VEEM Ltd posted a significant half-year loss of $19.5 million, driven by a 30% revenue decline and a $24.8 million impairment on gyro product development. Despite setbacks, new product launches and US defence market progress offer a hopeful outlook.
- Half-year revenue down 30% to $23.4 million
- Net loss of $19.5 million versus prior profit of $1 million
- $24.8 million impairment related to gyro stabiliser development
- Launch of VEEM Extreme propulsion range and Mark III gyro stabiliser
- Strengthened cash position with $14 million capital raise and improved operating cash flow
Financial Performance and Market Headwinds
VEEM Ltd has reported a challenging first half for the 2026 financial year, with revenue falling 30% to $23.4 million and a net loss after tax of $19.5 million, a sharp reversal from the $1 million profit recorded in the prior corresponding period. The decline reflects a softening in the marine propulsion market and delays in defence orders, notably a 49% drop in defence sales to $3.7 million, impacted by postponed orders from ASC.
Despite the revenue contraction, the company’s cash flow from operations improved markedly by 128% to $4 million, supported by a $14 million capital raise through a share issue. This bolstered VEEM’s cash reserves to $9.1 million at the half-year mark, providing a stronger financial footing amid market uncertainties.
Gyro Impairment and Product Development
A significant factor in the loss was a $24.8 million non-cash impairment charge related to capitalised development costs for VEEM’s gyro stabiliser products. Lower than expected sales, partly due to customer purchase hesitancy ahead of the Mark III gyro stabiliser launch, triggered the impairment. The launch of the Mark III model in the first half is expected to drive sales growth in the second half, with marketing efforts focusing on its enhanced reliability and reduced maintenance costs.
VEEM continues to invest in research and development, including the VEEM Extreme propulsion range, which promises an 18.1% efficiency gain over conventional systems. The company secured a contract with Manly Fast Ferries as the launch customer, with deliveries scheduled for the second half of FY26. This innovation, alongside complementary products like flow-aligned rudders, positions VEEM to capture a larger market share as conditions improve.
Defence Market Expansion and Outlook
VEEM’s defence segment is poised for growth following the late receipt of orders from ASC, which will be fulfilled through the remainder of FY26 and into FY27. The company is also progressing its entry into the US defence supply chain, having achieved approved supplier status with Huntington Ingalls Industries and signed a nine-year master agreement with Northrop Grumman valued at US$33 million. While progress was hampered by the US government shutdown in late 2025, VEEM expects acceleration in 2026 as it works towards qualification with additional US defence contractors.
Cost reduction initiatives have trimmed overheads by $3.5 million on an annualised basis, reflecting management’s focus on operational efficiency during this transitional period. VEEM’s core foundry and engineering businesses remain resilient, providing a stable revenue base as new product lines and markets develop.
Strategic Position and Future Prospects
FY26 is characterised as a transition year for VEEM, balancing investment in new technologies and market expansion against subdued revenue. The company anticipates propulsion revenue to have bottomed in the first half, with growth expected in the second half supported by the VEEM Extreme range and ongoing business development. The successful completion of the Hunter Class Frigate Program demonstrator is expected to unlock further defence opportunities.
While the gyro stabiliser segment faced challenges, the introduction of the Mark III model and enhanced marketing efforts aim to reverse subdued sales trends. VEEM’s strengthened balance sheet and undrawn credit facilities provide flexibility to capitalise on growth opportunities, particularly in the US defence sector.
Bottom Line?
VEEM’s half-year results underscore a pivotal phase of investment and market repositioning, with future profitability hinging on successful product rollouts and defence contract execution.
Questions in the middle?
- How quickly will VEEM’s new VEEM Extreme propulsion range gain traction in global markets?
- What is the timeline and likelihood of VEEM securing further US defence contracts following recent supplier approvals?
- Can the Mark III gyro stabiliser overcome initial sales hesitancy and contribute meaningfully to revenue growth in FY26 H2?