Harland & Wolff Focuses on Review, Suspending 2023 Audit and Report
Financial problems at the famed Harland & Wolff group are continuing with the newly appointed management reporting the board is now focusing on the sale process with its financial advisors. In a stock exchange filing, the group reports it can not complete its 2023 financial annual reports as a going concern, but work is continuing at the yards while the board works with its financial advisors.
Harland & Wolff was plunged into a financial crisis when it was confirmed that the new government of UK Prime Minister Keir Starmer had decided in mid-July not to proceed with the group’s application for loan guarantees to facilitate the refinancing of the operation. High-interest loans from a U.S. private equity firm Riverstone are due at the end of 2024 and the company was assembling a bank-led syndicate to refinance at more attractive terms. Riverstone agreed to increase its facility by $25 million in early August to provide short-term liquidity to the company while it launched a review being led by Rothschild & Co.
The group failed to publish its annual report before the July 1 deadline saying that it was in discussion with its auditors over revenue recognition issues. They later said the issues were resolved and the audit was being finalized.
“Currently, the company and its board do not believe it can finalize its 2023 accounts on a going concern basis and, therefore, work to complete its unpublished accounts has also been suspended, with resources being focused on the Rothschild process,” the filing reports.
The group’s CEO was terminated at the end of July with a reorganization specialist Russell Downs being named as Interim Executive Chairman. Today’s announcement confirmed his appointment to the board and he commented, "We remain focused on working with interested parties and key stakeholders to ensure that we can navigate through this uncertainty preserving the underlying value in the yards and the FSS contract for its employees and other stakeholders."
Harland & Wolff in 2022 was part of a winning consortium led by Spain’s Navantia Group for a contract to build three support ships for the British Royal Navy. As part of the company’s strategy to scale and diversify its operations, it was pursuing investments to ensure its capability of carrying out large-scale contracts, including the Fleet Solid Support (FSS) program.
“It remains the company's priority to deliver our program on the FSS project and the company is in active discussions with this customer to agree the optimum route,” according to the filing. “The company continues to work on its existing orderbook to the fullest extent possible, whilst at the same time working with interested parties to find a solution that supports the long-term ambitions and prospects of the business.”
Rothschild & Co is exploring “strategic options” for the group and assisting the board in “deciding a route forward that will maximize value for stakeholders and seek to preserve the company's core operations at its delivery centers in Belfast, Appledore, Methil, and Arnish.”
Harland & Wolff says it is reliant on Riverstone to provide liquidity while the group is undertaking a review of its business priorities. A dissident group of shareholders however told UK Defense Journal that they fear Riverstone is directing the process and leaning toward a pre-packaged administration that would see Harland & Wolff sold off piecemeal. They contend that Australian billionaire Clive Palmer has expressed interest in providing financial support to Harland & Wolff as an alternative to breaking up the company. The shareholders fear selling the assets off could endanger jobs and possibly the ability to complete the FSS contract. The shareholder group told UK Defense Journal that they have called an Extraordinary General Meeting with the company's directors to ensure that they have a voice in any restructuring.
The famed Belfast shipyard which built many famous ships including the Titanic, had not delivered a newbuild in 20 years until recently. A British energy and engineering company InfraStrata acquired the yard in 2019 after it had fallen into administration and assembled the group by buying additional yards. They had projected with the start of the Royal Navy project in 2025, the company would reach £200 million in revenue. A week ago, the group however reported the Falkland Islands Government had decided to cease further contractual negotiations regarding the port replacement project while Harland & Wolff also abandoned a project to launch ferry service from the British mainland to the Isles of Scilly.