Yahoo Finance Royal Navy ships at risk as auditors refuse to sign off Titanic shipyard’s accounts
Shares in the troubled shipyard that built the Titanic have been suspended after auditors refused to sign off its accounts, prompting fresh fears for a major Royal Navy contract.
Harland & Wolff asked for trading of its London-listed shares to be halted after admitting it had been unable to agree a set of audited annual financial statements in time for a deadline on Monday.
Instead, the company expects to publish them next week following “extensive discussions” with its bookkeepers on how revenues from contracts should be recognised.
Harland also said it was still waiting for the Government to sign off a vital loan guarantee, which is needed to ensure funding for new projects.
It warned that if the guarantee of up to £200m wasn’t approved soon after Thursday’s general election “the company’s ability to execute new and large contracts would be adversely affected”.
This has raised doubts about its ability to deliver a £1.6bn programme to build three fleet solid support (FSS) ships for the Royal Fleet Auxiliary.
An announcement to the London Stock Exchange said trading of Harland’s shares would remain suspended until the Belfast-based company was able to publish an audited set of annual accounts.
The shares closed at 8.4p on Friday valuing the company at £16m, following a 35pc drop in value so far this year.
Harland on Monday published an unaudited set of numbers which it said might be subject to minor changes in future.
These reported revenues of £87m in 2023, up from £28m a year earlier, and a loss of £43m, down from £71m.
The company has partnered with Spanish state-owned ship building giant Navantia to work on the £1.6bn Navy contract, with its own work on the project valued at £750m, according to the statement.
Harland insisted it was now on track to meet its target of £200m in annual revenues this year and that the business had “momentum”, even as it admitted problems agreeing with auditors how the deals should be valued.
“Given the multi-year and complex nature of some of the contracts under which the company is working, the company has been in extensive discussions with its auditors to agree the method of accounting for revenues throughout the duration of a build programme,” it said.
“This is especially relevant in the context of the FSS subcontract that is set to last for the next seven years.
“The assessment of the split in revenues between current year’s revenues and deferred revenues has caused a delay to the audit process and hence the publication of the company’s annual report and audited financial statements.
“Now that the company and its auditors agree with the treatment of revenues in the financial statements, the company will progress to complete the audit quickly.”
Arun Raman, Harland’s finance chief, added: “I am highly encouraged by the growth in revenues [in 2023] as we seek to achieve the critical mass required to get to cash break-even.”
He added that the company’s costs were being made worse by high-interest loans.
The company is currently seeking to refinance the loans by obtaining a loan guarantee from the Government.
Chief executive John Wood, who bought the group out of administration five years ago, previously told The Telegraph he was “100pc” confident his business would stay afloat – even without taxpayer support.
Harland was plunged into turmoil in May when it was revealed ministers were withholding approval for the £200m loan guarantee promised to the company back in December.
The crisis triggered concerns about the company’s finances, as well as the £1.6bn Navy contract it is expected to deliver.
Harland has applied for the loan guarantee via UK Export Finance, which is aimed at freeing up money for its expansion plans by moving debts onto a lower rate of interest.
Currently, the company is paying double-digit rates reported to be as high as 14pc.
The new £200m loan would be provided by four commercial banks but underwritten in full by taxpayers.
Talks between the company and Whitehall officials are still ongoing despite the general election campaign.
However, they have recently stalled amid concerns the support package risks falling foul of state aid rules.
That is partly because of Harland’s plan to launch a new ferry service in the Isles of Scilly after a local rival warned officials that a 100pc loan guarantee would breach competition laws, as revealed by The Telegraph.
