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. 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 two contracts total about $5 billion, and take the order book to a record $17.7 billion. That translates to about 76 ships in build or scheduled in our shipyards, providing certainty of jobs and revenue for a decade.

You'll see revenue and employee numbers are growing in line with the order book as programs come online, and that's translating into earnings too. We announced a revision to guidance a couple of weeks ago that was caused by a forecasting error.

Very disappointing, but we are still delivering a very strong financial performance this year despite this. The outlook is fantastic both in the United States and in Australasia.

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. 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.

We're operating five shipyards in four countries, with eight service centers in four countries, 76 ships under construction or scheduled, 64 vessels under sustainment contracts. 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 two. Employee headcount globally is over 4,600 and growing daily, recruiting people to deliver that record order book.

The vast majority of our work is in the defense sector these days, and defense will continue to grow relative to the commercial sector. Interestingly, we'll start to see more balance between the US and the Australian operations.

If I talk about the financial highlights and, as I said, Christian will go into the detail. Jumping straight in, we're building sustainable growth, seen through the order book that was predominantly in the US and now followed in Australia with the signing of those Landing Craft Medium and Heavy contracts.

We also signed two more evolved Cape-class vessels before Christmas. While that used to be big news, I think that was lost due to the size and scale of the landing craft announcement.

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. 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-emissions space. 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 one opening is due this financial year, bringing that project on board.

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. 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 T-ATS, and for me that really demonstrates the strength of relationship we have with the customer in the US. 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.

Christian will talk about that a bit more in the financial section. 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.

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.

I'll hand over to Christian now, and he'll talk you through some of the financial highlights.

Thank you, Paddy. Turning to slide eight, 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 of the focused efforts of our employees across the group to construct and deliver ships, submarine modules, sustainment services, and additive manufacturing to a growing customer base. The balance sheet is stable, and we have a robust cash balance to support the significant capital investment we have underway as we complete two key infrastructure growth projects in the USA, which have combined spend of more than a billion dollars.

The order book is an all-time high of $17.7 billion, which underpins continued growth over many years. Group revenue increased by 34.4%, which was a solid growth across the group, and pleasingly, all segments experienced growth, which is an exceptional outcome.

USA shipbuilding increased 29%, based on increased revenue from the OPC, 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 US and is seeking some contractual relief, the company's auditors, Deloitte, included a qualification in their review opinion to reflect the position that, whilst the company considers it has sufficient evidence to support the judgments made in respect of the contractual relief for these 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 to the half-year report.

USA support revenue increased by 11%, primarily due to additional contribution from the growing additive manufacturing business, which is performing strongly. It was particularly pleasing that Australasia shipbuilding continues its growth, with an increase of 83%, which has two key drivers being the appointment of Austal as the Commonwealth of Australia's sovereign shipbuilder and the work performed on the first two key contracts under this umbrella, being the Landing Craft Medium and Landing Craft Heavy contracts for the Australian Army.

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

Whilst there were mixed results across key segments, the geographical diversification of the group provides an ability to manage these variances. The standout earnings growth was Australasia shipbuilding at over 600%, which benefited from the work performed on the two landing craft programs and the commercial shipbuilding activities progressed by our Philippine and Vietnamese yards.

Australasia support business had an additional throughput from work from patrol patrol boats and sustainment contracts, and boosting earnings growth over 400%. There was a contraction in earnings from US shipbuilding, primarily driven by the margin compression as a result of the wind-down of the LCS and EMF programs, the early stages of the wind-up of the OPC and TAGOS programs, and from two onerous contracts that continue to dampen margins.

The US support business results were steady in the six 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 96% defense weighted across the group, and with the growth in Australasia business, the geographical contributions are nearing a 70/30 split between USA and Australasia. On a segment basis, the shipbuilding segment continues to report tight margins as a result of two onerous contracts we have in the US.

However, it should be noted that this segment is profitable, albeit at a level below our expectations. The support segment is a key earnings contributor, at an EBIT margin of 17.9% across the group, contributing the majority of earnings of $41.1 million for the half.

The group's balance sheet was stable, with net assets at over $1.3 billion. The group has a significant cash balance of $371.6 million at the close of 2025.

Whilst it reduced in the half, this reflects the significant capital investment underway in the US on growth infrastructure. The trade receivable balance was higher by 43% at $211 million, reflecting the growth in production in the six-month period.

The overall cash position decreased by $212 million, with $131 million of this comprising the capital expenditure on the ongoing MMF3 and FA2 projects. The cash flow from operations was negative $63 million, which reflected the two onerous contracts we have in the US 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 had significantly impacted this position. This will be a key focus for management in the second half.

I will now hand back to Paddy.

Thanks, Christian. 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.

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. 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. 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.

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. Overall, the business is performing well and executing the strategy we set out five years ago.

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

Hi, Paddy and Christian. I just have one question regarding the margins.

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?

Good question. I think it was the US shipbuilding business that was slightly lower than we wanted to be for reasons that we've talked about.

As those programs come online, we get stability in that business. I absolutely see that returning.

The US has been a massive contributor to our earnings for the last few years, and they will absolutely get back into their stride. It's been fantastic just seeing 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.

Yes, great. You said about the Australian business growing.

Do you expect that trend to continue and the US to also continue or remain relatively flat there?

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

Thanks, guys.

Hi, Paddy. Hi, Christian.

Done on securing the heavy landing craft. The pipeline now looks very good.

I want to ask about cash. You called out $105 million of milestone payments that didn't come through in the first half.

Have they come through now?

Yeah. They've come through now, but it wasn't obviously the balance at December.

That's why there was a bit of spike in trade receivables. That would have had a different earnings profile from the operating segments if they had come through.

They've come through.

Yeah. Okay.

In that cash flow number for the first half, is there T-ATS REA money in there or does that come in the second half?

Oh, T-ATS REA is across the program, there will be T-ATS REA cash in the first half as well, because it's earned through the progress of the whole three ships under that program.

Okay. Then what are you budgeting for cash at the end of the financial year?

Maybe just as part of that is MMF3 and FA2, how are they proceeding versus budget?

First question, we don't provide cash flow guidance. Second question, they're both in line with budget.

Actually, MMF3 is ahead of schedule, we had always said that that would open at the beginning of next financial year. Phase one is targeted to be open in the fourth quarter of this financial year.

Look, if that comes to fruition, what we expect, then that's a phenomenal effort by the team in the US 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.

That's really pleasing. Both are on schedule, on time, and both are in their budget cash flow around the costs of them.

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 need that for those programs going forward.

Great.

Good morning, Paddy and Christian. Thanks for taking the questions.

Can you hear me all right?

Yes, loud and clear.

Yeah. Yep.

Thanks, guys. Sorry, Paddy, I might have missed some of the detail.

I've 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, yeah, 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?

Good question. Coincidentally, both the Landing Craft Medium and Heavy programs will cut metal towards the back end of this calendar year.

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.

Damen have built one of those before. Both of them should come online back end of this year, and ramp up to steady-state production over about 18 months.

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.

Thank you. I know you just made a comment before about the 7% to 9% sort of target shipbuilding margin range over there in the US.

Just in terms of the landing craft programs, I know you've had some high-level details you put out with the announcements throughout the Strategic Shipbuilding Agreement, etc., but, yeah, is there just anything at this point in time high level you can provide us just in terms of how we should be thinking about, yeah, margins on these contracts over time? Is it, yeah, in that sort of range that you target?

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.

Both the US and Australia targeting to get into that 7%, 8%, 9% range.

Yeah. Just one quick one for Christian.

Obviously, you had the earnings guidance update back on the 12th of Feb just with that incentive payment. I'm not sure if you covered this during the general presentations before, Christian, but, yeah, do you mind just giving us a little bit more color I guess on, yeah, how it came about and have there been checks to make sure there's no other particularly issues like that on other programs?

Thanks, guys.

Thanks, Mitch. Look, that was an inadvertent error.

We're going through the half-year close process with the auditors, and in the US with one particular program that is an onerous contract position, firstly, it's a little bit different from the run-of-the-mill programs that we have. It was just going through that close end period, and a review of the auditors that, yeah, they've inadvertently double-counted because of the requirements to book the revenue for the earned revenue to the six months to December, but also the forecasted revenue over the program.

Because it's onerous, we have to consider what the revenue for the balance of the full program. It was just an inadvertent error.

We're putting in additional internal control checks, program checks, and revenue across each of those programs in the US to ensure that this doesn't happen again.

thank you. Just on the $6.7 million of sub module revenue, what EBIT margin would this be flowing through at?

Whatever it is, would that be a good guide as to what we should expect from this going forward?

It's very nuanced what the answer is. That 6.7 is related to the MMF3 program that we have.

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. Look, in totality, that's a $450 million US dollar contract that will flow through the income statement.

There's zero cost related to it, anything that's revenue recognized through that particular contract will then drop directly to earnings. What's separate to that, though, we don't separately disclose, is the earnings that we have through construction of submarine modules in the US.

That sits in as part of the segment around US shipbuilding. 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 we have in the US.

Thanks.

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.

Thanks for those of you that were able to get on the call today.