Austal Limited
Annual Report
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Austal Limited | Annual Report 2022 Contents
Contents ........................................................................................................................................................................................................................ i
Index to the notes to the financial statements .............................................................................................................................................. ii
Chairman’s report ...................................................................................................................................................................................................... 1
Chief Executive Officer’s report ..........................................................................................................................................................................4
Review of operations ............................................................................................................................................................................................... 9
Directors’ report ...................................................................................................................................................................................................... 12
Nomination & Remuneration Committee Chair’s message ..................................................................................................................... 18
Remuneration report ............................................................................................................................................................................................ 20
Auditor independence .......................................................................................................................................................................................... 47
Consolidated statement of profit and loss and other comprehensive income for the year ended 30 June 2022 ............ 48
Consolidated statement of financial position as at 30 June 2022...................................................................................................... 49
Consolidated statement of changes in equity for the year ended 30 June 2022 .......................................................................... 50
Consolidated statement of cash flows for the year ended 30 June 2022 ........................................................................................ 51
Notes to the consolidated financial statements ........................................................................................................................................ 52
Directors’ declaration.......................................................................................................................................................................................... 118
Independent audit report to the members of Austal Limited ............................................................................................................... 119
Shareholder information ................................................................................................................................................................................... 125
Corporate governance statement and ESG report .................................................................................................................................. 126
Corporate directory ............................................................................................................................................................................................ 126
Austal Limited | Contents i
Index to the notes to the financial statements
Basis of preparation ............................................................................................................................................................................................. 52
Current year performance ................................................................................................................................................................................. 56
Capital structure .................................................................................................................................................................................................... 78
Working capital....................................................................................................................................................................................................... 84
Infrastructure & other assets ........................................................................................................................................................................... 90
Financial risk management .............................................................................................................................................................................. 103
Unrecognised items .............................................................................................................................................................................................. 111
The Group, management and related parties ............................................................................................................................................. 114
ii Austal Limited | Index to the notes to the financial statements
Company Overview
Austal entered an exciting new phase of strategic growth
in FY2022, with significant progress made toward
becoming the Indo Pacific region’s leading naval defence
prime contractor. The company achieved a record-
equalling number of orders for 18 vessels while delivering
9 vessels, worldwide.
Austal USA commenced steel shipbuilding operations,
following the opening of additional facilities at the
Mobile, Alabama shipyard, in April 2022. The US$100
million construction was funded 50:50 between the U.S.
Government and Austal USA and will be used to deliver
three new steel vessel contracts, won during FY2022.
Firstly, Austal USA will build four Navajo-class Towing,
Salvage and Rescue (T-ATS) ships for the U.S. Navy,
followed by an Auxiliary Floating Dock (Medium) and
then the first of up to 11 Heritage-class Offshore Patrol
Cutters (OPC) for the U.S. Coast Guard.
The OPC contract, announced on 30 June 2022, is
valued at over US$3.3billion and extends the company’s
order book until at least 2032, if all options are exercised.
Austal USA also continues to deliver the U.S. Navy’s
Independence-variant Littoral Combat Ship (LCS) and
Expeditionary Fast Transport (T-EPF) programs. The
future USS Canberra (named after Australia’s national
capital) was delivered, an additional T-EPF (16) was
ordered and the U.S. Navy’s first semi-autonomous
T-EPF, the USNS Apalachicola (T-EPF-13), was launched
during the reporting period.
In Australia, Austal delivered four Guardian-class Patrol
Boats to the Commonwealth of Australia as well as
the first of eight Evolved Cape-class Patrol Boats to
be constructed for the Royal Australian Navy from the
Henderson, Western Australia shipyard.
Austal Philippines delivered the second of two 118 metre
trimaran ferries to Fred Olsen Express and continued
construction on the company’s largest ever ferry (by
volume) – Molslinjen’s Express 5. Austal Vietnam
commenced construction of a 66 metre high-speed
ferry for repeat customer The Degage Group during the
financial year and established a strategic partnership with
Spectainer to develop manufacturing capability for new,
innovative collapsible shipping containers that enable
up to four collapsed containers to be transported in one
container; resulting in meaningful economic savings,
increased operational productivity on land and sea, and
reduced carbon emissions.
Austal’s technology teams based in Australia have
been busy working on several initiatives over FY2022,
including the development of larger vehicle-passenger
derivatives of the VOLTA electric-powered ferry range,
that add greater choice to operators on the journey to
net-zero emissions. Our teams have also been playing a
lead role in the Patrol Boat Autonomy Trial for the Royal
Australian Navy, involving the retrospective fit-out of
a de-commissioned Armidale-class Patrol Boat at the
Henderson shipyard.
With the company well positioned to grow even further in
2023, there has never been a better time for individuals,
businesses and government to ‘Team with Austal’.
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$1.43B
Revenue
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New Ships
Contracted
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Ships scheduled or
under construction
9
Ships
delivered
42
Vessels under
sustainment
5 shipyards in 4 countries
8 Service Centres
5,000 Employees
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US Steel Production Facilities Open
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Towing, Salvage and Rescue Ship (T-ATS)
Austal USA opened a US$100 million state-of-the-
art steel shipbuilding facility in April 2022, enabling
the simultaneous production of both aluminium and
steel hulled ships in Mobile, Alabama.
Financing for the new steel shipbuilding facility
was provided in part by a Defense Production Act
(DPA) Title III Agreement between the United States
Department of Defense, and Austal USA.
The 11,000 square metre facility includes the
latest in computerised and robotic steel processing
equipment to handle current and future demands of
the U.S. Navy and the U.S. Coast Guard.
The agreement, valued at US$50 million, was
announced in June 2020. Austal USA matched
these funds and invested an additional US$50
million into the completion of the steel facility.
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U.S. Coast Guard OPC Contract
A Game Changer
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United States Coast Guard Heritage-class Offshore Patrol Cutter
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Austal USA was awarded a contract with a potential
value of US$3.3 billion (A$4.35 billion), for the detail
design and construction of up to 11 Offshore Patrol
Cutters (OPC) for the U.S. Coast Guard (USCG) in
June 2022.
The first vessel has been contracted by the USCG,
with options for a further 10 vessels. Construction is
expected to commence in 2023.
The USCG’s 110 metre steel OPCs are capable
of conducting a variety of missions including law
enforcement, drug and migrant interdiction, and
search and rescue operations.
Austal USA will construct the OPC using proven ship
manufacturing processes and innovative methods
that incorporate lean manufacturing principles,
modular construction, and moving assembly lines in
the company’s new steel production facility.
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Greater service and support
capability in Mobile and San Diego
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Austal USA completed the purchase of a
long-term lease of ship repair facilities in
the Port of San Diego in December 2021,
enabling the further growth of the Company’s
service and support business on the West
Coast of the United States.
The lease of the facility has a duration of
29 years. The purchase of the yard and
construction of a floating dock will cost a total
of ~US$80 million (~A$112.5 million).
With Austal USA’s inclusion on the United
States Navy’s Sustainment Execution
Contract West, the new facility in San
Diego is a critical enabler to winning new
maintenance contracts from the U.S. Navy,
Coast Guard and Military Sealift Command.
The yard is immediately adjacent to U.S.
Naval Base San Diego, occupies five
acres and includes a pier capable of
accommodating ships up to 80 metres long,
a dry dock, a travel lift (with lifting capacity
up to 300 tons) as well as machine shops
and warehouse space.
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Evolved Cape and
Guardian-class Patrol Boats
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Austal Australia’s naval vessel programs for the
Commonwealth of Australia progressed significantly
in FY2022, with the Pacific Patrol Boat Replacement
Project (SEA 3036) team delivering 4 Guardian-class
Patrol Boats, to Vanuatu, Papua New Guinea, the
Federated States of Micronesia and the Cook Islands;
and the Evolved Cape-class Patrol Boat Project (SEA
1445) team delivering the first of 8 vessels now
contracted for delivery to the Royal Australian Navy.
As at 30 June 2022, Austal had delivered 15 of the 21
Guardian-class Patrol Boats contracted, to be gifted by
the Australian Government to 12 Pacific Island nations
and Timor-Leste under the Pacific Maritime Security
Program.
Constructed with the support of over 300 contractors
and suppliers forming Australia’s National Naval
Shipbuilding Enterprise, they are already playing critical
roles in Australia’s and the Pacific’s regional security.
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Cook Islands Police Te Kukupa II (Guardian-class Patrol Boat) and
Royal Australian Navy’s ADV Cape Otway (Evolved Cape-class Patrol Boat)
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Sustainment
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Austal’s delivery of in-service support, sustainment
and commercial maintenance and repair operations
around Australia continued to expand in FY2022.
The Cairns team provided support for multiple
vessels operated by the Royal Australian Navy,
Australian Border Force, multiple Pacific Island
nations and various commercial vessel operators and
superyacht owners. A highlight of the year was the
support Austal Cairns provided to the visiting U.S.
Navy vessel, USS Ashland, in Townsville.
The Brisbane service centre completed the
refurbishment of the facility’s slipway and carried out
a number of dockings of commercial vessels despite
numerous flooding events throughout the year.
Meanwhile in Darwin, the Austal team re-located
service operations to a larger facility that is better
positioned to provide support to both defence and
commercial customers in the Northern Territory.
USS Ashland
Austal Darwin
Austal Brisbane slipway
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Pursuing New Opportunities
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Australian ILMV design for Australian Army
Offshore Patrol 83
Austal Australia launched a number of new product
designs in FY2022, including a steel-hulled 60
metre offshore patrol vessel, known as the Offshore
Patrol 60. Featuring a stern launch and multiple
mission configurations, including maritime security,
surveillance and subsea variants, the design is
based on the proven Cape-class Patrol Boat.
Austal also partnered with Raytheon Australia
and BMT to bid for the Australian Department of
Defence’s LAND 8710 (Phase 1A) tender for a new
Landing Craft for the Australian Army. If successful,
Austal Australia will complete the detailed design
and construct the ‘Australian ILMV’ in Henderson,
Western Australia.
The Australian Government is expected to announce
the preferred bidder for LAND 8710 in CY2023.
Offshore Patrol 60
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Creating a Culture of
Collaboration
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Austal is collaborating more than ever before
with suppliers, stakeholders and customers
to deliver vessels, technology, services and
support around Australia and throughout the
world.
As a defence Prime contractor and capability
partner to the National Naval Shipbuilding
Enterprise, Austal has an annual spend of
over $220 million across Australia, with an
established supply chain of more than 1,430
Australian businesses – 87% of which are
small-medium enterprises (SMEs).
On the Evolved Cape-class Patrol Boat Project,
Austal is engaging over 300 suppliers locally,
including Rohde & Schwarz Australia, who
has designed and developed the Integrated
Communications System for the 8 vessels
being delivered to the Royal Australian Navy.
Working closely with Austal and the Royal
Australian Navy, Rhode & Schwarz Australia
was able to configure and adapt their parent
company’s NAVICS MLS (multi-level security)
IP-based navy communications system – and
engage additional local companies, to meet
the Royal Australian Navy’s operational needs.
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Evolved Cape-class Patrol Boat
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Tomorrow’s Shipbuilders Today
Trainees, Apprentices and Graduates
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Austal Australia is developing the shipbuilders
of tomorrow through a number of employment
programs that will build a diverse range of skills and
capability in the company’s local workforce.
In FY2022, Austal engaged 15 ‘Defence Industry
Pathway’ (DIPP) Trainees, through an innovative
new program coordinated by the Commonwealth
Department of Defence Industry, South Metropolitan
TAFE and Programmed Training.
School leavers have had the opportunity for a
paid 12 month placement in a variety of roles at
Austal and other defence industry employers at the
Australian Marine Complex in Henderson.
Austal’s Apprenticeship Program continues to see at
least 100 apprentices employed at any given time,
across shipbuilding operations.
Meanwhile, Austal’s popular Graduate Program has
quickly become renowned for providing outstanding
opportunties to new university graduates, with up to
10 graduates employed annually.
FY2022 Graduate Program
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Celebrating 20 ships in 10 years
Building the largest vessel (by
volume) at any Austal shipyard.
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Bañaderos Express delivered October 2021
Express 5 (under construction)
Austal Philippines has celebrated ten years of
operation - and the delivery of 20 ships to 12
operators from 11 countries - in 2022.
The Balamban, Cebu shipyard, employing over
800 Filipinos across all areas of shipbuilding
design and construction, has demonstrated the
capability and capacity to deliver multiple projects
simultaneously; including the largest high-speed
ferries (catamarans and trimarans) ever built in the
Philippines.
Following the delivery of the 118 metre trimaran
‘Bañaderos Express’ to Fred Olsen Express in
October 2021, Austal Philippines is constructing
‘Express 5’ for Molslinjen of Denmark – a 115
metre ‘future-ready’ fast-ferry that may be fitted
with hybrid fuel-saving technology that provides a
genuine pathway to net-zero emissions.
Express 5 is the largest vessel (by volume) built by
any Austal shipyard, to be delivered in CY2023.
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Austal’s newest yard proving
capability and innovation
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Austal Vietnam was awarded a €20.5 million
(approximately A$32.8 million) contract to design
and build a 66 metre high-speed catamaran ferry for
The Degage Group of French Polynesia in August
2021.
Over the past two decades The Degage Group has
trusted Austal to design and construct five ships
for their growing maritime and tourism operations
in French Polynesia. Following delivery early in
CY2023, the new ferry will operate as the Apetahi
Express, between Pape’ete (Tahiti) and Vaitape (Bora
Bora).
Also in FY2022, Austal Vietnam engaged with
an Australian company, Spectainer to develop a
business model for the manufacture of innovative,
fully-patented collapsible containers called
COLLAPSECON® and associated fully automated
operating stations. COLLAPSECON® improves
operational efficiencies, delivers economic savings
and reduces environmental impact across global
logistics supply chains, without requiring a
fundamental change to the industry or trade.
Apetahi Express (Hull 425) under construction
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Accelerating a SMART path to
Autonomous Capability
Austal is working closely with the United States Navy and
Royal Australian Navy to integrate and enhance - not
replace – the mission capability of crewed platforms.
PBAT Sentinel
LUSV Concept for US Navy
USNA Apalachicola
Austal Australia showcased a number of autonomous
vessel concepts, based on proven Austal vessel platforms,
at the IndoPacific Maritime Exposition in Sydney in May
2022.
The company is also leading Royal Australian Navy’s
Patrol Boat Autonomy Trial (PBAT), supported by Trusted
Autonomous Systems and L3Harris, which will test
autonomous technology fitted to a de-commissioned
Armidale-class Patrol Boat (the former HMAS Maitland).
The newly named ‘Sentinel’ is preparing for trials
commencing in 2023, at the company’s Henderson,
Western Australia shipyard.
Austal USA was awarded a US$44 million contract in
June 2021 for the design, procurement, production
implementation and demonstration of autonomous
capability on T-EPF 13, USNS Apalachicola; and
the company continues with design studies for the
development of the U.S. Navy’s Large Unmanned Surface
Vessel (LUSV) requirement.
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Future-ready Fast Ferries offering
Proven Pathways to Zero Emissions
Drawing upon the research and
development that created the VOLTA
Passenger Express ferry solutions, and
going beyond the installation of an
electric powerplant, Austal has optimised
our proven vehicle passenger ferry
designs for both weight and efficiency, to
achieve the ideal solution for operators on
the pathway to net zero emissions.
In FY2022, development continued on
electric powered vehicle-passenger ferry
designs that will see the launch of the
VOLTA Auto Express range in FY2023.
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Financial Year Highlights
Enhanced EBIT amid unprecedented global
economic volatility and the transition from LCS
to steel programmes.
The opening of the new steel facilities in the
USA, with 3 steel progammes already won,
including OPC contract worth up to
US$3.3 billion.
The Group’s order book is $3 billion.
Delivered value for long-term, supportive
investors as we started the transition from the
LCS programme and secured OPC.
Acquisition of San Diego base to enhance
growth of USA Support business.
COVID-19 has continued to present challenges
that have impacted volume and timing of work.
All of Austal’s operations remained open while
continuing to adhere to local restrictions.
I am pleased to present the FY2022 Annual Report
to shareholders on behalf of the Board of
Austal Limited.
Despite significant global disruption and economic
uncertainty due to the COVID-19 pandemic, Austal
delivered another year of enhanced EBIT, a result
founded on excellent operational capability. This
strong result is a testament to Austal’s ability to
adapt its operations in an increasingly volatile global
environment, whilst maintaining efficiency and
consistency across our shipbuilding programmes and
support services.
Again, all our shipyards - USA, Australia,
Philippines, and Vietnam - remained fully
operational throughout the year, as the COVID-19
pandemic persisted. Austal has always maintained a
strong customer relationship focus, and the vast
majority of our customers have worked constructively
with us to pragmatically progress construction
programmes and the delivery of vessels. The
COVID-19 situation remains dynamic and we
continue to witness its impact on our operations
through a slowdown of ferry orders, albeit with some
signs of the market improving. Importantly, Austal
continues to implement a range of health and
wellbeing measures to protect our 5,000 strong
workforce and will continue to monitor and adapt
this as we seek to minimise the potential impacts
from the virus.
Strategic initiatives
Last year, Austal refreshed the Company’s long term
corporate strategy and we have begun its
implementation, ensuring its incorporation into the
Company’s 2050 vision. Our focus remains on
long-term, sustainable, and profitable growth. This
will be across shipbuilding, support, and systems,
with a strong aspiration to become the Sovereign
Defence Prime in Australia through organic and
inorganic growth.
The pivot to steel is already yielding significant
positive results through programme wins in the USA
on the Towing, Salvage, and Rescue ships (T-ATS),
floating dry dock (AFDM) and Offshore Patrol Cutters
(OPC). Steel capability positions the business to bid
for a greater proportion of available ship
construction work than an aluminium-only yard can
tender for, and that is becoming clear with the
current wins.
Our robust balance sheet and associated strong cash
position continues to provide the financial flexibility
to pursue inorganic growth through mergers and
acquisitions. The acquisition of the lease from
Marine Group Boat Works (MGBW) in San Diego and
the investment in a floating dock will provide a great
facility to target growth in our Support business.
Our investment in Systems is yielding some small,
but strategically import wins, with our Lifecycle
Upkeep Sustainment Intelligence (LUSI) software on
trial on the Cape Class Vessels with the Royal
Australian Navy. The capability the upgraded
MarineLink software provides in terms of efficient
operation of vessels will contribute to lower
emissions and increased efficiencies in the
commercial sector.
Risks & opportunities
The OPC win was undoubtedly the biggest
achievement of the year as it stabilises Austal’s
long-term future in the USA and underpins the
decision to invest in steel. It is noted that there is a
challenge from one of the competitors, something
we anticipated through the tender, and we have a
team assembled to defend this action.
Austal is confident that both the integrity of the
solicitation process and the selection of Austal USA
as the Stage II OPC shipbuilder will be upheld.
The first steel win was the TAT-S vessels. The
strategic importance of this was to prove the steel
production line and fine tune our processes in
preparation for OPC and future large steel vessels.
Austal Limited | Chairman’s report 1
The AFDM was won in competition and gives
confidence we have invested in state of the art
equipment and will be competitive.
The award of Evolved Cape Class Patrol Boats
17 & 18 in Australia provides the bridge from the
programmes we are delivering today to the future
programmes we are bidding for in the Department of
Defence’s Force Structure Plan.
Finally, the fast ferry fleet continues to age and will
need replacement. More stringent emissions
regulations may drive some of this replacement and
we are well placed with new product concepts, such
as the Volta electric ferry. Confidence is growing in
the resurgence of the commercial market as global
COVID-19 restrictions lift and travel grows.
The pivot to steel in tandem with the expansion of
our support business and increasingly diversified
order book will leave us better placed than ever to
continue Austal’s growth.
KMP & Board update
Just before the half year our CFO Greg Jason left the
business after 15 years of service across many
functions, with 9 years in the CFO role. After a
significant time working across various time zones,
Greg decided it was time to spend some well-
deserved time with the family before he looks for his
next career challenge. I would like to take this
opportunity to recognise all that Greg has done for
Austal, thank him for his commitment and wish him
well for his future.
It remains a challenging time for the Board and
Senior leaders, facing challenges such as COVID-19
and its impact on both employees and the
Company’s operating and therefore financial
performance, several legacy regulatory
investigations, and management changes. The OPC
win in the USA provides considerably more certainty
to the Company, and coupled with the other
competitively won steel programmes, demonstrates
we have invested wisely in the latest technology for
steel ship construction and should be very
competitive going forward.
CEO Paddy Gregg continues to lead the revitalisation
of our corporate strategy, while closely managing the
Company’s operations. The implementation of that
strategy and an improved focus on customer
relationships means that we have clear objectives.
I remain optimistic about the future and increased
potential for growth, albeit we will have to navigate
some challenges in the years coming as we begin
the steel programmes, which is part and parcel of
commencing major new programmes.
We have also formalised the leadership in the USA
with Rusty Murdaugh appointed as President
following his interim appointment.
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The Board is improving internal compliance and
reporting practices between the USA operations and
Austal’s corporate headquarters, and Paddy and
Rusty continue to work hard to implement these
improvements.
ESG
Austal continues to ensure that its operations grow
and evolve in a sustainable manner.
You will have seen in our Environmental, Social and
Governance (ESG) report last year, our focus is to
build on these initiatives with a particular focus on
environmental and social risks and opportunities in
the year ahead. This year, we have placed even more
focus on this, and our enhanced ESG report has
adopted the Global Reporting Initiative (GRI)
standards for the first time. These will be published
prior to the 2022 Annual General Meeting.
Austal continues to advance research and
development projects targeting methods to design
and construct vessels with increased fuel efficiency
and reduced emissions, such as battery-powered
smaller ferries (Volta) and larger vessels that could
be converted from diesel to greener fuels, such as
LNG or ammonia. Most of the commercial
opportunities we are quoting focus on reduced
emissions.
HSEQ
As always, our prime focus is ensuring that our
employees go home safely every day. We continue to
demonstrate excellent safety performance and
pursue more stringent targets each year. It was
especially pleasing to see our largest site, our Mobile
facility, again achieve an award for safety
performance.
Corporate investigations
As we have previously announced to the ASX, we are
working with the U.S. Department of Justice,
U.S. Securities and Exchange Commission, and the
Australian Securities and Investment Commission on
alleged breaches of regulatory standards. Their
investigations relate to activities in years leading up
to and including FY2016 and I look forward to its
conclusion and being able to devote our entire focus
on delivering our strategy for the benefit of our
customers, employees, and shareholders.
Thank-you
On behalf of the Board, I would like to thank each
and every one of our people for their adaptability
and resilience during a period of unprecedented
global uncertainty. The OPC win in the USA
underpins the business for many years and provides
certainty for shareholders and employees. Austal’s
continued strong earnings in FY2022 are testament
to the commitment of our people during the year.
I would like to acknowledge the Austal executive
team and support managers for their leadership in
guiding the Company through an unprecedented
period. I also want to express my appreciation to
Austal’s loyal shareholders.
John Rothwell AO
Chairman
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Chief Executive Officer’s report
Group financial results
Revenue
EBITDA 1
EBIT 2
NPAT 3
EBITDA margin
EBIT margin
2022
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2021
$’000
1,429,044
1,572,175
165,350
160,326
120,662
114,619
79,565
81,057
11.6%
8.4%
10.2%
7.3%
Net assets
924,285
774,038
Net cash position
4
115,598
231,900
Net cash flow
(106,786)
(49,768)
Earnings per share ($ per share)
Dividends per share ($ per share)
Payout ratio
0.220
0.080
36.3%
0.226
0.080
35.5%
1. Earnings before interest, tax, depreciation and amortisation (EBITDA).
2. Earnings before interest and tax (EBIT).
3. Net Profit / (loss) after tax (NPAT).
4. FY2021 excludes CCPB 9 & 10 notional lease debt.
FY2022 not required as derecognised.
EBIT and EBITDA are non-AASB measures.
EBIT is used to understand segment performance.
EBITDA is used by management to understand cash flows within the Group.
The information is unaudited but is extracted from the audited accounts.
Total revenue for the year decreased by
(9.1)% to $1,429 million in FY2022.
FY2022 EBIT increased by 5.3% to
$120.7 million compared to $114.6 million
in FY2021.
Austal reported a NPAT of $79.6 million in
FY2022 compared to $81.1 million in
FY2021.
4 Austal Limited | Chief Executive Officer’s report
Austal delivered operating cash flow of
$37.5 million (FY2021: $93.5 million), and
FY2022 net cash flow of $(106.8) million
(FY2021: ($49.8) million).
Austal has maintained a strong cash balance
of $240.1 million at 30 June 2022, despite
a significant capital investment programme
in Mobile and San Diego demonstrating the
ongoing cash generating strength of the
business (30 June 2021: $346.9 million).
Net cash was $115.6 million at
30 June 2022
(30 June 2021: $231.9 million).
A final FY2022 unfranked dividend of
4.0 cents per share was declared, adding to
the 4.0 cents a share paid in April 2022,
representing a 36.3% payout ratio
(FY2021: 8.0 cents per share, unfranked).
Austal received $1.5 billion of new contract
awards during FY2022 to bring the order
book to $3.0 billion at 30 June 2022.
Austal’s NPAT was $79.6 million in FY2022,
within $1.5 million of the $81.1 million recorded
in the prior corresponding period (pcp), and
EBITDA of $165.4 million, up 3.1% on the pcp.
These were the second-best EBIT results in the
Company’s history, and the fourth year in a row
that the Company’s EBITDA exceeded
$135 million. These strong results enabled the
Board to declare a final dividend of 4.0 cents per
share, with a total of 8.0 cents per share
(unfranked) for FY2022.
A few months into the year I received the
resignation from Greg Jason, Austal’s long serving
CFO. Greg was a great support to me as I took on
the CEO role and has been greatly missed by me
and the business. We appointed an Interim CFO,
Geoff Buchanan, who has brought a wealth of
financial knowledge and experience while we
undertake a global search for a permanent CFO.
The COVID-19 travel restrictions hampered this
search but with the relaxing of travel rules the
process to find the right permanent person is well
underway.
Austal delivered 9 ships in FY2022 and
maintained a strong balance sheet while
allocating considerable enhancing capital as we
strengthened our strategic position to unlock
significant long-term opportunities in the
shipbuilding industry and broader defence sector.
We provided guidance to shareholders in the half
year results that EBIT would not be less than
$107 million for the year and on the award of
OPC we were again able to increase that EBIT
guidance for FY2022 to a near record result.
Despite the strong overall performance, there was
a decline in revenue from FY2021.
This decline was driven by a reduction in
Littoral Combat Ship (LCS) shipbuilding
throughput, COVID-19 impacts, and reduced
Support activities in the USA.
Some of these are one-offs, others are caused by
general market fluctuations, and others are more
structural because Austal is in a transition period
where new orders were required for the
Company’s USA shipyard to replace the LCS
programme wind-down.
Pleasingly, the USA EBIT margin again improved,
predominantly due to mitigation of risk and
construction efficiency, which helped to offset the
year on year decline in revenue. The improved
efficiencies and risk mitigation were reflected in
an accelerated release of contingency reserves
during the year.
Importantly, we continue to translate the
Company’s earnings into strong cash flow despite
significant enhancing expenditure.
We made significant investments in the USA with
both completion of the San Diego service centre
purchase and the opening of the new steel facility
in Mobile. Both offer excellent potential growth in
future earnings in our ships and support business.
We delivered 9 ships to commercial and defence
customers around the world in FY2022; another
strong year of delivering to customers despite the
lingering challenges with COVID-19.
In Australia, we delivered 5 defence vessels,
including the first of the Evolved Cape Class
Patrol Boats (CCPB) to the Royal Australian Navy
and 4 Guardian Class Patrol Boats (GCPB) for the
Commonwealth of Australia’s Pacific Patrol Boat
Replacement Project.
Austal USA continued its success in delivering
the U.S. Navy’s LCS, with the delivery of LCS 30,
the future USS Canberra.
Austal Philippines delivered the second trimaran
to Fred Olsen following the delivery of the first
sister ship from Australia in the last financial
year.
Austal Vietnam was awarded and commenced
manufacture of a 66 metre ferry that will be
delivered in early 2023. We also concluded the
divestiture in our China joint venture as
announced in December 2021, freeing up
resources to focus on new opportunities.
People & Safety
Austal continues to manage implemented and
certified Health and Safety Management Systems
that support our people, our values, and achieving
our business objectives.
Austal strives for, and continues to achieve, low
Lost Time Injury Frequency Rates (LTIFR) and
Medical Treatment Injury Frequency Rates
(MTIFR) in our workplaces and we are recognised
as a leader in safety throughout the global
shipbuilding industry.
Austal management closely reviews 12 month
rolling MTIFR and LTIFR. The following tables
indicate similar performance to the prior
corresponding periods.
21.7
14.1
14.2
10.7
10.4
10.1
6.8
7.1
7.5
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
Medical Treatment Injury Frequency Rate
(Injuries per million hours worked)
3.90
3.62
3.11
2.10
1.75
2.07
1.68
1.70
1.78
FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
Lost Time Injury Frequency Rate
(Injuries per million hours worked)
Although the numbers are low and trending in the
right direction, continuous improvement is crucial
to ensure a safe working environment for all of our
staff. Austal’s individual Business Units have
started a process to identify further areas for
improvement related to learnings achieved
through MTIFR and LTIFR investigations.
These results motivate us to continually enhance
our HSEQ policies and practices and drive for
improvement in Group Safety performance
indicators, and it underpins the growth of our
business in a sustainable way; benefiting our
employees, shareholders, and the broader
community in which we operate.
Austal continues to achieve outstanding
accolades throughout its operations and
acknowledges and celebrates successes, such as
the winning of a seventh American Equity
Underwriters (AEU) Excellence in Safety award in
FY2022. This prestigious, nationwide, safety
award is presented to companies with excellent
safety performance, management involvement
Austal Limited | Chief Executive Officer’s report 5
and industry leading safety programmes. This
award reflects Austal USA’s commitment to safety
excellence and solidifies its place among the
safest shipyards in the USA.
Further details on Health, Safety and
Environmental initiatives at Austal can be found
in Austal’s Environmental, Social and Governance
(ESG) Report FY2022 when it is published in
October.
USA
Strategy
Austal USA remains the core driver of Austal’s
financial performance, constituting approximately
three-quarters of the Company’s revenue in
FY2022 as it continued the efficient delivery of
high-quality aluminium vessels to the U.S. Navy.
It was very pleasing to appoint Rusty Murdaugh
as the President of Austal USA after previously
acting in an interim capacity. Rusty possesses an
excellent understanding of the business and its
financial drivers, demonstrated through the early
success of contract wins. Our major success for
the year was the commencement of steel
shipbuilding. The steel facility was opened ahead
of schedule and the FY2020 decision to make
that investment was rewarded through recent
significant contract awards:
The Towing, Salvage and Rescue Ships
(T-ATS) programme with 2 vessels plus an
additional 3 options (2 of which were placed
post year end prior to report publication).
The Auxiliary Floating Dock Medium (AFDM)
for the U.S. Navy in competition,
demonstrating we expect to be efficient in
delivery with our automation and the latest
technology and equipment.
Undoubtedly the highlight for the year, the
Offshore Patrol Cutter (OPC) for the
U.S. Coastguard. This programme is for up
to 11 ships at a potential value of
US$3.3 billion and is a great replacement
platform for LCS as it ends in 2 years.
During the year the U.S. Navy also exercised
a contract option for the detail design and
construction of an Expeditionary Fast
Transport vessel (EPF 16).
The business has enjoyed the revenue consistency
of multi-vessel LCS and EPF programmes and the
pivot to steel will enable us to bid for more
programmes and from a wider customer base. The
sea trials on EPF 13 are progressing well, with
the ship demonstrating its autonomous capability.
Autonomy will undoubtedly be another area of
great potential revenue growth for Austal.
6 Austal Limited | Chief Executive Officer’s report
Shipbuilding
Austal has commenced construction of the
2 T-ATS for the U.S. Navy in the new steel
facility. The facility is the product of a combined
US$100 million investment by Austal and the
USA Government made in our Mobile facilities.
Steel represents a significant strategic step to
augment our current aluminium-based operations
to significantly broaden the opportunity horizon
for the Company.
The T-ATS vessels will be the proving ground for
the new facilities, followed by the AFDM floating
dock and the OPC programme.
The future continues to look positive in the
aluminium workload with EPF 16 awarded and a
design contract for an Emergency Medical Ship
(EMS). It is clear to me that autonomy will likely
play a role in these vessels and offer future
potential for more variants of the catamaran
platform.
Support
FY2022 set Austal’s support business up for
future success.
In August 2021 Austal was admitted to the
Sustainment Execution Contracts (SEC) panels on
both the East and West coast. The importance of
SEC West was cemented with the successful
completion of the acquisition of a maintenance
shipyard in San Diego, providing Austal its own
dedicated facility, team, and ability to bid for
maintenance works as a prime contractor. Austal
West Campus, located across the Mobile River
from Austal’s manufacturing facility, played an
increased role in the Support business with
excellent utilisation and contribution to profit
through commercial work won.
Proving our capability in this growth area, Austal
USA was awarded a $100.4 million contract by
the U.S. Navy to perform maintenance on Littoral
Combat Ships (LCS) deployed to the Western
Pacific, Indian Ocean, and the countries and
ports therein. The contract value could increase
to $298.9 million if options for further periods
contained in the contract are exercised by the
U.S. Navy.
When combined, these strategic investments will
deliver a long term, stable income stream that will
underpin sustained shareholder returns.
We also continue to look for acquisition and
organic growth opportunities to support our
customers in the regions in which they choose to
operate.
Outlook
Austal is starting to capture the benefits of its
hard work in previous years to set Austal up for
further success, and the business is perfectly
positioned for long term, profitable growth. This is
reflected in the investments made and the
contracts won, and an exciting pipeline of
opportunities.
Looking ahead, Austal entered FY2023 with a
US$1.7 billion contracted order book, with
contracted orders for the U.S. Navy and
U.S. Coast Guard extending through to FY2027.
Austal USA’s focus has been on broadening the
potential order book with investment in facilities
and capability, while delivering existing contracts,
winning future build programmes and ensuring we
are part of the design process for longer term
programmes and developing a true long-term
pipeline of work. This is demonstrated through
contract awards such as the preliminary design on
Next Generation Logistics Ships (NGLS).
Australasia
Strategy
Our core focus remains on long term sustainable,
profitable growth. We have maintained our focus
on sovereign capability and continue rebuilding
positive stakeholder relationships across Navy,
Defence, Australian Border Force, other
Departments and Government R&D and Digital
Technology teams. Austal’s strategy of
establishing operational capability in-country on
commercial vessels and then subsequently
moving into defence and support has worked well,
however Austal Philippines had a setback this
year when the Philippines Navy OPV (PNOPV)
contract changed from an onshore build
requirement to the contract being awarded to an
offshore shipyard.
Shipbuilding
The PNOPV decision means the Philippines
shipyard will continue to focus on commercial
work while continuing to look for opportunities in
sovereign defence.
Our near-term focus for Vietnam is to continue to
secure orders to preserve business capability and
longevity. The Vietnam shipyard has proven very
successful and efficient and is capable of
commercial shipbuilding and other manufacturing
work, an area of operations currently being
explored for opportunities.
Our Australian operations will continue to support
Australian Navy and Border Force on the new
build and sustainment of vessels. It was very
pleasing to win 2 additional CCPB vessels that
will provide continuity to future work. There is an
exciting pipeline of work detailed in the Force
Structure Plan that we are currently bidding for
now. The next opportunity is the Army’s
Independent Littoral Manoeuvre Vessel (Army
Landing Craft) and we are teaming with BMT and
Raytheon to bid for this contract. If successful, it
is likely we will invest in our facilities in
Henderson to support this programme of work. We
will agree these infrastructure investment plans
with the Commonwealth. Austal is seeking to
establish its position as the ultimate Sovereign
Defence Prime Contractor in Australia, and we
continue to assess merger and acquisition
opportunities in the sector.
The significant growth in the size of the
Australasia business over the last 5 years has
meant we needed to invest in the appropriate
Information Technology systems to monitor and
control our operations in multiple countries. We
will go live this year with a transformation project,
which includes implementation of a new
Enterprise Resource Planning (ERP),
Product Lifecycle Management (PLM) and
3-Dimensional Computer Aided Design (CAD)
tools. As part of this rollout, we achieved
ISO 270001 and Defence Industry Certification
Program (DISP) cyber security accreditations for
Austal IT systems.
Both Austal USA and Australasia have a clear
direction and agreed set of objectives to build
customer relationships and target addressable
markets using technologically advanced products.
We now have the ability to deliver shipbuilding,
support and systems, for commercial and defence
customers in both steel and aluminium.
Support
Following the acquisition of support yards in
Cairns and Brisbane last year we made some
upgrades and modernisation improvements to the
Brisbane yard following the flooding there in the
early part of the year. This has an impact on
revenue but has set us up to maximise
commercial revenue, while our Cairns facility
focuses on Border Force and Navy vessels. Many
of the newly built CCPB will be home ported
there.
As Australia’s Force Structure Plan increases the
size of the Navy fleet, there will be more vessel
sustainment activities being undertaken in Perth,
Darwin and Cairns, where we are already
established. Austal’s investment plans therefore
are targeted at both new build opportunities and
more sustainment business in locations where we
are already well established.
Austal Limited | Chief Executive Officer’s report 7
demonstrator project approved to retrofit an aged
Armidale Class vessel to demonstrate Australian
capability.
China
Austal completed the sale of its 40%
shareholding in Aulong Shipbuilding Co. Ltd,
Austal’s Joint Venture in Zhuhai, China, in
December 2021, after announcing the planned
sale in April 2021. Austal’s share in the joint
venture was sold to its joint venture partner,
Jianglong Shipbuilding Company for $4.4 million.
Jianglong previously owned the other 60%
shareholding in the joint venture company.
Austal will continue to provide Aulong
Shipbuilding Co. Ltd with ongoing design support
on an ad hoc basis as the parties determine is
appropriate.
Conclusion
The OPC win in the USA provides much needed
certainty in Austal’s order book and underpins the
decision to invest in steel capability. TAT-S and
AFDM are excellent programmes to fine tune the
steel production line in advance of the OPC
programme. We have fundamentally changed our
strategy to broaden the pipeline of opportunities
and our contracting horizons, and this is yielding
results that will provide excellent long term
stability to Austal.
The wins in Australia with 2 additional CCPB
vessels provides the bridge to future published
programmes, and with the excellent delivery
performance on our CCPB and GCPB, we strive to
cement our position as a trusted partner with the
Commonwealth of Australia.
Crucially, we continue to consistently generate
strong earnings, underpinned by a robust balance
sheet, during this transition period.
The strategic steps that Austal is undertaking in
steel shipbuilding, support, and technology
development, places the business incredibly well
for long term sustainable growth.
Paddy Gregg
Managing Director and Chief Executive Officer
Outlook
The Australian Government’s Force Structure Plan
provides Austal with the ability to focus on a
visible pipeline of tenders that match our
capabilities in Australian shipbuilding. We note
the new Labour Government has announced a
Force Posture Review, but do not believe this will
materially change near term opportunities in WA.
Not only is the future defence shipbuilding
programme looking healthy, but with new ships
come opportunities on new sustainment
contracts.
Austal anticipates that the commercial ferry
market will remain tough for the next few years,
but there are signs of increasing opportunities,
driven by three main factors: the reduction in
COVID-19 travel restrictions, the ageing of the
global commercial ferry fleet, and the desire of
operators to reduce emissions. This will be vitally
important for our yards in the Philippines and
Vietnam.
Research & Development (R&D)
Austal continues to invest in R&D, both in the
USA and Australia. Two significant areas of focus
in the R&D space remain emissions efficiency
and autonomy. This will be very important in the
future of commercial vessels in particular with
global focus on greener fuels and technology.
In the defence sector, the ability to remove
people from harm’s way remains desirable and is
becoming increasingly achievable. Considerable
work has been undertaken in the land and air
sector, and now marine is turning its focus to
autonomous technology in the USA, and more
recently Australia.
Austal R&D is focused on harnessing technologies
that differentiate Austal in creating value for
customers.
Austal continues to invest in its technological
capabilities to enhance our products and our
processes, particularly in the support area. This
will provide the Company with substantial
competitive advantages in the future, and our
sophisticated maintenance planning system that
directly interacts with the ship is currently on trial
on CCPB 9 & 10 with the Royal Australian Navy.
With EPF 13 autonomy trials progressing well it
will be very exciting to see capability and
requirements develop to maximise use of these
advances. A similar approach to autonomy is
being adopted in Australia with an autonomous
8 Austal Limited | Chief Executive Officer’s report
Review of operations
USA
Financial performance
Revenue
Shipbuilding
Support
Total
EBIT
Shipbuilding
Support
Total
EBIT Margin
Shipbuilding
Support
Total
2022
$’000
2021
$’000
$
880,101
175,821
$
1,012,983
163,621
$
1,055,922
$
1,176,604
$
122,105
11,636
$
105,396
26,257
$
133,741
$
131,653
13.9%
6.6%
12.7%
10.4%
16.0%
11.2%
USA revenue was $1,055.9 million in FY2022
compared to $1,176.6 million in FY2021.
second in calendar year 2021 after USS Savannah
(LCS 28) was delivered in June 2021.
4 LCS are presently under various stages of
construction. LCS 32, the future USS Santa Barbara
was launched in November 2021 and LCS 34, the
future USS Augusta was launched in May 2022. LCS
36, the future USS Kingsville, and LCS 38, the future
USS Pierre, are under construction.
EPF 13, the future USNS Apalachicola, EPF 14, the
future USNS Cody and EPF 15, the future USNS
Point Loma remain under construction. EPF 16, is
under contract.
Austal was awarded its first steel construction contract
by the U.S. Navy in October 2021, a US$144 million
build of 2 Towing, Salvage and Rescue Ships (T-ATS
11 and 12), with an option for a further 3 vessels.
Post-financial year end in July 2022, Austal was
awarded a US$156 million contract option for
T-ATS 13 and 14.
Rusty Murdaugh was appointed as President of
Austal USA, effective 9 September 2021. Rusty had
been serving as the interim President since February
2021, and Chief Financial Officer since 2017.
EBIT increased by $2.1 million (1.6%) on FY2021 to
$133.7 million, representing further year on year
improvement in efficiencies and profitability.
Support
Support work was impacted by:
Revenue decreased principally due to reduced
throughput as the LCS programme starts to wind back,
but this was offset by maturity of the LCS and EPF
programmes delivering greater efficiencies and
retirement of risk for Austal which allowed the
accelerated release of contingencies.
This was reflected in an EBIT margin of 12.7% in
FY2022, compared to 11.2% in FY2021.
Shipbuilding
Shipbuilding revenue decreased by 13.1% from
FY2021 to FY2022, in line with the planned wind
down of the LCS programme into FY2025, with Austal
experiencing reduced purchases of materials and
reduced labour hours that comprise shipbuilding
revenue.
Pleasingly, shipbuilding margin improved year on year
(10.4% to 13.9%), which was a product of both
operational efficiencies and the mitigation of risk that
enabled the accelerated release of contingencies.
Austal’s move to steel shipbuilding will be pivotal to
increasing both the Company’s order book and
revenue in future years, and it has already been
significantly positive in this regard with 3 new steel
programmes secured.
Austal delivered the future USS Canberra (LCS 30) to
the U.S. Navy in December 2021. The USS Canberra
is the 15th Independence-class Littoral Combat Ship
(LCS) delivered to the U.S. Navy since 2010, and the
1. The reduced volume of support work taking place
due to COVID-19 impacts.
2. Austal’s USA support business was unable to send
maintenance personnel to some locations, due to
COVID-19 related travel restrictions, which
impacted revenue generation.
Support revenue increased from $163.6 million in
FY2021 to $175.8 million in FY2022, whilst EBIT
generated by the USA Support segment decreased
from $26.3 million in FY2021 to $11.6 million in
FY2022 mainly due to one-off impacts in FY2021.
Austal expects support revenue to rebound over the
long term. With a growing fleet of LCS and EPF,
Austal USA’s Support business continues to be a
growth opportunity underpinned by the Company’s
recent admission to the Sustainment Execution
Contract (SEC) West panel of service providers in San
Diego. This positions Austal to win a larger share of
the available support work.
Austal has positioned its Support business to grow
revenue by expanding its services to other ship
classes, and the SEC West contract is an enabler of
that expansion.
In December 2021, Austal completed the purchase of
a long-term lease of the Marine Group Boat Works
facilities in the Port of San Diego, USA. This
important strategic acquisition enables further growth
of the Company’s service and support business. The
lease of the facility has a duration of 29 years.
Austal Limited | Review of operations 9
2023. Construction of the 110 metre OPC’s will take
place at Austal USA’s new steel shipbuilding facility.
Safety
Austal USA earned the 2021 American Equity
Underwriters (AEU) safety award, which was especially
gratifying considering the added complexities we
experienced this year; through construction of the new
steel production line, operating our newly-acquired dry
dock at Austal’s West Campus, commencing ship
repair efforts and navigating COVID-19.
This is the seventh AEU award we have received, and
the 21st industry safety award earned overall,
affirming that Austal USA remains one of the safest
shipyards in the USA maritime industry.
Australasia
Reporting of Austal’s Australia, Philippines, Vietnam
and Muscat operations are combined into the
Australasia Shipbuilding and Australasia Support
reporting segments for tendering, scheduling, resource
planning and management accountability.
Financial performance
2022
$’000
2021
$’000
Revenue
Shipbuilding
Support
Total
EBIT
Shipbuilding
Support
Total
EBIT Margin
Shipbuilding
Support
Total
$
285,705
98,261
$
310,055
95,781
$
383,966
$
405,836
$
11,863
2,755
$
16,020
1,288
$
14,618
$
17,308
4.2%
2.8%
3.8%
5.2%
1.3%
4.3%
The Australasia segment reported revenue of
$384.0 million in FY2022, compared to
$405.8 million for FY2021.
EBIT reduced from $17.3 million in FY2021 to
$14.6 million in FY2022.
Revenue and earnings in FY2022 continued to be
impacted by reduced work in the commercial ferry
sector due to COVID-19 induced travel restrictions, as
well as COVID-related impacts on the supply chain
and movement of people impacting milestone
payments and increasing costs.
Pleasingly, COVID-related restrictions and impacts
have been progressively improving late in FY2022 and
into FY2023.
New contract awards
In November 2021, Austal USA was awarded a
$100.4 million contract by the U.S. Navy to perform
maintenance on Littoral Combat Ships (LCS) deployed
to the Western Pacific, Indian Ocean, and the
countries and ports therein. The contract value could
increase to $298.9 million if options for further
periods contained in the contract are exercised by the
U.S. Navy.
In December 2021, the Company was awarded a
$2.8 million contract to perform design studies for the
U.S. Navy’s Next Generation Logistics Ship (NGLS)
programme. The contract requires Austal USA to
develop a new baseline design, as well as perform
specific trade studies for the Navy’s newest logistics
ship.
Austal USA officially opened the company’s new state-
of-the-art US$100 million steel shipbuilding facility
in Mobile, Alabama in April 2022, enabling the
simultaneous production of both aluminium and steel
hulled ships. The first vessels to be built in the new
steel facility will be 2 T-ATS vessels for the U.S. Navy.
In May 2022, the U.S. Navy exercised a
US$230.5 million fixed–priced incentive (firm target)
contract option for the detail design and construction
of Expeditionary Fast Transport (EPF) 16 by
Austal USA. EPF 16 will be the third ship constructed
in “Flight II” configuration, which has enhanced
medical and aviation capabilities. Austal USA has
successfully delivered twelve EPF ships to the Navy
since 2012, on schedule and on budget. It is
currently constructing EPFs 13, 14 and 15 at the
company’s shipyard in Mobile, Alabama.
In June 2022, the U.S. Navy awarded Austal USA a
contract to construct a new Auxiliary Floating Dock
Medium (AFDM). It will be constructed at Austal
USA’s new steel manufacturing facility. With a lifting
capacity of over 18,000 tonnes, length of 211 metres
and working area of nearly 8,500 square metres, the
dry dock will have the capability to service large
vessels such as Littoral Combat Ships (LCS), Guided
Missile Destroyers (DDG), Guided Missile Cruisers
(CG) and Landing Ship Docks (LSD’s).
Austal USA was also awarded a further $65.5 million
modification to a previously awarded LCS class design
contract, announced 23 June 2021, which exercises
options for additional LCS Class Design Services and
additional support for the U.S. Navy’s Integrated Data
Product Model Environment (IDPME).
On 30 June 2022, Austal USA was awarded a
contract with a potential value of US$3.3 billion, for
the detail design and construction of up to 11
Offshore Patrol Cutters (OPC) for the U.S. Coast
Guard. The first vessel has been contracted by the
U.S. Coast Guard, with options for a further 10
vessels, with construction expected to commence in
10 Austal Limited | Review of operations
Shipbuilding
Support
Support activity in FY2022 included continuing
servicing and support for the fleet of 8 CCPBs
operated by the Australian Border Force throughout
Northern Australia, plus a support contract worth up
to $54 million over three years for
CCPB 9 Cape Fourcroy and CCPB 10 Cape
Inscription, being operated by the Royal Australian
Navy.
In June 2022, Austal announced a two year support
contract to sustain the 2 CCPBs the Company built for
the Government of the Republic of Trinidad and
Tobago.
Austal delivered 5 defence vessels from Australia,
including 1 Cape Class Patrol Boat (CCPB) for the
Department of Defence (DoD).
Construction progressed well at Austal Australia on the
5 CCPBs for the Royal Australian Navy. All 5 vessels
are under various stages of construction. The
$324 million contract to design and construct the
evolved CCPB is the largest vessel construction
programme contract awarded to Austal in Australia in
the Company’s 30+ year history.
In April 2022, the DoD announced it would order an
additional 2 CCPBs for the Royal Australian Navy, for
$124 million.
Austal Australia also delivered 4 Guardian Class Patrol
Boats (GCPB) for the Commonwealth of Australia’s
Pacific Patrol Boat Replacement Project. GCPB 12,
13, 14 and 15 were delivered on time to the
Commonwealth of Australia in August 2021, October
2021, March 2022, and May 2022, respectively.
Austal was awarded a €20.5 million (~$32.8 million)
contract in August 2021 to build a 66 metre high-
speed catamaran ferry for the Degage Group of French
Polynesia. Construction commenced at Austal Vietnam
in the period, with a scheduled delivery in the first
half of 2023.
Austal Philippines delivered Banaderos Express
(Austal Hull 395), a 118 metre high-speed trimaran
ferry, to Fred Olsen Express of the Canary Islands in
October 2021. This completed the $190 million
contract for 2 trimarans, announced in
December 2018. Construction progressed on the
115 metre, high-speed vehicle-passenger catamaran
for Danish ferry operator Molslinjen. The new ‘Auto
Express 115’ will be the largest ferry (by volume) ever
built by Austal and is a further design evolution of the
distinctive 109 metre high-speed catamaran delivered
to Molslinjen in January 2019. The vessel is due to be
delivered in January 2023.
Despite the challenges being experienced in the
commercial market, Austal is actively focused on
securing a number of potential contracts, with
particular emphasis on work for our yard in Vietnam.
Both Australia and the Philippines are at full capacity
with existing contracts.
Australasia’s EBIT was negatively impacted by a
$2.6 million impairment charge (net of insurance
proceeds) taken to recognise damage sustained to the
Austal Philippines shipyard and floating dry dock as a
result of Typhoon Odette (in December 2021).
Austal Limited | Review of operations 11
Directors’ report
The Board of Directors of Austal Limited submit their report for the year ended 30 June 2022.
Directors
The names and details of the Company’s Directors in office at the date of this report are detailed below:
John Rothwell AO – Non-Executive Chairman
John has played a major role in the development of the Australian aluminium
shipbuilding industry approaching 50 years of experience in boat and shipbuilding. He is
the architect responsible for the establishment of Austal and was the founding Managing
Director. John identified markets for high speed ferries throughout Asia which resulted in
Austal’s rapid growth. He saw the potential for US Defence contracts for high speed
aluminium naval ships and he led the formation of a new shipyard in Mobile, Alabama in
1999.
John was appointed as an Officer of the Order of Australia (AO) in January 2004 for
services to the Australian shipbuilding industry, and for significant contributions to
vocational education and training. He was named “Australian Entrepreneur of the Year”
by Ernst and Young in 2002 and he was awarded the Western Australia Citizen of the
Year in the category of Industry and Commerce in 1999.
John stepped down as Executive Chairman in 2008 to continue as Non-Executive Chairman after managing the
Company for 20 years.
Paddy Gregg – Chief Executive Officer
Patrick (Paddy) Gregg was promoted to the position of Austal’s Chief Executive Officer
on 1 January 2021, following 4 years as Austal’s Chief Operating Officer.
Paddy is a highly regarded senior leader with significant project management,
manufacturing and business experience acquired within the high-technology nuclear
defence industry, rail industry and naval shipbuilding industry.
Immediately prior to joining Austal, Paddy was working for Network Rail in the United
Kingdom. During his time there he was responsible for major infrastructure
enhancements and renewals on the Western and Wales Route.
Paddy has extensive experience in the naval sector having worked for BAE Systems
Submarines, based in Barrow-in-Furness. Paddy was the Head of Project for the second
Astute Class hunter killer nuclear submarine build. In this role he worked closely with
both the Ministry of Defence and Navy to ensure the project was successfully delivered.
As Chief Operating Officer at Austal, Paddy had responsibility for the shipbuilding and sustainment operations in
Australia, China, Philippines and Vietnam. This responsibility covered both new build of commercial and naval
vessels, and the sustainment stream of the business focussed support for Australian Border Force and Royal
Australian Navy.
As Chief Executive Officer, Paddy joins the Board of Austal Limited and oversees a global company comprising
5 shipyards and 8 service centres, with 5,000 employees worldwide.
Paddy is a Chartered Engineer and fellow of the Institution of Mechanical Engineers, with a Masters Degree in
Mechanical Engineering from the University of Newcastle-upon-Tyne, and a Masters in Business Administration
from the Warwick Business School.
12 Austal Limited | Directors’ Report
Giles Everist – Independent Non-Executive Director
Giles has a breadth of board and executive experience gained over his 30 plus year career.
He has worked for a range of production and service based businesses, within the resources,
engineering and construction sectors, both in Australia and overseas in the UK and Africa.
Giles was appointed as a Non-Executive Director of the Company in November 2013,
became Chair of the Audit & Risk Committee in November 2015 and is a member of the
Nomination & Remuneration Committee. Giles holds a mechanical engineering degree and
is a qualified Chartered Accountant. Giles is currently Chief Financial Officer of Capital
Limited. He was Chairman of ASX listed Decmil Group Limited between 2011 and 2014,
formerly the Chief Financial Officer and Company Secretary of Monadelphous Group Limited
between 2003 and 2009, and Chief Financial Officer of Macmahon Holdings Limited
between 2017 and 2020. He has held senior financial executive roles during his career with
Rio Tinto in the United Kingdom and Australia, as well as major US design engineering
group Fluor Corporation.
Giles has held a number of other Non-Executive Director and Audit & Risk Committee Chair roles with ASX listed
companies including Decmil Group Limited, Logicamms Limited and Macmahon Holdings Limited, as well as for a
number of private and not for profit organisations.
Sarah Adam-Gedge – Independent Non-Executive Director
Sarah was appointed as a Non-Executive Director of the Company in August 2017, became
Chair of the Nomination & Remuneration Committee in September 2018, Deputy Chair of
the Austal Limited Board in September 2019 and is a member of the Audit & Risk
Committee. She brings strong consulting, customer experience, digital and technology
expertise to Austal through her experience in executive roles in the information technology
and consulting sectors.
Sarah is currently the Managing Director for Wipro Australia / New Zealand. Wipro is a global
company delivering innovation-led strategy, technology and business consulting services.
Previously, Sarah has been the Managing Director of Publicis Sapient Australia, Avanade
Australia, Managing Partner and Vice President, Global Business Services at IBM and has
also previously held senior executive roles at PwC and Arthur Andersen, leading the
development and implementation of numerous digital enterprise transformation engagements
across many industries. Sarah has worked extensively across Australia / New Zealand, Asia-Pacific, as well as the
Middle East and Africa, and Latin America.
Sarah is a Chartered Accountant and member of the Institute of Chartered Accountants Australia / New Zealand.
Sarah holds a Bachelor of Business (Accounting) from the Queensland University of Technology and is a Graduate
of the Australian Institute of Company Directors. Sarah was previously a member of the Diversity Council for the
Australian Computer Society and was previously a Non-Executive Director, and Chair of the Finance, Audit and Risk
Committee for Ovarian Cancer Australia.
Chris Indermaur – Independent Non-Executive Director
Chris was appointed as a Non-Executive Director of the Company in October 2018 and to
the Nomination & Remuneration Committee and Audit & Risk Committee in August 2019.
Chris has over 30 years of experience in large Australian companies in Engineering and
Commercial roles. Amongst these roles he was the Engineering and Contracts Manager for
the QNI Nickel Refinery at Yabulu, Company Secretary for QAL and General Manager for
Strategy and Development at Alinta Limited.
Chris holds a Bachelor of Engineering (Mechanical) and a Graduate Diploma of Engineering
(Chemical) from the West Australian Institute of Technology (now Curtin University).
He also holds a Bachelor of Laws and a Master of Laws from the Queensland University of
Technology and a Graduate Diploma in Legal Practice from the Australian National
University. Chris is also a Director of Austin Engineering Limited and Mayur Resources
Limited.
Austal Limited | Directors’ Report 13
Mick McCormack – Independent Non-Executive Director
Mick was appointed as a Non-Executive Director of the Company in September 2020 and to
the Nomination & Remuneration Committee and Audit & Risk Committee in April 2021.
Mick has over 35 years’ of experience in Australia’s energy infrastructure sector, is
acknowledged as a pioneer in the Australian energy industry and was instrumental in
transforming Australia’s gas delivery system with the development of a world-leading
pipeline grid system. He was formally Managing Director and CEO of ASX listed APA Group
between 2015-2019, growing the enterprise value of the business from $1 billion to
$24 billion during that time. Mick is recognised for delivering operational efficiency, safety
performance excellence, value-adding mergers & acquisition strategies, effective capital
allocation, prudent capital management and strong corporate governance principles.
Mick holds a Bachelor of Applied Science (Surveying) and a Master of Business
Administration from the University of Queensland, and a Graduate Diploma of Engineering
from Monash University. Mick is Chairman of Central Petroleum Limited and a Director of Origin Energy. He is also
a Director of the Clontarf Foundation and is Chairman of the Australian Brandenburg Orchestra Foundation.
14 Austal Limited | Directors’ Report
Interests in the shares and options of the company and related corporate bodies
The interests of the Directors in the shares of Austal Limited at the date of this report were as follows:
Director
Ordinary Shares
Share Rights
Indeterminate Rights
Mr John Rothwell
32,761,692
Mr Paddy Gregg
Mr Giles Everist
Mrs Sarah Adam-Gedge
Mr Chris Indermaur
Mr Mick McCormack
242,399
30,441
20,000
-
106,920
-
-
17,760
52,844
36,407
-
-
292,530
-
-
-
-
Principal activities
The principal activities of the companies within the consolidated entity during the year were the design,
manufacture and support of high performance vessels for commercial and defence customers worldwide.
These activities are unchanged from the previous year.
Results
The net profit after tax of the consolidated entity for the financial year was $79.6 million (FY2021: $81.1 million).
Review of operations
A review of the operations and financial position of the consolidated entity is outlined in the Review of Operations
on page 9.
Share price
The closing share price of Austal at 30 June 2022 was $1.80 (30 June 2021: $2.05). On 1 July 2022, the share
price closed at $2.25 following the announcement of the Offshore Patrol Cutter (OPC) award.
Dividends
An unfranked dividend of 4.0 cents per share was paid after the FY2022 H1 results (FY2021: H1 4.0 cents
per share) and a further dividend of 4.0 cents per share has been declared post 30 June 2022 for FY2022
(FY2021 final 4.0 cents per share).
Austal Limited | Directors’ Report 15
Significant events after the balance date
The Directors have declared an unfranked dividend of 4.0 cents per share in respect of the year ended
30 June 2022 as described above.
The directors are not aware of any other significant events since the reporting date.
Likely developments and future results
A general discussion of the Group’s outlook is included in the Chairman’s report on page 1, the CEO’s report on
page 4 and the Review of Operations on page 9.
Significant changes in the state of the affairs
Mr Rusty Murdaugh was appointed as President of Austal USA, effective 9 September 2021. Please refer to the
ASX announcement titled “Rusty Murdaugh appointed President of Austal USA“ on 16 September 2021 for further
information.
Mr Greg Jason resigned from his role as CFO effective on 10 December 2021. Please refer to the ASX
announcement titled “Resignation of Chief Financial Officer“ on 23 September 2021 for further information.
There were no other significant changes to the structure or operations of the Group during the financial year.
Environmental regulation and performance
The Group 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 2022.
Share rights, performance rights, indeterminate rights and service rights
There were 2,683,376 un-vested performance rights, 529,448 share rights, 128,316 indeterminate rights and
1,244,914 service rights at 30 June 2022.
2,302,302 performance rights and 75,193 share rights, 364,193 indeterminate rights and 612,915 service rights
were granted during FY2022.
Indemnification and insurance of Directors and Officers
An indemnification agreement has been entered into between the parent entity and each of the Directors and
Officers named in this report. The Company has agreed to indemnify those Directors and Officers against any claim
for any expenses or costs which may arise as a result of work performed in their respective capacities to the extent
allowed by the law.
The parent entity paid premiums during the financial year in respect of a contract insuring the Directors and
Officers of the Group in respect of liability resulting from these indemnities. The terms of the insurance
arrangements and premiums payable are subject to a confidentiality clause.
Indemnification of auditors
The parent entity has agreed to indemnify its auditors, Deloitte Touche Tohmatsu, against claims by third parties
arising from the audit (for an unspecified amount) to the extent permitted by law, as part of the terms of its audit
engagement agreement. No payment has been made to indemnify Deloitte Touche Tohmatsu during or since the
financial year.
16 Austal Limited | Directors’ Report
Committee membership
The Company has an Audit & Risk Committee and a Nomination & Remuneration Committee of the Board of
Directors. Members acting on the committees of the Board during the year were:
Audit & Risk
Nomination & Remuneration
Mr Giles Everist 1
Mrs Sarah Adam-Gedge
Mr Chris Indermaur
Mr Mick McCormack
1. Chair of the committee.
Mrs Sarah Adam-Gedge 1
Mr John Rothwell
Mr Giles Everist
Mr Chris Indermaur
Mr Mick McCormack
Directors’ meetings
The number of Board and committee meetings of Directors and the attendance by each Director during the year was
as follows:
Number of meetings held
Number of meetings attended:
Mr John Rothwell
Mr Paddy Gregg
Mr Giles Everist
Mrs Sarah Adam-Gedge
Mr Chris Indermaur
Mr Mick McCormack
Board
6
6
6
5
6
6
6
Meeting
Audit & Risk
Committee
Nomination &
Remuneration
Committee
4
-
4 1
4
4
4
4
2
2
2 1
2
2
2
2
1. Paddy Gregg is not formally a member of the Audit and Risk Committee or
Nomination & Remuneration Committee but attended as a guest.
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 Corporations (Rounding in
Financial / Directors’ Reports) Instrument 2016 / 191. The Company is an entity to which the instrument applies.
Austal Limited | Directors’ Report 17
Nomination & Remuneration Committee Chair’s message
Dear Shareholder,
The Board of Directors are pleased to present the Remuneration Report for the year ending 30 June 2022, outlining
the nature and amount of remuneration for Austal’s Non-Executive Directors and other Key Management Personnel
(KMP), and changes in KMP in the financial year.
2021 remuneration resolutions
I would like to thank shareholders for the positive support provided in favour of remuneration related resolutions at
the 2021 AGM.
KMP remuneration
Remuneration for KMP continues to be a focus for the organisation especially during the continuing global
pandemic, economic volatility and the challenges in attracting and retaining talent. Changes made to the Executive
remuneration framework in 2019 are monitored annually for relevance and competitiveness. Recent reviews of the
framework by the NRC have determined that salary mix and structure remain competitive against market and
identified competitors.
Benchmarking of KMP remuneration in FY2022 resulted in a fixed remuneration adjustment for the CEO to ensure
alignment to P50 was maintained in the CEO’s first full year in the role. Other KMP fixed remuneration was
adjusted in line with legislated superannuation changes.
The business has continued to build, deliver and sustain vessels for our customers during the financial year despite
Covid restrictions, ongoing disruptions to supply chains and international geopolitical tensions. A record number of
vessels was delivered during the year which is a testament to the dedication of our leaders and employees to
provide a product and service that continues to be sought after.
FY2022 proved to be a successful year for contract awards with $1.5 billion of work secured during the financial
year. The strategic shift to steel construction has been a major achievement for the Executive and will underpin
Austal’s growth in the years to come.
KMP performance has been assessed against a balance of financial and non-financial metrics and Executives have
been awarded short term incentives based on the achievement of those metrics as detailed in this report. In
addition, whilst the business has continued to deliver strong earnings, Austal’s Total Shareholder Return has not
performed well against the market over the last three years resulting in modest long term incentive awards, aligned
to the interests of shareholders.
KMP update
We have seen a number of changes to KMP this year:
Mr Greg Jason resigned as Chief Financial Officer in September 2021 after 15 years of service.
Mr Geoff Buchanan was appointed interim Chief Financial Officer whilst the business conducts an external
search for a permanent replacement.
After an extensive global search Mr Rusty Murdaugh, Interim President USA, was appointed into the
President USA position on a permanent basis in September 2021.
Board remuneration
External remuneration consultants have recently been engaged to benchmark NED remuneration. Results from this
exercise will be considered as part of FY2023 annual remuneration review.
18 Austal Limited | Nomination & Remuneration Committee Chair’s Message
Board Diversity
The Board recognise the need for diversity as part of its overall composition. Whilst the Board has been actively
searching for an additional female Board member during the year, this activity has not been successfully concluded
and the Board has revised the target date to June 2023 to appoint an additional female Director.
Commitment to ongoing feedback, and shareholder support
The Board looks forward to the continued support of shareholders for remuneration related resolutions at the
upcoming AGM. The Board will continue to consider further improvements to remuneration governance, policies,
and practices, and commits to engaging with shareholders and their representatives on these matters.
The Board will be pleased to receive feedback in relation to this report.
Yours sincerely,
Sarah Adam-Gedge
Chair, Nomination & Remuneration Committee
Austal Limited | Nomination & Remuneration Committee Chair’s message 19
Remuneration report
This Remuneration Report for the year ended 30 June 2022 outlines the remuneration arrangements of the
Company in accordance with the requirements of the Corporations Act 2001 (the Act) and its regulations.
This information has been audited as required by section 308(3C) of the Act.
1.
2.
Key management personnel ................................................................................................................................................................. 21
Remuneration governance framework ............................................................................................................................................ 22
3.
Executive KMP remuneration policy ................................................................................................................................................. 24
4.
Executive KMP remuneration .............................................................................................................................................................. 30
5.
Non-Executive Director remuneration ............................................................................................................................................. 39
6.
Equity instruments held by KMP ........................................................................................................................................................ 42
7.
Other related matters ............................................................................................................................................................................. 45
20 Austal Limited | Remuneration report
1.
Key management personnel
This report covers all Key Management Personnel (KMP) as defined in the Accounting Standards, including
all Directors, as well as those Senior Executives who have specific responsibility for planning, directing, and
controlling material activities of the Group.
The KMP for the year ended 30 June 2022 were:
Senior Executives
Mr Paddy Gregg
Chief Operating Officer Australasia from February 2017 - December 2020
Chief Executive Officer and Managing Director since January 2021
Mr Ian McMillan
Chief Operating Officer Australasia since January 2021
Mr Rusty Murdaugh
Interim President from February 2021 to September 2021 when appointed permanently
Mr Geoff Buchanan
Interim Chief Financial Officer since November 2021
The following person resigned and ceased to be a Senior Executive during FY2022:
Mr Greg Jason
Group Chief Financial Officer from January 2013 - December 2021
Non-Executive Directors
Mr John Rothwell
Chairman since 1998
Member of the Nomination & Remuneration Committee since December 1998
Mr Giles Everist
Independent Non-Executive Director since November 2013
Member of the Nomination & Remuneration Committee since February 2014
Chair of the Audit & Risk Committee since October 2014
Mrs Sarah Adam-Gedge
Independent Non-Executive Director since August 2017
Member of the Audit & Risk Committee since August 2017
Chair of the Nomination & Remuneration Committee since September 2018
Deputy Chair of the Board since September 2019
Mr Chris Indermaur
Independent Non-Executive Director since October 2018
Member of the Audit & Risk Committee since October 2018
Member of the Nomination & Remuneration Committee since August 2019
Mr Mick McCormack
Independent Non-Executive Director since September 2020
Member of the Audit & Risk Committee since April 2021
Member of the Nomination & Remuneration Committee since April 2021
Austal Limited | Remuneration report 21
2.
Remuneration governance framework
The following framework and strategy broadly outlines the principles and policies that the Board applies in
overseeing KMP remuneration:
I.
Nomination & Remuneration Committee Charter
The role and responsibilities of the committee are outlined in the Nomination & Remuneration
Committee Charter (the Charter), which is available on the Austal website.
The role of the Nomination & Remuneration Committee (NRC) is to ensure that appropriate
remuneration policies are in place which are designed to meet the needs of the Company and to
enhance corporate and individual performance.
The Committee also oversees the implementation of the policies in setting remuneration and
performance objectives related to the Short Term Incentive (STI) and Long Term Incentive (LTI) plans.
The remit of the NRC also includes succession planning which was undertaken for the Directors of
the Board and Executives during FY2022.
The Charter specifies that the NRC is to be composed of at least three members with the majority
being independent directors.
II.
Share trading policy
The Share Trading Policy of Austal is available on the Austal website. The Policy contains the
standard references to insider trading restrictions that are a legal requirement under the
Corporations Act, as well as conditions associated with good corporate governance. The Policy
specifies ‘Closed Periods’ during which Directors and related parties, KMP, Senior Executives, and
any employee in possession of inside information must not trade in the securities of the Company,
unless written permission is provided by the Board following an assessment of the circumstances.
All equity based remuneration awards which have vested are subject to the Group’s Share Trading
Policy.
III.
Executive remuneration consultant engagement policy
Austal has an Executive Remuneration Consultant (ERC) engagement policy which is intended to
manage the interactions between the Company and the ERC. The policy is intended to ensure
independence of advice and to provide clarity to the NRC regarding the extent of any interactions
between management and the ERC. This policy enables the Board to state with confidence that advice
received has been independent. The policy states that ERC are to be approved and engaged by the
Board before any advice is received and that such advice may only be provided to a NED.
Any interactions between management and the ERC must be approved and overseen by the NRC, this
includes the collection of factual internal records (e.g. superannuation paid or allowances and
benefits).
IV.
Stakeholder engagement
The Company seeks input regarding the governance of KMP remuneration from a wide range of
sources, including:
Shareholders
NRC Members
Stakeholder groups including proxy advisors
External remuneration consultants (ERC)
Other experts and professionals such as tax advisors and lawyers
Company management to understand roles and issues facing the Company
22 Austal Limited | Remuneration report
V.
Remuneration framework
Austal is committed to responsible remuneration practices. The need to reward the Group’s employees
fairly and competitively based on performance needs to be balanced with the requirement to do so
within the context of principled behaviour and action, particularly in the area of safety, risk,
compliance and control.
Remuneration should contribute to the Group’s achievements in a way that supports the Group’s
culture and goals. The Remuneration Policy Framework set out below summarises the key features of
the Group’s remuneration approach.
Our Vision
Maintain a responsible, performance-based Remuneration Policy aligned with the long-term interests of shareholders.
Certain incentive metrics are utilised on the Remuneration framework to capture the impact of the Group’s strategy.
Our Goal
Strike the right balance between meeting shareholders' expectations, paying our employees competitively,
and responding appropriately to the regulatory environment.
Our Approach
Governance
Clearly defined and documented governance procedure.
Independent Nomination & Remuneration Committee (NRC).
Independent External Remuneration Consultants (ERC).
Annual assessment of Remuneration Policy.
Individual Remuneration
Reward annual performance of Group relative to planned key performance indicators.
Aligned with business performance.
Recognise and reward teamwork and development of the culture of the organisation.
Award and differentiate based on individual performance and contributions.
Individual Remuneration Determination
Total remuneration based approach.
Facilitate competitiveness by paying remuneration for comparable roles and experience, subject to performance.
Promote meritocracy by recognising individual performance, with an emphasis on contribution, ethics and safety.
Equal remuneration opportunity.
Remuneration Structure
Provide the appropriate balance of fixed and variable remuneration consistent with the position and role.
Significant portion of variable remuneration deferred and aligned with the long-term performance of the Group.
Promote ethical behaviour and do not create incentives to expose the Group to inappropriate risk.
Austal Limited | Remuneration report 23
3.
Executive KMP remuneration policy
I.
Structure
The following policy applies to executive KMP:
Total Remuneration Packages (TRP) should be composed of:
Total Fixed Remuneration (TFR) which is inclusive of superannuation, allowances, social
security, benefits and any applicable fringe benefits tax (FBT) as well as any salary
sacrifice arrangements.
Short Term Incentives (STI) which provides a reward for performance against annual
objectives.
Long Term Incentives (LTI) which provides an equity-based reward for performance
against indicators of shareholder benefit or value creation, over a three year period.
Internal TRP relativities and external market factors should be considered.
TRP should be structured with reference to market practices and the particular circumstances
of the Group where appropriate.
II.
Total fixed remuneration
i.
Framework
Base Packages should be set with reference to the market practice of ASX listed
companies at the 50th percentile, where 50% of the comparator group are above
the median level and 50% are below the median level.
TRP at Target bonus levels (being the Base Package plus incentive awards intended to
be paid for targeted levels of performance) should be between the 50th and 75th
percentile range of the relevant market practice to create a strong incentive to achieve
targeted objectives in both the short and long term.
Remuneration will be managed within a range to allow for the recognition of individual
differences such as individual experience, knowledge or competency with which they
fulfil a role (a range of + / - 20% is generally targeted in line with common market
practices).
ii.
CEO minimum equity holding
The CEO must accumulate and hold a minimum equity holding that is equal to or greater in
value than 1 year of TFR. The minimum equity holding will be computed in July of each year
based upon the volume weighted average price of Austal shares in the month of June. The
minimum equity holding includes shares, share rights and vested indeterminate rights, but
does not include unvested performance rights.
The minimum equity holding may be achieved by the vesting of LTI grants, personal purchase
of shares on market by the CEO, or the CEO and the Board may agree at the commencement of
each year for a portion of TFR to be unconditionally (not subject to performance conditions
since it is part of TFR) payable in share rights.
III.
Short term incentive (STI) policy
The short term incentive policy provides for a component of annual remuneration of executives to be
at-risk, payable in a mix of cash and equity and based upon an assessment of performance measured
using Key Performance Indicators (KPI) that are aligned to the relevant business unit of each
individual and the Company performance.
i.
Purpose
The purpose of the STI Plan is to incentivise KMP to deliver and outperform KPI and annual
business plans that are challenging but achievable. This is intended to lead to sustainable
superior returns for shareholders and to modulate the cost of employing KMP such that the
cost of employment reflects the performance of the Company.
24 Austal Limited | Remuneration report
ii.
Principles
The principles of the plan are that:
STI should be aligned with clear and measurable targets which are set at the start of the
financial year, and the targets will be aligned with the achievement of the Company’s
business plan.
STI payments will be determined after the end of the financial year and the full year
accounts have been approved by the Board.
STI payments are at the full discretion of the Board even if hurdles are met in order to
avoid inappropriate outcomes.
iii.
Form of remuneration - cash and equity
STI awarded to all non-USA Executive KMP will be paid as follows:
50% in cash.
50% in Indeterminate Rights (refer to the definition below) with a minimum holding
period of 1 year irrespective of continued employment.
The Austal USA President receives 100% of STI in cash.
iv.
Indeterminate Rights
Indeterminate Rights are contractual rights to the value of a share in the Company which are
typically settled in the form of shares but which may, at the Board’s discretion, be settled in
cash.
v.
Minimum holding period
The minimum holding period for indeterminate rights is 1 year and applies irrespective of
continued employment with Austal.
vi. Measurement period
The Measurement period for STI awards is the financial year of the Group.
vii.
Determination of STI award
The Board reviews and approves performance targets and objectives annually for the CEO;
other executive KMP targets and objectives are also reviewed annually. At the discretion of the
Board the final STI award is determined subsequent to financial year end taking into
consideration the expectations and outcomes of shareholders. Where an STI is awarded, the
payment is made in September of the following financial year.
viii. Key performance indicators (KPI)
KPI are customised for each KMP, Senior Executive and Manager and reflect the nature of their
role, whilst creating shared objectives where appropriate.
Weightings are applied to the KPI selected for each participant to reflect the relative
importance of each KPI whilst ensuring that financial metrics always constitute at least 50% of
the total.
Satisfaction of KPI performance conditions are assessed qualitatively and quantitatively against
the targets defined at the start of the financial year.
The FY2022 KPI are contained in the STI KPI target and outcomes section commencing on
page 31.
Austal Limited | Remuneration report 25
ix.
Cessation of employment
STI awards will only be made to those participants that are still employed at the end of the
Measurement Period (30 June each year).
Resignation after the completion of the measurement period will not impact the 50% of STI
that is paid in cash.
STI recipients who resign after the completion of the measurement period will be subject to
good leaver / bad leaver provisions. An employee may forfeit their Indeterminate Rights if they
are a ‘bad leaver’. A bad leaver is defined as an employee whose employment is terminated for
cause, resigns upon being asked to do so or an ex-employee who acts against the interests
of the company.
STI awards may be determined at the discretion of the Board in the case of either resignation
or termination due to serious illness or disability.
x.
Change of control
The Board has determined that in the event of a Change of Control (including a takeover),
Indeterminate Rights will vest on a pro-rata basis at the ‘Target’ level for the portion of the
Performance Period that has elapsed at the date of the change of control. The Board retains
discretion to vary this approach if it considers that it would generate an inappropriate outcome.
xi.
Profit gate
The Company’s EBIT (Earnings Before Interest and Tax) result must be at least 85% of budget
in order for STI to be awarded.
xii.
Individual performance gate
Individual performance ratings for the year must be at least ‘Meets Expectations’ on the
following scale:
Does not meet expectations
Meets expectations
Exceeds expectations
The Board will have discretion to vary award outcomes in the circumstances that the outcomes
would otherwise be inappropriate.
xiii. Fraud or gross misconduct
All entitlements in relation to the Measurement Period will be forfeited by a participant if the
Board forms the view that a participant has committed fraud, defalcation or gross misconduct
in relation to the Company.
xiv. Clawback policy
The Board has implemented a Clawback policy which provides for the potential forfeiture of the
unvested equity based STI entitlements in the event of a material misstatement in the
Company’s financial statements of a relevant STI year being identified during the subsequent
holding lock period.
The Clawback policy only applies to the Indeterminate Rights awarded from STI and does not
apply to the cash portion of STI that has already been paid to participants.
xv.
STI award opportunities
The FY2022 STI award opportunities are contained in the STI KPI target and outcomes section
on page 33.
26 Austal Limited | Remuneration report
IV.
Long term incentive (LTI) policy
The LTI policy of the Company is to set a component of annual remuneration of executives to be at
risk, payable in equity in the Company and based on an assessment of long term performance over a
period of no less than three years in duration. A share disposal restriction applies for one year from
the expiry of the performance measurement period which extends the effective remuneration deferral
to a total of four years.
i.
Purpose
The purpose of the LTI Plan is to incentivise Senior Executives to deliver long term Group
performance that will lead to sustainable superior returns for shareholders and to modulate the
remuneration of Senior Executives relative to this performance.
ii.
Form of incentive
Non US participants in the LTI plan receive a grant of Indeterminate Performance Rights that
vest based on an assessment of performance against objectives over a defined Measurement
Period. No dividends are payable nor accrued on Performance Rights which are unvested.
US participants in the LTI plan receive a grant of Performance Rights that vest based on an
assessment of performance against the same objectives over a defined Measurement Period.
No dividends are payable nor accrued on Performance Rights which are unvested. US
participants receive shares for vested performance rights.
iii. Measurement period
The Measurement period is three financial years.
iv.
LTI grant
The number of LTI Rights granted are calculated with reference to the stretch (maximum) LTI
value divided by the volume weighted average closing share price in the first month of the
measurement period (i.e. July each year).
Details of the FY2022 LTI grant are contained on page 43.
v.
Measures of long term performance
Long term performance is measured in reference to three equally weighted metrics
(i.e. 1/3 each):
Indexed Total Shareholder Return (iTSR)
Earnings per Share Growth (EPSG)
Return on Equity (ROE)
Metrics are set so that Target performance is expected to be achieved 50 – 60% of the time
and Stretch (Maximum) performance is expected to be achieved 10 – 20% of the time.
The metrics are disclosed below.
vi.
Total shareholder return (TSR) measure
The Board believes that TSR is the measure that has the strongest alignment with
shareholders.
The Board utilises an absolute TSR premium to indexed TSR outcomes and avoids windfall
gains / (losses) from changes in broad market movements in share prices.
Austal’s iTSR is computed by comparing Austal’s TSR against Standard and Poor’s ASX 300
Industrials Total Return Index.
Austal’s TSR is the sum of share price appreciation and dividends (assumed to be reinvested in
shares) during the Measurement period. Share price appreciation is measured utilising a
Austal Limited | Remuneration report 27
1 month Volume Weighted Average Price (VWAP) at the beginning and the end of the
measurement period (i.e. July in year 1 and June in year 3).
The Company TSR metric for the measurement period must be positive to ensure that the LTI
will not reward executives when shareholders have lost value. None of the iTSR tranche will
vest if the Company TSR is negative.
vii.
Earnings per share growth (EPSG) measure
EPSG is an internal measure of performance which the Board encourages management to
focus on.
EPSG is determined by calculating the compound annual growth rate (CAGR) from EPS in the
last financial year prior to the 3 year measurement period, to the EPS in the final year of the
3 year measurement period.
EPS equals Basic EPS as reported in the financial accounts of the relevant year.
Actual EPSG results are compared against internal targets set by the Board.
viii. Return on equity (ROE) measure
Sustainability of ROE is a key element of creating sustainable shareholder wealth and hence
ROE was adopted to help ensure that this is taken into account by management.
ROE is calculated by dividing:
The average NPAT over the 3 year measurement period by;
The day weighted average Contributed Equity + Retained Profits - Reserved Shares
balance over the 3 year measurement period.
Actual ROE results are compared against internal targets set by the Board.
ix.
Board discretion
The Board retains a discretion to adjust vesting outcomes in the circumstances that the
outcomes from applying the vesting scales alone would be deemed to be inappropriate.
In exercising this discretion, the Board is required to take into account the Company
performance from the perspective of shareholders over the relevant Measurement Period and
consider whether specific participants:
Engaged in any activities or communications that may cause harm to the operations or
reputation of the Company or the Board;
Took actions that caused harm or will cause harm to the Company’s stakeholders;
Took excessive risks or contributed to or may otherwise benefit from unacceptable
cultures within the Company; or
Exposed employees, the broader community or environment to excessive risks, including
risks to health and safety.
The Board will also consider whether there has been a material misstatement in the Company’s
financial reports, which would unduly increase any award under the scheme.
x.
Vesting of performance rights
Performance rights meeting the performance hurdles will vest at the end of the measurement
period.
Participants are not required to make any payments at grant or at vesting.
28 Austal Limited | Remuneration report
xi.
Holding period
Non US recipients of vested performance rights are subject to a one year holding period:
Recipients are permitted to exercise their rights in order to receive shares, however;
Recipients are prevented from selling their shares during the holding period.
This effectively extends the incentive period to four years and increases the accumulation of
equity by executives to strengthen their alignment with shareholders.
The taxing point for US recipients of vested performance rights is at the time of vesting
because there is no further risk of forfeiture. Consequently, Austal sell 50% of shares arising
from vested performance rights immediately after vesting has occurred so that recipients can
fund their tax liability and the remaining 50% of shares are subject to a one year holding
period.
The difference between the realised proceeds from the sale of the first 50% of shares and the
actual tax liability for each participant is paid to participants in cash.
xii.
Specified disposal restrictions
Performance Rights may not be disposed of or otherwise dealt with prior to exercise.
All shares acquired by participants as a consequence of exercising vested Performance Rights,
shall be subject to a dealing restriction detailed in Austal’s Share Trading Policy and insider
trading restrictions.
xiii. Cessation of employment during a measurement period
A participant who resigns prior to the elapsing of the Measurement period in respect of which
the grant is made will forfeit their entire unvested Performance Rights grant.
The Board may exercise its discretion to award some proportion of LTI under certain
circumstances including consideration of whether the KMP was a good leaver up to the point of
vesting.
Vested rights already held by a participant are not forfeited.
xiv. Clawback policy
The Board may determine that a participant found to have harmed the interests of the
Company or its Shareholders, will forfeit some or all of their unvested entitlements at any time.
This includes fraud, defalcation, joining a competitor etc.
Unvested Performance Rights held that are not forfeited, will be retained for testing against the
vesting conditions at the normal time.
xv.
Change of control of the company
The Board has determined that in the event of a Change of Control (including a takeover), LTI
will vest on a pro-rata basis at the ‘Target’ level for the portion of the Performance Period that
has elapsed at the date of the change of control. The Board retains discretion to vary this
approach if it considers that it would generate an inappropriate outcome.
Austal Limited | Remuneration report 29
4.
Executive KMP remuneration
I.
5 year performance
The table below outlines Austal’s performance over the last five years.
2018 1
2019
2020
2021
2022
Financial Year
Earnings measures
EBIT (Earnings before interest & tax)
EBITDA (Earnings before interest, tax, depreciation & amortisation)
NPAT (Net profit after tax)
$'000
$'000
$'000
63,489
92,795
130,396
114,619
120,662
102,319
135,001
176,139
160,326
165,350
37,533
61,384
88,978
81,057
79,565
EPS (Earnings per share)
$ / share
0.11
0.18
0.25
0.23
0.22
Dividends paid
Share price
Closing
$ / share
0.04
0.06
0.06
0.09
0.08
$ / share
1.86
3.41
3.23
2.05
1.80
1. FY2018 EBIT, NPAT and EPS have been restated for the retrospective application of AASB 15 Revenue from Contracts with Customers.
30 Austal Limited | Remuneration report
II.
FY2022 award opportunities
The tables below depict the Target and Stretch (Maximum) remuneration for KMP in FY2022
including:
The Total Fixed Remuneration
STI award opportunity if Target or Stretch STI KPI results are achieved
LTI award opportunity if Target or Stretch LTI results are achieved
Awards are applied to Total Fixed Remuneration.
i.
Target remuneration
KMP
TFR
$
STI Opportunity
LTI Opportunity
% of TFR
$
% of TFR
$
Total
$
Mr Paddy Gregg
Mr Greg Jason
Mr Ian McMillan
Mr Rusty Murdaugh
1
970,000
578,535
512,550
724,533
45%
40%
40%
65%
436,500
231,414
205,020
470,946
50%
35%
35%
50%
485,000
202,487
179,393
362,266
1,891,500
1,012,436
896,963
1,557,745
1. Mr Greg Jason resigned effective 10 December 2021.
ii.
Stretch (Maximum) remuneration
KMP
TFR
$
STI Opportunity
LTI Opportunity
% of TFR
$
% of TFR
$
Total
$
Mr Paddy Gregg
Mr Greg Jason
Mr Ian McMillan
Mr Rusty Murdaugh
1
970,000
578,535
512,550
724,533
68%
60%
60%
98%
654,750
347,121
307,530
706,419
100%
70%
70%
100%
970,000
404,975
358,785
724,533
2,594,750
1,330,631
1,178,865
2,155,485
1. Mr Greg Jason resigned effective 10 December 2021.
Austal Limited | Remuneration report 31
III.
CEO remuneration
These charts depict the Minimum, Target and Stretch (Maximum) remuneration opportunities that
were available to the CEO and the breakdown between fixed remuneration (TFR) and variable
remuneration (STI and LTI).
FY2022 CEO Remuneration - Mr Paddy Gregg
Legend
Fixed
STI
LTI
Minimum
100%
$970,000
Target
51%
23%
26%
$1,891,500
Stretch (Maximum)
37%
26%
37%
$2,594,750
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
FY2021 CEO Remuneration - Mr Paddy Gregg (1 January 2021 - 30 June 2021)
Legend
Fixed
STI
LTI
Minimum
100%
$437,500
Target
51%
23%
26%
$853,125
Stretch (Maximum)
37%
26%
37%
$1,170,313
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
FY2021 CEO Remuneration - Mr David Singleton (1 July 2020 - 31 December 2020)
Legend
Fixed
STI
LTI
Minimum
100%
$554,279
Target
60%
40%
$923,798
Stretch (Maximum)
50%
50%
$1,108,558
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
32 Austal Limited | Remuneration report
IV.
STI targets and outcomes
The following KPI were selected because they were the most significant matters for each of the KMP
that were expected to contribute to the success of the Company during FY2022, given the business
plans approved by the Board at the commencement of the financial year.
Chief Executive Officer - Mr Paddy Gregg
Measures
Group EBIT
Group Free Cash flow
New Vessel Orders - USA
New Vessel Orders - Australasia
Strategic Growth - USA
Strategic Growth - Australasia
Strategic Growth - Corporate
Total
Actual Performance
Targets
Weight
Below Stretch
Award
Threshold Target
Stretch
Actual
22.50%
22.50%
15.00%
15.00%
10.00%
5.00%
10.00%
100.00%
$ 94 m $ 99 m $ 109 m $ 121 m
$ 57 m $ 61 m $ 67 m $ 61 m
Further detail is provided below
Further detail is provided below
Further detail is provided below
Further detail is provided below
Further detail is provided below
100%
67%
100%
87%
87%
43%
67%
83%
Chief Financial Officer - Mr Greg Jason (1 July 2021 - 10 December 2021)
Mr Greg Jason resigned effective 10 December 2022 and hence his FY2022 STI award was zero.
Chief Operating Officer Australasia - Mr Ian McMillan
Measures
Weight
Below Stretch
Award
Threshold Target
Stretch
Actual
Actual Performance
Targets
Australasia Revenue
Australasia EBIT 1
Australasia Free Cash flow
New Vessel Orders - Australasia
Strategic Growth - Australasia
Safety (Total Recordable Incident Rate)
Total
10.00%
20.00%
20.00%
35.00%
10.00%
5.00%
100.00%
$ 352 m $ 370 m $ 407 m $ 384 m
$ 6.0 m $ 6.5 m $ 7.0 m $ 7.4 m
$ 0.9 m $ 0.9 m $ 1.0 m $ 0.9 m
Further detail is provided below
Further detail is provided below
-
2.5
1.9
2.2
79%
100%
71%
87%
43%
67%
80%
1. Note that Australasia EBIT includes an allocation of Corporate Overhead for STI metric purposes and hence it doesn't match
the segment note.
President USA - Mr Rusty Murdaugh 2
Measures
Weight
Below Stretch
Award
Threshold Target
Stretch
Actual
Actual Performance
Targets
USA Revenue (USD)
USA EBIT (USD)
USA Free Cash flow (USD)
New Vessel Orders - USA
Strategic Growth - USA
Safety (Total Recordable Incident Rate)
People & Team
Total
10.00%
20.00%
20.00%
25.00%
15.00%
5.00%
5.00%
100.00%
$ 721 m $ 801 m $ 882 m $ 765 m
$ 74 m $ 87 m $ 95 m $ 97 m
$ 49 m $ 54 m $ 60 m $ 49 m
Further detail is provided below
Further detail is provided below
2.4
-
2.2
2.0
2.5
5.0%
7.5%
7.5%
64%
100%
61%
100%
90%
-
100%
82%
2. Mr Rusty Murdaugh was Interim President from February 2021 to September 2021 when appointed permanently.
Austal Limited | Remuneration report 33
Chief Executive Officer - Mr Paddy Gregg
New Vessel Orders - USA (100% Award)
Offshore Patrol Cutter OR T-Agos awarded.
T-ATS vessel build awarded.
EPF 16 appropriated.
New Vessel Orders - Australasia (87% Award)
Multiple commercial contract awards (commercial in confidence, CIC).
Philippines Navy OPV.
Australian defence contract awards (CIC).
Strategic Growth - USA (87% Award)
San Diego Dry Dock - Complete MGBW lease acquisition, and achieve business case schedule and financial performance.
Establish steel capability.
Stabilise the AUSA leadership with appointment of a President and Audit Outside Director.
Strategic Growth - Australasia (43% Award)
Queensland delivers in line with business case.
CCPB 9 & 10 In Service Support contract extended.
CCPB 9 & 10 Leases extended.
Awarded initial support for CCPB 11-12.
Awarded RAN Regional Maintenance Provider North East contract.
Board approved Investment Plan for Henderson and implementation.
ABF CCPB 1 - 8 contract renegotiated.
Strategic Growth - Corporate (67% Award)
Identification of M&A or greenfield targets and significant progress (LOI or equivalent) on a material transaction (CIC).
Chief Financial Officer - Mr Greg Jason (1 July 2021 - 10 December 2021)
Mr Greg Jason resigned effective 10 December 2021 and hence his FY2022 STI award was zero.
Chief Operating Officer Australasia - Mr Ian McMillan
New Vessel Orders - Australasia (87% Award)
Multiple commercial contract awards (CIC).
Philippines Navy OPV.
Australian defence contract awards (CIC).
Strategic Growth - Australasia (43% Award)
Queensland delivers in line with business case.
CCPB 9 & 10 In Service Support contract extended.
CCPB 9 & 10 Leases extended.
Awarded initial support for CCPB 11-12.
Awarded RAN Regional Maintenance Provider North East contract.
Board approved Investment Plan for Henderson and implementation.
ABF CCPB 1 - 8 contract renegotiated.
34 Austal Limited | Remuneration report
President USA - Mr Rusty Murdaugh
New Vessel Orders - USA (100% Award)
Offshore Patrol Cutter OR T-Agos awarded.
T-ATS vessel build awarded.
EPF 16 appropriated.
Strategic Growth - USA (90% Award)
San Diego Dry Dock - Complete MGBW lease acquisition, and achieve business case schedule and financial performance.
Establish steel capability.
Concept design award contracts.
Identification of M&A or greenfield targets and significant progress (LOI or equivalent) on a material transaction and execute (CIC).
V.
LTI vesting
i.
FY2020 Performance rights grant
143,263 Performance Rights were granted to KMP in FY2020, who were still employed by
Austal at 30 June 2022.
ii.
Measurement period
100% of the Performance Rights granted in FY2020 had a 3 year Measurement period from
1 July 2020 – 30 June 2022.
iii.
FY2020 LTI vesting performance
The performance criteria relating to the FY2020 grant of Performance Rights to KMP are
detailed below resulting in a 45% vesting:
Indexed TSR
Award
Stretch
Award
100%
75%
50%
Target
25%
-
0%
ROE
Award
100%
Stretch
Target
Threshold
Award
100%
75%
50%
25%
0%
0%
2%
4%
6%
8%
10%
0% 2% 4% 6% 8% 10% 12% 14% 16%
TSR Premium to market
ROE
Award
100%
75%
50%
25%
0%
0%
EPSG
Award
Stretch
34%
Target
Threshold
10%
20%
30%
EPSG
Indexed TSR = Austal TSR Premium to Market
ROE = NPAT / Equity (Excluding Reserves)
EPSG = CAGR EPS1 (Base Year) to EPS (Final Year)
1. CAGR = Compound Annual Growth Rate.
Austal Limited | Remuneration report 35
iv.
FY2020 LTI vesting awards
KMP
Tranche
Weight
Granted
%
Number
Grant Date ($)
Vesting
Value @
VWAP @ Grant Date
Mr Paddy Gregg
Mr Rusty Murdaugh
iTSR
ROE
EPSG
Total
iTSR
ROE
EPSG
Total
34%
33%
33%
31,175
31,173
31,173
-
100%
34%
-
31,173
10,658
3.82
-
118,997
40,685
100%
93,521
45%
41,831
159,682
34%
33%
33%
16,582
16,580
16,580
-
100%
34%
-
16,580
5,669
100%
49,742
45%
22,249
-
63,291
21,640
84,931
36 Austal Limited | Remuneration report
VI.
Realised Executive rem uneration (non-statutory disclosure)
The Realised Remuneration tables below are provided to convey the actual remuneration awarded to
KMP during FY2022 and FY2021 rather than the statutory disclosure required under the accounting
standards and includes:
2
3
4
5
2
6
FY2022
KMP
Value @ Grant VWAP
Mr Paddy Gregg
Mr Greg Jason
Mr Ian McMillan
Mr Rusty Murdaugh
Mr Geoff Buchanan
Total
FY2021
KMP
Value @ Grant VWAP
Mr David Singleton
Mr Paddy Gregg
- COO Australasia (H1)
- CEO (H2)
- Total
Mr Greg Jason
Mr Ian McMillan
Mr Craig Perciavalle
Mr Rusty Murdaugh
7
8
4
The portion of TFR paid in cash.
The portion of TFR contributed to superannuation plans or pension schemes.
STI awarded but not yet paid.
The value of LTI rights vesting following the conclusion of the relevant measurement period
using the VWAP at the grant date.
Total Fixed Remuneration
Payout 1
FY2022 STI Awarded
LTI
Total
Super-
annuation /
Pension
$
Cash
$
Other
$
Total
$
Leave
$
Indeterminate
Rights
$
Cash
$
Total
$
FY2020
Vesting
$
3.82
Total
$
946,432
351,726
485,050
23,568
14,029
27,500
-
-
-
703,564
75,977
123,400
314,971
31,497
51,101
970,000
365,755
512,550
902,941
397,569
-
271,722
271,721
543,443
159,682
1,673,125
249,073
-
-
-
38,224
-
123,320
123,319
579,539
122,607
-
-
-
246,639
579,539
122,607
-
-
614,828
759,189
84,931
1,605,635
-
520,176
2,801,743
172,571
174,501
3,148,815
287,297
1,097,188
395,040
1,492,228
244,613
5,172,953
Total Fixed Remuneration
Payout 1
FY2021 STI Awarded
LTI
Total
Super-
annuation /
Indeterminate
Cash
$
Pension
$
Other
$
Total
$
Leave
$
Cash
$
Rights
$
Total
$
554,279
51,798
554,279
-
554,279
541,779
12,500
244,153
426,653
10,847
10,847
670,806
21,694
553,963
227,299
551,835
227,458
21,694
21,593
72,072
22,746
-
-
-
-
-
-
58,980
20,809
255,000
437,500
692,500
575,657
248,892
682,887
271,013
-
-
-
-
-
114,228
43,509
81,211
43,509
81,210
87,018
162,421
124,720
124,719
249,439
334,830
1,276,769
94,983
42,467
-
94,983
42,467
-
-
189,966
84,934
-
219,032
-
-
265,020
110,434
984,655
333,826
797,115
646,467
-
265,020
FY2019
Vesting 9
$
Total
$
1.78
-
-
334,830
1,160,356
342,018
934,751
Total
2,773,140
172,299
79,789
3,025,228
166,026
1,081,469
262,169
1,343,638
664,296
5,199,188
1. This balance represents the KMPs annual leave and/or long service leave entitlements either cashed out or paid out on termination.
2. Value @ Grant VWAP is the Volume Weighted Average Share Price utilised for the respective LTI grant.
3. Mr Greg Jason resigned effective 10 December 2021. Included in his cash TFR is an Eligible Termination Payment of $100,000.
4. Mr Rusty Murdaugh was appointed as Interim President USA from February 2021 to September 2021 when appointed permanently.
The STI Awarded in both years represents the full year award.
5. Mr Geoff Buchanan was appointed as Interim CFO on 22 November 2021. Mr Geoff Buchanan was not a part of the STI award opportunity. The FY2022 STI awarded
represents a service bonus.
6. Mr David Singleton resigned effective 31 December 2020.
7. Mr Ian McMillan was appointed as Chief Operating Officer on 1 January 2021.
8. Mr Craig Perciavalle resigned effective 22 February 2021.
9. VWAP corrected from prior year disclosure (FY2021: $2.05).
Austal Limited | Remuneration report 37
VII. Statutory remuneration disclosure
The following table outlines the remuneration received by Executive KMP during FY2022 and
FY2021, prepared according to statutory disclosure requirements and accounting standards:
FY2022
KMP
Mr Paddy Gregg
Mr Greg Jason
Mr Ian McMillan
Mr Rusty Murdaugh
Mr Geoff Buchanan
Total
FY2021
KMP
Mr David Singleton
Mr Paddy Gregg
Mr Greg Jason
Mr Ian McMillan
Mr Craig Perciavalle
Mr Rusty Murdaugh
4
5
6
7
8
9
5
Fixed Remuneration
Super-
Other
Long Service
annuation / Monetary
Benefits
Pension
$
$
Leave
Accrued
$
Salary2
$
Variable Remuneration
Payout 1
Total
STI
Accrued
$
LTI
Accounting
Expense3
$
Total
$
Leave
$
Total
$
987,165
371,600
496,627
739,171
325,936
23,568
14,029
27,500
75,977
31,497
-
-
-
123,400
51,101
20,558
1,031,291
543,443
4,623
1,474
-
702
390,252
525,601
938,548
409,236
-
246,639
579,539
122,607
492,417
(378,023)
81,930
266,974
-
-
249,073
-
38,224
-
2,067,151
261,302
854,170
1,823,285
531,843
2,920,499
172,571
174,501
27,357
3,294,928
1,492,228
463,298
287,297
5,537,751
Fixed Remuneration
Variable Remuneration
Payout 1
Total
Super-
Other
annuation / Monetary Service Leave
Benefits
Pension
Long
Accrued
$
$
$
Salary2
$
532,666
721,075
562,333
245,950
556,361
240,053
12,500
21,694
21,694
21,593
72,072
22,746
-
-
-
-
58,980
20,809
(35,650)
16,434
10,663
500
-
-
STI
Accrued
$
LTI
Accounting
Expense3
$
Leave
$
Total
$
554,279
249,439
189,966
84,934
-
400,229
375,101
-
51,798
-
-
-
-
(662,331)
114,228
265,020
71,447
-
1,115,593
1,408,871
1,159,757
352,977
139,310
620,075
Total
$
509,516
759,203
594,690
268,043
687,413
283,608
Total
2,858,438
172,299
79,789
(8,053)
3,102,473
1,343,638
184,446
166,026
4,796,583
1. This balance represents the KMPs annual leave and/or long service leave entitlements either cashed out or paid out on termination.
2. Salary represents cash-based salary expensed during the reporting period including annual leave provision adjustments and therefore may not equal the cash received by the KMP.
3. The LTI expense represents the portion of the independent valuation of active LTI plans expensed through the Profit and Loss in accordance with AASB 2.
4. Mr Greg Jason resigned effective 10 December 2021.
5. Mr Rusty Murdaugh was appointed as Interim President USA from February 2021 to September 2021 when appointed permanently.
The STI Awarded in both years represents the full year award.
6. Mr Geoff Buchanan was appointed as Interim CFO on 22 November 2021. Mr Geoff Buchanan was not apart of the STI award opportunity. The FY2022 STI accrued
represents a service bonus.
7. Mr David Singleton resigned effective 31 December 2020.
8. Mr Ian McMillan was appointed as Chief Operating Officer on 1 January 2021.
9. Mr Craig Perciavalle resigned effective 22 February 2021.
38 Austal Limited | Remuneration report
VIII. Reconciliation of realised remuneration and statutory remuneration
The following table reconciles the realised remuneration received by Executive KMP during FY2022
and FY2021 with the statutory remuneration disclosures for those years.
FY2022
KMP
Remuneration
Explanation of Variance
Realised
Statutory
$
$
Variance
$
LTI Vesting
Long Service
Leave
versus
Expense
$
Leave
Provision
Provision
Movement
$
$
1
Mr Paddy Gregg
Mr Greg Jason
Mr Ian McMillan
Mr Rusty Murdaugh
Mr Geoff Buchanan
1,673,125
2,067,151
614,828
759,189
261,302
854,170
1,605,635
1,823,285
520,176
531,843
(394,026)
353,526
(94,981)
(217,650)
(11,667)
(332,735)
378,023
(81,930)
(182,043)
-
(20,558)
(4,623)
(1,474)
-
(702)
(40,733)
(19,874)
(11,577)
(35,607)
(10,965)
1. Mr Greg Jason's significant 'LTI Vesting versus Expense' variance represents the difference between zero vesting of LTI rights as disclosed in the
Realised Remuneration table and the reversal of the previously booked Share Based Payment expense in relation to the forfeited FY2020 and FY2021
grants within the Statutory Remuneration table.
FY2021
KMP
Remuneration
Explanation of Variance
Realised
Statutory
$
$
Variance
$
LTI Vesting
Long Service
Leave
versus
Expense
$
Leave
Provision
Movement
Movement
$
$
Mr David Singleton
Mr Paddy Gregg
Mr Greg Jason
Mr Ian McMillan
Mr Craig Perciavalle
1
Mr Rusty Murdaugh
1,160,356
1,276,769
984,655
333,826
797,115
646,467
1,115,593
1,408,871
1,159,757
352,977
139,310
620,075
44,763
(132,102)
(175,102)
(19,151)
657,805
26,392
-
(65,399)
(156,069)
-
662,331
38,987
35,650
(16,434)
(10,663)
(500)
-
-
9,113
(50,269)
(8,370)
(18,651)
(4,526)
(12,595)
1. Mr Craig Perciavalle's significant 'LTI Vesting versus Expense' variance represents the difference between zero vesting of LTI rights as disclosed in the
Realised Remuneration table and the reversal of the previously booked Share Based Payment expense in relation to the forfeited FY2019 and FY2020
grants within the Statutory Remuneration table.
Total
$
(394,026)
353,526
(94,981)
(217,650)
(11,667)
Total
$
44,763
(132,102)
(175,102)
(19,151)
657,805
26,392
5. Non-Executive Director remuneration
I.
Application
The Non-Executive Director Remuneration Policy applies to Non-Executive Directors (NED) of the
Company in their capacity as directors and as members of committees.
II.
Fee policy
The fee policy is designed to ensure that remuneration is reasonable, appropriate, and produces
outcomes that fall within the fee limit, at each point of being assessed.
i.
Fee cap
The Remuneration for NED is managed within the aggregate fee limit (AFL) of $3,000,000
approved by shareholders of the Company. The cap has remained unchanged since listing on
the Australian Securities Exchange (ASX) in 1998.
Austal Limited | Remuneration report 39
ii.
Board & committee fees
Remuneration is composed of Board fees and Committee fees. Both fee types include
superannuation to the extent applicable to the incumbent.
NED remuneration is targeted to be at the 50th percentile (where 50% of a reasonable
comparator group are above the median level and 50% are below the median level) for
FY2022.
NED remuneration was last externally benchmarked in FY2020. The fees were adjusted
for CPI in FY2022.
Remuneration for the current Chairman of the Board reflects his continued high level of
contribution to the Company and the Board.
Committee fees recognise additional contributions to the work of the Board by members
of committees. They are similarly referenced to the benchmark group as above.
iii.
NED fee rates
The following table outlines the NED fee policy rates that were applicable:
FY2022
Board of Directors
Audit & Risk Committee
Nomination & Remuneration Committee
FY2021
Board of Directors
Audit & Risk Committee
Nomination & Remuneration Committee
Chair
$
203,360
20,000
20,000
Chair
$
200,000
20,000
20,000
Role
Deputy Chair
$
111,760
N/A
N/A
Role
Deputy Chair
$
110,000
N/A
N/A
Member
$
101,600
10,000
10,000
Member
$
100,000
10,000
10,000
iv.
Termination benefits
Termination benefits are not paid to NED.
III.
Share rights
The NED have agreed annually with the Company to receive 25% of their Board fees (excluding
Committee fees) in the form of share rights in order to accumulate equity holdings up to the
equivalent of one year of Board fees (excluding Committee fees).
The minimum equity holding will be computed in July of each year based upon the volume weighted
average price of Austal shares in the month of June and Board fees for the financial year ahead. The
measurement date for the share rights is the VWAP of the last 5 trading days of each month.
The share rights provided to Mr Giles Everist, Mrs Sarah Adam-Gedge and Mr Chris Indermaur were
approved by shareholders during the 2021 Annual General Meeting.
KMP
Mr Giles Everist
Mrs Sarah Adam-Gedge
Mr Chris Indermaur
Earned
Number
Average fair
value per right
$
Fair value
$
13,142
14,456
13,142
1.93
1.93
1.93
25,400
27,940
25,400
40 Austal Limited | Remuneration report
IV.
NED remuneration in FY2022
The following table outlines the remuneration received by NED of the Company during FY2022 and
the previous year, prepared according to statutory disclosure requirements and applicable accounting
standards:
FY2022
Mr John Rothwell
Mr Giles Everist
Mrs Sarah Adam-Gedge
Mr Chris Indermaur
Mr Mick McCormack
1
1
2
Board Fees
Super-
annuation
$
Share
Rights
$
Cash
$
184,869
18,487
-
92,364
81,233
92,364
69,273
9,236
2,587
9,236
6,927
25,400
27,940
25,400
-
Total
$
203,356
127,000
111,760
127,000
76,200
Committee Fees
Super-
annuation
$
Total
$
909
2,727
-
1,818
1,818
10,000
30,000
30,000
20,000
20,000
Cash
$
9,091
27,273
30,000
18,182
18,182
Total
Total
$
213,356
157,000
141,760
147,000
96,200
Total
520,103
46,473
78,740
645,316
102,728
7,272
110,000
755,316
FY2021
Mr John Rothwell
Mr Giles Everist
Mrs Sarah Adam-Gedge
Mr Chris Indermaur
Mr Mick McCormack
3
Board Fees
Super-
annuation
$
Share
Rights
$
Cash
$
182,648
17,352
-
81,811
80,060
68,493
57,838
7,772
2,440
6,507
5,495
10,417
27,500
25,000
16,667
Total
$
200,000
100,000
110,000
100,000
80,000
Committee Fees
Super-
annuation
$
Total
$
868
2,603
-
1,735
396
10,000
30,000
30,000
20,000
4,564
Cash
$
9,132
27,397
30,000
18,265
4,168
Total
Total
$
210,000
130,000
140,000
120,000
84,564
Total
470,850
39,566
79,584
590,000
88,962
5,602
94,564
684,564
1. Mr Giles Everist and Mr Chris Indermaur were overpaid $25,400 in cash respectively, for board fees which should have been withheld for share rights during the year.
In FY2023 Mr Giles Everist and Mr Chris Indermaur will repay the $25,400.
2. Mr Mick McCormack's FY2022 board fees paid were $25,400 below the NED rates due to an administrative error. The shortfall will be paid in full in FY2023.
3. Mr Mick McCormack became a NED in September 2020.
Austal Limited | Remuneration report 41
6.
Equity instruments held by KMP
I.
FY2020 performance rights vesting
Further information relating to the FY2020 Performance Rights vesting is provided on page 36.
II.
FY2021 performance rights
i.
Performance rights
250,562 Performance rights were granted to KMP in FY2021, who were still employed by
Austal and whose rights were not lapsed, forfeited or vested at 30 June 2022.
ii.
Measurement period
100% of the Performance rights granted in FY2021 have a 3 year Measurement period from
1 July 2020 – 30 June 2023.
iii.
Performance criteria
The performance criteria relating to the FY2021 grant of Performance rights to KMP are
detailed below:
Indexed TSR
Award
Stretch
Award
100%
75%
50%
Target
25%
0%
ROE
Award
Stretch
Target
Threshold
Award
100%
75%
50%
25%
0%
0%
2%
4%
6%
8%
10%
0% 2% 4% 6% 8% 10% 12% 14% 16%
TSR Premium to market
ROE
Award
100%
75%
50%
25%
0%
0%
EPSG
Award
Stretch
Target
Threshold
10%
20%
30%
EPSG
Indexed TSR = Austal TSR Premium to Market
ROE = NPAT / Equity (Excluding Reserves)
EPSG = CAGR EPS1 (Base Year) to EPS (Final Year)
1. CAGR = Compound Annual Growth Rate.
42 Austal Limited | Remuneration report
III.
FY2022 performance rights grant
i.
Performance rights grant
Performance rights granted to KMP in FY2022 are depicted in the table below.
The Fair Value per right has been determined by an independent valuer in accordance with
AASB 2 Share Based Payments and does not match the Stretch LTI opportunity as detailed in
the Executive KMP remuneration 2022 award opportunities on page 31.
Name
iTSR
ROE
EPSG
Total
Rights granted
Value @
grant date ($)
Fair Value per right
$
0.88
$
1.74
$
1.74
$
1.45
$
1.45
Mr Paddy Gregg
Mr Greg Jason
Mr Ian McMillan
1
153,145
153,145
153,145
63,938
56,646
63,938
56,646
63,938
56,646
Mr Rusty Murdaugh
105,282
105,282
105,282
459,435
191,814
169,938
315,846
666,334
278,194
246,467
458,082
Total
379,011
379,011
379,011
1,137,033
1,649,077
1. Mr Greg Jason's FY2022 LTI grant was forfeited in accordance with his resignation on 10 December 2021.
945,219 Performance rights were granted to KMP in FY2022, who were still employed by
Austal and whose rights were not lapsed, forfeited or vested at 30 June 2022.
ii.
Measurement period
100% of the Performance rights granted in FY2022 have a 3 year Measurement period from
1 July 2021 – 30 June 2024.
iii.
Performance criteria
The performance criteria relating to the FY2022 grant of Performance rights to KMP are
detailed below:
Indexed TSR
Award
Stretch
Award
100%
75%
50%
Target
25%
0%
ROE
Award
Stretch
Target
Threshold
Award
100%
75%
50%
25%
0%
0%
2%
4%
6%
8%
10%
0% 2% 4% 6% 8% 10% 12% 14% 16%
TSR Premium to market
ROE
Award
100%
75%
50%
25%
0%
0%
EPSG
Award
Stretch
Target
Threshold
10%
20%
30%
EPSG
Indexed TSR = Austal TSR Premium to Market
ROE = NPAT / Equity (Excluding Reserves)
EPSG = CAGR EPS1 (Base Year) to EPS (Final Year)
1. CAGR = Compound Annual Growth Rate.
Austal Limited | Remuneration report 43
IV.
Changes in equity held by KMP
Balance at
30 June 2021
Granted
Vested
Exercised
Lapsed /
Forfeited
Bought
(Sold)
Balance at
Other 1
30 June 2022
Vested
Unvested
FY2022 Movements
Executives
Mr Paddy Gregg
Shares
Indeterminate Rights2
Performance Rights
Total
Mr Greg Jason
Shares
Indeterminate Rights2
Performance Rights
Total
Mr Ian McMillan
Shares
Indeterminate Rights2
Performance Rights
Total
Mr Rusty Murdaugh
Shares
Share Rights
Performance Rights
Total
Non-Executive Directors
Mr John Rothwell
Shares
Total
Mr Giles Everist
Shares
Share Rights
Total
Mrs Sarah Adam-Gedge
Shares
Share Rights
Total
Mr Chris Indermaur
Shares
Share Rights
Total
Mr Mick McCormack
Shares
Share Rights
Total
242,399
190,253
281,939
714,591
287,592
220,958
227,411
735,961
-
-
-
-
44,157
96,571
111,886
252,614
32,761,692
32,761,692
30,441
4,618
35,059
20,000
38,388
58,388
-
23,265
23,265
100,000
6,920
106,920
-
60,446
459,435
519,881
-
46,034
191,814
237,848
-
20,582
169,938
190,520
-
-
-
41,831
(41,831)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
96,571
22,249
(96,571)
315,846
(22,249)
315,846
-
-
-
-
13,142
13,142
-
14,456
14,456
-
13,142
13,142
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,920
(6,920)
-
-
-
-
-
-
-
(51,690)
(51,690)
-
-
-
-
-
-
-
-
242,399
292,530
647,853
242,399
292,530
-
-
-
647,853
1,182,782
534,929
647,853
266,992
(266,992)
-
-
(419,225)
(103,380)
(451,204)
-
-
-
-
(419,225)
(103,380)
(451,204)
-
-
-
-
-
-
(27,493)
-
-
-
-
(48,285)
-
-
(27,493)
(48,285)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,582
169,938
190,520
92,443
22,249
377,990
492,682
-
-
-
-
-
20,582
-
-
-
-
-
-
-
169,938
20,582
169,938
92,443
22,249
-
-
-
377,990
114,692
377,990
32,761,692
32,761,692
32,761,692
32,761,692
30,441
17,760
48,201
20,000
52,844
72,844
-
36,407
36,407
106,920
-
106,920
30,441
17,760
48,201
20,000
52,844
72,844
-
36,407
36,407
106,920
-
106,920
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1. Denotes the shares held by Mr Greg Jason at the time of his resignation, 10 December 2021.
2. Further information on Indeterminate rights is provided in the Executive KMP remuneration policy.
44 Austal Limited | Remuneration report
V.
Minimum equity holdings of KMP employed at 30 June 2022
Some KMP and all NED are required to accumulate and maintain a minimum level of equity holding
(Equivalent shares) with value equal to or greater than a specified percentage of annual TFR.
Shares, Share Rights and vested Indeterminate Rights all contribute toward the satisfaction of the
minimum equity holding. Unvested Performance Rights do not contribute toward the target.
Equity Holding at 30 June 2022
Equiv't Shares
Value ($)
FY2022
TFR ($)
Equity Holding % of TFR
Target
30 Jun 2022
Target
Introduced
Value / share
Executives
1.80
Mr Paddy Gregg
534,929
962,872
970,000
99%
100%
Jan 2021
Non-Executive Directors
Mr John Rothwell
Mr Giles Everist
Mrs Sarah Adam-Gedge
Mr Chris Indermaur
Mr Mick McCormack
32,761,692
58,971,046
48,201
72,844
36,407
106,920
86,762
131,119
65,533
192,456
1. Includes Board Fees and excludes Committee Fees.
Board Fees1
203,360
101,600
111,760
101,600
101,600
28998%
85%
117%
65%
189%
100%
100%
100%
100%
100%
Nov 2017
Nov 2017
Nov 2017
Oct 2018
Sep 2020
7.
Other related matters
I.
Board composition
The NRC reviews the structure, size and composition of the Board annually, taking inputs from
investors and other independent advisors received during the year into account. The NRC has
recommended that the current practice of maintaining at least three independent NED on the Board
should remain following the FY2021 review.
The Committee also undertook an annual review of the position of Chairman at Austal, in part because
he is aged over 70 years. The Board (excluding the Chairman) unanimously agreed that the
Chairman’s intimate knowledge of the shipbuilding industry, of Austal and its major customers,
together with his demonstrated high level of commitment, meant that he remains a significant asset
to the Group and he was requested to remain as Chairman, to which he has agreed.
II.
Details of contractual provisions for KMP
Name
Employer
Duration
Group
Individual
Termination Notice Period
Mr Paddy Gregg
Mr Ian McMillan
Austal Limited
Unlimited
Austal Ships Pty Ltd
Unlimited
6 months
6 months
Mr Rusty Murdaugh
Austal USA LLC
Unlimited
None
Mr Geoff Buchanan
Austal Limited
10 months
1 month
6 months
6 months
None
1 month
Termination
Benefits 1
6 months
6 months
None
Nil
1. The Termination Benefit Limit under the Corporations Act is 12 months of the average prior 3 years salary
unless Shareholder approval is obtained.
Austal may choose to terminate the contracts immediately by making a payment equal to the Group
Notice Period fixed remuneration in lieu of notice. Executives are not entitled to this termination
payment in the event of termination for serious misconduct or other nominated circumstances.
Executives will be entitled to the payment of any fixed remuneration calculated up to the termination
date, any leave entitlement accrued at the termination date and any payment or award of STI or LTI
Austal Limited | Remuneration report 45
permitted under the remuneration policy upon termination of employment is described in the relevant
sections of this report.
All NED enter into a service agreement with the Company in the form of a letter of appointment on
appointment to the Board. The letter summarises the Board policies and terms, including
compensation relevant to each director. The appointment letters specify a term of three years before
each NED is required to be put forward for re-election in accordance with regulatory requirements.
III.
Other transactions with KMP
There were no other transactions involving KMP other than compensation and transactions concerning
shares and performance rights as discussed in other sections of the Remuneration Report.
IV.
Use of external remuneration consultants
The Board approved and engaged an external remuneration consultant to provide KMP remuneration
recommendations and advice during the reporting period. The consultants and the amount payable for
the information and work that led to their recommendations are listed below:
i.
GRG
GRG were engaged for the following services during FY2022:
Benchmarking for NED remuneration in FY2022 ($3,500 excluding GST).
ii.
Independence from Executive KMP
The Board is satisfied that the KMP remuneration recommendations received were free from
undue influence from KMP to whom the recommendations related for the following reasons:
the policy for engaging external remuneration consultants is being adhered to and is
operating as intended.
the Board has been closely involved in all dealings with the external remuneration
consultants.
each KMP remuneration recommendation received during the year was accompanied by
a legal declaration from the consultant to the effect that their advice was provided free
from undue influence from the KMP to whom the recommendations related.
End of Remuneration Report
46 Austal Limited | Remuneration report
Auditor independence
The Board of Directors
Austal Limited
100 Clarence Beach Rd
Henderson, WA
6166, Australia
25 August 2022
Dear Board Members,
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Brookfield Place, Tower 2
123 St Georges Terrace
Perth WA 6000
GPO Box A46
Perth WA 6837 Australia
Tel: +61 8 9365 7000
Fax: +61 8 9365 7001
www.deloitte.com.au
Austal Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of
independence to the Directors of Austal Limited.
As lead audit partner for the audit of the financial statements of Austal Limited for the year ended 30 June 2022,
I declare that to the best of my knowledge and belief, there have been no contraventions of:
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(i)
(ii) any applicable code of professional conduct in relation to the audit.
Yours faithfully,
DELOITTE TOUCHE TOHMATSU
A T Richards
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte Network
Austal Limited | Auditor independence 47
Consolidated statement of profit and loss and other
comprehensive income for the year ended
30 June 2022
Notes
2022
$’000
2021
$’000
4
5
5
5
9
9
9
6
6
1,429,044
(1,198,762)
1,572,175
(1,349,610)
230,282
222,565
7,612
(94,546)
(22,686)
135
(8,369)
8,129
(95,055)
(21,020)
368
(7,745)
112,428
107,242
(32,863)
(26,185)
79,565
81,057
2,458
(752)
1,706
53,680
53,680
54,773
(13,858)
40,915
96,301
7,494
(1,830)
5,664
(53,216)
(53,216)
26,117
(6,757)
19,360
(28,192)
175,866
52,865
0.220
0.219
0.226
0.224
Continuing operations
Revenue
Cost of sales
Gross Profit
Other income and expenses
Administration expenses
Marketing expenses
Finance income
Finance costs
Profit before income tax
Income tax expense
Profit after tax
Other comprehensive income (OCI)
Amounts that may subsequently be reclassified to profit and loss:
Cash flow hedges
- Net gain
- Income tax expense
- Total
Foreign currency translations
- Net gain / (loss)
- Total
Amounts not to be reclassified to profit and loss in subsequent periods:
Asset revaluation reserve
- Net gain
- Income tax expense
- Total
Other comprehensive income / (loss) for the period
Total comprehensive income for the year
Earnings per share ($ per share)
Basic earnings per share
Diluted earnings per share
48 Austal Limited | Consolidated financial statements
Consolidated statement of financial position as at
30 June 2022
Assets
Current
Cash and cash equivalents
Inventories and work in progress
Trade and other receivables
Prepayments
Derivatives
Income tax receivable
Assets held for sale
Total
Non - current
Property, plant and equipment
Intangible assets and goodwill
Prepayments
Derivatives
Right of use lease assets
Other financial assets
Deferred tax assets
Total
Total
Liabilities
Current
Interest bearing loans and borrowings
Progress payments received in advance
Trade and other payables
Provisions
Derivatives
Income tax payable
Lease liabilities
Deferred grant income
Total
Non - current
Interest bearing loans and borrowings
Provisions
Derivatives
Lease liabilities
Deferred grant income
Deferred tax liabilities
Total
Total
Net assets
Equity attributable to owners of the parent
Contributed equity
Reserves
Retained earnings
Total
Notes
10
4, 17
15
16
29, 30
9
26
20
22
16
29, 30
21
25
9
11
4
18
19
29, 30
9
21
14
11
19
29, 30
21
14
9
13
2022
$’000
2021
$’000
240,113
263,070
132,085
13,012
5,835
16,955
-
671,070
799,364
37,525
3,959
64
152,513
14,933
10,017
346,899
178,329
138,282
11,588
4,088
3,468
1,729
684,383
644,210
37,571
3,203
162
55,993
14,991
9,002
1,018,375
765,132
1,689,445
1,449,515
-
(99,084)
(151,726)
(98,325)
(1,734)
(195)
(4,198)
(9,728)
(32,205)
(123,250)
(133,380)
(98,824)
(1,680)
(689)
(4,635)
(2,968)
(364,990)
(397,631)
(124,515)
(114,999)
(2,182)
(584)
(105,406)
(93,306)
(74,177)
(2,376)
(1,048)
(52,758)
(64,832)
(41,833)
(400,170)
(277,846)
(765,160)
(675,477)
924,285
774,038
143,932
302,454
477,899
924,285
141,666
205,264
427,108
774,038
Austal Limited | Consolidated financial statements 49
Consolidated statement of changes in equity for the
year ended 30 June 2022
Foreign
Currency
Employee
Cash Flow
Common
Asset
Issued
Capital
$’000
Reserved
Shares 1
$’000
Retained
Earnings
$’000
Transl'n
Reserve
$’000
Benefits
Reserve
$’000
Hedge
Reserve
$’000
Control
Reserve
$’000
Reval'n
Reserve
$’000
Total
Equity
$’000
Equity at 1 July 2020
136,696
(1,356)
378,416
119,347
9,655
(3,589)
(17,594)
127,303
748,878
Comprehensive income
Profit for the year
Other comprehensive income
Total
Other equity transactions
Shares issued for dividend reinvestment plan
Dividends declared
Share based payments expense
Shares issued to employee share trust
Shares or proceeds transferred to beneficiaries
Remeasurement gain on retirement benefits
Other
Total
Movement
-
-
-
1,097
-
-
9,440
(4,675)
-
-
5,862
5,862
81,057
-
-
(53,216)
81,057
(53,216)
-
-
-
-
-
-
(9,440)
9,904
-
-
-
(32,374)
-
-
-
-
9
-
-
-
-
-
-
-
-
464
(32,365)
-
-
-
-
-
3,017
-
(5,229)
546
-
(1,666)
-
5,664
5,664
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
19,360
19,360
-
-
-
-
-
-
-
-
81,057
(28,192)
52,865
1,097
(32,374)
3,017
-
-
546
9
(27,705)
464
48,692
(53,216)
(1,666)
5,664
-
19,360
25,160
Equity at 30 June 2021
142,558
(892)
427,108
66,131
7,989
2,075
(17,594)
146,663
774,038
Comprehensive income
Profit for the year
Other comprehensive income
Total
Other equity transactions
Dividends declared
Share based payments expense
Shares issued to employee share trust
Shares or proceeds transferred to beneficiaries
Remeasurement gain on retirement benefits
Other
Total
Movement
79,565
-
-
53,680
79,565
53,680
-
-
-
-
1,706
1,706
-
-
-
-
-
-
-
-
-
-
3,675
3
-
-
(3,675)
2,263
-
-
(28,870)
-
-
-
-
96
-
-
-
-
-
-
-
-
2,850
-
(2,266)
305
-
889
-
-
-
-
-
-
-
3,678
(1,412)
(28,774)
-
-
-
-
-
-
-
-
-
-
-
40,915
79,565
96,301
40,915
175,866
-
-
-
-
-
-
-
(28,870)
2,850
-
-
305
96
(25,619)
3,678
(1,412)
50,791
53,680
889
1,706
-
40,915
150,247
Equity at 30 June 2022
146,236
(2,304)
477,899
119,811
8,878
3,781
(17,594)
187,578
924,285
1. Reserved shares are held in relation to an employee share trust.
50 Austal Limited | Consolidated financial statements
Consolidated statement of cash flows for the year
ended 30 June 2022
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Income tax paid
Interest paid
Interest received
Net cash from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Payment for intangible assets
Payment for right-of-use asset
Proceeds from sale of property, plant and equipment
Proceeds from disposal of assets held for sale
Acquisition of subsidiaries, net of cash acquired
Receipts of government infrastructure grants
Net cash used in investing activities
Cash flows from financing activities
Dividends paid
Principal component of lease payments
Repayment of borrowings
Payment of borrowing costs
Notes
2022
$’000
2021
$’000
1,331,964
(1,261,203)
1,574,270
(1,450,018)
(28,339)
(5,058)
135
37,499
(116,329)
(767)
(47,820)
1,398
4,383
-
31,625
(26,692)
(4,464)
368
93,464
(76,257)
(895)
-
985
-
(20,952)
18,469
(127,510)
(78,650)
(28,870)
(8,638)
-
(823)
(31,277)
(7,585)
(7,265)
(187)
5
7
20
22
21
12
12
Net cash used in financing activities
(38,331)
(46,314)
Net decrease in cash and cash equivalents
(128,342)
(31,500)
Cash and cash equivalents
Cash and cash equivalents at beginning of year
Net decrease in cash and cash equivalents
Net foreign exchange differences
346,899
(128,342)
21,556
396,667
(31,500)
(18,268)
Cash and cash equivalents at end of year
10
240,113
346,899
Austal Limited | Consolidated financial statements 51
Notes to the consolidated financial statements
Basis of preparation
Corporate information
The financial report of the Austal Limited Group of Companies (the Group or the Company) for the year ended
30 June 2022 was authorised for issue in accordance with a resolution of the Directors on 25 August 2022.
Austal Limited is a limited liability company incorporated and domiciled in Australia whose shares are publicly
traded on the Australian Securities Exchange (ASX) under the code ASB.
The principal activities of the Group during the year were the design, manufacture and sustainment of high
performance vessels. These activities were unchanged from the previous year.
Basis of preparation
I
Introduction
The financial report is a general-purpose financial report, which has been prepared in accordance with the
requirements of the Corporations Act 2001 and the Australian Accounting Standards Board (AASB).
The financial report also complies with International Financial Reporting Standards (IFRS), as issued by the
International Accounting Standards Board.
The financial report has been prepared on a historical cost basis, except for derivative financial instruments
and land and buildings that have been measured at fair value.
The financial report is presented in Australian dollars and all values are rounded to the nearest thousand
dollars ($’000) (unless otherwise stated) under the option available to the Group under ASIC Corporations
(Rounding in Financial/Directors’ Reports) Instrument 2016 / 191. The Company is an entity to which the
Instrument applies.
The financial report presents the figures of the consolidated entity, unless otherwise stated.
Austal Limited is a for profit entity.
II
Reporting structure
The notes to the consolidated financial statements have been divided into 8 main sections as follows:
1.
Basis of preparation
This section focuses on the basis of consolidation, foreign currency transactions and translation,
accounting judgments and estimates, new and amended accounting standards adopted by the Group,
and other new accounting standards issued but not yet effective.
2.
Current year performance
This section focuses on the results and performance of the Group, including profitability, earnings
per share, cash generation, and the return of cash to shareholders via dividends.
52 Austal Limited | Notes to the consolidated financial statements
3.
Capital structure
This section focuses on the long term funding of the Group including cash, interest bearing loans and
borrowings, contributed equity and Government grants.
4. Working capital
This section focuses on shorter term working capital concepts such as trade receivables,
trade payables, work in progress and inventories, and provisions.
5.
Infrastructure & other assets
This section focuses on property, plant and equipment, intangibles, impairment and other assets.
6.
Financial risk management
This section focuses on the Group’s approach to financial risk management, fair value measurements,
foreign exchange hedging and the associated derivative financial instruments.
7.
Unrecognised items
This section focuses on commitments and contingencies that are not recognised in the financial
statements and events occurring after the balance date.
8.
The Group, management and related parties
This section focuses on the corporate structure of the Group, parent entity data, key management
personnel compensation and related party transactions.
III
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Group for the year ended
30 June 2022.
Subsidiaries are all of those entities over which the Group has power over the entity, exposure or rights to
variable returns from its involvement with the entity and the ability to use its power over the entity to affect
its returns. The existence and effect of potential voting rights that are currently exercisable or convertible are
considered when assessing whether the Group controls another entity.
Financial statements of foreign controlled entities presented in accordance with overseas accounting
principles are adjusted to comply with Group policy and generally accepted accounting principles in Australia
for consolidation purposes. All intercompany balances, transactions, unrealised gains and losses resulting
from intra-Group transactions and dividends have been eliminated in preparing the consolidated financial
statements.
Subsidiaries are fully consolidated from the date on which control is obtained by the Group and cease to be
consolidated from the date on which control is transferred out of the Group.
Investments in subsidiaries held by Austal Limited are accounted for at cost in the separate financial
statements of the parent entity less any impairment charges.
IV
Foreign currency transactions and translation
Both the functional and presentation currency of Austal Limited is Australian Dollars (AUD). The Company
determines the most appropriate functional currency for each entity within the Group and items included in
the financial statements of each entity are measured using that functional currency.
Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange
rates ruling applicable at the date of the transaction. Monetary assets and liabilities denominated in foreign
currencies are retranslated at the rate of exchange ruling applicable at the balance date. All exchange
differences arising from the above procedures are taken to Other Comprehensive Income.
Austal Limited | Notes to the consolidated financial statements 53
The functional currency of the subsidiaries undertaking the Group’s operations in the USA, Vietnam and the
Philippines is United States Dollars (USD).
The assets and liabilities of the overseas subsidiaries are translated into the presentation currency of
Austal Limited at the closing foreign exchange rate for the reporting date. The Profit and Loss is translated at
the average exchange rates for the period. The exchange differences arising on translation are taken directly
to a separate reserve in equity. The deferred cumulative amount recognised in equity relating to that
particular foreign operation is recognised in the Profit and Loss on disposal of a foreign entity.
V
Accounting judgements and estimates
The Directors are required to make judgements, estimates and assumptions about the carrying amounts of
assets and liabilities in the application of the Group’s accounting policies. The estimates and associated
assumptions are based on historical experience and other factors that are considered relevant. Actual results
may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that period
or in the period of the revision and future periods if the revision affects both current and future periods.
Information on material estimates and judgements considered when applying the accounting policies can be
found in the following notes:
Key accounting judgements and estimates
Contract revenue, expected construction profits at completion and onerous contracts
Research and development tax credits
Deferred tax assets
Tax treatment for royalties on intellectual property
Estimation of useful lives of assets
Impairment of non-financial assets
Leases
Provisions
Share based payments
Note
4
5
9
9
20, 22
20, 23
21
19
37
VI
New and amended standards adopted by the Group
The Group has applied all new and amended accounting standards and interpretations effective from
1 July 2021, including:
Interest Rate Benchmark Reform - Phase 2 - AASB 2020-8 Amendments to Australian Accounting
Standards
COVID-19-Related Rent Concessions beyond 30 June 2021 - AASB 2021-3 Amendments to Australian
Accounting Standards
The adoption of these standards did not have any effect on the financial position or performance of the
Group.
The Group has not early adopted any standards, interpretations or amendments that have been issued but
are not yet effective.
54 Austal Limited | Notes to the consolidated financial statements
VII Other new accounting standards issued but not yet effective:
The following new or amended standards in issue but not yet effective are not expected to have a significant
impact on the Group’s consolidated financial statements:
Insurance Contracts - AASB 17 Insurance Contracts and AASB 2020-5 Amendments to Australian
Accounting Standards
Sale or Contribution of Assets between an Investor and its Associate or Joint Venture - AASB 2014-10
Amendments to Australian Accounting Standards
Effective Date of Amendments to AASB 10 and AASB 128 - AASB 2015-10 Amendments to Australian
Accounting Standards
Effective Date of Amendments to AASB 10 and AASB 128 and Editorial Corrections - AASB 2017-5
Amendments to Australian Accounting Standards
Effective Date of Amendments to AASB 10 and AASB 128 and Editorial Corrections – AASB 2021-7
Amendments to Australian Accounting Standards
Classification of Liabilities as Current or Non-current - AASB 2020-1 Amendments to Australian
Accounting Standards
Classification of Liabilities as Current or Non-current - Deferral of Effective Date - AASB 2020-6
Amendments to Australian Accounting Standards
Annual Improvements 2018-2020 and Other Amendments - AASB 2020-3 Amendments to Australian
Accounting Standards
Disclosure of Accounting Policies and Definition of Accounting Estimates - AASB 2021-2 Amendments
to Australian Accounting Standards
Deferred Tax related to Assets and Liabilities arising from a Single Transaction – AASB 2021-5
Amendments to Australian Accounting Standards
Initial Application of AASB 17 and AASB 9 – Comparative Information – AASB 2022-1 Amendments to
Australian Accounting Standards
Austal Limited | Notes to the consolidated financial statements 55
Current year performance
O perating segments
I
Disclosures
USA
Australasia
Unallocated
Adjustments
Total
Shipbuilding
Support
$’000
$’000
Total
$’000
Shipbuilding
Support
$’000
$’000
Total
$’000
$’000
$’000
$’000
Elimination /
880,101
175,821
1,055,922
278,727
-
-
-
6,978
94,356
3,905
373,083
10,883
880,101
175,821
1,055,922
285,705
98,261
383,966
-
-
-
39
1,429,044
(10,883)
-
(10,844)
1,429,044
Year ended 30 June 2022
Revenue
External customers
Inter-segment 1
Total
Profit / (loss) before tax
Earnings before interest and tax
122,105
11,636
133,741
11,863
2,755
14,618
(27,905)
208
120,662
Finance income
Finance expenses
-
-
-
-
-
-
-
-
-
-
-
-
135
(8,369)
-
-
135
(8,369)
Profit / (loss) before income tax
122,105
11,636
133,741
11,863
2,755
14,618
(36,139)
208
112,428
Depreciation and amortisation
(20,648)
(5,026)
(25,674)
(13,599)
(5,415)
(19,014)
Impairment loss
-
-
-
(2,556)
-
(2,556)
-
-
-
-
(44,688)
(2,556)
Balance sheet
Segment assets
Segment liabilities
Year ended 30 June 2021
Revenue
External customers
Inter-segment 1
Total
Profit / (loss) before tax
1,025,103
186,937
1,212,040
291,595
111,504
403,099
(467,017)
(71,081)
(538,098)
(93,830)
(66,119)
(159,949)
76,895
(81,280)
(2,589)
1,689,445
14,167
(765,160)
USA
Australasia
Unallocated
Adjustments
Total
Shipbuilding
Support
$’000
$’000
Total
$’000
Shipbuilding
Support
$’000
$’000
Total
$’000
$’000
$’000
$’000
Elimination /
1,012,983
163,621
1,176,604
301,779
-
-
-
8,276
93,660
2,121
395,439
10,397
1,012,983
163,621
1,176,604
310,055
95,781
405,836
-
-
-
132
1,572,175
(10,397)
-
(10,265)
1,572,175
Earnings before interest and tax
105,396
26,257
131,653
16,020
1,288
17,308
(34,136)
(206)
114,619
Finance income
Finance expenses
-
-
-
-
-
-
-
-
-
-
-
-
368
(7,745)
-
-
368
(7,745)
Profit / (loss) before income tax
105,396
26,257
131,653
16,020
1,288
17,308
(41,513)
(206)
107,242
Depreciation and amortisation
(19,239)
(2,942)
(22,181)
(17,110)
(5,269)
(22,379)
(1,147)
Impairment loss
-
-
-
-
-
-
-
-
-
(45,707)
-
Balance sheet
Segment assets
Segment liabilities
865,801
150,717
1,016,518
286,085
93,374
379,459
(383,615)
(20,031)
(403,646)
(169,547)
(62,850)
(232,397)
55,538
(53,515)
(2,000)
1,449,515
14,081
(675,477)
1. Inter-segment revenues, investments, receivables and payables are eliminated on consolidation.
56 Austal Limited | Notes to the consolidated financial statements
Group Revenue from external customers
By geographical location of customers
USA
Australia
Europe
Asia
South America
Middle East
Other
Total
Analysis of unallocated
Profit / (loss) before tax
Administration expenses
Marketing expenses
Research and development credits
Foreign exchange gains / (losses)
Finance expenses
Finance income
Total
Segment assets
Cash
Deferred tax assets
Other receivables
Income tax receivable
Other
Total
Segment liabilities
Deferred tax liabilities
Creditors and provisions
Total
2022
$’000
2021
$’000
1,055,922
292,293
59,867
-
5,713
2,830
12,419
1,176,604
247,482
70,056
5,256
58,043
2,203
12,531
1,429,044
1,572,175
2022
$’000
2021
$’000
(17,810)
(11,395)
642
658
(8,369)
135
(22,814)
(14,486)
3,278
(114)
(7,745)
368
(36,139)
(41,513)
41,085
9,648
3,196
16,955
6,011
76,895
(70,870)
(10,410)
(81,280)
36,512
8,561
2,350
-
8,115
55,538
(39,281)
(14,234)
(53,515)
Austal Limited | Notes to the consolidated financial statements 57
Group Non-current assets 1
Geographical location
USA
Australia
Asia
Total
Composition
Property, plant and equipment
Intangible assets
Right of use lease assets
Total
2022
$’000
2021
$’000
792,753
127,471
69,178
989,402
799,364
37,525
152,513
989,402
509,211
161,614
66,949
737,774
644,210
37,571
55,993
737,774
1. Excludes financial instruments, prepayments, other financial assets and deferred tax assets.
II
Identification of reportable segments
The Group is organised into four business segments for management purposes. This is based on the location
of the production facilities, related sales regions, operating results and types of activity.
The Chief Executive Officer, who is the Chief Operating Decision Maker (CODM), monitors the performance
of the business segments separately for the purpose of making decisions. Segment performance is evaluated
based on EBIT. Finance costs, finance income and income tax are managed on a Group basis
(i.e. Unallocated).
The CODM monitors the tangible, intangible and financial assets attributable to each segment for the
purposes of monitoring segment performance and allocating resources between segments. All assets are
allocated to reportable segments with the exception of financial instruments, prepayments, deferred tax
assets and income tax refunds. Goodwill has been allocated to reportable segments as described in Note 22.
III
Reportable segments
The reportable segments are:
1.
USA Shipbuilding
The USA manufactures high performance defence vessels for the U.S. Navy and Coast Guard.
2.
USA Support
The USA provides on-going support and maintenance of Austal and non-Austal vessels to the
U.S. Navy, principally in the USA and other international jurisdictions.
3.
Australasia Shipbuilding
The Australasia Shipbuilding segment comprises Austal’s Australia, Philippines and Vietnam
shipbuilding operations. These operations act as a single business unit for tendering, scheduling,
resource planning and management accountability.
Australasia manufactures high performance vessels for markets worldwide, excluding the USA.
58 Austal Limited | Notes to the consolidated financial statements
4.
Australasia Support
The Australasia Support segment comprises Austal’s Australia, Oman and Trinidad & Tobago
operations. These locations act as a single business unit for allocation of resources, training, on-going
support and maintenance for high performance vessels.
IV
Accounting policies, inter- segment transactions and unallocated items
The accounting policies used for reporting segments internally are the same as those utilised for reporting
the accounts of the Group. Inter-entity sales are recognised based on an arm’s length pricing structure in
accordance with the Group’s transfer pricing policy.
Certain unallocated items are not considered to be part of the core operations of any segment.
Revenue
I
Disaggregation of Revenue
Revenue
Shipbuilding
Support
Total
II
Recognition and measurement
1.
Vessel construction
2022
$’000
2021
$’000
1,158,867
270,177
1,314,894
257,281
1,429,044
1,572,175
The Group’s accounting policy in respect of revenue in accordance with AASB 15 is as follows:
Revenue represents income derived from contracts for the provision of goods and services by the
Company and its subsidiary undertakings to customers in exchange for consideration in the ordinary
course of the Group’s activities.
Performance obligations
Upon approval by Austal and its counter party to a contract, each contract is assessed to identify each
promise to transfer either a distinct good or service or a series of distinct goods or services that are
substantially the same and have the same pattern of transfer to the customer.
Separate performance obligations
Goods and services are distinct and accounted for as separate performance obligations in the contract
if the customer can benefit from them either on their own or together with other resources that are
readily available to the customer and they are separately identifiable in the contract.
Combining contracts into a single performance obligation
Contracts are combined into one performance obligation for the purposes of revenue and profit
recognition where individual contracts do not result in a performance obligation on the basis that it is
not distinct and do not have independent utility to the customer.
Austal Limited | Notes to the consolidated financial statements 59
Multi vessel contracts
Austal regularly enters into contracts with an obligation to deliver multiple vessels under a single
contract. Austal assesses such multi vessel contracts to determine whether each vessel in the contract
represents a distinct performance obligation or whether there is a single performance obligation to
deliver a series of vessels that are substantially the same and have same pattern of transfer to the
customer.
Transaction price
Total transaction price
The total transaction price at the start of each contract is estimated as the amount of consideration to
which the Group expects to be entitled in exchange for transferring the promised goods and services
to the customer, excluding sales taxes.
Variable consideration
Variable consideration, such as price escalation, is included based on the expected value or most
likely amount only to the extent that it is highly probable that there will not be a reversal in the
amount of cumulative revenue recognised.
The transaction price does not include estimates of consideration resulting from contract
modifications, such as change orders, until they have been approved by the parties to the contract.
Allocation of total transaction price to each performance obligation
The total transaction price is allocated to the performance obligations identified in the contract in
proportion to their relative stand-alone selling prices. There are typically no observable stand-alone
selling prices given the bespoke nature of many of the Group’s products and services, which are
designed and / or manufactured under contract to each customer’s individual specifications. Instead,
stand-alone selling prices are typically estimated based on expected costs plus contract margin
consistent with the Group’s pricing principles.
Revenue and profit recognition
Revenue is recognised as performance obligations are satisfied as control of the goods and services is
transferred to the customer.
The Group determines whether each performance obligation within a contract is satisfied over time or
at a point in time.
Revenue recognition over time
Performance obligations are satisfied over time if one of the following criteria is satisfied:
The customer simultaneously receives and consumes the benefits provided by the Group’s
performance as it is performed;
The Group’s performance creates or enhances an asset that the customer controls as the asset is
created or enhanced; or
The Group’s performance does not create an asset with an alternative use to the Group and it has
an enforceable right to payment for performance completed to date.
The Group has determined that most of its contracts satisfy the criteria for recognition over time,
either because:
the customer simultaneously receives and consumes the benefits provided by the Group’s
performance as it is performed (typically sustainment contracts); or
the Group’s performance does not create an asset with an alternative use to the Group and it has
an enforceable right to payment for performance completed to date (typically shipbuilding
contracts).
60 Austal Limited | Notes to the consolidated financial statements
Satisfaction of performance obligations over time or at a point in time
Revenue is recognised at the point in time that control is transferred to the customer if the criteria for
revenue recognition over time are not met. Control is typically transferred to the customer when legal
title passes to the customer and Austal has a legal right to payment, for example, upon delivery or
acceptance of invoice.
Measuring progress
The Group recognises revenue using an input method, based on costs incurred in the period for each
performance obligation to be recognised over time. Revenue and attributable margin are calculated by
reference to reliable estimates of transaction price and total expected costs, after making suitable
allowances for technical and other risks. Revenue and associated margin are therefore recognised
progressively as costs are incurred, and as risks have been mitigated or retired. The Group does not
include long lead time materials where they do not represent progress. The Group has determined that
this method faithfully depicts the Group’s performance in transferring control of the goods and
services to the customer.
Multi vessel contracts representing a single performance obligation
The Group monitors the costs of each individual vessel under multi vessel contracts to identify risks
and additional costs that may arise as a result of first of class issues or achievement of productivity
improvements that are expected to be achieved from vessel to vessel (i.e. a learning curve).
Contingencies and additional costs are included in the cost estimate for each vessel under
multi vessel contracts to ensure that revenue recognition over time appropriately reflects the presence
of cost performance risks and outcomes.
Onerous contracts
Expected losses are recognised immediately as an expense when it is probable that total contract
costs will exceed total contract revenue (i.e. the contract has become onerous).
Contract modifications
The Group’s contracts are often amended for changes in customers’ requirements and specifications.
A contract modification exists when the parties to the contract approve a modification that either
changes existing or creates new enforceable rights and obligations. The effect of a contract
modification on the transaction price and the Group’s measure of progress towards the satisfaction of
the performance obligation to which it relates is recognised in one of the following ways:
Prospectively as an additional, separate contract;
Prospectively as a termination of the existing contract and creation of a new contract; or
As part of the original contract using a cumulative catch up.
The majority of the Group’s contract modifications are treated under either 1 (for example, the
requirement for additional distinct goods or services) or 3 (for example, a change in the specification
of the distinct goods or services for a partially completed contract), although the facts and
circumstances of any contract modification are considered individually as the types of modifications
will vary contract-by-contract and may result in different accounting outcomes.
Costs to obtain a contract
The Group expenses pre-contract bidding costs which are incurred regardless of whether a contract is
awarded. The Group does not typically incur costs to obtain contracts that it would not have incurred
had the contracts not been awarded.
Costs to fulfil a contract
Contracts recognised over time
Contract fulfilment costs in respect of over time contracts are expensed as incurred.
Austal Limited | Notes to the consolidated financial statements 61
Contracts recognised at a point in time
Contract fulfilment costs in respect of point in time contracts are accounted for under
AASB 102 Inventories.
2.
Vessel support
Vessel support revenue
Revenue from support contracts is recognised in the Profit and Loss statement when the performance
obligations are considered to have been met. Revenue is recognised at an amount that reflects the
consideration the Group expects to be entitled to receive, net of goods and services tax or similar tax.
Vessel finance for Cape Class Patrol Boats 9 & 10 (CCPB 9 & 10)
Austal entered into a finance arrangement with National Australia Bank (NAB) and the Royal
Australian Navy (RAN) for the construction of CCPB 9 & 10 in December 2015.
NAB financed the purchase of the vessels and chartered the vessels to RAN for an initial 3 year term
which was subsequently extended to April 2022 for CCPB 9 and May 2022 for CCPB 10.
This arrangement results in non-cash entries being recorded in Austal’s statutory reporting during the
charter period for notional revenue, notional depreciation and notional interest. Notional revenue of
$3.3 million was reported in FY2022 up to 28 October 2021 when Austal was released from the
buyback guarantee (FY2021: $9.9 million).
Further information is provided in Note 11.
III
Remaining performance obligations (work in hand)
The transaction price allocated to remaining performance obligations (unsatisfied or partially satisfied) at
30 June 2022 is set out below:
Transaction price allocated to remaining performance obligations pursuant to customer contracts
Committed but not recognised as liabilities payable:
- Within one year
- One to five years
Total
2022
$’000
2021
$’000
1,474,991
1,493,467
1,307,089
1,217,064
2,968,458
2,524,153
The transaction price associated with unsatisfied or partially satisfied performance obligations does not include variable
consideration that is constrained.
IV
Vessel construction and support contracts in progress
Net carrying amount
Work in progress
Progress payments received in advance
Total due from customers
2022
$’000
2021
$’000
255,566
(99,084)
156,482
171,605
(123,250)
48,355
62 Austal Limited | Notes to the consolidated financial statements
1.
Recognition and measurement
Construction and support work in progress represents the Group’s right to consideration for services
provided to customers for which the Group’s right remains conditional upon something other than the
passage of time.
Amounts are generally reclassified to trade receivables when contract performance obligations have
been certified or invoiced to the customer.
Progress payments received in advance arise where payment is received prior to work being performed.
Revenue of $88.2 million recognised in the current period was included in the progress payments
received in advance (PPIA) balance at the beginning of the period (FY2021: $119.7 million).
V
Significant accounting judgements and estimates
1.
Contract revenue and expected construction profits at completion
The assessment of contract revenue in accordance with the Group’s accounting policies requires
significant estimates to be made for total contract revenues, total contract costs and the current
percentage of completion. Estimates were made by management with respect to total contract
revenues, and total contract costs, which had a resulting impact on the percentage of completion,
in line with the Group’s accounting policy for contract revenue.
2.
Contingencies
Significant judgement is required in relation to the determination of cost contingencies that are
included within the estimated total contract costs for each vessel project at balance date.
Examples of risks
The Group includes contingencies in individual vessel projects to allow for risks associated with
estimates of material volumes and costs, labour hours including productivity improvements from ship
to ship in multi vessel programs, labour rates, future overhead rates, liquidated damages for
contractual commitments and other risks that may be identified for each individual project on a case
by case basis such as the incorporation and development of novel technologies and production
methods and achievement of key milestones.
Consumption and release of contingencies
Contingencies will either be consumed or released as progress is made on each vessel, and the risks
are either realised or retired and / or certain milestones are achieved. Successful mitigation of the
risks and / or successful achievement of the milestones can be estimated with greater certainty in the
latter stages of the completion of each particular vessel. The profit recognised on relevant vessels will
decrease in future reporting periods in the event that initial contingency estimates do not adequately
cover unplanned cost increases. The profit recognised on relevant vessels will increase in future
reporting periods in the event that initial contingency estimates exceed any unplanned cost increases
that may eventuate.
USA
USA shipbuilding cost performance has continued to improve however risks exist for the remaining
vessels until future events become known such as continued achievement of productivity
improvements, future overhead rates which are directly impacted by the volume and timing of future
contract awards and other vessel specific risks. Vessel specific risks include vessel weight and
associated financial penalties, achievement of progress milestones, adherence to launch schedules,
sea trials performance and remediation of trial issues, and adherence to delivery schedules.
USA applies a consistent methodology for setting a contingency for each vessel which includes
allocating the contingency to these risks and milestones.
LCS
Contingencies after shareline (risk sharing mechanism) held for LCS vessels at 30 June 2022 was
$98 million (FY2021: $152 million). This was equivalent to 11.8% of the Total Cost Estimate to
Completion (ETC) (FY2021: 11.6%).
Austal Limited | Notes to the consolidated financial statements 63
Significant design modifications were introduced on LCS 28 which was delivered in June 2021. Cost
performance for LCS 28 and LCS 30 (delivered in December 2021) resulted in accelerated reductions
in the remaining program contingencies during FY2022. A further re-assessment of the level of
contingencies required is expected to occur after the scheduled delivery of LCS 34, during FY2023.
EPF
Contingencies after shareline held for EPF vessels at 30 June 2022 was $16 million
(FY2021: $18 million). This was equivalent to 4.5% of the ETC (FY2021: 5.6%)
Design modifications were similarly introduced on EPF 13 which will be delivered during FY2023.
The cost performance and expiry of unrequired risks resulted in accelerated reductions in the
remaining program contingencies during FY2022.
The above contingencies held take into account the potential for reductions in vessel prices that may
arise through the risk sharing mechanism embedded in those U.S. Navy shipbuilding programs if the
cost contingencies are ultimately not consumed or required.
Future judgments about the appropriate level of contingencies to be held for each vessel could result
in an increase or decrease in the profit recognised on relevant vessels in FY2023 and future reporting
periods.
Australasia
Australasia is completing a number of vessels under both single vessel and multi vessel contracts.
First in class vessels carry heightened cost risk associated with vessel performance, schedule
adherence and material consumption and labour productivity.
Multi vessel contracts provide the opportunity for efficiency improvements from vessel to vessel which
are typically built into customer pricing and hence achievement of improvements from vessel to vessel
(i.e. a learning curve) represents additional cost risk.
Contingencies held at 30 June 2022 for undelivered vessels in the Australasia business unit were
$16 million (FY2021: $14 million). This was equivalent to 3.1% of ETC (FY2021: 3.6%).
64 Austal Limited | Notes to the consolidated financial statements
Other profit and l oss
I
Disclosure
Other income and expenses
Government infrastructure grants amortised
Training reimbursement grants
Sale of scrap materials
Sundry income
Gain on sale of Aulong JV
Vessel warranties
Loss on disposal of plant and equipment
Net foreign exchange gain / (loss)
Total
Finance income
Interest income
Finance costs
Interest payable to unrelated parties
Amortisation of capitalised loan origination costs
Total
Net finance costs
Depreciation and amortisation
Depreciation of property, plant & equipment
Depreciation of right of use assets
Amortisation of intangible assets
Total
Impairment loss
2022
$’000
2021
$’000
3,707
-
3,644
1,576
2,654
(3,776)
(563)
370
7,612
3,340
295
2,705
2,836
-
942
(1,314)
(675)
8,129
135
368
(7,996)
(373)
(8,369)
(8,234)
(35,180)
(7,771)
(1,737)
(44,688)
(6,871)
(874)
(7,745)
(7,377)
(38,257)
(4,854)
(2,596)
(45,707)
Impairment loss on plant and equipment
(2,556)
-
Employee benefits 1
Wages and salaries
Annual leave expense
Post-retirement benefits
Workers' compensation costs
Share based payments expense
Long service leave expense
Total
Research and development credits 2
Research and development credits
1. Disclosed within cost of sales and administrative expenses.
2. Disclosed within cost of sales.
(382,942)
(22,194)
(10,332)
(2,545)
(2,850)
(2,114)
(382,246)
(25,526)
(10,178)
(4,337)
(3,017)
(2,590)
(422,977)
(427,894)
4,712
7,075
Austal Limited | Notes to the consolidated financial statements 65
Auditors' remuneration 1
Amounts received or due and receivable by Deloitte Touche Tohmatsu Australia and related
network firms for:
Audit or review of the financial statements
2022
$’000
2021
$’000
Group
Controlled entities
Total
Other assurance services
Non-audit services
Taxation advice and compliance services
Consulting services
Total
Total
Other auditors and firms:
Audit or review of the financial reports
Subsidiaries
Non-audit services
Taxation advice and compliance services
Total
Total
(425,500)
(933,966)
(387,750)
(825,797)
(1,359,466)
(1,213,547)
-
(7,500)
(175,239)
-
(196,861)
(8,030)
(175,239)
(204,891)
(1,534,705)
(1,425,938)
(25,121)
(23,841)
(27,883)
(53,004)
(25,407)
(49,248)
(1,587,709)
(1,475,186)
1. The portion of the auditor's remuneration payable in USD was converted at a USD / AUD exchange rate of 0.7254
in FY2022 (FY2021: 0.7472).
II
Recognition & measurement
The following recognition and measurement criteria must be met before the following specific items are
recognised in the Profit and Loss:
1.
Grants relating to expense items
Grants include US Government infrastructure grants and training reimbursement grants. Grants are
recognised when there is reasonable assurance that the grant will be received and all attaching
conditions will be complied with.
All grants are recognised as income when they relate to an expense item. The grants are recognised
over the periods necessary to match the grant to the costs that they are intended to compensate.
66 Austal Limited | Notes to the consolidated financial statements
2.
Research and Development (R&D) credits
R&D tax credit incentives are accounted for in accordance with the Group’s accounting policies as a
Government grant under AASB 120 rather than as an income tax benefit under AASB 112.
The excess R&D credits are recognised as a reduction to each vessel’s cost estimate at completion
when there is reasonable assurance that the credits will be received and utilised. The entire credit is
recognised in cost of sales and changes the calculation of percent complete which impacts the timing
of revenue recognition for the projects.
The net impact to profit before tax in FY2022 was $4.7 million (FY2021: $7.1 million).
The future tax benefit of carry forward R&D credits where deemed to be probable of recovery are
recognised in Other Non-Current Assets. Further information relating to the R&D credits is provided in
Note 27.
3.
Finance costs
Finance costs directly attributable to the acquisition, construction or production of a qualifying asset
are capitalised as part of the cost of that asset. All other finance costs are expensed in the period that
they occur. There were no qualifying assets in FY2022.
Finance costs include interest payments, amortisation of capitalised loan origination costs and other
costs that an entity incurs in connection with the borrowing of funds.
4.
Sale of scrap materials
Revenue for the sale of scrap is recognised when the significant risks and rewards of ownership of the
materials have passed to the buyer. Risk and rewards of ownership are considered to have passed to
the buyer at the time of delivery of the goods to the customer.
5.
Foreign exchange gains and losses
Foreign exchange gains and losses included in the Profit and Loss comprise fair value adjustments on
non-derivative financial assets (such as foreign currency denominated loans) and gains and losses on
cash flow hedges that were deemed to be ineffective during the accounting period.
III
Significant accounting judgements and estimates
1.
R&D credits
Management has made judgements regarding which expenditure is classified as eligible for the credit,
including assessing activities to determine whether they are conducted for the purposes of generating
new knowledge, and whose outcome cannot be known or determined in advance.
Austal Limited | Notes to the consolidated financial statements 67
Earnings per share (EPS)
I
Calculation
Net profit / (loss) after tax
2022
2021
Net profit attributable to ordinary equity holders of the parent
$’000
79,565
81,057
Weighted average number of ordinary shares
Basic
Effect of dilution
Diluted
Earnings per share
Basic earnings per share
Diluted earnings per share
II
Measurement
Number
Number
361,337,051
359,410,147
1,867,104
2,109,432
Number
363,204,155
361,519,579
$ / share
$ / share
0.220
0.219
0.226
0.224
Basic EPS is calculated by dividing Net profit / (loss) after tax for the year attributable to ordinary equity
holders of the parent by the weighted average number of ordinary shares outstanding during the year.
Diluted EPS is calculated by dividing the Net profit / (loss) after tax for the year attributable to ordinary
equity holders of the parent by the weighted average number of ordinary shares outstanding during the year
plus the weighted average number of ordinary shares that would be issued on the conversion of all potentially
dilutive ordinary shares into ordinary shares.
III
Information concerning the classification of securities
1.
Performance rights
Performance rights granted to executives under the Group’s Long Term Incentive Plan are included in
the calculation of diluted EPS where the conditions would have been met at the reporting date. There
were 1,582,526 performance rights that were potentially dilutive at 30 June 2022.
Further information relating to the performance rights is provided in Note 37.
2.
Share rights
Share rights may be provided to KMP as part of total fixed remuneration. The share rights are treated
as effective shares and therefore included in the calculation of basic EPS.
Further information relating to the share rights is provided in Note 37.
3.
Service Rights
Service rights are included in the determination of diluted EPS. There were 284,578 service rights
that were potentially dilutive at 30 June 2022.
Further information relating to the service rights is provided in Note 37.
68 Austal Limited | Notes to the consolidated financial statements
4.
Other equity transactions
Austal issued 1,963,866 shares to the Employee Share trust during October 2021 in relation to the
vesting of the FY2019 LTI plan and share rights issued to Non-Executive Directors.
There have been no additional transactions involving ordinary shares or potential ordinary shares
between the reporting date and the date of completion of these financial statements.
Reconciliation of net profit after tax to net cash flows from operations
Net profit after tax
Adjustments for non cash profit and loss items:
Depreciation and amortisation
Impairment of plant and equipment
Net loss on disposal of property, plant and equipment
Share based payments expense
Net foreign exchange differences
CCPB 9 & 10 notional charter income
Interest expense
Gain on disposal of assets held for sale
Amortisation of borrowing costs
Deferred government grant income
Research and development tax credits recognised
Non-cash mark to market revaluations
2022
$’000
2021
$’000
79,565
81,057
44,688
45,707
2,556
563
2,850
-
(3,316)
3,559
(2,654)
373
(3,707)
(4,712)
389
-
1,314
3,017
304
(9,948)
2,407
-
874
(3,340)
(7,705)
(1,702)
Total
40,589
30,928
Changes in assets and liabilities:
Increase / (decrease) in income tax (current and deferred)
(Increase) / decrease in provisions
Decrease in trade and other receivables
(Increase) / decrease in inventories and work in progress
Increase in prepayments
Decrease / (increase) in other financial assets
Increase / (decrease) in trade and other payables
Decrease in progress payments in advance
Total
Net cash inflow from operating activities
4,524
(693)
6,197
(84,741)
(2,180)
58
18,346
(24,166)
(8,579)
18,547
5,948
26,542
(3,347)
(1,808)
(23,680)
(32,144)
(82,655)
(18,521)
37,499
93,464
Austal Limited | Notes to the consolidated financial statements 69
Dividends paid and proposed
I
Dividends on ordinary shares
Dividends paid on ordinary shares
Unfranked final dividend for the prior year, 4 cps (2021: unfranked, 5 cps)
Unfranked interim dividend for the current year, 4 cps (2021 unfranked, 4 cps)
Total
2022
$’000
2021
$’000
(14,396)
(14,474)
(17,978)
(14,396)
(28,870)
(32,374)
Dividend declared subsequent to the reporting period end (not recorded as liability)
Unfranked final dividend for the current year 4 cps (2021: unfranked, 4 cps)
(14,474)
(14,396)
The dividend declared in the prior year was an estimate of the amount that would be paid and hence does
not match the actual amount paid during the current year.
II
Franking credit balance
Opening balance
Franking credits movement from the payment / (refund) of income tax
Franking credits from acquisition of subsidiaries
Movement
Closing balance
2022
$’000
2021
$’000
2,966
1,170
437
-
437
(673)
2,469
1,796
3,403
2,966
The franking credit balance is subject to change as a result of any positive settlement of the royalty issue
with the ATO. For further information refer to Note 9VI3.
70 Austal Limited | Notes to the consolidated financial statements
Income and other taxes
I
Income tax expense
Major components of tax (expense) / benefit are:
Consolidated profit and loss
Current income tax
Current income tax charge
Adjustments in respect of current income tax of the previous year
Total
Deferred income tax
Relating to origination and reversal of temporary differences
Adjustments in respect of deferred income tax of the previous year
Total
Total income tax expense
Other comprehensive income (OCI)
2022
$’000
2021
$’000
(18,538)
(2,020)
(38,453)
1,514
(20,558)
(36,939)
(10,924)
(1,381)
(12,305)
10,826
(72)
10,754
(32,863)
(26,185)
Current and deferred income tax related items charged or credited directly to OCI
Current and deferred gains and losses on foreign currency contracts
Deferred gains on revaluation of property, plant and equipment
Total income tax expense charged to OCI
(752)
(13,858)
(14,610)
(1,830)
(6,757)
(8,587)
A reconciliation between tax expense and the product of accounting profit before income tax multiplied by the Group’s applicable
income tax rate is as follows:
Accounting profit before income tax from continuing operations
112,428
107,242
Income tax at the Group’s statutory income tax rate of 30% (2021: 30%)
(33,728)
(32,173)
USA combined federal and state income tax rate of 25.27% (2021: 25.39%)
Philippines gross income tax (GIT) regime
Other foreign tax rate differences
USA revalued deferred balances for change in weighted average state rate
USA withholding tax leakage due to losses in Australia
Non-assessable R&D credits in cost of sales
Carry forward tax losses not recognised
Transfer pricing adjustments in respect of intercompany royalties
Valuation of share based payments
Other non-assessable or non-deductible items
Non-deductible capital expenses
Adjustments in respect of current and deferred income tax of the previous year
Total Adjustments
9,046
262
(65)
(2,364)
(413)
1,413
(3,745)
(954)
245
(21)
862
(3,401)
865
3,538
309
1
1,151
-
2,122
(160)
(2,679)
1,774
(1,147)
(363)
1,442
5,988
Income tax expense reported in the profit and loss
(32,863)
(26,185)
Income tax receivable / (payable)
Income tax receivable 1
Income tax payable
16,955
(195)
3,468
(689)
1. The income tax receivable primarily relates to the USA tax group. The receivable relates to the FY2022 Q3 and Q4
instalments paid based on the forecast at the time of submission. The receivable is expected to be offset in FY2023
against instalments due.
Austal Limited | Notes to the consolidated financial statements 71
II
Analysis of temporary differences
Statement of Financial Position
Movement in Profit and Loss
2022
$’000
2021
$’000
2022
$’000
2021
$’000
Deferred income tax - USA
Deferred tax assets
Deferred grant income
Payables
Trade and Other Receivables
Provisions
Deferred gains and losses on foreign currency contracts
Facility lease
Losses available for offset against future taxable income
Other
Total
Deferred tax liabilities
Property, plant and equipment
Work in progress
Intangibles
Payables
Deferred gains and losses on foreign currency contracts
26,034
4,163
118
5,935
463
371
27
-
17,213
5,309
1,276
4,460
503
38
25
-
37,111
28,824
(94,258)
(16,259)
(689)
(82)
-
(65,496)
(4,298)
(732)
(65)
(66)
6,934
(1,518)
(1,199)
1,024
-
312
-
-
5,553
(8,737)
(10,963)
100
-
-
Total
(111,288)
(70,657)
(19,600)
Net deferred tax asset / (liability)
(74,177)
(41,833)
(14,047)
Deferred income tax - Australia
Deferred tax assets
Provisions
Payables
Cash
Deferred gains and losses on foreign currency contracts
Facility lease
CCPB 9 & 10
Other
Total
Deferred tax liabilities
Property, plant and equipment
Deferred gains and losses on foreign currency contracts
Prepayments
Other
Total
11,369
12,184
406
489
146
520
-
1,031
13,961
(332)
(2,261)
(1,572)
51
(4,114)
419
579
225
211
7
341
13,966
(2,613)
(1,345)
(961)
(215)
(5,134)
(815)
(14)
(90)
-
309
(7)
698
81
2,281
-
(611)
-
1,670
3,867
(72)
1,282
228
-
(3)
(6)
(52)
5,244
1,950
(891)
75
-
-
1,134
6,378
3,598
(74)
184
-
203
34
57
4,002
1,598
-
(961)
-
637
Net deferred tax asset / (liability)
9,847
8,832
1,751
4,639
Deferred income tax - Other
Deferred tax assets
170
170
(9)
(263)
Net deferred tax asset / (liability)
(64,160)
(32,831)
(12,305)
10,754
III
Austal Group Tax Strategy
Austal’s Group Tax Strategy has been endorsed by Austal’s Audit & Risk Committee (ARC) and is subject to
annual review and approval. This strategy applies to Austal Limited and its worldwide subsidiary companies.
72 Austal Limited | Notes to the consolidated financial statements
1.
Tax risk management and governance
Austal’s tax risk management and governance processes are supported through its Tax Risk
Management Standard that is approved by the Board of Directors. The Audit & Risk Committee (ARC)
assists the Board in fulfilling its oversight responsibilities by reviewing, monitoring and making
recommendations in relation to tax risk management and governance practices.
The standard includes:
Ensuring that the roles and responsibilities for the management of tax risks are documented and
understood;
Maintaining a qualified and adequately resourced tax team to manage the tax control framework
and day to day tax affairs;
Requiring tax review of specified transactions and events and obtaining external advice where
appropriate; and
Regular reporting of key tax issues to the Chief Financial Officer and to the Board of Directors
and ARC.
2.
Tax principles
Austal observes these principles in its approach to tax. It will:
Fulfil its tax obligations in accordance with tax laws and practice of the tax jurisdictions in which
it operates.
Pay the amount of tax which is legally due at the correct time.
Maintain an open, transparent and collaborative relationship with tax authorities.
Act with integrity and protect the reputation of Austal.
3.
Tax planning
Austal seeks to manage its business in a tax-efficient manner, compliant with the tax laws, rules and
regulations of the jurisdiction it operates in. Transactions are undertaken for commercial and
economic business reasons; Austal will not knowingly participate in, facilitate nor promote artificial or
contrived tax planning arrangements for the purposes of tax avoidance.
4.
Tax risk appetite
Tax risk will inevitably arise given the scale of the business and the number of tax jurisdictions in
which Austal operates, the judgements that are required to interpret complex tax regulations and the
continually changing nature of tax laws.
Austal practices prudent management of its tax affairs through the application of its Tax Risk
Management Standard. Austal proactively seeks to identify, evaluate, manage and monitor tax
uncertainties and risks to ensure that they are appropriately addressed. Transfer pricing is calculated
using the “arm’s length” principle and structured so that the tax results are consistent with the
underlying economic consequences.
Austal Limited | Notes to the consolidated financial statements 73
5.
Relationship with tax authorities
Austal is committed to engaging with the regulatory authorities with integrity, honesty, respect,
fairness, transparency and a spirit of co-operation.
In 2021, Austal completed a Combined Assurance Review (CAR) which related to the income tax
years FY2016 – FY2019 and GST period FY2020. The ATO obtained confidence that Austal paid the
right amount of income tax for the review period and issued Austal with a “High” overall level of
assurance.
6.
UK specific comments
Austal Group’s tax strategy is regarded as satisfying the statutory obligation under Paragraph 22(2) of
Schedule 19 Finance Act 2016 (‘Qualifying Company’) for Austal UK Limited.
IV
Recognition and measurement
1.
Current tax assets and liabilities
Current tax assets and liabilities for the current and prior periods are measured at the amount
expected to be recovered from, or paid to, taxation authorities. The tax rates and tax laws used to
compute the amount are those that are enacted or substantively enacted at the balance date.
2.
Deferred income tax
Deferred income tax is provided on all temporary differences at the balance date between the tax
bases of assets and liabilities and their carrying amounts for financial reporting purposes, except
when:
The deferred income tax liability arises from the initial recognition of goodwill, or an asset or
liability in a transaction that is not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable Profit and Loss; or
The taxable temporary differences associated with investments in subsidiaries, associates or joint
ventures, and the timing of the reversal of the temporary differences can be controlled and it is
probable that the temporary differences will not reverse in the foreseeable future.
3.
Deferred income tax asset recognition
Deferred income tax assets are recognised for all deductible temporary differences and carry-forward
tax assets and losses to the extent that the availability of taxable profit against which the deductible
temporary differences is probable; and the deferred tax assets can be utilised, except when:
The deferred income tax asset relating to the deductible temporary difference arises from the
initial recognition of an asset or liability in a transaction that is not a business combination and,
at the time of the transaction, affects neither the accounting profit nor taxable Profit and Loss;
The deductible temporary differences are associated with investments in subsidiaries, associates
and interests in joint ventures in which case a deferred tax asset is only recognised to the extent
that taxable profits will be available in the foreseeable future.
The carrying amount of deferred income tax assets is reviewed at each balance date and reduced to
the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part
of the deferred income tax asset to be utilised.
Unrecognised deferred tax assets are reassessed at each balance date and are recognised to the extent
that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set
off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to
the same taxable entity and the same taxation authority.
74 Austal Limited | Notes to the consolidated financial statements
4.
Deferred income tax asset and liability measurement
The US federal rate of income tax is 21.0% and the weighted average of individual US states in which
Austal operates was 4.3% for FY2022. The weighted average tax rate changes year on year based on
the distribution of activity between the states.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to
the year when the asset is realised or the liability will be settled, based on tax rates and tax laws that
have been enacted or substantively enacted at the balance date.
Amounts arising from the re-measurement of deferred balances is disclosed separately in the
tax expense reconciliation.
5.
Income taxes relating to equity items
Income taxes relating to items recognised directly in equity are only recognised in equity and not in
the Profit and Loss.
V
Tax consolidation
Austal Limited is the head entity in a Tax Consolidated Group comprising of Austal Limited and its 100%
owned Australian resident subsidiaries that was implemented 1 July 2002. Members of the Group entered
into a tax sharing arrangement in order to allocate income tax expense to the wholly owned subsidiaries on a
pro-rata basis.
The agreement provides for the allocation of income tax liabilities between the entities in the event that the
head entity defaults on its tax payment obligations. The possibility of default was assessed to be remote at
the reporting date.
The current and deferred tax amounts for the Tax Consolidated Group are allocated amongst the entities in
the Tax Consolidated Group using a stand-alone taxpayer approach whereby each entity in the Tax
Consolidated Group measures its current and deferred taxes as if it had continued to be a separately taxable
entity in its own right. Deferred tax assets and deferred tax liabilities are measured by reference to the
carrying amounts of the assets and liabilities in each entity’s statement of financial position and their tax
values applying under tax consolidation.
Any current or deferred tax assets or liabilities arising from unused tax losses assumed by the head entity
from the subsidiaries in the Tax Consolidated Group are recognised in conjunction with any tax funding
arrangement amounts. The Tax Consolidated Group recognises deferred tax assets arising from unused tax
losses of the Tax Consolidated Group to the extent that it is probable that future taxable profits of the
Tax Consolidated Group will be available against which the asset can be utilised. Any subsequent period
adjustments to deferred tax assets arising from unused tax losses assumed from subsidiaries are recognised
by the head entity only.
The members of the Tax Consolidated Group have a tax funding arrangement which sets out the funding
obligations of members of the Tax Consolidated Group in respect of tax amounts. The tax funding
arrangements require payments to or from the head entity to be equal to the current tax liability (asset)
assumed by the head entity and any tax-loss deferred tax asset assumed by the head entity.
No amounts have been recognised as tax consolidation contribution or distribution adjustments in preparing
the accounts for the head entity for the current year.
VI
Significant accounting judgements and estimates
Uncertainties exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the
amount and timing of future taxable income. Differences arising between the actual results and the
assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax
income and expense already recorded given the wide range of international business relationships and the
long term nature and complexity of existing contractual agreements.
Austal Limited | Notes to the consolidated financial statements 75
1.
Deferred tax assets
Deferred tax assets are recognised for deductible temporary differences because management
considers that it is probable that future taxable profits will be available to utilise those temporary
differences.
Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable
profit will be available against which the losses can be utilised. Significant management judgement is
required to determine the amount of deferred tax assets that can be recognised, based upon the likely
timing and the level of future taxable profits together with future tax planning strategies.
The Group has not recognised a deferred tax asset on the carry forward tax losses and Australian R&D
credits because there is sufficient uncertainty in the Group’s ability to utilise these in the short term.
The Group will continue to assess the recognition criteria against the probability of future taxable
profits.
Note that the Australian Consolidated Tax Group consists of the Australian Shipbuilding and Support
operations that comprise part of the Australasia segments as well as the Austal Limited Corporate
Head Office and hence the taxable income of the Australian Consolidated Tax Group is different from
the profitability of the Australasia segments.
Unrecognised deferred tax assets in respect of the Australian Consolidated Tax Group losses at
30 June 2022 were:
Unrecognised Australian tax losses (tax effected values)
Opening balance
5,520
5,519
2022
$’000
2021
$’000
True-up of prior year tax losses
Losses incurred in the current year
Total
Closing balance
(3,637)
3,742
105
-
1
1
5,625
5,520
Austal claimed R&D tax offsets for prior years in FY2022. The offset was claimed by adding back
accounting expenditure subject to R&D tax incentive and reduced carried forward losses for those
years.
The future tax benefit of carried forward research and development credits are recognised in Other
Non-Current Assets in accordance with the Group’s accounting policy of recognising research and
development credits as government grants under AASB 120 Government Grants.
2.
Audits by tax authorities
The Group establishes a provision based on reasonable estimates, for the possible consequences of
audits by the tax authorities of the respective countries in which it operates. The amount of such
provisions is based on various factors, such as experience of previous tax audits and differing
interpretations of tax regulations by the taxable entity and the responsible tax authority. Such
differences in interpretation may arise for a wide variety of issues depending on the conditions
prevailing in the respective domicile of the Group companies.
3.
Mutual Agreement Procedures (MAP) and Bilateral Advance Pricing Arrangement
(BAPA)
The Competent Authorities of Australia and the United States of America accepted Austal into the
Mutual Agreement Procedures (MAP) and Bilateral Advance Pricing Arrangement (BAPA) programs in
relation to the double taxation of intercompany royalties on intellectual property deployed from
Australia to the USA.
Austal is currently engaging with the Competent Authorities on these programs and responding to the
information requests issued by both competent authorities.
76 Austal Limited | Notes to the consolidated financial statements
Austal has accounted for and paid tax in Australia based on the ATO’s position and the outcomes of
the MAP and BAPA processes may generate tax refunds or tax payable in either jurisdiction. Austal is
currently unable to determine what the outcomes of these processes may be nor the timeline to
resolution.
The total additional tax relating to royalties on vessels that have been delivered in all years up to
30 June 2022 was $(22.0) million (FY2021: $(21.1) million).
$(7.6) million (FY2021: $(7.6) million) of the $(21.1) million has been paid in cash in periods up to
and including FY2022.
The remaining $(14.4) million (FY2021: $(13.5) million) has not had a cash impact in all years up to
30 June 2022, because the additional royalty income arose in loss years or in years when tax losses or
R&D credits were utilised to offset the additional tax liability.
The negative cash impact will be realised in future tax years if no double tax relief is realised because
less carry forward tax losses and / or R&D credits will be available to offset future tax liability.
VII Other taxes
Revenues, expenses and assets are recognised net of the amount of Goods and Services Tax (GST) or
Value Added Tax (VAT) except when:
The GST or VAT incurred on a purchase of goods and services is not recoverable from the taxation
authority, in which case the GST or VAT is recognised as part of the cost of acquisition of the asset or
as part of the expense item; and
Receivables and payables which are stated with the amount of GST or VAT included.
The net amount of GST or VAT recoverable from, or payable to, the relevant taxation authority is included as
part of receivables or payables in the statement of financial position.
Austal Limited | Notes to the consolidated financial statements 77
Capital structure
Cash and cash equivalents
I
Net carrying amount
Cash
Cash at bank and in hand
Total
2022
$’000
2021
$’000
240,113
346,899
240,113
346,899
II
Recognition and measurement
Cash and short term deposits in the Balance Sheet comprise cash at bank, cash in hand and short term
deposits with an original maturity of three months or less.
Cash and cash equivalents for the purposes of the Cash Flow Statement consists of cash and cash
equivalents (as defined above) net of any cash held as a guarantee.
Interest bearing loans and borrowings
I
Net carrying amount
Current
Vessel finance for CCPB 9 & 10
Total
Non - current
Go Zone Bonds
Total
Total
2022
$’000
2021
$’000
-
-
(32,205)
(32,205)
(124,515)
(114,999)
(124,515)
(114,999)
(124,515)
(147,204)
II
Recognition and measurement
Loans and borrowings are initially recognised at the fair value of the consideration received less directly
attributable transaction costs. Loans and borrowings are subsequently measured at amortised cost using the
effective interest method.
The fair values of all classes of borrowings are not materially different to their carrying amounts since the
interest payable on those borrowings is either close to current market rates or they are of a short term nature.
78 Austal Limited | Notes to the consolidated financial statements
III
Vessel finance for Cape Class Patrol Boats 9 & 10 (CCPB 9 & 10)
Austal entered into a finance arrangement with National Australia Bank (NAB) and the Royal Australian Navy
(RAN) for the construction of CCPB 9 & 10 in December 2015. NAB financed the purchase of the vessels
and chartered CCPB 9 to the RAN until April 2022 and CCPB 10 to the RAN until May 2022. The contract
contained a put option granting NAB the right to sell the vessels back to Austal for $24.3 million at the end
of the lease term (buyback guarantee).
On October 28 2021, RAN extended its lease of CCPB 9 & 10 with NAB and as a result NAB confirmed that
Austal was released from buyback guarantee. The corresponding asset ($29.1 million) and liability
($29.2 million) have been derecognised from the Company’s Balance Sheet.
IV
Go Zone Bonds (GZB)
The GZB are a form of indebtedness that was authorised by the US Federal Government to incentivise private
investment in infrastructure in geographical areas that were affected by Hurricane Katrina in 2005.
Austal qualified to borrow US$225 million with a 30 year maturity to invest in the development of
shipbuilding infrastructure in Austal USA between FY2008 and FY2013.
GZB are tax-exempt municipal bonds in the United States and attracted an average interest rate of 0.10% in
FY2022 (FY2021: 0.10%). The interest rates on GZB’s are reset on a weekly basis. GZB bondholders are
secured by letters of credit issued under Austal’s Syndicated Facility Agreement.
Austal re-financed the GZB Syndicated Facility during FY2022. The letters of credit securing the GZB now
mature in December 2024. All of the GZB debt is classified as non-current at 30 June 2022. The average
cost of the letters of credit in FY2022 was 1.54% (FY2021: 1.54%).
Austal has redeemed a cumulative amount of US$137 million and owed US$87.5 million at 30 June 2022
(FY2021: US$87.5 million). No GZB amounts were redeemed (repaid) during FY2022. Austal has the option
of redeeming the outstanding GZB balance, in whole or in part, at any time during the term of the
indebtedness with a 30 day notice to bondholders.
V
Revolving credit facility – Cash Loans
Revolving credit facility - cash loans
Total facility Limit
Facilities used at reporting date
Facilities unused at reporting date
2022
$’000
2021
$’000
50,000
-
50,000
50,000
-
50,000
Austal re-financed the Syndicated Facility Agreement during FY2022. The Syndicated Facility Agreement
has a $280 million revolving credit facility (RCF). The RCF has a $50 million cash loan sub limit.
The Syndicated Facility Agreement matures in December 2024.
Austal Limited | Notes to the consolidated financial statements 79
VI
Performance guarantees (bonding) facilities
Total facilities available
Revolving credit facility
Surety facilities
Total
Facilities used at reporting date
Revolving credit facility
Surety facilities
Total
Facilities unused at reporting date
Revolving credit facility
Surety facilities
Total
2022
$’000
2021
$’000
280,000
250,000
530,000
280,000
250,000
530,000
(116,396)
(835)
(162,161)
(22,810)
(117,231)
(184,971)
163,604
249,165
412,769
117,839
227,190
345,029
Any unused portion of the entire $280 million RCF can be used for non-financial performance guarantees,
up to $20 million of any unused portion can be used for financial performance guarantees, and up to
$50 million of any unused portion can be used for cash loans as described above.
Austal had a total of $420 million of uncommitted and unsecured Surety facilities at 30 June 2022.
However, only $250 million of the Surety facilities are available for the issuance of non-financial
performance guarantees in accordance with a limitation within the Syndicated Facility Agreement.
80 Austal Limited | Notes to the consolidated financial statements
Reconciliation of financing cash flow to interest bearing debt
I
Reconciliation
FY2022
Cash charges
Non-cash changes
30 June 2021
Debt
Repay /
(Draw)
Payment
of borrowing
costs
Debt acquired
from business
combination
CCPB 9 & 10
Debt
Reduction1
CCPB 9 & 10
De-recognition
Foreign
exchange
movement
Amortisation
of borrowing
costs
Reclassification
30 June 2022
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Current borrowings
Non-current borrowings
(32,205)
(114,999)
Total financing liabilities
(147,204)
-
-
-
-
823
823
-
-
-
3,066
-
29,139
-
-
(9,966)
3,066
29,139
(9,966)
-
(373)
(373)
-
-
-
-
(124,515)
(124,515)
FY2021
Cash charges
Non-cash changes
30 June 2020
Debt
Repay /
(Draw)
Payment
of borrowing
costs
Debt acquired
from business
combination
CCPB 9 & 10
Debt
Reduction1
CCPB 9 & 10
De-recognition
Foreign
exchange
movement
Amortisation
of borrowing
costs
Reclassification
30 June 2021
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Current borrowings
Non-current borrowings
(8,719)
(156,461)
Total financing liabilities
(165,180)
7,265
-
7,265
-
187
187
(7,265)
-
8,719
-
(7,265)
8,719
-
-
-
-
9,944
-
(874)
(32,205)
32,205
(32,205)
(114,999)
9,944
(874)
-
(147,204)
1. CCPB 9 & 10 debt reduction is equal to the difference between the notional charter income and the notional interest expense. Refer to Note 11.
Contributed equity and reserves
I
Contributed equity
1.
Net carrying amount
Shares
$’000
2022
2021
2022
2021
Ordinary shares on issue
1 July
359,894,288
356,708,489
142,558
136,696
Shares issued for dividend reinvestment plan
Shares issued to Employee Share Trust
Shares or proceeds transferred for beneficiaries
-
1,963,866
-
336,233
2,849,566
-
-
3,675
3
1,097
9,440
(4,675)
30 June
361,858,154
359,894,288
146,236
142,558
Reserved shares
1 July
(278,528)
(661,607)
Shares issued to Employee Share Trust or sold
Shares or proceeds transferred for beneficiaries
(1,963,866)
1,153,719
(2,849,566)
3,232,645
30 June
(1,088,675)
(278,528)
(892)
(3,675)
2,263
(2,304)
(1,356)
(9,440)
9,904
(892)
Net
360,769,479
359,615,760
143,932
141,666
Austal Limited | Notes to the consolidated financial statements 81
2.
Recognition and measurement
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of tax, from the proceeds of the new shares
or options. Ordinary shares have no par value and the company does not have a limited amount of
authorised capital.
Fully paid ordinary shares carry one vote per share and carry the right to dividends.
Reserved shares
Austal Limited equity instruments which are issued and held by a trustee under the Employee Share
Trust (EST) are classified as Reserved shares and are deducted from Equity. No gain or loss is
recognised in the Statement of Comprehensive Income on the purchase, sale, issue or cancellation of
the Group’s own equity instruments.
3.
Movements in ordinary share capital
The movement in ordinary shares during year ended 30 June 2022 is comprised of shares issued as
part employee share plans.
The Group announced an unfranked FY2021 final dividend of 4.0 cents per share, followed by an
unfranked FY2022 interim dividend of 4.0 cents per share which was announced on
24 February 2022.
Austal established an Employee Share Trust (EST) during FY2019 for the purpose of acquiring,
holding and transferring shares in connection with equity based remuneration established by the
Company for the benefit of participants in those plans. Austal issued 1,963,866 shares to the trust
during the year ended 30 June 2022 for the FY2019 LTI vesting, FY2021 indeterminate rights and
NED TFR share rights.
II
Reserves
The reserves are shown within the Consolidated Statement of Changes in Equity for the year ended
30 June 2022.
1.
Foreign currency translation reserve (FCTR)
This reserve is used to record exchange differences arising from the translation of the financial
statements of foreign subsidiaries.
2.
Employee benefits reserve
This reserve is used to:
Record the value of equity benefits provided to employees and Directors as part of their
remuneration, and
Record the re-measurement of the retirement benefits liability for the Philippines.
Further information relating to share based payment plans for the Group is provided in Note 37.
3.
Cash flow hedge reserve
This reserve records the portion of the gain or loss on hedging instruments in cash flow hedges that
are determined to be effective hedges.
82 Austal Limited | Notes to the consolidated financial statements
4.
Common control reserve
This reserve represents the premium paid on the acquisition of historical minority interests in a
controlled entity.
5.
Asset revaluation reserve
This reserve is used to record increases in the fair value of land and buildings.
Government grants relating to assets
I
Net carrying amount
Deferred grant income
Current
Infrastructure development
Total
Non - current
Infrastructure development
Total
Total
Movements in grants
1 July
Grants received during the year
Amortised to the profit and loss
Foreign exchange rate adjustment
Net movement
30 June
2022
$’000
2021
$’000
(9,728)
(9,728)
(2,968)
(2,968)
(93,306)
(64,832)
(93,306)
(64,832)
(103,034)
(67,800)
(67,800)
(57,278)
(31,625)
3,707
(7,316)
(18,469)
3,340
4,607
(35,234)
(10,522)
(103,034)
(67,800)
II
Recognition and measurement
Austal has received grants from various Government bodies in the USA to fund the infrastructure required for
the expansion of the Group’s USA operations in Mobile, Alabama.
The fair value of grants related to assets is credited to a deferred income liability account and is released to
the Profit and Loss over the expected useful life of the relevant asset.
The fair value of grants related to expense items is recognised as income over the periods necessary to match
the grants on a systematic basis to the costs that they are intended to compensate.
Government grants are only recognised when received or when there is reasonable assurance that the grant
will be received and all attaching conditions will be complied with.
Austal Limited | Notes to the consolidated financial statements 83
Working capital
Trade and other receivables
I
Net carrying amount
Trade and other receivables
Trade amounts owing by unrelated entities
Expected credit losses
Total
II
Recognition and measurement
2022
$’000
2021
$’000
132,553
(468)
143,177
(4,895)
132,085
138,282
Trade receivables represent receivables in respect of which the Group’s right to consideration is
unconditional subject only to the passage of time. Trade receivables are non-derivative financial assets
accounted for in accordance with the Group’s accounting policy for non-derivative financial assets as set out
in AASB 9 Financial Instruments.
Trade and other receivables are measured at amortised cost. A gain or loss on trade and other financial
assets that is subsequently measured at amortised cost is recognised in the Profit and Loss when the asset is
derecognised or impaired. Interest income from these financial assets is included in finance income using
the effective interest rate method.
The average credit period on trade receivables ranges from 30 to 45 days in most cases. The Group used the
expected credit loss model in determining the recoverability of trade receivables as per AASB 9.
The Group applies the simplified approach permitted by AASB 9 which requires expected lifetime losses to
be recognised from initial recognition of the receivables without the need to identify significant increases in
credit risk (i.e. no distinction is needed between 12 month and lifetime expected credit losses).
The expected credit loss model requires the Group to account for expected credit losses at each reporting
date to reflect changes in credit risk since initial recognition of the financial assets, meaning that a credit
default does not need to have occurred before credit losses are recognised.
III
Ageing analysis of trade & other receivables
Days outstanding
0-30
31-60
61-90
90+
Impaired
Total
30 June 2022
$’000
111,170
5,870
30 June 2021
$’000
126,044
11,081
551
100
14,962
(468)
132,085
5,952
(4,895)
138,282
Past due is defined under AASB 9 to mean any amount outstanding for one or more days after the
contractual due date. Past due amounts relate to a number of trade receivable balances where for
various reasons the payment terms may not have been met. These receivables have been assessed to be fully
recoverable.
IV
Fair value of trade and other receivables
The carrying amount of the receivables is assumed to be the same as their fair value due to their short term
nature.
84 Austal Limited | Notes to the consolidated financial statements
Prepayments
I
Disclosure
Prepayments
Current
Non-current
Total
2022
$’000
2021
$’000
13,012
3,959
16,971
11,588
3,203
14,791
II
Recognition and measurement
Prepayments represent goods or services which the Group has paid upfront but the underlying asset will not
be consumed until a future period. The Group expenses the prepayment over the corresponding period that
the asset is consumed.
Inventories and work in progress
I
Net carrying amount
Inventories and work in progress
Work in progress
Other inventory
Total
2022
$’000
2021
$’000
255,566
7,504
171,605
6,724
263,070
178,329
II
Recognition and measurement
Stock and finished goods are valued at the lower of cost and net realisable value.
Cost of stock is determined on the weighted average cost basis.
Further information relating to work in progress (WIP) is provided in Note 4.
III
Inventories
Inventories includes raw materials and WIP (accrued income) recognised in respect of contracts with
customers which have been determined to fulfil the criteria for over time revenue recognition under
AASB 15. The Group does not typically build inventory to stock because material is ordered specifically for
each shipbuilding project and receipted to WIP on arrival from the supplier. Inventories are stated at the
lower of cost and net realisable value in line with AASB 102.
Austal Limited | Notes to the consolidated financial statements 85
Trade and other payables
I
Disclosure
Trade and other payables
2022
$’000
2021
$’000
Trade and other payables owed to unrelated entities 1
Total
(151,726)
(133,380)
(151,726)
(133,380)
1. Trade payables are unsecured and non-interest bearing.
II
Recognition and measurement
Trade payables and other payables are carried at amortised cost and represent liabilities for goods and
services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group
becomes obliged to make future payments in respect of the purchase of these goods and services.
III
Fair value of trade and other payables
The carrying amounts of trade and other payables are assumed to be the same as their fair values, due to
their short term nature.
86 Austal Limited | Notes to the consolidated financial statements
Provisions
I
Net carrying amount
Employee
Workers'
Onerous
Benefits
Compensation
Warranty
Contracts
$’000
$’000
$’000
$’000
Other
$’000
Total
$’000
Provisions at 30 June 2021
(62,473)
(4,630)
(12,965)
(8,285)
(12,847)
(101,200)
Arising during the year
Utilised
Unused amounts reversed
Effects of foreign exchange
Movement
(75,905)
84,215
168
(3,256)
5,222
(2,704)
2,230
239
(235)
(470)
(10,248)
8,954
1,707
(69)
344
(9,604)
1,212
7,352
(769)
(8,792)
5,757
1,023
(582)
(107,253)
102,368
10,489
(4,911)
(1,809)
(2,594)
693
Provisions at 30 June 2022
(57,251)
(5,100)
(12,621)
(10,094)
(15,441)
(100,507)
Employee
Workers'
Onerous
Benefits
Compensation
Warranty
Contracts
$’000
$’000
$’000
$’000
Other
$’000
Total
$’000
Provisions at 30 June 2021
Current
Non-current
Total
(60,097)
(2,376)
(4,630)
(12,965)
(8,285)
(12,847)
-
-
-
-
(98,824)
(2,376)
(62,473)
(4,630)
(12,965)
(8,285)
(12,847)
(101,200)
Provisions at 30 June 2022
Current
Non-current
Total
(55,069)
(2,182)
(5,100)
(12,621)
(10,094)
(15,441)
-
-
-
-
(98,325)
(2,182)
(57,251)
(5,100)
(12,621)
(10,094)
(15,441)
(100,507)
II
Recognition and measurement
Provisions are recognised when:
The Group has a present obligation (legal or constructive) as a result of a past event;
It is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation; and
A reliable estimate can be made of the amount of the obligation.
Provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability if the
effect of the time value of money is material.
Austal Limited | Notes to the consolidated financial statements 87
III
Information about individual provisions and significant accounting estimates
1.
Employee Benefits
Liabilities for wages and salaries, including non-monetary benefits and accumulated sick leave
expected to be wholly settled within 12 months of the reporting date are recognised in other payables
in respect of employees’ services up to the reporting date. They are measured at the amounts
expected to be paid when the liabilities are settled.
The Group does not expect its long service leave and annual leave benefits provision to be wholly
settled within 12 months of each reporting date. The Group recognises a liability for long service and
annual leave measured as the present value of expected future payments to be made in respect of
services provided by employees up to the reporting date using the projected unit credit method.
Consideration is given to expected future wage and salary levels, experience of employee departures,
and periods of service. Expected future payments are discounted using market yields at the reporting
date on high quality corporate bonds with terms to maturity and currencies that match, as closely as
possible, the estimated future cash outflows.
2. Workers’ compensation
A provision for workers’ compensation is recognised based on monthly reports received from a claims
administrator, American Longshore Mutual Association Limited, (USA) and insurance broker, Aon Risk
Services Australia Limited, (Australia) for the expected costs of current claims and claims incurred
but not reported at the balance date.
3. Warranties
A provision for warranty is made upon delivery of each vessel in Australasia based on the estimated
future costs of warranty repairs. The estimated future costs are based on the Group’s history of
warranty claims made on similar vessels within their warranty periods. The Company subsequently
monitors the provision to ensure it is adequate for all known warranty claims and an estimation for
unknown warranty claims. Any increases or decreases in the provision are recognised in the Profit and
Loss for the period.
4.
Onerous contracts
A provision for onerous contracts is recognised for contracts that are forecast to generate a loss.
Significant judgment can be required in estimating the presence and magnitude of a loss for a vessel,
including assessments of future labour and material costs, overhead rates and contingencies, that may
subsequently increase or decrease through the period of construction to completion.
Austal was awarded its first steel construction contract by the United States Navy, a build of two
Towing, Salvage and Rescue Ships (T-ATS 11 and 12), in September 2021. At 30 June 2022, an
onerous provision of $10.1 million was recorded on these vessels on the basis of full absorption of
costs on the new steel line for which the potential future financial benefits are not yet virtually
certain. Changes in specification and material quantities from the initial award contributed to the cost
increase, and the Company is responding through submission of Requests for Equitable Adjustments
(REAs). Austal has not taken any value attributable to the REAs into the loss calculation.
The T-ATS award provides an excellent opportunity to prove the Company’s steel capability and is
expected to support an uplift in profitability across OPC and future programs.
5.
Corporate investigations
The Group continues to engage with ASIC and US Regulatory Authorities into certain market
disclosures made in late CY2015 and mid CY2016. An $8.2 million provision has been recorded
based on the best estimate of the probable incremental professional services costs relating to this
matter. Although ASIC has now commenced formal civil proceedings which provides some additional
insight into potential costs and/or penalties, the Group has had to apply significant judgement when
considering whether, and how much, to provide for costs. The Company continues to engage with
ASIC to explore alternative dispute resolution, however this provision could still change over time as
(i) the formal civil proceedings commenced by ASIC develop; and (ii) feedback is received from US
88 Austal Limited | Notes to the consolidated financial statements
regulators as to potential outcomes or resolutions in response to the Company’s engagement with
those authorities.
The Company remains in constructive discussions with its Directors’ and Officers’ insurer and has
received confirmation that the majority of its legal costs incurred to date in Australia will be
reimbursed under its Directors’ and Officers’ insurance cover. A substantial portion of the legal fees
claimed to date have been reimbursed from the insurer and based on the level of reimbursement to
date, the Company has made an estimate of what further reimbursements it considers are virtually
certain to be made in future. The receipt of any further amount is dependent on the insurance claim
approval process and the precise extent of coverage accepted by the insurer.
Whilst the commencement of formal proceedings by ASIC has provided additional clarity as to the
potential outcomes from that investigation, the ongoing uncertainty as to likely or potential outcomes
in the US investigation means that the Group is not in a position to make any provision for any
penalties or damages that may arise from the investigations. Refer to Note 32 for further information.
6.
Dividends
A provision for dividends is not recognised as a liability unless the dividends are declared, determined
or publicly recommended on or before the reporting date. An interim dividend of 4.0 cents per share
was issued for the half year 31 December 2021 (FY2021 H1: 4.0 cents per share).
An unfranked dividend of 4.0 cents per share cents per share has been declared post year end and is
not recognised as a liability for the year ended 30 June 2022 (FY2021 H2: 4.0 cents per share).
Austal Limited | Notes to the consolidated financial statements 89
Infrastructure & other assets
Property, plant and equipment
I
Net carrying amount
Freehold
Land and
Leasehold
Plant and
Buildings
Improvements
Equipment
$’000
$’000
$’000
Capital
WIP
$’000
Total
$’000
455,264
-
-
-
-
-
45,920
309,797
21,819
(10,555)
(178,035)
-
455,264
377,536
(188,590)
455,264
35,365
131,762
21,819
644,210
Balance 30 June 2021
Gross carrying amount at fair value
Gross carrying amount at cost
Accumulated depreciation and impairment
Net carrying amount
Balance 30 June 2022
Gross carrying amount at fair value
Gross carrying amount at cost
742,999
-
-
-
-
46,020
323,504
44,867
Accumulated depreciation and impairment
(165,636)
(11,906)
(180,484)
-
742,999
414,391
(358,026)
Net carrying amount
577,363
34,114
143,020
44,867
799,364
II
Reconciliation of movement for the year
Freehold
Land and
Leasehold
Plant and
Buildings
Improvements
Equipment
$’000
$’000
$’000
Capital
WIP
$’000
Total
$’000
Balance 1 July 2020
463,287
40,378
104,193
2,341
610,199
Additions
Acquisitions through business combinations
Transfer in / (out)
Disposals
Depreciation charge for the year
Revaluation
Effects of foreign exchange
9,403
3,164
-
(28)
(13,335)
26,117
(33,344)
-
-
-
-
(1,867)
-
34,481
8,830
12,810
(1,519)
(23,055)
-
32,373
-
(12,810)
-
-
-
(3,146)
(3,978)
(85)
76,257
11,994
-
(1,547)
(38,257)
26,117
(40,553)
Total
(8,023)
(5,013)
27,569
19,478
34,011
Balance 30 June 2021
455,264
35,365
131,762
21,819
644,210
Additions
Transfer in / (out)
Disposals 1
Depreciation charge for the year
Impairment
Revaluation
Effects of foreign exchange
111
43,382
(5)
(14,978)
-
54,773
38,816
-
-
-
(1,782)
(2,294)
-
2,825
41,638
10,818
(31,065)
(18,420)
(262)
-
8,549
74,580
(54,200)
-
-
-
-
2,668
116,329
-
(31,070)
(35,180)
(2,556)
54,773
52,858
Total
122,099
(1,251)
11,258
23,048
155,154
Balance 30 June 2022
577,363
34,114
143,020
44,867
799,364
1. The disposal relates to the CCPB 9 & 10 derecognition. See note 11 for further information.
90 Austal Limited | Notes to the consolidated financial statements
III
Recognition and measurement
Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment
losses.
Land and buildings are measured at fair value less accumulated depreciation on buildings and any
impairment losses recognised after the date of revaluation. Valuations are performed on a regular basis to
ensure that the fair value of a revalued asset does not differ materially from its carrying value.
The carrying amount of land and building would be recognised as detailed in the table below if they were
measured using the historic cost model.
2022
$’000
2021
$’000
Land and Buildings and Leasehold Improvements valued using cost model
Cost
Accumulated depreciation and impairment
Net carrying amount
533,010
(160,696)
441,986
(131,459)
372,314
310,527
Any revaluation surplus is recorded in Other Comprehensive Income and credited to the Asset Revaluation
Reserve in equity, except to the extent that it reverses a revaluation decrease of the same asset previously
recognised in the Profit and Loss, in which case the increase is recognised in the Profit and Loss.
A revaluation deficit is recognised in the Profit and Loss except to the extent that it offsets an existing
surplus on the same asset recognised in the Asset Revaluation Reserve.
Accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the
asset and the net amount is restated to the revalued amount of the asset. Any revaluation reserve relating to
the particular asset being sold is transferred to retained earnings upon disposal.
IV
De-recognition and disposal
An item of property, plant and equipment is derecognised upon disposal or when no further future economic
benefits are expected from its use.
Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal
proceeds and the carrying amount of the asset) is included in the Profit and Loss in the year the asset is
derecognised.
V
Key judgements and accounting estimates
1.
Impairment of non-financial assets
The Group assesses whether there is an indication that an asset may be impaired at each reporting
date. The Group considered impairment triggers including observable indications, significant market,
technological, economic or legal changes that have occurred, significant decreases in market interest
rates or market rates of return, the market capitalisation of the Group compared to the net assets of
the Group, evidence that any major asset or process is obsolete or damaged and other evidence from
internal reporting.
Further information relating to impairment testing of non-current assets is provided in Note 23.
The carrying values of plant and equipment are reviewed for impairment at each reporting date,
with the recoverable amount being estimated when events or changes in circumstances indicate the
carrying value of the asset may be impaired. The recoverable amount of plant and equipment is the
higher of fair value less costs to sell and value in use. The estimated future cash flows are discounted
Austal Limited | Notes to the consolidated financial statements 91
to their present value using a post-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset in assessing value in use.
The recoverable amount for an asset that does not generate largely independent cash inflows is
determined for the cash-generating unit to which the asset belongs, unless the asset’s value in use
can be estimated to be close to its fair value.
An impairment exists when the carrying value of an asset or a cash-generating unit exceeds its
estimated recoverable amount. The asset or cash-generating unit is then written down to its
recoverable amount.
Impairment losses on plant and equipment are recognised in the Profit and Loss.
The asset or cash-generating unit that suffered an impairment is tested for possible reversal of the
impairment whenever events or changes in circumstances indicate that the impairment may have
reversed.
The key assumptions used to determine the recoverable amount for cash-generating units (CGU) are
disclosed and further explained in Note 23.
2.
Estimation of useful lives of assets
The estimation of the useful lives of assets has been based on historical experience. The condition of
the assets is assessed at least once per year and considered against the remaining useful life.
Adjustments to useful life are made when considered necessary.
Depreciation is calculated on a straight-line or diminishing value basis over the estimated useful life
of the asset.
The following useful lives have been adopted as follows:
Buildings – 20 to 40 years.
Plant and Equipment – 2 to 10 years.
Leasehold Improvements – term of lease.
The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted at the
reporting date as appropriate.
3.
Revaluation of land and buildings
The Company’s land and buildings consist of shipyard facilities in Australia and USA.
The Company determined that these constitute one class of asset under AASB 13, based on the
nature, characteristics and risk of the property.
The valuation methodology utilised a market comparison approach based on highest and best use
which is consistent with the Group’s current use of the assets.
The independent revaluation is renewed every three to five years. The Company undertakes an
assessment in the years in between obtaining independent valuations to ensure that the latest
independent valuation remains appropriate and representative of fair value as at the reporting date.
The Company categorises the fair value measurement as a level 2 because the inputs and
assumptions used in arriving at the at the fair value are observable.
The last independent revaluation of the Australia land and buildings occurred during FY2021.
This resulted in a decrease in the valuation of $(1.137) million recognised in Other Comprehensive
Income.
The last independent revaluation of the USA land and buildings occurred during June 2022.
This resulted in an increase in the valuation of $54.8 million (before deferred tax) recognised in Other
Comprehensive Income.
92 Austal Limited | Notes to the consolidated financial statements
4.
Impairment of assets Australasia
The Austal Philippines shipyard and floating dry dock (Austal Lewek Hercules) sustained damage as a
result of Typhoon Odette, which struck the Philippines in December 2021. Damages net of insurance
proceeds of $2.6 million have been recognised through an impairment charge in cost of sales. Further
insurance proceeds for the shipyard damage are anticipated but have not been provided for as they do
not meet the requirement of virtual certainty.
Leases
I
Amounts recognised in the statement of financial position
Right-of-use assets
Properties
Equipment
Motor vehicles
Total
Lease liability
Current lease liability
Non-current lease liability
Total
2022
$’000
2021
$’000
152,377
5
131
152,513
55,818
8
167
55,993
2022
$’000
2021
$’000
(4,198)
(105,406)
(109,604)
(4,635)
(52,758)
(57,393)
The difference between the right-of-use assets and lease liability is primarily driven by the purchase of
Marine Group Boat Works lease for consideration of US$33 million ($47.8 million). An incremental
borrowing rate (IBR) of 5.15% has been determined. Please see Note 24 for further information.
Additions to the right of use assets during the reporting period were $104.3 million.
(FY2021: $52.1 million). The maturity analysis of lease liabilities is included in Note 28.
Austal Limited | Notes to the consolidated financial statements 93
II
Amounts recognised in the statement of profit and loss
Amounts recognised in the Profit and Loss
Depreciation for right-of-use assets
Properties
Equipment
Motor vehicles
Total
Interest expense (included in finance costs)
Expense relating to short term leases, low value leases and leases with variable payments
Total cash flow for leases
III
Lease liabilities
2022
$’000
2021
$’000
(7,753)
(4,755)
(4)
(14)
(3)
(96)
(7,771)
(4,854)
(3,311)
(2,398)
(8,638)
(1,179)
(3,431)
(7,585)
Liabilities arising from a lease are initially measured on a present value basis by discounting the following
lease payments to their present value:
Fixed payments (including in-substance fixed payments), less any lease incentives receivable;
Variable lease payments that are based on an index or a rate, initially measured using the index or rate
as at the commencement date;
Amounts expected to be payable by the group under residual value guarantees;
The exercise price of a purchase option if the group is reasonably certain to exercise that option; and
Payments of penalties for terminating the lease, if the lease term reflects the group exercising that
option.
Lease payments to be made under reasonably certain extension options are also included in the
measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily
determined, which is generally the case for leases in the Group, the incremental borrowing rate is used,
being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset
of similar value to the right of use asset in a similar economic environment with similar terms, security and
conditions.
Subsequent to initial recognition, lease liabilities are carried at amortised cost. Payments are allocated
between repayment of principal and borrowing costs, which are charged to profit or loss over the lease period
so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
94 Austal Limited | Notes to the consolidated financial statements
IV
Right of use assets
Right of use assets are initially recognised at cost, comprising:
The amount of the lease liability;
Any lease payments made at or before the commencement date, less any incentives received;
Initial direct costs; and
Restoration costs.
Subsequently, right of use assets are depreciated over the shorter of the asset’s useful life and lease term on
a straight-line basis.
V
Short term leases, leases of low value assets and leases containing variable payments
Payments associated with short term leases of equipment and vehicles and all leases of low value assets are
recognised on a straight-line basis as an expense in profit or loss. Short term leases are leases with a lease
term of 12 months or less.
VI
Key judgements and accounting estimates
The Group determines the lease term as the non-cancellable term of the lease. The non-cancellable term is
adjusted for periods covered by an option to extend the lease if it is reasonably certain that the option will be
exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be
exercised.
The Group applies judgement in evaluating whether it is reasonably certain that it will exercise the option to
renew or terminate the lease. After the commencement date, the Group reassesses the lease term if there is
a significant event or change in circumstances that is within its control and affects its ability to exercise or
not to exercise the option to renew or to terminate.
The interest rate implicit in the lease cannot readily be determined. The Group therefore uses an Incremental
Borrowing Rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Group would have
to pay to borrow the funds necessary to obtain an asset of a similar value to the right of use asset, in a
similar economic environment, over a similar term and with a similar security. The use of an IBR therefore
requires estimation when no observable rates are available.
Austal Limited | Notes to the consolidated financial statements 95
Intangible assets and goodwill
I
Net carrying amount
Balance 1 July 2021
Cost
Accumulated amortisation and impairment
Computer
Software
$’000
Other
Goodwill
Intangibles
$’000
$’000
Total
$’000
26,731
(23,174)
31,131
-
3,830
(947)
61,692
(24,121)
Net carrying amount
3,557
31,131
2,883
37,571
Balance 30 June 2022
Cost
Accumulated amortisation and impairment
28,078
(25,001)
31,643
-
4,161
(1,356)
63,882
(26,357)
Net carrying amount
3,077
31,643
2,805
37,525
II
Reconciliation of movement for the year
Balance 1 July 2020
Additions
Disposals
Acquisitions through business combinations
Amortisation for the year
Effects of foreign exchange
Total
Computer
Software
$’000
Other
Goodwill
Intangibles
$’000
$’000
Total
$’000
5,831
12,904
3,457
895
(617)
-
(2,295)
(257)
-
-
18,739
-
(512)
(2,274)
18,227
-
-
-
(301)
(273)
(574)
22,192
895
(617)
18,739
(2,596)
(1,042)
15,379
Balance 30 June 2021
3,557
31,131
2,883
37,571
Additions
Disposals
Amortisation for the year
Effects of foreign exchange
Total
767
(31)
(1,426)
210
(480)
-
-
-
512
512
-
-
(311)
233
(78)
767
(31)
(1,737)
955
(46)
Balance 30 June 2022
3,077
31,643
2,805
37,525
96 Austal Limited | Notes to the consolidated financial statements
III
Recognition and measurement
Intangible assets acquired separately are initially measured at cost and subsequently carried at cost less any
accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets,
excluding capitalised development costs, are not capitalised and expenditure is charged against the Profit
and Loss in the year in which the expenditure is incurred.
The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite
lives are amortised over the useful life and assessed for impairment whenever there is an indication that the
intangible asset may be impaired. The amortisation period and the amortisation method for an intangible
asset with a finite useful life is reviewed at least once per financial year.
Changes in the expected useful life or the expected pattern of consumption of future economic benefits
embodied in the asset are accounted for by changing the amortisation period or method, as appropriate,
which results in a change in accounting estimate. The amortisation expense on intangible assets with finite
lives is recognised in the Statement of Comprehensive Income in the expense category consistent with the
function of the intangible asset.
A summary of the policies applied to the Group’s intangible assets is as follows:
1.
Computer software
Computer software is initially measured at cost and amortised on a straight-line basis over the
estimated useful life of each asset. Computer software is amortised on a straight-line basis over 2 to 5
years.
2.
Goodwill
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration
transferred and the amount recognised for non-controlling interest over the net identifiable assets
acquired and liabilities assumed in a business combination.
Goodwill is measured at cost less any accumulated impairment losses after initial recognition.
Goodwill acquired in a business combination is allocated to each of the Group’s Cash Generating
Units (CGU) that are expected to benefit from the combination from the acquisition date for the
purpose of impairment testing, irrespective of whether other assets or liabilities acquired are assigned
to those units.
Goodwill is tested annually for impairment regardless of whether impairment indicators are identified.
The impairment is determined for goodwill by assessing the recoverable amount of each CGU or group
of CGUs to which the goodwill relates. An impairment loss is recognised when the recoverable amount
of the CGU is less than its carrying amount. Impairment losses relating to goodwill cannot be reversed
in future periods.
Goodwill allocated to a CGU that has a partial disposal of the operation within that unit is included in
the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed
in these circumstances is measured based on the relative values of the disposed operation and the
portion of the CGU retained.
Austal Limited | Notes to the consolidated financial statements 97
Impairment testing of non-current assets
I
Review cycle
Non-current assets are reviewed on an annual basis in accordance with the Group’s accounting policies,
to determine whether there is an impairment indicator. An estimate of the recoverable amount is made where
an impairment indicator exists.
II
Cash generating units (CGU)
The recoverable amounts have been assessed at the CGU level as identified below:
USA Shipbuilding.
USA Support.
Australasia Shipbuilding.
Australasia Support.
III
Allocation of assets to CGU
Corporate assets have been allocated to CGU to the extent that they relate to the CGU.
Goodwill, acquired through business combinations has been allocated to the following segments:
USA Support – a carrying amount of $6.4 million.
Australasia Support – a carrying amount of $25.2 million.
IV
Assessment of recoverable amounts and sensitivity to changes in assumptions
The recoverable amount of the CGUs was determined based on value in use calculations using 5 year cash
flow projections or qualitative assessments where applicable. Key inputs into the cash flow projection
include the volume and profitability of contracted and projected projects. Changes in these inputs may have
an impact on the cash flow projections. Any significant change in the key assumptions could lead to an
impairment of the CGU.
1.
USA Shipbuilding
The Company performed an assessment for indicators of impairment and concluded that there were
none present from an internal or external perspective. During FY2022 there were multiple
shipbuilding awards replenishing the order book. There is no goodwill in the USA Shipbuilding CGU.
2.
USA Support
The Company performed a qualitative assessment at 30 June 2022 noting no material change in the
USA Support CGU. Based on the assessment the recoverable amount is greater than the carrying
amount of assets and that no impairment charge is required as a result of this analysis.
3.
Australasia Shipbuilding
The recoverable amount for the Australasia Shipbuilding CGU was assessed because of the diminished
value of the contracted order book at 30 June 2022 and the negative impact of COVID-19 on the
commercial vessel market.
The Company concluded that the recoverable amount is greater than the carrying amount of assets
and that no impairment charge is required as a result of this analysis however the recoverable amount
of the Australasia Shipbuilding CGU is contingent upon the successful award of future commercial
and defence contracts.
Continued depression of commercial markets as a result of COVID-19 and or failure to secure defence
shipbuilding contracts beyond completion of the Guardian Class Patrol Boats and Cape Class Patrol
Boats 11 – 18 in FY2024 would be likely to result in an impairment loss.
98 Austal Limited | Notes to the consolidated financial statements
4.
Australasia Support
The recoverable amount for the Australasia Support CGU was assessed as required under the
accounting standards because goodwill has been allocated to the Australasia CGU.
The Company concluded that the recoverable amount is greater than the carrying amount of assets
and that no impairment charge is required as a result of this analysis. A reasonable forecast risk factor
of 20% has been applied to the revenue assumptions in the perpetuity element of the impairment
assessment. The result of this factor being applied still leaves 20% headroom between the carrying
value of the CGU assets and the Net Present Value of the discounted cash flows. The risk factor
applied is in recognition that the CGU holds all the goodwill in Australasia.
This is contingent on the renewal of existing contracts and uncontracted awards. Refer above for the
allocation of the goodwill.
V
Significant accounting judgement and estimates
1.
Recoverable amount of the CGU
The following table sets out the key assumptions used to assess the recoverable amounts in the
Australasia CGU:
Concept
Growth assumptions
Perpetuity growth rate
Post tax discount rate
Average inflation on costs
Assumption
Contract awards
0.0%
9.3%
4.0%
2.
Growth assumptions
Growth assumptions are based on future vessel construction and service projects not yet awarded.
The assumptions are based on historical experience of the size of the vessel that customers typically
contract and the corresponding average tender pricing.
3.
Perpetuity growth rate
Austal has taken a conservative view and included a 0% perpetuity growth rate in calculation of the
terminal value.
Austal Limited | Notes to the consolidated financial statements 99
4.
Post tax discount rate
Discount rates are determined with regards to the risks specific to each CGU, taking into
consideration the location, time value of money and individual risks of the underlying assets that have
not been incorporated in the cash flow estimates.
Austal has adopted a post tax discount rate of 9.3% for the Australasian CGUs.
5.
Inflation on costs
Estimates are obtained from published indices for the countries from which materials are sourced,
as well as data relating to specific commodities. Forecast figures are used if data is publicly available,
otherwise historical material price movements are used as an indicator of future price movements.
The Board was satisfied that no impairment was required for any of the CGUs as at 30 June 2022.
Marine Group Boat Works (MGBW) asset purchase
Austal USA acquired assets and leases through an asset acquisition from Marine Group Boat Works (MGBW) on
15 December 2021.
The acquisition of the long-term lease agreements in the Port of San Diego, USA are an important strategic step in
expanding the support presence of Austal USA. Austal will establish a full-service ship repair capability, providing
maintenance and modernisation for a wide variety of ships, including small surface combatants and autonomous
vessels. Services will include technical and material support, topside work and dry docking.
The right of use asset and corresponding lease liability at acquisition was valued at US$38.7 million. The right of
use asset includes a commitment of US$13.3 million to capital investments within the first five years of the lease.
The IBR of 5.15% has been determined and applied to opening balances. The leases have a duration of 29 years
to November 2050.
The purchase consideration of US$33.5 million has been separately assigned to the net book value of the property,
plant & equipment acquired of US$0.5 million and an additional right of use asset of US$33.0 million. The
additional right-of-use asset is associated with the future economic benefits which the lease will provide in the
expansion of Austal USA’s Support business. The additional right-of-use asset is being depreciated on a straight-
line basis over the term of the lease.
Austal has commissioned a dry dock to be built for use at the shipyard.
100 Austal Limited | Notes to the consolidated financial statements
Investments and other financial assets
I
Net carrying amount
Other financial assets
Collateral 1
Security deposits
Total
2022
$’000
2021
$’000
14,025
908
14,933
14,013
978
14,991
1. Austal USA has a legal obligation to provide cash collateral to ensure that workers' compensation claims will
be paid if they are upheld.
II
Recognition and measurement
The Group classifies its financial assets in the following measurement categories:
Financial Assets to be measured subsequently at fair value (either through Other Comprehensive
Income, or through the Profit and Loss); and
Financial Assets to be measured at amortised cost.
The Group measures a financial asset at initial recognition at its fair value plus transaction costs that are
directly attributable to the acquisition of the financial asset in the case of a financial asset not measured
at fair value through the Profit and Loss.
The Group subsequently measures derivative financial instruments at fair value. Gains and losses on
derivative financial instruments that do not qualify for hedge accounting are recognised in the
Profit and Loss for the period. The effective portion of any change in the fair value of a derivative financial
instrument designated as a cash flow hedge is recognised in Other Comprehensive Income and presented in
the Cash Flow Hedge Reserve in equity. Amounts recognised in equity are reclassified from reserves into the
cost of the underlying transaction and recognised in the Profit and Loss when the underlying transaction
affects the Profit and Loss. The ineffective portion of any change in the fair value of the instrument is
recognised in the Profit and Loss immediately. Where a derivative financial instrument is designated as a fair
value hedge, changes in the fair value of the underlying asset or liability attributable to the hedge risk, and
gains and losses on the derivative financial instrument, are recognised in the Profit and Loss for the period.
Collateral in the statement of financial position comprises cash at bank with an original maturity of 1 year or
more. Collateral and security deposits are classified as receivables and measured at amortised cost.
Austal Limited | Notes to the consolidated financial statements 101
Assets held for sale
Current assets held for sale
Investment in Aulong Shipbuilding Co Ltd Joint Venture
Total
2022
$’000
2021
$’000
-
-
1,729
1,729
In April 2021, Austal agreed to sell its 40% shareholding in Aulong Shipbuilding Co. Ltd Joint Venture (within the
Australasia shipbuilding segment) to its joint venture partner Guangdong Jianglong Shipbuilding Co Ltd (Jianglong
Shipbuilding) who already owned the other 60% for $4.4 million.
A gain on sale of $2.7 million was recognised net of the investment in the joint venture ($1.7 million) which at
30 June 2021 was classified as an asset held for sale.
The cash proceeds of the sale were $4.2 million net of stamp duty and income tax in China.
Other non- current assets
I
Net carrying amount
Research and development credits
Recognised
USA
Total
Unrecognised
Australia
Total
2022
$’000
2021
$’000
-
-
-
-
18,983
18,983
1,451
1,451
II
Recognition and measurement
All USA R&D credits that were recognised have been utilised to partially offset the FY2022 income tax
liability and hence there are no carried forward R&D credits as at 30 June 2022.
III
Unrecognised R&D credits
A non-current asset has not been recognised in relation to $19 million of carry forward R&D tax credits that
have been generated in the Australian Consolidated Tax Group because there is sufficient uncertainty in the
Group’s ability to utilise these in the short term. The Group will continue to assess the recognition criteria
against the probability of future taxable profits.
102 Austal Limited | Notes to the consolidated financial statements
Financial risk management
Financial risk management
This note explains the Group’s exposure to financial risks and how these risks could affect future financial
performance. Current year Profit and Loss information has been included where relevant to add further context.
Risk
Exposure arising from
Monitoring
Management
Market risk - interest rate
Long-term borrowings at variable rates
Sensitivity analysis
Sustainable gearing levels
across business cycles
Market risk - interest rate
Cash, trade receivables and derivative financial
instruments
Sensitivity analysis
Excess cash invested in
high-interest deposit accounts
Market risk - foreign currency
Future commercial transactions and
recognised financial assets and liabilities not
denominated in the functional currency
Cash flow forecast,
Sensitivity analysis
Cash, short term deposits, trade receivables
and derivative financial instruments
Ageing analysis,
Credit ratings
Forward foreign exchange
contracts and forward currency
options
Monitoring of credit allowances
Borrowings, trade payables and derivative
financial instruments
Rolling cash flow forecasts
Availability of committed credit
lines and borrowing facilities
Credit risk
Liquidity
Objectives and policy
The objective of the Group’s financial risk management policy is to reduce the impacts of external threats to
the Group and to afford the opportunity to seek further investments.
Ultimate responsibility for identification and control of financial risks rests with the Board of Directors. The Board
reviews and agrees policies for managing each of the risks identified below, including hedging cover of foreign
currency, credit allowances and future cash flow forecast projections.
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis
of measurement and the basis on which income and expenses are recognised, in respect of each class of financial
asset, financial liability and equity instrument are disclosed in the relevant notes to the financial statements.
I
Market risk
Market risk is the risk that changes in interest rates and foreign exchange rates will affect the Group’s
earnings, cash flows and carrying values of its financial statements.
1.
Interest rate risk
Source of risk
The Austal Group is exposed to interest rate risk from changes in interest rates on its outstanding
borrowings, derivative instruments and investments from the possibility that changes in interest rate
risk will affect future cash flows or the fair value of financial instruments.
Risk mitigation
The cash, debt and bank covenants of the Group are monitored and re-forecasted on a monthly basis
in order to monitor interest rate risk. A variable interest rate policy is maintained to ensure repayments
are carried out as soon as practicable, where fixed interest rates are less flexible. Consideration is
given to potential renewal of existing positions and alternative financing structures.
Austal Limited | Notes to the consolidated financial statements 103
Exposure
The Group had the following exposures to interest rate risk at the end of the reporting period:
Financial assets
Cash and cash equivalents
Derivative contracts
Total
Financial liabilities
Interest bearing liabilities
Derivative contracts
Total
Net exposure
Sensitivity
2022
$’000
2021
$’000
240,113
5,899
346,899
4,250
246,012
351,149
(124,515)
(2,318)
(147,204)
(2,728)
(126,833)
(149,932)
119,179
201,217
Profit and Loss is sensitive to higher or lower interest income from cash and cash equivalents and
interest expenses on borrowings as a result of changes in interest rates. There would be no material
impact on other components of Equity as a result of changes in interest rates.
The following table demonstrates the sensitivity to a reasonable change in interest rates to the Profit
and Loss after tax. A normal level of volatility has been assessed as 100 basis points and the
sensitivity below has been calculated on that basis.
Post tax gain / (loss)
+1.00% (100 basis points)
-1.00% (100 basis points)
2022
$’000
2021
$’000
1,352
(1,352)
1,729
(1,729)
The sensitivity analysis assumes that the change in interest rates is effective from the beginning of
the financial year and the balances are constant over the year.
2.
Foreign currency risk
Source of risk
The Group is exposed to currency risk on sales, purchases or components for construction that are
denominated in a currency other than the respective functional currencies of the Group entities,
primarily Australian Dollars (AUD) for the Australia operations and US Dollars (USD) for the USA,
Philippines and Vietnam operations. The Group is also exposed to foreign exchange movements
(primarily in USD) on the translation of the earnings, assets and liabilities of its foreign operations.
The Group’s transactions are primarily denominated in USD, AUD and EUR.
104 Austal Limited | Notes to the consolidated financial statements
Risk mitigation
The Group’s objective is to minimise the risk of a variation in the rate of foreign exchange used to
convert foreign currency revenues and expenses and assets or liabilities to the functional currency of
each Group entity by utilising the following techniques:
Negotiation of contracts to adjust for adverse exchange rate movements.
Using natural hedges.
Using financial instruments, such as foreign currency exchange contracts and swaps.
Exposure
The Group’s financial assets and liabilities exposed to foreign currency risk at 30 June 2022 were:
Balance 30 June 2022
Financial assets
Cash and cash equivalents
Trade and other receivables
Derivatives
Total
Financial liabilities
Trade and other payables
Derivatives
Total
Balance 30 June 2021
Financial assets
Cash and cash equivalents
Trade and other receivables
Derivatives
Total
Financial liabilities
Trade and other payables
Derivatives
Total
AUD
$’000
255
-
-
255
(5)
(836)
(841)
AUD
$’000
132
-
240
372
-
(252)
(252)
All values are stated in AUD equivalent
USD 1
$’000
EUR 2
$’000
$’000
Other
1,599
-
1
1,600
32
-
5,769
5,801
(9)
(4)
(7)
(1,131)
(13)
(1,138)
1,590
692
129
2,411
(523)
(347)
(870)
All values are stated in AUD equivalent
USD 1
$’000
EUR 2
$’000
$’000
Other
622
-
3
625
(50)
(575)
(625)
47
-
3,882
3,929
-
(1,822)
(1,822)
620
385
125
1,130
(315)
(79)
(394)
Total
$’000
3,476
692
5,899
10,067
(544)
(2,318)
(2,862)
Total
$’000
1,421
385
4,250
6,056
(365)
(2,728)
(3,093)
1. Spot USD / AUD exchange rate at 30 June 2022 was 0.6901 (30 June 2021: 0.7498).
2. Spot EUR / AUD exchange rate at 30 June 2022 was 0.6582 (30 June 2021: 0.6323).
Austal Limited | Notes to the consolidated financial statements 105
Sensitivity
A 10 per cent strengthening or weakening of the Australian Dollar against the following currencies
would have increased / (decreased) net profit after tax and equity below at balance date with all other
variables held constant as illustrated:
NPAT higher / (lower)
Equity higher / (lower)
2022
$’000
2021
$’000
2022
$’000
2021
$’000
Judgement of reasonable possible movements
USD / AUD - 10% lower
USD / AUD - 10% higher
EUR / AUD - 10% lower
EUR / AUD - 10% higher
2,240
(1,832)
333
(273)
1,766
(1,445)
1,648
(1,349)
188,053
(155,425)
(3,258)
2,666
103,585
(84,783)
(4,968)
4,064
1. Spot USD / AUD exchange rate at 30 June 2022 was 0.6901 (30 June 2021: 0.7498).
2. Spot EUR / AUD exchange rate at 30 June 2022 was 0.6582 (30 June 2021: 0.6323).
The foreign currency translation of USD denominated net assets would have significantly affected the
equity at the reporting date. The Group had US$484.1 million of USD denominated net assets at
30 June 2022 (FY2021: US$485.9 million).
Summary of forward foreign exchange contracts
The following table summarises the AUD equivalent value of the forward foreign exchange agreements
by currency. Foreign currency amounts are translated at rates current at the reporting date.
The ‘Buy’ amounts represent the AUD equivalent of commitments to purchase foreign currencies, and
the ‘Sell’ amount represents the AUD equivalent of commitments to sell foreign currencies.
2022
2021
Buy
Sell
Buy
Sell
Average
Forward
Rate
AUD
Equivalent
$'000
Average
Forward
Rate
AUD
Equivalent
$'000
Average
Forward
Rate
AUD
Equivalent
$'000
Average
Forward
Rate
AUD
Equivalent
$'000
USD
Buy USD
(Sell USD)
Buy USD
(Sell USD)
less than 3 months
3 - 12 months
> 12 months
0.7102
0.7307
-
Total
EUR
12,491
12,789
-
25,280
0.7366
0.7391
0.7310
(471)
(15,581)
(4,769)
(20,821)
0.7212
0.7560
-
0.7763
0.7690
0.7657
14,551
441
-
14,992
(176)
(26,703)
(24,826)
(51,705)
Buy EUR
(Sell EUR)
Buy EUR
(Sell EUR)
less than 3 months
3 - 12 months
> 12 months
0.5714
0.5846
0.5616
Total
177
3,331
2,628
6,136
0.5987
0.5983
0.6313
(11,089)
(43,756)
(298)
(55,143)
0.6424
0.6667
0.6108
0.6003
0.5958
-
77
25,790
18,572
44,439
(20,086)
(48,869)
-
(68,955)
106 Austal Limited | Notes to the consolidated financial statements
II
Credit risk
Credit risk is the risk of financial loss to the Group as a result of customers or counterparties to financial
assets failing to meet their contractual obligations.
1.
Source of risk
The Group is exposed to counterparty credit risk from trade and other receivables and financial
instrument contracts that are outstanding at the reporting date.
2.
Risk mitigation
Trade receivables
The Group only trades with recognised, creditworthy third parties. The Group’s policy is that all
customers who wish to trade on credit terms are subject to credit verification procedures, which are
conducted internally. The Group, while exposed to credit related losses in the event of
non-performance by counterparties to financial instruments, does not expect counterparties to fail to
meet their obligations given their credit ratings.
The Group minimises concentrations of credit risk and the risk of default of counterparties in relation
to cash and cash equivalents and financial instruments by spreading them amongst a number of
financial institutions.
Vessel sales contracts are structured to ensure that the Group is paid milestone progress payments
from the client to cover the ongoing cost of the vessel construction.
Financial instruments
The Group’s policy is to minimise the risk that the principal amount will not be recovered and the risk
that funds will not be available when required whilst at the same time obtaining the maximum return
relative to the risk. The Group’s policy is to restrict its investment of surplus cash funds to financial
institutions with a Standard and Poor’s credit rating of at least A-2, and for a period not exceeding
3 months to manage this risk. The Group is able to undertake investments in short term deposits to
achieve this objective.
Other financial assets
The Group’s exposure to counterparty credit default risk arising from the other financial assets of the
Group, which comprise cash and cash equivalents and certain derivative instruments, is equal to the
carrying amount of these instruments. The maximum exposure to credit risk at the reporting date is
disclosed in Note 15.
Cash and term deposits are predominantly held with three tier-one financial institutions which are
considered to be low credit risk.
III
Liquidity risk
Liquidity risk is the risk that the Group is not able to refinance its debt obligation or meet other cash outflow
obligations when required.
1.
Source of risk
Exposure to liquidity risk derives from the Group’s operations and from the external interest bearing
liabilities that it holds.
2.
Risk mitigation
The liquidity position of the Group is managed to ensure sufficient liquid funds are available to meet
financial commitments in a timely and cost-effective manner.
The Group’s policy is to continually review the Group’s liquidity position including cash flow forecasts
to determine the forecast liquidity position and maintain appropriate liquidity levels.
Critical assumptions include input costs, project pipeline, exchange rates and capital expenditure.
Austal Limited | Notes to the consolidated financial statements 107
The Group aims to hold a minimum liquidity buffer of $60 million between cash on hand and
undrawn non-current committed funding to meet any unforeseen cash flow requirements.
Further information relating to the Group’s committed finance facilities, including the maturity dates
of these facilities, is provided in Note 10 and Note 11.
3.
Exposure
The contractual cash flow and maturities of financial liabilities, including interest payments are as
follows:
Years to maturity
0 - 1
$’000
1 - 5
$’000
> 5
$’000
Total 1
$’000
Balance 30 June 2022
Derivative financial assets / (liabilities)
Outflow
Inflow
(73,754)
78,531
(5,710)
5,077
Net derivative financial assets / (liabilities)
4,777
(633)
Non-derivative financial liabilities
Trade and other payables
Go Zone Bond facility
Lease liabilities
Total
Balance 30 June 2021
Derivative financial assets / (liabilities)
(127,942)
-
-
(125,211)
(8,717)
(30,712)
(159,277)
(136,659)
(155,923)
(159,277)
(451,859)
Years to maturity
0 - 1
$’000
1 - 5
$’000
> 5
$’000
Total 1
$’000
-
-
-
-
-
-
-
-
-
-
-
(79,464)
83,608
4,144
(127,942)
(125,211)
(198,706)
(150,258)
151,599
1,341
(126,202)
(116,756)
(32,206)
(102,696)
Outflow
Inflow
(123,606)
(26,652)
126,107
25,492
Net derivative financial assets / (liabilities)
2,501
(1,160)
Non-derivative financial liabilities
Trade and other payables
Go Zone Bond facility
Vessel finance for CCPB 9 & 10 2
Lease liabilities
(126,202)
-
-
(116,756)
(32,206)
(7,377)
-
(19,673)
(75,646)
Total
(165,785)
(136,429)
(75,646)
(377,860)
1. Contractual cash flows include interest.
2. Contractual cashflows are equal to the residual value of the CCPB 9 & 10 vessels. Further information is provided in Note 11.
The Group had $50.0 million (FY2021: $50.0 million) of unused cash loan credit facilities available
for immediate use at the reporting date and $240.1 million (FY2021: $346.9 million) in cash and
cash equivalents, which can be used to meet its liquidity needs.
108 Austal Limited | Notes to the consolidated financial statements
IV
Offsetting financial instruments
The Group presents its assets and liabilities on a gross basis. Derivative financial instruments entered into by
the Group are subject to enforceable master netting arrangements such as the International Swaps and
Derivatives Associations (ISDA) master netting agreement. All outstanding transactions under an ISDA
agreement are terminated in certain circumstances, for example, when a credit event such as a default
occurs. The termination value is assessed and only a single net amount is payable in settlement of all
transactions.
The amounts set out in the liquidity risk table represent the derivative financial assets and liabilities of the
Group that are subject to those arrangements and are presented on a gross basis.
Derivatives and hedging
I
Cash flow hedges
The effective portion of any change in the fair value of a derivative financial instrument designated as a
hedge of cash flows relating to a highly probable forecast transaction (income or expense) is recognised in
Other Comprehensive Income and presented in the Cash Flow Hedge Reserve in equity. The ineffective
portion of any change in the fair value of the instrument is recognised in the Profit and Loss immediately.
II
Fair value hedges
Where a derivative financial instrument is designated as a fair value hedge, changes in the fair value of the
underlying asset or liability attributable to the hedged risk, and gains and losses on the derivative
instrument, are recognised in the Profit and Loss for the period.
III
Fair value through profit and loss
Gains and losses on derivative financial instruments that do not qualify for hedge accounting are recognised
in the Profit and Loss for the period.
IV
Financial liabilities
Loans, overdrafts, and trade and other payables are measured at amortised cost, except where fair value
hedge accounting is applied.
Austal Limited | Notes to the consolidated financial statements 109
Fair value measurements
I
Fair value
The value of the Group’s financial assets and liabilities is calculated using the following techniques
depending on the type of financial instrument as follows:
The fair value of financial assets and financial liabilities traded in active markets is the quoted market
price at the reporting date.
The fair value of forward exchange contracts is calculated using discounted cash flows, reflecting the
credit risk of various counterparties. Future cash flows are calculated based on the contract rate,
observable forward interest rates and foreign exchange rates. Adjustments for the currency basis are
made at the end of the reporting period.
The nominal value less expected credit losses of trade receivables and payables are assumed to
approximate their fair values due to their short term maturity.
1.
Fair value hierarchy
The table below analyses financial instruments carried at fair value by valuation method. The different
levels have been defined as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset
or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data.
Balance 30 June 2022
Financial assets
Derivatives
Financial liabilities
Derivatives
Balance 30 June 2021
Financial assets
Derivatives
Financial liabilities
Derivatives
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
-
5,899
-
5,899
-
(2,318)
-
(2,318)
-
4,250
-
4,250
-
(2,728)
-
(2,728)
2.
Fair value of financial assets and liabilities carried at amortised cost
Cash and cash equivalents, trade and other receivables, and trade and other payables are carried at
amortised cost which equals their fair value.
Interest bearing liabilities are carried at amortised cost and have a carrying value of $124.5 million
(30 June 2021: $147.2 million) which equals their fair value. Further information is provided in
Note 11.
110 Austal Limited | Notes to the consolidated financial statements
Unrecognised items
Commitments and contingencies
Capital commitments
Property, plant and equipment
Total
Guarantees
Bank performance guarantees1
Sureties
Total
2022
$’000
2021
$’000
(13,566)
(60,761)
(13,566)
(60,761)
(116,396)
(835)
(162,161)
(22,810)
(117,231)
(184,971)
1. The bank performance guarantees are secured by a mortgage over land and buildings and floating charges over cash, receivables,
work in progress that is not owned by customers and plant and equipment.
I
Commitments - Guarantees
Refer to Note 11 for information regarding performance guarantees.
II
Contingencies
The Group occasionally receives claims and writs for damages and other matters arising from its operations
in the course of its normal business. The Group entities may also have potential financial liabilities that
could arise from historical commercial contracts. No material losses are anticipated in respect of any of
those contingencies.
A specific provision is made where it is deemed appropriate in the opinion of the directors, otherwise the
directors deem such matters are either without merit or of such kind or involve such amounts that would not
have a material adverse effect on the results or financial position of Austal if disposed of unfavourably.
1.
Vessel delivery postponement
Extended Government imposed comprehensive quarantine measures implemented as a result of
COVID-19, have postponed a vessel’s scheduled delivery by several months, which has triggered a
potential cancellation right notwithstanding the absence of default by either party. Despite this
contractual entitlement, both parties have agreed to extend the contractual delivery to January 2023.
The customer retains the right to cancel the contract if Austal does not deliver the vessel within an
agreed period if the revised delivery date is not met. Both parties continue to cooperate constructively
to ensure the revised contracted date is met.
Delivery outside the cancellation period would require Austal to repay milestone payments received to
the date of cancellation which would be €62.4 million and Austal would then take possession of the
vessel.
Austal would need to resell the vessel to an alternative buyer.
2.
Other
The Directors are not aware of any other material contingent liabilities in existence as at
30 June 2022 requiring disclosure in the financial statements.
Austal Limited | Notes to the consolidated financial statements 111
Corporate investigations
As described in previous annual and half year reports and ASX announcements, the Group is assisting ASIC and US
regulatory authorities (notably, the Department of Justice (DoJ) and the Securities Exchange Commission) in their
investigations into historical matters concerning Austal’s Littoral Combat Ship (LCS) program before July 2016.
In June 2021, ASIC formally advised Austal Limited (the Company) that (i) it would not commence criminal
proceedings, and (ii) it has commenced civil proceedings against the Company and its prior CEO. The civil
proceedings allege that although an announcement notifying the market of a write back of profits from the US
business was made on 4 July 2016, the Company was aware as early as 4 June 2016 of the need to make a
material write back of work in progress attributable to the LCS program. ASIC is seeking civil declarations that the
Company contravened its continuous disclosure obligations as well as the relevant misleading and deceptive
conduct provisions of the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission
Act 2001 (Cth).
The matter has been scheduled for hearing in the Federal Court of Australia in October 2022. The Company is
defending the allegations but has continued to engage with ASIC to explore alternative dispute resolution avenues
and these continue to be explored. As at the date of this report, the Company is not in a position to provide any
further detail in this regard however it will continue to prepare for hearing in the event that an alternative resolution
cannot be reached.
The investigations by US regulatory authorities have been focussed primarily on Austal’s USA operations, including
the write back of work in progress (WIP) attributable to the LCS program in July 2016, the procurement of certain
ship components for use in connection with US Government contracts and charging and allocation of labour hours.
The Company and its wholly owned subsidiary Austal USA, LLC (Austal USA) have been cooperating with the US
regulatory authorities in relation to these investigations and engaged external lawyers in the US to conduct their
own detailed investigation in relation to what they understand to be the focus of the US regulatory investigations.
Since the FY2021 Annual Report, the Company has made substantial progress in relation to 2 of the matters being
investigated by US authorities:
•
•
In relation to the investigation of potential misallocation of labour hours across different projects at Austal
USA, the Company has completed its internal investigations and determined that there has not been any
misallocation of labour hours or incorrect attribution of costs codes on its projects. The Company has made
the DoJ aware of this and is not aware of DoJ looking to take this matter further.
In relation to the procurement and installation of butterfly valves on board certain LCS vessels, it is noted
that although the valves may not have met all relevant military specification requirements at the time of
their procurement, they have since been accepted by the U.S. Navy on board these vessels and remain in
use. The Company and DoJ have agreed ‘in principle’ to resolve this issue on confidential terms which
include the payment by the Company of a settlement sum that is proportionate to the value of the valves.
The exact sum cannot be disclosed at the time of this report.
In relation to the remaining issue regarding the investigation of the overstatement of profits during 2012 – 2016,
the Company continues to work with the DoJ to assist it in closing out its investigation. The Company has not been
advised when this investigation (or that of the SEC, proceeding in parallel) will be complete or what the outcome
will be.
Austal USA has appointed a highly regarded independent compliance and risk management advisor in
Washington DC to assist with the review of current compliance programs and practices, and the development and
implementation of a significantly enhanced compliance regime to ensure this kind of issue does not arise again.
Austal USA has made significant progress in updating its compliance program accordingly and it is anticipated this
will be complete during 2022. The Group is confident that this and other proactive steps it has already
implemented to strengthen its internal reporting and compliance practices will be taken into account in determining
whether there are any potential consequences arising from matters identified by the investigation in the US, as well
as ensuring such circumstances do not happen again.
Nevertheless, it is still possible that the US regulatory investigations could lead to civil or criminal proceedings
resulting in the application of penalties, damages, and/or possibly suspension or debarment from future US
Government contracts. The Group has not been advised whether such proceedings will be commenced in the US, or
whether any fines or penalties may be levied (or if so, their likely magnitude). Hence the Group is not in a position
to make any provision for such fines, penalties or other adverse outcomes at this stage. Any of these potential
outcomes could have a material adverse effect on the Group’s consolidated financial position, results of operations,
or cash flows.
112 Austal Limited | Notes to the consolidated financial statements
An $8.2 million provision has been recorded based on the best estimate of the probable incremental professional
services costs relating to the Australian civil proceedings and the US investigations. In light of uncertainty around
the potential outcome, the Group has had to apply significant judgement when considering whether, and how much,
to provide for costs. As a result of the high level of estimation uncertainty, the provision could change substantially
over time as new facts emerge and the investigations progress. Refer to the Provisions Note 19 for further
information.
Events after the balance date
I
Dividend proposed
An unfranked final dividend of 4.0 cents per share has been declared for FY2022 post 30 June 2022
(FY2021 final: 4.0 cents per share, unfranked).
II
Other
The Directors are not aware of any other significant events since the reporting date.
Austal Limited | Notes to the consolidated financial statements 113
The Group, management and related parties
Parent interests in subsidiaries
The consolidated financial statements include the financial statements of Austal Limited and the subsidiaries listed
in the following table.
Company
Austal Ships Pty Ltd
Austal Cyprus Ltd
Austal Egypt LLC
Austal Muscat LLC1
Austal Service Pty Ltd
Austal Service Darwin Pty Ltd
Hydraulink (NT) Pty Ltd
KM Engineering (NT) Pty Ltd
Austal Systems Pty Ltd
Austal UK Ltd
Austal Holdings Vietnam Pty Ltd
Austal Viet Nam Co Ltd
Austal Holdings Inc
Austal USA LLC
Austal USA Service LLC
ElectraWatch Inc
Austal Services Subic Bay Philippines Inc
Austal Philippines Pty Ltd
Austal Lewek Hercules Inc
Austal Middle East Pty Ltd
Austal Holdings China Pty Ltd
Austal Subic Bay Holdings Pty Ltd
Austal Australasia Pty Ltd
Seastate Pty Ltd
BSE Maritime Group Pty Ltd
Austal Cairns Pty Ltd
BSE Maritime Group Assets Pty Ltd
Brisbane Slipways Holdings Pty Ltd
Brisbane Slipways & Engineering Pty Ltd
Austal Brisbane Pty Ltd
Brisbane Slipways Assets Pty Ltd
Country
Australia
Cyprus
Egypt
Oman
Australia
Australia
Australia
Australia
Australia
United Kingdom
Australia
Vietnam
USA
USA
USA
USA
Philippines
Australia
Philippines
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Equity Interest
2022
2021
100%
100%
100%
70%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
70%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
1. Austal Ships Pty Ltd owns 70% of the shareholdings in Austal Muscat LLC but consolidates 100% of profits less commission
paid to the minority interest holder.
Related party disclosures
Group policy is that all transactions with related parties are conducted on commercial terms and conditions.
No related party transactions occurred with the consolidated entity other than the remuneration of Directors and
KMP and the matters disclosed in this report.
114 Austal Limited | Notes to the consolidated financial statements
Key management personnel (KMP) compensation
KMP Compensation
Short-term employee benefits
Post-employment benefits
Long term benefits
Share-based payments
Total
2022
$’000
2021
$’000
4,875
173
27
463
5,538
4,449
172
(8)
184
4,797
Detailed remuneration disclosures are provided in the Remuneration Report commencing on page 20.
Share based payments
I
Performance rights
The following changes in performance rights took place during the year:
Balance at
Grant Year
30 June 2021
Granted
Vested
Forfeited
/ Lapsed
Balance at
30 June 2022
Expiry date
FY2020
FY2021
FY2022
Total
703,412
955,539
-
-
-
2,302,302
(236,806)
-
-
(466,606)
(215,911)
(358,554)
-
739,628
1,943,748
30 Jun 2022
30 Jun 2023
30 Jun 2024
1,658,951
2,302,302
(236,806)
(1,041,071)
2,683,376
The Board has the discretion to decide if performance rights will lapse or vest.
II
Service rights
The following changes in service rights took place during the year:
Balance at
Grant Year
30 June 2021
Granted
Vested
Forfeited
/ Lapsed
Balance at
30 June 2022
Expiry date
FY2020
FY2021
FY2022
Total
320,423
388,545
-
708,968
-
-
612,915
612,915
-
-
-
-
(22,313)
(23,213)
(31,443)
(76,969)
298,110
365,332
581,472
1,244,914
30 Jun 2024
30 Jun 2025
30 Jun 2026
Service rights were introduced in FY2020 to offer a long term incentive to non-KMP. Service rights have a
vesting period of 5 years. The only vesting criteria is fulfilment of the 5 year service period.
Austal Limited | Notes to the consolidated financial statements 115
III
Recognition - e quity settled transactions
The Group provides benefits to employees (including KMP) of the Group in the form of share-based
payments, whereby employees render services in exchange for shares or rights over shares (equity settled
transactions).
Equity settled benefits have been provided to senior management and Directors under the following plans in
the current and prior years:
The Long Term Incentive Plan (LTI Plan)
The Short Term Incentive Plan (STI Plan)
TFR share rights
No account is taken of any performance conditions, other than conditions linked to the price of the shares of
Austal Limited (market conditions) if applicable in valuing equity settled transactions.
The cost of these equity settled transactions with employees is recorded by reference to the fair value at the
date at which they are granted. The cost of equity settled transactions is recognised, together with a
corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending
on the date on which the relevant employees become fully entitled to the award (the vesting period).
The cumulative expense recognised for equity settled transactions at each reporting date until vesting date
reflects (i) the extent to which the vesting period has expired and (ii) the number of awards that will
ultimately vest in the opinion of the Directors of the Group. This opinion is formed based on the best
available information at the reporting date. No adjustment is made for the likelihood of market performance
conditions being met because the effect of these conditions is included in the determination of fair value at
grant date. The Profit and Loss charge or credit for a period represents the movement in cumulative expense
recognised as at the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is
conditional upon a market condition. An expense is recognised as if the terms had not been modified.
An expense is also recognised for any modification that increases the total fair value of the share-based
payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.
An equity settled award that is cancelled is treated as if it had vested on the date of cancellation, and any
expense not yet recognised for the award is recognised immediately, however, cancelled awards and new
awards are treated as if they were a modification of the original award if a new award is substituted for the
cancelled award and designated as a replacement award on the date that it is granted, as described in the
previous paragraph.
Shares in the Group held by the Employee Share Trust (EST) are classified and disclosed as Reserved Shares
and deducted from equity in the Statement of Changes in Equity. Further information relating to Reserved
Shares is provided in Note 13.
IV
Recognised share-based payment expenses
The expense recognised for share based payments during the year is shown in the table below:
Share-based payments expense
Expense arising from equity-settled share-based payment transactions
(2,850)
(3,017)
2022
$’000
2021
$’000
116 Austal Limited | Notes to the consolidated financial statements
V
Significant accounting judgements and estimates
The Group is required to estimate the fair value of equity-settled share-based payment transactions with
employees at the grant date. Estimating the fair value requires determination of the most appropriate
valuation model which is dependent on the terms and conditions of the grant. This estimate also requires
determination of the most appropriate inputs to the valuation model including the expected life of the share
rights, volatility and dividend yield.
The Group has applied the Black Scholes option pricing model to estimate the fair value of the rights with
non-market based vesting conditions. A hybrid employee share option pricing model has been applied to
estimate the fair value of rights with market based vesting conditions.
Parent entity information
Information relating to Austal Limited, the parent entity, is detailed below:
Balance sheet
Assets
Current
Non - current
Total
Liabilities
Current
Non - current
Total
Net assets
Equity
Contributed equity
Employee benefits reserve
Asset revaluation reserve
Cash flow hedge reserve
Retained earnings
Total
Income
Net profit after tax
Total comprehensive income
2022
$’000
2021
$’000
163,967
317,948
72,407
325,672
481,915
398,079
(11,239)
(1,275)
(13,905)
(12,956)
(12,514)
(26,861)
469,401
371,218
143,932
8,255
11,332
90
141,666
7,670
11,332
50
305,792
210,500
469,401
371,218
124,010
124,049
69,072
68,282
Austal Limited provides parent company guarantees in respect of contract performance by various members of the
Austal Group including Austal USA LLC, Austal Ships Pty Ltd, Austal Philippines Pty Ltd and
Austal Holdings Vietnam Pty Ltd.
Austal Limited | Notes to the consolidated financial statements 117
Directors’ declaration
I state in accordance with a resolution of the Directors of Austal Limited, that:
In the opinion of the Directors:
The financial statements and notes of the consolidated entity are in accordance with the
Corporations Act 2001, including:
Giving a true and fair view of the consolidated entity’s financial position at 30 June 2022 and of its
performance for the year ended on that date; and
Complying with Accounting Standards (including the Australian Accounting Interpretations) and
Corporations Regulations 2001.
The financial Statements and notes also comply with International Financial Reporting Standards as disclosed
in Note 2.
In the opinion of the Directors, 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 at the date of this declaration.
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 2022.
John Rothwell AO
Chairman
on behalf of the Board
25 August 2022
118 Austal Limited | Directors’ declaration
Independent audit report to the members of Austal
Limited
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Tower 2, Brookfield Place
123 St Georges Terrace
Perth WA 6000
GPO Box A46
Perth WA 6837 Australia
Tel: +61 8 9365 7000
Fax: +61 8 9365 7001
www.deloitte.com.au
Independent Auditor’s Report to the members of Austal
Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Austal Limited (the “Company”) and its subsidiaries (the “Group”) which
comprises the consolidated statement of financial position as at 30 June 2022, the consolidated statement of profit or
loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement
of cash flows for the year then ended, and notes to the financial statements, including a summary of significant
accounting policies and other explanatory information, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001,
including:
• Giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its financial performance for
the year then ended; and
• Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards
are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are
independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and
the ethical requirements of the Accounting Professional & Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial
report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the
directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Austal Limited | Independent audit report 119
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial report for the current period. These matters were addressed in the context of our audit of the financial report
as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key Audit Matter
Revenue recognition
As disclosed in Note 4, Shipbuilding revenue for
the year ended 30 June 2022 was $1,159 million
(USA Shipbuilding $880 million, Australasia
Shipbuilding $279 million – refer Note 3).
Vessel construction revenues are recognised over
time as performance obligations are fulfilled after
assessing all factors relevant to each contract,
including specifically assessing the following, as
applicable:
•
•
•
•
•
Determining the stage of completion and
towards
of
measurement
satisfaction of performance obligations;
progress
Estimating total contract revenue and costs
including the estimation of contingencies the
most significant elements of which are in
relation to the cost contingencies on the LCS
and EPF programs in USA Shipbuilding;
Estimating the loss position on the T-ATS
contract based on the inclusion of project
risks and opportunities in the EAC forecast;
Determining the contractual entitlement and
assessment of customer approval of contract
modifications, variations and acceptance of
claims; and
Estimation of project completion dates.
We focused on recognition of vessel
construction revenue as a key audit matter due
to the number and type of estimation events
over the course of a contract life, the unique
nature of individual contract terms and the high
level of judgement required in estimating and
accounting for cost contingencies.
120 Austal Limited | Independent audit report
How the scope of our audit responded to the Key Audit Matter
Our audit procedures performed included but were not limited
to:
•
•
•
Evaluating the design and implementation of processes and
controls in respect of the underlying project costs and the
recognition of revenue and the operating effectiveness of
relevant controls;
Discussions with key project managers on the risks and
opportunities in relation to certain individual contracts;
Selecting a sample of contracts for testing based on a
number of quantitative and qualitative factors which may
indicate that a greater level of judgement is required in
recognising revenue, including consideration of historical
issues identified, variations and claims, delay risk, high
potential impact and high likelihood of risk events and
potential loss making contracts:
o Utilising engineering specialists in the USA to assist in
the assessment of the stage of completion of selected
vessels in USA Shipbuilding given the significance of the
revenue contribution to the Group;
o Obtaining an understanding of the contract terms and
conditions of relevant contracts to evaluate whether
these were reflected in the Group’s estimate of forecast
costs and revenue;
o Testing a sample of costs incurred to date and agreeing
these to supporting documentation;
o Testing contractual entitlement relating to contract
modifications, variations and claims recognised within
contract revenue to supporting documentation and by
reference to the underlying contracts;
o Evaluating the probability of recovery of contract assets
by reference to the status of contract negotiations,
historical
supporting
documentation;
recoveries
other
and
o Assessing the level of cost contingencies on the LCS and
EPF programs in USA Shipbuilding;
o Evaluating the reasonableness of the future overhead
rates used in the estimation of costs in USA Shipbuilding
by comparing the overhead assumptions to the
estimate of future overheads and future workload in
the order book;
Carrying amount of non-current assets
Australasia
Support
-
and Australasia
Shipbuilding
As at 30 June 2022, the carrying value of goodwill,
intangible assets and property, plant
other
and equipment was
as
disclosed in Notes 20 and 22.
$836.9 million
Long lived assets in relation to the Australasia
Shipbuilding and Support Cash Generating
Units (CGUs) was $85 million and $72
million, respectively.
The Group prepared a value in use model
to assess the recoverable value of these CGUs.
This requires the Group to exercise significant
judgement, with key assumptions
including
the level of uncontracted revenue included in
the forecast and the operating margins.
o Challenging the sufficiency of the onerous loss provision
on the T-ATS contract based on the project risks and
opportunities in the EAC forecast;
o Evaluating significant exposures to liquidated damages
for potential late delivery of vessels where relevant; and
o Evaluating historical accuracy of forecast costs to
complete by comparing actual performance to budgets.
We also assessed the adequacy of the relevant disclosures in
the financial statements.
Our procedures included, but were not limited to:
•
•
•
•
•
Understanding the process that the Group undertakes to
develop the value in use model;
Assessing historical forecasting accuracy by comparing
actual performance to budgets;
In conjunction with our valuation specialists:
o Challenging the forecast revenue with consideration of
contracted work, uncontracted work (including the
probability assigned
forecast
uncontracted work) and external industry data, where
available;
securing
the
to
o Evaluating the terminal growth rate with reference to
market forecasts;
o Independently calculating the discount rate; and
o Evaluating the reasonableness of operating margins
with reference to past performance and knowledge of
the business.
Testing the models for mathematical accuracy; and
Performing sensitivity analysis on the forecast revenue,
operating margins, terminal growth assumptions and
discount rate.
Provisions
As disclosed in Note 19, the Group recognised a
provision of $8.2 million as at 30 June 2022 for the
probable incremental professional services costs
(“costs”) relating to the regulatory investigations.
The Group had to apply significant judgement
when considering whether and how much to
We also assessed the appropriateness of the disclosures in
Note 20 and 22.
Our procedures included, but were not limited to the following:
•
•
Discussing the potential costs with in-house legal counsel,
other management and the directors;
Challenging the assumptions and the basis for the provision;
Austal Limited | Independent audit report 121
provide for costs. As a result of the high level of
estimation uncertainty, the provision could
change substantially over time as new facts
emerge and the investigations progress.
•
Assessing the appropriateness of recognition of a contingent
asset relating to the amounts expected to be recovered
from the insurers; and
• Where possible, corroborating the assumptions to external
sources and input from the Group’s professional advisors.
We also assessed the appropriateness of the disclosures in
Note 19.
Other Information
The directors are responsible for the other information. The other information comprises the information included in
the Group’s annual report for the year ended 30 June 2022 but does not include the financial report and our auditor’s
report thereon.
Our opinion on the financial report does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial report or our knowledge obtained
in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are required to report that fact. We have nothing to
report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view
in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the
directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is
free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative
but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian
Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and
maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate
to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations,
or the override of internal control.
122 Austal Limited | Independent audit report
• Obtain an understanding of internal control relevant to the audit 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
Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the directors .
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or,
if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained
up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to
continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and
whether the financial report represents the underlying transactions and events in a manner that achieves fair
presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and
performance of the Group’s audit. We remain solely responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied.
From the matters communicated with the directors, we determine those matters that were of most significance in the
audit of the financial report of the current period and are therefore the key audit matters. We describe these matters
in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of such
communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 20 to 46 of the Directors’ Report for the year ended 30
June 2022.
In our opinion, the Remuneration Report of Austal Limited, for the year ended 30 June 2022, complies with section 300A
of the Corporations Act 2001.
Austal Limited | Independent audit report 123
Responsibilities
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.
DELOITTE TOUCHE TOHMATSU
A T Richards
Partner
Chartered Accountants
Perth, 25 August 2022
124 Austal Limited | Independent audit report
Shareholder information
The following information was extracted from the Company’s share register at 30 June 2022:
Distribution of shares
Individual shareholding
1 - 1000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
Twenty largest shareholders
Number of
% of Total
Number of
shares
issued capital
holders
2,083,279
14,044,164
13,942,608
45,938,852
285,849,251
0.58%
3.88%
3.85%
12.70%
78.99%
3,666
5,161
1,824
1,863
105
361,858,154
100.00%
12,619
Rank
Shareholder
Number of
% of Total
shares
issued capital
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
HSBC Custody Nominees (Australia) Limited
Tattarang Ventures Pty Ltd
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Pty Limited
Austro Pty Ltd
National Nominees Pty Ltd
Washington H Soul Pattinson and Company Limited
Onyx (WA) Pty Ltd
Mr David Singleton
Mr Graham Wallace Ray
Pacific Custodians Pty Limited
Mr Gary Heys & Mrs Dorothy Heys
Ace Property Holdings Pty Ltd
UBS Nominees Pty Ltd
Mossisberg Pty Ltd
Mr Brenton Anthony Cook
Mr William Robert Chambers
Lavinia Shipping Limited
BNP Paribas NOMS (NZ) Ltd
Kenny Nominees (NT) Pty Ltd
Total
Substantial shareholders
Rank
Shareholder
1
2
Tattarang Ventures Pty Ltd
Austro Pty Ltd
Total
Voting rights
57,878,112
51,203,428
37,467,566
34,268,263
32,761,692
14,526,025
5,770,000
5,600,000
2,533,162
2,503,900
2,163,974
2,044,670
1,900,000
1,672,959
1,517,029
1,009,500
1,000,000
931,061
850,341
777,881
15.99%
14.15%
10.35%
9.47%
9.05%
4.01%
1.59%
1.55%
0.70%
0.69%
0.60%
0.57%
0.53%
0.46%
0.42%
0.28%
0.28%
0.26%
0.23%
0.21%
258,379,563
71.39%
Number of
% of Total
shares
issued capital
51,203,428
32,761,692
14.15%
9.05%
83,965,120
23.20%
All ordinary shares issued by Austal Limited carry one vote per share without restriction.
Austal Limited | Independent audit report 125
Corporate governance statement and ESG report
The Company has elected to post its Corporate Governance Statement on its website in accordance with ASX Listing
Rule 4.10.3 along with its Environmental, Social and Governance Report (ESG Report).
The Corporate Governance Statement and ESG Report can be found at the following URL:
http://www.austal.com/corporategovernance
Corporate directory
Directors
Non-Executive Directors
Mr John Rothwell
Mr Giles Everist
Mrs Sarah Adam-Gedge
Mr Chris Indermaur
Mr Mick McCormack
Executive Directors
Mr Paddy Gregg
Auditor
Deloitte Touche Tohmatsu
Brookfield Place, Tower 2
123 St Georges Terrace
Perth 6000
Australia
Company Secretary
Mr Adrian Strang
Registered office
100 Clarence Beach Road
Henderson 6166
Australia
Telephone: +61 8 9410 1111
Share registry
Link Market Services Limited
QV1 Building, Level 12
250 St Georges Terrace
Perth 6000
Australia
Telephone: +61 1300 554 474
ABN
73 009 250 266
126 Austal Limited | Shareholder information
Email: info@austal.com
Tel: +61 8 9410 1111
AUSTAL.COM
xxix
Austal Limited | Annual Report 2022