Full Year 2026 VEEM Ltd Earnings Call

August 27, 2026

Speaker #1: You have joined the meeting as an attendee and will be muted throughout the meeting.

Speaker #3: And CFO Teno Capumo, who will be going through the presentation released this morning on the ASX. If you'd like to ask a question, please do so by using the Q&A button at the bottom of the screen, and we'll do our best to get through as many of those as possible.

Operator: CFO, Tino Kapfumo, who will be going through the presentation released this morning on the ASX. If you would like to ask a question, please do so by the Q&A button at the bottom of the screen, and we will do our best to get through as many of those as possible. I will now hand it over to Mark.

Speaker #3: I will now hand it over to Mark.

Speaker #4: Thank you, Ben, and welcome everybody for joining us. I'm pleased to be able to take the time to go through our presentation with you.

Mark Miocevich: Thank you, Ben, and welcome everybody for joining us. I am pleased you are able to take the time to go through our presentation with us. We would like to kick off if we can. I will ask Tino if you would not mind just going through the highlights.

Speaker #4: So, I'd like to kick off, if we can. I'll ask Teno if he wouldn't mind just going through the highlights.

Speaker #5: Thank you, Mark. So, revenue for FY26 was $51.7 million, at the upper end of our guidance, with activity of $54.2 million. This represents an increase in WIP, as we became busier delivering into the ASC contract.

Tino Kapfumo: Thank you, Mark. Revenue for FY26 was AUD 51.7 million at the upper end of our guidance, with activity of AUD 54.2 million, representing an increase in WIP as we became busier delivering into the ASC contract. EBITDA was AUD 3.6 million, within our guidance of AUD 3.25 to AUD 3.75 million. Cash balance ended at a healthy AUD 9.4 million, with net debt down to AUD 1.2 million, and this is after our capital raise of AUD 13.1 million net of costs. Undrawn facilities sit at AUD 7.5 million, providing ample liquidity. Operating cash flow for the year was AUD 4.8 million, with EBITDA margin of AUD 6.9 million and no final dividend declared.

Speaker #5: EBITDA was $3.6 million, within our guidance of $3.25 to $3.75 million. The cash balance ended at a healthy $9.4 million, with net debt down to $1.2 million, and this is after our capital raise of $13.1 million, net of costs.

Speaker #5: Undrawn facilities sit at $7.5 million, providing ample liquidity. Operating cash flow for the year was $4.8 million, with EBITDA margin of $6.9 million, and no final dividend declared.

Speaker #5: So, revenue for the year for FY26 was at the upper end of guidance, which was below last year due to lower gyro sales and a delay in receiving our ASC audits.

Tino Kapfumo: Revenue for the year for FY26 was at the upper end of guidance, which was below last year due to lower Gyro sales and a delay in receiving our ASC orders. EBITDA for FY26 was AUD 3.6 million, which was down from AUD 9.1 million in the prior period, but at the upper end of our guidance provided, and again related to lower Gyro sales, and delay in receiving ASC orders. Cash flow from operations was stronger at AUD 4.8 million as the ASC contract kicked off and propeller orders accelerated late into H2 of FY26. Net debt at AUD 1.2 million was a reduction of AUD 12.5 million after net capital raise proceeds of AUD 13.1 million and additional equipment debt of AUD 2.4 million.

Speaker #5: EBITDA for FY26 was $3.6 million, down from $9.1 million in the prior period, but at the upper end of our guidance provided. Again, this was related to lower gyro sales and a delay in receiving ASC orders.

Speaker #5: Cash flow from operations was stronger at $4.8 million as the ASC contract kicked off, and propeller orders accelerated late into the fiscal year, in the second half of FY26.

Speaker #5: Net debt at $1.2 million was a reduction of $12.5 million, after net capital raise proceeds of $13.1 million and additional equipment debt of $2.4 million.

Speaker #5: As I've described, the first half was characterized by a slowdown in the marine market, which is now improving, and a delay in ASC orders, which we are currently delivering into.

Tino Kapfumo: As I have described, H1 was characterized by a slowdown in the marine market, which is now improving and a delay in ASC orders which we are currently delivering into. As a result, we saw a split in H1 and H2 sales, with H2 sales up 21%, and EBITDA from a small EBITDA loss of AUD 0.2 million, ended up at AUD 3.8 million. Recovery in the marine market has led to an increased proportion orders in H2 of FY26, and we are seeing this continuing into 2027, which Mark will go through later on. The factory extension was completed with our three CNC machines delivered and currently being installed and commissioning underway. The 3D printer was installed and commissioned with the remaining AUD 600,000 received from the government grant. Mark will now go briefly through our products, particularly for those who might be new to VEEM.

Speaker #5: As a result, we saw a split in first half and second half sales, with second half sales up 21%, and EBITDA, from a small EBITDA loss of $0.2 million, ended up at $3.8 million.

Speaker #5: Recovering the marine market has led to increased propulsion orders in the second half of FY26, and we're seeing this continue into 2027, which Mark will go through later on.

Speaker #5: The factory extension was completed, with our three CNC machines delivered and currently being installed, and commissioning underway. The 3D printer was installed and commissioned, with the remaining $600,000 received from the government grant.

Speaker #5: Mark will now briefly go through our products, particularly for those who might be new to VEEM.

Speaker #4: Yeah, for those that are new, I guess it's best to know what we're all about. Currently, VEEM provides the highest performing fixed-pitch propellers on the market.

Mark Miocevich: Yeah. For those that are new, I guess it is best to know what we are all about. Currently, VEEM provides the highest performing fixed pitch propellers on the market. Fixed pitch is when you have got all the blades attached to the hub, as the photo shows. And we have been exporting globally for over 20 years. We are considered to be the best globally in doing that. We will go faster, less vibration, less noise. So we have been winning business that way. And most of the leading boat builders in the world now are using us. I think it is half of the top 10 superyacht builders, nearly everyone on the East Coast of America, Princess Yachts, people like that are demanding and discerning customers. The market itself, we have looked at, and you look at the numbers, there is AUD 0.3 of a billion for new builds each year.

Speaker #4: So, fixed pitch is when you've got all the blades attached to the hub, as the photo shows, and we've been exporting globally for over 20 years.

Speaker #4: So we're considered to be the best globally in doing that. We go faster, have less vibration, less noise, so we've been winning business that way.

Speaker #4: And most of the leading boat builders in the world now are using us. I think it’s half of the top 10 superyacht builders, nearly everyone on the East Coast of America, Princess Yachts—people like that, that are, I guess, demanding and discerning customers.

Speaker #4: So the market itself—we've looked at it, and when you look at the numbers, there's $0.3 billion (US dollars) for new builds each year. We're primarily involved in new builds, or were, I should say, which is around 10% of the global market, and it's been really focused on the high-performance end of the market.

Mark Miocevich: We are primarily involved in new builds or were, I should say, which is around 10% of the global market. And it has been really focused on the high-performance end of the market. So, we have got the most advanced manufacturing facilities in the world, which run around-the-clock, lights off, being loaded and unloaded automatically. Going forward, we have expanded that to include a new technology on our VEEM Extreme range of products, which are made from a high-tech, tensile strength alloy, which I will talk about a bit later on.

Speaker #4: So we've got the most advanced manufacturing facilities in the world. We're running around the clock, lights-off, being loaded and unloaded automatically. Going forward, we've expanded that to include a new technology on our VEEM Extreme range of products, which are made from a high-tech tensile strength alloy, which I'll talk about a bit later on.

Speaker #4: We do defense, and we have always done most of the Collins Class for over 30 years. I think we're something in the order of $250 to $300 million worth of product that we've delivered into the defense space in Australia.

Mark Miocevich: We do defense and we have always done, mostly in the Collins-class for over 30 years. I think we are something in the order of AUD 250 million to AUD 300 million worth of product that we have delivered into the defense space in Australia over the years. So we have now got an enhanced security range at secret level in Australia.

Speaker #4: Over the years, we've now got an enhanced security rating to Secret level in Australia. We believe the defense market is very sticky and provides reliable long-term revenue.

Mark Miocevich: We believe the defense market is very sticky and it is reliable long-term revenue. It is difficult to get into. Moving on to the US Defense supply chain, we have done all the work required to gain entry into this market, but we are just working through the process in America to get them to supply. I think we have received AUD 180,000 of the order so far, so got some way to go. The future, obviously, we have Hunter-class coming up, which we are in the final stages of negotiating. There is also potential for the overseas Type 26 programs. Our Hunter-class boat is a modified T26. There is only one other supplier globally in that. There are also AUKUS opportunities both in Australia, the US, and the UK that we need to focus on, and the UK really has not come into the picture just yet.

Speaker #4: It is difficult to get into, and moving on to the U.S. defense supply chain, we've done all the work required to gain entry into this market, but we're just working through the process in America to get them to supply, and we've only—I think we've received $180,000 of the orders so far.

Speaker #4: So, got some way to go. The future, obviously, we've got the Hunter class coming up, which we're in the final stages of negotiating. There's also potential for the overseas Type 26 programs—our Hunter class boat is a modified T26.

Speaker #4: There's only one supplier globally in that. There are also opportunities with Orcas both in Australia and the US, and the UK that we need to focus on. The UK really hasn't come into the picture just yet.

Speaker #4: And there's a general increase in sovereign defense capability in this country that has to be developed due to the circumstances of the globe at the moment.

Mark Miocevich: It is a general increase in sovereign defense capability in this country that just has to be developed due to the circumstances of the globe at the moment. Gyros. We are the only supplier of large Gyros in the world. There are large barriers to entry. The market exists for all vessels from commercial, defense, and recreational. We just released a Mark II model, which is really important to us. There is a huge market, greater than AUD 1 billion a year if everyone bought one. So we are looking at moving more into the commercial market. We are finding that those people are better equipped to deal with Gyros. They tend to buy more, and it works for. Their understanding technically is better.

Speaker #4: Gyros — look, we're the only supplier of large gyros in the world. There are large barriers to entry. The market exists for all vessels, from commercial, defense, and recreational.

Speaker #4: We've just released the Mark 3 model, which is really important to us. The huge market could create a billion dollars a year if everyone bought one.

Speaker #4: So, we're looking at moving more into the commercial market. We're finding that those people are better equipped to deal with gyros, they tend to buy more, and it works well.

Speaker #4: Their understanding technically is better, but expansion into defense and defense-related industries is happening as well. And we've got a very large tender at the moment that we're working with, which is for a Northern Hemisphere Defense Department, which is using our biggest gyros as icebreakers, which is quite an interesting technical development.

Mark Miocevich: Expansion into defense and defense-related industries is happening as well, and we have got a very large tender at the moment where we are working with, which is for a northern hemisphere defense department, which is using our biggest Gyros as icebreakers, which is quite an interesting technical development. So we are looking at the adoption. We think it will be similar eventually to the smaller recreational Gyros, and I guess we are moving to a new model that addresses some of the problems with the early units, which has been holding us back a little. Engineering side. This is work that just falls in the door, and we have done it since 1968. We can cast over 250 different alloys. We are the biggest balancing shop in the country. We do a range of machining, founding, balancing, and fitting, welding. That is all part of our old business.

Speaker #4: So, we're looking at the adoption. We think it'll be similar eventually to the small recreational gyros, and we've just—I guess we're moving to a new model that addresses some of the problems with the early units, which has been holding us back a little.

Speaker #4: On the engineering side, look, this has worked—it just falls in the door. And we've done it since 1968. We can cast over 250 different alloys. We're the biggest balancing shop in the country.

Speaker #4: We do a range of machining, founding, balancing, and fitting. Welding, that's all part of our old business. And the future of that is we've got, I guess, most founders in Australia, so our products, such as our hollow bar, we're looking at expanding to new markets close to Australia.

Mark Miocevich: The future of that is, we have got, I guess, more or less foundries in Australia. So products such as our hollow bar, we are looking at expanding to new markets close to Australia, which is our centrifugally cast hollow bar, which has proven to be quite popular in the alumina industry. Increasing our capability here to deal with not only defense, but mining industrial as well. The 3D printing side, which we do not say too much about, but we have recently commissioned a 3D printer for printing molds for castings, which eliminates patterns altogether. That is going to be really important for low volume work, which will be available continuously in this country. So I will hand it over to Tino.

Speaker #4: Which is our centrifugally cast hollow bar, which has proven to be quite popular in the aluminum industry, and increasing our capability here to deal with not only defense but mining industrial as well.

Speaker #4: And the 3D printing side, which we don't say too much about, but we've recently commissioned a 3D printer for printing molds for castings, which eliminates patterns altogether.

Speaker #4: And that's going to be really important for low-volume work, which will be available continuously in this country. So I'll hand it over to the cleaner.

Speaker #1: Thank you, Mark. Going through the financials in a little bit more detail, the most significant reduction in revenue between FY25 and FY26 was the reduction in gyro, which we've talked about.

Tino Kapfumo: Thank you, Mark. Going through the financials in a little bit more detail, the most significant reduction in revenue between FY25 and FY26 was the reduction in Gyro, which we have talked about. However, the coming Mark 3, which Mark will talk about later on in the presentation, is expected to spur sales and increase that into FY27. Noting our order book is AUD 1 million at present. Defense was down due to a delay in receiving ASC orders. We have seen the difference between H1 and H2, with revenue up 130% in H2. We experienced a downturn in the propeller market, but we saw Q2 to Q3 of last financial year being the trough. That picking up at the end of Q3 into Q4 and so far has been sustained into the beginning of FY27.

Tino Kapfumo: Thank you, Mark. Going through the financials in a little bit more detail, the most significant reduction in revenue between FY25 and FY26 was the reduction in Gyro, which we have talked about. However, the coming Mark III, which Mark will talk about later on in the presentation, is expected to spur sales and increase that into FY27. Noting our order book is AUD 1 million at present. Defense was down due to a delay in receiving ASC orders. We have seen the difference between H1 and H2, with revenue up 130% in H2. We experienced a downturn in the propeller market, but we saw Q2 to Q3 of last financial year being the trough. That picking up at the end of Q3 into Q4 and so far has been sustained into the beginning of FY27.

Speaker #1: However, the coming Mark 3, which Mark will talk about later on in the presentation, is expected to spur sales and increase that into FY27.

Speaker #1: Noting our audit book is $1 million at present. Defense was down due to a delay in receiving ASC orders, but again, we've seen the difference between the first half and the second half, with revenue up 130% in the second half.

Speaker #1: We're experiencing a downturn in the propeller market, but we saw Q2 to Q3 of last financial year being the trough. That picked up at the end of Q3 into Q4 and so far has been sustained into the beginning of FY2027.

Speaker #1: VEEM Extreme inquiries have been robust since the launch, with the first contract signed, and we've begun delivering into our launch customer, mainly fast ferries.

Tino Kapfumo: VEEM Extreme inquiries have been robust since the launch, with the first contract signed, and we have begun delivering into our launch customer, Manly Fast Ferry. Mark will talk more about the details of the products going forward. The result this year also includes set up and preparatory costs for US Defense revenue, in addition to development costs for Gyro Mark 3 and VEEM Extreme. Expect these costs are now starting to roll off as we start to commercialize the products going into FY27. Due to the low sales below budget in H1 of the calendar of FY26, led to an impairment of the Gyro capitalized cost of AUD 24.2 million, in addition to AUD 0.6 million of obsolete Gyro stock as a result of the launch of the Mark 3. We ended FY26 with a strong balance sheet.

Tino Kapfumo: VEEM Extreme inquiries have been robust since the launch, with the first contract signed, and we have begun delivering into our launch customer, Manly Fast Ferry. Mark will talk more about the details of the products going forward. The result this year also includes set up and preparatory costs for US Defense revenue, in addition to development costs for Gyro Mark III and VEEM Extreme. Expect these costs are now starting to roll off as we start to commercialize the products going into FY27. Due to the low sales below budget in H1 of the calendar of FY26, led to an impairment of the Gyro capitalized cost of AUD 24.2 million, in addition to AUD 0.6 million of obsolete Gyro stock as a result of the launch of the Mark III. We ended FY26 with a strong balance sheet.

Speaker #1: Again, Mark will talk more about the details of the products going forward. The result this year also includes setup and preparatory costs for US defense revenue.

Speaker #1: In addition to development costs for Gyro Mark 3 and VEEM Extreme, we expect these costs are now starting to roll off as we begin to commercialize the products going into FY27.

Speaker #1: Due to low sales below budget in the first half of the calendar FY26, this led to an impairment of the Gyro capitalized costs of $24.2 million, in addition to $0.6 million of obsolete Gyro stock as a result of the launch of the Mark 3.

Speaker #1: We ended FY26 with a strong balance sheet. This was from our capital raise of $14 million before costs and $13.1 million net proceeds. So, as you can see, we had net cash of $9.4 million, with no overdraft and no undrawn trade facilities.

Tino Kapfumo: This was from our capital raise of AUD 40 million before costs and AUD 13.1 million net proceeds. As you can see, we had net AUD 9.4 million of cash with no overdraft and no undrawn trade facilities. This gives us AUD 7.5 million in unused facilities available. In terms of CapEx, we have continued to invest in the business. AUD 2.5 million of CapEx, predominantly the 3D printer which arrived, as well as equipment and tooling. Product development costs, as I spoke to you earlier, of AUD 24.2 million were impaired as well as AUD 600,000 of obsolete Gyro. I think the takeaway from our balance sheet is that our balance sheet is strong, and we are ready and prepared to take on the growth opportunities that we face in FY27.

Speaker #1: This gives us $7.5 million in unused facilities available. In terms of capex, we've continued to invest in the business—$2.5 million of capex, predominantly the 3D printer, which arrived, as well as equipment and tooling.

Speaker #1: Product development costs I spoke to you earlier about of $24.2 million were impaired, as well as $600,000 of obsolete gyro. So, I think the takeaway from our balance sheet is that our balance sheet is strong, and we're ready and prepared to take on the growth opportunities that we face in FY27.

Speaker #1: Cash flow was strong in operations at $4.8 million, driven particularly by ASC, with the contract beginning to be delivered in the second half.

Tino Kapfumo: Cash flow was strong in operations of AUD 4.8 million, driven particularly by ASC with the contract beginning and starting to be delivered in H2. In addition, we have continued, as I spoke about, investing in the business, and we had AUD 7.4 million in net financing inflows, predominantly from our capital raising of AUD 13.1 million after costs. This brought down our net debt, as you can see from here. We have no overdraft anymore. Our bank debt went up as part of the asset finance facility for the 3D printer. Our HP liabilities came down as part of the normal payment of those. We have AUD 9.4 million in cash, bringing our net debt down to AUD 1.2 million. Again, showing that our balance sheet is very strong.

Speaker #1: In addition, we've continued, as I spoke about, investing in the business, and we had $7.4 million in net financing inflows, predominantly from our capital raising of $13.1 million.

Speaker #1: After costs, this brought down our net debt. As you can see from here, we have no overdraft anymore. Our bank debt went up as part of the asset finance facility for the 3D printer.

Speaker #1: Our HPL abilities came down as part of the normal payment of those. And we have $9.4 million in cash, bringing our net debt down to $1.2 million.

Speaker #1: So again, showing that our balance sheet is very strong. Back to profitability in the second half, positive operating cash flows, and a strong balance sheet ready to take advantage of opportunities that are coming forward.

Tino Kapfumo: Back to profitability in the H2, positive operating cash flows and a strong balance sheet ready to take advantage of opportunities that are coming forward. I will now hand over to Mark to talk about our products and those opportunities.

Speaker #1: I'll now hand over to Mark to talk about our products and those opportunities.

Speaker #4: Thanks, Daniel, for that. Okay, what you've all been waiting for is what's been going on with the propulsion side of the business. So, what we found was the propulsion side dropped off a little, and largely due to Trump's tariffs.

Mark Miocevich: Thanks, Tino, for that. Okay. The bit you have all been waiting for is what has been going on with the propulsion side of the business. What we found was the propulsion side dropped off a little, and largely due to Trump's tariffs. There was a lot of hesitation in the marketplace, and as soon as it ruled in the Supreme Court back in February that he could not have his tariffs the way he had them, meant that there is like a light switch went on and people started ordering, and we have been pretty flat out since then.

Speaker #4: There was a lot of hesitation in the marketplace, and as soon as it was ruled in the Supreme Court back in February that he couldn't have his tariffs the way he had them, it meant that—it's like a light switch went on and people started ordering, and we've been pretty flat out since then.

Speaker #4: So, we all know that he's found other ways to do the tariffs, but for the rest of the world, it seems that the signal to start buying again was there.

Mark Miocevich: We all know that he has found other ways to do the tariffs, but for the rest of the world, it seems to be that the signal to start buying again was there. So they did. What we have done is been working on the VEEM Extreme range for the last, probably 2 years.

Speaker #4: So they did. So what we've done is been working on the VEEM extreme range for the last probably two years, but all the design and testing was all done late last calendar year.

Mark Miocevich: All the design and testing was all done late last calendar year. We have done a little bit more this year, and now we have now launched into production, meeting all the early demand and building up the pricing programs and sales programs for it. What we found is, and if you have a look at the picture on the left, last year, we spoke about our propulsion improvement and the rudder improvement, so it is 11.9% and 6.4%, which got us to about 18%. That was against a standard commercial propeller and a standard plate-type runner, which was actually on our boat initially. We tested that and found that improvement. This year, we have been working on the bracket, and we did not think the bracket would be significant. We thought maybe a few percent.

Mark Miocevich: All the design and testing was all done late last calendar year. We have done a little bit more this year, and now we have now launched into production, meeting all the early demand and building up the pricing programs and sales programs for it. What we found is, and if you have a look at the picture on the left, last year, we spoke about our propulsion improvement and the rudder improvement, so it is 11.9% and 6.4%, which got us to about 18%. That was against a standard commercial propeller and a standard plate-type rudder, which was actually on our boat initially. We tested that and found that improvement. This year, we have been working on the bracket, and we did not think the bracket would be significant. We thought maybe a few percent.

Speaker #4: We've done a little bit more this year, and now we've launched into production, meeting all the early demand and building up the pricing programs and sales programs for it.

Speaker #4: So, what we found is—and you've had a look at the picture on the left—last year, we spoke about our propulsion improvement and the rudder improvement.

Speaker #4: So it's 11.9 and 6.4, which got us to about 18%. And that was against a standard commercial propeller and a standard plate-type rudder, which was actually on our boat initially.

Speaker #4: So, we tested that and found that improvement. But this year, we've been working on the bracket, and we didn't think the bracket would be significant.

Speaker #4: We thought maybe a few percent, but our resident computational fluid dynamics people unlocked much more, and they've managed to find a 6% improvement.

Mark Miocevich: Our resident computational fluid dynamics people, they unlocked much more, and they have managed to be able to find a 6% improvement. Now, in fact, we have our brackets are matched to our rudders, which provides much of that benefit. We have sort of found that we have got 24%, nearly 25% improvement, and that is across a very broad range of speed. What we can do now is we can actually tune in the bracket and rudder based on the speed of the vessel. In other words, if they would like the efficiency at high speed, that some customers it is very important. Others are more at cruising speed. We can give them what they are chasing. This is a really significant step up. I have never heard of anyone getting anywhere near this improvement, and it is all down to this new high-tech alloy, which is double the strength of bronze.

Speaker #4: And now, in fact, our brackets are matched to our rudders, which provides much of that benefit. So we've found that we've got a 24, nearly 25%, improvement.

Speaker #4: And that's across a very broad range of speed. So what we can do now is actually tune in the bracket and rudder based on the speed of the vessel.

Speaker #4: Otherwise, if I’d liked the efficiency at high speed, at some customers, it’s very important. Others are more at cruising speed. We can give them what they’re chasing.

Speaker #4: But this is a really significant step up. I've never heard of anyone getting near this improvement, and it's all down to this new high-tech alloy, which is double the strength of bronze.

Speaker #4: And we can unlock all of that strength in the products we've got. That makes everything so much thinner in profile, and we can move our designs around to capture the benefits of that strength, which is what we've done.

Mark Miocevich: We can unlock all of that strength in the products we have, that makes everything so much thinner in profile. We can move our designs around to capture the benefits of that strength, which is what we have done. The best thing about it is we made sure Lloyd's Register was on board for every test that we did. The one little one left to do is we can make the main propeller shafts a little bit smaller. We have developed a unique attaching method for the propeller onto the shaft, which you can see where it goes on. That enables us to use more strength in each shaft, which means we can make the shafts a bit smaller.

Speaker #4: The best thing about it is we made sure Lloyd's was on board for every test that we did. The one little one left to do is we can make the main propeller shafts a little bit smaller.

Speaker #4: We've developed a unique attaching method for the propeller onto the shaft, which you can see where it goes on. That enables us to use more strength in each shaft, which means we can make the shafts a bit smaller.

Speaker #4: And that means that we can make the boss of the bracket and the boss of our propeller that little bit smaller, and that will lead to a little less drag.

Mark Miocevich: That means that we can make the boss of the bracket and the boss of our propeller that little bit smaller, that will lead to a little less drag. There might be another percent or so in that we can pick up, but everything counts, plus it is cheaper to buy a smaller shaft, so it is all good. Manly Fast Ferry, we have some benefits here saying they have an 8.3% fuel burn reduction and we found more. While it is a bit misleading, they were already using one of our bronze propellers. They went to one of our new ones and picked up 8.3%. When we made that change on our boat, we only picked up 6% difference. Maybe their propellers were a little worn after a few years. That is what they found.

Speaker #4: So, there might be another percent or so in that that we can pick up. But everything counts, and plus it's cheaper to buy a smaller shaft.

Speaker #4: So, it's all good. Now, Manufast Ferries, and we've got some benefits here saying they've got an 8.3% fuel burn reduction, and we found more.

Speaker #4: Well, it's a bit misleading. They were already using one of our bronze propellers, so they went to one of our new ones and picked up 8.3%.

Speaker #4: When we made that change on our boat, we only picked up a 6% difference. Maybe their propellers were a little worn after a few years.

Speaker #4: But that's what they found. They documented it well. And we've done the modeling on their rudders. They'll pick up 7% on their rudders, a bit more than we picked up.

Mark Miocevich: They documented it well, and we have done the modeling on their rudders. They will pick up 7% on their rudders, a bit more than we picked up. They are going to be looking at around 15% just by the rudder and the propeller from where they were. They are chasing a 30% reduction in carbon footprint. We have just given them part of it, which is significant. They have been a wonderful advocate of that, and they have relayed that around the world. We have a lot of inquiries from customers looking for the same thing. I think the product is going to be very successful. The advantage of the whole shaft line is that previously we have generally only supplied propellers. I would suggest for 90 something percent of our sales were just the propeller.

Speaker #4: So they're going to be looking at around 15% just by the rudder and the propeller from where they were. They're chasing a 30% reduction in carbon footprint.

Speaker #4: We've just given them half of it, which is significant. So, they've been a wonderful advocate of that, and they've relayed that around the world.

Speaker #4: We've got a lot of new inquiries from customers looking for the same thing, so I think the product is going to be very successful. The advantage of the whole shaft line is that previously we generally only supplied propellers.

Speaker #4: I'd suggest that 90-something percent of our sales were just the propeller. And now we're going to be able to sell a shaft line, not just the propeller.

Mark Miocevich: Now we are going to be able to sell a shaft line, not just a propeller, that is going to lead to a significant increase of three to five times the value of the sale we were making before. Really powerful, change for our business coming. That way, we are moving into that starting from now, and we are working very hard to build that up, supplying from now and building it up so the back half of the year it gets busier and busier. We believe that is one of our many strategies to help us fill that slowdown in the submarine work, when we have completed most of these orders. You know from our previous graphs you have seen that it is a cyclical business because of the refits, and this product is one of the things we are doing to try and smooth out those peaks and troughs.

Speaker #4: And that's going to lead to a significant increase of three to five times the value of the sales we were making before. So, a really powerful change for our business coming.

Speaker #4: So, that way, we're moving into that starting from now, and we're working very hard to build that up, supplying from now and building it up so the back half of the year gets busier and busier.

Speaker #4: And we believe that's one of our many strategies to help us fill that slowdown in the submarine work when we've completed most of these orders.

Speaker #4: So, you know from our previous graphs you've seen that it's a cyclical business because of the refits. And this product is one of the things we're doing to try and smooth out those peaks and troughs.

Speaker #4: Just a note on the Sharrow, we're still working with Sharrow. We've got a number of sets in production at the moment. It is proving very difficult for Sharrow to be able to have that translation from outboard- to inboard-powered vessels.

Mark Miocevich: Just a note on the Sharrow. We are still working with Sharrow, and we have got a number of sets in production at the moment. It is proving very difficult for Sharrow to be able to have that translation from outboards to inboard-powered vessels. We are working with them while they are still working through the technology. We have offered them, of course, our VEEM Extreme range of alloys, so they will get the same advantage if they choose to use that alloy as well. We continue to maintain that relationship. Okay, and defense. Interesting defense. ASC is on board. Obviously, we are very, very busy doing that up until probably January, February, which is terrific. They will always be. They will be continuing work after that time, but perhaps not quite at this volume.

Speaker #4: So we're working with them while they're still working through the technology, and we have offered them, of course, our VEEM Extreme range of alloys.

Speaker #4: So, they'll get the same advantage if they choose to use alloy as well, so we continue to maintain that relationship. Okay. And defense—interesting, interesting defense.

Speaker #4: ASC is on board. Obviously, we're very, very busy doing that up until probably January or February, which is terrific—and they’ll always be. We're continuing to work after that time, but perhaps not quite at this volume.

Speaker #4: Fortunately, this time around we're able to negotiate all of the valves to come back to VEEM for storage, so we can cycle them correctly and protect them so they're in pristine condition when they're needed.

Mark Miocevich: Fortunately, this time around, we are able to negotiate all of the valves to come back to VEEM for storage so we can cycle them correctly and protect them so they are in pristine condition when they need them. As a by-product, it enables us to have a better handle on what the usage of these valves are, what they might need next, which enables us to level load a little more, by perhaps, being able to work with ASC and say, "Look, these valves look like you are running low on these ones. We know your usage pattern is a little high. Would you like those?" It also enables us to manufacture a little bit in advance when we feel the need, which will help level out those peaks and troughs.

Speaker #4: But also, as a byproduct, it enables us to have a better handle on what the usage of these valves is, what they might need next, which enables us to level-load a little more by perhaps being able to work with ASC, instead of these valves looking like you're running low on these ones.

Speaker #4: We know your usage pattern is a little high. Would you like those? It also enables us to manufacture a little bit of an advance when we feel the need, which will help level out those peaks and troughs.

Speaker #4: So we're likely to continue on with those until the submarines are mothballed, which we think will be around the late 2040s. We're in the final stage of negotiating the Hunter class.

Mark Miocevich: We are likely to continue on with those till when the submarines are mothballed, which will be, we think around late 2040s. We are in the final stage of negotiating the Hunter-class. I know it has been going for quite a while. There are some issues with secret ratings, which is a cost we need to carry over the life of the program. A big part of this is once we have won the Australian ones, and I think it is Shipset Two is the one they are aiming for, there is also the opportunity to look at supplying the rest of the Type 26 or some of them. We are one of only two accredited suppliers for that program globally. That is working very well for us at the moment.

Mark Miocevich: We are likely to continue on with those till when the submarines are mothballed, which will be, we think around late 2040s. We are in the final stage of negotiating the Hunter-class. I know it has been going for quite a while. There are some issues with secret pricings, which is a cost we need to carry over the life of the program. A big part of this is once we have won the Australian ones, and I think it is Shipset Two is the one they are aiming for, there is also the opportunity to look at supplying the rest of the Type 26 or some of them. We are one of only two accredited suppliers for that program globally. That is working very well for us at the moment.

Speaker #4: I know it's been going for quite a while. There are some issues with secret ratings, which is a cost we need to carry over the life of the program.

Speaker #4: But viewed, part of this is once we’ve won the Australian ones—and I think it’s Ship Set Two—that’s the one they’re aiming for.

Speaker #4: There's also the opportunity to look at supplying the rest of the Type 26, or some of them. We're one of only two accredited suppliers for that program globally.

Speaker #4: So that's working very well for us at the moment. And a nice thing is that Kongsberg now see us as an approved supplier, and we have another $1.6 million order in the system making monoblock propellers, which is our specialty.

Mark Miocevich: A nice thing is that Kongsberg now see us as an approved supplier, and we have another AUD 1.6 million order in the system making monoblock propellers, which is our specialty. That is in process now. So expect Kongsberg to become a regular customer of ours, which is good news. We are continuing to work on the US Defense chain, and it surprised us that we are all absolutely accredited, approved, every part of our business is ready to go, and we have got AUD 180,000 confirmed order, which we are making. But it is still pretty thin pickings, and we have still got some approvals that are needed at their end. So HII, and some of it can be government approval from State Department for transfer of technology. Others are internal.

Speaker #4: And that's in process now, so expect Kongsberg to become a regular customer of ours, which is good news. We're continuing to work on the US defense chain.

Speaker #4: And I must say, it surprised us that we're all absolutely accredited and approved. Every part of our business is ready to go, and we have got a $180,000 confirmed order.

Speaker #4: Which we're making, but it's still pretty thin pickings. And we've still got some approvals that are needed at their end—so HII, and some of it can be government approval from the State Department for transfer of technology.

Speaker #4: Others are internal. And the people that work inside at HII who make the Virginia-class submarines, those people are actually designated as ORCAS managers.

Mark Miocevich: The people that work inside at HII, who make the Virginia class submarines, those people are actually designated as AUKUS managers, and they are working within their organization to send tenders and work out to the Australian part of AUKUS. It is all happening, it is just very slow. In the meanwhile, we are working with another group of consultants. We are just starting work with them to explore what is available in the sustainment side, because America has 66 submarines running around, and there is a lot of work on sustainment. In fact, there might be more work on sustainment because some of these items they have trouble getting because of the new build program, and some items are obsolete, which means they cannot get them. We are sort of working through that. So continuing to work, and we expect that to have results for us.

Mark Miocevich: The people that work inside at HII, who make the Virginia-class submarines, those people are actually designated as AUKUS managers, and they are working within their organization to send tenders and work out to the Australian part of AUKUS. It is all happening, it is just very slow. In the meanwhile, we are working with another group of consultants. We are just starting work with them to explore what is available in the sustainment side, because America has 66 submarines running around, and there is a lot of work on sustainment. In fact, there might be more work on sustainment because some of these items they have trouble getting because of the new build program, and some items are obsolete, which means they cannot get them. We are sort of working through that. So continuing to work, and we expect that to have results for us.

Speaker #4: And they are working within their organization to send tenders and work out to the Australian part of ORCAS. So it is all happening; it's just very slow.

Speaker #4: But in the meanwhile, we are working with another group of consultants. We're just starting work with them to explore what is available on the sustainment side, because America has 66 submarines running around.

Speaker #4: And there's a lot of work on sustainment. In fact, there might be more work on sustainment because some of these items—they have trouble getting them because of the new build program.

Speaker #4: And some items are obsolete, which means they can't get them. So we're sort of working through that—just continuing to work. We expect that to have results for us.

Speaker #4: But it's just taking us longer than we all thought it would take. Okay, next one: the gyros. Okay, we've started building Mark IIIs in a small frame.

Mark Miocevich: It is just taking us longer than we all thought it would take. Okay, next one. The Gyros. We have started building Mark IIIs in a small frame, and they will all roll out towards the back part of this year. Key features, we have gone to a no-schedule maintenance Gyro, which is really important. Customers normally get every 3,500 hours, even on the small Gyros, it is AUD 20,000 to AUD 25,000 to change all the internal seals and all the external oil pumps. That is a big problem and a big cost, especially for commercial vessels. By doing this, removing seals and patenting this new patented oiling system, means we eliminate the seals, eliminate the service cost as it is a mechanical pump, not electrical. There is just simply an electrical startup pump, which runs for a very short period, then turns off.

Speaker #4: And they'll all roll out towards the back part of this year. Key features: we've gone to a no-scheduled-maintenance gyro, which is really important.

Speaker #4: So customers normally get, every three and a half thousand hours, even on the small gyros, it's $20,000 to $25,000 to change all the internal seals and all the external oil pumps.

Speaker #4: That's a big problem and a big cost, especially for commercial vessels. So by doing this, by moving the seals and patenting this new patented ordering system, it means we reduce or eliminate the seals and eliminate the service cost, as it is a mechanical pump, not electrical.

Speaker #4: There's simply an electrical startup pump, which runs for a very short period and then turns off. So that's a really big cost reduction. We've also made sure that it is available as a retrofit kit to all of our existing gyros in the field.

Mark Miocevich: That is a really big cost reduction. We have also made sure that it is available as a retrofit kit to all of our existing Gyros in the field. There are over 80 of those at the moment, and which means when they get to their first major service, we can offer them this upgrade at the same price, and they are not going to have to spend any money on major services again. That puts us where we always wanted to be. The power consumption, though, is available. We found, in fact, it was more than 20% reduction just by eliminating the seals. The new low-friction bearings will carry an additional reduction. It may well be that we would expect to be running around half or less what we used to burn up in power, which is really very important on a boat.

Speaker #4: There's over 80 of those at the moment, which means when they get to their first major service, we can offer them this upgrade at the same price, and then they'll never have to spend any money on major services again.

Speaker #4: So that puts us where we always wanted to be. The power consumption, though, is available. We found, in fact, it was more than a 20% reduction just by eliminating the seals.

Speaker #4: The new low-friction bearings will carry an additional reduction. So it may well be that we expect to be running around half or less of what we used to burn up in power, which is really very important on the boat.

Speaker #4: The new gyros cost less to build. They have less assembly time and a more reliable build because there are fewer connections, which is very important. So we've now started to build on the small frames.

Mark Miocevich: The new Gyros cost less to build. They have less assembly time, a more reliable build because there is less connections, which is very important. We have now started to build on the small frames. We have passed the peak of our development costs, and they will be tapering off towards the end of this year, which is very convenient for us because we need a couple of our key engineers to assist us with the introduction of VEEM Extreme, as we have to do more and more boat analysis to be able to estimate our fuel saving reductions for our customers. That will be a service we will need to provide when requested. It is working out very well. The slowdown in the market, the global marine market, meant that Gyro sales really slowed up to nothing there for a while.

Speaker #4: We've passed the peak of our development costs, and they'll be tapering off towards the end of this year, which is very convenient for us because we need a couple of our key engineers to assist us with the introduction of VEEM Extreme, as we have to do more and more boat analysis to be able to estimate fuel savings reductions for our customers.

Speaker #4: So that'll be a service we will need to provide when requested. So it's working out very well. Now, the slowdown in the market—the global marine market—meant that gyro sales really slowed up to nothing there for a while.

Speaker #4: And the auditors and the board felt that the write-down of what we'd spent, considering it was nearly auditable, was on the very original model.

Mark Miocevich: The auditors and the board felt that the write-down of what we had spent, considering the audit was on the very original model, it was appropriate time to write that down. We have some sales now, which is happening, and now we have these new Mark IIIs. I think there has been some eagerly anticipated sales on that, where people are just sitting back and waiting to see. We have done all our testing and our building, and thank you, Tino. This is my favorite photo. I do not know whether any of you have seen the SpaceX rocket, but I keep it on my wall. I did not know their journey until we had already done this. If you look at SpaceX's rocket, the first one they built and the last one, the current one they are building now, the difference is a bit like ours.

Speaker #4: It was an appropriate time to write that down. So we've got some sales now, which is happening. And now we've got these new Mark IIIs.

Speaker #4: I think there's been some eagerly anticipated sales on that, where people are just sitting back and waiting to see. So, we've done all our testing.

Speaker #4: We're now building, and thank you, Tino. This is my favorite photo. I don't know whether any of you have seen the SpaceX rocket, but I keep it on my wall.

Speaker #4: I didn't know their journey until we'd already done this. But if you look at SpaceX's rocket, the first one they built and the last one the current one they're building now, the difference is a bit like ours.

Speaker #4: You can see the complication and the external pipes, and down the bottom, the black little boxes there are oil pumps. We made it very reliable in the Mark IIs, but we felt that once we went to this for the ordering system, the bottom end changed a lot.

Mark Miocevich: You can see the complication of the external pipes and down the bottom, the black little boxes there are oil pumps. We made it very reliable in the Mark IIs, but we felt that once we went to this with the oiling system, the bottom end changed a lot, and we pushed ourselves to put all of the necessary fluid galleries inside the wall of the casting, which makes it very simple to assemble and makes it even more reliable because there are no joints there that could potentially leak a drop of oil. It is a tremendous high-technology unit, and I believe that is what the market will receive eagerly, and I think it is where we always want it to be. It is a fantastic thing, and the guys, the development team should be very proud of themselves because they have done a fantastic job.

Speaker #4: And we pushed ourselves to put all of the necessary fluid galleries inside the wall of the casting, which makes it very simple to assemble.

Speaker #4: It makes it even more reliable because there are no joints there that can potentially leak a drop of oil. It's a tremendous, high-technology unit.

Speaker #4: And I believe that's what the market will receive eagerly, and I think it's where it was wanted to be. It's a fantastic thing, and the guys—the development teams—will be very proud of themselves because they've done a fantastic job.

Speaker #4: Okay. Engineering products and services fall in the door all the time. Hollow bar is still going for us, which is great—mostly in the aluminum industry.

Mark Miocevich: Engineering products and services falls in the door all the time. Hollow bars are still going for us, which is great, mostly in the alumina industry. We are always looking for opportunities, and we have supplied some of the Middle East before now. We are still pushing. We do a lot of dynamic balancing, which we are one of, I think, we are Australia's largest dynamic balancing shop. Foundry, there is a foundry demand for relatively short lead time, low volume, sophisticated product, and we are still doing that. Our new 3D printer, which it is actually a sand printer, so it means that we can print molds up to a certain size, and that means no patterns. When you are doing low volume items, the cost of the pattern is really prohibitive in people buying from a new source.

Speaker #4: So we're always looking for opportunities, and we've supplied some of the Middle East before now, so we're still pushing. We do a lot of dynamic balancing, which we're one of—I think we're Australia's largest dynamic balancing shop.

Speaker #4: Foundry, there's a foundry demand for relatively short lead times, low-volume, sophisticated products, and we're still doing that. And our new 3D printer, which is actually a sand printer...

Speaker #4: So, it means that we can print molds up to a certain size, and that means no patents. And when you're doing low-volume items, the cost of a patent is really prohibitive for people buying from a new source.

Speaker #4: So even in the US defense market, if we can quote just casting for casting, that puts us in a very strong position. We don't have that extra cost of the tooling cost, which our competition in America doesn't have, because they paid for their tooling years ago.

Mark Miocevich: Even in the US defense market, if we can quote just casting for casting, that puts us in a very strong position. We do not have that extra cost of the tooling costs, which our competition in America does not have because they paid for their tooling years ago. The new extension does not look like that at the moment. It is full of machines. There are three machines being installed and commissioned, and they will probably all be running over the next six weeks. That will fill up, and as you can see, there is probably room for, probably, I would suggest maybe 10 machines in there like we have in the other factory. That is all happening. We are very excited about that. It is what we need because we know the VEEM Extreme product takes a little bit longer to machine.

Speaker #4: Right. New extension. Doesn't look like that at the moment—it's full of machines. There are three machines being installed and commissioned. They'll probably all be running over the next six weeks.

Speaker #4: So that'll fill up. And as you can see, there's probably room for—I would suggest—maybe 10 machines in there, like we have.

Speaker #4: And the other factory, so that's all happening. We're very excited about that, and it's what we need because we know the VEEM Extreme product takes a little bit longer to machine.

Speaker #4: Also, we have rudders and brackets to consider, which will be new additional products. So we've got plenty of capacity for expansion, going forward.

Mark Miocevich: Also, we have rudders and brackets to consider, which will be new additional products. We have plenty of capacity for expansion. Going forward, outlook is propulsion. We expect the global demand for propellers to continue and in fact increase with the new product we have. We have found that our market didn't really involve workboats, whereas the big saving is for workboats. People that are spending between AUD 500,000 and AUD 1 million a year on fuel are going to get tremendous benefits in reduction of carbon footprint and in fuel burn, and it's a bit of a no-brainer. They can pick up, depending on what they have currently on their vessel, but they could pick up up to 18% just by changing the propeller and the rudder, which is an overnight job.

Speaker #4: Outlook is propulsion. We expect the global demand for propellers to continue and, in fact, increase with the new product we've got. We've found that our market didn't really involve workboats, whereas the big saving is for workboats.

Speaker #4: People are spending between a million and a half a million and a million dollars a year on fuel. They're going to get tremendous benefits and reduction of carbon footprint and in fuel burn.

Speaker #4: And it's a bit of a no-brainer. They can pick up, depending on what they've got currently on their vessel, but they could pick up up to 18% just by changing the propeller and the rudder, which is an overnight job.

Speaker #4: It means it doesn't impact their operations, and they can pay for it all in their OPEX. Trevor and Tino have been very clever in organizing potential funding through Export Finance Australia, which means we can fund them into a program where they pay it off per month based on the level of fuel savings we estimate.

Mark Miocevich: That means it doesn't impact their operations, and they can pay for it all in their OpEx. Trevor Raman has been very clever in organizing potential funding through Export Finance Australia, which means we can fund them into a program where they pay it off per month, based on the level of fuel savings we estimate. That way it stays in their OpEx budget and don't have to go begging for CapEx, which we all know is very difficult. We are monitoring the Middle East because it has had a bit of an impact on market confidence in that 50 to 90-foot market. On top of that market is moving bigger. We are just monitoring all this at the moment. You can see there's a couple of big boat builders in that 50 to 90-foot range that are restructuring at the moment.

Speaker #4: And that way, it stays in their OPEX budget, and they don't have to go begging for CAPEX, which we all know is very difficult.

Speaker #4: So, we're monitoring the Middle East because it has had a bit of an impact on market confidence in that 50- to 90-foot market.

Speaker #4: But on top of that, that market is getting bigger. So we're just monitoring all this at the moment. And you can see there's a couple of big boat builders in that 50- to 90-foot range that are restructuring at the moment.

Speaker #4: I think it's to find the Princess and Sunseeker—big players in that market. And they're both going through a bit of change at the moment.

Mark Miocevich: I think you will find that Princess Yachts and Sunseeker are big players in that market and they are both going through a bit of change at the moment. The VEEM Extreme, we will be talking to our existing client base. One of the very positive things is I was at Maritimo and Riviera a month or so ago when we went, did our road trip, and they did say, "Look, we have a customer each that had a desire to have the VEEM Extreme." They both expressed the view that they would like to have VEEM Extreme as an option for all their vessels. That was very encouraging because we believe that people that don't use their boats much, and I guess Riviera and Maritimo are in that market with their pleasure boats, that we would have thought there would have been limited access to that.

Speaker #4: So the VEEM Xtreme will be talking to the existing client base. And one of the very positive things is—I was at Maritimo and Riviera a month or so ago when we went and did our road trip.

Speaker #4: And they did say, "Look, we've got customers—a customer each—that had a desire to have the VEEM Extreme." And they've both expressed the view that they'd like to have VEEM Extreme as an option for all their vessels.

Speaker #4: So that was very encouraging because we believe that people that aren't using their boats much, and I guess Riviera and Maritimo in that market where they're pleasure boats, we thought there would have been limited access to that.

Speaker #4: But having it as an option means that the client can get to choose, so that's really strong. And our focus will go mostly there, into commercial and defense, for the fuel savings.

Mark Miocevich: Having it as an option means that the client can get to choose. That's really strong. Our focus will go mostly there into commercial and defense for the fuel savings. Obviously, defense is a range extender, that's critical. For the ferry market and offshore supply vessel market, one of the inquiries we have got, the people who have got 78 offshore supply vessels. There's a savings there of AUD 7 million or AUD 8 million a year on their fuel bill, which is significant and a huge reduction in carbon. There's also a drive to automate more. I won't go into too much detail on that because we wanted to keep that fairly confidential.

Speaker #4: Obviously, defense is a range extender. That's critical. And for the ferry market and offshore supply vessel market, one of the inquiries we've got—the people who've got 78 offshore supply vessels.

Speaker #4: So there's a savings there of $7 or $8 million a year on their fuel bill, which is significant, and a huge reduction in carbon.

Speaker #4: So, there's also a drive to automate more. I won't go into too much detail about that because we want to keep that fairly confidential.

Speaker #4: But again, we've had some significant robotics upgrades in our post-machining parts of our manufacturing process, which should improve our GPs. We estimate by six or seven percent on our product range.

Mark Miocevich: But again, we have had some significant robotic upgrades in our post-machining parts of our manufacturing process, which should improve our GMs, we estimate by 6% or 7% on our product range, which is very important for us. Defense side, defense remains strong. ASC is there. It is great to see them on. We had that contract negotiation that had to occur, which delayed orders. We are super busy at the moment. That will continue on until after Christmas.

Speaker #4: Which is very important for us. Defense side, defense remains strong. ASC is there. It's great to see them on. We had that contract negotiation that had to occur, which delayed orders.

Speaker #4: So we're super busy at the moment. That'll continue on till after Christmas. There's continuing work. We say qualification work, but it's more so now waiting for them.

Mark Miocevich: There is a continuing work. We say qualification work, but it is more so now waiting for them. And of course, we will be pushing into the sustainment side. I think that is a worthwhile pursuit. We have got a designated path that we think will be fruitful. Hunter at the final stage. The high-level qualifications we have got are not just suitable for the US, and for Hunter, but those qualification opens doors on other defense projects.

Speaker #4: And, of course, we'll be pushing into the sustainment side. I think that's a worthwhile pursuit. We've got a designated path that we think will be fruitful.

Speaker #4: Hunter at the final stage. We've got the high-level qualifications we've got, and not just suitable for the US and for Hunter, but those qualifications open doors on other defense projects.

Speaker #4: So, talking to people like Ryan Mattel, for instance, with the tank program, that's important. And also Hostile—there's a lot of work coming in Hostile over the next 20 years.

Mark Miocevich: So talking to people like Rheinmetall, for instance, with the tank program. So that is important. And also, Austal. There is a lot of work coming in Austal over the next 20 years. So having the right qualifications, being able to supply and meet their needs is very important. So we are well-positioned to take the opportunities as they come from that. A little slow, but very sticky. With Gyros, it is about a AUD 40 million potential contract that we are working through now for a Northern European country in a defense area. There is a patrol boat program where they are looking at using them as icebreakers, and that is a great opportunity for us and we hope that will be available to commence later this calendar year, so before Christmas. So we are working very hard on that as well as now the Mark III stuff coming out.

Speaker #4: So, having the right qualifications and being able to meet their needs is very important. We're well positioned to take advantage of the opportunities that come from that.

Speaker #4: A little slow, but very sticky. With gyros, we've got—it's about a $40 million potential contract that we're working through now for a Northern European country in a defense area.

Speaker #4: There's a patrol boat program where they're looking at using them as icebreakers, and that's a great opportunity for us. We hope that will be available to commence later this calendar year.

Speaker #4: So, before Christmas. So we're working very hard on that, as well as now the market's really got stuff coming out. So we expect that to pick up and start growing.

Mark Miocevich: So we expect that to pick up and start growing and this we are hoping will be the product we always wanted and the growth pattern we always wanted. So I think we have proved that we are seeing a better understanding in the marketplace. And I had a question going back last year, someone said, "Look, do you think the market really understands gyrostabilizers?" And I think that tender on using large Gyros in patrol boats for icebreaking, where they are going to actually rock the boat with our Gyro to break ice as it travels through the ice area. It will simply rock it and break the ice. It does show that there is now a significant understanding of our technology, and I do think that we have broken the ice on that issue, and that we will go forward from there. Engineering continue as normal.

Speaker #4: And this, we're hoping, will be the product we always wanted and the growth pattern we always wanted. So, I think we've proved that we're seeing a better understanding in the marketplace.

Speaker #4: And I had a question going back to last year. Someone said, "Look, do you think the market really understands gyro stabilizers?" And I think that tender on using large gyros in patrol boats for icebreaking, where they're going to actually rock the boat with our gyro to break ice as it travels through the ice area—it'll simply rock it and break the ice.

Speaker #4: It does show that there is now a significant understanding of our technology, and I do think that we've broken the ice on that issue.

Speaker #4: And it will go forward from there. Engineering continues as normal. We've also, because of the slowdown, taken the opportunity to cut our overheads back a bit and now provide additional capacity for growth.

Mark Miocevich: Because of the slowdown, we took the opportunity to cut our overheads back a bit and have now provided additional capacity for growth. So we are in a pretty good spot. And happy to take questions.

Speaker #4: So, we're in a pretty good spot, and happy to take questions.

Speaker #1: Thank you, Mark, and thank you, Tino. Just a reminder, if you'd like to ask a question, please do so via the Q&A button at the bottom of the screen. We have a couple of questions that have come through.

Operator: Thank you, Mark, and thank you, Tino. Just a reminder, if you would like to ask a question, please do so via the Q&A button at the bottom of the screen. A couple of questions have come through. Firstly, regarding, so defense revenue was a lot higher in the H2 once ASC orders started coming in. Should we expect this pace to continue into FY27?

Speaker #1: Firstly, regarding SOE defense revenue, it was a lot higher in the second half, once ASC orders started coming in. Should we expect this pace to continue into FY27?

Speaker #2: ASC, it certainly will. I think we still had $13 million worth of orders to fulfill when we started this financial year.

Mark Miocevich: Yes, it certainly will. I think we still had AUD 13 million worth of orders to fulfill when we started this financial year, and we expect that to flow into January, February of next calendar year. That is without any other orders coming through. There are always orders flowing through. The whole, what our program is for this year is to make sure we get all those out successfully and on time. We also then start seeing sales coming up on the VEEM Extreme range of products. Also, we would like to be commencing the Hunter-class and commencing that Northern European Navy work on Gyros. So they are the big movers for us for this financial year. So it will be a little bit busier this H1 than the H2, we predict, which is a little different. Normally, we have a slower H1 and a busier H2.

Speaker #2: And we expect that to flow into January, February, and into next calendar year. And that's without any other orders coming through—there are always orders flowing through.

Speaker #2: And the whole focus of our program for this year is to make sure we get all those out successfully on time. And we also then start seeing sales coming up on the VEEM Extreme range of products.

Speaker #2: Also, we'd like to be commencing the Hunter class and commencing that Northern European Navy work on gyros. So, they're the big movers for us for this financial year.

Speaker #2: So, it'll be a little bit busier this first half than the second half, we predict, which is a little different. Normally, we have a slower first half and a busier second half.

Speaker #2: This year, we think it might be back the other way. But it certainly will be a successful financial year, as we have had in previous years.

Mark Miocevich: This year, we think it might be back the other way, but it certainly will be a successful financial year as we have had in previous years. So business going back to normal, I would say.

Speaker #2: So, business is going back to normal, I would say.

Speaker #1: Thank you, Mark. Next question: How much additional capacity does the completion of the factory extension and commissioning of the new CNC machines give you relative to current demand?

Operator: Thank you, Mark. Next question. How much additional capacity does the completion of the factory extension and commissioning of the new CNC machines give you relative to current demand?

Speaker #2: Yeah, it's about a 25% increase in capacity in the next six weeks. And we then measure demand to be able to then order machinery based on that.

Mark Miocevich: Yeah, it's about a 25% increase in capacity in the next six weeks. We then measure demand to be able to then order machinery. Basically, our foundry can do quite a bit more, probably more than 50% more than what we're currently doing. So we've got plenty of capacity going forward. In terms of the other, the beauty about this is the rudders and brackets can be done on very much cheaper machinery that are immediately available. Whilst we'll start them off using the capacity we've got, we can move them out of existing propeller machining capacity onto cheaper machines and grow that area quite quickly and cheaply. So that's all very positive.

Speaker #2: So our foundry can do quite a bit more—probably more than 50% more than what we're currently doing. So we've got plenty of capacity going forward.

Speaker #2: And in terms of the other, the beautiful thing about this is the rudders and brackets can be done on much cheaper machinery that is immediately available.

Speaker #2: So whilst we'll start them off using the capacity we've got, we can move them out of existing propeller machining capacity onto cheaper machines and grow that area quite quickly and cheaply.

Speaker #2: So that's all very positive.

Speaker #1: Thank you, Mark. You mentioned that the marine market troughed in the second and third quarters, which has since recovered. What are you seeing in order flow that gives you confidence that that's sustained, rather than just a short-term bounce?

Operator: Thank you, Mark. You mentioned that the marine market trough in Q2 and Q3, which has since recovered. Where are you seeing an order flow that gives you confidence that that's sustained rather than a short-term bounce?

Speaker #2: Interesting. There are two reasons. One of them is that we're at the end of August now, and we've still got quite a significant backlog.

Mark Miocevich: Interesting. There's two reasons. One of them is that we've seen, we're at the end of August now, and we've still got quite a significant backlog. We haven't seen that before. We're running, at the moment, we're running at around 20 propellers a day. So that's a fairly significant workload for us, and that's kind of our peak, and it's continued on now to the end of August. On top of that, the VEEM Extreme is becoming available, and there's a lot of pent-up demand for that and a lot of new customers for that. So we think that generally, we think it's a seasonal game. It slows down around Christmas time or towards Christmas time. We haven't seen any of that sign yet, and I think that the VEEM Extreme will probably mask that this year.

Speaker #2: Now, we haven't seen that before. At the moment, we're running at around 20 propellers a day, so that's a fairly significant workload for us.

Speaker #2: And that's kind of our peak, and it's continued on now to the end of August. On top of that, the VEEM M Extreme is becoming available.

Speaker #2: And there's a lot of pent-up demand for that and a lot of new customers for that. So, we think that, generally, it's a seasonal game.

Speaker #2: It slows down around Christmas time, or towards Christmas time. We haven't seen any of that sign yet, and I think that the VEEM Extreme will probably mask that this year.

Speaker #1: All right. Thank you, Mark. What do you need to see or achieve before dividends are reinstated?

Operator: Right. Thank you, Mark. What do you need to see or achieve before dividends are reinstated?

Speaker #2: Profit. So we want to get back to our normal profit so we can resume. We'll just keep watching that space for that. Certainly, our desire is to get back to our dividend stream.

Mark Miocevich: Profit. We want to get back to our normal profit so we can resume. We will just keep watching that space, but that is certainly our desire is to get back to our dividend stream as soon as we have profit returning to where it should be.

Speaker #2: As soon as we have profit returning to where it should be.

Speaker #1: And are you looking for a new CEO or, Mark, are you going to continue both roles?

Operator: Are you looking for a new CEO or Mark, are you going to continue both roles?

Speaker #2: For the short term, yeah, I'll continue both roles. It's something that I enjoy, and we'll just take our time. This is a high-technology business, so finding the right person is going to take time.

Mark Miocevich: For the short term, I will continue both roles. It is something that I enjoy, and we will just take our time. This is a high-technology business, so finding the right person is going to take time.

Speaker #1: Thank you, Mark. That concludes the Q&A segment of this webinar. I'll now hand back to Mark for closing comments.

Operator: Thank you, Mark. That concludes the Q&A segment of this webinar. I will now hand back to Mark for closing comments.

Speaker #2: Yeah, thank you, Ben. Look, it's been one of those years. We had, I think, the last I remember was after the GSC in '08–'09.

Mark Miocevich: Yeah. Thank you, Ben. Look, it has been one of those years. We had, I think the last I remember was after the GFC in 2008, 2009. Very rare for us to have this, and we are back on track again now. Circumstances sometimes can lead to this. But we have not wasted the opportunity to regroup and to provide extra capacity for our business and complete the development of our new products. So we are extremely well poised to be able to meet the demands of having new and exciting products going into the market. So thank you all for taking the time to listen, and thank you, Ben.

Speaker #2: It's very rare for us to have this, and we're back on track again now. Circumstances sometimes can lead to this, but we haven't wasted the opportunity to regroup and to provide extra capacity for our business and complete the development of our new products.

Speaker #2: So we're extremely well poised to be able to meet the demands of having new and exciting products going into the market. So thank you all for taking the time to listen.

Speaker #2: And thank you, Ben.

Operator: Goodbye.

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