FSS Contract Update

RNS Number : 6949G

Harland & Wolff Group Holdings PLC

17 November 2022

 

17 November 2022

Harland & Wolff Group Holdings plc

("Harland & Wolff" or the "Company")

Fleet Solid Support Preferred Bidder Status Award

Naval Shipbuilding Returns to Belfast

Harland & Wolff Group Holdings plc (AIM: HARL), the UK quoted company focused on strategic infrastructure projects and physical asset lifecycle management, is pleased to release further details following yesterday's announcement by the Secretary of State, The Rt Hon Ben Wallace MP, at the Appledore Shipyard of Team Resolute's appointment as Preferred Bidder on the Fleet Solid Support contract.

The Ministry of Defence (MOD) has selected Team Resolute, comprising Harland & Wolff, Navantia UK and BMT, as Preferred Bidder to build support ships for the Royal Navy with a £1.6 billion contract (before inflation). Team Resolute has been appointed to deliver three crucial support ships to the Royal Fleet Auxiliary (RFA), where such vessels will provide munitions, stores and provisions to the Royal Navy's aircraft carriers, destroyers and frigates deployed at sea.  With not less than 60% UK content that includes British supply chain procurement and fabrication, this contract will create 1,200 UK shipyard jobs, 800 indirect jobs and generate hundreds of graduate and apprentice opportunities in shipbuilding and is in keeping with other programmes of its type in relation to domestic work retention.

As part of this contract, the consortium has pledged approximately £77 million of capital investment into Harland & Wolff. This capital investment is crucial to develop the Company's infrastructure in order to facilitate works to be carried out under the contract, in addition to enabling the Company's shipyards to be well placed for future export and domestic build opportunities. This investment will also assist in delivering the strategic aims of the Government's ambitious National Shipbuilding Strategy.

Planning applications for the Belfast shipyard upgrades will be issued in the next few months with full scale production due to commence in 2025. Prior to 2025, several revenue-generating pre-fabrication, engineering and design workstreams will be undertaken by Team Resolute during the next 18-24 months in preparation for full scale fabrication. The quantum and value of these workstreams attributable to each consortium member will be determined at the point of executing formal contracts. All three support ships are expected to be operational sequentially, with the last vessel delivered by 2032. The manufacture contract is due to be awarded by Defence Equipment & Support (DE&S) by the first quarter of 2023 to Navantia, as Prime Contractor, subject to successful completion of the Preferred Bidder process and approvals. The Company and BMT will be Sub-contractors respectively within the consortium.

The Company will now enter a period of negotiation to finalise the terms and scope of the specific works to be undertaken by the Company. Once the various contracts currently under negotiation are executed, a further announcement will be made detailing the specific economic and financial benefits of this programme to the Company.

The majority of the blocks and modules for each ship measuring 216 metres in length will be built at Harland & Wolff's facilities in Belfast and Appledore, with components and other parts being fabricated in the other delivery centres, such as Methil and Arnish. The vessels will be built utilising predominantly UK steel.  This work, which will also support a significant British-based supply chain, will be undertaken in collaboration with the internationally renowned shipbuilder, Navantia who has a track record for delivering projects on time and on budget. The vessels will be fully designed by the British design house, BMT, creating and sustaining a significant number of UK jobs and retaining crucial design skills for future generations.

Build work will also take place at Navantia's shipyard in Cadiz, Spain, in a collaboration that allows for key skills and technology transfer from a world-leading shipbuilder. This will provide Harland & Wolff with the ability and knowledge to facilitate a substantial up-skilling amongst its current and future workforce that will be essential to build and maintain these vessels.

Vice Admiral Paul Marshall, DE&S Director General Ships, said:

" FSS will deliver worldwide logistic and operational support to the Royal Navy, including the Maritime Strike Group on deployment.

"Significant investment in emerging shipyards across the UK will also strengthen and diversify our industrial base. Alongside our investment in the Type 26 and Type 31 frigate programmes, this breadth will be vital to grow and support a highly capable and modern Navy."

John Wood, Chief Executive Officer of Harland and Wolff, commented;

"This is a truly defining moment for Harland & Wolff and a major boost both for our assets and for the shipbuilding industry in the UK.

The FFS programme will revitalise shipbuilding across our four UK sites and will deliver significant levelling up - from Northern Ireland to North Devon. We are delighted that this contract will be the catalyst for substantial investment in the Belfast facility in particular, ensuring that it has a vibrant future supporting not only domestic and international shipbuilding, but also the offshore and commercial fabrication markets.

Our Team Resolute partners will join forces with us to ensure its successful outcome - Navantia has a track record of delivering ships on time and on budget and BMT's is known to produce distinguished designs. The technology transfer and skills training this international collaboration will bring will be essential as we rebuild our production capability and capacity.

It was just under three years ago when we made our initial acquisition of the Belfast facility and at the beginning of 2020 our revenues were zero. We now look forward to very material portion of this £1.6bn contract which - alongside existing projects - provides significant revenue visibility over the short to medium term and substantiates the Group Business Update and outlook that we issued on 16 August 2022 This is an incredibly proud moment for the entire group, our workforce and our supply chain. We will continue to grow our capacity and capabilities to be a best-in-class UK shipyard."

This announcement contains inside information.

For further information, please visit  www.harland-wolff.com  or contact:

Harland & Wolff Group Holdings plc John Wood, Chief Executive Officer Seena Shah, Head of Marketing & Communications	[phone] [e-mail]   [e-mail]
Cenkos Securities plc (Nominated Adviser & Broker) Stephen Keys / Callum Davidson / Dan Hodkinson (Corporate Finance) Michael Johnson (Sales)	[phone]

About Harland & Wolff

Harland & Wolff is a multisite fabrication company, operating in the maritime and offshore industry 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. As a result of the acquisition of Harland & Wolff (Appledore) in August 2020, the company has been able to capitalise on opportunities at both ends of the ship-repair and shipbuilding markets where there will be significant demand.

In February 2021, the company acquired the assets of two Scottish-based yards along the east and west coasts. Now known as Harland & Wolff (Methil) and Harland & Wolff (Arnish), these facilities will focus on fabrication work within the renewables, energy and defence sectors.

In addition to Harland & Wolff, it owns the Islandmagee gas storage project, which is expected to provide 25% of the UK's natural gas storage capacity and to benefit the Northern Irish economy as a whole when completed.

 

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