This announcement contains inside
information
1 July 2024
Harland & Wolff Group
Holdings plc
("Harland
& Wolff" or the "Company")
Unaudited Financial Results
and Temporary Suspension
Harland & Wolff Group Holdings
plc (AIM: HARL), the UK quoted company focused on
strategic infrastructure projects and physical asset lifecycle
management, releases its unaudited
financial results for the financial year ended 31 December
2023.
Key
highlights:
· Revenues of £86.91 million (2022: £27.75 million)
· Operating loss of £24.71 million (2022: £58.51
million)
· Loss
of £43.08 million (2022: £70.80 million)
· Key
contract wins:
o Fleet Solid Support Programme ("FSS") £750 million (adjusted for
inflation)
o SeaRose Midlife Extension £61 million; over 50% upgrade to the
base contract value
· Directors believe that Company remains on track to achieve
revenue of £200 million for FY24
Trading performance for FY23
Having secured the FSS Subcontract
in February 2023, the Company has been actively engaged in the
programme's regeneration plan. Accordingly, the Company has placed
orders for several major CAPEX items, including but not limited to,
one of Europe's largest robotic welding panel lines, plasma cutters
and transporters. in addition to commencing construction works to
expand Belfast's fabrication halls by another 5,000 square metres.
Work continues in relation to the procurement of long lead and
critical path equipment for the three vessels.
In October 2023, the Company was
awarded a contract for the midlife upgrade of the SeaRose FPSO.
Preparatory works commenced in October 2023 and works commenced on
the vessel from 17 February 2024. This is a highly time constrained
project with the vessel expected to leave Belfast in August 2024.
Following an increase to the initial scope of work to be undertaken
by Harland and Wolff on this contract, the Company expects a
significant increase of over 50% from the base contract value of
£61 million.
The Company's yards have been busy
through the year with multiple contracts being fulfilled. Solid
progress has been made on the M55 Regeneration Programme in the
Appledore facility during FY23 and delivery of the vessel is now
expected in Q3'24. The Company continues to fulfil its 33-barge
contract with the Cory Group and, thus far, 16 barges have been
delivered. The balance of 17 barges is expected to be delivered by
Q1'25. The Company is utilising Belfast, Methil and Arnish for this
programme and the Company is targeting the completion of all the
remaining barges by the end of FY24.
Across the Group, several smaller
contracts were executed and completed through FY23. These spanned
across the five markets that the Company is involved in,
demonstrating that the five-market strategy continues to work and
develop over time. The Company will continue to pursue
opportunities in all these markets in order to reduce its reliance
on Government contracts and as part of its commitment to the
National Shipbuilding Strategy.
The Company continues to increase
its core personnel in preparation for first cut of steel for the
FSS programme in Q1'25. As at 31 December 2023, the Group headcount
was 1,010 personnel which has now gone up to 1,512 with an increase
in work undertaken in all the yards. The Company remains committed
to its social value commitments under the FSS Programme and more
widely. Accordingly, the number of apprentices has risen from 85 at
the end of FY23 to 142 as at end-June 2024. The Company continues
to engage in a meaningful manner with the local communities, in
which its facilities are located, promoting employment, further
education, apprenticeships and upskilling.
Financial performance for FY23
The Company's revenues grew to
£86.91 million, a 213% increase over its FY22 revenues of £27.75
million. The Company was able to reduce its operating loss in FY by
136% to £24.71 million compared to its FY22 operating loss of
£58.51 million. Loss attributable to shareholders for FY23 stood at
£43.08 million, a 39% reduction from the FY22 loss of £70.80
million. Whilst the decrease in loss is movement in the right
direction towards break-even and profitability, the Company's
interest burden increased from £12.29 million in FY22 to £18.37
million in FY23. The Company upsized its credit facility with
Riverstone Credit Partners through FY23 and Q1'24 from $35 million
to $115 million as at end-June 2024. Accordingly, net debt as at 31
December 2023 stood at £92.38 million (2022: £81.13 million). This
credit facility matures on 31 December 2024 and the Company
continues to have discussions with UK Export Finance and other
counterparties to refinance the Riverstone credit facility and
obtain further working capital for the Company's growing contracted
order book.
Under IFRS15 Revenue from Contracts
with Customers, we have been unable to recognise £13.06
million in FY23 on one of our multi-year contracts. This value of
revenue already received in cash has been treated as deferred
revenue and will be recognised in future
periods.
Refinancing
As previously announced, the Company
has been in discussions with UK Export Finance since Q3'22 for a
proposed £200 million facility. During FY23, a significant amount
of work was done and, accordingly, an announcement was made on 29
December 2023 stating that the facility was approved subject to a
Commercial Rate Review and ministerial consents. Further work
continues on this facility and the Company expects UK Government to
reach a decision after the General Election. Should there be any
material delays to securing the facility post the General Election,
the Company's ability to execute new and large contracts would be
adversely affected. The Company continues to engage with UK
Government and will make an announcement in due course.
Suspension of the Company's shares on AIM
The Company has not been able to
publish its audited financial statements and Annual Report on or
before 1 July 2024.
As previously announced, given the
multi-year and complex nature of some of the contracts under which
the Company is working, the Company has been in extensive
discussions with its auditors to agree the method of accounting for
revenues throughout the duration of a build programme. Accordingly,
the Company has spent a considerable amount of time in determining
its accounting treatment for revenues arising from long-term
contracts in compliance with IFRS15. This is especially relevant in
the context of the FSS Subcontract that is set to last for the next
seven years. Equally, it is important for the Company to have an
agreed position on the treatment of revenues for future long-term
contracts, in accordance with IFRS15 and to the satisfaction of the
auditors. The assessment of the split in revenues between current
year's revenues and deferred revenues has caused a delay to the
audit process and hence the publication of the Company's Annual
Report and audited financial statements. Now that the Company and
its auditors agree with the treatment of revenues in the financial
statements, the Company will progress to complete the audit quickly
and prepare its financial statements and issue its Annual Report.
The Company expects to release its audited financial statements for
the year ended 31 December 2023 during the week commencing 8 July
2024. Whilst the Company expects to make some adjustments to the
final audited numbers, these changes are not expected to be
material.
Outlook for FY24
The Company now has an agreed
position on its treatment of revenues from long term contracts. The
majority of revenues from the SeaRose contract will be realised in
FY24. The M55 Regeneration Programme and Cory barge contract are
due to be completed in FY24 with revenues realised in the current
financial year. The Belfast facility has been busy with
refurbishment contracts for its cruise clients; Margaritaville at
Sea and Villa Vie Residences. The Company continues to be in
advanced negotiations with other cruise clients to welcome
additional cruise vessels in Q4'24. Given the momentum in the order
book, and revenues realised to date, the Company expects to meet
its forecasted revenues of £200 million for FY24.
Arun Raman, Group Chief Finance
Officer, Harland & Wolff comments: "I am highly encouraged by
the growth in revenues from FY22 to FY23 as we seek to achieve the
critical mass required to get to cash break-even at EBITDA levels.
Our financing costs are high, exacerbated by the rises in the base
rate in FY23 and. it is crucial to close the UKEF facility as soon
as possible in order to provide the stable long-term working
capital needed for securing large, multi-year contracts. Our
engagement with UK Government continues in order to bring this deal
to closure."
For
further information, please
visit www.harland-wolff.com or
contact:
Harland & Wolff Group Holdings plc
John Wood, Chief Executive
Officer
Arun Raman, Chief Finance
Officer
|
+44 (0)20 3900 2122
investor@harland-wolff.com
media@harland-wolff.com
|
h2Radnor (Investor Relations)
Neville Harris
|
+44 (0) 20 3897 1838
|
Cavendish Capital Markets Limited (Nominated Adviser &
Broker)
Stephen Keys / Callum
Davidson / Dan Hodkinson (Corporate
Finance)
Michael
Johnson (Sales)
|
+44 (0)20 7397 8900
|
Liberum Capital Limited (Joint Broker)
Nicholas How / Edward
Mansfield
|
+44 (0)20 3100 2000
|
|
|
About Harland & Wolff
Harland & Wolff is a multisite
fabrication company, operating in the maritime and offshore
industry through five markets: commercial, cruise and ferry,
defence, energy and renewables and six services: technical
services, fabrication and construction, decommissioning, repair and
maintenance, in-service support and conversion.
Its Belfast yard is one
of Europe's largest heavy engineering facilities, with
deep water access, two of Europe's largest drydocks,
ample quayside and vast fabrication halls. As a result of the
acquisition of Harland & Wolff (Appledore) in August 2020,
the company has been able to capitalise on opportunities at both
ends of the ship-repair and shipbuilding markets where there will
be significant demand.
In February 2021, the company
acquired the assets of two Scottish-based yards along the east and
west coasts. Now known as Harland & Wolff (Methil) and Harland
& Wolff (Arnish), these facilities will focus on
fabrication work within the renewables, energy and defence
sectors.
In addition to Harland & Wolff,
it owns the Islandmagee gas storage project, which is expected to
provide 25% of the UK's natural gas storage capacity and
to benefit the Northern Irish economy as a whole when
completed.