Tuesday, January 31, 2023

Harland & Wolff slashes full-year revenue guidance

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Harland & Wolff, the owner of the historic Belfast shipyard, has warned that its revenues for the full year will be “materially below” previous expectations after supply chain constraints and inflationary pressures led to the deferral of work on a number of contracts.

The company said in a trading update on Friday that it expected to generate revenues of between £29mn and £31mn for the full year to the end of December 2022 — significantly below expectations of between £65mn and £75mn. 

Shares in the Aim-listed group plunged 23 per cent on Friday morning, before recovering to 16p by midday.

H&W said material shortages had affected its ability to complete “certain key workstreams” of a £55mn contract to regenerate a former Royal Navy minehunting vessel for the Lithuanian navy. As a result, about £20mn in revenues would be deferred.

“Whilst it is unfortunate that the company could not advance these workstreams to book revenues in 2022, the overall project is still on track and in line with the base redelivery schedule for the vessel,” H&W said.

H&W also said geopolitical uncertainties and global inflation had caused “certain other clients” within the cruise and ferry market to either defer contracts into 2023 or reduce the scope of works. The estimated loss of revenues for the fourth quarter from these contracts was between £8mn and £10mn. 

The company stressed, however, that it remained confident that the bulk of the revenues that had been expected would be booked during the course of the first six months of 2023.

H&W also said that it had mutually agreed with Italian contractor Saipem to terminate a wind turbine generator jacket contract after being unable to agree on a “mutually acceptable methodology” on how to split additional costs.

John Wood, H&W chief executive, conceded that it was “disappointing” that the company had not met its “aspirations for FY 2022 due to timing issues”, while adding that it had “made significant progress over the last 12 months”.

“Despite the external challenges that we face, I believe that we are now at the cusp of a major transformation of the entire group and the team is working hard to convert bids into contracts,” he added.

The company is finalising negotiations in relation to a £1.6bn contract with the UK Ministry of Defence to build three support vessels for the Royal Navy.

The ships will be built by a consortium led by Spain’s Navantia and which includes naval architect BMT. Navantia UK, the British subsidiary of the Spanish shipbuilder, is the official prime contractor of the consortium. The involvement of the Spanish company has sparked concerns among unions and opposition politicians that work will migrate to Spain.

H&W said on Friday that as a result of the contract award, as well as a review of the “potential contracted order book for 2023 and 2024”, it was in talks to increase an existing debt facility with Astra Asset Management to between £150mn and £200mn.

“As the company executes larger contracts, it believes that it is crucial to maintain a significant quantum of liquidity with a larger committed facility that can be drawn down as and when needed,” it added.

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