REG - Tekmar Group PLC - Interim Results
21/06/2023 07:15
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RNS Number : 3612D Tekmar Group PLC 21 June 2023
TEKMAR GROUP PLC
("Tekmar Group", the "Group" or the "Company")
UNAUDITED INTERIM RESULTS
For the 6-month period ending 31 March 2023
Tekmar Group (AIM: TGP), a leading provider of technology and services for the
global offshore energy markets, announces its half year results for the
6-month period ending 31 March 2023 ("H1 2023" or the "Period").
Headlines
The Group's financial performance is improving and is in-line with management
expectations for the Period
· Revenue of £17.7m (HY22: £13.0m) with strong growth across both
Offshore Energy (37%) and Marine Civils (35%) divisions, compared with prior
year comparator
· Gross profit margin for the Period increased to 28% (HY22: 22%),
driven by strong variation and commercial management
· Adjusted EBITDA loss of £0.6m (HY22: loss of £1.8m),
attributable to non-cash FX movement of £0.8m during the Period. Excluding
this FX loss Adjusted EBITDA is £0.2m, reflecting stronger underlying trading
performance and enhanced margins.
· On a like for like basis, excluding FX gain of £149k in HY22 and
£0.8m loss in HY23, there is a £2.2m improvement in underlying trading
EBITDA YoY
· On a statutory basis Group loss before tax was £1.8m (HY22:
£3.2m loss)
· Expect business to break even at an Adjusted EBITDA level for the
current financial year, with revenue in the region of £40m, of which over 90%
is already secured
Record order book and recent landmark contract awards highlight the appeal of
Tekmar's differentiated and engineering-led solutions, and an improving market
environment for commissioning offshore energy projects
· In December 2022, selected to design, manufacture and supply 172
Cable Protection Systems (CPS) for Dogger Bank C Offshore Wind Farm, following
the previously announced Dogger Bank A & B contracts, which when delivered
is expected to be the world's largest global offshore wind project
· Awarded US$10m of contract in January 2023 for pipeline support
and protection for a major subsea customer in the Middle East
· £5m contract awarded in May 2023 to design, manufacture and
supply Cable Protection System Solution ("CPS") for delivery in 2024
· The above contract awards support growth in the order book to
£26m as at the end of May 2023, a record high for the Group
Business stabilised and balance sheet significantly strengthened
· In April 2023, the Group successfully completed an equity
fundraise with SCF and other shareholders totalling £5.2m, net of expenses.
This significantly strengthened the cash position of the Group post period end
· Ongoing strategic partnership with SCF, with Colin Welsh and
Steve Lockard appointed to the Board and additional investment of £18m
available through the committed convertible loan note facility ("CLN")
· Cash on the balance sheet of £3.7m as at 31 March 2023, with net
debt of £3.3m as the £3m CBILs Loan and the £4m trade Loan were fully
drawn. This excludes the fundraising and CLN facility referenced above. Cash
on the balance sheet as at end of May 23 was £2.8m with net debt of £1m.
The £3m CBILs loan continued to be fully drawn and £0.8m of the £4m trade
loan was drawn.
H1 2023 financials
6M ending Mar-23 6M ending Mar-22 12M ending
Unaudited Unaudited Sep-22
£m £m Audited
£m
Revenue 17.7 13.0 30.2
Adjusted EBITDA(1) (0.6) (1.8) (2.1)
Sales KPIs
6M ending Mar-23 6M ending Mar-22 12M ending
Unaudited Unaudited Sep-22
£m £m Audited
£m
Order Book(2) 23.7 20.1 15.6
Order intake(3) 24.5 22.7 33.3
Enquiry Book(4) 423 302 370
Book to Bill(5) 1.4 1.7 1.2
Alasdair MacDonald, CEO, commented:
"We are delighted to have successfully concluded the strategic review process,
welcoming SCF as a highly complementary strategic partner and significantly
strengthening the balance sheet with the fundraise we completed in April. With
our lower risk, lower cost and differentiated offering resonating strongly
with the industry, the business can look forward now with real confidence to
leveraging our lead position as the market accelerates its investment in
offshore wind through 2030. Our near-term priority remains restoring
profitability to the business, creating a solid platform to drive further
profitable growth as the business scales, supported by investment, to create a
leading offshore energy products and services business. As we complete this
transition, we continue to expect the business to break even at an Adjusted
EBITDA level for the current financial year, with revenue in the region of
£40m, ahead of the business generating positive Adjusted EBITDA in FY24."
Notes:
(1) Adjusted EBITDA is defined as profit before finance costs, tax, depreciation,
amortisation, share based payments charge, and exceptional items is a non-GAAP
metric used by management and is not an IFRS disclosure.
(2) Order Book is defined as signed and committed contracts with clients.
(3) Order intake is the value of contracts awarded in the Period, regardless of
revenue timing.
(4) Enquiry Book is defined as all active lines of enquiry within the Tekmar
Group. When converted expected revenue recognition within 3 years.
(5) Book to Bill is the ratio of order intake to revenue.
Enquiries:
Tekmar Group plc
Alasdair MacDonald, CEO +44 (0)1325 349 050
Leanne Wilkinson, CFO
Singer Capital Markets (Nominated Adviser and Joint Broker)
Rick Thompson / George Tzimas / Alex Emslie +44 (0)20 7496 3000
Berenberg (Joint Broker)
Ben Wright / Ciaran Walsh +44 (0)20 3207 7800
Bamburgh Capital Limited (Financial media & investor relations) +44 (0) 131 376 0901
Murdo Montgomery
About Tekmar Group plc
Tekmar Group plc (LON:TGP) collaborates with its partners to deliver robust
and sustainable engineering led solutions that enable the world's energy
transition.
Through our Offshore Energy and Marine Civils Divisions we provide a range of
engineering services and technologies to support and protect offshore wind
farms and other offshore energy assets and marine infrastructure. With near 40
years of experience, we optimise and de-risk projects, solve customer's
engineering challenges, improve safety and lower project costs. Our
capabilities include geotechnical design and analysis, simulation and
engineering analysis, 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 Darlington, UK, Tekmar Group has an extensive global reach
with offices, manufacturing facilities, strategic supply partnerships and
representation in 18 locations across Europe, Africa, the Middle East, Asia
Pacific and North America.
For more information visit: www.tekmargroup.co.uk
(http://www.tekmargroup.co.uk) .
Subscribe to further news from Tekmar Group at Group News
(http://eepurl.com/cN91l5) .
INTERIM REPORT FOR THE 6 MONTHS TO 31 MARCH 2023
CEO overview
A key priority for me since assuming the role of CEO has been to stabilise the
business and restore profitability as we transition the Group to a stronger
engineering-led culture that sets the business up for sustained success,
delivering lower installed cost and lower risk solutions as a leading offshore
energy products and services business. Today we are reporting an Adjusted
EBITDA loss of £0.6m, when adjusted for non-cash FX headwinds of £0.8m, this
provides an underlying trading performance of £0.2m Adjusted EBITDA profit.
For the 12-month period to September 2022 we reported a loss at the Adjusted
EBITDA level of £2.1m, being a loss of £1.8m for H1 and £0.3m for H2; a
£2.9m loss was reported for the 12 month period to September 2021. The
financial performance for the second half of 2022 and the first half of 2023
illustrates the actions we have undertaken to stabilise the business are
working. It is particularly encouraging to see the improved financial
trajectory coming through given the transition has been undertaken through a
period of industry headwinds, compounded by the impact of legacy contracts on
gross margin, and the Group's relatively weak balance sheet. With the
successful conclusion of the strategic review completed in April 2023, the
strategic partnership with SCF and the related fundraise, the stability of the
business has been secured and we can look forward with renewed confidence. Now
our attention is firmly focused on driving the profitability of the business
through operational improvements, and winning in the market, leveraging our
strong reputation in the industry and working closely and effectively with our
valued customers and partners.
Review of near-term priorities
Return to Sustained Profitability. We are currently over 18 months into a
programme of business wide improvement initiatives in areas such as
engineering discipline, project risk management, contract negotiations and
sales effectiveness, disciplined cash management, supply chain strategy and
operational excellence. With the benefit of the recent investment, we are
taking the opportunity to target further efficiency gains across the business.
We are developing a number of action plans on this, including greater
integration, and we will update the market further on these plans in due
course. These initiatives are all in support of our defined wider group
strategy to strengthen our integrated, engineering-led offering and gross
margin stabilisation and profit improvement. Strengthening the core business
today, allows the operating leverage of the business to drive a step-change in
profitability as volume growth accelerates reflecting a strengthening market
outlook.
Building a better quality pipeline and order book. As we focus on restoring
sustainable profitable growth for the business, we are encouraged by the
strength of our enquiry book, which is consistent with a recovering market,
and are seeing signs of improving supply chain pricing to acceptable margin
levels. We are seeing the strengthening of the market, with larger volumes
of enquiries in the market converting into orders, supporting the record order
book of £25.7m as at May 2023.
Consistent with our margin improvement focus, we are focused on commercial
discipline and leveraging our technology leadership to capture more favourable
project economics as we convert the enquiry book into firm orders. New
contracts are being secured at more favourable project margins at the outset
and include more favourable cost escalation protection and milestone payments
to de-risk the projects for Tekmar. We are encouraged by the progress here in
securing lower risk projects and our opportunity to partner with the tier 1
contractors and developers to address lower risk, lower installed cost
solutions for complex engineering projects as the offshore wind market
develops and matures.
Cash flow and liquidity. We have strengthened the liquidity position of the
Group but remain focused on a disciplined approach to cash, working capital
management and improved cash generation. Cash used in operations in the first
half of £3.8m reflects short term working capital requirements which are
expected to unwind over the course of the year. We are also in discussion with
our relationship bank relating to the renewal of our existing trade and CBILs
facilities, with these discussions progressing in line with planned
timeframes.
Customer and employee engagement. A consequence of running a strategic review
process is that it creates uncertainty for customers, employees and partners.
Employee engagement remained high through the period and the successful
conclusion has re-energised confidence across the Group. All employees were
awarded a cash bonus of £1,000 in recognition of their considerable efforts
in supporting the business through the period of strategic review.
Customer engagement has been an area of focus for the senior leadership group,
and we have prioritised making sure customers understand the positive
consequences of securing the strategic investment from SCF and how this
transforms the future prospects of the Group whilst maintaining Tekmar's
identity as an independent partner in the industry. There is mutual excitement
about the leadership role a stronger Tekmar can play in the industry, an
industry which requires the delivery of larger projects requiring more complex
engineering solutions that we are well set up to deliver.
As previously reported, we are continuing to support our industry partners to
assess and address some issues relating to legacy Offshore Wind Systems
installed at offshore wind farms. As we have previously highlighted, the
precise cause of the issues are not clear and could be as a result of a number
of factors, such as the absence of a second layer of rock to stabilise the
cables. We remain committed to working with relevant installers and operators,
including directly with customers who have highlighted any issues, to
investigate the root cause and assist with identifying potential remedial
solutions. Whilst this consumes company resource and senior management
attention, it is consistent with our responsible approach to supporting the
industry to resolve these legacy issues.
In addition, we have introduced new solutions for customers and have embedded
the industry learnings to support our superior technical offering for new
installations alongside using our expertise and capability to support clients
across the wider lifecycle of offshore wind projects. This supports our aim
to diversify into the opex market whilst offering our customers a lower risk
solution and a lower installed cost through our industry leading knowledge.
Leadership. Leanne Wilkinson has been appointed as Group CFO, having assumed
the role of interim CFO in December 2022. Leanne has been with the business
since June 2020, is a highly capable finance leader with a deep understanding
of the business and was recruited with a view to assuming the role of CFO in
time. Additionally, the team has been further strengthened with Bill Boyle
joining the Group as Chief Commercial Officer, effective April 2023. I have
known Bill for three decades and he brings great industry experience and a
track record as a leader in global energy services businesses.
We are also benefitting from the high calibre additions of Colin Welsh and
Steve Lockard to the Board, as representatives of SCF. Colin is a Partner of
SCF and brings extensive global energy sector expertise, including through his
role as Head of International Energy Investment Banking at Simmons &
Company International prior to joining SCF in 2017. Colin's track record in
the industry as an adviser and investor in building valuable companies is a
major asset for us to draw on. Steve brings over 35 years of experience in
global operations leadership and has been an operating partner of SCF since
2021 where he supports energy transition investments and company platform
building, both highly relevant to the journey Tekmar is on. He brings great
industry perspective on building valuable businesses in the global wind and
broader energy industry, including through his roles at NASDAQ-quoted TPI
Composites, where he was formerly CEO and is current Chairman, and where he
led the company's transformation from a New England based boat builder to the
largest independent global wind blade manufacturer. He is also an advisor to
Keystone Tower Systems, an innovative manufacturer of wind turbine towers.
Recap of the Strategic Investment and Partnership with SCF.
We are excited to be partnering with SCF and look forward to delivering the
value of this partnership on the public market for the benefit of all
investors and stakeholders. SCF and Tekmar have a shared ambition to build a
top tier global offshore wind services company, through the company's core
organic growth strategy and, at the right time, through acquisitive growth.
The investment by SCF is a major catalyst for creating this growth platform
and by any measure is transformational for the future prospects of the Group.
The Board also recognised the exceptional track record of SCF, built over 30
plus years, in supporting value creation in offshore energy companies.
It is also worth highlighting that SCF identified Tekmar as the business of
choice for building a global, offshore wind services platform. This recognised
Tekmar's market leading position in the industry and also reflects the
diligence undertaken by SCF to validate the growth opportunity and Tekmar's
strong standing in the industry, particularly with its customers.
Alongside the initial equity investment of £4.275m through SCF (investing
through SCF-IX L.P.) and Steve Lockard, SCF Partners has also committed up to
a further £18m investment through the creation of the CLN. The CLN is
intended to provide the Company with funding for the primary purpose of
financing acquisition-led growth, although is also available to finance
significant organic growth initiatives that are consistent with the Group's
strategic plan. Accordingly, the CLN is an effective mechanism of providing
medium-term visibility of growth funding for the Company and creates a
"war-chest" to be deployed as and when appropriate to drive acquisition led
growth.
Market overview
The global market for offshore wind, the Group's core market, continues to
strengthen as energy markets are aligned to the commitment of the United
Nation's global coalition for net-zero emissions by 2050. Most notably:
· Global capacity is forecast to reach over 269GW (installed or
underway) by 2030, from a commissioned capacity of 59.2GW today, with current
visibility of over 300 projects. ((1))
· Continued energy security concerns triggered by Russia's invasion
of Ukraine, with many countries accelerating their renewable energy agenda.
· Over 47% of projects entering construction by 2035 are forecast
to be in the UK, US and China, markets where Tekmar is already active and
well-positioned to benefit from future growth. ((1))
· The global operation and maintenance (O&M) market continues
to scale up and is now valued at £19.5bn per year by 2035, offering
significant growth potential for the Group. ((1))
· The emerging floating wind market outlook is now at 13.9GW,
installed or underway by 2030, motivated by a requirement to cut carbon
emissions and reduce dependency on Russian energy. ((1))
Adjacent offshore energy markets are strengthening due to renewed investment
in offshore energy markets given the importance of energy security.
Current trading and outlook support our confidence in meeting previously set
expectations
The financial performance of the business, for the first half of the current
financial year was in-line with expectations. Trading remains satisfactory
so far in the second part of the year, such that the Board's expectation
continues to be for the business to break even at an Adjusted EBITDA level for
the current financial year, with revenue in the region of £40m, of which over
90% is already secured. The effects of existing legacy contracts on margin
begin to diminish in FY23 and as a result of improved contractual and
commercial discipline, the Board continues to expect the business to generate
positive Adjusted EBITDA in FY24.
Post period-end events
On 20(th) April 2023, the Company announced a £4.275m initial investment by
SCF and Steve Lockard and a placing and retail offer of £2.1m with the
company shareholders, together with a committed £18m convertible loan note
facility from SCF. This concluded the Formal Sale Process and the Strategic
Review which commenced in June 2022.
On 31 May 2023, the Company announced a contract award with a total value in
excess of £5m for the design and supply of Tekmar Group's flagship Generation
10 cable protection system (CPS) product and associated ancillaries, helping
to consolidate the Group's strong position in the growing offshore wind
market.
On 21(st) June 2023, the Company announced the appointment of Leanne Wilkinson
as Chief Financial Officer (CFO). Leanne had held the post of Interim CFO
since 1(st) December 2022 and has been with the Group since June 2020.
Alasdair MacDonald
CEO
21 June 2023
Sources:
(1) 4C Offshore, Offshore Wind Farms Project Opportunity Pipeline Database,
Version Q1 2023
Financial review
A summary of the Group's financial performance is as follows:
6M ending 6M ending Mar-22 12M ending
Mar-23 Unaudited Sep-22
Unaudited £m Audited
£m £m
Revenue 17.7 13.0 30.2
Adjusted EBITDA((1)) (0.6) (1.8) (2.1)
LBT (1.8) (3.2) (5.2)
Adjusted EPS((2)) (2.87p) (4.63p) (9.0p)
Gross cash 3.7 10.4 8.5
Net cash((3)) (3.3) 4.7 1.5
(1) Adjusted EBITDA is a key metric used by the directors. Earnings before
interest tax depreciation and amortisation are adjusted certain non-cash and
exceptional items.
(2) Adjusted EPS is a key metric used by the Directors and measures earnings
after adjusting for non-recurring items. Earnings for EPS calculation are
adjusted for amortisation on acquired intangibles (£104k HY23, £376k HY22).
(3) Net cash reflects total cash in bank less cash borrowings (trade loan
facility and CBILS). The £10.4m cash balance at Mar 22 included an
overpayment from a customer of £5.2m, resulting in an inflated cash position.
On a statutory basis Group loss before tax was £1.8m (HY22: £3.2m loss).
Overview
The results for the 6 months to 31 March 2023 are in-line with the Board's
expectations as the Group has begun to see the anticipated recovery from the
challenging trading period of the previous two financial years, along with the
continued benefits of cost saving initiatives. The Group reported revenue for
the 6-month period to March 2023 of £17.7m, which is an increase of 36% when
compared to the 6-months to 31 March 2022. Costs have continued to be
monitored closely and the improvements in commercial management and project
execution which were embedded in FY22 have resulted in a continued gross
profit margin per cent improvement from 22% for the 6-months to 31 March 2022
to 28% for the 6-months to 31 March 2023. An adjusted EBITDA loss of
£0.6m is reported for the 6-months to 31 March 2023, which includes a £0.8m
FX loss due to unfavourable forex movements. Adjusting for this non-cash
item, the group delivered positive Adjusted EBITDA of £0.2m for the period.
In comparison, the period to the 6-months to 31 March 2022 reported an
adjusted EBITDA loss of £1.8m and an adjusted EBITDA loss of £2.0m when
adjusted for a £149k FX gain. The Adjusted EBITDA improvement, when
adjusted for the non-cash FX gains and losses, was a positive variance of
£2.2m when compared to the comparator period. This was driven by the £4.7m
higher revenue at an improved gross profit margin.
As announced on 20(th) April 2023, the Group successfully raised £6.4m
(£5.2m net of expenses) through an initial strategic investment by SCF,
alongside a placing and retail offer with existing shareholders. The proceeds
of the investment and placing have been used to strengthen the balance sheet
and will help support the delivery of the strategic plan as the business
embarks on its transition to sustained profitable growth.
Revenue
Revenue by Division Revenue by market
£m 6M 6M 12M £m 6M 6M 12M
Mar23 Mar22 Sep22 Mar23 Mar22 Sep22
Offshore Energy 10.7 7.8 17.4 Offshore Wind 7.8 7.2 14.7
Marine Civils 7.0 5.2 12.8 Other Offshore 9.9 5.8 15.5
Total 17.7 13.0 30.2 Total 17.7 13.0 30.2
Offshore Energy, incorporating Tekmar Energy, Subsea Innovation, AgileTek and
Ryder Geotechnical, all of which operate largely as a single unit, has started
to see growth due to volume with revenue in the period increasing to £10.7m
(HY23) from £7.8m (HY22).
The Marine Civils division has seen an increase in revenue of £1.8m, up from
£5.2m for the comparative 6-month period to £7.0m for the 6-months to 31
March 2023. This growth is reflective of the size and volume of contracts the
Group is winning in this important market, particularly in the Middle East
region.
Gross profit
Gross profit by Division Gross Profit by market
£m 6M 6M 12M £m 6M 6M 12M
Mar23 Mar22 Sep22 Mar23 Mar22 Sep22
Offshore Energy 2.5 1.9 4.4 Offshore Wind 2.5 1.5 4.2
Marine Civils 2.4 1.0 2.6 Other Offshore 3.2 2.2 4.4
Unallocated costs - - - Unallocated costs (0.8) (0.8) (1.6)
Total 4.9 2.9 7.0 Total 4.9 2.9 7.0
Gross profit margin for the group increased from 22% (HY22) to 28% (HY23).
This is due primarily to improvements in the Marine Civils division increasing
margins from 19% (HY22) to 34% (HY23). This was achieved by the Marine Civils
team securing new contracts at higher margins, coupled with strong commercial
and contract management resulting in good traction on variation orders where
project scope change has been encountered.
Within Offshore Energy, gross profit margin remained stable at 24%, although
gross profit increased as a direct result of increased volume in this
division. Gross profit improvement plans continue to be in place to address
the required increase in margin in this division. However, due to the
duration of the contracts within this division, it will take some time to see
the improvements in full until some of the current backlog is completed in the
coming months. Due to quality of the recent order intake and the business
improvements in place, the Board consider the planned gross profit margin
improvement is tracking in line with expectations.
Operating expenses
Operating expenses for the 6-month period to 31 March 2023 were £6.6m (HY22:
£6.0m). The negative variance relates to adverse forex movements from a gain
of £149k in HY22 to a cost of £784k in HY23. Adjusting for the forex
impacts, there has been an underlying reduction in operating expenses of
£0.3m between HY22 and HY23, achieved by careful management of the group cost
base whilst transitioning the business back to profitability.
Adjusted EBITDA
Adjusted EBITDA is a primary measure used across the business to provide a
consistent measure of trading performance. The adjustment to EBITDA removes
certain non-cash and exceptional items to provide a key metric to the users of
the financial statements that is reflective of the performance of the business
resulting from movements in revenue, gross margin and the cash costs of the
business. The Board reviews all exceptional items to ensure resulting
Adjusted EBITDA achieves this. For the 6-month period ended 31 March 2023 and
the comparable 6-month period to 31 March 2022, the adjustment includes
depreciation and amortisation only.
Improvements in EBITDA reflect a growth in revenue and gross margin in the
period, along with cost savings in operating expenses, offset in part by
unfavourable foreign exchange movements.
Adjusted EBITDA by division £m
£m 6M 6M 12M
Mar23 Mar22 Sep22
Offshore Energy (1.1) (1.4) (1.8)
Marine Civils 1.1 0.2 1.0
Group costs (0.6) (0.6) (1.3)
Total (0.6) (1.8) (2.1)
Profit
The result after tax is a loss of £1.8m (HY22: Loss £3.2m, FY22: Loss
£5.1m). The improvement versus the comparator is due mainly to an increase
in revenue and gross margin as set out above.
Balance Sheet
Balance Sheet
£m Mar23 Mar22 Sep22
Fixed Assets 6.5 5.4 5.9
Other non-current assets 24.6 24.9 24.6
Inventory 5.6 3.1 4.6
Trade & other receivables 18.8 15.8 13.4
Cash 3.7 10.4 8.5
Current Liabilities 20.0 15.0 16.9
Other non-current liabilities 1.9 3.8 0.8
Equity 37.2 40.9 39.2
Fixed Assets
Fixed asset investments were largely in line with depreciation levels.
Additions in the period included £1.0m relating to the renewal of the Newton
Aycliffe Manufacturing facility lease in Tekmar Energy, otherwise there were
no other major capital spends in the period.
Other non-current assets
Goodwill of £22.2m includes the goodwill arising on the original management
buy-out of Tekmar Energy Limited in 2011 of £19.6m. The balance relates to
the acquisitions of Subsea Innovation and Pipeshield.
Inventory
Inventory on the balance sheet grew by £2.5m to £5.6m compared to £3.1m at
HY22 due to an increase in work-in-progress in Pipeshield relating to the
mobilisation of the large Middle East contracts awarded in HY23.
Trade and other receivables
Trade and other receivables grew to £18.8m (HY22: £15.8m) due largely to an
increase in accrued income in-line with the increase in revenue in the period,
as discussed earlier in this review.
Within the above, trade receivables balance remained broadly in-line with the
prior period (£11.3m HY23 v £11.6m HY22) which reflects the improvements in
the strengthening of our contracting process and credit control function as
despite a growth in revenue, a reduction in the balance has been achieved.
Accrued income has increased to £6.0m (HY22: £1.9m). The majority of the
HY23 balance is expected to be invoiced by Jun-23. As an offset, deferred
income balance is £5.5m which reflects the improved commercial terms and
project milestone payments the business has been able to secure.
Cash
Cash balance at the period end to 31 March 2023 was £3.7 million offset by
bank borrowings of £7m resulting in net debt of £3.3m. HY22 cash balance
of £10.4m included a £5.2m overpayment by a customer and included £3.7m net
proceeds from the Firm Placing and Open Offer which completed in March 2022.
Cash continues to be a major focus of the Group as we monitor and manage the
working capital lifecycle across projects. In addition to establishing a
dedicated credit control function, further work was undertaken in FY22 which
strengthened much of the business systems surrounding contracting, project
management and accounts receivable which has drove greater transparency and
integration amongst functions. An increasingly common client base across the
group also helps leverage credit control processes particularly in geographies
with typically slower payment cycles.
Cash used in operations in the first half of £3.8m reflects short term
working capital requirements which included the mobilisation of two large
Middle East contracts with local supply chain. These contracts had sizable
upfront milestones which were billed at the half year and represented around
£3.8m of the £5.5m deferred income balance, however, as at end of March had
not yet crystallised into cash.
On 20 April 2023 the Group successfully completed a strategic investment which
secured an initial investment from SCF and other shareholders totalling £6.4m
(£5.2m net of transaction expenses), with a further committed £18m of
convertible loan note facility from SCF. This has significantly strengthened
the cash position of the Group post period end.
Current liabilities
Current liabilities increased to £20.0m (HY22: £15.0m). Within the
£20.0m in HY23 is £3m of CBILs loan which was classified as non-current
liabilities in HY22. The trade loan borrowings have also been increased from
£2.5m in HY22 to £4.0m in HY23. £0.8m of the £4m trade loan facility was
utilised at the end of May 23, with the reduction due to timing of project
working capital requirements. The trade loan remains a flexible facility
available for ongoing working capital particularly as the business grows.
Other non-current liabilities
Other non-current liabilities are £1.9m (HY22: £3.8m). In HY22 the balance
included £3m CBILs loan which is now included in current liabilities as the
renewal, currently being progressed with the relationship bank, Barclays, is
technically due in October 2023. Other amounts relate to lease liabilities in
relation to IFRS16, deferred grant and deferred tax liability.
Leanne Wilkinson
CFO
21 June 2023
Consolidated statement of comprehensive income
for the 6M period ended 31 March 2023
6M 6M 12M ended
ended ended 30 Sep 2022
Note 31 Mar 31 Mar Audited
2023 2022
Unaudited Unaudited
£000 £000 £000
Revenue 3 17,715 13,033 30,191
Cost of sales (12,820) (10,144) (23,153)
Gross profit 4,895 2,889 7,038
Administrative expenses (6,578) (5,956) (11,623)
Other operating income 17 9 24
Group operating (loss) (1,666) (3,058) (4,561)
Analysed as:
Adjusted EBITDA( 1 ) (587) (1,761) (2,079)
Depreciation (658) (652) (1,370)
Amortisation (421) (645) (1,112)
Group operating (Loss) (1,666) (3,058) (4,561)
Finance costs (99) (147) (685)
Finance income 2 - 18
Net finance costs (97) (147) (667)
(Loss) before taxation (1,763) (3,205) (5,228)
Taxation 11 5 99
(Loss) for the period (1,752) (3,200) (5,129)
Equity-settle share-based payments (5) 196 (97)
Revaluation of property - - 238
Retranslation of overseas subsidiaries (218) 20 326
Total comprehensive income for the period (1,975) (2,984) (4,662)
Loss attributable to owners of the parent (1,752) (3,200) (5,129)
Total Comprehensive income attributable to owners of the parent (1,975) (2,984) (4,662)
(Loss) per share (pence)
Basic 4 (2.87) (6.11) (9.04)
Diluted 4 (2.87) (6.11) (9.04)
All results derive from continuing operations.
1: Adjusted EBITDA, which is defined as profit before net finance costs, tax,
depreciation, amortisation, share based payments charge, and exceptional items
is a non-GAAP metric used by management and is not an IFRS disclosure.
Consolidated balance sheet
as at 31 March 2023
31 Mar 31 Mar 30 Sep 2022
2023 2022 Audited
Note Unaudited Unaudited
£000 £000 £000
Non-current assets
Property, plant and equipment 6,462 5,416 5,883
Goodwill and other intangibles 24,564 24,895 24,564
Total non-current assets 31,026 30,311 30,447
Current assets
Inventory 5,568 3,121 4,623
Trade and other receivables 5 18,836 15,837 13,375
Cash and cash equivalents 3,696 10,366 8,496
Total current assets 28,100 29,324 26,494
Total assets 59,126 59,635 56,941
Equity and liabilities
Share capital 609 610 609
Share premium 67,653 67,664 67,553
Merger relief reserve 1,738 1,738 1,738
Merger reserve (12,685) (12,685) (12,685)
Foreign currency translation reserve (45) (133) 173
Retained losses (20,035) (16,294) (18,278)
Total equity 37,235 40,900 39,210
Non-current liabilities
Other interest-bearing loans and borrowings 6 957 3,172 194
Trade and other payables 329 333 331
Deferred tax liability 579 263 313
Total non-current liabilities 1,865 3,768 3,651
Current liabilities
Other interest-bearing loans and borrowings 6 7,291 2,624 7,198
Trade and other payables 12,707 12,075 9,669
Corporation tax payable 28 268 26
Total current liabilities 20,026 14,967 16,893
Total liabilities 21,891 18,735 17,731
Total equity and liabilities 59,126 59,635 56,941
Consolidated statement of changes in equity
for the 6M period ended 31 March 2023
Share Share premium Merger Merger reserve Foreign currency translation reserve Retained earnings Total equity attributable to owners of the parent Total
capital relief equity
reserve
£000 £000 £000 £000 £000 £000 £000 £000
Balance at 1 October 2021 516 64,097 1,738 (12,685) (153) (13,290) 40,223 40,223
(Loss) for the Period - - - - - (3,200) (3,200) (3,200)
Share based payments - - - - - 196 196 196
Exchange difference on translation of overseas subsidiary - - - - 20 - 20 20
Total comprehensive income for the year - - - - 20 (2,163) (2,163) (2,163)
Issue of shares 94 3,567 - - - 3,661 3,661
Total transactions with owners, recognised 94 3,567 - - - - 3,661 3,661
directly in equity
Balance at 31 March 2022 610 67,664 1,738 (12,685) (133) (16,294) 40,900 40,900
(Loss) for the Period - - - - - (1,929) (1,929) (1,929)
Share based payments - - - - - (293) (293) (293)
Revaluation of property - - - - - 238 238 238
Exchange difference on translation of overseas subsidiary - - - - 306 - 306 306
Total comprehensive income for the year - - - - 306 (1,984) (1,678) (1,678)
Issue of shares (1) (11) - - - - (12) (12)
Total transactions with owners, recognised (1) (11) - - - - (12) (12)
directly in equity
Balance at 30 September 2022 609 67,653 1,738 (12,685) 173 (18,278) 39,210 39,210
(Loss) for the Period - - - - - (1,752) (1,752) (1,752)
Share based payments - - - - - (5) (5) (5)
Exchange difference on translation of overseas subsidiary - - - - (218) - (218) (218)
Total comprehensive income for the year - - - - (218) (1,757) (1,975) (1,975)
Issue of shares - - - - - - -
Total transactions with owners, recognised - - - - - - - -
directly in equity
Balance at 31 March 2023 609 67,653 1,738 (12,685) (45) (20,035) 37,235 37,235
Consolidated cash flow statement
for the 6M period ended 31 March 2023
6M ended 6M ended 12M Ended
31 March 2023 31 March 2022 30 Sep 2022
Unaudited Unaudited Audited
£000 £000 £000
Cash flows from operating activities
Loss before taxation (1,763) (3,205) (5,228)
Adjustments for:
Depreciation 658 652 1,370
Amortisation of intangible assets 421 645 1,112
Profit on disposal of fixed assets (99) - -
Share based payments charge - 226 (103)
Finance costs 99 147 685
Finance income (2) - (18)
(686) (1,535) (2,182)
Changes in working capital:
(Increase) in inventories (945) 844 (658)
Decrease / (increase) in trade and other receivables (5,476) 2,232 4,561
(Decrease) / increase in trade and other payables 3,316 2,944 178
Cash (used) / generated from operations (3,791) 4,485 1,899
Tax recovered 11 - -
Net cash (outflow) / inflow from operating activities (3,780) 4,485 1,899
Cash flows from investing activities
Purchase of property, plant and equipment (331) (395) (1,274)
Purchase of intangible assets (294) (233) (369)
Proceeds from sale of property, plant and equipment 99 - -
Interest received 2 - 18
Net cash (outflow) from investing activities (524) (628) (1,625)
Cash flows from financing activities
Proceeds from capital share issues - 3,661 3,649
Lease Obligation borrowings - (212) 656
Repayment of borrowings under Lease obligations (185) (440) (537)
Facility drawdown - - 991
Interest paid (93) (2) (345)
Net cash inflow / (outflow) from financing activities (278) 3,007 4,414
Net increase /(decrease) in cash and cash equivalents (4,582) 6,864 4,688
Cash and cash equivalents at beginning of year 8,496 3,482 3,482
326
Effect of foreign exchange rate changes (218) 20
Cash and cash equivalents at end of year 3,696 10,366 8,496
Notes to the Group financial statements
for the 6 month period ended 31 March 2023
1. GENERAL INFORMATION
Tekmar Group plc (the "Company") is a public limited company incorporated and
domiciled in England and Wales. The registered office of the Company is
Innovation House, Centurion Way, Darlington, DL3 0UP. The registered company
number is 11383143.
The principal activity of the Company and its subsidiaries (together the
"Group") is that of design, manufacture and supply of subsea stability and
protection technology, including associated subsea engineering services,
operating across the global offshore energy markets, predominantly Offshore
Wind.
Forward looking statements
Certain statements in this 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 unaudited consolidated interim financial information has been prepared
under the historical cost convention and in accordance with the recognition
and measurement requirements of UK-adopted international accounting standards
("IFRS"). The condensed consolidated interim financial information does not
constitute financial statements within the meaning of Section 434 of the
Companies Act 2006 and does not include all of the information and disclosures
required for full annual financial statements. It should therefore be read in
conjunction with the Group's Annual Report for the period ended 30 September
2022, which has been prepared in accordance with IFRSs and is available on the
Group's investor website.
The accounting policies used in the financial information are consistent with
those used in the Group's consolidated financial statements as at and for the
period ended 30 September 2022, as detailed on pages 86 to 93 of the Group's
Annual Report and Financial Statements for the period ended 30 September 2022,
a copy of which is available on the Group's website, www.tekmargroup.com.
The comparative financial information contained in the condensed consolidated
financial information in respect of the period ended 30 September 2022 has
been extracted from the 2022 Financial Statements. Those financial statements
have been reported on by Grant Thornton UK LLP and delivered to the Registrar
of Companies. The report was unqualified and did not contain a statement under
Section 498(2) or 498(3) of the Companies Act 2006. The report did include a
reference to a material uncertainty in relation to going concern which the
auditor drew attention to by way of emphasis without qualifying their report.
Selected explanatory notes are included to explain events and transactions
that are significant to an understanding of the changes in financial position
and performance of the Group since the last annual consolidated financial
statements as at the period ended 30 September 2022.
The preparation of the interim financial statements requires management to
make judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expenses. Estimates and judgements are continually evaluated and are based
on historical experience and other factors, such as expectations of future
events and are believed to be reasonable under the circumstances. Actual
results may differ from these estimates. In preparing these interim financial
statements, the significant judgements made by management in applying the
Group's accounting policies and the key sources of estimation uncertainty were
the same as those applied to the audited consolidated financial statements for
the period ended 30 September 2022.
There have been no new accounting standards or changes to existing accounting
standards applied for the first time from 1 October 2022 which have a material
effect on these interim results. The Group has chosen not to early adopt any
new standards or amendments to existing standards or interpretations.
(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 2023 and a trade loan facility of up to £4.0m that
can be drawn against supplier payments, currently available to 31 July 2023.
The latter is provided with support from UKEF due to the nature of the
business activities both in renewable energies and in driving growth through
export lead opportunities. The Group held £3.7m of cash at 31 March 2023
including full draw down of the £3.0m CBILS loan and a further £4.0m of the
trade loan facility. There are no financial covenants that the Group must
adhere to in either of the bank facilities.
The Directors have prepared cash flow forecasts to 30 September 2024. The
base case forecasts include assumptions for annual revenue growth supported by
current order book, known tender pipeline, and by publicly available market
predictions for the sector. The forecasts also assume a retention of the
costs base of the business with increases of 5% on salaries and a cautious
recovery of gross margin on contracts. These forecasts show that the Group
is expected to have a sufficient level of financial resources available to
continue to operate on the assumption that the two facilities described are
renewed. Within the base case model management have not modelled anything in
relation to the matter set out in note 8 Contingent Liabilities, as management
have assessed there to be no present obligation.
The Directors have sensitised their base case forecasts for a severe but
plausible downside impact. This sensitivity includes reducing revenue by 15%
for the period to 30 September 2024, including the loss or delay of a certain
level of contracts in the pipeline that form the base case forecast, and a 10%
increase in costs across the Group as a whole for the same period. The base
case and sensitised forecast also includes discretionary spend on capital
outlay. In addition, 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 revenue by 20% and increasing overheads by 15%
against the base case. The inputs applied to the reverse stress are not
considered plausible.
Facilities - Within both the base case and severe but plausible case,
management have assumed the renewal of both the CBILS loan and trade loan
facility in October 2023 and July 2023 respectively. In the unlikely case that
the facilities are not renewed, the Group would aim to take a number of
co-ordinated actions designed to avoid the cash deficit that would arise.
Following the recent strategic investment from SCF a further avenue of funding
could be available to the group in the form of the Convertible Loan Notes
(CLN) facility from the group's largest shareholder, which is in place. SCF
has agreed that the company may request to draw down against the CLN facility,
subject to the relevant approvals required by the terms of the CLN (including
investment committee approval), to support the working capital of the Group if
the need arises, due to banking facilities not being renewed. The availability
of this funding is contingent on the approval requirements of the CLN terms
and is therefore not certain.
The Directors are confident, based upon the communications with the team at
Barclays, the historical strong relationship and recent bank facility renewal
in November 2022, that these facilities will be renewed and will be available
for the foreseeable future. However, as the renewal of the two facilities in
October 2023 and July 2023 are yet to be formally agreed and the Group's
forecasts rely on their renewal, these events or conditions indicate that a
material uncertainty exists that may cast significant doubt on the Group's and
parent company's ability to continue as a going concern.
The Directors are satisfied that, taking account of reasonably foreseeable
changes in trading performance and on the basis that the bank facilities are
renewed, these forecasts and projections show that the Group is expected to
have a sufficient level of financial resources available through current
facilities to continue in operational existence and meet its liabilities as
they fall due for at least the next 12 months from the date of approval of the
financial statements and for this reason they continue to adopt the going
concern basis in preparing the financial statements.
(c) 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.
(d) 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. Exceptional items and share
based payment charges are excluded from EBITDA to calculate Adjusted EBITDA.
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. SEGMENTAL REPORTING
Management has determined the operating segments based upon the information
provided to the executive Directors which is considered the chief operation
decision maker. The Group is managed and reports internally by business
division and markets.
Major customers
In the period ended 31 March 2023 there was one major customer within the
Marine Civils segment, and one major customer in the Offshore Energy segment
that individually accounted for at least 10% of total revenues (2022 6M: one
customer, 2022 one customer). The revenues relating to these in the period to
31 March 2023 were £7,253,000 (2022 6M: £2,236,000, 2022; £7,243,000).
Included within this is revenue from multiple projects with different entities
within each customer.
Analysis of revenue by region 6M ending 6M ending 12M ending
31 March 2023 31 Mar 2022 30 Sep 2022
Unaudited Unaudited Audited
£000 £000 £000
UK & Ireland 5,054 834 8,028
Germany 721 - 1,230
Netherlands 57 - -
Norway 377 - -
Turkey - - 499
Greece - - 409
Denmark - - 757
Other Europe 386 7,412 2,721
China 1,491 1,657 3,847
USA & Canada 1,221 235 674
Japan 1,034 - 561
Philippines 134 - 534
Qatar 4,735 - 8,716
KSA 1,665 - 509
Other Middle East 401 270 468
Trinidad & Tobago 274 - -
Rest of the World 165 2,625 1,238
17,715 13,033 30,191
Analysis of revenue by market Mar-23 Mar-22 Sep-22
Unaudited Unaudited Audited
£000 £000 £000
Offshore Wind 7,812 7,221 14,705
Other offshore 9,903 5,812 15,486
17,715 13,033 30,191
Analysis of revenue by product category Mar-23 Mar-22 Sep-22
Unaudited Unaudited Audited
£000 £000 £000
Offshore Energy protection systems & equipment 9,770 6,996 15,497
Marine Civils 7,064 5,166 12,734
Engineering consultancy services 881 872 1,960
17,715 13,033 30,191
Profit and cash are measured by division and the Board reviews this on the
following basis.
Offshore Marine Group/ Total
Energy Civils Eliminations Mar-23
Mar-23 Mar-23
Unaudited Unaudited Unaudited Unaudited
£000 £000 £000 £000
Revenue 10,651 7,064 - 17,715
Gross profit 2,536 2,359 - 4,895
% Gross profit 24% 33% - 28%
Operating (loss)/ profit (1,949) 982 (699) (1,666)
Analysed as: (1,123) 1,126 (590) (587)
Adjusted EBITDA
Depreciation (509) (144) (5) (658)
Amortisation (317) - (104) (421)
Operating (loss)/ profit (1,949) 982 (699) (1,666)
Interest & similar expenses 89 195 (381) (97)
Tax 1 - 10 11
(Loss) / profit after tax (1,859) 1,177 (1,070) (1,752)
Offshore Marine Group/ Total
Energy Civils Eliminations Mar-23
Mar-23 Mar-23
Unaudited Unaudited Unaudited Unaudited
£000 £000 £000 £000
Other information
Reportable segment assets 18,493 13,198 27,435 59,126
Reportable segment liabilities (6,923) (6,885) (8,083) (21,891)
Offshore Marine Group/ Total
Energy Civils Eliminations Mar-22
Mar-22 Mar-22
Unaudited Unaudited Unaudited Unaudited
£000 £000 £000 £000
Revenue 7,867 5,166 - 13,033
Gross profit 1,904 985 - 2,889
% Gross profit 24% 19% - 22%
Operating (loss)/ profit (2,233) 99 (924) (3,058)
Analysed as: (1,434) 221 (548) (1,761)
Adjusted EBITDA
Depreciation (530) (122) - (652)
Amortisation (269) - (376) (645)
Operating (loss)/ profit (2,233) 99 (924) (3,058)
Interest & similar expenses (88) - (59) (147)
Tax 5 - - 5
(Loss) / profit after tax (2,316) 99 (983) (3,200)
Offshore Marine Group/ Total
Energy Civils Eliminations Mar-22
Mar-22 Mar-22
Unaudited Unaudited Unaudited Unaudited
£000 £000 £000 £000
Other information
Reportable segment assets 24,684 6,979 27,972 59,635
Reportable segment liabilities (9,452) (2,885) (6,398) (18,735)
Offshore Marine Group/ Total
Energy Civils Eliminations Sep-22
Sep-22 Sep-22
Audited Audited Audited Audited
£000 £000 £000 £000
Revenue 17,455 12,736 - 30,191
Gross profit 4,442 2,596 - 7,038
% Gross profit 25% 20% - 23%
Operating profit/(loss) (3,405) 789 (1,945) (4,561)
Analysed as: (1,800) 1,060 (1,339) (2,079)
Adjusted EBITDA
Depreciation (1,099) (271) - (1,370)
Amortisation (506) - (606) (1,112)
Operating profit/(loss) (3,405) 789 (1,945) (4,561)
Interest & similar expenses (318) (185) (164) (667)
Tax (237) 175 161 99
Profit / (loss) after tax (3,960) 779 (1,948) (5,129)
Offshore Marine Group/ Total
Energy Civils Eliminations Sep-22
Sep-22 Sep-22
Audited Audited Audited Audited
£000 £000 £000 £000
Other information
Reportable segment assets 19,029 9,541 28,175 57,766
Reportable segment liabilities (5,530) (4,483) (7,631) (17,678)
4. EARNINGS PER SHARE
Basic earnings per share are calculated by dividing the earnings attributable
to equity shareholders by the weighted average number of ordinary shares in
issue. Diluted earnings per share are calculated by including the impact of
all conditional share awards.
The calculation of basic and diluted profit per share is based on the
following data:
6M ending 6M ending 12M ending
31 March 2023 31 March 2022 30 Sep 2022
Unaudited Unaudited Audited
Earnings (£'000)
Earnings for the purposes of basic and diluted earnings per (1,752) (3,200) (5,219)
share being profit/(loss) for the year attributable to equity shareholders
Number of shares
Weighted average number of shares for the purposes of basic earnings per share 60,960,484 52,404,863 56,719,539
Weighted average dilutive effect of conditional share awards 562,832 678,432 968,399
Weighted average number of shares for the purposes of diluted earnings per 61,523,316 53,083,295 57,687,938
share
Profit per ordinary share (pence)
Basic profit per ordinary share (2.87) (6.11) (9.04)
Diluted profit per ordinary share (2.87) (6.11) (9.04)
Adjusted earnings per ordinary share (pence)* (2.7) (4.63) (7.44)
The calculation of adjusted earnings per share is based on the following data:
Mar-23 Mar-22 Sep-22
Unaudited Unaudited Audited
£000 £000 £000
(Loss) / Profit for the period attributable to equity shareholders (1,752) (3,200) (5,129)
Add back:
Amortisation on acquired intangible assets 104 376 605
Tax effect on above (1) (1) (12)
Adjusted earnings (1,649) (2,825) (4,536)
*Adjusted earnings per share is calculated as profit for the period adjusted
for amortisation as a result of business combinations, exceptional items and
the tax effect of these at the effective rate of corporation tax, divided by
the closing number of shares in issue at the Balance Sheet date. This is the
measure most commonly used by analysts in evaluating the business' performance
and therefore the Directors have concluded this is a meaningful adjusted EPS
measure to present.
5. TRADE AND OTHER RECEIVABLES
Mar-23 Mar-22 Sep-22
Unaudited Unaudited Audited
£000 £000 £000
Amounts falling due within one year:
Trade receivables not past due 5,076 3,620 2,698
Trade receivables past due (1-30 days) 2,271 1,770 1,948
Trade receivables past due (over 30 days) 3,060 6,253 3,279
Trade receivables not yet due (retentions) 877 - 1,620
Trade receivables net 11,284 11,643 9,545
Contract assets 6,035 1,900 3,194
Other receivables 713 1,525 203
Prepayments and accrued income 537 633 433
Deferred Tax Asset 267 139 -
Derivative financial assets - (3) -
18,836 15,837 13,375
Trade and other receivables are initially recorded at transaction price and
thereafter are measured at amortised cost using the effective interest rate. A
loss allowance for expected credit losses on trade and other receivables and
contract assets is measured at an amount equal to the lifetime expected credit
losses. Lifetime expected credit losses are the expected credit losses that
will result from all possible default events over the expected life of a
financial instrument. This assessment is performed on a collective basis
considering forward-looking information. The Group considers a financial asset
to be in default when the receivable is unlikely to pay its credit obligations
to the Group in full without recourse by the Group to actions such as
realising security (if any is held).
Trade and other receivables are all current and any fair value difference is
not material.
The derivative financial asset relates to forward foreign currency contracts.
There have been no provisions for impairment against the trade and other
receivables noted above. The Group has calculated the expected credit losses
to be immaterial.
6. BORROWINGS
Mar-23 Mar-22 Sep-22
Unaudited Unaudited Audited
£000 £000 £000
Current
Trade Loan Facility 4,000 2,549 3,990
Lease liability 291 75 208
CBILs Bank Loan 3,000 - 3,000
7,291 2,624 7,198
Non-current
CBILS Bank Loan - 3,088 -
Lease liability 957 84 194
957 3,172 194
7. CONTINGENT LIABILITIES
Contingent liabilities are disclosed in the financial statements when a
possible obligation exists, the existence will be confirmed by uncertain
future events that are not wholly within the control of the entity. Contingent
liabilities also include obligations that are not recognised because their
amount cannot be measured reliably or because settlement is not probable.
As noted by the Group in prior public announcements, there is an emerging
industry-wide issue regarding abrasion of legacy cable protection systems
installed at off-shore windfarms. The precise cause of the issues are not
clear and could be as a result of a number of factors, such as the absence of
a second layer of rock to stabilise the cables. The decision not to apply this
second layer of rock, which was standard industry practice, was taken by the
windfarm developers independently of Tekmar. Tekmar is committed to working
with relevant installers and operators, including directly with customers who
have highlighted this issue, to investigate further the root cause and assist
with identifying potential remedial solutions. This is being done without
prejudice and on the basis that Tekmar has consistently denied any
responsibility for these issues. However, given these extensive uncertainties
and level of variabilities at this early stage of investigations no
conclusions can yet be made.
Tekmar have been presented with defect notifications for 8 legacy projects on
which it has supplied cable protection systems ("CPS"). These defect
notifications have only been received on projects where there was an absence
of the second layer of rock traditionally used to stabilise the cables.
At this stage management do not consider that there is a present obligation
arising under IAS37 as insufficient evidence is available to identify the
overall root cause of the damage to any of the CPS. Independent technical
experts have been engaged to determine the root cause of the damage to the
CPS, Tekmar have reviewed these assessments and it is still unclear the cause
of the faults and therefore no present obligation exists.
Given the range of possible outcomes, management considers that a possible
obligation exists which will only be confirmed by further technical
investigation to identify the root cause of alleged CPS failures. As such
management has disclosed a contingent liability in the 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.
8. POST BALANCE SHEET EVENTS
On 20th April 2023, the Group successfully raised £6.4m (£5.2m net of
expenses) through an initial strategic investment by SCF, alongside a placing
and retail offer with existing shareholders. The proceeds of the investment
and placing have been used to strengthen the balance sheet and will help
support the delivery of the strategic plan as the business embarks on its
transition to sustained profitable growth.
Tekmar issued and allotted 22,222,222 Placing Shares, 47,505,458
Subscription Shares and 1,273,164 Retail Shares. The Company has also
issued and allotted 4,075,788 Management Shares to certain members of the
senior management team.
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