HAVYARD GROUP ASA ANNUAL REPORT 2019
Havyard Group ASA annual report 2019. 2019 was a very demanding year for the Havyard Group, but restructuring and ongoing processes provided the basis for creating a healthier and more sustainable group
Reference is made to the stock exchange announcement dated 05.07.20 with the publication of Havyard Group ASA’s annual report.
Final consolidated profit before tax is MNOK – 442. The main reason for the loss is the negative results in Havyard Ship Technology AS (“HST”), and the effect this has had for other group companies.
Very demanding 2019
2019 was characterized by constant deterioration in the newbuilding projects at HST. In particular, two prototype projects, a live fish carrier and a pelagic trawler, developed negatively during 2019. Postponement of delivery times and large overuse of labour also gave negative impacts on other projects.
The severe deterioration in the projects led to HST introducing suspension of payments on 17 November 2019 and started the process of renegotiating agreements with shipowners, banks and guarantors. This was done to secure construction loan financing for the active shipbuilding contracts HST had when the suspension of payments was introduced. Successful renegotiation was critical for both Havyard Group ASA (the parent company) and its subsidiaries, as there was a high exposure of warranty liability and delivery obligations to these shipbuilding projects.
On February 11, 2020, HST requested public debt negotiations. The major losses in this company is the main explanation for the consequential losses and impairment of values in Havyard Group ASA and its subsidiaries Havyard Design & Solutions AS and Norwegian Electric Systems AS.
In connection with the renegotiation of the shipbuilding contracts and the debt negotiations in HST, the subsidiaries had to take major losses, which affect both profit and equity in these companies. For Havyard Group ASA (the mother) and the group, the direct and indirect losses on HST and subsequent write-down of values are the main reasons for the poor results and the substantial reduction in equity.
Successful restructuring of the shipyard business
Through the transfer of fixed assets and employees as well as parts of the contract portfolio to a new subsidiary of HST, New Havyard Ship Technology AS, the Group succeeded in renegotiating agreements with all customers and also construction loan financing for all projects.
The work on renegotiating the contracts has also meant that significant warranty responsibilities that Havyard Group ASA had undertaken have been renegotiated so that exposure and risk under warranty are significantly reduced.
The Group’s subsidiaries had large deliveries that were linked to the shipbuilding contracts and the renegotiation thus largely ensured the activity and turnover contained in these deliveries.
HST has now delivered 6 of the 7 ships that were under construction at the yard when the situation arose. The last ship, a fully electric ferry to Fjord1 will be delivered from HST in August this year. The contracts for the last 6 projects, 3 live fish carriers to Norsk Fisketransport and 3 offshore wind turbine service vessels to Esvagt were transferred to New Havyard Ship Technology AS. Two of the vessels are being outfitted at the shipyard, and four hulls are under construction at the hull yard in Turkey. The last ship will be delivered in mid-2021.
The road to a healthy and sustainable group
The situation in HST has resulted in negative one-off effects for Havyard Group ASA’s financial statements, but implementation of the planned compulsory composition will form the basis for a positive effect on equity.
Independent valuations of the values of the most important subsidiaries show that there may be real values in addition to those that are posted as per 31.12.19.
Many organizational and cost-reducing measures have already been implemented in the Group, where further strategic processes have been initiated to strengthen the Group’s position.