The Harland & Wolff Group Holdings PLC (LON: HAL) share price spiked 19.3% higher after announcing that it had finally executed the subcontract with Navantia UK Limited following the signing of the Fleet Solid Support (FSS) Programme manufacturing contract between the Ministry of Defence and Navantia UK Limited.
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The company, which specialises in strategic infrastructure projects and physical asset lifecycle management, announced the formal signing of the £1.6 billion Fleet Solid Support Programme (FSS) with the MoD on 18 January 2023.
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Harland & Wolff shares were trading in negative territory at the time of writing as sellers outnumbered buyers despite the significance of today’s announcement. The company noted that the subcontract would generate revenues worth £700 million to £800 million by the time it delivers the final vessel.
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Still, the subcontract will run for seven years, from 2023 to 2031, and Navantia will be responsible for fabricating various shipbuilding blocks, including some mega blocks composed of multiple standard blocks. The firm will also procure some equipment to be installed in each vessel.
All three bow sections will be manufactured at Appledore, given its experience fabricating the bow sections for the Prince of Wales and HMS Queen Elizabeth vessels, which are classified as Queen Elizabeth Class aircraft carriers. The bow sections will then be transported to Belfast for the final assembly.
The three vessels will have all their blocks assembled, fully integrated, consolidated and commissioned at the Belfast facility, finally returning shipbuilding to Belfast after a 20-year hiatus. Full-scale fabrication will begin in 2025, allowing ample time for the three vessels to be delivered to the MoD in 2031.
Harland & Wolff expects to generate annual revenues worth £25 million in 2023 and 2024 from the prefabrication works before the full-scale fabrication works begin. Still, the gross project margins are expected to be within the company’s forecasted margins.
The company also expects to invest £77 million in the Belfast and Appledore facilities as part of a capital investment programme over the next two years. The firm will expand the fabrication facilities in Belfast while investing in autonomous equipment and advanced robotic technologies.
*This is not investment advice.
Harland & Wolff share price.
The Harland & Wolff share price spiked 19.26% higher to trade at 24.15p, from Tuesday’s closing price of 20.25p.
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