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  • Writer's pictureMark Watson-Mitchell

Harland & Wolff Group Holdings – investors should steel themselves for bigger loss than anticipated

Harland & Wolff Group Holdings – investors should steel themselves for bigger loss than anticipated to be revealed by the end of this week


Despite having a contracted order book of some £900m, extending over the next seven years, Harland & Wolff Group Holdings (LON:HARL) the Belfast-based infrastructure facilities group is reckoned to have only turned over £28m in the year to end December 2022.


Surprisingly, perhaps worryingly, the company is still in the process of completing its audit but expects to issue its annual report for that financial year before the end of this week.


The market is now being guided that the unaudited revenues for the group for last year were £27.96m, producing a loss of £70.35m.


Further details will be declared in annual report.


However, the company has clearly stated that it remains on track to meet its current year guidance.


The Business


The group operates 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.


The group also has two Scottish-based yards, focused upon work for the renewables, energy and defence sectors.


In addition, it also has a sizeable undercover drydock at Appledore.


The group also owns the Islandmagee gas storage project which is expected to provide 25% of the UK’s natural gas storage capacity.


Massive Order Backlog


It has a backlog of confirmed contract revenue of some £900m, extending over the next seven years.


It also has a weighted pipeline of new business opportunities reckoned to be in excess of £3.6bn in revenues over the next five years.


Working Capital and Borrowings


The company reported that it has made significant progress on its group refinancing, now looking to close the transaction in the early autumn.


We will expect to be given further details in due course however the company is anticipating reducing the cost of capital substantially.


With the massive amount of contract work now on hand the group will need to increase significantly its working capital levels to be able to cope with the slew of new business.


I understand from the group’s brokers that the term sheet with Astra Asset Management to refinance the group’s $100m Riverstone credit facility, has now been upsized to £200m.


Importantly the group and Astra are hoping that the UK Export Finance Development Guarantee will cover up to 80% of the loan amount.


Analyst Opinion – rated as a Buy


Michael Renton at Cenkos Securities, the group’s NOMAD and Joint Broker, still rates the shares as a Buy.


He looks for revenues this year to more than treble to around £100m, while his pre-tax profits figure was last published at £34.1m loss.


Previously he has forecast £200m sales next year, easing the loss down to around £20.0m.


After the results come the end of this week it is likely that Renton will be revising his figures.


Conclusion – await the report at the end of this week


The £24.5m group’s shares, which dipped to 12.70p on Friday afternoon, closed that night at 13.50p.


This morning they are trading at around 13.30p.

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