Harland & Wolff widens revenue expectations on cautious outlook
By Josh White
Date: Monday 23 May 2022
(Sharecast News) - Shipyard and maritime engineer Harland & Wolff reported revenue of £18.5m for the 17 months ended 31 December in its annual results on Monday, compared to £1.48m in the year through July 2020, although it sounded a cautious tone as it broadened its revenue expectations for the year.
The AIM-traded firm said its gross margins improved to 28% from 20%, while its operating loss totalled £22.37m following "significant" investment to support future growth, compared to a £9.18m loss in 2020.
It completed three major acquisitions in the period, of H&W Appledore, H&W Methil and H&W Arnish, and undertook two equity placings to raise a total of £20.27m before expenses.
After the period ended, Harland & Wolff signed a $70m debt facility with Riverstone Holdings.
The board reported "significant" growth in the cruise and ferry repair market in the first quarter of 2022, with the repair dock at Belfast operating at near-full capacity since the fourth quarter of last year.
It also described "significant" progress on converting advanced negotiations in defence and commercial fabrication into executed contracts.
On its outlook, Harland & Wolff said that at the time of its last fundraise in November, it expected 2022 revenue to be between £70m and £75m as it entered 2022 with a "renewed sense of optimism", a "well-invested footprint" and a desire to scale the business rapidly.
"Since then, while the impact of the pandemic has eased somewhat, the tragic Ukraine crisis has erupted, energy prices have increased materially and ongoing supply chain issues have further raised raw material prices," the board said in its statement.
"This inevitably has a lengthening impact on sales cycles and makes clients more cautious to commit.
"However, the company has made good progress across the five markets in which it operates, and now has an attractive pipeline of tangible commercial opportunities to execute against, with visibility improving."
As a result, and despite a "difficult background", the firm said it currently expected 2022 revenue to be in the range of £65m to £75m.
While it was facing wage escalation issues similar to others, it said its overhead base was relatively small.
Wage and cost inflation had started feeding through the business since the end of the first quarter, with management maintaining a "close watch" on them.
"The last two years have been very challenging, yet I am pleased to have delivered growth in the business over the period," said chief executive officer John Wood.
"I have always maintained that reactivating all the assets and moving along the growth to profit curve is effectively a five-year journey and we are now in year three.
"Whilst we appear to be battling the next global crisis as soon as the previous one has ended, I am certain that our strategic presence and work in the sunrise sectors of defence and renewables will be increasingly valuable."
Wood said all of the company's five markets were "key", allowing for a healthy mix and diversity of contracts within the overall portfolio and distribution of its capital cost base across the sectors.
"This dynamic should reduce the overall cost of bidding for projects and help us win the more price sensitive ones.
"As we ramp up, our focus remains on converting opportunities into a contracted backlog whilst at the same time keeping a close eye on costs.
"The key focus is to contract for projects as quickly as possible to get to a critical mass where revenues and associated margins more than cover our maturing cost base."
At 0921 BST, shares in Harland & Wolff Group Holdings were down 8.27% at 13.53p.
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