REG - Harland & Wolff - Half-year Report
08/09/2023 07:00
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RNS Number : 7864L Harland & Wolff Group Holdings PLC 08 September 2023
This announcement contains inside information.
8 September 2023
Harland & Wolff Group Holdings plc
("H&W" or the "Company" or the "Group")
Unaudited interim results for the six months ended 30 June 2023 & business
update
Harland & Wolff Group Holdings plc (AIM: HARL), the UK quoted company
focused on strategic infrastructure projects and physical asset lifecycle
management , is pleased to present its unaudited interim results for the
six-month period ended 30 June 2023 ("H1 23") and business update.
Key highlights:
· Revenues of £25.53 million; a 65% increase from the previous
year (30 June 2022: £15.41 million).
· Gross margin of 19.4%, for the portfolio of contracts delivered
in the period; cost pressures around labour, energy and inflation feeding into
cost of sales.
· EBITDA loss £15.92 million (30 June 2022: loss of £12.71
million) predominantly on account of investment in headcount in preparation
for delivery of the Fleet Solid Support contract and other contracts.
· Net debt for the Group stood at £88.53 million as at 30 June
2023 (30 June 2022: £19.74 million) reflecting the upsized Riverstone Credit
Facility from $35 million in March 2022 to $100 million as at 30 June 2023.
· Group corporate credit facility of $70 million ($35 million
committed plus $35 million uncommitted accordion) signed in March 2022 upsized
to $100 million (fully committed) in March 2023 with drawdowns being utilised
to fund ongoing working capital requirements.
· Advanced negotiations regarding a new £200 million credit
facility along with the UK Export Finance (UKEF) guarantee, which is expected
to close in Q4'23.
· Fleet Solid Support Manufacture Subcontract executed with
Navantia in February 2023; expected to generate total revenues of between
£700 million and £800 million for the Company from this multi-year contract.
· Company's backlog (contracted revenues) now sits at circa £1
billion for the next seven years, an increase of £100 million since March
2023.*
· Directors believe that trading remains on track to achieve FY23
Group revenues of £100 million, subject to various design completions and
procurement permissions with revenues from the FSS and M55 contracts expected
to increase significantly in the second half.
· The Company reiterates its revenue guidance for FY24 of £200
million.
Post period end highlights:
· Notice to Proceed for the mid-life upgrade and dry docking of a
large vessel, expected to be in the region of £60 million - £70 million
revenues.
· First contract win for heavy lift vessel at Belfast worth £1.50
million.
· Favourable outcome of Islandmagee Gas Project judicial review in
the High Court
* These figures as at 30 June 2023 in addition to previously reported figures
in the Company's 2022 Annual Report are management's best estimates. The Board
remains comfortable with the estimates relating to the Company's markets,
prospects and pipeline. They should be understood as the Board's views and
should not be attributed to the author of the Independent Business Review
Report or any other third party.
John Wood, Chief Executive Officer of Harland & Wolff Group Holdings plc
comments:
"These are increasingly exciting times at Harland and Wolff - not just from a
broad company perspective - but for each of our yards, the communities that
they serve and of course, our workforce. The award this year of the FSS
contract provides a substantial baseload over the next five years and will
result in a transformation at Belfast which will become one the most modern
shipyards from both a national and global perspective. Its facilities - as
well as the Group's skill base - are already attracting global clients
especially with large and complex vessels dry docking in the Belfast Dock,
demonstrated by both orders won and those in the pipeline. The opportunities
within the energy and renewables markets are also substantial and will benefit
all of the Group's yards with their strategic locations and their ability to
flex and scale production. The Group's workforce has scaled rapidly and now
totals some 780 employees and the Group is proud to be putting British
shipbuilding back on the map.
Like all businesses, we face challenges - from procurement cycles to wage and
energy inflation - but the worst of the inflationary effects would appear now
to be behind us, and we look forward to increasing our margins as we build out
our rapidly growing order book. We have our foot hard on the pedal and are
intent on delivering the goals we have laid out. It is full steam ahead at
Harland and Wolff."
Operational Review
Cruise & Ferry Market
The ferry market continues to be buoyant and operational recovery post the
pandemic is well underway. Whilst the Company continues to undertake ferry
repair works on a regular basis, for both planned and emergency dry dockings,
there are new enquiries also coming in for ferry refits. These refit contracts
are in the range of £5 million - £15 million and the Company is engaged in
commercial conversations with ferry owners to find the best solutions. The
Company has a deep supply chain in Belfast and Scotland to offer these
services and it continues to grow its in-house capabilities and expertise in
tandem.
The cruise market has undergone a fundamental change in recent months as a new
era of monetary policy unfolds. The construction of new ships has stagnated
and we are seeing cruise operators increasingly decommissioning old vessels
and refurbishing other vessels as part of their mid-life upgrades. As a result
of COVID regulations and lessons learned from the pandemic, the cruise
industry is seeing an increasing number of major interior refurbishment
projects to reduce the number of cabins and create more open spaces. The
Company's optimal capability is in the cruise refurbishment market and
therefore expects to benefit from this trend. The Company's newly opened
Southampton and Miami offices are being staffed with personnel who have
decades of experience in the cruise market and with extensive relationships in
the industry. These hires were made with a view to increasing the number of
major cruise vessel dry dockings in 2024 from enhanced sales leads.
Defence
The Company formally executed the Manufacture Subcontract for the Fleet Solid
Support Programme (FSS Programme) in February 2023. The FSS Programme is
transformational for the Company and will enable the regeneration of Belfast
and Appledore over the next 18 months. At its peak, the Company expects to
employ approximately 1,500 personnel on this contract alone across its various
sites. The contract value attributable to the Company is expected to be
between £700 million - £800 million (adjusted for inflation) over the
duration of this multi-year contract, with fabrication to commence at the end
of 2024 / early 2025 and targeted completion of the contract by 2031. Over the
next 18 months, the Company will continue to undertake major renovations of
the Belfast facility including the acquisition of sophisticated robotics,
transporters, new buildings, plant and machinery. Once completed, the Belfast
yard will be the most modern and sophisticated yard in the UK. As previously
announced, £77 million has been allocated for the capital expenditure in
Belfast of which £45 million will come from the project. The balance will be
funded through a number of mechanisms such as landlord contributions,
levelling up funding in Northern Ireland and long-term asset financing for
which discussions are ongoing.
In addition to the FSS Programme, the Company has been actively seeking
further sub-contract work from other large and prominent prime contractors
based in the UK. The Company has been successful in winning contracts worth
circa £7 million in Q4'22 and Q1'23 to begin its sub-contracting journey with
such prime contractors. As the Company deepens its relationship with the prime
contractors, the value of the future sub-contracts is likely to increase in
size and expand in the nature of work being undertaken. For instance,
discussions are on-going for the building of blocks in Appledore and Methil in
relation to certain prime contractors' ongoing programmes with the Ministry of
Defence.
The M55 Regeneration Programme at Appledore continues at pace. All equipment
and supplies have now been delivered with sea trials expected to commence in
Q1'24 and vessel delivery anticipated in Q2'24. The project remains on
schedule and on budget.
Looking ahead, with the establishment and maturing of the National
Shipbuilding Office, several tenders are set to be released in the forthcoming
months for the fabrication of government vessels (defence and civilian),
anticipated in 2025. The Company will be actively engaged in the bidding
process, the outcomes of which will be determined in the second half of next
year.
Energy
The energy market has shown immense resilience over the last few years. Whilst
the energy transition away from traditional fossil fuels is well underway, the
UK economy will continue to have both traditional fuels and new energy within
its energy mix for the next few decades. The ongoing Russia-Ukraine conflict
has magnified the need for energy security in relation to the country's energy
supplies and, accordingly, several government programmes have been launched to
increase national resilience. Energy, as a core target market for the Company,
has now emerged as one of the key markets that will fuel near-term revenue
growth.
North Sea developers have commenced new exploration programmes, alongside
developing plans to extend the life of existing fields and supporting the
renewables markets through modifications of existing infrastructure. The
Company recently announced (post period end) that it has received a Notice to
Proceed for the mid-life upgrade of a large vessel for circa £60 million -
£75 million revenues in 2024. The contract for this project is due to be
executed in the next few weeks. Additionally, the Company is in advanced
negotiations with other North Sea developers for the refurbishment and new
build of offshore platforms. The Company is also actively involved in
discussions with owners of oil tankers, LNG carriers and FPSOs for dry docking
of these vessels in Belfast. Recognising the growing importance of the energy
market, the Company has recently established offices in Aberdeen, the UK's
energy capital. This will enable the Company to be in close proximity to its
potential clients and deepen relationships with the aim of securing further
contracts.
Renewables
The Company has previously stated that there is typically an 18-24-month
period required from the award of a sea-bed licence to commencement of
fabrication for a wind farm project. During this period, the developer needs
to take a number of steps; completion of planning and consenting,
environmental impact assessments, obtaining a marine licence and firming up
the design specifications of the project in line with seabed and other
offshore conditions. Since the Scotwind auction award announcement in April
2022, the Company has been actively engaged with a large number of the
awardees, both for fixed and floating wind structures.
There is a very clear commitment from the developers to enhance the value of
local content and to strengthen the supply chain. Importantly, fabrication for
a project includes not only the structures but also the ancillary equipment
and ships, such as Service Operating Vessels (SOVs) and Crew Transfer Vessels
(CTVs) to name a couple. The Company has been working alongside these awardees
to identify the commercial pathway for these projects and ensure that the
fabrication for these projects is de-risked as much as possible.
Along with strengthening the supply chain, the Company has been looking at how
to increase its footprint in Belfast, Arnish and Methil with a view to
accommodating the fabrication, assembly and load-out of large floating
structures. A number of initiatives on capital expenditure are being explored
such as co-investment in the yards, long term capacity bookings and joint
ventures with the awardees.
The renewables market is substantial and growing, and the Company believes
that the best way to monetise the opportunity is to enter into a series of
partnerships (in various commercial forms) as opposed to securing standard
fabrication contracts. Whilst the Company continues to negotiate with its
clients on standard fabrication contracts for smaller pieces of work ranging
between £1 million and £5 million, the Company is engaged in strategic
partnership discussions for larger and longer-terms contracts. The Company
believes that large material contracts should start getting executed at the
back end of 2024 and has therefore budgeted for smaller prototype fabrication
projects next year with more meaningful contracts commencing from 2025
onwards.
Commercial
The commercial market has opened up globally for the Company. The directors
believe that the Company has an established a reputation of delivering complex
and large projects on time and on budget. Testament to this is the fact that
vessel owners from North America have been making the journey across the
Atlantic to seek dry docking and repair works in Belfast. The large dry docks
and an experienced team in Belfast lend themselves to be the facility of
choice for large vessels such as 'The Sunshine', a heavy lift vessel of Korean
origin, which is currently in Belfast undergoing repair work.
More locally, the Company successfully completed the fabrication for a mining
project in Greenland and has delivered all the fabricated components to the
client. The Cory contract which involves the fabrication and build of 23
barges continues at pace with the barges now being fabricated in Belfast and
Methil. This contract has underpinned the rejuvenation of the fabrication
halls in Belfast and following a steady ramping-up, both yards are now
well-positioned to deliver at least one barge every four to five weeks.
Moreover, as work gathers pace to modernise UK's electricity and energy
infrastructure, the Company continues to have discussions with developers and
key contactors in the nuclear and electrification markets. These are large
projects that are now at the Final Investment Decision (FID) stage and the
Company is bidding on work relating to the contracting for significant
component and structural steel work in Methil and Arnish.
Islandmagee Gas Storage Project (Islandmagee Project)
The judicial review for the Islandmagee Project was held in the first week of
May 2023 with the judgment finally issued on 31 August 2023. The Company is
delighted to report that the case was formally dismissed by the High Court in
Northern Ireland with all grounds on which the applicants had challenged the
issuance of the marine construction licence, abstraction licence and discharge
consent comprehensively dismissed. The marine licence issued to the project in
November 2021, therefore, stands.
The Islandmagee Project represents a strategic asset both for the island of
Ireland and mainland UK, underpinned by a recent independent study (the
Large-Scale Hydrogen Concept Study) confirming that the Islandmagee Project is
technically suitable to store, blend, process and introduce hydrogen into the
network. The hydrogen market is rapidly evolving, and the Company believes
that this project will stimulate the growth and monetisation of hydrogen
production and consumption. This has the potential to add enormous value in
the transition from natural gas to hydrogen, with the recent study emphasising
the viability of the business case and economic model. Accordingly, the
Company will be seeking to appoint a technical consultant to conduct a
Front-End Engineering and Design (FEED) study for hydrogen storage as well as
amend its existing permissions to incorporate the storage of hydrogen.
Whilst the Company is currently reviewing the details of the High Court
judgement, the judgement has created the opportunity to evaluate several
potential strategic options for the asset including:
· Trade sale of the project;
· Government funding (either in full or on a matched basis) through
the National Infrastructure Bank or similar entity via a commercial mechanism
such as a Contract for difference (CfD) or Regulated Asset Base (RAB) model;
and
· Traditional farm-out model with the Company retaining a minority
stake in the project.
The Company will fully assess its options in respect of the Islandmagee
Project to ensure any future decision on this project is in the best interest
of shareholders.
Financial overview
For the period ended 30 June 2023, the Company's revenues were £25.53 million
(30 June 2022: £15.41 million) representing a 65% increase from the
comparative period last year. The gross profit for the period was £4.95
million (30 June 2022: £3.38 million) representing a gross margin percentage
of 19.4% reflecting a highly volatile cost environment in which the Company
was not able fully to pass on labour and energy related cost increases to all
clients.
As we move into the next phase of the Company's growth, with the onset of
large fabrication contracts, our goal is to develop an optimum blend and mix
of work across the four sites, in order to increase our gross margin to our
target of between 24% - 27% One critical cost consideration is steel and we
are, as far as possible, reducing our exposure to the volatility in steel
prices by requesting for client delivered materials. Where we are required to
acquire steel, our contracts are normally structured on a floating price with
the actual costs being passed to the clients. Our ability to negotiate such
terms is key to securing the right work at the right price.
The net loss for the period was £31.50 million (30 June 2022: £17.65
million). This widened loss versus the same period last year largely reflects
the investment in personnel and general overheads to service a growing
workload, along with increased financing costs.
Net debt as at 30 June 2023 was £88.53 million (30 June 2022: £19.74
million) reflecting the upsizing of the Riverstone Credit Facility from $35
million in March 2022 to $100 million as at 30 June 2023. As reported
previously, we are now at an advanced stage of refinancing a new £200 million
credit facility from UK Export Finance (UKEF). Having completed significant
due diligence in the first half of 2023, we are now in the process of
negotiating with the high-street banks and Astra Asset Management to structure
a syndicate of commercial and private debt along with the UKEF guarantee. We
expect to close this facility in Q4'23. Further announcements will be made at
completion
Outlook for 2023 (FY23) and 2024 (FY24)
As stated previously, the Company expects to generate revenues of circa £100
million for FY23 and circa £200 million for FY24. The Company currently
estimates these revenues would have the following mix:
Market vertical 2023 (£m) 2024 (£m)
Defence 60 63
Energy 20 84
Commercial 12 18
Cruise and ferry 7 20
Renewables 1 15
Revenues for FY23 will be significantly second half weighted reflecting that
the FSS Programme was contracted in February 2023 and that deliveries of
equipment for the M55 Regeneration Programme were received in Q1 2023. The
FSS-related revenues, and a number of other contracts signed in the current
financial year, are subject to a number of procurement activities defined by
clients and, in the case of FSS, are controlled by the UK Government. The
Company continues to liaise closely with its various counterparties to ensure
that procurement remains on target to achieve revenue recognition in 2023. As
a result of the processes involved in setting up supply chains and seeking a
number of security clearances, bench overheads and additional administration
expenses will be incurred in the short term. Therefore, the EBITDA loss for
FY2023 is expected to be in the region of £22 million - £25 million.
For FY24, the Company already has a significant backlog (contracted revenues)
of £145 million providing good visibility, and the Company continues to
progress a number of identified contract prospects.
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)
Arun Raman, Chief Finance Officer 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
Radnor Capital Partners (Investor Relations) +44 (0) 20 3897 1838
Neville Harris / Joshua Cryer
About Harland & Wolff
Harland & Wolff is a multisite fabrication company, operating in the
maritime and offshore industry through five markets: commercial, cruise and
ferry, defence, energy and renewables and six services: technical services,
fabrication and construction, decommissioning, repair and maintenance,
in-service support and conversion.
Its Belfast yard is one of Europe's largest heavy engineering facilities,
with deep water access, two of Europe's largest drydocks, ample quayside and
vast fabrication halls. As a result of the acquisition of Harland & Wolff
(Appledore) in August 2020, the company has been able to capitalise on
opportunities at both ends of the ship-repair and shipbuilding markets where
there will be significant demand.
In February 2021, the company acquired the assets of two Scottish-based yards
along the east and west coasts. Now known as Harland & Wolff (Methil) and
Harland & Wolff (Arnish), these facilities will focus on fabrication work
within the renewables, energy and defence sectors.
In addition to Harland & Wolff, it owns the Islandmagee gas storage
project, which is expected to provide 25% of the UK's natural gas storage
capacity and to benefit the Northern Irish economy as a whole when completed.
CONSOLIDATED INCOME STATEMENT
For the six months ended 30 June 2023
Six months to Six months to
30 June 30 June
2023 2022
Unaudited Unaudited
Notes £ £
Continuing operations
Revenue 25,532,712 15,413,527
Cost of sales (20,577,625) (12,031,833)
Gross profit 4,955,087 3,381,694
Management and administrative expenses (21,133,404) (16,432,799)
Other operating income 250,192 337,960
Depreciation and amortisation (1,756,530) (1,354,540)
Operating loss (17,684,655) (14,067,685)
Finance income 597 -
Finance costs (13,819,604) (3,580,205)
Loss before taxation (31,503,662) (17,647,890)
Taxation - -
Loss for the period (31,503,662) (17,647,890)
Total comprehensive loss for the period attributable
to:
Owners of the company (31,503,662) (17,647,890)
Earnings Per Share
Basic and diluted 2 (18.21)p (10.83)p
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2023
30 June 30 June
2023 2022
Unaudited Unaudited
Notes £ £
Non-current assets
Intangible assets 3 12,579,193 12,055,457
Property, plant and equipment 4 26,670,074 24,437,365
Right of use assets 5 17,575,541 12,580,662
Total non-current assets 56,824,808 49,073,484
Current assets
Inventories 4,042,617 9,005,144
Trade and other receivables 6 14,070,797 10,637,686
Cash and cash equivalents 6,742,640 2,290,311
Total current assets 24,856,054 21,933,141
Current liabilities
Trade and other payables 7 (43,836,149) (29,783,847)
Loans and borrowings 8 (98,303,054) (8,401,946)
Total current liabilities (142,139,203) (38,185,793)
Net current liabilities (117,283,149) (16,252,652)
Non-current liabilities
Loans and borrowings 8 (19,214,540) (29,017,760)
Financial liability 8 (200,000) (200,000)
Total non-current liabilities (19,414,540) (29,217,760)
Net liabilities (79,872,881) 3,603,072
Shareholders' funds
Share capital 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 392,058 379,904
Revaluation reserve 6,074,895 6,074,895
Retained earnings (167,234,391) (83,021,284)
Total equity (79,872,881) 3,603,072
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 June 2023
Share Share Revaluation Merger Share based Retained Total
capital premium Reserve reserve payment earnings equity
reserve
£ £ £ £ £ £ £
Balance at 1 January 2022 (Audited) 12,444,734 58,736,711 6,074,895 8,988,112 360,501 (65,373,396) 21,231,557
Loss for the period - - - - - (17,647,890) (17,647,890)
Total comprehensive expense for the period - - - - - (17,647,890) (17,647,890)
Transactions with owners recorded
directly in equity:
Share option expense - - - - 19,403 - 19,403
Balance at 30 June 2022 (Unaudited) 12,444,734 58,736,711 6,074,895 8,988,112 379,904 (83,021,286) 3,603,070
Balance at 1 January 2023 (Audited) 12,546,328 59,360,117 6,074,895 8,988,112 392,058 (135,730,729) (48,369,219)
Loss for the period - - - - - (31,503,662) (31,503,662)
Total comprehensive expense for the period - - - - 392,058 (31,503,662) (31,503,662)
Transactions with owners recorded
directly in equity:
Share option expense - - - - - - -
Balance at 30 June 2023 (Unaudited) 12,546,328 59,360,117 6,074,895 8,988,112 392,058 (167,234,391) (79,872,881)
CONSOLIDATED CASH FLOW STATEMENT
For the six months ended 30 June 2023
Six months to Six months to
30 June 30 June
2023 2022
Unaudited Unaudited
£ £
Cash flows from operating activities
Loss for the period (31,503,662) (17,647,890)
Adjustments to cash flows from non-cash items:
Depreciation and amortisation 1,756,530 1,354,540
Foreign exchange (gain)/loss (18,684) 101,337
Finance income (597) -
Finance costs 13,819,604 3,580,205
Share option expense - 19,403
(15,946,809) (12,592,405)
Working capital adjustments:
Increase in inventories (2,308,053) (7,828,503)
Increase in trade and other receivables (6,223,884) (3,811,742)
Increase in trade and other payables 13,496,186 7,673,315
Net cash outflows from operating activities (10,982,560) (16,559,335)
Cash flows from investing activities
Interest received 597 -
Acquisitions of property, plant and equipment (3,366,687) (680,716)
Acquisitions of intangible assets (117,364) (133,813)
Net cash outflows from investing activities (3,483,454) (814,529)
Cash flows from financing activities
Proceeds from borrowings, net of debt issuance costs 20,940,803 20,155,203
Repayment of borrowings and lease liabilities (1,340,272) (4,549,580)
Interest paid (371,702) (1,219,450)
Net cash inflows from financing activities 19,228,829 14,386,173
Net increase/(decrease) in cash and cash equivalents 4,762,815 (2,987,691)
Cash and cash equivalents at the start of the period 1,979,825 5,278,002
Cash and cash equivalents at the end of the period 6,742,640 2,290,311
NOTES TO THE INTERIM RESULTS
For the six months ended 30 June 2023
1. Accounting policies
Basis of preparation
The interim financial information in this report has been prepared using
accounting policies consistent with International Financial Reporting
Standards (IFRS) as adopted by the European Union (EU). IFRS is subject to
amendment and interpretation by the International Accounting Standards Board
(IASB) and the IFRS Interpretations Committee and there is an ongoing process
of review and endorsement by the European Commission. The financial
information has been prepared on the basis of IFRS that the Directors expect
to be adopted by the European Union and applicable as at 30 June 2023.
Non-statutory accounts
Financial information contained in this document does not constitute statutory
accounts within the meaning of section 434 of the Companies Act 2006.
A copy of the statutory accounts of the Company for the 12-month period ended
31 December 2022 has been delivered to the Registrar of Companies. The audit
report on these accounts is unqualified and did not contain a statement under
Sections 498(2) or (3) of the Companies Act 2006.
The financial information for the six months ended 30 June 2023 and 30 June
2022 is unaudited.
The Group has chosen not to adopt IAS 34 "Interim Financial Statements" in
preparing the interim financial information'.
The interim report does not include all the notes of the type normally
included in an annual financial report. Accordingly, this report is to be read
in conjunction with the annual report for the 12-month period ended
31 December 2022, which was prepared under IFRS as adopted by the EU, and
any public announcements made by Harland & Wolff Group Holdings plc during
the interim reporting period.
Accounting policies
The interim financial information has been prepared under the historical cost
convention except for certain items that are shown at fair value as disclosed
in the accounting policies.
The same accounting policies, presentation and methods of computation are
followed in preparing the interim financial information as were applied in
preparation of the Group's financial statements for the 12-month period ended
31 December 2022.
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 (£).
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
with the Group's accounting policies.
NOTES TO THE INTERIM RESULTS
For the six months ended 30 June 2023
1. Accounting policies (continued)
Going concern
The interim results 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 period and an operating loss
has been recorded in the profit and loss account for the period. 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 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. In February 2023, the Group executed the Fleet Solid
Support Manufacture Subcontract with Navantia UK Limited (Navantia).
This Subcontract is expected to generate total revenues of between £700
million and £800 million for the Company 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. .
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 interim results for the six months ended 30 June 2023. 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 lenders along with a UK
Export Finance (UKEF) guarantee to raise £200 million. Whilst there is no
indication at the date of issuing the interim results 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 of the Group's financial statements for the 12-month
period ended 31 December 2022.
2. Earnings per share
Six months to Six months to
30 June 30 June
2023 2022
Unaudited Unaudited
£ £
The loss for the purposes of basic and diluted earnings per share being the
net loss attributable to equity shareholders
Continuing operations (31,503,662) (17,647,890)
Number of shares
Weighted average number of ordinary shares for the purpose of:
Basic earnings per share 173,047,211 162,887,840
Basic and diluted earnings per share
Continuing operations (18.21)p (10.83)p
NOTES TO THE INTERIM RESULTS
For the six months ended 30 June 2023
3. Intangible assets
Project Total
Artefacts Trademarks Computer software Development Gas storage costs
costs development
£ £ £ £ £ £
Cost
At 1 January 2023 647,395 1,013,192 181,273 55,000 10,433,973 184,177 12,515,010
Additions - - 6,631 - 110,733 - 117,364
At 30 June 2023 647,395 1,013,192 187,904 55,000 10,544,706 184,177 12,632,374
Amortisation
At 1 January 2023 - - 25,846 7,833 - - 33,679
Amortisation charge - - 18,127 1,375 - - 19,502
At 30 June 2023 - - 43,973 9,208 - - 53,181
Net book value
At 30 June 2023 647,395 1,013,192 143,931 45,792 10,544,706 184,177 12,579,193
At 31 December 2022 647,395 1,013,192 155,427 47,167 10,433,973 184,177 12,481,331
4. Property, plant and equipment
Land and buildings Office equipment Motor vehicles Plant and machinery Total
£ £ £ £ £
Cost or valuation
At 1 January 2023 11,946,019 813,723 554,517 16,493,425 29,807,684
Additions 25,517 - - 3,341,170 3,366,687
At 30 June 2023 11,971,536 813,723 554,517 19,834,595 33,174,371
Depreciation
At 1 January 2023 1,310,069 283,628 175,006 3,668,652 5,437,355
Charge for the period 214,064 77,681 28,082 747,115 1,066,942
At 30 June 2023 1,524,133 361,309 203,088 4,415,767 6,504,297
Carrying amount
At 30 June 2023 10,447,403 452,414 351,429 15,418,828 26,670,074
At 31 December 2022 10,635,950 530,095 379,511 12,824,773 24,370,329
NOTES TO THE INTERIM RESULTS
For the six months ended 30 June 2023
5. Right of use assets
Property
£
Cost or valuation
At 1 January 2023 20,833,652
Additions -
At 30 June 2023 20,833,652
Depreciation
At 1 January 2023 2,588,025
Charge for the period 670,086
At 30 June 2023 3,258,111
Carrying amount
At 30 June 2023 17,575,541
At 31 December 2022 18,245,627
6. Trade and other receivables
30 June 30 June
2023 2022
Unaudited Unaudited
£ £
Trade receivables 5,183,693 2,411,008
Accrued Income 6,047,093 5,532,511
Other receivables 1,032,211 1,060,560
Prepayments 1,807,800 1,633,607
14,070,797 10,637,686
7. Trade and other payables
30 June 30 June
2023 2022
Unaudited Unaudited
£ £
Trade payables 8,532,133 17,814,372
Social security and other taxes 1,059,753 2,707,543
Outstanding defined contribution pension costs 85,178 118,092
Other payables 4,030,099 153,560
Accruals and deferred income 30,128,986 8,990,280
43,836,149 29,783,847
NOTES TO THE INTERIM RESULTS
For the six months ended 30 June 2023
8. Loans and borrowings
30 June 30 June
2023 2022
Unaudited Unaudited
£ £
Current liabilities:
Lease liabilities - right of use 3,034,804 1,499,946
Other borrowings 95,268,250 6,902,000
98,303,054 8,401,946
Non-current liabilities:
Lease liabilities - right of use 19,214,540 13,891,686
Other borrowings - 15,126,074
Financial liability 200,000 200,000
19,414,540 29,217,760
Other borrowings
Riverstone Credit Partners LLC ("RCP")
On 9 March 2022, the Company entered into a group-wide $70 million Green Term
Loan Facility (the "Facility") with affiliates of Riverstone Credit Partners,
LLC ("RCP"). 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 will be securitised against substantially all the
assets of the Company, including land, property, plant and machinery and
receivables.
Financial liability
Moyle Investments
In December 2017, the Company's wholly owned subsidiary, InfraStrata UK
Limited increased its ownership in Islandmagee Energy Limited 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, Harland & Wolff Group Holdings plc will pay Moyle
£200,000 on first gas storage.
9. Seasonal trend analysis
The Company normally observes a seasonal trend of ferry and cruise repairs
being conducted over the winter period in preparation for summer sailings.
There are no particular seasonal variations observed within the other markets.
10. Dividend
The Directors do not recommend payment of a dividend for the period to 30 June
2023.
11. Publication of the interim report
This interim report is available on the Company's website
https://www.harland-wolff.com (https://www.harland-wolff.com/)
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