Harland & Wolff Group Holdings – Waiting on SONIA for £200m 

‘Better the devil you know’? 

Just what has SONIA got to do with this multisite fabrication company? 

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Investors can’t believe that a 53-year old Eurovision Song Contestant from Liverpool has anything to do with Harland & Wolff. 

Surely, she has no importance in just how the offshore and maritime engineering services group will fare in 2024. 

Skeptical investors would be right in their doubts. 

SONIA will, however, bear strategic importance next year 

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This morning Harland & Wolff Group Holdings (LON:HARL) has announced that it has sought and obtained permission to advance negotiations for its proposed £200m guaranteed loan facility with UKEF. 

Under the arrangement UK Export Finance, through its Export Development Guarantee Scheme, will provide 100% guarantees to UK commercial lending banks. 

For HARL this would be a very important conduit towards future fulfilment of its growing Order Book contracts. 

So what is SONIA? 

Some £30 trillion of assets each year are classed under a SONIA rate. 

It follows on from the previously frequently used comparison rate known as the LIBOR. 

It is the interest rate benchmark set by the Bank of England – the Sterling Overnight Index Average. 

Based on actual transactions the rate reflects the average of interest rates that banks pay to borrow sterling overnight from financial institutions and investors. 

Why is this important to HARL? 

With the Ministerial permissions in place Harland & Wolff can start its £200m facility process. 

The UKEF will need to appoint an independent third party to ascertain the appropriate premium rate over SONIA that will be the basis for the £200m facility covering the group’s future business. 

So what does 2024 hold for HARL? 

Already this morning the group’s shares have responded well to this news, rising 13% to 13p. 

The group’s brokers have a 45p ‘sum of the parts’ valuation out on its shares. 

They estimate that the company’s losses will fall to £45.5m (£70.3m loss) for the 2023 year, then almost halving again in 2024 to a negative £23.5m. 

In 2022 the group’s revenues were just £28.0m, this year they are expected to have almost quadrupled to £100.om, while £200.0m of business is expected in 2024. 

It really does look as though Harland & Wolff is getting its act together – will its shares react similarly in 2024? 

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