Trading Statement and the Impact of Corona Virus
18/02/2020 07:00
RNS Number : 2699D
Tekmar Group PLC
18 February 2020
18 February 2020
The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
TEKMAR GROUP PLC
("Tekmar Group" or the "Group")
TRADING UPDATE AND THE IMPACT OF CORONAVIRUS
Tekmar Group (AIM: TGP), a leading technology provider of subsea protection systems for the global offshore energy markets, announces a trading update, which reflects the foreseeable impact of the outbreak of the coronavirus on the Group's performance in the year ending 31 March 2020 ("FY20").
The Board stated, in the Half Year Results announced on 3 December 2019 (RNS Number 4083V), that seasonal weighting in the Group's performance was in line with our expectations and that the Group was firmly on track to meet market expectations for FY20. These expectations included identified sales into China in Q4. In addition to this, some of the Group's estimated cost of sales was based on pricing for components sourced from China.
China's necessary and prudent response to the outbreak of the coronavirus, including the restriction of travel in the country, is affecting the Group's performance materially in a number of ways. The Board now expects that the Group's earnings in FY20 will be broadly in line with those achieved in FY19, as a result of the following factors:
· all of the Group's projects scheduled for shipment to China have been delayed and there is little visibility as to when travel restrictions will be lifted;
· the supply of components from China has ceased pending further notice. The Group has the ability to source replacement components from Europe and any resulting delay will not affect contractual delivery schedules for clients, but does affect the timing of revenue recognition and margins on affected projects; and
· the Group's office in Shanghai, which services the whole of APAC, has been placed on official shutdown, as have many of our clients' and suppliers' offices in the region.
China accounted for circa 10% of our revenue forecast in FY20 and represented 20% of our outstanding supply-chain commitments.
Tekmar fully supports the efforts that are being taken to contain the virus and is working in close conjunction with local authorities and partners in this regard.
Increased costs relating to one project within Subsea Innovation, which have arisen since December, are also affecting the Group's performance in FY20 to a lesser extent. Mitigating measures are being implemented to minimise the impact of these additional costs.
Alasdair MacDonald, Chairman of Tekmar Group, said: "The disruption caused by the outbreak of the coronavirus on the Group's activities and performance has been unpredictable and rapid, impacting the Group materially in our crucial, heavily weighted Q4 period. With the situation in China and the surrounding APAC countries evolving, we are not yet able to evaluate the full impact of the virus on FY21 and will provide further updates as necessary."
Enquiries:
| Tekmar Group plc James Ritchie-Bland, Chief Executive Officer Sue Hurst, Chief Financial Officer | +44 (0)1325 379 520 |
| Grant Thornton UK LLP (Nominated Adviser) Philip Secrett / Samantha Harrison | +44 (0)20 7383 5100 |
| Berenberg (Broker) Chris Bowman / Ben Wright / Richard Salmond | +44 (0)20 3207 7800 |
| Belvedere Communications (Financial PR) Cat Valentine (cvalentine@belvederepr.com) Keeley Clarke (kclarke@belvederepr.co.uk) | +44 (0) 20 3687 2750 +44 (0) 7715 769 078 +44 (0) 7967 816 525 |