REG - Tekmar Group PLC - Interim Results
13/06/2022 07:00
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RNS Number : 5595O Tekmar Group PLC 13 June 2022
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.
TEKMAR GROUP PLC
("Tekmar Group", the "Group" or the "Company")
UNAUDITED INTERIM RESULTS
For the 6-month period ending 31 March 2022
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 2022 ("H1 2022" or the "Period") and also
notifies it is separately announcing today that the board of directors (the
"Board") has determined to undertake a review of the strategic options open to
the Company in order to maximise value for shareholders. These options
include, but are not limited to, a sale of the Company which will be conducted
under the framework of a "formal sale process" in accordance with the Takeover
Code.
Headlines
Current trading remains challenging albeit consistent with management
expectations
· Revenue of £13.0m (6M to 31 March 2021: £13.9m) and Adjusted EBITDA
loss of £1.8m (6M to 31 March 2021: loss of £1.1m), is in-line with
management expectations for the period
· On a statutory basis Group loss before tax was £3.2m (6M to 31 March
2021: £2.2m loss)
Recent landmark contract awards highlight the appeal of Tekmar's
differentiated and engineering-led solutions, and signal that the market
environment for commissioning offshore wind projects is improving
· Contract award to design, manufacture and supply Cable Protection
System Solution ("CPS") for Dogger Bank Offshore Wind Farm
· US$10m award for pipeline support and protection for a major subsea
customer in the Middle East, Tekmar's largest single contract award to date
· Further expansion into the strategically important US offshore wind
market with the recent award to provide an integrated engineering and CPS
solution for a US offshore wind farm project
· The above contract awards support a healthy order book of £20.1m as
at the end of March 2022
Significant actions taken during the period to stabilise the Group's balance
sheet
· The Group extended its £3.0m CBILs facility to October 2022 and
extended and increased its trade loan facility to £4.0 million, which is
available at least to November 2022
· The Group raised additional cash proceeds of £3.7m, net of expenses,
through a Firm Placing and Open Offer of new ordinary shares which completed
in March 2022
· Cash on the balance sheet of £10.3m at the period-end is overstated
by £5.2m due to a customer overpayment, which has now been repaid. Available
cash at the period-end net of this overpayment was £5.1m and includes the
funds received from the equity fundraise and draw down of bank facilities of
£5.7m
H1 2022 financials
6M ending Mar-22 6M ending Mar-21 18M ending
Unaudited Unaudited Sep-21
£m £m Audited
£m
Revenue 13.0 13.9 47.0
Adjusted EBITDA(1) (1.8) (1.1) (2.1)
Sales KPIs
6M ending Mar-22 6M ending Mar-21 18M ending
Unaudited Unaudited Sep-21
£m £m Audited
£m
Order Book(2) 20.1 14.5 9.7
Order intake(3) 22.7 21.5 46.4
Enquiry Book(4) 302 273 327
Book to Bill(5) 1.7 1.5 0.99
Alasdair MacDonald, CEO, commented:
"We continue to see 2022 and 2023 as transition years for Tekmar as we
stabilise the business through the residual impacts of the pandemic and drive
our business improvement programs to recover a sustainable level of
profitability and cash generation for the business. Whilst we are making
satisfactory progress in delivering on our strategic plans, our planned
timeframes to establish the improved financial performance for the business we
are targeting are being hampered by the prevailing industry conditions, which
remain challenging.
On a more positive note, we are greatly encouraged by the momentum we have in
securing landmark contracts. These contracts provide a good level of forward
visibility for the business as we work on the transition and are an important
marker of the market starting to recover.
We remain focused on managing the business through the current industry-wide
pressures to benefit from this recovery. Whilst cautious on the environment in
the near-term, with a focus on cash preservation prevalent across the industry
an added pressure, the market opportunity for Tekmar remains significant, with
our differentiated and integrated solutions adding value to our customers in
large addressable markets."
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. 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
Derek Bulmer, CFO
Singer Capital Markets (Nominated Adviser and Joint Broker)
Rick Thompson / Rachel Hayes +44 (0)20 7496 3000
Berenberg (Joint Broker)
Chris Bowman / Ben Wright / Ciaran Walsh +44 (0)20 3207 7800
Bamburgh Capital Limited (Financial media & investor relations) +44 (0) 131 376 0901
Murdo Montgomery
The person responsible for arranging the release of this announcement on
behalf of the Company is Derek Bulmer, Chief Financial Officer.
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 2022
CEO overview
The financial results we are reporting today, with the headlines of revenue of
£13.0m and an adjusted EBITDA loss of £1.8m, are in-line with our
expectations for the first half at the time we announced our FY21 results in
February. Whilst these results are consistent with management's expectations
for the period, they do highlight the continued challenging environment in
which the Company has operated over the last two years.
These results are also consistent with one of my key messages since assuming
the role of CEO - that the business requires a transition period as we
position Tekmar to recover a sustainable level of profitability and cash
generation. We see this transition running through 2022 and 2023 as we
navigate the ongoing industry pressures including the current dislocation
triggered by the events in Ukraine.
A consequence of the Company incurring the level of sustained losses it has
over the last two years has been the weakening of the balance sheet over this
period. Since Derek Bulmer joined as Group CFO on 1 June 2021, to strengthen
the management team, a key priority for the business has been to stabilise the
balance sheet. A number of significant steps have been taken to improve the
cash position, including renewing and extending the banking facilities,
strengthening the systems and processes relating to cash collection, embedding
a more disciplined approach to contract bidding and negotiation and
undertaking the equity fundraise undertaken earlier this year. Whilst the net
proceeds raised through the fundraise of £3.7m incrementally supports the
balance sheet and the Group's turnaround strategy, it does not go as far as
the Board would have wanted in fulfilling the objective of strengthening the
balance sheet given the sustained period of losses and anticipated further
challenges during the transition period over 2022 and 2023.
Operational progress highlighted by significant contract momentum
Alongside strengthening the balance sheet, the other key priority for the
management team has been to deliver on the strategy to maintain Tekmar's
position as a leader in the industry. The Group is making good progress
towards meeting its strategic goals set out at the 2021 Capital Markets Day in
support of this objective. The Company is embedding a stronger engineering
culture within the business as a key pillar of strengthening the value
proposition to customers. The success of this approach is highlighted by a
number of significant contract wins announced by the Company over the course
of the last six months. These contract awards highlight Tekmar's continued
position as a trusted partner alongside strengthening the business through
diversification and regional expansion.
Of particular note in this context are the following landmark contract awards:
- the partnership with DEME Offshore, announced in December 2021, contracting
Tekmar to design, manufacture and supply Cable Protection System Solutions
(CPS) for the Dogger Bank Wind Farm, which is set to become the world's
largest offshore wind farm by capacity;
- the US$ 10m contract award announced in January 2022, to provide pipeline
support and protection materials for a major subsea construction project in
the Middle East. This is Tekmar's largest contract award to date; and
- the recent award of a significant contract to provide an integrated
engineering solution, including Cable Protection System Solutions ("CPS"), for
an offshore wind farm project in the US (expected to be delivered in 2023),
extending our presence in this strategically important market.
These recent contract wins underpin an order book of £20.1m (as at end March
2022), which highlights the commercial momentum across the business. This
momentum, order book visibility and broader pipeline of contract activity are
particularly significant for the business as management stabilises and
completes the turnaround of the business.
Industry cross-winds - short-term industry-wide challenges mask the
longer-term market opportunity
The Group has been executing on its turnaround strategy at the same time as it
continues to work with industry partners to assess and address the industry
wide issues relating to legacy cable installations. Whilst the business is
managing this as part of its commitment to responsibly supporting its
customers, and the learnings complement its existing expertise and capability
and supports its strategic initiative to further diversify across the wider
lifecycle of offshore wind projects, it requires the Company to dedicate
significant engineering and senior management resource. The issues
surrounding the ultimate resolution of these legacy issues are complex and
multi-faceted and may be likely to continue to consume significant company
resource and senior management attention for the foreseeable future. For a
business the size of Tekmar this becomes a particularly onerous undertaking
alongside executing a turnaround strategy in a market environment which
remains challenging.
The contract awards highlighted above also signal an improving market outlook
for commissioning new projects, as the industry emerges from the lag in
offshore wind capacity investment we have highlighted with previous results
announcements. Industry analysts highlight visibility on over 300 projects for
construction by 2030 as the industry invests US$520bn((1)) to build over
200GW((2)) of new offshore wind capacity by 2030. Additionally, the offshore
wind market is a maturing industry with installations and ongoing maintenance
become more complex and challenging. This is positive for Tekmar as we are
using our expertise to provide the industry leading solutions in our field. It
can, however, also lead to extended timelines for securing contracts as
clients assess the impact of technology transition and the changing value
proposition from a product-led approach to a more holistic integrated
solutions and services led approach.
Whilst the market fundamentals support a positive medium to long term outlook,
the current market environment remains challenging for contract related
businesses operating in global energy supply chains. The issue of funding and
cash pressure across the industry is evident from the extent of major
corporate restructurings undertaken over the course of the last 12 months or
so and companies continue to reference cash preservation as a key theme in
public disclosures. Tekmar has not been immune from the impact of these
pressures, with extended payment cycles a tactic being deployed by certain
counterparties. The industry is also dealing with the ongoing disruption to
global trade of "exogeneous shocks", which now extends to the repercussions of
the Ukraine crisis. We are taking a proactive approach to mitigate cost
inflation and supply chain issues, including escalation clauses on new
contracts alongside more favourable milestone and earlier cash payments. This
is consistent with our overall business improvement programme which is aligned
with our objective of gross margin improvement through embedding a more
disciplined commercial approach across the business.
We remain focused on delivering on our plans and on managing the business
through the current headwinds, including prioritising balance sheet stability
and cash. 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 2022, and a trade loan facility of up to
£4.0m that can be drawn against supplier payments, currently available to 30
November 2022. As was outlined in the Company's audited accounts for the
18-month period to 30 September 2021, whilst these renewals are expected with
some confidence, they represent a material uncertainty for the Group. The
Board recognises this creates a potential vulnerability for the business,
particularly at a time when the industry environment remains challenging. The
Group's available cash at the period end of £10.3m over-states the Group's
available cash position as it includes an overpayment of £5.2m by a customer
that has subsequently been repaid. Available cash at the period-end net of
this overpayment was £5.1m. This includes the net proceeds of £3.7m raised
in the equity fundraise earlier in the year and draw down of bank facilities
of £5.7m.
Announcement of strategic review including a formal sale process
Whilst the Group is currently operating with sufficient working capital for
its requirements, the combination of sustained trading losses and increased
pressure on working capital mean that the Group may not have the necessary
cash to make all the required investment to deliver fully the turnaround
strategy to return the Group to profitable cash generation within the
timescale targeted by the Board.
In light of these matters, the Board considers that the Group's best interests
would be served by seeking a strategic partner to support its opportunities
for growth and provide additional balance sheet strength. Accordingly, the
Board has now determined to undertake a review of the strategic options open
to it in order to maximise value for shareholders. These options include, but
are not limited to, a sale of the Company which will be conducted under the
framework of a "formal sale process" in accordance with the Takeover Code.
Further information on this process is set out in the strategic review and
formal sales process announcement released separately today.
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 258GW (installed or
underway) by 2030, from a commissioned capacity of 53GW today, with current
visibility of over 300 projects.((1), (2))
· Considering growing energy security concerns triggered by Russia's
invasion of Ukraine, the market's mid-term outlook could be revised upwards
again.
· Almost 40% of projects entering construction by 2032 will 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 £11.8bn per year by 2030, offering significant
growth potential for the Group. ((1))
· In the last six months, the emerging floating wind market outlook has
grown by 4GW to 16GW, 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, reflecting a stronger oil
price. Most notably:
· Brent spot price has reached a ten year high of $120 per barrel.
· Upturn expected in UK North Sea activity due to short-term anxiety of
supply. UK regulators are looking to hold oil and gas licencing rounds for new
fields, and the UK government looking to fast track investment.
Post period-end events
On 6 May 2022, the Company announced the appointment of David Wilkinson as a
new independent Non-executive Director replacing Chris Gill, effective from
the date of the announcement.
On 25 May 2022, the Company announced a contract award to provide an
integrated engineering solution, including Cable Protection Systems ("CPS"),
for an offshore wind farm project in the US, strengthening its position in
this strategically important market.
Alasdair MacDonald
CEO
13 June 2022
Sources:
(1) 4C Offshore, Offshore Wind Farms Project Opportunity Pipeline Database,
Version Q1 2022
(2) 4C Offshore - Offshore Wind Farm Database (06-Apr-2021 to 09-Jun-2022)
Financial review
A summary of the Group's financial performance is as follows:
6M ending 6M ending Mar-21 18M ending
Mar-22 £m Sep-21
£m £m
Revenue 13.0 13.9 47.0
Adjusted EBITDA((1)) (1.8) (1.1) (2.1)
LBT (3.2) (2.2) (5.8)
Adjusted EPS((2)) (4.63p) (3.35p) (9.1p)
· 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. Details of the adjustments can be found in the adjusted
EBITDA section below.
· 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 share-based payments awarded on IPO (£0k HY22, £44k HY21)
and amortisation on acquired intangibles (£376k HY22, £376k HY21).
On a statutory basis Group loss before tax was £3.2m (HY21: £2.2m loss).
Overview
In the 6 months to 31 March 2022, the Group has endured the impacts of delayed
financial investment decisions in the industry during the Covid pandemic. The
6-month period to 31 March 2022 has seen revenue at £13.0m, down by 6.2% on
the 6-months to 31 March 2021. The business has seen cost pressures and
inefficiencies remain, driven by these lower volumes, supply chain and
logistics matters. The group continues to experience the challenging operating
environment across the industry which has seen gross profit fall to 22.2% for
the 6 months ending 31 March 2022 from 25.8% for the comparative 6-month
period. As a result of decreased revenues and gross margin, Adjusted EBITDA
has fallen to a loss of £(1.8)m for the 6 month period (HY21: Loss £1.1m).
Despite the challenges faced by the Group, we continue to view the current
year as a transition year. We presented the Group's strategic plan to
investors in the Capital Markets Day of 22nd July 2021, setting out the
significant medium and long term prospects of the Group. This driven by the
expansion in offshore wind energy anticipated at the time from 33GW to over
238GW by 2030, drawing from the engineering and technology base of the Group,
supplemented by the acquisitions on complementary technologies and products
during 2018 and 2019.
As announced on 16(th) March 2022, the Group successfully raised approximately
£3.7m (net of expenses) through the Firm Placing and Open Offer. The proceeds
of the fundraise have been used to strengthen the balance sheet and will help
support the delivery of the strategic plan as the business seeks to transition
to sustained profitable growth.
Revenue
Revenue by Division Revenue by market
£m 6M 6M 18M £m 6M 6M 18M
Mar22 Mar21 Sep21 Mar22 Mar21 Sep21
Offshore Energy 7.8 9.6 33.8 Offshore Wind 7.2 8.8 26.9
Marine Civils 5.2 4.3 13.2 Other Offshore 5.8 5.1 20.1
Total 13.0 13.9 47.0 Total 13.0 13.9 47.0
Offshore Energy, incorporating Tekmar Energy, Subsea Innovation, AgileTek and
Ryder Geotechnical, all of which operate largely as a single unit, continued
to see revenue severely impacted by the protracted effects of the pandemic,
with revenue at £7.8m for 6-months compared to £9.6m for the comparative
6-month period. Revenue is behind the comparative period due to customer
delays in project execution dates.
The Marine Civils division has seen an increase in revenue of £0.9m, up from
£4.3m for the comparative 6-month period to £5.2m for the 6-months to 31
March 2022. The majority of the underlying growth was driven by a single
contract of in excess of £8m to design, build and supply a subsea protection
system for a project in Qatar.
Gross profit
Gross profit by Division Gross Profit by market
£m 6M 6M 18M £m 6M 6M 18M
Mar22 Mar21 Sep21 Mar22 Mar21 Sep21
Offshore Energy 1.9 2.6 8.2 Offshore Wind 1.5 2.4 8.9
Marine Civils 1.0 1.0 3.0 Other Offshore 2.2 2.0 5.0
Unallocated costs - - - Unallocated costs (0.8) (0.8) (2.7)
Total 2.9 3.6 11.2 Total 2.9 3.6 11.2
Gross profit margin for the group reduced from 25.8% (HY21) to 22.2% (HY22).
This is due primarily to a change in project mix, with a higher proportion of
group revenues being derived from the Marine Civils division, which operates
at lower profit margins. The Group has also continued to face cost pressures
driven by the global supply chain and logistics issues.
Within Offshore Energy, gross profit fell to 24% (HY21: 27%) and within Marine
Civils, gross profit fell to 19% (HY21: 23%) due to the impacts noted above.
Offshore Energy was particularly impacted due to lower volumes of sales as it
carries fixed manufacturing costs of an annual equivalent of £2m. Further,
this division continue to incur costs supporting investigations to support our
customers in the industry wide infield cable protection issues caused by the
movement of the CPS over the rock-scour protection installed on the seabed.
Operating expenses
Operating expenses for the 6-month period to 31 March 2022 was £6.0m (HY21:
£6.0m). There have been no changes in the composition of the running costs of
the business with the comparative period.
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 as it represents a useful milestone 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 2022 and the comparable 6-month period to 31
March 2021, the adjustment includes share-based payment charges relating to
the IPO options and SIP schemes launched at IPO costs.
Adjusted EBITDA by division Adjusted items
£m 6M 6M 18M £000 6M 6M 18M
Mar22 Mar21 Sep21 Mar22 Mar21 Sep21
Offshore Energy (1.4) (1.0) (1.9) Exceptional charges - (36) -
Marine Civils 0.2 0.4 1.2 Share based payment charge - (44) (364)
Group costs (0.6) (0.5) (1.4)
Total (1.8) (1.1) (2.1) - (80) (364)
Profit
The result after tax is a loss of £3.2m (HY21: Loss £2.1m, FY21: Loss
£5.4m)) due mainly to a fall in revenue and reduction in gross margin as set
out above.
Balance Sheet
Balance Sheet
£m Mar22 Mar21 Sep21
Fixed Assets 5.4 5.4 5.7
Other non-current assets 24.9 25.7 25.3
Inventory 3.1 2.5 4.0
Trade & other receivables 15.8 18.5 18.0
Cash 10.4 3.8 3.5
Current Liabilities 15.0 11.5 12.5
Other non-current liabilities 3.8 1.0 3.7
Equity 40.9 43.5 40.2
Fixed Assets
Fixed asset investments were largely in line with depreciation levels. There
was no major capital expenditure project or disposal 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.
Trade and other receivables
Trade and other receivables fell to £15.8m (HY21: £18.5m) due largely to
the fall in revenue levels discussed earlier in this review. The high levels
of debtors and accrued income relative to revenue reflects the large number of
contracts across the Group, including in Offshore Energy into China, plus the
major contracts within the Marine Civils division where project milestones
were towards the end of the reporting period, or the projects were not yet due
for invoicing. Added to this, the Group has seen the impact of slowing down
of payment cycles from a number of customers noted earlier.
Cash
Cash balance at the period end to 31 March 2022 was £10.4 million. As
announced on 16th March 2022, the Group successfully raised £3.7m (net of
expenses) through the Firm Placing and Open Offer. The proceeds of the
fundraise have been used to strengthen the balance sheet and will help support
the delivery of the strategic plan as the business transitions to sustained
profitable growth. At the period end, the Group had received a milestone
overpayment from one of its customers of £5.2m, resulting in an inflated cash
and other current liabilities position. Included within cash is £5.7m of
draw down of the banking facilities.
Cash continues to be a major focus of the Group as we monitor and manage the
working capital lifecycle across projects. We have strengthened much of the
business systems surrounding contracting, project management and accounts
receivable to drive greater transparency and integration amongst functions and
also established dedicated credit control functions. We strongly believe
that these enhanced systems will drive greater fluidity in contract lifecycles
and cash collection.
Trade and other payables
Trade and other payables increased to £12.1m (HY21: £8.1m). Within the
HY22 balance of £12.1m, £5.2m relates to an overpayment from a customer,
which was refunded in April 2022. The underlying reduction in the balance of
£1.3m is linked to lower revenues throughout the group.
Other non-current liabilities
Other non-current liabilities are £3.7m (HY21: £1.0m), with the increase
due to the drawdown and renewal of the £3.0m CBILs facility. Other amounts
relate to lease liabilities in relation to IFRS16, deferred grant income and
£0.3m in deferred tax liability relating to the Pipeshield acquisition in
2019.
Derek Bulmer
CFO
13 June 2022
Consolidated statement of comprehensive income
for the 6M period ended 31 March 2022
6M 6M 18M ended
ended ended 30 Sep 2021
Note 31 Mar 31 Mar Audited
2022 2021
Unaudited Unaudited
£000 £000 £000
Revenue 3 13,033 13,901 47,034
Cost of sales (10,144) (10,319) (35,794)
Gross profit 2,889 3,582 11,240
Administrative expenses (5,956) (5,975) (16,721)
Other operating income 9 23 48
Group operating (loss) (3,058) (2,370) (5,433)
Analysed as:
Adjusted EBITDA( 1 ) (1,761) (1,131) (2,115)
Depreciation (652) (642) (2,031)
Amortisation (645) (517) (1,651)
Exceptional Share based payments charges - (44) 364
Exceptional items - (36) -
Group operating (Loss) (3,058) (2,370) (5,433)
Finance costs (147) 121 (402)
Finance income - 48 5
Net finance costs (147) 169 (397)
(Loss) before taxation (3,205) (2,201) (5,830)
Taxation 5 38 394
(Loss) for the period (3,200) (2,163) (5,436)
Equity-settle share-based payments 196 260 (164)
Retranslation of overseas subsidiaries 20 - (153)
Total comprehensive income for the period (2,984) (1,903) (5,753)
Loss attributable to owners of the parent (3,200) (2,163) (5,436)
Total Comprehensive income attributable to owners of the parent (2,984) (1,903) (5,753)
(Loss) per share (pence)
Basic 4 (6.11) (4.22) (10.60)
Diluted 4 (6.11) (4.22) (10.60)
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 2022
31 Mar 31 Mar 30 Sep 2021
2022 2021 Audited
Note Unaudited Unaudited
£000 £000 £000
Non-current assets
Property, plant and equipment 5,416 5,386 5,696
Goodwill and other intangibles 24,895 25,721 25,307
Total non-current assets 30,311 31,107 31,003
Current assets
Inventory 3,121 2,508 3,966
Trade and other receivables 5 15,837 18,546 17,971
Cash and cash equivalents 10,366 3,781 3,482
Total current assets 29,324 24,385 25,419
Total assets 59,635 55,942 56,422
Equity and liabilities
Share capital 610 513 516
Share premium 67,664 64,100 64,097
Merger relief reserve 1,738 1,738 1,738
Merger reserve (12,685) (12,685) (12,685)
Foreign currency translation reserve (133) - (153)
Retained losses (16,294) (10,197) (13,290)
Total equity 40,900 43,469 40,223
Non-current liabilities
Other interest-bearing loans and borrowings 6 3,172 247 3,183
Trade and other payables 333 347 343
Deferred tax liability 263 370 125
Total non-current liabilities 3,768 964 3,651
Current liabilities
Other interest-bearing loans and borrowings 6 2,624 3,088 3,160
Trade and other payables 12,075 8,128 9,121
Corporation tax payable 268 293 267
Total current liabilities 14,967 11,509 12,548
Total liabilities 18,735 12,473 16,199
Total equity and liabilities 59,635 55,942 56,422
Consolidated statement of changes in equity
for the 6M period ended 31 March 2022
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 April 2020 513 64,100 1,738 (12,685) - (7,690) 45,976 45,976
Loss for the period
- - - - (187) (187) (187)
Total comprehensive income for the year - - - - (187) (187) (187)
Issue of shares - - - - - - -
Share based payments - - - - (417) (417) (417)
Total transactions with owners, recognised - - - - (417) (417) (417)
directly in equity
Balance at 30 September 2020 513 64,100 1,738 (12,685) - (8,294) 45,372 45,372
Profit for the period
- - - - (2,163) (2,163) (2,163)
Total comprehensive income for the year - - - - (2,163) (2,163) (2,163)
Issue of shares - - - - - - -
Share based payments - - - - 260 260 260
Total transactions with owners, recognised - - - - (1,903) (1,903) (1,903)
directly in equity
Balance at 31 March 2021 513 64,100 1,738 (12,685) - (10,197) 43,469 43,469
(Loss) for the Period - - - - (3,086) (3,086) (3,086)
Total comprehensive income for the year - - - - (3,086) (3,086) (3,086)
Issue of shares 3 (3) - - - - -
Share based payments - - - - (7) (7) (7)
Exchange difference on translation of overseas subsidiary
- - - - (153) - (153) (153)
Total transactions with owners, recognised 3 (3) - - (153) (3,093) (3,246) (3,246)
directly in equity
Balance at 30 September 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)
Total comprehensive income for the year - - - - (3,200) (3,200) (3,200)
Issue of shares 94 3,567 - - - 3,661 3,661
Share based payments - - - - 196 196 196
Exchange difference on translation of overseas subsidiary
- - - - 20 - 20 20
Total transactions with owners, recognised 94 3,567 - - 20 (3,004) 677 677
directly in equity
Balance at 31 March 2022 610 67,664 1,738 (12,685) (133) (16,294) 40,900 40,900
Consolidated cash flow statement
for the 6M period ended 31 March 2022
6M ended 6M Ended 18M Ended
31 March 2022 31 Mar 2021 30 Sep 2021
Unaudited Unaudited Audited
£000 £000 £000
Cash flows from operating activities
Loss / profit before taxation (3,205) (2,201) (5,830)
Adjustments for:
Depreciation 652 642 2,031
Amortisation of intangible assets 645 517 1,651
Share based payments charge 226 258 (135)
Finance costs 147 (121) 402
Finance income - (48) (5)
(1,535) (953) (1,886)
Changes in working capital:
(Increase) in inventories 844 (316) (1,429)
Decrease / (increase) in trade and other receivables 2,232 1,701 8,847
(Decrease) / increase in trade and other payables 2,944 513 (6,954)
Cash (used) / generated from operations 4,485 945 (1,422)
Tax recovered - 225 240
Net cash (outflow) / inflow from operating activities 4,485 1,170 (1,182)
Cash flows from investing activities
Purchase of property, plant and equipment (395) (503) (1,840)
Purchase of intangible assets (233) (422) (664)
Proceeds from sale of property, plant and equipment - - 5
Interest received - 5 5
Net cash (outflow) from investing activities (628) (920) (2,494)
Cash flows from financing activities
Proceeds from capital share issues 3,661 - -
Lease Obligation borrowings (212) - 247
Repayment of borrowings under Lease obligations (440) (203) (770)
Facility drawdown - - 6,052
Interest paid (2) 121 (348)
Net cash inflow / (outflow) from financing activities 3,007 (82) 5,181
Net increase /(decrease) in cash and cash equivalents 6,864 168 1,505
Cash and cash equivalents at beginning of year 3,482 3,613 2,130
(153)
Effect of foreign exchange rate changes 20 -
Cash and cash equivalents at end of year 10,366 3,781 3,482
Notes to the Group financial statements
for the 6 month period ended 31 March 2022
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
2021, 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 2021, as detailed on pages 77 to 85 of the Group's
Annual Report and Financial Statements for the period ended 30 September 2021,
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 2021 has
been extracted from the 2021 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 2021.
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 2021.
There have been no new accounting standards or changes to existing accounting
standards applied for the first time from 1 October 2021 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 2022 and a trade loan facility of up to £4.0m that
can be drawn against supplier payments, currently available to 30 November
2022. 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 £10.3m of cash at 31 March 2022
including full draw down of the £3.0m CBILS loan and a further £2.6m of the
trade loan facility. There are no financial covenants that the Group must
adhere to in either of the bank facilities.
The Directors have prepared cash flow forecasts to 30 September 2023. 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 inflationary increases of 2% 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.
Given the planned recovery of the Group from the impacts of the Covid-19
pandemic and recognising the significant market opportunity for growth in the
market for off-shore energy, the Directors have sensitised their base case
forecasts for a severe but plausible downside impact. This sensitivity
includes reducing revenue by 15% for the year to 30 September 2022, including
the loss or delay of a certain level of contracts in the pipeline that form
the base case forecast, and a 15% increase in costs across the group as a
whole for the same period. The base case forecast also includes
discretionary spend on capital outlay which has been withheld in the
sensitised case. 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.
Based on this assessment, 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.
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 November
2022. 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 2021, that these facilities will be renewed and will be available
for the foreseeable future.
However, as the renewal of the two facilities in October and November 2022 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.
(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 2022 there was one major customer within the
Marine Civils segment that individually accounted for at least 10% of total
revenues (2021 6M: one customer, 2021 18M: one customer). The revenues
relating to these in the period to 31 March 2022 were £2,236,000 (2021 6M:
£1,957,000, 2021 18m: £7,123,000). Included within this is revenue from
multiple projects with different entities within each customer.
Analysis of revenue by region 6M ending 6M ending 18M ending
31 March 2022 31 Mar 2021 30 Sep 2021
Unaudited Unaudited Audited
£000 £000 £000
UK & Ireland 834 4,656 20,312
China 1,657 4,072 7,068
USA & Canada 235 2,548 4,351
Middle East 270 - 3,810
Europe 7,412 1,201 7,414
Rest of the World 2,625 1,424 4,079
13,033 13,901 47,034
Analysis of revenue by market Mar-22 Mar-21 Sep-21
Unaudited Unaudited Unaudited
£000 £000 £000
Offshore Wind 7,221 8,788 26,899
Other offshore 5,812 5,113 20,135
13,033 13,901 47,034
Analysis of revenue by product category Mar-22 Mar-21 Sep-21
Unaudited Unaudited Unaudited
£000 £000 £000
Offshore Energy protection systems & equipment 6,996 8,715 30,584
Marine Civils 5,166 4,265 13,196
Engineering consultancy services 872 921 3,254
13,033 13,901 47,034
Profit and cash are measured by division and the Board reviews this on the
following basis.
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)
Share based - - - -
payments
Exceptional - - - -
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-2022
Mar-2022 Mar-2022
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 Mar-21
Mar-21 Mar-21
Unaudited Unaudited Unaudited Unaudited
£000 £000 £000 £000
Revenue 9,636 4,265 - 13,901
Gross profit 2,616 966 - 3,582
% Gross profit 27% 23% - 26%
Operating profit/(loss) (1,737) 292 (925) (2,370)
Analysed as: (1,019) 357 (469) (1,131)
Adjusted EBITDA
Depreciation (577) (65) - (642)
Amortisation (141) - (376) (517)
Share based - - (44) (44)
payments
Exceptional - - (36) (36)
Operating profit/(loss) (1,737) 292 (925) (2,370)
Tax & Finance cost 195 (3) 15 207
Profit / (loss) after tax (1,542) 289 (910) (2,163)
Offshore Marine Group/ Total
Energy Civils Eliminations Mar-21
Mar-21 Mar-21
£000 £000 £000 £000
Other information
Reportable segment assets 24,941 7,665 23,336 55,942
Reportable segment liabilities (5,931) (3,160) (3,382) (12,473)
Offshore Marine Group/ Total
Energy Civils Eliminations Sep-21
Sep-21 Sep-21
Audited Audited Audited Audited
£000 £000 £000 £000
Revenue 33,837 13,197 - 47,034
Gross profit 8,208 3,032 - 11,240
% Gross profit 24% 23% - 24%
Operating profit/(loss) (4,266) 969 (2,136) (5,433)
Analysed as: (1,881) 1,195 (1,429) (2,115)
Adjusted EBITDA
Depreciation (1,805) (226) - (2,031)
Amortisation (523) - (1,128) (1,651)
Share based (57) - 421 364
payments
Exceptional - - - -
Operating profit/(loss) (4,266) 969 (2,136) (5,433)
Tax & Finance cost (50) (238) 285 (3)
Profit / (loss) after tax (4,316) 731 (1,851) (5,436)
Offshore Marine Group/ Total
Energy Civils Eliminations Sep-21
Sep-21 Sep-21
Audited Audited Audited Audited
£000 £000 £000 £000
Other information
Reportable segment assets 25,048 6,793 25,542 57,383
Reportable segment liabilities (6,755) (2,832) (7,072) (16,659)
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 18M ending
31 Mar 2022 31 Mar 2021 30 Sep 2021
Unaudited Unaudited Audited
Earnings (£'000)
Earnings for the purposes of basic and diluted earnings per (3,200) (2,163) (5,436)
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 52,404,863 51,261,685 51,284,412
Weighted average dilutive effect of conditional share awards 678,432 2,032,894 1,545,392
Weighted average number of shares for the purposes of diluted earnings per 53,083,295 53,294,579 52,829,804
share
Profit per ordinary share (pence)
Basic profit per ordinary share (6.11) (4.22) (10.60)
Diluted profit per ordinary share (6.11) (4.22) (10.60)
Adjusted earnings per ordinary share (pence)* (4.63) (3.35) (9.11)
The calculation of adjusted earnings per share is based on the following data:
Mar-22 Mar-21 Sep-21
Unaudited Unaudited Unaudited
£000 £000 £000
(Loss) / Profit for the period attributable to equity shareholders (3,200) (2,163) (5,436)
Add back:
Amortisation on acquired intangible assets 376 376 1,128
Share based payments - 44 (364)
Exceptional items - 36 -
Tax effect on above (1) (8) 1
Adjusted earnings (2,825) (1,715) (4,671)
*Adjusted earnings per share is calculated as profit for the period adjusted
for amortisation as a result of business combinations, exceptional 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.
5. TRADE AND OTHER RECEIVABLES
Mar-22 Mar-21 Sep-21
Unaudited Unaudited Unaudited
£000 £000 £000
Amounts falling due within one year:
Trade receivables not past due 3,620 5,222 4,861
Trade receivables past due (1-30 days) 1,770 979 3,192
Trade receivables past due (over 30 days) 6,253 898 3,344
Trade receivables net 11,643 7,099 11,397
Contract assets 1,900 10,020 5,432
Other receivables 1,525 606 563
Prepayments and accrued income 633 636 542
Deferred Tax Asset 139 - -
Derivative financial assets (3) 185 37
15,837 18,546 17,971
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-22 Mar-21 Sep-21
Unaudited Unaudited Unaudited
£000 £000 £000
Current
Trade Loan Facility 2,549 3,000 2,999
Lease liability 75 88 160
2,624 3,088 3,159
Non-current
CBILS Bank Loan 3,088 - 3,053
Lease liability 84 247 131
3,172 247 3,184
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