Austal Stock

Good afternoon, ladies and gentlemen. Well, that's a little loud. On behalf of the Board, I'd like to welcome you to the 2026 Annual General Meeting for Austal Limited. My name is Richard Spencer, and I'm the Non-Executive Chair of Austal Limited.

This is a shareholders' meeting and only shareholders, their proxies, attorneys, and authorized representatives are entitled to speak. This 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 live and view the presentation materials, but not be able to ask questions, make comments or vote through the webcast facility.

I'd like to introduce my fellow directors, who you can see at the table. Lee Goddard, you could raise your hand, Lee, who's been on the Board since January of 2023 and will be put forward for reelection today. Kath Toohey, who joined us in February of 2024 and also Chair of the Nomination and Remuneration Committee. Brent Cubis, who commenced in October of 2024. Richard Gibb, who commenced in June of last year, and Sue Murphy, who joined us September of last year and Chairs the Risk and Audit Committee. And of course, ladies and gentlemen, Paddy Gregg, our Chief Executive Officer. Each of the Board member is present, is able to assist in answering your questions going forward. We also have representatives from the company's auditors and external legal advisers.

Austal shareholders, guests, ladies and gentlemen. When I stood in this position in 2025, I remarked at the high level of activity that occurred in the past 12 months. Well, to quote an American colloquialism, 2026 looked at 2025 and said, "Hold my beer, I'll show you activity." And the breadth and cadence of activity actually increased. Also when I stood here in 2025, we had just signed the Strategic Shipbuilding Agreement with the Commonwealth of Australia. And I said at that time, the importance of the SSA to Austal could not be overstated, because it effectively anointed Austal as the shipbuilder of Tier 2 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 combined.

That description was quickly franked 6 weeks later when Austal signed a $1 billion contract to build 18 Landing Craft Medium for the Australian Army. And then 2 months later, we signed a $4 billion contract to build 8 of the Damen designed Heavy Landing Craft here in Henderson. So that was $5 billion of new contracts for Australian construction in just 2 months. The benefits of those contracts for Austal are enormous.

Just to highlight, they fill our order book and facilities for the next 10-plus years. They provide see-through revenue visibility for the next 10-plus years. They provide certainty to invest in capital upgrades at Henderson. They give our employees the opportunity to develop meaningful careers with Austal. They offer opportunities for our supply chain partners. They give us the ability to showcase our skills and efficiency so that the future award of the General Purpose Frigate build program can be in Austal's grasp. It also strengthens Austal's position as a leading local employer and contributor to Western Australian and Australian economies.

We spent most of calendar year 2026 refining the designs for the Landing Craft Medium and getting into the minutia for the already mature Landing Craft Heavy design from Damen. Landing Craft Medium will be built at our existing facilities in Henderson. Modules for the Landing Craft Heavy will be built both at Henderson and our Hope Valley Road operations. The modules will then be assembled at the Common User Facility in the Henderson Precinct. Shareholders may have seen last week's announcement that the National Reconstruction Fund was contributing $245 million to finance the infrastructure required to turn the Common User Facility into a major shipbuilding facility to be used by Austal.

The next opportunity for us, ladies and gentlemen, is the Mogami-class General Purpose Frigate, which will be built in Henderson. Winning the contract to build is a significant opportunity for Austal and one that we'll be pursuing vigorously. Early discussions have been promising, and it's likely that this contract will be awarded in fiscal year 2028.

The other major development during the year, which has dominated investors' attention of late, has been the offer we received in February by Hanwha for the purchase of Austal USA's business. This was followed by a subsequent offer from Wildcat Infrastructure to purchase Austal USA from Austal Limited. The level of activity in Australia, the Strategic Shipbuilding Agreement with the Commonwealth, the associated Landing Craft Medium and Landing Craft Heavy contracts, and the Mogami opportunity, that I've just talked about, allowed Austal to view these offers in an entirely different prism than we would have 12 months ago.

Prior to that, the SSA -- pardon, prior to the SSA, a sale of Austal USA despite its contracting issues would have been difficult to entertain and harder to navigate, because the size and scale of the Australian business would not have been sufficient to support it as a continued listing on the ASX. But now with a $5 billion order book, 10-plus-year runway of work, and the opportunity to secure the General Purpose Frigate, Austal Australia can definitely stand alone as an independent financial organization.

Turning our attention to those 2 nonbinding indicative offers that Austal has received to sell the Austal USA business, Austal remains in negotiations with both companies. But I can say the Hanwha negotiations are significantly more advanced, as we announced to the marketplace October 14th that we have afforded Hanwha more time to submit a binding proposal offer. At this point in time, we have yet to receive that binding proposal from Hanwha. There's no guarantee that we will receive a binding proposal, but based on the negotiations that are occurring and the fact that we are down to discussing transaction documentation, I have confidence that it is not far away. Our October 14th announcement also noted that the negotiations were proceeding under the original parameters of the transaction.

That wording, ladies and gentlemen, is important. As it clearly signaled that after conducting significant due diligence, the original price range of $1.05 billion to $1.2 billion remained on foot and would be the basis on which the transaction documentation could progress. The Board will assess any final and binding offer, against the usual metrics used to assess whether the transaction meets the Board's requirement to act in the best interest of you, the shareholders. Austal USA is also a strategic asset that has much value. No other asset is available for a foreign shipbuilder to immediately become the United States' fifth largest military shipbuilder overnight, and it's unlikely to become again available ever.

In describing Austal USA as an asset, it's not limited to the land and infrastructure at Mobile, Alabama. It's the contracts it possesses now, the contracts available to it in the future, our role in accelerating the delivery of strategically crucial nuclear U.S. submarines, and the ability, skills and workmanship of the 5,000 men and women in Mobile, Alabama that deliver high-quality ships and submarine modules on a regular cadence to our key partners. Austal, if you remember, was the first international shipbuilder contracted to deliver vessels for the United States defense force. Our shipyard in the United States was established in 1999, and we have invested considerable capital and technology, effort over nearly 3 decades to build the business, where it stands today.

But at the same time, we have acknowledged that the U.S. operations lost a significant amount of money in fiscal year 2026. The contracts are onerous, and the Request for Equitable Adjustment process, which is to receive money back from the government for our efforts, is a long and uncertain road. We had hoped to negotiate accelerated contractual relief instead of going down this formal REA process. But earlier this year, to our question, the Department of War indicated that they would not agree to that, at least the time being, and it narrowed our options to go forward. This was obviously disappointing, but it's important to also note that Austal's contractual right to be made whole for the numerous variations and for assuming the role of the lead yard instead of the follow-on yard for 3 different programs has not been disputed.

Only the process used to recover the variations has changed at this point in time. I want to acknowledge the work that our executive team members at both corporate headquarters and Austal USA have been working day and night to respond to the data requests, as part of the due diligence process in this effort. It has been a massive task that they have tackled historically. While our defense business has been in the spotlight, I do want to shine some light on our smaller commercial ferry operations in both Vietnam and the Philippines. The trend towards the construction of low and in some cases, 0-emission commercial ferries is now well established.

This is evident in our build of a 130-meter combined cycle hydrogen-ready vehicle passenger ferry for Gotland, Horizon X program, they call it. This high-speed RoPax Catamaran isn't just the largest vessel ever constructed by Austal. We are unaware of any other companies in the marketplace enjoying this highly efficient combined cycle propulsion system for high-speed aircraft anywhere in the world. The construction of a 67-meter wind-powered trimaran for Vela is a next-generation cargo ship, designed to slash emissions on transatlantic routes. It has been engineered to operate on 100% wind propulsion, supported by solar generation and a hydro generator to transport high-value, low-volume cargo, which will include cosmetics and luxury goods across the Atlantic Ocean.

These are important contracts, and they're important trends. I look forward to the continued contribution from that part of the Australasian business. Paddy will go into our fiscal year 2026 results in more detail, but I think it's important to acknowledge the following: for the only second time in Austal's history, revenue topped the $2 billion mark in 2026. As explained earlier, contract issues in the U.S. meant that we didn't drive the earnings we should have from the revenue figure. So our operations there incurred a $173 million earnings before interest and tax loss. However, the $62 million a (sic) [ $85 million ] EBIT recorded by Australasia was 72% a (sic) [ 137% ] higher than the previous corresponding period.

Australasian profits will be increasingly relevant going forward, particularly if the Austal USA business is divested. So when we put it together, the group reported a loss of $112.8 million a (sic) [ $125 million ] at the earnings before interest and tax level, and a loss of $106.4 million after interest and tax. Austal does retain a robust balance sheet and liquidity position, and significant cash at the banks and undrawn debt facilities of $435 million, which provides significant liquidity to support ongoing operations and growth embedded in its excellent order book. There was a large expected cash spend in fiscal year 2026, as we progressed on our 2 largest expansion programs in Mobile.

The build of final assembly plant 2, which we call FA2, will service vessels such as the Offshore Patrol Cutter, and Module Manufacturing 3, which is solely dedicated to submarine modules. These will be tremendous assets for Austal USA now and into the future. MMF3 is already part operational, after Phase 1 was opened this past June. When completed, the building will support approximately 1,000 new jobs. As I've noted previously, our prime focus is ensuring that our employees go home safely every single day. Safety at Austal is nonnegotiable. Our medical treatment injury rate for fiscal '26 was in line with the prior year, while it was pleasing to see that the lost time injury frequency rate declined after an unexpected increase the year before.

On behalf of the Board, I want to thank each and every Austal employee for their contribution to our company, without them this would be impossible. And I'd also like to thank you, our shareholders, for your ongoing support. I'd also like to thank our customers for recognizing our capabilities and the talents of our people and trusting us with their shipbuilding needs. As a former marine, I know more than most of the importance of a quality vessel to defend our nation's borders and protect those who serve aboard. Austal is absolutely invested in making sure we meet the demands of our customers to meet that mark.

At the same time, ladies and gentlemen, we also need to meet the requirements of you, shareholders, to build and sustain these vessels profitably. That hasn't occurred in 2026 for the reasons explained earlier. Know that the Board and management are 100% focused on returning Austal to profitability in 2027, and then growing our business from whatever form it might take in the future. Thank you very much.

And now I'd like to introduce Paddy Gregg, our CEO.

Good afternoon, everybody. So I'm going to take you through results from last year, a bit of an overview of the business, what's happening and then leave you with a video at the end, which highlights what's coming here in Western Australia. So I'm sure most of you will know this, but Austal at a glance, $2 billion of revenue, a fantastic order book, both in the U.S. and here in Australia, based on the 2 landing craft programs we signed this year. Gives us about 4,500 employees globally and 5 shipyards around the world. And why only 4 flags, as Richard highlighted, there's 2 facilities we operate out of here in Perth, the 100 Clarence Beach Road, that you all know and the Hope Valley Yard in the Naval Base.

So a good year of delivery, 32 ships ordered, 6 ships delivered and very important that we are delivering for our customers. The $16.5 billion order book corresponds to about 75 ships that are either under construction or scheduled for construction going forward. Not only are we building, we're sustaining ships in maintenance. So 78 ships that we're working on around the globe through 8 service centers around the world. Key locations, as I'm sure most of you are aware, head office here in Perth with operations in Brisbane, Cairns, and Darwin, doing maintenance, coverage with the customer in Canberra. Our commercial yards in Vung Tau and Balamban, in Vietnam and Philippines, and then maintenance operations in San Diego, the main shipyard in Mobile. Some smaller operations out of Trinidad and Tobago and additive manufacturing up in Danville just outside of Washington.

So lots going on around the world and continue to invest in the business. So the overview, Richard sort of talked through the highlights of this. Revenue increasing and will continue to increase going forward, based on the order book. So a very exciting time. There's growth in the business. Record order book, absolutely fantastic for us, very pleased with how that's looking. But with some of the challenges in the U.S. then, yes, the overall EBIT position is pretty unhealthy for the company, but really done to be as transparent as possible around due diligence on the Hanwha operations. So for me, the growth in the Australasia business is incredibly exciting, and the performance in Australasia last year was exceptional.

So my congratulations to the team that delivered that, and lots more to come. Really very exciting time for us as the revenue grows, the profit grows, the support business grows, record-level order book and all underpinned by that strong relationship we've got with the Commonwealth of Australia through the Strategic Shipbuilding Agreement, our enduring relationship with Navy, our new relationship that's performing very nicely with the Army, because the 2 landing craft programs get delivered to Army. And of course, the Australian Border Force with the Capes that we're still delivering.

So the U.S. business, we see that shipbuilding revenue growing, as the program options that are in the order book are exercised. The submarine module production facility is mind-blowing. I was in that facility a couple of weeks ago, when I was over there. We've opened Phase 1 of that. Phase 2 should open at the back end of this year, that will see 1,000 people building submarine modules. And remember those submarine modules are for -- some of them are for the Virginia-class submarines, that will be delivered to Australia. So a very nice feeling that an Australian company building bits of the submarines, that under AUKUS will ultimately come to Australia.

Some challenges in the support revenue, as ships are deployed based on some of the conflicts we've seen around the world. And as Richard pointed out, we -- either there will be a transaction or we will focus on returning that business to profitability and we've got a lot of work to do with our customers on those contracts.

And again, Richard has talked about the Hanwha position, but sort of underpinning last year's results and overview of the business. You see it coming through the segments. Fantastic in Australasia, which is very exciting going forward. As Richard said, that gives us the confidence it truly can stand on its own 2 feet and we'll be in very good shape going forward. And then you see some of the challenges coming through the U.S. business. I really look at the business as 4 parts. We've got the shipbuilding bit of the business, which is having challenging times at the minute based on the contracts. But the maintenance part of the business, the additive manufacturing part of the business and the submarines part of the business still performing well, but shipbuilding being such a key part of it, a pretty challenging time.

Overall, the business is about 95% defense these days. We've stood up here for years and talked about ferries and where they've gone all over the world. But real change over the last couple of years in the business. So 95% defense, 5% commercial work these days. So that growth story in Australasia very, very exciting for us. We just expect revenue to grow year-on-year. That is based on the existing Landing Craft Medium contracts that have been signed. That sees us through the next 10 years. Getting into a General Purpose Frigate and negotiations there, that will be enormous. It could be in the $15 billion to $20 billion contract range. Biggest contract Austal would have ever signed globally.

So the team have embarked on that piece of work ready to submit a response to the Commonwealth in April 2028. And that could put 20 years of work into this business. Something we've never been able to talk about before. When I stood up here in years gone by, I've talked about maybe an 18-month, 2-year look ahead. To be standing here today, talking about the possibility of a 20-year look ahead is really very exciting for this business going forward.

Looking in Australasia, what's going on? We completed the Guardian-class program this year. That was an excellent program, 24 of those delivered to Pacific Island nations, really demonstrating steel capabilities, so our steel-hulled vessels with an aluminum superstructure.

The Evolved Cape-class program continues. We're still building Capes for the Australian Border Force at the minute. And just cut metal on the Landing Craft Medium project and indeed the Landing Craft Heavy project. So those are absolutely getting through the design, signed off as ready for start of construction. And then as I talked about moving into contract negotiations on General Purpose Frigate, and the picture down at the bottom is me and Gavin from our defense team over in the Mitsubishi Shipyard in Nagasaki in Japan. Just commencing that relationship and those negotiations with Mitsubishi.

Commercial world, some exciting and interesting stuff. The Vela sailing trimaran will be an amazing project. We've got some keen sailors in our business, that have never seen ships of this size and Gordon tells me he's ready to go to the top of the mast, if there are any problems. Good luck, Gordon. So aluminum ships, steel ships, high-speed ships. and yes, as Richard said, very exciting, the Gotland vessel, the 130-meter low-emission vessel, really exciting going forward.

Looking at defense over time, you can sort of see how far that order book is going to go out. The number of vessels, the volume that we've got, very exciting. Whenever we can build 18 vessels, we can really demonstrate how efficiently we can do that. 24 in the Guardian-class program, and we saw an excellent learning curve and our team is really getting used to how we build those. So very nice in the defense world, where we get multiple vessels, 18, 8, 8, 6, very nice business to have rather than the hard work in the commercial world, where we've got to go out and win one and win one. And no matter what I say to the sales team, it's a different design every time. So a lot more risk, but very exciting, and you just see that amazing growth in the order book and the backlog that we've got.

So recently, you would have seen announcements around the Defense Precinct. It's been a long time coming, but we are very pleased that they have announced the overall layout. So we will be building Landing Craft Medium in our existing shipyard up here.

We know in the future, we will be moving into a new build facility in this area. We previously announced that we had secured a Common User Facility for the build of the Landing Craft Heavy vessels. And good to see that the shipbuilding sustainment precinct that will be developed by the Commonwealth is right where we're building those ships. So there'll be a bit of a jigsaw, as we develop and build the shipyard while we deliver the Landing Craft Heavy program, but we've already started working with the Commonwealth in terms of what does that look like and a little artist impression of the existing Common User Facility main building with some of the new block building facilities, blast and paint facilities, that we will be establishing on that site to help deliver that program.

Looking at the U.S., submarine modules, very, very exciting for us, a real area of growth and an order book that we think will just continue forever. You have all read in the press highlights the Virginia-class programs are, how many submarines they are behind. We're very proud that we're a big part of that program and trying to help accelerate it. And indeed, the investment, the $450 million that's being invested on our site in a bespoke facility to enable advancement in submarine module manufacturing is a great opportunity for our U.S. team. Shipbuilding, 5 of the landing craft under construction, started work on the second OPC this year, and the T-ATS vessels still continuing.

As Richard said, some of these programs are pretty challenging, all based on the design information that we were supplied with. So while it's not going to be easy and it's going to take time, we believe we've got good contractual entitlement to get those contracts resolved and get that business back to profitability. The floating dock that we've talked about for a long time received its certification and has been used and is in use. So a good opportunity for us to keep growing the support business in the United States. And what does that order book look like? We finished the LCS program this year. That's been a great program with 19 of those ships delivered. We're on the last EPF vessel at the minute.

And then towing, salvage, and rescue vessels underway, LCU underway, T-AGOS still in design, Offshore Patrol Cutter underway, and the submarines modules underway. So again, good opportunity for us to recruit the people and grow the revenue in the United States, all based on orders that we've got today. Not me promising you that I'm going to go and win work and grow this order book. We see years and years and years of revenue growth based on how successful we've been in the last couple of years. Sustainment business, you see the bottom right, that is the new floating dock in San Diego. I can assure you that it did come back up after it went under, which is the main trick for these things.

And that should allow us to keep increasing that support revenue, both in the U.S. as we get more work through the San Diego yard with the floating dock and as we deliver more vessels to Border Force here in Australia. The number of Capes that are out there for us to look at is still growing. And technology, I always got one eye on the future, can't stand still. So I think it will be no surprise to you that we have a team looking at autonomous capability. Some of you may remember, we did a project with an amazing company, Greenroom, based here in Freo, and did an old Armidale vessel as an autonomous demonstrator for the Commonwealth. We are developing these proposals right now.

And the technology team and the research and development team very focused on what that looks like, because we think it's going to be a big part of the future. MARINELINK Prime, one of our existing products, making sure that we continue to develop these and our offerings are match fit and absolutely correct for customers going forward. And no surprise, we've done a lot of work with motion control over the years and leading the world in T-foils and trim tabs, et cetera, and algorithms that help keep ships stable at sea. So going forward, increasing defense expenditure, a massive order book and our strategic position is in an absolutely fantastic place. I think both in the U.S. and here in Australia, we see defense spend tailwinds.

The world isn't getting safer anytime soon. A lot of the geographies that these troubles are surrounded by ocean. So we think it's a great time to be in shipbuilding in the defense sector. That shipbuilding agreement with the Commonwealth is a wonderful thing, and having that long-term partnership puts so much certainty into our business going forward. Really, the business is performing well, starting to ramp up on Landing Craft Medium and Heavy. And the U.S. business, we need to focus on those contractual issues and getting them resolved. But very strong outlook in the submarines work. Just a huge volume of work that we can go and attack as the building comes online. Technology business performing very well and some of the opportunities of what we've learned in the United States on the 3D printing additive manufacturer work.

Can we bring that back to Australia? Trying to demonstrate to the Commonwealth the advantages of having us as a strategic partner and what we can bring back to Australia from what we've learned around the globe. And then the precinct upgrades, a lot of focus to be put on that. Strong government investment coming, absolutely fantastic position to be in. Great the government have announced it, and we'll be working alongside them to make sure that gets delivered in time for the back end of the Landing Craft Heavy program and indeed, the General Purpose Frigate program, building the Mogami-class from Japan after that. So lots of exciting things happening and traditionally, we give financial guidance at the AGM to help people out.

We recognize it's a complex business. We're not going to do that for the U.S. business at this time based on what's happening, but we are pleased to announce that we see an EBIT growth in excess 30% in the Australasia business going forward. So all underpinned by that fantastic order book and all of these programs coming online, a very, very exciting time for the business to grow going forward. Just before I finish with the video, we had the Land Forces Conference here in Perth a couple of weeks ago. We had amazing support from the Commonwealth of Australia, whether that was through the Deputy Prime Minister, Richard Marles, whether that was with the Minister for Defense Industry, Pat Conroy.

You see our Premier, Roger Cook, also supporting us, and great to start building that relationship with the Chief of Army there, who spent a lot of time with us at the show and brought a large team of people down to the shipyard the day after the show finished to just really cement that relationship, get the teams working together, building that partnership for delivering what's going to be a really exciting Landing Craft Medium and Landing Craft Heavy program.

So I will finish with a little video to help you understand what these Landing Craft Medium and Landing Craft Heavy ships will look like.

[Presentation]

Inspiring. Ladies and gentlemen, at this time, I would like to take questions from you, the shareholders. My request is that you stand and when given the microphone, state your full name and then ask your question. And we have our expertise here at the table to answer your questions. Who's manning the mics? There we go.

Good afternoon. I'm Ros Ferguson, representing the Australian Shareholders Association with proxy votes from 15 shareholders today, representing about 223,000 shares. We congratulate Austal on your record order book and the strong results for the Australasia segment this year. A couple of questions, please. What proportion of the order book is onerous? If the Offshore Patrol Cutter contract also became onerous, how much of the order book would be at risk? And what assurance can you give that Austal USA can still build steel-hulled vessels profitably?

I'm happy to answer that. So a good question. I don't know what proportion of the order book it would be, but we've declared everything in the full year results. That is audited. As a business, you would expect, we've been through every program with a fine-tooth comb to understand any potential challenges that we have in there. We've brought in external experts from the industry to help assist with that analysis. And all of that gets audited by our auditors at Deloitte. So we're not overly proud of what has happened in the U.S., but we've taken every measure we possibly can to ensure we fully understand it and we won't have these issues going forward.

And question two, on the potential sale of Austal USA, you've given us a good update today about where we're at, but just wondering, can you share any of the points that are still open for negotiation?

Yes. The present status is we are developing the purchase and sale agreement, the purchase and sale contract that will define the actual transaction itself. So we're in a first round drafting session. We generated and we bring it, flip it over to Hanwha and we have some back and forth, obviously. That's a very meaningful part of a transaction right there. They have spent 6 weeks, 8 weeks, 8 weeks in due diligence on the company. So they have a good handle on where we stand and where the contracts stand. So we feel comfortable that we'll go forward with us. Obviously, I can't guarantee anything. But if you ask me where the comfort zone is, I think we're leaning positively in that regard. In the back, yes.

My name is Anne Prior, I'm a long-term shareholder. In fact, I preceded all of the faces up the front. In terms of association with this company, not Mr. Rothwell, I have to say. Look, I'm really concerned about these contracts. Having an order book and having revenue is fine, but the objective of the exercise is to make a profit. Now I know that we've got a wonderful example of how not to make a profit with Snowy 2.

But I'm just absolutely astounded that the T-ATS program, I mean, the contract loss was 106% of the contract. And then the auxiliary floating dry dock overrun was something like 85% of the contract price and the Landing Craft Utility was 35%. So we've got actually 3 contracts there. And I suppose you could say that moving from 106% overrun to a 35% overrun is a slight improvement. I think the shareholders deserve an explanation and a walk-through of how this happened. I mean I could understand on one occasion, but not 3 occasions how you've got such significant overruns. So could you give us a walk-through how this happened? What have you learned? And are these lessons transferable to work in Australasia?

Excellent question. Let me walk you through some of the somewhat arcane processes of the federal acquisition process in the U.S. We bid the -- 2 of the programs, let's talk LCU and T-ATS. We bid those contracts as a follow-on contract, because there was already a lead yard. And the importance of that data point is the lead yard contract allows for cost recoup, because you're building it for the first time. Yes, you have a should-cost number that provider provides and at the end of the day much like building a house, there's going to be change orders, and you actually add those in and the government compensates you for that.

When you got a follow-on contract, most " bugs" have been worked out, and you enjoy the learning curve of speed of assembly and efficiency of assembly going forward with the other hulls. What happened here, and it's a complement in an ironic way, at Austal is in T-ATS and LCU, our speed of building the ship surpassed the lead shipyard. By a factor in the case of T-ATS, somewhere around 14 months, we were ahead of the lead yard. Now all of a sudden, we are first of ship, and we are incurring all the costs as first of ship without a contractual vehicle to capture that. Now were we stupid to do that? No. Traditionally, the way the U.S. government acquisition system works is you keep track of all your costs and then there's a settle-up period, sometimes cost an REA or Request for Equitable Adjustment, but sometimes in a negotiation, a renegotiation and restructuring of the contract.

We had started with the United States Navy in January of this year to restructure the T-ATS and LCU contracts to make them profitable. We had progressed to the point, we were talking about how we would take possible losses on the existing ships we had and the Navy was going to make up margin on the follow-on ships so as a portfolio would have a healthy, sustainable margin. The Secretary of the Navy, who we were dealing with got fired in the end of March. And all of a sudden, the tide changed and the Department of War took over the contract. And they turned around and told us that there will be no renegotiation of contract. We had no idea where this came from. We had no idea their standing as to why this would happen because right now, the biggest penalty is being handed to the United States Navy, which also doesn't understand why they're not getting their ships due to a contract renegotiation.

The OPC, which is the Coast Guard ship was in a similar fashion. It was a follow-on contract. Our speed to delivery overtook the lead yard, and we were, again, in the #1 lead ship capability. The Coast Guard sat down with us, and we're in the process now of renegotiating the contract to make it profitable. As arcane as that might sound, that is military shipbuilding in the United States of America. You will make money at the end of the day, and there is a process to do it. This administration has chosen a different path, to be very frank with you. We don't know why they're doing it, but that's the path that they've taken. And unfortunately, at our position in the contract, we had to sustain that loss. Do we have avenues and equities available to us going forward? Yes, we do. Can I tell you exactly when those will happen and the dollar amount, that I cannot at this point in time. I hope that provides some insight.

Can I just add something? We haven't actually lost all of that money at this point in time. The way accounting standards work is if contracts deemed onerous, you run out the forward part of the expenditure and the forward part of the revenue you would expect and that's all taken in 1 year. So although we have lost some money, we haven't lost $200 million, it would be if we continued and did nothing else and ran those contracts out as per the contract we have at the moment, that would be what we would lose. That's correct. I'm checking my auditor here. Yes.

Could I ask why were the 2 T-ATS program ships canceled?

That was part of the Request for Equitable Adjustment, that we went through the year before and we were doing that for portfolio balancing to go forward to make it a profitable program. That is a perfect example of the standard process. Last year, we were behind the curve quite a bit and we sat down with the Navy and said, "How can we get whole on this." And part of the outcome was the canceling of those 2 ships in order for us to regain footing going forward. And we would expect to have another renegotiation, which was the one that was supposed to happen this spring, when all of a sudden, the Department of War overrode the Navy and said, you're not going to restructure contracts.

Good afternoon, Andrew Jenkin, shareholder, a relatively recent shareholder. So my question is, this impairment that we're talking about, how does that factor in with the Hanwha deal. I'm assuming that there's going to be some discount applied by the buyer and they take the responsibility for recovering those costs. So when the deal with Hanwha was made, effectively that disappears off Austal's balance sheet.

And that's another great question. A discount, no, because they have the same availability to them to reconstruct -- restructure the contract, which in the irony of everything, the Department of War is actually entertaining restructuring the contracts for them. The good news is we get full value on the sale. Does that answer your question? Thank you. Any other questions?

Okay. We'll move on. 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 2026 were released on the ASX on 31 August 2026, there's no voting on this item. Instead, shareholders have the opportunity to ask questions of those reports. Are there any questions of the financial reports?

Excellent. There being no further questions, we'll now proceed to the resolutions to be considered. All resolutions will be put to the 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. Please bear with me because I'm going to be reading word for word of this to make sure we get it correctly, because my Chief Counsel is watching me.

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 not binding on the company. The proxies shown on the slide beside me have been received in respect to the resolution. Although I am personally excluded from voting on this resolution, I will vote the undirected proxies I hold in favor of this resolution. Are there any questions for this resolution? Yes.

Ros Ferguson, representing ASA. We are concerned that the Board exercised discretion to allow the FY '26 STI assessment to proceed despite the profit gate. However, we weighed this against the Australasian segment's strong performance and the Board's further downward discretion. So we will be voting in favor of Resolution 1. Going forward, we have concerns about the FY '27 framework. The reduced STI equity component and deferral period and the LTI, relative TSR vesting beginning at the 30th percentile do not meet ASA guidelines.

The LTI issue bears directly on Resolution 9. And for that reason, we'll be voting against that. We welcome any comments. Thank you.

Look, thank you for that comment and thank you for your support of Resolution 1. I would say that this was a difficult decision for the Board, but I think it was the right decision to award STI the way we did. Where we ended up in FY '26 was a large loss for our U.S. business, albeit an accounting loss and a loss that we believe we've got strong legal claim to recoup.

For the U.S. business, we awarded no STI as a result. For our Australian business, as you've heard, it was a record profit. And we're very conscious that we need to win General Purpose Frigate. And the winning of General Purpose Frigate is based on performance with the landing craft. So we chose to award STI, albeit the President of Australasia had 1/3 of his STI deducted. And then, of course, for the limited execs, they were given no payout for the U.S. business, payout for the Australian business plus revenue. So it was a balanced approach, and put my hand on my heart, we believe it's the right approach for the company.

With respect to the remuneration framework moving forward, we've spent the last 18 months working with a global remuneration consultancy. A lot of work and a lot of thought have gone into that framework. It started with benchmarking all of our base salaries. And then we looked at the incentive framework for both the U.S. business and the Australasian business. I have heard that the relative TSR hurdles may be different to what you are used to. A threshold of relative TSR at the 30th percentile is normal for the U.S. And of course, the U.S. is a big part of our business. We also looked at the payout for the last 10 years against relative TSR and using a range of between the 50th and the 75th percentile in all but one of those years, the payout was 0 or stretch. And the reason for that is our shares are really volatile compared to the index.

So what we have done with the framework moving forward is we have expanded our range. It goes -- used to be 50th to the 75th percentile. We have changed it to the 30th to the 85th percentile. So we want to make sure that the LTI operates as designed. We want to retain our people. And hence, we've decided to expand the range of the payout. We -- it has been different to what people have been used to, but we've been pleasantly surprised that when we explain it to folk, generally, they are quite supportive.

Thank you, Kath. Moving to Resolution 2. It concerns the reelection of Lee Goddard, as a director. The resolution is set out on the screen next to me. I will vote the undirected proxies in favor of the resolution. Are there any questions? Thank you.

Resolutions 3, 4, 5, 6, and 7 deal with the issue of share rights to some of the nonexecutive directors of Austal. At the last 6 Annual General Meetings, shareholders approved the grant of share rights to nonexecutive directors, so that participating directors will be remunerated through a combination of 75% cash and 25% share rights. Resolutions 3, 4, 5, 6, and 7 seeks shareholder approval to continue the grant share rights for 12 months, following this annual meeting. Do I have any questions?

Moving on to Resolution 3. It concerns the approval of the issue of the share rights to Lee Goddard. I will vote the undirected proxies in favor of this resolution. Are there any questions in this specific case? Thank you.

We'll move to Resolution #4, which concerns the approval of the issue of share rights to Kath Toohey. I will vote the undirected proxies in favor of the resolution. Are there any questions? Thank you.

We'll move to Resolution 5, which concerns the approval of the issue of rights shares to Brent Cubis. I will vote the undirected proxies in favor of the resolution. Are there any questions? Thank you.

We'll move to Resolution #6, which concerns the approval of issue of share rights to Richard Gibb. I will vote the undirected proxies in favor of the resolution. Are there any questions? Thank you.

Moving to Resolution 7 concerns the approval of the issue of share rights to Sue Murphy. I will vote the undirected proxies in favor of the resolution. Are there any questions in this case? Thank you.

We'll now move to Resolution 8. Resolution 8 concerns the approval the issue of the STI rights to Mr. Patrick Gregg. The resolution is set out on the screen next to me. I will vote the undirected proxy in favor of the resolution. Are there any questions in relation to this resolution? Thank you.

We'll now move to Resolution 9, which concerns the approval to issue the LTI rights to Mr. Patrick Gregg. The resolution is set out on the screen next to me. I will be voting the undirected proxies in favor of the resolution. Are there any questions relating to this resolution? Thank you.

We will now move to Resolution 10, which concerns the approval of potential benefits under the equity incentive plans in connection with the transfer of the undertaking or property. Resolution is set out on the screen before me. I will be voting the undirected proxy, excuse me, sorry?

Ros Ferguson, representing ASA. Although we understand the context, we are concerned about the lack of detail in Resolution 10. Could you explain why a 3-year general approval with no cap is preferable to seeking approval for a specific transaction once the terms are known. We would prefer proposed benefits to be subject to specific shareholder approval, which we understand the Corporations Act permits. Thank you for your time today.

Appreciate that. Duly noted. I will be voting the undirected proxies in favor of this resolution. We had a statement duly noted. Any questions, other questions?

Could you let me just?

Certainly.

And maybe at the heart of your question, we see this as a bit of housekeeping to make sure that the Board has maximum flexibility related to payouts against the incentive plan. We don't know if there is a transaction and if there is a transaction, we don't know what it will look like. We want to make sure that if a transaction is in the best interest of shareholders, we can move as quickly as we need to. I would highlight that this does not provide any additional remuneration benefits and the LTI plan is not changed at all by this resolution. So the Board still has discretion, in terms of the award of equity rights.

Any other questions? I now direct the poll be held in relation to each one of these resolutions. Lyndall Weston from MUFG Corporate Markets, Austal 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 ask Lyndall to come forward to announce the directions in relation to the conduct of the poll procedure. Lyndall?

The person's entitled to vote on this poll are all shareholders, representatives and proxy holders who hold yellow voting cards. Please indicate on your card how you wish to vote by marking the appropriate square for all resolutions. 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 sum of the 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 one of the ballot boxes circulating the room. If you need assistance, please speak to one of the MUFG representatives. Thank you.

I believe all of those persons who wish to vote in the poll have now done so. If there's anyone present who has not yet had their completed poll paper collected from them by the MUFG staff, would you raise your hand. Seeing no hands. All persons have now voted. I declare the poll is now closed. I do not intend to keep the meeting open while the poll results are collected. The results of the poll will be announced to the ASX, as required.

There being no further business, I now declare the meeting closed, and thank you for your attendance. I would like to invite you to enjoy an afternoon tea and refreshments and be advised, unfortunately, we must vacate the premises by 5:00 p.m. Thank you all very much.

Thank you for standing by, and welcome to Austal's FY 2026 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 presentation. Paddy, over to you.

Good morning, everybody, and welcome to the 2026 full year results call. I'm Paddy Gregg, the CEO at Austal, and I'm joined by our CFO, Christian Johnstone. We'll be presenting in the same format as usual. I'll give the business overview and context while Christian focuses on the financial details, and I'll finish with the outlook as I see it. And as always, we plan to present for no more than 30 minutes, so we'll have plenty of time for questions.

So FY '26 has been a year of significant strategic achievements for Austal, both in Australia and the U.S. In Australia, the execution of the strategic shipbuilding agreement has delivered a record-breaking Australasian order book with $5-plus billion, 12-year build program for the Landing Craft Medium and Landing Craft Heavy, plus the General Purpose Frigate is very real, valuable and compelling future opportunity. Our Australian operations have delivered a record result with EBIT more than doubling to $85 million, demonstrating the strength of our defense and commercial programs.

As we announced 2 weeks ago, the group EBIT result was shaped by an accounting adjustment at Austal USA. And while our request for accelerated contractual relief was not agreed by the U.S. Department of War at this stage, notwithstanding prior constructive engagement, we have proactively commenced a longer, formal process to recover value on these contracts and our position is supported by documented factual and contractual records that give us confidence in that outcome. And we took this change of approach to ensure maximum transparency and to actively facilitate Hanwha's due diligence on Austal USA. The receipt of an indicative, nonbinding and conditional proposal from Hanwha Defense USA to acquire Austal USA was a major development this year.

Austal is determined that it merits further evaluation, and we've approved Hanwha to undertake some due diligence to strengthen the certainty of any proposal. We're really pleased to see the revenue and employee numbers in both businesses are growing in line with the order book as programs come online. And the outlook in Australasia is truly exciting. The combination of a profitable and high-growth Austal Australasia and potential proceeds from the sale of Austal USA will be carefully assessed as to whether that outcome provides the best value for shareholders, but it's certainly looking very interesting.

For those of you who are looking at the presentation that we've uploaded, Austal at a Glance. We've got a couple of slides covering key facts to summary overview of the business for anyone who doesn't know Austal. Revenue has grown beyond $2 billion for only the second time in the company's history, a milestone that reflects the accelerating momentum across our operations. As many of you know, we operate our shipyards in 4 countries, 8 service centers, giving us the opportunity to design, build and service ships and submarine modules.

We also operate the United States Navy's Additive Manufacturing Center of Excellence in Danville. What does that order book look like in ships? So we have about 75 ships under construction or scheduled with approximately 64 (sic) [ 78 ] under sustainment contracts. We can build in steel, we can build in aluminum. We can build ships. We can build submarine modules for both defense and commercial customers. And our major customers include the United States Navy, the United States Coast Guard, Royal Australian Navy, Australian Border Force and many commercial passenger ferry operators around the world.

Importantly, we continue to build the order book in Australia, which now stands at a record high, a testament to the confidence our government partners place on Austal's capabilities. We've ordered for some 32 ships in Australia and delivered 6 this year. Employee headcount globally is growing to make sure we service these contracts like the subs modules in the U.S. with the opening of the module manufacturing facility and then the strategic shipbuilding agreement in Australia for the Landing Craft Medium and Landing Craft Heavy contracts. The vast majority of our work is in the defense sector, and that will continue to grow relative to commercial. We'll also see more balance between the U.S. and Australian operations as the Australian shipbuilding revenue will more than double over the next 5 years.

If we look at the FY '26 overview, turning to the financial highlights, I'm pleased to report these are presented with no qualification from our auditors that we had at half year. I talked about the record revenue of over $2 billion is an 11% increase year-on-year. And as I said, it's just the second time that we've surpassed that $2 billion mark, really driven by successful ramp-up of shipbuilding programs, both in the U.S. and Australasia, including meaningful progress on new defense contracts awarded under the Strategic Shipbuilding Agreement here in Australia.

EBIT was finalized at a loss of $125 million as part of Austal USA's year-end closing adjustments, resolving the half year audit qualification in the process. And as previously advised, the FY '26 result was largely driven by a onetime accounting adjustment on the U.S. programs relating to contracts like T-ATS, AFDM and LCU. The adjustment reflects a conservative and prudent accounting approach to contractual claims and Austal is actively advancing its formal recovery process with the U.S. Department of War.

This EBIT position was partly counterbalanced by a record EBIT of $85 million in Australasia, up 49% on the prior year. It's important to touch on that figure. Previously, our record EBIT in Australasia was $36 million set last year. So this year's EBIT is 137% higher than the prior year and a partial signal of the extraordinary growth trajectory ahead for the Australian business. We had an outstanding year for orders in Australia, the 18 Landing Craft Medium vessels at $1 billion and 8 Landing Craft Heavy vessels at $4 billion. We also signed 4 Evolved Capes this year. The signing of multiple capes is big news, and I think it's just got lost in size and scale of the landing craft, but excellent, we see the aluminum program continuing for Australian Border Force.

I was also in Japan a few weeks ago with the Commonwealth, commenced the contract discussions with Mitsubishi Heavy Industries on Mogami, the General Purpose Frigate for Australia. And as you know, that will see the first 3 vessels built in Japan with 8 here in Henderson. And last week, it's fantastic to host the Deputy Prime Minister following the announcement on the Defense Precinct and see that coming to life in line with the requirements for Landing Craft Heavy and then moving on into Mogami. This is all about creating long-term value for shareholders.

The order book at $16.5 billion secures revenue for years to come. It's grown significantly in Australia following the signing of the Strategic Shipbuilding Agreement and the award of Landing Craft Medium and Landing Craft Heavy. The subs module production in the U.S. is expanding with MMF 3 coming online and the commercial yachts have got a solid order book and future potential for growth, particularly in the low emission space. Cash is always projected to be lower than the half year due to the value-creating capital investments to increase capability and capacity for future growth. Both the submarine module manufacturing facility and the final assembly sheds for large steel ships are fully funded and in construction to support future growth.

You can see a progress of MMF 3 in the investor pack and achieving Stage 1 opening in May ahead of schedule was a really fantastic achievement for our team in the U.S. We started using this facility almost immediately with modules being moved in and starting construction in July. And the full facility should be completed by the end of the calendar year, and it's going to support over 1,000 jobs. And we've already got about 500 people trained and working on subs modules today.

We put a new slide in the pack this year around the Australasia business, really based on the significant growth that we're seeing in the signing of the Strategic Shipbuilding Agreement. We really wanted to highlight the capabilities we have, how strong the performance improvement over recent years has been, and there's a very exciting growth trajectory based on orders that we have placed and the EBIT that's going to come with it. So I really look at years of revenue and EBIT growth coming on those contracts, which is incredibly exciting for the Australian business.

With that, I'll hand over to Christian, and he will talk a little bit more in detail about the financial highlights of this year's results.

Thank you, Paddy. It's my pleasure to present Austal's FY '26 performance highlights. As Paddy mentioned, FY '26 has been a significant year for the group, marked by strong revenue growth, substantial strategic progress and outstanding performance across our Australasian operations.

Before I move into the details, the key message is that Austal delivered double-digit revenue growth of 11.2% with revenue exceeding $2 billion. While ongoing discussions with our key U.S. customers regarding contract alignment and recovery of additional scope have impacted reported earnings for the period, the underlying operational performance of the business, particularly within Australasia, has been exceptionally strong.

Delivery performance remains at the core of Austal's success and reflects the dedication and expertise of our employees across the group. Their commitment enables the delivery of ships, submarine modules, sustainment activities and additive manufacturing solutions to an expanding customer base around the world. Our balance sheet remains robust and continues to support significant investment in U.S. shipbuilding infrastructure. Importantly, we have maintained a strong cash position, providing the financial flexibility to execute on our substantial backlog and capture future growth opportunities.

Turning to Slide 8. Group revenue increased 11.3% to over $2 billion, reflecting strong growth across the majority of our business segments and continued execution of our strategic priorities. U.S. shipbuilding revenue increased 3.9%, driven by higher activity on the OPC, T-ATS and submarine programs, more than offsetting the completion of the LCS and EPF programs. U.S. support revenue decreased 16.5%, reflecting changes in the operational deployment profile of the LCS fleet. Despite the lower revenue contribution, the business remained focused on supporting customer requirements and maintaining strong operational performance.

Australasia shipbuilding delivered another outstanding year with revenue increasing almost 80%. This growth was driven by Austal's appointment as Western Australia's strategic shipbuilder, progress on the Landing Craft Medium and Landing Craft Heavy programs, completion of the Guardian Class program, ongoing work on the Cape program and strong contributions from our shipbuilding operations in the Philippines and Vietnam. Australasia support continued its positive growth trajectory, increasing revenue by 7.3%, supported by an expanding sustainment footprint and increased servicing requirements across a growing fleet space.

Turning to EBIT performance. FY '26 reflects both the strength of our operating businesses and the impact of unresolved contract matters within the U.S. shipbuilding segment. The standout performance was our Australasian operations with Australasia shipbuilding increasing EBIT by more than 130% and Australasia support increasing EBIT by over 140% year-on-year. Australasia shipbuilding benefited from strong execution on the landing craft programs and increased activity across commercial shipbuilding operations in the Philippines and Vietnam.

Australasia support delivered substantial earnings growth through improved operational efficiency, disciplined project execution and increased sustainment activity across both patrol boat and commercial fleet contracts. The year-on-year performance across Australasia was particularly encouraging with EBIT margins improving by 288 basis points in shipbuilding to 12.4% and 818 basis points in support to 14.7%, demonstrating both scale benefits and strong operational execution.

In U.S. shipbuilding, revenue growth continued during the year. However, the delay in finalizing contract restructuring arrangements impacted reported earnings for the segment. The U.S. Support business delivered another solid result, generating EBIT of $22.2 million and maintaining a healthy margin of 9.2%. Looking at the geographical mix of the group, the continued growth of Australasia is evident with the region now contributing 32% of group revenue, highlighting the increasing diversification and strength of the overall business.

The group balance sheet reflects the strategic investment made to support long-term growth, particularly within our U.S. operations. During the year, property, plant and equipment increased by approximately $270 million as we expanded our shipbuilding infrastructure and capability. Importantly, Austal finished the year with a strong balance -- cash balance of $312 million, providing significant liquidity and positioning the group to continue executing its capital investment program while supporting future operational growth. FY '26 represented a significant year of investment with more than $320 million deployed into U.S. infrastructure projects that will underpin future capacity and capability. Pleasingly, the group generated positive operating cash flow of $62 million, demonstrating the underlying cash-generating strength of the business.

I'll now hand back to Paddy.

Thanks, Christian. And so strategic outlook from me before we open for questions. So 2027 for us is all about our commitment to return the business to profitability. We've got some contractual positions we need to work through in the U.S. But as Christian outlined, all other areas in the United States are performing really well and both the U.S. and Australia supported by a really robust order book and outlook.

The Australian business has never been better positioned, long-term order book, a landmark strategic agreement that will provide decades of stability, growth and value creation. Increasing defense expenditure in Austal's primary markets being driven by heightened global security demand is generating powerful and sustained tailwinds for Austal's core defense client base. And Austal is really well positioned to capitalize on these dynamics with its diversified program base, strong order book and ongoing investment in capability.

The impressive order book at $16.5 billion continues to grow with the signing of the Strategic Shipbuilding Agreement and subsequent Landing Craft Medium and Landing Craft Heavy contracts. This delivers greater contract diversity and deepening the operational base of our business. When I think about revenue and earnings, the Australasia business performance is ahead of expectations with continued growth expected into the medium- and long-term outlook based on that order book full of government contracts. Our U.S.A. focus is absolutely on return to profitability in the shipbuilding contracts, and we're actively seeking to resolve those contractual matters. But as previously announced, the Austal Board and its advisers have carefully assessed the Hanwha conditional nonbinding indicative proposal to acquire Austal USA and have determined that it absolutely merits further evaluation, and we've approved Hanwha to undertake due diligence, which is very proactively happening at the minute as we work with them.

We're making significant and targeted capital investment in facilities to drive growth in both the U.S. and Australia. including contractually covered investment in the Common

User Facility here in Henderson for Landing Craft Heavy alongside government investment in the broader Henderson Defense Precinct. And as I said, fantastic to have the Deputy Prime Minister here last week making those announcements. So I look forward, we possess the order book, the capability and momentum to significantly grow revenue and earnings for years to come, another very exciting time for Austal.

So thank you for listening, and we will now open up for questions.

[Operator Instructions] And your first question is from the line of Sam Teeger at Citi.

Can you please walk us through the timing of Hanwha's approach and the FY '26 onerous contract provisions? Specifically, when was Hanwha first made aware of the issues that led to the write-downs? And were these matters reflected in the information available to Hanwha when it submitted its initial proposal?

Thanks, Sam. Hanwha has been around for quite a long time. We've had discussions with them probably some years ago that were public around an overall company transaction. But getting to your point, we have been working very closely with them, and we have shared information with them. And part of that announcement about us clearing the market on all contractual positions and their intentions was just trying to be as transparent as possible. So yes, in short, Hanwha is well aware of all our contractual positions and has been talking through those in the U.S.

Right. Just checking, they were across everything prior to them putting in the bid?

Correct.

And your next question comes from the line of Mitch Sonogan of Macquarie.

Maybe just over in the U.S. first. Just on the onerous contracts, I think everyone is pretty aware of the issues across the T-ATS program and the REA process that went through there. But do you mind just providing a little bit more color on the OPC, maybe any discussions that you've been having with the Coast Guard and maybe comparison versus involvement with the Department of War. Just any color you can give on that program and how you see that being rectified would be great.

Yes, sure. So Coast Guard slightly different position. They've had some challenges with previous shipyards, and they've been in contract for OPCs for many years and not taking delivery of any. So our conversations and negotiations with Coast Guard are really around putting certainty into that program and how do we accelerate the delivery of OPC vessels. So maybe not an REA process, but maybe a sort of contract restructure as we work with them to put some certainty into that program and try and accelerate the delivery of vessels for them.

Yes. And just looking at the Australasian segment, obviously, if a bid formalizes, then that's clearly going to be the key focus of growth. Just in terms of the Landing Craft Heavy, it's obviously the most material part of the order book, can you just talk to maybe the risk profile of that program? Is it any different given that the design is actually already a proven design from Damen? Just trying to understand how that plays out and how investors should think about the risk profile of that going forward.

Thanks, Mitch. Yes, great question. I think there's less risk rather than more risk in that program because it is an existing design and the vessel has been built. And we've worked very closely with Damen around support for that design, as built drawings, jigs and fixtures, things that we would normally have to go and develop have already been developed. And as part of that contract, they're happy to support us with people as well. So people who have actually been through the design, the build, the commissioning at the relevant points in that program, we will be able to second them into Austal. So Damen, a great company. We've worked with them a lot over the years, built some of their designs. There's a really good relationship there. And I see reduced risk based on the fact it's a complete design, and we've got a great working relationship with them.

And your next question comes from the line of David Fraser of MST.

Look, I mean we've touched on Hanwha a couple of times. Your gut feel on, I guess, how certain this deal will proceed?

Yes. Good question. I'll have to speculate, but let me talk you through what I know. So Hanwha have been interested for a very long time and not gone away. They are absolutely in due diligence and taking things very seriously. They have assembled an A team with relevant consultants from each area. So they're throwing resources at this. That costs money. It feels like there is support in the U.S. from senior people in the Department of War based on what we're reading and the fact that this is public. They're a very credible shipbuilder.

So they're very different to a private equity approach. They know exactly what they're looking at. And they see our very modern facilities with a big order book and perhaps some of the efficiencies they can bring as a win for Austal's shareholders, a win for war fighters in the U.S., a win for the United States. And we take them very seriously as we've opened up for due diligence and we've all gone public on this. So there's great momentum behind it and a desire to do the right deal for everybody.

Great. Okay. I'm on the basis that I think this deal will go ahead. So you're going to be an Australasian-focused business. Clearly, you've got a great order book. The infrastructure effectively is going to be funded by the [ Feds ] for the medium and heavies. Looking a little bit further out, if you are successful in participating in the GPFs and the LOSVs, how do you think about how you could potentially fund the infrastructure required to get those contracts and those programs running?

Yes, it is really interesting, and that's a good line of thinking. If the sale of the U.S. business did go through and we had access to significant cash funds, investing that in our own shipyard and own facilities with the very long-dated order book may be something that's incredibly attractive to us. So yes, having those funds available at a time whenever there's significant growth in Australasia would be very helpful indeed.

I might add too, but this is part of the previous question. Given that you talk about a signing of the GPFs, I think it's 2029, you've got a lot of cash potentially sitting on your balance sheet for a long time. How are you going to think about that, give it back...

Well, we have to commence reasonably quickly to build the facilities. That would take some time. We're talking about hundreds of millions of dollars of investment to create the shipyard of the future that's running for Mogami. So I don't think there'd be a huge pool of funds that just kept doing nothing. We want to try and deploy that as soon as possible if we were able to get into shipbuilding. And if it's not facilities, we'll do what we normally do. We consider other opportunities for growth. We weigh working capital needs and then we consider potential for tax efficient ways to make returns to shareholders.

Your next question is from the line of [ Patrick Moore ] of KMP Super.

In the directors' report on Page 3, you made the comment or comment by the Chairman that if the deal doesn't go ahead that with the onerous contract on the business, you have to be very carefully managed -- you have to carefully manage negotiations. First of all, what do you mean by carefully managed? And secondly, is there possibility of further deterioration in those amounts?

Yes. So I'll take the second question first. We've provided our best estimate of everything that we'll see these contracts through to completion as we're required to by the accounting standards. So we're not anticipating any further deterioration. And I think careful negotiation in so much as it's a somewhat unusual situation that we have some contractual challenges at the same time as -- and we are trying to do the due diligence. So I think what Richard means is it's not quite as straightforward as if everything is rosy in the contract, it would be much easier to evaluate positions. So I think that's what he means in his remarks.

Okay. And are there any other contracts which may be subject to the same set of problems?

Not to our knowledge. We will have to declare those if we saw any problems.

[Operator Instructions] And you have a follow-up question from Sam Teeger at Citi.

There's some talk that Hanwha is a done deal, but what would be the strategic arguments for saying no and retaining the U.S. business?

I think it would be shareholder value is the primary view that the Board would take on any binding offer that they may make. So we'll work with them and give them access to all the information they need to make a firm proposal, and we'll assess that in the interest of shareholders.

Okay. That's clear. And then Australian order book has grown from $0.7 billion to $5.6 billion in a year. And historically, shipbuilders often struggle when backlog growth exceeds organizational growth. What evidence can you point to that suggests the organizational capability has expanded as quickly as the backlog here?

Yes, good question. So we see it as a growth trajectory really. So we had the ramping down of the Guardian Class for 12 months, and then we see the Landing Craft Medium contract ramping up. Landing Craft Medium is probably less complex than the Guardians that the team we're building. So I don't anticipate a huge challenge there.

The Cape Class boats continue. We've built a lot of those, and we know them very well. It's our design. It's a very mature design. And that sort of gives us time as the Landing Craft Heavy ramps up. But again, Landing Craft Heavy is a big ship, but not necessarily hugely complex. It doesn't come with weapon systems or combat systems that are the trickier bits of these ships to build and commission. So we see it progressing over the next 4 or 5 years. And the way the programs were bid and worked with the government is around steady growth rather than a big step growth. So we will need to recruit people over 3 years rather than we need 1,000 people tomorrow. So we've tried to be as sensible as possible whenever we work with the customer to align these programs in terms of programs coming off and programs coming on to make sure that there's a steady growth of people and capability of the business.

Right. And then as these programs ramp up in Australia, what do you see as the biggest risk to maintaining margins? Is it labor productivity, procurement, inflation, the terms of the programs or something else?

Yes. No, probably a little bit of all of that. But certainly getting the people and making sure they are all trained up will be a challenge. We will do it the same way we have always done it in so much as we're big believers in bringing people in the bottom, training them up, whether that's graduates, apprentices, then we know that they're specifically trained in shipbuilding. They come with our culture from day 1 and then promoting from within gives people an opportunity to advance their careers.

I think the other key feature is the government have done a fantastic job with continuous naval shipbuilding. And for the first time, we can kind of offer people a career. And whereas in the past, we've been successful in winning work every year or two to make sure that there is continuity of employment. We can genuinely look there today and say we see 20 or 25 years of continuous work in front of us. So bringing people in with that employment proposition is -- we've never had a better employment proposition. So that's why I think we'll be able to attract the people, retain them, train them and give them some really exciting work opportunities.

So how many people are you at now? And how many will you be at or you need to have in 3 years?

Yes, we're just over 900 now, and I think we'll need another 1,000 people over the next 3 or 4 years.

And this concludes our Q&A session for today. I would like to turn the call back over to Paddy for closing remarks.

I'd just like to thank everybody for their participation today. We've uploaded all the material online. So you can have access to it. Thanks for listening, and thanks for the questions.

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

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.