Harland & Wolff maintains guidance, looks to strong growth

The AIM-traded firm said that in addition, a number of smaller contracts had been executed - and would continue to be executed - at the Belfast and Arnish sites, providing a “steady stream” of work and cash flow.

It said the first and fourth quarters were usually the busiest for the Belfast repair dock, with the company expecting multiple cruise and ferry vessels during those periods this year.

Arnish was also set to become busier in the last two quarters, with the facility fabricating across multiple projects at the same time.

As a result, management said it maintained its comfort with market guidance of revenues between £65m and £75m for the full financial year.

Looking ahead, Harland & Wolff said that with “significant levels” of revenue contracted, the relative stability of the cruise, ferry and ship repair markets, and confidence around potential orders within the defence and renewables markets, it had an aspiration of generating revenues of between £100m and £115m for 2023.

“While it is clearly more difficult to project 2024 revenues given the lumpiness and scale of certain contracts, the aspiration is to generate revenues of between £200m and £230m for 2024,” the board said in its statement.

“Whilst this is a significant step-change from the 2023 aspiration, it reflects the trajectory of major defence and renewable programmes commencing from 2024 onwards and beyond.”

At turnover levels of £200m and above, the company said it would expect to be in a position to generate “sufficient cash flow” to initiate returns to shareholders.

“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 group remains contingent upon a number of factors including wage and energy inflation, the macro-economic backdrop and the mix of work within the company's portfolio across its five core verticals.

“For instance, cruise and ferry work is shorter in duration but attracts higher margins, whereas with significant defence contracts, margins tend to be lower but benefit from longer term cash flow visibility and tenure.”

Harland & Wolff said it was continuing to target and achieve a group blended gross margin of between 24% and 27% across the broad spread of work it undertakes.

As a result, the board said it believed that annualised cash flow break-even was achievable on revenues of between £80m and £100m, depending on the mix of contract wins.

“Harland and Wolff now has a growing reputation in the markets in which it operates and was delighted to secure the M55 contract as a milestone and validation of its strategy.

“The board believes that this will be an important springboard in executing on its plan to create a sustainably profitable company by the end of next year and beyond.

“The combination of the material investments made in the group's yards and the scaling up of personnel - more of which will be needed in the execution of a substantial contract - as well as the increased yard utilisation and the successful contract wins in all five verticals, gives the board confidence that the group is now primed to accelerate the conversion of its pipeline of opportunities to firm contracts.”

At 1406 BST, shares in Harland & Wolff Group were down 3.44% at 11.23p.

Reporting by Josh White at Sharecast.com.