REG - Harland & Wolff - Annual Financial Report
30/06/2023 18:00
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RNS Number : 6346E Harland & Wolff Group Holdings PLC 30 June 2023
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
(https://protect-eu.mimecast.com/s/rLUKC5WxRiYPQKizcIcJ?domain=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
(http://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 (mailto:investor@harland-wolff.com)
Seena Shah, Head of Marketing & Communications media@harland-wolff.com (mailto:media@harland-wolff.com)
Cenkos Securities plc (Nominated Adviser & Broker) +44 (0)20 7397 8900
Stephen Keys / Callum Davidson / Dan Hodkinson (Corporate Finance)
Michael Johnson (Sales)
Liberum Capital Limited (Joint Broker) +44 (0)20 3100 2000
Nicholas How / Edward Mansfield / Lucas Bamber / Antonia Brown
Harland & Wolff Group Holdings Plc
Consolidated Income Statement for the Year Ended 31 December 2022
Note 12 months to 17 months to
31 December
31 December
2022
2021
£
£
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 (42.73)p (26.59)p
diluted
12
Harland & Wolff Group Holdings Plc
(Registration number: 06409712)
Consolidated Statement of Financial Position as at 31 December 2022
Note 31 December 31 December
2022
2021
£
£
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
2022
2021
£
£
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 987,277 25,213,539 - 234,828 - 26,535,644
recorded directly in equity
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 101,594 623,406 - 31,557 - 756,557
recorded directly in equity
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
31 December
31 December
2022
2021
£
£
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 17 months to
31 December 31 December
2022
2021
£
£
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
31 December
31 December
2022
2021
£
£
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 17 months to
31 December 31 December
2022 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
31 December
31 December
2022
2021
£
£
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
31 December
31 December
2022
2021
£
£
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
31 December
31 December
2022
2021
£
£
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
31 December
31 December
2022
2021
£
£
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
31 December
31 December
2022
2021
£
£
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
31 December
31 December
2022
2021
No.
No.
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
31 December
31 December
2022
2021
£
£
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
31 December
31 December
2022
2021
No.
No.
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 1(st) 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
31 December
31 December
2022
2021
£
£
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
31 December
31 December
2022
2021
£
£
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 (70,357,333) (25,508,270)
Operations
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 Motor Plant & machinery Total
£
£
£
equipment vehicles
£
£
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 Motor Plant & machinery Total
£
£
£
equipment vehicles
£
£
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 Total
£
£
equipment
£
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 100% 100%
2 Swan Lane
London EC4R 3TT
England and Wales
Islandmagee Energy Limited Gas storage and energy infrastructure development and operation 8 Portmuck Road 100% 100%
Islandmagee
County Antrim
BT40 3TW
Northern Ireland
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 100% 100%
Islandmagee
County Antrim
BT40 3TW
Northern Ireland
InfraStrata Energy UK Limited Dormant Fieldfisher Riverbank House 100% 100%
2 Swan Lane
London EC4R 3TT
England and Wales
Harland and Wolff (Appledore) Limited Ship building, ship repair and maintenance Fieldfisher Riverbank House 100% 100%
2 Swan Lane
London EC4R 3TT
England and Wales
Harland and Wolff (Belfast) Limited Shipbuilding, heavy engineering, ship repair and maintenance C/o Donaldson Legal Consulting Llp 100% 100%
Shore Studios
18c Shore Road
Holywood, BT18 9HX
Northern Ireland
Harland and Wolff Technical Services Limited Dormant C/o Donaldson Legal Consulting Llp 100% 100%
Shore Studios
18c Shore Road
Holywood, BT18 9HX
Northern Ireland
Harland & Wolff Holdings Limited* Holding company Fieldfisher Riverbank House 100% 100%
2 Swan Lane
London
EC4R 3TT
England and Wales
Harland and Wolff (Methil) Limited Fabrication Fieldfisher Riverbank House 100% 100%
2 Swan Lane
London
EC4R 3TT
England and Wales
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 100% 100%
2 Swan Lane
London
EC4R 3TT
England and Wales
Harland and Wolff (People & Skills) Limited Recruitment Fieldfisher Riverbank House 100% 100%
2 Swan Lane
London
EC4R 3TT
England and Wales
* indicates direct investment of the company
16 Investments (continued)
Company
31 December
2022
£
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
2022
2021
2022
2021
£
£
£
£
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
2022
2021
2022
2021
£
£
£
£
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
2022
2021
2022
2021
£
£
£
£
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
2022
2021
2022
2021
£
£
£
£
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
2022
2021
2022
2021
£
£
£
£
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
2022
2021
2022
2021
£
£
£
£
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
2022
2021
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 Strike price Value
warrants £ per share £
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.
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