VEEM (ASX: VEE) Hits Choppy Waters: FY25 Miss Sparks 21% Selloff

Execution Misfires Sink VEEM’s FY25 Performance

VEEM Ltd (ASX: VEE) has had a tough month, with shares plunging 21% following the release of its FY25 results, bringing the stock close to its 52-week low. For those unfamiliar, VEEM is a precision engineering company specialising in marine propulsion systems and defence manufacturing, two sectors where timing and execution are critical to profitability.

This year’s results were a reality check for investors. Revenue fell 15% to A$68 million, while EBITDA dropped nearly 40% to A$9.2 million. Cash flow also took a hit, falling around 50% year on year. The company attributed the weaker performance to delays in defence contract execution and softer sales of its gyro stabilisers, both of which are significant revenue drivers.

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VEEM Faces Rough Seas as Contract Delays Weigh on FY25 Results

In this business model, contract timing plays a major role in financial performance. When deals are delayed or project milestones shift, the impact flows directly through to earnings and cash generation. VEEM’s results highlight this risk clearly. While the long-term opportunity in defence and marine technology remains intact, the short-term volatility reminds investors that execution timing can make or break results in a business of this nature.

 Long-Term Contracts Secured, Short-Term Pain Persists

The second half of FY25 showed some encouraging signs of recovery, with revenue rising 4% and EBITDA improving 36%, helping to stabilise VEEM’s performance. However, these gains were not enough to fully offset the weakness from earlier in the year.

It wasn’t all bad news, though. The company secured several major defence contracts that strengthen its long-term outlook. These include a six-year agreement with ASC, with major project work scheduled to begin in the second half of FY26, and progress on the A$1.7 million BAE Hunter Class Frigate demonstration blades. In the US, VEEM signed a nine-year master licence agreement with Northrop Grumman worth up to A$33 million in September.

The long-term pipeline remains strong, but the timing of these projects means meaningful defence-related revenue is unlikely to ramp up until the second half of FY26. That mismatch between new contract wins and near-term cash flow generation likely spooked investors and contributed to today’s sharp sell-off. For now, VEEM’s challenge is bridging that gap between future potential and current earnings visibility.

VEEM’s Product Pipeline Strength Suggests Market Overreaction

Looking at VEEM’s product pipeline, propulsion revenue held steady at around A$35 million, while the company launched its new Extreme VEEM, now positioned as the world’s most efficient propeller with up to 18% fuel savings. The first commercial order came from Manly Fast Ferries, marking an early validation of this next-generation product.

However, gyro stabiliser unit sales fell to 13, representing a 20% year-on-year decline due to lower volumes from key customer Strategic Marine and delayed orders for the new Mark III gyro, which is set to launch in FY26. Despite these softer short-term sales, the underlying product pipeline is improving, suggesting the market may have overreacted to the immediate weakness.

The takeaway for investors

Taking this company data into account, the situation looks more like a short-term setback than a structural decline in fundamentals. After a near 50% pullback, VEEM could present value for investors willing to look beyond the next few quarters. The company currently trades on a price-to-sales multiple of roughly 2.7x, with forecasts pointing to multiple compression to 2.36x by FY27 as revenue growth rebounds an estimated 27%. If VEEM can meet its revenue targets and demonstrate consistent execution, the stock appears slightly undervalued at current levels.