Harland & Wolff: investors should steel themselves for bigger loss than anticipated to be revealed by the end of this week

Mark Watson-Mitchell
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Harland & Wolff: investors should steel themselves for bigger loss than anticipated to be revealed by the end of this week

Despite having a contracted order book of some £900m, extending over the next seven years, Harland & Wolff Group Holdings (LON:HARL) the Belfast-based infrastructure facilities group is reckoned to have only turned over £28m in the year to end December 2022.

Surprisingly, perhaps worryingly, the company is still in the process of completing its audit but expects to issue its annual report for that financial year before the end of this week.

The market is now being guided that the unaudited revenues for the group for last year were £27.96m, producing a loss of £70.35m.

Further details will be declared in annual report.

However, the company has clearly stated that it remains on track to meet its current year guidance.

The Business

The group operates 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. 

The group also has two Scottish-based yards, focused upon work for the renewables, energy and defence sectors.

In addition, it also has a sizeable undercover drydock at Appledore.

The group also owns the Islandmagee gas storage project which is expected to provide 25% of the UK’s natural gas storage capacity.

Massive Order Backlog

It has a backlog of confirmed contract revenue of some £900m, extending over the next seven years.

It also has a weighted pipeline of new business opportunities reckoned to be in excess of £3.6bn in revenues over the next five years.

Working Capital and Borrowings

The company reported that it has made significant progress on its group refinancing, now looking to close the transaction in the early autumn.

We will expect to be given further details in due course however the company is anticipating reducing the cost of capital substantially.

With the massive amount of contract work now on hand the group will need to increase significantly its working capital levels to be able to cope with the slew of new business.

I understand from the group’s brokers that the term sheet with Astra Asset Management to refinance the group’s $100m Riverstone credit facility, has now been upsized to £200m.

Importantly the group and Astra are hoping that the UK Export Finance Development Guarantee will cover up to 80% of the loan amount.

Analyst Opinion – rated as a Buy

Michael Renton at Cenkos Securities, the group’s NOMAD and Joint Broker, still rates the shares as a Buy.

He looks for revenues this year to more than treble to around £100m, while his pre-tax profits figure was last published at £34.1m loss.

Previously he has forecast £200m sales next year, easing the loss down to around £20.0m.

After the results come the end of this week it is likely that Renton will be revising his figures.

Conclusion – await the report at the end of this week

The £24.5m group’s shares, which dipped to 12.70p on Friday afternoon, closed that night at 13.50p. This morning they are trading at around 3% lower.

Failed Russian mutiny hits European stock markets, Ruble sinks

UK Investor Magazine
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Failed Russian mutiny hits European stock markets, Ruble sinks

The dramatic events in Russia over the weekend dictated early trade in European markets, with major equity indices falling back and commodities inching higher at the open on Monday.

Russian mercenary group Wagner marched on Moscow on Saturday but later made a U-turn as leader Yevgeny Prigozhin struck a deal with the Kremlin.

Should Saturday’s events have taken place during open trade, one would have expected sharp volatility across stocks, energy and FX. By all accounts, traders would be surprise by the benign reaction in markets on Monday.

Nonetheless, European equities were on the back foot as trade got underway on Monday but buyers quickly stepped in. The FTSE 100 opened marginally lower and was down 0.28% at the time of writing, while the German DAX also dipped 0.2%.

Brent and West Texas Intermediate oil contracts made tepid gains on Monday as traders weighed the broader implications of Putin’s political weakness in a backdrop of slowing global growth.

“The weekend rebellion which rocked Russia has sent the price of oil higher, as traders assess the regime’s instability following the insurgency. Brent crude jumped by more than 1% before retreating a little, amid expectations of tighter supply,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

The Rouble sank against the dollar, hitting 84.5500 on Monday – the highest level since Russia invaded Ukraine.

Wildcat Petroleum inks landmark funding agreement

UK Investor Magazine
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Wildcat Petroleum inks landmark funding agreement

Wildcat Petroleum has entered into a landmark Memorandum of Understanding (MoU) with a third party for funding up to $25 million into energy projects sourced by Wildcat Petroleum.

The agreement will initially focus on Sudan, but there is scope to expand to other African countries. The MoU is not legally binding, and neither party has an obligation to proceed with any proposed investment.

The MoU has potentially game-changing implications for Wildcat Petroleum which is seeking to close on its first transaction.

“This MOU is a significant step forward for Wildcat as we aim to complete our first transaction in Sudan. Now that we have a party that is interested in the same geographies, we are focused on closing a deal as soon as possible,” said Mandhir Singh, Chairman, Wildcat Petroleum.

“Last October the company signed an MOU with the Sudanese over 4 producing oil Blocks (*) and efforts will be concentrated in signing a Production Sharing Agreement (PSA) over at least one of them. If the on-going political situation prevents travel to Khartoum then the Company will endeavour to negotiate a deal remotely.”

Today’s announcement saw Wildcat Petroleum shares soar 37.5% in early trade as investors positioned for further developments.

Janus Henderson fund managers have sold this FTSE 100 bank

UK Investor Magazine
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Janus Henderson fund managers have sold this FTSE 100 bank

The Bankers Investment Trust provides investors with the opportunity to buy a portfolio of global mega-caps at a 12% discount to Net Asset Value. It is difficult to find an investment trust with such a high-quality portfolio at a similar discount.
The portfolio contains Microsoft, Apple, Accenture and AstraZeneca. Microsoft was one of their best performers in the last half-year period as trust managers increased their holdings and enjoyed a substantial rally in the US tech giant.
The trust also increased holdings in Apple and added McDonald's to the portfolio but sold down their stake in a UK...

A beneficiary of the new UK Biological Security Strategy

Andrew Hore
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A beneficiary of the new UK Biological Security Strategy

Last week, the UK government announced its new Biological Security Strategy. This replaces the existing version of the strategy that dates back to 2018, before Covid.
The report is short on specific details but includes plans for a dedicated minister for Biological Security Strategy and launching a real-time Biothreats Radar to monitor risks and threats. There will also be a council to provide leadership in the relevant matters. By 2030, the idea is that the UK will be resilient to a spread of biological threats.
The report can be found here: UK Biological Security Strategy (publishing.service...

Aquis weekly movers: Coinsilium share price recovery

Andrew Hore
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Aquis weekly movers: Coinsilium share price recovery

Coinsilium Group Ltd (LON: COIN) reported a reduction in revenues from £530,000 to £212,000 in 2012. The impairment charge increased from £148,000 to £273,000, but there was no loss on financial assets, compared to a £407,000 loss in 2021. There was a swing from a realised profit on assets of £1.52m to a loss of £1.29m. The reported loss was £2.06m, compared to a profit of £14,000. Net cash outflow from operations increased from £602,000 to £789,000. NAV is £3.94m, including cash of £668,000. Digital asset markets have recovered since the beginning of the year. The share price recovered 43.5% to 1.65p. That is the highest it has been since March.

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Fallers

The latest medicinal cannabis research roundup from Ananda Developments (LON: ANA) highlights that CBD can be beneficial for behavioural symptoms of dementia. The level of behavioural disturbance fell from an average of 60 to 15 over a six-month trial period. There is also a study showing that cannabis-based medicinal products improve the quality of life scores for Fibromyalgia. The share price declined 16.2% to 0.44p.

Barry Hersh cut his stake in Global Connectivity (LON: GCON) from 8.95% to 7.96%. The share price is 14.3% lower at 1.35p.

EDX Medical Group (LON: EDX) has appointed Oberon Capital as corporate adviser and broker. The diagnostic products developer also appointed Dr Keti Zeka as head of R&D and director of laboratories and Dr Liam Dower as head of quality, regulatory affairs and compliance. The share price fell 13.3% to 3.25p.

Pubs operator Daniel Thwaites (LON: THW) had a tougher second half and Christmas trading was poor. In the year to March 2023, revenues improved from £96m to £108.8m, while pre-tax profit rose from £12.7m to £15.1m, mainly due to a higher gain on interest rate swaps. Operating profit before property disposals was lower, although that is predominantly because of the lack of government assistance in the most recent year. NAV is £242m, including a pension asset of £32.2m due to higher interest rates, while net debt is £66.7m. The final dividend was raised from 2.2p/share to 2.4p/share. At 93.5p, the share price fell 2.6%, and that values Daniel Thwaites at £55m.

Ukraine’s counteroffensive: it will be arduous and major results yet to come

Valérie Proschenko
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Ukraine’s counteroffensive: it will be arduous and major results yet to come

KYIV, Ukraine – Ukraine’s widely anticipated counteroffensive has probably begun. Ukrainian forces have stepped up activities along the frontline in Zaporizhzhia region in south of country. And at the same time, Ukraine is conducting offensive and defensive actions in the east.

According to the information from the Ministry of Defence of Ukraine on June 12, in the Donetsk and Tavriia operational areas, the Ukrainian Armed Forces have liberated seven settlements over the week: Lobkove, Levadne, Novodarivka, Neskuchne, Storozheve, Makarivka, Blahodatne.

https://twitter.com/NOELreports/status/1668173843989446656
https://twitter.com/DefenceU/status/1670145056014049286

It is worth noting that the village of Novodarivka in Zaporizhzhia region is situated on the right flank of the so-called the Vremivsky ledge, Blahodatne, Neskuchne, Storozheve, Makarivka are on the left flank of the ledge in Donetsk region.

https://twitter.com/bayraktar_1love/status/1667919144535171072

On June 19, the Ministry of Defence of Ukraine announced the de-occupation of Piatykhatky in the Zaporizhzhia region. As of now, the units on the Tavriia front had advanced into the depths of the Russian forces by up to 7 kilometers, and the liberated area in the south is 113 square kilometers. Ukraine thus confirmed the liberation of 8 settlements over the past two weeks.

https://twitter.com/Deepstate_UA/status/1670750349479534593
https://twitter.com/StratCom_AFU/status/1670757112887103488

Furthermore, Ukrainian military officials and international analysts claim some ‘successes’ in Bakhmut direction, a major hotspot for the last 10 months. Commander of the Ground Forces of the Armed Forces of Ukraine (AFU) Oleksandr Syrsky said that the enemy continues to move some of the most combat-capable units to the Bakhmut direction, combining these actions with powerful artillery fire and strikes by assault and army aircraft on the positions of Ukrainian troops.

The UK Defence Intelligence also states that “Russia has highly likely started relocating elements of its Dnipro Group of Forces (DGF) from the eastern bank of the Dnipro River to reinforce the Zaporizhzhia and Bakhmut sectors”.

The last update of DeepStateMap.Live (open-source intelligence online map) shows that Ukrainian forces made some advances north west of Klishchiivka and in the area of Orichovo-Vasylivka.

https://twitter.com/visegrad24/status/1670720494130155522

And yet the enemy continues to focus its main efforts on the Lymansk, Avdiivka, Maryinka directions alongside Bakhmut. According to Hanna Maliar, Deputy Minister of Defense of Ukraine, Russians are launching an active attack on the Lymansk and Kupyansk front, trying to get the initiative.

“The Russians have not given up their plans to advance up to the administrative borders of Donetsk and Luhansk region – at the moment this is the main direction of the Russian offensive”, Maliar said.

Despite the progress, the Ukrainian forces have to break through an elaborate network of Russian fortifications running hundreds of miles across the country, The Telegraph reported. As UK intelligence have claimed, since summer 2022 “Russia has constructed some of the most extensive systems of military defensive works seen anywhere in the world for many decades”. Moreover, Ukrainians face huge minefields and ongoing artillery work, thereby there will be no rapid but meticulous and careful liberation of territories. And there is still a big threat because Europe’s largest nuclear power plant (Zaporizhzhia NPP) is in an area controlled by Russian forces.

US Secretary of Defence Lloyd Austin considers that “Ukraine stands well-positioned for the challenges ahead” and called the Ukrainians’ fight a “marathon and not a sprint”. There is no doubt that the counteroffensive is going to be tough, bloody and exhausting but even at an early stage Ukraine has not lost any position.

As commander-in-Chief of the Armed Forces of Ukraine Valerii Zaluzhniy has assured recently that “the operation continues according to the plan”. And his words inspire confidence since ‘Iron General‘ has never let Ukrainians down before

AIM weekly movers: Strip Tinning share buying

Andrew Hore
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AIM weekly movers: Strip Tinning share buying

Share buying by the wife of chief executive Richard Barton made flexible automotive connectors supplier Strip Tinning (LON: STG) the highest riser on the week with a 60% gain to 60p. She bought 15,000 shares at 70p each, taking the couple’s combined stake to 55.2%. This follows director share buying in the previous week at 39p/share.  Strip Tinning is expected to reduce its loss this year.

Quadrise (LON: QED) says that parts and spares have been delivered to Morocco and it is ready to recommence the demonstration test that was paused in May. The share price increased 38.2% to 2.145p.

Offshore services provider Tekmar Group (LON: TGP) increased interim revenues by 36% to £17.7m and the loss was reduced. Management believes the company can reach EBITDA breakeven for the full year. That is based on forecast revenues of £40m, which is 90% covered by existing revenues and orders. The share price is 28.4% ahead at 11.875p.  

Avacta Group (LON: AVCT) says that following the fifth dose escalation cohort in a phase I clinical study of AVA6000 for tumour targeted chemotherapy. There has been a marked reduction in frequency and severity of toxicities associated with doxorubicin chemotherapy. The sixth dose will be increased as Avacta tries to identify the maximum tolerated dose. The share price improved 23.2% to 122p.

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Fallers

Allergy Therapeutics (LON: AGY) has returned from suspension following the publication of full year accounts and the subsequent interim results. The interim revenues declined by 18% to £39.9m and there was a swing from operating profit of £7.4m to a loss of £8m. Net cash was £13.2m at the end of 2022. Additional cash will be required by September. The share price slumped 83.2% to 1.05p. The most recent fundraising was at 1p.

Battery technology developer AMTE Power (LON: AMTE) is one of the poorer performers for the second week running. The company requires a financing within three weeks. The cash will provide more time for the company, but it needs significant funds to finance the building of a battery plant.  It is not certain that enough money can be raised and that means that shareholders may end up with nothing. The share price slumped 73.2% in the previous week. The latest decline is 49.9% to 6.64p. The March 2021 placing price was 175p.

Capital Metals (LON: CMET) raised £500,000 at 1p/share and following this announcement the chief executive Michael Frayne stepped down. A further £250,000 will be raised. The market price slumped 48.9% to 1.15p. The cash is required for working capital while Capital Metals attempts to end the suspension of its mineral sands licences in Sri Lanka. A general meeting is being held on 12 July to gain authority to issue the new shares.

Costs at in-video advertising company Bidstack (LON: BIDS) doubled to £5.3m in 2022, but the loss still increased from £7.96m to £8.77m. There was £8.7m in cash at the end of 2022, similar to the cash outflow from operations last year. The dispute with Azerion, which terminated its reseller contract, continues. The share price dived 47.1% to 0.925p.

Non-Standard Finance shareholders set to get nothing

Andrew Hore
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Non-Standard Finance shareholders set to get nothing

Non-Standard Finance (LON: NSF) says the proposed scheme of arrangement has been approved and the company will leave the standard list. The share price slumped 38.2% to 0.1081p and it has fallen by 78% so far this year. There appears no likelihood of shareholders getting anything if the company is wound up.

The scheme of arrangement makes £14m available to satisfy claims by borrowers about loans made by Everyday Loans prior to 31 March 2021, as well as fees owed to the Financial Ombudsman Service arising from complaints.

There was a proposed recapitalisation, but major shareholder Alchemy did not want to back a fundraising. Instead, the business will be transferred to secured lenders.

Everyday Loans was acquired for £235m in December 2015, having earlier that year acquired S&U’s home credit division for £82.5m. Non-Standard Finance joined the standard list on 19 February 2015 when it raised £102m at 100p/share. One of its backers was Woodford Investment Management. At the end of 2015, £160m was raised at 85p/share.

FTSE 100 falls as housebuilders downgraded

UK Investor Magazine
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FTSE 100 falls as housebuilders downgraded

The FTSE 100 showed signs of a hangover from yesterday’s surprise 0.5% rate hike on Friday, led lower by housebuilders and Ocado.

The Bank of England’s decision to hike rates by 0.5% will have implications for the FTSE 100’s UK-focused contingent, who were trading down heavily again on Friday.

“Yesterday’s super-hike to UK interest rates, and the fact there’s likely more to come, continue to play on investors’ minds as they weigh up the impact on corporate earnings,” said Matt Britzman, equity analyst at Hargreaves Lansdown.

HSBC equity analysts took an axe to their housebuilder ratings on Friday, cutting Taylor Wimpey, Barrat Developments and Persimmon to a hold. Berekely Group was cut to reduce.

Housebuilders were among the worst performers, with Persimmon shares crumbling over 3%.

GSK was the FTSE 100 top riser after announcing the settlement of a Zantac court case in the US. GSK shares were over 5% higher.

US Tech shares

Even a strong showing from US tech names overnight failed to ignite enthusiasm in UK shares on Friday. Yesterday, Fed chair Jerome Powell provided reassuring tones to the market, saying future US rate hikes would be more considered and hinted there may not be too many more this year.

“Federal Reserve chairman Jerome Powell gave the market the message it wanted to hear – while US rates have not hit the top of the current cycle, the central bank will proceed with caution. That was enough to convince investors to keep bidding up shares in the mega cap tech names, which in turn gave a near 1% lift to the Nasdaq last night,” said Danni Hewson, head of financial analysis at AJ Bell.

Ocado

Ocado shares were the FTSE 100’s top faller after soaring on takeover speculation yesterday. The Times yesterday reported Amazon could be considering an 800p per share offer for Ocado, sending shares in food retailer and technology company over 30% higher.

The absence of any announcement today from either party saw Ocado shares down over 8% at the time of writing.

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