Slide 1: FY2016 earnings and LCS program update
FY2016 earnings and LCS program update For personal use only David Singleton, Chief Executive Officer 4 July 2016 Greg Jason, Chief Financial Officer
Slide 2: Summary post detailed review of LCS program
Summary post detailed review of LCS program Increased the total cost estimate for LCS 6 – 26 For personal use only LCS review • (11 ships) due to design changes required to achieve shock certification and US Naval Vessel Rules FY16 guidance • US$115 million (A$156 million) write back of work in prog
Slide 3: LCS detailed program review completed
LCS detailed program review completed For personal use only Review complete • Completed a detailed review of the LCS program following: • delivery of LCS 6 & 8 • Preliminary results from the first two shock trials of LCS 6 Baseline design • Defined a revised baseline design to meet the shock standar
Slide 4: LCS shock trial – key technical requirement
LCS shock trial – key technical requirement • Unique nature of the For personal use only vessel has meant that there were minimal design reference points • 2 of 3 planned trials now completed and preliminary feedback is positive • LCS 6 is the only vessel that will be shock trialled (class not vesse
Slide 5: Change of cost estimate
Change of cost estimate Shock & US Naval • Materially increased the total cost estimate for For personal use only Vessel Rules LCS 6 – 26 (11 ships) due to changes required to meet the revised baseline design • In discussion with the customer about increases in design scope that may improve Austal’s
Slide 6: LCS concurrent construction
LCS concurrent construction Rework is significantly exacerbated by the concurrent construction of multiple For personal use only vessels Number of vessels under construction Vessel 2 4 6 8 10 10 6 8 10 12 14 16 18 20 22 24 26 2010 2011 2012 2013 2014 2015 2016 6 Financial year
Slide 7: Implementation of modifications
Implementation of modifications Implementation of modifications has stabilised giving clarity on full program costs For personal use only Operational • > 5,000 design modifications with 98% implemented on LCS 6 • Modifications being progressively implemented across the rest of the program • Continuo
Slide 8: Modification program is maturing
Modification program is maturing The chart shows that the rework modifications required to existing For personal use only ships is decreasing which increases cost confidence Modifications 6,000 5,000 4,000 3,000 2,000 1,000 0 6 8 10 12 14 16 18 20 Vessel 8
Slide 9: Financial impact
For personal use only Financial impact 9
Slide 10: Profit impact
Profit impact Cost increases are shared 50 / 50 with the US Navy up to For personal use only Risk sharing • a ceiling price per the LCS contract structure Change of • The change of estimate means that too much revenue and profit estimate was attributed to work already completed • Work in progress (W
Slide 11: Accounting for changes in cost estimates
Accounting for changes in cost estimates Changes in estimated cost at completion result in a write back of WIP and a For personal use only restatement of profit (graph for illustrative purposes only) Actuals Reset Date Forecast Cumulative Profit X WIP write down @ Reset Date Y Profits continue to be
Slide 12: Capital management
Capital management Balance Sheet • Balance sheet remains strong For personal use only • Net cash A$49 million at 30 June 2016 (unaudited) • FY2016 A$75 million cash flow pre-dividends and debt reduction (unaudited) • A$221 million of cash and A$(140) million of infrastructure debt at 30 June 2016 (u
Slide 13: Group guidance
Group guidance For personal use only FY2016 • EBIT A$(116-121) million loss after accounting for write down of work in progress (unaudited) • Revenue A$1.3 billion after accounting for write down of work in progress FY2017 • Revenue A$1.4 billion • EBIT A$45 – 55 million @ USD / AUD 0.73 • FY2017 fo
Slide 14: Questions
For personal use only Questions 14
Slide 15: Disclaimer
Disclaimer For personal use only David Singleton Chief Executive Officer Greg Jason Chief Financial Officer Telephone: +61 8 9410 1111 For further information visit www.austal.com Disclaimer This presentation and any oral presentation accompanying it has been prepared by Austal Limited (“Austal”).