The Austal Limited (ASX: ASB) share price
has risen more than 10% this morning in response to a record FY19 result. Here’s what you need to know.
Austal is a shipbuilder and global defence contractor that designs and constructs advanced commercial and defence vessels. Austal is Australia’s largest defence exporter and the world’s largest aluminium shipbuilder.
In its 30 years of operations, Austal has constructed more than 300 commercial and defence vessels.
FY19 Results
Austal reported record revenue of $1.852 billion, up 33% from FY18, and earnings before interest and tax (EBIT) of $92.8 million, up 46% from $63.5 million. Both revenue and EBIT were in line with guidance provided by Austal last month.
Net profit after tax (NPAT) increased by 64% to $61.4 million, beating the Bell Potter estimate of $57 million.
Austal CEO David Singleton said cash generation was strong in FY19.
“It is particularly pleasing that this broad-based earnings growth has translated into strong cash generation, with Austal recording $164.5 million in operating cash flow that has enabled us to boost full year dividends to shareholders,” he said.
The dividend mentioned by Mr Singleton is an unfranked final dividend of 3 cents per share, bringing the full-year dividend to 6 cps, up 20% from 5 cps in FY18.
The Rask Finance video below explains dividends:
Austal’s order book increased from $3 billion to $4.9 billion, securing work until 2024 with 54 vessels currently scheduled or under construction.
The significant revenue growth is largely a result of improved efficiency across business operations.
“Operationally, we continued to construct and deliver high quality vessels for the US Navy but to a tempo and efficiency that surpasses what we have achieved before,” Mr Singleton said.
“We also made investments to expand throughput capacity and reduce costs at our Australasian shipyards to support the delivery of our large order book of commercial ferries.”
FY20 Outlook
Austal estimates FY20 revenue of no less than $1.9 billion, and also expects the USA shipbuilding margin range will be 7.5-8.5%, up from previous guidance of 7-8%. Australasia revenue is expected to grow around 25% with the potential for further margin improvements.
My Take
Austal is an attractive business at the right price. It operates in an industry with very high barriers to entry, which means it can consistently grow its revenue, profit and market share. Austal also receives long-term contracts that lock in revenue for years to come.
However, with shares up 94% year-to-date, I’m not convinced that Austal is a buying opportunity right now so it will remain on my watchlist.
For other proven businesses, have a look at the companies in the free report below.
[ls_content_block id=”14945″ para=”paragraphs”]
Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.
