As per an ASX announcement dated 24th December 2018, vessel builder Austal Limited (ASX: ASB) has been awarded USD21,070,175 from the United States Defence Department for support activities on the Littoral Combat ship program, situated in Mobile, Alabama. This is the first time Austal US acted as a prime contractor on LCS for such work. It will be the prime contractor for undertaking dry docking of LCS 14.
This award represents Basic Ordering Agreement (BSA) to complete the Post Shakedown Availability (PSA) for the Littoral Combat ship program (LCS 14).
Austal CEO, David Singleton highlighted Austal’s strong future of delivering a significant support business in the US and all over the world with these contracts forming the basis of the steady expansion of the support business. The Littoral Combat Ship program supports a huge number of jobs at Austal's facility in Alabama and supports related companies as well.
The order encompasses correction of Government responsible trial card insufficiencies, new work identified between custody transfer and the time of PSA, and incorporation of permitted engineering modifications, not incorporated during the construction period.
Austal has transported nine LCS vessels with additional ten ships on order. All these will undergo regular maintenance and dry-docking activities to maintain navy availability during the life of the class. Austal has set up a significant LCS support capability in San Diego in the last 24 months. The company’s support business has grown at a rate of circa 30% over the last couple of years, posting revenue of circa A$200 million last year. It plans to expand this segment in the US further.
The program involves several ships under production. LCS 20 is about to finish sea tests and the LCS 22 is about to begin the trials. Final assembly is underway for the future LCS 24 and LCS 26. The components are under construction for LCS 28. Work on the future LCS 30 is planned to commence by January 2019 end. The company obtained two additional orders of LCS 36 and 38.
About the company
Austal Limited has established its strong global footprint as significant defense prime contractor and marine technology partner. The company has orders of more than 300 commercial and defense vessels across the globe. It is designated as the 5th largest shipyard in the USA. The major part of the company’s business is in the USA, focussing on two major shipbuilding programs for the US Navy, the Littoral Combat ship program (LCS) and Expeditionary Fast Transport (EPF).
In its annual financial release, Austral reported an EBITDA of $103.319 million, a massive increase of 32.8% from the last year. This is the 2nd time since the company’s inception, EBITDA crossed $100 million. NPAT of $39.028 million was 25.6% higher than 2017 financial year.
The scrip price has been on an uptrend this year from $1.825 at the beginning of the year, representing a YTD return of 5.21%. The shares closed at $1.925 today with a market capitalization of AUD 675.83 million. The company reflects a price-earnings ratio of 16.990 with earnings per share of AUD 0.113.