REG - Tekmar Group PLC - Final Results
04/03/2025 07:15
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RNS Number : 2565Z Tekmar Group PLC 04 March 2025
TEKMAR GROUP PLC
("Tekmar Group", the "Group" or the "Company")
FINAL RESULTS
For the year ending 30 September 2024
The Group's financial performance is improving with FY24 in-line with market
expectations for the Period
· Adjusted EBITDA of £1.7m (FY23: £0.6m) on revenue of £33m (FY23:
£36m), in-line with market expectations, highlighting the successful
execution of the Group's profit improvement plan.
· Gross profit of £10.5m (FY23: £8.3m), representing a materially
improved gross profit margin of 32.1% (FY23: 23.3%) as remaining low margin
backlog from previous years has been worked through in the offshore energy
division.
· Operating loss reduced from £7.9m to £3.8m in the year, mainly
reflects the profit improvement plan. FY24 includes an impairment charge of
£1.5m, a provision of £0.5m in respect of an aged debt balance and £0.7m
provision in respect of warranty claims. The prior year includes a £4.7m
impairment charge.
· The Group held £4.6m of cash as at 30 September 2024 with net debt of
£1.6m. This cash position excludes the SCF Capital Partners £18m convertible
loan note facility which remains undrawn and is available to drive growth
through acquisitions.
· During the year, the Group completed the divestment of its subsidiary,
Subsea Innovation Limited for a total cash consideration of £1.9m. This
divestment aligns with Tekmar's strategy to drive profitable growth and
improve its financial performance. As at the year end, £0.2m cash was
received with £1.7m being deferred.
· Order book as at the end of January 2025 of £16.4m and net debt of
£0.4m.
Strategic plan in place to achieve a step-change in scale and transformation
· Refreshed three-year strategy in-place under new CEO, Richard
Turner, who was appointed in September 2024. The plan focuses on achieving
greater scale through accelerated profitable organic growth and complementary
M&A.
· Robust M&A pipeline developed and the Board is actively
assessing M&A opportunities.
· Warranty claims in relation to alleged CPS defects have
progressed. The Group has recognised a net charge of £0.7m in FY24 from a
£5.8m provision which is largely offset by insurance monies received post
year end of £5.2m.
Financial KPIs
Audited 12M Audited 12M Audited 12M
ended ended ended
Sep-24 Sep-23 Sep-22
£m £m £m
Restated Restated
Revenue(1) 32.8 35.6 33.2
Adjusted EBITDA(2) 1.7 0.6 (2.3)
Gross profit % 32% 23% 23%
Net cash/(debt)(3) (1.6) (1.4) 1.5
Commercial KPIs
12M 12M 12M
ended ended ended
Sep-24 Sep-23 Sep-22
£m £m £m
Order Book(4) 16.4 16.7 15.0
Order intake(5) 32.4 37.4 33.2
Notes:
(1) Revenue is the value of sales recognised in the financial statements in the
year.
(2) Adjusted Earnings before interest, tax, depreciation, amortisation and
significant one-off items, as defined in CFO review.
(3) Net cash / (debt) represents total cash less banking facilities.
(4) Order Book is defined as signed and committed contracts with clients.
(5) Order intake is the value of contracts awarded in the in the year.
Current trading and outlook
The Board is encouraged that the market environment is improving and supports
sustained demand for Tekmar's technology and engineering services across our
markets. Moreover, we believe Tekmar's differentiated technology positions the
Group to outperform this improving market. This is supported by the Group's
developing sales pipeline, which the Board expects will convert to orders and
revenue over time.
Accordingly, we believe a reasonable expectation is for EBITDA for FY25 to be
consistent with FY24, and for the phasing of EBITDA generation to be second
half weighted. This is aligned with our primary focus on increasing order
intake through 2025 to position the Group for improved performance in 2026 and
beyond.
The Company continues to maintain tight controls on managing the cash
requirements of the business to support growth and working capital, including
disciplined capex and targeted investment in products and services that
represent the greatest opportunity for near-term growth.
Richard Turner, CEO, commented: "Overall, these results demonstrate we now
have a stronger platform from which we can execute our medium-term plan to
deliver true scale and diversification. FY24 was a transitionary year for
Tekmar, where we focused on the basics - providing high-quality engineering,
delivering on time and maintaining consistent commercial discipline. This
supported the Group reporting its highest level of Adjusted EBITDA since FY20,
and a material improvement in gross margin to 32%. Looking ahead, our markets
are aligned for growth like never before. Our strategy looks to capitalise on
our industry pedigree to drive organic growth across all revenue streams,
leverage our operational gearing to enhance our returns on sales, drive value
through strategic M&A and generate cash to build our reserves and fuel our
growth."
Enquiries:
Tekmar Group plc
Richard Turner, CEO c/o +44 (0)20 4582 3500
Leanne Wilkinson, CFO
Cavendish (Nominated Adviser and Broker)
Peter Lynch / Neil McDonald / Pearl Kellie +44 (0)131 220 9771
Gracechurch PR (Financial media & investor relations) +44 (0)20 4582 3500
Murdo Montgomery / Heather Armstrong
About Tekmar Group plc
Tekmar Group plc collaborates with its partners to deliver robust and
sustainable engineering led solutions that enable the world's energy
transition.
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, bespoke equipment design and build,
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 (http://www.tekmarGroup.co) m.
Subscribe to further news from Tekmar Group at Group News
(http://eepurl.com/cN91l5) .
Chairman's Statement
I joined the Board in April 2023, initially as Non-Executive Director, and was
appointed Chair in June 2024. The period of time with which I have been
involved with Tekmar has strengthened my conviction about the opportunity we
have to make Tekmar a stand-out offshore energy business - a business that
delivers exceptional value for customers and creates significant value for
shareholders. This is what drives us as a Board. We start from a position of
unmatched experience in the offshore wind market and a reputation across the
broader industry for engineering and technical excellence. Our growth strategy
builds on these strengths to create a business of much greater scale, through
both organic growth and M&A. 2025 is where we underpin the foundations of
this growth to support sustained and profitable growth in the years to follow.
2024 was a year of stabilisation for the business and for the industry more
widely. The financial results for the year reflect this, with Adjusted EBITDA
of £1.7m on revenue of £32.8m. Both divisions were profitable at the
Adjusted EBITDA level such that the Group overall delivered its highest level
of Adjusted EBITDA since FY20. This was achieved through disciplined execution
of projects supporting higher gross margin.
Going forward, we are focused on fundamentally transforming the financial
strength of the business through organic growth complemented by meaningful
M&A.
Richard Turner was appointed as CEO in September 2024 and has set the
strategic plan to build this value. Richard has been involved in the energy
industry for over 15 years and brings a strong track record in driving true
scale and transformation in his previous leadership roles.
Our organic growth plan aims to deliver record financial performance for the
Group through outperforming an improving and growing market and benefitting
from our operational leverage.
Our M&A strategy is based on accelerating scale and strengthening our
offering through a logical broadening of the portfolio. Overall, the
successful execution of our strategy will build an exceptional and profitable
platform with the attributes that investors value.
One of our primary responsibilities as a Board is to support and challenge
Richard and the team to deliver from here - to scale the business effectively
and to accelerate growth, whilst critically making Tekmar a durable business
that will be successful "no matter what" the path of energy transition looks
like.
As we execute on these plans, we are fortunate to draw on the experience,
relationships and insights of our Board. It is a marker of our ambition that
in 2024 we were able to secure the appointments of Lars Bondo Krogsgaard and
David Kemp as Non-Executive Directors. Both bring complementary and highly
relevant experience gained at large, global organisations. That they chose to
join Tekmar highlights the scale of the opportunity we have, and we look ahead
with confidence and renewed purpose as we unlock the true potential of Tekmar.
During the year, and in light of the appointments of Lars and David, Ian
Ritchey and Julian Brown stepped down from their roles on the Tekmar Board.
Julian had been a member of the Board since the IPO in 2018, and Ian joined
the Board in 2021.
In February 2025, Alasdair MacDonald stepped down from his position as
Director of the Group. Alasdair had been on the Board of Tekmar for over a
decade, both as Chairman and CEO.
On behalf of the Board, I would like to reiterate our thanks to Alasdair, Ian
and Julian for their contributions to Tekmar over their respective periods,
which included supporting the business to navigate the market-wide challenges
of recent years.
A final comment on our people. Tekmar is dependent on the capability and
commitment of its employees. We are fortunate that our colleagues bring
unrivalled experience and expertise to address what can often be complex
customer requirements. They demonstrate their commitment to Tekmar on a daily
basis and this translates to long-standing service to the business and
underpins our pedigree of engineering excellence.
This commitment to Tekmar has been sustained as the business has navigated its
way through some challenging periods in recent years. As a Board, we
appreciate the hard work of our colleagues as they've supported our improved
performance for the benefit of all our stakeholders.
The pressures in the industry are abating and we have a focused growth
strategy to deliver true scale for Tekmar as a leading global offshore energy
services business.
Our commitment as a Board is to be careful stewards of capital and to promote
the best interests of Tekmar's people and shareholders as we position the
business for long-term success.
Thank you.
Steve Lockard
Chairman
Chief Executive Officer's Review
I joined the business as CEO in September 2024. Having worked across the
offshore energy markets for more than 15 years, I know the Tekmar business,
the customers and supply chain. It is clear to me that Tekmar has exceptional
growth potential.
In December 2024, alongside our trading update for FY24, we communicated to
the market a summary of our three-year plan to transform Tekmar and realise
this potential. We are executing this plan with a business that is positioned
for growth and with great people and strong industry pedigree. The services we
offer across the full lifecycle of offshore energy projects from front end
engineering and design, installation, operation and decommissioning perform a
critical role in ensuring security and certainty of supply from offshore
assets. Our holistic offering across our protection and assurance technology
and engineering services sets us apart in the market and puts us ahead of the
competition.
FY24 Performance and FY25 Outlook
FY24 was a transitionary year for Tekmar, where we focused on the basics -
providing high-quality engineering, delivering on time and maintaining
consistent commercial discipline.
The Group reported Adjusted EBITDA of £1.7m, an increase of £1.1m on a
like-for-like basis reflecting the disposal of Subsea Innovation. The
improvement in EBITDA primarily reflects consistency of execution, with a
material improvement in gross margin to 32% and was achieved despite market
conditions which remained challenging in FY24. This is a stable and solid
platform against which the business can drive profitable growth.
On a statutory basis, the Group's result for the period before tax from
continuing operations was a loss of £4.5m, an improvement of £4m versus the
previous year. FY24 includes an impairment charge of £1.5m, a provision of
£0.5m in respect of an aged debt balance and £0.7m provision in respect of
warranty claims. The prior year includes a £4.7m impairment charge. This
reflects an underlying trading improvement of £0.8m.
The Group closed the year with £4.6m of cash at bank (2023: £5.2m) in
addition to the availability of undrawn working capital debt facilities of
£0.8m with Barclays. The Group's net debt position, including all debt except
right of use property leases, was £1.6m at the end of the financial year
(2023: £1.4m).
As we look ahead, we are encouraged that the market environment is improving
and supports sustained demand for Tekmar's technology and engineering services
across our markets. Moreover, we believe Tekmar's differentiated technology
positions the Group to outperform this improving market. This is supported by
the Group's developing sales pipeline, however it will take time for this
activity to convert to orders and revenue.
Accordingly, we believe a reasonable expectation is for EBITDA for FY25 to be
consistent with FY24, and for the phasing of EBITDA generation to be second
half weighted. This is aligned with our primary focus on increasing order
intake through 2025 to position the Group for improved performance in 2026 and
beyond.
The Company continues to maintain tight controls on managing the cash
requirements of the business to support growth and working capital, including
disciplined capex and targeted investment in products and services that
represent the greatest opportunity for near-term growth.
Favourable Markets Support Sustained Demand for Tekmar's Technology
The key indicators across offshore energy markets are consistent with an
improving market environment.
In offshore wind, there is now a higher volume of projects being sanctioned
than ever before as the market moves into recovery and builds momentum after
the challenges of recent years. The lead indicators support this improving
trajectory, with record Final Investment Decision ("FID") in 2023 and 2024,
with 12.3GW and 13.1GW respectively reversing the pause in 2022 when 0.8GW of
offshore wind capacity was consented. Linked to this, industry analysts
forecast 1,000 turbines per year will be installed through 2028, increasing to
2,000 by 2030. Demand is expanding globally, with Europe remaining the anchor
growth market, particularly the UK. In addition, turbine OEMs are reporting
improved financial performance and cable manufacturers are reporting stronger
backlogs. Activity levels across the oil and gas industry highlight the
continued high and sustained levels of CAPEX and OPEX, with this investment
increasingly recognised as essential to support energy transition. These
factors in turn indicate supply chain capacity will be stretched and supports
sustained demand for Tekmar's technology and engineering services.
Our three-year plan supports a step-change in Tekmar's scale
We have developed a three-year plan rooted in driving significant organic
growth across the Group's existing portfolio of products and services, along
with an iterative product development programme and complementary M&A.
This addresses the importance of Tekmar achieving greater scale with
significant profitability gains driven by the benefit of operational gearing.
The following opportunities are integral to the plan:
· capitalise on our industry pedigree and differentiated technology
to drive order intake and outperform a growing market
· drive higher utilisation rates across the business, achieved
through the balance of scale of projects and duration of projects
· reweighting of revenue streams, with a shift to higher margin
services
· investment in our grouting capability which provides compelling
near-term returns
· incremental investment in our technology roadmap to support
product development and market diversification
· resolve outstanding legacy issues relating to notifications of
potential defects
· continued refinement of the org model and deployment of Tekmar
best practice programme across the business.
Our M&A strategy complements the organic growth opportunity
The organic growth plan is complemented by the Group's ambitious M&A
strategy to deliver additional scale and diversification. This plan is
supported by the £18m of funding available through the SCF convertible loan
note instrument and the relevant experience and relationships across the Board
and the broader business.
Accelerating the level of EBITDA and cash generation of the Group is key in
our assessment of opportunities as we look to build scale, strengthen the
technology and services we offer customers, and expand our reach in targeted
geographies. A robust acquisition pipeline has been developed and the Board is
actively assessing complementary acquisition targets.
Ongoing legacy defect notifications
Tekmar has continued its commitment in working with relevant installers and
operators to investigate further, the root cause of ongoing legacy defect
notifications.
This has been undertaken without prejudice and on the basis that Tekmar has
consistently denied any responsibility for these issues. Given the extensive
uncertainties, the RCA investigations have not concluded that the Tekmar
products are defective.
Working in collaboration with the relevant two customers, Tekmar has explored
the insurance available for such matters notwithstanding Tekmar's position
regarding responsibility and liability. In this regard, the Group has
negotiated a commercial settlement with its EXPL insurance provider of £5.2m
in relation to the above claims. The insurance proceeds are available for use
at the discretion of the Group in settlement of the above claims, with any
unused cash repayable to the insurer.
Within the result for FY24 there is a net charge of £0.7m recognised in the
P&L. This represents the net impact of the provision of £5.8m offset by
the insurance monies received post year end of £5.2m.
The business is positioned for growth, our markets are aligned for growth and
our strategic plan focuses on delivering this growth. I have a track record of
driving growth in my previous leadership roles and we have the opportunity to
do the same at Tekmar building our financial strength. We have renewed purpose
for what Tekmar can achieve and we look forward to updating investors with our
progress over the course of the year.
Richard Turner
Chief Executive Officer
3 March 2025
CFO Review
The Group delivered further improvement in its financial performance in FY24,
delivering the highest full-year Adjusted EBITDA reported by the Group since
FY20. This was driven primarily as a result of significant improvement in
gross profit margins despite market conditions remaining challenging during
the period.
A summary of the Group's financial performance is as follows:
Note, due to the sale of Subsea Innovation Limited in the year, comparative
figures have been restated to exclude Subsea Innovation Limited as this is now
included as discontinued operations in the Statement of Comprehensive Income
Audited 12M ended Audited
Sep -24 12M ended
£m Sep-23
£m
Restated
Revenue 32.8 35.6
Gross Profit 10.5 8.3
Adjusted EBITDA((1)) 1.7 0.6
LBT from continuing operations (4.5) (8.5)
Loss for the period from continuing operations (5.1) (8.8)
EPS (3.74p) (9.2p)
Adjusted EPS((2)) (1.00p) (3.2p)
(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 which are adjusted 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, £160k (£508k FY23),
amortisation on acquired intangibles £98k (£168k FY23), Impairment of
goodwill £1,546k (£4,745k FY23), warranty provision £656k (2023: £nil),
expected credit loss £520k (2023:£nil) and other one-off items £399k (FY23:
£430k) and the tax impact of £351k (FY23: £22k).
On a statutory basis, the Group loss from continuing operations was £5.1m
(FY23: £8.8m loss).
Overview
For the year ended 30 September 2024, the Group reported revenue of £32.8m,
reflecting an 8% decrease compared to FY23. The decrease in revenue is due to
the Marine Civils Division delivering lower revenue in the period as expected
against a particularly strong prior year comparator.
Despite the revenue decrease, the Group achieved a 27% increase in Gross
Profit to £10.5m versus £8.3m in the previous reporting period. This
improvement in margin performance is attributable to the success of the
Group's margin improvement action plans which have been focused on securing
contracts with suitably attractive project economics followed by disciplined
execution of these projects.
The Group's adjusted EBITDA for the year was £1.7m, compared to £0.6m in
FY23. This was primarily as a result of stronger gross margins.
The Group's loss before tax from continuing operations of £4.5m has been
impacted by a goodwill impairment charge in relation to the offshore energy
division of £1.5m, net charge to the P&L of £0.7m in relation to the
warranty related matters and £0.5m in relation to expected credit losses
discussed below.
Discontinued Operation
As part of Tekmar Group's strategic focus on strengthening the Group's
performance through efficient resource allocation and portfolio management,
during the period, the Group completed the divestment of Subsea Innovation
Limited to Unique Group for £1.9m. As a result of the disposal, the
financial performance of Subsea Innovation Limited (sold in May-24) is
classified as a discontinued operation and consolidated into a single line
item in the Statement of Comprehensive Income. This line item includes the
post-tax profit or loss of the discontinued operation, as well as any gains or
losses from the sale or remeasurement of the assets associated with the
discontinued operation. A loss from discontinued operations of £1.3m has been
recognised in FY24, further details can be found in note 26 of the Group
financial statements. The prior periods have been restated to reflect the
discontinued operation ensuring consistency and comparability.
Revenue and Gross Profit
Revenue by operating segment Revenue by market
£m 12M 12M £m 12M 12M
FY24 FY23 FY24 FY23
Offshore Energy 19.5 17.3 Offshore wind 17.1 17.7
Marine Civils 13.3 18.3 Other offshore 15.7 17.9
Total 32.8 35.6 Total 32.8 35.6
Gross profit by operating segment Gross Profit by market
£m 12M 12M £m 12M 12M
FY24 FY23 FY24 FY23
Offshore Energy 5.7 3.0 Offshore wind 5.5 4.8
Marine Civils 4.8 5.3 Other offshore 6.0 5.1
Unallocated costs (1.0) (1.6)
Total 10.5 8.3 Total 10.5 8.3
It is encouraging to see a continuation of revenue growth in the Offshore
Energy division during the period. Revenues in this division increased by 13%
in FY24 and 24% in FY23. The Offshore Energy division incorporates Tekmar
Energy and Ryder business units, both of which are beginning to benefit from
the improvement in the offshore renewables market and a higher volume of
projects being sanctioned.
Marine Civils division experienced a decline in revenue for the 12-month
period of £13.3m, which is £5.0m lower compared with revenue of £18.3m for
the previous 12-month period. The prior year performance had been
particularly strong and included several large Middle East contracts which
were completed in the prior period.
Consistent with the approach of the Offshore Energy division, the Marine
Civils division, comprising Pipeshield International, has focused on
delivering more profitable contracts. As a result, this has led to higher
gross margin for the division in comparison to previous periods since
acquisition, despite the decrease in revenue in the period.
Marine Civils has continued to supply the core Pipeshield product lines as
well as further investment in the grouting service line offering. This
diversification, which has predominantly been in the Middle East to date, is
expected to continue as a growth area for the Group and will be replicated in
other regions as the asset base is increased.
The gross profit for the reporting period for the Group increased by £2.2m to
£10.5m, with a significant increase in gross profit percentage from 23% in
FY23 to 32% in FY24. The growth in profit margins results from the Group's
improved contracting policies and project execution. There was also a
specific focus in the year on strategic supply chain initiatives which further
contributed to the improvement.
Within the Offshore Energy division, gross margins increased from 17% for FY23
to 29% for FY24. FY23 was impacted as the opening order book included two,
sizable, lower margin offshore wind contracts awarded in prior periods and had
experienced material cost escalations from wider macro-economic factors since
their award in 2021. One of these contracts was substantially complete in FY23
with the other being substantially complete in FY24 and will have no material
impact on FY25 margin.
Gross profit margin within Marine Civils increased to 35.9% from 29.1%. This
was primarily due to strong contribution from variation orders in the period
and also service based income from equipment hire. Whilst this level of gross
profit margin is not expected to be repeated in FY25 to the same extent, the
Group is focused on the diversification of revenues to offshore services
alongside traditional protection and stabilisation product sales and has
incrementally invested in the asset base throughout the period to support this
transition.
Operating expenses
Operating expenses for the 12-month period to 30 September 2024 were £14.4m
compared to £16.3m for the previous 12-month period ending 30 September 2023.
The decrease of £1.9m relates largely to a goodwill impairment relating to
the offshore energy CGU of £4.7m in the prior period versus an impairment of
£1.5m in FY24, offset by a £0.5m charge to the P&L for expected credit
losses and £0.7m warranty provision charge to the P&L for ongoing defect
notices. Other costs have been managed carefully and remained stable despite
the inflationary environment.
Adjusted EBITDA
Adjusted EBITDA is a primary measure used by management to monitor and provide
a consistent measure of trading performance from one period to the next. The
adjustments to EBITDA remove material items of a one-off nature or of such
significance that they are considered relevant to the user of the financial
statements as it represents a useful measure that is reflective of the
comparable performance of the business. Foreign exchange losses and gains form
part of the adjustment to EBITDA, this is due to the significant influence of
exchange rate fluctuations versus the Group's reporting currency (GBP) in
FY23. The adjustment to EBITDA for foreign exchange is also shown in FY24 for
consistency and comparability with FY23 results. For transparency of the FY24
result, details of foreign exchange transactions for FY24 are highlighted
below.
The below table shows the adjustments that have been made to calculate
adjusted EBITDA in the year ended 30 September 2024.
EBITDA Reconciliation (£m) 12 months Sep-24 12 months Sep-23
Reported operating (loss)/profit (3.8) (7.9)
Amortisation of acquired intangible assets 0.1 0.1
Amortisation of other intangible assets 0.3 0.4
Depreciation on tangible assets 0.9 0.7
Depreciation on ROU assets 0.4 0.5
EBITDA (2.1) (6.2)
Adjusted items:
Share Based Payments 0.2 0.5
Impairment of goodwill 1.5 4.7
Exceptional items - Bonus - 0.3
Implementation of accounting System 0.2 -
Warranty provision 0.6 -
Expected credit loss 0.5 -
Foreign exchange losses 0.6 0.9
Restructuring costs 0.2 0.3
Adjusted EBITDA 1.7 0.6
EBITDA and Adjusted EBITDA have shown significant improvement from FY23 in
line with our profit improvement focus. Growth in adjusted EBITDA is
attributed to the growth in Gross Profit discussed above. Both divisions
reported positive Adjusted EBITDA for FY24, which has resulted in an overall
positive Adjusted EBITDA for the Group in the period.
Adjusted EBITDA by division £m
£m 12M 12M
FY24 FY23
Offshore Energy 1.7 (1.2)
Marine Civils 2.6 3.5
Group costs (2.6) (1.8)
Total 1.7 0.6
Group costs increased by £0.9m largely due to an increase in staff costs of
£0.4m; wage inflation and increased share based payments related to
management incentive schemes launched, £0.2m increase in professional fees
and £0.1m higher bank facility fees.
Subsea Innovation Divestment
In May 2024, Tekmar Group plc completed the divestment of Subsea Innovation
Limited (SIL) to Unique Group for a cash consideration of £1.9m. This
strategic move was part of Tekmar's broader plan to enhance its financial
stability and focus on core operations. SIL, which specialises in subsea
products and engineering consultancy for the energy sector, had previously
reported an adjusted EBITDA loss of £1.4m in 2023. The sale has allowed
Tekmar to reallocate resources more efficiently and invest in growth areas.
Tekmar retained ownership of Innovation House, the premises previously
occupied by SIL. As part of the transaction, the Group agreed for Subsea
Innovation to use the property on a rent-free basis for a 12-month period
following Completion, with an option for both parties to enter into a lease
agreement for a further 12 months following the rent-free period. This
divestment aligns with Tekmar's strategy to drive profitable growth and
improve its financial performance.
Profit/(loss) for the year
The result for the period is a loss of £6.6m (FY23: Loss of £10.1m) which is
shown in the Statement of Comprehensive Income. The result includes a £1.3m
loss attributable to the disposal of Subsea Innovation with the loss for the
period from continuing operations being £5.3m.
Foreign currency
The Group has continued to see growth in international markets and, as a
result, this increases the Group's exposure to fluctuations in foreign
currency rates. During the year, the Group was impacted by foreign exchange
losses of £0.6m. These losses have been accounted for within operating
expenses.
The Group mitigates exposure to fluctuations in foreign exchange rates by the
use of derivatives, mainly forward currency contracts and options. At the year
end the Group held forward currency contracts to mitigate the risk of
receivables balances for both Euros and Dollars. Any gains or losses on
derivative instruments are accounted for in cost of sales. At the year end the
Group had a derivative asset of £0.3m.
The Group predominately trades in pounds sterling with its principal currency
exposures including approximately 17% of revenue denominated in Euros and 23%
denominated in US dollars. In prior years there has been a material level of
trading in Chinese RMB which has now reduced although the Group had £2m
billed debtors in RMB at the FY24 period end. On certain overseas projects
the Group can, in some cases, create a natural hedge by matching the currency
of the supply chain to the contracting currency, this helps to mitigate the
Group's exposure to foreign currency fluctuations. The Groups net loss from FX
in FY24 is generated predominantly from outstanding balances denominated in
RMB, the uncertainty surrounding the recovery of these balances has resulted
in the Group being unable to effectively hedge against these transactions
which have resulted in FX losses of c.£0.5m over the past 2 financial years.
Cashflows and Balance Sheet
A summary balance sheet is presented below:
Balance Sheet
£m FY24 FY23
Fixed Assets 4.5 6.8
Other non-current assets 19.6 19.4
Inventory 1.9 2.1
Trade & other receivables 20.3 19.7
Cash 4.6 5.2
Current liabilities (20.9) (16.9)
Non-current liabilities (1.8) (1.7)
Equity 28.2 34.6
Other key balance sheet items
Included within other current liabilities is a provision of £5.1m and
non-current liabilities a provision of £0.7m. The provision covers the
warranty matters outlined in note 20 of the Group financial statements, with
these matters having been disclosed as contingent liabilities in the prior
year's financial statements. A corresponding receivable due from the Groups
EXPL insurance of £5.2m is included within Trade and other receivables. The
net charge in the year to the P&L is £0.7m.
Cashflows and cash balances
The gross cash balance at 30 September 2024 was £4.6m with net debt (gross
cash less bank facilities) of £1.6m. The Group's cash position at year end is
comparable to the prior period end, where gross cash was £5.2m with net debt
of £1.4m.
The Group has extended its CBILs facility of £3.0m for a further 12 months to
October 2025 and the UKEF backed trade loan facility of £4.0m remains
available to Tekmar, with the next annual review date with Barclays Bank being
in June 2025. These facilities continue to support the working capital
requirements of the Group in delivering the projects the Group undertakes. The
expected continued renewal of the banking facilities forms part of the
Directors going concern assumptions which are detailed in the notes to the
financial statements below.
Of the £4.0m trade loan facility available, £3.2m was drawn against supplier
payments at the year end and is repayable within 90 days of drawdown. The FY23
comparative is £3.6m. The change in the value borrowed is dependent on the
timing of the loan drawdowns and the Groups immediate funding requirements.
The trade loan facility balance and the CBILS loan of £3.0m are reported
within current liabilities as both are fully repayable within 12 months of the
balance sheet date.
For FY24, the Group generated cash flows from operations of £3.3m. The main
driver of the increase was the successful recovery of final milestone balances
on completed contracts within the Middle East region. Historically these
balances have taken longer to be recovered.
The Group's ageing profile for trade receivables significantly improved, with
almost 50% of balances for FY24 being within standard credit terms compared to
21% in the comparative period. This benefit has arisen from the Group's
enhanced contracting terms and cash collection processes implemented in
previous periods.
The Group holds a debt of £2.0m outside of standard credit terms with a
customer in China.
Historically, the Group has recovered 100% of receivable balances and no
credit losses have previously been accounted for. However, at the year end,
the Group has made a credit loss provision in line with IFRS9 of £0.5m in
relation to a specific historic debt in China. The Group continues to operate
in global markets where payment practices surrounding large contracts differ
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
30 September 2024 the value of these overdue trade receivables was £2.0m, of
a total outstanding trade receivable balance for the entity was £2.2m.
These amounts are not in dispute from the customer, however given the range of
possible outcomes and duration of the outstanding debt, the Group have made an
expected credit loss provision in relation to the outstanding China debt of
£0.5m. Further details can be found in note 16 of the Group financial
statements.
All other receivables are considered to be fully recoverable on the basis that
previous trading history sets a precedent that these balances will be
received.
The net cash outflow from investing activities was £2.0m with Group capital
expenditure in the period totalling £1.9m. These projects primarily relate to
investment in Grouting equipment and other service-related assets which are
able to provide near term cash and profit generation. An additional £0.2m
also related to the Group's main manufacturing facility.
Relating to the sale of Subsea Innovation, the Group received £0.2m cash
proceeds. The remaining deferred consideration of £1.7m relating to this
disposal falls into FY25 and at the year-end is included within other
receivables on the balance sheet. £1.2m of the deferred consideration has
been received since the balance sheet date with a further £0.5m due 12-months
following the transaction date.
Net cash outflows from financing activities of £1.6m related to £0.4m net
movement on the Group's trade loan facility, £0.5m due to the repayment of
lease borrowings with £0.8m attributable to interest payments on the Group's
banking facilities.
As noted in the basis of preparation below in the notes to the financial
statements, due to the required annual renewal of our banking facilities and
the uncertain timing of contract awards the Group has disclosed a material
uncertainty in relation to going concern. Management remains confident that
the relationship with Barclays and positive growth outlook for the offshore
energy market will ensure sufficient liquidity for the Group.
A continued focus on cash management remains to ensure growth and working
capital can be supported as the business scales.
Summary
The business improvement measures implemented in recent years have led to a
stabilised and streamlined business with both divisions now delivering profit
at the Adjusted EBITDA level. There is a strong foundation now from which
the Group can scale and become more resilient. The key drivers of this being
diversified revenues and cashflows, operational gearing benefits and improving
market conditions in sectors in which Tekmar operates.
Leanne Wilkinson
Chief Financial Officer
3 March 2025
Consolidated statement of comprehensive income
for the year ended 30 September 2024
Year ended Year ended
30 Sep 30 Sep
Note 2024 2023
Restated
£000 £000
Revenue 32,808 35,633
Cost of sales (22,291) (27,319)
Gross profit 10,517 8,314
Other administrative expenses (13,195) (16,258)
Expected credit loss (520) -
Warranty provision (656) -
Total administrative expenses (14,371) (16,258)
Other operating income 22 18
Group operating (loss) (3,832) (7,926)
Analysed as:
Adjusted EBITDA( 1 ) 1,715 569
Depreciation (1,277) (1,172)
Amortisation (366) (586)
Exceptional Share based payments charges (160) (500)
Impairment of goodwill (1,546) (4,745)
Exceptional bonus payments - (296)
Exceptional IT costs (169) -
Foreign exchange losses (623) (928)
Warranty provision (656) -
Expected credit loss (520) -
Restructuring costs (230) (268)
Group operating (Loss) (3,832) (7,926)
Finance costs (727) (627)
Finance income 19 4
Net finance costs (708) (623)
(Loss) before taxation from continuing operations (4,540) (8,549)
Taxation (557) (201)
(Loss) for the period from continuing operations (5,097) (8,750)
Discontinued operations (1,316) (1,374)
(Loss) for the period (6,413) (10,124)
Items which will not be classified subsequently to profit or loss
Revaluation of property 75 -
Items which will be classified subsequently to profit or loss
Retranslation of overseas subsidiaries (333) (281)
Total comprehensive income for the period (6,671) (10,405)
(Loss) attributable to owners of the parent (6,413) (10,124)
Total Comprehensive income attributable to owners of the parent (6,671) (10,405)
(Loss) per share (pence) from continuing operations
Basic 10 (3.74) (9.24)
Diluted 10 (3.74) (9.24)
(Loss) per share (pence) from discontinuing operations
Basic 10 (0.97) (1.45)
Diluted 10 (0.97) (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.
2: Comparative period has been restated to reclassify Subsea Innovation
Limited results as discontinued operations.
3: The statement of other comprehensive income comparative period has been
restated to remove equity settled share-based payments, which has increased
the total comprehensive loss by £548,000. This credit entry has now been
presented within transactions with owners in the statement of changes in
equity. This has no impact on retained losses.
Consolidated balance sheet
as at 30 September 2024 30 Sep 30 Sep
2024 2023
Note
£000 £000
Non-current assets
Property, plant and equipment 4,514 6,808
Goodwill and other intangibles 16,708 19,367
Investment property 2,842 -
Total non-current assets 24,064 26,175
Current assets
Inventory 1,878 2,127
Trade and other receivables 20,336 19,734
Cash and cash equivalents 4,630 5,219
Total current assets 26,844 27,080
Total assets 50,908 53,255
Equity and liabilities
Share capital 1,373 1,360
Share premium 72,202 72,202
Merger relief reserve 744 1,738
Merger reserve (12,685) (12,685)
Foreign currency translation reserve (441) (108)
Retained losses (33,029) (27,854)
Total equity 28,164 34,653
Non-current liabilities
Other interest-bearing loans and borrowings 924 834
Trade and other payables - 327
Deferred tax liability 234 503
Provisions 656 -
Total non-current liabilities 1,814 1,664
Current liabilities
Other interest-bearing loans and borrowings 6,554 7,046
Trade and other payables 8,503 9,398
Corporation tax payable 647 29
Provisions 5,226 465
Total current liabilities 20,930 16,938
Total liabilities 22,744 18,602
Total equity and liabilities 50,908 53,255
The Group financial statements were approved by the Board and authorised for
issue on 3 March 2025 and were signed on its behalf by:
Leanne Wilkinson
Chief Financial Officer
Company registered number: 11383143
Consolidated statement of changes in equity
for the year ended 30 September 2024
Share Merger reserve Retained earnings Total equity attributable to owners of the parent Total
capital Share premium equity
Foreign currency translation reserve
Merger
relief
reserve
£000 £000 £000 £000 £000 £000 £000 £000
Balance at 30 September 2022 609 67,653 1,738 (12,685) 173 (18,278) 39,210 39,210
(Loss) for the Period - - - - - (10,124) (10,124) (10,124)
Exchange difference on translation of overseas subsidiary - - - - (281) - (281) (281)
Total comprehensive income for the year - - - - (281) (10,124) (10,405) (10,405)
Share based payments - - - - - 548 548 548
Issue of shares 751 4,549 - - - 5,300 5,300
-
Total transactions with owners, recognised 751 4,549 - - - 548 5,848 5,848
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 - - - - - (6,413) (6,413) (6,413)
Revaluation of property - - - - - 75 75 75
Exchange difference on translation of overseas subsidiary - - - - (333) - (333) (333)
Total comprehensive income for the year - - - - (333) (6,338) (6,671) (6,671)
Share based payments - - - - - 169 169 169
Issue of shares, net of transaction costs 13 - - - - 13 13
-
Total transactions with owners, recognised 13 - - - - 169 182 182
directly in equity
Transfer following disposal of subsidiary - - (994) - - 994 - -
Balance at 30 September 2024 1,373 72,202 744 (12,685) (441) (33,029) 28,164 28,164
Consolidated cash flow statement
for the year ended 30 September 2024
12M ended 12M Ended
30 Sep 2024 30 Sep 2023
£000 £000
Cash flows from operating activities
(Loss) before taxation (5,856) (9,923)
Adjustments for:
Depreciation 1,365 1,327
Amortisation of intangible assets 483 763
Loss on disposal of fixed assets 41 -
Loss on disposal of subsidiary 1,316 -
Share based payments charge 193 537
Impairment of goodwill 1,546 4,745
Unrealised foreign gains (276) -
Finance costs 727 552
Finance income (19) (4)
(480) (2,003)
Changes in working capital:
Decrease / (Increase) in inventories 82 2,496
(Increase) / decrease in trade and other receivables (2,533) (6,360)
(Decrease) / Increase in trade and other payables 790 (272)
Increase in provisions 5,439 465
Cash (used in) / generated from operations 3,298 (5,674)
Tax recovered - -
Net cash (outflow) / inflow from operating activities 3,298 (5,674)
Cash flows from investing activities
Purchase of property, plant and equipment (1,697) (1,012)
Purchase of intangible assets (235) (310)
Proceeds on sale of property, plant and equipment 71 29
Proceeds / (outflows) from sale of subsidiary (112) -
Interest received 19 4
Net cash (outflow) from investing activities (1,954) (1,289)
Cash flows from financing activities
Facility drawdown 11,413 11,526
Facility Repayment (11,805) (11,941)
Repayment of borrowings under Lease obligations (436) (414)
Shares issued 13 5,300
Interest paid (795) (505)
Net cash inflow from financing activities (1,610) 3,966
Net (decrease) / increase in cash and cash equivalents (266) (2,997)
Cash and cash equivalents at beginning of year 5,219 8,496
Effect of foreign exchange rate changes (322) (280)
Cash and cash equivalents at end of year 4,630 5,219
Notes to the Group financial statements
for the year ended 30 September 2024
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
Grindon Way, Aycliffe Business Park, Newton Aycliffe, DL5 6SH. 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.
Statement of compliance
The financial information set out in this preliminary announcement does not
constitute the Group's statutory financial statements for the period ended 30
September 2024 or 30 September 2023 as defined in section 435 of the Companies
act 2006 (CA 2006) but is derived from those audited financial statements.
Statutory financial statements for 2023 have been delivered to the Registrar
of Companies and those for 2024 will be delivered in due course. The auditors
reported on those accounts; their reports were unqualified and did not contain
a statement under either Section 498(2) or Section 498(3) of the Companies Act
2006. For the year ended 30 September 2024 and period to 30 September 2023
their report contains a material uncertainty in respect of going concern
without modifying 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.
Forward looking statements
Certain statements in this Annual 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 years 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 results for the year ended 30 September 2024 have been prepared in
accordance with UK-adopted International Accounting Standards ("IFRS"). The
financial statements have been prepared on the going concern basis and on the
historical cost convention modified for the revaluation of Freehold property
and certain financial instruments. The comparative period represents 12 months
to 30 September 2023.
Tekmar Group plc ("the Company") has adopted all IFRS in issue and effective
for the year.
(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 2025 and a trade loan facility of up to £4.0m that
can be drawn against supplier payments, currently available to 31 July 2025.
The latter is provided with support of 80% 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 £4.6m of cash at 30 September 2024
including draw down of the £3.0m CBILS loan and a further £3.1m 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 31 March 2026. 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 consistent
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 and
refinanced respectively. Within the base case model management have modelled
the outflow of cash of £5.8m in relation to note 9 Provisions within the
going concern period which is offset against the corresponding insurance
receivable within the same period, 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 17%
(£10m equivalent) for 18 month the period to 31 March 2026, to model the
potential loss or delay of a certain level of contracts in the pipeline that
form the base case forecast, and a further 5% 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
include 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 these financial
statements. 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 £15m (60% of unsecured revenue)
and increasing overheads by 7% against the base case. In addition, the delays
of specific cash receipts have been modelled, this results in elimination of
liquidity headroom in the final month in the going concern period. The severe
but plausible case includes mitigating actions such as delayed capital
expenditure spend.
Facilities - Within the base case, severe but plausible case and reverse
stress test, management have assumed the renewal of trade loan facility in
July 2025 and renewal or conversion of the CBILS loan into a term loan in
October 2025. 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 2024, that these facilities will be renewed and will be available
for the foreseeable future. The renewal of the two facilities in October 2025
and July 2025 are yet to be formally agreed and the Group's forecasts rely on
their renewal.
Contract Award and timings - In the severe but plausible scenario, management
has adjusted the base case forecast to account for the potential downside
impact of order intake not being converted within the expected timescales.
This adjustment results in a 17% reduction in revenue over the entire going
concern period. This sensitised model shows that there is sufficient cash
headroom to continue to operate the business.
The Group operates on a contract basis and during the normal course of
business, contracts are expected to be executed within specific timeframes
during the forecast period. If the Group fails to secure a number of
significant contracts, in line with its forecasted timeframes, during a period
of lower cash reserves cash headroom would be breached. Management does not
consider this to be a likely outcome based on current backlog levels being
representative of prior periods coupled with a strong pipeline visibility,
opportunities at preferred supplier status and further anticipated contracts
awards within the required timescales. Such contract awards would provide
sufficient cash resources for the going concern period.
Both the required renewal of the facilities and contract award timing
represent events or conditions which would indicate a material uncertainty
that may cast significant doubt on the Group's and the 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
financial statements and for this reason they continue to adopt the going
concern basis in preparing the financial statements.
(c) New standards, amendments and interpretations
The new standards, amendments or interpretations issued in the year, with
which the Group has to comply with, have not had a significant effect impact
on the Group. There are no standards endorsed but not yet effective that
will have a significant impact going forward.
(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) Revenue
Revenue (in both the offshore energy and the marine civils markets) arises
from the supply of subsea protection solutions and associated equipment,
principally through fixed fee contracts. There are also technical consultancy
services delivered through subsea energy.
To determine how to recognise revenue in line with IFRS 15, the Group follows
a 5-step process as follows:
1. Identifying the contract with a customer
2. Identifying the performance obligations
3. Determining the transaction price
4. Allocating the transaction price to the performance obligations
5. Recognising revenue when / as performance obligation(s) are
satisfied
Revenue is measured at transaction price, stated net of VAT and other sales
related taxes.
Revenue is recognised either at a point in time, or over-time as the Group
satisfies performance obligations by transferring the promised services to its
customers as described below.
i) Fixed-fee contracted supply of subsea protection
solutions
For the majority of revenue transactions, the Group enters individual
contracts for the supply of subsea protection solutions, generally for a
specific project in a particular geographic location. Each contract generally
has one performance obligation, to supply subsea protection solutions. When
the contracts meet one or more of the criteria within step 5, including the
right to payment for the work completed, including profit should the customer
terminate, then revenue is recognised over time. If the criteria for
recognising revenue over time is not met, revenue is recognised at a point in
time, normally on the transfer of ownership of the goods to the customer.
For contracts where revenue is recognised over time, an assessment is made as
to the most accurate method to estimate stage of completion. This assessment
is performed on a contract-by-contract basis to ensure that revenue most
accurately represents the efforts incurred on a project. For the majority of
contracts this is on an inputs basis (costs incurred as a % of total forecast
costs).
There are also contracts which include the manufacture of a number of
separately identifiable products. In such circumstances, as the deliverables
are distinct, each deliverable is deemed to meet the definition of a
performance obligation in its own right and do not meet the definition under
IFRS of a series of distinct goods or services given how substantially
different each item is. Revenue for each item is stipulated in the contract
and revenue is recognised over time as one or more of the criteria for over
time recognition within IFRS 15 are met. Generally, for these items, an output
method of estimating stage of completion is used as this gives the most
accurate estimate of stage of completion. On certain contracts variation
orders are received as the scope of contract changes, these variation orders
are considered on a case by case basis to determine whether they form a
separate performance obligation in their own right or an addition to the
original performance obligation. The same revenue recognition criteria discuss
above is then applied to the variation order.
In all cases, any advance billings are deferred and recognised as the service
is delivered.
ii) Manufacture and distribution of ancillary
products, equipment.
The Group also receives a proportion of its revenue streams through the sale
of ancillary products and equipment. These individual sales are formed of
individual purchase orders for which goods are ordered or made using inventory
items. These items are recognised on a point in time basis, being the delivery
of the goods to the end customer.
iii) Provision of consultancy services
The entities within the offshore energy division also provide
consultancy-based services whereby engineering support is provided to
customers. These contracts meet one or more of the criteria within step 5,
including the right to payment for the work completed, including profit should
the customer terminate. Revenue is recognised over time on these contracts
using the inputs method.
Tekmar Group plc applies the IFRS 15 Practical expedient in respects of
determining the financing component of contract consideration: An entity need
not adjust the promised amount of consideration for the effects of a
significant financing component if the entity expects, at contract inception,
that the period between when the entity transfers a promised good or service
to a customer and when the customer pays for that good or service will be one
year or less.
Accounting for revenue is considered to be a key accounting judgement which is
further explained in note 3.
(f) 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. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of the Group financial statements under IFRS requires the
Directors to make estimates and assumptions that affect the reported amounts
of assets and liabilities. Estimates and judgements are continually evaluated
and are based on historical experience and other factors including
expectations of future events that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates.
The Directors consider that the following estimates and judgements are likely
to have the most significant effect on the amounts recognised in the Group
financial statements.
(a) Critical judgements in applying the entity's accounting policies
Revenue recognition
Judgement is applied in determining the most appropriate method to apply in
respect of recognising revenue over-time as the service is performed using
either the input or output method. Further details on how the policy is
applied can be found in note 2(e).
(b) Critical accounting estimates
Revenue recognition - stage of completion when recognising revenue overtime
Revenue on contracts is recognised based on the stage of completion of a
project, which, when using the input method, is measured as a proportion of
costs incurred out of total forecast costs. Forecast costs to complete each
project are therefore a key estimate in the financial statements and can be
inherently uncertain due to changes in market conditions. For the partially
complete projects in Tekmar Energy at year end if the percentage completion
was 1% different to management's estimate the revenue impact would be
£116,830. Within Pipeshield International there were a number of projects in
progress over the year end and a 1% movement in the estimate of completion
would impact revenue by £36,940. However, the likelihood of errors in
estimation is small, as the businesses have a history of reliable estimation
of costs to complete and given the nature of production, costs to complete
estimate are relatively simple.
Recoverability of contract assets and receivables
Management judges the recoverability at the balance sheet date and makes a
provision for impairment where appropriate. The resultant provision for
impairment represents management's best estimate of losses incurred in the
portfolio at the balance sheet date, assessed on the customer risk scoring and
commercial discussions. Further, management estimate the recoverability of any
accrued income balances relating to customer contracts. This estimate includes
an assessment of the probability of receipt, exposure to credit loss and the
value of any potential recovery. Management base this estimate using the most
recent and reliable information that can be reasonably obtained at any point
of review. The Group have recognised a credit loss provision in relation to a
specific historic aged trade receivable (See note 5)
Impairment of Non-Current assets
Management conducts annual impairment reviews of the Group's non-current
assets on the consolidated statement of financial position. This includes
goodwill annually, development costs where IAS 36 requires it, and other
assets as the appropriate standards prescribe. Any impairment review is
conducted using the Group's future growth targets regarding its key markets of
offshore energy and marine civils. Sensitivities are applied to the growth
assumptions to consider any potential long-term impact of current economic
conditions. Provision is made where the recoverable amount is less than the
current carrying value of the asset. Further details as to the estimation
uncertainty and the key assumptions are set out in note 6.
Provision for warranty costs and recognition of related insurance income
In accordance with IAS 37, the company recognises a provision when it has a
present obligation as a result of past events, it is probable that an outflow
of resources will be required to settle the obligation, and a reliable
estimate can be made of the amount of the obligation. The estimation and
calculation of the value of provisions involves significant judgement,
particularly in determining the likelihood, cost and timing of warranty
related issues.
Additionally, the company may receive insurance receipts to cover certain
warranty claims. These receipts are recognised as an asset only when it is
virtually certain that reimbursement will be received if the company settles
the obligation. The timing and amount of such receipts can be uncertain,
requiring careful assessment and judgement to ensure accurate financial
reporting. Post year end, the Group had £5.2m of cash receipts from insurance
in relation to warranty related matters. The Group recognised this balance
within other receivables on the balance sheet at the financial year end.
4. REVENUE AND SEGMENTAL REPORTING
Management has determined the operating segments based upon the information
provided to the Board of Directors which is considered the chief operation
decision maker. The Group is managed and reports internally by business
division and market for the year ended 30 September 2024.
Major customers
In the year ended 30 September 2024 there were two major customers within the
Group that individually accounted for at least 10% of total revenues (2023:
three customers). The revenues relating to these in the year to 30 September
2024 were £11,085,000 (2023: £13,913,000). Included within this is revenue
from multiple projects with different entities within the Group.
Analysis of revenue by region 12M ending 12M ending
30 Sep 2024 30 Sep 2023
Restated
£000 £000
UK & Ireland 5,836 7,683
Germany 439 1,133
Turkey - 983
Italy 101 -
Other Europe 413 1,152
USA & Canada 555 3,006
China 665 1,676
Japan 102 1,083
Philippines - 1,157
Taiwan 7,696 -
South Korea 828 -
Qatar 5,222 8,036
KSA 4,674 6,888
UAE 2,695 -
Abu Dhabi 225 -
Africa 2,129 -
India 543 -
Other Middle East 40 904
Rest of the World 645 1,932
32,808 35,633
Analysis of revenue by market 12M ending 12M ending
30 Sep 2024 30 Sep 2023
Restated
£000 £000
Offshore Wind 17,100 17,658
Other offshore 15,708 17,975
32,808 35,633
Analysis of revenue by product category 12M ending 12M ending
30 Sep 2024 30 Sep 2023
Restated
£000 £000
Offshore Energy protection systems & equipment 17,916 15,844
Marine Civils 13,688 18,320
Engineering consultancy services 1,204 1,469
32,808 35,633
Analysis of revenue by recognition point 12M ending 12M ending
30 Sep 2024 30 Sep 2023
Restated
£000 £000
Point in Time 1,889 3,252
Over Time 30,919 32,381
32,808 35,633
At 30 September 2024, the Group had a total transaction price £15,471k (2023:
£19,462k) allocated to performance obligations on contracts which were
unsatisfied or partially unsatisfied at the end of the reporting period. The
amount of revenue recognised in the reporting year to 30 September 24 which
was previously recorded in contract liabilities was £2,709k (2023: £3,188k)
EBITDA and cash are measured by division and the Board reviews this on the
following basis.
Offshore Marine
Energy Civils Group/ Total
2024 2024 Eliminations 2024
£000 £000 £000 £000
Revenue 19,465 13,343 - 32,808
Inventory recognised as an expense (9,842) (7,059) - (16,901)
Other cost of sales (3,900) (1,490) - (5,390)
Gross profit 5,379 5,138 - 10,517
% Gross profit 29% 36% - 32%
Administrative expense (6,692) (3,078) (3,155) (13,195)
Warranty provision (656) - - (656)
Expected credit loss (520) - - -
Other operating income 1 9 12 22
Operating (loss)/ profit from continuing operations (2,414) 1,726 (3,143) (3,832)
Analysed as: 1,702 2,582 (2,569) 1,715
Adjusted EBITDA
Depreciation (811) (454) (12) (1,277)
Amortisation (268) - (98) (366)
Exceptional share based payment charges (46) (6) (108) (160)
Exceptional IT costs (46) - (123) (169)
Foreign Exchange losses (222) (398) (3) (623)
Warranty provision (656) - - (656)
Impairment of goodwill (1,546) - - (1,546)
Expected credit loss (520) - - (520)
Restructuring costs - - (230) (230)
Operating (loss)/ profit (2,413) 1,724 (3,143) (3,832)
Finance income 18 1 - 19
Finance costs (74) (6) (647) (727)
Tax (496) (334) 273 (557)
(Loss) / profit after tax from continuing operations (2,965) 1,385 (3,517) (5,097)
Offshore Marine
Energy Civils Group/ Total
2024 2024 Eliminations 2024
£000 £000 £000 £000
Other information
Reportable segment assets 17,119 11,405 22,385 50,908
Reportable segment liabilities (12,022) (3,673) (7,249) (22,944)
The goodwill and other intangible assets allocated to Group for the purposes
of internal reporting are £13,903k for Offshore Energy and £2,805k for
Marine Civils.
Offshore Marine
Energy Civils Group/ Total
2023 2023 Eliminations 2023
Restated Restated Restated
£000 £000 £000 £000
Revenue 17,323 18,320 - 35,633
Inventory recognised as an expense (12,272) (12,166) - (24,438)
Other cost of sales (2,053) (828) - (2,881)
Gross profit 2,988 5,326 - 8,314
% Gross profit 17% 29% - 23%
Administrative expenses (11,185) (2,528) (2,545) (16,258)
Other operating income 6 - 12 18
Operating (loss)/ profit from continuing operations (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)
Exceptional share based payment charges (55) (82) (363) (500)
Impairment of goodwill (4,745) - - (4,745)
Exceptional bonus payments (180) (34) (82) (296)
Foreign exchange gains/(losses) (675) (255) 2 (928)
Restructuring costs (61) (77) (130) (268)
Operating (loss)/ profit (8,19) 2,798 (2,533) (7,926)
Finance income 3 1 - 4
Finance costs (48) (10) (569) (627)
Tax 521 (789) 67 (201)
(Loss) / profit after tax from continuing operations (7,715) 2,000 (3,035) (8,750)
Offshore Marine
Energy Civils Group/ Total
2023 2023 Eliminations 2023
£000 £000 £000 £000
Other information
Reportable segment assets 17,391 10,169 25,695 53,255
Reportable segment liabilities (8,175) (3,208) (7,219) (8,602)
Note - Comparative figures have been restated to remove Subsea Innovation
Limited as reclassified as discontinued operations.
5. 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:
30 Sep 2024 30 Sep 2023
Continuing operations Discontinued operations Continuing operations Discontinued operations
Earnings (£'000)
Earnings for the purposes of basic and diluted earnings per share being (5,097) (1,316) (8,750) (1,374)
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 136,305,536 136,305,536 94,694,962 94,694,962
Weighted average dilutive effect of conditional share awards 8,121,261 8,121,261 4,346,203 4,346,203
Weighted average number of shares for the purposes of diluted earnings per 144,586,797 144,586,787 99,041,165 99,041,165
share
Profit per ordinary share (pence)
Basic profit per ordinary share (3.74) (0.97) (9.24) (1.45)
Diluted profit per ordinary share (3.74) (0.97) (9.25) (1.45)
Adjusted earnings per ordinary share (pence)* (1.00) (0.97) (3.19) (1.30)
The calculation of adjusted earnings per share is based on the following data:
30 Sep 2024 30 Sep 2023
Continuing operations Discontinued operations Continuing operations Discontinued operations
£000 £000
(Loss) for the period attributable to equity shareholders (5,097) (1,316) (8,750) (1,374)
Add back:
Impairment of goodwill 1,546 - 4,745 -
Amortisation on acquired intangible assets 98 - 168
Exceptional share based payment 160 - 508 -
Exceptional staff costs (bonus and restructuring) 230 - 296 134
Exceptional IT costs 169 - - -
Warranty provision and legal fees 656 - - -
Expected credit loss 520 - - -
Tax effect on above 351 - 22 -
Adjusted earnings (1,367) (1,316) (3,011) (1,240)
* Adjusted earnings per share is calculated as profit for the period adjusted
for amortisation as a result of business combinations, one off items, share
based payments 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.
6. 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 - - 311 - - 311
As at 30 September 2023 26,292 294 3,814 1,289 1,870 33,559
Additions 150 - 85 - - 235
Disposals - (272) (845) - - (1,117)
Discontinued operations (234) - (880) (738) (445) (2,297)
As at 30 September 2024 26,208 22 2,174 551 1,425 30,380
AMORTISATION AND IMPAIRMENT
As at 1 October 2022 4,109 155 2,135 455 1,831 8,684
Charge for the period - 139 456 129 39 763
Impairment charge 4,745 - - - - 4,745
As at 30 September 2023 8,854 294 2,590 584 1,870 14,192
Amortisation charge for the year - - 385 98 - 483
Eliminated on disposal - (272) (844) - - (1,116)
Impairment charge 1,546 - - - - 1,546
Discontinued operations - - (576) (412) (445) (1,433)
As at 30 September 2024 10,400 22 1,555 270 1,425 13,672
NET BOOK VALUE
As at 30 September 2022 22,183 139 1,369 834 39 24,564
As at 30 September 2023 17,438 - 1,224 705 - 19,367
As at 30 September 2024 15,808 - 619 281 - 16,708
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 2024 2023
£000 £000
Offshore Energy Division 13,218 14,848
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 value in use of the
cash generating unit. The value in use has been calculated using budgeted cash
flow projections for the next 5 years. The forecasts have been compiled at
individual CGU level with the first year 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 years 2 to 5 are based on assumed compound annual growth rates (CAGR). The
CAGR applied across the 5-year period were 15.1% for the Offshore Energy CGU
and 10% for the Marine Civils CGU. Gross margin assumptions applied range from
the overall group margin for FY24 to a level in line with the margin reported
for the Marine Civils segment. The value in use calculation models an
increase in revenue for both CGU's of 2% into perpetuity after year 5.
The cashflow forecasts assume growth in revenue and a corresponding increase
in gross margin levels across the Group to bring the overall group margin
broadly in line with the margin reported for the Marine Civils segment. These
growth rates are based on past experience and market conditions and 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:
· A post tax discount rate of 14.3 % 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 14.3%. 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.
Marine Civils
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 the Marine Civils CGU.
Offshore Energy
The value in use calculations performed for the impairment review were
£1,546k lower than the carrying value of the Offshore Energy CGU. As a
result, an impairment charge of £1,546k has been recognised in the P&L
for the year ended 30 September 2024 against the goodwill apportioned to the
Offshore Energy CGU.
The value in use calculations have a range of assumptions, which if changed
would lead to a change in the impairment charge recognised. To assess these
changes management have run a model which sensitises the assumption on EBITDA
generated in the offshore wind division.
In the base case model, management have assumed varying growth rates across
the 5 year period, with an average CAGR across the period of 15.1%. If the CGU
fell short of the revenue growth by 1% in each year of the model a further
impairment of £2,737k would be recognised.
In the base case model, management have assumed varying growth rates across
the 5 year period, with an average CAGR across the period of 15.1%. If the CGU
fell short of the revenue growth by 1% in each year and gross margin fell by
1% in each period of the model a further impairment of £4,707k would be
recognised. If revenue is stable but gross margin fell by 1% in each period of
the model a further impairment of £2,042k would be recognised.
All amortisation charges have been treated as an expense and charged to cost
of sales and operating costs in the income statement.
7. TRADE AND OTHER RECEIVABLES
30 Sep 30 Sep
2024 2023
£000 £000
Amounts falling due within one year:
Trade receivables not past due 3,978 2,963
Trade receivables past due (1-30 days) 1,517 4,822
Trade receivables past due (over 30 days) 2,744 5,547
Trade receivables not yet due (retentions) 259 650
Expected credit loss (520) -
Trade receivables net 7,978 13,982
Contract assets 3,590 4,628
Other receivables 637 328
Warranty insurance debtor 5,165 -
Prepayments and accrued income 977 796
Deferred consideration on sale of subsidiary 1,742 -
Derivative asset 247 -
20,336 19,734
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.
The Group assesses on a forward-looking basis the expected credit losses (ECL)
associated with its financial assets. The Group has the following types of
financial assets that are subject to the expected credit loss model:
· Trade receivables arising from sale of goods and provision of
consultancy services
· Contract assets relating to the sale of goods and provision of
consultancy services
The Group recognizes a loss allowance for such losses at each reporting date.
The measurement of ECL reflects:
1. An unbiased and probability-weighted amount that is determined by
evaluating a range of possible outcomes.
2. The time value of money.
3. Reasonable and supportable information that is available without undue cost
or effort at the reporting date about past events, current conditions, and
forecasts of future economic conditions.
Methodology
The Group applies the simplified approach permitted by IFRS 9, which requires
expected lifetime losses to be recognized from initial recognition of the
receivables. The Group uses a provision matrix to calculate ECLs for trade
receivables. The provision rates are based on days past due for Groupings of
various customer segments that have similar loss patterns by geographical
region and product type. The expected loss rates are based on the payment
profiles of sales over a period of 5 years before 30 September 2024.
To measure the expected credit losses, trade receivables and contract assets
have been Grouped based on shared credit risk characteristics and the days
past due. The contract assets relate to unbilled work in progress and have
substantially the same risk characteristics as the trade receivables for the
same types of contract. The Group has therefore concluded that the expected
loss rates for trade receivables are a reasonable approximation of the loss
rates for the contract assets.
Key Assumptions
The key assumptions used in estimating ECL are as follows:
- Historical credit loss experience.
- Adjustments for forward-looking information such as economic forecasts and
industry trends.
- The impact of macroeconomic factors on the creditworthiness of customers.
On that basis, the loss allowance as at 30 September 2024 and 30 September
2023 was determined as follows for both trade receivables and contract assets:
31 Sep 24 - £'000 Not yet due < 3 Months past due 3m - 12m past due > 12m past due
Expected loss rate 0% 0% 0% 23%
Carrying amount - Trade receivables 4,273 2,240 - 2,021
Carrying amount - Contract assets 3,590 - - -
Loss Allowance Nil Nil Nil 520
Historically the Group has recovered 100% of receivable balances and no credit
losses have previously been accounted for. 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 30 September
2024 the value of these overdue trade receivables was £2.0m, of a total
outstanding trade receivable balance for the entity of £2.2m, These amounts
remain outstanding at the approval of the financial statements. The Group made
an expected credit loss provision in relation to the outstanding balances due
to its Subsidiary within China. The provision is calculated on the weighted
probabilities of the potential range of outcomes in relation to the
outstanding balance.
All other receivables are considered to be 100% recoverable on the basis that
previous trading history sets a precedent that these balances will be
received.
Trade receivables and contract assets are written off where there is no
reasonable expectation of recovery. Indicators that there is no reasonable
expectation of recovery include, amongst others, the failure of a customer to
engage in a repayment discussion with the Group.
Impairment losses on trade receivables and contract assets are presented as
net impairment losses within operating profit. Subsequent recoveries of
amounts previously written off are credited against the same line item.
Reconciliation of Loss Allowance
The movement in the allowance for credit losses during the year was as
follows:
£'000 30 Sep 30 Sep
2024 2023
Opening balance - -
Increase in loss allowance 520 -
Closing Balance 520 -
8. BORROWINGS
30 Sep 30 Sep
2024 2023
£000 £000
Current
Trade Loan Facility 3,183 3,575
Lease liability 371 471
CBILS Bank Loan 3,000 3,000
6,554 7,046
Non-current
Lease liability 924 834
924 834
2024 2023
£000 £000
Amount repayable
Within one year 6,554 7,049
In more than one year but less than two years 344 327
In more than two years but less than three years 351 290
In more than three years but less than four years 175 214
In more than four years but less than five years 54 -
7,478 7,880
The above carrying values of the borrowings equate to the fair values.
2024 2023
% %
Average interest rates at the balance sheet date
Lease liability 5.92 5.60
Trade Loan Facility 7.19 7.50
CBILS Bank Loan 7.50 7.50
The CBILS Bank Loan was renewed in July 2024 and is due for maturity on 31
October 2025. The trade Loan Facility has been renewed in July 2024 and is due
for Maturity on 31 July 2025, as described in note 2b.
Lease liability
This represents the lease liability recognised under IFRS 16. The assets
leased are shown as a right of use asset within Tangible Fixed Assets and
relate to the buildings from which the Group operates, along with leased items
of equipment and computer software.
The asset and liability have been calculated using a discount rate between
3.25% and 7.25% based on the inception date of the lease.
These leases are due to expire between October 2024 and June 2029.
Cash flows from financing activities
An analysis of cash flows from financing activities is provided as follows:
Lease liabilities Loans & borrowings Total
£000 £000 £000
Balance at 1 October 2022 402 6,990 7,392
Changes from financing cash flows
Proceeds from loans & borrowings - 11,526 11,526
Payment of loans & borrowings (11,941) (11,941)
Payment of lease liabilities (414) - (414)
Total changes from financing cash flows (414) (415) (829)
Other changes
New leases 1,270 - 1,270
Interest expense 47 505 552
Payment of interest - (505) (505)
Total other changes 1,317 - 1,317
Balance at 30 September 2023 1,305 6,575 7,880
Balance at 1 October 2023 1,305 6,575 7,880
Changes from financing cash flows
Proceeds from loans & borrowings - 11,413 11,413
Repayment of Loans & Borrowings - (11,805) (11,805)
Payment of lease liabilities (514) - (514)
Total changes from financing cash flows (514) (392) (906)
Other changes
New leases 494 - 494
Interest expense 78 569 647
Payment of interest - (569) (569)
Adjustments to lease calculation (8) - (8)
Disposal r.e. discontinued operations (60) - (60)
Total other changes 504 - 504
Balance at 30 September 2024 1,295 6,183 7,478
9. PROVISIONS & CONTINGENT LIABILITIES
All provisions are considered current. The carrying amounts and the movements
in the provision account are as follows:
Onerous contracts
£000 Warranty provision Total
£000 £000
Carrying amount at 1 October 2022 - - -
Additional provision 465 - 465
Amounts utilised - - -
Reversals - -
Carrying amount at 30 September 2023 465 - 465
Carrying amount at 1 October 2023 465 - 465
Additional provision - 5,821 5,821
Amounts utilised (404) - (404)
Reversals - -
Carrying amount at 30 September 2024 61 5,821 5,882
£5.2m of the warranty provision has been included as current liability as
outflow of economic resources is expected within one year. The remaining
provision (£0.7m) is expected to be paid in a period of greater than one year
and therefore is included in non-current liabilities.
Onerous Contracts
The provision unwound in the year ending 30 September 2024 is 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 one contract in the offshore energy
division (2023: two contracts) which are expected to be completed in the year
ending September 2025.
Warranty Provisions
As noted by the Group in prior public announcements, there is a historic
industry-wide issue regarding abrasion of legacy cable protection systems
installed at off-shore windfarms. The precise cause of the issues in each
instance is not always clear and could be as a result of a number of factors,
such as the decision by windfarm developers to exclude a second layer of rock
to stabilise the cables.
Since the emergence of the issue, Tekmar has been 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 has been undertaken without
prejudice and on the basis that Tekmar has consistently denied any
responsibility for these issues. Given the extensive uncertainties the, the
RCA investigations have not concluded that the Tekmar products are defective.
Post the financial year end, the Group entered commercial settlement
discussions with [2 customers] to resolve disputes related to the legacy
defect notifications on 9 projects with alleged CPS failures. The aggregate of
the expected outflows under the proposed settlement is £5.2m in full and
final settlement of the 9 claims. The provision has been estimated based on
the proposed settlement value. In addition to the above a further provision of
£0.7m has been made in respect of 1 legacy project with one of the above
customers.
Working in collaboration with the relevant 2 customers, Tekmar have sought to
explore insurance available for such matters not withstanding Tekmar's
position regarding responsibility and liability. In this regard, the Group
have negotiated a commercial settlement with its EXPL insurance provider of
£5.2m in relation to the above claims. The insurance proceeds are available
for use at the discretion of the Group in settlement of the above claims, with
any unused cash repayable to the insurer. The insurance receipt post year end
is evidence that the insurance amount was virtually certain at year end, as
such the Group have recognised the insurance income in the year ended 30
September 2024 with a corresponding insurance receivable recognised in the
statement of financial position at 30 September 2024.
Tekmar has received a further defect notification in relation to incorrect/out
of specification coating application on 1 historic project. The nature of this
defect notification is entirely separate to the legacy defect issues disclosed
above. There are a number of units which have been installed in relation to
the this legacy project and discussions with the customer are ongoing in
regards to the solution. Management believe that the most likely solution
would result in an outflow of economic benefits of c£0.2m to provide a
resolution to the issue.
The expected outflow of economic resources from the warranty matters has been
recognized as an expense on the face of the statement of profit and loss for
the year ended 30 September 2024. This value is shown net of the insurance
receivable in accordance with IAS 37.
Tekmar Group plc has taken exemption under IAS37, Paragraph 92 to not disclose
information on the uncertainties in relation to timing and the assumptions
used to calculate the provision 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 settlement discussions.
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 a historic
industry-wide issue regarding abrasion of legacy cable protection systems
installed at off-shore windfarms. The precise cause of the issues in each
instance is not always clear and could be as a result of a number of factors,
such as the decision by windfarm developers to exclude a second layer of rock
to stabilise the cables.
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 in each case 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 2 legacy projects (in
addition to those disclosed as provisions) 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 financial statements.
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
On 2nd May 2024, Subsea Innovation Limited was sold for £1,951,000 with
payments due in instalments up until May 2025 resulting in a loss of
£547,000.
Operating profit of Subsea Innovation Limited until the date of disposal, and
the profit and loss from remeasurement and disposal of assets and liabilities
classified as held for sale are summarised as follows:
30 Sep 24 30 Sep 23
£000 £000
Revenue 3,792 4,275
Cost of sales (2,937) (3,289)
Employee benefits expense (763) (1,911)
Depreciation and amortisation (197) (223)
Other expenses (311) (224)
Other income 327 8
Operating profit (89) (1,364)
Net finance income/(costs) 3 (10)
Loss from discontinued operations before tax (86) (1,374)
Tax expense 140 -
Profit/(loss) for the period / year 54 (1,374)
Loss on measurement and disposal
Loss before tax on disposal (1,370) -
Total loss on remeasurement and disposal (1,370) -
Loss for the year from discontinued operations (1,316) (1,374)
Cash flows generated by Subsea Innovation Limited for the reporting periods
under review until its disposal were as follows:
30 Sep 24 30 Sep 23
£000 £000
Operating activities 48 (1,180)
Investing activities (3) (186)
Financing activities (178) 1,538
Total cash flows (133) 172
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