Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue increased by 35% to $80.6 million.
- EBITDA rose by 48% to $14.8 million, resulting in an 18.3% EBITDA margin.
- Gyro sales more than doubled to $12.5 million, driven by a strategic marine contract.
- Propeller sales reached $32 million, benefiting from increased capacity and reduced backlog.
- Defense revenue grew by 23% to $21 million, with significant contributions from the Collins Class submarine program.
Negative Points
- Non-recurring costs of $5 million related to a liver cancer research project were fully amortized.
- Initial costs of $0.8 million for the Sharrow engineering agreement impacted financials.
- Working capital increased due to high receivables and inventory levels at year-end.
- Cash balance decreased, partly due to repaying over $4 million in debt and investing $4.6 million in capital.
- The rollout of Sharrow propellers is expected to be slow, with significant sales not anticipated until after FY25.
Q & A Highlights
Q: How many Sharrow preorders had there been and how does this translate to likely orders in FY25?
A: James, I think -- I don't know the exact number right now, but it's at least 300. So we had I think we had 300 when we last gave the number which was a couple months ago, and that continued to come in sort of maybe a couple of weeks, something like that. So it's a pretty healthy book, and we're only going out to the ones that we've selectively picked at the moment based on trying to get a broad range. So the first four, for example, that we've got follow very different boats on location wise. We've tried to keep them close together, so we can actually feel very hands on as I explained before. But in terms of being able to turn them into orders, I think there's no reason why you wouldn't be able to turn all of them into orders or a very high proportion, but we're not going to be in a position to do in FY25. I think the rollout will -- as I said, the small-group now the second half we'll get into another phase which might be another 20 or 30, but starting to get into some volumes that will people will like-minded boats as one part of that. And in the second part of that will be another group of different vessels to see which one of those is going to be a priority because the Sharrow, it could look like at the moment is going to perform extremely well on some boats and well on other boats. So we're going to obviously go to the ones that are extremely well as the first rollout on depending on the boat characteristics. So I hope that answers your question. We're not expecting a massive year in terms of volume in FY25. The development process just has to take its time, or we're going to make a misstep and not get it right, which won't be good. So we've got to follow the right process to make sure the ones that we make are based on the right data and therefore they deliver what they're supposed to do deliver.
Q: What is the revenue opportunity on Type 26 frigates?
A: That's another difficult one to answer at the minute. It all depends on how many of the vessels they actually place on us. At the moment from understanding there's only one other supplier who can supply the props to them or to the program. And from the information we've seen up to date, there's in excess of 30 vessels in the program. But until we understand how much of that would come to us, we're not really able to put a number on that.
Q: Are the defense opportunities beyond Australia?
A: We are exploring that currently. With defense requirements in general, there's a number of hoops that have to be jumped through in order to get access to the type of information that we would need to manufacture. So we tried to get an understanding of what those hoops are in the different areas. We're definitely trying a strong push to get into the US supply chain on, but that comes with probably the most red tape around it. We anticipate that the agreements that are coming across with information with them, information sharing between the UK and the US that comes out of the August deal will help us cut through some of that. And similarly, we are partnering with a few Australian manufacturers to see whether collaboratively we can open up some of those channels. But to answer the question directly, yes, there's opportunities outside of Australia and yes, we're positioning ourselves to take advantage of those.
Q: Do you see sharp lines contributing to revenue significantly in FY25? Or will it take longer than now?
A: I don't know. We're actually tendering already. Part of developing a global supply chain for gyro has meant we're very well positioned to bring that supply chain to a focus on chart lines. So that's already in progress. And also looking at some of our -- looking at strategic growth and acquisitions, obviously, there might be some opportunities in that space that we're exploring at the moment.
Q: Can you confirm that the $14.8 million EBITDA is [arched] to the $1.3 million liver cancer insurer one-off costs?
A: Correct. So if you want to know the recurring EBITDA, you add those back on again.
Q: Are prospective customers taking interest in the new Mark II gyro range in consideration of the increased warranty?
A: Yeah. And one of the issues we've faced is a lot of the owners of gyro has currently have resisted plugging it into the Internet. And we found that -- as time has gone by, we find it extremely frustrating that it can take us several days before we get photographs of the of the alarm screens. So enable us to begin our investigation and process to work out root cause of what's going on. So by doing this, we really speed up that process. We can provide much better customer service to existing boat owners. So they're very excited about getting increased warranty, and we're very excited about getting information much faster than what we're currently getting at. So we're using is a bit of a hoop, saying, if you'd like a retrospective increase in a few gyros and a few years old, and you can take it out to five years, but there's a hook there's two hooks. You've got a heavy oil services up to date, which means we build our service book, which is really important. And we also get better feedback from the vessel. So the previous feedback has indicated that water and power supply by the vessel are particularly problematic. And these changes represent a thorough investigation and are really minor upgrades so to be able to and to be able to deal with a wider range of unusual circumstances that we find that we weren't really able to predict when the initial design phases are completed. So it's a real win for our customers, which is really good. But I think it's a big win for VEEM as well because we're going to be so much more efficient at what we do in the aftersales area.
Q: Success in your cost control measures described to say, can you please speak to the specifics of what levers you pull in FY24 and what is left to come if anything in FY25?
A: Yeah, I think the efficiency side of things it comes about -- particular in repellents comes about in volume. We get a full -- better utilization of the resources, it is really important. So we find that we have to assume an image infrastructure in place to operate the propulsion division and you can feed more propellers, and it just becomes more and more efficient. So that was a big feature of that. But also I think Trevor and his team are working very hard to improve the productivity of staff. So we have unique measures. So their output was actually higher last year by a number of percentage points, which leads to a significant increase as well. So I think it was a combination of those that was a big thing. Going forward, the
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
