(Sharecast News) - Maritime infrastructure company Harland & Wolff Group has been awarded the M55 regeneration programme contract by the Ministry of Defence, it announced on Wednesday, on behalf of the Lithuanian Defence Materiel Agency (DMA) after a competitive bid process.
The AIM-traded firm said the contract value for the programme was £55m, with a potential to increase that through additional equipment and further upgrades at the client's option.
It said the M55 contract would incorporate the delivery of a regenerated vessel, with stated mission and sonar systems, to an agreed operational condition, for final delivery to the Lithuanian Navy.
It was described as a "landmark deal" for the company, being its first contract win within the defence sector.
Following "extensive discussions" with the MoD and a competitive tender process, winning the M55 contract was a "clear validation" of the strategic progress the company had made in the last two years, the directors said, as well as the technical skills, expertise and facilities it now had in operation.
The M55 contract was expected to begin in August, and be completed within 18 to 24 months, with the programme being undertaken at Harland & Wolff's Appledore site.
Under the terms of the contract, no performance bonds would be required to be issued, and an acceptable milestone payment plan had been agreed for the lifecycle of the programme.
Contractual payments would be spread across the 2022, 2023 and 2024 financial years, thus creating a predictable, ongoing revenue stream for three financial years.
The contract would underpin the firm's 2022 and 2023 revenues, with margins also in line with management expectations.
Harland & Wolff's board said it "strongly believes" the contract would "significantly enhance" its reputation in the market, and "pave the way" to securing future defence and government contracts.
With the award now secured, the company said it had delivered on its objective of becoming operational in its five key markets - cruise and ferry, commercial, energy, renewables and defence.
In conjunction with the recent award of the Cory barge contract, all the company's facilities were now operational and active on projects.
The firm said it was progressing towards its stated medium-term goal of becoming a £500m per annum turnover business.
"I am thrilled that the company has been awarded the M55 contract - this is a watershed moment," said group chief executive officer John Wood.
"This contract has provided the breakthrough that we needed to activate our fifth and final key market of defence.
"Our strategy has been well and truly validated and we intend to capitalise on this win through bidding on and securing further government contracts."
Wood said the extended process to win the M55 contract enabled the firm to showcase the technical and commercial capabilities of the entire group, and had now provided the MoD with a "credible alternative" to the existing industry base.
"This contract is validation that the government can go elsewhere, recognising the investment and progress made over the last two years to put the company in a position to execute on such programmes.
"Our eyes are now set on delivering this contract and executing on our pipeline as we continue to build momentum, credibility and a high-performing, experienced workforce."
At 1244 BST, shares in Harland & Wolff Group Holdings were up 21.21% at 15p.
Reporting by Josh White at Sharecast.com.
Harland & Wolff (HARL)