The Veem Ltd (ASX: VEE) share price is deep in negative territory on Tuesday afternoon following the release of the company's first-half results.
After disappointing investor expectations, the marine technology company's shares have fallen by 13.64% to trade at 76 cents each at the time of writing.
Veem reports weakened result for H1 FY22
The Veem share price is heading south today following the company's performance for the six months ending 31 December 2021. Here are some of the key highlights:
- Total revenue of $26.3 million, down 7.4% on the prior corresponding period (H1 FY21 $28.4 million)
- Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) of $2.9 million, down 49% (H1 FY21 $5.7 million)
- Net Profit After Tax (NPAT) of $0.3 million, down 90% (H1 FY21 $3 million)
- Earnings Per Share (EPS) of 0.2 cents per share, down 91% (H1 FY21 2.3 cents per share)
- Unfranked interim dividend of 0.0007 cents per share.
How did Veem perform in H1 FY22?
As foreshadowed at the company's annual general meeting (AGM), there were a number of factors that impacted the above results.
The first was the company vigorously competing for staff in a very tight labour market caused by border closures. This means that Veem has been unable to recruit many skilled tradespeople when needed. This, in turn, constrained capacity (production hours) and increased costs through payment of overtime and higher wages.
In addition, raw materials price increases have eroded margins, particularly the bronze (copper and nickel) used for propellers.
The company has also been impacted by a surge in freight costs and shipping times which have affected its margins.
At year's end, Veem had a cash balance of $4.6 million and an undrawn overdraft facility of $3.4 million.
What's the outlook for Veem?
Looking ahead, Veem is confident that it can continue driving growth of its gyrostabiliser product in the global marine market.
Notably, the company is the only major supplier in the large marine gyrostabiliser market. The total addressable opportunity is valued at US$1.1 billion for new builds and US$13.5 billion for retrofits.
Management noted that its significant investment and ongoing development provides a major barrier for entry for potential competitors.
The global demand for propellers is expected to remain robust, with Veem already increasing its manufacturing capacity last month.
The company expects sales of propellers to increase in line with capacity and also be boosted by price rises.
In addition, Veem's defence revenue is expected to remain strong. Deliveries under the upcoming Collins Class submarine full cycle docking are scheduled to commence in April 2022.
Nonetheless, investors have sold off the Veem share price after the company advised that revenue over the next period will likely be similar to the first half. This is due to the tight labour market, rising raw materials and freight costs, freight and supplier uncertainty, and COVID-related issues.
The company refrained from providing earnings or profit guidance for the FY22 full year.
Veem share price snapshot
The Veem share price is down more than 19% year to date and almost 16% over the past 12 months.
The company has a current market capitalisation of around $103 million.
