September 5, 2003
Austal reports full year loss
Managing Director, Bob McKinnon, said that while the company's core business operations in commercial and military vessel construction performed satisfactorily, previously announced costs associated with developing Oceanfast luxury motor yachts and Austal USA's production capabilities adversely impacted the final result. Losses from these operations were A$18.0 million and A$12.9 million respectively.
The overall result was also affected by a A$3.7 million provision for the Austal Group Management Share Plan loans.
McKinnon said the result from the Oceanfast operation is mainly attributable to difficulties in obtaining sufficient skilled labor to complete vessels efficiently. This resulted in lower than acceptable productivity and the extensive use of subcontractors. In response to the unacceptable results, structural changes have been implemented and a vessel currently under construction is displaying substantially improved results.
"While the financial performance related to the completed yachts is disappointing, the quality of the vessels is earning Oceanfast a place among the world's premier luxury motor yacht builders," McKinnon said.
Austal USA's performance was impacted by higher than expected workforce development costs, primarily due to lower than anticipated labor productivity levels and the consequent training demands.
McKinnon said the group's inexperience with U.S. classification requirements also caused delays and rework. Marketing expenditure, particularly in relation to the military market, was substantially increased.
"Focus within this business is to develop operating capability in a structured way so skilled resources are available as opportunities arise," McKinnon said.
"Work on a contract to build a 58 m vehicle-passenger ferry for delivery in May 2004 provides Austal USA with an important platform to develop its resources," he said.
Austal's Board and management remain confident in the direction and long-term benefit of its diversification strategy and the company's capability to take advantage of future opportunities.
Significant achievements during the year that contribute to a positive outlook include:
The Australian Government's announcement on August 29, 2003 that Austal Ships, in conjunction with its tender partner, Defence Maritime Services, is the preferred tenderer to construct 12 navy patrol vessels for the Royal Australian Navy;
Austal's significant role in one of three teams awarded contracts for the preliminary design of the U.S. Navy's Littoral Combat Ship (LCS) project;
Securing a contract for Fred Olsen SA in the Canary Islands to build the world's largest high-speed aluminium trimaran, a 126 m ferry. Austal's design and technology will provide ferry operators with significantly improved levels of passenger comfort in a range of sea conditions and, importantly, is closely aligned to the platform proposed for the U.S. Navy's LCSs;
The successful delivery of Oceanfast's largest world-class luxury motor yacht, which demonstrates the group's capabilities in this market;
Receiving two separate export patrol boat contracts, reflecting Austal's growing stature in the global military and patrol vessel markets.
No dividend will be payable for the year ended June 30, 2003.