TIDMINFA
RNS Number : 9231O
Infrastrata PLC
12 February 2021
12 February 2021
InfraStrata plc
("InfraStrata" or the "Company" or the "Group")
Acquisition of assets of Burntisland Fabrication Limited
(Bifab)
InfraStrata plc (AIM: INFA), the UK quoted company focused on
strategic infrastructure projects and physical asset lifecycle
management , announces that it has acquired substantially all of
the assets of Burntisland Fabrication Limited (the "Acquisition"),
providing the Company with increased capacity across two sites in
prime locations in Scotland. The consideration paid for the assets
is GBP650,000 in cash with a further deferred consideration of up
to GBP200,000 in cash, subject to achievement of future revenues
targets. These facilities will trade under the Harland & Wolff
brand and represent the final fabrication piece of its UK
footprint, positioning the Company to fully deliver on its existing
strategy quicker than it would have done with only its two existing
sites: Harland & Wolff (Belfast) and Harland & Wolff
(Appledore).
Key highlights:
-- Strategic acquisition of assets and leases across two sites
in prime locations in Scotland with particular regard to renewable
and defence projects; Methil on the east coast of Scotland and
Arnish on the west coast of Scotland. The Burntisland site will not
form part of the transaction.
-- Over 25,000m(2) of undercover fabrication capacity acquired,
with 580,000 m(2) of total site area and 24,000 tonnes of quayside
load-out capabilities and annual throughput tonnage potential
estimated at over 100,000 tonnes.
-- Waterfront sites acquired that are capable of load in, load out and launching activities.
-- Sites are in close proximity to an array of wind farm
projects currently ongoing and planned in the Irish Sea and North
Sea; and significant fabrication capabilities added through the
Acquisition.
-- Substantial increase in the probability-to-win rate (Pwin
rate) by offering clients multiple fabrication sites and management
estimate reducing major project fabrication timelines by as much as
30%; Acquisition offers project developers a faster route to
project monetisation and de-risking fabrication projects by
spreading work across three distinct but close-proximity
geographies.
-- Acquisition brings numerous historic pre-qualification and
live tender opportunities in addition to the track record in the
oil & gas and renewables markets that Bifab has already
established.
-- The Acquisition is expected to accelerate Harland &
Wolff's renewable market penetration by opening up projects
previously at the planning stage before the Belfast site was
acquired in December 2019 but are now ready to commence tendering
for fabrication works.
-- Assignment of long-term leases of 12 years at Methil and
Arnish subject to completion of due diligence and board approval of
the respective landlords; an MOU has been entered into at this
stage which sets out the basis of future agreements which will be
on no worse conditions than that of the previous tenant.
-- The assets acquired and up to 29 existing employees will come
under the newly formed Harland & Wolff (Methil) Limited, a
fully owned subsidiary of the Company; employees are currently on
furlough and will be brought back as required to re-establish
operations at the sites.
-- The Acquisition fulfils the Company's strategic ambition to
have fabrication sites across various geographical locations of the
United Kingdom, leading to local and cross government support;
aligned even closer to the UK Government's "levelling-up" agenda
and the "Green Industrial Revolution".
-- Extensive consultation has been undertaken with key
stakeholders who will look to use the facility going forward,
including projects that were set to utilise the facilities prior to
Bifab entering into administration in late 2020.
Acquisition rationale:
A shortage of UK shipbuilding and heavy fabrication capacity
In 2019, the Company set out its objective of being revenue
generating as quickly as possible and the acquisition of Harland
& Wolff (Belfast) was quickly followed by the acquisition of
Harland & Wolff (Appledore). As the year has evolved, it has
become more obvious than ever that the UK lacks sufficient
shipbuilding and heavy fabrication capacity. This has been
exacerbated by the Government's twin strategy of rejuvenating the
shipbuilding sector coupled with the "Green Industrial
Revolution".
Growth in UK Shipbuilding
Following recent announcements in relation to shipbuilding with
a specific reference to Belfast and Appledore, management believes
that the shipbuilding strategy that it has put in place is closely
aligned to Government policy and could lead to some large
contracts, both from Government and the private sector.
Accordingly, a number of negotiations are currently taking place
with a view to consummating multiple shipbuilding contracts,
conversion projects and significant fabrication works in due
course.
Growth in wind farm fabrication demand
Management's view that wind farm fabrication is set to grow
exponentially has been reinforced by:
-- The announcement of the Government's "Green Industrial Revolution"
-- Legislation expected to be put in place to promote local content for wind farm developments
-- The latest Crown Estates Round 4 leases awarded to BP and RWE
for 3GW each of wind projects in the Irish Sea and Dogger Bank
region in the North Sea, respectively.
Management is pleased to report that, since the various
announcements by Government, Harland & Wolff has seen a
significant increase in the number of inquiries from wind farm
developers for fabrication capabilities across the Company's
sites.
Multi-site competitive edge
Whilst advanced discussions are currently taking place between
the Company and wind farm developers, one of the key requirements
that has emerged is the need to split large works programmes across
multiple sites. This helps de-risk the overall fabrication strategy
and enables the Company to fabricate as quickly as the developer
would like, thereby helping the developer monetise the project
earlier than scheduled.
Most importantly for the Company, management estimates that
multiple fabrication facilities in the correct geographical
locations significantly enhance the Probability-to-win rate (Pwin
rate) given that only a handful of the Company's competitors in the
UK have the ability to offer fabrication across multiple sites that
are strategically located to additionally support construction
activities.
Management has critically evaluated its weighted pipeline across
the five core markets in which it operates and believes the Company
would run short of fabrication capacity should (as is expected)
multiple large contracts come to fruition at the same time.
Methil and Arnish's competitive advantages
Both Methil and Arnish have a rich history of heavy engineering
and fabrication. Initially fabricating for the oil and gas
industry, the facilities added to their fabrication portfolio a
number of energy companies that were developing wind farm projects
around the UK. Whilst Methil is the larger of the two sites and
will be heavily focussed on fabrication for the oil and gas,
commercial and renewables markets, Arnish lends itself to multiple
opportunities across all five of the Company's chosen markets.
Given Arnish's locational advantages and sophisticated plant and
equipment, it is a highly suitable location for a cost-effective
fabrication supply chain for defence programmes and vessel block
assembly, as well as having a rich history of providing rolled
structures for the renewables and offshore oil and gas markets.
Additionally, given Arnish's access to Stornoway Port and
deep-water areas, it is an attractive location for the repairs,
maintenance and new build programmes for local ferry and maritime
operators. A full business case will be developed for a floating
dock in this area and will be presented to the local authorities
including the influential Highlands and Islands Enterprise board in
due course. The intention is to capitalise on the large numbers of
vessels required, bearing in mind key criteria related to providing
as much local content as possible and enhancing the substantial
economic and social benefits that these programmes will bring to
the local area.
Consideration:
The Company has agreed with the administrators a total
consideration of GBP850,000 split into two tranches:
-- The first tranche is for the sum of GBP650,000 to be paid upon completion
-- The second tranche will be for the sum of GBP200,000 upon the
occurrence of either of the following events, whichever occurs
earlier:
o Consolidated Group turnover is or exceeds GBP75 million in the
next 24 months
o Consolidated turnover of Methil and Arnish is or exceeds GBP40
million in the next 24 months
Acquisition of assets, personnel, and leases:
The Acquisition will include, amongst other things, the
following key assets:
-- 580,000m(2) of leased area in Methil and Arnish
-- 25,000m(2) of undercover fabrication halls
-- Plate rolling and forming equipment
-- Plate cutting and sub-assembly fabrication shop
-- Shotblasting and painting facilities
-- Storage and quayside
-- Welding and cutting machines
-- Cranes
-- Material handling equipment
-- Multi-wheel trailers
-- Office buildings and stores warehouses
-- 29 skilled personnel transferred under TUPE regulations
-- 12-year leases on both Methil and Arnish facilities;
assignment of leases / entering into of new leases to commence upon
finalisation of landlords' due diligence, expected to complete
within the next four weeks, after which assignments of the leases
are expected to commence. As a back stop should the negotiations
not prove fruitful, the leases will be assigned on the same basis
as the previous tenant.
John Wood, CEO of InfraStrata, commented : "I am very pleased to
have completed the acquisition of the assets of Bifab, which is in
keeping with our stated strategy of capitalising on complementary
opportunities when they present themselves. Whilst the total
consideration is not material, relative to our balance sheet size
and market cap, it nevertheless is a very important and highly
strategic acquisition for InfraStrata. With this acquisition, we
now have a footprint in Scotland, which is the hotbed for major
wind farm projects as well as for shipbuilding programmes.
We have now positioned ourselves strategically across the UK,
with four sites capable of servicing our five core markets. This
acquisition gives us the flexibility to optimise our operations
across the Group and offer our clients the ability to fabricate
faster and de-risk their exposure by offering multiple sites. As we
move into larger contracts, it is crucial that we demonstrate the
capacity to bid for and deliver on these projects. The acquisition
of Bifab's assets delivers that capability to us and will open up a
larger demographic of tender opportunities. Most importantly, it is
expected to substantially boost our existing sales pipeline success
rate given that the fabrication risk carried by the project
developers will drop significantly since we will now be more
favourably located geographically than others. Finally, I wish to
warmly welcome the personnel whom we have taken on at Methil and
Arnish and I am confident that we will turn these facilities into
highly successful businesses that generate jobs and investment into
their local economies in due course."
This announcement contains inside information.
For further information, please visit www.infrastrataplc.com or
contact:
InfraStrata plc +44 (0)20 3900 2122
John Wood, Chief Executive investor@infrastrataplc.com
Seena Shah, Head of Marketing & Communications
Cenkos Securities plc (Nominated Adviser
& Broker)
Stephen Keys (Corporate Finance)
Michael Johnson (Sales) +44 (0)20 7397 8900
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