TIDMHARL
RNS Number : 0716W
Harland & Wolff Group Holdings PLC
16 August 2022
16 August 2022
Harland & Wolff Group Holdings plc
("Harland & Wolff", the "Company" or the "Group")
Group Business Update and Outlook
Harland & Wolff Group Holdings plc (AIM: HARL), the
UK-quoted company focused on strategic infrastructure projects and
physical asset lifecycle management, is pleased to provide a
business and trading update for the year ended 31 December 2022 and
an outline of management's aspirations for financial year 2023
("FY23") and financial year 2024 ("FY24"). Given the many variables
which need to be considered, these aspirations should not be
construed as forecasts but as management's framework for the
direction of the business.
Current trading and FY22
As announced previously, the Company has secured three material
contracts in quick succession; Cory phase 1 at GBP8.5 million; Cory
phase 2 at GBP9.6 million and the M55 Regeneration Programme at
GBP55 million (with the potential to further increase the contract
value at the client's option). In addition, a number of smaller
contracts have been executed - and will continue to be executed -
at the Belfast and Arnish sites which continue to provide a steady
stream of work and cashflow for the Group. The first and fourth
quarters are normally the busiest for the Belfast repair dock and
we expect to welcome multiple cruise and ferry vessels into Belfast
during these periods. Arnish is also set to become busier in the
last two quarters with the facility fabricating across multiple
projects simultaneously.
Therefore, management maintains that it remains comfortable with
market guidance of revenues between GBP65 million - GBP75 million
for FY22.
Outlook for FY23 and FY24
Background
The Company has announced previously that it has built a strong
backlog* of GBP40 million for FY23 due to recent multi-year
contract wins. More broadly, management has identified
opportunities amounting to approximately GBP1.2 billion, across the
Company's five key markets; cruise & ferry, commercial
fabrication, energy, defence and renewables.
The Company recently secured its first contract from the
Ministry of Defence as a 'Prime contractor' and has also submitted
its bid in relation to the Fleet Solid Support (FSS) Programme,
with the FSS contract award expected to reach 'preferred bidder'
status in Q4 2022. The Company is also collaborating with other
'Prime contractors' to take on sub-contracting work in relation to
their own respective programmes, with much of that work to be
carried out in the UK in line with local content requirements and
broader UK Government policy. The UK continues to suffer from
insufficient fabrication capacity to take on all the fabrication
work that is due to commence from 2023/24. Harland & Wolff
retains one of the largest fabrication footprints in the country
and has enormous flexibility and optionality across the yards to
offer optimum fabrication solutions, particularly for its defence
and renewables clients. In summary, the Board believes that the
Company is well placed to play an important part in the FSS
Programme.
Following the recent Scotwind auction results announcement,
Belfast, Methil and Arnish have been identified as three highly
strategic fabrication sites given their respective coastal
positions. Management is confident that the Company will be a
beneficiary in this programme and will update the market as
appropriate.
Revenue aspiration
With significant levels of revenue contracted, the relative
stability of the cruise & ferry and ship repair markets and
confidence around potential orders within the defence and
renewables markets, management has an aspiration of generating
revenues of between GBP100 million - GBP115 million for FY23.
While it is clearly more difficult to project FY24 revenues
given the lumpiness and scale of certain contracts, the aspiration
is to generate revenues of between GBP200 million - GBP230 million
for FY24. Whilst this is a significant step-change from the FY23
aspiration, it reflects the trajectory of major defence and
renewable programmes commencing from 2024 onwards and beyond.
At turnover levels of GBP200 million and above, the Company
would expect to be in a position to generate sufficient cashflow to
initiate returns to shareholders.
Cashflow and profitability
Management continually evaluates the projects in the Company's
pipeline and contract mix with a view to striking an optimum
balance between cashflow and margins.
The profitability of the Group remains contingent upon a number
of factors including wage and energy inflation, the macro-economic
backdrop and the mix of work within the Company's portfolio across
its five core verticals. For instance, cruise & ferry work is
shorter in duration but attracts higher margins, whereas with
significant defence contracts, margins tend to be lower but benefit
from longer term cashflow visibility and tenure. The Company
continues to target and achieve a Group blended gross margin of
between 24% and 27% across the broad spread of work it
undertakes.
Consequently, the Company believes that annualised cashflow
break-even is achievable on revenues of between GBP80 million -
GBP100 million depending on the mix of contract wins.
Summary
Harland and Wolff now has a growing reputation in the markets in
which it operates and was delighted to secure the M55 contract as a
milestone and validation of its strategy. The Board believes that
this will be an important springboard in executing on its plan to
create a sustainably profitable company by the end of next year and
beyond.
The combination of the material investments made in the Group's
yards and the scaling up of personnel - more of which will be
needed in the execution of a substantial contract - as well as the
increased yard utilisation and the successful contract wins in all
five verticals, gives the Board confidence that the Group is now
primed to accelerate the conversion of its pipeline of
opportunities to firm contracts.
*Backlog is defined as confirmed contracted revenues for future
periods.
For further information, please visit www.harland-wolff.com or contact:
Harland & Wolff Group Holdings plc +44 (0)20 3900 2122
John Wood, Chief Executive Officer investor@harland-wolff.com
Seena Shah, Head of Marketing & Communications media@harland-wolff.com
Cenkos Securities plc (Nominated Adviser
& Broker)
Stephen Keys / Callum Davidson / Dan Hodkinson
(Corporate Finance)
Michael Johnson (Sales) +44 (0)20 7397 8900
----------------------------
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.
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