The Austal Limited (ASX: ASB) share price is flat this morning following the release of the company’s FY2020 results. At the time of writing, the Austal share price has edged lower to $3.58 after closing Friday’s session at $3.61. The global defence contractor’s shares were up as much as 5.5% to $3.81 at one stage before giving back all of those gains.
What’s moving the Austal share price?
The Austal share price has edged lower this morning despite the company announcing a net profit after tax (NPAT) of $89 million for the six months ending 30 June 2020, up 45% on the prior period. The company reported a 13% increase in revenue for the full-year to $2,086 million.
Earnings before interest, tax depreciation and amortisation (EBITDA) came in at $176.1 million, a 30% jump on FY H120 results.
The company achieved record revenue, EBITDA, EBIT and NPAT. This was underpinned by expansion of commercial shipbuilding, growth revenue support in the United States and a favourable FX translation.
Austal’s cash flow from its operations remained unchanged at $164.5 million, and underlying earnings per share was at 25 cents, up 42%.
The global shipbuilder recorded a strong balance sheet of $272.4 million net cash on hand.
The company declared an unfranked final dividend of 5 cents per share. Austal has paid a total of 8 cents per share for the full year, a year-on-year increase of 33%.
What were the drivers of Austal’s results?
Austal’s FY20 results highlighted strong growth in its US segment, news of which has already been driving the Austal share price higher over the last month. Over half of total group revenue was accounted for by US Navy contracts. Three vessels were delivered with a further seven in construction.
In the company’s Australian operations, shipbuilding margins grew 210% with EBIT more than doubling (180%) following infrastructure investment over the past three years.
COVID-19 impact
The operational impact from coronavirus has been minimal on the company.
Austal did advise its commercial ferry market is likely to be affected, however it is considered a relatively small area of revenue for the business.
The current commercial market turnover for Austal is less than 10%. The shipbuilder aims to have a pipeline of $1 billion to be bided over the next three years.
FY21 0utlook
Austal did not provide EBIT guidance for FY2021 given the global economic uncertainty. However, the company has an order book of $4.3 billion with expectations that both defence and commercial ships will be delivered by FY2024.
Furthermore, Austal has committed to investing $100 million to build a modern steel shipbuilding plant in the US that is estimated to be completed within the next two years. This will position Austal to bid for work in a series of significant contracts for the US Navy.
Commenting on Austal’s FY20 results, COO Patrick Gregg said:
The financial results highlight the success of our ongoing strategy to grow our defence business, which now makes up approximately 88 per cent of the Group’s revenue across construction and support. The value of this is clear as we see that the broader Defence Market is strengthening and has largely been shielded from the economic impacts of COVID-19.
Importantly, these record earnings have translated into significant cash flow, enhancing our strong balance sheet position with $397 million of cash. This financial strength is enabling Austal to target strategic investment opportunities to drive the Company’s next phase of growth whilst at the same time increasing dividends and considering debt reductions in FY2021.
About the Austal share price
The Austal share price has recovered nearly 55% from its March low of $2.31. Whilst trading around 28% lower than its 52-week high, the Austal share price has fallen 4.8% in year-to-date trading.
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Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Austal Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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