TEKMAR GROUP PLC
("Tekmar Group", the "Group" or the
"Company")
FINAL RESULTS
For the year ending 30 September
2023
Tekmar Group (AIM: TGP), a
leading provider of technology and services for the global offshore
energy markets, announces its audited final results for the year
ending 30 September 2023 ("FY23" or the
"Period").
Financial Highlights
· Revenue of £39.9m (FY22: £30.2m) and Adjusted EBITDA loss of
£0.3m (FY22: loss of £2.3m) highlights an improved financial
performance.
· Gross profit of £9.3m (FY22: £7.0m) with gross profit margin
of 23.3% consistent with prior year (FY22: 23.2%)
· On a
statutory basis, the Group loss before tax for the Period was £9.9m
(FY22: loss of £5.2m). This includes a non-cash impairment charge
of £4.7m to the value of goodwill in the Group's Offshore Energy
division.
· The
Group was also impacted by foreign exchange losses for the Period
of £0.9m (FY22: gain of £0.2m), accounted for within operating
expenses.
· The
Group held £5.2m of cash as at 30 September 2023 with net debt of
£1.4m. Net debt included the drawdown of bank facilities from the
£3.0m CBILS loan and £4.0m trade loan facility, available until at
least July 2024. This cash position excludes the SCF Capital CLN
facility. Net debt at 31 January 2024 was £1.2m.
Strategic Highlights
· During the year, the Group successfully completed the formal
sales process and strategic review which culminated with the
strategic investment and related equity fundraising by SCF Partners
and existing shareholders. This exercise completed in April 2023
and raised £5.3m, net of expenses.
· In
addition, SCF Partners committed, with conditions, an additional
investment of £18.0m which is available through the convertible
loan note facility (the "CLN facility"). The use of the CLN
facility is targeted to drive growth including through
acquisitions, in-line with the ambition of the Board to build a
leading offshore wind services company over
time.
Operational Highlights
· During the year, Pipeshield secured and delivered a
combination of projects valued in excess of £8m for pipeline
protection systems in the Middle East.
· The
Group was also selected for Dogger Bank C Offshore Wind Farm (in
continuation of the previously announced Dogger Bank A & B
contracts), which, when completed, will be the largest global
Offshore Wind Project to date.
· These contract awards have helped to support a Group
orderbook of £19.7m at Jan-24 with a gross margin of
28%. and the Board is encouraged by the opportunities
for material order intake in the remainder of the current financial
year.
Key financials
|
Audited 12M
ended
Sep-23
£m
|
Audited 12M
ended
Sep-22
£m
|
Revenue
|
39.9
|
30.2
|
Adjusted
EBITDA1
|
(0.3)
|
(2.3)
|
|
|
|
Commercial KPIs
|
12M ending Sep-23
£m
|
12M ending
Sep-22
£m
|
Order
Book2
|
19.9
|
15.6
|
Order
intake3
|
44.2
|
33.3
|
Enquiry
Book4
|
386
|
370
|
Book to
Bill5
|
1.11
|
1.2
|
|
|
|
Alasdair MacDonald, CEO,
commented:
"Overall, the business made
further progress in FY23 in improving operational and financial
performance and delivered results in-line with market expectations.
Importantly, we have stabilised the business, with breakeven
Adjusted EBITDA a significant improvement on FY22 and FY21 and the
balance sheet strengthened. We are confident we have established a
clear and sustainable path to improving profitability, with the
Group expected to be profitable at the Adjusted EBITDA level in
FY24.
We are alert to the opportunities
to complement organic growth through M&A that can increase our
scale and strengthen our services offering across our end-markets,
all consistent with building a leading, global offshore wind
services platform over time. We are fully committed to delivering
on the opportunity ahead for Tekmar to build a platform for
sustainable growth and creating significant value for
shareholders."
Notes:
(1)
|
Adjusted EBITDA is defined as profit before finance costs,
tax, depreciation, amortisation, share based payments charge, and
significant one-off 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
Leanne Wilkinson, CFO
|
+44
(0)1325 349 050
|
Singer Capital
Markets (Nominated Adviser and Joint Broker)
Rick Thompson / Sam
Butcher
|
+44
(0)20 7496 3000
|
Berenberg (Joint
Broker)
Ben Wright / Ciaran
Walsh
|
+44
(0)20 3207 7800
|
Bamburgh Capital
Limited (Financial media & Investor Relations)
Murdo Montgomery
|
+44 (0)
131 376 0901
|
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.
Subscribe to further news from
Tekmar Group at Group News.
Chairman's
Statement
2023 was a pivotal year for
Tekmar. We have stabilised the business and welcomed SCF Partners
(SCF) to the Board as a highly respected strategic partner with a
shared ambition to transform Tekmar as a leading, global offshore
wind services company. The underlying business is in much better
shape than it was two years ago and the business is now on the path
to deliver sustained and improving profitability. The hard work of
my colleagues means we are more in control of our business. This is
particularly important at the current time with uncertainty in
energy markets but sets us up well for significant success ahead.
Aligned with this, is the benefit we have as a balanced business,
addressing the needs of the broad offshore energy market as it
transitions to meet the evolving commitments to lower carbon
intensity and net zero targets.
Instability in the offshore wind
market has been a feature of 2023. The pressures created by fiscal
and regulatory uncertainty, particularly in the UK and US, have
been well trailed by the media but this has been exacerbated by
supply chain constraints, inflationary pressure, permitting delays
and grid connection and infrastructure shortage. We have been
encouraged more recently to see Governments adjust their subsidy
regimes to enable developers to proceed on a viable basis.
Alongside this, projected demand for offshore wind over the
longer-term remains strong with fixed seabed foundations expected
to continue as the dominant technology through until mid-2030's
with floating foundations with dynamic cabling solutions increasing
market share from mid-2030's onwards. As installations become more
complex the attractiveness of our integrated offering becomes
stronger. With the backing of SCF, we can, over time, transform the
scale and breadth of our platform, to offer more strategic and
commercial value to our infrastructure partners, the developers and
tier one contractors.
As the offshore wind industry
continues to develop, we are being disciplined in maintaining
project margins, with the strong technology capability of Tekmar's
services and products underpinned by our consultancy expertise.
Alongside this, we value the ballast provided by our other energy
division, anchored by Pipeshield, a leading provider of specialised
subsea pipeline protection systems to oil and gas majors and
offshore contractors.
We have made substantial progress
over the last two years. There has been uncertainty along the way
for our employees, industry partners and shareholders. This is now
behind us and we are continuing to build a stronger business. We
are doing this from a good position in terms or our competitive
standing in the market and we look forward with real confidence
given the scale of the opportunity ahead for Tekmar. On behalf of
the Board, I would like to thank all our staff for their hard work
and focus on improving the Group's performance. I am pleased they
can see the fruits of these efforts coming through and look forward
to our strengthened Group delivering on its full
potential.
Chief Executive Officer's Review
Overall, the business made further
progress in FY23 in improving operational and financial performance
and delivered results in-line with market expectations.
Importantly, we have stabilised the business, with near breakeven
Adjusted EBITDA a significant improvement on FY22 and FY21 and the
current net assets position strengthened. We are confident we have
established a clear and sustainable path to improving
profitability, with the Group expected to be profitable at the
Adjusted EBITDA level in FY24. The primary objective for the
management team in FY24 is on driving consistent operational
performance to deliver improved profitability and cash generation
for the Group. We are doing this in a maturing market environment
for offshore wind which we anticipate should support incremental
market improvement in the current year. Our balanced portfolio
across energy markets gives us valuable diversification as we work
with developers and industry partners on de-risking the delivery of
critical energy infrastructure projects and supporting the energy
transition journey.
Review of near-term priorities
Return to sustained profitability
A key feature of these results is
the business mix reflected in the Group reporting an Adjusted
EBITDA loss of £0.3m for the year. Marine Civils delivered Adjusted
EBITDA of £3.5m on revenue of £18.3m. This represents a very strong
performance for this division which has become an increasingly
important part of the Group since the acquisition of Pipeshield in
2019. Marine Civils consistently generates profit and provides
diversification for the Group, which has been particularly valuable
given the headwinds and uncertainty in the offshore wind market
over the last couple of years. Our expectation is for Marine
Civils to deliver positive EBITDA in FY24, albeit we see it as
unlikely that it will meet or exceed the contribution in the
current financial year.
The Offshore Energy division by
contrast generated an Adjusted EBITDA loss for the year of £2.1m,
with a broadly similar loss across H123 and H223. This reflects
market delays and uncertainties in offshore wind projects and masks
the underlying improvements we have made in this part of the
business, particularly in strengthening the commercial and
operating model of our Tekmar Energy business. Supply chain cost
escalation also impacted project margins for two material
contracts, weakening H2 profitability in particular. Further
detail on these legacy contracts is set out in the CFO Review. We
are comfortable any residual exposure for these contracts has been
appropriately addressed such that our expectation is for gross
margin percentage for this division to recover to the mid to high
20s in FY24. This, together with the anticipated incremental volume
growth in offshore wind projects supports our confidence that
Offshore Energy will deliver positive EBITDA in 2024.
Improving the profitability of our
Offshore Energy business is an important marker in demonstrating we
are on track to deliver the trajectory of sustained profit
improvement we are driving for the Group. When we then
overlay the positive medium to long term fundamentals of the
offshore wind industry, and our balanced portfolio, we believe
Tekmar is well positioned to deliver sustainable profit growth for
shareholders through the medium to long term.
Building a better quality pipeline and order
book
Consistent with our profit
improvement focus, we are focused on commercial discipline as we
convert the enquiry book into firm orders. New contracts are
being secured at more favourable gross margins at the outset and
include more favourable cost escalation protection and milestone
payments to de-risk the projects for Tekmar.
Our current order book of £19.7m
as at 31 January 2024, reflects this disciplined approach, with a
gross margin of 28%. We are seeing the effects of legacy contracts
on margin diminishing in the order book, with 86% of the January
2024 order book value represented by better forecasted margins on
live projects at a blended 30% margin. There is more we can
do here but we are more in control of our business than we were two
years ago.
Our pipeline and enquiry book is
healthy across the Group and we are in discussions with developers
and Tier 1 contractors on a number of significant projects. The
main risk to delivering on our expectations for FY24 is the market
environment where delays with decisions, extended negotiations and
project starts continues to be a feature.
On the offshore wind side, we
secured an important contract win with an established Tier 1
contractor announced in January 2024. This contract award positions
us well for future phases of this project, as and when they come to
fruition. We were also selected to deliver our flagship cable
protection systems (CPS) for the 1 GW Hai Long Offshore Wind Farm,
situated in Taiwan, highlighting our presence in APAC. We see APAC
as a key near-term growth market for our offshore wind
division.
Our Marine Civils division
continues to win significant and profitable contracts balancing our
offshore wind opportunity. This includes building a strong
capability in the Middle East in particular, where we secured £15m
of order intake for FY23, including our grouting services, which we
see as an attractive near-term growth opportunity, where in
FY23, Tekmar won contracts worth over £1.5m.
Customer engagement
With the strategic investment by
SCF and related fundraise placing Tekmar on a stronger financial
standing, there is encouraging alignment with our customers 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 part of this, an increased focus of the Group is on
embedding the Group's engineering consultancy capability through
the lifecycle of projects and on building more strategic
partnerships with our clients. It is worth highlighting that SCF's
diligence at the time they were appraising their investment
highlighted the strength of Tekmar's standing in the industry and
the scope to deepen and expand the services and technology we offer
customers and partners. We have a significant opportunity ahead of
us to grow with our customers and help them support energy
transition and to manage the related risk of developing and
managing major infrastructure projects.
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.
Strengthening the business
During FY23, we continued to
implement our programme of organisational efficiency and targeted
cost reductions. Across the Group there is a continued focus on
improvement and simplification, including full integration of Group
support functions. We also consolidated our early stage design and
engineering resources creating a more efficient base to grow our
engineering consulting offering which is a key focus for the
current year. We streamlined the cost base removing annualised cost
of £0.8m, which has helped offset against staff inflation costs and
investment for growth in FY24. In addition, as part of our
discipline to maintain a tight control on costs, we are targeting
additional cost saving benefits in the current year in the region
of £500,000 from supply chain initiatives.
We continue to look for
opportunities to further strengthen the business through more
efficient resource allocation.
Targeted investment and capex
We are also adopting a measured
approach to capex and investment in the core business, aligning our
resources to opportunities which provide the greatest near-term
benefits. We expect capex for the current financial year to be in
the region of £2m, with approximately half of that covered by
investment in strategic initiatives including product development
for our core Teklink cable protection system and investment in our
grouting services in support of near-term revenue growth with
Pipeshield including in the Middle East. We have identified a
number of other strategic investment opportunities, with funding of
these initiatives subject to phasing as cashflow builds to support
the required investment.
M&A to strengthen and broaden the
portfolio
With the path to profitability
established, we are pursing M&A opportunities to complement
organic growth, including opportunities to build scale and
strengthen the technology and services we offer to our customers.
The ambition is to build a leading global offshore wind services
company over time, and consistent with this, we are alert to the
potential value in acquiring capability that can transition to
servicing the needs of the offshore wind industry over time.
Building a stronger platform should, in turn, create a business
which the stock market can value more highly.
We benefit significantly in this
M&A context from having SCF as a strategic partner, where we
can leverage their complementary industry knowledge and investment
expertise to help source and execute value-enhancing acquisitions.
We also benefit from SCF's committed £18m funding through the
Convertible Loan Notes, which are targeted to be deployed primarily
for value-enhancing M&A and strategic growth. Having this
committed funding in place puts Tekmar at a distinct advantage,
particularly given the current financing environment for
M&A
Market environment
The current instability in
offshore wind investment has been a theme that has been well
trailed in the media. Looking beyond the media headlines, 2023 was
actually a record year for offshore wind investment, with market
analysts highlighting Final Investment Decisions ("FID") on
projects totalling 12.3 GW during the year globally (excluding
China and cancelled projects). This followed only 0.8 GW of FID in
2022, the lowest level since 2012 and highlighting the volume
constraints in the market. (Source: TGS - 4C Offshore, 3 January
2024).
The rebound in FID approval for
2023 is clearly a positive for Tekmar. With the lead-time typically
12-months between a project receiving FID approval and the
contractors and suppliers being awarded contracts, this should
support the return to volume growth for Tekmar over the next 12-18
months. The headline data does require some caution, however, given
the prevailing environment for ongoing delays to project starts and
contract awards post-FID and the residual risk of subsequent
cancellations post-FID. Overall, we see the market moving in the
right direction in 2024 with a more balanced approach to developers
and contractors in managing project risk leading to incremental but
sustained improvement in demand. Longer-term, we see
demand for offshore wind remaining strong with fixed seabed
foundations continuing as the dominant technology through until
mid-2030's.
Following a period of
underinvestment, the Oil & Gas industry is entering a new capex
cycle, with market conditions expected to remain supportive of an
upturn in global spend over the medium term. Tekmar is well
positioned to take advantage of this forecast
growth.
Current trading and outlook
The Board anticipates the Group
should return to profitability at the Adjusted EBITDA level for the
current financial year. The absolute level of profitability will be
determined by conversion of the material opportunities in our
pipeline and by the timing of project awards and starts. Whilst
timing remains the key risk to our financial performance in the
current environment, we also remain focused on managing the
delivery of existing contracts to budget and on maintaining a tight
control of costs and cash across the business. Our near-term plans
and targeted investments support the opportunity we have to grow
organically across our core markets.
We are alert to the opportunities
to complement organic growth through M&A that can increase our
scale and strengthen our services offering across our end-markets,
all consistent with building a leading, global offshore wind
services platform over time. We are fully committed to delivering
on the opportunity ahead for Tekmar to build a platform for
sustainable growth and creating significant value for
shareholders.
Alasdair MacDonald
CEO
CFO
Review
Following my appointment to the
role of CFO in April 2023, having held the role on an interim basis
since December 2022, I am pleased to present the Financial Review
for the Group for the year ended 30 September 2023.
A summary of the Group's financial
performance is as
follows:
|
Audited
12M ended Sep
-23
£m
|
Audited
12M
ended
Sep-22
£m
|
Revenue
Gross Profit
|
39.9
9.3
|
30.2
7.0
|
Adjusted
EBITDA(1)
|
(0.3)
|
(2.3)
|
(LBT)
|
(9.9)
|
(5.2)
|
EPS
|
(10.7p)
|
(9.0p)
|
Adjusted
EPS(2)
|
(4.5p)
|
(8.1p)
|
(1) Adjusted EBITDA is a key metric used by the
Directors.
'Earnings before interest, tax, depreciation and
amortisation' are adjusted for material items of a one-off
nature and significant items which allow comparable business
performance. Details of the adjustments can be found in the
adjusted EBITDA section below. Adjusted EBITDA might not be
comparable to other companies.
(2) Adjusted EPS is a key metric used by the
Directors and measures earnings are adjusted for material items of
a one-off nature and significant items which allow comparable
business performance. Earnings for EPS calculation are
adjusted for share-based payments, £508k (£nil FY22), amortisation
on acquired intangibles £168k (£605k FY22), Impairment of goodwill
£4,745k (£nil FY22).
On a statutory basis, the Group
loss before tax was £9.9m (FY22: £5.2m loss).
Overview
The Group delivered revenue of
£39.9m for the 12-month reporting period, a 32% increase from prior
year and continued growth per half year with £22.2m in revenue
delivered in the second half from the £17.7m reported for the first
half. The adjusted EBITDA loss of (£0.3m) was largely in line
with our expectations of being around break-even at this level of
trading profitability. This is a much-improved position from
the previous two reporting years where adjusted EBITDA losses of
(£2.3m) and (£2.0m) were reported for the twelve-month period to
September 2022 and the eighteen-month period to September 2021
respectively. FY23 continued to be a transition year for the
Group as expected, particularly whilst some lower margin backlog
projects continued to be worked through and business improvement
measures continued. The cost base has been carefully managed
with further efficiencies achieved through wider group
integration.
Revenue
Revenue by operating
segment
|
|
Revenue by market
|
£m
|
|
Audited
12M
FY23
|
Audited
12M
FY22
|
Unaudited
LTM(1)
FY21
|
|
£m
|
Audited
12M
FY23
|
Audited
12M
FY22
|
Unaudited
LTM(1)
FY21
|
Offshore Energy
|
|
21.6
|
17.4
|
21.9
|
|
Offshore Wind
|
17.7
|
14.7
|
16.8
|
Marine Civils
|
|
18.3
|
12.8
|
9.9
|
|
Other Offshore
|
22.2
|
15.5
|
15.0
|
Total
|
|
39.9
|
30.2
|
31.8
|
|
Total
|
39.9
|
30.2
|
31.8
|
(1) LTM - Last twelve months
It has been encouraging to see
revenues grow in both Offshore Energy and Marine Civils divisions
in FY23, by 24% and 43% respectively during the reporting
period.
The Offshore Energy division,
incorporating Tekmar Energy, Subsea Innovation, AgileTek and Ryder
Geotechnical, all of which operate largely as a single unit, has
achieved a revenue increase of £4.2m. The growth in offshore
wind contributed to £3m of this increase and was underpinned by
revenues from windfarm developments across a number of key regions
for the Group including Europe and emerging regions in offshore
wind such as Asia Pacific and the United States. The
remaining increase in revenue of £1.2m was largely from work in the
Middle East, whereby the Group's brands and track record which has
been established, has enabled further work to be secured with key
clients in the region.
Marine Civils, comprising
Pipeshield, saw continued revenue growth for the 12-month period at
£18.3m, which is £5.5m higher compared with revenue of £12.8m for
the previous 12-month period. Consistent with prior year, this
growth was achieved through securing and delivering further
contracts for both the core Pipeshield product line as well as a
diversified grouting service line offering, in the Middle East,
which continues to be a growth market for Pipeshield and the wider
group demonstrating our regional expansion strategy is
delivering.
Gross profit
|
Gross profit by operating
segment
|
|
Gross Profit by market
|
£m
|
Audited
12M
FY23
|
Audited
12M
FY22
|
Unaudited
LTM(1)
FY21
|
|
£m
|
Audited
12M
FY23
|
Audited
12M
FY22
|
Unaudited
LTM(1)
FY21
|
Offshore Energy
|
4.0
|
4.4
|
4.4
|
|
Offshore wind
|
|
4.8
|
4.2
|
4.8
|
Marine Civils
|
5.3
|
2.6
|
2.1
|
|
Other offshore
|
|
6.1
|
4.4
|
3.3
|
|
|
|
|
|
Unallocated costs
|
|
(1.6)
|
(1.6)
|
(1.6)
|
Total
|
9.3
|
7.0
|
6.5
|
|
Total
|
|
9.3
|
7.0
|
6.5
|
|
|
|
|
|
|
|
|
|
| |
(1) LTM - Last twelve months
The gross profit increase of £2.3m
reported for the period is driven from the increase in revenue
which is £9.7m higher than the prior 12 months. The gross
profit percentage of 23% remains consistent with the prior year as
the opening order book for FY23 included two, sizable, lower margin
offshore wind contracts awarded in prior periods and have
subsequently experienced material cost escalations from wider
macro-economic factors since they were awarded in 2021. This
impacted gross profit margin in Offshore Energy division which fell
to 18% from 25% in FY22. Regarding the two Offshore Energy
projects noted above, one was significantly progressed for revenue
recognition in FY23 and the other project which runs into early
FY25 has appropriate contract loss provisioning (£0.4m) included in
FY23. Management continue to explore opportunities for margin
improvement on this contract over the remaining life of the
project.
Gross profit margin within Marine
Civils increased to 29% from 20% in FY22 from the additional scale
within the Pipeshield business coupled with capturing the value of
contract variations in the year.
The focus on margin improvement in
Offshore Energy remains. Although there has continued to be
pricing pressure on some contracts from opening backlog delivered
in the year, newer contracts, some of which have been delivered
across FY23, have been awarded at improved margins which have been
maintained or improved through contract execution. This
expected improved commercial and operational performance, coupled
with increased volume in the market and the recent improvement in
energy strike prices across the industry, paves the way for the
Offshore Energy division to track back to a 30% gross margin in the
next 3 years.
Operating expenses
Operating expenses for the
12-month period to 30 September 2023 were £18.6m compared to £11.6m
for the equivalent 12-month period ending 30 September 2022. The
increase of £7.0m relates largely to several one-off items; £4.7m
goodwill impairment relating to the offshore energy CGU as detailed
below, £1.2m foreign exchange differences, a bonus payment of £0.4m
was made to staff upon the successful completion of the Group's
strategic review and share based payments increased by £0.5m,
primarily as a result of share awards to management on the
completion of the Group's strategic review. In addition,
there were £0.3m of restructuring costs incurred. The share
awards were approved by shareholders when approving the investment
by SCF.
Other cost increases in the year
included higher professional fees of £0.2m which have been offset
by staff cost savings of £0.2m (net of inflationary increase of
£0.5m) and £0.3m benefit from lower amortisation expense year on
year.
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
material items of a one-off nature or of such significance that
they are considered relevant to the user of the financial
statements as it represents a useful milestone that is reflective
of the comparable performance of the business. Foreign exchange
losses and gains form part of the adjustment to EBITDA, this is due
to the significant influence of exchange rate fluctuations versus
the group's reporting currency (GBP) in the first quarter of
FY23.
The below table shows the
adjustments that have been made to calculate Adjusted EBITDA in the
year ended 30 September 2023.
EBITDA Reconciliation
(£m)
|
12 months
Sep-23
|
12 months
Sep-22
|
18 months
Sep-21
|
|
|
|
|
Reported operating
(loss)/profit
|
(9.3)
|
(4.6)
|
(5.4)
|
Amortisation of intangible
assets
|
0.1
|
0.6
|
0.8
|
Amortisation of other
intangible assets
|
0.6
|
0.5
|
0.9
|
Depreciation on tangible
assets
|
0.8
|
0.9
|
1.4
|
Depreciation on ROU
assets
|
0.5
|
0.5
|
0.6
|
EBITDA
|
(7.1)
|
(2.1)
|
(1.8)
|
Adjusted items:
|
|
|
|
Share Based
Payments
|
0.5
|
-
|
(0.4)
|
Impairment of
goodwill
|
4.7
|
-
|
-
|
Exceptional items -
Bonus
|
0.4
|
-
|
-
|
Foreign exchange losses
& gains
|
0.9
|
(0.2)
|
(0.2)
|
Restructuring
costs
|
0.3
|
-
|
-
|
|
|
|
|
Adjusted EBITDA
|
(0.3)
|
(2.3)
|
(2.3)
|
The £0.3m adjusted EBITDA loss for
the 12 months ended 30 September 2023 was an improvement of £2.0m
when compared to the £2.3m adjusted EBITDA loss for the 12 months
to September 2022 and is a result of the increased gross profit as
above.
Adjusted EBITDA by 6-month
period
(Unaudited)
|
|
£m
|
|
6m
Sep-23
|
6m
Mar-23
|
6m
Sep-22
|
6m
Mar-22
|
6m
Sep-21
|
6m
Mar-21
|
|
Revenue
|
|
22.2
|
17.7
|
17.2
|
13.0
|
17.9
|
13.9
|
|
Adjusted EBITDA
|
|
(0.5)
|
0.2
|
(0.3)
|
(1.8)
|
(1.8)
|
(1.1)
|
|
H2 23 reported an increase revenue
of £5m versus the prior 6-month period, however, adjusted EBITDA
(net of FX impacts) was £0.7m lower due to the gross margin on two
offshore energy projects and higher overhead costs of £0.4m versus
H1 23 due to £0.3m professional costs and £0.1m bank
charges.
As we work through the remaining
lower margin backlog contracts, coupled with the increased volume
in the offshore wind sector, the profitability of the Group's
Offshore Energy division has opportunity to improve going forward,
in support of management's medium-term target of 30% gross
margin. The recent pricing resets starting to be seen in the
industry are also likely to support this direction of travel,
however, we are mindful this will take time to fully take
effect.
Adjusted EBITDA by division
£m
|
|
|
£m
|
|
12M
FY23
|
12M
FY22
|
LTM(1)
FY21
|
|
|
Offshore Energy
|
|
(2.1)
|
(1.8)
|
(2.7)
|
|
|
Marine Civils
|
|
3.6
|
1.0
|
0.9
|
|
|
Group costs
|
|
(1.8)
|
(1.3)
|
(1.1)
|
|
|
Total
|
|
(0.3)
|
(2.1)
|
(2.9)
|
|
|
(1) LTM - Last twelve months
Result for the year
The result after tax is a loss of
£10.1m (FY22: Loss of £5.2m) and the loss includes an impairment
charge of £4.7m to the value of the goodwill in the Group's
Offshore Energy division. Trading forecasts for the Offshore Energy
division have been reviewed and continue to grow inline with market
expectations for the offshore wind market , however changes in
economic conditions and specifically increases in interest rates
have led to a substantial increase in the group's Weighted average
cost of capital (WACC), increasing from 13.5% FY22 to 15.5% FY23.
The increase in the group's WACC resulted in a deterioration in the
future expected cashflows leading to the impairment being
recognised.
Although the Group reports an
improvement in adjusted EBITDA of £2.0m and £0.4m lower
depreciation and Amortisation between FY22 and FY23, this is offset
by impacts of one-off items; Share based payments £0.5m, bonus
£0.4m, restructuring costs of £0.3m and the movement in FX impacts
of £1.2m.
Foreign currency
The Group has continued to see
growth in international markets and, as a result, this growth
increases the Group's exposure to fluctuations in foreign currency
rates. During the year the Group were impacted by foreign exchange
losses of £0.9m. These losses have been accounted for within
operating expenses. In comparison, FY22 had a foreign
currency gain of £0.2m.
The Group mitigates exposure to
fluctuations in foreign exchange rates by the use of derivatives,
mainly forward currency contracts and options. At the year end the
Group held forward currency contracts to mitigate the risk of
receivables balances for both Euros and Dollars. Any gains or
losses on derivative instruments are accounted for in cost of
sales. At the year end the group had a derivative liability of
£20k.
The Group predominately trades in
pounds sterling with approximately 17% of revenue denominated in
Euros, 23% denominated in US dollars, and significant trading in
Chinese RMB. On certain overseas projects the Group can create a
natural hedge by matching the currency of the supply chain to the
contracting currency, this helps to mitigate the Group's exposure
to foreign currency fluctuations.
Cash and Balance Sheet
The Group's balance sheet was
stabilised in April 2023 following the conclusion of the strategic
review. New capital investment from SCF Partners and related
parties of £4.3m alongside a placing and retail fund raise of £2.1m
raised cash proceeds of £5.3m, net of expenses. In addition,
SCF Partners have committed, with conditions, an additional
investment of £18.0m available through the convertible loan note
facility.
The gross cash balance at 30
September 2023 was £5.2m with net debt being (£1.4m). The Group has
extended its CBILs facility of £3.0m for a further 12 months to
October 2024 and the trade loan facility of £4.0m, which is
available until at least July 2024, aligning with the annual review
date of the facilities with Barclays Bank. These facilities
continue to support the working capital requirements of the Group
in delivering the projects the Group undertakes. The expected
continued renewal of the banking facilities form part of the
directors going concern assumptions.
Of the £4.0m trade loan facility,
£3.5m was drawn against supplier payments at the year end and is
repayable within 90 days of drawdown. The FY22 comparative is
£4.0m. This balance and the CBILS loan of £3.0m is reported within
current liabilities.
The decrease in operational
cashflows of £5.7m were primarily driven by the increase in the
year end trade receivables of £6.4m This position contributed to a
net decrease in cash and cash equivalents of £3.3m in the
year.
Inventories reduced by £2.5m in
the year, however, net working capital increased by £3.7m due to a
£6.4m increase in trade and other receivables which rose to £19.7m
(FY22: £13.4m). This was driven by specific overdue debtor
receipts in the Middle East and China. The ageing of debtors has
increased across the group due to the specific debts in the Middle
East and China. The group has not provided for any credit loss
provisions as these debts are considered to be recoverable in full
based on prior trading history with these customers.
The Group has continued to
enhance its contracting terms and cash collection processes
however, the year-end position was impacted by the timing of
certain material receipts at the year-end related to these
regions.
Cash generation continues to be a
major focus for the Group. We maintain our disciplined
approach to commercial management and debtor collections whilst
adopting a cautious and considered approach to ongoing organic
investment to support the growth plans of the underlying
business.
The business continuously invests
in research and development activity. The highlight during the
financial year was the continued development of the next generation
TekLink product in the offshore wind division. A total of £353,000
of Research and Development costs were incurred in year. All costs
have been capitalised as intangible assets under IAS36.
The annual impairment review of
the goodwill on the balance sheet has resulted in an impairment
charge of £4.7m which related to the offshore energy
division. As detailed in the P&L commentary, this was
predominantly due to a substantial increase in the Group's weighted
average cost of capital (WACC) which has increased from 13.5% in
FY22 to 15.5% in FY23 due to changes in economic conditions and
especially increases in interest rates.
During the year, Tekmar Energy
Limited renewed a property lease relating to its manufacturing
facility. The lease value was £1.1m and is accounted for as a
right of use asset under IFRS16, within fixed assets. To
preserve cash during the year a cautious approach has been taken
regarding wider investments and therefore other fixed asset
investments were largely in line with depreciation charges within
the year.
A provision of £0.5m has been
recognised in the year for onerous contracts. The group has
assessed that the unavoidable costs of fulfilling the contract
obligations exceed the economic benefits expected to be received
from the contract. The provision relates to two contracts in the
offshore energy division which are expected to be largely completed
in the year ending September 2024
A summary balance sheet is
presented below:
Balance Sheet
|
£m
|
|
FY23
|
FY22
|
Fixed Assets
|
|
6.8
|
5.9
|
Other non-current
assets
|
|
19.4
|
24.6
|
Inventory
|
|
2.1
|
4.6
|
Trade & other
receivables
|
|
19.7
|
13.4
|
Cash
|
|
5.2
|
8.5
|
Current liabilities
|
|
(16.9)
|
(16.9)
|
Other non-current
liabilities
|
|
(1.7)
|
(0.8)
|
Equity
|
|
34.6
|
39.2
|
Summary
The Group has achieved the planned
stepped improvement in financial results for FY23 and our
expectations of returning to profitability in FY24 remain.
The completion of the strategic review which culminated in the new
capital investment has reset the balance sheet and allowed the
business to move forward with the organic growth plans previously
set out and supported by the wider opportunity within the energy
markets we operate.
The hard work and improvements
undertaken by the Group in the last 3 years provides for a stronger
foundation and I look forward with optimism in supporting the
business in its continued growth and return to sustainable
profitability.
Leanne Wilkinson
Chief Financial Officer
Consolidated statement of comprehensive
income
for the year ended 30 September 2023
|
Note
|
12M
ended
30
Sep
2023
|
12M
ended
30
Sep
2022
|
|
|
£000
|
£000
|
|
|
|
|
Revenue
|
4
|
39,908
|
30,191
|
Cost of sales
|
|
(30,608)
|
(23,153)
|
Gross profit
|
|
9,300
|
7,038
|
|
|
|
|
Administrative expenses
|
|
(18,616)
|
(11,623)
|
Other operating income
|
|
26
|
24
|
Group operating (loss)
|
|
(9,290)
|
(4,561)
|
|
|
|
|
Analysed as:
|
|
|
|
Adjusted
EBITDA[1]
|
4
|
(323)
|
(2,308)
|
Depreciation
|
|
(1,327)
|
(1,370)
|
Amortisation
|
6
|
(763)
|
(1,112)
|
Exceptional Share based payments
charges
|
|
(508)
|
-
|
Impairment of goodwill
|
6
|
(4,745)
|
-
|
Exceptional bonus
payments
|
|
(430)
|
-
|
Foreign exchange
(losses)/gains
|
|
(926)
|
229
|
Restructuring costs
|
|
(268)
|
-
|
Group operating (Loss)
|
|
(9,290)
|
(4,561)
|
|
|
|
|
Finance costs
|
|
(637)
|
(685)
|
Finance income
|
|
4
|
18
|
Net finance costs
|
|
(633)
|
(667)
|
|
|
|
|
(Loss) before taxation
|
|
(9,923)
|
(5,228)
|
Taxation
|
|
(201)
|
99
|
(Loss) for the period
|
|
(10,124)
|
(5,129)
|
Equity-settled share-based
payments
Revaluation of property
Retranslation of overseas
subsidiaries
|
|
548
-
(281)
|
(97)
238
326
|
Total comprehensive (loss) for the period
|
|
(9,857)
|
(4,662)
|
|
|
|
|
(Loss) attributable to owners of the
parent
|
|
(10,124)
|
(5,129)
|
Total Comprehensive income
attributable to owners of the parent
|
|
(9,857)
|
(4,662)
|
|
|
|
|
(Loss) per share (pence)
|
|
|
|
Basic
|
5
|
(10.69)
|
(9.04)
|
Diluted
|
5
|
(10.69)
|
(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 in relation to
one-off awards, material items of a one off nature and
significant items which allow comparable business performance is a
non-GAAP metric used by management and is not an IFRS
disclosure.
Consolidated balance sheet
as at 30 September 2023
|
Note
|
30
Sep
2023
|
30
Sep
2022
|
|
|
£000
|
£000
|
|
|
|
|
Non-current assets
|
|
|
|
Property, plant and
equipment
|
|
6,808
|
5,883
|
Goodwill and other
intangibles
|
6
|
19,367
|
24,564
|
Total non-current
assets
|
|
26,175
|
30,447
|
|
|
|
|
Current assets
|
|
|
|
Inventory
|
|
2,127
|
4,623
|
Trade and other
receivables
|
7
|
19,734
|
13,375
|
Cash and cash
equivalents
|
|
5,219
|
8,496
|
Total current assets
|
|
27,080
|
26,494
|
|
|
|
|
Total assets
|
|
53,255
|
56,941
|
|
|
|
|
Equity and liabilities
|
|
|
|
Share capital
|
|
1,360
|
609
|
Share premium
|
|
72,202
|
67,653
|
Merger relief reserve
|
|
1,738
|
1,738
|
Merger reserve
|
|
(12,685)
|
(12,685)
|
Foreign currency translation
reserve
|
|
(108)
|
173
|
Retained losses
|
|
(27,854)
|
(18,278)
|
Total equity
|
|
34,653
|
39,210
|
|
|
|
|
Non-current liabilities
|
|
|
|
Other interest-bearing loans and
borrowings
|
8
|
834
|
194
|
Trade and other
payables
|
|
327
|
331
|
Deferred tax liability
|
|
503
|
313
|
Total non-current
liabilities
|
|
1,664
|
838
|
|
|
|
|
Current liabilities
|
|
|
|
Other interest-bearing loans and
borrowings
|
8
|
7,046
|
7,198
|
Trade and other
payables
|
|
9,398
|
9,669
|
Corporation tax payable
|
|
29
|
26
|
Provisions
|
9
|
465
|
-
|
Total current
liabilities
|
|
16,938
|
16,893
|
|
|
|
|
Total liabilities
|
|
18,602
|
17,731
|
|
|
|
|
Total equity and liabilities
|
|
53,255
|
56,941
|
Consolidated statement of changes in equity
for the year ended 30 September 2023
|
Share
capital
|
Share
premium
|
Merger
relief
reserve
|
Merger
reserve
|
Foreign
currency translation reserve
|
Retained
earnings
|
Total
equity attributable to owners of the parent
|
Total
equity
|
|
£000
|
£000
|
£000
|
£000
|
£000
|
£000
|
£000
|
£000
|
|
|
|
|
|
|
|
|
|
Balance at 30 September 2021
|
516
|
64,097
|
1,738
|
(12,685)
|
(153)
|
(13,290)
|
40,223
|
40,223
|
(Loss) for the Period
|
-
|
-
|
-
|
-
|
-
|
(5,129)
|
(5,129)
|
(5,129)
|
Share based payments
|
-
|
-
|
-
|
-
|
-
|
(97)
|
(97)
|
(97)
|
Revaluation of fixed
assets
|
-
|
-
|
-
|
-
|
-
|
238
|
238
|
238
|
Exchange difference on translation
of overseas subsidiary
|
-
|
-
|
-
|
-
|
326
|
-
|
326
|
326
|
Total comprehensive income for the
year
|
-
|
-
|
-
|
-
|
326
|
(4,988)
|
(4,662)
|
(4,662)
|
Issue of shares
|
93
|
3,556
|
-
|
-
|
-
|
-
|
3,649
|
3,649
|
Total transactions with owners, recognised
directly in equity
|
93
|
3,556
|
-
|
-
|
-
|
-
|
3,649
|
3,649
|
Balance at 30 September 2022
|
609
|
67,653
|
1,738
|
(12,685)
|
173
|
(18,278)
|
39,210
|
39,210
|
(Loss) for the Period
|
-
|
-
|
-
|
-
|
-
|
(10,124)
|
(10,124)
|
(10,124)
|
Share based payments
|
-
|
-
|
-
|
-
|
-
|
548
|
548
|
548
|
Exchange difference on translation
of overseas subsidiary
|
-
|
-
|
-
|
-
|
(281)
|
-
|
(281)
|
(281)
|
Total comprehensive (loss) for the
year
|
-
|
-
|
-
|
-
|
(281)
|
(9,578)
|
(9,857)
|
(9,857)
|
Issue of shares, net of
transaction costs
|
751
|
4,549
|
-
|
-
|
-
|
-
|
5,300
|
5,300
|
Total transactions with owners, recognised
directly in equity
|
751
|
4,549
|
-
|
-
|
-
|
-
|
5,300
|
5,300
|
Balance at 30 September 2023
|
1,360
|
72,202
|
1,738
|
(12,685)
|
(108)
|
(27,854)
|
34,653
|
34,653
|
Consolidated cash flow statement
for the year ended 30 September 2023
|
|
12M
ended
30
Sep 2023
|
12M
Ended
30
Sep 2022
|
|
|
£000
|
£000
|
Cash flows from operating activities
|
|
|
|
(Loss) before taxation
|
|
(9,923)
|
(5,228)
|
Adjustments for:
|
|
|
|
Depreciation
|
|
1,327
|
1,370
|
Amortisation of intangible
assets
|
|
763
|
1,112
|
Share based payments
charge
|
|
537
|
(103)
|
Impairment of goodwill
|
|
4,745
|
-
|
Finance costs
|
|
552
|
685
|
Finance income
|
|
(4)
|
(18)
|
|
|
(2,003)
|
(2,182)
|
|
|
|
|
Changes in working
capital:
|
|
|
|
Decrease / (Increase) in
inventories
|
|
2,496
|
(658)
|
(Increase) / decrease in trade and
other receivables
|
|
(6,360)
|
4,561
|
(Decrease) / Increase in trade and
other payables
|
|
(272)
|
178
|
Increase in provisions
|
|
465
|
-
|
Cash (used in) / generated from operations
|
|
(5,674)
|
1,899
|
|
|
|
|
Tax recovered
|
|
-
|
-
|
Net cash (outflow) / inflow from operating
activities
|
|
(5,674)
|
1,899
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
Purchase of property, plant and
equipment
|
|
(1,012)
|
(618)
|
Purchase of intangible
assets
|
|
(310)
|
(369)
|
Proceeds on sale of property,
plant and equipment
|
|
29
|
-
|
Interest received
|
|
4
|
18
|
Net cash (outflow) from investing
activities
|
|
(1,289)
|
(969)
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
Facility drawdown
Facility Repayment
Repayment of borrowings under
Lease obligations
|
|
11,526
(11,941)
(414)
|
991
-
(537)
|
Shares issued
|
|
5,300
|
3,649
|
Interest paid
|
|
(505)
|
(345)
|
Net cash inflow from financing activities
|
|
3,966
|
3,758
|
|
|
|
|
Net (decrease) / increase in cash
and cash equivalents
|
|
(2,997)
|
4,688
|
Cash and cash equivalents at
beginning of year
Effect of foreign exchange rate
changes
|
|
8,496
(280)
|
3,482
326
|
Cash and cash equivalents at end of year
|
|
5,219
|
8,496
|
Lease borrowings in relation to
right of use assets have been offset against the asset additions
within cashflows from investing activities.
Notes to the Group financial statements
for the year ended 30 September 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.
Statement of compliance
The financial information set out
in this preliminary announcement does not constitute the Group's
statutory financial statements for the period ended 30 September
2023 or 30 September 2022 as defined in section 435 of the
Companies act 2006 (CA 2006) but is derived from those audited
financial statements. Statutory financial statements for 2022 have
been delivered to the Registrar of Companies and those for 2023
will be delivered in due course. The auditors reported on those
accounts; their reports were unqualified and did not contain a
statement under either Section 498(2) or Section 498(3) of the
Companies Act 2006. For the year ended 30 September 2023 and period
to 30 September 2022 their report contains a material uncertainty
in respect of going concern without modifying their
report.
Selected explanatory notes are
included to explain events and transactions that are significant to
an understanding of the changes in financial position and
performance of the Group.
Forward looking statements
Certain statements in this Annual
report are forward looking. The terms "expect", "anticipate",
"should be", "will be" and similar expressions identify
forward-looking statements. Although the Board of Directors
believes that the expectations reflected in these forward-looking
statements are reasonable, such statements are subject to a number
of risks and uncertainties and events could differ materially from
those expressed or implied by these forward-looking
statements.
2. BASIS OF PREPARATION AND
ACCOUNTING POLICIES
The Group's principal accounting
policies have been applied consistently to all of the years
presented, with the exception of the new standards applied for the
first time as set out in paragraph (c) below where
applicable.
(a) Basis of preparation
The results for the year ended 30
September 2023 have been prepared in accordance with
UK-adopted International
Accounting Standards ("IFRS"). The financial statements have been
prepared on the going concern basis and on the historical cost
convention modified for the revaluation of Freehold property and
certain financial instruments. The
comparative period represents 12 months to 30 September
2022.
Tekmar Group plc ("the Company")
has adopted all IFRS in issue and effective for the
year.
(b) Going concern
The Group meets its day-to-day
working capital requirements through its available banking
facilities which includes a CBILs loan of £3.0m currently available
to 31 October 2024 and a trade loan facility of up to £4.0m that
can be drawn against supplier payments, currently available to 31
July 2024. The latter is provided with support from UKEF due
to the nature of the business activities both in renewable energies
and in driving growth through export lead opportunities. The Group
held £5.2m of cash at 30 September 2023 including draw down of the
£3.0m CBILS loan and a further £3.6m of the trade loan facility.
There are no financial covenants that the Group must adhere to in
either of the bank facilities.
The Directors have prepared cash
flow forecasts to 31 March 2025. The base case forecasts
include assumptions for annual revenue growth supported by current
order book, known tender pipeline, and by publicly available market
predictions for the sector. The forecasts also assume a
retention of the costs base of the business with increases of 5% on
salaries and a cautious recovery of gross margin on
contracts. These forecasts show that the Group is expected to
have a sufficient level of financial resources available to
continue to operate on the assumption that the two facilities
described are renewed. Within the base case model management have
not modelled anything in relation to the matter set out in note 21
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 31 March 2025, including the loss or delay of a
certain level of contracts in the pipeline that form the base case
forecast, and a 10% increase in costs across the Group as a whole
for the same period. In addition the delays of specific cash
receipts have been modelled. The base case and sensitised forecast
also includes discretionary spend on capital outlay. The Directors
note there is further discretionary spend within their control
which could be cut, if necessary, although this has not been
modelled in the sensitised case given the headroom already
available. These sensitivities have been modelled to give the
Directors comfort in adopting the going concern basis of
preparation for these financial statements. Further
to
this, a 'reverse stress test' was
performed to determine at what point there would be a break in the
model, the reverse stress test included reducing order intake by
22.5% and increasing overheads by 15% against the base case. In
addition the delays of specific cash receipts have been
modelled. The inputs applied to the reverse stress are not
considered plausible.
Facilities - Within the base case,
severe but plausible case and reverse stress test, management have
assumed the renewal of both the CBILS loan and trade loan facility
in October 2024 and July 2024 respectively. In the unlikely case
that the facilities are not renewed, the Group would aim to take a
number of co-ordinated actions designed to avoid the cash deficit
that would arise.
The Directors are confident, based
upon the communications with the team at Barclays, the historical
strong relationship and recent bank facility renewal in November
2023, that these facilities will be renewed and will be available
for the foreseeable future. However, as the renewal of the two
facilities in October 2024 and July 2024 are yet to be formally
agreed and the Group's forecasts rely on their renewal, these
events or conditions indicate that a material uncertainty exists
that may cast significant doubt on the Group's and parent company's
ability to continue as a going concern.
The Directors are satisfied that,
taking account of reasonably foreseeable changes in trading
performance and on the basis that the bank facilities are renewed,
these forecasts and projections show that the Group is expected to
have a sufficient level of financial resources available through
current facilities to continue in operational existence and meet
its liabilities as they fall due for at least the next 12 months
from the date of approval of the financial statements and for this
reason they continue to adopt the going concern basis in preparing
the financial statements.
(c) New standards, amendments and
interpretations
The new standards, amendments or
interpretations issued in the year, with which the Group has
to comply with, have not had a significant effect impact on the
Group. There are no standards endorsed but not yet effective
that will have a significant impact going forward.
(d) Basis of consolidation
Subsidiaries are all entities over
which the Group has control. The Group controls an entity when the
Group is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those
returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the
Group and are deconsolidated from the date control ceases.
Inter-company transactions, balances and unrealised gains and
losses on transactions between group companies are
eliminated.
(e) Revenue
Revenue (in both the offshore
energy and the marine civils markets) arises from the supply
of subsea protection solutions and associated equipment,
principally through fixed fee contracts. There are also technical
consultancy services delivered through subsea energy.
To determine how to recognise
revenue in line with IFRS 15, the Group follows a 5-step process as
follows:
1.
Identifying the contract with a customer
2.
Identifying the performance obligations
3.
Determining the transaction price
4.
Allocating the transaction price to the performance
obligations
5.
Recognising revenue when / as performance obligation(s) are
satisfied
Revenue is measured at transaction
price, stated net of VAT and other sales related taxes.
Revenue is recognised either at a
point in time, or over-time as the Group satisfies performance
obligations by transferring the promised services to its customers
as described below.
i)
Fixed-fee contracted supply of subsea protection
solutions
For the majority of revenue
transactions, the Group enters individual contracts for the supply
of subsea protection solutions, generally for a specific project in
a particular geographic location. Each contract generally has one
performance obligation, to supply subsea protection solutions. When
the contracts meet one or more of the criteria within step 5,
including the right to payment for the work completed, including
profit should the customer terminate, then revenue is recognised
over time. If the criteria for recognising revenue over time is not
met, revenue is recognised at a point in time, normally on the
transfer of ownership of the goods to the
customer.
For contracts where revenue is
recognised over time, an assessment is made as to the most accurate
method to estimate stage of completion. This assessment is
performed on a contract by contract basis to ensure that revenue
most accurately represents the efforts incurred on a project.
For the majority of contracts this is on an inputs basis
(costs incurred as a % of total forecast costs).
There are also contracts which
include the manufacture of a number of separately identifiable
products. In such circumstances, as the deliverables are
distinct, each deliverable is deemed to meet the definition of a
performance obligation in its own right and do not meet the
definition under IFRS of a series of distinct goods or services
given how substantially different each item is. Revenue for
each item is stipulated in the contract and revenue is recognised
over time as one or more of the criteria for over time recognition
within IFRS 15 are met. Generally for these items, an output
method of estimating stage of completion is used as this gives the
most accurate estimate of stage of completion. On certain contracts
variation orders are received as the scope of contract changes,
these are review on a case-by-case basis to ensure the revenue for
these obligations is appropriately recognised.
In all cases, any advance billings
are deferred and recognised as the service is delivered.
ii)
Manufacture and distribution of ancillary products,
equipment.
The Group also receives a
proportion of its revenue streams through the sale of ancillary
products and equipment. These individual sales are formed of
individual purchase order's for which goods are ordered or made
using inventory items. These items are recognised on a point in
time basis, being the delivery of the goods to the end
customer.
iii)
Provision of consultancy services
The entities within the offshore
energy division also provide consultancy based services whereby
engineering support is provided to customers. These contracts meet
one or more of the criteria within step 5, including the right to
payment for the work completed, including profit should the
customer terminate. Revenue is recognised over time on these
contracts using the inputs method.
Tekmar Group PLC applies the IFRS
15 Practical expedient in respects of determining the financing
component of contract consideration: An entity need not adjust the
promised amount of consideration for the effects of a significant
financing component if the entity expects, at contract inception,
that the period between when the entity transfers a promised good
or service to a customer and when the customer pays for that good
or service will be one year or less.
Accounting for revenue is
considered to be a key accounting judgement which is further
explained in note 3.
(f) EBITDA and Adjusted
EBITDA
Earnings before Interest, Taxation,
Depreciation and Amortisation ("EBITDA") and Adjusted EBITDA are
non-GAAP measures used by management to assess the operating
performance of the Group. EBITDA is defined as profit before net
finance costs, tax, depreciation and amortisation. Material
items of a one-off nature or of such significance they are
considered relevant to the user of the financial statements, and
share based payment charge in relation to one-off awards are
excluded.
.
The Directors primarily use the
Adjusted EBITDA measure when making decisions about the Group's
activities. As these are non-GAAP measures, EBITDA and Adjusted
EBITDA measures used by other entities may not be calculated in the
same way and hence are not directly comparable.
3. CRITICAL
ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of the Group
financial statements under IFRS requires the Directors to make
estimates and assumptions that affect the reported amounts of
assets and liabilities . Estimates and judgements are continually
evaluated and are based on historical experience and other factors
including expectations of future events that are believed to be
reasonable under the circumstances. Actual results may differ from
these estimates.
The Directors consider that the
following estimates and judgements are likely to have the most
significant effect on the amounts recognised in the Group financial
statements.
(a) Critical judgements in applying the entity's
accounting policies
Revenue recognition
Judgement is applied in determining
the most appropriate method to apply in respect of recognising
revenue over-time as the service is performed using either the
input or output method. Further details on how the policy is
applied can be found in note 2(e).
Product development capitalisation
Group expenditure on development
activities is capitalised if it meets the criteria as per IAS 38.
Management have exercised and applied judgement when determining
whether the criteria of IAS 38 is satisfied in relation to
development costs. As part of this judgement process, management
establish the future Total Addressable Market relating to the
product or process, evaluate the operational plans to complete the
product or process and establish where the development is
positioned on the Group's technology road map and asses the costs
against IAS 38 criteria. This process involves input from the
Group's Chief Technical Officer plus the operational, financial and
commercial functions and is based upon detailed project cost
analysis of both time and materials.
(b) Critical accounting
estimates
Revenue recognition - stage of completion when recognising
revenue overtime
Revenue on contracts is recognised
based on the stage of completion of a project, which, when using
the input method, is measured as a proportion of costs incurred out
of total forecast costs. Forecast costs to complete each project
are therefore a key estimate in the financial statements and can be
inherently uncertain due to changes in market conditions. For
the partially complete projects in Tekmar Energy at year end if the
percentage completion was 1% different to management's estimate the
revenue impact would be £106,590. Within Subsea Innovation and
Pipeshield International there were a number of projects in
progress over the year end and a 1% movement in the estimate of
completion would impact revenue in each by £5,720 and £39,100
respectively. However, the likelihood of errors in estimation is
small, as the businesses have a history of reliable estimation of
costs to complete and given the nature of production, costs to
complete estimate are relatively simple.
The forecast costs to complete
also form part of the judgement of management as to whether a
contract loss provision is required in line with IAS37. At year end
a contract loss provision has been recognised for 2 contracts where
the unavoidable costs of meeting the obligations under the contract
exceed the economic benefits expected to be received under it. If
the loss making contracts was 1% different to management's estimate
the impact on the loss making contract provision would be
£4,650.
Recoverability of contract assets and
receivables
Management judges the
recoverability at the balance sheet date and makes a provision for
impairment where appropriate. The resultant provision for
impairment represents management's best estimate of losses incurred
in the portfolio at the balance sheet date, assessed on the
customer risk scoring and commercial discussions. Further,
management estimate the recoverability of any accrued income
balances relating to customer contracts. This estimate includes an
assessment of the probability of receipt, exposure to credit loss
and the value of any potential recovery. Management base this
estimate using the most recent and reliable information that can be
reasonably obtained at any point of review. Given the group's
historic recoverability of 100% of receivable balances, no
provision for bad debts or credit losses have been accounted for.
The group continues to operate in
global markets where payment practices surrounding large contracts
can be different to those within Europe. The flow of funds on large
capital projects within China tend to move only when the windfarm
developer approves the completion of the project. The group has a
number of trade receivable balances, within its subsidiary based in
China, which have been past due for more than 1 year. At
30th September 2024 the value of these overdue trade
receivables was £1.4m, of a total outstanding trade receivable
balance for the entity of £2.9m, These amounts remain outstanding
at the approval of the financial statements. Management have not
provided for the trade receivable balance or made a credit loss
provision on the basis that previous trading history sets a
precedent that these balances will be received. Since 2020,
the group has traded in China generating £10.1m of revenue, of
which £7.2m has been fully received to date which represents full
cash receipt on older projects. The amounts which remain
outstanding are from more recent projects and none of the values in
trade receivables are in dispute with the customer.
Impairment of Non-Current assets
Management conducts annual
impairment reviews of the Group's non-current assets on the
consolidated statement of financial position. This includes
goodwill annually, development costs where IAS 36 requires it, and
other assets as the appropriate standards prescribe. Any impairment
review is conducted using the Group's future growth targets
regarding its key markets of offshore energy and marine civils.
Sensitivities are applied to the growth assumptions to consider any
potential long-term impact of current economic conditions.
Provision is made where the recoverable amount is less than the
current carrying value of the asset. Further details as to the
estimation uncertainty and the key assumptions are set out in note
6.
4. REVENUE AND
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 market for the year ended 30 September
2023.
Major customers
In the year ended 30 September 2023
there were three major customers within the group that individually
accounted for at least 10% of total revenues (2022: one customer).
The revenues relating to these in the year to 30 September 2023
were £13,913,000 (2022: £7,243,000). Included within this is
revenue from multiple projects with different entities within the
group.
Analysis of revenue by region
|
12M
ending
30 Sep
2023
|
12M
ending
30 Sep
2022
|
|
£000
|
£000
|
UK & Ireland
|
10,146
|
8,028
|
Germany
|
1,133
|
1,230
|
Turkey
|
983
|
499
|
Greece
|
-
|
409
|
Denmark
|
-
|
757
|
Other Europe
|
1,716
|
2,721
|
China
|
1,676
|
3,847
|
USA & Canada
|
3,006
|
674
|
Japan
|
1,083
|
561
|
Philippines
|
1,157
|
534
|
Qatar
|
8,036
|
8,716
|
KSA
|
6,888
|
509
|
Other Middle East
|
2,152
|
468
|
Rest of the World
|
1,932
|
1,238
|
|
39,908
|
30,191
|
Analysis of revenue by market
|
12M
ending
30 Sep
2023
|
12M
ending
30 Sep
2022
|
|
£000
|
£000
|
Offshore Wind
|
17,659
|
14,705
|
Other offshore
|
22,249
|
15,486
|
|
39,908
|
30,191
|
Analysis of revenue by product category
|
12M
ending
30 Sep
2023
|
12M
ending
30 Sep
2022
|
|
£000
|
£000
|
Offshore Energy protection systems
& equipment
|
20,119
|
15,497
|
Marine Civils
|
18,320
|
12,734
|
Engineering consultancy
services
|
1,469
|
1,960
|
|
39,908
|
30,191
|
Note - Engineering consultancy
services forms part of the offshore energy segment
Analysis of revenue by recognition point
|
12M
ending
30 Sep
2023
|
12M
ending
30 Sep
2022
|
|
£000
|
£000
|
Point in Time
|
3,922
|
10,048
|
Over Time
|
35,986
|
20,143
|
|
39,908
|
30,191
|
At 30 September 2023, the group had
a total transaction price £19,462k (2022: £15,488k) allocated to
performance obligations on contracts which were unsatisfied or
partially unsatisfied at the end of the reporting period. The
amount of revenue recognised in the reporting year to 30 September
23 which was previously recorded in contract liabilities was
£3,188k (2022: £1,168k)
Profit and cash are measured by
division and the Board reviews this on the following
basis.
|
Offshore
Energy
2023
|
Marine
Civils
2023
|
Group/
Eliminations
|
Total
2023
|
|
£000
|
£000
|
£000
|
£000
|
|
|
|
|
|
Revenue
|
21,588
|
18,320
|
-
|
39,908
|
Gross profit
|
3,975
|
5,326
|
-
|
9,301
|
% Gross profit
|
18%
|
29%
|
-
|
23%
|
Operating (loss)/ profit
|
(9,554)
|
2,798
|
(2,533)
|
(9,289)
|
|
|
|
|
|
Analysed as:
Adjusted EBITDA
|
(2,087)
|
3,544
|
(1,780)
|
(323)
|
Depreciation
|
(1,018)
|
(298)
|
(12)
|
(1,327)
|
Amortisation
|
(594)
|
-
|
(168)
|
(763)
|
Share based payments
|
(63)
|
(82)
|
(363)
|
(508)
|
Impairment of goodwill
|
(4,745)
|
-
|
-
|
(4,745)
|
Exceptional bonus
payments
|
(314)
|
(34)
|
(82)
|
(430)
|
Foreign Exchange losses
|
(672)
|
(255)
|
2
|
(926)
|
Restructuring costs
|
(61)
|
(77)
|
(130)
|
(268)
|
|
|
|
|
|
Operating (loss)/ profit
|
(9,554)
|
2,798
|
(2,533)
|
(9,289)
|
|
|
|
|
|
Interest & similar
expenses
|
(55)
|
(10)
|
(569)
|
(634)
|
Tax
|
521
|
(789)
|
67
|
(201)
|
(Loss) / profit after tax
|
(9,087)
|
1,999
|
(3,036)
|
(10,124)
|
|
Offshore
Energy
2023
|
Marine
Civils
2023
|
Group/
Eliminations
|
Total
2023
|
|
£000
|
£000
|
£000
|
£000
|
|
|
|
|
|
Other information
|
|
|
|
Reportable segment assets
|
17,391
|
10,169
|
25,695
|
53,255
|
Reportable segment
liabilities
|
(8,175)
|
(3,208)
|
(7,218)
|
(18,601)
|
|
|
|
|
|
The goodwill and other intangible
assets allocated to group for the purposes of internal reporting
are £16,445k for Offshore energy and £2,805k for Marine
civils
|
Offshore
Energy
2022
|
Marine
Civils
2022
|
Group/
Eliminations
|
Total
2022
|
|
£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 (loss)/ profit
|
(3,405)
|
789
|
(1,945)
|
(4,561)
|
|
|
|
|
|
Analysed as:
Adjusted EBITDA
|
(1,988)
|
1,020
|
(1,339)
|
(2,307)
|
Depreciation
|
(1,099)
|
(271)
|
-
|
(1,370)
|
Amortisation
|
(506)
|
-
|
(606)
|
(1,112)
|
Foreign Exchange gains
|
188
|
40
|
-
|
228
|
Operating (loss)/ profit
|
(3,405)
|
789
|
(1,945)
|
(4,561)
|
|
|
|
|
|
Interest & similar
expenses
|
(318)
|
(185)
|
(164)
|
(667)
|
Tax
|
(237)
|
175
|
161
|
99
|
(Loss) / profit after tax
|
(3,960)
|
779
|
(1,948)
|
(5,129)
|
|
Offshore
Energy
2022
|
Marine
Civils
2022
|
Group/
Eliminations
|
Total
2022
|
|
£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)
|
(17,644)
|
5. EARNINGS PER SHARE
Basic earnings per share are
calculated by dividing the earnings attributable to equity
shareholders by the weighted average number of ordinary shares in
issue. Diluted earnings per share are calculated by including the
impact of all conditional share awards.
The calculation of basic and
diluted profit per share is based on the following data:
|
12M
ending
30 Sep
2023
|
12M
ending
30 Sep
2022
|
Earnings (£'000)
|
|
|
Earnings for the purposes of basic
and diluted earnings per
share being profit/(loss) for the
year attributable to equity shareholders
|
(10,124)
|
(5,219)
|
Number of shares
|
|
|
Weighted average number of shares
for the purposes of basic earnings per share
|
94,694,962
|
56,719,539
|
Weighted average dilutive effect
of conditional share awards
|
4,346,203
|
968,399
|
Weighted average number of shares
for the purposes of diluted earnings per share
|
99,041,164
|
57,687,938
|
Profit per ordinary share (pence)
|
|
|
Basic profit per ordinary
share
|
(10.69)
|
(9.04)
|
Diluted profit per ordinary
share
|
(10.69)
|
(9.04)
|
Adjusted earnings per ordinary share
(pence)*
|
(4.49)
|
(8.06)
|
The calculation of adjusted
earnings per share is based on the following data:
|
|
2023
|
2022
|
|
£000
|
£000
|
(Loss) for the period attributable
to equity shareholders
|
(10,124)
|
(5,129)
|
Add back:
|
|
|
Impairment of goodwill
|
4,745
|
-
|
Amortisation on acquired
intangible assets
|
168
|
605
|
Share based payment on IPO and SIP
at Admission
|
508
|
-
|
Exceptional bonus costs
|
430
|
|
Tax effect on above
|
22
|
(12)
|
Adjusted earnings
|
(4,251)
|
(4,536)
|
|
|
|
*Adjusted earnings per share is
calculated as profit for the period adjusted for amortisation as a
result of business combinations, one off items, share based
payments and the tax effect of these at the effective rate of
corporation tax, divided by the closing number of shares in issue
at the Balance Sheet date. This is the measure most commonly
used by analysts in evaluating the business' performance and
therefore the Directors have concluded this is a meaningful
adjusted EPS measure to present.
6.
GOODWILL AND OTHER INTANGIBLES
|
Goodwill
|
Software
|
Product
development
|
Trade
name
|
Customer
relationships
|
Total
|
|
|
|
|
|
|
|
|
£000
|
£000
|
£000
|
£000
|
£000
|
£000
|
COST
|
|
|
|
|
|
|
As at 1 October 2021
|
26,292
|
394
|
3,181
|
1,289
|
1,870
|
33,026
|
Additions
|
-
|
16
|
353
|
-
|
-
|
369
|
Disposals
|
-
|
(116)
|
(34)
|
-
|
-
|
(150)
|
Forex on consolidation
|
-
|
-
|
3
|
-
|
-
|
3
|
As at 30 September 2022
|
26,292
|
294
|
3,503
|
1,289
|
1,870
|
33,248
|
Additions
|
-
|
-
|
311
|
-
|
-
|
311
|
As at 30 September 2023
|
26,292
|
294
|
3,814
|
1,289
|
1,870
|
33,559
|
|
|
|
|
|
|
|
AMORTISATION AND IMPAIRMENT
|
As at 1 October 2021
|
4,109
|
132
|
1,798
|
326
|
1,354
|
7,719
|
Charge for the period
|
-
|
139
|
367
|
129
|
477
|
1,112
|
Eliminated on disposals
|
-
|
(116)
|
(34)
|
-
|
-
|
(150)
|
Forex on consolidation
|
-
|
-
|
3
|
-
|
-
|
3
|
As at 30 September 2022
|
4,109
|
155
|
2,134
|
455
|
1,831
|
8,684
|
Amortisation charge for the
year
|
-
|
139
|
456
|
129
|
39
|
763
|
Impairment charge
|
4,745
|
-
|
-
|
-
|
-
|
4,745
|
As at 30 September 2023
|
8,854
|
294
|
2,590
|
584
|
1,870
|
14,192
|
|
|
|
|
|
|
|
NET BOOK VALUE
|
|
|
|
|
|
|
As at 30 September 2021
|
22,183
|
262
|
1,383
|
963
|
516
|
25,307
|
As at 30 September 2022
|
22,183
|
139
|
1,369
|
834
|
39
|
24,564
|
As at 30 September 2023
|
17,438
|
-
|
1,224
|
705
|
-
|
19,367
|
The remaining amortisation periods
for software and product development are 6 months to 48 months
(2022: 6 months to 48 months).
Goodwill has been tested for
impairment. The method, key assumptions and results of the
impairment review are detailed below:
Goodwill is attributed to the CGU
being the division in which the goodwill has arisen. The Group has
2 CGUs and the goodwill related to each CGU as disclosed
below.
Goodwill
|
2023
£000
|
2022
£000
|
Offshore Energy
Division
|
14,848
|
19,593
|
Marine Civils Division
|
2,590
|
2,590
|
Goodwill is allocated to two CGUs
being Offshore Energy and Marine Civils. Goodwill has been tested
for impairment by assessing the recoverable amount of each cash
generating unit. The recoverable amount is the higher of the fair
value less costs to sell (FVLCD) and the value in use. The
value in use has been calculated using budgeted cash flow
projections for the next 4 years. A terminal value based on a
perpetuity calculation using a 2% real growth rate was then added.
The next 4 years forecasts have been compiled at individual CGU
level with the forecasts in the first 2 years modelled around the
known contracts which the entities have already secured or are in
an advanced stage of securing. A targeted revenue stream based on
historic revenue run rates has then been incorporated into the
cashflows to model contracts that are as yet unidentified that are
likely be won and completed in the year. The forecasts for year 3
and year 4 are based on assumed growth rates for each individual
entity, the total growth rate for the group (CAGR 13.5%) are in
line with expected market rate. The value in use calculation
models an increase in revenue for the offshore energy division of
16% across year 3 and year 4 and then 2% into perpetuity. The
growth rates for year 3 and 4 are comparable to the expected market
CAGR. The group has used the fair value less costs to sell as the
estimate of recoverable amount for one subsidiary of the offshore
energy division, as the FVLCD was in excess of the value in
use.
The cashflow forecasts assume
growth in revenue and profitability across the Group. These growth
rates are based on a combination of business units returning to
previously experienced results combined with externally generated
market information. The discount rates are consistent with external
information. The growth rates shown are the average applied to the
cash flows of the individual cash generating units and do not form
a basis for estimating the consolidated profits of the Group in the
future.
In addition to growth in revenue
and profitability, the key assumptions used in the impairment
testing were as follows:
· Gross Margin % returning towards FY20 levels for offshore
energy division
· A post tax discount rate of 15.5 % WACC (FY22 13.5%) estimated
using a weighted average cost of capital adjusted to reflect
current market assessment of the time value of money and the risks
specific to the group
· Terminal growth rate percentage of 2% (FY22: 2%)
The discount rate used to test the
cash generating units was the Group's post-tax WACC of 15.5%.
The goodwill impairment review has been tested against a reduction
in free cashflows. The Group considers free cashflows to be EBITDA
less any required capital expenditure and tax.
The value in use calculations
performed for the impairment review, together with sensitivity
analysis using reasonable assumptions, indicate sufficient headroom
for the goodwill carrying value in the Marine Civils
CGU.
The value in use calculations have
a range of assumptions, which if changed would lead to a change in
the impairment charge recognised. To assess these changes
management have run a model which sensitises the assumption on
EBITDA generated in the offshore wind division. Management believes
that the offshore wind division will grow faster than market rates
in FY24 and FY25 due to contract visibility, however if the product
sales in the offshore wind GCU only grows in line with market CAGR
of 16% for the forecast period, the impairment charge in offshore
wind division would be £12,136,000 as opposed to the £4,745,000
recognised in the financial statements for FY23. Similarly if the
revenues generated in the consultancy business fell by 10% against
the base case for the forecast period, the impairment charge in
Tekmar Limited would increase to £5,979,000.
Management has considered the most
likely worst-case scenario in the Marine Civils CGU to be to be a
reduction in free cashflows to 80% of the base case. Under this
sensitivity test sufficient headroom was available to support the
carrying value of goodwill in the Marine Civils CGU.
Further sensitivity analysis
performed by management shows that free cashflows would have to
reduce to 27% (Marine Civils) of forecasted base case values to
trigger an impairment of goodwill. The post-tax discount rate of
15.5% would need to increase to 54% in Marine Civils to trigger an
impairment of goodwill. Management do not consider either of these
scenarios to be likely.
All amortisation charges have been
treated as an expense and charged to cost of sales and operating
costs in the income statement.
7. TRADE AND OTHER
RECEIVABLES
|
30
Sep
2023
|
30
Sep
2022
|
|
£000
|
£000
|
Amounts falling due within one year:
|
|
|
Trade receivables not past
due
|
2,963
|
2,698
|
Trade receivables past due (1-30
days)
|
4,822
|
1,948
|
Trade receivables past due (over 30
days)
|
5,547
|
3,279
|
Trade receivables not yet due
(retentions)
|
650
|
1,620
|
Trade receivables net
|
13,982
|
9,545
|
|
|
|
Contract assets
|
4,628
|
3,194
|
Other receivables
|
328
|
203
|
Prepayments and accrued
income
|
796
|
433
|
|
19,734
|
13,375
|
Trade and other receivables are
all current and any fair value difference is not material.
Trade receivables are assessed by management for credit risk and
are considered past due when a counterparty has failed to make a
payment when that payment was contractually due. Management
assesses trade receivables that are past the contracted due date by
up to 30 days and by over 30 days.
The carrying amounts of the Group's
trade and other receivables are all denominated in GBP, USD, EUR
and RMB.
There have been no provisions for
impairment against the trade and other receivables noted
above. The Group has calculated the expected credit losses to
be immaterial.
The group continues to operate in
global markets where payment practices surrounding large contracts
can be different to those within Europe. The flow of funds on large
capital projects within China tend to move only when the windfarm
developer approves the completion of the project. The group has a
number of trade receivable balances, within its subsidiary based in
China, which have been past due for more than 1 year. At
30th September 2024 the value of these overdue trade
receivables was £1.4m, of a total outstanding trade receivable
balance for the entity of £2.9m, These amounts remain outstanding
at the approval of the financial statements. Management have not
provided for the trade receivable balance or made a credit loss
provision on the basis that previous trading history sets a
precedent that these balances will be received. Since 2020,
the group has traded in China generating £10.1m of revenue, of
which £7.2m has been fully received to date which represents full
cash receipt on older projects. The amounts which remain
outstanding are from more recent projects and none of the values in
trade receivables are in dispute with the customer.
8. BORROWINGS
|
30
Sep
2023
|
30
Sep
2022
|
|
£000
|
£000
|
Current
|
|
|
Trade Loan Facility
Lease liability
|
3,575
471
|
3,990
208
|
CBILS Bank Loan
|
3,000
|
3,000
|
|
7,046
|
7,198
|
Non-current
|
|
|
CBILS Bank Loan
Lease liability
|
-
834
|
-
194
|
|
834
|
194
|
|
2023
|
2022
|
|
£000
|
£000
|
Amount repayable
|
|
|
Within one year
In more than one year but less than
two years
|
7,049
327
|
7,198
144
|
In more than two years but less than
three years
|
290
|
39
|
In more than three years but less
than four years
|
214
|
11
|
In more than four years but less
than five years
|
-
|
-
|
|
7,880
|
7,392
|
The above carrying values of the
borrowings equate to the fair values.
|
2023
|
2022
|
|
%
|
%
|
Average interest rates at the balance sheet
date
|
|
|
Lease liability
|
5.60
|
3.25
|
Trade Loan Facility
|
7.50
|
3.75
|
CBILS Bank Loan
|
7.50
|
2.40
|
The CBILS Bank Loan was renewed in
October 2023 and is due for maturity on 31 October 2024, The trade
Loan Facility has been renewed post year end and is due for
Maturity on 31 July 2024, as described in note 2b.
Lease liability
This represents the lease
liability recognised under IFRS 16. The assets leased are shown as
a right of use asset within Property, plant and equipment (note 12)
and relate to the buildings from which the Group operates, along
with leased items of equipment and computer software.
The asset and liability have been
calculated using a discount rate between 3.25% and 6% based on the
inception date of the lease.
These leases are due to expire
between May 2024 and August 2028.
9. PROVISIONS
All provisions are considered
current. The carrying amounts and the movements in the provision
account are as follows:
|
|
Onerous
contracts
£000
|
Total
£000
|
|
|
|
|
Carrying amount at 1 October 2022
|
|
-
|
-
|
Additional provision
|
|
465
|
465
|
Amounts utilised
|
|
-
|
-
|
Reversals
|
|
-
|
-
|
Carrying amount at 30 September 2023
|
|
465
|
465
|
The provision recognised in the
year ending 30 September 2023 is for onerous contracts. The group
has assessed that the unavoidable costs of fulfilling the contract
obligations exceed the economic benefits expected to be received
from the contract. The provision relates to two contracts in the
offshore energy division which are expected to be completed in the
year ending September 2024.
10. 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 10 legacy projects on which it has
supplied cable protection systems ("CPS"). These defect
notifications have only been received on projects where there was
an absence of the second layer of rock traditionally used to
stabilise the cables.
At this stage management do not
consider that there is a present obligation arising under IAS37 as
insufficient evidence is available to identify the overall root
cause of the damage to any of the CPS. Independent technical
experts have been engaged to determine the root cause of the damage
to the CPS, Tekmar have reviewed the assessments and concluded that
a present obligation does not exists.
Management acknowledges that there
are many complexities with regards to the alleged defects which
could lead to a range of possible outcomes. Given the range of
possible outcomes, management considers that a possible obligation
exists which will only be confirmed by further technical
investigation to identify the root cause of alleged CPS failures.
As such management has disclosed a contingent liability in the
financial statements.
Tekmar has received a further 2
defect notifications in relation to alleged defects with the
loosening of VBR fasterners. The precise cause of the issues
are not clear and could be as a result of a number of factors, such
as the incorrect placing of rock bag shielding and restraint.
Tekmar is committed to working with relevant customers, to
investigate further the root cause and assist with identifying
potential remedial solutions. This is being done without prejudice
and on the basis that Tekmar has denied any responsibility for
these issues. However, given these extensive uncertainties and
level of variabilities at this early stage of investigations no
conclusions can yet be made.
At this stage management do not
consider that there is a present obligation arising under IAS37 as
insufficient evidence is available to identify the overall root
cause of the damage to any of the CPS. Independent technical
experts have been engaged to determine the root cause of the damage
to the CPS and upon completion of these technical assessments,
Tekmar will review the assessment as to whether a present
obligation exists. Given the range of possible outcomes, management
considers that a possible obligation exists which will only be
confirmed by further technical investigation to identify the root
cause of alleged CPS failures. As such management has disclosed a
contingent liability in the financial statements.
Management acknowledges that there
are many complexities with regards to the alleged defects which
could lead to a range of possible outcomes. Given the range of
possible outcomes, management considers that determining whether a
possible obligation exists, can only be confirmed by further
technical investigation to identify the root cause of alleged CPS
failures. As such management has disclosed a contingent liability
in the financial statements.
Tekmar has received a further
defect notification in relation to incorrect coating specification
on 1 historic project. This defect notification is in relation to
units which had not yet been installed and have been recoated post
year end at no cost to Tekmar. There are a number of units which
have been installed in relation to the same legacy project which
may have the incorrect coating specification. At this stage
management do not consider that there is a present obligation
arising under IAS37 as insufficient evidence is available to
identify whether any unresolved defects exist. Given the
range of possible outcomes, management considers that determining
whether a possible obligation exists, can only be confirmed by
further technical investigation to identify any further units which
have may not have been coated to the correct specification. As such
management has disclosed a contingent liability in the 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.