Harland & Wolff (AIM:HARL) Business update and outlook

Harland & Wolff Group Holdings plc (AIM: HARL), the UK-quoted company focused on strategic infrastructure projects and physical asset lifecycle management, is pleased to provide a business update and management outlook for financial year 2023 (“FY23”) and financial year 2024 (“FY24”).


· Backlog of confirmed contracted revenues (“Backlog”) totalling circa £900m, extending over a seven-year period, of which circa £750m is represented by the previously announced FSS contract

· In addition, the Company has a weighted pipeline of new business in excess of £3.6bn of revenues over the next five years; at the current win ratio of 34%, this equates to a projected Backlog of c£1.24bn

· Updated outlook for FY23 and FY24

o Target revenues of £100m – £115m in FY23

o Target revenues of £200m – £230m in FY24

· Cashflow breakeven expected in FY24

· Target Group blended gross margin of between 24% and 27% over the medium term

· Upsizing of debt facility with Riverstone Credit Partners LLC to a committed $100m (previously $75m) whilst the Company closes its proposed £200m refinancing in early Q2 2023

Group Projections

The Company issued a Business Update on 16 August 2022 in which it stated that the aspirations for FY23 and FY24 were revenues of £100m-£115m and £200-£230m respectively. At that time, the Company had confirmed a Backlog of circa £40m for FY23 and had identified further opportunities amounting to approximately £1.2bn over the next five years across the Company’s five key markets.

The Company has since made significant progress in increasing its Backlog following the FSS Programme contract win and the recent announcement of additional smaller contract wins. The Company is pleased to report that its Backlog now amounts to circa £900m over a seven-year period, providing significant revenue visibility. In addition, the Company has a weighted pipeline of new business in excess of £3.6bn in revenues, which on a current win ratio of 34% represents a total of £1.24bn of possible revenues over the next five years, in addition to the Company’s existing Backlog of £900m (total current and projected Backlog: £2.14bn), in order to help deliver its medium-term targets.


The year has started well, with an uptick in the level of enquiries flowing through and all four yards are busy on a range of different contracts across the Company’s target markets. Despite well-documented delays experienced across the supply-chain and the recently announced termination of the Saipem contract, the Company continues to maintain its target of delivering between £100m-£115m of revenue in FY23.

For FY23, the Company already has a Backlog of circa £75m comprising defence contracts of £45m, commercial fabrication of £15m, cruise & ferry work of £10m and smaller renewables programmes of £5m, as well as a number of advanced opportunities which leave the management team confident in meeting these expectations.


The Backlog for FY24 currently sits at circa £75m, of which £25-30m represents FSS-related revenue with the balance from other defence contracts of £20m, cruise & ferry contracts of £10m, commercial fabrication of £10m and renewables of £10m. With the momentum in the business, the Company is confident of growing revenues to between £200m-£230m in FY24.

Cashflow and profitability

Management continually evaluates the projects in the Company’s pipeline and contract mix with a view to striking an optimum balance between cashflow and margins.

The profitability of the Company remains contingent upon a number of macroeconomics factors, including the rate of inflation, and also the mix of work within the Company’s portfolio across its five core sectors. The Company continues to target a Group blended gross margin of between 24% and 27% over the medium term and recent contract wins confirm that this target remains achievable, even against a challenging backdrop.

Management expects gross margins to be between 20% and 23% in FY23 given the business mix and as new charge-out rates based on higher wage costs gradually work their way into new and existing contracts through the year. The Company is also actively negotiating with its energy suppliers on energy costs and the new, improved rates agreed will also gradually feed into the various contracts across all the yards through the year.

Typically, large defence, energy and renewables contracts attract lower initial gross margins with higher upfront overheads relative to other markets. Therefore, upon review of the structure of the Backlog and pipeline, the Company believes a slightly more conservative view of the annualised cash break-even threshold is prudent at this stage and believes that annualised cashflow break-even will be achieved in FY24.

Group financing

The Company is also pleased to announce that it has amended its debt facility with Riverstone Credit Partners LLC, upsizing the loan to $100 million (previously $75m). This upsized facility is fully committed and will be used to accommodate the Company’s near-term working capital requirements whilst the Company concludes its £200m refinancing with UK Export Finance and Astra Asset Management. The Company has agreed further terms with Riverstone in which the interest payable will be accrued and paid on maturity thereby reducing the Company’s cash outflow on a monthly basis.

This £200m refinancing is now expected to close in early Q2 2023, subject to credit committee approvals and finalisation of the credit agreement and other ancillary documentation.

As part of the £77m FSS Recapitalisation Plan over the next 24 months, alongside other capital expenditure requirements in the medium term, the Company is evaluating a number of different financing mechanisms, including long-term asset financing, in order to achieve a balanced capital structure for the Company’s further development.

Market Outlook

The Board considers there to be a continuing improvement in market conditions across the five markets in which the Company is engaged. Higher charge-out rates are working their way through the contracts (new and existing) to reflect the inflationary environment and preserve a blended gross margins target range of between 24% and 27% in the medium term. Further detail of the Company’s five markets is set out below:

Cruise & Ferry


Enquiries have increased significantly following on from the successful dry docking of the Queen Victoria cruise vessel in 2022, the largest ever cruise ship in the UK, for standard dry-docking works and hull painting. Currently, the Company has over twenty-four cruise docking enquiries that will be negotiated over the next 12-24 months..

Whilst there is no certainty that these negotiations will convert into contracted revenues, the level of engagement and ongoing negotiations provides significant comfort on the prospects for Belfast. Certain of the opportunities involve multi-year and multi-ship group deals. This has the potential to provide greater contractual visibility as well as being more efficient for management.


The ferry market remains buoyant, with the Company securing repeat business from long-standing clients on a regular basis. In addition, there are now enquiries coming in from operators on the cross-Channel route, a new market segment for the Company, which shows promise.


Following entry into the FSS contract and work having commenced on the £77m FSS Recapitalisation Plan, the Company is in the process of developing its defence pipeline. There are a number of export opportunities that are in advanced stages of negotiation and the Company has already secured a collection of small value sub-contracts from prime contractors which provide the basis for a more substantial workflow from this area in the future.

To date, the Company has focused on fabrication and repair and maintenance services. The Company is now actively seeking through-life support opportunities (multi-year repairs and maintenance contracts of between five and ten years) and has identified over £300m of multi-year contracts that will have invitations to tender over the next 24-36 months. This is a new sector for the Company and provides the opportunity to secure additional long-term and multi-year contracted revenue flow.

The Company is currently evaluating design options and potential partners for the T32 project, as well as three other types of Royal Navy vessels. There are a large number of customs and Border Force vessels needed in a relatively short span of time and the Company’s distributed ship-build capabilities across all four yards plays into its strengths of offering expedited delivery if required.

The former HMS Atherstone that was acquired at the time of executing the M55 contract is undergoing the process of final removal works of parts and spares to aid the M55 Programme. The current progress development on the M55 Programme has spurred international interest to refurbish the former HMS Atherstone and reinstate its mine hunting capabilities; however, the Company retains the optionality of converting this vessel to something that can be monetised in the commercial market.


The Company is now able to leverage off the successful delivery of a number of large projects in the commercial tanker market to develop its market position. As a result of establishing its credentials, the Company is gaining traction from international customers for large commercial vessels – including LNG – with a view to maximising the utilisation of the larger of the two docks in Belfast (“building dock”).

Another segment pertains to work vessels where the Company has completed its first in-house design for a 26m vessel with the optionality of various propulsion systems; diesel-mechanical, diesel-electric and full electric and this design basis has been used to tender for a dredger vessel for a UK based client. Given the flexibility of the design and the optionality on equipment and propulsion, the Company will be marketing its bespoke design to a larger commercial market; aquaculture, survey, dredging, freight and general work boat. The Company will also be looking at licensing this design globally as it continues to build its repository of designs and Intellectual Property (IP).

The Company’s two Scottish yards are now both actively involved in aspects of shipbuilding, supported by the larger teams in Belfast and Appledore. Management will bid for the next parcel of ferries that will be put out to tender for Calmac shortly, positioning itself to deliver the project in Scotland and provide a substantial boost to the local economy.

In Arnish, work continues at pace for the ongoing mining-based project, which when completed and installed, will demonstrate the Company’s capabilities not only in the marine fabrication market but also in the land-based large structural steel market.

Following on from the successful delivery of the super duplex structures to an ongoing nuclear power plant project, the Company continues to be in discussion with the developer for additional work. There is a significant opportunity within the nuclear decommissioning market which the Company is evaluating with its joint venture partners.

The Company is also making a detailed evaluation of ramping up its aluminium fabrication capabilities should it be successful in winning projects in that market. This could be achieved through repurposing of a portion of the Appledore facility, as well as ringfencing a section at the Company’s Methil facility. The Company is currently seeing substantial demand for aluminium vessels across the defence and renewables markets and will pursue opportunities in this area.


The Company is selectively tendering for opportunities in this fast-growing market in order to increase the win ratio and to reduce overall bid costs. The Company remains actively involved in discussions with project developers post the Scotwind announcement last year and hopes to see contracts coming to fruition in the next 18-24 months. Whilst large fabrication contracts continue to be the focus from a longer-term perspective, the Company is actively engaged in the secondary steel and sub-contracting markets for ongoing projects to maintain a balanced risk profile in the yards and ensure continuity of work. This mix of projects also helps to ensure that the Company is partnering with the right clients from a longer-term perspective.


The energy markets are slowly but surely showing signs of increasing activity. Currently, the Company has eight enquiries at various stages in the contractual lifecycle and comprise of, inter alia, subsea structures, platform repairs and repairs and refurbishments of FPSOs, one of which has been in Belfast previously.

John Wood, Group CEO of Harland & Wolff comments:

“It is gratifying to see the levels of activity that are already present in all of our yards, with the knowledge that this is only going to increase steadily – and materially – from this point.

The Harland and Wolff machine is really starting to hum and our ability to operate flexibly across multiple facilities will become increasingly important as an industry differentiator as our workload expands. We look forward to the future with increasing confidence.”

Harland & Wolff Group Holdings plc

John Wood, Chief Executive Officer

Seena Shah, Head of Marketing & Communications

+44 (0)20 3900 2122

[email protected]

[email protected]

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