30 June 2023
Harland & Wolff Group Holdings plc
("Harland & Wolff" or the "Company")
Audited Financial Results for the Financial Year Ended 31 December 2022
Harland & Wolff Group Holdings plc (AIM: HARL), the UK quoted company focused on strategic infrastructure projects and physical asset lifecycle management, is pleased to release its audited financial results for the financial year ended 31 December 2022. These financial results are for the twelve-month period ended 31 December 2022 whilst the financial year 2021 comparative is for a seventeen-month period from 1 August 2020 to 31 December 2021.
Key highlights:
· Revenues of £27.96 million (2021: £18.51 million)
· Loss for the year of £70.35 million (2021: £25.50 million)
· 769 core employees at year end 2022 (2021: 410) and apprentices at 64 (2021: 37)
· First ever corporate debt facility of $35 million entered into in March 2022 and upsized to $100 million by the end of the year
· Appledore deferred consideration paid in full
· Key contract wins:
o M55 Regeneration Programme £55 million
o Cory Barges contract £18 million
· Preferred Bidder status achieved in November 2022 for the £1.60 billion Fleet Solid Support (FSS) Programme; Subcontract with Navantia executed in February 2023 with the Company's share estimated at £750 million (adjusted for inflation)
The full annual report has been published today and is now available to view on the Company's website: https://www.harland-wolff.com and will shortly be posted to shareholders who have requested a physical copy.
John Wood, Group Chief Executive Officer, Harland & Wolff Group Holdings plc comments: "The Company has made significant progress in 2022 in its revenue generation and contracted backlog which now sits at approximately £900 million. Having completed the third year of our turnaround strategy at the end of FY 2022, we have started on a strong foot at the beginning of FY 2023 with the award of the subcontract for the FSS Programme. Whilst the FSS subcontract is a game-changing contract win for the Company, it will take several years to deliver and we still have a lot to achieve over the next two years in order to turn this Company into a target £500 million per annum business. We believe this is a wholly achievable goal and our maturing presence across five markets will fuel the growth that we are targeting by the time we end the fifth year (FY 2025) of our turnaround strategy.
Chairman's Statement
Our collective achievements during 2022 are a credit to everyone at Harland & Wolff but particularly to the vision and dedication of our outstanding executive leadership team.
Building our business involves many parts, but the most pleasing for me to witness are the expanding orderbook and the wealth of talent now joining us. All the effort of recent years is beginning to bear fruit as we win orders across five markets, notably of course the securing of the Royal Navy's Fleet Solid Support (FSS) Programme.
As Chairman of this growing enterprise, I am fortunate to have the support of wise and engaged Board colleagues, a strong and forward-thinking executive team, and a high calibre workforce working with dedication to deliver on our vision to redefine our industry and pioneer twenty-first century offshore and maritime engineering with daring ingenuity.
During 2022, the team secured a $70 million Green Term Loan Facility with an affiliate of Riverstone Partners, which was subsequently upsized to $100 million. Securing this facility has been instrumental in meeting the Group's growing capital needs as further investment was made to support the winning and execution of a wider range of fabrication contacts. The two barge fabrication contracts that Belfast secured from the Cory Group have set the fabrication halls in Belfast in motion and are preparing the workforce for the FSS fabrication programme. The award of the M55 Regeneration Programme marked a watershed moment for the Group as our first and formal entry into the defence market. These events are a clear demonstration of the capabilities of the Group and I am delighted that all the hard work put in over the last few years is finally yielding results. We aim to finish 2023 in a much stronger position and with a sizeable orderbook going into 2024.
Strong Foundations
Over the last year, our team has secured and delivered on projects at the sites we acquired in 2019 (Belfast), 2020 (Appledore) and 2021 (Methil & Arnish) and taken the key steps necessary to ensure we are prepared for the long-term through investment in the yards, in skills and in building a backlog in the orderbook. Whilst further advancing our original Islandmagee gas storage project, vital to UK gas supply, we have all the while been building Harland & Wolff into a fully functioning four-site fabrication and ship repair business. In addition to filling the Belfast shipyard with increasingly complex dockings, the team is bringing shipbuilding back to Methil with the Cory barge contract split between Belfast and Methil; is fabricating mining infrastructure and exporting in Arnish; and delivering valuable defence projects in Appledore.
Our Future
As vessel dockings increase in complexity and major fabrication projects are secured across all markets in the medium term, we are well placed to continue moving the business forward, and significantly ramping up our revenue generation. With our strategy of serving five markets across six services encompassing the complete lifecycle of an asset, I am confident that we will achieve formidable growth in the medium-term and sustain a vibrant business in the long run. Proud of our history, we are also nimble proponents of change. I am particularly keen to see us further extend our environmental, social and governance (ESG) efforts. Sterling work is being done to ensure diversity and inclusion across the business, and you will see in this year's report for the first time, that we report on TCFD. Among other initiatives where we are already having an impact for good, we are proud of our apprenticeship programme which continues to grow, providing solid high-quality career paths for people in parts of our country that are in the vanguard for levelling-up.
Post the balance sheet date, we secured the manufacture subcontract for the FSS which will see a £77 million investment into technology in our Belfast yard, making it the most state of -the -art shipyard in the UK, also bringing a ramp up of 1,200 shipyard jobs across Belfast and Appledore. This contract award is a game -changer for the company and will allow us to rekindle and modernise worldclass shipbuilding skills and trades that were otherwise dying out. FSS has enabled us to build a legacy that will provide secure and sustainable high-quality employment for decades to come.
I would like to place on record my thanks to the hard-working and dedicated team who helped to secure this contract and to our close partners, Navantia and BMT. It is thanks to all of you that we have been able to bring complex shipbuilding back to Belfast.
Board of Directors
During the year, we welcomed Katya Zotova to the Board. Katya brings over 25 years of experience in strategy and business development, investment banking and private equity, and has already contributed greatly to the ongoing success of Harland & Wolff. Further development of our Board will take place alongside the very significant commercial expansion that is already underway. Committed to serving all our stakeholders, we are clear in our vision and firm in our purpose. Buoyed always by your unstinting support, we are confident of building a brilliant future.
Malcolm Groat
Chairman
Chief Executive Officer's Statement
Harland & Wolff has continued to grow at a pace, having secured major contract wins such as the Fleet Solid Support (FSS) Programme and M55 regeneration programme, it is now well on its journey to revitalising shipbuilding and fabrication skills at all it sites.
Looking over 2022, I am proud of how the Group has successfully navigated the impacts of the COVID-19 pandemic, a war in Ukraine, rapid inflation increases, and supply chain delays. Inevitably, some of these challenges will persist through 2023, but we continue to deliver on projects won, be awarded new contracted works and build our backlog in order to secure a financially strong performing business for our shareholders.
Harland & Wolff has continued to progress in 2022. We have taken ourselves from a one-project non-revenue generating company in 2019 to a Group that has one of the largest fabrication footprints in the UK, from zero revenues in December 2019 to £27.96 million by the end of 2022, and from securing contracts worth just thousands in 2021 to securing the FSS manufacture contract worth an expected c£750 million over a seven-year period (adjusted for inflation).
Our revenues for the period ended 31 December 2022 stood at £27.96 million representing a material increase over the £18.51 million achieved over a 17-month period to 31 December 2021. By any standards, we still have much to achieve. Given the contracted revenue flow already generated in 2023 for FY3 and FY24, we can reasonably expect FY23 revenues to be in the region of c£100-£115 million, consistent with market guidance. Our contracted revenues for FY24 have already exceeded £70 million at the date of this report. We are seeing significant traction in contract fruition going into Q3'23 and beyond, giving us confidence of achieving further growth as I have outlined in March of this year.
We have seen very healthy growth to our business since 2021 and key achievements include:
1. Contracted backlog increase from £110 million to £900 million (based on management estimates)
2. Largest single contract size increased from £55 million to £750 million
3. The workforce has grown to 769 personnel
4. Debt facility moving from $35 million to $100 million, with negotiations ongoing to complete a £200 million refinancing facility with UK Export Finance guarantees and a syndicate of private lenders and commercial banks, expected to complete in early autumn 2023
5. Uncontracted weighted pipeline of opportunities increased from £1.36 billion to over £2.50 billion over a five-year period
6. Securing our first export contract
7. Securing our first defence contract
8. Securing our first large commercial fabrication contract
We are confident of the above trends continuing and we continue to pursue opportunities aggressively yet with the pragmatism of picking and choosing carefully the projects on which we bid. To that extent, we have introduced a new Client Relationship Management (CRM) system that is used across the group to track opportunities and convert them to executed contracts.
We have worked tirelessly at converting our pipeline of opportunities into contracts. Our goal is to become a £500 million per annum turnover company within five years and aspire to maintain a blended gross margin of 24%-27%. This clock started ticking in 2020/21 and we are now in our third year of this turnaround strategy. I have firm belief that we can achieve this ambition given our growing backlog as well as pipeline of opportunities. We are deeply involved in two "sunrise markets" - defence and renewables. Whilst contracts in both these markets admittedly have long gestation periods to fruition, once contracted, they lend themselves to multi-year stable revenues that provide a solid baseline from where to grow. The cruise & ferry market is set to be buoyant from 2024 onwards given the level of inquiries and bid submissions that are leaving our door. We welcomed our first major cruise repair contract in the summer of 2022 - the Queen Victoria. With the successful redelivery of this vessel to the client, we have now grown to become a credible shipyard for cruise clients.
We were delighted to be awarded Preferred Bidder status for the prestigious three-ship Fleet Solid Support (FSS) Programme in November 2022. The relationship with the Ministry of Defence and Navantia was crystallised in February 2023 with the formal execution of the Sub-contract with Navantia. Following its execution, we have now embarked upon a £77 million regeneration programme in Belfast in preparation for fabrication of the first ship commencing in 2025. The FSS Programme will not only provide a baseload revenue line for the next seven years but will also enable us to make Belfast one of the most modern, efficient and cost-effective shipyards in the UK and Europe. Notwithstanding the increased levels of productivity and optionality that this regeneration programme will provide to the Group, it will significantly enhance our social value outcomes across some of the most deprived communities in the UK. We have embarked on an aggressive apprenticeship programme and are reskilling / upskilling our workforce who will embrace the latest shipbuilding technologies along with utilising decades of experience that they already carry. The world is changing and we are changing too; embracing new technologies, introducing a flexible work culture and creating stimulating opportunities for the next generation of Harland & Wolff employees are things that will enable us to grow and thrive in an increasingly competitive and volatile global environment. We are delighted to be partnering with Navantia and BMT on the FSS Programme and look forward to a mutually fruitful relationship in the years to come.
There is a substantial opportunity within our five markets, our biggest operational inhibitor is an appropriately skilled workforce to secure and execute on the growth opportunity. To address this the Group has a fast-growing apprenticeship scheme. We employed our first intake of 37 apprentices in 2021 and to see this increase to 64 in 2022. We will continue to increase our total number of apprentices to over 100 during the next academic year. We are building for the future and taking this path is critical to ensure enough skills are available as we continue to grow the business.
One of the keys to achieving our growth objectives is ensuring that we have enough working capital and a calibrated capital investment programme to meet the growing needs of the facilities. Whilst we have undertaken several equity raises over the past few years, our growing reputation, sizeable contract wins and a track record of delivery have all enabled us to explore other options of financing the business. Our first ever corporate debt facility for $35 million was entered into in March 2022 and was upsized to $100 million at the end of year. We will continue to seek larger levels of financing at lower cost as we continue to win new contracts and stabilise the business.
Our Islandmagee gas storage project has been effectively future proofed with a pre-FEED study conducted for the storage of hydrogen making it of strategic importance. The Group continues to work on the judicial review after having been awarded the marine licence and expect to receive the outcome of this in the second half of 2023. Having sought legal opinion, we have been advised that the application has limited chance of success. We will continue to explore several funding options for this project with ongoing engagement from interested parties. Alongside exploring the development of the project the Group has also received interest to sell the project in its entirety. The Board will review the options available to the Group with a view to securing a commercial solution that is in the best interests of shareholders.
Whilst a lot has been achieved, there remains a tremendous volume of work that still requires to be undertaken to deliver on our strategic plan. With this in mind, we will be looking to strengthen our senior leadership team over the course of 2023 to ensure we have the appropriate experience and talent in place to achieve our vision. Our workforce is the bedrock of our success, and we will look to keep upskilling them and growing these numbers as we move forward.
I wish to thank the Ministry of Defence and the National Shipbuilding Office for their unstinting support and guidance through the year. I also wish to thank all our clients and the ever-growing supply chain for the confidence that they have shown in us over the last year. I look forward to working closely with them in the coming months and years. Finally, I wish to place my thanks to all our shareholders and wider stakeholder group for the support that they have provided to Harland & Wolff.
Our aim is to capitalise on this massive growth opportunity and to build a large and sustainable business that delivers value for all of our stakeholders and I look forward to reporting on our successes over the course of 2023 and beyond.
John Wood
Group Chief Executive Officer
Chief Financial Officer's Statement
I am pleased to write to shareholders and stakeholders to share my views on the year gone past and the outlook for the future.
Having emerged from the COVID-19 pandemic that ravaged the global economy, we were struck by two new challenges, once again, that had global ramifications; rapid inflation caused predominantly by a very stretched supply chain and the onset of the Russia-Ukraine war. High inflation rates across the world persisted throughout 2022 and has continued into 2023. Whilst we believe that it has now peaked, it remains unclear how long it will take to unwind. The rate of inflation has caught everybody by surprise and there are very limited tools to counter it. Consistent hikes in the base rates by central banks around the world have caused an increase in the cost of capital. For a high growth company like Harland & Wolff, that has growing capital needs, this has proven to be a difficult path to go down, as evidenced by higher financing costs recorded at the year-end. The Russia-Ukraine conflict continues to weigh on the global economy. Whilst energy prices peaked in Q3/Q4 last year but mitigated to some extent with the onset of summer, a combination of energy supply volatility and transitioning into renewables and green energy could well see energy prices on the upswing post-summer. Whilst we have been able to contain our energy costs through a series of fixed price contracts over winter, our energy consumption is a function of the volume of work going through our yards. For the months in which we receive or conduct a large volume of additional works the Group has to buy energy on the spot market leaving us exposed to prevailing energy prices that sit outside of our hedged position. We are in a business that competes globally, therefore, whilst increased costs are shared with clients, we need to be mindful of the quantum of such pass-through. Whilst we aim to maintain a blended gross margin of between 24%- 27% in the medium term, we expect to see a drop in these margins in the short term before they recover, as evidenced from the gross margins achieved in FY 2022. The mitigating measure for a loss in the gross margin rate is to drive larger volumes of work through the yard and we continue to do so in 2023 and for 2024.
For the 12-month period to 31 December 2022, we generated revenues of £27.96 million (2021: £18.51 million), a significant increase over the previous period given that the previous reporting period was a 17-month period. Gross profits were £5.75 million (2021: £5.22 million) and we achieved a gross margin of 20.57% (2021: 28.21%). For the financial year 2022, we expected to see a drop in the gross margins on account of wage and energy inflation as well as a change in the nature of contracts within our portfolio, i.e., expanding our portfolio from predominantly cruise and ferry to commercial fabrication (Cory) and defence (M55). It has also taken time for incremental costs to flow into contracts which allow for cost escalation. Looking ahead, we have put in place a number of cost mitigation measures such as group bulk procurement for consumables, energy hedges, steel price exposure to clients' account and inflation indexation clauses on multi-year contracts. As these measures feed into the system, we expect margin improvements in FY 2023 and future years.
Operating losses stood at £58.06 million (2021: £22.37 million), and a substantial proportion of this was related to the recruitment of personnel across the board in preparation for bidding on large value contracts across the five markets. A large number of personnel were hired in preparation for key contracts such as the M55 Regeneration Programme, Cory barges and for FSS. Delays to the formal execution of contracts in order to commence work on these programmes have caused the workforce to be "benched" in 2022 and this should reverse itself out in 2023. Having said that, it is imperative that we keep growing our team and build key skills in-house. Whilst this strategy has an adverse short-term impact of skewing operating costs, over the longer term, we believe it will lead to significant cost savings by avoiding the excessive use of external consultants, who are typically more expensive than an inhouse skilled workforce. We expect to keep building this core base of skilled personnel in 2023 whilst we prepare for the FSS programme and other large contracts that we expect to win in the short term. Inevitably, we will go through the "benching" process in FY 2023 as well which we believe should correct itself in FY 2024.
I am delighted to report that we signed our first significant corporate debt deal with Riverstone Credit Partners, a New York based private credit fund. From an initial committed amount of $35 million, we have upsized the facility to $100 million during FY 2022. This deal has put us firmly in the corporate debt market. In order to bring down the cost of capital, we expect to refinance Riverstone out of the Company in 2023. As part of the refinancing process, we are engaged with UK Export Finance (UKEF) and other high street lenders with a view to achieving two objectives; bringing down the overall cost of capital and further upsizing our facility to £200 million. As part of this process, we were subject to a highly detailed five-month due diligence process conducted by Grant Thornton on behalf of UK Export Finance. The Independent Business Review Report (IBR) was formally published by Grant Thornton at the end of May and validated our strategy of operating in five markets and six services as well as confirming the substantial addressable markets and weighted pipeline that we have been building since 2020. The report also highlights criticality of human and capital resources to take this business to a £500 million p.a. company. We recognise the challenge and are gearing up on both fronts in a methodical manner.
We are now at an advanced stage in our negotiations with UKEF and our lending consortium and expect the refinancing to be completed in early autumn 2023. This is a five-year deal and it is important that we get the economics right. Our current cashflows allow us to take the time and get the best possible deal for the Company and its shareholders. We will be making announcements on this deal as it matures and comes to fruition.
As we become more mature as an organisation and pick up higher levels of debt, one of the important metrics that we will be reporting on is the net debt level at periodic intervals. Accordingly, our net debt as at the end of FY 2022 stood at £82.51 million (2021: £14.05 million). This highlights the fact that we are under-capitalised and would need to balance our capital stack in due course.
Total loss for the year stood at £70.35 million (2021: £25.50 million) which was reflective of increased borrowing costs and an increase in the size of our core workforce from 410 to 769. We also incurred additional legal, professional and consulting fees of £4.50 million (2021: £1.95 million) which further reinforces our position of acquiring in-house skills. We absorbed further costs of £6.38 million as a result of incurring non-capital development costs and increased labour costs to provide the Company with the ability to ramp up as quickly as possible for extensions to existing contracts and in anticipation of new contracts.
Looking ahead, FY 2023 and FY 2024 are years of growth and consolidation. We will continue to make investments across the Group especially in preparation for the FSS Programme. A £77 million capital expenditure has been approved for the refurbishment of Belfast, which is expected to convert Belfast into one of the most modern and productive yards in Europe. We will also be making investments in our other sites to improve productivity and cross-yard optionality with a view to driving economies of scale and increasing margins. The impacts of these investments may not be felt immediately within the financial year but will reap long term rewards. The goal is set; £500 million per annum by the time we get to the end of our 5-year turnaround strategy. We are now in our third year of our five-year strategy.
Finally, I would like to thank all our shareholders, internal and external stakeholders for their unstinting support. We are on a journey and with each passing month, we are making progress on all fronts.
Arun Raman
Group Chief Financial Officer
For further information, please visit www.harland-wolff.com or contact:
| Harland & Wolff Group Holdings plc John Wood, Chief Executive Officer Seena Shah, Head of Marketing & Communications
| +44 (0)20 3900 2122 |
| Cenkos Securities plc (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 / Lucas Bamber / Antonia Brown
| +44 (0)20 3100 2000 |
|
| |
Harland & Wolff Group Holdings Plc
Consolidated Income Statement for the Year Ended 31 December 2022
| | Note | 12 months to | 17 months to |
| Continuing operations | | | |
| Revenue | 3 | 27,969,837 | 18,518,239 |
| Cost of sales | | (22,214,534) | (13,293,198) |
| Gross profit | | 5,755,303 | 5,225,041 |
| Other operating expenses | 4 | (10,847,232) | (3,372,861) |
| | | (5,091,929) | 1,852,180 |
| Management and administrative expenses | 4 | (53,415,507) | (24,718,895) |
| Other operating income | 5 | 443,968 | 495,220 |
| Operating loss | | (58,063,468) | (22,371,495) |
| | | | |
| Net finance costs | 6 | (12,293,865) | (3,136,775) |
| Loss before tax | | (70,357,333) | (25,508,270) |
| Taxation | 11 | - | - |
| Loss for the year | | (70,357,333) | (25,508,270) |
| Total comprehensive loss for the year | (70,357,333) | (25,508,270) | |
| Total comprehensive loss for the period attributable to: | | | |
| Owners of the Company | (70,357,333) | (25,508,270) | |
| | |
| |
| Earnings Per Share | | | |
| Basic and diluted 12 | (42.73)p | (26.59)p | |
Harland & Wolff Group Holdings Plc
(Registration number: 06409712)
Consolidated Statement of Financial Position as at 31 December 2022
| | Note | 31 December | 31 December |
| Non-current assets | | | |
| Intangible assets | 13 | 12,481,331 | 11,923,019 |
| Property, plant and equipment | 14 | 24,370,329 | 24,734,782 |
| Right of use assets | 15 | 18,245,627 | 12,955,693 |
| Total non-current assets | | 55,097,287 | 49,613,494 |
| Current assets | | | |
| Inventories | 17 | 1,734,564 | 1,176,641 |
| Trade and other receivables | 18 | 7,846,913 | 6,825,944 |
| Cash and cash equivalents | 19 | 1,979,825 | 5,278,002 |
| Total current assets | | 11,561,302 | 13,280,587 |
| Current liabilities | | | |
| Trade and other payables | 20 | (30,454,452) | (22,288,777) |
| Loans and borrowings | 21 | (64,915,031) | (3,167,287) |
| Total current liabilities | | (95,369,483) | (25,456,064) |
| Net current liabilities | | (83,808,181) | (12,175,477) |
| Non-current liabilities | | | |
| Loans and borrowings | 21 | (19,458,325) | (16,006,460) |
| Financial liability | 21 | (200,000) | (200,000) |
| Total non-current liabilities | | (19,658,325) | (16,206,460) |
| Net (liabilities)/assets | | (48,369,219) | 21,231,557 |
| Shareholders' funds | | | |
| Share capital | 22 | 12,546,328 | 12,444,734 |
| Share premium | | 59,360,117 | 58,736,711 |
| Merger reserve | | 8,988,112 | 8,988,112 |
| Share based payment reserve | | 392,058 | 360,501 |
| Revaluation reserve | | 6,074,895 | 6,074,895 |
| Retained earnings | | (135,730,729) | (65,373,396) |
| Total equity | | (48,369,219) | 21,231,557 |
Under the Companies Act 2006, s454, on a voluntary basis, the directors can amend these financial statements if they subsequently prove to be defective.
These financial statements were approved and authorised for issue by the board on 30 June 2023 and signed on its behalf by:
Mr J M Wood
Director
Harland & Wolff Group Holdings Plc
(Registration number: 06409712)
Company Statement of Financial Position as at 31 December 2022
| | Note | 31 December | 31 December |
| Non-current assets | | | |
| Intangible assets | 13 | 184,177 | 184,177 |
| Property, plant and equipment | 14 | 62,213 | 46,763 |
| Right of use assets | 15 | 1,385,153 | 1,904,585 |
| Investments in subsidiaries | 16 | 100 | - |
| Total non-current assets | | 1,631,643 | 2,135,525 |
| Current assets | | | |
| Trade and other receivables | 18 | 92,605,100 | 45,903,326 |
| Cash and cash equivalents | 19 | 1,897,599 | 233,277 |
| Total current assets | | 94,502,699 | 46,136,603 |
| Current liabilities | | | |
| Trade and other payables | 20 | (2,245,667) | (1,385,945) |
| Loans and borrowings | 21 | (62,616,189) | (680,000) |
| Total current liabilities | | (64,861,856) | (2,065,945) |
| Total current assets | | 29,640,843 | 44,070,658 |
| Non-current liabilities | | | |
| Loans and borrowings | 21 | (1,206,445) | (1,716,824) |
| Financial liability | 21 | (200,000) | (200,000) |
| Total non-current liabilities |
| (1,406,445) | (1,916,824) |
| Net assets | | 29,866,041 | 44,289,359 |
| Shareholders' funds | | | |
| Share capital | 22 | 12,546,328 | 12,444,734 |
| Share premium | | 59,360,117 | 58,736,711 |
| Merger reserve | | 8,466,827 | 8,466,827 |
| Share based payment reserve | | 392,058 | 360,501 |
| Retained earnings | | (50,899,289) | (35,719,414) |
| Total equity | | 29,866,041 | 44,289,359 |
The loss for the year dealt with in the financial statements of Harland & Wolff Group Holdings Plc was £15,179,875 (17 months to 31 December 2021: £4,385,684). As provided by s408 of the Companies Act 2006, no statement of comprehensive income is presented in respect of Harland & Wolff Group Holdings Plc, the company.
These financial statements were approved and authorised for issue by the board on 30 June 2023 and signed on its behalf by:
Mr J M Wood
Director
Harland & Wolff Group Holdings Plc
Consolidated Statement of Changes in Equity for the Year Ended 31 December 2022
| | Share capital | Share premium | Revaluation reserve | Merger reserve | Share based payment reserve | Retained earnings | Total equity |
| At 1 August 2020 | 11,457,457 | 33,923,172 | 6,074,895 | 8,988,112 | 125,673 | (39,865,126) | 20,704,183 |
| Loss for the period | - | - | - | - | - | (25,508,270) | (25,508,270) |
| Total comprehensive expense | - | - | - | - | - | (25,508,270) | (25,508,270) |
| Transactions with owners recorded directly in equity: | | | | | | | |
| Shares issued, net of issue costs | 987,277 | 24,813,539 | - | - | - | - | 25,800,816 |
| Share option expense | - | - | - | - | 234,828 | - | 234,828 |
| Total transactions with owners recorded directly in equity | 987,277 | 24,813,359 | - | - | 234,828 | - | 26,035,644 |
| At 31 December 2021 | 12,444,734 | 58,736,711 | 6,074,895 | 8,988,112 | 360,501 | (65,373,396) | 21,231,557 |
| | Share capital | Share premium | Revaluation reserve | Merger reserve | Share based payment reserve | Retained earnings | Total equity |
| At 1 January 2022 | 12,444,734 | 58,736,711 | 6,074,895 | 8,988,112 | 360,501 | (65,373,396) | 21,231,557 |
| Loss for the year | - | - | - | - | - | (70,357,333) | (70,357,333) |
| Total comprehensive expense | - | - | - | - | - | (70,357,333) | (70,357,333) |
| Shares issued | 101,594 | 623,406 | - | - | - | - | 725,000 |
| Share option expense | - | - | - | - | 31,557 | - | 31,557 |
| Total transactions with owners recorded directly in equity | 101,594 | 623,406 | - | - | 31,557 | - | 756,557 |
| At 31 December 2022 | 12,546,328 | 59,360,117 | 6,074,895 | 8,988,112 | 392,058 | (135,730,729) | (48,369,219) |
Harland & Wolff Group Holdings Plc
Consolidated Statement of Changes in Equity for the Year Ended 31 December 2022 (continued)
Share capital: This represents the nominal value of equity shares in issue.
Share premium: This represents the premium paid above the nominal value of shares in issue.
Revaluation reserve: This represents the difference between the carrying value and fair value of certain assets.
Merger Reserve: The merger reserve represents the difference between the nominal value of the shares issued on the demerger and the combined share capital and share premium of Harland & Wolff Group Holdings Plc at the date of the demerger.
Share-based payments reserve: This represents the value of share-based payments provided to employees and Directors as part of their remuneration as part of the consideration paid. The reserve represents the fair value of options and performance share rights recognised as an expense. Upon exercise of options or performance share rights, any proceeds received are credited to share capital and share premium.
Retained earnings: This represents the accumulated profits and losses since inception of the business and adjustments relating to options and warrants.
Harland & Wolff Group Holdings Plc
Company Statement of Changes in Equity for the Year Ended 31 December 2022
| Company | Share capital | Share premium | Merger reserve | Share based payment reserve | Retained earnings | Total equity |
| At 1 August 2020 | 11,457,457 | 33,423,172 | 8,466,827 | 125,673 | (31,333,730) | 22,139,399 |
| Loss for the period | - | - | - | - | (4,385,684) | (4,385,684) |
| Total comprehensive expense | - | - | - | - | (4,385,684) | (4,385,684) |
| Shares issued, net of issue costs | 987,277 | 25,313,539 | - | - | - | 26,300,816 |
| Share option expense | - | - | - | 234,828 | - | 234,828 |
| Total transactions with owners recorded directly in equity | 987,277 | 25,213,539 | - | 234,828 | - | 26,535,644 |
| At 31 December 2021 | 12,444,734 | 58,736,711 | 8,466,827 | 360,501 | (35,719,414) | 44,289,359 |
| Company | Share capital | Share premium | Merger reserve | Share based payment reserve | Retained earnings | Total equity |
| At 1 January 2022 | 12,444,734 | 58,736,711 | 8,466,827 | 360,501 | (35,719,414) | 44,289,359 |
| Loss for the year | - | - | - | - | (15,179,875) | (15,179,875) |
| Total comprehensive expense | - | - | - | - | (15,179,875) | (15,179,875) |
| Shares issued | 101,594 | 623,406 | - | - | - | 725,000 |
| Share option expense | - | - | - | 31,557 | - | 31,557 |
| Total transactions with owners recorded directly in equity | 101,594 | 623,406 | - | 31,557 | - | 756,557 |
| At 31 December 2022 | 12,546,328 | 59,360,117 | 8,466,827 | 392,058 | (50,899,289) | 29,866,041 |
Harland & Wolff Group Holdings Plc
Consolidated Statement of Cash Flows for the Year Ended 31 December 2022
| | Note | 12 months to | 17 months to |
| Cash flows from operating activities | |||
| Loss for the year | | (70,357,333) | (25,508,270) |
| Adjustments to cash flows from non-cash items: | | | |
| Depreciation and amortisation | 4 | 3,460,651 | 3,372,861 |
| Foreign exchange loss | | 938,942 | 3,702 |
| Finance income | 6 | (943) | (278) |
| Finance costs | 6 | 12,294,808 | 3,137,053 |
| Share option expense | | 31,557 | 234,828 |
| | | (53,632,318) | (18,760,104) |
| Working capital adjustments: | | | |
| Increase in inventories | 17 | (557,923) | (845,176) |
| Increase in trade and other receivables | 18 | (1,020,969) | (4,815,927) |
| Decrease in deferred income | | - | 678,278 |
| Increase in trade and other payables | 20 | 8,321,763 | 9,249,933 |
| Net cash outflows from operating activities | | (46,889,447) | (14,492,996) |
| Cash flows from investing activities | | | |
| Interest received | 6 | 943 | 278 |
| Acquisitions of property, plant and equipment | 14 | (1,825,781) | (15,652,972) |
| Acquisition of intangible assets | 13 | (586,909) | (719,017) |
| Net cash outflows from investing activities | | (2,411,747) | (16,371,711) |
| Cash flows from financing activities | | | |
| Proceeds from issue of shares, net of share issue costs | | 725,000 | 25,800,816 |
| Proceeds from borrowings, net of debt issuance costs | | 54,336,234 | 6,235,973 |
| Repayment of borrowings and lease liabilities | | (5,317,690) | (1,615,143) |
| Interest paid | 6 | (3,740,527) | (1,002,173) |
| Net cash inflows from financing activities | | 46,003,017 | 29,419,473 |
| Net decrease in cash and cash equivalents | | (3,298,177) | (1,445,234) |
| Cash and cash equivalents at the beginning of the period | | 5,278,002 | 6,723,236 |
| Cash and cash equivalents at the end of the period | | 1,979,825 | 5,278,002 |
| | | | |
Harland & Wolff Group Holdings Plc
Company Statement of Cash Flows for the Year Ended 31 December 2022
| | Note | 12 months to 31 December | 17 months to 31 December |
| Cash flows from operating activities | |||
| Loss for the year | | (15,179,875) | (4,385,684) |
| Adjustments to cash flows from non-cash items: | | | |
| Depreciation and amortisation | 4 | 536,836 | 752,241 |
| Foreign exchange loss | | 693,999 | 392 |
| Finance income | 6 | - | (51) |
| Finance costs | 6 | 9,742,161 | 440,051 |
| Share option expense | | 31,556 | 234,828 |
| | | (4,175,323) | (2,958,223) |
| Working capital adjustments: | | | |
| Increase in trade and other receivables | 18 | (46,417,859) | (28,815,716) |
| Increase in trade and other payables | 20 | 859,725 | 61,762 |
| Net cash outflows from operating activities | | (49,733,457) | (31,712,177) |
| Cash flows from investing activities | | | |
| Interest received | 6 | - | 51 |
| Acquisitions of property plant and equipment | 14 | (38,354) | (35,404) |
| Acquisition of intangible assets | 13 | - | (162,445) |
| Net cash outflows from investing activities | | (38,354) | (197,798) |
| Cash flows from financing activities | | | |
| Proceeds from issue of shares, net of share issue costs | | 725,000 | 26,300,816 |
| Proceeds from borrowings, net of debt issuance costs | | 54,336,234 | - |
| Repayment of borrowings and lease liabilities | | (680,000) | (778,000) |
| Interest paid | 6 | (2,945,101) | (65,621) |
| Net cash inflows from financing activities | | 51,436,133 | 25,457,195 |
| Net increase/(decrease) in cash and cash equivalents | | 1,664,322 | (6,452,780) |
| Cash and cash equivalents at the beginning of the period | | 233,277 | 6,686,057 |
| Cash and cash equivalents at the end of the period | | 1,897,599 | 233,277 |
| | | | |
Harland & Wolff Group Holdings Plc
Notes to the Financial Statements for the Year Ended 31 December 2022
| 1 | General information |
The company is a public company limited by share capital, incorporated and domiciled in the UK. The address of its registered office is:
Fieldfisher LLP
Riverbank House 2 Swan Lane London
EC4R 3TT
United Kingdom
The company's ordinary shares are traded on the Alternative Investment Market (AIM) of the London Stock Exchange under the ticker symbol HARL.
The principal activities of the Group throughout the year were the development of sub-surface gas storage facility together with that of shipbuilding, heavy engineering, ship repair and refurbishments as well as fabrication of wind turbine generator jackets for offshore wind farms. The Group has one of the largest heavy engineering and fabrication physical footprints in the UK as at the date of this report. The assets of the Group include the largest dry docks in the UK (Belfast), the largest fully undercover dry dock in the UK (Appledore) and vast fabrication halls in its Belfast and Methil facilities.
As at 31 December 2022, the Group was organised into 6 segments: Cruise & Ferry, Commercial, Energy, Defence, Renewables and other being Head Office related. The segmental analysis for the year ended 31 December 2022 is shown in note 3.
| 2 | Accounting policies |
Basis of preparation
The financial statements have been prepared in accordance with UK adopted international accounting standards and with the requirements of the Companies Act 2006. The financial statements have been prepared under historical cost accounting, modified, where applicable, by the measurement at fair value.
The financial statements are presented in Sterling which is the functional currency of the Group and all values are rounded to the nearest Pound Sterling (£) unless otherwise stated.
Summary of significant accounting policies and key accounting estimates
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
Changes to accounting policies, disclosures, standards and interpretations
(a) New and amended standards adopted by the Group
There were no new International Financial Reporting Standards that were applicable for the current reporting period that materially impacted the Group.
(b) New standards not yet adopted
There are no new International Financial Reporting Standards and Interpretations issued but not effective for the reporting period ending 31 December 2022 that will materially impact the Group.
| | |
Basis of consolidation
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform to the group's accounting policies.
Going concern
The financial statements have been prepared on a going concern basis. The Group's assets are now generating revenue following the acquisitions of assets in Belfast, Appledore, Methil and Arnish under the Harland & Wolff umbrella. Operating cash outflows have been incurred in the year and an operating loss has been recorded in the profit and loss account for the year. There is a baseload level of work flowing through the shipyard in Belfast with continuous ship repair and refurbishment activities in the Belfast Repair Dock. In addition, the Group has been able to win smaller fabrication contracts in Appledore, Methil and Arnish throughout the year in addition to the multi-year M55 Regeneration Programme worth £55 million and the fabrication of 23 barges for the Cory group worth £18 million. Post the balance sheet date, the Group has announced that it has secured the Fleet Solid Support Programme under a Subcontract with Navantia UK Limited (Navantia). This Subcontract will yield circa £750 million (inflation adjusted) over a seven year period that provides a baseload of revenues over the next few years. Additionally, there is a strong pipeline of opportunities across the five markets that the Group is involved in that management seeks to convert into firm contracts over the course of the next twelve months. However, given the uncertainty surrounding bid success and the relative lack of bid to success history, management has prepared a worst-case scenario for a period of twelve months from the date of the signing of these financial statements in respect of their going concern assumptions. This assumes no bid contract wins and that the sole revenue generated by the Group will arise from the existing contracts that are currently being fulfilled at the various facilities within the Group. The scenario includes all expected costs associated with such works as well as the repayment of all liabilities that fall due within this twelve-month period and takes into account all cost savings and process efficiencies considered achievable.
Based on this worst case forecast scenario the directors have a reasonable expectation that the Group has access to adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the annual financial statements for the year ended 31 December 2022. Should the Group be unable to continue trading, adjustments would have to be made to reduce the value of the assets to their recoverable amounts, to provide for further liabilities which might arise and to classify fixed assets as current.
The Company is in advanced discussions with potential funders (both debt and equity) to raise additional funds. Whilst there is no indication at the date of signing of these financial statements that this financing will not be forthcoming, there can be no certainty that it will be successful. Should the Company not be successful in raising these additional funds and continues to retain its current cost base, a material uncertainty exists that may cast significant doubt on the group's ability to continue as a going concern.
The auditors have included material uncertainty in relation to Going Concern in the audit opinion.
Revenue
Revenue represents income derived from contracts for the provision of goods and services, over time or at a point in time, by the Group to customers in exchange for consideration in the ordinary course of the Group's activities.
| | |
Performance Obligations
Upon approval by the parties to a contract, the contract is assessed to identify each promise to transfer either a distinct good or service or a series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer. Goods and services are distinct and accounted for as separate performance obligations in the contract if the customer can benefit from them either on their own or together with other resources that are readily available to the customer, and they are separately identifiable in the contract.
The Group provides warranties to its customers to give them assurance that its products and services will function in line with agreed upon specifications. Warranties are not provided separately and, therefore, do not represent performance obligations.
Transaction price
At the start of the contract, the total transaction price is estimated as the amount of consideration to which the Group expects to be entitled in exchange for transferring the promised goods and services to the customer, excluding sales taxes. Variable consideration, such as price escalation, is included based on the expected value or most likely amount only to the extent that it is highly probable that there will not be a reversal in the amount of the cumulative revenue recognised. The transaction price does not include estimates of consideration resulting from contract modifications, such as change orders, until they have been approved by parties to the contract. The total transaction price is allocated to the performance obligations identified in the contract in proportion to their relative stand-alone selling prices. Given the nature of many of the Group's products and services, which are designed and/or manufactured under contract to customers' individual specifications, there are typically no observable stand-alone selling prices. Instead, stand-alone selling prices are typically estimated based on expected costs plus contract margin consistent with the Group's pricing principles.
Whilst payment terms vary from contract to contract, an element of the transaction price may be received in advance of delivery. The Group may therefore have contract liabilities depending on the contracts in existence at a period end. The Group's contracts are not considered to include significant financing components on the basis that there is no difference between the consideration and the cash selling price.
Revenue recognition
Revenue is recognised as performance obligations are satisfied as control of the goods and services is transferred to the customer.
For each performance obligations within a contract the Group determines whether it is satisfied over time or at a point in time. Performance obligations are satisfied over time if one of the following criteria is satisfied:
· The customer simultaneously receives and consumes the benefits provided by the Group's performance as it performs;
· The Group's performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or
· The Group's performance does not create an asset with an alternative use to the Group and it has an enforceable right to payment for performance completed to date.
The Group has determined that most of its contracts satisfy the overtime criteria, either because the customer simultaneously receives and consumes the benefits provided by the Group's performance as it performs or the Group's performance does not create an asset with an alternative use to the Group and it has an enforceable right to payment for performance completed to date.
| | |
For each performance obligation recognised over time, the Group recognises revenue using an input method, based on costs incurred in the period. Revenue and attributable margin are calculated by reference to reliable estimates of transaction price and total expected costs, after making suitable allowances or technical and other risks. Revenue and associated margin are therefore recognised progressively as costs are incurred, and as risks have been mitigated or retired. The Group has determined that this method appropriately depicts the Group's performance in transferring control of the goods and services to the customer.
If the overtime criteria for revenue recognition is not met, revenue is recognised at the point in time that control is transferred to the customer which is usually when legal title passes to the customer and the business has the right to payment.
When it is expected that total contract costs will exceed total contract revenue, the expected loss is recognised immediately as an expense.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker ("CODM") as required by IFRS 8 "Operating Segments". The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the executive board of Directors.
Government grants
Government grants are recognised only when there is reasonable assurance that the Group will comply with the conditions attaching to the grant and that the grants will be received. The amounts received are reported under other income in the financial statements. The income is reported in the period that the relief relates to.
Foreign currency transactions and balances
In preparing the Financial Statements, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined.
Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences arising, if any, are recognised in profit or loss.
Translation from functional currency to presentational currency
When the functional currency of a Group entity is different from the Group's presentational currency (GBP£), its results and financial position are translated into the presentational currency as follows:
· Assets and liabilities are translated using exchange rates prevailing at the balance sheet date.
· Income and expense items are translated at average exchange rates for the year, except where the use of such average rates does not approximate the exchange rate at the date of a specific transaction, in which case the transaction rate is used.
· All resulting exchange differences are recognised in other comprehensive income and presented in the translation reserve in equity and are reclassified to profit or loss in the period in which the foreign operation is disposed of.
| | |
Tax
Tax expense represents the sum of the tax currently payable and any deferred tax. The taxable result differs from the net result as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the statement of financial position date. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset realised.
Deferred tax is charged or credited to the statement of comprehensive income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current assets and liabilities on a net basis.
Capitalisation and impairment of Intangible Assets
Costs of development of gas storage facilities are capitalised as intangible assets once it is probable that future economic benefits that are attributable to the assets will flow to the Group and until consent to construct has been awarded, at which time the capitalised costs are transferred to plant and equipment provided there being reasonable certainty of construction proceeding. The nature of these costs includes all direct costs incurred in project development, including any directly attributable finance costs. No amortisation or depreciation is provided until the storage facility is available for use.
An impairment test is performed annually and whenever events or circumstances arising during the development phase indicate that the carrying value of a development asset may exceed its recoverable amount. The aggregate carrying value is compared against the expected recoverable amount of the cash generating unit, generally by reference to the present value of the future net cash flows expected to be derived from storage revenue. The present value of future cash flows is calculated on the basis of future storage prices and cost levels as forecast at the statement of financial position date.
| | |
The cash generating unit applied for impairment test purposes is generally an individual gas storage facility. Where the carrying value of the facility is greater than the present value of its future cash flows a provision is made. Any such provisions are charged to the profit and loss account as an impairment cost.
Amortisation
Amortisation is provided on intangible assets so as to write off the cost, less any estimated residual value, over their useful economic lives as follows:
| Asset Class | Amortisation method and rate |
| Storage facility | None until facility available to use |
Harland Heritage Project
Project costs related to Harland Heritage are capitalised as incurred. The Harland Heritage Project is a project that seeks to celebrate the history and heritage of Harland & Wolff. The plan for this project broadly consists of developing a visitor centre in the Belfast shipyard and creating an immersive experience for visitors which includes, inter alia, and subject to planning and health and safety regulations, a walk around a fully operating shipyard, crane lifts, hiring out of designated zones for social functions, a museum with historic artefacts and the sale of Harland & Wolff branded merchandise. On the basis that the Harland Heritage Project will be a standalone business that will be generating income and have its own funding sources, management believes that this project should be treated like an operating business in the future. Accordingly, all pre-development and developments costs associated with this project will be capitalised and then amortised as soon as the project has been commercialised. Where management determine that the project should not proceed to commercialisation, the capitalised costs will be written off immediately to the profit and loss account.
Amortisation
Amortisation is provided on intangible assets so as to write off the cost, less any estimated residual value, over their expected useful economic life as follows:
| Asset class | Amortisation method and rate |
| Artefacts | Not depreciated |
| Trademarks | Not depreciated |
| Software | Over 5 Years Straight line basis |
| Gas storage facility | None until facility available for use |
| Developments Costs | Over 20 Years Straight line basis |
| Harland Heritage Project | None until facility available for use |
| Floating Storage Regasification Project | None until facility available for use |
| | |
Tangible assets
Property, plant and equipment
Property, plant and equipment is stated in the statement of financial position at cost, less any subsequent accumulated depreciation and subsequent accumulated impairment losses.
The cost of property, plant and equipment includes directly attributable incremental costs incurred in their acquisition and installation.
Depreciation
Depreciation is charged so as to write off the cost of assets, other than land and properties under construction over their estimated useful lives, as follows:
| Asset Class | Depreciation method and rate |
| Freehold land | Not depreciated |
| Leasehold land and buildings | Over 50 years Straight line basis |
| Modular buildings | Over 20 years Straight line basis |
| Right of use | Over the lease term |
| Plant and machinery | Over 10 years Straight line basis |
| Motor vehicles | Over 5 years Straight line basis |
| Office equipment | Over 5 years Straight line basis |
Investments
Investments in subsidiaries are stated at cost less provision for impairments.
Financial Instruments
Financial assets and liabilities are recognised in the Company's statement of financial position when the Company becomes a party to the contractual provisions of the instrument. The Company currently does not use derivative financial instruments to manage or hedge financial exposures or liabilities.
Financial Assets
The financial assets currently held by the Group and Company are classified as financial assets held at amortised cost. These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment under the expected credit loss model.
The group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all financial assets.
The amount of the expected credit loss is measured as the difference between all contractual cash flows that are due in accordance with the contract and all the cash flows that are expected to be received (i.e. all cash shortfalls), discounted at the original effective interest rate (EIR).
| | |
The carrying amount of the asset is reduced through use of allowance account and recognition of the loss in the Statement of Comprehensive Income. Allowances for credit losses on financial assets are assessed collectively. Collectively assessed impairment allowances cover credit losses inherent in portfolios of financial assets with similar credit risk characteristics when there is objective evidence to suggest that they contain impaired financial assets, but the individual impaired items cannot yet be identified.
In assessing collective impairment, the Group uses information including historical trends in the probability of default (although this is limited given the relatively short trading history of the Group), timing of recoveries and the amount of expected loss, adjusted for
management's judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical evidence. Default rates, loss rates and the expected timing of future recoveries are regularly benchmarked against actual outcomes to ensure that they remain appropriate.
IFRS 9 suggests the use of reasonable forward-looking information to enhance ECL models. The Group incorporates relevant forward-looking information into the loss provisioning model.
Financial assets at amortised cost comprise trade and other receivables and cash and cash equivalents in the statement of financial position.
Cash and cash equivalents include cash in hand and amounts held on short term deposit. Any interest earned is accrued monthly and classified as finance income. Short term deposits comprise deposits made for varying periods of between one day and three months.
For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above.
Derecognition of Financial Assets
The Group and Company derecognise a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the asset and substantially all the risk and rewards of ownership of the asset to another entity.
Financial Liabilities
The Group and Company classify their financial liabilities into one category, being other financial liabilities measured at amortised cost. The Group's accounting policy for the other financial liabilities category is as follows:
Trade payables and other short-term monetary liabilities are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method. All interest and other borrowing costs incurred in connection with the above are expensed as incurred and reported as part of financing costs in profit or loss. The Group and Company derecognise financial liabilities when, and only when, the obligations are discharged, cancelled or they expire.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and call deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.
Trade receivables
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business.
If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as current assets. If not, they are presented as non-current assets.
Trade receivables are recognised when the group has a right to consideration that is unconditional (subject only to the passage of time before the payment is due). Trade receivables do not carry interest and are stated at initial cost reduced by appropriate allowances for expected credit losses.
The group applies the simplified approach to measurement of expected credit losses in respect of trade receivables, which requires expected lifetime losses to be recognised from initial recognition of the receivables, estimated by reference to past experience and forward-looking factors.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the first-in, first-out (FIFO) method.
The cost of finished goods and work in progress comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. At each reporting date, inventories and work in progress are assessed for impairment. If inventory or work in progress is impaired, the carrying amount is reduced to its selling price less costs to complete and sell; the impairment loss is recognised immediately in profit or loss.
Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.
Trade payables are recognised initially at the transaction price and subsequently measured at amortised cost using the effective interest method.
Borrowings
All borrowings are initially recorded at the amount of proceeds received, net of transaction costs. Borrowings are subsequently carried at amortised cost, with the difference between the proceeds, net of transaction costs, and the amount due on redemption being recognised as a charge to the income statement over the period of the relevant borrowing.
Interest expense is recognised on the basis of the effective interest method and is included in finance costs.
Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.
Leases
Definition
A lease is a contract, or a part of a contract, that conveys the right to use an asset or a physically distinct part of an asset ("the underlying asset") for a period of time in exchange for consideration. Further, the contract must convey the right to the group to control the asset or a physically distinct portion thereof. A contract is deemed to convey the right to control the underlying asset if, throughout the period of use, the group has the right to:
· Obtain substantially all the economic benefits from the use of the underlying asset, and;
· Direct the use of the underlying asset (e.g. direct how and for what purpose the asset is used)
Where contracts contain a lease coupled with an agreement to purchase or sell other goods or services (i.e., non-lease components), the group has made an accounting policy election, by class of underlying asset, to account for both components as a single lease component.
Initial recognition and measurement
The group initially recognises a lease liability for the obligation to make lease payments and a right-of-use asset for the right to use the underlying asset for the lease term.
The lease liability is measured at the present value of the lease payments to be made over the lease term. The lease payments include fixed payments, purchase options at exercise price (where payment is reasonably certain), expected amount of residual value guarantees,
termination option penalties (where payment is considered reasonably certain) and variable lease payments that depend on an index or rate.
The right-of-use asset is initially measured at the amount of the lease liability, adjusted for lease prepayments, lease incentives received, the group's initial direct costs (e.g., commissions) and an estimate of restoration, removal and dismantling costs.
Subsequent measurement
After the commencement date, the group measures the lease liability by:
(a) Increasing the carrying amount to reflect interest on the lease liability;
(b) Reducing the carrying amount to reflect the lease payments made; and
(c) Re-measuring the carrying amount to reflect any reassessment or lease modifications or to reflect revised in substance fixed lease payments or on the occurrence of other specific events.
Interest on the lease liability in each period during the lease term is the amount that produces a constant periodic rate of interest on the remaining balance of the lease liability. Interest charges are presented separately as non-operating /included in finance cost in the income statement, unless the costs are included in the carrying amount of another asset applying other applicable standards. Variable lease payments not included in the measurement of the lease liability, are included in operating expenses in the period in which the event or condition that triggers them arises.
The related right-of-use asset is accounted for using the Cost model in IAS 16 and depreciated and charged in accordance with the depreciation requirements of IAS 16 Property, Plant and Equipment as disclosed in the accounting policy for Property, Plant and Equipment. Adjustments are made to the carrying value of the right of use asset where the lease liability is re-measured in accordance with the above. Right of use assets are tested for impairment in accordance with IAS 36 Impairment of assets as disclosed in the accounting policy in impairment.
Lease modifications
If a lease is modified, the modified contract is evaluated to determine whether it is or contains a lease. If a lease continues to exist, the lease modification will result in either a separate lease or a change in the accounting for the existing lease.
The modification is accounted for as a separate lease if both:
· The modification increases the scope of the lease by adding the right to use one or more underlying assets; and
· The consideration for the lease increases by an amount commensurate with the stand-alone price for the increase in scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of the particular contract.
If both of these conditions are met, the lease modification results in two separate leases, the unmodified original lease and a separate lease. The group then accounts for these in line with the accounting policy for new leases.
If either of the conditions are not met, the modified lease is not accounted for as a separate lease and the consideration is allocated to the contract and the lease liability is re-measured using the lease term of the modified lease and the discount rate as determined at the effective date of the modification.
For a modification that fully or partially decreases the scope of the lease (e.g., reduces the square footage of leased space), IFRS 16 requires a lessee to decrease the carrying amount of the right-of-use asset to reflect partial or full termination of the lease. Any difference between those adjustments is recognised in profit or loss at the effective date of the modification.
For all other lease modifications which are not accounted for as a separate lease, IFRS 16 requires the lessee to recognise the amount of the re-measurement of the lease liability as an adjustment to the corresponding right-of-use asset without affecting profit or loss.
Short term and low value leases
The group has made an accounting policy election, by class of underlying asset, not to recognise lease assets and lease liabilities for leases with a lease term of 12 months or less (i.e., short-term leases).
The group has made an accounting policy election on a lease-by-lease basis, not to recognise lease assets on leases for which the underlying asset is of low value.
Lease payments on short term and low value leases are accounted for on a straight line basis over the term of the lease or other systematic basis if considered more appropriate. Short term and low value lease payments are included in operating expenses in the income statements.
Leases are recognised as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:
· Fixed payments (including in-substance fixed payments), less any lease incentives receivable;
· Variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date;
· Amounts expected to be payable by the Group under residual value guarantees;
· The exercise price of a purchase option if the Group is reasonably certain to exercise that option; and
· Payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.
Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee's incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period.
Right-of-use assets are measured at cost which comprises the following:
· The amount of the initial measurement of the lease liability;
· Any lease payments made at or before the commencement date less any lease incentives received;
· Any initial direct costs; and
· Restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset's useful life.
Share based payment transactions
Employees (including senior executives) of the Group receive part of their remuneration in the form of share-based payment transactions, whereby employees render services as consideration for equity instruments (equity settled transactions).
The cost of equity settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (the vesting date). The cumulative expense recognised for equity settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group's best estimate of the number of equity instruments that will ultimately vest. The statement of comprehensive income charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied.
Where an equity settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.
Defined contribution pension obligation
The Company has a defined contribution plan which requires contributions to be made into an independently administered fund.
The amount charged to the statement of comprehensive income in respect of pension costs reflects the contributions payable in the year. Differences between contributions payable during the year and contributions actually paid are shown as either accrued liabilities or prepaid assets in the statement of financial position.
Critical accounting judgements and key sources of estimation uncertainty
Judgements in applying accounting policies and key sources of estimation uncertainty
Amounts included in the financial statements involve the use of judgement and/or estimation. These estimates and judgements are based on management's best knowledge of the relevant facts and circumstances, having regard to previous experience, but actual results
may differ from the amounts included in the financial statements. Information about such judgements and estimation is contained in the accounting policies and/or the notes to the financial statements, and the key areas are summarised below.
Judgements
Capitalisation of gas storage costs - Note 13
The assessment of whether costs incurred on gas storage development should be capitalised or expensed involves judgement.
Any expenditure where it is not probable that future economic benefits will flow to the Group are expensed. Management considers the nature of the costs incurred and the stage of project development and concludes whether it is appropriate to capitalise the costs. The key assumptions depend on whether it is probable that the expenditure will result future economic benefits that are attributable to the assets.
In relation to the Islandmagee gas storage project, management costs incurred on gas storage development as those that will provide future economic benefit. There is a structural shortage of gas storage in the UK, as demonstrated by extreme price fluctuations and volatility in the spot gas markets and along the forward curve. The Islandmagee gas storage facility is a fast cycling gas store that will derive its economic value from the winter-summer spreads as well as from the optimisation of gas flows from and into the gas store in the spot market. This is in sharp contrast to medium and long range gas stores that derive economic value only from seasonal spreads and not from spot gas price volatility. Management believes that a combination of the two revenue streams will ultimately provide significant economic benefit to the project, once it has been commercialised. With a renewed global focus on climate change and measures to mitigate global warming globally, the UK economy is transitioning from a gas led economy to a renewables and hydrogen based economy. Green hydrogen is expected to be produced from excess power generated by offshore wind farms and will be consumed principally for heating and transportation. The value chain in a hydrogen economy must consist of mid-stream storage assets that are capable of storing hydrogen in periods of peak supply and then releasing the molecules during periods of peak demand, very similar to gas storage. The Islandmagee gas storage can be future proofed to accommodate this transition from natural gas storage to hydrogen storage subject to variations to the licences that have been currently granted for the storage of natural gas. Management believes that there is significant economic benefit during this transition process and, further out, in the storage of hydrogen as a liquid traded market for hydrogen develops and matures over time.
Estimates
Carrying value of gas storage project asset - Note 13
The assessment of capitalised project costs for any indications of impairment involves judgement. When facts or circumstances suggest that impairment exists, a formal estimate of recoverable amount is performed, and an impairment loss recognised to the extent that the carrying amount exceeds recoverable amount. Recoverable amount is determined to be the higher of fair value less costs to sell and value in use. The key assumptions are the net income expected to be generated from the facilities, the cost of construction and the date from which the facilities become operational. Management assigns values and dates to these inputs after taking into account market information, engineering design costing and the project programme. A discount rate of 8% (2021: 8%) is applied in determining gas storage project net present values. Notwithstanding the current inflation rates and rising interest costs, the Islandmagee gas storage project has a typical life of 40 years and beyond. This project is capable of generating steady cashflows over its lifetime and suitable investors include pension funds and long-life infrastructure funds. These institutions are attracted by the cashflow profile of the project and given the length of time of the project's life, the benchmark threshold discount rates tend to be lower than private equity. Management, therefore, believes that an assumed discount rate of 8% is appropriate to determine the net present value of future cashflows. Salt cavern gas storage projects are long term investments and cash flows are therefore projected over periods greater than 5 years. Engineering design provides for a project life of 40 years (2021: 40 years). It is assumed that 100% (2021: 100%) of the project's capacity will be sold from the date that the capacity becomes operational. The Islandmagee gas storage facility has a working volume of circa 500 million cubic metres and is classified as a mid-sized gas store. Given the long-standing structural shortage of gas storage in the UK and the optionality that the caverns can offer to a capacity offtaker, it lends itself to being utilised or sold on a 100% basis. Moreover, from an engineering standpoint, the seven caverns are serviced by common above ground installations (compressors, dehydration plant, pipelines etc.), therefore, the most feasible mechanism would be a 100% capacity offtake by a client. Finally, given the nature of potential clients, each of them has a very large gas trading book that can very easily absorb all the capacity of the project.
The Islandmagee gas storage project has been effectively future proofed with a pre-FEED study conducted for the storage of hydrogen. This pre-FEED study has concluded that the project has the technical capability to store large volumes in the seven caverns once Northern Ireland and the UK transition from natural gas to hydrogen. The salt caverns will be created using the existing drilling and leaching methodologies and will retain their integrity when hydrogen is injected into and withdrawn from them. The only changes to the project would be in relation to the above ground installations where hydrogen compliant compressors, dehydrators and pipelines would need to be installed.
Valuation of assets, including receivables from related parties - Note 14
Management make judgements in respect of the valuation and carrying value of assets used in operations. A revaluation exercise was undertaken at the time of acquiring the assets in Belfast, Appledore, Methil and Arnish. This revaluation was undertaken based on valuations provided by third party independent valuation experts. At the year-end management made a judgement that the basis for revaluations remained and that on the basis on future expected work there were no indications of impairment. Following the acquisition of assets, the Company has recorded further revenues for the period ended 31 December 2022. From a post balance sheet perspective, the Company has announced that it has formally executed the Subcontract with Navantia UK Limited (the "Subcontract").Under the terms of the Subcontract, the Company will be responsible for delivering works which are expected to generate revenues of between £700 million and £800 million to the Company by the time the final vessel is delivered. This is a significant win for Harland & Wolff and will propel the Company to the next stage of its development. Current gross margins are running at between 25% and 27% depending on the type of contract and the market attributable to such a contract.
Management, therefore, believe that the carrying value of the assets a true and fair reflection of the assets that are currently being used in operations and there are no indications of impairment.
Harland & Wolff Group Holdings Plc
Notes to the Financial Statements for the Year Ended 31 December 2022 (continued)
| 3 | Revenue |
(a) Revenue streams
The analysis of the group's revenue for the year from continuing operations is as follows:
| | 12 months to | 17 months to |
| Rendering of services | 16,247,109 | 18,384,712 |
| Sale of goods | 11,722,728 | 133,527 |
| | 27,969,837 | 18,518,239 |
All revenue above is recognised over time and is wholly generated in the UK.
Two customers individually account for over 10% of the group's revenue during the year.
(b) Segmental revenue
As at 31 December 2022, the Group was organised into 6 segments: Cruise & Ferry, Commercial, Energy, Defence, Renewables and other being Head Office related.
The segmental analysis for the period ended 31 December 2022 is as follows:
| | 12 months to 31 December 2022 £ | 17 months to 31 December 2021 £ |
| Cruise & Ferry | 5,752,137 | 9,561,467 |
| Commercial | 5,814,674 | 2,522,476 |
| Renewables | 8,085,249 | 6,426,796 |
| Energy | 1,081,854 | - |
| Defence | 7,235,923 | - |
| Head Office | - | 7,500 |
| | 27,969,837 | 18,518,239 |
| 4 | Expenses |
(a) Other operating expenses
The analysis of the group's other operating expenses for the year is as follows:
| | 12 months to | 17 months to |
| Costs for discontinued contracts | 6,389,791 | - |
| Depreciation of owned assets | 2,190,234 | 2,307,445 |
| Depreciation of right of use assets | 1,241,821 | 1,062,588 |
| Amortisation expense | 28,596 | 2,828 |
| Training costs | 719,381 | - |
| Stock write down adjustments | 157,409 | - |
| Warranty provisions | 120,000 | - |
| | 10,847,232 | 3,372,861 |
| | | |
During the year £6,389,791 was incurred in Methil in relation to non-capital development costs and increased labour costs to provide the Company with the ability to ramp up as quickly as possible for extensions to existing contracts and in anticipation of new contracts. Those costs whose potential benefits will accrue in future years, have been booked in the current financial year. A further sum of £719,381 was incurred in Belfast as preparatory works and training of a larger workforce for the FSS Programme. A warranty provision of £120,000 has been booked for works completed in Belfast.
(b) Management and administrative expenses
The analysis of the group's management and administrative expenses for the year is as follows:
| | 12 months to | 17 months to |
| Staff Costs | 27,116,209 | 12,749,339 |
| Premises and vehicle costs | 5,488,637 | 988,602 |
| Maintenance | 9,873,822 | 1,729,986 |
| Legal and professional | 4,212,646 | 1,114,105 |
| Insurance | 1,591,999 | 1,595,268 |
| Other expenses | 5,132,194 | 6,541,596 |
| | 53,415,507 | 24,718,896 |
| | | |
| 5 | Other operating income |
The analysis of the group's other operating income for the year is as follows:
| | 12 months to | 17 months to |
| Government grants | 185,394 | 235,410 |
| Other income | 258,574 | 259,810 |
| | 443,968 | 495,220 |
| 6 | Finance income and costs | ||
| | 12 months to | 17 months to | |
| Finance income | | | |
| Interest income on bank deposits | 943 | 278 | |
| Total finance income | 943 | 278 | |
| Finance costs | | | |
| Interest expense on other financing liabilities | (10,195,452) | (1,001,781) | |
| Other finance costs | (2,099,356) | (2,135,272) | |
| Total finance costs | (12,294,808) | (3,137,053) | |
| Net finance costs | (12,293,865) | (3,136,775) | |
| 7 | Staff costs |
Group
The aggregate payroll costs (including directors' remuneration) were as follows:
| | 12 months to | 17 months to |
| Wages and salaries | 28,334,239 | 9,637,047 |
| Social security costs | 3,177,407 | 1,676,705 |
| Other short-term employee benefits | 147,647 | 66,910 |
| Pension costs, defined contribution scheme | 651,557 | 416,010 |
| Redundancy costs | 236,587 | - |
| Share-based payment expenses | 31,557 | 234,828 |
| | 32,578,994 | 12,031,500 |
The average monthly number of persons employed by the group (including directors) during the year, analysed by category was as follows:
| | 12 months to | 17 months to |
| Management | 30 | 29 |
| Operations | 582 | 202 |
| Administration and support | 26 | 36 |
| | 638 | 267 |
Company
The aggregate payroll costs (including directors' remuneration) were as follows:
| | 12 months to | 17 months to |
| Wages and salaries | 1,658,291 | 2,264,214 |
| Social security costs | 225,374 | 281,925 |
| Other short-term employee benefits | 74,465 | 701 |
| Pension costs, defined contribution scheme | 95,497 | 70,877 |
| Share-based payment expenses | 31,557 | 234,828 |
| | 2,085,184 | 2,852,545 |
| 7 | Staff costs (continued) |
The average monthly number of persons employed by the company (including directors) during the year, analysed by category was as follows:
| | 12 months to | 17 months to |
| Management | 13 | 5 |
| Administration and support | 4 | - |
| | 17 | 5 |
| 8 | Directors' remuneration |
The directors' remuneration for the year was as follows:
| | Salary & Fees | Bonus | Pension | Total |
| Year ended 31 December 2022 | £ | £ | £ | £ |
| Executive Directors |
| | | |
| John Wood | 369,288 | - | 30,046 | 399,335 |
| Arun Raman | 352,791 | - | 32,879 | 385,671 |
| Non-Executive Directors | | | | - |
| Malcolm Groat | 11,000 | - | 440 | 11,440 |
| Judith Tweed | 42,000 | - | 1,680 | 43,680 |
| Jonathon Band | 45,000 | - | - | 45,000 |
| Katya Zotova (appointed 1st September 2022) | 15,000 | - | - | 15,000 |
| | 835,079 | - | 65,045 | 900,126 |
|
| Salary & Fees | Bonus | Pension | Total |
| 17 months to 31 December 2021 | £ | £ | £ | £ |
| Executive Directors |
| | | |
| John Wood | 498,154 | - | 18,292 | 516,446 |
| Arun Raman | 469,224 | - | 17,378 | 486,602 |
| Non-Executive Directors |
| | | |
| Clive Richardson (Resigned 24 September 2021) | 72,917 | - | - | 72,917 |
| Deborah Saw (Resigned 27 August 2020) | 3,000 | - | - | 3,000 |
| Malcolm Groat | 10,333 | - | 413 | 10,746 |
| Judith Tweed | 51,000 | - | 2,040 | 53,040 |
| Jonathon Band | 15,000 | - | - | 15,000 |
| | 1,119,628 | - | 38,123 | 1,157,751 |
| 9 | Auditors' remuneration | ||
| | 12 months to | 17 months to | |
| For the audit of these financial statements | 97,500 | 81,000 | |
| Other fees to auditors | | | |
| For the audit of the subsidiaries | 65,000 | 54,000 | |
| Total Remuneration | 162,500 | 135,000 | |
| 10 | Share-based payments |
Scheme details and movements
A share-based payment plan was created in the year ended 31 July 2008. All directors and employees are entitled to a grant of options subject to the Board of Directors' approval. The options do not have a cash settlement alternative. The options granted were Enterprise Management Incentive share options for qualifying employees. These options have now lapsed following the departure of these employees.
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during the year.
| | 2022 | 2022 |
| 2021 | 2021 |
|
| | Number | WAEP |
| Number | WAEP |
|
| | | £ | | | £ | |
| Outstanding at the beginning of the year | 79,458,597 | 0.0088 | | 79,458,597 | 0.0088 | |
| Granted during the year | - | - | | - | - | |
| Forfeited during the year | - | - | | - | - | |
| Outstanding at the end of the year | 79,458,597 | 0.0088 | | 79,458,597 | 0.0088 | |
| | | | | | | |
| Exercisable at the end of the year | 26,486,199 | 0.0088 | | 26,486,199 | 0.0088 | |
| During the period, no options were granted. |
| |
| After the reporting period no options lapsed. |
| |
| Options are exercisable annually or in one tranche at the end of the grant period noted above with estimated dates ranging from January 2020 through to end 2027 at an average price of 0.0088p per share. The options will expire after five years. |
| The weighted average remaining option life for the share options outstanding at 31 December 2022 is 2 years (2021: 3 years). |
| |
| The fair value of equity settled options granted is estimated as at the date of the grant using a Black-Scholes model, taking into account the terms and conditions upon which the options were granted and the following inputs: share price volatility of 85%, risk free interest rate of 0.93%, no dividends to be paid over the options lives, and early exercise is not applicable. The total share-based payment charge for the year is £31,557. |
| 11 | Income tax |
The tax on profit before tax for the year is the same as the standard rate of corporation tax in the UK (2022 - the same as the standard rate of corporation tax in the UK) of 19% (2022 - 19%).
The differences are reconciled below:
| | 12 months to | 17 months to |
| Loss before tax | (70,357,333) | (25,508,270) |
| Corporation tax at standard rate | (13,367,893) | (4,846,571) |
| (Decrease)/increase from effect of capital allowances depreciation | (423) | 31,480 |
| Increase from effect of expenses not deductible in determining taxable loss | 1,620,368 | 34,422 |
| Increase from effect of unrelieved tax losses carried forward | - | 5,041,908 |
| Increase from effect of unrelieved tax losses | 11,918,958 | - |
| Other tax effects for reconciliation between accounting profit and tax income | (171,010) | (261,239) |
| Total tax credit | - | - |
| 11 | Income tax (continued) |
No tax charge/ credit arises in 2022 or in 2021 due to expenses not permitted for tax purposes and losses carried forward.
Factors that may affect the future tax charge
The Group has trading losses of £62,732,366 (2021: £28,145,431) which may reduce future tax charges. Future tax charges may also be reduced by capital allowances on cumulative capital expenditure.
No deferred tax asset has been recognised due to uncertainty as to when profits will be generated against which to realise said asset.
12 Earnings per Share
| | 2022 | 2021 |
|
| £ | £ |
| Loss |
| |
| The loss for the purposes of basic and diluted loss per share being the net loss attributable to equity shareholders | | |
| Continuing Operations | (70,357,333) | (25,508,270) |
| | | |
| | | |
| Number of shares |
| |
| Weighted average number of ordinary shares for the purpose of: | | |
| Basic earnings per share | 164,647,988 | 95,905,732 |
| Basic and diluted earnings per share | | |
| Continuing Operations | (42.73)p | (26.59)p |
Harland & Wolff Group Holdings Plc
Notes to the Financial Statements for the Year Ended 31 December 2022 (continued)
| 13 | Intangible assets |
| Group | |
|
|
|
|
|
|
|
|
| | Artefacts | Trademarks | Computer Software | Development | Gas Storage development | Project Costs | Total |
| | | £ | £ | £ | £ | £ | £ | £ |
| Cost | | | | | | | | |
| At 1 August 2020 | | 647,395 | 863,192 | - | 55,000 | 9,621,766 | 21,732 | 11,209,085 |
| Additions | | - | 150,000 | - | - | 406,572 | 162,445 | 719,017 |
| At 31 December 2021 | | 647,395 | 1,013,192 | - | 55,000 | 10,028,338 | 184,177 | 11,928,102 |
| At 1 January 2022 | | 647,395 | 1,013,192 | - | 55,000 | 10,028,338 | 184,177 | 11,928,102 |
| Additions | | - | - | 181,273 | - | 405,635 | - | 586,908 |
| At 31 December 2022 | | 647,395 | 1,013,192 | 181,273 | 55,000 | 10,433,973 | 184,177 | 12,515,010 |
| Amortisation | | | | | | | | |
| At 1 August 2020 | | - | - | - | 2,255 | - | - | 2,255 |
| Amortisation charge | | - | - | - | 2,828 | - | - | 2,828 |
| At 31 December 2021 | | - | - | - | 5,083 | - | - | 5,083 |
| At 1 January 2022 | | | | | 5,083 | | | 5,083 |
| Amortisation charge | | - | - | 25,846 | 2,750 | - | - | 28,596 |
| At 31 December 2022 | | - | - | 25,846 | 7,833 | - | - | 33,679 |
| | | | | | | | | |
| Net Book Value | | | | | | | | |
| At 31 December 2022 | | 647,395 | 1,013,192 | 155,427 | 47,167 | 10,433,973 | 184,177 | 12,481,331 |
| At 31 December 2021 | | 647,395 | 1,013,192 | - | 49,917 | 10,028,338 | 184,177 | 11,923,019 |
| 13 | Intangible assets (continued) |
Intangible assets carried at revalued amounts
The fair value of the group's Artefacts was revalued on 30 June 2019 by Hilco Valuation services.
Had this class of asset been measured on a historical cost basis, their carrying amount would have been £200,000.
The revaluation surplus (gross of tax) recognised in profit and loss amounted to £447,395.
The revaluation surplus (gross of tax) recognised in other comprehensive income amounted to £447,395.
The fair value of the group's Trademarks was revalued on 30 June 2019 by Hilco Valuation Services.
Had this class of asset been measured on a historical cost basis, their carrying amount would have been £170,000.
The revaluation surplus (gross of tax) recognised in profit and loss amounted to £693,192.
The revaluation surplus (gross of tax) recognised in other comprehensive income amounted to £693,192.
Company
| | Project costs |
| Cost or valuation | |
| At 1 August 2020 | 21,732 |
| Additions | 162,445 |
| At 31 December 2021 | 184,177 |
| At 1 January 2022 | 184,177 |
| At 31 December 2022 | 184,177 |
| Carrying amount | |
| At 31 December 2022 | 184,177 |
| At 31 December 2021 | 184,177 |
| 14 | Property, plant and equipment |
Group
| | Land and buildings | Office equipment | Motor vehicles | Plant & machinery | Total |
| Cost or valuation | |||||
| At 1 August 2020 | 6,603,708 | 238,464 | 670,520 | 4,816,239 | 12,328,931 |
| Additions | 5,347,811 | 36,511 | 11,680 | 10,256,970 | 15,652,972 |
| Transfers | - | - | (127,683) | 127,683 | - |
| At 31 December 2021 | 11,951,519 | 274,975 | 554,517 | 15,200,892 | 27,981,903 |
| At 1 January 2022 | 11,951,519 | 274,975 | 554,517 | 15,200,892 | 27,981,903 |
| Additions | - | 537,798 | - | 1,292,533 | 1,830,331 |
| Reclassification | (5,500) | 5,500 | - | - | - |
| Disposals | - | (4,550) | - | | (4,550) |
| At 31 December 2022 | 11,946,019 | 813,723 | 554,517 | 16,493,425 | 29,807,684 |
| Depreciation | |||||
| At 1 August 2020 | 276,050 | 63,865 | 55,478 | 544,283 | 939,676 |
| Charge for period | 605,890 | 72,559 | 63,364 | 1,565,632 | 2,307,445 |
| At 31 December 2021 | 881,940 | 136,424 | 118,842 | 2,109,915 | 3,247,121 |
| At 1 January 2022 | 881,940 | 136,424 | 118,842 | 2,109,915 | 3,247,121 |
| Charge for the year | 428,129 | 147,204 | 56,164 | 1,558,737 | 2,190,234 |
| At 31 December 2022 | 1,310,069 | 283,628 | 175,006 | 3,668,652 | 5,437,355 |
| 14 | Property, plant and equipment (continued) | |||||
| | Land and buildings | Office equipment | Motor vehicles | Plant & machinery | Total | |
| Carrying amount | ||||||
| At 31 December 2022 | 10,635,950 | 530,095 | 379,511 | 12,824,773 | 24,370,329 | |
| At 31 December 2021 | 11,069,579 | 138,551 | 435,675 | 13,090,977 | 24,734,782 | |
Included within the net book value of plant and machinery is £2,965,352 (2021: £3,267,466) in respect of assets under construction which has been capitalised.
| 14 | Property, plant and equipment (continued) |
Revaluation
The fair value of the group's Land and buildings was revalued on 30 June 2019 by Hilco. Had this class of asset been measured on a historical cost basis, their carrying amount would have been £5,506,046. The revaluation surplus (gross of tax) amounted to £3,066,738.
The fair value of the group's Furniture, fittings and equipment was revalued on 30 June 2019 by Hilco Valuation Services. Had this class of asset been measured on a historical cost basis, their carrying amount would have been £61,726. The revaluation surplus (gross of tax) amounted to £25,972.
The fair value of the group's Motor vehicles was revalued on 30 June 2019 by Hilco Valuation Services. Had this class of asset been measured on a historical cost basis, their carrying amount would have been £670,520. The revaluation surplus (gross of tax) amounted to £373,464.
The fair value of the group's Plant and machinery was revalued on 30 June 2019 by Hilco Valuation Services. Had this class of asset been measured on a historical cost basis, their carrying amount would have been £4,212,621. The revaluation surplus (gross of tax) amounted to 2,346,331.
| 14 | Property, plant and equipment (continued) |
Company
| | Land and buildings | Office equipment | Total |
| Cost or valuation | |||
| At 1 August 2020 | - | 31,775 | 31,775 |
| Additions | 5,500 | 29,904 | 35,404 |
| At 31 December 2021 | 5,500 | 61,679 | 67,179 |
| At 1 January 2022 | 5,500 | 61,679 | 67,179 |
| Additions | - | 37,404 | 37,404 |
| Reclassification | (5,500) | 5,500 | - |
| Disposals | - | (4,550) | (4,550) |
| At 31 December 2022 | - | 100,033 | 100,033 |
| Depreciation | |||
| At 1 August 2020 | - | 4,037 | 4,037 |
| Charge for period | - | 16,379 | 16,379 |
| At 31 December 2021 | - | 20,416 | 20,416 |
| At 1 January 2022 | - | 20,416 | 20,416 |
| Charge for the year | - | 17,404 | 17,404 |
| At 31 December 2022 | - | 37,820 | 37,820 |
| Carrying amount | |||
| At 31 December 2022 | - | 62,213 | 62,213 |
| At 31 December 2021 | 5,500 | 41,263 | 46,763 |
| 15 | Right of use assets |
Group
| | Property |
| Cost or valuation | |
| At 1 August 2020 | 14,302,132 |
| Disposals | (235) |
| At 31 December 2021 | 14,301,897 |
| At 1 January 2022 | 14,301,897 |
| Additions | 6,531,755 |
| At 31 December 2022 | 20,833,652 |
| Depreciation | |
| At 1 August 2020 | 283,616 |
| Charge for period | 1,062,588 |
| At 31 December 2021 | 1,346,204 |
| At 1 January 2022 | 1,346,204 |
| Charge for the year | 1,241,821 |
| At 31 December 2022 | 2,588,025 |
| Carrying amount | |
| At 31 December 2022 | 18,245,627 |
| At 31 December 2021 | 12,955,693 |
| 15 | Right of use assets (continued) |
Company
| | Property | |
| Cost or valuation | ||
| At 1 August 2020 | 2,770,305 | |
| At 31 December 2021 | 2,770,305 | |
| At 1 January 2022 | 2,770,305 | |
| At 31 December 2022 | 2,770,305 | |
| Depreciation | ||
| At 1 August 2020 | 129,858 | |
| Charge for period | 735,862 | |
| At 31 December 2021 | 865,720 | |
| At 1 January 2022 | 865,720 | |
| Charge for the year | 519,432 | |
| At 31 December 2022 | 1,385,152 | |
| Carrying amount | ||
| At 31 December 2022 | 1,385,153 | |
| At 31 December 2021 | 1,904,585 | |
| 16 | Investments | |
Group subsidiaries
Details of the group subsidiaries as at 31 December 2022 are as follows:
| Name of subsidiary | Principal activity | Registered office | Proportion of ownership interest and voting rights held | |
|
|
|
| 2022 | 2021 |
| InfraStrata UK Limited* | Intermediate holding and gas storage project research company | Fieldfisher Riverbank House England and Wales | 100% | 100% |
| Islandmagee Energy Limited | Gas storage and energy infrastructure development and operation | 8 Portmuck Road Northern Ireland | 100% | 100% |
| 16 | Investments (continued) | ||||
| Name of subsidiary | Principal activity | Registered office | Proportion of ownership interest and voting rights held | ||
|
|
|
| 2022 | 2021 | |
| Islandmagee Energy Hub Limited | Dormant | 8 Portmuck Road Northern Ireland | 100% | 100% | |
| InfraStrata Energy UK Limited | Dormant | Fieldfisher Riverbank House England and Wales | 100% | 100% | |
| Harland and Wolff (Appledore) Limited | Ship building, ship repair and maintenance | Fieldfisher Riverbank House England and Wales | 100% | 100% | |
| Harland and Wolff (Belfast) Limited | Shipbuilding, heavy engineering, ship repair and maintenance | C/o Donaldson Legal Consulting Llp Northern Ireland | 100% | 100% | |
| Harland and Wolff Technical Services Limited | Dormant | C/o Donaldson Legal Consulting Llp Northern Ireland | 100% | 100% | |
| Harland & Wolff Holdings Limited* | Holding company | Fieldfisher Riverbank House England and Wales | 100% | 100% | |
| Harland and Wolff (Methil) Limited | Fabrication | Fieldfisher Riverbank House England and Wales | 100% | 100% | |
| 16 | Investments (continued) | ||||
| Name of subsidiary | Principal activity | Registered office | Proportion of ownership interest and voting rights held | ||
|
|
|
| 2022 | 2021 | |
| Harland and Wolff (Arnish) Limited | Fabrication | Fieldfisher Riverbank House England and Wales | 100% | 100% | |
| Harland and Wolff (People & Skills) Limited | Recruitment | Fieldfisher Riverbank House England and Wales | 100% | 100% | |
* indicates direct investment of the company
| 16 | Investments (continued) |
Company
| | 31 December | ||||
| Investments in subsidiaries | 100 | ||||
| | | ||||
| Subsidiaries | £ | ||||
| Cost | |||||
| At 1 August 2020 | 15,247,011 | ||||
| Revaluation | (15,247,011) | ||||
| At 31 December 2021 | - | ||||
| At 1 January 2022 | 15,247,011 | ||||
| Additions | 100 | ||||
| Revaluation | (15,247,011) | ||||
| At 31 December 2022 | 100 | ||||
| Net book value | |||||
| At 31 December 2022 | 100 | ||||
| At 31 December 2021 | - | ||||
| 17 | Inventories | ||||
| | Group | Company | |||
| | 31 December | 31 December | 31 December | 31 December | |
| Raw materials and consumables | 109,427 | 34,279 | - | - | |
| Work in progress | 1,054,693 | 715,850 | - | - | |
| Other inventories | 570,444 | 426,512 | - | - | |
| | 1,734,564 | 1,176,641 | - | - | |
The write-down of inventories recognised in other operating expenses is disclosed in Note 4.
| 18 | Trade and other receivables | ||||
| | Group | Company | |||
| Current | 31 December | 31 December | 31 December | 31 December | |
| Trade receivables | 1,868,096 | 2,310,323 | - | - | |
| Receivables from related parties | - | - | 92,107,734 | 45,549,667 | |
| Accrued income | 3,877,015 | 2,084,519 | - | - | |
| Prepayments | 520,214 | 1,327,773 | 78,395 | 91,997 | |
| Other receivables | 1,581,588 | 1,103,329 | 418,971 | 261,662 | |
| | 7,846,913 | 6,825,944 | 92,605,100 | 45,903,326 | |
The group's exposure to credit and market risks, including maturity analysis, relating to trade and other receivables is disclosed in note 26 "Financial risk review".
| 19 | Cash and cash equivalents | ||||
| | Group | Company | |||
| | 31 December | 31 December | 31 December | 31 December | |
| Cash at bank | 1,979,825 | 5,278,002 | 1,897,599 | 233,277 | |
Included within cash and cash equivalents for the group at 31 December 2021 is £4 million pledged as a collateral provision in relation to the Saipem contract.
| 20 | Trade and other payables | ||||
| | Group | Company | |||
| | 31 December | 31 December | 31 December | 31 December | |
| Trade payables | 19,538,846 | 7,897,251 | 808,472 | 1,137,817 | |
| Social security and other taxes | 2,823,460 | 4,779,356 | 246,681 | 113,829 | |
| Outstanding defined contribution pension costs | 107,299 | 60,510 | 20,065 | 28,376 | |
| Other payables | 1,475,811 | 491,437 | 34,377 | 21,566 | |
| Accruals and deferred income | 6,509,036 | 9,060,223 | 1,136,072 | 84,357 | |
| | 30,454,452 | 22,288,777 | 2,245,667 | 1,385,945 | |
The group's exposure to market and liquidity risks, including maturity analysis, relating to trade and other payables is disclosed in note 26 "Financial risk review".
| 21 | Loans and borrowings | ||||
| | Group | Company | |||
| | 31 December | 31 December | 31 December | 31 December | |
| Current loans and borrowings | |||||
| Lease liabilities - right of use | 3,028,842 | 1,390,287 | 730,000 | 680,000 | |
| Other borrowings | 61,886,189 | 1,777,000 | 61,886,189 | - | |
| | 64,915,031 | 3,167,287 | 62,616,189 | 680,000 | |
| | Group | Company | ||
| | 31 December | 31 December | 31 December | 31 December |
| Non-current loans and borrowings | ||||
| Lease liabilities - right of use | 19,458,325 | 13,916,460 | 1,206,445 | 1,716,824 |
| Other borrowings | - | 2,090,000 | - | - |
| Financial liability | 200,000 | 200,000 | 200,000 | 200,000 |
| | 19,658,325 | 16,206,460 | 1,406,445 | 1,916,824 |
Lease payments for the Group during the year amounted to £1,595,598.
| 21 | Loans and borrowings (continued) |
Group
Other borrowings
Riverstone Credit Partners LLC (RCP)
On 9 March 2022, the Company announced that it has entered into a group-wide $70 million Green Term Loan Facility (the "Facility") with affiliates of Riverstone Credit Partners, LLC ("RCP") , a dedicated credit investment platform managed by Riverstone Holdings LLC ("Riverstone") and focused on entities engaged in building infrastructure and providing infrastructure services to generate, transport, store and distribute both renewable and conventional sources of energy, as well as entities focused on or otherwise engaged in the energy transition from fossil-based, to a zero-carbon economy. The Facility will be used to support growth in the business and supplement the Company's working capital requirements.
The Company upsized the facility on 1 March 2023 to a total of $100 million with the entire facility maturing on 31 December 2024. The Facility will attract an interest rate of the published 90 day Secured Overnight Financing Rate (the "SOFR") plus 9% per annum, with the floor of the SOFR set at 1%.
The Facility has been structured as a Green Loan following the Green Loan Principles published by the LMA, APLMA, and LSTA and a Sustainability-Linked Loan with performance indicators focused on social responsibility. The Company is incentivised to upscale its group-wide apprenticeship programme aimed at the local communities in which Harland & Wolff operates. Harland & Wolff plans to build on its success to-date and seeks further contracts within the renewables and "green maritime" sectors, such as fabrication contracts for offshore wind and hydrogen projects, new vessel builds, retrofits with sustainability credentials and other such contracts that would promote the UK Government's agenda to achieving Net Zero by 2050.
The Facility will be securitised against substantially all the assets of the Company, including land, property, plant and machinery and receivables.
Riverfort Global Opportunities PCC Limited Loan
Harland & Wolff (Belfast) Ltd ("HWB") obtained an unsecured short term loan amounting to £530,000. The loan had an interest rate of 1.5% per month. The loan balance remaining at 31 December 2021 of £27,000 was repaid in full by February 2022.
HWB also secured a new loan of £2,000,000 from Riverfort Global Opportunities PCC Limited at a fixed interest rate of 1.5% per month and a guarantee was provided by the ultimate parent, Harland & Wolff Group Holdings Plc. As at 31 December 2021 £1,750,000 remained outstanding. This loan was repaid in full on 9 March 2022.
Portnum Capitis Ltd Loan
HWB obtained a term loan amounting to £2,090,000 and was secured by Portnum Capitis Ltd by way of a debenture over the assets of HWB and a guarantee was provided by Harland & Wolff Group Holdings Plc.
The Portnum Capitis Ltd loan was an interest only loan and was repaid in full by February 2022. The loan had a fixed interest rate of 13.2% per annum. This loan was repaid in full and debenture, as well as guarantee, discharged on 9 March 2022.
Moyle Investments
In December 2017, The Company's wholly-owned subsidiary, InfraStrata UK Limited increased its ownership in IMEL from 90% to 100% by acquiring the remaining interest from Moyle Energy Investments Limited at par value. In recognition of the support by Moyle of the gas storage project at Islandmagee, InfraStrata plc will pay Moyle £200,000 on first gas storage.
The group's exposure to market and liquidity risks, including maturity analysis, relating to loans and borrowings is disclosed in note 26 "Financial risk review".
| 22 | Share capital |
Allotted, called up and fully paid shares
| | 31 December | 31 December |
| |||
| | No. | £ | No. | £ | ||
| Ordinary shares 1p of £0.01 each | 173,047,211 | 1,730,472 | 162,887,840 | 1,628,878 | ||
| Deferred shares 1p of £0.01 each | 895,424,391 | 8,954,244 | 895,424,391 | 8,954,244 | ||
| Second deferred shares 0.01p of £0.00 each | 18,616,118,301 | 1,861,612 | 18,616,118,301 | 1,861,612 | ||
| | 19,684,589,903 | 12,546,328 | 19,674,430,532 | 12,444,734 | ||
New shares allotted
During the year 10,159,371 Ordinary shares 0.01p having an aggregate nominal value of £101,594 were allotted for an aggregate consideration of £725,000
Authorised share capital
The Company's articles do not specify an authorised share capital.
Objectives, policies and processes for managing capital
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to achieve its operational objectives.
The Group defines capital as being share capital plus reserves. The Board of Directors monitors the level of capital as compared to the Group's forecast cash flows and long-term commitments and when necessary issues new shares. Dilution of existing shareholder value is considered during all processes which may result in an alteration of share capital in issue.
Ordinary share capital in issue is managed as capital.
The Group is not subject to any externally imposed capital requirements and there are no restrictions in place over the different types of shares.
Deferred share capital
On 21 January 2015, following approval at the Company's AGM, the existing ordinary shares of 10p each were subdivided into one new Ordinary share of 1p and nine Deferred shares of 1p each. The Deferred shares do not carry any rights to vote or any dividend rights. The Deferred shares will not be admitted to AIM and holders will only be entitled to a payment on return of capital or winding up of the Company after each of the holders of the Ordinary shares has received a payment of £10,000,000 on each such share.
| 23 | Pension and other schemes |
Defined contribution pension scheme
The group operates a defined contribution pension scheme. The pension cost charge for the year represents contributions payable by the group to the scheme and amounted to £651,557 (17 months to 31 December 2021: £416,009).
Contributions totalling £107,299 (17 months to 31 December 2021: £60,509) were payable to the scheme at the end of the year and are included in creditors.
24 Warrants
As at the date of this report, the Company has the following warrants outstanding that remain to be exercised and converted into Company's ordinary shares:
| Expiry date | Number of warrants | Strike price £ per share | Value £ |
| 08/03/2025 | 1,754,386 | 0.1425 | 250,000 |
| 08/03/2025 | 8,665,380 | 0.0623 | 540,590 |
| 08/03/2025 | 8,573,044 | 0.0565 | 484,377 |
| Total | 18,992,810 | | 1,274,967 |
25 Financial Instruments
|
| Group | Company | ||
|
| 31 December 2022 £ | 31 December 2021 £ | 31 December 2022 £ | 31 December 2021 £ |
| Trade and other receivables | 7,846,913 | 6,825,944 | 497,366 | 353,659 |
| Due from subsidiary undertakings | - | - | 92,107,734 | 45,549,667 |
| Cash and Cash Equivalents | 1,979,825 | 5,278,002 | 1,897,599 | 233,277 |
Financial liabilities at amortised cost
|
| Group | Company | ||
|
| 31 December 2022 £ | 31 December 2021 £ | 31 December 2022 £ | 31 December 2021 £ |
| Current liabilities | | | | |
| Trade and other payables | 30,454,452 | 22,288,777 | 2,245,667 | 1,385,945 |
| Lease liabilities - right of use | 3,028,842 | 1,390,287 | 730,000 | 680,000 |
| Other Borrowings | 61,886,189 | 1,777,000 | 61,886,189 | - |
| | 95,369,483 | 25,456,064 | 64,861,856 | 2,065,945 |
| | | | | |
| Non-current liabilities | | | | |
| Lease liabilities - right of use | 19,458,325 | 13,916,460 | 1,206,445 | 1,716,824 |
| Other borrowings | - | 2,090,000 | - | - |
| Moyle investments | 200,000 | 200,000 | 200,000 | 200,000 |
| | 19,658,325 | 16,206,460 | 1,406,445 | 1,916,824 |
Accretion interest on the lease liabilities - right of use at 31 December 2022 is £2,203,074 to be recognised within one year and £82,631,916 to be recognised after more than one year. The figures above include a land lease with an expiration term of 47 years.
| 26 | Financial risk review |
Foreign exchange risk
The Company's contracts are predominantly GBP denominated and, therefore, there is limited forex risk on the realisation of receivables. As the Company expands its supply chain, especially for the FSS Programme, outside the UK, the Company will be buying equipment and supplies of higher values. These contracts are likely to be in Euros. In order to mitigate against currency fluctuations, the Company tends to fix the foreign exchange rate at the time of contract execution an either creates a hedge with its corporate bank or has the supplier take forex risk on the transaction. The Company's largest forex exposure is towards the corporate loan facility with Riverstone Credit Partners. The forex risk is currently unhedged and payments are made by converting GBP to USD in the spot market. The Company maintains a deposit in an interest reserve account in USD so that interest payments are made directly in USD without the need for any spot conversion.
Liquidity risk
The total carrying value of Group and Company financial liabilities is disclosed in note 25 (Financial instruments) and in note 20 (Trade and other payables). The Company seeks to issue share capital, gain loan funding and/or dispose of assets when external funds are required. The reconciling items between the contractual maturities presented below and that presented in notes 25 and 20 are taxes and accruals.
The following table shows the contractual maturities of the Group's and Company's financial liabilities, all of which are measured at amortised cost.
|
| Group | Company | ||
|
| 31 December 2022 | 31 December 2021 | 31 December 2022 | 31 December 2021 |
| Trade & other payables (Note 20) |
|
|
|
|
| Within one month | 22,169,062 | 2,883,495 | 1,109,595 | 189,898 |
| More than one month less than one year | 8,285,390 | 5,012,371 | 1,136,072 | 947,102 |
| Financial liability (Note 21) | | | | |
| Within one month | 504,806 | - | 60,833 | - |
| More than one month less than one year | 64,410,225 | 6,607,287 | 62,555,356 | - |
| More than one year | 19,658,325 | 18,316,460 | 1,406,445 | 200,000 |
The Group's trade receivables are all denominated in UK Sterling and the ageing of gross trade receivables is as follows:
|
| Group | Company | ||
|
| 31 December 2022 | 31 December 2021 | 31 December 2022 | 31 December 2021 |
| 0-2 months | 1,868,096 | 1,169,359 | - | - |
| 2-3 months | - | - | - | - |
| Over 3 months | - | 1,140,964 | - | - |
| | 1,868,096 | 2,310,323 | - | - |
| 26 | Financial risk review (continued) |
Capital management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to achieve its operational objectives.
The Group defines capital as being share capital plus reserves. The Board of Directors monitors the level of capital as compared to the Group's forecast cash flows and long-term commitments and when necessary issues new shares. Dilution of existing shareholder value is considered during all processes which may result in an alteration of share capital in issue.
Ordinary share capital in issue is managed as capital. The Group is not subject to any externally imposed capital requirements and there are no restrictions in place over the different types of shares.
| 27 | Related party transactions |
During the course of the year, the Company utilised the services of Arrow Marine Management Limited ("AMM"), in which John Wood is sole director, for various survey works and studies required to be undertaken in order to update the necessary environmental information required for the marine licence in relation to the Islandmagee gas storage project. The total fees paid for utilisation of the survey boat and personnel by the Company was £43,614 (17 months to 31 December 2021: £185,760) and the balance outstanding at 31 December 2022 was £Nil (2021: £Nil).
Details of directors' remuneration is disclosed in Note 8.
| 28 | Control of the Group |
There is no ultimate controlling party of Harland and Wolff Group Holdings Plc.
| 29 | Capital commitments |
Amounts contracted for but not provided in the financial statements at 31 December 2022 amounted to £500,660 (2021: £Nil). These commitments relate to plant and machinery.
| 30 | Post Balance Sheet Events |
Fleet Solid Support Programme - Contract Win
On 1 February 2023, the Company announced that it has formally executed the Subcontract with Navantia UK Limited (the "Subcontract").
Under the terms of the Subcontract, the Company will be responsible for delivering works which are expected to generate revenues of between £700 million and £800 million to the Company by the time the final vessel is delivered. This is a significant win for Harland & Wolff and will propel the Company to the next stage of its development.
The Subcontract is for a duration of seven years commencing in 2023 and ending in 2031. As part of this Programme, the Company will be responsible for the fabrication of various blocks including some mega blocks (i.e., a block incorporating several standard sized blocks) as well as the procurement of a number of items of equipment to be installed on each vessel in Belfast. Given Appledore's experience in the fabrication of the bow sections for the Queen Elizabeth Class aircraft carriers - HMS Queen Elizabeth and the Prince of Wales, all three bow sections for this Programme will be fabricated in Appledore prior to being transported to Belfast. The three vessels will have all the blocks assembled, consolidated, fully integrated and commissioned before proceeding to sea trials from the Belfast facility, marking a return to shipbuilding in Belfast after over twenty years.
Full scale fabrication is due to commence in 2025 with the vessels due to be delivered to meet the MOD's objective to bring three ships into service by 2032. However, the Company expects to generate approximately £25 million in revenues from pre-fabrication works in 2023, and a similar sum in 2024. The Programme's gross margins are expected to maintain the Group's previously advised overall blended gross margins.
The Belfast and Appledore facilities will benefit from a £77 million capital investment programme ("Recapitalisation Plan") during the next 24 months., In Belfast, an extension to the fabrication halls will be undertaken to facilitate a highly dynamic material and sub-structure production flow along with a highly efficient manufacturing and production process. Investments will be made in technologically advanced robotic and autonomous equipment that includes material movement, marking, plate cutting, panel lines and robotic welding. In addition, new larger paint buildings will be constructed to facilitate larger and more efficient block painting. The investments in this site will ensure that the Company has one of the most technologically advanced marine fabrication facilities in the United Kingdom with the latest state-of-the-art machinery and production flows. Appledore will benefit from upgrades to the shipyard roof along with investments in additional automated machinery that includes the relocation of the existing micro panel line from Belfast.
This Subcontract will be a significant and historic step change to Harland and Wolff's capabilities and will make the Company an important participant in the international shipbuilding industry. Specifically, with modern shipyards and a proven track record post FSS, the Company will be able to capitalise on further multi-billion-pound fabrication and heavy engineering opportunities within the defence, renewables and commercial maritime markets globally. Following the planned investments and upgrades to its sites, the Company hopes to capitalise on the significant number of floating wind projects for which fabrication is expected to commence between 2024 and 2030, which would diversify and complement the Company's revenues from FSS. Work has been ongoing in relation to the Recapitalisation Plan with Mott McDonald acting as consultant and owner's engineer, whilst Royal Haskoning, a specialist shipyard designer, has been engaged to define the production flow as well as plant & machinery requirements. The Company's partnership with Navantia will further lead to invaluable transfer of technology over the next seven years. Pre-planning applications have already been submitted and demolition works are expected to start shortly in Belfast, with the new facility coming to life over the next two years.
| 30 | Post Balance Sheet Events |
The UK government has implemented the National Ship Building Strategy to, inter alia, improve productivity rates in UK shipbuilding & fabrication, reduce waste and to drive the transition to Net Zero. In line with this strategy, the Company has been working with numerous parties to maximise investments in the shipyard to achieve these goals alongside delivering projects on time and on budget. The Company will be receiving a significant proportion of the investment required for the Recapitalisation Plan from the project directly. The Company will also look to capitalise on production savings with new plant and equipment. It is envisaged that £32m will be financed through additional long term leasehold improvements, medium term asset finance and the Company's proposed new enlarged debt facility with Astra, which is expected to be completed by the end of Q1 2023. Further, there may be opportunities to access other external funding such as new technology grants and carbon reduction grants that the Company will be working through over the next twelve months in order to maximise funding and optimise the Group's capital stack.
In collaboration with its partners in Team Resolute, Navantia and BMT, the Company will continue to engage as a team in future phases of this Programme as well as on other opportunities in the UK and globally. Further announcements will be made in due course should any of these opportunities materialise.
The Company will be measured on its social value contribution through the life of the Programme. This will include, inter alia, deepening and strengthening of the UK supply chain, taking on graduates and apprentices as the next generation of ship-builders and crucial technology transfer between Navantia and the Company. At the peak of the Programme, the Company will be providing employment to over 1,200 personnel (900 in Belfast and 300 in Appledore) and over 100 graduates and apprentices in Belfast and Appledore generating substantial social value across the UK. This Programme not only provides the Company with a significant baseload revenue line for the next seven years, but also enables the Company to leave a positive and lasting legacy in communities across the UK.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.