REG - Tekmar Group PLC - Interim Results
15/05/2024 07:00
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RNS Number : 4456O Tekmar Group PLC 15 May 2024
TEKMAR GROUP PLC
("Tekmar Group", the "Group" or the "Company")
UNAUDITED INTERIM RESULTS
For the 6-month period ending 31 March 2024
Tekmar Group (AIM: TGP), a leading provider of technology and services for the
global offshore energy markets, announces its interim results for the 6-month
period ending 31 March 2024 ("HY24" or the "Period").
Highlights
Group profitability for the Period is the highest in four years driven by
strong commercial management
· Revenue of £16.2m (HY23: £15.9m) excludes any contribution from
Subsea Innovation Limited ("SIL") sold post period end and treated as a
discontinued operation (Comparative figures have been adjusted for
comparability)
· Gross profit of £5.4m for the Period (HY23: £4.4m) reflects an
increase in the gross profit margin for the Period to 33% (HY23: 28%)
· Adjusted EBITDA of £1.8m reflects a £1.2m improvement on the
comparative 6 month period. (HY23: £0.6m)
· On a GAAP basis Group loss before tax was £0.4m (HY23: £1.2m
loss)
Order book of £24.1m reflects the benefits of a balanced portfolio across
energy and subsea markets
· During the Period, Tekmar's offshore wind business and Pipeshield
("PIL"), secured order intake of £13.7m and £10.0m respectively
· These contract awards support order intake of £23.7m in the
financial year to date with a blended gross margin of 31%
The disposal of Subsea Innovation Limited strengthens the core business
· Completed post-Period on 2 May 2024 for a total cash
consideration of £1.9m, with cash receipts predominantly phased over the next
12 months
· The Group retained ownership of the premises, with the property
valued at £2.8m as at 30 September 2023
Balance sheet supported by SCF Partner's £18.0m Convertible Loan Note
facility (the "CLN" facility)
· The Group held £2.7m of cash as at 31 March 2024 with net debt
of £3.6m. Net debt included the drawdown of bank facilities from the £3.0m
Covid Business Interruption Loan Scheme ("CBILS") and £3.3m of the available
£4.0m trade loan facility, both expected to be renewed in 2024.
· This cash position excludes the £18.0m SCF Capital CLN facility
committed in 2023 which is available, with conditions, to drive growth
including acquisitions
HY24 financials
6M ending Mar-24 6M ending Mar-23 12M ending
Unaudited Unaudited Sep-23
£m £m Unaudited
£m
Revenue 16.2 15.9 35.6
Gross Margin 33% 28% 23%
Adjusted EBITDA(1) 1.8 0.6 0.6
Net Cash(2) (3.6) (3.2) (2.9)
Sales KPIs
6M ending Mar-24 6M ending Mar-23 12M ending
Unaudited Unaudited Sep-23
£m £m Unaudited
£m
Order Book(3) 24.1 23.7 19.9
Order Intake(4) 23.7 24.5 44.2
Current trading and outlook
The Board is encouraged by the Group's first half performance with the
business on track to achieve its FY24 revenue and EBITDA expectations. Looking
ahead to the rest of the year, the market is still impacted by the phasing and
timing of major projects, however, we expect another period of positive EBITDA
in the second half albeit modestly lower than the first half, with full year
2024 representing a clear improvement in trading profit over the prior year.
The Company continues to maintain tight cost controls and will continue its
disciplined programme of targeted capex and investment in product development
that represent the greatest opportunity for near-term growth. Capex for FY24
is expected to be in the region of £2m.
Alasdair MacDonald, CEO, commented: "We are pleased to report our best
results and highest level of adjusted EBITDA for four years. The business
performed well in the first half of 2024 as we continue to build a
better-quality and de-risked order book, returning the business to sustained
profitability. We have strengthened our platform for consistent growth by
divesting the SIL business, which also supports our focus on efficient capital
allocation. Our offshore wind business returned to making a material
contribution to Group profitability in the first half, and we continue to
benefit from the consistent profit generation of our Pipeshield business.
Overall, these results demonstrate we now have a stronger platform to drive
near-term growth and accelerate growth through targeted and potentially
transformational M&A."
Notes:
(1) Adjusted EBITDA is a key metric used by the Directors. Earnings before
interest, tax, depreciation and amortisation are adjusted for material items
of a one-off nature and significant items which allow comparable business
performance. Details of the adjustments can be found in the adjusted EBITDA
section below. Adjusted EBITDA might not be comparable to other companies.
(2) Net cash is defined as total cash held by the Group less bank borrowings
(3) Order Book is defined as signed and committed contracts with clients.
(4) Order Intake is the value of contracts awarded in the Period, regardless of
revenue timing.
(5) Order Book and order Intake include Subsea Innovation Limited for current year
and comparative periods.
Revenue, Gross Margin and Adjusted EBITDA exclude Subsea Innovation Limited
for HY24 as held as a discontinued operation. Comparative figures exclude
Subsea Innovation Limited figures.
Enquiries:
Tekmar Group plc
Alasdair MacDonald, CEO Via Gracechurch Group
Leanne Wilkinson, CFO
Singer Capital Markets (Nominated Adviser and Joint Broker)
Rick Thompson / Sam Butcher +44 (0)20 7496 3000
Berenberg (Joint Broker)
Ben Wright / Ciaran Walsh +44 (0)20 3207 7800
Gracechurch Group (Financial media & investor relations)
Murdo Montgomery / Heather Armstrong +44 (0)20 4582 3500
About Tekmar Group plc
Tekmar Group plc (AIM:TGP) collaborates with its partners to deliver robust
and sustainable engineering led solutions that enable the world's energy
transition.
Through our Offshore Energy and Marine Civils Divisions we provide a range of
engineering services and technologies to support and protect offshore wind
farms and other offshore energy assets and marine infrastructure. With near 40
years of experience, we optimise and de-risk projects, solve customer's
engineering challenges, improve safety and lower project costs. Our
capabilities include geotechnical design and analysis, simulation and
engineering analysis, subsea protection technology and subsea stability
technology.
We have a clear strategy focused on strengthening Tekmar's value proposition
as an engineering solutions-led business which offers integrated and
differentiated technology, services and products to our global customer base.
Headquartered in Newton Aycliffe, UK, Tekmar Group has an extensive global
reach with offices, manufacturing facilities, strategic supply partnerships
and representation in 18 locations across Europe, Africa, the Middle East,
Asia Pacific and North America.
For more information visit: www.tekmargroup.co.uk
(http://www.tekmargroup.co.uk) .
Subscribe to further news from Tekmar Group at Group News
(http://eepurl.com/cN91l5) .
INTERIM REPORT FOR THE 6 MONTHS TO 31 MARCH 2024
CEO overview
The business performed well in the first half of the 2024 financial year,
delivering encouraging results in line with our plan. This reflects the hard
work of the Tekmar team as we continue to focus on our key priorities to
strengthen the core business and underpin significant future growth.
Review of near-term priorities
(1) Return to Sustained EBITDA Growth
Adjusted EBITDA of £1.8m represents the highest level of trading profit for a
six-month period delivered by the Group in four years. The level of
profitability also reflects significant improvement with £5.4m of gross
profit reflecting an achieved gross margin of 33% for the Period, the first
time since 2019 that the Group has achieved this level of gross margin.
Adjusted EBITDA margin of 11% for the first six months is an important marker
in the Group restoring sustainable mid-teen EBITDA margins, which is a key
pillar of our strategic plan. The delivery of that target requires greater
volume to be addressable in the market but there are encouraging signs that
the market environment is improving, albeit steadily.
The table below shows the profitability profile (at Adj. EBITDA level) of the
Group over recent interim periods. The 6 month periods ending Mar-24, Sep-23
and Mar-23 have been amended to exclude the results of Subsea Innovation
Limited as this is reported as a discontinued operation:
6m 6m 6m 6m 6m 6m 6m 6m 6m
Mar-24 Sep-23 Mar-23 Sep-22 Mar-22 Sep-21 Mar-21 Sep-20 Mar-20
Revenue (£m) 16.2 19.7 15.9 17.2 13.0 17.9 13.9 15.2 23.8
Gross margin (%) 33% 20% 28% 24% 22% 16% 26% 31% 28%
Adj. EBITDA (£m) 1.8 0.0 0.6 (0.3) (1.8) (1.8) (1.1) 0.8 2.7
Adj. EBITDA margin (%) 11.1% 0.0% 3.8% (1.7%) (13.8%) (10.1%) (7.9%) 5.3% 11.3%
We highlighted in our last set of annual results announced in March 2024, the
importance of consistent profit generation across both our divisions - Marine
Civils and Offshore Energy. The performance of Offshore Energy has lagged
behind Marine Civils over recent periods. This Period has seen a consistent
contribution from both divisions, with Offshore Energy and Marine Civils
contributing £1.4m and £1.5m respectively to the Group's Adjusted EBITDA.
We are encouraged by the improved trading performance of the Group in the
Period as highlighted by the above table and by the return to profitability of
the Offshore Energy division. When we then overlay the consistent performance
of our Marine Civils division with the positive medium to long term
fundamentals of the offshore wind industry, we believe Tekmar is well
positioned to deliver sustainable EBITDA growth for shareholders through the
current industry cycle and beyond.
(2) Building a better-quality pipeline and order book
We are encouraged by the strength of our enquiry book and continue to see
improvement to the supply chain pricing to more acceptable margin levels and
larger volumes of enquiries in the market converting into orders. We
highlighted in our March 2024 results announcement that we are seeing the
effects of legacy contracts on margin diminishing in the order book and we
continue to see our backlog replaced with higher margin, lower risk projects.
This is supported by order intake of £23.7m in the financial year to date
with a blended gross margin of 31%. We caveat this positive outlook by
highlighting that delays to project commissioning and commencement continues
to be a feature across the industry and this constrains our ability to predict
with confidence the outturn for nearer-term financial periods. Overall though
we continue to characterise the current market environment as steady with
incremental improvement ahead of accelerated growth as the industry positions
itself to meet the anticipated global buildout to meet 2030 net-zero
commitments.
(3) Cash flow and liquidity
We remain focused on a disciplined approach to cash, working capital
management and improved cash generation. Cash used in operations in the first
half of £1.0m reflects short-term working capital requirements which are
expected to unwind over the course of the year. As a management team we
maintain a major focus on debtor collections and on overall liquidity and
working capital support. We are currently in active discussions with our
relationship bank relating to the renewal of our existing trade and CBILs
facilities, with these discussions progressing in line with planned timeframes
for renewal in 2024.
(4) Strengthening the business
The Disposal of Subsea Innovation Limited and targeted investment and capex
On 2 May 2024 we announced the disposal of SIL to Unique Group ("Unique") for
an aggregate cash consideration of £1.9m. This was a strategic acquisition of
a business servicing predominantly oil and gas customers with the potential to
transition to servicing offshore wind energy projects over time. Under
Tekmar's ownership, the business demonstrated this potential, however the
nature of projects undertaken highlighted a lumpiness of revenue and relative
lack of pipeline visibility. The business had also struggled to deliver
consistent profitability with SIL reporting an Adjusted EBITDA loss of £1.4m
for FY23, the latest audited period prior to announcing the Transaction. We
were pleased to have reached agreement with Unique, which sees 38 employees
transfer with SIL to new ownership which can invest in the business to realise
its potential.
In terms of the financial effects of the Transaction on the Tekmar Group
· Innovation House, the premises in Darlington currently occupied
by SIL (the "Property"), is being retained by the Group on Completion. The
Property was valued at £2.8 million as at the latest audited financial
statements to 30 September 2023. The Group has agreed for the Purchaser to use
the Property on a rent-free basis for a 12-month period following Completion,
with the option for both parties to enter into a lease agreement after the
rent-free period. Ownership of the property gives the Group optionality for
future Group refinancing.
· The consideration value comprises an initial cash payment of
£27,000, a cash payment of £1.4 million relating to a trade receivable,
payable post-Completion, and a further cash payment of £549,000 payable 12
months post-Completion.
· These proceeds, net of costs, will be available to support the
Group's disciplined investment programme to drive near-term growth and for
general working capital purposes.
· The effect of the disposal on the ongoing Group is expected to be
broadly EBITDA neutral for FY24.
· The disposal also mitigates potential near-term cash requirements
which were being considered to support operational efficiency changes and
working capital requirements in the business.
We highlighted in our 2023 Full Year results that we will continue to look for
opportunities to further strengthen the business through more efficient
resource allocation. The disposal of SIL is consistent with this approach,
with the Group now benefiting from a more streamlined portfolio of products,
services and technology that addresses the needs of the offshore wind industry
and broader energy markets. We will continue to allocate capital to the
ongoing Group in a disciplined way, aligning our resources to opportunities
which provide the greatest near-term benefits and growth opportunities.
We expect capex for the current financial year to be in the region of £2m,
with approximately half of that covered by investment in strategic initiatives
including product development for our core Teklink cable protection system and
investment in our grouting services in support of near-term revenue growth
with Pipeshield including in the Middle East. We have identified a number of
other strategic investment opportunities, with funding of these initiatives
subject to phasing as cashflow builds to support the required investment.
M&A to strengthen and broaden the portfolio
With the path to profitability established and the core platform streamlined
with the disposal of SIL, we are pursuing M&A opportunities to complement
organic growth, including opportunities to build scale and strengthen the
technology and services we offer to our customers. The ambition is to build a
leading global offshore wind services company over time, and consistent with
this, we are alert to the potential value in acquiring capability that can
transition to servicing the needs of the offshore wind industry over time.
Building a stronger platform should, in turn, create a business which the
stock market can value more highly.
We benefit significantly in this M&A context from having SCF as a
strategic partner, where we can leverage their complementary industry
knowledge and investment expertise to help source and execute value-enhancing
acquisitions. We also benefit from SCF's committed £18m funding through the
Convertible Loan Notes, which are targeted to be deployed primarily for
value-enhancing M&A and strategic growth. Having this committed funding
in place puts Tekmar at a distinct advantage, particularly given the current
financing environment for M&A.
Market overview
The Offshore Wind market continues to strengthen as energy markets are aligned
to the commitment of the United Nation's global coalition for net-zero
emissions by 2050. Most notably:
· Global capacity is forecast to reach over 261GW (installed or
underway) by 2030, from a commissioned capacity of 70GW today, with current
visibility of over 300 projects. ((1))
· A peak in buildout is expected in Europe around 2030 as
governments ramp up expansion targets, which has been influenced by the fall
out of the invasion of Ukraine and energy crisis. Tekmar has a strong track
record in this region and is well-positioned to benefit from future growth.
· Asia Pacific to adopt proven European technology to meet
ambitious timeframes as they look to move from 2.8GW fully commissioned to
91GW by 2040. Tekmar already has a presence in Asia and has been awarded
multiple contracts for countries' first commercial wind farms in the region,
demonstrating a strong track record.
· The global operation and maintenance (O&M) market continues
to scale up and is now valued at nearly £26bn per year by 2035, offering
significant growth potential for the Group. ((1))
· The emerging floating wind market outlook is now at 31GW
installed or underway by 2035, rising dramatically in the second half of the
2030s.
Adjacent offshore energy markets are strengthening due to renewed investment
in offshore energy markets given the importance of energy security.
Alasdair MacDonald
CEO
15 May 2024
Sources:
(1) 4C Offshore, Offshore Wind Farms Project Opportunity Pipeline Database,
Version Q1 2024
CFO Review
A summary of the Group's financial performance is as follows:
6M ending 6M ending Mar-23 12M ending
Mar-24 Unaudited Sep-23
Unaudited £m Unaudited
£m £m
Revenue 16.2 15.9 35.6
Gross Profit 5.4 4.4 8.3
Adjusted EBITDA((1)) 1.8 0.6 0.6
(LBT) (0.4) (1.2) (8.5)
EPS (0.55p) (2.87p) (10.70p)
Adjusted EPS((2)) (0.06p) (1.74p) (4.50p)
Figures for HY24 exclude Subsea Innovation Limited as treated as discontinued
operation. Comparative information has been adjusted to treat Subsea
innovation as a discontinued operation.
(1) Adjusted EBITDA is a key metric used by the Directors. Earnings before
interest, tax, depreciation and amortisation are adjusted for material items
of a one-off nature and significant items which allow comparable business
performance. Details of the adjustments can be found in the adjusted EBITDA
section below. Adjusted EBITDA might not be comparable to other companies.
(2) Adjusted EPS is a key metric used by the Directors and measures earnings
after adjusting for material items of a one-off nature and significant items
which allow comparable business performance. Earnings for EPS calculation are
adjusted for share based payments (£nil HY24, £nil HY23, £0.5m FY23),
amortisation on acquired intangibles (£0.1m HY24, £0.1m HY23, £0.1m FY23).
On a statutory basis Group loss before tax was £0.4m (HY23: £1.2m loss).
Overview
The results for the 6 months to 31 March 2024 reflect the results of the
business turnaround which has been in progress over recent years and the
journey back to sustained profitability. The Group reported revenue for the
6-month period to March 2024 of £16.2m, broadly similar to the £15.9m
revenue reported for the 6 months to 31 March 2023. The continued work to
improve the business on a number of fronts including commercial management,
technical discipline, strong project execution and supply chain management has
resulted in a continued gross profit margin per cent improvement from 28% for
the 6-months to 31 March 2023 to 33% for the 6-months to 31 March 2024.
An adjusted EBITDA profit of £1.8m is reported for the 6-months to 31 March
2024, in comparison, the period to the 6-months to 31 March 2023 reported an
adjusted EBITDA profit of £0.6m, providing a positive variance of £1.2m. The
adjusted EBITDA profit of £1.8m is enhanced by £0.2m due to accounting for
the Subsea Innovation disposal as a discontinued operation, as this business
unit incurred a £0.2m EBITDA loss for HY24 (EBITDA loss £0.4m HY23).
Revenue
Revenue by Division Revenue by market
£m 6M 6M 12M £m 6M 6M 12M
Mar24 Mar23 Sep23 Mar24 Mar23 Sep23
Offshore Energy 9.8 8.9 17.3 Offshore Wind 11.3 7.8 17.7
Marine Civils 6.4 7.0 18.3 Other Offshore 4.9 8.1 17.9
Total 16.2 15.9 35.6 Total 16.2 15.9 35.6
Figures for HY 24 exclude Subsea Innovation Limited as treated as discontinued
operation. Comparative information has been adjusted to treat Subsea
innovation as a discontinued operation.
Offshore Energy, incorporating Tekmar Energy, AgileTek and Ryder Geotechnical,
all of which operate largely as a single unit, reported revenue of £9.8m in
the 6-month period to 31 March 2024 compared with £8.9m for the 6-month
period to 31 March 2023. The revenue of £9.8m reported for HY24 has been
adjusted down by £3.3m relating to the disposal of Subsea Innovation which is
reported as a discontinued operation (HY23 adjusted down by £1.8m.
The Marine Civils division delivered revenue of £6.4m for the 6-month period
to 31 March 2024. This is broadly similar to the £7.0m for the comparative
6-month period to 31 March 2023 but materially lower than the £11.3m of
revenue delivered by this division in H2 23. We flagged in our FY23 results
announcement in March that the H2 23 run-rate for this division reflected a
very strong period and may not be a reasonable read-across for expectations
for FY 24. The pipeline for this division and our Pipeshield business remains
strong and pending timing of order book conversion there is opportunity to
achieve second half revenue materially ahead of the first half.
Gross profit
Gross profit by Division Gross Profit by market
£m 6M 6M 12M £m 6M 6M 12M
Mar24 Mar23 Sep23 Mar24 Mar23 Sep23
Offshore Energy 2.9 2.0 3.0 Offshore Wind 2.9 2.5 4.8
Marine Civils 2.5 2.4 5.3 Other Offshore 3.7 2.7 5.1
Unallocated costs - - - Unallocated costs (1.2) (0.8) (1.6)
Total 5.4 4.4 8.3 Total 5.4 4.4 8.3
Figures for HY 24 exclude Subsea Innovation Limited as treated as discontinued
operation. Comparative information has been adjusted to treat Subsea
Innovation as a discontinued operation.
Gross profit margin for the Group increased from 28% (HY23) to 33% (HY24) with
margin improvement across both divisions.
Marine Civils division gross profit margin increased from 34% (HY23) to 39%
(HY24) despite the lower revenue in the 6-month period to 31 March 2024
compared to the prior year 6-month period to 31 March 2023. This was achieved
by strong operational delivery particularly around variation orders where
project scope change has been encountered.
Within Offshore Energy, gross profit margin also improved, increasing from 22%
in HY23 to 30% in HY24. A number of factors, as a result of our business
improvement plans, have played a key part in the turnaround of this division,
including robust commercial management, strong project execution and supply
chain initiatives. The Board is encouraged with the performance improvement in
this division which is a key element of the Group's overall success in
delivering sustained profit growth. The lower margin backlog work has declined
to a low level and the performance improvement delivered year to date provides
management with confidence in the achievement of the anticipated backlog gross
margins.
Operating expenses
Operating expenses for the 6-month period to 31 March 2024 were £5.4m (HY23:
£5.5m). Operating expenses are broadly in line with the 6-month period to 31
March 2023, through continued careful management of the cost base, despite
further wage cost inflation.
Adjusted EBITDA
Adjusted EBITDA is a primary measure used across the business to provide a
consistent measure of trading performance. The adjustment to EBITDA removes
certain non-cash and exceptional items to provide a key metric to the users of
the financial information that is reflective of the performance of the
business resulting from movements in revenue, gross margin and the cash costs
of the business. The Board reviews all exceptional items to ensure resulting
Adjusted EBITDA achieves this. For the 6-month period ended 31 March 2024 and
the comparable 6-month period to 31 March 2023, the adjustment includes
depreciation, amortisation and foreign currency losses.
Improvements in EBITDA are as a result of the improved gross margin in the
period, as highlighted above.
The below table shows the adjustments that have been made to calculate
Adjusted EBITDA.
EBITDA Reconciliation (£m) 6 Months 6 months 12 months Sep-23
Mar-24 Mar-23
Reported operating (loss)/profit (0.0) (1.1) (7.9)
Amortisation of intangible assets 0.1 0.1 0.1
Amortisation of other intangible assets 0.2 0.3 0.5
Depreciation on tangible assets 0.5 0.2 0.7
Depreciation on ROU assets 0.2 0.3 0.5
EBITDA 1.0 (0.2) (6.1)
Adjusted items:
Share Based Payments - - 0.5
Impairment of goodwill - - 4.7
Exceptional items - Bonus - - 0.3
Foreign exchange losses & gains 0.8 0.8 0.9
Restructuring costs - - 0.3
Adjusted EBITDA 1.8 0.6 0.6
Figures for HY 24 exclude Subsea Innovation Limited as treated as discontinued
operation. Comparative information has been adjusted to treat Subsea
innovation as a discontinued operation.
The £1.8m Adjusted EBITDA profit for the 6 months ended 31 March 2024 was an
improvement of £1.2m when compared to the £0.6m Adjusted EBITDA profit for
the 6 months to March 2023 and is a result of the increased gross profit as
above. Both Offshore Energy and Marine Civils divisions contributed £1.4m and
£1.5m respectively to the Group's Adjusted EBITDA, highlighting the benefits
of Tekmar's balanced portfolio across energy markets.
Adjusted EBITDA by 6-month period
(Unaudited)
£m 6m 6m 6m 6m 6m 6m 6m
Mar-24 Sep-23 Mar-23 Sep-22 Mar-22 Sep-21 Mar-21
Revenue 16.2 19.7 15.9 17.2 13.0 17.9 13.9
Adjusted EBITDA 1.8 0.0 0.6 (0.3) (1.8) (1.8) (1.1)
Figures for HY 24 exclude Subsea Innovation Limited as treated as discontinued
operation. Comparative information for Sep-23 and Mar-23 has been adjusted to
treat Subsea innovation as a discontinued operation.
Although HY24 reports a reduced revenue of £3.5m versus the prior 6-month
period, adjusted EBITDA was £1.8m higher due to the gross margin improvements
in HY24 and noting H2 23 included two Offshore Energy backlog projects at
lower margins, as was highlighted in the Group's FY 23 results announcement in
March 2024.
Adjusted EBITDA by division £m
£m 6M 6M 12M
Mar24 Mar23 Sep23
Offshore Energy 1.4 (0.3) (1.2)
Marine Civils 1.5 1.5 3.6
Group costs (1.1) (0.6) (1.8)
Total 1.8 0.6 0.6
Figures for HY 24 exclude Subsea Innovation Limited as treated as discontinued
operation. Comparative information for Sep-23 and Mar-23 has been adjusted to
treat Subsea innovation as a discontinued operation.
Overall, the above table highlights the positive impact on Group profitability
with the return to profitability of the Offshore Energy division. This has
contributed to the Group delivering an Adjusted EBITDA margin of 11% for the
Period.
Profit
The result after tax is a loss of £0.7m (HY23: Loss £1.8m, FY23: Loss
£10.1m). The improvement versus the 6-month comparator is due to the gross
margin improvement as set out above.
Balance Sheet
Balance Sheet
£m Mar24 Mar23 Sep23
Fixed Assets 6.7 6.3 6.5
Intangible assets 18.9 23.9 18.9
Inventory 3.2 5.4 2.0
Trade & other receivables 15.1 16.5 17.2
Assets held for sale 5.0 3.2 5.0
Cash 2.7 3.8 3.5
Current Liabilities (13.5) (18.4) (15.6)
Liabilities held for sale (2.8) (2.1) (1.8)
Non-current liabilities (1.4) (1.4) (1.1)
Equity (33.9) (37.2) (34.6)
Fixed Assets
Fixed asset investments have remained largely in line with depreciation
levels. There were no other major capital spends in the period.
Intangible assets
Goodwill of £17.6m (HY23 £22.2m) includes goodwill arising on the original
management buy-out of subsidiaries since 2011. Of the balance £15.0m (HY23:
£19.6m) relates to the Offshore Energy division and £2.6m (HY23: £2.6m)
relates to the Marine Civils division. During HY24 the Group purchased the
minority interest in Ryder Geotechnical Limited for £150,000.
In FY23 the annual impairment review of the goodwill on the balance sheet has
resulted in an impairment charge of £4.6m which related to the offshore
energy division. As detailed in the P&L commentary of the annual statutory
accounts, this was predominantly due to a substantial increase in the Group's
weighted average cost of capital (WACC) which has increased from 13.5% in FY22
to 15.5% in FY23 due to changes in economic conditions and especially
increases in interest rates. No further impairment is considered necessary in
HY24.
Inventory
Inventory on the balance sheet is £3.2m and has reduced by £2.2m to a more
normalised level having been higher at HY23 due to an increase in
work-in-progress in Pipeshield relating to the mobilisation of two large
Middle East contracts awarded in HY23.
Trade and other receivables
Trade and other receivables are £15.1m after adjusting out for the Subsea
Innovation disposal (HY23: £15.6m).
Within the above, trade receivables balance was £10.0m for the 6-months to 31
March 2024 (HY23 £10.8m). Collections are generally well managed, however,
delays in payments from the Middle East and China continue to persist.
Contract assets has decreased to £2.9m (HY23: £4.5m). The reduction is due
to operating contracts in HY23 with more favourable invoicing milestones than
in previous periods.
Cash
Cash balance at the period end to 31 March 2024 was £2.7m offset by bank
borrowings of £6.3m resulting in net debt of £3.6m.
Cash used in operations in the first half of the year was £1.0m, much reduced
from the £3.8m in HY23. We continue to manage our debtor days carefully and
have payment plans in place for the more aged debt.
Current liabilities
Current liabilities, excluding liabilities held for sale, reduced to £13.5m
(HY23: £18.4m), with £4.3m of this reduction relating to reduced deferred
revenue due to timing of customer milestones on projects.
Within the £13.5m in HY24 is £3.0m of CBILs loan consistent with HY23
reporting. The trade loan borrowings also included in current liabilities was
£3.3m as at 31 March 2024 compared to £4.0m at 31 March 2023. The trade loan
remains a flexible facility of £4.0m available for ongoing working capital.
The annual renewal of the banking facilities is currently underway with our
relationship bank.
Other Non-current liabilities
Other Non-current liabilities of £1.4m (HY23: £1.4m) relate to lease
liabilities in relation to IFRS16 and deferred tax liability.
Leanne Wilkinson
CFO
15 May 2024
Consolidated statement of comprehensive income
for the 6M period ended 31 March 2024
6M 6M 12M
ended ended ended
Note 31 Mar 31 Mar 30 Sep 2023
2024 2023 Unaudited
Unaudited Unaudited
£000 £000 £000
Revenue 3 16,211 15,910 35,633
Cost of sales (10,819) (11,530) (27,319)
Gross profit 5,392 4,380 8,314
Administrative expenses (5,413) (5,498) (16,258)
Other operating income 7 17 18
Group operating (loss) (14) (1,101) (7,926)
Analysed as:
Adjusted EBITDA( 1 ) 1,776 607 569
Depreciation (653) (603) (1,172)
Amortisation (336) (322) (586)
Exceptional share based payments charges - - (500)
Impairment of goodwill - - (4,745)
Exceptional bonus payments - - (296)
Foreign exchange (losses)/gains (801) (783) (928)
Restructuring costs - - (268)
Group operating (Loss) (14) (1,101) (7,926)
Finance costs (351) (92) (627)
Finance income 7 2 4
Net finance costs (344) (90) (623)
(Loss) before taxation (358) (1,191) (8,549)
Taxation - 11 (201)
(Loss) for the period from continuing operations (358) (1,180) (8,750)
Loss for the year from discontinued operations (including held for sale) 10 (386) (572) (1,374)
Loss for the year (744) (1,752) (10,124)
Equity-settle share-based payments - (5) 548
Revaluation of property 71 - -
Retranslation of overseas subsidiaries (99) (218) (281)
Total comprehensive income for the period (772) (1,975) (9,857)
Loss attributable to owners of the parent (744) (1,752) (10,124)
Total Comprehensive income attributable to owners of the parent (772) (1,975) (9,857)
(Loss) per share (pence)
Basic 4 (0.55) (2.87) (10.69)
Diluted 4 (0.55) (2.87) (10.69)
Basic loss per share (pence)
From continuing operations 4 (0.26) (1.94) (9.24)
From discontinued operations 4 (0.28) (0.94) (1.45)
1: Adjusted EBITDA, which is defined as profit before net finance costs, tax,
depreciation, amortisation, share based payments charge in relation to one-off
awards, material items of a one-off nature and significant items which allow
comparable business performance is a non-GAAP metric used by management and is
not an IFRS disclosure.
Consolidated balance sheet
as at 31 March 2024
31 Mar 31 Mar 30 Sep 2023
2024 2023 Unaudited
Note Unaudited Unaudited
£000 £000 £000
Non-current assets
Property, plant and equipment 6,670 6,263 6,510
Goodwill and other intangibles 5 18,923 23,932 18,946
Total non-current assets 25,593 30,195 25,456
Current assets
Inventory 3,202 5,374 2,042
Trade and other receivables 6 15,134 16,552 17,182
Cash and cash equivalents 2,662 3,829 5,028
20,998 25,755 24,252
Assets held for sale 10 4,990 3,176 3,547
Total current assets 25,988 28,931 27,799
Total assets 51,581 59,126 53,255
Equity and liabilities
Share capital 1,360 609 1,360
Share premium 72,202 67,653 72,202
Merger relief reserve 1,738 1,738 1,738
Merger reserve (12,685) (12,685) (12,685)
Foreign currency translation reserve (207) (45) (108)
Retained losses (28,527) (20,035) (27,854)
Total equity 33,881 37,235 34,653
Non-current liabilities
Other interest-bearing loans and borrowings 7 719 911 795
Trade and other payables - - -
Deferred tax liability 686 482 300
Total non-current liabilities 1,405 1,393 1,095
Current liabilities
Other interest-bearing loans and borrowings 7 6,616 7,246 6,995
Trade and other payables 6,661 11,084 8,191
Corporation tax payable 29 28 28
Provisions 8 210 - 356
13,516 18,358 15,570
Liabilities held for sale 10 2,779 2,140 1,937
Total current liabilities 16,295 20,498 17,507
Total liabilities 17,700 21,891 18,602
Total equity and liabilities 51,581 59,126 53,255
Consolidated statement of changes in equity
for the 6M period ended 31 March 2024
Share Share premium Merger Merger reserve Foreign currency translation reserve Retained earnings Total equity attributable to owners of the parent Total
capital relief equity
reserve
£000 £000 £000 £000 £000 £000 £000 £000
Balance at 1 October 2022 609 67,653 1,738 (12,685) 173 (18,278) 39,210 39,210
(Loss) for the Period - - - - - (1,752) (1,752) (1,752)
Share based payments - - - - - (5) (5) (5)
Exchange difference on translation of overseas subsidiary - - - - (218) - (218) (218)
Total comprehensive income for the year - - - - (218) (1,757) (1,975) (1,975)
Balance at 31 March 2023 609 67,653 1,738 (12,685) (45) (20,035) 37,235 37,235
(Loss) for the Period - - - - - (8,372) (8,372) (8,372)
Share based payments - - - - - 553 553 553
Exchange difference on translation of overseas subsidiary - - - - (63) - (63) (63)
Total comprehensive income for the year - - - - (63) (7,819) (7882) (7882)
Issue of shares 751 4,549 - - - - 5,300 5,300
Total transactions with owners, recognised 751 4,549 - - - - 5,300 5,300
directly in equity
Balance at 30 September 2023 1,360 72,202 1,738 (12,685) (108) (27,854) 34,653 34,653
(Loss) for the Period - - - - - (744) (744) (744)
Revaluation of property - - - - - 71 71 71
Exchange difference on translation of overseas subsidiary - - - - (99) - (99) (99)
Total comprehensive income for the year - - - - (99) (673) (772) (772)
Balance at 31 March 2024 1,360 72,202 1,738 (12,685) (207) (28,527) 33,881 33,881
Consolidated cash flow statement
for the 6M period ended 31 March 2023
6M ended 6M ended 12M ended
31 March 2024 31 March 2023 30 Sep 2023
Unaudited Unaudited Unaudited
£000 £000 £000
Cash flows from operating activities
Loss before taxation (744) (1,763) (9,923)
Adjustments for:
Depreciation 653 603 1,172
Amortisation of intangible assets 336 322 586
Profit on disposal of fixed assets - (99) -
Share based payments charge - - 537
Impairment of goodwill - - 4,745
Finance costs 351 99 552
Finance income (7) (2) (4)
589 (840) (2,335)
Changes in working capital:
(Increase) / decrease in inventories (1,075) (945) 2,496
Decrease / (increase) in trade and other receivables 277 (5,322) (6,028)
(Decrease) / increase in trade and other payables (313) 3,316 (272)
(Decrease) / increase in provisions (255) - 465
Cash (used) from operations (777) (3,791) (5,674)
Tax (paid) / recovered (208) 11 -
Net cash (outflow) from operating activities (985) (3,780) (5,674)
Cash flows from investing activities
Purchase of property, plant and equipment (426) (331) (1,012)
Purchase of intangible assets (62) (294) (310)
Proceeds from sale of property, plant and equipment - 99 29
Acquisition of subsidiary minority interest (150) - -
Interest received 7 2 4
Net cash (outflow) from investing activities (631) (524) (1,289)
Cash flows from financing activities
Facility drawdown 6,016 5,500 11,526
Facility repayment (6,278) (5,490) (11,941)
Repayment of borrowings under lease obligations (265) (195) (414)
Shares issued - - 5,300
Interest paid (315) (93) (505)
Net cash inflow / (outflow) from financing activities (842) (278) 3,966
Net (decrease) in cash and cash equivalents (2,458) (4,582) (2,997)
Cash and cash equivalents at beginning of year 5,219 8,496 8,496
(280)
Effect of foreign exchange rate changes (99) (218)
Cash and cash equivalents at end of year 2,662 3,696 5,219
Notes
1. GENERAL INFORMATION
Tekmar Group plc (the "Company") is a public limited company incorporated and
domiciled in England and Wales. The registered office of the Company is
Innovation House, Centurion Way, Darlington, DL3 0UP. The registered company
number is 11383143.
The principal activity of the Company and its subsidiaries (together the
"Group") is that of design, manufacture and supply of subsea stability and
protection technology, including associated subsea engineering services,
operating across the global offshore energy markets, predominantly Offshore
Wind.
Forward looking statements
Certain statements in this interim report are forward looking. The terms
"expect", "anticipate", "should be", "will be" and similar expressions
identify forward-looking statements. Although the Board of Directors believes
that the expectations reflected in these forward-looking statements are
reasonable, such statements are subject to a number of risks and uncertainties
and events could differ materially from those expressed or implied by these
forward-looking statements.
2. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The Group's principal accounting policies have been applied consistently to
all of the periods presented, with the exception of the new standards applied
for the first time as set out in paragraph (c) below where applicable.
(a) Basis of preparation
The unaudited consolidated interim financial information has been prepared
under the historical cost convention and in accordance with the recognition
and measurement requirements of UK-adopted international accounting standards
("IFRS"). The condensed consolidated interim financial information does not
constitute financial statements within the meaning of Section 434 of the
Companies Act 2006 and does not include all of the information and disclosures
required for full annual financial statements. It should therefore be read in
conjunction with the Group's Annual Report for the period ended 30 September
2023, which has been prepared in accordance with IFRSs and is available on the
Group's investor website.
As permitted, this interim report has been prepared in accordance with the AIM
rules and not in accordance with IAS 34 "Interim financial reporting".
The accounting policies used in the financial information are consistent with
those used in the Group's consolidated financial statements as at and for the
period ended 30 September 2023, as detailed on pages 88 to 93 of the Group's
Annual Report and Financial Statements for the period ended 30 September 2023,
a copy of which is available on the Group's website, www.tekmargroup.com.
The comparative financial information contained in the condensed consolidated
financial information in respect of the period ended 30 September 2023 has
been extracted from the 2023 Financial Statements, this information has been
restated to show the impact of discontinued operations. Those financial
statements have been reported on by Grant Thornton UK LLP and delivered to the
Registrar of Companies. The report was unqualified and did not contain a
statement under Section 498(2) or 498(3) of the Companies Act 2006. The report
did include a reference to a material uncertainty in relation to going concern
which the auditor drew attention to by way of emphasis without qualifying
their report.
Selected explanatory notes are included to explain events and transactions
that are significant to an understanding of the changes in financial position
and performance of the Group since the last annual consolidated financial
statements as at the period ended 30 September 2023.
The preparation of the condensed consolidated interim financial information
requires management to make judgements, estimates and assumptions that affect
the application of accounting policies and the reported amounts of assets and
liabilities, income and expenses. Estimates and judgements are continually
evaluated and are based on historical experience and other factors, such as
expectations of future events and are believed to be reasonable under the
circumstances. Actual results may differ from these estimates. In preparing
the condensed consolidated interim financial information, the significant
judgements made by management in applying the Group's accounting policies and
the key sources of estimation uncertainty were the same as those applied to
the audited consolidated financial statements for the period ended 30
September 2023.
(b) Going concern
The Group meets its day-to-day working capital requirements through its
available banking facilities which includes a CBILs loan of £3.0m currently
available to 31 October 2024 and a trade loan facility of up to £4.0m that
can be drawn against supplier payments, currently available to 31 July
2024. The latter is provided with support from UKEF due to the nature of the
business activities both in renewable energies and in driving growth through
export lead opportunities. The Group held £5.2m of cash at 30 September 2023
including draw down of the £3.0m CBILS loan and a further £3.6m of the trade
loan facility. There are no financial covenants that the Group must adhere to
in either of the bank facilities.
The Directors have prepared cash flow forecasts to 30 September 2025. The
base case forecasts include assumptions for annual revenue growth supported by
current order book, known tender pipeline, and by publicly available market
predictions for the sector. The forecasts also assume a retention of the
costs base of the business with increases of 5% on salaries and a cautious
recovery of gross margin on contracts. These forecasts show that the Group is
expected to have a sufficient level of financial resources available to
continue to operate on the assumption that the two facilities described are
renewed. Within the base case model management have not modelled anything in
relation to the matter set out in note 9 Contingent Liabilities, as management
have assessed there to be no present obligation.
The Directors have sensitised their base case forecasts for a severe but
plausible downside impact. This sensitivity includes reducing revenue by 15%
for the period to 30 September 2025, including the loss or delay of a certain
level of contracts in the pipeline that form the base case forecast, and a 10%
increase in costs across the Group as a whole for the same period. In
addition, the delays of specific cash receipts have been modelled. The base
case and sensitised forecast also includes discretionary spend on capital
outlay. The Directors note there is further discretionary spend within their
control which could be cut, if necessary, although this has not been modelled
in the sensitised case given the headroom already available. These
sensitivities have been modelled to give the Directors comfort in adopting the
going concern basis of preparation for this condensed consolidated interim
financial information. Further to this, a 'reverse stress test' was performed
to determine at what point there would be a break in the model, the reverse
stress test included reducing order intake by 22.5% and increasing overheads
by 15% against the base case. In addition, the delays of specific cash
receipts have been modelled. The inputs applied to the reverse stress are not
considered plausible.
Facilities - Within the base case, severe but plausible case and reverse
stress test, management have assumed the renewal of both the CBILS loan and
trade loan facility in October 2024 and July 2024 respectively. In the
unlikely case that the facilities are not renewed, the Group would aim to take
a number of co-ordinated actions designed to avoid the cash deficit that would
arise.
The Directors are confident, based upon the communications with the team at
Barclays, the historical strong relationship and recent bank facility renewal
in November 2023, that these facilities will be renewed and will be available
for the foreseeable future. However, as the renewal of the two facilities in
October 2024 and July 2024 are yet to be formally agreed and the Group's
forecasts rely on their renewal, these events or conditions indicate that a
material uncertainty exists that may cast significant doubt on the Group's and
parent company's ability to continue as a going concern.
The Directors are satisfied that, taking account of reasonably foreseeable
changes in trading performance and on the basis that the bank facilities are
renewed, these forecasts and projections show that the Group is expected to
have a sufficient level of financial resources available through current
facilities to continue in operational existence and meet its liabilities as
they fall due for at least the next 12 months from the date of approval of the
interim financial information and for this reason they continue to adopt the
going concern basis in preparing the interim financial information.
(c) New standards, amendments and interpretations
There have been no new accounting standards or changes to existing accounting
standards applied for the first time from 1 October 2023 which have a material
effect on these interim results. The Group has chosen not to early adopt any
new standards or amendments to existing standards or interpretations.
(d) Basis of consolidation
Subsidiaries are all entities over which the Group has control. The Group
controls an entity when the Group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect
those returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group and
are deconsolidated from the date control ceases. Inter-company transactions,
balances and unrealised gains and losses on transactions between group
companies are eliminated.
(e) EBITDA and Adjusted EBITDA
Earnings before Interest, Taxation, Depreciation and Amortisation ("EBITDA")
and Adjusted EBITDA are non-GAAP measures used by management to assess the
operating performance of the Group. EBITDA is defined as profit before net
finance costs, tax, depreciation and amortisation. Material items of a
one-off nature or of such significance they are considered relevant to the
user of the financial statements and share based payment charge in relation to
one-off awards are excluded.
The Directors primarily use the Adjusted EBITDA measure when making decisions
about the Group's activities. As these are non-GAAP measures, EBITDA and
Adjusted EBITDA measures used by other entities may not be calculated in the
same way and hence are not directly comparable.
3. REVENUE AND SEGMENTAL REPORTING
Management has determined the operating segments based upon the information
provided to the executive Directors which is considered the chief operating
decision maker. The Group is managed and reports internally by business
division and markets.
Major customers
In the period ended 31 March 2024 there was one major customer within the
Marine Civils segment, and one major customer in the Offshore Energy segment
that individually accounted for at least 10% of total revenues (2023 6M: two
customers). The revenues relating to these in the period to 31 March 2024 were
£7,017,000 (2023 6M: £7,253,000). Included within this is revenue from
multiple projects with different entities within each customer.
Analysis of revenue by region 6M ending 6M ending 12M ending
31 Mar 2024 31 Mar 2023 30 Sep 2023
Unaudited Unaudited Unaudited
£000 £000 £000
UK & Ireland 2,018 4,382 7,683
Germany 82 721 1,133
Italy 101 - -
Belgium 130 - -
Netherlands - 57 -
Norway - 25 -
Turkey - - 983
Other Europe 161 326 1,152
China 21 1,491 1,676
USA & Canada 203 1,129 3,006
Japan 43 1,034 1,083
South Korea 539 - -
Philippines - 134 1,157
Qatar 1,923 4,108 8,036
Taiwan 4,806 - -
Egypt 5 - -
UAE 334 - -
KSA 4,892 1,665 6,888
Other Middle East - 401 904
Trinidad & Tobago 274 -
Africa 658 - -
Rest of the World 295 163 1,932
16,211 15,910 35,633
Analysis of revenue by market Mar-24 Mar-23 Sep-23
Unaudited Unaudited Unaudited
£000 £000 £000
Offshore Wind 11,293 7,812 17,659
Other offshore 4,918 8,098 17,974
16,211 15,910 35,633
Analysis of revenue by product category Mar-24 Mar-23 Sep-23
Unaudited Unaudited Unaudited
£000 £000 £000
Offshore Energy protection systems & equipment 9,284 7,965 15,844
Marine Civils 6,375 7,064 18,320
Engineering consultancy services 552 881 1,469
16,211 15,910 35,633
Profit and cash are measured by division and the Board reviews this on the
following basis.
Offshore Marine Group/ Total
Energy Civils Eliminations Mar-24
Mar-24 Mar-24 Unaudited Unaudited
Unaudited Unaudited
£000 £000 £000 £000
Revenue 9,836 6,375 - 16,211
Gross profit 2,889 2,503 - 5,392
% Gross profit 29% 39% - 33%
Operating (loss)/ profit 479 628 (1,121) (14)
Analysed as: 1,358 1,467 (1,049) 1,776
Adjusted EBITDA
Depreciation (469) (178) (6) (653)
Amortisation (272) - (64) (336)
Foreign exchange losses (138) (661) (2) (801)
Operating (loss)/ profit 479 628 (1,121) (14)
Interest & similar expenses (25) - (319) (344)
Tax - - - -
(Loss) / profit after tax on continuing operations 454 628 (1,440) (358)
Offshore Marine Group/ Total
Energy Civils Eliminations Mar-24
Mar-24 Mar-24 Unaudited Unaudited
Unaudited Unaudited
£000 £000 £000 £000
Other information
Reportable segment assets 16,090 11,378 24,113 51,581
Reportable segment liabilities (6,498) (3,524) (7,678) (17,700)
Offshore Marine Group/ Total
Energy Civils Eliminations Mar-23
Mar-23 Mar-23 Unaudited Unaudited
Unaudited Unaudited
£000 £000 £000 £000
Revenue 8,846 7,064 - 15,910
Gross profit 2,021 2,359 - 4,380
% Gross profit 23% 33% - 28%
Operating (loss)/ profit (1,381) 982 (702) (1,101)
Analysed as: (318) 1,517 (592) 607
Adjusted EBITDA
Depreciation (454) (144) (5) (603)
Amortisation (218) - (104) (322)
Foreign exchange losses (391) (391) (1) (783)
Operating (loss)/ profit (1,381) 982 (702) (1,101)
Interest & similar expenses 96 195 (381) (90)
Tax 1 - 10 11
(Loss) / profit after tax on continuing operations (1,284) 1,177 (1,073) (1,180)
Offshore Marine Group/ Total
Energy Civils Eliminations Mar-23
Mar-23 Mar-23 Unaudited Unaudited
Unaudited Unaudited
£000 £000 £000 £000
Other information
Reportable segment assets 18,493 13,198 27,435 59,126
Reportable segment liabilities (6,923) (6,885) (8,083) (21,891)
Offshore Marine Group/ Total
Energy Civils Eliminations Sep-23
Sep-23 Sep-23 Unaudited Unaudited
Unaudited Unaudited
£000 £000 £000 £000
Revenue 17,313 18,320 - 35,633
Gross profit 2,988 5,326 - 8,314
% Gross profit 17% 29% - 23%
Operating profit/(loss) (8,191) 2,798 (2,533) (7,926)
Analysed as: (1,195) 3,544 (1,780) 569
Adjusted EBITDA
Depreciation (862) (298) (12) (1,172)
Amortisation (418) - (168) (586)
Share based payments (55) (82) (363) (500)
Impairment of goodwill (4,745) - - (4,745)
Exceptional bonus payments (180) (34) (82) (296)
Foreign exchange losses (675) (255) 2 (928)
Restructuring costs (61) (77) (130) (268)
Operating profit/(loss) (8,191) 2,798 (2,533) (7,926)
Interest & similar expenses (44) (10) (569) (623)
Tax 521 (789) 67 (201)
(Loss) / profit after tax on continuing operations (7,714) 1,999 (3,035) (8,750)
Offshore Marine Group/ Total
Energy Civils Eliminations Sep-23
Sep-23 Sep-23 Audited Audited
Audited Audited
£000 £000 £000 £000
Other information
Reportable segment assets 17,391 10,169 25,695 53,255
Reportable segment liabilities (8,175) (3,208) (7,218) (18,601)
4. EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the earnings attributable
to equity shareholders by the weighted average number of ordinary shares in
issue. Diluted earnings per share are calculated by including the impact of
all conditional share awards.
The calculation of basic and diluted profit per share is based on the
following data:
6M ending 6M ending 12M ending
31 March 2024 31 March 2023 30 Sep 2023
Unaudited Unaudited Unaudited
Earnings (£'000)
Earnings for the purposes of basic and diluted earnings per (744) (1,752) (10,124)
share being profit/(loss) for the year attributable to equity shareholders
Number of shares
Weighted average number of shares for the purposes of basic earnings per share 136,072,626 60,960,484 94,694,962
Weighted average dilutive effect of conditional share awards 7,720,039 562,832 4,346,203
Weighted average number of shares for the purposes of diluted earnings per 143,792,665 61,523,316 99,041,165
share
Profit per ordinary share (pence)
Basic profit per ordinary share (0.55) (2.87) (10.69)
Diluted profit per ordinary share (0.55) (2.87) (10.69)
Basic profit per ordinary share (pence)
From continuing operations (0.26) (1.94) (9.24)
From discontinuing operations (0.28) (0.94) (1.45)
Adjusted earnings per ordinary share (pence)* (0.06) (1.74) (4.49)
The calculation of adjusted earnings per share is based on the following data:
Mar-24 Mar-23 Sep-23
Unaudited Unaudited Unaudited
£000 £000 £000
(Loss) for the period attributable to equity shareholders (744) (1,752) (10,124)
Add back:
Impairment of goodwill - - 4,745
Amortisation on acquired intangible assets 64 104 168
Foreign exchange losses 801 784 926
Share based payment on IPO and SIP at Admission - - 508
Exceptional bonus costs - - 430
Tax effect on above (200) (196) 22
Adjusted earnings (79) (1,060) (3,325)
*Adjusted earnings per share is calculated as profit for the period adjusted
for amortisation as a result of business combinations, exceptional items and
the tax effect of these at the effective rate of corporation tax, divided by
the closing number of shares in issue at the Balance Sheet date. This is the
measure most commonly used by analysts in evaluating the business' performance
and therefore the Directors have concluded this is a meaningful adjusted EPS
measure to present.
5. GOODWILL AND OTHER INTANGIBLES
Goodwill Software Product development Trade name Customer relationships Total
£000 £000 £000 £000 £000 £000
COST
As at 1 October 2022 26,292 294 3,503 1,289 1,870 33,248
Additions - 138 286 - - 424
Assets held for sale - (138) (880) - - (1,018)
As at 31 March 2023 26,292 294 2,909 1,289 1,870 32,654
Additions - - 24 - - 24
Reclassify as tangible fixed assets - (138) - - - (138)
Assets held for sale - 138 - - - 138
As at 30 September 2023 26,292 294 2,933 1,289 1,870 32,678
Additions 150 - 41 - - 191
As at 31 March 2024 26,442 294 2,974 1,289 1,870 32,869
AMORTISATION AND IMPAIRMENT
As at 1 October 2022 4,109 155 2,134 455 1,831 8,684
Charge for the period - 101 220 64 39 424
Assets held for sale - (27) (359) - - (386)
As at 31 March 2023 4,109 229 1,995 519 1,870 8,722
Amortisation charge for the period - 71 238 64 - 373
Impairment charge 4,745 - - - - 4,745
Reclassify as tangible fixed assets - (33) - - - (33)
Assets held for sale - 27 (102) - - (75)
As at 30 September 2023 8,854 294 2,131 583 1,870 13,732
Amortisation charge for the period - - 248 64 - 312
Assets held for sale - - (98) - - (98)
As at 31 March 2024 8,854 294 2,281 647 1,870 13,946
NET BOOK VALUE
As at 30 September 2022 22,183 139 1,369 834 39 24,564
As at 31 March 2023 22,183 65 914 770 - 23,932
As at 30 September 2023 17,438 - 802 706 - 18,946
As at 31 March 2024 17,588 - 693 642 - 18,923
The remaining amortisation periods for software and product development are 6
months to 48 months (2023: 6 months to 48 months).
Goodwill has been tested for impairment. The method, key assumptions and
results of the impairment review are detailed below:
Goodwill is attributed to the CGU being the division in which the goodwill has
arisen. The Group has 2 CGUs and the goodwill related to each CGU as disclosed
below.
Goodwill Mar-24 Mar-23
£000 £000
Offshore Energy Division 14,998 19,593
Marine Civils Division 2,590 2,590
Goodwill is allocated to two CGUs being Offshore Energy and Marine Civils.
Goodwill has been tested for impairment by assessing the recoverable amount of
each cash generating unit. The recoverable amount is the higher of the fair
value less costs to sell (FVLCD) and the value in use. The value in use has
been calculated using budgeted cash flow projections for the next 4 years. A
terminal value based on a perpetuity calculation using a 2% real growth rate
was then added. The next 4 years forecasts have been compiled at individual
CGU level with the forecasts in the first 2 years modelled around the known
contracts which the entities have already secured or are in an advanced stage
of securing. A targeted revenue stream based on historic revenue run rates has
then been incorporated into the cashflows to model contracts that are as yet
unidentified that are likely be won and completed in the year. The forecasts
for year 3 and year 4 are based on assumed growth rates for each individual
entity, the total growth rate for the Group (CAGR 13.5%) are in line with
expected market rate. The value in use calculation models an increase in
revenue for the offshore energy division of 16% across year 3 and year 4 and
then 2% into perpetuity. The growth rates for year 3 and 4 are comparable to
the expected market CAGR. The Group has used the fair value less costs to sell
as the estimate of recoverable amount for one subsidiary of the offshore
energy division, as the FVLCD was in excess of the value in use.
The cashflow forecasts assume growth in revenue and profitability across the
Group. These growth rates are based on a combination of business units
returning to previously experienced results combined with externally generated
market information. The discount rates are consistent with external
information. The growth rates shown are the average applied to the cash flows
of the individual cash generating units and do not form a basis for estimating
the consolidated profits of the Group in the future.
In addition to growth in revenue and profitability, the key assumptions used
in the impairment testing were as follows:
Gross Margin % returning towards FY20 levels for offshore energy division.
A post tax discount rate of 15.5 % WACC (FY23 15.5%) estimated using a
weighted average cost of capital adjusted to reflect current market assessment
of the time value of money and the risks specific to the Group.
Terminal growth rate percentage of 2% (FY23: 2%)
The discount rate used to test the cash generating units was the Group's
post-tax WACC of 15.5%. The goodwill impairment review has been tested against
a reduction in free cashflows. The Group considers free cashflows to be EBITDA
less any required capital expenditure and tax.
The value in use calculations performed for the impairment review, together
with sensitivity analysis using reasonable assumptions, indicate sufficient
headroom for the goodwill carrying value in all of the identified CGU's.
All amortisation charges have been treated as an expense and charged to cost
of sales and operating costs in the income statement.
6. TRADE AND OTHER RECEIVABLES
Mar-24 Mar-23 Sep-23
Unaudited Unaudited Unaudited
£000 £000 £000
Amounts falling due within one year:
Trade receivables not past due 1,639 4,484 2,648
Trade receivables past due (1-30 days) 1,710 2,271 4,738
Trade receivables past due (over 30 days) 6,303 3,057 4,136
Trade receivables not yet due (retentions) 346 876 650
Trade receivables net 9,998 10,688 12,172
Contract assets 2,858 4,475 4,079
Other receivables 879 598 135
Prepayments and accrued income 1,010 537 796
Deferred Tax Asset 389 254 -
15,134 16,552 17,182
Trade and other receivables are all current and any fair value difference is
not material. Trade receivables are assessed by management for credit risk
and are considered past due when a counterparty has failed to make a payment
when that payment was contractually due. Management assesses trade
receivables that are past the contracted due date by up to 30 days and by over
30 days.
The carrying amounts of the Group's trade and other receivables are all
denominated in GBP, USD, EUR and RMB.
There have been no provisions for impairment against the trade and other
receivables noted above. The Group has calculated the expected credit losses
to be immaterial.
The Group continues to operate in global markets where payment practices
surrounding large contracts can be different to those within Europe. The flow
of funds on large capital projects within China tend to move only when the
windfarm developer approves the completion of the project. The Group has a
number of trade receivable balances, within its subsidiary based in China,
which have been past due for more than 1 year. At 31(st) March 2024 the value
of these overdue trade receivables was £1.4m, of a total outstanding trade
receivable balance for the entity of £2.9m. These amounts remain outstanding
at the approval of the condensed consolidated interim financial information.
Management have not provided for the trade receivable balance or made a credit
loss provision on the basis that previous trading history sets a precedent
that these balances will be received. Since 2020, the Group has traded in
China generating £10.1m of revenue, of which £7.2m has been fully received
to date which represents full cash receipt on older projects. The amounts
which remain outstanding are from more recent projects and none of the values
in trade receivables are in dispute with the customer.
7. BORROWINGS
Mar-24 Mar-23 Sep-23
Unaudited Unaudited Unaudited
£000 £000 £000
Current
Trade Loan Facility 3,313 4,000 3,575
Lease liability 303 246 420
CBILs Bank Loan 3,000 3,000 3,000
6,616 7,246 6,995
Non-current
Lease liability 719 911 795
719 911 795
Mar-24 Mar-23 Sep-23
Unaudited Unaudited Unaudited
£000 £000 £000
Amounts repayable
Within one year 6,616 7,246 6,995
In more than one year but less than two years 257 192 288
In more than two years but less than three years 256 257 293
In more than three years but less than four years 206 256 214
In more than four years but less than five years - 206 -
7,335 8,157 7,790
Mar-24 Mar-23 Sep-23
Unaudited Unaudited Unaudited
£000 £000 £000
Average interest rates at the balance sheet dates
Lease liability 5.60 5.60 5.60
Trade Loan Facility 7.50 7.50 7.50
CBILS Bank Loan 7.50 7.50 7.50
The CBILS Bank Loan was renewed in November 2023 and is due for maturity on 31
October 2024. The Trade Loan Facility is due for Maturity on 31 July 2024, as
described in note 2b.
8. PROVISIONS
All provisions are considered current. The carrying amounts and the movements
in the provision account are as follows:
Mar-24 Mar-23 Sep-23
Unaudited Unaudited Unaudited
£000 £000 £000
Carrying amount at period start 356 - -
Additional provision 34 - 465
Amounts utilised (146) - -
Transferred to liabilities held for sale (34) - (109)
210 - 356
The provision recognised in the periods ending 31 March 2024 and 30 September
2023 are for onerous contracts. The Group has assessed that the unavoidable
costs of fulfilling the contract obligations exceed the economic benefits
expected to be received from the contract. The provision relates to two
contracts in the offshore energy division which are expected to be completed
in the year ending September 2024.
9. CONTINGENT LIABILITIES
Contingent liabilities are disclosed in the financial statements when a
possible obligation exists, the existence will be confirmed by uncertain
future events that are not wholly within the control of the entity. Contingent
liabilities also include obligations that are not recognised because their
amount cannot be measured reliably or because settlement is not probable.
As noted by the Group in prior public announcements, there is an emerging
industry-wide issue regarding abrasion of legacy cable protection systems
installed at off-shore windfarms. The precise cause of the issues is not clear
and could be as a result of a number of factors, such as the absence of a
second layer of rock to stabilise the cables. The decision not to apply this
second layer of rock, which was standard industry practice, was taken by the
windfarm developers independently of Tekmar. Tekmar is committed to working
with relevant installers and operators, including directly with customers who
have highlighted this issue, to investigate further the root cause and assist
with identifying potential remedial solutions. This is being done without
prejudice and on the basis that Tekmar has consistently denied any
responsibility for these issues. However, given these extensive uncertainties
and level of variabilities at this early stage of investigations no
conclusions can yet be made.
Tekmar have been presented with defect notifications for 10 legacy projects on
which it has supplied cable protection systems ("CPS"). These defect
notifications have only been received on projects where there was an absence
of the second layer of rock traditionally used to stabilise the cables.
At this stage management do not consider that there is a present obligation
arising under IAS37 as insufficient evidence is available to identify the
overall root cause of the damage to any of the CPS. Independent technical
experts have been engaged to determine the root cause of the damage to the
CPS, Tekmar have reviewed the assessments and concluded that a present
obligation does not exists.
Management acknowledges that there are many complexities with regards to the
alleged defects which could lead to a range of possible outcomes. Given the
range of possible outcomes, management considers that a possible obligation
exists which will only be confirmed by further technical investigation to
identify the root cause of alleged CPS failures. As such management has
disclosed a contingent liability in the condensed consolidated interim
financial information.
Tekmar has received a further 2 defect notifications in relation to alleged
defects with the loosening of VBR fasteners. The precise cause of the issues
is not clear and could be as a result of a number of factors, such as the
incorrect placing of rock bag shielding and restraint. Tekmar is committed to
working with relevant customers, to investigate further the root cause and
assist with identifying potential remedial solutions. This is being done
without prejudice and on the basis that Tekmar has denied any responsibility
for these issues. However, given these extensive uncertainties and level of
variabilities at this early stage of investigations no conclusions can yet be
made.
At this stage management do not consider that there is a present obligation
arising under IAS37 as insufficient evidence is available to identify the
overall root cause of the damage to any of the CPS. Independent technical
experts have been engaged to determine the root cause of the damage to the CPS
and upon completion of these technical assessments, Tekmar will review the
assessment as to whether a present obligation exists. Given the range of
possible outcomes, management considers that a possible obligation exists
which will only be confirmed by further technical investigation to identify
the root cause of alleged CPS failures. As such management has disclosed a
contingent liability in the interim financial information.
Management acknowledges that there are many complexities with regards to the
alleged defects which could lead to a range of possible outcomes. Given the
range of possible outcomes, management considers that determining whether a
possible obligation exists, can only be confirmed by further technical
investigation to identify the root cause of alleged CPS failures. As such
management has disclosed a contingent liability in the interim financial
information.
Tekmar has received a further defect notification in relation to incorrect
coating specification on 1 historic project. This defect notification is in
relation to units which had not yet been installed and have been recoated post
year end at no cost to Tekmar. There are a number of units which have been
installed in relation to the same legacy project which may have the incorrect
coating specification. At this stage management do not consider that there is
a present obligation arising under IAS37 as insufficient evidence is available
to identify whether any unresolved defects exist. Given the range of possible
outcomes, management considers that determining whether a possible obligation
exists, can only be confirmed by further technical investigation to identify
any further units which have may not have been coated to the correct
specification. As such management has disclosed a contingent liability in the
interim financial information.
Tekmar Group plc has taken exemption under IAS37, Paragraph 92 to not disclose
information on the range of financial outcomes, uncertainties in relation to
timing and any potential reimbursement as this could prejudice seriously the
position of the entity in a dispute with other parties on the subject matter
as a result of the early stage of discussions.
10. DISCONTINUED OPERATIONS
The Group is currently in the process of selling one of its subsidiaries,
Subsea Innovation Limited. Therefore, loss for the period has been classed as
discontinued operations, and assets and liabilities categorised as held for
sale.
Operating loss of Subsea Innovation Limited until the 31 March 2024 is
summarised below:
6M 6M 12M
ended ended Ended
31 Mar 31 Mar 2023 Unaudited 30 Sep
2024 2023
Unaudited Unaudited
£000 £000 £000
Revenue 3,327 1,805 4,275
Cost of sales (2,580) (1,290) (3,289)
Gross profit 747 515 986
Administrative expenses (1,135) (1,080) (2,358)
Other operating income 5 - 8
Operating (loss) (383) (565) (1,364)
Analysed as:
Adjusted EBITDA( 1 ) (223) (411) (892)
Depreciation (51) (55) (155)
Amortisation (123) (99) (177)
Share based payments - - (8)
Exceptional items - bonus - - (134)
Foreign exchange gains 14 - 2
Operating (Loss) (383) (565) (1,364)
Finance costs (3) (7) (10)
Finance income - - -
Net finance costs (3) (7) (10)
(Loss) before taxation (386) (572) (1,374)
Taxation - - -
(Loss) for the period from discontinuing operations (386) (572) (1,374)
Most of the assets and all of the liabilities will be disposed of in this
transaction, however, the Group continues to own the land and buildings. The
carrying amount of assets and liabilities to be disposed of are as follows:
31 Mar 31 Mar 30 Sep
2024 2023 2023
Unaudited Unaudited Unaudited
£000 £000 £000
Non-current assets
Property, plant, and equipment 246 199 298
Goodwill and other intangibles 320 632 421
Total non-current assets 566 831 719
Current assets
Inventory 167 194 85
Trade and other receivables 3,914 2,283 2,552
Cash and cash equivalents 343 (132) 191
Total current assets 4,424 2,345 2,828
Assets classified as held for sale 4,990 3,176 3,547
Non-current liabilities
Loans and other borrowings - 46 39
Trade and other payables 341 331 328
Deferred tax liability - 95 203
Total non-current liabilities 341 472 570
Current liabilities
Loans and other borrowings - 45 51
Trade and other payables 2,404 1,623 1,207
Provisions 34 - 109
Total current liabilities 2,438 1,668 1,367
Liabilities classed as held for sale 2,779 2,140 1,937
Cash flows generated by Subsea Innovation Limited for the reporting periods
under review until the period end are as follows:
31 Mar 31 Mar 30 Sep
2024 2023 2023
Unaudited Unaudited Unaudited
£000 £000 £000
Operating activities (785) (73) (1,175)
Investing activities - (156) (177)
Financing activities 937 78 1,524
Cash flows from discontinued operations 152 (151) 172
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