Harland & Wolff shares plunge after shipbuilder lowers sales outlook

Harland & Wolff shares tumbled by more than a fifth on Friday after the Belfast-based shipbuilder lowered its annual revenue guidance.

The AIM-listed company told investors it had been unable to finish ‘certain key workstreams’ on a Ministry of Defence contract during recent months because some manufacturing parts were in short supply.

As a result, it has deferred around £20million of revenues to the first half of 2023, meaning sales of between £29million and £31million are expected for this year instead of £65million to £75million as previously forecast.

Belfast-based Harland & Wolff told investors it had been unable to finish ‘certain key workstreams’ on a Ministry of Defense contract during recent months 

In July, the business won a contract from the MoD on behalf of the Lithuanian Defence Materiel Agency worth £55million, its first-ever defence sector contract, to regenerate a former Royal Navy mine-hunting vessel.

This deal is set to create 100 new positions at the group’s Appledore shipyard in Devon, which reopened two years ago, and is due to be completed within 18 to 24 months.

Harland & Wolff, known for building the Titanic passenger liner, insisted the M55 project was still ‘on track and in line with the base redelivery schedule for the vessel.’

When trading closed early on Friday, Harland & Wolff Group Holdings shares were 21.2 per cent, or 4.3p, lower at 15.9p, making it one of the five biggest fallers on the AIM All-Share Index.

However, their value remains far higher than before the UK Government granted the firm preferred bidder status on the £1.6billion Fleet Solid Support contract last month.

The shipbuilder also announced today that a number of cruise and ferry industry clients had deferred their contracts into 2023 as a consequence of rising inflation and political uncertainty.

In addition, it has agreed with Italian multinational oilfield services provider Saipem to terminate a contract involving the manufacture of four wind turbine generator jackets for the NNG offshore wind project off the Scottish coast.

Harland & Wolff was initially given the contract in April 2021 but has struggled with payment problems, delays and defective materials, which have led to costs worsening.

‘The company has therefore determined that continuing with the project will be sub-economic from a target margin perspective and would, therefore, not be in the best interests of the group,’ it remarked.

Instead, the firm’s management has decided to focus on utilising capacity at its Methil site on the Firth of Forth estuary, where it is targeting £10million in contracts and has significantly expanded the workforce.

It intends to transfer the construction of a pair of barges related to a contract with Cory Group, a waste management and recycling business.