Updated Investor presentation. Nothing much new. Seem to be dragging their heels on the acceptance testing of the Sharrow props.

Sharrow by VEEM:

Subject to successful acceptance testing in the coming weeks, the SHARROW by VEEM product is expected to be introduced to customers in the fourth quarter of FY24.

Further design refinements expected to be generated as the different series are rolled out through FY25

General:

VEEM expects to be able to continue at the higher level of hours worked through the rest of FY24.

VEEM remains vigilant in terms of cost increases and availability of materials and components globally due to issues like the conflict in the middle east impacting global shipping. Mechanisms are in place to protect pricing and margins.

Liquidity adequate to fund current planned operations and capital expenditure.

Sold out in RL and SM recently after good run but up another 9% today.

Nice piece on 9 news promoting the company

Sharrow propeller in Time magazine's best inventions of 2023

Good news for the company that the Hunter class frigate is still going ahead. Veem was contracted to build prototype propellers back in 2022 due for completion Q2 24.

In short: Britain's BAE Systems will get the go ahead to build at least six new Hunter-class warships — costing around $4.5 billion each — for the Royal Australian Navy.

From the Fy23 presentation

Currently manufacturing blades and hubs for the Hunter Class Frigate Program (HCFP) demonstrator program for BAE Systems Australia. The value of the demonstrator contract is $1.8 million, with successful completion of the task by Q2 2024 ensuring VEEM qualifies as a supplier to the HCFP. VEEM is one of only two suppliers globally to be able to produce this level of precision.

• Success with this project and subsequent high-level defence supplier qualification is expected to lead to further Australian defence work as well as the potential to export equipment for other naval shipbuilding programs around the world, including other Type 26 frigate programs.

Interesting tour of the factory and experience of the gyros on the water in a 50 min video from Nautistyles a YouTube channel with 374k subscribers. Already has 129k views and 700 comments in 3 days. Good PR for the company and raises the profile.

I first came across toroidal propellers in this YouTube video from Matt Ferrell. At the time I thought of Veem and this announcement confirms that VEE will be making the Sharrow marine propellers for inboard powered applications.

Agreement signed with Sharrow Engineering for VEEM and Sharrow to partner together to design and then VEEM to exclusively manufacture and sell Sharrow designed propellers worldwide for inboard powered vessels.

• Sharrow has developed an award-winning propeller design that has made a spectacular impact on the outboard motor market with outstanding improvements in fuel efficiency, noise, vibration and handling.

VEEM will now take this technology to the larger inboard propellers.

• Sharrow chose VEEM as VEEM is the only manufacturer globally producing a range of high-performance, fully CNC machined propellers, thereby guaranteeing the accuracy of the propeller every time.

• The total addressable market for inboard propellers is estimated to be US$2.6 billion with the annual new build market estimated at US$338 million.

• Progressing with the project is subject to VEEM’s acceptance of the performance of the Sharrow design on the VEEM test vessel with the testing to be done in the coming weeks.

• Design work has already commenced and the first SHARROW by VEEM propellers are expected to be available in early 2024 with the full range rolled out by the end of 2024.

• Initial production will be at VEEM’s facility in Western Australia with the early adoption rates to determine potential demand and resultant capacity expansion opportunities

Trading update (EBITDA back up to FY21 levels although profit at 75%, when the SP was $1.20, currently 40c) and Exclusivity agreement for Gyros released today. The agreement with a Singapore shipbuilder looks to gives a good forward order book worth about half the current year's Gyro sales. Propeller/ submarine business doing well. Growth in Gyro sales but still taking time to be significant in overall revenue.

Strategic Marine is a dynamic shipbuilding company based in Singapore renowned for producing quality, high performance commercial vessels for markets across the globe. It operates principally in five key market segments, producing high quality vessels for Oil & Gas, Renewable Energy, Ferries & Transportation, Defence and Paramilitary and Port / Pilot Services.

Strategic Marine has incorporated the VEEM gyro into its latest fast crew transfer boat design and is marketing this as a unique selling point for their product which delivers superior performance and economics for offshore energy operators.

VEEM has signed an agreement with Strategic Marine for the exclusive use of small and medium size VEEM gyros for fast crew transfer vessels in the Southeast Asian region and specific windfarm crew vessels in Europe.

Strategic will place orders immediately for 12 gyrostabilizers to be delivered over the next three years with a value in excess of USD 5.6 million (AUDe 8.2 million).

The agreement gives Strategic Marine exclusive use of the specified VEEM gyrostabilizers in their own new build vessels as well as retrofits and on-selling to other operators.

Strategic Marine Chief Executive Officer, Chan Eng Yew said: “We believe that the VEEM gyro provides a significant performance advantage to our fast crew boats. Strategic is committed to the fast crew boat market as we have demonstrated through our expansion of facilities and orders of engines. We see the introduction of our fourthgeneration FCB with the VEEM gyro, as a game changer that will be embraced by offshore energy operators in Southeast Asia and elsewhere around the world.”

VEEM expects its activity level (Sales + change in WIP) for FY23 to be ~$60m with EBITDA and profit to be ahead of analyst forecasts of $8.3m and $2.9m respectively. (FY21 59.5 EBITDA 8.7 profit 4.4)

Gyro sales for the year are expected to be $5m (included in the $60m activity above) with orders in hand of $11m including the orders under the recently announced exclusivity agreement with Strategic Marine.

Three new propeller machining centres, associated equipment and tooling were installed and commissioned with May recording a record month for propeller sales ($2.3m) and June continuing the stepped up production levels.

In addition to the machining centres and associated equipment, VEEM has also invested in a large 3D printer, large laser scanner and process improvement to bring further efficiencies to the propeller manufacturing process. Further equipment is on order for 1HFY24.

Revenue from the submarine program is expected to be over $6m for 2HFY23 taking the full year revenue for submarines alone to $12m.

From April 22 update.  In FY22 to date VEEM has sold $3.4m of gyros and has orders on hand of $3.1m.

Orders and sales for FY21 totalled 12 units and YTD FY22 is already at 12 units indicating sales volumes are increasing with lumpiness in sales value caused by vast differences in the value of the individual gyro units ranging from US$250k to US$1.2m.

Damen’s new walk to work vessel, the FCS 7011 (the VEEM VG520SD is the “secret weapon”), is expected to have its global gala launch in the Netherlands in the next month. The vessel is designed to revolutionise offshore crew transfers. (no mention in current update)

A positive report for VEE. Looks like the worst of the pandemic is behind them. Costs, stabilising/ reducing, work in progress increasing. Propeller sales drove the increase in revenue and with three new machines operating from the end of March driving further sales as they are automated and not constrained by staffing. Smaller Gyro being developed. Gyro sales still not meeting expectations despite the Head of Sales and Business Development - Europe now in the job for a year, looks like the growth is in the smaller recreational market not currently supplied by Veem. Cash flows from operations was $1.4m, up 23%. During the period VEEM drew down an additional $2m from its commercial facilities to fund capital equipment and product development. Capital intensive work with only $1.4M cash at hand. 1.35cps dividend

Highlights from the Director's report

Customer Work in Progress increased by $2.5m to $9.2m during the period, highlighting that activity levels increased far more than demonstrated only by the increase in sales.

VEEM successfully managed a tightening labour market and resultant rising costs (overtime and higher wages). Chargeable hours were up compared to the second half of FY22 and were slightly down on the corresponding first half of FY22. Propeller and gyro manufacturing are less susceptible to local labour constraints due to automation in the case of propellers and by the global supply chain that the gyro division utilises. 

Raw materials prices were mixed over the period with some rising and some relatively stable after several periods of significant rises. Air freight costs have recently stabilised with sea freight costs reducing, significantly in some cases. Where there were rises in input costs, VEEM was able to pass these through to customers preserving margins. VEEM has continued actively looking for sources of supply globally in order to improve margins and lower the risks of its supply chain.

Propulsion sales increased 19% to $11.7m for the half-year and work in progress also increased $0.8m over the same period. The two new machining centres installed in FY22 were at full availability for the period with sales of VEEM propellers alone (excludes shaftlines and Conquest) being a record $10.4m, up 23% on the prior comparative period. Despite this increase, lead times did not reduce indicating continued strong demand. Three new machines have now arrived and are all expected to be fully available by the end of March 2023 providing a platform for further increases in sales over the next six month period.

VEEM expects sales of propellers to continue to increase in line with capacity with margins protected against cost increases by regular pricing reviews. VEEM also continues to drive improvements to its processes through R&D with the goal of improving margins and reducing exposure to labour constraints.

VEEM continued to invest in research and development during the period with a number of staff involved in generating a smaller gyro model and further development of the current gyro range as well as projects related to the engineering and propulsion businesses. 

Demand for the traditional engineering products and services is expected to continue with skilled labour shortages being the main inhibitor of revenue growth in this area. VEEM is working on a number of initiatives to minimise the labour constraints.

VEEM’s defence revenue is expected to remain strong with the deliveries under the upcoming Collins Class submarine full cycle docking to continue for at least the next quarter. Other defence work for a number of different prime contractors, including Austal, is also expected to continue with the building of patrol boats and other platforms. 

Concerns

Revenue from gyrostabilisers was $1.7m for the period, up very slightly on the prior corresponding period. Orders on hand totalled $4.8m at 31 December 2022. Head of Sales and Business Development - Europe now in the job for a year, qualified leads are higher than ever, both in number of units and probable value. Commercial projects such as offshore support vessels continue to be very engaged with the technology once the economic, comfort and safety aspects are understood. The high rates of qualified leads, the evidence of take-up in the small boat recreational market (smaller than VEEM’s products) and the continued product improvements that have been made continue to give the Board confidence that the wide adoption of the technology is well on the way and VEEM is the only manufacturer with the products to capitalise on this.

Engineering products and services revenue, excluding defence and hollow bar, was down $1.4m to $3.6m.

The working capital position remained steady with progress payments from customers covering part of the significant increase in WIP at 31 December 2022.

The Company drew down an additional $2m from its commercial facilities to fund part of the capital equipment and the ongoing product development (intangible assets). The balance of the capital equipment was financed by HP agreements.

Coverage on Stockhead and syndicated in the Weekend Australian

Martin Pretty

Director, Equitable Investors

Pretty reckons beaten-down tech stocks could reward the patient investor in 2023 – especially those with a “fresh” and “optimistic” approach who’re looking for “value” lying on the battlefield that was 2022.

His top pic is WA-based marine propulsion and stabilisation systems maker Veem (ASX:VEE) which has seen its market cap drop from around $130m at the end of CY2021.

“Beyond the negativity from the broader market, the decline in market value for VEE has really been about the gyroscopic stabilisers (gyros), opportunity being slow to kick into gear, along with cost inflation,” Pretty says.

“Its gyro business was expected to see stronger sales in FY23 with a strong level of quality leads and enquiries – overall, the company was expecting its half-year earnings to return to traditionally higher levels.”

Announced on Linkedin but not on ASX for either company a pipe and possible recycling contract for a stage 1 plant to extract magnesium from fly ash by LMG. If successful followed by a commercial production plant. Initial 3 year contract.

We are excited to announce that VEEM Ltd has been awarded a three-year fixed term contract to supply centrifugally cast Hollowbar to Latrobe Magnesium for their 1,000 tpa Latrobe Valley Stage 1 Demonstration Plant.

The contract, which includes two one-year extension options, will allow VEEM to maximise local content and supply chains by manufacturing all product here in Western Australia.

“VEEM is proud to be working with Latrobe Magnesium and very grateful that the project has awarded the supply contract within Australia.

"The local manufacture and supply of this Hollowbar keeps jobs in Australia and provides advantages in terms of lead times and potential recycling of waste product,” said VEEM Global Commercial Manager, Brett Silich.

Read more: https://lnkd.in/g7KDDsgp

A quick review of the AGM presentation and Annual report prior to the meeting. Good background info in the 2016 prospectus

VEEM produces propellers and Gyro stabilisers in the marine industry. Engineering products and supplies Defence projects. The directors own 50% of the company. SP off lows of 40c.

Pros

Head of Sales Europe appointed for Gyros leading to increased enquiries and expected orders.

Gyro used in Offshore vessel award winner June 22 showcasing tech

Demo days conducted in Australia

Gyro patents run to 2031 with 46% of orders in USD

Props +26%. 3 new machines in 23 to increase capacity +25% and increasing automation to reduce labour burden.

Hunter Class program selection has global potential for Type 26 Frigates

Prop prices under quarterly review (inflation costs being passed on) sold through distributors in USA/ France/ Aus

Plans in place to protect margins

Defence work for BAE Systems and Austal. Collins class subs.

Engineering products +20%

Expertise in Induction Heating being used to help develop a device for the treatment of liver cancer.

$2.7M spent on R&D

Dividend 30% of profit and cash flow +ve, currently 60% of revenue in AUS

Cons

Showcase vessel for large gyro has been delayed (now in place)

Last year has been difficult $1.3M NPAT down from $4.9M.

Defence contracts completed

Labour shortages, energy, material, transport costs, difficulty travelling to sites for sales and support due to COVID

Defective castings (issues resolved)

Forever pipe orders flat.

Dilution shares @135M up from 130M (but last raise @ $1.18 compared to current 55c)

Order supports Veem’s strength in producing propellers with longer term potential for exports.

VEEM SECURES ORDER FOR HUNTER CLASS FRIGATE PROGRAM NEXT STAGE DEMONSTRATOR PROJECT

BAE Systems Australia, prime contractor for the Hunter Class Frigate Program (HCFP), has placed an order with VEEM to manufacture two propeller blades and a hub under the demonstrator program.

VEEM successfully delivered the initial pilot propeller blade in early 2022, thus completing the first ‘targeted task’ in qualifying as a supplier for Kongsberg Maritime.

Value of the contract is $1.7 million, with the successful completion of the task by Q2 2024 ensuring VEEM qualifies as a supplier to the HCFP with export potential to the T26 Global Combat Ship platform.

Contract award for the propeller and brake blade manufacture for the first batch of three Hunter class frigates is anticipated in 2024/5.

Positive investor update which will hopefully provide some support to the sp which has tumbled of late. Need to see some Gyro orders to lift revenue.

Company has been able to pass on price increases although skilled labour still an issue. Good potential to benefit from Defense spending. Rising freight/ material costs likely to lead to further price rises which could hit margins.

Increase in propeller manufacturing which is mainly automated so not hindered by labour shortages. 2 large machines now and 3 new machines in December 22 will double number compared to 21. $2M /month in sales possible.

Strong leads for Gyros building inventory for future orders.

Disc held in rl

After SP being hammered release of further details on the level of gyrostabilizer orders on hand following questions from a number of investors. As at 31 December 2021 VEEM had gyrostabilizer sales of $1.6m and orders on hand of $4.0m (for future delivery). In January 2022 $0.5m was delivered leaving orders in hand for future delivery of $3.5m as at 31 January 2022.

Revenue down 7%. Profit, NPAT, EPS down 80%+ over FY21. Although these numbers had been forecast at the AGM I guess the SP will be hit until there is evidence of a turn around. $120M MC on revenue of $26M

Dividend of 0.0007c unfranked seems not worth the admin cost but notionally still a dividend.

Skills shortages and increased costs including raw materials are not going to change in the near future. COVID order delays for Gyro should dissipate and lead to quick revenue increase with a $3M inventory being built in the half year. Of 44 sold, 17 not commissioned so a backlog that could hamper sales in the near term

New machines have increased capacity for propulsion sales and defence spending could boost core earnings.

Hopefully this Gyro update and appointment of experienced Head of Sales gives the sp a bit of a boost as it has been hit pretty hard since the AGM

• Since 17 November 2021 VEEM has received orders for six of its VEEM Marine gyrostabilizers worth $2.2 million*.

VEEM Managing Director Mark Miocevich said: “We are pleased, but not surprised, to land these new orders in rapid succession over the last few weeks. Based on our leads and enquiries we are very confident the orders will continue to increase through the second half of FY2022.

• Total orders in hand for VEEM Marine gyrostabilizers are $5m with $1m to be delivered this month*.

• The order book includes repeat orders for three prestige boatbuilders including Alia in Europe and Westport and the US.

• Damen Shipyards have commenced their marketing campaign for the use of VEEM Marine gyrostabilizers on their FCS 5009 vessels.

• Appointment of a new agent in the growing Turkish shipbuilding market has already resulted in an order.

• VEEM has announced that its new Head of Sales & Business Development - Europe will be Mr Dennis Bravenboer.

Dennis comes to VEEM with a long history in the European luxury yacht market having spearheaded the growth of various equipment manufacturers, most recently with HUG Engineering. Client’s of Dennis comprise the most prestigous Yacht builders such as Feadship, Oceanco, Lurssen, Azimut-Bennett, Damen Yachting to name a few.

Market reaction to the AGM presentation has been very negative. Forecast for 1H22 below FY21 and various headwinds including staff shortages and shipping costs. 

FY22 has had some early challenges in some areas which have impacted productivity, costs and the financial results. Confident that these specific issues have been rectified and the productivity and financial performance is back on track.

• Strong order book and global market for VEEM’s propellers. Confident propeller sales and margins will be stronger than FY21 going forward. The first of two new machines has been installed with the second due Jan 2022. Commodity price increases led to some margin erosion on propellers. Price rises have been implemented and are now starting to flow through to revenue.

• The very tight labour market has also meant that we have been unable to recruit as many skilled trades as we desire, constraining capacity. We are working to solve this.

• Delays in installations and commissioning of gyros has led to delays in repeat business. This has meant that sales for the first half are only expected to be $1.5m. The volume and quality of leads and recent orders provides confidence to expect 2H FY22 orders and sales to be significantly up on FY21 sales. As VEEM continues to build gyros to a plan, it will be able to sell from inventory in the 2H and beyond.

• Sea and air freight costs and duration have risen over the period since Jan 2019 as has been well reported.

• Much of the business continues to do well and overall we expect the above impacts to mean that 1H FY22 revenue is in the order of $26m with EBITDA of around $3m. We expect a strong 2H FY22 noting this may be impacted by labour shortages..

Disc : bought today in RL and added to SM