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I’d strongly encourage anyone interested to run this through Claude (free version) — it does a great job of breaking down just how significantly this company’s earnings could grow over the next 12-24 months, given their data centre exposure and product portfolio in this space.

A 38p EPS target (sterling, not cents) looks very much within reach.

18-month price targets:

Conservative: 35p earnings, 19x multiple = £6.65

Central: 28p, 21x = £8.00

Bull: 42p, 23x = £9.66​​​​​​​​​​​​​​​​

Strongly recommend you use AI to connect the dots yourselves - but here’s what I have found:

- A licensing deal with Credo points to the likelihood that VLX now has Microsoft / Azure as a data centre client

- Azure is set to increase data centre investment by 100% in 2026

- Volex has been developing the 800G and 1.6T that is the coming standard and is likely to additionally upscale margin and revenue 2026-2027

- Bottom line : data centre revenues look set to drive a further surge in eps this year and next

I have analysed the price action in detail and identified the underlying cause of the rally: there were more buyers than sellers

What is still completely under-appreciated here, despite all the clues from the last update, is just how much money Volex is making and is set to make from data centres. This is the biggest investment boom in a generation and some of VLX’s keystone clients like Xai are the biggest players. McKinsey: "Global companies are projected to invest nearly $7 trillion in data-centre infrastructure by 2030 — driven mostly by AI computing demand — roughly equivalent to the combined GDP of major economies like Japan and Germany. "They are going to blow away earnings expectations again and again - no wonder management are still loading up on shares for themselves.

Before we weep for Riverstone, remember that their ‘loss’ includes annual compounding interest of 14%. In fact they are getting back about 70% of the principal amount they have leant (excluding the interest). This is a great result for a high risk lender, and a high recovery rate from a massively bankrupt company. Riverstone will be happy with it, and no doubt more than offset by gains elsewhere in their portfolio. Additionally, a chunk of their loss was offloaded onto the hapless shareholders of the defunct Riverstone Energy Opportunities Investment Trust, who found themselves underwriting the deal.

I think Arun is only there as they’ll need him to help them understand and unpick what I have no doubt will have been very creative financial management and accounting.

Re the Riverstone profit warning (in the UK listed vehicle), I’m afraid that for me that’s why the govt had little choice. You can’t write a 200 mln cheque of scarce taxpayer funds and then have 100mln or whatever going straight out the door and into the pocket of some Wall Street loan shark

There’s a surprisingly large number of people on here who seem to believe there is still hope, however slight, that following some new finance or bailout, the company shares will remain listed with a reduced value and then there could be some possibility of participating in a long-term future recovery.

I know it’s hard to accept after all this time and emotional engagement, but it is exceedingly unlikely existing shareholders will have any equity in whatever is left over. Imagine you owned 1% of a house worth £100,000 which had a defaulted mortgage on it from a hard nosed lender of £300,000. That’s where we are, the lender is repossessing the house, the shareholders are forgiven their negative equity, but are irreversibly out of the picture . If parts of the company ever start trading again it will be under completely new shareholders, probably private / unlisted capital. A wise person told me a while ago that the best way to deal with the stress of some situations is to try and get comfortable with the worst case scenario - it’s time to let go.

Who did they sell it to?

Correction noted about terminology, and my language was a bit loose, HW is not formally in administration, but personally I see this as shortly inevitable (see Times story below). The other thing I would sadly note is that all these advisors are going to be racking up vast bills. (The new CEO was responsible for winding up Lehman Brothers. The fees to advisors on that one were $6 billion!!! )

This is from the Sunday Times today..

Harland & Wolff has lined up administrators as vulture funds prepare to pick apart the sinking company behind the shipyard that built the Titanic.

Contingency plans are being drawn up by insolvency experts from Teneo in case a phalanx of financial advisers fail to thrash out an interim rescue deal.

Accountancy firm EY is advising officials from the Department for Business on its options, and accountants from Deloitte have been parachuted in to replace Grant Thornton in advising the Harland & Wolff board, according to City sources.

Hi Stokey - the only important caveat I would make to your post, and it’s something I hear a lot on this board, is that the revenue size of a contract is not relevant to the debt. Debts can’t be repaid from revenue, only gross profit.

Contact size is what they’re offered to deliver a contract; they receive 100mln, they have to spend, say, 90-95mln to fulfil that contract (based on average European shipbuilding margins). After that they can think about paying interest on debts. A 100mln contract probably wouldn’t be enough to service the current interest let alone pay down debt.

Now the administrators have been called in, they will quickly move to firesale whatever they can and put into insolvency what they can’t. Riverstone will need to be repaid the 134 million, which will be rising by over a million a month. Then there will be the administrator’s costs and the costs of redundancy, closure etc plus any other debts they have kept off balance sheet (leasing, unpaid suppliers, etc). Let’s call it 150 million. Will the break-up raise this much? Obviously nowhere near - remember Infa originally bought H&W for 6 million. Shipbuilding assets will not be seen as attractive - it is an horrendous commercial undertaking in the UK, it was only a device used by JW to wash a lot of capital through the business and his pockets. In my opinion IM will in years ahead be seen as the one great asset they had, providing long-term energy security to the UK, and this is probably what Riverstone always wanted. If JW had focused on IM with careful financial management and patience shareholders could have done well.

If that was offered it would be the deal of the century as the equity net of debt is worth a lot less than nothing.

I’m afraid to say that the moment they signed the debt deal with Rivertsone, they handed the keys over at the same time.

The margins in shipbuilding are far too small, these big headline revenue numbers sound impressive but they would never have produced sufficient free cashflow to service the growing debt. The company has been bust for a long time.

This is the key part of the Riverstone RNS (below). It means that all other capital will be subordinate to the the new money provided by Riverstone. In effect, they will get the whole company. I think the rest of their RNS just shows what madness it would have been for the govt to provide a ‘loan’, it would mostly have gone immediately into a big payout to Riverstone shareholders.

“The new capital provided is expected to be classified as a super priority position to the existing facility under of which the Company is a lender. As a condition to the financing, the most recent $15 million upsize of the facility completed in February 2024 (in which RCOI did not participate), is also expected to be recharacterised as part of the new super priority facility.”

Will say again what I said a long time ago. Riverstone is an energy infrastructure specialist. No interest in shipbuilding. They will take IM and have another go, and fold / flog the shipbuilder. This share will be delisted and then presumably this board will close too.

Fitting that John Wood’s final act as CEO was a totally misleading RNS to the shareholders whose pockets he has been picking from day one.

Meanwhile on IM

https://www.telegraph.co.uk/news/2022/11/24/northern-ireland-councillor-larne-islandmagee-witch-trial/

Subsea 7 wins $300mln gas development contract in Trinidad today, their market cap increase on the news: £120mln. Harl wins likely ~£800mlm contract from UK govt, mkt cap increase so far: £25mlm.

It’s a very unfair comparison but I was reminded of the last minute Nayim goal against ****nal in the 1995 UEFA final…

https://youtu.be/gktEEs61q_E

A few days ago HARL’s share price traded as though approaching bankruptcy. Now HARL’s long-term future is literally guaranteed, they are going to experience enormous top line growth, its debts will shrink in size relative to its cash flow and can be beneficially restructured, management also has the space it needs to optimise the sale of its forgotten prize asset, the gas caverns, worth perhaps well over £50mln. I have zero evidence of this but I suspect they pulled a fast one to shake off Rivertsone Capital just before the contract news. If HARL were to actually to evolve into a shipbuilder with a steady flow of profitable contracts then we’d be talking about a market cap in the hundreds of millions or maybe even billions. That’s a loong way off and may well never happen. For now, the share price needs to reflect that of a govt backed ongoing enterprise with a healthy nine figure top line, the transformation of the asset value of it yards after the £77mln investment, and the gas caverns to boot. Anything below £50mln mkt cap is deep deep value, and would likely provoke interest from private buyers. I know most of us are already long so don’t expect one way traffic on the share price, but personably I will absolutely buy any dip that materialises here and I say all this as one of the biggest historical JW critics you will find. They needed something massive and man did they get it.

What an extraordinary turnaround in fortunes. To go from a situation that was (in my opinion) on the very edge of bankruptcy barring a miracle, to being the lead British player in a multi-billion pound contract is extremely unusual. And in that context, a 100%ish share price gain isn’t nearly sufficient. People need to realise that 6p was a price that implied the shipyards had no or maybe negative value (which personally I did not disagree with at the time). Where the share is trading now only rows the price back to where it was during their dire summer. It may take some time for new buyers to appear; research reports need to be written, distributed, and digested by a different crowd. Of course lots of question remain about the way HARL had been managed and their longer-term game plan, and I have to say I will be selling my shares when we eventually get near to fair value, but those are worries for another day. Well done you faith keepers, you deserved some reward.