Austal Limited (ASB) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to Austal Limited H1 Financial Year 2023 Results Conference Call. [Operator Instructions] I'd now like to hand the conference over to Mr. Paddy Gregg, Chief Executive Officer. Please go ahead, sir.

Good morning, everybody, and welcome to the financial year 2023 half 1 results call. I'm Paddy Gregg, the CEO at Austal, and I'm joined by our Interim CFO, Geoff Buchanan. And this year, we'll be presenting the same format with me giving business overview and context while Geoff focuses on the financial details. And as always, we plan to present for no more than 30 minutes to allow plenty of time for questions. And it should be no surprise that the financial results we announced today given the announcement we made a month ago in mid-January about the T-ATS provisions we were taking due to uncertainty around some of the predicted losses on that program. And unfortunately, these previously announced T-ATS provisions mask a very respectful first half set of results with very good operational, financial performance in a number of key areas, such as U.S. Support and Australian Defense. Finally, as always, I plan to update you on where I see the business growing significantly over the coming years. So if we start by talking about the financial headlines. Revenue is reasonably consistent, up slightly driven through FX, and EBIT is obviously down a negative due to the T-ATS onerous contract provision. And remembering the FY 2022 half 1 included some accelerated contingency released on the LCS program when we compare to the previous corresponding period. NPAT down and follows the EBIT loss. But good news is the dividend remains consistent, and that's really based on the strong cash position we have and that cash remains strong despite the significant investment we've made in the business ready for future growth. Operating cash is down really as a result of program milestone timing. And as you're aware, we get a lot of cash in based on when milestones are achieved, and it depends where they fall in the half as to when that cash comes into the business. So nothing to be concerned about, just a function of where the programs lie. Our net cash reduced really due to the investment we've made in the business, predominantly the San Diego support facility and the dry dock that will be coming later on this year. If we look at the key facts and an overall summary of the business, revenue is healthy and consistent with prior years, as I said previously. We sit at a near record order book if we consider all the OPC options, demonstrating massive success in the business at winning new work and really a long way away from where we were a couple of years ago when we were staring down the barrel of the end of the LCS program and a whole lot of uncertainty about what was coming next. Austal USA and Australia achieved delivery of 3 ships in the half, LCS 32 and 2 Evolved Cape-class vessels from the Australian business. And since the half finished, we've delivered EPF 13 and another Evolved Cape-class patrol boat. So really, that goes to what I said earlier about cash and whenever we deliver boats and milestones. I'm really pleased to see the Service and Support business continue to grow. For the last couple of years, we've talked about the suppression there due to COVID, and we're really starting to see that come back. I'm also pleased to say the floating dock for San Diego is running on track, and again, that will provide an opportunity for future growth in Service. We're now up to 8 service centers worldwide with 56 vessels under construction contracts and 5,000 employees globally, and I'm pleased to say they're all COVID vaccinated. So whatever comes in the future, I think we're in the best place possible to deal with whatever comes. At this point, I'll hand over to Geoff, who will talk you through a little bit more detail on the financials, before I summarize the business outlook.

Thanks, Paddy, and good morning, everyone. If we turn to Slide 4 and look at the group revenue, we saw a $53 million revenue increase over the same period last year and this was driven largely by favorable foreign exchange, about $47 million, and overall was in line with our expectations. The reduction in U.S. Shipbuilding revenue reflects the expected reduction in throughput arising from the maturity of the LCS program with only 3 vessels remaining undelivered, and from the fact that the newer contracts, primarily the AFDM, the floating dock, passed an OPC at very early stages with minimal throughput. The U.S. Support business continued its steady growth, mainly from availabilities in Singapore and the MARRS business, and our San Diego Support business also enjoyed growth with the full benefits of the acquisition expected when the floating dock arise, as Paddy just said. In Australasia, Shipbuilding revenues fell with the decline in commercial work and the MOLS 2 ferries nearing completion. However, Australasia Support saw greater throughput with increases in both availabilities and in emergent work, primarily from increased Guardian and Cape class vessel dockings. If we move to the group EBIT slide, the annual EBIT movement was obviously dominated by an $85 million fall in U.S. Shipbuilding EBIT. The main component being the onerous contract provision booked against the T-ATS program, totaling $59.6 million in total, of which $41.2 million was booked in the second -- sorry, in the first half, as advised in our EBIT guidance update at the 17th of January. Profit on the LCS program has also been inflated in FY '22, H1 by the impact of the accelerated release of contingencies with the remainder of the delta relating to slightly lower LCS profit. Whilst the T-ATS program is at very early stages, we provided our best forecast of the loss that could arise on the program based on known sensitivities at a program level covering T-ATS 11 to 14 and the option on T-ATS 15 relating to cost increases arising from cost inflation as well as specification and bills of material changes. The relevant accounting standards require us to fully provide for any forecast losses, notwithstanding the early stage of the program. And whilst a request for equitable adjustment, or REA, has been submitted seeking recovery of these amounts, the likelihood of success and the timing of any recoveries remain uncertain, and therefore, we've not assumed any recovery during the reporting period. However, if we are successful in our REA claim at some point in the future, then the extent these losses will obviously be reduced. In the U.S. Support business, the growth referred to earlier drove an approximate $4 million increase in EBIT. And in Australasia Shipbuilding, our half-on-half comparison was distorted by virtue of the $6.7 million provision that we took in the first half of last year for the Philippines typhoon impairment. Ignoring this, EBIT was broadly flat year-on-year within Australasia Shipbuilding. The Australasia Support business performed well through increased availabilities and emergent work, delivering an additional $4 million of EBIT in addition to the higher revenues. If we move on to the segment breakdown on Slide 6. Although the U.S. Shipbuilding revenue declined by just $6 million at a headline level, $37 million of FX tailwinds helped to offset some slightly declining profit through the reducing LCS program given its level of maturity. Eventually, growth in other programs will replace this decline. The impact of the T-ATS onerous provision drove negative EBIT, although it's worth noting that if these losses are added back, a respectable EBIT margin of 9.7% would have been achieved. Both the U.S. and Australasia saw strong growth in revenue and some EBIT growth in their respective Support businesses with combined revenues of $193.4 million in the first half and EBIT margin of 6.6% and 4.6%, respectively. We're now enjoying the benefits of our investment in the Support businesses with growth in both availabilities and emergent work post COVID, positioning us on a favorable trajectory towards meeting our aspirational support EBIT target of $500 million by 2027. Australasia Shipbuilding revenue fell by $21 million due to a reduction in commercial ferry construction with vessels at an advanced stage of completion in the Philippines and Vietnam. Australasia Shipbuilding margin at 8.3% remains strong, though, although much of the delta reflects the EBIT impact of the impairment provision taken in the first half of FY 2022 for the impact of the Philippines typhoon. If we move on to cash flow, Slide 7. Delays in milestone payments on EPF 13 in the U.S. and MOLS 2 in Australasia were the main drivers of the negative operating cash flow at 31 December, which will translate to an operating cash uplift in the second half, as Paddy mentioned earlier. U.S. also made prepayments for the purchase of some long-lead materials to take advantage of the strong U.S. dollar to euro exchange rate. Investing cash flows included continued enhancing CapEx in the U.S. on the San Diego expansion, particularly on the floating dry dock, which will be a key enabler of our future sustainment contracts. So looking forward, we anticipate enhancing CapEx spend will increase in the second half, predominantly in San Diego. On the financing side, there was no additional debt with the FY '22 first half loan origination amount relating to the extension of the Syndicated Facility Agreement, which runs through to December 2024. The lease principal charge is reduced as in the first half of FY '22 these had included lease charges on CCPB 9 and 10, which was subsequently derecognized. The foreign exchange difference is a translation difference arising as a result of the stronger USD in FY '22 H1. Pleasingly, the strong flows in gross and net cash position, positions us to support an interim dividend payment of $0.04 per share. So thank you for listening, and I'll hand you back to Paddy.

Thanks, Geoff. And so just talking through some of the operational highlights in the business. I think there's a lot of those. And for those of you looking at the presentation, it's really pleasing to see how well the business is performing. But in my mind, thinking about the USA and being able to commence the OPC contract is a great milestone, and we're really excited to be on that journey and ready for the future. We're seeing great delivery through the LCS and EPF program and very excited about the recent delivery of EPF 13 and its autonomous capability. And indeed autonomy, I think, is a tremendous opportunity for us as a business going forward, and some of the future opportunities we see and are prosecuting in the small, medium and large range, both in projects that we are building and design studies that we are part of, I think that's going to be a really exciting future for us. And those design contracts -- really, this is about us securing work to build both breadth and longevity into our pipeline and order book. Our business that has traditionally relied upon repeat orders on programs we have won. It's really, really exciting to be looking strategically about how we can diversify, broaden and put a whole lot more longevity into that pipeline. And of course, with the recent announcement also in January about medical ships and our confidence on where that program is going, that's probably the most exciting near-term opportunity that we've got. If we think about Australasia, I think operational performance is excellent with a total of 4 Evolved Capes and 15 Guardians delivered on those programs. Support business is performing well, and we've seen that revenue and profitability increase in the business, as Geoff has just talked about. It would be remiss not to mention the commercial market, still challenging. But recently, we've seen a quite significant increase in opportunities, and I'm confident we will have some good news for you in the reasonably near term. And then, of course, in Australia, a lot of focus on the defense strategic review, which is due sometime in March, and we'll highlight the way forward for defense and specifically Western Australia. And I think we're really well placed based on our delivery performance and our sovereign capability, 2 things which seem to be very, very important based on what we're all reading in the press today. Now if we think about how we're going to grow the business, expand Shipbuilding and Support. We've spent the last few years growing the order book, bringing in the diversity of programs, many of which are now in contracts. So we're not just talking about this. We have started to contract these programs. And while it may be early days getting in contract, demonstrating delivery, I think puts us in great shape for winning more and more in the future and just growing and diversifying the business. And the design studies really help us look much further into the future. It's great getting on programs early, shaping design, understanding what the program is all about and putting us in the best possible place whenever we come to tender for these vessels in the future. And we've looked -- previously, we've looked exclusively kind of prime contracting major shipbuilding contracts. We're now also happy to partner with subcontractors. You've seen that with aircraft carrier elevator modules, you've seen that with the submarine modules, which is really in its infancy. And providing we perform on that, I think, a great opportunity to grow and grow that part of the business. So well done to the U.S. team for diversifying strategically onto a program that just has many, many years of backlog that hopefully we will be a big part of going forward. And as you know, we've targeted to grow our Support business to $500 million by FY '27. We got asked a lot of questions about how we're going to do whenever you looked at the declining figures through COVID. But I'm really pleased that both USA and Australia have almost doubled compared to the previous corresponding period. And that's what gives us the confidence that, that was a real target underpinned by detailed understanding of markets rather than some aspirational figure we threw out there. And we are back on track definitely to achieve that. And really great to see San Diego having a successful ground opening a couple of weeks ago. More investment to come with the addition of the floating dock, allows us to significant increase the revenue through that facility. So again, another area of real growth in the business that I'm very, very excited about. So maybe just to round off and think strategically about where we're going. There's no hiding from the fact that we must resolve the T-ATS position, and we're all working very hard to do that. But there's a really strong operational performance in the business demonstrated by the ship deliveries, the success in winning steel. The older book is sitting at nearly $7 billion when you include all the OPC options, and indeed, those OPC options could double if they order the second batch. Support revenue back in the upward trajectory, as we talked about. We now have the capability to deliver in steel and aluminum in Shipbuilding and Support in commercial and defense sectors globally. So I think we are very well placed to get out there, get after more work and put some real growth into this business. AUKUS and the Australian Defense Review, I think, will be very exciting for the company, should give us a real clear route ahead and provide a whole lot of future opportunities for Austal both in the U.S. and Australia and maybe even in a joint combined way through tech transfer and a lot of the work that we're already doing. And we really -- we continue to invest and build the capability and opportunities to grow. And if we compare this business to where we were 2 years ago, a lot of these are not real and on contract. And that's what gives me such excitement about where we can go in the future and just how big we can grow to. So with that, I will thank you for listening so far, and we will open up the call to questions.

[Operator Instructions] The first question comes from Russell Gill with JPMorgan.

Just a question on the T-ATS process since the big provision you took in January. You made commentary in your announcement that the OPC contract, which is obviously materially larger, is, I guess, structured differently, and therefore, you're not as concerned about how you price that one. Can you just possibly give us some more color so we can get some comfort over, I guess, the pricing of that OPC contract? And obviously, a different customer. And more color around how those contracts differ?

Yes, sure. Contract [ you get ] slightly different times and in slightly different ways. T-ATS is a contract that was direct awarded based on information we were given, and we relied on our information to put our pricing in. We've since proven that some of that information was incorrect. And therefore, we go through the request for equitable adjustment. Whereas OPC, we were intimately involved in the detail of the design and really understood the ships that we were tendering for. I think the other major difference, the T-ATS vessel was bid for or priced just before the hyperinflation that we saw at the back end of COVID and we were able to understand that with the OPC contract. And then some of the clauses in the OPC contract are much more favorable in terms of their allowances for inflation going forward. So there's quite a number of technical differences in terms of how the contracts were bid and the contractual mechanisms that we've signed up to.

I appreciate. I'm going to have only one, but just a follow-up within that OPC contract. Is all the inflation ability -- can you pass on all inflation? Or what are the risks that you take, I guess, from a fixed price standpoint? Clearly, obviously, you're bidding when there was already an inflation trajectory. But what are the, I guess, fixed price risks you take on the OPC contract and what passed through?

It's probably a very complex question to answer, and I'm generally not trying to avoid it. The contract comes in multiple parts, some of which have inflation, some of which are fixed. So things like the design part of the contract is fixed. And we're comfortable with that because we understand it's our designers and we know the hours that they have to spend to do the design for production, design for manufacture. But then we get inflation on materials and things like that. So we really need to go into a whole lot of detail as to why we have that confidence. But on the parts of the contract where we think we need inflation to cover what's happening in the market, we've got it.

The next question comes from Sam Teeger with Citi.

Just keen to talk about what role do you see Austal playing within AUKUS? I'm wondering if they go with a U.K. design, wouldn't that be built at the BAE yard in Adelaide? So is it fair to say unless they go with the U.S. design, there may not be much for Austal?

So good question. And that's a submarine specific question, Sam. So what will Austal have to do with it? It will be interesting to see what happens in advance of a submarine build. I think the work that we're doing in the U.S. on the submarine modules, although nobody said it, in my mind is really to try and accelerate the delivery of nuclear submarines in the U.S. and bringing in more partners like Austal to be able to build parts of submarines -- while we're not confident or capable to build whole submarines today, building parts to try and accelerate the overall delivery will help AUKUS. I think if Australia does start building subs, they will be built in Adelaide. But a lot of submarines are going to be based here in the West. So we will start to think about opportunities to get involved in maintenance and support. And often submarines travel with Support ships, which may open up an opportunity. But I think in general for me, AUKUS is much bigger than just submarines. I know submarines take the limelight. And that's probably the next biggest decision that will get announced. But there's a whole lot more behind AUKUS with tech transfer, with missiles, with systems, with ships. And the bit I'm most excited about is the Defense Strategic Review publication in Australia, which should give us a real understanding of what opportunities are coming in the near term. So while, yes, AUKUS is good, submarines is interesting, but I don't think submarines is the main event for us. It will be the shipbuilding side and potentially any support.

All right. And just following on the topic before the T-ATS provision, given current rates of inflation, what's the likelihood that there will be further provisions on that program? And 2, what are the fixed price contracts do you have in business that we should be aware of?

Yes. So second part of your question first. The fixed price contracts generally only come in the commercial world because they're much shorter and we have a good idea of what they are and we're back-to-back on all our contracts there. So we'll place contracts with the supply chain in line with what we're tendering. And can you remind me the first part again, Sam?

Yes. I guess just what you -- just in terms of current rates of inflation, what's the likelihood that there's going to be further provisions on the T-ATS program? And can...

Yes. We had a long debate with the auditors over this and did a whole lot of sensitivity analysis on the T-ATS contract. And I guess the short answer is independently audited we've come to the conclusion that, that provision is sufficient for the T-ATS project based on everything we can possibly think of today. So we're optimistic that, that is the final number and the total provision we need. It's also very early on in the contract. So we're less than 10% complete on the first vessel, and that's a provision for 5 vessels going forward. So it will be really interesting to see how we perform. And we're starting to learn lessons between the first boat and the second boat, and it will be how far down the learning curve we can go to see where we end up. But based on the information we have today, that's the best provision we can put forward for all 5 vessels.

The next question comes from Mitch Sonogan with Macquarie.

I was just keen to get an update on some of those upcoming opportunities there, the medical ships, T-AGOS, et cetera. Do you mind just giving us a quick refresh on expected value? And I guess just when -- with what you're seeing at the moment, when those programs would start as well, please?

Yes, sure. So as I said, medical ships, I think, is the biggest and closest opportunity that we've got at the minute. And we expect that to be up to 3 ships. And we think 3 ships, because that's what we've seen approved through presidential budgets in the United States. And we think that's in the order of USD 900 million. We are in sort of final design, discussions and negotiations and being able to price that. So if I'm optimistic, I'd like to think by the end of March we're signing that contract. A lot can happen in defense procurement, but we think we're well placed because we were the design partner for it. We don't believe anybody else is tendering for it. So we're working with the customer to try and get into contract on that. You mentioned T-AGOS. We also have submitted a tender for T-AGOS. We've put in a tender back end of last year, and they had asked for some revisions. And we revised our price and specification and put that in. And we think tender contract award will be or announced will be sometime around the end of June this year. And again, that's likely to be a USD 3 billion contract. So again, another very, very substantial contract. But we've got a real chance of winning. And then there's a number of smaller things, as you've seen in some of our announcements, that we've been out there winning. Saildrone will be interesting in the U.S. Some of the medium unmanned surface vessels, the OUSVs, are continuing to grow that order book. Growing the submarine module work, I think there's an opportunity to do that and we will keep the market informed as we go through that. And if we think about Australia, I guess, the landing craft, the Army landing craft, the 8710 program is the one that we have a tender in for. And we think some sort of announcement on that will be made in line with the Defense Strategic Review. And then sometime in March when Defense Strategic Review is published, that will give us a real indication of certainly what's coming in Australia and may give us some indications around submarines and any other opportunities there are through AUKUS. So I think for me, as I said earlier, a very, very exciting time. We've kind of gone from LCS and EPF in the U.S. to about 10 programs we're on now. So the opportunity for growth and diversity in the business is just nothing like we've ever been able to achieve in the past. So the team over there are doing an excellent job in terms of their strategizing and aligning the business to be able to grow significantly in the future. And Australia are very well placed, consistent delivery at a time when you pick up a newspaper and there are not very many people delivering ships. We are very, very proud of what we're being able to achieve here, consistent delivery on Guardians and Evolved Capes. And hopefully, a whole lot of opportunities that will come from the Defense Strategic Review on the back of that performance.

Yes. And just a quick one, I guess, just surrounding that -- just on the commercial side of things. And that's not a huge -- hasn't been a huge profit generator overall, but gets sort of interest that -- yes, you did mention there might be news in the not too distant future. So yes, I was just keen to understand how that part of the business is looking in terms of leads or interest particularly from some of the big customers that you've worked with previously?

Yes, it's a good question. So a lot of our bigger customers are Scandinavian based and they have the what is the green fuel dilemma. We've talked about this before. Hydrogen is not ready. Diesel doesn't look like it's the fuel of the future. LNG has gone incredibly expensive and doesn't get you to 0. Batteries aren't quite there yet. So there's a lot of work we're doing with those customers on longer-term stuff. But there's a number of other existing customers that have realized that those fuels will not be available on the routes they operate, so they are happy to go down diesel. And so we've had a significant uptick in opportunities. And there's a few that we're in final negotiation with at the minute. So I'm reasonably confident that we won't have a problem in the Philippines and Vietnam. And I would hope in the next couple of weeks, we've got some good announcements for the market that just keep that bit of the business ticking over, because I think there's a great opportunity in the future. And for me, it's survive this transition from diesel to whatever the future is. And our yards are very efficient and very well placed in the longer term. And it's that medium term we need to get through. But as you pointed out, it's a very small part of our revenue and profit in the business. But it just feels like when we've got the capability, if we can hold on to it to be ready for the future, it will be great. But we also see a huge opportunity for growth in the defense sector. So if we had to take a difficult decision, I don't think it would be the end of the world for Austal.

[Operator Instructions] The next question comes from [ Steven Sherman with English Excellence City ].

I'm a new investor, only very small. I'm just curious about our opportunities in Japan and if that's a market that's open to Austal with the Japanese expanding their Navy? And the other thing is, what assurances industry is having from government about the government interfering in the economy and the way they've destroyed businesses in the last 2 to 3 years? And how is Australian industry getting any re-insurances about the failures that are being addressed from government, from the people who've made all these terrible decisions in the last 2 or 3 years?

Okay. Let's start with Japan. Japan is interesting for us. We delivered a ferry to Japan probably right in the middle of COVID, which was disappointing for them because it was due to operate between Fukuoka and Busan, and with the border to Korea closed, they couldn't operate. But actually, I traveled there a couple of weeks ago with the Premier of Western Australia to meet with the company that bought it, and actually we rode the ferry that has just gone back into operation from Japan to Korea. And they were very, very pleased with the boat. And I was pleased with the boat, to be honest. It's not too often I get to ride one of our boats in service after we deliver it. And it's a beautiful vessel that has won a lot of design awards. So in terms of the relationship between Austal and Japan, I think it's good. And I think that's demonstrated through the boat that we've already delivered. And yes, we have been having discussions with them about, "Are there vessels that we build that could support your Navy?" I mean, they're obviously quite sophisticated shipbuilders in their own right. But some of the specialist stuff we do, the large catamarans, the ability to move troops, equipment or people if they're needed to, those are conversations we're having. And actually, I was at a celebration last night for the Emperor's birthday at the Japanese Consul General's house. So we're doing everything we can to build and further the relationship with Japan. And it was really great to get the support of the Premier himself in terms of traveling with Austal and promoting the capabilities and really demonstrating that sort of nation-to-nation partnership and friendship that we've got. So I think there will be opportunities, and we're on top of it and doing everything we can to support them. And second part of your question in terms of government-industry and support. A change of government last year and it would be no surprise to you that Austal supports both sides of politics equally. We're defense, which we see as pretty bipartisan. And a couple of weeks ago, I was in the office of the Defense Minister and the Defense Industry Minister. And we get great engagement around workload, what's coming up, jobs. And they are very supportive of sovereign industry. And I think really demonstrated -- there was a quote in the Prime Minister's question time a couple of weeks ago from the Deputy Prime Minister, Richard Marles, talking about Austal being a national asset and the design capability we have and how impressive it is. So I'm really encouraged by everything that's being said, which gives me confidence when the Defense Strategic Review is released in a few weeks, that, that will yield great opportunities and an ability to work with the Commonwealth on sovereign jobs, sovereign capability and just making sure that we're delivering the equipment to those that defend our nation needs. And with our track record of on-time and high-quality delivery, I'm really confident that we're very well placed for the future as far as defense and government relations go.

And I think what you guys do is great. But I just wanted to clarify about, I think, with the government. I'm not an expert in this stuff, but I'm worried about the way that they use -- I know they've done it forever -- industry is a political tool. And I'm not being political about the different parties; they're all the same. But I'm just wondering if there's been any -- have you seen any reform or any consequences or revision of the way that they've -- the mess that they've made, because -- the bureaucracy, not the politicians, those guys. Anyway, I won't go into all that. But you guys -- I know you know what I'm talking about. I guess nobody talks about this stuff except behind closed doors. But have you seen any evidence at all that there's been any kind of rethinking about the way that they handle information the way it affects the economy and the government, particularly Australian industry?

Yes. Look, they've got a difficult job to do. They've got budgets to balance like a lot of businessmen and women do. But...

Yes. But they're not winning the information war with their enemies and they're failing because they have no flexibility. I'm sorry to interrupt. That's not me saying that. But I don't know if you agree or if -- I don't know. But they're not winning it and they haven't been winning for a long time. They keep losing, and that's what we saw in the pandemic. They don't seem to be on the cutting edge of the information stuff and getting good news out there. Because I think what you guys do is wonderful and everyone should know about it. And it's good they're mentioning questions on -- but I just feel like the bureaucracy and the government people and the industry it's all politicized. And they don't -- and I know it's a difficult thing to talk about. But do you know what I'm talking about? Have you seen any kind of reform at all from the government to kind of...

Yes, I think so...

Review their systems of -- the way that they handle information.

Yes. I think they're getting better at working with industry. I think they were pretty hands off through the -- towards the end of what the Libs were doing. They put cape boats into production in an unsolicited way to retain the work [ because ] they understood future capability. And I think we need to look to this Defense Strategic Review when it's published, because everything I understand, it will be pro sovereign industry. And again, not to quote that -- I talked about Richard Marles. He went on to criticize the previous incumbents for going offshore for too much. And he made quite a bold statement about a real reluctance to go offshore and support industry onshore. So I think everybody is saying the right things at the minute. I think let's get the Defense Strategic Review. And then within the next 4 to 6 weeks, we will have a much better understanding of what their intentions are. But I'd be really surprised if it's not pro sovereign industry and supporting Australia.

There are no further questions at this time. I'll now hand back to Mr. Gregg for closing remarks.

Thank you. And thanks for listening, everybody, and thanks for dialing in to the conference today. As I said at the ahead of the meeting, it's been a difficult few weeks with the T-ATS announcement. We've made that. We've worked through that. But if we look at the underlying performance in the business, it's really very good. And with the outlook we see and the opportunities, we have never been in such good shape for growth. And everybody at Austal is 100% hedged on, focused on prosecuting those opportunities and growing the business. So while some of the news is disappointing, if you managed to look through that, I think we're well set for a very, very exciting future and some very exciting things are likely to come from the Defense Strategic Review. So stick with us, and we've got an exciting journey ahead of us. So thanks very much for your time today.

That does conclude our conference for today. Thank you for participating. You may now disconnect.