Management Discussion and Analysis
for the period ended 30 September
2023
HIGHLIGHTS
Revenues in the first nine-months of 2023 were AED 736 million, compared with AED 503
million during the corresponding period in 2022. Net profit for the period was AED 23.4
million after incurring costs of AED 2.2 million relating to the NAVDEX exhibition held in
Abu Dhabi in February, compared with AED 14.0 million net profit reported during the
corresponding period in 2022.
Revenue and profit growth in the third quarter was impacted by some supply chain issues
in the Falaj3 program, but the program remains ahead of schedule. Six milestones have
successfully been completed, and 5 of the 16 blocks for the First of Class have been built.
Work commenced on the Second of Class vessel with two milestones completed.
At a time of rising interest rates, ADSB was fortunate to have net cash at 30 Sep 2023 of
AED 506 million which generated interest income during the period of AED 7.6 million.
During the second quarter, the Company received the first advance payment on the
contract announced at NAVDEX 2023 to build three BR71 MKII 71-meter corvettes along
with ADSB-designed patrol boats and logistical support for the Angolan Navy. On October
9, 2023, the Company received the second and final instalment of the advance payment.
This contract is now effective and will enable the Company to recognise revenue
consistently from the fourth quarter 2023 onwards. This contract, worth just under AED
4.0 billion at current exchange rates, is a very significant deal for ADSB and the largest
export order in the Company’s history. Considerable work has already been done pending
receipt of the balance of the advance payment and the first milestone has already been
PUBLICsuccessfully completed. Another milestone, the First Steel Cut, is scheduled to be
completed in Q4.
Post the end of the second quarter, the Company also received the advance payment on
the contract announced at NAVDEX 2023 to build twenty-four Search and Rescue boats for
CICPA. This was an order for the ADSB designed and built vessels which were showcased
at NAVDEX 2021.
The Company has continued with this strategy, and in 2023, showcased a new 17-meter
autonomous Mine Counter Measures vessel which generated significant interest from
customers. In addition, contracts were also signed to build and deliver 5x16 meter Sea
Troopers, 3x15 meter patrol boats, and 3x18 meter patrol boats.
During the period, the Company continued its MRO activities under both the MSS and
Commercial contracts. It completed a total of 108 dockings while completing the mid-life
refit of a large military vessel early in the third quarter. The Company also successfully
delivered in the first quarter a refurbished Sea Trooper landing craft to one of its major
customers.
We continue to implement the strategy of expanding the design portfolio both with in
house designs and through working with partners to generate designs in the 40-meter to
100-meter range, which are expected to be shown at NAVDEX 2025 at the latest.
The order book now stands at over AED 8 billion and further large potential export sales
are in the early stages of negotiation, with a potential pipeline of an additional several AED
billion. The business will see a very significant increase in activity in the next few years, and
a capacity enhancement program with the necessary CAPEX will commence later this year.
The net cash position further improved to AED 506 million as of 30 Sep 2023 which will
further improve due to the subsequent receipt of the second and final instalment of
advance payment for the Angolan Navy contract and further significant sums are expected
to be received in the fourth quarter for the milestone payments on current ones.
Significant payments to suppliers were subsequently made and further payments will also
become due but the cash balance is nonetheless expected to remain healthy throughout
the remainder of 2023 and into 2024, generating additional interest income.
PUBLICWhile the UAE Navy will always be the Company’s main customer, and indeed ADSB was
set up to be a strategic national asset for the UAE, ADSB is now demonstrating the results
of its expansion strategy which will enable the Company to pass the benefits back to the
domestic customers in terms of expanded design capability, enhanced production and
maintenance capacity, and economies of scale.
We continue to serve our military and commercial customers and look to the future with
increased confidence.
__________________
David Massey
Chief Executive Officer
PUBLIC

Sentiment: positive