Posted on January 25, 2023
Positive EBITDA and reduced net loss but still (€63million)
Royal IHC has published its delayed Annual Report 2021. The delay is due to the outline agreement with the company’s financial stakeholders, concluded at the end of 2022, which had to be incorporated into the report.
In 2021, Royal IHC’s focus was on successfully completing the large and complex projects that began in 2017 and 2018. The following milestones were achieved:
- in August 2021, the self-propelled cutter suction dredger SPARTACUS was transferred to DEME, which was able to deploy it successfully in its initial activities in Egypt and Portugal
- in December 2021, AMAZON returned from successful sea trials, marking another milestone in the completion of the ship’s conversion project. On 31 August 2022, the vessel was successfully handed over to McDermott
- several other new-build contracts were successfully completed on schedule in 2021, including two cutter suction dredgers for the Suez Canal Authority. In December 2021, Royal IHC delivered an Easydredge® 2700 trailing suction hopper dredger to SEMAR (Secretaria de Marina) in Mexico. This ship was built from stock in The Netherlands to meet a short delivery time.
Unfortunately, there were also some additional setbacks on the AMAZON and SPARTACUS in 2021, which led to additional losses. In addition, Royal IHC continued to suffer greatly from COVID-19. Due to the uncertainty regarding the course of the pandemic – as well as the general economic outlook – many customers postponed purchasing decisions. As a result, Royal IHC was unable to make up for the significant loss of turnover compared to the pre-COVID-19 period.
Financial results 2021
The financial results for 2021 show a positive EBITDA of € 15.7 million (2020: € 199.4 million loss), a significant improvement compared to previous years. The net result amounted to a loss of € 63.4 million (2020: € 300.1 million loss), partly due to a one-off impairment of € 20 million on the deferred tax asset. The reorganisation in 2020, the increase in flow business (equipment, services and standard modular dredgers) and the completion of complex and loss-making legacy projects contributed positively to this result. In addition, COVID-19 government support helped to retain the company’s employees at a time of a significant drop in order intake and turnover due to the pandemic.
Developments in 2022 and 2023
The disappointing inflow of larger orders, partly due to geopolitical developments and volatility in the raw materials market, also has consequences for Royal IHC’s financial position. To improve this, the company started a restructuring process, including the process of selling the independent subsidiary IQIP. This is at an advanced stage and will significantly improve Royal IHC’s liquidity and equity upon completion. The proceeds from the sale of IQIP will be used to pay off virtually all existing bank debt while maintaining working capital facilities for new orders.
In accordance with the new financial relationships, it has been agreed in the recent outline agreement that the Stichting Continuïteit may appoint several candidates to the Supervisory Board, including the chairman. As part of the implementation of this agreement agreed by the stakeholders, Gerben van de Rozenberg, on behalf of Stichting Continuïteit, will be a member of the Supervisory Board from 5 January 2023, and Menno Snel will hand over the chairmanship to Mr Van de Rozenberg. At the request of the stakeholders, Mr Snel will remain active as an independent member of the Supervisory Board for some time in order to be able to advise and assist the company and the Supervisory Board in its new composition. At least until the full implementation of the outline agreement, the Supervisory Board of Royal IHC will consist of Gerben van de Rozenberg, Menno Snel, Kees Korevaar, Boudewijn Wentink and Frank Verhoeven.
The financial restructuring agreement envisaged by Royal IHC, which only relates to an adjustment of the conditions of the existing financing (and therefore not to trade creditors) and does not provide for writing off the liabilities, is supported by a majority of the lenders. At the beginning of 2023, the Board of Directors initiated a WHOA (Wet Homologatie Onderhands Akkoord) pre-insolvency procedure, supported by the majority of the lenders, to commit a minority of lenders to the financial restructuring plan. The Board of Directors expects a favourable outcome of this procedure.
CEO Jan-Pieter Klaver says: “Our flow business is running smoothly and profitably, and after a very difficult time for Royal IHC, I expect that with the finalisation of the agreement with our financial stakeholders, we will regain the confidence of our customers for large custom-built vessels. In that respect, 2023 will be a crucial year for us as a producer of complex integrated ships.”
Read the full press release via the download link below.