Harland & Wolff – Ferry refits buoyant, cruise ships stagnate

2023-09-15T19:52:15+00:00 September 15th, 2023|Finance|

In its first half 2023 results presentation, Harland & Wolff Group Holdings (H&W) took a look at the ferry and cruise ship market in terms of refits and newbuildings.

Starting with the ferry market, this continued to be buoyant and operational recovery post the pandemic is well underway.

Whilst H&W continued to undertake ferry repair works on a regular basis, for both planned and emergency drydockings, there are new enquiries also coming in for ferry refits.

These refit contracts are in the range of £5 mill – £15 mill and the company is engaged in commercial conversations with ferry owners to find the best solutions.

H&W said it had a deep supply chain in Belfast and Scotland to offer these services and it continues to grow its in-house capabilities and expertise in tandem.

However, the cruise market has undergone a fundamental change in recent months, as a new era of monetary policy unfolds.

The construction of new ships has stagnated and cruise operators are increasingly decommissioning old vessels and refurbishing other vessels, as part of their mid-life upgrades.

As a result of COVID regulations and lessons learned from the pandemic, the cruise industry is seeing an increasing number of major interior refurbishment projects to reduce the number of cabins and create more open spaces.

H&W’s optimal capability is in the cruise refurbishment market and therefore expects to benefit from this trend. The company’s newly opened Southampton and Miami offices are being staffed with personnel who have decades of experience in the cruise market and with extensive relationships in the industry.

These hires were made with a view to increasing the number of major cruise vessel drydockings in 2024 from enhanced sales leads.

Overall, H&W reported revenues of £25.53 mill for 1H23 a 65% increase from the previous year’s £15.41 mill.

EBITDA was a loss of £15.92 mill, compared to a loss of £12.71 mill in 1H22. This was predominantly on account of investment in headcount in preparation for delivery of the UK Navy’s Fleet Solid Support (FSS) contract and other contracts.

Net debt for the Group stood at £88.53 mill as at 30th June, compared to £19.74 mill in the same period for 2022, which reflected the enlarged Riverstone Credit Facility from $35 mill in March, 2022 to $100 mill as at 30th June this year.

Group corporate credit facility of $70 mill ($35 mill committed, plus another $35 mill uncommitted accordion, signed in March, 2022 was increased to $100 mill (fully committed) in March, 2023 with drawdowns being utilised to fund ongoing working capital requirements.

At the end of June, advanced negotiations regarding a new £200 mill credit facility along with the UK Export Finance (UKEF) guarantee, were under negotiations, which is expected to close in 4Q23.

Company’s backlog (contracted revenues) now sits at around £1 bill for the next seven years, an increase of £100 mill since March, 2023.

H&W’s Directors believed that trading remains were on track to achieve FY23 Group revenues of £100 mill, subject to various design completions and procurement permissions with revenues from the FSS and M55 contracts expected to increase significantly in the second half.

As a result, the company reiterated its revenue guidance for FY24 of £200 mill.

Following the presentation, H&W received a Notice to Proceed for the mid-life upgrade and drydocking of a large vessel, expected to be in the region of £60 mill – £70 mill revenues.