This announcement contains inside information
1 July 2024
Harland & Wolff Group Holdings plc
("Harland & Wolff" or the "Company")
Unaudited Financial Results and Temporary Suspension
Harland & Wolff Group Holdings plc (AIM: HARL), the UK quoted company focused on strategic infrastructure projects and physical asset lifecycle management, releases its unaudited financial results for the financial year ended 31 December 2023.
Key highlights:
· Revenues of £86.91 million (2022: £27.75 million)
· Operating loss of £24.71 million (2022: £58.51 million)
· Loss of £43.08 million (2022: £70.80 million)
· Key contract wins:
o Fleet Solid Support Programme ("FSS") £750 million (adjusted for inflation)
o SeaRose Midlife Extension £61 million; over 50% upgrade to the base contract value
· Directors believe that Company remains on track to achieve revenue of £200 million for FY24
Trading performance for FY23
Having secured the FSS Subcontract in February 2023, the Company has been actively engaged in the programme's regeneration plan. Accordingly, the Company has placed orders for several major CAPEX items, including but not limited to, one of Europe's largest robotic welding panel lines, plasma cutters and transporters. in addition to commencing construction works to expand Belfast's fabrication halls by another 5,000 square metres. Work continues in relation to the procurement of long lead and critical path equipment for the three vessels.
In October 2023, the Company was awarded a contract for the midlife upgrade of the SeaRose FPSO. Preparatory works commenced in October 2023 and works commenced on the vessel from 17 February 2024. This is a highly time constrained project with the vessel expected to leave Belfast in August 2024. Following an increase to the initial scope of work to be undertaken by Harland and Wolff on this contract, the Company expects a significant increase of over 50% from the base contract value of £61 million.
The Company's yards have been busy through the year with multiple contracts being fulfilled. Solid progress has been made on the M55 Regeneration Programme in the Appledore facility during FY23 and delivery of the vessel is now expected in Q3'24. The Company continues to fulfil its 33-barge contract with the Cory Group and, thus far, 16 barges have been delivered. The balance of 17 barges is expected to be delivered by Q1'25. The Company is utilising Belfast, Methil and Arnish for this programme and the Company is targeting the completion of all the remaining barges by the end of FY24.
Across the Group, several smaller contracts were executed and completed through FY23. These spanned across the five markets that the Company is involved in, demonstrating that the five-market strategy continues to work and develop over time. The Company will continue to pursue opportunities in all these markets in order to reduce its reliance on Government contracts and as part of its commitment to the National Shipbuilding Strategy.
The Company continues to increase its core personnel in preparation for first cut of steel for the FSS programme in Q1'25. As at 31 December 2023, the Group headcount was 1,010 personnel which has now gone up to 1,512 with an increase in work undertaken in all the yards. The Company remains committed to its social value commitments under the FSS Programme and more widely. Accordingly, the number of apprentices has risen from 85 at the end of FY23 to 142 as at end-June 2024. The Company continues to engage in a meaningful manner with the local communities, in which its facilities are located, promoting employment, further education, apprenticeships and upskilling.
Financial performance for FY23
The Company's revenues grew to £86.91 million, a 213% increase over its FY22 revenues of £27.75 million. The Company was able to reduce its operating loss in FY by 136% to £24.71 million compared to its FY22 operating loss of £58.51 million. Loss attributable to shareholders for FY23 stood at £43.08 million, a 39% reduction from the FY22 loss of £70.80 million. Whilst the decrease in loss is movement in the right direction towards break-even and profitability, the Company's interest burden increased from £12.29 million in FY22 to £18.37 million in FY23. The Company upsized its credit facility with Riverstone Credit Partners through FY23 and Q1'24 from $35 million to $115 million as at end-June 2024. Accordingly, net debt as at 31 December 2023 stood at £92.38 million (2022: £81.13 million). This credit facility matures on 31 December 2024 and the Company continues to have discussions with UK Export Finance and other counterparties to refinance the Riverstone credit facility and obtain further working capital for the Company's growing contracted order book.
Under IFRS15 Revenue from Contracts with Customers, we have been unable to recognise £13.06 million in FY23 on one of our multi-year contracts. This value of revenue already received in cash has been treated as deferred revenue and will be recognised in future periods.
Refinancing
As previously announced, the Company has been in discussions with UK Export Finance since Q3'22 for a proposed £200 million facility. During FY23, a significant amount of work was done and, accordingly, an announcement was made on 29 December 2023 stating that the facility was approved subject to a Commercial Rate Review and ministerial consents. Further work continues on this facility and the Company expects UK Government to reach a decision after the General Election. Should there be any material delays to securing the facility post the General Election, the Company's ability to execute new and large contracts would be adversely affected. The Company continues to engage with UK Government and will make an announcement in due course.
Suspension of the Company's shares on AIM
The Company has not been able to publish its audited financial statements and Annual Report on or before 1 July 2024.
As previously announced, given the multi-year and complex nature of some of the contracts under which the Company is working, the Company has been in extensive discussions with its auditors to agree the method of accounting for revenues throughout the duration of a build programme. Accordingly, the Company has spent a considerable amount of time in determining its accounting treatment for revenues arising from long-term contracts in compliance with IFRS15. This is especially relevant in the context of the FSS Subcontract that is set to last for the next seven years. Equally, it is important for the Company to have an agreed position on the treatment of revenues for future long-term contracts, in accordance with IFRS15 and to the satisfaction of the auditors. The assessment of the split in revenues between current year's revenues and deferred revenues has caused a delay to the audit process and hence the publication of the Company's Annual Report and audited financial statements. Now that the Company and its auditors agree with the treatment of revenues in the financial statements, the Company will progress to complete the audit quickly and prepare its financial statements and issue its Annual Report. The Company expects to release its audited financial statements for the year ended 31 December 2023 during the week commencing 8 July 2024. Whilst the Company expects to make some adjustments to the final audited numbers, these changes are not expected to be material.
Outlook for FY24
The Company now has an agreed position on its treatment of revenues from long term contracts. The majority of revenues from the SeaRose contract will be realised in FY24. The M55 Regeneration Programme and Cory barge contract are due to be completed in FY24 with revenues realised in the current financial year. The Belfast facility has been busy with refurbishment contracts for its cruise clients; Margaritaville at Sea and Villa Vie Residences. The Company continues to be in advanced negotiations with other cruise clients to welcome additional cruise vessels in Q4'24. Given the momentum in the order book, and revenues realised to date, the Company expects to meet its forecasted revenues of £200 million for FY24.
Arun Raman, Group Chief Finance Officer, Harland & Wolff comments: "I am highly encouraged by the growth in revenues from FY22 to FY23 as we seek to achieve the critical mass required to get to cash break-even at EBITDA levels. Our financing costs are high, exacerbated by the rises in the base rate in FY23 and. it is crucial to close the UKEF facility as soon as possible in order to provide the stable long-term working capital needed for securing large, multi-year contracts. Our engagement with UK Government continues in order to bring this deal to closure."
For further information, please visit www.harland-wolff.com or contact:
| Harland & Wolff Group Holdings plc John Wood, Chief Executive Officer Arun Raman, Chief Finance Officer
| +44 (0)20 3900 2122 |
| h2Radnor (Investor Relations) Neville Harris | +44 (0) 20 3897 1838 |
| Cavendish Capital Markets Limited (Nominated Adviser & Broker) Stephen Keys / Callum Davidson / Dan Hodkinson (Corporate Finance) Michael Johnson (Sales)
| +44 (0)20 7397 8900 |
| Liberum Capital Limited (Joint Broker) Nicholas How / Edward Mansfield
| +44 (0)20 3100 2000 |
|
| |
About Harland & Wolff
Harland & Wolff is a multisite fabrication company, operating in the maritime and offshore industry through five markets: commercial, cruise and ferry, defence, energy and renewables and six services: technical services, fabrication and construction, decommissioning, repair and maintenance, in-service support and conversion.
Its Belfast yard is one of Europe's largest heavy engineering facilities, with deep water access, two of Europe's largest drydocks, ample quayside and vast fabrication halls. As a result of the acquisition of Harland & Wolff (Appledore) in August 2020, the company has been able to capitalise on opportunities at both ends of the ship-repair and shipbuilding markets where there will be significant demand.
In February 2021, the company acquired the assets of two Scottish-based yards along the east and west coasts. Now known as Harland & Wolff (Methil) and Harland & Wolff (Arnish), these facilities will focus on fabrication work within the renewables, energy and defence sectors.
In addition to Harland & Wolff, it owns the Islandmagee gas storage project, which is expected to provide 25% of the UK's natural gas storage capacity and to benefit the Northern Irish economy as a whole when completed.
Harland & Wolff Group Holdings Plc
Consolidated Income Statement for the Year Ended 31 December 2023
| | | 12 months to | RESTATED 12 months to |
| Continuing operations | | | |
| Revenue | | 86,914,499 | 27,754,776 |
| Cost of sales | | (62,001,347) | (22,445,824) |
| Gross profit | | 24,913,152 | 5,308,952 |
| Other operating expenses | | (3,023,155) | (10,403,264) |
| Management and administrative expenses | | (46,604,943) | (53,415,507) |
| Operating loss | | (24,714,946) | (58,509,819) |
| | | | |
| Net finance costs | | (18,372,478) | (12,293,865) |
| Loss before tax | | (43,087,424) | (70,803,684) |
| Taxation | | - | - |
| Loss for the year | | (43,087,424) | (70,803,684) |
| | | | |
| Loss attributed to: | | | |
| Equity owners of the parent company | (43,087,424) | (70,803,684) | |
| | |
| |
| Earnings Per Share | | | |
| Basic and diluted | (23.99)p | (43.00)p | |
Other comprehensive income, net of tax:
| Items that may be reclassified subsequently to profit or loss |
| | |
| Exchange differences on translation of foreign operations. |
| (3,159) | - |
| Other comprehensive income, net of tax |
| (3,159) | - |
| Total comprehensive loss |
| (43,090,583) | (70,803,684) |
Harland & Wolff Group Holdings Plc
(Registration number: 06409712)
Consolidated Statement of Financial Position as at 31 December 2023
| | |
31 December | RESTATED 31 December |
| Non-current assets | | | |
| Intangible assets | | 12,498,611 | 12,481,331 |
| Property, plant and equipment | | 35,604,630 | 24,370,329 |
| Right of use assets | | 16,905,456 | 18,245,627 |
| Total non-current assets | | 65,008,697 | 55,097,287 |
| Current assets | | | |
| Inventories | | 1,039,815 | 1,094,805 |
| Trade and other receivables | | 23,032,256 | 8,251,110 |
| Cash and cash equivalents | | 25,414,588 | 1,979,825 |
| Restricted cash | | 3,002,373 | - |
| Total current assets | | 52,489,032 | 11,325,740 |
| Current liabilities | | | |
| Trade and other payables | | (93,667,630) | (30,576,120) |
| Lease liabilities | | (2,991,901) | (3,028,842) |
| Loans and borrowings | | (94,163,317) | (61,886,189) |
| Total current liabilities | | (190,822,848) | (95,491,151) |
| Net current liabilities | | (138,333,816) | (84,165,411) |
| Non-current liabilities | | | |
| Lease liabilities | | (18,683,971) | (19,458,325) |
| Other financial liability | | (200,000) | (200,000) |
| Total non-current liabilities | | (18,883,971) | (19,658,325) |
| Net liabilities | | (92,209,090) | (48,726,449) |
| Capital and reserves | | | |
| Share capital | | 12,546,328 | 12,546,328 |
| Share premium | | 59,360,117 | 59,360,117 |
| Other reserves | | 15,059,848 | 15,455,065 |
| Retained earnings | | (179,175,383) | (136,087,959) |
| Total equity | | (92,209,090) | (48,726,449) |
Harland & Wolff Group Holdings Plc
Consolidated Statement of Changes in Equity for the Year Ended 31 December 2023
| | Share capital | Share premium | Revaluation reserve | Merger reserve | Share based payment reserve | Currency translation reserve £ | Retained earnings | Total equity |
| At 1 January 2023 | 12,546,328 | 59,360,117 | 6,074,895 | 8,988,112 | 392,058 | - | (136,087,959) | (48,726,449) |
| Loss for the year | - | - | - | - | - | - | (43,087,424) | (43,087,424) |
| Other comprehensive loss | - | - | - | - | - | (3,159) | - | (3,159) |
| Total comprehensive loss for the year | - | - | - | - | - | (3,159) | (43,087,424) | (43,090,583) |
| Share based payment reserve release | - | - | - | - | (392,058) | - | - | (392,058) |
| At 31 December 2023 | 12,546,328 | 59,360,117 | 6,074,895 | 8,988,112 | - | (3,159) | (179,175,383) | (92,209,090) |
| RESTATED | Share capital | Share premium | Revaluation reserve | Merger reserve | Share based payment reserve | Currency translation reserve £ | Retained earnings | Total equity |
| At 1 January 2022 | 12,444,734 | 58,736,711 | 6,074,895 | 8,988,112 | 360,501 | - | (65,284,275) | 21,320,678 |
| Loss for the year | - | - | - | - | - | - | (70,803,684) | (70,803,684) |
| Total comprehensive loss for the year | - | - | - | - | - | - | (70,803,684) | (70,803,684) |
| 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 | - | (136,087,959) | (48,726,449) |
Harland & Wolff Group Holdings Plc
Consolidated Statement of Changes in Equity for the Year Ended 31 December 2023 (continued)
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 and the combined share capital and share premium in issue at the date of an historic corporate restructuring.
Share-based payment reserve
The employee benefit reserve is used to record the value of equity-settled share-based payments provided to employees.
Currency translation reserve
The currency translation reserve represents the currency translation differences arising from the consolidation of foreign operations.
Retained Earnings
This represents the accumulated losses of the business since inception.
Harland & Wolff Group Holdings Plc
Consolidated Statement of Cash Flows for the Year Ended 31 December 2023
| | | 12 months to | RESTATED 12 months to |
| Cash flows from operating activities | |||
| Loss before taxation | | (43,087,424) | (70,803,684) |
| Adjustments to cash flows from non-cash items: | | | |
| Depreciation and amortisation | | 3,555,423 | 3,460,651 |
| Impairment of intangibles | | 184,177 | - |
| Foreign exchange (gain) / loss | | (3,869,845) | 938,942 |
| Finance income | | (146,961) | (943) |
| Finance costs | | 22,110,092 | 12,294,808 |
| Share-based payment expense | | (392,058) | 31,557 |
| | | (21,646,596) | (54,078,669) |
| Working capital adjustments: | | - | - |
| Increase in inventories | | 54,990 | 81,836 |
| Increase in trade and other receivables | | (14,781,146) | (1,425,166) |
| Increase in trade and other payables | | 62,945,057 | 8,532,552 |
| Net cash inflow / (outflow) from investing activities | | 26,572,305 | (46,889,447) |
| Cash flows from investing activities | | | |
| Interest received | | 146,961 | 943 |
| Purchase of property, plant and equipment | | (13,409,911) | (1,825,781) |
| Purchase of intangible assets | | (241,097) | (586,909) |
| Net cash outflow from investing activities | | (13,504,047) | (2,411,747) |
| Cash flows from financing activities | | | |
| Proceeds from issue of shares, net of share issue costs | | - | 725,000 |
| Proceeds from borrowings, net of debt issuance costs | | 20,815,144 | 54,336,234 |
| Repayment of borrowings | | - | (3,867,000) |
| Payments of lease liabilities | | (2,868,034) | (1,450,690) |
| Restricted cash held for performance bonds | | (3,002,373) | - |
| Interest paid | | (4,670,879) | (3,740,527) |
| Net cash inflow from financing activities | | 10,273,858 | 46,003,017 |
| Net increase / (decrease) in cash and cash equivalents | | 23,342,116 | (3,298,177) |
| Cash and cash equivalents at the beginning of the period | | 1,979,825 | 5,278,002 |
| Net foreign exchange differences on cash, cash equivalents and restricted cash | | 92,647 | - |
| Cash and cash equivalents at the end of the period | | 25,414,588 | 1,979,825 |
| | | | |
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