half year. And whilst there are mixed results across key segments, the geographical diversification of the group provides an ability to manage these variances. The standout earnings growth was Australasia shipbuilding at over 600%, which benefited from the work performed on the two landing craft programmes and the commercial shipbuilding activities progressed by our Philippine and Vietnamese yards. Australia's support business had an additional throughput from work from patrol boats and sustainment contracts, and posting earnings growth over 400%. There was a contraction in earnings from U.S. shipbuilding, primarily driven by the margin compression as a result of the wind down of the LCS and EMF programs, the earlier stages of the wind up of the OPC and Tegos programs, and from two onerous contracts that continued to dampen margins. The U.S. support business results were steady in the six months. We continue to see strong contributions from the Advanced Manufacturing Centre of Excellence facility in Danville. Turning to the segment breakdown, we are now at 96% defence weighted across the group, and with the growth in Australasia business, the geographical contributions are nearing a 70-30 split between USA and Australasia. On a segment basis, the shipbuilding segment continues to report tight margins as a result of two owner's contracts we have in the US. However, it should be noted that this segment is profitable, albeit at a level below our expectations. The support segment is a key earnings contributor at an EBIT margin of 17.9% across the group, contributing the majority of earnings of $41.1 million for the half. The group's balance sheet was stable with net assets at over $1.3 billion. The group has a significant cash balance of $371.6 million at the close of 2025, and whilst it reduced in the half, this reflects a significant capital investment underway in the U.S. on growth infrastructure. The trade receivable balance was higher by 43% at $211 million, reflecting the growth in production in the six-month period. Overall cash position decreased by $212 million, with $131 million of this comprising the capital expenditure on the ongoing MMF3 and FA2 projects. The cash flow from operations was negative $63 million, which reflected the two owners' contracts we have in the U.S. and the late receipt of customer payments. As I highlighted earlier, the trade stables is $211 million across the group, and the collection of this could have had significantly impacted this position. This will be a key focus for management in the second half. I will now hand back to Paddy. Thanks, Christian.