Austal Aktie

Thank you for standing by, and welcome to the Austal Limited FY '26 Half Year Results Call. [Operator Instructions] 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 half year results call. I'm Paddy Gregg, the CEO, and I'm joined by our CFO, Christian Johnstone. 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 to allow time for questions.

I think it's been a very exciting half for the company. 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 2 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. And 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 is 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 detail 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 5 shipyards in 4 countries with 8 service centers in 4 countries, 76 ships under construction or scheduled, 64 vessels under sustainment contracts. And importantly, we've continued 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 2.

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, Christian 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 Landing Craft Medium and Heavy contracts. We also signed 2 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 growing in line with forecast as new programs move from design phases into construction with a big increase compared to the previous corresponding period. It's really encouraging as the legacy programs start to tail 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've put a slide in the pack where you can see the progress on MMF3 and Stage 1 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 an 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 the 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 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 defense 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.

Turning to Slide 8. It's my pleasure to present Austal's FY '26 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 NPAT, which represents the results from the focused efforts of our employees across the group to construct and deliver ships, submarine modules, sustainment 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 2 key infrastructure growth projects in the U.S.A., which have a combined spend of more than $1 billion. The order book is at 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. U.S.A. shipbuilding increased 29% based on increased revenue from the OPC, T-ATS, 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 T-ATS and AFDM programs.

Whilst the company is in ongoing discussions with its sole customer in the U.S. 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 programs, 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 programs. Further details appear in the notes for the half year report.

U.S.A. 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 continued its growth with an increase of 83%, which has 2 key drivers being the appointment of Austal as the Commonwealth of Australia's sovereign shipbuilder and the work performed on the first 2 key contracts under this umbrella being the Landing Craft Medium and Landing Craft Heavy contracts with the Australian Army.

In addition, the work completed from our Asian shipyards was a strong contributor to this performance. The Australasia 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 centers.

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 2 Landing Craft programs and the commercial shipbuilding activities progressed by our Philippines and Vietnamese yards.

Australia 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 EMS programs, the earlier stages of the windup of the OPC and T-AGOS programs and from 2 onerous contracts that continue to dampen margins. The U.S. support business results were steady in the 6 months. We continue to see strong contributions from the Advanced Manufacturing Center of Excellence facility in Danville.

Turning to the segment breakdown. We are now at 96% defense weighted across the group and with the growth in Australasia business, with the geographical contributions are nearing a 70-30 split between U.S.A. and Australasia. On a segment basis, the Shipbuilding segment continues to report tight margins as a result of 2 onerous contracts we have in the U.S. 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 6-months 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 2 onerous contracts we have in the U.S. and the late receipt of customer payments. As I highlighted earlier, the trade receivables is $211 million across the group, and the collection of this could have significantly impacted this position. This will be a key focus for management in the second half.

I'll now hand back to Paddy.

Thanks, Christian. And so focus on strategic outlook. In summary, our key growth pillars are increasing defense expenditure, and this is going to continue to drive positive momentum in the medium-term. We have revenue and earnings growth with the underlying business performing well. And as Christian pointed out, it is especially pleasing to see the Australia business contributing so significantly on the back of the strategic shipbuilding agreement and the associating contracts and all of that work starting to come online. And then also the commercial business as well. No drag from that business and some very exciting projects that we're building there.

The order book of $17.7 billion has grown significantly to the record high that we have today. And as I said earlier, that gives us certainty of work for the next decade, a position we've just never been in before as a company. And the greater diversity in the contracts will lower the overall risk profile of the business. We're making significant CapEx investments, and those projects are performing very well. That will enable further growth for the company and increase our capacity and capability.

We've got additional opportunities to grow on top of what we're talking about today. The AUKUS agreement, the submarine modules, the technology business, and generally, the world becoming a less safe place is a good time to be in defense shipbuilding. We're capitalizing on those defense spend trends, both in the United States and in Australia. And I think that trend will continue. So overall, the business is performing well and executing the strategy we set out 5 years ago.

So with that, thank you, and we're happy to open up for questions.

[Operator Instructions] And your first question comes from the line of Pia Donovan of Argonaut.

Hello, Paddy and Christian. I just have one question regarding the margin. So obviously, the margins are slightly lower on a half-on-half basis. Just wondering, do you expect the current margins to be going forward into the second half? Or will there be an improvement back to those margins levels of last half?

Yes. Good question. I think the -- it was the U.S. shipbuilding business that was slightly lower than we wanted to be for reasons that we've talked about. But as those programs come online, we get stability in that business, yes, I absolutely see that returning. The U.S. has been a massive contributor to our earnings for the last few years, and they will absolutely get back into their stride. And it's been fantastic to see how well the Australian business has done. And the new contracts coming online, I think, are what's very exciting about earnings growth going forward.

Okay. Yes. Great. So yes, you said about the Australian business growing. Do you expect that trend to continue and the U.S. to also continue or remain relatively flat there?

No, I expect them to continue. As the programs really come online and the U.S. gets back into the strides, we'll be up into the 7% to 10% sort of EBIT range that we've often talked about, that is pretty common in defense shipbuilding.

And your next question comes from the line of Sam Teeger of Citi.

Hello, Paddy, hello, Christian. Well done in securing the Heavy Landing Craft. The pipeline now looks very good. I want to ask about cash. So you called out $105 million of milestone payments that didn't come through in the first half. Have they come through now?

Yes, they've come through now. But it wasn't -- obviously, the balance -- well, that's why there's a bit of spike in trade receivables. So that would have had a different earnings profile from the operating segments that they have come through. So yes, they've come through.

Okay. And in that cash flow number for the first half, is there tax [ REA ] money in there? Or does that come in the second half?

Tax REA is across the program. So there will be tax REA cash in the first half as well because it's earned through the progress of the whole 3 ships under that program.

Okay. And then what are you budgeting for cash at the end of the financial year? And maybe just as part of that, is MMF3 and FA2, are those construction projects? Like how they're proceeding versus budget?

So first question, we don't provide cash flow guidance. Second question, they're both in line with budget. Actually, MMF3 is ahead of schedule. So we had always said that that would open at the beginning of next financial year. Phase 1 is targeted to be open in the fourth quarter of this financial year. So look, if that comes to fruition, what we expect, then that's a phenomenal effort by the team in the U.S. to get that large growth infrastructure up and running. If we can then drive some earnings through that for the fourth quarter, that's going to have a boost to the business. So that's really pleasing.

But both are on schedule, on time, and then both are in cash flow and their budget cash flow around the cost of them. So we have significant cash. And you can see through our untapped debt lines, we've got a huge amount of debt capacity if we were to meet that for those programs going forward.

[Operator Instructions] And your next question comes from the line of Mitchell Sonogan of Macquarie.

And sorry, Paddy, I might have missed some of the detail, been jumping around a few different calls this morning. Just on the Landing Craft programs, do you mind just giving a little bit more color just in terms of timing and how that might ramp, particularly in the heavy, I guess, with the visibility you have now, over what time frame would you expect that to get to more of a, I guess, a steadier mature run rate in production?

Yes. Good question. So coincidentally, both the Landing Craft Medium and Heavy programs will cut metal towards the back end of this calendar year. So last quarter of this year. We are working through the Landing Craft Medium design and the Landing Craft Heavy design came slightly more mature as it's an existing vessel that is currently in build down and have built one of those before. Yes, so both of them should come online back end of this year and ramp up to steady-state production over about 18 months. And then as we delivered the Guardian Class program and the Cape Class program, we really want to establish a drumbeat and build those programs as efficiently as possible.

Yes. Thank you. And I know you just made a comment before about the 7% to 9% sort of target shipbuilding margin range over there in the U.S. Just in terms of the Landing Craft programs, I know you've had some high-level details you put out with the announcements about the strategic shipbuilding agreement, et cetera. But yes, is there anything at this point in time, high level you can provide us just in terms of how we should be thinking about margins on these contracts over time? Is it in that typical range that you target?

Yes, absolutely. Same sort of range and really driven by government procurement rules and what they find acceptable based on the risk we take in the contracts. So yes, both the U.S. and Australia are targeting to get into that 7%, 8%, 9% range.

Yes. And just one quick one for Christian. Obviously, you had the earnings guidance update back on the 12th of Feb, just with that incentive payment. And I'm not sure if you covered this during the general presentations before, Christian. But yes, do you mind just giving us a little bit more color, I guess, on how that came about and have they been checked to make sure there's no other particular issues like that on other programs?

Yes. Thanks, Mitch. That was an error. We're going through that, the half year close process with our auditors. And in the U.S. with one particular program, that is an onerous contract position. So it's a bit -- firstly, it's a little bit different from the run-of-the-mill programs that we have. And it was just going through that closing period and a review of the auditors that they had inadvertently double counted because of the requirements to then -- to book the revenue for -- the end revenue to the 6 months to December, but also the forecasted revenue over the program because it's onerous, we have to consider the revenue for the balance of the full program.

And it was just an inadvertent error. We are putting in additional internal control checks, program checks, and revenue across each of those programs in the U.S. to ensure that this doesn't happen again.

And you have a follow-up question from Sam Teeger at Citi.

Just on the $6.7 million of sub-module revenue, what EBIT margin would this be flowing through at? And whatever it is, would that be a good guide as to what we should expect from this going forward?

So it's a bit nuance what the answer is. That $6.7 million is related to the MMF3 program that we have. So it's a bit unusual. We have a contract to build a building. And so our delivery mechanism is the construction of that building. We previously put out a lot of guidance around what we expect the earnings and revenue profile for that. So look, in totality, that's a USD 450 million contract that will flow through the income statement. There's 0 cost related to it. So anything that's revenue recognized through that particular contract will then drop directly to earnings.

What's separate to that, though, and is not -- we don't separately disclose is the earnings that we have through construction of submarine modules in the U.S. That sits in as part of the segment around U.S. shipbuilding. So we don't split program by program out, but that's a very profitable part of the business right now and somewhat offset some of the margin compression we have on the onerous contracts that we have in the U.S.

And this does conclude our Q&A session for today, and I'd like to turn the call back over to Paddy for closing remarks.

Thanks, everybody, for joining us this morning and asking the questions. As always, we are transparent and happy to answer any questions you've got. So thanks for those of you that were able to get on the call today.

This does conclude today's conference call. Thank you all for joining us. You may now disconnect.

Good afternoon, ladies and gentlemen. On behalf of the Board, I'd like to welcome you to the 2025 Annual General Meeting of Austal Limited. How did you get in here? My name is Richard Spencer, and I'm the Non-Executive Chairman of Austal. This is a shareholders' meeting and only shareholders, their proxies, attorneys and authorized representatives are entitled to speak. The meeting is being webcast to shareholders who are unable to attend in person. As it is a webcast, virtual participants will be able to listen to the meeting, view the presentation materials, but not be able to ask questions or make comments or vote through the webcast facilities.

I'd like to introduce my fellow directors, who you can see at the table beside me. Lee Goddard, who's been on the Board since 2023; Kath Toohey, who joined us in February 2024 and is Chair of the Nomination and Remuneration Committee; Brent Cubis, who joined us in October of 2024 and is also Chair of the Risk and Audit Committee; Richard Gibb, who commenced in June of this year; and Sue Murphy, who just joined us in September of this year. And of course, Paddy Gregg, our Chief Executive. Each of our Board members is present and able to assist in answering any questions that you may have. We also have representatives from the company's auditors and external legal advisers present in the audience. Ladies and gentlemen, this is my second address to you as Chairman of Austal. When I stood here 12 months ago, I was just 4 months into the job. And it was taking over from long-standing Chairman, John Rothwell. Those were big shoes to fill.

As a result, my comments at that time were very limited to my preliminary observations, and I made a few remarks on where I saw the opportunities for this amazing company. I knew being Chairman of Austal wasn't going to be a lifestyle role or I wouldn't have taken it. But wow, it's been one hell of a ride for 12 months since I last took this podium, and we want to share that with you today.

There will be a slide in your fiscal year '25 results presentation, which Paddy will discuss when he speaks a bit later that details every major announcement that we made in fiscal year 2025. Not all of them, just the major announcements. And to our shareholder last year who complained about the font of the size of the slide, I apologize in advance because there's a lot on that slide.

It was a graphic designers nightmare because the slide is quite busy because the company has been quite busy. especially over the last 12 months. Busy developing the foundations for future success, busy closing out some of the issues from the past and busy building high-quality vessels and commercial ferries for our valued customers. Today, I want to expand on 3 of those events and what they mean to Austal and to you as our shareholders.

Just prior to our 2024 Annual General Meeting, Austal announced that through General Dynamics Electric Boat, the U.S. government was investing $450 million or AUD 680 million to build module manufacturing facility #3 as Austal was to expand our role in manufacturing for the U.S. submarine base. MMF3, as we love to caller, will provide 392,000 square feet. That's close to 36,500 square meters of indoor manufacturing space.

The U.S. needs to increase the delivery rate of the Virginia-class submarines from its current rate of 1.2 submarines per year to the required production rate of 2.3 per year to meet the U.S.'s commitment to AUKUS, including the transfer of submarines to Australia, while also fulfilling its own domestic needs.

Outsourcing modules is the key strategy in the United States for employing speed to enhance the production rate. When MMF3 is up and running in late '26 or '27, it will be a case of when, not if contracts flow to Austal to build more modules for more submarines. To give you some perspective as to what that means for Austal, MMF3 will be capable of delivering up to 3 million work hours per annum, work hours which contribute to Austal's revenue and profits to deliver up to 14 modules a year.

Relatedly, in March of this year, we announced a successful $220 million placement and share purchase plan to fund the construction of Final Assembly Plant 2. And then in June, we announced a $488 million debt refinance with most of the debt also earmarked for FA2. That debt includes $160 million from the Australian government's Export Finance Agency. And it is truly great to have them on board, and it further demonstrates support from Canberra, and I'll speak about more of that later.

FA2 is larger than module manufacturing Unit 3, coming in at more than 400,000 square feet or 37,500 square meters with a ship lift that can launch new build U.S. Navy and U.S. Coast Guard vessels and also size for the capacity of an Arleigh Burke-class destroyer, the T-AGOS submarine sweeper and it can handle the length of a Frigate. We plan to assemble modules for the Offshore Patrol Cutters and Ocean-going Surveillance Vessels, i.e., the T-AGOS in final assembly Plant 2. So it's crucial for our infrastructure -- in our infrastructure for growth. With the combination of equity capital, debt funding and future cash flow from operations, construction of FA2 is fully funded and is well underway.

The last significant announcement I want to touch on is the signing of the strategic shipbuilding agreement with the Commonwealth of Australia. The SSA, as it is known to us, appoints a new Austal subsidiary, Austal Defense Shipbuilding Australia as the Commonwealth's strategic shipbuilder for Tier 2 surface combatants at Henderson. The Tier 2 vessels, including Landing Craft-Medium, Landing Craft-Heavy and general purpose Frigates with Optionally Crewed Vessels are in the mix.

Under the SSA, Austal will be the prime contractor for Landing Craft-Medium and Landing Craft-Heavy. And then provided we perform and the Henderson Precinct is consolidated, we will build the Mogami-class general-purpose Frigate and Optionally Crewed Vessels. The importance of the SSA cannot be overstated. Subject to our performance, it has effectively announced Austal as the shipbuilder of the aforementioned vessels for the next 20-plus years, providing outstanding forward visibility of our production schedule and potential order book in the tens of billions of dollars when those programs are all combined. And it provides longevity for shipbuilders, ship designers, fabricators, fitters, all looking for long, successful careers in the Australian shipbuilding industry. It is a terrific agreement for all parties.

The Board, management and I are extremely conscious that contract announcements, SSAs and capital work announcements are fantastic. But if they don't ultimately generate value for our shareholders, then we must question their real value. I'm pleased to report -- I was pleased to report in August that our fiscal year 2025 earnings before interest and taxes had doubled to $113 million, and our profits had increased fivefold to $90 million.

In addition, our contract wins have outpaced the work performed. So our order book, inclusive of options grew to $13 billion. It was a great financial success, which reflected the hard work of ship designers, builders, commercial and finance teams as well as our executives to execute on the base that they had established in previous years. And the base we are establishing now will underpin future positive financial results. While it may be challenging to repeat the same rate of earnings and profit that we have in fiscal '26, there will be growth nonetheless, which Paddy is going to provide you more insight after I speak. While it's not an Austal-specific topic, every time I'm here in Australia, I get the question about the United States commitment to AUKUS. I'm on the record of saying I truly believe that AUKUS is some of the best state craft that has been put together in the past 70 years, circling 3 tremendous allies.

And certainly, President Trump's recent statements on AUKUS, when Prime Minister Anthony Albanese he was in D.C. 2 weeks ago, indicates that the United States remains firmly committed to AUKUS and removes a lot of questions about the studies that have been underway. And I must say there's been a lot of focus on the politics of AUKUS, but little on how it positively impacts on the ability of U.S. and Australia to defend their nations.

One of the key areas impacting naval battle strategy is how long a vessel can remain on station before it needs to be resupplied. Some facts. On sailing times alone, the journey to free metal from the South China Sea is approximately 1/3 to 1/2 the time taken to transit back to the West Coast of the United States. And then that figure is the same on the return journey. This massive advantage in any Asian engagement, and that figure alone is a reason enough for us to continue backing AUKUS. When you combine that fact with other strategic and operational rationale, I think it's safe to say that AUKUS is here. And the expanding role that Austal can play in AUKUS is on our shoulders, and we will take advantage of it. That said, Australia should not be complacent either.

The pace of progress in Australia to increase its force posture has been slow. And while there are various reasons why that inertia exists, it exists nonetheless. As the saying goes, no Snowflake feels responsible for an avalanche. So while most of these delays are likely to be individually justified, the net effect is that programs that should be underway to equip Australia's armed service men and women with the infrastructure they need to defend this nation and contribute to Austal -- beg your pardon, Australia's strategic position across the region, AUKUS and the globe remain in the planning stage when they should be in the build stage.

In addition to impacts on our frontline troops, geopolitics, defense and AUKUS, the delays also impact prime contractors such as Austal in terms of labor requirements, revenue and even ability to meet our ESG commitments. Supply chain participants are also impacted. Those who've been gearing up to partner with us, those that have been installing new equipment, purchasing their own long lead items and expanding their workforce are at risk. So it's time for Australia to pick up the pace and to match the pace of our allies as well as the pace of our adversaries.

Back to Austal. Before I finish my address, it's important to note that there is a significant change to the composition of the Board members seated in front of you today. But most markedly, for the first time in the company's history, Austal Founder and former Chairman, John Roth isn't sitting up here. John retired from the Board at the start of September. Ending his formal association with the company that he founded 38 years ago.

As I said at that time, and I want to publicly repeat today, John has left an indelible mark on Austal specifically, but also shipbuilding in Australia, the United States and in general. His drive and commitment, his capacity to innovate, his fierce desire to build the best designed and crafted vessels using the best people and his seasoned business acumen are embedded deep in the DNA of Austal, and it will serve the company well as we go forward. Ladies and gentlemen, I feel it appropriate today to offer John Rothwell a hearty applause. And once some old faces have departed -- oh sorry, John, some familiar faces have departed. There are some new faces on the Board with the appointment of Richard Gibb and Sue Murphy since our last AGM. Both Richard and Sue possess important skills and are well round out our Board and have already hit the ground running, ladies and gentlemen, and making substantial contributions to the Board.

I want to thank them and the remainder of the Board for their hard, hard work. Thank you all very much. Lastly, I want to thank also staff. As I've moved about Austal's operations over the last 12 months, it has become abundantly clear that we have staff and management who are energized, smart, innovative and hard working. And as a result, they're delivering some of the most amazing vessels to our clients and to keep us safe as we go forward. I'm looking forward to the next 12 months as we build on the foundations that we have laid it. Thank you very much, ladies and gentlemen.

Good afternoon, everybody, and nice to see some familiar faces in the audience. So as Richard outlined, I plan to talk a little bit about what's happened last year and what's happening in the business today. Outline where I think the business is going, importantly, provide guidance around EBIT for the current financial year, and then finish with a new video at the end to help highlight some of the amazing things that are happening at Austal.

So I'm sure many people in the room are very familiar with Austal, but at a glance, last financial year, we did about $1.8 billion in revenue. As Richard said, EBIT pretty much doubled in the year and is progressing very well. Simply outstanding order book. For those of you that have followed Austal for a long time, you will know that a good order book for us used to look like $2 billion or $3 billion. [indiscernible] here with $13 billion, predominantly in the United States today, with Australia set to follow through the strategic shipbuilding agreement is really an amazing achievement for the team, and puts a whole lot of certainty into the business that we just have not had before.

So in the year, 7 ships ordered, and we continue to deliver with 7 ships. And that order book translates to 49 ships in construction already to commence construction. And we continue to see growth in the support business with 73 vessels under sustainment contracts, and an ability to keep growing that segment of our business as we deliver more ships, and we seek to invest in facilities that will enable Austal service ships that were perhaps not built by us.

4,700 employees, and again, big growth coming here in Perth with the strategic shipbuilding agreement and big growth coming in the United States with things like the module manufacturing facility and the big steel ships that we've won over there. So really exciting time for us, growing defense prime contractor with lots of opportunity ahead of us.

And if we look at the results we delivered in FY '25, those you can see that, that's greens right across the Board and some quite significant increases. So every financial measure that we find important and we report on, we improved last year, and this year is set to improve again. Indeed, with that order book, we've got the runway to carry on improving the financial performance through the revenue, through the profitability of the business for years and years to come. And that's based on what we've won or what the government have announced, that's not me standing up here being optimistic about what we could do in the future. It really is a phenomenal position that we find ourselves in.

So for us, it's important to keep delivering on financial expectations. We do that through delivering on our commitments in the shipbuilding and support world, keeping our customers happy. That translates into the financials to keep our shareholders happy. We're very focused on the long-term growth. We're building that sustainable growth in the business. You see it coming through the order book. We're ready to invest in facilities, now is the right time to do it.

We're getting tremendous support in the United States from the government to invest in facilities. And here in Australia, you have heard the Deputy Prime Minister, Richard Marles, talk about the levels of investment that they're going to make in the defense precinct, right where we are in Henderson, ready to deliver the strategic shipbuilding agreement and the ships that come with it. So really thinking about the long-term growth and making sure that we keep the shareholders happy, who have supported us for many, many years.

So that slide that Richard mentioned in his speech, '25 was just a phenomenal year. There are -- I can't even call out the bits I like the most because there were so many good things that we managed to achieve last year. Whether it was contract awards, whether it was delivering ships, whether it was cleaning up historical issues, some great additions to the Board, as the business continues to grow, we're adding strength and depth to the Board. And we're in a very good position to deliver on the strategy that we have set out in front of us.

And lots of ships coming, both in defense and in the commercial world. So great to see orders returning to the Philippines and Vietnam. Some really exciting ships in terms of lower emissions, green technology, technology that's very important in the commercial world tomorrow, that could be very important in the defense world in coming years, and Austal being able to demonstrate we're familiar with the technology. We've already integrated it. Defense, we're still a very good partner for what's coming in the future.

All of the order book growth underpinned by a couple of big successful financial events, and oversubscribed capital raising, and Christian leading a debt restructure as well, really setting the company up with all of the firepower it needs to go and execute the strategy and deliver on the order book that we have won.

And then even more announcements. Since we did results in August, fantastic to get the tax request for equitable adjustments settled and some USD 92 million payment that came with that settlement. So if you thought the company financials were in good shape at the full year results, we're on track to have another strong set of results at certainly the half year.

Export Finance Australia finalizing the loan. And what's really important about that, support from a government agency here in Australia for an Australian company to go and make investments in the United States. So building on that AUKUS theme, building on that relationship between the United States and Australia with great government support, whether it's the National Reconstruction Fund or whether it's Export Finance Australia, our links with government are as good and as strong as they ever have been, and fantastic to see them leaning in to support a great Australian company.

And of course, those of you who are like reading, we published our ESG report, quite an impressive report, I think, and all preparations in place and underway for integrating that with the annual report next year as will be required. So thinking about that ESG report, a lot of the focus for us is around emissions and what we can do. Whether that's the material we use to build ships in steel rather than aluminum as we move more towards defense, or whether that's some of the really exciting projects that we have underway with the VELA cargo sailing ship, or whether it's the GOTLAND vessel that will be the biggest ship we've ever built, an LNG, Hydrogen-ready vessel being built in the Philippines, a very, very exciting project for us and very pleased to win that.

So not only is it about green technology for us and lower emissions, sustainability in the business, technology we're putting in, the investment we make in people, some of the support we give through charity work and helping out local needy and good causes right across all of our facilities. This happens in Vietnam. This happens in the Philippines. This happens in the United States. This happens in Australia. We try our best to work with our community and be good corporate citizens. So again, in the report some really exciting details of that work that we do with the community and with charities.

So I often get asked, Strategic Shipbuilding Agreement. What is it? I'll talk about that in a minute. And why Austal? So in my mind, these figures speak for themselves. Our shipyard down the road here in Henderson, 269 ships delivered. And I think in the last 7 years, something like 38 ships delivered out of that shipyard at a time where no other ships really have been delivered in Australia, maybe 2 ships in the last 7 years or something like that, the OPVs with Lürssen.

But again, years late, way over budget, but Austal, with its incredibly skilled workforce, it's very strong core, we find ways to overcome problems, we deliver on our commitments, and that's why you see the volume of work. And I think that Australian presence, that United States presence, the volume of shifts we've delivered over the last 37 years, it becomes very obvious why the Commonwealth chose Austal as their strategic shipbuilder here in Western Australia.

So what does it mean? For me, this is one of the most defining moments in the company's history. This puts longevity and certainty. This makes a binding formal relationship with the Commonwealth of Australia. This gives us that 20-year look ahead across 4 classes of programs. So just an incredibly exciting time. And this is not all about Austal, the Commonwealth have entrusted us to work with the supply chain to develop the capability here in Australia in a really sensible way.

Starting with the Landing Craft-Medium, reasonably small, simple vessels building into the Landing Craft-Heavy, bigger, more complex, significant more tonnage and volume of work that goes into those. To make sure that Western Australia is then ready for the Mogami-class general purpose Frigates with Mitsubishi. So following that down select, you will start to see more and more media about Austal working with Mitsubishi. Austal being a strategic shipbuilder, working with Mitsubishi to build the first 3 vessels over in Japan and then bringing that technology, transferring it back here to Australia ready for the 8 vessels to be built here in Henderson.

So an incredibly exciting time. We have really gone all in with the Commonwealth. They have gone all in with us. We've given them a golden chair an option over the shipyard if there was ever to be a change in control that they did not like the look of. So just demonstrating that depth of relationship and that commitment we've made to each other. So it's going to be a very, very exciting time. And as I said, that strategic shipbuilding agreement really is a game changer for Austal here in Australia.

So what does it look like? Today, we're building evolved Cape-class vessels, and we believe that will continue. So we've got long lead orders for another 2 vessels in the defense strategic review and the fleet review that followed. They announced that they think 11 vessels are required for the Australian Border Force, have been a great customer of ours for years. We support their vessels up in Cairns and Darwin, and I would anticipate we get 2 vessels awarded every year. So that aluminum production line continues alongside what's coming through the strategic ship billing agreement.

Guardian Class Patrol Boats are coming to an end, 2 boats left to deliver. It's been an amazing program, started way back in 2015 or '16. Both have just popped off a production line every couple of months, and the team have really done a phenomenal job. Importantly, steel held vessels. So we have capability, we have had capability in steel for many, many years. So moving to steel vessels through the Medium Landing Craft, the Heavy Landing Craft and into Mogami, not something that concerns us. We're doing it today. We've done it for years. We're absolutely ready for it.

And I think most excitingly, building Mogami-class here, these are proper war ships. These are about 140 meters long. These are big complex vessels. So very, very exciting for Western Australia. And we don't have a picture of it because it hasn't been designed or not even a concept at the minute, but Optionally Crewed Surface Vessels. So if you're worried what we're going to do after 15 years, there is a program at the back end that has already been announced.

We've just never had forward visibility like this.

So there will be investment to be made. We think it will come from the government. They have announced they would like to be the owner of the Defense Precinct in the same way they are in Osborne in South Australia. And I anticipate, Austal will be the shipbuilder that's put into that yard to operate, maintain and build the ships in it. So not a huge amount of capital required for that program. But with the strength of the balance sheet, we've made it really clear to government that we are prepared to lean in.

We are prepared to invest in the long-term program. If there's things that we can do quicker than they can do, let's work together to get the right answer for defense personnel. Let's get these ships delivered, let's get the facilities created, and let's really cement the Strategic Shipbuilding Agreement.

Now if we look at Asia, I talked about what's happening predominantly in the commercial world. Again, a very exciting time. We've had some challenging years with our yards over there post-COVID and a lack of orders. But with the volume of vessels we've now won, we have tremendous opportunity to ensure these yards are profitable for years to come.

Commercial work will probably be a relatively small percentage, maybe 2% or 3% of our overall revenue of the company, just with how successful we've been in the defense and the support world. We have the capability. And as I talked earlier, having that ability to demonstrate technology integration in the commercial world and bring it into defense, I see it strategically important. When we've got the yards, when we've got the capability let's use them, let's win the work. It will all add to the bottom line, and that is something that's very, very important.

So again, you see a tremendous capability with the size of the facility we built some years ago. And then the large floating dock, we've got out the front of the facility that we predominantly use for launching vessels, but starting to use it to generate more revenue in the sustainment world as well. So vessels in that region that need support, we can bring them to our yard, we can lift them out of the water, we can do more sustainment work, all part of that strategy to keep growing all aspects of our business.

And then looking at what is the biggest facility we've got, Richard gave you some of the statistics around the sheer size of the buildings that we're building. These are going to generate tremendous revenue and opportunity for growth in the future, whether it's the ship lift you see there, whether it's the sheds that we will consolidate, the new steel vessels, predominantly the offshore patrol cutters and the T-AGOS vessels or the submarine module manufacturing facility.

The United States gifting us USD 450 million is again, unprecedented. I could use that word a lot in this presentation, but phenomenal capability that has been gifted to Austal. And again, it hasn't been talked about publicly, but I'd like to think this is as an AUKUS circle. So Australia has written a big check to the United States, funded by the taxpayers, to get access to Virginia-class nuclear submarines and SSN-AUKUS in the future. The United States has written a very large check to an Australian company, Austal, to build a facility that will build submarine modules that will go on the Virginia-class submarines that will then come to Australia.

So very important to us and very proud that we are a major cog in that wheel of AUKUS and helping support submarine production and what it can do for Australia. Obviously, fantastic for the revenue, the skills capability that we have and a good area of growth, and maybe something we'll look at in the future here in Australia. If we're doing it in the United States -- we are one company and we can transfer that technology and might give us more opportunities in the future.

So on the top right, you can see the start of the facility going up. The groundworks are done and any of you that have built will know that's probably the hardest bit of the job. So as the skeleton of the building goes up, the cladding goes up, and we will be working very hard to get that building as operational as soon as we can.

All of this underpinned by global defense spending. So a slide you can read at your leisure and not one that I'm going to take you through line-by-line, but rising political tensions, the world is certainly not getting safer every day. We've seen more conflicts than any of us would have anticipated and not the ones we were expecting. Big focus on modernization. So a lot of the Western world realizing that we have not invested in shipbuilding capability, shipbuilding capacity. And looking at most of the most tensious regions, absolutely, Navy is front and center of what our Armed Forces think is required to defend our nations.

Our big commitments to alliances. We talked about AUKUS. We've seen Australia exercising with the United States, with Japan, with the Philippines. We've seen Australia make a big commitment to Japan by choosing the Mogami-class. And it feels like a very exciting time for Austal in terms of how we're positioned with our facilities in Asia, our presence in the United States and of course, headquartered here in Australia.

So defense thematic has very much helped the growth of the company, and doesn't feel like it's going to back off anytime soon. These programs that are being committed to take years to build. The size of these ships that we're talking about are 2-, 3-year builds per ship, and governments are making commitment to 8, 5, 11 ships these are very long-dated programs. So capturing this work now, it's highly unlikely which will go away or change in the future. So just puts that longevity in the business that really, really excites us.

So for me, looking forward, a great set of financial results, really great performance last year and another strong performance anticipated this year. The order book underpins so many decisions that we can make. Whenever there's a year to look ahead, very hard to make serious financial commitments, that will take years to pay back. But with this long-dated order book, the company is committed to investing in what will be a very, very bright future. And you've seen some of the pictures of what we're doing in the United States and how we'll work with the government here in Western Australia.

AUKUS, we've talked about, just scratching the surface on that. Maybe today, we're building a few modules for submarines. You talk about AUKUS Pillar 2, which is around technologies and transfers. You'll remember from last year, we talked about the autonomous demonstrator that we did, the Sentinel, where we took an Old Armidale, put green room. Local company technology on that vessel was able to sail itself up and down the West Coast without anybody needing to touch the controls. Autonomy is a key theme of AUKUS Pillar 2 and as Austal, we've demonstrated both in the United States and here in Australia, we're ready willing and able. We have the capability. So when people decide what that technology, what that platform looks like, we're absolutely ready to go on it.

Brings us into other areas of technology. AUKUS Pillar 2, again, 3D printing additive manufacturer. We operate the United States Navy's Additive Manufacturing Center of Excellence, just outside Washington, D.C., a couple of hours outside Washington, D.C. Walking into that building is like looking at the future. Components that used to be cast in a dirty dangerous environment that would take maybe 18 months to complete a series of components. We're not demonstrating these things can be printed in a matter of weeks.

So when there's a real need for speed to capability, working with the U.S. Navy, we are absolutely demonstrating that technology. Austal is right in the center of it again, and that is another technology under AUKUS we will look to bring here to Western Australia. Again, that partnership with the government is something they very much enjoy, that we can learn the lessons, we can transfer the technology with what we've done in the U.S. back to Australia or what we're doing in Australia over to the U.S.

And the whole defense spend, we had a whole slide on it, but I don't see it going away anytime soon. And that leads me on to be able to give guidance for this financial year. I'm really pleased to say that we're putting guidance out at $135 million. That's actually record EBIT guidance that we're forecasting. Previous record was $130 million in -- back in FY '22.

So you see the strength of the company. You see the confidence of the teams and the Board. That record order book, the strategic ship billing agreement, the volume of work coming through in Asia, really everywhere I look in the business, I see performance, and I see opportunity for growth. So very pleased to be able to come to you today with our record EBIT guidance.

So I'll finish with a video and give you a bit of an insight into what's happening at Austal.

[Presentation]

Ladies and gentlemen, that represents the end of the LCS line, 19 ships produced, LCS 38 will be commissioned and handed over to the United States Navy at the end of this year.

Now it's time for questions. And anything that Paddy put up on the board. What I ask, if you have a question, could you please stand up? You'll be given a microphone. If you could state your name and then ask the question, we'll find you the appropriate answer.

[ Ann Prior ] Congratulations, Paddy, a wonderful result. And as a shareholder who's been on your register for 19 years, I have to say it's been a long time coming.

Just 2 questions, and one might be somewhat of a Dorothy Dixer. What's the difference if you've got emissions, say, from a like-for-like ships, one aluminum, one steel. What's the difference between them in terms of the emissions?

And the second question is, I've been reading quite a lot about the automotive industry in the U.S.A. that's been badly impacted by a fire in a large aluminum facility. So do you have any problems with supply chain of aluminum?

I'll hand that to Paddy.

Yes. So simplistically, and there's a couple of my senior engineers in the room who will correct me afterwards, if I get this wrong. Aluminum is about 1/3 of the density of steel. So there is a significant saving whenever you consider the force and therefore, the engine power and fuel required to propel a steel ship versus an aluminum ship.

So we see aluminum as a great product because it's lightweight, it's efficient in terms of its fuel use. But the less dense the material, these ships are higher in the water. So certainly, things like the LCS ideal on aluminum because they can get into much shallower ports. But going forward, some of the vessels and the roles that they will undertake, maybe both in the United States and here in Australia, have decided that steel is more appropriate for those vessels.

We'll carry on with the Capes as I talked about in aluminum. So the company will retain the capability to build in both steel and aluminum. And certainly in the future, when we think about autonomy and Optionally Crewed Vessels, and without that need for ballistic protection and that speed that could be so advantageous, we see there's a real opportunity for aluminum in the future.

And in terms of the supply chain, no, I don't think we've seen major problems with the aluminum supply chain. We use quite specialist aluminum, which only comes from a couple of places, marine grade aluminum that we use. So we're not anticipating any major supply chain issues at the minute. But as I said, we are moving more and more towards steel. So there would be less impact in the aluminum supply chain.

[ Rose Ferguson ] representing the Australian Shareholders Association. Representing our 16 shareholders today, representing about 249,000 votes. We'd like to congratulate Austal on a strong year and many, many highlights. Well done. We'd also like to express our sincere best wishes to John Rothwell for his retirement, and congratulate him on the legacy that he has left in Austal.

A couple of queries we do have. ASA members were disappointed this year that the equity raising in March limited the share purchase plan for retail shareholders to only 10%. And that, in fairness, the percentage should have been at least equal to the retail investor share proportion. Can you comment on why the retail investors were disadvantaged?

I think it's always a balance between the volume of shareholders and the ability of them to deploy capital. What was really important to the Board was that we did give the shareholders a chance to participate in that scheme, whether we got the percentage right or not, you don't think so, but it's a difficult decision, but the important part for us was that every shareholder could participate in the raise.

And there was a question you're probably sick of hearing, but it relates to Hanwha. We are still waiting on news about the FIRB approval. Do you have any updates? And should we have any concerns if approval is granted?

So we are not privy to any more information than you. We saw the treasurer make a commitment to make a decision in October, and we saw October come and go. So no, we don't -- sorry, September, it was. No, we don't have any insights. We've asked defense if they can give us any insights into time scales or the decision. And the answer is we'll find out when -- everyone else finds out when the treasurer makes a decision. So unfortunately, not much there to share with you.

Whether it goes one way or the other, I guess, for the last year, Hanwha have owned 19.9% of Austal, whether it's directly or indirectly, and we haven't seen any adverse effects on the company. We will continue to execute on the strategy. As you can see from the results, it certainly hasn't distracted us in any way, shape or form, and we'll carry on running our business. And if a decision is made, we will deal with that decision at the time and any consequence that comes from it.

I'd like to put a finer point on that, if I could. From the minute they announced their investment in Austal, Paddy and I sat down and met with the President of Hanwha Marine, who kept promoting the fact that he was after a partnership. And we asked him, could you please present to us the value add that you will bring to a partnership for Austal? To date, we have still not received one document supporting the value add of Hanwha to Austal. And I want your shareholders to know that we are working for the value with the shareholders. We will explore everything we can. In the case of Hanwha, we have heard nothing.

Please note our appreciation for the release of both the annual report and the ESG report at the same time this year.

Any other questions? Okay. I'll now move to the next item on the agenda, which is the directors' report and the financial statements of the company. The annual financial statements of the company for the year ended 30 June 2025, were released to the ASX on 29 August 2025. There is no voting on this item of business. Instead, shareholders have the opportunity to ask questions about those reports. Are there any questions? No questions.

We'll now proceed to the resolutions to be considered at this meeting. All resolutions will be put to a poll. However, there will be an opportunity to ask questions relating to each resolution before the poll is taken. I will ask a representative from the company's share registry to conduct the poll at the end of the meeting after all resolutions have been considered.

Resolution #1 is for the adoption of the remuneration report. The resolution is set out on the screen next to me, and I'll give you a moment to read it. I note that a vote on this resolution is nonbinding on the company. The proxies shown on the slide beside me have been received in respect to this resolution. Although I'm personally excluded from voting on this resolution, I will vote the undirected proxies I hold in favor of the resolution. Are there any questions regarding this resolution? Thank you.

We'll now move to resolution #2. Resolution 2 concerns the election of Richard Gibb as Director. The resolution is set out on the screen next to me. I and the rest of the Board recommend Richard's election as a Director of Austal. I will vote the undirected proxies in favor of the resolution. Are there any questions? Yes?

[ Rose Ferguson ] representing Australian Shareholders Association. While we acknowledge and respect the relevant experience of Mr. Gibb, we are concerned about having 2 nonexecutive directors from the same substantial shareholder, and subsequently, an additional non-independent non-executive Director on the Board. We will be voting against this resolution, but would welcome any comments regarding this concern.

In the light of the Board, we are looking for the best and most well rounded candidates to fill the role, and Mr. Gibb checks many of the boxes that we needed the expertise to fill. Any other questions? Thank you.

Resolution #3 concerns the election of Sue Murphy as a director. The resolution is set out on the screen next to me. I and the rest of the Board recommend Sue's election as a Director of Austal. I will vote the undirected proxies in favor of the resolution. Are there any questions? Thank you.

Resolution #4 concerns the approval of the employee share plan. The resolution is set out next to me on the screen. I will vote the undirected proxies in favor of the resolution. Are there any questions regarding this resolution? Thank you.

We'll now move to Resolution 5, 6, 7, 8, 9. Deal with the issue of share rights to some of the non-executive directors of Austal. At the last 5 annual general meetings, shareholders approved the grant of share rights to non-executive directors so that participating directors will be remunerated through a combination of 75% cash and 25% share rights. Resolutions 5, 6, 7, 8, and 9 seek shareholders' approval to continue the grant of share rights for the 12 months following this Annual General Meeting.

Resolution 5 concerns the approval of the issue of share rights to Lee Goddard. I and the rest of the Board recommend the approval of the issue of share rights to Lee. I will vote the undirected proxies in favor of this resolution. Are there any questions of this resolution? Thank you.

Resolution #6 concerns the approval of the issue of share rights to Kath Toohey. I and the rest of the Board recommend the approval of issues of share rights to Kath. I will vote the undirected proxies in favor of the resolution. Are there any questions concerning this resolution? Thank you.

We'll now move on to 7. Resolution 7 concerns the approval of issue of share rights to Brent Cubis. I and the rest of the Board recommend the approval of the issue of share rights to Brent. I will vote the undirected proxies in favor of the resolution. Are there any questions concerning this resolution? Thank you.

Resolution #8 concerns the approval of the issue of share rights to Richard Gibb. I and the rest of the Board recommend the approval of issue of share rights to Richard. I will vote the undirected proxies in favor of the resolution. Are there any questions concerning the resolution? Thank you.

Resolution 9 concerns the approval to issue share rights to Sue Murphy. I and the rest of the Board recommend the approval of issues of share rights to Sue. I will vote the undirected proxies in favor of this resolution. Are there any questions concerning this resolution? Thank you.

We'll now move to Resolution #10. Resolution 10 concerns the approval of issues of LTI Rights to Mr. Paddy Gregg. The resolution is set out before you on the screen next to me. I and the rest of the Board recommend voting in favor of the resolution. I will vote the undirected proxies in favor of this resolution. Are there any questions related to this resolution? Thank you.

We'll now move to Resolution 11. Resolution 11 concerns the ratification of the prior issue of placement shares in March of 2025. This resolution refreshes the company's 15% placement capacity. The resolution is set out for you on the screen next to me. I and the rest of the Board recommend voting in favor of the resolution. I will vote the undirected proxies in favor of the resolution.

Are there any questions concerning this resolution? Thank you.

I now direct that the poll will be held in relation to each of the resolutions. [ Lindle Weston ] from MUFG Corporate Markets, also share registry provider, will conduct the poll. I retain the right to make all final decisions on who may vote, the votes cast, and the declaration of the results of the poll. I asked [ Lindle ] to come forward and announce the directions in relation to the conduct of the poll procedures.

The persons entitled to vote on this poll are all shareholders, representatives and attorneys of shareholders and proxy holders who hold yellow voting cards. Please indicate on this card how you wish to vote by marking the appropriate square for resolutions 1 through to 11. You must mark either the for or against box for your vote to count. If you wish to cast some of your votes for the resolution and some of your votes against the resolution, you must write the number of votes you are casting in the for box, and again, write the number of votes you are casting in the against box.

The summary of votes cast for or against the resolution must not exceed your voting entitlement. If you are a proxy holder, a summary of the votes to which you are entitled has been provided with the voting card. If you only have directed votes, you need to do nothing other than submit the voting card. Votes at your discretion or open votes are shown in the column titled Votes Open on your proxy summary and can be cast at your discretion by marking either the for or against box. Once you have finished marking your card, please place it in the ballot box that is circulating the room. If you need assistance, please ask one of the MUFG staff walking around the room now. Thank you.

Thank you.

[Voting]

I believe all those persons who wish to vote in the poll have now done so. If there's anyone present who has not yet completed their paper poll collected by MUFG, please raise your hand. No hands present, everyone's voted.

If all persons have now voted. I declare the poll closed. I do not intend to keep the meeting open while the poll results are collected. Results of the poll will be announced to the ASX as required. There being no further business, I now declare the meeting closed, and I would like to thank you for your attendance.

I would now like you to join us for afternoon tea and refreshments. And also be advised, unfortunately, we must vacate the premise by 5:00 p.m. Thank you all very much.

Thank you for standing by, and welcome to the Austal Limited FY 2025 FY Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Paddy Gregg, Chief Executive Officer. Please go ahead.

Good morning, everybody, and welcome to the FY '25 Full Year Results Call. I'm Paddy Gregg, the CEO at Austal, and I'm joined by our CFO, Christian Johnstone. This morning, we'll 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 to make sure there's plenty of time for questions.

And for me, this really has been a transformational year for the company. We've seen important inflection points on earnings performance, the balance sheet reposition for major expansion in manufacturing capacity in the U.S., further growth potential in our near-record order book following the signing of the Strategic Shipbuilding Agreement yesterday. And so much of this has been achieved this year. We have added a slide in the published investor pack to try and summarize everything that has happened. We've had Board and leadership changes. We've turned around areas of poor performance. We continue to deliver on contracts and hand over ships. And I think this has really been recognized by our loyal investors with the re-rate in the share price.

So in my mind, the outlook is fantastic in both the U.S. and Australia. So I'm going to talk through where the business is today and then finish by giving you some more detail on where I see the outlook going. In the pack, we've got a couple of slides covering key facts. This is really just a summary overview of the business for anyone who doesn't know Austal. We operate 5 shipyards in 4 countries. We have 8 service centers. At the minute, we've got 49 ships under construction or scheduled with 73 ships under sustainment contracts.

Importantly, we've continued to add to the order book as it stands at a near record high. And this year, we received orders for 7 ships and also delivered 7 this year. Headcount is growing globally. We stand at nearly 4,500 people. And just a reminder, the vast majority of the work that we do is in the defense sector, and that will continue to grow relative to commercial shipbuilding going forward.

So if I jump straight into the financial highlights, we focused on delivering earnings expectations and increased guidance twice this year, which has been very pleasing. We're building sustainable growth as seen through the order book. That was predominantly in the U.S. and now to be followed in Australia with the signing of the Strategic Shipbuilding Agreement contract. This is all about us creating long-term value for shareholders as we've spoken about in previous years.

When I look at the results, I see greens right across the key financial measures, demonstrating strong business performance with year-on-year improvement and the foundation laid for growth. EBIT doubled from FY '24 to AUD 113.4 million this year, and that loss we saw in Australasia last year not only reversed, but the segment returned to profitable. Revenue is growing in line with forecast as new programs move from design phases into construction with a 24% year-on-year increase. This is encouraging as legacy programs tail off with the delivery of the last LCS vessel earlier this year.

The order book at AUD 13 billion secures revenue for years. It's also set to grow following the Strategic Shipbuilding Agreement and the award of the Landing Craft Medium and Landing Craft Heavy contracts, which will follow this year. Options that were previously announced are being converted to orders as we forecast like OPC that we announced a few weeks ago. And there's also growth in the submarine module production and the commercial yards have signed order book and future potential for growth, particularly in the low emission space, demonstrated by the Gotland contract that we signed earlier this year.

Both the Submarine Module Manufacturing Facility, or MMF3, as we call it, and the final assembly sheds for large steel ships, final assembly 2 are funded and in construction to support future growth. And in the investor pack, you can see progress photos of MMF3. We delivered an excellent cash performance with net cash of AUD 453 million this year, which was underpinned by operational performance. We also had the equity raise and debt refinance, both of which were oversubscribed.

General Purpose Frigate down-select ahead of the anticipated schedule in December, I see as a real positive for us. I'm very excited about working with Mitsubishi on the Mogami class on what will be a strategically important program for both nations in terms of Japan's first defense export and the capability that it will bring to Australia. Let's not forget about the additional ABF, Australian Border Force Cape-class vessels that were outlined in the strategic defense review, providing additional opportunity for growth on top of what we've talked about in the Strategic Shipbuilding Agreement.

Thinking longer term, we've also talked about AUKUS and how Australia can benefit from Pillar 1 with the submarine modules we're already building and the growth that will come there. Pillar 2 is all about technology in both the U.S. and Australia, it's pleasing to see that Austal's technology business, including the Additive Manufacturing Center of Excellence in the United States, has started contributing to performance this year, and I anticipate that will continue to grow.

So again, for those of you that are looking at the pack, FY '25, the year that was, with so much happening in this financial year, I've included a slide in the pack to remind you of all that we have achieved. It's hard to pick favorites, but many of these achievements have been exceptional and making -- and in the making for some years. This reflects the hard work of all Austal employees globally and what they have achieved. As I often say, sheds don't build ships, and I'm very proud of the commitment of the workforce, their drive and their performance this year. Our people are undoubtedly our greatest asset.

Looking at the order book, for those of you who like to model bottom-up, we've included 2 slides in the pack on the defense contracts to try and help you. We haven't included the commercial vessels, but relatively fewer of these and our ASX announcements. I'm sure you've got the information that you need to create your models. It's really pleasing to see these commercial orders have returned following the challenging post-COVID period. And we're seeing those yards really start to ramp up in the future. Again, no drag from those facilities and great contribution coming. So with that, I'll hand over to Christian to talk through some of the financial highlights.

Thank you, Paddy. It's my pleasure to present Austal's FY '25 performance highlights and it's green across the board with all financial metrics improving. On Slide 9, you can see those results. And before we get into the details, the key message is that we had at least double-digit growth across all key financial performance metrics, revenue, earnings and NPAT, which represents the results of the focused efforts of our employees across the group to construct and deliver ships, submarine modules, sustainment services and additive manufacturing to our growing customer base.

We strengthened our balance sheet, had strong operating cash flow and have a robust cash balance, which positions us for sustained growth based on our backlog and pipeline. Turning to Slide 10 shows our revenue bridge. Group revenue increased 24.1%, which was solid across the group. U.S. shipbuilding increased 28% based on increased revenue from the OPC, T-ATS, and submarine contracts, which more than offset the near completion of the LCS and EPF programs. U.S. support revenue contracted by 9% due to the change in forward deployment of the LCS vessels, which reduced top line revenue.

Australasia shipbuilding has a 60% growth with 2 key drivers being the appointment of Austal as the Commonwealth of Australia's sovereign shipbuilder and the work performed on the first 2 key contracts under this umbrella for the Australian Army. In addition, the work completed from our Asian shipbuilding yards was a strong contributor to this performance. The Australasia support business improved by 27% due to the increase in servicing work driven by an expansion of the fleet sustainment activities.

On Slide 11, it shows our group EBIT movement. As previously mentioned, earnings more than doubled to AUD 113 million for FY '25. The standard year-on-year earnings growth was Australasia shipbuilding, which benefited from the work performed on the 2 Landing Craft programs and the commercial shipbuilding activities progressed by our Philippines and Vietnamese yards. The U.S. support business was -- which again delivered a strong improvement in earnings in financial year '25, benefiting from the contribution from the Advanced Manufacturing Center of Excellence facility in Danville.

The Australasia support business had a concerted focus on shortening the invoice cycle, which led to a significant 24% increase in earnings. 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 windup of the OPC and T-AGOS programs and from 2 onerous contracts that we substantially progressed in financial year '25.

On Slide 12 shows our segment breakdown. The year-on-year movement across the business segments were all green with an improvement in EBIT margins by 180 basis points across the group. The customer split is dominated by defense, which makes up 97% of our revenue. When analyzing the geographical split between U.S.A. and Australasia, it shows a significant improvement of our Australasian business, which contributed to the overall group margin improvement.

On Slide 13 shows the balance sheet. The group balance sheet strengthened by over 30% to AUD 1.3 billion, which was driven by the receipts under the submarine capacity expansion contract with General Dynamics Electric Boat, the proceeds from the capital raising, the repayment of the short-term debt facility and the improvement generated from the doubling of earnings. The group has a significant cash balance of AUD 583 million, which positions us to deliver on our capital and operational growth projects.

On Slide 14 shows our group cash movement. We have prudently focused our group cash resources to invest in our business to expand our capacity to deliver expanded production to deliver the order book. The key highlights is the significant cash flow generated from operations of over AUD 400 million, which enabled the repayment of AUD 40 million of debt and the investment of AUD 146 million in enhancing capital expenditure. The net proceeds from our successful and oversubscribed capital raising of AUD 250 million positions us to deploy significant infrastructure expansions to underpin increasing production of submarine modules and to deliver large shipbuilding programs to our key U.S. customers of U.S. Navy and U.S. Coast Guard. I will now hand back to Paddy.

Thanks very much, Christian. And so just before I conclude with my strategic outlook, let me touch on the Strategic Shipbuilding Agreement. I often get asked exactly what is it. So for those of you who have not read in detail our ASX releases, let me give you a short summary. It really is a defining moment for Austal. It establishes Austal Defense Australia as the Commonwealth of Australia's strategic shipbuilder for surface competent vessels to be built at Henderson here in Western Australia. It contributes to the Commonwealth's strategic objective of continuous naval shipbuilding capability in Western Australia and the development of Australian sovereign shipbuilding capability.

Austal Defense Australia becomes a prime contractor for the build and delivery of the Landing Craft-Medium and Landing Craft-Heavy programs. And in return, Austal is provided a sovereign share, which provides the Commonwealth with a call option over Austal Defense Australia if the Strategic Shipbuilding Agreement is terminated or a relevant event like change of control occurs. I'm sure we'll be talking about this for a long time to come.

So strategic outlook. I think in summary, our key growth pillars and increased defense expenditure are set to drive positive momentum in the medium term. We have revenue and earnings growth with underlying business performance ahead of expectations with near record AUD 113 million of EBIT in FY '25. The order book of AUD 113 billion (sic) [ AUD 13.1 billion ] has grown from a 25% CAGR from FY '25 with continued growth expected in Australia, specifically through the shipbuilding agreement, as I have discussed. And this will also deliver greater contract diversity, lowering the overall risk profile of the business.

We're making significant CapEx investment in facilities for growth, particularly in the United States, in Mobile. And I see additional opportunities for growth through the AUKUS agreement within both submarine modules and technological capabilities. We're capitalizing on defense spend trends that's anticipated in the U.S. and Australia and globally. And that's all in the face of growing global conflict. So a good time to be in the defense sector. The business is performing and executing the strategy we set out 5 years ago, and this really has been a transformational year for Austal. So with that, I'm happy to open up to questions. Thank you.

[Operator Instructions] Today's first question comes from Mitchell Sonogan with Macquarie.

Can you hear me?

Yes, loud and clear.

Paddy, just a quick one, I guess, like looking out into '26. I know you're going to provide an update at the AGM and expect some revenue and earnings growth there. But yes, do you mind just providing any color you can, particularly in the U.S. segment about how we should think about margins there, particularly in shipbuilding, obviously, a little bit volatile half-on-half. But yes, do you mind just giving us a little bit of color of how we should think about margins moving through ships, but also support given the high margin in the second half there? Yes, just talk to any factors there, whether any incentive payments, et cetera.

Yes, sure. So in U.S. shipbuilding, we had a little bit of a drag with some of the contracts remaining onerous around T-ATS and AFD-M. We're pushing very hard to resolve T-ATS in the near future. We've talked about this on calls that, that's been something we've been working with Navy on, and it's got to be a feature of this half. So taking away that drag. We think we're at the end of AFD-M and have full understanding of exactly where that's going to land.

So as we get through those programs, we should see the revenue increase, and we should see the profitability alongside it increase. We're coming through that transition phase. We've delivered the last LCS. So there'll be very little or no revenue from that going forward. And we're transitioning very nicely with -- actually the T-ATS program providing significant revenue contribution and really in full swing now. We've got the LCU program in full swing, we've got the OPC right into production, and you saw that we had the order for the second one. So those options being called off. So I'm confident about the U.S. business and growth in both revenue and profit going forward.

And over in Australasia, a much better result here, and it sounds like you've got good visibility into growing revenues. Can you maybe just give a little bit more color on the Strategic Shipbuilding Agreement? I guess I'm just keen to understand where the medium landing craft comes in and you really start to see revenue ramping up from that? And maybe likewise, just a broad update of what you can give us now of when we should expect to see the heavy contract finalized and when you expect that program starts to ramp up as well.

Yes, sure. So in terms of what we're at the minute, we've got Cape-class vessels under construction. We've got the last 2 Guardians under construction. We're working with Border Force on trying to turn what was announced in the Strategic Shipbuilding Agreement -- sorry, in the Defense Strategic Review into orders for additional capes going forward, which would provide a lovely baseload through the Australian business.

We're currently working on the Landing Craft Medium program. We've got an early implementation contract there with the Commonwealth of Australia. We need to, in the near future, turn that into a full contract that we'll be able to announce the -- all 18 vessels and the full value of the contract, but that is actually in play in the design phase at the moment.

And then the target for the heavy landing craft, if we can really get going on that, I'd hope to be in contract by the end of this calendar year. So those 2 programs would probably add the best part of AUD 5 billion to the order book this calendar year and really set us up for years of work with 18 medium landing craft and 8 heavy landing craft. So pretty exciting time. Australia really set to follow what we've done in the U.S.

And just a final quick one. Obviously, a lot of stuff happening over in the U.S. and the submarine module manufacturing facility is only just ramping up. But I guess, medium term over there, do you see opportunities to work with other prime contractors on maybe some of the other big programs you're seeing out there? Obviously, that's on the submarine program, but obviously, in the Destroyer Programs and things. I think it just feels like the U.S. is trying to ramp up as quickly as they can, and there's not enough capacity out there. So yes, do you mind just giving a broader update on, I guess, Austal's position in that and your conversations and how your view is on that medium-term growth opportunity in the U.S.

Yes, it's a great question, Mitch. Probably 4 or 5 years ago, we changed the strategy around only being a prime contractor to one where we will be much more flexible and where we have capacity capability, we will happily work with partners to keep our yard busy and deliver work. So you see that with submarine modules. You saw that with aircraft carrier elevators, little bits of the overload program on the medium-sized autonomous vessels. So it's absolutely something that we will do going forward.

And we see it as a great opportunity to support maybe things like destroyers in the U.S., the submarine modules, we're absolutely doing it, and we will continue to do it. Yes, so we are open to working with others. And I think it's a real good way to do it that you don't need to tie up an entire shed to consolidate a ship and modules are nice pieces of work we can fit around the programs that we are building in totality and priming.

So yes, there are quite a few conversations we're having in the U.S. about how we can use our capacity and capability. As you know, we've got space to expand there as well. So if we were successful in winning more module work or subcontract work working with others, we've got the ability to add both in terms of sheds and capacity and people to recruit as well. So it's absolutely a feature of our strategy going forward.

[Operator Instructions] Our next question today comes from Sam Teeger at Citi.

Firstly, congratulations, not only on the result, but more on how you've grown this business more broadly. It feels like yesterday, we're just talking about LCS and EPF and now there's so many different contracts, it's harder for us to keep on top of everything.

First question, I just want to dig into Australasia a bit more. The performance was strong, and you called out the benefit of SSA precontract work. Is it reasonable for us to assume there'll be more SSA-related EBIT in '26 related to -- sorry, relative to '25 with LCM and LCH ramping up? Or do you think these projects take a bit longer to get off the ground. And even when they do, the margin will be quite low for the first boat of each. Anything you can share with us around Australasia EBIT in FY '26 would be great.

Thanks, Sam. Yes, I think at a high level, there's been an exceptional performance this year to double EBIT from last year. So I don't think any of you would be surprised if I said don't expect us to double it again. That's not a trick that is possible. But with the stability we see going through the commercial yards and with the stability in the Australian yards through the strategic shipbuilding agreement, I don't think there's much risk of us going backwards.

We recognize profit in line with revenue. And the Landing Craft Medium ships are relatively low risk in terms of their complexity. So I would hope that we will be reasonably consistent in terms of how we trade profit. So as we see the revenue grow, we should see the profit in the business grow. So I would hope we're not going backwards, and we've got the opportunity just to keep a nice steady growth over the next few years as these programs all come online.

Okay. Great. And then Support had a great result and that AUD 500 million target, which initially seemed like a big stretch now seems probably too conservative. I am conscious that Support EBIT has been lumpy over the years. Is there anything that could surprise us with Support in FY '26? Or should we expect ongoing growth in Support EBIT from the AUD 88.7 million from here?

Yes. I think we were slightly ahead of that AUD 500 million target last year, and you saw not quite as big an increase this year. There are a few things that are happening in the business. In Australia, as we deliver more ships, there's more opportunity to win work. Things like the early Guardian-class ships that we delivered are now starting to come into 5-yearly maintenance periods, which brings increased revenue. So we're having a good look at what we can do with our Cairns facility and potential for investment to capture as much of that opportunity as possible.

The last LCS just being delivered, we're still delivering EPF vessels. So we're very much looking in the U.S. about where those LCS ships are being deployed and where we should target our maintenance facilities and people to capture as much work there as possible. We're still working to get the floating dock operational in San Diego, and the team over there have made some great progress this year, and that should be operational mid this financial year, which again gives us another opportunity for increase.

Yes, you're right, Sam, you've been on the journey long enough that you recognize that sometimes there is a slight lag between the revenue that we generate from shipbuilding and when we can actually recognize the profit based on sometimes you've got a lot of information to provide post the physical work, which does see some disconnect between profit and revenue. We work very hard to address that. There was a lot of focus on that in Australasia this year.

But longer term, we do see Support work as lower risk. We're not designing, building for the first time, commissioning and proving that we've met the design requirements. A lot of maintenance work is remove and replaced. So it's still a segment that we want to try and drive because we think with that less risk, there is an opportunity for more profitability in that sector, and we'll continue to push that.

And last question. On Slide 17 of your presentation, it's the map of Mobile and what you have on the land there. In the middle, you have this Submarine Industrial Base. Just confirming this is not owned by Austal. And is this something you'd like to acquire? And what's the reference for the USD 152 million?

So we announced that, I think, back in December -- September last year. And that was really the U.S. Navy purchasing what was formerly the Alabama Shipyard, now known as the Mobile Naval Yard. They have a great desire to increase shipbuilding capability and capacity in the Mobile area. We think we've got access to land as is seen there. We think we've got access to people and a real opportunity to try and increase defense Navy capacity that you read about in the press every day.

So that is -- I don't think we want to own it, but that is absolutely an opportunity for us to expand. That's exactly why that site has been secured by Navy to make sure that no other industry goes in there. So it's a future-free option, the way I look at it, that if we see sufficient work out there, there's land available that we can invest in. So it's just -- it's a great insurance policy for the future.

And sorry, just last one, just given the amount of work that you are winning, can you just talk and compare Henderson versus Mobile in terms of how many people you have now, how many people you need to be able to deliver on all this work and which region is easier and which one is harder to get all the people?

Yes. Good question. And interestingly, there's a lot of similarities between our strategy for increasing both in Mobile and here in Henderson. Both facilities probably need the best part of 1,000 people over the next few years, driven by submarine modules predominantly in the U.S. in Mobile. And here, it will be when Landing Craft Medium and then Heavy start really coming online in the next couple of years.

Our recruitment strategy has been around making the best use of our shipbuilding capability, our 37 years of history, our 360 ships, that real strong shipbuilding core that we've got. We're big believers in bringing people in at the bottom, training them up, both in terms of shipbuilding skills and capability, in terms of culture, in terms of expectations from the customer, really getting those people in and getting them shape the way we want them to shape and then promoting from within. So giving our employees a career, giving them the opportunity to progress at Austal without the need to go away, try other things.

And the fact that we're bringing people in the bottom and promoting from within helps prevent major wage growth. I think if you're bringing people in sideways, everybody wants to back to move, so you can very quickly create your own internal inflation. So that is the strategy we will adopt both in Mobile and here in Henderson.

In both yards, we've been slightly higher in terms of overall numbers than we are today. And it looks like there are people that are available and becoming available as they leave school as youngsters or indeed people who want to come back and enjoy a slightly different quality of life than the likes of the mining sector gives here with the fly-in fly-out lifestyle. So I'm not saying it's going to be easy. We know what we want to do. We know how we're going to try and do it. We just now need to go and get after it and make it happen.

And our next question today comes from David Fraser at MST Financial.

Can you hear me okay?

Yes. Thanks, David.

Three or four questions, if that's okay. Obviously, with the Landing Craft Heavy and Medium, where are you going to build them at Henderson? And the CapEx associated with that, I think I led to believe that it was going to be funded by the government. Is that still the case?

Yes. So Landing Craft Medium fits very nicely in our existing facility, 100 Clarence Beach Road, down in Henderson. So that may require a handful of millions just around specifics for that steel fabrication and those landing craft. So nothing that gets us particularly stressed. We're working with the Commonwealth now on what the right build strategy for the Landing Craft Heavy is. They are probably too big for our existing facilities. But as you remember, Richard Miles, the Deputy Prime Minister and Defense Minister announced AUD 127 million study that is underway around the defense precinct, what that looks like and where vessels like Landing Craft Heavy will be built. So we are working with them.

It's our understanding that they'd like to create a defense precinct in the same way they did in Osborne, and that is something that they would like to own and therefore, fund. So I don't think there will be a huge need for our capital. But at the same time, if the opportunity arose for us to be masters of our own destiny, find the right site, invest in it, backed by these government contracts and we could get the return on it, it's certainly something we would look at, but it's not what we anticipate will happen today.

I'll jump to Christian, if that's okay. Christian, where are we at with the REAs, I guess, versus the provisions given that you seem to be progressing on all of those programs, I would have thought the REAs would come relatively quickly.

Yes. Thanks, David. Yes, we are progressing. We've got 3 ships that are progressing through the yard under the T-ATS Program. We continue to discuss with the U.S. Navy, have not finalized the REA, but have reflected the impact of what we expect the outcome to be in the financial statements as we've done in the past. I think when you kind of take a step back and look at the T-ATS Program, it's not materially changed the position from FY '24 to '25.

So the probably key thing on the settlement of the REA, what it does do is we kind of tried to allude to this that it is an onerous contract. So what's happened is there has been an operational cash flow drain from that program. But as soon as the REA is settled, we will have a significant cash investment because of the progress we've made under those ships to date. So that's probably something probably we think for the half year, we will see an REA settlement, which we will tell the market around what the quantum is, but it's more the cash injection that will come and effectively to recoup some of the onerous nature of that program, and we'll get a significant cash injection when that's finalized.

Are the REA -- potential REAs bigger than what you provisioned?

It might not -- it wouldn't be materially bigger. I think like everything, we have to be as accurate as possible and the current position that we have reflects our ongoing discussions with the Navy. So it might change, but it's not going to be material. If it was material, we would have had to take that into the position. So yes.

Jumping now MMF3, you got obviously USD 350 million. So you still -- you've received the remaining USD 100 million already. Is that correct?

No, no, that USD 100 million, so the kind of breakdown of the USD 450 million contract, there's 5 different milestones that triggers the cash payments. We've met 2 of them. So it means we've received USD 350 million and the USD 100 million to come is 3 different milestones, but they will be towards the end of construction. So it will be a bit of a delay before we actually get that extra USD 100 million in. Probably what's more important then is just to do the kind of cash flow profile.

So whilst we've had USD 350 million in from that contract, we've had to pay tax on it. So that's probably about USD 80 million because we're a large corporate user of a large taxpayer in the U.S. We pay every quarter. So the U.S. tax authorities follow the money, not the revenue recognition. So we've paid out tax on that already. And as Paddy mentioned, you've seen pictures in the pack, we've started expanding and deploying those funds to the construction of the MMF3 facility already.

So what we put in the presentation on the balance sheet, I'll just get, it's on -- if you can have a look on Slide 13. We've tried to give a bit of a flavor of out of the AUD 583 million we have at June '25, how much of that is represented from that MMF3 contract. And it's really USD 200 million. So when you take the USD 350 million take off tax and take off the amount we've already spent on the contract, housed within that cash balance at June is probably equivalent of USD 200 million.

On the accounting, you noted in the accounts that I think it was around about USD 6 million was in this year...

That's right.

WWith another USD 23 million next year, '26 or the current year we're in and USD 500 million to go over 8.5 years. Once you get that USD 100 million, once you finish completion at the back end of '26, I presume that USD 500 million will step up by another USD 100 million. Is that correct?

No, no, no, it doesn't. So what that represents is the totality of the USD 450 million contract. So what we've had to do because it's a 10-year contract, we're going to recognize that revenue and earnings, and there's no costs associated with that contract. So that will drop down to the earnings part of our income statement.

But what we've shown in that particular note is, look, there's a buildup and there's quite a significant step-up that you'll see in FY '25, it was only USD 6.2 million. FY '26, we expect, and it's a forecast based on what we expect to happen will be USD 23.3 million. And then the balance of the contract is -- has to be unwound over the balance of the 10-year of that's remaining. So 8.5 years, is about USD 59 million per year on average. So you can see like there will be a significant step-up once the construction has actually been completed.

Thanks, Christian. Last one, Paddy. The elephant in the room, no one's actually asked a question about it yet, Hanwha, where do you think the government is on FIRB. And then I guess the second part of it, with the setting up of the structure with the government involved in the golden share, et cetera. Who are your partners or potential partners for the Landing Craft Heavy and Medium? And how will they react work with Hanwha, if Hanwha actually got control?

Yes. Great questions, David. So as far as Hanwha is concerned, all quiet at the minute, we saw that the Treasurer made an announcement a few weeks ago at a press conference that he would make a decision on whether they could go to 19.9% in September. I didn't put a date on it, but we await his response, and we'll respect his decision. That's absolutely his decision to make. Once he's made it, we'll see what happens next.

In terms of the Strategic Shipbuilding Agreement and the golden share, if you like, that's really to give the Commonwealth certainty that they can deal with any situation. They've got -- in legislation, they've got 19.9% there for a reason. So on one hand, one could expect that they would be allowed to go to 19.9%, otherwise, what's the point in having that level set.

On the other hand, U.S. nuclear submarine modules just been appointed strategic shipbuilder. It will be really interesting to see which way he goes. But with a long-term partnership with the government here through the Strategic Shipbuilding Agreement, we will work hand-in-hand with them to get the right answer.

I think it's natural to assume that there would be some nervousness from the designers on these programs. So Damen on the Landing Craft Heavy and Mitsubishi on the General Purpose Frigate. Again, that's something we will work through with the Commonwealth. Owning 19.9% of the company does not give you access to any sensitive technical information. So I think it is a situation that we could absolutely manage, but no doubt it would cause some angst on the way through.

There are no further questions at this time. I'll now hand back to Mr. Gregg for closing remarks.

Yes. Thanks for taking the time to dial in this morning, everybody. As you know, we've been on a pretty big turnaround for the last 4 or 5 years, and it's great to see this being such a transformational year for the business. We've got a lot ahead of us and a lot to deliver and a lot of opportunities to keep prosecuting. And we'll have the whole team focused on making sure we do that and delivering great results to our loyal shareholders. So thanks for your support and your questions this morning.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.