The Austal Limited (ASX: ASB) share price has fallen flat today following an announcement to expand its Australian support business.
From market open, shares in the global shipbuilder reached an intra-day high of $3.27, but have since retreated. At the time of writing, the Austal share price is down 0.9% to $3.16.
New support business
Austal advised it has entered an agreement to acquire Australian-based BSE Maritime Solutions. The new deal will see Austal build on its growing support business to service vessels on Australian shores.
BSE Maritime Solutions is a leading ship repair and support business that operates in defence, commercial, tourism and luxury vessels. The company has dockyards in both Cairns and Brisbane, Queensland. Current customers include Australian Border Force, BAE Systems, Thales and Svitzer.
The takeover aligns with Austal strategic direction to develop its support segment. Revenue from servicing vessels jumped at an annual rate of 28% over the past four years to reach $360 million in 2020. The ongoing revenue stream is considered an integral part alongside Austal’s shipbuilding operations.
Under the acquisition, Austal will purchase BSE Maritime Solutions for $27.5 million. The purchase will be funded from Austal cash reverses, which held a total of $272.4 million at the end of June.
Austal expects the new business will generate earnings before interest, tax, depreciation and amortisation (EBITDA) of $5 million in FY21. This will then rise to $11 million by FY25 as more contracted Austal ships are delivered to the Australian government.
The agreement is scheduled to be completed by the end of November.
What did the CEO say?
Commenting on the new deal, Austal CEO David Singleton said:
BSE Maritime Solutions is a quality business and its acquisition aligns with our stated strategy of growing our support division, adding further scale to our operations on the east coast of Australia in addition to our existing support services at Henderson, Cairns, and Darwin.
In particular, the acquisition provides Austal with dockyard and ship lift capability in the north- east region of Australia – including the Pacific’s largest mobile boat hoist, capable of moving 1120 tonnes – supporting our existing and future customers and reinforcing our commitment to grow in the region.
It further enhances our in-service support capabilities, currently provided across multiple facilities in Cairns, for the Austal designed and constructed Cape-class and Guardian-class Patrol Boats.
About the Austal share price
The Austal share price has been relatively stagnant over the past 6 months, hitting its resistance level of around $3.50. With a market capitalisation of $1.13 billion, shares in Austal reached as low as $2.25 in March. Prior to the COVID-19 pandemic, the company broke an all-time high record of $4.99 in November.