Associated Banc-Corp
Annual Report 2011

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The Directors’ report, Concise Financial report and Independent Audit report contained within this document represent a Concise report. The 2011 Concise report is an extract of Austal Limited’s 2011 Annual report. The financial statements and specific disclosures included in the Concise report have been derived from Austal Limited’s 2011 Annual report. The financial statements included in the Concise report cannot be expected to provide as full an understanding of Austal Limited’s financial performance, financial position and financing and investing activities as that provided by the 2011 Annual report. 2011 Annual report A copy of Austal Limited’s 2011 Annual report, together with the Independent Audit report and Corporate governance Statement, is available to all shareholders and will be sent to shareholders without charge upon request. The financial statements can be requested by telephone on +61 8 9410 1111 or by visiting www.austal.com 2011/2012 CALEnDAr oF EvEnTS Annual general Meeting The Annual general Meeting of shareholders will be held at 3.00pm on 21 october 2011 at the Fremantle Sailing Club, “Success harbour”, Marine Terrace, Fremantle, western Australia. Dividend payment The final dividend will be paid to shareholders on 6 october 2011 to those registered at 5pm on 22 September 2011. ConTEnTS 02 ChAIrMAn’S rEporT 04 opErATIng AnD FInAnCIAL ovErvIEw 06 proFILE oF DIrECTorS 08 DIrECTor’S rEporT 16 ConSoLIDATED STATEMEnT oF CoMprEhEnSIvE InCoME 18 ConSoLIDATED STATEMEnT oF FInAnCIAL poSITIon 19 ConSoLIDATED STATEMEnT oF CASh FLowS 20 ConSoLIDATED STATEMEnT oF ChAngES In EqUITy 21 noTES To ThE ConCISE FInAnCIAL STATEMEnTS 24 DIrECTor’S DECLArATIon 25 InDEpEnDEnT AUDIT rEporTS 27 ShArEhoLDEr InForMATIon 28 CorporATE DIrECTory Austal’s largest catamaran built to date, the 113 metre “Leonora Christina”, was delivered to Færgen of Denmark in May 2011. AUSTAL LIMITED 1 ChAIrMAn’S rEporT This year was an exciting, transformational one for Austal which, with the award of a 10 vessel Littoral Combat Ship (LCS) program and the exercising of further options under its Joint high Speed (JhSv) contract, saw Austal emerge as an international prime contractor for defence programs. The high Australian dollar and adverse international market conditions, particularly in the important European market, continued to impede Austal’s ability to export its commercial products during this period, reflecting in this year’s result. we are confident, however, that Austal’s underlying business strategy and the heavy emphasis on defence will continue to deliver growth and long term financial stability. our continuing involvement in two major multi-vessel US defence programs is the best example of the benefits of such a strategy. The company’s success in being selected by the US navy for an additional 10 vessel LCS program is a major boost both for Austal’s Alabama shipyard and the company as a whole. “USS Independence”, the first Austal LCS delivered under the initial contract, continues to perform well while “USS Coronado”, the second vessel, is due for delivery in 2012. The third Austal LCS, and the first under the new multi-vessel contract, “USS Jackson”, is currently under construction, and the US navy has confirmed the order for the fourth LCS, “USS Montgomery”. As the total program is for more than 50 vessels, Austal is well placed for further multiple vessel orders. At the same time Austal continues to build Joint high Speed vessels (JhSvs) under a 10 ship program with the US Department of Defence. Confirmed contracts are in place for 7 JhSvs with the first, “Spearhead”, due to deliver in December 2011. The LCS contract award will see a doubling in size of Austal’s US operations with a second 34,000m2 Modular Manufacturing Facility (MMF) currently under construction, while Austal’s US-based workforce is planned to expand to approximately 4,000 people by 2013. Consistent with its ongoing strategy to target the long-term, predictable income streams offered by defence contracts, Austal has refocussed its Australian activities completing the rationalisation of its shipbuilding facilities and strengthening its capabilities as a prime contractor for defence projects. In late 2010, Austal acquired Australian Technology Information (ATI), a Canberra-based company specialising in and possessing intellectual property in systems engineering and integration. By merging ATI into a new division, Austal Systems, which combines systems engineering with Austal’s existing in-service support capability, the company is well placed to compete as a prime contractor in the defence sector both in Australia and internationally. The success of this strategy was reinforced by the award, after year end, of the contract for the supply and in-service support of eight 58 metre Cape Class patrol Boats (CCpB) for the Australian Customs and Border protection Service. Although the commercial ferry market has not fully emerged from the global financial crisis, there are some signs of recovery. Austal secured orders for two passenger ferries during the year, one a 35 metre monohull for repeat customer, Mary D Enterprises, and the other a 41 metre catamaran for vale. These contracts underline the company’s ongoing commitment to the commercial market which was further bolstered by securing an order for three 21 metre wind farm support vessels just after year end. whilst the current economic conditions continue to present challenges across Austal’s markets, the company remains focussed on delivering growth opportunities through its focus on the defence sector, international expansion and product diversification. with Austal emerging as a global defence prime contractor, we look forward to continuing to deliver consistent and predictable growth and I again wish to thank our staff and shareholders for their ongoing support. John roThwELL Ao ChAIrMAn Joint High Speed Vessel (JHSV) modules under construction at Austal USA’s state-of-the-art Modular Manufacturing Facility in Mobile, Alabama. AUSTAL LIMITED 2 AUSTAL LIMITED 3 opErATIng AnD FInAnCIAL ovErvIEw The group operating profit after tax for the year was $21.890 million compared with the previous year of $37.132 million. revenue has decreased by $17.558 million over the previous year while operating profit before tax has decreased by $31.365 million. revenue from Austal’s US operations increased by 23% over 2011, to $328.709 million. The EBIT contribution from the US operations decreased, from $23.722 million in 2010, to $19.386 million in 2011. This reduction in contribution resulted from an under recovery of overheads due to the delay in the award of the LCS contract and cost overruns on the first JhSv. Cost overruns on a first class vessel are not uncommon and, with the application of lessons learned, follow on vessel projects are performing at or very close to budget. Further the near 30% appreciation of the Australian dollar against the US Dollar over the year adversely impacted the translation of the results of Austal’s US operations. The revenue from Austal’s Australian operations decreased by $75.447 million compared to 2010 due to the continued impact of global economic conditions, resulting in less work volume awarded and completed in 2011. Further contributing to this result was that the stock vessels were not sold during the year as previously expected. The EBIT contribution from the Australian operations decreased, from $27.601 million in 2010, to a negative EBIT of $8.573 million in 2011. Importantly Austal’s USA business is now providing the group with a level of diversification in its earnings which is in part offsetting the impact of global economic conditions. FInAnCIAL SUMMAry year ended 30 June revenue* EBITDA 2011 $’000 2010 $’000 503,427 520,150 37,568 67,159 Depreciation, Amortisation & Impairment (15,466) (14,428) EBIT net Interest (paid)/received operating profit Before Tax Tax (Expense)/Benefit operating profit After Tax % EBIT/revenue Basic Earnings per Share (cps) net Assets return on Equity (%) *Excludes interest and other income 22,102 52,731 (2,310) (1,574) 19,792 51,157 2,098 (14,025) 21,890 37,132 4.4 11.9 10.1 20.3 274,166 269,365 8.0 13.8 AUSTrALIAn opErATIonS Although challenging economic conditions continued to hold back sales at our Australian facilities, we were pleased to secure two new contracts during the year. In February, Austal was awarded a contract to build a 35 metre passenger monohull ferry for Mary D Enterprises, the second vessel Austal has built for this customer, and in June, Austal secured a contract to build a 41 metre passenger catamaran ferry for vale in new Caledonia. Just after year end, Austal was awarded a further contract to build three 21 metre support vessels for the fast growing European offshore turbine wind farm industry. A review of the Australian operations was conducted during the year to consider how the significant capabilities of our Australian operations could be refocused towards AUSTAL LIMITED 4 the manufacture and support of defence vessels. Several trends were identified that have significant potential for Austal’s future growth. There is continuing strong demand in specific segments of the international commercial vessel market (such as fast crew transfer boats, work boats and 30 metre to 50 metre ferries) and new markets (such as offshore turbine wind farms) are emerging for which new products can be developed using Austal’s considerable intellectual property. To be successful in these markets, apart from applying its market leading intellectual property, Austal will need to regionalise its manufacturing base to enhance competitiveness. In the defence sector, systems engineering and integration present attractive opportunities that have the potential to deliver significant recurrent income. In 2010, Austal acquired Canberra-based Australian Technology Information pty Ltd (ATI), an Australian company that provides specialised services to the Australian Defence Forces including systems engineering and integration, information technology, verification and validation systems and deployable tactical command centres. These capabilities have been merged with our existing in-service support enabling the delivery, as prime contractor, of an integrated ship construction, systems integration and in-service support capability for defence programs. The success of this strategy was demonstrated in August 2011, when Austal was awarded the contract for the construction and in-service support of eight 58 metre Cape Class patrol Boats (CCpB) for the Australian Customs and Border protection Service. recently completed at our western Australian facility during the year has been the 113 metre vehicle ferry “Leonora Christina” for Danske Færger A/S (formerly nordic Ferry Services). As the largest catamaran built by Austal, and the largest ever built in Australia, “Leonora Christina” was delivered in May, and is currently in service in Denmark, linking ronne on the Danish island of Bornholm with the southern Swedish city of ystad. Construction also continued on the two 47 metre catamaran ferries for L’Express des Iles which were completed. USA opErATIonS In December 2010 the US navy obtained budgetary approval to proceed with contracts for two LCS variants, with the result that Austal’s US facility was awarded a contract for up to ten 127 metre Austal-designed and built Independence Class Littoral Combat Ships (LCS). The initial contract was for one vessel with the US navy having options to build nine more over the following five years. In March 2011 the US navy exercised its option for the second vessel. The first Austal LCS, “USS Independence”, has been in service since January 2010 and continues to perform well. The second, “USS Coronado”, is nearing completion and is due for delivery in 2012. The third Austal LCS, and the first under the new contract, “USS Jackson”, is currently under construction, and the US navy has confirmed the order for the fourth LCS, “USS Montgomery”. Austal’s US facility is also constructing the first of the US Department of Defence’s high speed support vessels – the Joint high Speed vessel (JhSv). As the sole supplier of a vessel that may expand into a 40-ship class, Austal currently has contracts in hand to build seven of these 103 metre JhSvs with the first, “Spearhead”, due for delivery in December 2011. In order to fulfil these US military programs, Austal USA recently commenced a further upgrade to its production capacity with the construction of a second 34,000m2 Modular Manufacturing Facility (MMF), a new Assembly Bay and a new office complex. when complete, the state-of-the-art facility will be capable of constructing two LCSs and two JhSvs per year. The new three-story office complex will be placed just north of the MMF, will house 450 employees and will include a reconfigurable multi-purpose room capable of seating 400 people. It will be five times the size of the existing two-story office building on Dunlap Drive. Concurrent with physical expansion of the facility, the workforce will be expanded to about 4,000 by 2013. EnvIronMEnTAL pErForMAnCE whilst the international debate on greenhouse gas emissions progressed, we continued to devote significant resources to the development of more efficient vessels with a smaller environmental footprint. Initiatives that are currently being pursued include medium speed ferries that combine Austal’s lightweight aluminium technology with highly fuel efficient engines, the use of Lng and Cng fuels, reduction in on board electrical load through power saving and power substituting technologies, and the use of more hydro dynamically efficient hull forms. SAFETy pErForMAnCE For the second year running Austal achieved both Lost Time Injury Frequency rates (LTIFr) and Medical Treatment Injury Frequency rates (MTIFr) at record low levels in contrast to the frequency rates in the previous years. LTIFr for Austal over the last 5 years has typically been at levels between 5 and 6.5. we have continued our safety journey improving on performance while continuing to develop new processes. while maintaining a focus on the workplace culture and ramping up behavioural programs, we have embarked on a more systematic approach. The results continue to be very encouraging, especially given the rapidly expanding workforce in the US operations which brings with it the challenges of new people, inexperienced in Austal’s systems and processes, and the hazards of the marine manufacturing environment. while our Lost Time Injury performance remained steady, a substantial improvement was seen in the number of medical treatments. oCCUpATIonAL SAFETy AnD hEALTh poLICy Austal’s occupational Safety and health (oSh) policy focuses on safe people, safe practices and safe work environments and promotes a workplace culture that raises awareness of individual responsibility for safety and health. Austal’s safety culture is achieved as these components become accepted practice in the workplace and are supported by strong leadership. SAFE pEopLE This year has seen the nomination of employees in various Safe work Awards for their safety innovations and the implementation of monthly recognition awards for safety. Austal’s henderson manufacturing facility last year achieved a Silver Certificate of Achievement under the workSafe plan Assessment and has been recommended to workSafe western Australia for a gold Certificate of Achievement, a 3rd party assessment process, this year. The US operations received two significant safety awards during the year. The first award was from the Ship Builders Council of America for Excellence in Safety and our ongoing Improvement in Safety performance. The second award was from the American Longshore Mutual Association (ALMA) for the Safest Large Shipyard. This is the second consecutive year that Austal USA has received both of these awards. Austal USA’s current safety performance places Austal USA to again receive both of these awards for the upcoming year. At Austal the safety of our people is at the forefront of everything we do. our goal is Zero harm and we work hard in an effort to achieve this every day. oUTLooK Sustained adverse international market conditions have had a significant impact on the result for this year. Austal believes that the current market conditions – a high Australian dollar, weak European and US economies and increasing competition for labour in Australia – will be the norm for some years to come. Austal has reviewed its strategy against this macro backdrop and has drawn the following conclusions: • • • • • The prospect of significant cuts to the US defence budget over coming years is inevitable. whilst all US defence procurement programs face some level of risk, Austal considers that the risk of cuts to the JhSv and LCS programs is very low, particularly in comparison to the risk of cuts to other higher profile and more costly procurement programs undertaken by the US Department of Defence. Accordingly, the focus of Austal’s US business unit needs to remain on the “on time, on budget, to quality” delivery of Austal’s U.S. navy vessels out to 2018/19. Demand in specific segments of the international commercial vessel market (e.g. fast crew transfer boats, works boats and 30 metre to 50 metre ferries) remains strong and new markets are emerging. Austal needs to apply its considerable intellectual property towards developing products specifically for these markets. Apart from deploying superior intellectual property, success in these markets will require Austal to regionalise its manufacturing base to enhance its international competitiveness. The market for defence systems opportunities is attractive and has the potential to deliver significant recurrent income. Austal will leverage its existing systems integration capabilities and look to strategically grow its capabilities to access these new opportunities. The outlook for the commercial and defence vessel service and maintenance markets remains strong and Austal will therefore continue to pursue contracts in this space. Austal is now focusing its Australian manufacturing and support facilities on the defence sector and the award of the 8 vessel Cape Class patrol Boat Contract by the Australian Customs and Border protection Service just after year end was an important first step in the implementation of that strategy. In conjunction with the position that has been carved out in the US defence sector, Austal has now become a global defence prime contractor – a significant achievement given that the Company listed on the Australian Stock Exchange only 12 years ago. Austal’s US business has now become a key supplier to the U.S. navy. of the 50 vessels that the U.S. navy intends to procure over the next 5 years, 17 of them will be built by Austal (9 JhSv and 8 LCS). This gives Austal a level of visibility and predictability of future revenues that is unparalleled in the Company’s history. Austal now has 7 JhSvs under contract, with options remaining for a further 3 ships, and 2 LCSs under contract with options remaining for a further 8 vessels. As the remaining options for all vessels are exercised, the revenues from Austal’s US business alone will rise to approximately US$1 billion over the course of the next 2 years. As at 30 June 2011, the order book backlog totalled $1.49 billion. This gives the group a tremendous platform for growth and further allows Austal to reposition its mature Australian business for the next phase of its evolution. The challenges of the macro environment have caused Austal to think about its inherent skills, intellectual property and competitive advantages in new ways and we believe that the group is well positioned for future growth. LoST TIME InJUry FrEqUEnCy rATE pEr MILLIon hoUrS worKED MEDICAL TrEATMEnT InJUry FrEqUEnCy rATE pEr MILLIon hoUrS worKED AnDrEw BELLAMy EXECUTIvE DIrECTor AnD ChIEF EXECUTIvE oFFICEr AUSTAL LIMITED 5 proFILE oF DIrECTorS John Rothwell AO non Executive Chairman Director since: 9 October 1987 Last elected: 22 October 2010 with in excess of 30 years experience in boat and shipbuilding, John rothwell has played a major role in the development of the Australian aluminium shipbuilding industry and is a Founding Director of Austal. In June 2004, John was appointed a Council member of the Australian national Maritime Museum and became Chairman of the Capital works Committee of that organisation in november 2005. In January 2004, John rothwell was appointed an officer of the order of Australia for services to the Australian shipbuilding industry through the development of trade links and for significant contributions to vocational education and training. In october 2002, John rothwell was named the Ernst & young “Australian Entrepreneur of the year”. John stepped down as Executive Chairman and Chief Executive officer on 22 August 2008 to continue as non-Executive Chairman. Michael Atkinson CA, (Zim) CA (SA) Executive Director Director since: 14 September 1994 Last elected: 21 October 2008 Michael Atkinson joined Austal in 1990 as Financial Controller and was appointed to the Board in 1994. he is a qualified Chartered Accountant with 10 years experience in the accounting profession. on leaving the profession, he entered the railway and construction industry where he served in a senior financial capacity and as a Board member. Unless otherwise indicated all Directors held their position as a Director throughout the entire financial year and up to the date of this report. The maximum term of office for a Director on the Austal Board is three years, with the exception of the Managing Director who is exempted from retirement by rotation. Each year the longest serving one third of the Board must retire from office. A retiring Director is eligible for re-election. AUSTAL LIMITED 6 Christopher Norman, (B.Eng Hons) non Executive Director Director since: 9 October 1987 Last elected: 23 October 2009 Chris norman is one of the Founding Directors of Austal. he graduated from the University of new South wales in 1986 with first class honours in naval Architecture and has previously been Austal’s Technical Director. Mr norman has been a driving force in the technical and marketing success of the company and, with extensive experience in international marketing and sales, held the position of Sales Director between 1993 and 2002. In May 2000, Chris was awarded the prestigious A.g.M. Michell Award in recognition of outstanding service in the profession of Mechanical Engineering. he is a member of both the royal Institution of naval Architects and the germanischer Lloyd Asean Committee. John Poynton, B.Com, FSIA, FAIM, FAICD Independent Director - non Executive Director since: 24 August 1998 Last elected: 23 October 2009 John is a Co-Founder and Executive Chairman of Azure Capital. John is the Deputy Chairman of Austal Limited and is a non-Executive Director of Burswood Ltd. In the not-for-profit arena, he chairs giving west and the Council of Celebrate wA. John is a member of Social ventures Australia and Curtin Foundation. previously, John was a Chairman of ASX perth, Fleetwood, Alinta and west Australian Museum Foundation; Director of Multiplex; Member of the higher Education Endowment Fund Advisory Board, payments System Board of the reserve Bank of Australia and of the Business School at the University of western Australia. John is a Senior Fellow of the Financial Services Institute of Australia (FInSIA), and a Fellow of the Australian Institute of Company Directors (AICD) and Australian Institute of Management (AIM). John is a Member in the general Division of the order of Australia and is a past recipient of a wA Citizen of the year award in the industry and commerce category. John holds a Bachelor of Commerce and an honorary Doctor of Commerce from the University of western Australia. Andrew Bellamy, BSc (Hons) Material Science, MA (Marketing) Executive Director & Chief Executive officer Director since: 24 February 2011 Andrew Bellamy joined Austal Limited in September 2008, bringing with him proven experience in establishing sales excellence and business simplification programs. In 2010, Mr Bellamy was appointed Chief operating officer of Austal’s Australian businesses and has overseen the growth and expansion of Austal’s international network of locations at a time of significant turbulence in global markets. Mr Bellamy was appointed Chief Executive officer of Austal in February 2011. prior to assuming his role at Austal Limited, Mr. Bellamy held senior positions within the refining and petrochemical industry with honeywell and ICI. he is also the former Sales and Marketing Director of henkel AnZ. Dario Amara, BE (Distn) FIEAust CPEng Independent Director - non Executive Director since: 16 August 2005 Last elected: 21 October 2008 Dario Amara is co founder and Chief Executive of Emerson Stewart Limited, a project delivery, mining services and technologies group based in perth. he has 28 years of Australian and International experience covering both the engineering and construction sectors, and has been involved in a number of senior leadership roles. Most recently, he successfully led a major Australian engineering group as Chief Executive officer. he has a record of accomplishment in rejuvenating and growing businesses in new markets. he is a graduate from the Curtin University of Technology. he is currently non Executive Chairman of Mission Biofuels Limited, Chairman of the City of perth heritage Appeal and a board member of the perth International Art Festival. he has also served as Chairman of the west Australian opera Company and the Art gallery of western Australia. Ian Campbell Independent Director - non Executive Director since:1 August 2007 Last elected: 22 October 2010 Mr Campbell had a distinguished 17 year career as a Senator for western Australia in the Australian Federal parliament. As parliamentary Secretary to the Treasurer for 4 years, Mr Campbell initiated the Corporate Law Economic reform program including legislating to move Australia to International Financial reporting Standards and reform of Accounting and Audit oversight institutional arrangements. he is a former Member of Federal Cabinet where he held the portfolios of Environment and heritage and human Services. As a Federal Minister he also served as Minister for Local government, Territories and roads. Ian is a non-Executive Director of Solco Ltd, ASg group Ltd and proto resources and Investments Ltd. InTErESTS In ThE ShArES AnD opTIonS oF ThE CoMpAny AnD rELATED BoDIES CorporATE As at the date of this report, the interests of the directors in the shares of Austal Limited were: number of ordinary Shares number of Shares held in AgMSp* Direct Indirect John rothwell 33,974,685 Michael Atkinson 1,415,737 - - - 285,062 Christopher norman 26,595,621 6,600 John poynton Dario Amara Ian Campbell Andrew Bellamy 10,000 50,000 - - - - - - - - - - - *This represents the number of shares (in substance options) held in the Austal group Management Share plan (AgMSp). There were no additional ordinary shares issued or options granted and exercised between the balance date and the date of this report. AUSTAL LIMITED 7 DIrECTor’S rEporT rEMUnErATIon rEporT (AUDITED) This remuneration report outlines the remuneration arrangements in place for Directors and Executives of Austal Limited (the Company) and the group in accordance with the requirements of the Corporations Act 2001 and its regulations. For the purposes of this report, Key Management personnel (KMp) of the group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the group, directly or indirectly, including any director (whether executive or otherwise) of the Company, and includes the five executives of the Company and the group receiving the highest remuneration. For the purposes of this report, the term ‘executive’ encompasses the Chief Executive, senior executives and general managers and secretaries of the parent and the group. noMInATIon AnD rEMUnErATIon CoMMITTEE The nomination and remuneration Committee of the Board of Directors reviews the remuneration of all Directors and makes recommendations to the Board. rEMUnErATIon poLICy It is the Company’s objective to provide maximum stakeholder benefit from the retention of a high quality Board and executive team by remunerating Directors and Key Executives fairly and appropriately with reference to relevant employment market conditions. other than the variable component and the share option plan, the remuneration policy is not linked to company performance. The Company aims to reward executives and senior managers with a level and mix of remuneration commensurate with their position and responsibilities within the Company so as to: • • attract and retain exceptional employees (‘key employees’) that have the capacity to significantly impact the growth and profitability of the Company; and align key employees’ behaviour towards the growth and profitability objectives of the Company; and reward key employees for sustained contributions to business success. Structure The non-executive directors receive fixed remuneration, in the form of salary and fees. however, they do not receive retirement benefits, nor do they participate in any incentive programs. The remuneration for the executives consists of fixed remuneration, being base salary, superannuation and non-monetary benefits and variable remuneration as listed below. no element of fixed remuneration is linked to performance conditions. To encourage the retention of employees, KMp who are not directors of the Australian companies participate in an annual bonus which takes into account length of service and profits earned by the Australian enterprises. The bonus vests and is paid dependent on the employees being employed at the end of December of each year. The bonus is paid at the discretion of the nomination and remuneration Committee. $218,414 (2010: $157,689) of the cash bonuses vested with the executives and was paid during this financial year. Similarly, Austal KMp who are not directors of Austal USA participate in an annual bonus program. Two forms of bonus opportunities exist; one form for the production workforce and one form for administration and management. Bonuses to the production workforce are tied to achievement of the performance objectives of Austal USA, reduction of waste, and safety and attendance measures. Bonuses to administration and management are tied to achievement of the financial objectives of Austal USA, specific growth initiatives, productivity improvement initiatives, customer satisfaction measures and employee satisfaction measures. These measures were chosen as they represent the key drivers for the short term success of the business and provide a framework for delivering long term value. prInCIpAL ACTIvITIES The principal activities during the year of entities within the consolidated entity were the design and manufacture of high performance vessels. These activities are unchanged from the previous year. rESULTS The profit of the consolidated entity for the financial year was $21.890 million after income tax (2010: $37.132 million). opErATIng AnD FInAnCIAL rEvIEw A review of the operations and financial position of the consolidated entity is outlined in the operating and Financial overview on page 4. DIvIDEnDS A fully franked final dividend of $11.284 million (6 cents per share) (2010: $11.284 million being 6 cents per share) has been declared for the year ended 30 June 2011 to be paid on 6 october 2011. SIgnIFICAnT EvEnTS AFTEr ThE BALAnCE DATE There were no significant events occurring after year end requiring disclosure. LIKELy DEvELopMEnTS AnD FUTUrE rESULTS A general discussion of the group outlook is included in the Chairman’s report on page 2 and the operating and Financial overview on page 4. SIgnIFICAnT ChAngES In ThE STATE oF ThE AFFAIrS A review of the significant changes in the state of affairs of the consolidated entity is outlined in the operating and Financial overview on page 4. EnvIronMEnTAL rEgULATIon AnD pErForMAnCE The consolidated entity has a policy of at least complying with, but in most cases exceeding, environmental performance requirements. no environmental breaches have been notified by any government Agency during the year ended 30 June 2011. ShArE opTIonS As at the date of this report, there were 6,664,402 un-issued ordinary shares under options. There were no options exercised during the year. ToTAL nUMBEr oF EMpLoyEES As at 30 June 2011, the consolidated entity employed a total of 2,404 full-time equivalents (2010: 2,452 full-time equivalents). InDEMnIFICATIon AnD InSUrAnCE oF DIrECTorS AnD oFFICErS An indemnity agreement has been entered into between the parent entity and each of the directors named in this report. Under the agreement, the company has agreed to indemnify those directors against any claim to the extent allowed by the law, for any expenses or costs which may arise as a result of work performed in their respective capacities. During the financial year, the parent entity has paid premiums in respect of a contract insuring the directors and officers of the consolidated entity in respect of liability resulting from these indemnities. The terms of the insurance arrangements and premiums payable are subject to a confidentiality clause. AUSTAL LIMITED 8 DIRECTORS’ REPORT Continued REMUNERATION REPORT (Audited) (Continued) Structure Goals for each of the preceding categories are established at the beginning of each financial year for each participant and bonuses are paid at the conclusion of rEMUnErATIon rEporT (AUDITED) (Continued) that year dependent upon the level of achievement of these goals. Such bonuses are reviewed and approved by the Nomination and Remuneration Committee. goals for each of the preceding categories are established at the beginning of each 100% of the cash bonuses vested with the executives and was paid during the financial year for each participant and bonuses are paid at the conclusion of that financial year. year dependent upon the level of achievement of these goals. Such bonuses are reviewed and approved by the nomination and remuneration Committee. 100% of Ex gratia bonuses are paid to executives in certain circumstances for exceptional the cash bonuses vested with the executives and was paid during the financial year. performance as determined by the CEO. These bonuses vest immediately. Ex gratia bonuses are paid to executives in certain circumstances for exceptional performance as determined by the CEo. These bonuses vest immediately. SHARE OPTION PLAN • The Share Option Plan aims to reward executives and senior managers with the ShArE opTIon pLAn issue of share options commensurate with their position and responsibilities within The Share option plan aims to reward executives and senior managers with the the Company so as to: issue of share options commensurate with their position and responsibilities within the Company so as to:  attract and retain exceptional employees (‘key employees’) that have the capacity to significantly impact the growth and profitability of the Company; attract and retain exceptional employees (‘key employees’) that have the capacity to significantly impact the growth and profitability of the Company;  align key employees’ behaviour towards the growth and profitability objectives of the Company; and reward key employees for sustained contributions to align key employees’ behaviour towards the growth and profitability objectives of the Company; and reward key employees for sustained contributions to business success. business success. The Group does not have a policy prohibiting executives from hedging of equity The group does not have a policy prohibiting executives from hedging of equity awards. awards. • Group performance group performance The graph below shows the performance of the Company as compared to the The graph below shows the performance of the Company as compared to the movement in the Company’s earnings per share over time. movement in the Company’s earnings per share over time. The share options are granted to executives and senior managers based on the eligibility criteria set by the Remuneration Committee. Eligibility for the plan will be Structure linked to employee performance. The exercise of the options will vest after 3 The share options are granted to executives and senior managers based on the years subject to meeting the company performance criteria. eligibility criteria set by the remuneration Committee. Eligibility for the plan will be linked to employee performance. The exercise of the options will vest after 3 years subject to meeting the Company performance criteria. performance hurdle The Company uses a relative Total Shareholder return (TSr) as the performance hurdle for the share option plan. relative TSr was selected as the share option plan performance hurdle as it ensures an alignment between comparative shareholder return and reward for executives. The Company’s performance against the hurdle is determined by comparing the TSr against the return of the Small Industrials Accumulation Index (or another appropriate index) for the three year period commencing on 1 July prior to the grant date. If the TSr does not exceed the return of the Small Industrials Accumulation Index for a particular three year period, the series of options issued at that grant date would lapse. In relation to the options issued after 3 november 2009, the options vest if the TSr of Austal Limited exceeds 25% for each three year period after issuance. The percentage vesting reduces on a sliding scale if the TSr is below 25%, until no options vest if the TSr is below 5%. Performance hurdle The Company uses a relative Total Shareholder Return (TSR) as the performance hurdle for the share option plan. Relative TSR was selected as the share option plan performance hurdle as it ensures an alignment between comparative shareholder return and reward for executives. The Company’s performance against the hurdle is determined by comparing the TSR against the return of the Small Industrials Accumulation Index (or another appropriate index) for the three year period commencing on 1 July prior to the grant date. If the TSR does not exceed the return of the Small Industrials Accumulation Index for a particular three year period, the series of options issued at that grant date would lapse. In relation to the options issued after 3 November 2009, the options vest if the TSR of Austal Limited exceeds 25% for each three year period after issuance. The percentage vesting reduces on a sliding scale if the TSR is below 25%, until no options vest if the TSR is below 5%. Austal Limited 2011 Company Directors DETAILS oF KEy MAnAgEMEnT pErSonnEL InCLUDIng groUp AnD CoMpAny EXECUTIvES who rECEIvED ThE hIghEST rEMUnErATIon DETAILS OF KEY MANAGEMENT PERSONNEL INCLUDING GROUP AND COMPANY EXECUTIVES WHO RECEIVED THE HIGHEST REMUNERATION FOR For ThE yEArS EnDED 30 JUnE 2011 AnD 2010 THE YEARS ENDED 30 JUNE 2011 AND 2010 (I) DIrECTorS (i) DIRECTORS Mr John rothwell non-Executive Chairman (ii) EXECUTIVES Mr Joseph rella Chief operating officer Austal USA (II) EXECUTIvES Mr John Rothwell Mr Michael Atkinson Executive Director* Non-Executive Chairman Mr Christopher norman non-Executive Director Mr Michael Atkinson Mr John poynton Mr Christopher Norman Mr robert Browning Mr John Poynton Mr Robert Browning Mr Dario Amara Mr Ian Campbell Mr Dario Amara Mr Andrew Bellamy Mr Ian Campbell Mr Andrew Bellamy Executive Director* Independent Director Non-Executive Director Managing Director & Chief Executive Independent Director officer – resigned 15 november 2010 Managing Director & Chief Executive Officer - resigned 15 November 2010 Independent Director Independent Director Independent Director Executive Director & Chief Executive officer Independent Director – appointed 24 February 2011 Chief Executive Officer – appointed 24 February 2011 * on 21 January 2011, Michael Atkinson resigned as Company Secretary and richard Simons was appointed. Mr Joseph Rella Mr greg Metcalf Mr Greg Metcalf Mr richard Simons Mr Richard Simons Mr william rotteveel Mr William Rotteveel Mr Mark Dummett Chief Financial officer Chief Operating Officer Austal USA – resigned 18 September 2009 Chief Financial Officer – resigned 18 September 2009 Chief Financial officer & Company Secretary* – appointed 1 February 2010 Chief Financial Officer & Company Secretary* – appointed 1 February 2010 general Manager Austal Image – resigned 6 July 2010 General Manager Austal Image – resigned 6 July 2010 Executive Manager Australian operations Mr Mark Dummett Mr peter hogan Chief operating officer Australia Executive Manager Australian Operations – resigned 10 December 2009 Mr Peter Hogan Chief Operating Officer Australia – resigned 10 December 2009 * On 21 January 2011, Michael Atkinson resigned as Company Secretary and Richard Simons was appointed. AUSTAL LIMITED 9 AUSTAL LIMITED 2011 CONCISE REPORT 8 DIrECTor’S rEporT Continued rEMUnErATIon rEporT (AUDITED) (Continued) rEMUnErATIon oF KEy MAnAgEMEnT pErSonnEL InCLUDIng groUp AnD CoMpAny EXECUTIvES who rECEIvED ThE hIghEST rEMUnErATIon For ThE yEAr EnDED 30 JUnE 2011. TABLE 1: rEMUnErATIon For ThE yEAr EnDED 30 JUnE 2011 Short-Term Salary & Cash Monetary non- post Employment Superannuation Termination payments Share-based payment options Total % performance related Contract Terms note non-executive directors John rothwell** Christopher norman John poynton Dario Amara Ian Campbell Fees $ 440,000 85,000 90,000 93,000 90,000 Sub-total non-executive directors 798,000 Bonus Benefits $ - - - - - - $ - - - - - - Executive directors robert Browning* Michael Atkinson Andrew Bellamy 301,077 104,452 6,760 380,000 - 486,759 45,555 other key management personnel Joseph rella richard Simons 338,237 102,314 369,708 17,202 william rotteveel* 48,987 - Mark Dummett 316,333 28,891 Sub-total executive KMp 2,241,101 298,414 Total 3,039,101 298,414 * ** Key management personnel for part of year of 2011. Inclusive of 10% goods and Services Tax. - - - - - - 6,760 6,760 $ - - - - - - - - 26,241 - 34,404 $ - - - - - - $ 440,000 85,000 90,000 93,000 90,000 798,000 (1,322,171) (909,882) 33,519 413,519 44,660 603,215 54,147 494,698 48,703 470,017 - - - - - - - - - - - - 130,700 (36,520) 143,167 15,188 75,833 75,833 - 33,599 394,011 130,700 (1,144,063) 1,608,745 130,700 (1,144,063) 2,406,745 - - - - - 133.8 8.1 15.0 31.6 14.0 (25.5) 15.9 2 1 1 1 1 5 2 4 5 4 3 3 Austal was awarded a contract for the design and construction of one 35m high speed monohull passenger ferry for repeat customer, Mary D Enterprises, in February 2011. AUSTAL LIMITED 10 rEMUnErATIon rEporT (AUDITED) (Continued) TABLE 2: rEMUnErATIon For ThE yEAr EnDED 30 JUnE 2010 Short-Term Salary & Cash Monetary non- post Employment Superannuation Termination payments Share-based payment options Total % performance related Contract Terms note non-executive directors John rothwell** Christopher norman** John poynton Dario Amara Ian Campbell Fees $ 416,666 85,000 90,000 93,000 90,000 Sub-total non-executive directors 774,666 Executive directors robert Browning Michael Atkinson 623,986 364,105 other key management personnel Bonus Benefits $ - - - - - - - - $ - - - - - - 28,008 - Joseph rella greg Metcalf* richard Simons* william rotteveel Mark Dummett Andrew Bellamy peter hogan* 374,065 84,527 35,646 131,353 125,960 - - 231,682 9,050 254,285 9,760 324,507 32,110 155,790 22,242 - - - - - - $ - - - - - - - - - $ - - - - - - $ 416,666 85,000 90,000 93,000 90,000 774,666 478,754 1,130,748 15,346 379,451 21,330 515,568 - - - - - - - - - 5,812 212,994 11,290 361,449 11,274 18,847 23,377 28,321 21,946 - - - - 9,397 146,631 15,615 275,194 21,648 309,070 12,537 397,475 83,479 (1,641) 281,816 - - - - - 42.3 4.0 4.1 3.1 6.4 5.7 7.0 3.2 7.3 2 1 1 1 1 5 2 5 3 4 3 3 4 4 Sub-total executive KMp 2,585,733 157,689 63,654 109,577 296,473 584,276 3,797,402 Total 3,360,399 157,689 63,654 109,577 296,473 584,276 4,572,068 * ** Key management personnel for part of year of 2010. Exclusive of 10% goods and Services Tax. ConTrACT TErMS noTES 1. Directors fees only. 2. Subcontract – no fixed notice period or duration. no termination entitlements. 3. Employment contract – one week notice period or duration. no non-statutory termination entitlements. 4. Employment contract – nine months’ notice period. no non-statutory termination entitlements. 5. Employment contract – upon involuntary termination of employment without cause, a severance of six months salary will be paid. AUSTAL LIMITED 11 DIrECTor’S rEporT Continued rEMUnErATIon rEporT (AUDITED) (Continued) TABLE 3: CoMpEnSATIon opTIonS: grAnTED AnD vESTED DUrIng ThE yEAr granted Terms & Conditions for each grant Fair value per option at grant date Exercise price per option no. grant Date ($) ($) Expiry Date Exercise Date Exercise Date vested no. First Last 30 June 2011 Michael Atkinson 140,000 28 Sept 2010 Joseph rella richard Simons Mark Dummett 140,000 28 Sept 2010 140,000 28 Sept 2010 70,000 28 Sept 2010 Andrew Bellamy 140,000 28 Sept 2010 Total 630,000 30 June 2010 Joseph rella 140,000 3 nov 2009 richard Simons* 140,000 16 Feb 2010 william rotteveel*** 70,000 3 nov 2009 Mark Dummett 70,000 3 nov 2009 Andrew Bellamy 140,000 3 nov 2009 peter hogan* 140,000 3 nov 2009 100,000 16 Feb 2010 Total 800,000 * ** Key management personnel for part of year of 2010. 140,000 options were forfeited on cessation of employment. *** Forfeited in 2011. 0.840 0.840 0.840 0.840 0.840 0.522 0.561 0.522 0.522 0.522 0.522 0.690 2.34 2.34 2.34 2.34 2.34 2.95 2.45 2.95 2.95 2.95 2.95 1.81 29 Sept 2017 29 Sept 2013 29 Sept 2017 29 Sept 2017 29 Sept 2013 29 Sept 2017 29 Sept 2017 29 Sept 2013 29 Sept 2017 29 Sept 2017 29 Sept 2013 29 Sept 2017 29 Sept 2017 29 Sept 2013 29 Sept 2017 30 oct 2016 30 oct 2012 30 oct 2016 27 Feb 2017 27 Feb 2013 27 Feb 2017 30 oct 2016 30 oct 2012 30 oct 2016 30 oct 2016 30 oct 2012 30 oct 2016 30 oct 2016 30 oct 2012 30 oct 2016 ** ** ** 27 Feb 2016 27 Feb 2012 27 Feb 2016 - - - - - - - - - - - - - - of existing option holdings only 140,000 of Michael Atkinson and 67,500 of Mark Dummett’s options had vested during the year and no options we exercised (2010: no options vested or were exercised during the year or prior year). TABLE 4: opTIonS grAnTED AS pArT oF rEMUnErATIon value of options granted during the year $ value of options exercised during the year $ value of options forfeited during the year $ value of options lapsed during the year $ remuneration consisting of options for the year % 30 June 2011 Michael Atkinson Joseph rella richard Simons Mark Dummett Andrew Bellamy 30 June 2010 Joseph rella richard Simons* william rotteveel Mark Dummett Andrew Bellamy peter hogan* 117,600 117,600 117,600 58,800 117,600 73,080 78,540 36,540 36,540 73,080 73,080 69,000 * Key management personnel for part of year of 2010. AUSTAL LIMITED 12 - - - - - - - - - - - - - - - - - - - - - - 73,080 - - - - - - - - - - - - - 8.1 10.9 10.4 8.5 7.4 4.1 6.4 5.7 7.0 3.2 - 3.7 rEMUnErATIon rEporT (AUDITED) (Continued) TABLE 5: ShArES hELD In AgMSp (In SUBSTAnCE opTIonS) grAnTED AS pArT oF rEMUnErATIon value of shares held in AgMSp (in substance options) granted during the year $ value of shares held in AgMSp (in substance options) exercised during the year $ Total value of options granted, and exercised during the year $ remuneration consisting of in substance options for the year $ 30 June 2011 robert Browning* 30 June 2010 robert Browning* - - - - - - - 42.3 * robert Browning was granted 3,000,000 in substance options on 22 october 2007 at an average fair value and exercise price of $0.96 and $3.51 respectively. The first exercise date for these in substance options was 22 october 2008. There were no alterations to the terms and conditions of options granted as remuneration since their grant date. The maximum cost assuming that all service and performance conditions are met, is equal to the number of options or rights granted multiplied by the fair value at the grant date. The minimum cost assuming that service and performance criteria are not met is zero. During the year nil (2010: 600,000) in substance options vested and nil (2010: 285,000) were exercised by KMp. EnD oF rEMUnErATIon rEporT (AUDITED) “Leonora Christina” Captain Soren Schow with Austal’s Chief Executive Officer, Andrew Bellamy, at a traditional coin ceremony held during the final stages of construction of the 113 metre catamaran. AUSTAL LIMITED 13 DIrECTor’S rEporT Continued DIrECTorS’ MEETIngS The number of meetings of directors (including meetings of committees of Directors) held during the year and the number of meetings attended by each Director was as follows: Director’ Meetings Meetings of Audit Committee Meetings of nomination and remuneration Committee number of Meetings held number of Meetings Attended: John rothwell Michael Atkinson Christopher norman John poynton robert Browning* Dario Amara Ian Campbell Andrew Bellamy* * Director for part of year of 2011. Committee Membership 6 6 4 6 5 2 6 6 2 4 - - 3 - - 4 4 - 2 2 - - 1 1 - 2 - As at the date of this report, the Company had an Audit Committee and a nomination and remuneration Committee of the Board of Directors. Members acting on the committees of the Board during the year were: Audit D Amara* C norman I Campbell nomination and remuneration I Campbell* J rothwell J poynton * Designates the Chairman of the committee rounding The amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (where rounding is applicable) under the option available to the Company under ASIC Class order 98/0100. The Company is an entity to which the Class order applies. Austal USA held a combined groundbreaking ceremony to celebrate the start of work on three new facilities including Phase 2 of the Modular Manufacturing Facility (MMF); a new office complex; and an additional waterfront Assembly Bay. AUSTAL LIMITED 14 AUDITor InDEpEnDEnCE AnD non-AUDIT SErvICES The directors received the following declaration from the auditor of Austal Limited. DIRECTORS’ REPORT Continued non-AUDIT SErvICES There were no non-audit services provided by the entity’s auditor, Ernst & young, during the year. AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES Signed in accordance with a resolution of directors. The directors received the following declaration from the auditor of Austal Limited. Auditor’s Independence Declaration to the Directors of Austal Limited In relation to our audit of the financial report of Austal Limited for the financial year ended 30 June 2011, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct. Ernst & Young Gavin Buckingham Partner Perth 18 August 2011 GB:MB:AUSTAL:090 NON-AUDIT SERVICES There were no non-audit services provided by the entity’s auditor, Ernst & Young, during the year. Signed in accordance with a resolution of directors. Liability limited by a scheme approved under Professional Standards Legislation J ROTHWELL AO Chairman A BELLAMY Executive Director and Chief Executive officer ___________________________________ J ROTHWELL AO Dated at henderson this 18th day of August 2011 Chairman ________________________________ A BELLAMY Executive Director and Chief Executive Officer Dated at Henderson this 18th day of August 2011 AUSTAL LIMITED 2011 CONCISE REPORT AUSTAL LIMITED 12 15 ConSoLIDATED STATEMEnT oF CoMprEhEnSIvE InCoME For the year ended 30 June 2011 ConTInUIng opErATIonS revenue other income Expenses (excluding finance costs) Impairment of land and buildings Unrealised gain/(loss) on deferred premium options Finance costs profit before income tax Income tax benefit/(expense) profit after tax from continuing operations notes 2(a) 2(b) 2011 $’000 503,856 10,401 2010 $’000 521,414 9,242 (492,403) (474,817) - 677 (2,739) 19,792 2,098 21,890 (2,462) 618 (2,838) 51,157 (14,025) 37,132 Attributable to Members of the parent 21,890 37,132 The US Department of Defence’s Joint High Speed Vessel and Littoral Combat Ship (LCS4) under construction at Austal’s Mobile, Alabama, shipyard. AUSTAL LIMITED 16 notes profit after tax from continuing operations other comprehensive income Cash flow hedges: gain taken to equity Transferred to the statement of comprehensive income Foreign currency translations Income tax expense on items of other comprehensive income other comprehensive income for the period, net of tax Total comprehensive income for the year Attributable to members of the parent Earnings per share (cents per share) - Basic for profit for the year attributable to ordinary equity holders of the parent - Diluted for profit for the year attributable to ordinary equity holders of the parent Dividends per share (cents per share) 3 3 5 A render of the US Department of Defence’s Joint High Speed Vessel. 2011 $’000 21,890 52,483 (51,076) (7,180) (422) (6,195) 15,695 15,695 11.9 11.9 6.0 2010 $’000 37,132 12,554 (1,684) (1,416) (3,268) 6,186 43,318 43,318 20.3 20.2 6.0 The Navy’s Littoral Combat Ship “USS Independence” AUSTAL LIMITED 17 ConSoLIDATED STATEMEnT oF FInAnCIAL poSITIon As at 30 June 2011 2011 $’000 2010 $’000 42,265 128,837 21,986 177,922 5,792 37,805 29,030 - 31,060 275,288 2,206 60,273 414,607 397,857 903 15 - 37,233 208,275 5,063 8,524 260,013 674,620 52,837 153 8,554 26,409 3,567 20,724 2,679 1,138 - 309 16,394 217,734 3,786 10,900 250,261 648,118 87,488 2,690 46,567 25,187 4,840 19,755 11,816 114,923 198,343 274 217,985 2,138 41,899 23,235 6,320 79,335 2,829 55,045 36,881 285,531 180,410 400,454 274,166 378,753 269,365 31,175 20,063 222,928 274,166 30,870 26,173 212,322 269,365 ASSETS Current Assets Cash and cash equivalents restricted cash Trade and other receivables Inventories prepayments Derivatives Total Current Assets non-current Assets other financial assets Trade and other receivables prepayments Derivatives property, plant and equipment Intangible assets Deferred tax assets Total non-current Assets ToTAL ASSETS LIABILITIES Current Liabilities Trade and other payables Derivatives Interest-bearing loans and borrowings provisions government grants Income tax payable other Total Current Liabilities non-current Liabilities Derivatives Interest-bearing loans and borrowings provisions government grants Deferred tax liabilities Total non-current Liabilities ToTAL LIABILITIES nET ASSETS EqUITy Contributed equity reserves retained earnings ToTAL EqUITy AUSTAL LIMITED 18 ConSoLIDATED STATEMEnT oF CASh FLowS For the year ended 30 June 2011 Cash flows from operating activities receipts from customers payments to suppliers and employees Interest received Interest paid Income tax received/(paid) gST refunds receipts/(repayment) of government grants net cash inflow/(outflow) from operating activities Cash flows from investing activities proceeds from sale of property, plant and equipment purchase of property, plant and equipment purchase of intangible assets net cash used in investing activities Cash flows from financing activities repayment of loan – in substance options repayment of borrowings Loans received Equity dividends paid net cash from/(used) in financing activities net increase/(decrease) in cash and cash equivalents net foreign exchange differences Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period 2011 $’000 573,626 (506,755) 429 (2,739) (8,200) 5,638 2,284 64,283 3,607 (44,755) (1,442) (42,590) 305 (253,115) 383,496 (11,284) 119,402 141,095 977 29,030 171,102 2010 $’000 549,683 (664,945) 1,264 (2,838) 798 9,024 11,725 (95,289) 10 (46,503) (1,922) (48,415) 774 (16,887) 107,566 (11,284) 80,169 (63,535) (463) 93,028 29,030 Following the June 2011 announcement of Austal as preferred tenderer for the design, construction and through life support of 8 patrol vessels for the Australian Customs and Border Protection Service, Austal was awarded the contract in August 2011. AUSTAL LIMITED 19 ConSoLIDATED STATEMEnT oF ChAngES In EqUITy For the year ended 30 June 2011 Attributable to equity holders of the parent Issued capital $’000 reserved shares* $’000 retained earnings $’000 41,075 (10,979) 186,474 - - - - - - - - - - - - - - - 774 - - - - - - 37,132 37,132 - - (11,284) Foreign currency translation reserve $’000 (269) (1,416) - - (1,416) - - 8,791 (1,189) 7,602 - (1,416) 7,602 - - - - Cash flow hedge reserve $’000 other reserves** Total Equity $’000 $’000 32,921 (13,487) 235,735 - - - - - - - 822 - (1,416) 8,791 (1,189) 6,186 37,132 43,318 774 822 (11,284) 41,075 (10,205) 212,322 (1,685) 40,523 (12,665) 269,365 41,075 (10,205) 212,322 - - - - - - - - - - - - - - - 305 - - - - - - 21,890 21,890 - - (11,284) (1,685) (7,180) - - (7,180) - (7,180) - - - 40,523 (12,665) 269,365 - 36,739 (35,754) 985 - 985 - - - - - - - - - - 85 - (7,180) 36,739 (35,754) (6,195) 21,890 15,695 305 85 (11,284) 41,075 (9,900) 222,928 (8,865) 41,508 (12,580) 274,166 AS AT 1 JULy 2009 Currency translation differences net gains on cash flow hedges Transfer from cash flow hedge reserve Total other comprehensive income for the year profit for the year Total comprehensive income for the year Equity Transactions: options exercised Cost of share-based payments Equity dividends As at 30 June 2010 AS AT 1 JULy 2010 Currency translation differences net gains on cash flow hedges Transfer from cash flow hedge reserve Total other comprehensive income for the year profit for the year Total comprehensive income for the year Equity Transactions: options exercised Cost of share-based payments Equity dividends As at 30 June 2011 * reserved shares are in relation to the Austal group Management Share plan. Ongoing construction on the US Navy’s Independence-Class Littoral Combat Ship “Coronado” at Austal’s Alabama manufacturing facilities. AUSTAL LIMITED 20 noTES To ThE ConCISE FInAnCIAL STATEMEnTS For the year ended 30 June 2011 noTE 1. BASIS oF prEpArATIon oF ThE ConCISE rEporT This concise financial report has been derived from the full 2011 Financial report as presented in the Austal Limited Annual report, which complies with the Corporations Act 2001 and Australian Accounting Standards. This concise financial report has been prepared in accordance with Accounting Standard AASB 1039 – “Concise Financial reports”, and the relevant provisions of the Corporations Act 2001. A full description of the accounting policies adopted by Austal Limited is provided in the full 2011 Financial report. The presentation currency used in this concise financial report is Australian Dollars. noTE 2. rEvEnUE AnD EXpEnSES rEvEnUE AnD EXpEnSES FroM ConTInUIng opErATIonS (a) revenue Construction contract revenue Charter revenue Service revenue rental revenue Sale of scrap Interest from other unrelated parties (b) other income government grants other income noTE 3. EArnIngS pEr ShArE 2011 $’000 2010 $’000 469,161 9,968 21,591 543 2,164 429 476,611 12,300 29,279 28 1,932 1,264 503,856 521,414 6,056 4,345 10,401 8,934 308 9,242 net profit attributable to ordinary equity holders of the parent from continuing operations weighted average number of ordinary shares (excluding reserved shares) for basic earnings per share Effect of dilution – share options weighted average number of ordinary shares (excluding reserved shares) adjusted for the effect of dilution 2011 $’000 21,890 2010 $’000 37,132 2011 number 2010 number 183,559,322 183,311,350 767,611 782,824 184,326,933 184,094,174 Earnings per share (cents per share) Diluted earnings per share (cents per share) 11.9 11.9 20.3 20.2 There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements. 9,664,402 (2010: 6,874,402) potential ordinary shares have been excluded from the earnings per share calculation as they were not considered dilutive. AUSTAL LIMITED 21 noTES To ThE ConCISE FInAnCIAL STATEMEnTS Continued For the year ended 30 June 2011 noTE 4. opErATIng SEgMEnTS Identification of reportable segments For management purposes the group is organised into three business segments based on the location of the production facilities, related sales regions and types of activity. The Board monitors the performance of the business segments separately for the purpose of making decisions about resources to be allocated and of assessing performance. Segment performance is evaluated based on operating profit or loss. Finance costs, finance income and income tax are managed on a group basis. The group’s reportable segments are as follows: Australia The Australian business manufactures high performance vessels for markets worldwide, excluding the USA. USA The USA manufactures high performance vessels for markets within the USA. Service The Service business provides training and on-going support and maintenance for high performance vessels and includes the chartering of vessels. other/Unallocated The following items and associated assets and liabilities are not allocated to operating segments as they are not considered part of the core operations of any segment: • • • • • Cost of group services Corporate overheads revenue from property leased to other group segments Finance revenue and costs Taxation Inter-entity sales are recognised based on an arm’s length pricing structure. The US Navy announces the names of the next two Littoral Combat Ships – “Jackson” and “Montgomery”. AUSTAL LIMITED 22 noTES To ThE ConCISE FInAnCIAL STATEMEnTS Continued For the year ended 30 June 2011 noTE 4. opErATIng SEgMEnTS (continued) Australia $’000 USA $’000 Service $’000 other/ Unallocated $’000 Eliminations/ Adjustments $’000 Total $’000 yEAr EnDED 30 JUnE 2011 revenues External customers Inter-segment Total revenues 144,250 21,111 328,709 16,340 165,361 345,049 net profit/(loss) before tax (8,573) 19,386 Depreciation and amortisation gain on deferred premium Segment assets Additions to non-current assets yEAr EnDED 30 JUnE 2010 revenues External customers Inter-segment Total revenues net profit/(loss) before tax Depreciation and amortisation Impairment of land and buildings gain on deferred premium Segment assets Additions to non-current assets (2,367) 677 406,988 2,653 (9,246) - 280,187 41,683 219,697 14,799 267,016 279 234,496 267,295 27,601 (2,373) (2,462) 618 352,676 2,638 23,722 (8,190) - - 300,077 45,260 15,736 - 15,736 1,816 (1,370) - 4,851 333 41,595 3,316 44,911 2,757 (30) - - 18,102 140 - 503,427 (39,917) (39,917) - 503,427 (256) 22,102 14,732 2,466 17,198 9,729 (2,522) - - - 318,819 (336,225) - 1,702 22,188 23,890 (1,562) (1,373) - - - - (40,582) (40,582) 213 - - - 338,421 (361,158) 57 - (15,505) 677 674,620 44,669 530,010 - 530,010 52,731 (11,966) (2,462) 618 648,118 48,095 i) ii) Segment revenue does not include finance revenue of $0.429 million (30 June 2010: $1.264 million). Segment profit before tax does not include finance revenue of $0.429 million (30 June 2010: $1.264 million) and finance costs of $2.739 million (30 June 2010: $2.838 million). noTE 5. DIvIDEnDS A fully franked dividend of $11.284 million of 6 cents per share has been declared for the year ended 30 June 2011 to be paid on 6 october 2011. A fully franked dividend of $11.284m of 6 cents per share was paid on 7 october 2010. noTE 6. EvEnTS AFTEr ThE BALAnCE DATE There were no material events occurring after year end requiring disclosure. AUSTAL LIMITED 23 DIrECTorS DECLArATIon The directors of Austal Limited declare that the accompanying Concise Financial report is presented fairly in accordance with Accounting Standard AASB 1039 Concise Financial report and is consistent with the consolidated entity’s 30 June 2011 financial report. with regard to the 30 June 2011 financial report of Austal Limited, the directors declared that: 1. In the opinion of the directors: (a) The financial statements and notes of the consolidated entity are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2011 and of its performance for the year ended on that date; and (ii) Complying with Accounting Standards (including the Australian Accounting Interpretations) and Corporations regulations 2001. 2. The financial Statements and notes also comply with International Financial reporting Standards. 3. In the opinion of the directors, as at the date of this declaration, there are reasonable grounds to believe that the consolidated entity will be able to pay its debts as and when they become due and payable. 4. This declaration has been made after receiving the declarations required to be made to the directors in accordance with sections 295A of the Corporations Act 2001 for the financial period ending 30 June 2011. This statement has been made in accordance with a resolution of directors. on behalf of the Board J ROTHWELL AO Chairman Dated at henderson this 18th day of August 2011 Austal was awarded a contract for the design and construction of 3 x 21 metre wind farm support vessels in July 2011. AUSTAL LIMITED 24 INDEPENDENT AUDIT REPORT Independent auditor’s report to the members of Austal Limited Report on the Concise Financial Report We have audited the accompanying concise financial report of Austal Limited which comprises the consolidated statement of financial position as at 30 June 2011, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended and related notes, derived from the audited financial report of Austal Limited for the year ended 30 June 2011. The concise financial report also includes the directors’ declaration. The concise financial report does not contain all the disclosures required by the Australian Accounting Standards. Directors’ Responsibility for the Concise Financial Report The Directors are responsible for the preparation of the concise financial report in accordance with Accounting Standard AASB 1039 Concise Financial Reports, and the Corporations Act 2001, and for such internal controls as the directors determine are necessary to enable the preparation of the concise financial report. Auditor’s Responsibility Our responsibility is to express an opinion on the concise financial report based on our audit procedures which were conducted in accordance with ASA 810 Engagements to Report on Summary Financial Statements. We have conducted an independent audit, in accordance with Australian Auditing Standards, of the financial report of Austal Limited for the year ended 30 June 2011. We expressed an unmodified audit opinion on the financial report in our report dated 18 August 2011. The Australian Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report for the year is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the concise financial report. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the concise financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation of the concise financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. Our procedures included testing that the information in the concise financial report is derived from, and is consistent with, the financial report for the year, and examination on a test basis, of audit evidence supporting the amounts and other disclosures which were not directly derived from the financial report for the year. These procedures have been undertaken to form an opinion whether, in all material respects, the concise financial report complies with AASB 1039 Concise Financial Reports We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. GB:MB:AUSTAL:091 Liability limited by a scheme approved under Professional Standards Legislation AUSTAL LIMITED 2011 CONCISE REPORT AUSTAL LIMITED 25 21 INDEPENDENT AUDIT REPORT Continued Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Opinion In our opinion, the concise financial report, including the directors’ declaration of Austal Limited for the year ended 30 June 2011 complies with Accounting Standard AASB 1039 Concise Financial Reports. Report on the Remuneration Report We have audited the Remuneration Report included in the directors' report for the year ended 30 June 2011. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Opinion In our opinion, the Remuneration Report of Austal Limited for the year ended 30 June 2011, complies with section 300A of the Corporations Act 2001. Ernst & Young Gavin Buckingham Partner Perth 18 August 2011 GB:MB:AUSTAL:091 AUSTAL LIMITED 26 AUSTAL LIMITED 2011 CONCISE REPORT 22 ShArEhoLDEr InForMATIon The following information was extracted from the Company’s register as at 16 August 2011. DISTrIBUTIon oF ShArES number of holders number of Units % of Total Issued Capital 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total TwEnTy LArgEST ShArEhoLDErS rank Shareholder 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Austro pty Ltd Longreach (wA) pty Ltd hSBC Custody nominees J p Morgan nominees Australia Ltd national nominees Limited onyx (wA) pty Ltd Mr vincent Michael o’Sullivan Citicorp nominees pty Ltd Austal group Management Share plan pty Ltd garry heys & Dorothy heys Lavinia Shipping Ltd Zilon pty Ltd Mossisberg pty Ltd pepperwood holdings pty Ltd Cogent nominees pty Ltd Citicorp nominees pty Ltd Mr James nicholas Bennett rBC Dexia Investor Services Bond Street Custodians Ltd peninsula Audiological Services pty Ltd SUBSTAnTIAL ShArEhoLDErS rank Shareholder 1 2 3 4 5 6 Austro pty Ltd (J rothwell) Longreach (wA) pty Ltd (C norman) hSBC Custody nominees J p Morgan nominees Australia Ltd national nominees Ltd onyx (wA) pty Ltd (g heys) voTIng rIghTS All ordinary shares issued by Austal Limited carry one vote per share without restriction. 1,717 2,377 708 491 33 5,326 910,850 6,675,510 5,475,523 11,525,961 163,481,794 188,069,638 Total Units 32,200,745 26,595,621 25,655,483 22,314,009 11,692,180 9,932,592 9,305,301 8,192,500 4,390,767 2,844,670 2,267,625 1,773,940 1,556,945 1,415,737 798,011 533,396 417,569 416,320 264,598 235,000 0.48 3.55 2.91 6.13 86.93 100.00 % Issued Capital 17.12 14.14 13.64 11.87 6.22 5.28 4.95 4.36 2.34 1.51 1.21 0.94 0.83 0.75 0.42 0.28 0.22 0.22 0.14 0.13 162,803,009 86.57 no. of ordinary Shares 32,200,745 26,595,621 25,655,483 22,314,009 11,692,180 9,932,592 AUSTAL LIMITED 27 CorporATE DIrECTory CorporATE DIrECTory DIRECTORS Executive Directors Andrew Bellamy Michael Atkinson Non Executive Directors John rothwell John poynton Christopher norman Dario Amara Ian Campbell AUDITORS Ernst & Young The Ernst & young Building 11 Mounts Bay road perth 6000 western Australia COMPANY SECRETARY richard Simons REGISTERED OFFICE 100 Clarence Beach rd henderson 6166 western Australia Telephone: +61 8 9410 1111 Facsimile: +61 8 9410 2564 SHARE REGISTRY Advanced Share Registry Services 110 Stirling highway nedlands 6009 western Australia Telephone: +61 8 9389 8033 Facsimile: +61 8 9389 7871 “Liberty”, the 47 metre catamaran constructed for Guadeloupe operator L’Express des Iles, returning to Austal’s Henderson shipyard following sea trials. AUSTAL LIMITED 28 Printed using petroleum free inks and green electricity on paper sourced from plantation timber. Both paper manufacturer and printer are certified to international environmental management standard ISO 14001. Shipyards: Australia and USA Email: sales@austal.com Tel: +61 8 9410 1111 Fax: +61 8 9410 2564 w w w. A U S T A L . C o M

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